Muris Testifies on Competition in the Pharmaceutical Industry

The Chairman of the Federal Trade Commission today told a Senate committee that the agency is extending its efforts to protect consumers from anticompetitive practices that block the timely entry of generic drugs to market. Testifying before the Committee on Commerce, Science, and Transportation, Timothy J. Muris praised the Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act for promoting robust competition in the pharmaceutical industry and ensuring that the benefits of pharmaceutical innovation would be widely available to consumers. He noted, though, that in spite of a "remarkable record of success," the amendments also have been subject to abuse in the pharmaceutical industry. "Although many drug manufacturers - including both branded companies and generics - have acted in good faith, some have attempted to 'game' the system, securing greater profits for themselves without providing a corresponding benefit to consumers," Muris testified. "It is these anticompetitive efforts that the Federal Trade Commission has addressed."

Muris highlighted the FTC's first generation litigation which focused "on patent settlement agreements between branded companies and generic companies that the Commission alleged delayed the entry of one or more generics. Resolving patent infringement litigation through settlement can be efficient and procompetitive. Certain patent settlements between brands and generics, however, drew the Commission's attention when it appeared that their terms may have maintained monopolies through abuses of the Hatch-Waxman regime." Muris cited the FTC's consent settlements in Abbott/Geneva and Hoechst/Andrex as examples of company agreements whose "primary effect appears to be to delay generic entry, leading to less vigorous competition and higher prices for consumers."

In addition, Muris announced the FTC's newest enforcement action in the Commission's "second generation" of litigation which involves unilateral action by branded manufacturers to delay generic competition. "Today, the Commission is announcing that it has accepted for public comment an agreement and proposed consent order with Biovail Corporation, settling charges that Biovail illegally acquired an exclusive patent license and wrongfully listed that patent in the Orange Book for the purpose of blocking generic competition to its branded drug Tiazac. This is the Commission's first enforcement action to remedy the effects of an allegedly anticompetitive Orange Book listing," he stated.

Beyond the FTC's litigation efforts, Muris noted, the FTC is conducting an industry-wide study of generic drug competition to "provide a more complete picture" of generic drug competition developments under the Hatch-Waxman Amendments. To be completed this summer with results contained in a published report, the study will help determine whether, among other things, the types agreements the FTC has challenged between branded and generic drug manufacturers are isolated instances or typical of industry practices.

The FTC's study, he noted, will look at how often the amendment's 180-day marketing exclusivity provision has been used. The report will determine the frequency of branded manufacturers initiating patent litigation versus cases in which patent litigation has been settled or litigated to a final court decision. In addition, the study will monitor manufacturers' patent listings in the Orange Book, the timeliness of the listings, and the number of challenges by generics. Finally, the study will examine whether the size of a drug product's sales affects the likelihood that a particular strategy will be used to delay generic competition.

"The Commission has been and will continue to be very active in protecting consumers from anticompetitive practices that inflate drug prices," the testimony says. "The Commission looks forward to working closely with the Committee, as it has in the past, to ensure that competition in this critical sector of the economy remains vigorous. In keeping with this objective, the Commission will likewise endeavor to ensure that the careful Hatch-Waxman balance - between promoting innovation and speeding generic entry - is scrupulously maintained."

The Commission vote to present the testimony was 5-0.

The FTC's Bureau of Competition 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 Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 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.

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(FTC File No. P01 0101)