[House Report 116-695]
[From the U.S. Government Publishing Office]


116th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                      {      116-695

======================================================================



 
AFFORDABLE PRESCRIPTIONS FOR PATIENTS THROUGH PROMOTING COMPETITION ACT 
                                OF 2019

                                _______
                                

 December 24, 2020.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

    Mr. Nadler, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5133]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 5133) to amend the Federal Trade Commission Act to 
prohibit anticompetitive behaviors by drug product 
manufacturers, and for other purposes, having considered the 
same, reports favorably thereon without amendment and 
recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for the Legislation..........................     2
Hearings.........................................................     6
Committee Consideration..........................................     7
Committee Votes..................................................     7
Committee Oversight Findings.....................................     7
New Budget Authority and Tax Expenditures and Congressional 
  Budget Office Cost Estimate....................................     7
Duplication of Federal Programs..................................     7
Performance Goals and Objectives.................................     7
Advisory on Earmarks.............................................     8
Section-by-Section Analysis......................................     8
Changes in Existing Law Made by the Bill, as Reported............    10

                          Purpose and Summary

    H.R. 5133, the ``Affordable Prescriptions for Patients 
Through Promoting Competition Act,'' prohibits ``product 
hopping,'' a particularly abusive form of anti-competitive 
conduct used by drug manufacturers to protect and extend their 
monopolies on prescription drugs. Product hopping occurs when a 
branded drug manufacturer seeks to extend its market 
exclusivity on a drug for which its patent is about to expire 
by switching doctors and patients from the old version to a new 
version, which may not offer any improvements in effectiveness 
or safety. This practice allows a pharmaceutical company to 
continue to reap monopoly profits by preventing generic 
substitution for its new, but not necessarily improved, version 
of the drug. The result can be years of additional market 
exclusivity for the pharmaceutical company without substantial 
improvements for patients in terms of effectiveness or safety.
    H.R. 5133 will end this abusive delay tactic by expressly 
prohibiting product hopping as an unfair method of competition 
under the Federal Trade Commission Act. Public-interest 
organizations--including Public Citizen, Consumer Reports, 
Patients for Affordable Drugs Now, the Coalition for Affordable 
Prescription Drugs, and the Coalition Against Patent Abuse--
support this bipartisan legislation.

