FTC: Minor Drug Changes To Prolong Monopoly May Violate Antitrust Law

AntitrustOn November 21, 2012, the U.S. Federal Trade Commission filed in the U.S. District Court for the Eastern District of Pennsylvania an amicus brief contending that minor, non-therapeutic changes to branded pharmaceutical products may violate U.S. antitrust law if the changes harm generic competition. Amicus Brief, Mylan Pharmaceuticals, Inc. v. Warner Chilcott Public Limited Co., No. 12-3824 (E.D. Pa.).

The FTC states in its brief that name brand pharmaceutical companies may attempt to block generic competition and preserve their monopolies by making modest reformulations of patented drugs that offer little or no therapeutic advantages. For example, before its original drug patent expires, a brand drug company may withdraw its original product from the market, inducing consumers to switch to the reformulated brand drug. This practice, known as “product switching” or “product hopping,” can freeze out generic competitors and enable the brand company to maintain a monopoly.  The FTC explains that,

Once the original version of the brand product is less available or more expensive, physicians will stop writing prescriptions for it. Because the prescription must contain, among other things, the same dosage and form as the generic for a pharmacist to substitute it for the brand, a product-switch will effectively eliminate substitution at the pharmacy counter and thus meaningful generic competition.

In addition, “If the brand manufacturer reformulates its product before a generic receives FDA approval, the generic’s only practical option is to go back to the drawing board and reformulate its own product to be bioequivalent to the brand reformulation and thus substitutable at the pharmacy. ”

According to the FTC, the success of “product-switching” “does not depend on whether consumers prefer the reformulated version of the product over the original, or whether the reformulated version provides any medical benefit.” The exclusion of competition under these circumstances, the FTC says, can violate antitrust law. The Commission cited for this proposition United States v. Microsoft, 253 F. 3d 34 (D.C. Cir. 2001), where the court expressly held that a monopolist’s product change can violate the antitrust laws when the change is made for anticompetitive purposes and with anticompetitive effect.

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