California Governor Gavin Newsom recently signed three legislative bills into law, all aimed at lowering the cost of prescription drugs and fostering greater access to healthcare. One of those bills, Assembly Bill 824, is commonly referred to as the “Pay for Delay” bill.
The law makes it unlawful for companies to settle patent infringement claims filed by generic manufacturers by providing “anything of value” in exchange for settlement. Any attempts to settle in such a fashion will be considered anti-competitive and open the company to civil litigation. The law becomes effective January 1, 2020.
By signing AB 824 into law, California is now the first state in the nation to prevent deals between pharmaceutical companies in which one company pays a generic competitor to delay research, production, or sale of a competitive drug.
In a press release announcing the signed laws, Governor Newsom stated, “California will use our market power and our moral power to take on big drug companies and prevent them from keeping affordable generic drugs out of the hands of people who need them.” He continued, “Competition in the pharmaceutical industry helps lower prices for Californians who rely on life-saving treatments.”
Chip Davis, President and CEO of the Association for Accessible Medicines (AAM) disagrees with the new law, stating it penalizes procompetitive deals that typically enable generic drug market entry prior to patent expiration. “Because AB 824 seeks to prohibit the type of patent license that is contemplated under federal patent law, the portions of AB 824 relating to exclusive licenses should be invalidated,” AAM said in a letter in April to California legislators.
Michael Carrier, a professor of law at Rutgers Law School, however, disagrees with AAM, stating, “This is important. The Supreme Court in 2013 found that these settlements could violate the antitrust laws. But a presumption that a settlement involving payment and delayed entry is anticompetitive will help the CA AG [California Attorney General] bring a case (given that the settling parties disguise payment in increasingly complex ways).” He also explained how the legislation “makes clear that entry before the end of the patent term is not necessarily procompetitive (consistent with the Supreme Court’s rejection of the ‘scope of the patent’ test).”
AB 824 mirrors work being done at the federal level to reduce anti-competitive agreements. Therefore, this may be an area to watch for expanded legislation, both on national and local levels.
It’s also an area to watch for future litigation, as a flood of lawsuits may be coming against manufacturers trying to keep generic competitors off the market.
Other California Laws
Governor Newsom signed two other bills into law, including one that allows pharmacists to dispense HIV protection drugs without a prescription. There are certain limitations to this, however, including requirements that the pharmacist: undergo training, provide HIV testing to prospective patients/ensure that testing has been done, notify the patient’s primary care physician of the postexposure prophylaxis treatment, and maintain records of the treatment provided to each patient. Pharmacists are also not permitted to provide more than a 60-day supply of preexposure prophylaxis to any individual patient more than one every two years.
The last bill signed will require all perinatal health care providers to undergo implicit bias training to curb the impact of bias on maternal health and improve data collection at the California Department of Public Health to better understand pregnancy-related deaths. These changes are expected to reduce preventable maternal mortality among black women.