[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
ANTITRUST CONCERNS AND THE FDA APPROVAL PROCESS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
REGULATORY REFORM,
COMMERCIAL AND ANTITRUST LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
JULY 27, 2017
__________
Serial No. 115-27
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://judiciary.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
30-235 WASHINGTON : 2018
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE MEMBERSHIP
One Hundred Fifteenth Congress
COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
JOHN CONYERS, Jr., Michigan F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ZOE LOFGREN, California LAMAR SMITH, Texas
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
STEVE COHEN, Tennessee DARRELL E. ISSA, California
HENRY C. ``HANK'' JOHNSON, Jr., GeorgiaEVE KING, Iowa
THEODORE E. DEUTCH, Florida TRENT FRANKS, Arizona
LUIS V. GUTIERREZ, Illinois LOUIE GOHMERT, Texas
KAREN BASS, California JIM JORDAN, Ohio
CEDRIC L. RICHMOND, Louisiana TED POE, Texas
HAKEEM S. JEFFRIES, New York JASON CHAFFETZ, Utah
DAVID CICILLINE, Rhode Island TOM MARINO, Pennsylvania
ERIC SWALWELL, California TREY GOWDY, South Carolina
TED LIEU, California RAUL LABRADOR, Idaho
JAMIE RASKIN, Maryland BLAKE FARENTHOLD, Texas
PRAMILA JAYAPAL, Washington DOUG COLLINS, Georgia
BRAD SCHNEIDER, Illinois RON DeSANTIS, Florida
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona
Shelley Husband, Chief of Staff
and General Counsel
Perry Apelbaum, Minority Staff
Director and Chief Counsel
Subcommittee on Regulatory Reform, Commercial and Antitrust Law
TOM MARINO, Pennsylvania, Chairman
BLAKE FARENTHOLD, Texas, Vice-
Chairman
DAVID CICILLINE, Rhode Island DARRELL E. ISSA, California
HENRY C. ``HANK'' JOHNSON, Jr., GeorgiaUG COLLINS, Georgia
ERIC SWALWELL, California KEN BUCK, Colorado
PRAMILA JAYAPAL, Washington JOHN RATCLIFFE, Texas
BRAD SCHNEIDER, Illinois MATT GAETZ, Florida
C O N T E N T S
----------
JULY 27, 2017
OPENING STATEMENTS
Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the
Judiciary...................................................... 5
The Honorable John Conyers, Jr., Michigan, Ranking Member,
Committee on the Judiciary..................................... 4
The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on
Regulatory Reform, Commercial and Antitrust Law, Committee on
the Judiciary.................................................. 1
The Honorable David Cicilline, Rhode Island, Ranking Member,
Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Committee on the Judiciary................................ 3
WITNESSES
Hon. Scott Gottlieb, M.D., Commissioner, Food & Drug
Administration
Oral Statement................................................. 8
Mr. Markus H. Meier, Acting Director, Bureau of Competition and
Assistant Director, Health Care Division, Federal Trade
Commission
Oral Statement................................................. 10
Prof. David S. Olson, Esq., Associate Professor of Law, Boston
College Law School
Oral Statement................................................. 27
Prof. Erika Lietzan, Esq., Associate Professor of Law, University
of Missouri School of Law
Oral Statement................................................. 29
Mr. Alden Abbott, Esq., Deputy Director and Senior Legal Fellow,
The Heritage Foundation
Oral Statement................................................. 31
Prof. Aaron S. Kesselheim, M.D., M.P.H., Associate Professor of
Medicine, Harvard Medical School
Oral Statement................................................. 32
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Responses to Questions for the Record from the Hon. Scott Gottlieb,
M.D., Commissioner, Food & Drug Administration
Statement and letters submitted by the Honorable Tom Marino,
Pennsylvania, Chairman, Subcommittee on Regulatory Reform,
Commercial and Antitrust Law, Committee on the Judiciary. This
material is available at the Committee and can be accessed on the
Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115-
JU05-20170727-SD002.pdf
Article submitted by the Honorable David Cicilline, Rhode Island,
Ranking Member, Subcommittee on Regulatory Reform, Commercial and
Antitrust Law, Committee on the Judiciary. These materials are
available at the Committee and can be accessed on the Committee
Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115-
JU05-20170727-SD003.pdf
Statement submitted by the Honorable Bob Goodlatte, Virginia, Chairman,
Committee on the Judiciary. These materials are available at the
Committee and can be accessed on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115-
JU05-20170727-SD005.pdf
ANTITRUST CONCERNS AND THE FDA APPROVAL PROCESS
----------
THURSDAY, JULY 27, 2017
House of Representatives
Subcommittee on Regulatory Reform
Commercial and Antitrust Law
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 1:00 p.m., in
room 2141, Rayburn House Office Building, Hon. Tom Marino
(Chairman of the Subcommittee) presiding.
Present: Representatives Marino, Goodlatte, Gaetz,
Cicilline, Conyers, Johnson, Swalwell, and Schneider.
Staff Present: Ryan Dattilo, Counsel; Andrea Woodard,
Clerk; and Slade Bond, Minority Counsel.
Mr. Marino. Good morning. The Subcommittee on Regulatory
Reform, Commercial and Antitrust Law will come to order.
We are going to vote in anywhere from 20 to 30 minutes. I
may be speaking a little faster than I normally do because I
would like to get our opening statements in and our
distinguished witnesses' opening statements in.
So let's begin.
Without objection, the Chair is authorized to declare a
recess of the committee at any time.
We welcome everyone to today's hearing on antitrust
concerns and the FDA approval process. And I now recognize
myself for an opening statement.
The Committee has a robust history of examining competition
in the healthcare marketplace to ensure patients receive the
highest quality treatment at the lowest cost. In the past few
years, the Subcommittee has held four hearings in this area,
covering the topics of market consolidation, the impact of the
Patient Protection and Affordable Care Act on competition,
opioid addiction, and trends in pharmacy benefit management. We
continue that tradition today, focusing on the pharmaceutical
industry and antitrust concerns surrounding the FDA drug
approval process.
Competition in the pharmaceutical market involves a
delicate balance. On one hand, we want to encourage
pharmaceutical manufacturers to invest in needed, but often
expensive research and development in order to bring innovative
and life-saving drugs to the market. On the other hand, we want
to encourage sufficient competition to ensure that there is an
appropriate check on consumer prices.
Innovation is one of the hallmarks of our pharmaceutical
industry and should be celebrated. However, there have been
allegations that some companies may be abusing their roles as
innovators to engage in the manipulation of regulations to
preclude generic manufacturers from bringing competing products
to the market. Such conduct is anticompetitive and should be
put to a stop.
Since its enactment, the Hatch-Waxman Act has provided
opportunities for manufacturers to make lower-cost generic
versions of previously approved drugs available to the people
of the United States in a timely manner, thereby lowering
overall prescription drug costs for patients and taxpayers by
billions of dollars each year.
An essential piece of this framework is the ability of
generic drug manufacturers to obtain sufficient samples of
branded drugs to conduct the testing necessary to support an
application for FDA approval of the drugs' generic version.
Concerns have been raised that generic manufacturers have been
prevented from obtaining such samples, in some instances based
on the position that the drugs in question are subject to a
risk evaluation and mitigation strategy with elements to assure
safe use under Section 505-1, the Federal Food, Drug, and
Cosmetic Act. This is more commonly referred to as the REMS
program.
While the enforcement of existing antitrust laws could
address the refusal by some branded manufacturers to provide
samples to a generic drug manufacturer, a more tailored legal
pathway would help to ensure timely resolution of disputes over
sample testing, provide clear guidelines, and facilitate
healthy competition in the marketplace, benefiting all
consumers.
For these reasons, Ranking Member Cicilline and I
introduced the Creating and Restoring Equal Access to
Equivalent Samples, more commonly known as the CREATES Act.
This legislation will deter pharmaceutical companies from
manipulating sample availability to block cheaper generic
alternatives from entering the marketplace.
The CREATES Act will lead to lower costs for patients by
ensuring that they have access to safe and effective FDA-
approved generic medicines. It will also ensure consumer safety
by maintaining safeguard features of the REMS program while
closing regulatory loopholes that are used to keep prices
artificially high.
The Congressional Budget Office has estimated that the bill
would result in a $3.3 billion--that's with a B--billion dollar
net decrease in the Federal deficit. Savings to consumers and
private insurers likely would be far greater.
I look forward to hearing our witnesses' views on the
CREATES Act as well as on other areas of the FDA approval
process which may be subject to anticompetitive measures.
And just to get a piece of work out of the way, if there
are no objections, I would like to enter into the record that I
have several letters in support of the CREATES Act and our
efforts with this hearing.
So without objection, I would like to enter this, and I'll
read off who sent us letters and statements: FreedomWorks,
America's Health Insurance Plans, West-Ward Pharmaceuticals,
International Center for Law and Economics, Coalition to Reduce
Spending, the Academy of Managed Care Pharmacy, Association for
Accessible Medicines, the American Society of Health-System
Pharmacists, Pharmaceutical Care Management Association,
Consumers Union, Premier Healthcare Alliance, Campaign for
Sustainable Rx Pricing, Blue Cross Blue Shield, CVS Health, and
Express Scripts.
This Material is available at the Committee or on the
Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/
106333/HHRG-115-JU05-20170727-SD002.pdf
The Chair now recognizes the Ranking Member of the
Subcommittee on Regulatory Reform, Commercial and Antitrust
Law, Mr. Cicilline of Rhode Island, for his opening statement.
Mr. Cicilline. Thank you, Mr. Chairman, for your leadership
and for holding today's hearing.
Every year hardworking Americans pay too much for
prescription drugs. The cost of prescription drugs has
increased by over 200 percent over the past decade. These
soaring prices are life threatening. Kaiser Health reports that
a quarter of Americans cannot afford their prescription
medicines, while many are skipping or reducing their dosages.
This heartbreaking epidemic is particularly harmful for the
hundreds of thousands of cancer patients who are forced to skip
or delay their treatments because of the immense financial
burden of prescription cancer drugs, which can cost more than
$159,000 a year. Leading oncologists report that these
skyrocketing costs are causing deaths and harming patients on a
daily basis.
And beyond the human toll of this epidemic, spiking drug
prices have a direct impact on Federal spending because most
cancer patients are older than 65 and are enrolled in Medicare.
And there is no upper limit on out-of-pocket costs for these
patients, so they can pay as much as $57,000 in lifetime
expenses, or about 11 percent of their income, even if they're
insured.
We must find lasting policy solutions to save lives by
lowering the cost of prescription drugs. Earlier this week
Democrats announced A Better Deal for Americans to stop
outrageous prescription drug price increases.
The American people deserve a government that is in their
corner fighting for them to take on drug profiteering and price
hikes. And that's why I'm extremely proud of my work with
Chairman Marino and our introduction of H.R. 2122, the CREATES
Act, a targeted solution to reduce drugs prices by increasing
generic competition.
The Federal Trade Commission reports that generic drugs can
reduce the price of branded drugs by more than 85 percent,
while the presence of just one generic competitor can decrease
prescription drug prices by 20 to 30 percent.
But over the past decade some branded drug companies have
abused safety protocols at the Food and Drug Administration in
order to keep affordable drugs out of the market at the expense
of hardworking Americans.
Congress never intended these safety programs, called risk
evaluation and mitigation strategies, to allow a branded drug
company to block or delay generic competitors from receiving
FDA approval and enter the market.
And yet, some drug companies have exploited these safety
programs to delay generic competition, if only by days and
months, to prolong high drug prices.
That's because months of delay could be worth hundreds of
millions of dollars in additional monopoly revenues as the
generic sits on the sideline, as Professor Robin Feldman has
noted.
While this abusive behavior often violates the antitrust
laws, as the Federal Trade Commission will testify today, these
cases are often two-timing to provide effective relief. The
CREATES Act addresses these delay tactics by creating a
tailored path for generic drug manufacturers to obtain the
samples that are necessary to bring low cost drugs to market.
The Congressional Budget Office estimates, as the Chairman
has said, that the bill would result in a $3.3 billion net
decrease in the Federal deficit, while the estimate of the
total cost of this delay for consumers is $5.4 billion.
This bill is supported by numerous physicians, hospitals,
health insurers, and patient groups, along with public interest
organizations, such as Consumer Union and Public Citizen. CVS
Health, which is located in my district strongly supports this
bill because, ``it is vitally important in end practices that
delay competition and ultimately lead to higher drug prices.''
I again thank the Chairman for calling today's hearing,
along with our esteemed witnesses for their appearances here
today. And I look forward to working with my colleagues to
ensure an end to profiteering and price gouging by prescription
drug companies.
And with that, I yield back.
Mr. Marino. Thank you, David.
The Chair now recognizes the Ranking Member of the full
Judiciary Committee, Congressman Conyers of Michigan, for his
opening statement.
Mr. Conyers. Thank you, Chairman Marino.
What we're doing today is examining the process for the
Food and Drug Administration's method of approval for branded
and generic drugs and its effect on competition and drug
prices. And it sure is timely.
Just this past month, my colleagues in the House, Leader
Pelosi and Senator Schumer, Mr. Cicilline, and others, have
released an excellent white paper called ``A Better Deal:
Lowering Prescription Drug Costs.'' And it calls for rewriting
rules to stop prescription drug price increases, lowering drug
prices for Medicare, and requiring drug manufacturers to
publicly release data justifying any significant price
increases.
I support the idea of making prescription drugs affordable
and accessible for all Americans, for everybody. Additionally,
the ability of lower-priced generic drugs to compete against
branded drugs is a pretty important consideration that I hope
we will get into this afternoon.
With this overarching goal in mind, I'd like our
distinguished witnesses present to consider the following: What
extent to which the Food and Drug Administration's use of risk
evaluation and mitigation strategies make it harder for lower-
price generic drugs to enter the market in competition with, of
course, the branded drugs.
