HJU120000 PAGE 1 1 ALDERSON COURT REPORTING 2 CHRISTINE ALLEN 3 HJU120000 4 MARKUP OF H.R. 965, THE CREATES ACT; 5 H.R. 2375, THE PRESERVE ACCESS TO AFFORDABLE GENERICS AND 6 BIOSIMILARS ACT; 7 H.R. 2374, THE STOP SIGNIFICANT AND TIME-WASTING ABUSE 8 LIMITING LEGITIMATE INNOVATION OF NEW GENERICS ACT; AND 9 H.R. 2376, THE PRESCRIPTION PRICING FOR PEOPLE ACT OF 2019. 10 Tuesday, April 30, 2019 11 House of Representatives 12 Committee on the Judiciary 13 Washington, D.C. 14 The committee met, pursuant to call, at 2:22 p.m., in 15 Room 2141, Rayburn Office Building, Hon. Jerrold Nadler 16 [chairman of the committee] presiding. 17 Present: Representatives Nadler, Lofgren, Jackson Lee, 18 Cohen, Jeffries, Cicilline, Lieu, Raskin, Demings, Correa, 19 Scanlon, Garcia, Neguse, Stanton, Dean, Murcarsel-Powell, 20 Collins, Sensenbrenner, Chabot, Gohmert, Jordan, Buck, Roby, HJU120000 PAGE 2 21 Johnson of Louisiana, Biggs, McClintock, Reschenthaler, 22 Cline, Armstrong, and Steube. 23 Staff present: David Greengrass, Senior Counsel; Senior 24 Advisor; Lisette Morton, Director of Policy, Planning, and 25 Member Services; Madeline Strasser, Chief Clerk; Moh Sharma, 26 Member Services and Outreach Advisor; Susan Jensen, 27 Parliamentarian/Senior Counsel; Amanda Lewis, ACAL Counsel; 28 Joseph Van Wye, Professional Staff Member, ACAL; Lina Khan, 29 Counsel, ACAL Subcommittee; Slade Bond, Chief Counsel, ACAL; 30 Brendan Belair, Minority Chief of Staff; Robert Parmiter, 31 Minority Deputy Chief of Staff; Jon Ferro, Minority 32 Parliamentarian; Tom Stoll, Minority Chief Counsel, 33 Intellectual Property Subcommittee; Daniel Flores, Minority 34 Chief Counsel, Antitrust Subcommittee; Erica Barker, Minority 35 Chief Clerk; and Andrea Woodard, Minority Professional Staff 36 Member. 37 HJU120000 PAGE 3 38 Chairman Nadler. The Judiciary Committee will please 39 come to order, a quorum being present. Without objection, 40 the chair is authorized to declare a recess at any time. 41 Pursuant to Committee Rule II and House Rule XI, Clause 42 2, the chair may postpone further proceedings today on the 43 question of approving any measure or matter or adopting any 44 amendment for which a recorded vote for the yeas and nays are 45 ordered. 46 Pursuant to notice, I now call up H.R. 2375, the 47 Preserve Access to Affordable Generics and Biosimilars Act, 48 for purposes of markup and move that the committee report the 49 bill favorably to the House. 50 The clerk will report the bill. 51 Ms. Strasser. H.R. 2375, to prohibit prescription drug 52 companies from compensating other prescription drug companies 53 to delay the entry of a generic drug, biosimilar, biological 54 product, or interchangeable biological product into the 55 market. 56 Chairman Nadler. Without objection, the bill is 57 considered as read and open for amendment at any point. 58 [The bill follows:] 59 HJU120000 PAGE 4 60 Chairman Nadler. I will begin by recognizing myself for 61 an opening statement. 62 H.R. 2375, the Preserve Access to Affordable Generics 63 and Biosimilars Act, is one of a series of bipartisan 64 measures that we are considering today to address the 65 critical need to lower the soaring costs of prescription 66 drugs, which is jeopardizing the health and wellbeing of 67 millions of Americans. Too many Americans simply cannot 68 afford lifesaving medicines. Others find their budgets 69 strained to the limit because of the high cost of 70 prescription drugs. Some patients delay essential care, cut 71 their pills in half, or skip drug treatment all together, all 72 because of unaffordable drug prices, and their health suffers 73 as a result. 74 Several of the bills we are considering today address in 75 different ways one of the leading drivers of high 76 prescription drug costs, efforts by branded drug companies to 77 preserve their monopolies by preventing or delaying 78 competition from lower-priced generic and biosimilar drugs. 79 The Preserve Access to Affordable Generics and Biosimilars 80 Act prohibits one of these outrageous delay tactics, so- 81 called pay-for-delay settlement agreements. These agreements 82 occur when a generic drug maker seeks to enter the market and 83 compete with a brand-name drug product. If the drug patent 84 has not yet expired, patent litigation ensues, and the HJU120000 PAGE 5 85 branded drug firm may seek a settlement agreement as a 86 vehicle to pay the potential generic competitor to delay 87 entering the market with a lower-cost generic product. These 88 agreements result in a financial windfall for both drug 89 companies. The brand-name drug company gets to keep its 90 monopoly, and the generic gets paid off with a portion of the 91 monopoly profits, but consumers inevitably lose. 92 According to a Federal Trade Commission study, pay-for- 93 delay agreements are estimated to cost American consumers $3- 94 and-a-half billion per year, $35 billion over the decade from 95 2010 to 2020. And despite a clear holding by the Supreme 96 Court in the Actavis case nearly 6 years ago that such 97 agreements may be significantly anticompetitive and illegal 98 under the antitrust laws -- I almost feel like saying "you 99 think" -- they still persist today. 