Helping to reduce healthcare costs
Generic drugs are an undisputed means to reduce health care costs. Due to generics, the amount of money Americans spent on prescription drugs in 2012 declined for the first time ever, by about 1 percent to $325.7 billion, according to the research firm IMS Health. About 80 percent of all prescriptions are filled with generic drugs.
Monday, the U.S. Supreme Court announced a decision that could increase those savings. In a 5-3 vote with Justice Samuel Alito not participating, the court found that deals between generic and patent drug manufacturers that keep generics off the market can be challenged in court on anti-trust grounds.
Generic drug manufacturers sometimes sue to overturn patents on certain brand-name drugs. Often, they contend that the patented drugs are insignificant modifications of earlier versions and should not enjoy patent protection.
Often the parties settle, with the patent drug manufacturer paying the generic manufacturer not to pursue the claim, thus keeping much cheaper generic drugs off the market. The practice is known as "pay for delay."
The Supreme Court decision will enable far greater scrutiny of those settlements and, in some cases, preclude "pay for delay" deals that keep drug prices artificially high.
Dissenting judges said that government normally would applaud agreements that reduce litigation costs. But the majority decision doesn't hold all of the pay for delay deals to be illegal; it opens them to warranted scrutiny.
Ideally, the decision will help to accelerate generics' role in reducing health care costs.