These regulatory requirements are an important safeguard to
ensure that drugs with potentially dangerous characteristics
and side effects are safely and carefully distributed. The
process, however, may also serve to stifle competition and keep
drug prices high, artificially high at that.
For instance, these requirements may make it difficult for
generic drug manufacturers to obtain samples in order to
conduct the bioequivalence testing necessary to gain regulatory
approval of a lower-priced generic equivalent to a branded
drug. Indeed, some have alleged that branded drug companies
deliberately cite these restrictions as a way of refusing to
provide such samples to potential generic competitors.
In addition, we should of course remain vigilant about pay-
for-delay schemes, whereby branded drug manufacturers pay
generic manufacturers to delay the entry of a version of
branded drugs as the patent on the branded drug expires.
These arrangements are cause for some concern--and in some
areas a lot of concern--because the Supreme Court has already
held in Federal Trade Commission v. Actavis they may violate
the antitrust laws. They may contravene longstanding Federal
policy encouraging the rapid entry of generic drugs into the
marketplace in order to dramatically reduce drug prices.
So to what extent should we be concerned about potential
abuse of the citizen petition process at the Food and Drug
Administration? That agency allows any concerned citizen to
solicit changes to agency regulations and other administrative
actions. While in principle this is admirably democratic
procedure, branded drug manufacturers may manipulate it to
stifle entry of generic drug competition, for example, by
challenging generic drug approvals using this process.
Because the agency must review every citizen petition it
receives, generic drug manufacturers allege that branded
manufacturers use the petition process to stop or delay agency
approval of competing generic drugs with multiple and
unwarranted petitions. And despite amendments made in 2007 to
address such potential abuse, the agency reports that it
remains concerned that many nonmeritorious citizen petitions
are being filed primarily to delay the entry of generic drugs
into the marketplace.
Wouldn't it be nice if we could solve this this afternoon,
at this hearing?
I thank Chairman Marino and my Ranking Member Cicilline for
their work on this important matter. And a word of welcome to
our witnesses being here today. Thank you so much, Mr.
Chairman.
Mr. Marino. Thank you, John.
The Chair now recognizes the Chairman of the full Judiciary
Committee, Congressman Goodlatte of Virginia, for his opening
statement.
Chairman Goodlatte. Thank you very much, Mr. Chairman.
And welcome to our witnesses.
The United States has been and continues to be a champion
of free and open markets. An open marketplace cultivates
competition among sellers and is the very foundation of
maintaining lower prices, higher quality, both in products and
services, and superior innovation.
The antitrust laws established in this country serve a
valuable role in promoting competition, and the Judiciary
Committee routinely exercises its oversight authority to ensure
that these laws are applied in a manner that is transparent,
fair, predictable, and reasonably stable over time.
One area of essential antitrust oversight is the healthcare
industry. Healthcare and its related markets have long been
subject to extensive antitrust scrutiny and have been a focal
point of the Committee for the past several years.
This hearing marks the fifth in our series focused on
competition in the healthcare marketplace and continues the
Committee's history of vigilant oversight into this important
industry that touches nearly every American.
Today the Committee turns its attention to antitrust
concerns surrounding the Food and Drug Administration drug
approval process and its impacts on competition between branded
and generic drug manufacturers. As with approval processes for
any industry subject to government regulations, the drug
approval process can provide a fertile environment to secure
and abuse market power.
Although Congress has passed laws aimed at facilitating
competition from lower-priced generic drug manufacturers, while
maintaining incentives for branded drug manufacturers to invest
in developing new and innovative drugs, the Hatch-Waxman Act
and the surrounding regulatory environment create unique issues
that are only present in the pharmaceutical marketplace.
For example, a generic drug manufacturer must rely on its
competitor's product in order to test bioequivalence so that
FDA approval may be sought.
One of the most common antitrust concerns in pharmaceutical
conduct cases occurs when companies engage in activity aimed at
delaying the entry of generic drugs, thus leading to higher
prices for consumers.
Of particular concern today is the potential abuse of
certain Food and Drug Administration approval processes
intended to ensure safety. Although the FDA has no authority to
regulate the cost of a drug, certain FDA policies and practices
have substantial ramifications throughout the drug pricing
market.
Today, the United States has the largest pharmaceutical
market in the world, accounting for roughly 40 percent of the
global market. U.S. firms conduct the majority of the world's
pharmaceutical research and development and currently hold the
intellectual property rights pertaining to most new medicines.
While it is imperative that the U.S. continue to remain the
world leader and innovator in the pharmaceutical market, it is
important that these antitrust concerns be given significant
deliberation. The benefits from such leadership and innovation
are undermined if our consumers unfairly bear the brunt of
anticompetitive conduct through above-market prices.
I look forward to hearing the witnesses' views on these
issues and whether our existing antitrust laws are equipped to
address these antitrust concerns in the FDA approval process.
I'd like to again thank Chairman Marino for holding today's
hearing. And today's testimony will help the Committee gain a
better understanding of the seriousness of these issues and how
they might be addressed.
Thank you, Mr. Chairman.
Mr. Marino. Thank you, Bob.
Without objection, other members' opening statements will
be made part of the record. We'll begin by swearing in our
witnesses before introducing them.
Would you please stand and raise your right arm?
Do you swear or affirm that the testimony you are about the
give before this Committee is the truth, the whole truth, and
nothing but the truth, so help you God?
Please be seated.
Let the record reflect that the witnesses have responded in
the affirmative.
Dr. Scott Gottlieb was sworn in as the 23rd Commissioner of
Food and Drug on May 11, 2017. Mr. Gottlieb is a physician,
medical policy expert, and public health advocate who
previously served as the FDA's Deputy Commissioner for Medical
and Scientific Affairs, and before that, as a senior adviser to
the FDA Commissioner. Mr. Gottlieb has also served as a senior
policy adviser at the Centers for Medicare and Medicaid
Services.
Mr. Gottlieb was previously a resident fellow at the
American Enterprise Institute and a clinical assistant
professor at the New York University School of Medicine in
Manhattan where he also practiced medicine as a physician.
Having authored over 300 articles appearing in leading
medical journals and other well-respected periodicals, Mr.
Gottlieb's career has included working as a staff writer for
the British Medical Journal, serving as a senior editor to the
Pulse, Journal of the American Medical Association, and serving
on multiple editorial boards, including Food and Drug Law
Institute's Policy Forum, Value-Based Cancer Care, and Cancer
Commons. He is also a member of the Leukemia and Lymphoma
Society, the Public Policy Committee of the Society of
Hospitalist Medicine, and a member of the board for Keystone
Center.
Mr. Gottlieb received his BA in economics from the Wesleyan
University and his MD from Mount Sinai School of Medicine in
New York University, where he completed his residency in
internal medicine.
Welcome, Doctor.
Mr. Meier is the Assistant Director in charge of the
Federal Trade Commission's Healthcare Division in Washington,
D.C. He leads an office of 35 lawyers--that's got to be a tough
job--and other professionals who investigate and litigate
alleged violations of antitrust law by pharmaceutical
companies, physicians, and other healthcare providers.
Since November 2015, Mr. Meier has also been serving as the
Acting Deputy Director, and more recently as the Acting
Director of the FTC's Bureau of Competition, where he oversees
more than 280 lawyers and other professionals investigating and
litigating merger and nonmerger cases.
Mr. Meier joined the FTC in 1990 and became head of the
Healthcare Division in 2006. In addition to his work at the
FTC, Mr. Meier has worked in private practice, where he focused
on antitrust litigation and represented clients before the FTC
and the Department of Justice. He has served as a Special
Assistant United States Attorney--we have a little fraternity
going here now--prosecuting criminal cases in the Eastern
District of Virginia.
He was also a resident adviser to the Indonesian
Competition Commission in Jakarta in 2001. Before joining the
FTC, Mr. Meier served as an officer in the United States Army.
Thank you for your service.
He is a graduate of the George Mason School of Law, has a
master's degree in public administration from Old Dominion
University and a bachelor's degree from the University of
Virginia.
Welcome, sir.
Each of the witnesses' written statements will be entered
into the record in its entirety. I will ask that each of you
summarize your testimony in 5 minutes or less.
And to help you with that, you have some lights in front of
you. The light will switch from green to yellow when you have a
minute left, and then when it switches to red, the time's out.
I've been in your position and I don't pay attention to the
lights. So what I'm going to do is very politely and
diplomatically pick up the gavel and hopefully that will give
you an incentive to wrap up.
Dr. Gottlieb, the floor is yours.
TESTIMONY OF MR. SCOTT GOTTLIEB, M.D., COMMISSIONER, FOOD &
DRUG ADMINISTRATION; AND MR. MARKUS H. MEIER, ACTING DIRECTOR,
BUREAU OF COMPETITION, ASSISTANT DIRECTOR, HEALTH CARE
DIVISION, FEDERAL TRADE COMMISSION
TESTIMONY OF SCOTT GOTTLIEB
Dr. Gottlieb. Thanks a lot, Mr. Chairman and Ranking
Member. Thank you for the opportunity to testimony before the
Committee. My name is Scott Gottlieb. I'm a physician and
Commissioner of the Food and Drug Administration.
At FDA we've undertaken a broad initiative to promote
prescription drug competition with the aim of lowering drug
costs to consumers. FDA doesn't oversee any aspect of drug
pricing as part of our regulatory mandate, but our policies can
have a significant impact on the cost of medicines, and
ensuring American patients have access to affordable medicines
is a top priority for FDA and for the administration.
In particular, our policies related to generic drugs can
promote competition, which lowers drug costs. Similarly, our
regulatory policies related to the clinical development of new
drugs ultimately impact the cost of these endeavors. Our
requirements and their impact on the risks and costs of new
drug development can affect the way that entrepreneurs price
their finished products in order to justify their investments.
In each case, we're closely examining the impacts of our
policies. We want to strike the right balance between access
and innovation while we hold steadfast to our core consumer
protection mandate to make sure the drugs we approve are safe
and effective.
Today, I'd like to briefly review with your policies we're
considering and steps we're taking to promote generic drug
competition.
First, we're improving the efficiency of the generic review
and approval process to help new generic drugs reach consumers
more quickly, but without sacrificing the assurance of safety
and effectiveness.
Historically, the average generic drug application
undergoes four cycles of review by FDA. Through new policies
we're implementing, we believe we can sharply reduce this
number and reduce total development times.
Our average total time to approval for legacy applications
has averaged 42 months. We're significantly bringing down that
time. Beginning this October, if we get a high quality
submission, we'll be able to review and approve it in 8 to 10
months, depending on the type of application, and I'll report
on our progress the following fall.
A second major part of our efforts is to improve our
policies and scientific approach to the approval of generic
competitors to complex or difficult-to-duplicate brand name
drugs.
Collectively, this represents a sizable category of
medicines that in many cases could be subject to generic
competition, but are not. We're looking at how to change that,
such as developing clear principles for approving generic
versions of these products and issuing those principles well in
advance of the time of the first patent expiry.
The third part of our plan relates most directly to the
topics we're here to discuss today. I want to make sure that
companies aren't gaming our own rules to extend their
monopolies on brand drugs and maintain their monopoly pricing
by forestalling competition that Congress intended for when it
crafted the Hatch-Waxman amendment.
One example of this relates to risk management programs
we've put in place in order to assure the safe use of drugs but
where brand manufacturers have then denied generic drug
manufacturers access, even at fair market value and despite
assurances from FDA, to the doses they need in order to run the
bioequivalent studies required for applications.
This is clearly not what Congress intended. While at least
some of these restrictions on access may fall outside our
direct purview, we're exploring potential measures we could
take, including actions we might take in concert with our
colleagues at CMS and the FTC, to prevent this sort of
activity.
We're also looking at steps we can take to reduce the
potential for brand companies to block generic entry by
extending the negotiations they're obligated to have over the
application of a single shared REMS program.
These are cases where they have a REMS program in place to
help manage the safe use of a product and the generic entrant
is seeking to share the REMS program with the brand sponsor.
Here is the bottom line, in my view. We have a market-based
system for pricing medicines that functions in part as a way to
make sure entrepreneurs have appropriate rewards for their risk
taking. This system has unlocked unprecedented drug innovation
that's saving lives and quite literally curing disease.
But we need to balance access with innovation. We need to
make sure that when the patent and exclusivity periods have
lapsed, the point at which Congress intended for vigorous
competition to be possible, consumers are able to benefit from
the savings that come from generic drug entry and the choice it
enables.
That's our goal, to do all that we can to make sure markets
are efficient and close loopholes that are letting a handful of
market participants game the rules in ways that hurt consumers.
Thank you, Mr. Chairman.
Hon. Gottlieb's written statement is available at the
Committee or on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-Wstate-GottliebS-20170727.pdf
Mr. Marino. Thank you, Doctor.
Attorney Meier.
TESTIMONY OF MARKUS MEIER
Mr. Meier. Chairman Marino, Ranking Member Cicilline, and
members of the Subcommittee, thank you for the opportunity to
address the hearing today. It's a very important subject. And
I'm pleased to testify about one of the FTC's top priorities:
stopping anticompetitive conduct in the pharmaceutical
industry. Such conduct harms American consumers through higher
drug prices.
I'm also pleased to be here sitting next to FDA
Commissioner Dr. Gottlieb. The FTC and the FDA have had a long
history of working closely together on these issues and many
others as well, and the FTC looks forward to continuing to
build on our relationship with the FDA in the months and years
to come.
Unlike the FDA, however, the FTC is not a sector regulator.
Instead, we are primarily a law enforcement agency, and the
laws we're charged with enforcing are intended to promote
competition for the benefit of consumers, and they apply across
wide ranges of industries in the United States, not just the
pharmaceutical industry.