                Background and Need for the Legislation


                               BACKGROUND

    Americans spend more on prescription drugs--about $1,200 
per person--than residents of any other developed country.\1\ 
Total spending on prescription drugs in the United States is 
also growing,\2\ rising to $333.4 billion in 2017.\3\ Americans 
also pay more out-of-pocket for prescription drugs than for 
hospital care or health insurance.\4\
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    \1\OECD, Pharmaceutical Spending (last accessed on Mar. 1, 2019), 
https://data.oecd.org/healthres/pharmaceutical-spending.htm.
    \2\A Look at Drug Spending in the U.S.: Estimates and Projections 
from Various Stakeholders, Pew Charitable Trusts (Feb. 27, 2018), 
https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2018/02/
a-look-at-drug-spending-in-the-us.
    \3\National Health Expenditure Data: NHE Fact Sheet, Ctrs. for 
Medicare & Medicaid Servs. (Feb. 20, 2019), https://www.cms.gov/
Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/NHE-Fact-Sheet.html.
    \4\Yusra Murad, As Drug Prices Soar, Policymakers Eye Dose of 
Government Intervention, Morning Consult (Dec. 20, 2018), https://
morningconsult.com/2018/12/20/drug-prices-soar-policymakers-eye-dose-
government-intervention/.
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    The role of biological products in rising drug costs is 
particularly striking. A biological product, or biologic--a 
pharmaceutical derived from living organisms\5\--is 
significantly larger and has a more complex structure than a 
conventional chemically derived, small-molecule drug, and it is 
inherently more costly to develop, more difficult to 
manufacture, and more expensive per dose.\6\ These dynamics are 
reflected in high costs and spending totals. In 2018, net 
spending on biologics totaled $125.5 billion in the United 
States,\7\ and annual costs for some biologics can exceed 
$250,000 per patient.\8\
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    \5\Kristina M. Lybecker, The Biologics Revolution in the Production 
of Drugs 3 (2016), https://www.fraserinstitute.org/sites/default/files/
biologics-revolution-in-the-production-of-drugs.pdf; see 42 U.S.C. 
Sec.  262(i)(1).
    \6\Kristina M. Lybecker, The Biologics Revolution in the Production 
of Drugs 3, 7 (2016), https://www.fraserinstitute.org/sites/default/
files/biologics-revolution-in-the-production-of-drugs.pdf; Andrew W. 
Mulcahy et al., The Cost Savings of Potential Biosimilar Drugs in the 
United States 1 (2014), https://www.rand.org/content/dam/rand/pubs/
perspectives/PE100/PE127/RAND_PE127.pdf.
    \7\Murray Aitken & Michael Kleinrock, Medicine Use and Spending in 
the U.S.: A Review of 2018 and Outlook to 2023 26 (2019), https://
www.iqvia.com/insights/the-iqvia-institute/reports/medicine-use-and-
spending-in-the-us-a-review-of-2018-and-outlook-to-2023.
    \8\Aaron S. Kesselheim et al., The High Cost of Prescription Drugs 
in the United States: Origins and Prospects for Reform, 316 J. Am. Med. 
Ass'n 858, 860 (2016).
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    Anti-competitive conduct in the pharmaceutical industry 
harms American consumers through higher drug prices and worse 
healthcare outcomes. Delaying entry of generic and biosimilar 
competitors deprives consumers of the lower prices that 
competition brings to the market. For some consumers, these 
delays could mean the difference between life and death. As a 
result of rising prices, many patients skip doses, take less 
than the prescribed amount of medicine, or do not fill their 
prescriptions.\9\ According to a study by Kaiser Health News, 
``[h]undreds of thousands of cancer patients are delaying care, 
cutting their pills in half or skipping drug treatment 
entirely.''\10\
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    \9\Liz Szabo, Sticker Shock Forces Thousands of Cancer Patients To 
Skip Drugs, Skimp On Treatment, Kaiser Health News (Mar. 15, 2017), 
https://khn.org/news/sticker-shock-forces-thousands-of-cancer-patients-
to-skip-drugs-skimp-on-treatment/.
    \10\Id.
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    While decreased competition from generics and biosimilars 
harms patients, delayed generic entry for a blockbuster drug--
even by just a few months--can be worth hundreds of millions of 
dollars in additional revenue to the branded drug company. For 
example, the Hepatitis C drug, Sovaldi, reached $7.9 billion in 
sales in the United States in 2014.\11\ At that rate, three 
additional months would constitute $1.98 billion in sales.\12\ 
Because branded drug manufacturers have so much to lose from 
the entry of a generic competitor, they are highly incentivized 
to block or delay generic entry. Product hopping is one way, 
among others, that they achieve this--to the detriment of 
consumers who end up paying higher prescription drug prices.
---------------------------------------------------------------------------
    \11\Lacie Glover, Here Are the Top-Selling Drugs in the US, Time 
(June 26, 2015), http://time.com/money/3938166/top-selling-drugs-
sovaldi-abilify-humira/.
