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Drug 'Pay-for-Delay' Agreements Are Bad For Consumers — Especially Older Americans

Read AARP President Rob Romasco's Senate testimony

AARP President Rob Romasco was invited to testify before the Senate Committee on the Judiciary's Subcommittee on Antitrust, Competition Policy and Consumer Rights, which is addressing prescription drug "pay-for-delay" deals and how they limit competition and cost consumers.

Pay-for-delay agreements involve brand-name and generic drug manufacturers entering into agreements that pay the generic drug manufacturer to delay bringing its lower-priced alternative to market. This practice not only denies consumers access to lower-cost treatment options as soon as possible, but also prevents competition. Ending these pay-for-delay agreements is critical to improving care and saving money in Medicare and throughout the health care system. Learn more at You've Earned a Say.

The following remarks were delivered on July 23, 2013.

Chairman Klobuchar, Ranking Member Lee, distinguished members of the committee, on behalf of AARP's more than 37 million members, we thank you for holding this hearing on "pay-for-delay" agreements — reverse settlements that delay the availability of generic prescription drugs — and their impact on consumers' prescription drug costs.

My name is Rob Romasco. I'm a member of AARP's all-volunteer board of directors, and I am honored to serve as AARP president.

Older Americans use prescription drugs more than any other segment of the U.S. population. These drugs play a critical role in their health and financial security. Two-thirds of people 65 and older report using three or more prescription drugs within the past month. Forty percent used five or more.

Unfortunately, retail prices for brand-name drugs continue to rise faster than inflation. In contrast, generic prescription drugs are considerably less expensive. Their retail prices are actually falling.

Generic drugs have proved to be one of the safest, most effective ways for consumers to lower their prescription costs. They have been essential to the recent slowdown in health care spending, and AARP believes that eliminating pay-for-delay agreements will result in additional savings for consumers and taxpayers.

Pay-for-delay agreements provide financial benefits to prescription drug manufacturers at the expense of consumers. The Federal Trade Commission (PDF) estimates that pay-for-delay agreements cost consumers and taxpayers $3.5 billion a year. If nothing changes, that's $35 billion over the next 10 years.

The FTC has found that pay-for-delay agreements keep generics off the market for an average of nearly 17 months longer than patent settlement agreements without such payments.

In the meantime, consumers must pay brand-name drug prices, typically 80 to 85 percent higher than generics.

This substantially raises costs for consumers, businesses and taxpayer-funded health programs such as Medicare and Medicaid.

Putting an end to these agreements will not only save consumers and taxpayers money, but will also help prevent patients, including older Americans, from forgoing needed medications because of the high cost of brand-name drugs.

Researchers have found that cost is one of the primary reasons why older adults do not fill prescriptions, skip doses, or take smaller doses. People who do not follow their prescription drug regimens use more urgent care and expensive inpatient hospital services.

This results in extra health costs estimated to be as much as $290 billion each and every year, not to mention the toll on individuals' health.

Next page: Rob Romasco's testimony continues. »

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WHY SOCIAL SECURITY MATTERS: AARP President Rob Romasco explains how Social Security protects and benefits Americans of all ages.

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