FTC targeting improper drug patents, receives backing from FDA

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The Federal Trade Commission has issued a policy statement warning pharmaceutical companies that make and sell brand-name drugs that they could face legal action if they improperly list patents in the FDA's catalog of "Approved Drug Products with Therapeutic Equivalence Evaluations," commonly known as the "Orange Book." This policy has been endorsed by the U.S. Food and Drug Administration.

Improperly listing patents in the Orange Book may harm competition from less expensive generic alternatives and keep prices artificially high, according to the policy statement. The FTC will scrutinize improper Orange Book patent listings as potential unfair methods of competition in violation of Section 5 of the FTC Act.

FTC Chair Lina M. Khan said that these listings illegitimately delay or bar generic manufacturers from entering the market. This, she said, deprives people of access to lower-cost drugs, prompting the agency to combat what it sees as illegal practices that are inflating the price of medicines.

In support of this position, the FDA said it "stands ready to assist the FTC as part of our long history of collaboration to protect American consumers, including our continued engagement under the Executive Order on Competition in the American Economy to help identify and address efforts to block or delay generic drug and biosimilar competition."

WHAT'S THE IMPACT?

The FDA's Orange Book is a list of drug products approved by the agency as safe and effective. When a brand pharmaceutical company lists a patent in the Orange Book, it may lead to a statutory stay that blocks the introduction of competing drug products for up to 30 months, including lower-cost generic alternatives. 

Listing patents in the Orange Book can, however, tend to negatively affect competitive conditions if listings are improper, as defined by law, the FTC said.

As described in the policy statement, listing certain types of brand drug patents in the Orange Book is a statutory requirement. If a brand company files a timely patent infringement action based on a listed patent, the brand company may be entitled to an automatic 30-month stay of approval of the marketing application for the generic's drug product while the companies litigate potential patent infringement, regardless of whether the patent is invalid or not infringed.

As the policy statement describes, improper patent listings may unlawfully delay generic competition for years and disincentivize generic manufacturers from trying to come to market with lower cost alternatives. 

Such improper patent listings have likely been distorting pharmaceutical markets for decades, the agency said. A 2002 FTC study, for example, identified numerous instances in which the automatic 30-month stay was used to block competition. Since then, the commission has filed several lawsuits and amicus briefs in court alleging the anticompetitive impacts of improper Orange Book patent listings.

"Patents improperly listed in the Orange Book can significantly undermine competition and harm the American public," the policy statement emphasized. "The FTC will continue to use all its tools to halt unlawful business practices that contribute to high drug prices." 

These tools include using FDA's regulatory process for disputing a brand company's patent listing, and potentially pursuing relief under the antitrust laws including Section 5 of the FTC Act.

THE LARGER TREND

HHS' analyses of prescription drug prices from 2016-2022 show that if the Inflation Reduction Act had been in place from July 2021 to July 2022, more than 1,200 prescription drugs potentially would have been subject to the new provision requiring drug manufacturers to pay rebates to Medicare if they enact price increases greater than inflation for drugs. Price increases on those drugs in the month the price change took effect averaged more than 30%.

Linking the cost of prescription drugs in the U.S. to the prices paid in other high-income nations could have reduced American spending for the drugs by at least half in 2020, a RAND study found last year.

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com