Posted 02 October 2015
By Zachary Brennan
The Federal Trade Commission (FTC) on Thursday criticized the way brand-name drug manufacturers often tweak products' formulations shortly before a generic's entry to market, thereby delaying competition.
The practice, commonly known as "product hopping," can end up harming consumers as it impedes competition "from would-be generic entrants, which have sought FDA approval to sell a generic version only of the original formulation but not the replacement,” FTC says in an amicus brief filed with the US Court of Appeals for the Third Circuit.
The brief was submitted as part of a case in which Mylan Pharmaceuticals alleges that Warner Chilcott, which was acquired by Actavis in 2013 and is now known as Allergan, maintained a monopoly on the market for its antibiotic Doryx (which was later sold by Allergan to Mayne Pharma) by suppressing generic competition through three insignificant reformulations, combined with other efforts to curtail the availability of the original formulations.
In its brief, FTC described in detail the way brand-name companies can rein in generic competition by making therapeutically insignificant tweaks to dosage levels or to the form of administration (e.g., capsules vs. tablets) just prior to the generic's entry to market.
After those tweaks are made, the brand-name manufacturer then seeks to extinguish demand for the original version of the drug.
"For example, the manufacturer might restrict or eliminate the supply of the original formulation, increase its effective price to patients, or flood physician offices with free samples of the revised formulation but not the original to divert prescriptions to the revised formulation," FTC said. "That shift in prescriptions is generally a one-way street: once doctors prescribe a medicine and find that it works, they are generally reluctant to switch users back to the original formulation even if a cheaper generic version of it later becomes available."
And automatic substitution for the generic at the pharmacy level is thereby thwarted as it requires an FDA determination of therapeutic equivalence, which is specific to dosage and form.
Theoretically, FTC added, insurers paying for the drugs are incentivized to persuade doctors to switch patients back to generics, even if there are new formulations of the branded drugs, but research suggests that such efforts "have been generally ineffective in influencing physicians’ responses to product-hopping behavior."
Mylan v. Warner Chilcott
The product-hopping scheme alleged in this case involves delayed-release doxycycline hyclate, a prescription drug used primarily to treat severe acne, which is marketed by the defendant Warner Chilcott under the brand name Doryx, while plaintiff Mylan sought to market a generic version.
Mylan alleges that, before generic entry, Warner Chilcott curtailed the availability of the original formulation via three successive product reformulations that, according to Mylan, offered little or no therapeutic benefit to consumers.
However, a district court ruled in favor of Warner Chilcott, concluding that the company did not have a monopoly because of the “the interchangeability of Doryx with other oral tetracyclines.” While recognizing the product hops, the court also said that Mylan could have competed with Warner Chilcott through means other than automatic substitution and it faulted Mylan for not promoting its generic through other means, such as advertising or marketing.
But the FTC said the district court erred in its judgment because, “It relied heavily on evidence that Doryx is therapeutically similar to other antibiotics.
"Without automatic substitution, the disconnect between prescribing physicians and payors often insulates brand-name prescription drugs from effective price competition, and a given drug may be priced at monopoly levels even if other drugs are therapeutically similar," FTC said.
FTC also said the district court "was wrong to dismiss automatic substitution as a mere 'regulatory windfall' undeserving of antitrust protection."
And as far as Mylan's claim that Warner Chilcott’s reformulations had no redeeming therapeutic value, FTC concluded that the district court, “Did not examine that claim on the merits; instead, it expressed broad-brush opposition to product-hopping liability in any circumstances. This Court should thus remand the case with instructions to apply the antitrust principles set forth above."
FTC Amicus Brief