    \12\Although competition would not reduce the sales to zero, a 
price drop of even a modest 10% would be worth $198 million for three 
months.
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    Product hopping occurs when a branded drug manufacturer 
seeks to extend its market exclusivity on a drug for which its 
patent is about to expire by switching doctors and patients 
from the old version to a new version, which may not offer any 
improvements in effectiveness or safety. Branded drug 
manufacturers can accomplish a product hop through what is 
often referred to as either a hard switch or a soft switch. In 
the case of a hard switch, the branded drug manufacturer may 
remove the original drug from the market entirely and replace 
it with a new product covered by a later-expiring patent, also 
referred to as a follow-on product.\13\ The manufacturer may 
even buy back and destroy any of the original drug product that 
remains in the supply chain. In the case of a soft switch, the 
branded drug manufacturer may impede the original product's 
ability to compete with the follow-on product through more 
subtle means.\14\ In either case, leading experts have noted 
that the branded drug manufacturer's conduct threatens to 
undermine the generic-promoting goals of the Hatch-Waxman Act 
through a switch to a reformulation for which a generic cannot 
be automatically substituted.\15\ As Professor Michael Carrier 
and Steve Shadowen explain, such conduct ``lacks innovation-
based justifications because the brand does not build up the 
prescription base by competing with other brands or expanding 
the market, but merely leverages already-gained power solely by 
blocking generic entry.''\16\
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    \13\Antitrust Concerns and the FDA Approval Process: Hearing Before 
the Subcomm. on Regulatory Reform, Commercial, and Antitrust Law of the 
H. Comm. on the Judiciary, 115th Cong. (2017), https://docs.house.gov/
meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Wstate-KesselheimA-
20170727.pdf (written testimony of Dr. Aaron S. Kesselheim, Associate 
Professor of Medicine, Harvard Medical School, at 7).
    \14\See, e.g., In re Suboxone Antitrust Litigation, 64 F. Supp. 3d 
665 (E.D. Pa. 2014).
    \15\See, e.g., Michael A. Carrier & Steve D. Shadowen, Product 
Hopping: A New Framework, 92 Notre Dame L. Rev. 167, 171 n.3 (2016); 
see id. at 217-18 (providing examples of generic making 2% of sales 
after hard switch, 25% after soft switch, but 85% in absence of product 
hopping).
    \16\Id.
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    An example of a hard switch involves Forest Laboratories, 
which sold memantine, also known as Namenda.\17\ Namenda is an 
immediate-release treatment for Alzheimer's that must be taken 
twice daily.\18\ Before its patent expired, allowing a generic 
version of Namenda to come on the market, Forest obtained FDA 
approval for a new, patented version of the drug (memantine 
XR). This version of Namenda was extended-release instead of 
instant and only had to be taken once daily instead of 
twice.\19\ Forest announced that it intended to remove the 
original version of Namenda (memantine) from the market.\20\ 
Forest's removal of the original product from the market would 
have forced doctors to switch patients from the original 
(memantine) to the follow-on product (memantine XR), 
eliminating the possibility of automatic substitution of a 
lower-priced generic.\21\
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    \17\Antitrust Concerns and the FDA Approval Process: Hearing Before 
the Subcomm. on Regulatory Reform, Commercial, and Antitrust Law of the 
H. Comm. on the Judiciary, 115th Cong. (2017), https://docs.house.gov/
meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Wstate-KesselheimA-
20170727.pdf (testimony of Dr. Aaron S. Kesselheim, Associate Professor 
of Medicine, Harvard Medical School, at 7).
    \18\Id.
    \19\Id.
    \20\Id.
    \21\Id.
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    An example of a soft switch can be seen in the case of In 
re Suboxone Antitrust Litigation.\22\ In that case, the 
plaintiffs alleged that Reckitt switched the market from a 
tablet form of Suboxone, a drug that treats opioid dependence, 
to a sublingual film.\23\ The plaintiffs alleged that Reckitt 
promoted the Suboxone film to doctors, disparaged the tablet 
version of Suboxone, issued false warnings about safety 
concerns related to the tablets, announced plans to remove the 
tablets because of these false safety concerns, and raised the 
price of the tablets relative to the film even though the film 
was more expensive to make.\24\ In this case, Reckitt attempted 
to shift the market without going so far as to withdraw the 
tablet version from the market.
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    \22\64 F. Supp. 3d 665 (E.D. Pa. 2014).
    \23\Michael A. Carrier & Steve D. Shadowen, Product Hopping: A New 
Framework, 92 Notre Dame L. Rev. 167, 195 (2016).
    \24\Id.
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                            APPLICABLE LAWS

