[Pharm-policy] 1998 FTC letter on generics and antitrust concerns, by Reps. Stark, Waxman and Berry

[James Love]

This 1998 letter to the FTC by Reps. Stark, Waxman and Berry sought the
FTC investigation into anticompetitive practices to discourage generic
entry.  Jamie


                December 10, 1998

The Honorable Robert Pitofsky
Chairman
Federal Trade Commission
Sixth and Pennsylvania Ave., N.W.
Washington, D.C. 20580

Dear Chairman Pitofsky,

We are writing to express our concerns about
anti-competitive practices in the prescription drug
industry that require immediate scrutiny by the
Federal Trade Commission (FTC). The potential for
millions of consumers to be denied access to
lifesaving pharmaceutical medical treatments during
the next decade warrants broad analysis by the FTC
of such practices and recent pricing trends by
leading brand-name and generic drug manufacturers.
Fueled by aggressive direct advertising to
consumers and reports of pending mergers between
major drugmakers, prescription drug spending is now
on the march again. 

We applaud the FTC's scrutiny of generic drug
manufacturer Mylan Laboratories' pricing practices
and raw material agreements. Mylan's dramatic price
increases, regardless of their relationship to
competing brand name prices, fell hardest upon
older and uninsured Americans who must pay
out-of-pocket for their medicines. Our hope is that
your agencyÕs review of the factors underlying
these aggressive price increases will encourage
competition and reduce prices.

The FTC's analysis of the prescription drug
marketplace would greatly benefit policymakers in
evaluating, for example, whether generic drug
companies are engaging in any anti-competitive
behaviors and restraints of trade in violation of
section 1 of the Sherman Act, such as
'shadow-pricing' of brand-name products. Also
critical is whether manufacturers of patented drugs
are increasingly turning to anti-competitive
strategies to keep lower-cost generic versions off
the market for as long as possible Ð as suggested
in recent media reports. Business Week recently
published a piece that indicates Schering-Plough
Corp. has 'a three-pronged strategy' designed to
keep potential generic competitors off the market
(see attached).

Efforts to extend monopolies through state laws
restricting generic substitution, such as DuPont
Merck Pharmaceuticals' lobbying on behalf of
Coumadin (warfarin) are particularly egregious. The
Food and Drug Administration (FDA) has consistently
held that its findings of bioequivalency obviate
any scientific basis for such legislation, which is
clearly intended to protect product market share,
and not the public health.

We also understand that the FTC is reviewing the
proposed merger of Hoechst-Marion-Roussel and
Rhone-Poulenc Rhorer under section 7 of the Clayton
Act. We wish to bring to your attention an overtly
anti-competitive effort to delay the introduction
of generic competition to Hoechst's calcium-channel
blocker, Cardizem CD (diltiazem).

In September 1997, generic manufacturer Andrx
agreed to defer marketing of its generic version of
Cardizem CD in exchange for an annual $40 million
payment from Hoechst. Despite receiving FDA
approval in July 1998, Andrx has refrained from
marketing its product under this agreement,
delaying the commencement of 180-day market
exclusivity as the 'first' generic manufacturer and
thus effectively barring other generic competitors
from the market.

Such collusion is clearly inconsistent with the
intent of the Food, Drug and Cosmetic Act, as
amended by the Waxman-Hatch amendments of 1984, and
is thoroughly at odds with the interests of
American consumers. Hoechst and Andrx have taken
advantage of recent ambiguity in the application of
the Act, creating the troubling anti-competitive
possibility that generic competition may be delayed
or even indefinitely postponed if the first generic
manufacturer colludes with the brand-name
manufacturer in marketing its generic drug.

A careful examination of the various ways in which
brand and generic drug companies price their
products would provide policymakers with valuable
needed information. Of equal importance will be the
debate over the fairest way to give Medicare
beneficiaries access to outpatient prescription
drug coverage.

Thank you for your consideration of this request.
We look forward to your response.

Sincerely,


                        
Pete Stark, MC  
Henry Waxman, MC                
Marion Berry, MC


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James Love, Director           | http://www.cptech.org
Consumer Project on Technology | mailto:love@cptech.org 
P.O. Box 19367                 | voice: 1.202.387.8030
Washington, DC 20036           | fax:   1.202.234.5176
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