Plans target drug pricing practices

Budgets would require reporting on cost increases, address “pay to delay” deals

ALBANY — Policies buried in the budget proposals advanced by Gov. Kathy Hochul and the state Senate could force pharmaceutical companies doing business in New York to reveal “anti-competitive” drug pricing policies, as well as require them to report every cost increase for prescription drugs that millions of residents rely on each month.

If the proposal is included in the final state budget due at the end of the month, New York would join a handful of states in the nation that already mandate the reporting of price increases for drugs and the reason behind those hikes.

But the Senate wants to go a step further: Language in its one-house budget, released earlier this week, would effectively ban so-called “pay to delay” agreements between brandname pharmaceutical companies and their generic counterparts.

The Federal Trade Commission has charged that “pay to delay” deals cost American consumers billions by allowing brand-name companies to delay competition — and the resulting price drops — by paying generic companies to keep their products off the market for a set period of time. Generic companies can often produce the same drug for as much as 85 percent less, according to the Food and Drug Administration.

But Congressional legislation to ban that practice has stagnated — putting the onus on states to pass laws that target major drug companies.

Bill Ferris, a lobbyist for the state AARP, said that while the organization supports the Senate’s more ambitious push, it would likely face an uphill battle in court: A similar law in California

was essentially struck down by a federal judge in 2021.

Hochul’s more moderate policy would instead require drug companies to report every “pay to delay” agreement they enter to the state Department of Financial Services. They would also have to report detailed information on all price increases, including their justifications.

If adopted, the “pay to delay” requirement could mark “a great first step to push the industry on curbing their behavior on these types of deals,” Ferris said.

Ferris said he was not worried that the move would significantly impact the pharmaceutical industry’s presence in the state.

Several states, including Vermont and Oregon, have successfully enacted pricing transparency requirements. They found that on average, the number of price increases triggering the reporting requirement have tended to go down, according to the National Academy for State Health Policy.

“We often say ‘Sunlight is the best disinfectant,’” said Chuck Bell, director of advocacy at Consumer Reports. “Bringing these deals out of darkness can be the best way to protect affordability.”

“Pay to delay” has proven to be a trickier practice for antitrust watchdogs to confront,

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however. Prescription drug companies take out patents that run for a set amount of years, after which generic producers are allowed to replicate the product and sell it for much lower than the brand price.

But brand-name companies will often try to extend patent timelines, forcing generic producers to sue for the right to produce the same drugs. Settlements to those lawsuits can include “pay to delay” agreements that prohibit generic companies from entering the market for nearly 17 months longer on average than agreements without payments, according to a 2010 study by the Federal Trade Commission.

The FTC has estimated that such agreements cost Americans around $3.5 billion per year.

“It creates sort of a race to the bottom in terms of business behavior,” Bell said. “These agreements are extremely costly for consumers . ... It’s an abusive practice to hold up generic production.”

Yet states who attempt to regulate “pay to delay” deals, like California, risk running afoul of the interstate commerce clause, which reserves certain regulatory powers for Congress.

“If we ban (the practice) in New York, we’re probably headed to federal court,” Ferris said.