    The federal antitrust laws preserve competition by 
preventing cartelization, monopolization, and mergers or 
acquisitions that may substantially lessen competition or tend 
to create a monopoly. The first major federal antitrust statute 
was the Sherman Antitrust Act of 1890.\25\ Section 1 of the 
Sherman Act prohibits competitors from colluding or conspiring 
with each other to restrain trade by reducing their overall 
output or raising prices.\26\ Section 2 of the Sherman Act 
prohibits any individual competitor from unilaterally and 
willfully obtaining or maintaining control of an industry 
through the use of exclusionary conduct.\27\
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    \25\15 U.S.C. Sec. Sec.  1-7 (2019).
    \26\15 U.S.C. Sec.  1 (2019).
    \27\15 U.S.C. Sec.  2 (2019).
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    In 1914, Congress established the Federal Trade Commission 
(FTC) to promote, develop, and protect antitrust law and 
competition policy.\28\ Section 5 of the FTC Act empowers the 
Commission to prevent all ``[u]nfair methods of competition in 
or affecting commerce . . . .''\29\ Although the FTC has no 
authority to enforce the Sherman Act, the Supreme Court has 
held that any conduct that violates the Sherman Act also 
violates section 5 of the FTC Act.\30\ Section 5 may also reach 
conduct that does not violate the Sherman or Clayton Acts.\31\ 
The FTC Act empowers the FTC to: (a) prevent unfair methods of 
competition, and unfair or deceptive acts or practices in or 
affecting commerce; (b) seek monetary redress and other relief 
for conduct injurious to consumers; (c) prescribe trade 
regulation rules defining with specificity acts or practices 
that are unfair or deceptive, and establishing requirements 
designed to prevent such acts or practices; (d) conduct 
investigations relating to the organization, business, 
practices, and management of entities engaged in commerce; and 
(e) make reports and legislative recommendations to 
Congress.\32\
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    \28\Humphrey's Ex'r v. United States, 295 U.S. 602, 625-26 (1935) 
(``[T]he language of the act, the legislative reports, and the general 
purposes of the legislation as reflected by the debates, all combine to 
demonstrate the congressional intent to create a body of experts who 
shall gain experience by length of service; a body which shall be 
independent of executive authority, except in its selection, and free 
to exercise its judgment without the leave or hindrance of any other 
officialor any department of the government.'').
    \29\15 U.S.C. Sec. 45(a)(1) (2019).
    \30\Fed. Trade Comm'n v. California Dental Ass'n, 526 U.S. 756, 763 
n.3 (1999) (``The FTC Act's prohibition of unfair competition and 
deceptive acts or practices . . . overlaps the scope of Sec. 1 of the 
Sherman Act.'').
    \31\See Fed. Trade Comm'n v. Sperry & Hutchinson Co., 405 U.S. 233, 
239 (1972) (holding that section 5 empowers the FTC ``to define and 
proscribe an unfair competitive practice, even though the practice does 
not infringe either the letter or the spirit of the antitrust laws'').
    \32\15 U.S.C. Sec.  45 (2019).
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                        NEED FOR THE LEGISLATION