The way we do our job is we do it by challenging three
broad categories of business practices known to harm
competition. First, we challenge agreements among competitors
that unreasonably restrain trade. Second, we challenge acts of
monopolization. And third, we challenge mergers that may
substantially lessen competition. The FTC has a long history of
applying these laws in the pharmaceutical industry.
With respect to the three topics of today's hearing, the
FTC has brought cases and filed amicus briefs addressing
antitrust problems with abuse of the FDA processes in each of
the three areas.
First are the abuses that occur when brands use FDA-
mandated REMS or when they use voluntary distribution systems,
either to prevent a generic company from gaining access to the
samples it needs to go through the FDA-approval process, or
secondly, by refusing to negotiate a single shared REMS
distribution system.
To date, the FTC's actions in this area have been to file
amicus briefs in private litigation, because private parties
can also bring antitrust cases, not just the FTC, and to
explain to courts how the REMS abuse can in fact violate the
antitrust laws.
Second are the abuses arising from so-called pay-for-delay
agreements. Pay-for-delay agreements occur in the context in
which a brand and a generic company are in patent litigation,
the generic is trying to gain entry into the marketplace. It
says to the brand company, your patent is not valid or I do not
infringe your patent. They're fighting out a patent case. And
at some point they settle the litigation, in which the brand,
one, offers money to the generic, and two, the generic agrees
to stay out for some period of time. And we've had a lot of
cases in this area and currently have cases, a case called
Actavis, AbbVie, Allergan, Watson and Impax.
Third are abuses that can occur with the citizen petition
process. Brands may use the FDA's citizen petition process to
delay generic approval by raising scientific or legal issues
that the FDA must respond to before approving a generic.
Studies have shown that while these petitions often lack merit,
they delay entry of lower-cost generics. FTC actions to date
include a recent lawsuit that we filed in the case of
ViroPharma in the District of Delaware.
Despite our many efforts, however, there are limits on
antitrust law enforcement. First, and possibly most
importantly, it's not a violation of Federal law simply to
charge high prices. Secondly, litigation, which is what I do
and what we do at the FTC, can be slow, it's expensive, and
it's uncertain. I personally have been working to stop pay-for-
delay agreements for more than 17 years, as have a handful of
my colleagues who have been there from the very beginning, and
we're still years away from court resolutions of some of those
cases.
These limitations are the reason why the Commission
supports the goals of the CREATES Act, and if enacted, the FTC
believes that the CREATES Act would reduce the incentive for
brands to use REMS to impede competition from lower-cost
generics.
In closing, I look forward to addressing your questions,
and again, thank you for inviting me here today.
Mr. Meier's written statement is available at the Committee
or on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-Wstate-MeierM-20170727.pdf
Mr. Marino. Thank you, Attorney Meier.
We will now begin the Congress members' 5 minutes of
questioning. And I will recognize myself for 5 minutes of
questioning.
Dr. Gottlieb, I want to commend you, first of all, for
shining the light on the issues that we're addressing here
today. It's critically important. These competition problems
have been around for a long time, so I want to better
understand FDA's current authorities in this area.
One of the principal objects of the CREATES Act is to allow
a generic company to seek an injunction from the court to
require the sale of a brand's product. To be clear, a court can
only order a sale once the generic has received FDA
authorization to handle the product.
When Congress established REMS authority in 2007, Congress
included a provision that said a REMS should not be used to
delay competition. It is my understanding that the FDA has
authority to level civil monetary penalties when they determine
a brand company is delaying competition using the REMS program.
Is that correct?
Dr. Gottlieb. There is a provision in the law, Congressman.
Mr. Marino. I also understand the FDA has never used that
authority. Are you aware of that?
Dr. Gottlieb. I know it's a complex authority to exercise,
Congressman.
Mr. Marino. If they did use that authority, it would
require the development of a lengthy record, be time-consuming,
and use resources. Would you agree with me?
Dr. Gottlieb. I know it's highly complex to develop the
administrative record to exercise the authority, so it would
take time--it would take a lot of time.
Mr. Marino. In a determination by the FDA that the brand's
actions were taken to block or delay the generic application,
would you agree with me concerning that?
Dr. Gottlieb. I'm sorry, I missed the question.
Mr. Marino. The brand's actions, if taken, would delay the
generic application.
Dr. Gottlieb. There are a lot of brand actions that delay
generic entry, yes.
Mr. Marino. And once all these steps have happened, you
have to work with DOJ to level penalties, correct?
Dr. Gottlieb. If we were to exercise that authority, yes.
And penalties, I believe, are relatively modest.
Mr. Marino. This seems, as a prosecutor, as a former U.S.
Attorney, these are pretty intense and time-consuming
processes, and the FDA only has the authority for drugs that
are behind a REMS, not for voluntary manufacturer's schemes.
That's correct also?
Dr. Gottlieb. It's a good point that a lot of the
restrictions on the ability of the generic companies to get
access to the doses are commercially driven as well through
contracting.
Mr. Marino. It would seem to me that we could resolve these
issues and these disputes quicker if competitors had limited
resources in the courts to require the sale of some samples
when the FDA has found it can safely handle those samples.
That's not a question, but could you please share with us some
of your insight on how we streamline this?
Dr. Gottlieb. Well, Congressman, you've raised a lot of
concerns that are our concerns. The fact that generic companies
literally can't get access to the doses they need, the units
they need, to run the bioequivalent studies to go through the
regulatory approval process, that is clearly not what Congress
prescribed under Hatch-Waxman.
Some of these fall within the scope of gaming regulations
that exist within FDA's purview, and the REMS is an example.
Some of them fall within the scope of things branded companies
do in the context of commercial contracts to deny the ability
of generic companies to get the drugs from either specialty
pharmacy companies or other intermediaries like wholesalers.
But it requires between 1,500 and 5,000 physical doses in
order to run the bioequivalent studies, and quite literally,
there are situations, and we see them, where the generics can't
get access to those doses in a timely fashion.
Mr. Marino. Attorney Meier, while the FTC has expressed
concerns about anticompetitive abuse of the REMS process, and I
think you filed two amicus briefs in disputes between
manufacturers, it doesn't appear to have brought any
enforcement suits. Can you explain why enforcement suits
haven't been brought and what would we do to better improve the
system?
Mr. Meier. This is an area where we've spent a lot of time
looking into it. We've chased down a lot of leads and taken,
heard a lot of different complaints. In fact, the FDA sent us a
list of approximately 150 inquiries it's received, and we've
reviewed those very carefully to look for a good test case to
bring.
But in addition to the activities of the FTC, there are
private litigations. Private companies can bring antitrust
cases, too, and they have. And as I said before, we filed
amicus briefs in a number of those cases to try to assist the
court in understanding how the antitrust laws can apply to
those behaviors.
Mr. Marino. Thank you.
My time has expired, and I do now recognize the Ranking
Member of the Committee, Congressman Cicilline, for his
questions.
Mr. Cicilline. Thank you, Mr. Chairman.
And thank you again to our witnesses.
Mr. Meier, you explained in your written testimony that
delaying generic competition through REMS abuse results in
about $5.4 billion dollars in annual costs to consumers.
Could you please explain how delaying competition through
REMS abuses increases costs to consumers? You know, sort of
explain a little bit, when does the FTC require the REMS safety
protocol for a drug and how does it result in that kind of an
impact on consumers?
Mr. Meier. So, first of all, with respect to the testimony
and the $5.4 billion figure in the testimony, I do want to
point out that that was a study done by the generic
pharmaceutical industry, as we indicated in the report. So we
haven't independently verified that number. But it does suggest
that this is a problem.
With respect to your question about what exactly the FDA
has to do when it does a review process, that's really a
question I think that might be better addressed to the FDA.
But having said that, in a number of instances where we
have done investigations I've come to learn some about the
standards that the FDA uses. And obviously what they want to do
and what they have to do is make sure that the drug supply is
safe and effective, and I think they do a very good job of
doing that. And there are certain drugs that, when certain
patient populations are exposed to it, can be dangerous for
those patients and can be dangerous for other people.
The classic example that often comes up is the Thalidomide
example, which obviously results in horrible, horrible
potential birth defects if a pregnant woman is exposed to that,
and that is in fact subject to a REMS program.
So it's those types of drugs that I understand are subject
to REMS programs with what are known as ETASU or elements to
assure safe use. But, again, I think it might be a question
that the FDA can better address than I can.
Mr. Cicilline. Dr. Gottlieb.
Dr. Gottlieb. Congressman, these are drugs that have
certain what we call elements to assure safe use, certain
provisions that are put in place at the time of approval to
help ensure their safe prescribing by providers. So typically
they'll have certain side effects or risks associated with them
that we feel in order to strike the right risk-benefit balance
we have to have certain measures in place, like provider
education, or requirements that providers take certain
measures, to subject patients to certain tests, to look for the
manifestation of certain side effects.
Just as a general matter, and you asked the question about
how would it save consumers money, by and large, the majority
of the drugs for which we have risk management plans in place
tend to be specialty drugs, and they tend to be higher priced
drugs.
And to the extent that manipulation of the REMS to
forestall the ability of the generic companies to get access to
the samples they need to do the bioequivalent studies would
then delay the generic from filing the application and getting
onto the market, that's going to disadvantage consumers,
because it's just a delay in getting competition where patents
might have lapsed that would be lower cost. So, you know, just
month by month, every month, to your point, could add up to a
lot of money.
Mr. Cicilline. Thank you.
Mr. Meier, you made reference in your testimony, obviously,
to one of the ways that brand drug companies realize profits is
to prevent--refuse to provide samples that are necessary for
the development of the generic, which the CREATES Act attempts
to address. I think you've already said that you consider that
anticompetitive behavior.
I guess the question I have is, should we consider simply a
prohibition against that, an outright prohibition against these
pay-for-delay or refusal to provide? I know they're two
different issues, but----
Mr. Meier. So you're right, they're two different issues.
But with respect to the samples, I do want to be careful that
it's not just merely the refusal to provide a sample that
causes an antitrust problem. When we do an antitrust case, the
type of case that you would have to bring in this instance
would be a charge of monopolization. That's basically a single
company acting unilaterally, saying, I'm not going to turn over
the samples.
One of the elements you'd have to show is exclusionary
conduct, but an additional element in that case you'd have to
show is that the company actually has a monopoly and is
maintaining or holding on to that monopoly as a result.
So the challenge is not just to say refusing to provide a
sample is an antitrust problem, but it's the combination of the
refusal to provide it by a monopolist under certain
circumstances can violate the law.
Mr. Cicilline. And what about with respect to pay-for-
delay? What would be-- wouldn't it be sensible public policy
simply to prohibit those outright, that you couldn't contract
with another entity to prevent the introduction into the
marketplace. I mean, that seems pretty, obviously, on its face
anticompetitive.
Mr. Meier. Well, that have been a number of different bills
that have been floated over the years that would come close to
doing what you're describing, both on the House side and the
Senate side, and there have been various times when the FTC has
been asked to look at that and comment on that, and we have.
And should somebody put together such a bill again in the
future, we'd be happy to provide whatever technical assistance
we could on that.
Mr. Cicilline. Thank you.
Thank you, Mr. Chairman. I yield back.
Mr. Marino. The Chair recognizes the Chairman of the full
Judiciary Committee, Congressman Goodlatte.
Chairman Goodlatte. Thank you, Mr. Chairman.
Thank you, gentlemen, for your testimony. Let me start with
Dr. Gottlieb.
I have received several inquiries over the years from
constituents regarding escalating prices for specific drugs,
some of them 100 years old, that have been on the market in
every instance for long periods of time, decades. I understand
that some of this may be the result of the FDA's Unapproved
Drug Initiative.
Can you explain what the goal of that program is and
whether you think it's been effective?
Dr. Gottlieb. Congressman, there's a large category of
drugs that were effectively grandfathered in when the modern
statute to require the demonstration of safety and
effectiveness was put in place in the 1960s. We refer to them
as the DESI drugs. And they never went through a traditional
approval process. They never had to demonstrate safety and
efficacy through the traditional clinical trial requirements.
We have a program in place to both take these drugs off the
market when we feel that there are certain concerns relative to
their safety and effectiveness or the way they're being
manufactured. We've taken over a thousand unapproved drugs off
the market.
And also to try to move certain drugs into the approved
space, especially for critical medicines where it might have a
narrow therapeutic window and you want to make sure it's being
manufactured in an appropriate fashion. We've moved these drugs
into the market through the approval process.
Now, it is the case that when that happens, in some
instances, and in a lot of instances, when a drug that's
previously unapproved becomes an approved drugs and we clear
the market of the other formulations that might be on the
market, they will have some exclusivity. They might have 3
years of exclusivity under Hatch-Waxman for doing clinical
studies. They might have 5 years of exclusivity in rare cases
where there is a new molecular entity. So they will have a
period of exclusivity.
I will say that the juxtaposition here is that you now have
a formal reference listed drug for which you can then bring
generics onto the market when that exclusivity period lapses.
And the final point I would make is----
Chairman Goodlatte. Why did they get a period of
exclusivity for a drug that's not new?
Dr. Gottlieb. If they do clinical studies to demonstrate
safety and effectiveness as part of the FDA approval process,
they get a short period of exclusivity.
Chairman Goodlatte. How long is a short about?
Dr. Gottlieb. That's 3 years, is what's prescribed under
Hatch-Waxman.
I will say, I've been around FDA for about 15 years now and
I've gone through different cycles where at various points in
time we've been criticized for not moving aggressively enough
on the unapproved drugs. So it's a real public health
challenge.
Chairman Goodlatte. Well, let me ask you about that.
Because when you take them off the market, is it based on
safety? Is it based on efficacy? What is your standard? And
what kind of research do you do, or does somebody else do that
research for you, and might it be one of the competitors that
does the research for you? What do you rely upon to take the
drug off the market in the first place?
