FTC to Study Generic Drug Competition

Seeking to ensure that consumers gain timely access to generic pharmaceuticals and are protected from potentially anticompetitive arrangements between brand-name and generic drug-makers, the Federal Trade Commission today announced that it proposes to conduct a focused study of generic drug competition, and requested public comment on the process it would use to collect relevant information from manufacturers nationwide. The proposed study would examine whether brand-name and generic drug manufacturers have entered into agreements, or have used other strategies, to delay competition from generic versions of patent-protected drugs. Among the issues to be explored by the proposed study is whether drug companies have manipulated certain provisions of the Hatch-Waxman Act to delay the marketing of generic drug products. A public comment period is required prior to receiving approval from the Office of Management and Budget to collect the necessary information.

"Over the next five years, brand-name drugs with combined U.S. sales approaching $20 billion will go off patent," FTC Chairman Robert Pitofsky said. "The goal of this study would be to continue the Commission's look at the business relationships between brand-name and generic drug manufacturers to ensure that the process of bringing new low-cost generic alternatives to the marketplace -- and into the hands of consumers -- is not impeded in ways that are anticompetitive."

The Commission's announcement comes just five months after it filed complaints against four drug companies for allegedly entering into agreements that effectively stopped the generic version of two brand-name drugs, Cardizem-CD and Hytrin, from coming to market. The first of those complaints, against Abbott Laboratories and Geneva Pharmaceuticals, Inc., resulted in a settlement under which the companies agreed to not engage in similar behavior in the future. The second complaint, concerning Hoechst Marion Roussel, Inc. (now Aventis) and Andrx Corporation, is scheduled to be heard before an administrative law judge later this year. In both cases, the Commission alleged significant consumer harm through the multi-million dollar arrangements between the companies. The Commission also recently confirmed it is investigating the possibility of similar anticompetitive behavior by Bristol-Myers-Squibb, Co. and American Bioscience, Inc. regarding the cancer drug Taxol.

The Hatch-Waxman Act

Under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, a company can seek approval from the Food and Drug Administration (FDA) to market a generic drug before the expiration of a patent relating to the brand-name drug upon which the generic is based. In these cases, the generic drug manufacturer certifies in its Abbreviated New Drug Application (ANDA) that the branded product's patent(s) is invalid or will not be infringed by the generic drug for which the ANDA applicant seeks approval.

The Act then provides a 45-day window during which the patent holder may bring a patent-infringement suit against the applicant. If such a suit is filed, the Act forbids the FDA from approving the ANDA for 30 months or until the litigation is completed, whichever comes sooner ("30-month stay"). The provision is generally thought to protect branded companies against patent infringement. To encourage generic competition, the first company to file an ANDA with the FDA is given the exclusive right to market the generic drug for 180 days. No other generic can gain FDA approval until this 180-day period expires ("180-day marketing exclusivity").

The Proposed Study

The proposed study would examine whether the 30-month stay and 180-day marketing exclusivity provisions of the Hatch-Waxman Act have encouraged generic competition or facilitated the use of anticompetitive strategies. In addition, in light of the FTC's investigations of several cases in which the manufacturers of brand-name drug products and generic competitors have allegedly entered into anticompetitive agreements to delay generic entry, the proposed study would examine the use of agreements between pharmaceutical companies, and any other strategies, that may delay generic drug competition.

Before beginning the proposed study, the Commission is required to seek public comment on the information requests that would be sent to approximately 30 innovator drug companies and 60 generic firms in the pharmaceutical industry. The format of these requests is detailed in a Federal Register notice that provides additional background on why the Commission believes such an investigation is necessary, how the information would be collected and used, and the estimated burden (both in terms of cost and human resource requirements) of the planned study. All comments received will be considered before the FTC submits a request to the Office of Management and Budget to begin the study. Written comments should be submitted to: Secretary, Federal Trade Commission, Room H-159, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580. Comments may also be submitted electronically to: generic drugstudy@ftc.gov. They must be received within 60 days of the date the Federal Register notice is published.

The Commission vote to approve publication of the Federal Register notice seeking public comment, to request approval from OMB and, if approval is obtained, to issue compulsory process to investigate agreements between and among pharmaceutical companies and any other strategies that may delay generic competition was 5-0.

NOTE: The Federal Register notice detailing the Commission's request for public comment is available from the FTC's Web site at www.ftc.gov. For more detailed information about the Commission's action in the Hoechst/Andrx and Abbot/Geneva matters, see the FTC's press release dated May 16, 2000 (http://www.ftc.gov/opa/2000/03/hoechst.htm).

Media Contact:

Mitchell J. Katz,
Office of Public Affairs
202-326-2161  

Staff Contact:

Michael Wroblewski
202-326-2155

(FTC File No. V000014)