California has introduced a pioneering new law designed to stop large pharmaceutical companies settling claims of patent infringement by generic drug manufacturers by paying those manufacturers to delay launching their products – the so-called “pay-for-delay” practice.

California hopes that Bill AB 824 will, in effect, block pharmaceutical companies from keeping cheaper generic medicines off the market. In doing so, it is hoped that prescription drug costs will be significantly lowered. According to the Federal Trade Commission, “pay-for-delay” deals cost consumers and taxpayers $3.5 billion in higher drug costs every year. The bill prohibits such agreements between branded and generic drug manufacturers by making them, in effect, anticompetitive by presumption.

According to California Governor Gavin Newsom, “California will use our market power and our moral power to take on big drug companies and prevent them from keeping affordable generic drugs out of the hands of people who need them. Competition in the pharmaceutical industry helps lower prices for Californians who rely on life-saving treatments”.

With plans for similar legislation underway at a federal level, it is expected that this first step by California will mark the beginning of a new battle between the powerful pharmaceutical industry and legislators seeking to reduce the cost of medicines for all US citizens.

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