Dr. Gottlieb. We're careful in how we take the drug off the
market in these instances to make sure that the new entrant can
actually supply the market.
Chairman Goodlatte. You say you've done a thousand or more?
Dr. Gottlieb. Those aren't situations where we've
necessarily cleared the market of all the drugs in a category.
Those are situations where there might have been one drug on
the market that had certain problems associated with it.
There's only 23 cases where we've had one approved drug come
onto the market and made an attempt to clear the market of the
competitors. And I think those are the situations that you're
referencing. I believe it's 23.
You know, it is the case that in order to--and this is a
balance, and Congress can speak to this because we went through
the last time I was at the agency and worked very closely with
Congress on this.
But you want to provide--if you want these unapproved drugs
to come through a regulatory process and develop the data to
demonstrate safety and effectiveness and go through the
manufacturing requirements, you have to provide an incentive.
And the incentive is that if they go through that process and
spend the money to do it, they're going to get a short period
of exclusivity, and the FDA is going to make an attempt to
clear the market of potential competitors.
Chairman Goodlatte. They're going to clear the market of
people who haven't done that, even though they don't want to
spend the money and they may have exactly the same result if
they were to do it for their drug, because they may be
identical drugs.
Dr. Gottlieb. I understand the concern you're raising, and
I would say----
Chairman Goodlatte. I've seen drugs that have cost 50
times, after they get this exclusivity, what it costs on the--
you're talking about some things that cost $2, $3 for a
prescription, and suddenly they become several hundred dollars
or even a thousand dollars for a little tube of some kind of a
skin ointment or a gout drug.
Dr. Gottlieb. Right. I would simply say, if we want to go
down the path of unwinding FDA's current policy, we need to
accept that the unapproved drugs will stay unapproved in
perpetuity. And if Congress is comfortable with that, we can
contemplate that. But I will tell you, I have been at the FDA
when we've been vigorously criticized for not bringing the
unapproved drugs through the approval process.
Chairman Goodlatte. Surely, there must be other sources of
information about the lack of safety. If the issue is, well,
the drug doesn't really work, you know, obviously, if it's been
around for 100 years and people still want to buy it, I'm not
sure we should be too concerned about it.
Safety, that's a different concern. But if the mechanism is
to let somebody buy into exclusivity as opposed to doing some
independent research through universities or something to find
out that the drug truly is harmful, or based upon medical
testimony or medical history with the use of the drug, that's a
different situation to me.
Dr. Gottlieb. We focus in situations where there are safety
questions, and that's where we tend to focus our resources. The
one that I remember was, I believe, pancreatic enzymes, which
are used by patients with cystic fibrosis, there was a lot of
variability in how those drugs were being formulated that had
clinical implications, and the CF community wanted FDA to exert
more oversight over the safety and efficacy of those products.
There are situations where these unapproved drugs on the
market do present certain questions of safety and
effectiveness, and that's where FDA has tended to focus its
attention.
Chairman Goodlatte. Let me ask one more question, if I may.
I know I'm over the time.
But if the company that comes in and does these tests for
you and gets the exclusivity, if there's no difference between
their drug and the drugs that you're taking off the market
based upon the formulation of it, why, what would be in the
best interest to do that? Just to get the work done to prove
the safety and the efficacy of the one?
Because to me, if that's the case, there ought to be some
limitation, some control. And is this authority based upon the
law or is the authority based upon FDA regulations.
Dr. Gottlieb. The application of this authority is based on
what we have been told to do by Congress in the past. Congress
has raised questions around the----
Chairman Goodlatte. With the statutory language.
Dr. Gottlieb. Well, the way Hatch-Waxman is written, this
is how the statute should be exercised. Congress has told us
they have concerns around the DESI drugs, the unapproved drugs.
And I realize when we then take action to move these drugs into
the approved column and prices go up in certain anecdotal
cases, that raises concerns as well. So I'm sympathetic to it.
Chairman Goodlatte. Look, I would expect they would go up
something so that the company can recover the cost of doing
that.
Dr. Gottlieb. Exactly.
Chairman Goodlatte. But a hundred times?
Dr. Gottlieb. Well, that's a separate question, whether
it's being priced to value.
Chairman Goodlatte. Yeah, but it all comes together, right?
I mean, if you're the consumer who has been relying upon a drug
that your doctor has told you that you should take, and then it
suddenly costs a hundred times as much money----
Dr. Gottlieb. I fully understand your concerns,
Congressman. Fully understand them.
Chairman Goodlatte. Thank you, Mr. Chairman.
Mr. Marino. The Chair now recognizes the Ranking Member of
the full Committee, the full Judiciary Committee, Mr. Conyers.
Mr. Conyers. Thank you, Mr. Chairman.
This is a tremendously important subject. Let me ask
Director Meier of the bureau about Professor Lietzan's
testimony, which characterizes requiring access to drug samples
as ``a duty to deal,'' which ``may undermine incentives for
investment and innovation.'' What do you think of that
characterization of providing drug samples as a duty to deal,
sir?
Mr. Meier. So the antitrust issue is not whether a brand
has a duty to deal. Actually, the antitrust issue is the
conditions under which a brand's refusal to deal--it's refusal
to deal--results in the creation or maintenance of monopoly
power.
And this is a longstanding concept in the law. It goes all
the way back to a 1919 case involving Colgate in which the
Supreme Court said, yeah, parties do not have an obligation to
deal with each other, but there may be certain circumstances in
which that refusal to deal creates the purpose--has the purpose
or the action of creating or maintaining a monopoly, and that's
illegal.
And that case law has continued to develop all the way
through the present with a case that is often cited actually by
the defense bar in these issues, the Trinko case, where Justice
Scalia said under certain circumstances a refusal to cooperate
with rivals can constitute anticompetitive conduct and violate
Section 2.
As this Committee knows, when you have--take an action
where you provide no samples to the generic, it means there's
going to be no generic filings with the FDA, there's going to
be no generics, and there's going to be no competition, and
that could go on literally forever. Even when all the patents
have expired, a company could continue to refuse to provide
samples and there could still be a monopoly that simply wasn't
what Congress intended.
Mr. Conyers. How prevalent a problem is this?
Mr. Meier. Well, there are different views, and the
difficulty is, I don't have any means to get perfect insight
into it. On the one hand, you have the generic pharmaceutical
industry and the study that was done by Matrix economics
company, by a person, an economist named Alex Brill, that says
it costs consumers $5.4 billion a year. On the other hand, you
have Professor Lietzan suggesting that perhaps it really only
involves 20, 22 drugs, something like that.
My suspicion or my intuition is that it's probably
somewhere in between those numbers. But I think some of these
drugs are very significant and these prices compete very, very
significant. And even if it's only a few drugs, it could be a
very, very significant problem.
Moreover, if companies understand that they can get away
with this, the expectation is not just what the problem is
today, but what might the problem be tomorrow and further into
the future as companies recognize that they can adopt this same
strategy and apply it to drug products that currently aren't
even subject to these restricted distribution systems.
Mr. Conyers. What can we up here approach--how do we
approach this in a sensible way?
Mr. Meier. So as we put forward in our testimony, we
believe that the CREATES Act--that the FTC supports the goals
of the CREATES Act and that the CREATES Act goes a very far way
to readjust the incentives to address this problem.
Mr. Conyers. You do? What does that mean?
Mr. Meier. Well, one of the problems right now is if a
brand company refuses to provide the samples, it basically can
just sit back and run out the clock and let it just continue.
What the CREATES Act does, as I understand it, is it
readjusts those incentives so that it provides greater
incentives for the branded company to actually engage in a
negotiation and engage in bargaining with the generic to
ultimately provide them with samples. And if the bargain
doesn't work, it gives the generic companies additional rights
to pursue--that they could possibly pursue through litigation.
Mr. Conyers. So when you combine CREATES with the antitrust
laws, you may get an effective strategy. Do you think that's
right?
Mr. Meier. I think that's a fair statement.
Mr. Conyers. Now, I think you've noted that there are
several ways that branded firms can use programs strategically
to delay generic entry. And at least some of these methods will
be difficult to reach effectively under antitrust laws. Is that
a fair assessment?
Mr. Meier. That's a fair statement also. Antitrust law
doesn't necessarily break down every possible barrier to entry
and barrier to competition. We are limited, as I said during
the prepared remarks, to bringing cases that fit within one of
these three broad categories of antitrust violation.
Mr. Conyers. So what ought we do?
Mr. Meier. I think, as I've said before, I think the
CREATES Act goes a long way to trying to resolve some of these
issues.
Mr. Conyers. Now, last question, about vertical agreements.
Could this be a violation of the Sherman Act?
Mr. Meier. Yes. It can be under certain circumstances.
Mr. Conyers. So how do we approach that?
Mr. Meier. As the Congress or as an antitrust enforcer?
Mr. Conyers. Well, we're not antitrust enforcers, although
we oversee that because it's the law. But, you know, in our
congressional capacity here with our Chairman and the rest of
my colleagues, how do we deal with this Sherman Act challenge?
Mr. Meier. So if you are talking about the specific
challenge of how do you deal with vertical agreements under the
antitrust laws, it is my view, and speaking for myself, that we
have adequate means under the antitrust laws as currently
written to address ourselves to vertical agreements. That might
be anticompetitive.
Mr. Conyers. Okay. This is a good start.
Thank you, sir, very much.
Mr. Meier. Thank you.
Mr. Conyers. Thank you, Mr. Chairman.
Mr. Marino. If you want to continue when we come back, you
are very welcome to do that. They have called votes. We have
about 20 minutes or 25 minutes we are going to be delayed. But
we stand in recess, and we will return as quickly as possible.
[Recess.]
Mr. Marino. The hearing will begin. Sorry for the delay.
The Chair now recognizes the gentleman from Georgia, Mr. Hank
Johnson.
Mr. Johnson. Thank you, Mr. Chairman, and thank the
witnesses for their appearance today.
I have heard reports that a significant portion of the
patients either skip, delay, or reduce doses of prescription
medication because of high drug prices. What is the FDA doing
to address soaring drug prices? And do you believe that the FDA
has adequate statutory authority to meaningfully address drug
price increases, Dr. Gottlieb.
Dr. Gottlieb. Thanks for the question. I share your
concerns when patients forego necessary doses because they
can't afford their drugs. That is a concern of ours. It falls
squarely on our public health mandate to worry about issues of
access to needed medications.
With respect to your question about do we have adequate
authority, I would answer by saying I think we have untapped
authority. I think there are things we could do within the
scope of our current authorities to try to provide for more
competition in the marketplace consistent with what Congress
intended when it passed Hatch-Waxman. So, for example, we are
looking at places we can make our generic drug approval process
more efficient without sacrificing on the safety and
effectiveness that people depend on. With respect to that, the
standard that we maintain the markets so that people can't come
into the market, buy--for example, buy off low-volume generics
that might be used infrequently, raise the price substantially
knowing that it might take us an average of 42 months, which
was the old standard, to get a subsequent generic drug approved
in that category.
So they are taking advantage of what I have called a
regulatory arbitrage knowing that they could raise prices. And
even if competition comes into the market, it is going to take
us a long time to approve that. So we have committed to
reviewing generic applications in eight to ten months for high-
quality applications going forward.
I think there is a number of places like this where we
could address issues of access which would give people more
low-cost options. Clearly, another one is the topic of today's
hearing, which is places where the generic companies can't get
access to the samples they need where the branded companies
might be gaining certain rules to deny them the access that the
bio--the sample they need to do their bioequivalent studies.
Mr. Johnson. Well, with the authority that can be expanded
that would enable drug pricing to be more competitive, do you
believe that the FDA needs additional resources to address that
challenge, or are the resources that you are getting now and
what is projected for you to get according to the Trump budget
plan----
Dr. Gottlieb. Well, we could always do more with more,
Congressman. And the generic drug approval group that offers
generic drugs in particular has a very heavy burden and a very
heavy workload. And we are not at the point we are at steady
state with respect to generic applications where we will--we
will always have a certain cohort in-house that are being
worked. But we are continuing to build that number. So we are
not--we are not getting out generic applications at the same
pace we are getting them in. We will get there shortly, I
believe. But it is a very--it is a challenging dynamic, because
the market is continuing to expand, we are getting more
applications. And so that group works very hard.
I wouldn't say that we--there is not an opportunity to look
at new authorities that could address some----
Mr. Johnson. No. No. I am speaking of resources.
Dr. Gottlieb. Resources.
No. I was--when I was addressing resources, we also
researched about authorities. But we can always do more with
more, Congressman. There is no question that there----
Mr. Johnson. Do you need more to do your job more
effectively?
Dr. Gottlieb. I feel confident that we are going to meet
our goals with the resources we have if the user fees are
passed in a timely fashion by the deadline.
Mr. Johnson. I understand. You don't really want to delve
into that issue----
Dr. Gottlieb. Fair enough.
Mr. Johnson [continuing]. Forthrightly. But let me turn to
Mr. Meier.
And--some have suggested that there is no need for
legislation to address reverse settlements, also known as pay-
for-delay agreements, in light of the Supreme Court's holding
in FTC versus Actavis, that these agreements, ``have
significant adverse effects on competition.''
Do you agree?
Mr. Meier. What I would say is we have made a great deal of
progress, and it is not just the FTC. There are private cases.
There are cases brought by States' attorneys general. And I
have lost the exact count, but there may be more than 20 cases
going on right now across the country. And I do think, based on
evidence we have seen, that pharmaceutical companies have
pulled back on how frequently they are doing these and to what
degree and how long the delay is.
You know, the Commission itself hasn't taken a position on
any specific legislation. But, again, I think if there -- if
somebody's got a legislative proposal and thinks that they can
address the problem more rapidly and better than what we are
able to do through law enforcement, I am sure that we would be
happy to help in any way that we can to provide any technical
assistance that we could.
