FDA and FTC Say They Will Work Collaboratively to Deter Anticompetitive Behavior

A press release from the US Food and Drug Administration and the Federal Trade Commission announced the signing of a joint statement that focuses on anticompetitive behavior in the biosimilar market. According to the FDA and FTC, this statement describes “key steps the agencies will take to address false or misleading promotion about biosimilars within their respective authorities and deter anticompetitive behavior in this space.”

FDA and FTC Collaboration

When introducing the Biosimilar Action Plan in 2018, former FDA Commissioner Scott Gottlieb noted that biosimilar market competition is being hampered by reference manufacturers’ attempts to unfairly delay competition. “Strengthening the partnership and interagency coordination between FDA and FTC will help each agency address and deter anticompetitive behavior in the US market for biological products,” stated the federal agencies today. “Such behavior might include anticompetitive reverse payment agreements, abusive repetitive regulatory filings, or misuse of restricted drug distribution programs.

Food and Drug Administration

In the press announcement, FDA Commissioner Stephen M. Hahn remarked, “Strengthening efforts to curtail and discourage anticompetitive behavior is key for facilitating robust competition for patients in the biologics marketplace, including through biosimilars, bringing down the costs of these crucial products for patients.”

FTC Chairman Joseph Simons added, “The FTC is committed to continuing to enforce the antitrust laws in healthcare markets, including those for biologics and biosimilars.”

The FDA and FTC have pledged to begin efforts in 4 areas:

  • They will coordinate to promote greater competition in biologic markets.
  • They will work together to deter behavior that impedes access to samples needed for the development of biologics, including biosimilars.
  • FDA and FTC intend to take appropriate action against false or misleading communications about biologics, including biosimilars, within their respective authorities. FDA is publishing a draft guidance outlining considerations for FDA-regulated advertisements and promotional labeling that contains information about biologic products.
  • FTC will review patent settlement agreements involving biologics, including biosimilars, for antitrust violations.

A Real Beginning for the Biosimilar Action Plan?

It is unclear what action(s) will arise from this joint statement. Although a few initiatives have been implemented, such as limiting the ability of Citizens Petitions to delay FDA decision making on biosimilar applications, both the FDA and FTC have not addressed other opportunities to attack anticompetitive behavior in this marketplace.

Legislation, such as the CREATES Act (first introduced in 2017 and is awaiting action in 2020), was intended to address the ability of prospective biosimilar makers to obtain biologic samples from reference manufacturers. It is unclear what teeth FDA or FTC will use to take a bite out of these delaying tactics.

In 2019, the Trump administration backed away from the removal of the drug rebate safe harbor, believing that it might somehow result in higher Medicare premiums. Pfizer’s 2017 lawsuit against Janssen Biotech seeks to address the use of exclusionary rebate contracts. No other significant actions against drug rebates have been taken to date.

The FDA has unintentionally encouraging misinformation by requiring the use of four-letter suffixes for the biosimilars but not their reference products. Interestingly, the FTC disagreed with this policy, and submitted comments to the FDA explaining why it believes this will contribute to misinformation.

The FTC has been opposed to “pay for delay” deals, which have principally been seen in the generic marketplace. Legislators have tried to move proposals through Congress or the Senate that prevent these arrangements, but these have not progressed very far. In the biosimilar arena, licensing arrangements that pay royalties to the reference manufacturer and allow biosimilar firms to start marketing their product after a certain date may not exactly fit this “pay-for-delay” description. Further, some argue that these arrangements may actually create an avenue for earlier access to the less-expensive biosimilar.

Importantly, the FTC has not yet taken any material action to address the anticompetitive patent thickets that prevent marketing of biosimilars for some of oldest biologic agents.

Is this statement by the FTC and FDA a first step in activating the Biosimilar Action Plan? Or is it a first step towards a collaboration that leads to a beginning?

Budget Proposal Floats an Idea to Discourage Pay-for-Delay Deals

The Department of Health and Human Services (HHS) had signaled in the past that it would seek to discourage the signing of “pay-for-delay” agreements. These agreements contribute to slow access to less-expensive biosimilars. The recently released budget proposal from the Trump Administration, though dead on arrival in Congress, does include a provision that could bring biosimilars to the market earlier.

Under this proposal, any reference product manufacturer involved in a pay-for-delay agreement would see drug reimbursements cut by close to 40%. Specifically, the originator drug would be paid at a new rate, ASP minus 33%, down from the standard ASP plus 4.2% (ASP + 6% not considering the financial sequester).

pay-for-delay agreements

The Trump Administration added that this new reimbursement rate would be imposed, not only for those signing other manufacturers to pay-for-delay agreements, but also if the originator manufacturer engages in “anticompetitive action” once marketing exclusivity expires. This action is likely a reaction to both the Pfizer v. Janssen Biotech lawsuit involving infliximab and the creation of patent thickets.

These provisions in the budget proposal do hold some potential. Yet the pharmaceutical industry will argue that the arrangements that are currently signed that delay launch for biosimilars of adalimumab and trastuzumab, for example, do not involve upfront payments to the prospective biosimilar manufacturers. They simply end expensive patent litigation, in exchange for royalty payments upon biosimilar sales commencing on an agreed-upon date. In contrast, pay-for-delay deals for generic drugs were just that —a large upfront payment by the brand manufacturer to persuade the generic drug maker to allow the former to rake in more profits.

Arrangements of this type do still significantly delay the launch of previously approved biosimilars. If one manufacturer decides to launch “at risk” (before patent litigation is resolved), that company could attempt to gain a large share of the market. Pfizer planned to do this with Inflectra®, but miscalculated the discounts that would be necessary to move marketshare. Janssen took action to drastically increase the rebates it offered, making it less attractive to payers to move away from Remicade®.

Perhaps the more intriguing question here, is what would be the definition of “anticompetitive action?” The administration could define this quite broadly (which no doubt will evoke actions, including lawsuits, to render the phrase harmless). If it defines the current drop-the-patent-litigation-for-royalties arrangements as anticompetitive, it could result in big savings for the government in lower payments for drugs like Humira® and Herceptin®. The definition of anticompetitive action could even be extended to exclusive positioning on formulary (in exchange for more rebate dollars). Of course, this also may depend on how the government, pharmacy benefit managers, and payers view rebates in the future.

If that should happen, don’t expect private payers to continue to reimburse for originator drugs at the higher rate. They will want similar savings (particularly if they cover both Medicare and commercial populations).

Back to reality for a moment: The budget proposal has no chance of approval in a Congress with a Democratic majority. However, this provision does signal how HHS wants to approach the pay-for-delay issue. And it may receive a warmer reception as part of other legislation.