AUTHORIZED GENERICS MAY FACE INCREASED FTC SCRUTINY
Although a growing number of generic drugmakers appear willing to participate in the authorized generics market, the controversial practice may soon face increased scrutiny from the FTC, according to an industry expert.
David Balto, an attorney with Robins, Kaplan, Miller and former policy director in the FTC's Bureau of Competition, said regardless of whether some generic firms are in favor of authorized generics, the anticompetitive nature of the business strategy is something the FTC is expected to monitor closely.
"Authorized generics lead to short-term cost savings for consumers and that's important, but that's not the end of an antitrust analysis," Balto said at the recent Institute for International Research's annual Generic Drugs Summit in Washington, D.C.
"Protecting incentives is crucial to the balance undertaken in the Hatch-Waxman Act," Balto added. "Without that, what efforts are [generic drugmakers] going to be making to challenge invalid patents? Authorized generics ... are in a number of ways a long-term disincentive to develop generics."
For instance, Balto said, a brand drugmaker may discourage generic competition by launching an authorized generic every time a standard generic product is launched, which can significantly lower profits for the generic company that is first to file an abbreviated new drug application.
Congress has already asked the FTC to investigate the competitive effects of authorized generics, Balto noted, citing a May 9 letter by Sens. Chuck Grassley (R-Iowa), Patrick Leahy (D-Vt.) and Jay Rockefeller (D-W.Va.) that asks the FTC to review the practice. The FTC could very well grant the request, said Balto, who noted the agency has undertaken several initiatives to address generic competition issues, including a study on generic drugs in 2002.
The issue of authorized generics remains a polarizing one among generic drugmakers, with some firms electing to stay out of the market and others jumping ship to form partnerships with brand firms. William Kennally, president of Pfizer's generics subsidiary Greenstone, said a schism has formed between the companies that support the practice and those that don't.
Most of the more than 30 generic-brand partnerships to market authorized generics have occurred since 2004, though the Generic Pharmaceutical Association (GPhA) came out with its first initiative that year against authorized generics, Kennally noted. In short, GPhA's members are "not aligned," he said. "The top is saying one thing and the troops are saying something else."