FTC to Study Generic Prescription Drugs

On March 29th, the Federal Trade Commission announced its intention to conduct a study of the use, and likely short- and long-term competitive effects, of authorized generics in the prescription drug marketplace. An authorized generic is chemically identical to a particular brand-name drug, but the brand-name manufacturer authorizes it to be marketed in a generic version. This study continues the FTC's research and development efforts to identify and report on marketplace trends and developments that affect the price of prescription drugs. Comments on the FTC's “Authorized Generic Drug Study” were accepted until June 5, 2006. The Commission also authorized the staff to use compulsory process to collect the information needed for the study from approximately 80 brand-name drug manufacturers, 10 authorized generic companies, and 100 independent generic manufacturers.
In certain circumstances, the Hatch-Waxman Act allows the first-filing generic competitor of a branded drug a 180-day marketing exclusivity period. This marketing exclusivity period granted to certain generic first-filers, however, does not preclude competition from “authorized generics” that have an approved New Drug Application on file with the FDA. Recently, brand-name drug makers began marketing authorized generics at exactly the same time the generic first-filer is beginning its 180-day marketing exclusivity period, leading to questions about the effects of authorized generics on pharmaceutical competition.

The goal of the Commission's study will be to assess the likely short- and long-run effects of market entry by authorized generics on generic drug competition. Among other things, the study will examine actual wholesale prices (including rebates, discounts, etc.) for brand-name and generic drugs, both with and without competition from authorized generics; business reasons that support authorized generic entry; factors relevant to the decisions of generic firms about whether and under what circumstances to seek entry prior to patent expiration; and licensing agreements with authorized generics. The data collected will enable the FTC to advance the understanding of the effects of generic entry on prescription drug prices – in particular, the role of the 180-day exclusivity period in generic competition prior to patent expiration – beyond what is available in the economic literature today.

During the public comment period, the Commission sought information on, among other things: 1) whether the proposed information collection was needed for the proper performance of the agency's functions and whether what was collected will have practical utility; 2) the accuracy of the FTC's estimate of the burden of the information collection; 3) ways to limit the number of companies included in the study without undermining the validity and reliability of the study results; 4) ways to enhance the quality, utility, and clarity of the information to be collected; and 5) ways to minimize the burden of collecting the information on companies asked to respond.