If it's Thursday, S. 369 must be on the agenda.

For three weeks in a row, Sen. Herb Kohl, D-Wisc., has tried to get his bill to ban "pay for delay" settlements between brand and generic firms through the Senate Judiciary Committee.

On Sept. 10, he discussed the possibility of a compromise substitute bill. On Sept. 17, the committee ran out of time before it could consider the revised version. And on Sept. 24, he got his substitute bill brought up, but he still couldn't get it passed out of committee because Republicans who were not present wanted to offer amendments.

Oct. 1 might be the charm for Kohl, but the bill is still the last item on the agenda and faces at least five possible amendments. The fitful progress of the bill may be an indication of Chairman Patrick Leahy's, D-Vt., concerns about it, although Leahy did offer to move the time of the session next week to ensure a debate even if the Senate Finance Committee markup of health reform legislation is still continuing.

Contrast Kohl's struggles with how the House bill moved, though, and the Senate looks like relatively friendly territory for settlers. ¹ H.R. 1706, which is very similar to Kohl's original bill, is sponsored by Rep. Bobby Rush, D-Ill., chairman of the Energy and Commerce Committee Subcommittee on Commerce, Trade and Consumer Protection. The bill passed out of Rush's committee with minimal modifications (² Also see "Reverse Settlement Bill Clears House Subcommittee With GAO Report Attached" - Pink Sheet, 8 June, 2009.), and then he got a slightly trimmed version attached to the health reform package when that legislation was being marked up by the full committee (³ Also see ""Pay For Delay" Legislation Gaining Speed" - Pink Sheet, 31 July, 2009.).

In the Senate, the best that supporters of a settlement ban can seem to hope for is getting added to the health bill on the floor. And while Senate debate is often freewheeling, getting the bill out of committee is seen as a critical step for turning it into a floor amendment.

Compromises And Excise Taxes

Kohl has had to make several compromises to get his bill this far. His ⁴ original bill would have declared settlements in which an ANDA filer receives anything of value "unlawful." Kohl's ⁵ modified bill now says they are presumed to have anticompetitive effects, and allows the FTC to initiate an enforcement proceeding which the parties can challenge by showing "clear and convincing evidence" that the deal is pro-competitive.

Kohl's modifications nearly double the size of his bill with various caveats, but it's unclear what the changes have done to convince skeptics of a ban, who tend to see any settlement limits as a reduction in patent rights.

The bill moving through the Judiciary Committee also is significantly different than S. 1315, another piece of anti-settlement legislation that Kohl has co-sponsored with Sen. Bill Nelson, D-Fla. That bill would ban settlement-related payments but would also strip first-filer exclusivity from any ANDA filer who settles, thus allowing subsequent applicants that can win in court to come to market.

Nelson is considering a different tactic to reduce settlements - imposing an excise tax - in an amendment he's prepared for the Finance Committee markup of the health reform bill.

"Each party of such settlements would be required to pay a tax to the federal government equal to 50 percent of the value of the settlement," according to a summary. "The IRS would be charged with determining the value of the settlements and amount due by each of the settling parties," which would be required to report the full terms to the agency in the same way they now to the FTC.

Because "any revenue that accrues from the above provision would be used to reduce the size of the coverage gap under Medicare Part D," the amendment is expected to be budget neutral.

Nelson has asked for a score on the amendment, and many be waiting for that before presenting it for a vote.

Both of Nelson's anti-settlement approaches seem to focus not so much on banning settlements, but by discouraging them. Go ahead and settle, the excise tax and exclusivity trigger seem to be saying, but if you do you won't get any economic benefit.

Nelson and Kohl's modified approaches mean that a settlement ban will likely wind up as conference issue between the chambers as they negotiate health reform.

But even as the opponents of pay-for-delay face potential delays themselves, some firms have begun to settle more cautiously. For example, all of Teva's most recent settlements have involved solely an early date of entry (⁶ Also see "Teva Settlements Stick To Date of Entry Even As Legislative Debate Continues" - Pink Sheet, 17 August, 2009.).

- M. Nielsen Hobbs ( ⁷ n.hobbs@elsevier.com )

Brand/Generic Settlement Opponents May Have To Settle For Less

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