FTC To Study Competitive Effects Of Authorized Generics Under Hatch-Waxman Act

On March 29, 2006, the FTC announced that it will conduct a study of the use, and likely short- and long-term competitive effects, of authorized generics in the prescription drug marketplace. Pricing and competition in the pharmaceutical industry is one of the hottest topics in antitrust law.

The FTC notice explains:

In certain circumstances, the Hatch-Waxman Act allows the first-filing generic competitor of a branded drug a 180-day marketing exclusivity period. This marketing exclusivity period granted to certain generic first-filers, however, does not preclude competition from "authorized generics" that have an approved New Drug Application (NDA) on file with the FDA. Recently, brand-name drug makers have begun marketing authorized generics at exactly the same time the generic first-filer is beginning its 180-day marketing exclusivity period, leading to questions about the effects of authorized generics on pharmaceutical competition.

The goal of the Commission's study will be to assess the likely short- and long-run effects of market entry by authorized generics on generic drug competition. Among other things, the study will examine actual wholesale prices (including rebates, discounts, etc.) for brand-name and generic drugs, both with and without competition from authorized generics; business reasons that support authorized generic entry; factors relevant to the decisions of generic firms about whether and under what circumstances to seek entry prior to patent expiration; and licensing agreements with authorized generics. The data collected will enable the FTC to advance the understanding of the effects of generic entry on prescription drug prices -- in particular, the role of the 180-day exclusivity period in generic competition prior to patent expiration -- beyond what is available in the economic literature today.