Attorney General Becerra, Assemblymember Wood Announce Bill to Outlaw Collusive Agreements Between Drug Companies that Inflate Drug Prices

SACRAMENTO – California Attorney General Xavier Becerra and Assemblymember Jim Wood today unveiled legislation to help curb increasing drug prices in California. AB 824 would prohibit pharmaceutical agreements in which a drug company transfers anything of value to delay a competitor’s research, marketing, or sale of a competing version of its drug. These agreements, known as “pay-for-delay” agreements, have significantly contributed to price increases for prescription drugs in California.

“Patients and consumers deserve to be free of unfair practices and price manipulation within the pharmaceutical industry,” said Attorney General Becerra. “This legislation is a crucial step in combating predatory pricing practices, like “pay-for-delay” schemes, by drug companies and in defending access to affordable care.”

“When drug companies use these quiet pay-for-delay agreements with generic drug manufacturers it hurts consumers twice – once by delaying the introduction of an equivalent generic drug that is almost always cheaper than the brand name and again by stifling additional competition when multiple generic companies begin producing even less expensive generic equivalents,” said Assemblymember Wood. “This is just wrong.”

Drug manufacturers employ pay-for-delay agreements to block competitors from marketing lower-cost versions of their drugs. Studies from the Federal Trade Commission and from experts have consistently shown that, as a result of these anticompetitive maneuvers, consumers are left to pay as much as 90% more for drugs shielded from competition. 

Pay-for-delay agreements are the product of lawsuit settlements between a branded drug company and a generic drug company. In these cases, the branded company sues the generic company for alleged patent infringement. The companies then settle the case out of court in a confidential agreement. As part of the agreement, the branded drug company pays the generic drug company to keep its generic drug off the market for a period of time. These pay-for-delay arrangements are kept secret from the public through out-of-court settlements.

AB 824 would presume these agreements are anticompetitive and that they delay entry of the generic drug into the marketplace. It would also prevent the parties from withholding relevant evidence regarding the agreements behind attorney-client and common-interest privileges. This legislation is the first state legislation in the United States to tackle pay-for-delay agreements, providing California with the opportunity to continue to be a leader in pay-for-delay litigation.