For months, US Federal Trade Commission commish Jon Leibowitz has argued that passing legislation to restrict pay-for-delay deals between brand name and generic drugmakers will save consumers billions of dollars over the next decade (back story). He has pointed to a Congressional Budget Office study forecasting nearly $2 billion in savings over 10 years and an FTC study that estimates savings of $3.5 billion annually. And he has maintained restrictions would speed the arrival of low-cost generics by more than a year onto pharmacy shelves.

Now, a new study claims the CBO report “is flawed and likely substantially overestimates the budgetary savings,” and also claims that restrictions may have the opposite effect. “Under many circumstances, reverse payment patent settlements between branded and generic manufacturers can benefit competition and consumers,” the study says, “particularly by averting continued litigation that may well delay generic entry substantially.”

The new study arrives two weeks after the US Senate Appropriations Committee voted to pass the Preserve Access to Affordable Generic Drugs Act (see here), and not long after a companion House bill was recently passed. The legislative effort is the result of tenacious lobbying by Leibowitz, who has suffered previous setbacks in attempting to convince Congress to address the issue.

The timing of this new study, of course, is not coincidental. Funding was provided by PhRMA, the trade group for brand-name drugmakers. And the Generic Pharmaceutical Association quickly praised the findings using an argument that brand-name and generic drugmakers have proferred for some time: “GPhA calls upon members of Congress to take a closer look at this issue based on the analysis by these experts and reject patent reform legislation that will ultimately harm consumers. It’s time to accept the fact that a ban on patent settlements is bad public policy because it would cost consumers and reduce competition,” the trade group said in a statement.

The report written by Jonathan Orszag, a former member of President Bill Clinton’s National Economic Council and a senior managing director at Compass Lexecon consulting; Bret Dickey, a senior vp at Compass Lexecon; and Robert Willig, a professor of economics and public affairs at Princeton University.

UPDATE: An FTC spokesman send us this: “We’re still looking at the industry study, but we think it’s wrong – it is devoid of meaningful substance, and what little economic analysis there is misses the point entirely. The pharmaceutical industry can fund as many studies as it wants, but it can’t change the facts — these pay-for-delay deals cost consumers $3.5 billion a year.”

Leibowitz has his hands full, by the way. The FTC is also fighting an embarassing episode in federal court, where Watson Pharmaceuticals has accused the agency of abusing its power in connection with an ongoing investigation. The FTC has denied the charges (look here and here).