FTC Files Amicus Brief Explaining That Pharmaceutical "Product Hopping" Can Be the Basis for an Antitrust Lawsuit
The Federal Trade Commission filed an amicus brief before the U.S. District Court for the Eastern District of Pennsylvania explaining that minor, non-therapeutic changes to a branded pharmaceutical product that harm generic competition can constitute exclusionary conduct that violates U.S. antitrust laws.
Although U.S. courts are properly reluctant to question the innovative value of a new product in most industries, the FTC's amicus brief states, "The potential for anticompetitive product redesign is particularly acute in the pharmaceutical industry."
Brand name pharmaceutical companies can try to obstruct generic competitors and preserve monopoly profits on a patented drug by making modest reformulations that offer little or no therapeutic advantages, a tactic known as "product-switching" or "product hopping," the amicus brief states. Prior to facing generic competition, a brand drug company can, for example, simply withdraw its original product, forcing consumers to switch to the reformulated brand drug and enabling the branded company to keep its market exclusivity and preventing consumers from obtaining the benefits of generic competition.
This "product-hop" may succeed despite the fact that consumers would not likely choose the new product. As the amicus brief states: "In the pharmaceutical industry … the success of a product-switching scheme does not depend on whether consumers prefer the reformulated version of the product over the original, or whether the reformulated version provides any medical benefit." Instead of making a choice, consumers are denied a real choice.
The FTC filed its amicus brief in conjunction with a private antitrust action against the pharmaceutical firm Warner Chilcott. Plaintiffs in that case allege that Warner Chilcott maintained a monopoly in the market for its antibacterial drug Doryx by suppressing generic competition through three successive insignificant reformulations of the drug.
Warner Chilcott has filed a motion to dismiss the case, essentially arguing that product reformulations are per se legal.
The FTC's amicus brief, however, asserts: "Applying a per se legal standard, as Warner Chilcott effectively advances here, would entitle brand pharmaceutical companies as a matter of law to manipulate the FDA regulatory process and undermine state and federal laws that encourage generic competition."
The FTC vote approving the amicus brief filing was 4-1, with Commissioner Rosch voting no. It was filed with the court on November 21, 2012.
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