THEY SAID IT! ANTITRUST EXPERTS AND OFFICIALS SHINE A LIGHT ON BIG PHARMA’S ANTI-COMPETITIVE PLAYBOOK

Federal Trade Commission Workshop Highlights How Brand Name Drug Companies Game the System to Keep Prices High — Demonstrating the Urgency for Congress to Act

This week, the Federal Trade Commission and U.S. Department of Justice Antitrust Division hosted a two-day virtual workshop on enforcing antitrust laws in the pharmaceutical industry. The workshop brought together administration officials, state attorneys general staff, and international enforcement partners to address Big Pharma’s anti-competitive behavior, as well as concerns about pharmaceutical mergers and acquisitions.

Industry experts outlined the wide array of tactics in Big Pharma’s anti-competitive playbook, including killer acquisitions, product hopping, sham petitioning, generic price-fixing conspiracies and other deceptive practices deployed by branded drug companies to maintain monopolies, keep drug prices high and bolster profits at the expense of American consumers.

Here is what Federal Trade Commission officials had to say:

Lina M. Khan, Chair, U.S. Federal Trade Commission: “Unfortunately, reports on the state of competition in the pharmaceutical markets in recent years have been troubling and underscore just how much work there is to be done. For example, just recently a study came out showing that the median list price for new drugs have soared from around $2,000 in 2008 to over $180,000 in 2021 – an increase of 20 percent per year. We also have seen empirical reports showing that killer acquisitions, or acquisitions made for the purpose of shutting down potential competitors, may be relatively common in the pharmaceutical industry. And we also have seen that relatively few leading drugs have been developed within the largest pharmaceutical companies, which are the companies that ultimately enjoy the vast majority of profits. And then of course we have seen a whole set of lawsuits surfacing various allegations that companies have been illegally bundling and tying market-leading drugs to exclude competitors for their drugs in recent years.”

Rebecca Kelly Slaughter, Commissioner, U.S. Federal Trade Commission: “In the U.S., spending on prescription drugs has increased from $30 billion in 1980 to $335 billion in 2018. Over that period, real per capita spending on prescription drugs has increased more than seven-fold, from $140 to $1,073. This is not only from consumers’ pockets, but a sizeable amount is taxpayer dollars spent on Medicare and Medicaid drug programs. When mergers diminish competition in pharmaceutical markets, the result is higher prices which can have a devastating effect on patients. Enforcement action is necessary to prevent such harms.”

“Pharma mergers matter because we know that the pharmaceutical industry has a particularly checkered legacy of anti-competitive conduct. In fact, anti-competitive conduct in the pharmaceutical industry is so widespread that we have an entire division of our agency dedicated to investigating this.”

Caroline N. Holland, Attorney-Advisor, U.S. Federal Trade Commission: “We’re all worried about killer acquisitions. Although our staff monitors the industry closely, there are obviously deals that are not public and fall outside of our radar… Mergers that might reduce drug research development really can diminish the innovation competition that results in scientific progress. This type of progress we’re trying to protect is very important and the risks of losing that are great enough to take this seriously and investigate it.”

The workshop also included panels of leading academics who discussed the incentive structure behind Big Pharma’s anti-competitive behavior and outlined specific instances of egregious practices top pharmaceutical companies use to undermine competition:

Michael A. Carrier, Distinguished Professor of Law, Rutgers Law School: “You have the patent thickets we’ve heard about in which AbbVie collected more than 100 patents to delay competition on Humira… There was evidence of sham conduct in which AbbVie listed patents that were invalidated with ingredients that weren’t in the biosimilar product… When you put it all together, with AbbVie, you have evidence of pay-for-delay settlements, sham litigation, and thickets. But that’s not all, because AbbVie merged with Allergan. So now we get some additional anti-competitive conduct… In case we thought we knew the universe of anti-competitive conduct, Allergan very creatively came up with a new one, which is trying to transfer its patent to a Native American tribe to invoke tribal immunity to avoid review at the patent office. When the two companies merged, you have five forms of anti-competitive conduct that have been pretty much proven in the courts. Why does this matter? You think about the ability and incentive to engage in anti-competitive conduct.”