    H.R. 5133 is needed to strengthen the FTC's ability to 
bring and win cases against prescription drug companies that 
engage in product hopping. Although some courts have held 
branded drug manufacturers accountable for engaging in product 
hopping under existing antitrust law, other courts have let 
companies off the hook. For example, in Mylan Pharmaceuticals 
v. Warner Chilcott (Doryx),\33\ the Third Circuit Court of 
Appeals affirmed a district court decision that Warner 
Chilcott's product hopping strategy was not anti-competitive. 
The court of appeals reached this outcome despite a district 
court finding that ``viewing the facts in the light most 
favorable to Mylan, [] Defendants had indeed made the Doryx 
`hops' primarily to `delay generic market entry.'''\34\ The law 
on what constitutes illegal product hopping activity, 
particularly for soft switches, is conflicting and unsettled. 
H.R. 5133 is needed to clarify that it is illegal for drug 
manufacturers to engage in this conduct to the detriment of 
patients.
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    \33\Mylan Pharmaceuticals v. Warner Chilcott, 838 F.3d 421 3d Cir. 
2016).
    \34\Id. at 431. For criticism of the decision, see Michael A. 
Carrier, Three Challenges for Pharmaceutical Antitrust, 59 Santa Clara 
L. Rev. 613, 620-21 (2020) (noting that court ``focused exclusively on 
the effect of [the brand firm's] conduct on . . . the generic 
competitor, never even mentioning the effect on consumers'') (emphases 
omitted).
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    Furthermore, H.R. 5133 is needed to improve the agency's 
ability to bring and win cases against companies that use 
product hopping to block generic or biosimilar competitors from 
entering the market. Litigation under existing law is extremely 
resource-intensive in terms of time and money. Even when the 
FTC is ultimately successful, as it was in the Supreme Court's 
decision in Actavis on pay-for-delay agreements,\35\ litigation 
can take too long to provide timely relief. The Actavis case 
was not fully resolved until a decade after the FTC filed its 
original complaint.\36\ As Markus Meier, then-acting director 
of the FTC's Bureau of Competition testified before Congress, 
``litigation . . . can be slow, it's expensive, and it's 
uncertain.''\37\ By more clearly defining the conduct that 
constitutes illegal product hopping and establishing a 
framework for evaluating possible justifications, H.R. 5133 
will help deter companies from engaging in this behavior in the 
first place. In addition, by providing clearer guidance to the 
courts, when the FTC must go to court and litigate a product 
hop case, this bill should help expedite those proceedings.
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    \35\Fed. Trade Comm'n v. Actavis, Inc., 570 U.S. 136, 158 (2013).
    \36\Complaint, Fed. Trade Comm'n v. Watson Pharm., Inc., CV 09-
00598 (C.D. Cal. Jan. 29, 2009), https://www.ftc.gov/sites/default/
files/documents/cases/2009/02/090202androgelcmpt_0.pdf.
    \37\Antitrust Concerns and the FDA Approval Process: Hearing Before 
the Subcomm. on Regulatory Reform, Commercial, and Antitrust Law of the 
H. Comm. on the Judiciary, 115th Cong. (2017), https://docs.house.gov/
meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Transcript-20170727.pdf 
(testimony of Markus Meier, Acting Director, Bureau of Competition and 
Assistant Director, Health Care Division, FTC).
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                                Hearings

    In the 116th Congress, the Subcommittee on Antitrust, 
Commercial, and Administrative Law held a hearing on 
``Diagnosing the Problem: Exploring the Effects of 
Consolidation and Anticompetitive Conduct in Health Care 
Markets.''\38\ At this hearing, several witnesses testified 
about competition issues in health care markets, including Dr. 
Fiona Scott Morton, Professor of Economics at Yale School of 
Management; Dr. Martin Gaynor, Professor of Economics and 
Health Policy at Carnegie Mellon University; Michael Kades, 
Director of Markets and Competition Policy at Washington Center 
for Equitable Growth; and Dr. Craig Garthwaite, Herman R. Smith 
Research Professor at Northwestern University's Kellogg School 
of Management. This hearing satisfies the requirement of H. 
Res. 6, sec. 103(i).
---------------------------------------------------------------------------
    \38\Id.
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    In the 115th Congress, the Subcommittee on Regulatory 
Reform, Commercial, and Antitrust Law held a two-paneled 
hearing on ``Antitrust Concerns and the FDA Approval 
Process.''\39\ On the first panel, the Subcommittee heard 
testimony from Dr. Scott Gottlieb, M.D., then-Commissioner of 
the U.S. Food and Drug Administration (FDA), and Markus Meier, 
then-Acting Director, Bureau of Competition at the FTC. On the 
second panel, the Subcommittee heard testimony from Professor 
David Olson, Boston College Law School; Professor Erika 
Lietzan, University of Missouri School of Law; Alden Abbott, 
Deputy Director and Senior Legal Fellow, the Heritage 
Foundation; and Professor Aaron Kesselheim, M.D., M.P.H., 
Harvard Medical School. Dr. Kesselheim described various 
examples of product hopping and testified that ``[p]roduct 
hopping is especially problematic when the manufacturer removes 
the original drug from the market shortly before its patent 
term expires to channel physicians, consumers, and payors 
towards its new product.''\40\ Dr. Kesselheim continued, ``The 
manufacturer's conduct in these cases typically makes sense 
only by harming the generic.''\41\
---------------------------------------------------------------------------
    \39\Antitrust Concerns and the FDA Approval Process: Hearing Before 
the Subcomm. on Regulatory Reform, Commercial, and Antitrust Law of the 
H. Comm. on the Judiciary, 115th Cong. (2017), https://docs.house.gov/
meetings/JU/JU05/20170727/106333/HHRG-115-JU05-Transcript-20170727.pdf.
    \40\Id. (written testimony of Dr. Aaron S. Kesselheim, Associate 
Professor of Medicine, Harvard Medical School, at 6-7).
    \41\Id. at 7.
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                        Committee Consideration

