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A newly enacted California law that bans so-called pay-to-delay deals between drug makers would reduce competition and consequently lead to higher prices for medicines, according to a lawsuit recently filed by a trade group for generic drug companies.

In these deals, a brand-name drug maker settles a patent lawsuit by paying cash or transferring something else of value to an erstwhile generic rival, which agrees to delay launching a copycat medicine until a specific date in the future. This gives the brand-name drug maker more time to sell its medicine without lower-cost competition.


The Federal Trade Commission, which has gone to court several times to protest such agreements, has claimed the agreements cost U.S. consumers an estimated $3.5 billion annually. A turning point occurred, though, in 2012, when the U.S. Supreme Court ruled that these deals can be subject to review for anticompetitive arrangements. Earlier this year, the FTC noted there have been fewer such deals.

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