Mr. Johnson. Thank you.
I yield back.
Mr. Marino. The Chair recognizes the Congressman from
Florida, Mr. Gaetz.
Mr. Gaetz. I thank for the Chairman, and I am grateful for
the hearing.
Currently, the Federal Government maintains a patent on
Cannabis. And for those that may find that surprising, it is
Patent No. 6,630,507. And I also believe that the Federal
Government, through its various appendages, has engaged in
anticompetitive practices as it relates to Cannabis. And so I
am grateful for the Chairman calling a hearing, having the FDA
here.
Dr. Gottlieb, marijuana is a schedule 1 drug, right?
Dr. Gottlieb. Yes, that is right, Congressman.
Mr. Gaetz. And for those watching, a schedule 1 drug means
that the Federal Government has taken the position that
marijuana has no medical use. Is that right?
Dr. Gottlieb. It has not demonstrated to be safe and
effective for clinical use. That is right, Congressman.
Mr. Gaetz. And so as we look schedule 1 in some context
with the schedules of other drugs, hydrocodone is a schedule 2,
right?
Dr. Gottlieb. I believe so, Congressman.
Mr. Gaetz. And raw opium is a schedule 2, right?
Dr. Gottlieb. I believe it has certain clinical
applications. That is right.
Mr. Gaetz. And powdered opium is a schedule 2, right?
Dr. Gottlieb. You probably have a list.
I believe that is correct, yes.
Mr. Gaetz. And fentanyl is a schedule 2, right?
Dr. Gottlieb. That is correct.
Mr. Gaetz. And methamphetamine is a schedule 2, right?
Dr. Gottlieb. That is correct.
Mr. Gaetz. And even cocaine is a schedule 2, right?
Dr. Gottlieb. It has certain clinical uses. Yes,
Congressman.
Mr. Gaetz. And so when assessing whether or not it has--a
drug has these acceptable medical uses, there is a five-part
test that assesses the merits. Is one of the elements of that
test that there must be adequate safety studies demonstrating
appropriate medical use?
Dr. Gottlieb. I believe so. I am not intimately familiar
with the five-part test. I know what you are referring to. I
believe it is.
Mr. Gaetz. And so in order to meet that test and
demonstrate potential medical use, one would presumably need to
do research, right?
Dr. Gottlieb. You would need to do clinical studies.
Mr. Gaetz. And how does one do a clinic study on a schedule
1 drug, currently?
Dr. Gottlieb. It is currently the ability to study
marijuana. And there is a number of INDs. There is probably a
few dozen INDs in-house right now studying either the
ingredient itself or an extract from it. And there is an--there
is some approved therapies based on the extract from
medicinal--from marijuana.
Mr. Gaetz. If the University of Florida in my State wanted
to engage in studies regarding the medical use of Cannabis,
would that be more or less difficult than if they wanted to
study the medical use of cocaine?
Dr. Gottlieb. I don't know, Congressman. I would have to
get back to you on that and ask the experts at the--my drug
center.
Mr. Gaetz. Well, I would very much like to hear that. If
anyone in the Federal Government and anyone who works at the
FDA is taking the position that it is not more difficult to
study medical application of a schedule 2 drug, like cocaine,
than a schedule 1 drug, like marijuana, I would be very eager
to see what the basis for that was.
Right now, I have been told by universities in my State
that, were they to engage in research on the medical
application of marijuana, they could potentially impair over
$100 million dollars in other Federal grants that they receive.
Is that something that you are familiar with?
Dr. Gottlieb. Congressman, it probably wouldn't fall within
our purview if there are issues with getting access to it. It
falls outside the scope of our jurisdiction. A lot of that
falls within the jurisdiction of DEA.
Mr. Gaetz. Well, as a physician yourself, as an FDA
commissioner, do you have an opinion on whether or not
marijuana ought to be listed as a schedule 1 drug?
Dr. Gottlieb. I haven't reviewed the literature,
Congressman. There is no--there is no clinically demonstrated
use for marijuana right now. There is no approved use for
smoked marijuana. It has not gone through clinical studies to
prove safety and effectiveness for any indication.
Mr. Gaetz. Does it seem like a logical tautology that we
say we cannot declassify marijuana as a schedule 1 drug because
we don't have the clinical studies and its status as a schedule
1 drug impairs further clinical studies?
Dr. Gottlieb. Well, look. Congress has the authority to
take this up. And I think it has been taken up in some forms in
the past and contemplated by Congress.
The clinical studies, as I understand it, and I made the
point that there is a number of INDs in-house, some of that is,
I believe, for the raw ingredient, which I think is the subject
of your question. Some of it is for the extracts of marijuana.
So there are clinical studies going on in people who are
studying the safety and effectiveness in rigorous trials that
could potentially lead to an approved indication if they are
successful.
Mr. Gaetz. Yeah. And I know that right now--I believe it is
the University of Mississippi that is the only place where they
can grow the product in order to do the studies. Are you
familiar with that dynamic?
Dr. Gottlieb. The issues around access and growing--growing
and then access to product to do clinical studies for
regulatory purposes falls outside of our direct jurisdiction,
Congressman.
Mr. Gaetz. Well, I want to take my remaining few moments to
thank Chairman Goodlatte for the public commitment that he made
at a recent Judiciary Committee meeting that we are going to
study this question of research. I also want to thank the
Ranking Member of this Subcommittee for his desire to work on
research applications for medical Cannabis. It seems entirely
unacceptable to me that we block research that could
potentially show us the medical use that would then justify
delisting Cannabis.
And I yield back.
Mr. Marino. The Chair now recognizes the Congressman from
California, Congressman Swalwell.
Mr. Swalwell. Thank you, Chair. And, Chair, the beauty of
our democracy is that I sat here for hours yesterday, and I
think I disagreed with 100 percent of the things that Mr. Gaetz
said yesterday. But today I sit here, and I agree 100 percent
with what he just said. So I am glad that he and I, and Mr.
Cicilline, and others can work together on what I agree is an
important issue.
But I do thank the Chair and the Ranking Member for calling
us here to talk about how we can lower drug prices and increase
the therapeutic drugs--the therapies and drugs that can get to
the market to help people.
I did have some questions. Dr. Gottlieb and Mr. Meier,
thank you both for appearing. With respect to REMS, Risk
Evaluation and Mitigation Strategies, what is the percentage of
REMs on the market with respect to total number of drugs on the
market?
Dr. Gottlieb. I don't know what--I couldn't tell you what
the total is right now. In 2016, there were 115 new drugs or
new biologics approved, and nine were approved with REMS. So
that gives you sense of the proportion by year. And it has been
fairly steady with respect to the number of drugs that are
getting approved with REMs. So it is not something that is
spiking up.
Mr. Swalwell. Do you believe that all REMs are created
equally? And what I mean is, for example, certain controlled
substances like opioids, and fentanyl, and sodium oxybate,
which is, you know, commonly referred to as the date rape drug,
they are regulated under REMs, but they seem to be quite unique
in that they are, to me, at least, in the category of those
that you especially want to control and protect. Would you
agree with that?
Dr. Gottlieb. Yeah, there are some common situations where
you see REMS apply drugs that have abuse potential. It can be
diverted. Drugs, for example, that have risk of teratogenicity
associated with them where you might want to implement certain
testing before the application of drugs. So there are some
standard categories. If you look to all the drugs that have
REMs, you will see some patterns appearance for sure.
Mr. Swalwell. And, Commissioner, you wrote, on July 6,
2017, in a JAMAnetwork.com article entitled ``Marshaling FDA
Benefit-Risk Expertise to Address the Current Opioid Abuse
Epidemic'' that the FDA limits prescribing of sodium oxybate to
certified prescribers. In addition, the drug may be dispensed
only to enrolled patients by a certified pharmacy and only by a
certified pharmacy that shifts drugs directly to patients.
Sodium oxybate is not available in retail pharmacies. Then you
actually laid out, I think, a good case as to why opioids
should also, you know, be controlled and regulated, you know,
in that same manner in talking about the opioid crisis.
Do you foresee, as we look at making sure that drugs can
get to the market and that, you know, we are not allowing
anticompetitive practices to take place, that there is a
special category, though, for those types of drugs that have,
as I just mentioned, those certain characteristics that you
really want to make sure controls are in place?
Dr. Gottlieb. That is absolutely true, Congressman. It has
been the case that, for certain drugs, historically, certain
controls have been put in place when there are special
circumstances where there are very unique risks associated with
them.
The thrust of that article was related to an imperative by
the FDA to consider the risks associated with the potential
illicit use of the drugs and how it looks at risk-benefit
balance both pre and post-market as well as the risks
associated with the labeled use of the drugs. And we were
laying out the basis for why we believe we need to look at the
illicit risk as well.
But it is the case, to your underlying point, that there
are certain risks associated with drugs where, historically, we
have applied REMS, and historic--and we will likely apply them
going forward. And a lot of them are well-defined.
Mr. Swalwell. Right. It sounds like a challenge for us, Mr.
Meier. I would be interested in your thoughts, as lawmakers, to
make sure that we don't have anticompetitive practices but that
we are still doing everything we can to protect the public
from, you know, God forbid, a date rape drug being, you know,
widely accessible without any reigns or controls.
Mr. Meier. Well, I think that is precisely right is finding
that balance.
Mr. Swalwell. Thank you, Mr. Chairman.
I yield back.
Mr. Marino. Thank you. Seeing no other Congress Members on
the dais for questioning, this concludes our first panel. I
want to thank Dr. Gottlieb. I want to thank Attorney Meier for
being here. You were very helpful, and you are excused.
Now we call the second panel to come up and--to the table.
Now that you-all are comfortably seated, I would ask you to
stand and raise your right hand to be sworn in.
Do you swear or affirm that the testimony you are about to
give before this Committee is the whole truth, nothing but
truth, so help you God?
Please be seated.
Let the record reflect that the witnesses have responded in
the affirmative.
I am going to read each of your bios, and then we will
begin with you then making your 5 minute statements. But I will
go through all four bios first.
David Olson is an associate professor at Boston College Law
School teaching patents, intellectual property, and antitrust
law. Prior to joining Boston College, he worked at Stanford Law
School's Center for Internet and Society where he researched in
patent law and litigated copyright fair use impact cases.
Before entering academia, Professor Olson practiced as a
patent litigator at the law of the Kirkland & Ellis, LLP, and
clerked for Judge Jerry Smith of the U.S. Court of Appeals for
the Fifth Circuit. He earned his bachelor's degree from the
University of Kansas and his JD from Harvard Law School.
Welcome, Professor.
Professor Erika Lietzan is an associate professor of law at
the University of Missouri School of Law. Professor Lietzan
researches, writes, and teaches primarily in the areas of drug
and device regulations, intellectual property, and
administrative law. She recently completed a historical and
empirical examination of the new drug research and development
paradigm in the United States and the relationship between the
length of that process and incentives to innovate.
Prior to teaching, she was in private practice, including
eight years as a partner at Covington & Burlington in
Washington, D.C. Professor Lietzan was involved in every major
amendment to the Federal Food Drug and Cosmetic Act between
1997 and 2014 working as outside counsel and sometimes lobbyist
for various individual companies as well as the trade
association PhRMA.
She serves in the leadership of the Food and Drug Law
Institute and served for many years in the leadership of the
Science and Technology section of the American Bar Association.
The professor received a bachelor's degree in history from the
University of North Carolina where she graduated with honors,
her master's degree in history from UCLA, and a law degree with
high honors from Duke Law School. Professor, welcome.
Alden Abbott is the Rumpel Senior Legal Fellow and Deputy
Director of the Meese Center for legal and judicial studies at
the Heritage Foundation. Prior to joining the Heritage
Foundation, he served as director of Patent and Antitrust
Strategy for BlackBerry and in a variety of senior Government
positions, including director of antitrust policy for the
Federal Trade Commission, acting general counsel of the
Commerce Department, chief counsel for the National
Telecommunications and Information Administration, and senior
counsel in the Justice Department.
Mr. Abbott is an adjunct professor at the Antonin Scalia
Law School at George Mason University and was a visiting fellow
at All Souls College, Oxford University, and a Wasserstein
Fellow at Harvard Law School. He is also a member of the
Leadership of the American Bar Association's Antitrust Section
and a Non-Governmental Advisor to the International Competition
Network.
Attorney Abbott received his bachelor's degree from the
University of Virginia, his master's degree in economics from
Georgetown University, and his JD from Harvard Law School.
Welcome.
Aaron Kesselheim is an associate professor of medicine at
Harvard Medical School and a faculty member in the Division of
pharmacoepidemiology and Pharmacoeconomics in the Department of
Medicine at Brigham and Women's Hospital. His research focuses
on the effects of intellectual property law and regular
policies on pharmaceutical development, the drug approval
process, and the cost, availability, and use of prescription
drugs both domestically and in resource-poor settings, Jen
Center for primary care at Brigham and Women's Hospital.
He is a member of the New York State Bar and is a patent
attorney. And within the Division, Dr. Kesselheim leads the
program on regulation, therapeutics and law, an
interdisciplinary research core focuses on intersections among
prescription drugs and medical devices, patent health outcomes,
and regulatory practices and the law. And modernizing clinical
trials and served as a consultant for the NIH, FDA, Institute
of Medicine, USPTO, and numerous state government offices.
He has been a visiting scholar at the Yale School of
Medicine and School of Management and the visiting associate
professor of law at Yale Law School.
Dr. Kesselheim earned his bachelor's degree from Harvard
College, his JD from the University of Pennsylvania Law School,
his MD from the University of Pennsylvania School of Medicine,
and his MBH from Harvard School of Public Health. Doctor,
welcome.
