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From Antitrust Law Daily, November 8, 2017

FTC workshop considers competition in prescription drug markets

By Jeffrey May, J.D.

Acting FTC Chairman Maureen K. Ohlhausen kicked off a workshop this morning that focused on competition issues in prescription pharmaceuticals. In her opening remarks, entitled "Diagnosing the Treatments: Issues in Post-Patent Pharmaceutical Markets," Ohlhausen explained that the program was envisioned to consider the impediments to vigorous competition once pharmaceuticals are no longer protected by intellectual property rights.

The acting chairman warned that the agency’s focus on this issue should not lead to speculation about "a raft of new enforcement actions." She explained that the FTC may "ultimately determine there is a need for greater antitrust enforcement in pharmaceutical markets, but that decision will be made on the basis of specific facts and actual market effects, using the familiar methods and processes of antitrust law."

Ohlhausen began her remarks by noting that the FTC has made much progress on reviewing mergers involving prescription pharmaceuticals and challenging pay-for-delay agreements and abuse of government drug approval process. However, she predicted that "competition issues involving patented pharmaceuticals will remain a significant focus of the agency’s enforcement efforts in the years ahead."

Yet these efforts were not the focus of Ohlhausen's remarks or the workshop itself. "When you consider our pharmaceutical enforcement history in aggregate, it becomes strikingly clear that most of our work in this space has clustered around just one part of the broader Hatch-Waxman Act framework," said Ohlhausen. The Hatch-Waxman Act had two broad goals. It was intended to "protect the important intellectual property rights associated with new medicines, so that firms would retain appropriate economic incentives to develop vital new drugs and to undertake the costly work necessary to demonstrate their safety and efficacy." In addition, it included "incentives to induce generic entry once patents have run their course." According to Ohlhausen, "this second, vital part of the Hatch-Waxman framework has received far less attention."

While the Hatch-Waxman framework has improved access to low-cost generic drugs, the improvement has not occurred in every market. Ohlhausen explained that the FTC is trying to understand the root causes and the appropriate policy response for a lack of competition in some pharmaceutical markets where a drug is no longer protected by intellectual property rights.

The following questions were raised as a starting point for understanding the issues:

  1. What are the incentives (and disincentives) that generic manufacturers consider when making the decision to enter or refrain from entering the market for a particular pharmaceutical no longer protected by patents? Should policymakers or market participants alter those incentives to better align with the public interest in robust competition? If so, how?
  2. What strategies, if any, are being undertaken with the intent to reduce generic drug competition today? Are these strategies working and what impact are they currently having on these markets?
  3. What is the current role of intermediaries like group purchasing organizations and pharmacy benefit managers in these markets? What benefits do these intermediaries provide and what costs are they imposing today?
  4. How should all stakeholders evaluate proposals to reduce drug prices and increase consumer access?

Dr. Scott Gottlieb, the Commissioner of the Food and Drug Administration (FDA), also was on hand to discuss the FDA's efforts in this area.

"Our two agencies may have different missions and different spheres of responsibility, but we plan to work together closely to ensure that the markets for generic drugs work the way they should, and that U.S. consumers get the safe, efficacious and affordable medicines they deserve," Ohlhausen remarked.

The FTC is seeking public comments through December 8, 2017. To submit a comment, go to: https://ftcpublic.commentworks.com/ftc/pharmaworkshop.

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