Close Close

Portfolio > ETFs > Broad Market

Drugmaker tactic to block generics may violate law, FTC says

Your article was successfully shared with the contacts you provided.

(Bloomberg) — Pharmaceutical companies that make minor tweaks to brand-name drugs in order to blunt competition from cheaper generic treatments may be violating antitrust laws, the U.S. Federal Trade Commission (FTC) said.

The practice, known as “product-hopping,” harms consumers who save billions of dollars each year through generic competition and undermines laws that allow pharmacists to automatically substitute brand-name drugs with low-cost copycats, the commission said.

“Such conduct could deprive generic companies of their most efficient means of distribution — automatic substitution at the pharmacy — and, as a result, maintain the brand’s monopoly through illegal means,” the FTC said in a statement Thursday.

The FTC is asking the 3rd U.S. Circuit Court of Appeals to reinstate a lawsuit in which Mylan NV claims that the makers of an antibiotic called Doryx changed the formula to thwart competition. Allergan PLC had the rights for Doryx in the United States until earlier this year when it sold them to Mayne Pharmaceuticals.

Brand-name drugmakers sometimes make insignificant formulation changes to their products just before patents are about to run out and as generics are about to come to the market. Those formulation tweaks let the drugmaker switch patients to the new brand-name drug, or to make improved product claims, blunting use of the less-expensive generics.

Mark Marmur, a spokesman for Allergan, didn’t immediately respond to requests for comment. Nina Devlin, a Mylan spokeswoman, declined to comment.

Claims dismissed

A trial judge in Pennsylvania had dismissed Mylan’s claims in the Doryx case, saying Mylan failed to prove any anticompetitive harm in the actions by the drugmaker. The FTC said the 3rd Circuit should have taken into account the unique elements of the pharmaceutical market, like pharmacists’ ability to automatically substitute a cheaper generic for a brand-name treatment, which can save consumers money.

Doryx isn’t the only recent example. The FTC’s brief mentions a case where the state of New York sued Actavis, now Allergan, over its Alzheimer’s disease drug Namenda.

“In that case, a brand-name manufacturer altered the formula for an anti-Alzheimer’s drug to avoid automatic generic substitution, and it took various steps, including sharply limiting supply of the legacy version, to ensure that most physicians would prescribe only the reformulated version before the expected date of generic entry,” the FTC said in the brief. In May, a court barred Allergan from restricting access to the original drug.

The FTC also mentioned Teva Pharmaceutical Industries Ltd.’s case against Abbott Laboratories regarding the cholesterol-lowering drug TriCor. Teva and others involved in the drug industry claimed Abbott patented new formulations of TriCor with only minor changes in order to block competition. Abbott agreed to pay $184 million to settle the lawsuits.

“A company is unlikely to face potential antitrust liability if it does not take targeted steps to damage the market for the original formulation and instead allows the marketplace itself to choose between that formulation and the modified version,” the FTC said.

—With assistance from Susan Decker in Washington.