FTC Proposes Study of Competitive Impacts of Authorized Generic Drugs

The Federal Trade Commission today announced its intention to conduct a study of the use, and likely short- and long-term competitive effects, of authorized generics in the prescription drug marketplace. An authorized generic is chemically identical to a particular brand-name drug, but the brand-name manufacturer authorizes it to be marketed in a generic version. This study continues the FTC’s research and development efforts to identify and report on marketplace trends and developments that affect the price of prescription drugs.

Comments on the FTC’s “Authorized Generic Drug Study” will be accepted until June 5, 2006. The Commission also has authorized the staff to use compulsory process to collect the information needed for the study from approximately 80 brand-name drug manufacturers, 10 authorized generic companies, and 100 independent generic manufacturers.

In certain circumstances, the Hatch-Waxman Act allows the first-filing generic competitor of a branded drug a 180-day marketing exclusivity period. This marketing exclusivity period granted to certain generic first-filers, however, does not preclude competition from “authorized generics” that have an approved New Drug Application (NDA) on file with the FDA. Recently, brand-name drug makers have begun marketing authorized generics at exactly the same time the generic first-filer is beginning its 180-day marketing exclusivity period, leading to questions about the effects of authorized generics on pharmaceutical competition.

The goal of the Commission’s study will be to assess the likely short- and long-run effects of market entry by authorized generics on generic drug competition. Among other things, the study will examine actual wholesale prices (including rebates, discounts, etc.) for brand-name and generic drugs, both with and without competition from authorized generics; business reasons that support authorized generic entry; factors relevant to the decisions of generic firms about whether and under what circumstances to seek entry prior to patent expiration; and licensing agreements with authorized generics. The data collected will enable the FTC to advance the understanding of the effects of generic entry on prescription drug prices – in particular, the role of the 180-day exclusivity period in generic competition prior to patent expiration – beyond what is available in the economic literature today.

During the public comment period, the Commission is seeking information on, among other things: 1) whether the proposed information collection is needed for the proper performance of the agency’s functions and whether what is collected will have practical utility; 2) the accuracy of the FTC’s estimate of the burden of the information collection; 3) ways to limit the number of companies included in the study without undermining the validity and reliability of the study results; 4) ways to enhance the quality, utility, and clarity of the information to be collected; and 5) ways to minimize the burden of collecting the information on companies asked to respond.

The Commission will use the public comments to refine the study and to seek approval from the Office of Management and Budget (“OMB”) under the Paperwork Reduction Act to issue the information collection orders. With OMB approval, the Commission will likely issue the orders later this year, and prepare a final report in 2007.

The Commission vote authorizing the resolution directing the use of compulsory process and the publication of the Federal Register notice announcing the study was 4-0, with Commissioner Pamela Jones Harbour recused. Copies of the notice can be found on the FTC’s Web site as a link to this press release.

The FTC’s Bureau of Competition, in conjunction with the Bureau of Economics, seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

(FTC File No. P062105)