North Coast Assemblyman Jim Wood (D-Santa Rosa) teamed up with Attorney General Xavier Becerra to tout a new bill taking aim at a drug company tactic that costs consumers and taxpayers an estimated $3.5 billion each year.
Assembly Bill 824, which was introduced Wednesday, would outlaw what is called a pay-for-delay tactic.
“Affordability is a huge issue in health care and this calculating practice makes it worse and we need to stop it,” Wood said.
Wood, who in recent years has been dogged in fighting the high cost of pharmaceuticals, called the practice “a scheme” during a news conference and noted it had been a business practice for decades.
When a pharmaceutical company creates, patents and markets a product, they have a few years of exclusivity in sales. When generic manufacturers offer the drug, the brand-name makers often take legal action with litigation with claims of intellectual property theft, the lawmakers said. But when the companies meet to settle out of court, the end result is often the aggrieved party, the one who filed suit, ends up paying the generic makers to keep their product off the market. Because of the limited competition, the brand-name maker can reap large profits.
Becerra said the whole scenario doesn’t make sense.
“Why, in these lawsuits, do we end up not with the generic paying the brand company for perhaps violating a patent right? Why is it the reverse?” Becerra said. “The company who is saying you harmed me is paying the company that harmed them. It flips the whole legal process upside down. It’s like ‘Alice in Wonderland.’”
The bill, if it becomes law, would create a tool that allows the state Department of Justice to crack down on what Wood and Becerra called “a collusive business practice.”
Becerra said the case of “pharma bro” Martin Shkreli was one of the inspirations for the case. Before Shkreli acquired the company that made Daraprim, the drug cost about $13.50; after the acquisition, the drug was priced at $750. That was the cost per pill.
“Mr. Shkreli took advantage of having little competition in the pharmaceutical (market) and hiked up the price of the drug,” Becerra said.
According to studies by the Federal Trade Commission and others, consumers are stuck with a tab that is 90 percent higher when drugs are shielded from competition.
“This is just wrong,” Wood said.
A news release from Wood’s office stated consumers have saved more than $1 trillion between 2007 and 2016 because of generic medications.
“As anyone here who has been to a pharmacy lately can tell you, the cost of prescription drugs is not going down. It’s going up,” said Becerra, noting that in 2016 consumers spent $329 billion on prescription drugs.
He added that figure was six times greater than what the federal government spent on public education “for 250 million school children.”
“We’re here to stop this calculating pay for delay. It’s a scheme. It really is a scheme,” Wood said. “… Companies make money for doing nothing. What do patients get? Nothing.”
Ruth Schneider can be reached at 707-441-0520.