100 In 2015 alone, there were 14 settlements between branded 101 and generic drug companies that contained potential pay-for- 102 delay provisions, covering 11 branded drugs totaling $4.6 103 billion in sales. And the FTC continues to investigate and 104 challenge potential pay-for-delay agreements that keep 105 affordable generic drugs off the market. That is why these 106 anticompetitive practices must be prohibited all together. 107 The significance of generic competition on drug prices 108 cannot be overstated. According to the FTC, the first 109 generic competitor's product is typically offered at a 20 to HJU120000 PAGE 6 110 30 percent discount from the branded product's price. 111 Subsequent generic entry creates massive price discounts with 112 additional competition reducing the cost of prescription 113 drugs by as much as 85 percent or more off the branded price. 114 To help ensure that these generic alternatives can enter 115 the market, this bill would establish that certain pay-for- 116 delay agreements are presumptively anticompetitive, and would 117 authorize the FTC to initiate an enforcement proceeding 118 against parties to such an agreement involving the sale of a 119 drug or biological product. Importantly, the Preserve Access 120 to Generics and Biosimilars Act also includes safe harbors 121 that preserve the incentives of generic and biosimilar 122 competitors to challenge weak patents and enter the market as 123 early as possible. 124 This legislation builds on the committee's strong 125 tradition of bipartisan work to lower the cost of 126 prescription drugs through the full benefits of competition. 127 This committee has been and will continue to be active in 128 stopping drug companies from reaping monopoly profits at the 129 expense of the health of American consumers. 130 I am proud of this work to provide meaningful relief to 131 Americans who struggle every day with the high cost of 132 prescription medicine along with other outrageous healthcare 133 costs. I thank Ranking Member Collins for his leadership on 134 this issue, and I urge my colleagues to support this HJU120000 PAGE 7 135 legislation. And speaking of Ranking Member Collins, I now 136 recognize the ranking member of the Judiciary Committee, the 137 gentleman from Georgia, Mr. Collins, for his opening 138 statement. 139 Mr. Collins. Thank you, Mr. Chairman, and I will be 140 brief on this. But thank you for your leadership and 141 introducing the Preserve Access to Affordable Generics and 142 Biosimilars Act, and I am proud to be the lead co-sponsor on 143 the Republican side for this important bill. 144 Years ago when the Congress passed the Hatch-Waxman Act, 145 the hope was that it would dramatically help speed the 146 introduction of low-cost generic alternatives to high-cost 147 brand-name prescription drugs. At the same time, it was also 148 hoped that the legislation had struck the right balance to 149 preserve healthy incentives for the innovation of new drugs 150 branded by manufacturers. To a degree these hopes have been 151 realized, but unfortunately too often those hopes have been 152 stymied by the use of pay-for-delay settlements. 153 In these often anticompetitive settlements, the generic 154 manufacturer has filed for FDA approval to produce a generic 155 alternative. The branded manufacturer raises patent 156 litigation in response, and the pay-for-delay settlement buys 157 the peace. The generic manufacturer agrees to delay for a 158 certain time, and the branded manufacturer agrees to pay the 159 generic manufacturer for that delay. HJU120000 PAGE 8 160 There is just one catch. While the situation looks rosy 161 for the two manufacturers, consumers who would benefit from 162 the lower cost of a new generic drug get stuck still paying 163 the high cost of the branded drug. That is true even if the 164 threatened patent litigation is not justified. However long 165 the delay endures, higher costs prevail. That is not right, 166 and it is part of the reason that American consumers still 167 pay too much for prescription drugs. 168 The Preserve Access to Affordable Generics and 169 Biosimilars Act would solve this problem and accelerate the 170 lowering of prescription drug prices in America. It doesn't 171 prevent litigants from entering into bona fide pro- 172 competitive settlements that would help consumers, but it 173 does prevent the anticompetitive settlements that just line 174 drug company's pockets while consumers pay the bill, and I 175 would urge my colleagues to support this bill.