    On November 20, 2019, the Committee met in open session and 
ordered the bill, H.R. 5133, favorably reported by unanimous 
voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that no 
rollcall votes occurred during the Committee's consideration of 
H.R. 5133.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

  New Budget Authority and Tax Expenditures and Congressional Budget 
                          Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has requested 
but not received a cost estimate for this bill from the 
Director of Congressional Budget Office. The Committee has 
requested but not received from the Director of the 
Congressional Budget Office a statement as to whether this bill 
contains any new budget authority, spending authority, credit 
authority, or an increase or decrease in revenues or tax 
expenditures.

                    Duplication of Federal Programs

    No provision of H.R. 5133 establishes or reauthorizes a 
program of the Federal government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
5133 would make prescription drugs more affordable for patients 
and increase competition in the prescription drug market by 
strengthening the FTC's ability to bring and win cases against 
drug companies that engage in product hopping.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 5133 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Section 1. Short Title. Section 1 sets forth the title of 
the legislation as the ``Affordable Prescriptions for Patients 
Through Promoting Competition Act of 2019.''
    Section 2. Product Hopping. Section 2 amends the Federal 
Trade Commission (FTC) Act by adding a new Section 27 to the 
FTC Act after Section 26 (15 U.S.C. Sec. 57(c-2)).
    New subsection 27(a) sets forth various definitions.
    New subsection 27(a)(4) defines ``follow-on product'' 
broadly to cover a drug or biological product which shares an 
indication, in whole or in part, with the listed drug or 
reference product.
    New subsections 27(a)(4)(B)-(D) identify the types of 
applications or supplements to an application for the new 
version of the drug or biological product that are excluded 
from the definition of a ``follow-on product.'' Subsection 
27(a)(4)(B) establishes a narrow exclusion for the specified 
application or supplement to an application that is requested 
by the Secretary or necessary to comply with law.
    New subsection 27(a)(4)(C) establishes a narrow exclusion 
when the FDA has granted New Chemical Entity (NCE) exclusivity 
for the individual application or supplement to an application 
for the new version of the drug or biological product. This 
exclusion applies to follow-on products that have been granted 
NCE exclusivity independent of the listed drug or reference 
product (original drug) application to which it is a 
supplement. Whether or not the original drug or biological 
product was granted NCE exclusivity would not affect whether a 
product qualifies for this exclusion.
    New subsection 27(a)(4)(D) establishes a narrow exclusion 
for the specified application or supplement to an application 
that has been granted exclusivity pursuant to section 351(k)(7) 
of the Federal Food, Drug, and Cosmetic Act.
    New subsection 27(a)(6) defines the term ``disadvantage'' 
to encompass actions that impede the original drug's ability to 
compete on the merits with the follow-on product by creating an 
obstacle or hindrance to the marketing, sale, or distribution 
of the original drug.
    New subsections 27(a)(6)(A) and (B) establish narrow 
exclusions from the definition of ``disadvantage,'' for actions 
that consist solely of either (1) truthful, non-misleading 
advertising; or (2) ceasing promotional marketing for the 
listed drug or reference product. These subsections do not 
exclude actions that misrepresent or obscure information about 
the existence, identity, availability, or efficacy of the 
listed drug or reference product such as the manufacturer 
removing the product from the list of available drugs on its 
website.
    New subsection 27(b)(1) establishes that a manufacturer of 
a reference product or listed drug shall be liable for engaging 
in an unfair method of competition under section 5(a) of the 
FTC Act if the Commission demonstrates that the manufacturer 
engaged in a hard switch, as set forth in subsection 
27(b)(1)(A), or a soft switch, as set forth in subsection 
27(b)(1)(B) during a specified time period. This time period 
begins when the manufacturer first receives notice that a new 
drug applicant has submitted an abbreviated new drug 
application (ANDA) or a biosimilar biological product license 
application. The time period ends on the date that is the 
earlier of 180 days after the generic or biosimilar drug 
referencing the listed drug or reference product is first 
marketed or 3 years after the manufacturer's follow-on product 
is first marketed.
    New subsection 27(b)(1)(A) establishes that a manufacturer 
engaged in a hard switch if the Commission demonstrates that 
the manufacturer engaged in the actions described in 
subsections 27(b)(1)(A)(i) or 27(b)(1)(A)(ii).
    Under subsection 27(b)(1)(A)(i), the actions that 
constitute a hard switch are that upon the manufacturer's 
request, the Commissioner of Food and Drugs withdrew the 
approval of the listed drug's or reference product's 
application or placed the drug on the discontinued products 
list, and the manufacturer marketed or sold a follow-on 
product. Under subsection 27(b)(1)(A)(ii), the actions that 
constitute a hard switch are, first, that the manufacturer 
ceased providing a supply of the listed drug or reference 
product to the marketplace for commercial distribution or sale 
by withdrawing, discontinuing the manufacture of, or 
withdrawing the application for the listed drug or reference 
product in a way that impedes competition from a generic or 
biosimilar drug (unless this was done in response to a request 
from the Commissioner of Food and Drugs) and, second, marketed 
or sold a follow-on product.
    An alternate set of actions that constitute a hard switch, 
under subsection 27(b)(1)(A)(ii), are that, first, the 
manufacturer destroyed its inventory of the listed drug or 
reference product in a way that impedes competition from a 
generic or biosimilar drug and, second, marketed or sold a 
follow-on product.
    New subsection 27(b)(1)(B) sets forth that a manufacturer 
engaged in a soft switch if the Commission establishes that, 
first, the manufacturer took one or more actions with respect 
to the listed drug or reference product that unfairly 
disadvantage that drug relative to the manufacturer's follow-on 
product in a way that impedes competition from either a generic 
or biosimilar drug and, second, the manufacturer marketed or 
sold a follow-on product. A manufacturer ``unfairly'' 
disadvantages the listed drug or reference product where the 
manufacturer has not demonstrated a justification under 
subsection 27(b)(2)(A) or where that justification has been 
rebutted by the Commission's Response.
    New subsection 27(b)(2) sets forth certain justifications 
that a manufacturer can offer for engaging in either a hard or 
soft switch. For both, the manufacturer first must prove that 
it would have taken the actions regardless of whether the 
corresponding generic or biosimilar drug had already entered 
the market. For a hard switch, in addition to the first part, 
the manufacturer must prove that it took these actions due to 
safety risks to patients or due to a supply disruption outside 
of its control. For a soft switch, in addition to the first 
part, the manufacturer must prove that it had legitimate pro-
competitive reasons, apart from the financial benefits of 
reduced competition, for taking the actions.
    New subsection 27(b)(3) establishes that if the 
manufacturer is able to demonstrate one of the justifications, 
the Commission will nonetheless prevail in its case if it 
establishes that the hard or soft switch conduct was not 
reasonably necessary to achieve the justification or that it 
could have been achieved through less anti-competitive means. 
Alternatively, the Commission will prevail if it establishes 
that the pro-competitive benefits from the hard or soft switch 
conduct do not outweigh the anti-competitive effects.
    New subsection 27(c)(1) provides that, except as stated in 
subsection 27(c)(2), the Commission shall enforce this section 
pursuant to the same jurisdiction, powers, duties, and remedies 
provided for by all applicable terms and provisions of the FTC 
Act.
    New subsection 27(c)(2) provides that any manufacturer that 
is subject to a final order of the Commission may petition for 
review in the D.C. Court of Appeals or the court of appeals for 
the circuit in which the manufacturer is incorporated. This 
subsection also sets forth that on review, the Commission's 
factual findings shall be conclusive if supported by the 
evidence.
    New subsection 27(c)(3) provides that nothing in new 
subsection 27 may be construed as requiring the Commission to 
bring a suit seeking a temporary injunction under paragraph 
(1)(B) before bringing a suit seeking a permanent injunction 
under paragraph (1)(C); or affecting any other authority of the 
Commission under this Act to seek relief or obtain a remedy 
with respect to a violation of this Act.
    Section 2(b) sets the Act's effective date such that the 
Act applies to all conduct that occurs on or after the date it 
is enacted.
    Section 2(c) establishes that nothing in this Act shall 
impair, limit, or supersede the applicability of existing 
antitrust laws. Further, nothing in this Act shall affect the 
ability of the FTC to bring a cause of action against companies 
that engage in product hopping under existing antitrust 
statutes including current section 5 of the FTC Act.
    Section 2(d) establishes that the Commission may issue 
rules to carry out new section 27 of the FTC Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                      FEDERAL TRADE COMMISSION ACT




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SEC. 27. PRODUCT HOPPING.