Each of the witness's written statements will be entered
into the record in its entirety. I ask that each of you
summarize your statements in 5 minutes or less. And to help
you, you have lights in front of you. When that light switches
from the green to yellow, you have a minute left, and from
yellow to red means your time's expired. But as I told the last
group, when I sit there, I never look at the lights. So I will
diplomatically pick up the gavel, and maybe that will give you
an indication to wrap it up.
Now we are going to hear from our distinguished panel. And,
Professor, the floor is yours.
TESTIMONY OF PROFESSOR DAVID S. OLSON, ESQUIRE, ASSOCIATE
PROFESSOR OF LAW, BOSTON COLLEGE LAW SCHOOL; PROFESSOR ERIKA
LIETZAN, ESQUIRE, ASSOCIATE PROFESSOR OF LAW, UNIVERSITY OF
MISSOURI SCHOOL OF LAW; ALDEN ABBOTT, ESQUIRE, DEPUTY DIRECTOR
AND SENIOR FELLOW, THE HERITAGE FOUNDATION; AND PROFESSOR AARON
KESSELHEIM, M.D., M.P.H., ASSOCIATE PROFESSOR OF MEDICINE,
HARVARD MEDICAL SCHOOL
TESTIMONY OF PROFESSOR DAVID S. OLSON
Mr. Olson. Thank you, Chairman Marino, Ranking Member
Cicilline, and members of the Subcommittee. I appreciate the
opportunity to testify today. A more detailed version of my
remarks is available in the written testimony, as you said.
Let me state from the outset my firm belief that patents
are necessary to give adequate incentive to develop new drugs.
After patent expiration, however, market competition from
generics is the best way to provide patients with lifesaving
drugs that they need at the best prices. I believe that the
CREATES Act, which is one of the things being considered at
this hearing, can be an important step in addressing abuse of
FDA regulations.
Forcing brand companies to share samples with generics is
necessary, will not undermine incentives to invest in inventing
new drugs, and does not violate patent or antitrust policy.
Moreover, the narrowly tailored approach of the CREATES Act is
superior to antitrust litigation.
I would be pleased to discuss these issues more with the
Subcommittee. But I want to focus my oral remarks on the
problem abuse of REMs patents and the FDA approval process. In
addition to performing bioequivalent studies to support an
ANDA, FDAAA--the FDAAA Act requires that generic and brand
manufacturers use a single shared REMS system for risk
mitigation unless the brand manufacturer's system is either,
one, too burdensome or, two, is protected by a patent or a
trade secret that the brand company will not license.
The problem that has arisen is that some brand companies
have patented their REMs systems, or their REMs, with Elements
to Assure Safe Use, ETASU, and then have refused to license
generics. This means the generics cannot use that system. But
more problematically, in some cases, the brand companies have
then gone on to file citizen petitions arguing that a generic
may not use another or comparable version of a REMs with ETASU
program that the generic comes up with on its own because no
other system would be as safe or effective as the patented
ETASU. What this effectively does is keep generics off the
market for the entirety of the period of the REMS with ETASU
patent if successful.
This has been done--asserted more than once. For example,
Celgene took this approach in arguing that generic versions of
Thalomid could not be sold. Besides this, brand companies also
list REMs patents in the Orange Book notwithstanding the fact
that a REMS patent is for a method of--is not for a method of
use but, rather, a method of distribution. This could result in
extension of the monopoly over a drug for almost 20 more years
depending on the data filing of the REMS patent.
It is worth noting that the parameters for a REMS with
ETASU system are set forth in the FDAAA of 2007, and specific
requirements for ETASU are given in the act. For instance, the
FDAA sets out the requirements for ETASU including very simple
and straightforward things like only--like educating doctors
and hospitals, only allowing doctors and hospitals that have
been educated and certified to prescribe the drug, having
restricted distribution of the drug, patient testing and
information, counseling patients, monitoring patients to make
sure the drug is administered safely, and maintaining the
database to coordinate all this information. This is set out in
the statute.
If you look at REMs with ETASU patents, which I have spent
some time doing, what you note is that they track very closely
to the statute. For example, claim 1 from Merck's REMS patent
for Entereg contains the following steps: Identifying relevant
hospitals; providing such hospitals with literature about the
drug, wherein the drug is Entereg or a generic; identifying a
subpopulation of hospitals which have measures in place to
limit use of the drug wherein said measures comprise order
sets, protocols, or guidelines; then registering the
subpopulation using a computer-readable storage medium,
authorizing them to dispense the drug, and monitoring the
patients. Very closely track the statute and yet this is being
patented.
The problem with this is that not only might this be
obvious, but if generics may not use the patented system, they
may not be able to safely distribute the drugs and may be kept
off the market. There is no solution to this problem under the
status quo.
The CREATES Act does provide a narrowly tailored and
appropriate solution. By requiring branded and generic drugs
to--companies to enter into a shared single REMS system within
120 days of a request, this forces them to share unless a
comparable system can be approved by the Secretary. The beauty
of this is that what it will do--this approach will do is it
will stop REMS companies from abusing REMS patents if they
argue that there is no ability to distribute the drug except
through the REMS process. Then what the statute does force them
to do is to share their process.
And I would just wrap up by saying that that forced sharing
is neither a violation of patent policy nor of antitrust law.
And I would be happy to speak more to that in the question and
answer. Thank you.
Mr. Olson's written statement is available at the Committee
or on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-Wstate-OlsonD-20170727.pdf
Mr. Marino. Thank you, Professor. Professor Lietzan.
TESTIMONY OF PROFESSOR ERIKA LIETZAN, ESQUIRE
Ms. Lietzan. Chairman Marino, Ranking Member Cicilline, and
members of the Subcommittee, thank you for this opportunity to
speak with you today.
I was asked to talk about three aspects of the FDA
framework that are the focus of complaints that brand companies
are acting improperly and may be violating antitrust law.
The first is FDA's citizen petition process which furthers
the open Government principles of transparency, public access,
and accountability. Anyone may petition FDA to take any
administrative action, and the petition and any comments on it
are public documents. Petitions play an important role in our
political system. The public has a strong interest in ensuring
that executive branch agencies work within the constraints of
the laws that Congress writes, and a robust petitioning
practice adds a layer of surveillance to complement the
oversight function of the legislative branch and the review
function of the judicial branch.
You have been told that brand companies file frivolous
petitions that delay generic drug approval. These claims rest
on anecdotes and a rhetoric, not evidence. Congress passed a
law in 2007 stating that FDA may not delay approval of a
generic drug due to a petition, unless necessary, to protect
the public health. Since then, FDA reports only five generic
drugs have been delayed without public health justification out
of more than 4,000 copies approved.
A high denial rate is not proof that petitions are
frivolous. Drug approval decisions can require difficult
judgment calls about appropriate regulatory policy in the face
of scientific uncertainty and about the flexibility of the law
to accommodate new facts. Differences in opinion and
perspective are natural. A valid petition may simply lack
persuasiveness at the end of the day.
Congress has also been told that innovative companies use
REMS restrictions to block generic drug approval. To the best
of my knowledge, though, innovators refuse to provide samples
primarily because they have concerns that requesting companies
lack adequate safeguards to address the risks presented by
these drugs. And these concerns are reasonable.
Access restrictions are usually imposed to mitigate severe
side effects, like birth defects or irreversible organ damage.
And even minor lapses in safety protocols by any party at any
point can have horrific consequences.
If Congress wants to encourage innovators to provide
samples, it should protect them from liability arising out of
the actions of the third party once a restricted drug has left
the innovator's special access system. We should not force
innovators to provide their products to generic companies. If a
drug is under patent, this would require the company to
practice its patent for the benefit of a competitor. It is a
bedrock principle of U.S. law that a patent owner has no duty
to practice its patent at all.
We lack evidence of a systemic problem that would justify
such a fundamental change to the intellectual property system.
Only 22 brand drugs have access restrictions and no generic
application. And more than half of those are so new that FDA
statute doesn't allow approval of a generic or by a similar
anyway. It is not clear how many, if any, lack generic
competition because an innovator didn't share its drug.
Finally, there are concerns when the price jumps on a drug
that has been inexpensive for years. Sometimes this results
from FDA's unapproved drugs initiatives. And it is important to
understand why this happens. Several thousand drug products are
marketed without the required FDA approval.
Many have been used for half a century or longer, and some
are even covered by insurance. Some are not safe. Others are
not effective, which is a problem because it keeps patients
from drugs that do work.
FDA focuses its enforcement efforts on the companies that
sell these drugs which present a public health concern. FDA
can't force the other companies to file applications. They
would have to threaten enforcement action. And enforcement
action threats are effective only if backed up. This would
require resources that FDA doesn't have. It would also take
medicines away from patients.
So after approving an application, FDA removes the
competing products from the market. This ensures that patients
receive the specific product that was studied, and it preserves
the integrity of the approval system. It also encourages
applications.
Usually generics can be approved three years later. But in
the meantime, the company that submitted the application can
recover its costs. This company hasn't done anything wrong. In
fact, it is the one company that chose to comply with the law
to bring an illegally marked product into the FDA system, but
the system has taken away a cheap medicine from patients.
Clearly we need a better solution that maintains the integrity
of the drug-approval scheme but doesn't deprive patients of
drugs they rely on.
In sum, regulated industries, consumers, and other
stakeholders share responsibility with FDA for the public
health mission enshrined in the statute. When the rhetoric and
anecdote are laid aside, the evidence suggests that regulated
entities generally operate in good faith within this framework.
And when companies protect their property rights, participate
in open Government, or protect themselves from unfair liability
exposure, it would be a mistake to take action against them.
Instead we should look for ways to support FDA in its public
health mission and to encourage private choices that we prefer
as a public policy matter. Thank you.
Ms. Lietzan's written statement is available at the
Committee or on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-Wstate-LietzanE-20170727.pdf
Mr. Marino. Thank you, Professor. Attorney Abbott.
TESTIMONY OF ALDEN ABBOTT, ESQUIRE
Mr. Abbott. Chairman Marino, Ranking Member Cicilline, and
distinguished members of the Subcommittee, I applaud you for
convening this hearing on a very important public policy
matter.
The views I express today are my own and should not
necessarily be construed as representing any official position
of the Heritage Foundation.
Today I will briefly note the interplay between regulation
of the competitive process before commenting specifically on
the potential abuse of FDA citizen petitions. And I will
summarize my views on a CREATES Act of 2017.
Extensive economic research demonstrates that regulated
entities may manipulate regulatory process to undermine
competition. Such regulatory manipulation is harmful to the
American economy. It often defers entry into a market and thus
precludes competition on the merits thereby raising prices
above competitive levels, reducing product quality spawning
economic inefficiency and deterring innovation which is a key
driver of economic growth.
As a general matter, in order to maximize economic welfare,
Federal regulators should seek to devise rules that are as
procompetitive and adds little subject to an anticompetitive
manipulation by private parties as possible consistent with
statutorily set goals.
And I am not commenting specifically on FDA rules, but I
think the FDA certainly should and probably will go about doing
that. There are principles of guidance provided by
organizations such as the OECD/International Competition
Network in which I am involved. And there is also general
guidance available from competition economists, for example, at
the Federal Trade Commission and Justice Department, who
actually, in the past, in the 1970s, provided a very important
role in promoting regulatory reform and transportation, in
aviation.
Now, one particular sort of regulatory manipulation that
undermines competition is a taking of actions by an incumbent
firm to forestall entry into the market by a potential
competitor. References have been made to potential abuse of FDA
citizen petitions to delay entry from producers of generic
versions of branded drugs. Our current regulations require the
FDA review and respond to every citizen petition receives
creating the potential of delay.
Now, claims have been made that citizen petitions have been
filed to undermine competitive generic entry into certain
pharmaceutical matters. Those concerns have been noted by the
FDA, for example, in a 2015 report. And most recently, in
February 2017, the Federal Trade Commission filed a complaint
in Federal District Court alleging that Shire ViroPharma, a
branded pharmaceutical company, engaged in a series of
meritless filings, including 24 FDA citizen petitions to delay
generic entry into a particular market.
Now, clearly, baseless FDA filings made by brand name
Pharma firms lacking any plausible efficiency justification
used solely to forestall competition undermine the competitive
process. FDA and Congress certainly should consider what, if
any, additional legislative or regulatory steps may be
appropriate to curb such abusive filings including, but not
necessarily limited to, reform of citizen petition process.
Now, the Federal Trade Commission's suit against Shire
ViroPharma appears to advance sound policy. I would note,
however, a slight bit of caution. Although antitrust actions
occurred clearly pretextual petitioning, at a potential to
reduce harmful regulatory delays, such cases need to be
selected with great care by public officials. I believe the
Federal Trade Commission certainly appears to have done that in
this case. But certainly, you want to be careful. And the
Supreme Court in its case law is sort of cavil to bringing
suits of that kind.
Now, the CREATES Act of 2007 is a modified, and I believe,
an improved version of its 2016 CREATES Act on which I
testified favorably before Senate Judiciary. Now, the 2017 act
gives the FDA more discretion than 2016 act to approve
alternative safety protocols for high-risk drugs rather than
require parties to develop shared safety protocols, and it does
away with a concern of alleged free riding on safety protocols
developed by the branded company.
Now, that 2017 act also creates a statutory gap. I explain
in my testimony, as I did my testimony last year, there are
real limitations in the application of the antitrust laws to
cases of regulatory violations and refusals to supply. Not that
it is necessarily impossible, but these cases are very hard to
bring. And because of that, I think the CREATES Act is
appropriate and narrowly tailored to fill a niche that
antitrust may not really be able to address appropriately.
Thank you once again. I look forward to your questions.
Mr. Marino. Thank you, Attorney Abbott. Dr. Kesselheim.
Mr. Abbott's written statement is available at the
Committee or on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-Wstate-AbbottA-20170727.pdf
Dr. Kesselheim. Chairman Marino, Ranking Member Cicilline,
and other members of the Subcommittee, thank you for this
opportunity to join you today.
