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 FDA is publishing a draft guidance outlining considerations for FDA-regulated advertisements and promotional labeling that contains information about biologic products.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?

Will Government Action to Spur the Biosimilars Industry Have Any Bite?

“Biosimilars are such an underutilized entity to truly drive down costs and generate savings. We are heartened by the fact that several pieces of legislation have been introduced to help change provider and patient incentives,” said Molly Burich, MS, Director, Public Policy, Biosimilars and Reimbursement at Boehringer Ingelheim.

A panel at last week’s GRx+Biosims meeting focused its remarks on the potential of legislative proposals brewing on Capitol Hill to incentivize biosimilar uptake.

Incentives for Patients and Doctors

In Medicare Part B, Ms. Burich explained, beneficiaries have a 20% co-insurance, and about 85% will have wraparound or gap insurance that covers this out-of-pocket cost. However, about 15% do not. According to Ms. Burich, removing this co-insurance for biosimilar use through the legislative process would generate sufficient savings through the lower costs of these drugs to fund it.

Molly Burich, MS

“Physicians say that patient out-of-pocket costs,” she noted, “are their number 2 concern.” She also raised the potential of utilizing a shared-savings model to incentivize biosimilar use, such as allowing clinicians who prescribe the lower-cost drug to share in the government’s savings. Legislation containing this provision has not yet been introduced, she emphasized.

Another mechanism to induce greater physician prescribing is to increase the average sales price (ASP) add-on payment, where ASP+8% may incent more physicians to prescribe biosimilars. The current payment of ASP+6% hasn’t encouraged sufficient physicians and groups to move to biosimilars, said Ms. Burich.

What About Part D?

Recognizing that virtually all marketed biosimilars are covered under a medical or Part B benefit, Mr. Burich pointed out that “we should be using this time to prepare the Part D benefit for biosimliars.” Many payers currently manage the use of self-administered injectables under the pharmacy (or Part D) benefit, and when adalimumab biosimilars are available in 2023, payers will need to be ready. She said that a couple of ideas were introduced around the Medicare Star ratings for Medicare Advantage plans, by perhaps alerting beneficiaries of lower-cost products being available on formulary.

Erika Satterwhite

As Erika Satterwhite, Head of Global Biosimilars Policy at Mylan, stated, “The core principal of biosimilars is access.” Yet, patent abuse is the number 1 challenge to bringing new biosimilars to the market. Admittedly, after the flurry of discussions earlier this year about the Federal Trade Commission (FTC) exercising its authority to invalidate anticompetitive patents, there is little activity to change this at the moment. Several current proposals in the Congress and Senate attempt to limit the number of patents for biologics that can be claimed subject to infringement (e.g., 20 in at least one proposal), but these bills, if passed, would only affect new biosimilar applications and companies choosing to participate in the “patent dance.”

James Carey

Even some biotechnology manufacturers are beginning to recognize the inherent problems with patents and access. James Carey, Executive Director, US Health Policy, Merck & Co., Inc, said, “Intellectual property [IP] is the lifeblood of our innovation. However, we have made it clear that we have a strong belief that once the IP has been exhausted, safe and effective biosimilars should be available on the market.” One bill in the House would require more transparency around patents; this would be reflected in a far more useful Purple Book than exists today.

Christine Simmons, Executive Vice President of the Association of Accessible Medicines, and President of the Association’s Biosimilar Council, reminded the audience that the inter partes review system “still remains an important avenue to resolve patent disputes.” Yet, as Mr. Carey pointed out, “The courts are clogged with cases—we need more judges to get through the backlog.” Ms. Simmons believes that we must maintain the ability for the biosimilar and innovator manufacturer to settle, and avoid waiting for the full patent expirations (perceived by the reference manufacturer).

What should be the role of the FTC? Ms. Simmons commented that the FTC has long been active on the biosimilars front. “The agency argued that an exclusivity period for biologics was unnecessary, and the FTC argued that the use of four-letter suffixes would harm their uptake. They’ve been engaged around the misinformation as well. However, much of their participation has been rhetorical. They haven’t had the opportunity to dig in,” she said. The panelists would not comment on FTC’s potential role in considering whether rebates were anticompetitive.