“If you look at the top ten companies by global sales – Pfizer, Roche, Novartis, Johnson & Johnson, Merck, Sanofi, AbbVie, GlaxoSmithKline, Takeda, and Bristol-Myers Squibb – they really do have advantages in terms of insurance and reimbursement. When they have a large portfolio of blockbusters, they have a lot of leverage…”

Patricia M. Danzon, Professor of Health Care Management, The Wharton School, University of Pennsylvania: “The continued dominance of the same top 20 pharma firms in the industry – if you look over the last decade, or even go back even further, it’s the same names, the same companies that have been the leading players, with changes happening mainly due to M&A within that group of top firms as well as their acquisitions of other smaller companies… This dominance that has persisted for these top firms is not due to their preeminence in R&D. On the contrary, large firms’ share of new active substances, new compounds, has slowly declined to around 20 percent in 2018.”

Raksha Kopparam, Senior Research Assistant, Washington Center for Equitable Growth: “We’re all aware that prescription drug costs have been on the rise for the last few years. In 2020, the United States spent around $348 billion on prescription drugs, which is an increase of around $15 billion from the previous five years. The rising drug prices affect over half the U.S. population. A 2019 study found that 62 percent of U.S. adults take at least one prescription drug. At a time of immense economic volatility, rising drug prices just boost the profits of large pharmaceutical manufacturers at the expense of households across the country. At the beginning of this year, over 800 prescription drugs increased at an average of 5.1 percent. Companies like Pfizer experienced a six percent increase in revenue, not considering their COVID-19 products. As costs continue to rise, people are actually turning to dangerous methods to manage their healthcare expenses. Around 40 percent of adults reported not taking their prescriptions as directed by their doctors due to high costs. So they’ll cut their pills in half, they’ll skip doses, or even resort to not filling prescriptions at all.”

Antitrust groups working with the U.S. Department of Justice Antitrust Division discussed legal efforts to combat the monopolization of big drug manufacturers and the impact of out-of-control prescription drug prices stemming from outrageous anti-competitive behavior:

Diana Moss, President, American Antitrust Institute: “Where does this all leave us with this shrinking group of very powerful drug manufacturers? What we see is that antitrust violations in the pharmaceutical industry are pervasive. What we’ve found is that 55 percent of the about 70 firms that were party to mergers and purchasers of divested assets, oftentimes multiple assets in multiple mergers, are now defendants in anti-trust litigation. So more than half of this group of companies involved in mergers and purchases of divested assets have been or are currently defendants in antitrust litigation. That is an enormous percentage of the number of firms operating in the industry that have been involved in merger activity. That includes generic price-fixing conspiracies. DOJ has taken indictments. We have private and state multi-district litigations alleging conspiracies. We have monopolization concerns – pay for delay, product hopping, deceptive practices, sham petitioning… Suffice it to say we have a disproportionately large number of these pharma companies that have been involved in M&A now charged with antitrust violations.”

Gwendolyn J. Cooley, Antitrust Task Force Chair, National Association of Attorneys General: “I’m the lead attorney on the Suboxone case so I will start there with product hopping. In that case, we allege the makers of Suboxone attempted to force the switch from a tablet form that was about to lose exclusivity to a film form of the drug. That film form was protected by a patent. Another similar case, Namenda, involved switching from a twice-daily pill to a once-daily pill. Allegations in both cases were about the removal of that originator drug and its effect on potential generics who would not be substitutable for that patent-protected version…”

“We see patent thickets, which some enforcers have taken a look at like in Humira, where a group of states filed an amicus in the seventh circuit expressing concerns about the effect that huge numbers of patents with varying expiration dates would have on competition… There are also allegations of straight-up price-fixing or territorial allocation where companies have agreed not to compete to produce generic pharmaceuticals… All of this is an attempt to corner the market on a particular drug and maximize profits.”

Read more on Big Pharma’s egregious anti-competitive practices HERE.

Read more on why Big Pharma’s bogus rhetoric on innovation doesn’t hold up to scrutiny HERE.

Learn more about market-based solutions to hold Big Pharma accountable and lower drug prices HERE.