California Enacts First State Law to Combat Pay-for-Delay Rx Deals

Last week, California enacted the first-in-the-nation state law to combat pay-for-delay deals between brand-name and generic pharmaceutical drug manufacturers. In a pay-for-delay deal, a brand manufacturer pays a generic competitor to settle patent litigation and keep the lower-cost version of the drug off the market. Delaying market entry of generic drugs limits competition and can keep prices for brand-name drugs high. 

The Federal Trade Commission estimates these deals cost consumers $3.5 billion in higher drug costs each year.

Under California’s new law, pay-for-delay agreements are presumed to have anticompetitive effects – unless a company can prove otherwise – if a generic manufacturer receives anything of value from a brand-name drug manufacturer that has sued for patent infringement. The law opens these agreements to civil litigation from California’s Attorney General, who can recover up to $20 million or three-times the value given to parties in the agreement, whichever is greater.

This isn’t the first action California has taken to push back against anticompetitive practices by pharmaceutical manufacturers. Earlier this year, the state reached a $70 million settlement with two manufacturers that allegedly entered into pay-for-delay agreements to delay market entry of cheaper generic drugs. Although a 2013 US Supreme Court case found that pay-for-delay settlements could violate antitrust laws, California’s presumption that these types of deals are anticompetitive gives the Attorney General a stronger platform to investigate and prosecute drug makers who enter into these agreements.

To explore all state legislation across the country to curb prescription drug costs, explore the National Academy for State Health Policy’s Legislative Tracker.