The FTC has its Eyes on Biotech for Antitrust Enforcement

On July 27, 2017, representatives of the Food and Drug Administration (FDA) and Federal Trade Commission (FTC) gave coordinated testimony to Congress that ought to raise alarm bells for pharmaceutical companies. Scott Gottlieb, Commissioner of the FDA, and Markus Meier, Acting Director of the Bureau of Competition at the FTC, both testified before the House Judiciary Committee’s Subcommittee on Regulatory Reform Commercial and Antitrust Law. Their statements announced a renewed coordination between the respective agencies with a goal to increase competition in the pharmaceuticals market and drive down prices for consumers. Both generic and branded drug companies should take note.

The pair identified three strategies by which drug companies delay the entry of generics into the marketplace, thereby reducing competition, and increasing the period during which consumers pay a higher price for a branded drug. The three main vehicles of anti-competitive conduct: Risk Evaluation and Mitigation Strategies (REMS), Pay-for-Delay Agreements, and sham citizen petitions and abuse of process. The speeches identify policy approaches to all three issues, but also highlight the enforcement roll the FTC has in policing each type of conduct.

REMS encompass a wide range of programs designed to ensure that a drug’s benefits outweigh its risks, and are often mandated by the FDA as part of the approval process. However, the FDA and FTC have voiced concerns that REMS can be abused by branded drug companies to delay and obstruct the ability of generics companies to gain access to samples of drugs for bioequivalence testing. Thus far, abuse of REMS has mainly been the subject of private civil litigation, but Mr. Meier stated in his testimony that the FTC has filed amicus briefs in some of those actions asserting that abuse of REMS may violate the Sherman Act. Referencing that position in his testimony to Congress suggests that the FTC may be considering enforcement actions in the right circumstances. This possibility is further supported by the Mr. Gottleib’s statement that the FDA is referring complaints to the FTC about restrictions on the supply of drugs for testing by generics firms.

Pay-For-Delay Agreements are settlements by branded drug companies and generic drug companies of patent litigation by which the branded company pays the generics company, in exchange for the generics company delaying marketing its generic for a period of time. Because the Hatch-Waxman Amendments to the Food Drug and Cosmetics Act permit a first generic filer 180 days of market exclusivity that doesn’t begin until the generic hits the market, these agreements end up delaying the entry of not just the settling generics company (the first filer), but all potential generics for a particular drug. Mr. Gottleib stated that solutions will involve multiple stakeholders, but specifically references the FTC as responsible for enforcement actions related to pay-for-delay agreements. Mr. Meier testified that the FTC is both active in litigation against such agreements, and monitors private actions for opportunities to file amicus briefs to assist courts in assessing anti-competitive conduct.

Lastly, Mr. Meier called out the abusive filing of “sham” citizen petitions with the FDA and frivolous lawsuits as potential conduct by branded drug companies intended to delay the approval of generics that the FTC views as illegal attempts to maintain a monopoly in violation of the Sherman Act. The FTC intends to remain active in monitoring this kind of activity, and has shown a willingness to bring enforcement actions for violating the antitrust laws through the abuse of government processes.

Taken together, the testimony of the FTC and FDA officials are required reading for regulatory and litigation attorneys practicing in the pharmaceuticals arena. Eliminating obstruction to the entry of generics to the pharmaceutical markets is clearly a priority for the FDA and FTC, and additional enforcement action in this area appears likely.

The text of Mr. Meier’s and Mr. Gottleib’s prepared statements, both titled “Antitrust Concerns and the FDA Approval Process,” are available here and here.

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