Reference Pricing and Drug Pricing

Ms. Satterwhite asserted that the success of biosimilars in Europe was not the result of an external referencing pricing model. “Implementing tenders in a place that does not use them does not get you to lower pricing,” she said.

Reference pricing, Ms. Satterwhite emphasized, could actually reduce access. “The European Commission has recommended against its use on the continent,” she said. “You need to look at the market context of the country you’re focused on.” Ms. Burich added that in the different EU countries, “many incentives were implemented for physicians and patients,” with the objective of  driving awareness of biosimilars.

Biosimilars in the US have long been viewed as a market-based way of increasing competition and lowering drug prices. The proposals today to negotiate Medicare drug prices for up to 250 drugs (as well as use of reference pricing mechanisms) could have a dramatic adverse impact on the pharmaceutical industry—perhaps up to $1.2 trillion over 10 years. “That means jobs will be lost and products won’t make it to market,” said Mr. Carey. He pointed out that Medicare drugs (in the Part B benefit by Medicare Advantage plans and in the Part D benefit by Part D plans) are negotiated heavily today.

Ms. Satterwhite reemphasized that the key point is sustainability of the biosimilar market in the US. “We need to unlock the barriers to sustainable competition, not just seek a short-term price cut.”

The question remains whether the myriad proposals put forth will enable the federal government to have a greater ability to assure this sustainability. To date, there is a great deal of talk but very little substantive action.

In other biosimilar news…Biogen is taking a more active role in promoting biosimilars in the US market. The Massachusetts-based company has been a principal investor in Samsung Bioepis. In 2018, it increased its investment in the South Korean company (to 50%). On November 6, it announced a deal with Samsung Bioepis to be the commercial marketer for SB11, an investigational ranibizumab biosimilar (reference drug, Lucentis®), and SB15, an investigational aflibercept (Eylea®). The new agreement also covers marketing rights for these products in Australia, Canada, Europe, and Japan. Biogen already markets Samsung biosimilars for etanercept, infliximab, and adalimumab biosimilars in Europe.

The FTC and Patent Thickets: A Conversation With Kevin M. Nelson, Esq., Partner, Schiff Hardin LLP, Chicago

On May 7, the Senate Judiciary Committee held hearings on how to clear the patent thickets obstructing access to lower-cost biosimilars. One of the key avenues raised during the hearings was moving the Federal Trade Commission (FTC) directly into the fray. We asked Kevin M. Nelson, our go-to expert on intellectual property issues, for his take on this possibility.

Biosimilars Review & Report: Kevin, thanks for trying to help us sort out these issues! Let’s set the stage first: Has the FTC dipped their toes into intellectual property (IP) and patent issues in the past?

Kevin Nelson, Esq: The way you phrased the question is appropriate. Yes, they have dipped their toes into patent issues a little bit. It’s sort of a dicey field for the FTC.

FTC and Patent Thickets
Kevin M. Nelson

To provide a bit of background, two matters come to mind. The first, Federal Trade Commission v. AbbVie, had to do with Androgel®, where the FTC alleged violations of section 5 of the FTC Act and sham litigation. This is usually a civil cause of action brought by generic companies. (Sham litigation is a form of anticompetitive litigation that is “baseless or otherwise without any legitimate foundation.” It is usually a delaying tactic to prevent product competition for extended periods of time). Antitrust violations can be difficult to prove, so sham litigation, which can also be a high hurdle, is sometimes alleged. Interestingly, in the Androgel matter, the FTC’s decision did make it past the District Court level, but I believe it is currently on appeal. But there was a large disgorgement ordered by the District Court in the $500 million range. One of the primary things the Commission said was that the lawsuits filed delay competition, and those lawsuits were objectively and subjectively baseless. So the FTC did wade into the patent issue.

The second was Federal Trade Commission v. Bristol-Myers Squibb, which involved BuSpar®. In its investigation, the FTC found that there was not only false listing in the Orange Book but false statements to the US Patent Office by Bristol-Myers Squibb, and also baseless allegations of patent infringement.

So the FTC has dipped its toes in the water in evaluating the patent issues and the merits of patents as part of its jurisdiction of looking at whether there is anticompetitive injury. The focus has been more in the FTC Act versus one of the traditional antitrust acts.