The reason today's hearing is so important is that low-cost
generics and biosimilars improve patient adherence and clinical
outcomes. And generics have led to trillion dollars in
healthcare system savings over the last decade. However, too
often branding manufactures work to delay the availability of
generics using different business strategies. I am going to
mention, briefly, five.
First, most drugs have patents covering their active
ingredients, but manufacturers will seek secondary patents on
peripheral features such as the drug's metabolite or method of
administration. Generic manufacturers then have to design
around these patents or challenge their validity in court. One
classic example with the anti-ulcer medication, Prilosec, which
was protected for additional years by a patent on the pill's
coating.
In one study I led, we found that Medicaid alone could have
saved $600 million on this single drug had a low-cost generic
been available before this delay. In another study of two HIV
drugs, we found nearly 200 such secondary patent claims
threatening to delay generic availability for 12 years.
Another strategy aided by these secondary patents is
product hopping in which manufacturers switch to different
products, sometimes trivially different, pulling their old
generic--their old product off the market to stay one step
ahead of generic manufacturers. For one antibiotic drug, the
manufacturer switched first from a capsule to a tablet, then to
a slightly different dose, then to a tablet with a single
score, and finally to be tablet with two scores.
Problematic patents may be challenged in court. But a third
delaying strategy is for branding manufacturers to make
substantial payments to generics to end these cases in so-
called pay-for-delay settlements.
The FTC estimated in 2010 that such settlements would cost
Americans $3.5 billion annually extra over the subsequent
decade. An analysis revealed that, when these cases were
litigated to completion, two-thirds of the cases related to
secondary patents. And in those cases, generics were
victorious. Pay-for-delay settlements are naturally much more
likely to cover challenges over secondary patents.
A fourth strategy involves preventing generic manufacturers
from getting samples or other key information that they need
for FDA approval. And we have talked about that a lot today
already. To help the HIV drug Daraprim sustain its 5000 percent
price increase, the manufacturer restricted the distribution
through a single specialty pharmacy in part so the generics
couldn't get it.
The FDA has received about 150 inquiries from generic
manufacturers regarding inability to secure samples. For drugs
protected by special REMS-prescribing restrictions, generic
manufacturers need to be able to use the same system for their
interchangeable drugs. But branding manufacturers have delayed
generic entry by refusing to share information about their REMS
or getting secondary patents covering their REMS processes.
Finally, as Mr. Abbott explained, manufacturers use citizen
petition requests to the FDA to delay generic drug entry. One
review of 5 years of petitions found that 87 percent of these
petitions were filed by manufacturers of brand-name drugs, and
92 percent were ultimately denied.
Relying on FDC antitrust enforcement is not sufficient to
stop these tactics. Patients need Congress to step in. A first
step would be to pass the CREATES Act which provides a process
for requiring manufacturers to provide key drug samples and to
prevent some REMS abuses. But this Committee should also
consider other potential reforms. I am going to mention four,
and I have other suggestions in my written comments.
First, to prevent improper secondary patents from delaying
generic entry, Congress should require formal patent review
when these patents are listed with the FDA. Many secondary
patents would not pass such scrutiny and could be weeded out
before lengthy litigation is required.
Second, the Committee should consider additional mechanism
to address problematic pay-for-delay settlements that continue
to this day even after the FTC versus Actavis case. Including
preventing settlements with transfers of value for delayed
entry over the cost of the litigation or increasing the
penalties for settlements found to be anticompetitive, such as
full disclosure of profits or treble damages.
Third, all terms of REMS should be public information, and
REMS patents should not be able to be listed with the FDA.
Ultimately, I believe we should move to a system in which it is
the FDA with sufficient resources that controls and manages the
REMS as a public good, because it will increase efficiency for
patients if brand names and their interchangeable generics are
all part of the same REMs.
To address the misuse of citizen petitions, the Committee
could also expand the opportunities for the FDA to summarily
reject petitions without requiring an in-depth review.
Manufacturers of brand-name drugs use many strategies to
delay generic entry, of which I have only highlighted some of
them today. That is bad for patients, bad for the economy, and
it reduces innovation. One study found that it was the ending
of market exclusivity periods in contrast to their indefinite
extension that was most associated with the introduction of new
branding products.
The CREATES Act is a laudable first step in helping address
some of these strategies, but other policy reforms are also
needed. I appreciate the Committee's commitment to solving
these issues and would be happy to continue to be involved in
the deliberative process.
Mr. Kesselheim's written statement is available at the
Committee and on the Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-Wstate-KesselheimA-20170727.pdf
Mr. Marino. Thank you, Doctor. We will now begin with
questioning. There will be other members that may come in and
out.
I am going to start off with a question for each, you if
you care to answer it. I will start with Professor Olson and
work our way down to Dr. Kesselheim, and then I have another
question that I would like each of you to respond to, if you
care to. Then I would start with Dr. Kesselheim. Okay.
Concerns have been raised that the approval of a generic
alternative REMS distribution system will inevitably lead to
patent infringement systems. Given the likely overlap with the
branded manufacturers original distribution system, do you
anticipate this being a problem? And I have been a critic of
bringing--wanting to so much bring the Patent and Copyright
Office into the 21st Century.
So Professor Olson.
Mr. Olson. Yes, Mr. Chairman. I do think that the way that
patents are written, the fact that they have to track the
statute very closely, means that it will be very easy to bring
infringement suits. Even if the patent is found invalid or the
suit is not successful, this listing them in the Orange Book
and the litigation can significantly delay generic entrance.
Furthermore, there is no additional incentive that is given
by granting REMS patents that is needed, because there is
already an incentive to create the REMS in ETASU systems
because you don't get to market your drug unless you create it.
They are a tiny fraction of a cost of drug development. And so
by forcing sharing, or at stopping companies from arguing that
if generics don't share they may not market the drug, we are
not going to be losing anything. We are not going to lose any
benefit.
Mr. Marino. Professor.
Ms. Lietzan. Well, first of all, I disagree with Professor
Olson that there isn't much difference between the statutory
language and the REMS patents the statute describes in very
general terms the type of access restrictions that are
permitted. And anyone who has ever worked on designing a risk
management plan or negotiating a REMS with FDA can tell you
that there are many ways to mitigate a risk. And the REMS
themselves are very detailed, and there are a lot of decision
points along the way.
I think the question that matters is whether it is possible
to mitigate a particular risk more than one way. And that is a
clinical question and a regulatory question. It has to be
answered case-by-case. But having worked on REMS issues for
companies, my instinct is, yes, there is--there is absolutely
more than one way to design a system.
Mr. Marino. Thank you.
Attorney Abbott, do you care to comment?
Mr. Abbott. Well, it is certainly possible, Mr. Chairman,
as I mentioned, the possibility of designing around a patent.
That may be tricky. There is certainly a possibility of
infringement lawsuits. It could also, perhaps, be dealt with
legislative. And if Congress wanted to, could make it clear
that any actions taken to develop sort of a REMS system by
potential entrant, is not going to constitute patent
infringement, I am just not saying good it is a good idea or
not, but there may be ways to have very, very narrow
modifications to try and forestall the problem of opportunistic
patent litigation here. You have to be very careful, you know,
and maintain appropriate incentives to innovate.
But I think, as Professor Olson mentioned, they probably
already are given the need to meet FDA regulatory requirements
to develop these systems. But I am not an expert in this area,
but that is just my initial reaction.
Mr. Marino. Doctor.
Dr. Kesselheim. I think that here we should be thinking
about what is best for the patient. And to me the best thing
for our patients is to have a single REMS system, because,
again, these are otherwise interchangeable drugs. It doesn't
make any sense if you are a clinician or a patient to be
enrolling people in different REMS for otherwise
interchangeable drugs based on a manufacturer that you may not
know.
And so I think that ultimately we should be trying to
develop a system where shared REMS are able to be done and are
able to be established in an efficient way. And I think that we
can do that by, for example, creating royalty free licenses for
patented REMS so that generic manufacturers can use them or
other mechanisms to try to encourage the development of shared
REMS for patients' benefits.
Mr. Marino. I am going to play a little devil's advocate
with myself here, and I would like to hear what you folks have
to say about it. And we will start with you, Dr. Kesselheim.
I am very familiar with, because I have a very dear friend
who is now retired from his 90s, who was a researcher, Ph.D.,
and come working in with drug companies, which I won't mention.
And I saw, and he has explained to me over the years, the time,
the labor, the expense that goes into developing a drug.
How do we--or should be even think about that concept of
the profit or not meeting the profit to make sure that
companies still are in the research aspect of creating life-
saving drugs.
Do you understand my question?
Dr. Kesselheim. Sure. So, I mean, I--obviously I think it
is very important for there to be a period of time when
companies can make back the investment that they had in their
product and make a profit on that. But at some point that
period has to end. And currently, manufacturers on average get
about 12 to 16 years of market exclusivity.
How much longer--how much more market exclusively is
necessary? I mean, you know, manufacturers--pharmaceutical
manufacturers currently make about 22 percent profit margins as
compared to 7 percent profit margins for the rest of the
Fortune 500, you know.
And so--I mean, I think that it is--it is important both
for there to be a fair return on investment but then at some
point for that to end and for a competitive market to be in so
that patients can get the benefit of lower-cost generic
products.
And I don't think what we are talking about here has any,
necessarily, bearing on the questions of innovation. We are
talking about getting timely access to generic products after
an extended period of market exclusivity that already exists.
Mr. Marino. Thank you.
Attorney Abbott.
Mr. Abbott. I think, yes, one may agree or disagree about
the appropriate length of exclusivity. I think once the
exclusivity period is over, whatever decision you make, you
want to get the competitive products to the market as quickly
as possible.
I will just note very briefly. It is beyond the scope of
this hearing, but it is very important. One issue that American
pharma firms face that is very serious is a single purchaser.
Many foreign countries are sort of monopsony purchasers of
American pharmaceuticals. And they say if you want to enter our
market, you know, we are going to dictate these price terms.
So, unfortunately, the American consumer has sort of been
losing because of that. In the cross subsidization, American
consumers and the American economy has paid more for drugs than
foreign countries. But often that is an artifact of the foreign
systems. And I don't know if you can talk about international
agreements or something to deal with it. But it is part of the
bigger again that is beyond the scope of this hearing.
Mr. Marino. Thank you.
Professor Lietzan.
Ms. Lietzan. Yes. Thank you. This is actually an area in
which I have done a fair amount of research recently.
You are right about the cost. In addition, there is a high
degree of risk. There are a lot of products that are--compounds
that look promising at the beginning and fail through the long
process. It is expensive and risky. And a company that does
this research has to recover not only the cost of researching
the drug that actually got approved but the cost of starting to
research, starting the process with the drugs that failed.
So I have serious concerns about the adequacy of our
incentives right now. And I am particularly concerned about the
products that take a really long time--products, for example,
that might prevent Alzheimer's, things that--things for which
we may need to do trials that exceed 10 or 15a years.
Dr. Kesselheim is right about the average market
exclusivity data. But I think recent economic data suggests
suggestion the break-even point for new molecular entities is
somewhere in that 12- to 16-year range. And innovators and
other industries benefit from 17 to 20 years of patent life.
And if you compare that with 12 to 14 for the drugs that we
desperately need, that leaves me concerned.
Thank you.
Mr. Marino. Thank you.
Professor Olson.
Mr. Olson. I echo the comments of Dr. Kesselheim. And just
to add one thing to that. Professor Lietzan's right, of course,
that the risk is very high. But the profit margin overall tells
you that you are getting high risk and a pretty high reward.
That takes into account all the failures.
The other thing I would just add is that in my proud city
of Boston, we have many biological biotech companies. Some of
them are taking 20 or 30 years to get a pathway to a drug. And
yet we have this amazing ecosystem that supports that.
The system has worked without needing extension. When we
grant extensions of exclusivity or if we can end the granting
of some of these extensions of exclusivity, the drug companies
will also stop focusing on trying to extend and move back to
focus on R&D. And that is where we want them to focus once
their drug has been patented.
Mr. Marino. Thank you.
The Chair now recognizes Congressman Johnson.
Mr. Johnson. Thank you, Mr. Chairman.
Professor Lietzan, in your written testimony you state that
requiring branded drug companies to provide drug samples to
generic drug competitors is a duty to deal that will undermine
innovation.
How would requiring samples to all patent drugs or drugs
nearing the ending of their patent exclusivity harm innovation?
Ms. Lietzan. So I do believe that requiring the sale of a
product ultimately requires--if it is a patented product, it
requires the company to manufacture enough of the product to
satisfy all of the generic applicants, all the biosimilar
applicants that wanted that. And if a product is under patent,
that requires the company to practice its patent for the
benefit of one of its competitors. That is contrary to bedrock
principles of U.S. patent law right now and in and of itself
will devalue the patent, which, to me, is concerning because
decades of research show that robust patent protection is
essential for pharmaceutical innovation.
Mr. Johnson. All right.
And, Mr. Abbott, do you agree with Professor Lietzan's
characterization that providing drug samples is a duty to deal?
Do you agree with that?
Mr. Abbott. Well, Congressman, I think one has to look at
this duty as a general matter, non-regulated contacts. There
isn't normally a duty to deal here. The problem is that, in
order to enter the market, you need to get hold of these
samples.
So, yes, you are, in some sense, constraining potentially
intellectual property right. But it may be near the end of the
patent life, and it is sort of necessary to be able to entry--
to enter. And if it is necessary to be able to enter, that is,
you know, one of the tradeoffs.
I think that--so I--that would be my response.
Mr. Johnson. Dr. Kesselheim, as a practicing doctor, are
you concerned that requiring access to branded drug samples
would undermine----
Dr. Kesselheim. No, I'm not. I mean, I feel like the
statute is well constructed to try to prevent any risk of
patient safety.
