California Bill Says Pay-for-Delay is Anticompetitive
Legislation awaiting signature by California’s governor does not prohibit pay-for-delay settlements between branded and generic drug companies but presumes an anticompetitive effect if, as part of a Paragraph 4 litigation settlement, an ANDA sponsor receives anything of value in exchange for limiting or foregoing entry of a generic drug product. Attorney Sara Koblitz (Hyman, Phelps & McNamara) writes in her firm’s FDA Law Blog that “anything of value” includes an exclusive license or promise that the branded company will not launch an authorized generic version of the reference-listed-drug. However, she writes, it is not specifically defined, leaving room for interpretation.
Parties to a Paragraph 4 settlement can overcome the anticompetitive presumption if they can demonstrate that the value received by the ANDA sponsor is fair and reasonable compensation solely for other goods or services or that the agreement has directly generated procompetitive benefits that outweigh the anticompetitive effects of the agreement. She says this effectively shifts the burden from the government to demonstrate that a settlement is anticompetitive to the parties to show that it is not anticompetitive, making it significantly easier for the government to challenge such agreements.
Koblitz notes that the legislation is like a bill introduced in Congress in 2017 and again in 2019 but has not gone anywhere. “Given the lack of traction on a federal stage, California appears to have taken a page from the drug pricing control efforts to try to regulate at the state level,” she concludes. “However, this increasingly common tactic is bait for constitutional challenges, so it wouldn’t be surprising if California AB 824 is challenged, especially since industry is not in favor of this type of legislation.”