  (a) Definitions.--In this section:
          (1) Abbreviated new drug application.--The term 
        ``abbreviated new drug application'' means an 
        application under subsection (b)(2) or (j) of section 
        505 of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 355).
          (2) Biosimilar biological product.--The term 
        ``biosimilar biological product'' means a biological 
        product licensed under section 351(k) of the Public 
        Health Service Act (42 U.S.C. 262(k)).
          (3) Biosimilar biological product license 
        application.--The term ``biosimilar biological product 
        license application'' means an application submitted 
        under section 351(k) of the Public Health Service Act 
        (42 U.S.C. 262(k)).
          (4) Follow-on product.--The term ``follow-on 
        product''--
                  (A) means a drug approved through an 
                application or supplement to an application 
                submitted under section 505(b) of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 355(c)) 
                or a biological product licensed through an 
                application or supplement to an application 
                submitted under section 351(a) of the Public 
                Health Service Act (42 U.S.C. 262(a)) for a 
                change, modification, or reformulation to the 
                same manufacturer's previously approved drug or 
                biological product that treats the same or a 
                related indication;
                  (B) excludes such an application or 
                supplement to an application for a change, 
                modification, or reformulation of a drug or 
                biological product that is requested by the 
                Secretary or necessary to comply with law, 
                including sections 505A and 505B of the Federal 
                Food, Drug, and Cosmetic Act (21 U.S.C. 355a, 
                355c);
                  (C) excludes such an application or 
                supplement to an application submitted under 
                section 505(b) of the Federal Food, Drug, and 
                Cosmetic Act (21 U.S.C. 355(c)) that has been 
                granted New Chemical Entity exclusivity (21 
                U.S.C. 355(c)(3)(E)(ii)) by the Food and Drug 
                Administration; and
                  (D) excludes such an application or 
                supplement submitted under section 351(a) of 
                the Public Health Service Act (42 U.S.C. 
                262(a)) that has been granted exclusivity 
                pursuant to section 351(k)(7) of such Act (42 
                U.S.C. 262(k)(7)).
          (5) Commission.--The term ``Commission'' means the 
        Federal Trade Commission
          (6) Disadvantage.--The term ``disadvantage'' means to 
        impede the listed drug or reference product's ability 
        to compete on the merits with the follow-on product. 
        This term excludes actions that consist solely of--
                  (A) truthful, non-misleading promotional 
                marketing; or
                  (B) ceasing promotional marketing for the 
                listed drug or reference product.
          (7) Generic drug.--The term ``generic drug'' means a 
        drug approved under an application submitted under 
        subsection (b)(2) or (j) of section 505 of the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 355).
          (8) Listed drug.--The term ``listed drug'' means a 
        drug listed under section 505(j)(7) of the Federal 
        Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(7)).
          (9) Manufacturer.--The term ``manufacturer'' means 
        the holder, licensee, or assignee of--
                  (A) an approved application for a drug under 
                section 505(c) of the Federal Food, Drug, and 
                Cosmetic Act (21 U.S.C. 355(c)); or
                  (B) a biological product license under 
                section 351(a) of the Public Health Service Act 
                (42 U.S.C. 262(a)).
          (10) Reference product.--The term ``reference 
        product'' has the meaning given the term in section 
        351(i) of the Public Health Service Act (42 U.S.C. 
        262(i)).
          (11) Ultimate parent entity.--The term ``ultimate 
        parent entity'' has the meaning given the term in 
        section 801.1 of title 16, Code of Federal Regulations, 
        or any successor regulation.
  (b) Prohibition on Product Hopping.--
          (1) Prima facie.--Except as provided in paragraph 
        (2), a manufacturer of a reference product or listed 
        drug shall be considered to have engaged in an unfair 
        method of competition in or affecting commerce in 
        violation of section 5(a) of the Federal Trade 
        Commission Act if complaint counsel or the Commission 
        demonstrates by a preponderance of the evidence in a 
        proceeding initiated by the Commission under subsection 
        (c)(1), or in a suit brought under subparagraph (B) or 
        (C) of subsection (c)(1), that, during the period 
        beginning on the date on which the manufacturer of the 
        reference product or listed drug first receives notice 
        that an applicant has submitted to the Commissioner of 
        Food and Drugs an abbreviated new drug application or 
        biosimilar biological product license application and 
        ending on the date that is the earlier of 180 days 
        after the date on which that generic drug or biosimilar 
        biological product or another generic drug or 
        biosimilar biological product referencing the listed 
        drug or reference product is first marketed or 3 years 
        after the date on which the follow-on product is first 
        marketed, the manufacturer engaged in either of the 
        following actions:
                  (A) The manufacturer engaged in a hard 
                switch, which shall be established by 
                demonstrating that the manufacturer engaged in 
                either of the actions described in clause (i) 
                or (ii):
                          (i) Upon the request of the 
                        manufacturer of the listed drug or 
                        reference product, the Commissioner of 
                        Food and Drugs withdrew the approval of 
                        the application for the listed drug or 
                        reference product or placed the listed 
                        drug or reference product on the 
                        discontinued products list; and
                          (I) the manufacturer marketed or sold 
                        a follow-on product.
                          (ii)(I) The manufacturer of the 
                        listed drug or reference product--
                                  (aa) withdrew, discontinued 
                                the manufacture of, or withdrew 
                                the application with respect 
                                to, or announced withdrawal of, 
                                discontinuance of the 
                                manufacture of, or withdrawal 
                                of the application with respect 
                                to, the drug or reference 
                                product in a manner that 
                                impedes competition from a 
                                generic drug or a biosimilar 
                                biological product, as 
                                established by objective 
                                circumstances, unless such 
                                actions were taken by the 
                                manufacturer pursuant to a 
                                request of the Commissioner of 
                                Food and Drugs; or
                                  (bb) destroyed the inventory 
                                of the listed drug or reference 
                                product in a manner that 
