Proposed California Bill to Prohibit Pay-for-Delay Agreements to Reduce Drug Prices

California State Seal

California Attorney General Xavier Becerra and Assembly member Jim Wood are proposing a bill to help lower the prices of prescription drugs.

Their legislative proposal, AB 824 will prohibit so-called pay-for-delay agreements between pharmaceutical companies. The legislation also prevents the parties from using attorney-client and common-interest privileges to keep relevant information about their contracts.

Under a pay-for-delay agreement, a generic drug manufacturer agrees to delay the marketing of its product for a period of time in exchange for monetary payment or other benefits from a brand name drug manufacturer.

Signup for the USA Herald exclusive Newsletter

Becerra considers such contracts as collusive, allowing pharmaceutical companies to control competition and increase the prices of prescription drugs in California.

Usually, pharmaceutical companies enter into these anti-competitive agreements during out-of-court settlements. These contracts are confidential.

The Attorney General noted studies from the Federal Trade Commission (FTC) and from experts that pay-for-delay agreements resulted to a 90 percent increase in drug prices.

An important step to crackdown predatory pricing practices

In a statement, Becerra said, “Patients and consumers deserve to be free of unfair practices and price manipulation within the pharmaceutical industry. 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.”