But, again, these samples are not being collected to then
be distributed to patients. They are being collected to be put
into laboratory and other clinical testing that is necessary to
demonstrate to the FDA that the drug is bioequivalent and
therefore the generic drug and be approved.
I don't really see the risk that, for example, a drug that
is used in elderly patients with a type of cancer called
multiple myeloma, but also, unfortunately, has a birth defect
risk, because it's being transmitted to a generic for the
purpose of conducting clinical testing so that the generic can
get on the market, would somehow end up in the hands of
patients for whom it would cause risk.
I don't see that as a reasonable safety risk. And I do
think that to the extent that there are weird ways that we
could think of that that might exist, the statute does a good
job of trying to prevent that from happening by forcing the
company to develop a plan and register that with the FDA.
Mr. Johnson. Professor Lietzan, I feel compelled to offer
you the opportunity to respond.
Ms. Lietzan. Yes. So these drugs are--they present very
serious risks to patients, and some of them are toxic. And many
times the generic companies that request samples have no
experience with drugs of this sort. Some of sophisticated, but
some do not.
And I think that the concern has always been that if
anybody in the process of conducting, especially when you get
to the clinical trials, if there's any sort of lapse by
anybody, the contract--the clinical research organization, not
the generic company, the group that they contracted with to do
the bioequivalent study, if there's any sort of lapse, the
consequences can be horrific.
And my own view is that the concerns that the companies
have are valid, and I know that many of the companies that have
been the focus of attention, because they have demanded
assurances about safety protocols, have in fact sold their
products to generic companies that have adequate safety
protocols. And to me that is very strong evidence of good
faith.
Mr. Johnson. Mr. Abbott, would you care to respond?
Mr. Abbott. Well, I don't know if you're asking about the
questions of safety and risk. I mean, perhaps Dr. Kesselheim
might be best.
I do know that most generic companies, they have to meet
very rigorous--generic companies, some of the largest
pharmaceutical companies in the United States, they have to
meet, in general, very rigorous safety controls. They are
subject to potential liability of various sorts.
But perhaps Dr. Kesselheim might want to have some
additional comments.
Mr. Johnson. Doctor.
Dr. Kesselheim. Sure. I mean, I think I said--I mean, I
said what I said before. But I think you also have to take into
account the risk of not allowing this kind of normal business
practice to happen, which is that very expensive drugs do not
get timely generic competition, which keeps the price high,
reduces access to important drugs for patients who are unable
to afford access.
And I think you also have to take into account that whole
risk of not having a system in which businesses can exchange
the product that they need in order to do the various basic FDA
testing as well.
Mr. Johnson. Thank you. And I yield back.
Mr. Marino. The Chair now recognizes the Ranking Member,
Congressman Cicilline.
Mr. Cicilline. Thank you, Mr. Chairman.
I'd like to begin, if I may, with you, Professor Lietzan. I
wonder if you're familiar with the Harvard Law--Harvard Journal
on Legislation written by Robin Feldman that spoke specifically
about this pay-for-delay problem. And in her writing, she gives
an example, In Re: Flonase Antitrust Litigation.
At its peak, Flonase, a steroid nasal spray for allergy
treatment, received $1.3 billion a year in sales. Through a
complicated series of citizen petitions, GlaxoSmithKline was
able to stave off generic entry for 23 months. Thus, the delay
achieved through citizen petitions was worth approximately $2.5
billion, assuming it maintained the peak $1.3 billion in sales
per year.
They ended up settling that case for $185 million. So even
with that large settlement, the delay may have been worth $2.3
billion.
That's just a single example. So I just wonder how you
square that with the suggestion in your testimony that this
doesn't continue to be a problem and that citizen petitions
aren't used by brand companies for the specific purpose of
delaying entry into the market and causing them to realize
significant financial gains.
Ms. Lietzan. Sure. I appreciate the question.
I'm not familiar with that particular article that
Professor Feldman wrote, and I haven't looked at this
particular example. And I don't know the date on it, if it
might be prior to the change in the law that Congress enacted
in 2007.
Mr. Cicilline. I think it was written last year.
Ms. Lietzan. No, no, I'm sorry, the actual Flonase example.
Because I do know that FDA itself has told Congress that
there have only been five generic drug approvals delayed that
didn't have a public health justification since that law was
enacted. So it's possible, I'm not familiar with that
particular example, it's possible that predates the current
situation.
Mr. Cicilline. Thank you very much.
Dr. Kesselheim, am I pronouncing that correctly.
Dr. Kesselheim. Yes.
Mr. Cicilline. Thank you again for your testimony.
I'm wondering whether you could speak a little bit about
whether or not the Supreme Court's decision in FTC v. Actavis
has affected the use for pay-for-delay settlements. Do you
assess that this continues to be a problem? Even if it's not a
lot of instances, these instances can impose significant costs
on the consumer and significantly enrich the brand companies.
Dr. Kesselheim. Sure. I mean, I do think that the FTC v.
Actavis case has caused some shifts in--you know, the FTC v.
Actavis case was really about the FTC being able to review pay-
for-delay settlements that included extremely large monetary
transfers like handing over of suitcases full of cash.
But since then, pay-for-delay settlements have continued.
Many of them also still involve monetary settlements. But many
of them also now involve more complex co-marketing arrangements
or other kinds of business deals, some of which may not
necessarily be at the sort of fair value that they might have
otherwise been, and these kinds of agreements persist.
And I think the problem is that allowing FTC to review them
is great, but it takes a really long time and a lot of
resources to get through this. The Actavis case itself, which
was the subject of the Supreme Court case, was started back in
2006, and we still haven't had really a full trial of it.
So I do think that congressional action is needed to try to
prevent settlements that are--that go beyond mere exchanges of
litigation costs.
Mr. Cicilline. And do you think we ought to consider as
well enactment of a prohibition, a statutory prohibition of
pay-for-delay, like completely prohibit that activity as a
matter of law?
Dr. Kesselheim. Well, I do think that the FTC in the past
has said that it would prefer kind of a per se rule where these
kinds of agreements are presumed not to be legitimate unless
there is a sort of compelling justification that is provided
for them.
Mr. Cicilline. Other than the enrichment of the brand drug
company.
Dr. Kesselheim. Right, a compelling public health
justification, not a compelling personal or market profit
justification. And I do think that that might be a good model
to consider.
Mr. Cicilline. Professor Olson, would you--I'd like your
thoughts on that as well.
Mr. Olson. Yes, I agree. I think that there is a case to be
made for per se treatment. The Supreme Court did not do that in
Actavis. But I think the Court eventually is getting to the
right answer, but it will take many, many years. And it's hard
to come up with much significant harm that would come from
simply prohibiting transfers of value to the generic company
for basically delaying.
Mr. Cicilline. And I'm wondering whether any of the members
of the panel, it's my last question, have any suggestions of
improvements that we might make to the CREATES Act or consider.
I expect that, Professor Olson, you were nice enough to
describe the CREATES Act as an elegant narrowly tailored fix.
Nobody has ever called our legislation elegant, so we like
that. But I'm just curious to know whether or not you think
there are ways that we could improve the legislation that
you've reviewed.
Mr. Olson. Yes, sir.
So I, you know, I do think that it's narrowly tailored, and
I'll stick by the word ``elegant.'' I think there could be some
leeway on the period of, you know, is it 30 days or 45 days. I
wouldn't go, you know, is 120 or 150 days, but I wouldn't go
much farther.
And I would point out that coming up with an ETASU in the
first place, the company is only given 120 days. So I think the
timeframes you've chosen are very good.
And I think there are other ways to address the issues
you're getting at that would go beyond the CREATES Act, but for
what the CREATES Act is specifically getting at, I think it
does a very good job.
Mr. Cicilline. Thank you.
Doctor.
Dr. Kesselheim. I guess I would just go back to my point
that I think that--if you want to focus on just the issues that
the CREATES Act covers, which is the REMS and the products, I
mean, I think that you could add provisions that would again
require REMS information to be public so there is no
proprietary information about REMS, so that everybody knows
what's in REMS and generic manufacturers can create their own
REMS without having to haggle with the manufacturer for
proprietary information. And I think you could include
provisions that do not allow REMS patents to be listed with the
FDA so that they don't block entry of generic drugs as
secondary patents.
Mr. Cicilline. Great.
Mr. Abbott. I'll just briefly say, it's interesting, this
notion of REMS as sort of a regulated public utility model. And
it's certainly possible, there are to the extent--and again, I
don't know enough about the science--but to the extent you have
do have one sort of optimal set of safety protocols, there are
some issues.
I think in that situation, though, if you wanted access to
this, you would not necessarily--the brand name drug company
might say, wait a second, okay, I can see that argument, but we
shouldn't have to bear all the costs and the risks of
developing it. There should be some way of having the FDA or
getting some compensation, making sure that everyone has sort
of access to this efficient public facility. You have to also
take that potential cost to the brand companies as well.
Dr. Kesselheim. I just want to echo that. And I agree. And
I think that managing the REMS through the FDA instead of
making it be--making them be managed through the companies
would be helpful, again, with the proper resources, because, as
I said before, it is optimal for patients who are otherwise--
who don't know who their generic manufacturer is.
Because generic drugs are interchangeable with each other,
to have to go to different REMS based on whoever the generic
manufacturer is, is inefficient and would be frustrating for me
as a clinician to try to figure out, well, who should I be
calling, which registry should I be calling.
It should all be centralized. And maybe the optimal way to
do that would be to have the REMS authority be within the FDA
and the FDA to be properly resource to run the single central
REMS and then none of these issues would exist.
Mr. Cicilline. Great. I know my time. I thank the Chairman
for indulging me. Thank you very much. I yield back.
Mr. Marino. Would each of you, if you care to respond to my
question, give an explanation for the general public, because
we're throwing around a lot of language here in testing and
retesting, what an originator of a drug has to go through to
get that drug to the market? And what difference is there, if
any, for the generic company to get that drug to the market?
So, please.
Dr. Kesselheim. I'll start. So, you know, a brand name
manufacturer usually has to go through a period of preclinical
testing that leads ultimately to an investigational new drug
application, and then a period of clinical trials that takes on
average about 6 to 7 years, and then files a new drug
application with the FDA that then is reviewed in, on average,
about 8 months.
Brand name manufacturers--that's brand name manufacturers--
generic manufacturers have to prove that their drug is
bioequivalent, which is to say, you know, based on preclinical
and very limited clinical trials, show that the bioavailability
of the drug and the blood levels of the drug for their version
is the same as the brand name version, which is why, of course,
the samples of brand name version are so critical, and then go
through sort of, again, a more limited FDA review process only
because there's less data that the generic manufacturer is
submitting to the FDA. And then the generic manufacturer's drug
may be evaluated with the FDA as being interchangeable and be
able to go on the market.
Mr. Marino. Could you give an estimate of some time?
Because you did bring out estimates for the original company of
7 to 8 years of just one segment of testing.
Dr. Kesselheim. Right. I think that that pre--the
bioequivalence testing can take far less than that. It probably
takes, you know, in the sort of months to small number of
years, rather than, on average, about 6 to 7 years.
And the generic review period by the FDA, as of 5 years
ago, was actually much longer than the brand name review period
because of far less resources that are dedicated to the Office
of Generic Drugs. That's changed in the last few years and now
the generic drug review process is faster, although still, I
think, averages more like 12 to 18 months, rather than on
average about 8 months for brand name drugs.
Mr. Marino. Anyone else?
Ms. Lietzan. No. I think, actually, Dr. Kesselheim's
description of the approval--the two different approval
pathways is entirely right. The only thing I would add is that
I believe the Federal Trade Commission wrote a few years ago
that the process for developing and getting a generic drug
approved was 3 to 5 years. I don't know if that remains true,
but that's what they said in, I think, 2009.
Mr. Marino. Professor Olson.
Mr. Olson. Yes. I just wanted to--I agree with that
process. I want to add on, though, it's a little bit different
for large molecule biologics.
So for large molecule biologics, the testing for a generic
takes longer and it's much more complex because it's a more
complex molecule and because the cell lines can change over
time. So it's key that these generics are provided samples not
just once, but several times over a period of could be a year
or so.
And that actually make the CREATES Act or some approach
like it very important, because a brand name could basically
disrupt and ruin the testing of someone trying to do a
biosimilar simply by not providing samples in the middle of a
testing procedure.
Ms. Lietzan. Congressman, could I just make one comment on
that?
Mr. Marino. Sure.
Ms. Lietzan. FDA has actually said that a biosimilar
company can use a foreign-sourced version of the reference
product for much, probably not all, but much of that
application. I just wanted to make sure you were aware of that.
Mr. Marino. Obviously, there's no other--Congressman
Cicilline has something.
Mr. Cicilline. Yeah. Mr. Chairman, I would just ask
unanimous consent to make a part of the record this article,
``Drug Wars: A New Generation of Generic Pharmaceutical
Delay,'' by Robin Feldman and Evan Frondorf, as a part of the
record.
Mr. Marino. Without objection.
This material is available at the Committee or on the
Committee Repository at:
https://docs.house.gov/meetings/JU/JU05/20170727/106333/
HHRG-115-JU05-20170727-SD003.pdf
Mr. Marino. This concludes today's hearing. I want to thank
you very much. We could sit here for another 24 hours and I got
a million questions in my head. But, as always, if you have
anything to offer us. Mr. Cicilline has what we usually say,
either one of us, is, what do you think of our legislation?
That's important to us. You're the experts. We're the
legislators and we need your assistance as well.
So, again, thank each and every one of you for being here.
I'm sure we'll see each other in the future at some time.
So without objection, all members will have 5 legislative
days to submit additional written questions for the witnesses
or additional materials for the record.
This hearing is adjourned. And we're going to go vote again
shortly.
[Whereupon, at 3:48 p.m., the Subcommittee was adjourned.]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT
[all]