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upstart writes for Bytram:

Sneaky deals are keeping cheaper generic medicines off the market

A bill — AB 824 — now making its way through the Legislature would prohibit agreements among drug companies involving "anything of value" changing hands to delay introduction of a generic alternative to a brand-name medicine.

The legislation already has been passed by the Assembly. It's scheduled to be voted upon Wednesday by the Senate Health Committee.

"We know these agreements happen. Everyone knows it," Assemblyman Jim Wood (D-Healdsburg), the author of the bill, told me.

[...] About 90% of all U.S. drug sales involve generics, which are intended to be cheaper alternatives to brand-name drugs once a sufficient amount of time has passed for the original maker to recoup its research and development costs.

Healthcare advocates say pharmaceutical companies figured out years ago that they can reap even greater profits by encouraging generic manufacturers to stay away from some of the most lucrative brand-name meds.

This is typically done by direct payments or promises of profit sharing, or by the brand-name maker pledging not to bring out its own "authorized" generic to compete directly with the generic manufacturer. The deals are often reached during settlements of patent litigation.

The Federal Trade Commission estimates that pay-for-delay deals cost American consumers $3.5 billion a year in the form of higher drug prices.

"Pay-for-delay agreements are 'win-win' for the companies," the FTC said in a 2010 study. "Brand-name pharmaceutical prices stay high, and the brand and generic share the benefits of the brand's monopoly profits."

A more recent analysis by the California Public Interest Research Group found that pay-for-delay deals keep cheaper generics off the market for an average of five years after patent rules allow their introduction.

This allows drug companies to charge for a brand-name med as much as 33 times what a generic alternative would cost, the analysis found.

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