BR&R: Will legislation be necessary to provide the FTC the necessary authority to investigate patent filings that hinder competition?

Nelson: The FTC already does have the authority to bring causes of action where there has been unlawful use of patent rights in order to delay or harm competition. That’s the FTC’s mission—to protect competition. If there is any action to harm competition, the FTC has the tools to address that right now. The Androgel matter is a perfect example. The FTC used the FTC Act, not the Antitrust Act, but the result was the same—a significant disgorgement of profits, which is the penalty that we as consumers would want to occur if someone was abusing their patent rights.

BR&R: One way the FTC may intervene in the biosimilar patent thickets is to focus solely on the expiration of the composition-of-matter patents when deciding on the timing of a biosimilar launch. Might this start us on a slippery slope? In this case, the Commission would disregard patents involving new formulations, new manufacturing processes, new indications, etc, as a separate, less-essential group. We’re not talking necessarily about invalid or obfuscating patents per se.

Nelson: It will be interesting to see exactly what the legislative proposal will say. Right now, it’s a bit unclear.

The first problem that we’re seeing, is that the FTC has the tools to act, but these tools can only be used after the fact, or after competition has been harmed.

Problem 2 then becomes, if we try to do something before the competition is harmed (or to prevent this harm) and we allow some patents to be asserted, we will be getting into constitutional concerns. If you bring lawsuits based on patents, is that a violation of Takings Clause? [Editor’s Note: The Takings Clause is found in the Fifth Amendment of the Constitution, and prohibits the government from taking personal property without just compensation.] A product may be protected by subsequent, legitimate patents; we can’t prejudge that.

The Constitution prohibits the government, at least right now, from saying that “you cannot assert these patents.” That also relates to a petitioning or free speech issue. If I file a lawsuit because I have a patent, and the FTC says I can’t file that lawsuit, does that interfere with my free speech rights? The answer is yes, unless your lawsuit was objectively and subjectively baseless.

That’s where we get into FTC’s dilemma now. It will be very interesting to see the remedies that will be proposed, especially since there may be better avenues out there.


BR&R: It sounds like the FTC doesn’t lack the authority, but legislation would have to be passed to further define how it can enforce this authority.

Nelson: I don’t know that we need new legislation to further define the FTC’s authority, rather there needs to be direction in terms of their priorities. The FTC could enforce these issues, but that has been low on its priorities.

For example, the Commission have been very active in the pay-for-delay area. A lot of their actions are the result of anticompetitive acts that took place in the early 2000s. We’re not seeing much action today where the government is trying to punish companies for wielding an unfair number of patents—where many of them are improperly issued or should not be enforced at all. That needs to be more of a policy focus or objective of the FTC.

BR&R: Assuming the FTC does get involved more proactively in policing anticompetitive patents, do you think that might affect drug manufacturers who intend to seek new formulation/manufacturing patents and others in the future?

Nelson: The hope is that innovator companies would be careful in the types of patents that they pursue and try to enforce against potential competitors. Because there hasn’t been much enforcement in this area, we are seeing these 100-patent assertion cases, which put a strain on resources. In some companies, we are seeing less emphasis on a strategy of innovation and more on creating these patent thickets to delay competition. In several open forums, the FTC has actually expressed this view. And that’s not what we should be focusing on as a society. They should be focusing on the next generation of life-saving therapies, not putting a protective wall around older agents.

If the FTC is more willing to go after companies that are enforcing a lot of these improper patents, the manufacturers may actually start to refocus on innovation.

BR&R: When do you think the rubber will meet the road? Will the FTC be pushed in this direction?

Nelson: I think we will see that legislative proposal. The better focus is on things that have an impact on consumers, innovation, and competition. We do need legislation that limits or prohibits product hopping or product shifting; that’s a real concern and can be addressed. We can limit use of products that are “second-generation” and have no additional clinical benefit to patients over the original product. If there is no clinical benefit to the patient, then we shouldn’t be giving them exclusivity. That takes companies away from the incentive to protect old products and move them toward creating new innovative products.

I think a policy shift for the FTC, rather than a legislative shift, will encounter fewer obstacles.