Rx DRUGS II: FTC Probes Brand Name-Generic Drug Deals
The FTC plans to subpoena records from 90 pharmaceutical companies in an investigation into whether industry practices keep "lower-cost generic drugs" from patients, the New York Times reports. The agency has already filed complaints against two brand-name makers and two generic companies -- not named by the New York Times -- saying they made deals that kept or delayed generic versions of two brand-name drugs from entering the market, eliminating competition that could produce "considerable savings" for customers. Noting that drugs with $20 billion in annual sales will come "off patent" in the next five years, FTC Commission Chair Robert Pitofsky said the proposed industry study, which must undergo public comment and be approved by White House budget officials, is intended to "ensure that the process of bringing new low cost generic alternatives to the marketplace ... is not impeded in ways that are anticompetitive." The FTC's "concerns" stem from the 1984 Hatch-Waxman Act, which sought to create "greater competition between generic and brand name drugs." But Rep. Henry Waxman (D-Calif.), the bill's co-author, now says the law has been used "to delay competition, rather than foster it" (Gerth, New York Times, 10/12). If approved, the FTC study will examine whether provisions of the law, which permit companies to seek FDA approval for generic drugs before a patent has expired, have been "manipulated." Dr. Larry Sasich, a pharmacist with the consumer advocacy group Public Citizen, said, "It's about time [the FTC started] looking at this, but the overall issue is still about the price of prescription drugs." He added there is a notion "that the pharmaceutical industry has some kind of public health mandate, and in fact they behave in the same manner that any other business would operate in ... and that is in their own financial self-interest" (Jaspen, Chicago Tribune, 10/12). Jackie Cottrell, a spokesperson for the Pharmaceutical Research and Manufacturers of America said a comment on the study would be "premature", but added, "[W]e are confident that any balanced study by the FTC will find the brand name industry's practices are beneficial to patients" (New York Times, 10/12).
Settlement Prompts Further Inquiries
The FTC said the probe was in part triggered by a settlement with Chicago-based Abbott Laboratories and Geneva Pharmaceuticals, a unit of Novartis AG, over charges that Abbott paid Geneva not to market a generic form of Hytrin, Abbott's brand-name hypertension drug, until a district court resolved a patent infringement suit between the two firms. Abbott "admitted no wrongdoing" and the companies were not fined, but were prohibited from engaging in similar deals in the future. Abbott said its agreement with Geneva was "in accordance with all laws," but the FTC said the case and "similar arrangements it recently has uncovered warrant further study" (Chicago Tribune, 10/12). A study last year by Yale University economist Paul MacAvoy found consumers saved $112.5 billion with generic drugs between 1985 and 1997. In addition, despite lost sales, brand-name companies increased their spending on research and development from $4 billion to $18 billion over the same period (New York Times, 10/12).