                                impedes competition from a 
                                generic drug or a biosimilar 
                                biological product, which may 
                                be established by objective 
                                circumstances; and
                          (II) marketed or sold a follow-on 
                        product.
                  (B) The manufacturer engaged in a soft 
                switch, which shall be established by 
                demonstrating that the manufacturer engaged in 
                both of the following actions:
                          (i) The manufacturer took one or more 
                        actions with respect to the listed drug 
                        or reference product other than those 
                        described in subparagraph (A) that 
                        unfairly disadvantage the listed drug 
                        or reference product relative to the 
                        follow-on product described in clause 
                        (ii) in a manner that impedes 
                        competition from either a generic drug 
                        or a biosimilar biological product, 
                        which may be established by objective 
                        circumstances.
                          (ii) The manufacturer marketed or 
                        sold a follow-on product.
          (2) Justification.--
                  (A) In general.--Subject to paragraph (3), 
                the actions described in paragraph (1) by a 
                manufacturer of a listed drug or reference 
                product shall not be considered to be an unfair 
                method of competition in or affecting commerce 
                if--
                          (i) the manufacturer demonstrates to 
                        the Commission or a district court of 
                        the United States, as applicable, by a 
                        preponderance of the evidence in a 
                        proceeding initiated by the Commission 
                        under subsection (c)(1), or in a suit 
                        brought under subparagraph (B) or (C) 
                        of subsection (c)(1), that--
                                  (I) the manufacturer would 
                                have taken the actions 
                                regardless of whether a generic 
                                drug that references the listed 
                                drug or biosimilar biological 
                                product that references the 
                                reference product had already 
                                entered the market; and
                                  (II)(aa) with respect to a 
                                hard switch under paragraph 
                                (1)(A)(i), the manufacturer 
                                took the action for reasons 
                                relating to the safety risk to 
                                patients of the listed drug or 
                                reference product;
                                  (bb) with respect to an 
                                action described in item (aa) 
                                or (bb) of paragraph 
                                (1)(A)(ii)(I), there is a 
                                supply disruption that--
                                          (AA) is outside of 
                                        the control of the 
                                        manufacturer;
                                          (BB) prevents the 
                                        production or 
                                        distribution of the 
                                        applicable listed drug 
                                        or reference product; 
                                        and
                                          (CC) cannot be 
                                        remedied by reasonable 
                                        efforts; or
                                  (cc) with respect to a soft 
                                switch under paragraph (1)(B), 
                                the manufacturer had legitimate 
                                pro-competitive reasons, apart 
                                from the financial effects of 
                                reduced competition, to take 
                                the action.
                  (B) Rule of construction.--Nothing in 
                subparagraph (A) may be construed to limit the 
                information that the Commission may otherwise 
                obtain in any proceeding or action instituted 
                with respect to a violation of this section.
          (3) Response.--With respect to a justification 
        offered by a manufacturer under paragraph (2), 
        complaint counsel or the Commission, as applicable, 
        will prevail in its case if it establishes by a 
        preponderance of the evidence that--
                  (A) the conduct described in subsection 
                (b)(1) is not reasonably necessary to address 
                or achieve the justifications claimed under 
                paragraph (2)(A)(II)(aa-cc), or such 
                justifications could be reasonably addressed or 
                achieved through less anticompetitive means; or
                  (B) the pro-competitive benefits from the 
                conduct described in subparagraph (A) or (B) of 
                paragraph (1), as applicable, do not outweigh 
                any anticompetitive effects of the conduct, 
                even in consideration of the justification so 
                offered.
  (c) Enforcement.--
          (1) Enforcement by the federal trade commission.--
        Except as provided in paragraph (2), the Commission 
        shall enforce this section in the same manner, by the 
        same means, and with the same jurisdiction, powers, 
        duties, and remedies provided for by all applicable 
        terms and provisions of the Federal Trade Commission 
        Act (15 U.S.C. 45 et seq.).
          (2) Judicial review.--
                  (A) In general.--Notwithstanding any 
                provision of section 5 of the Federal Trade 
                Commission Act, any manufacturer that is 
                subject to a final order of the Commission that 
                is issued in a proceeding initiated under 
                paragraph (1) may, not later than 30 days after 
                the date on which the Commission issues the 
                order, petition for review of the order in--
                          (i) the United States Court of 
                        Appeals for the District of Columbia 
                        Circuit; or
                          (ii) the court of appeals of the 
                        United States for the circuit in which 
                        the ultimate parent entity of the 
                        manufacturer is incorporated.
                  (B) Treatment of findings.--In a review of an 
                order issued by the Commission conducted by a 
                court of appeals of the United States under 
                subparagraph (A), the factual findings of the 
                Commission shall be conclusive if those facts 
                are supported by the evidence.
          (3) Rules of construction.--Nothing in this 
        subsection may be construed as--
                  (A) requiring the Commission to bring a suit 
                seeking a temporary injunction under paragraph 
                (1)(B) before bringing a suit seeking a 
                permanent injunction under paragraph (1)(C); or
                  (B) affecting any other authority of the 
                Commission under this Act to seek relief or 
                obtain a remedy with respect to a violation of 
                this Act.

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