A Senate panel voted on Thursday to bar drug companies from paying generic drugmakers to delay bringing their cheaper medicines to market.
The Judiciary Committee voted 12 to 7 to forbid such deals.
Lawmakers are seeking to ban the complicated deals that often arise after a generic drugmaker begins the process of bringing to market a cheaper version of a branded medicine. The owner of the patent for the brand name drug often accuses the generic firm of infringement and the result is sometimes a settlement that the Federal Trade Commission calls a pay for delay deal.
The pharmaceutical companies argue that they are an effective way to resolve expensive litigation and often result in generic drugs coming to market before patents expire anyway.
The FTC has led the fight against the deals and has filed suit against several of them with mixed success.
The Justice Department, which did not oppose the settlements during the Bush administration, said in July that it considered a payment to a generic company to drop a patent challenge to be presumptively unlawful.
President Barack Obama supports a ban. European Union antitrust regulators also oppose the deals.
Consumers, insurance companies and the federal government spend an extra $3.5 billion for prescription drugs every year because brand-name companies pay generic producers to stay out of the market, according to a FTC study released in June.
A branded medicine quickly loses upward of 80 percent of its revenue once cheaper generic versions start flooding the market.
The first known pay for delay deal was in 1994, when Bristol-Myers Squibb Co (BMY) paid $290 million to Schein Pharmaceutical to delay the sale of a generic version of the Bristol-Myers anxiety drug Buspar.
Pay for delay bills are being stiffly fought by both the brand-name pharmaceutical and generic drugmakers. (Reporting by Diane Bartz; additional reporting by Bill Berkrot in New York, editing by Gerald E. McCormick)