[Federal Register Volume 68, Number 49 (Thursday, March 13, 2003)]
[Notices]
[Pages 12080-12087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-6078]



[[Page 12080]]

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FEDERAL TRADE COMMISSION

[File Nos. 001 0221, 011 0046, and 021 0181]


Bristol-Myers Squibb Company; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before April 7, 2003.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments filed in electronic form should be 
directed to: [email protected], as prescribed below.

FOR FURTHER INFORMATION CONTACT: Susan Creighton or Jeffrey Brennan, 
FTC, Bureau of Competition, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, (202) 326-2946 or 326-3688.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission's Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 7, 2003), on the World Wide Web, at http://www.ftc.gov/os/2003/03/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains 
nonpublic information, it must be filed in paper form, and the first 
page of the document must be clearly labeled ``confidential.'' Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as 
part of or as an attachment to email messages directed to the following 
email box: [email protected]. Such comments will be considered 
by the Commission and will be available for inspection and copying at 
its principal office in accordance with Section 4.9(b)(6)(ii) of the 
Commission's Rules of Practice, 16 CFR 4.9(b)(6)(ii)).

Analysis To Aid Public Comment

    The Federal Trade Commission has accepted for public comment an 
agreement and proposed consent order with Bristol-Myers Squibb 
Corporation (BMS). The proposed consent order would settle charges that 
BMS engaged in a series of unlawful acts to delay competition from 
generic versions of three of its major drug products. The proposed 
consent order has been placed on the public record for 30 days to 
receive comments by interested persons. The proposed consent order has 
been entered into for settlement purposes only and does not constitute 
an admission by BMS that it violated the law or that the facts alleged 
in the complaint, other than the jurisdictional facts, are true.
    The complaint charges that BMS engaged in a series of 
anticompetitive acts over the past decade to obstruct the entry of low-
cost generic competition to three highly profitable BMS prescription 
drug products: BuSpar, an anti-anxiety agent; and two anti-cancer 
drugs, Taxol and Platinol. According to the complaint, when confronted 
with imminent competition to these drugs through generic entry, BMS 
undertook a course of conduct that includes: paying a would-be 
competitor $72.5 million to abandon its challenge to a BMS patent and 
stay off the market until the patent expired; abusing Food and Drug 
Administration (FDA) regulations to block generic entry; making false 
statements to the FDA in connection with listing patents in the Orange 
Book; engaging in inequitable conduct before the U.S. Patent and 
Trademark Office (PTO) to obtain patents; and filing baseless patent 
infringement suits. As a result, the complaint alleges, consumers were 
forced to incur hundreds of millions of dollars in additional costs to 
obtain vital prescription drug products.
    The proposed order is designed to remedy the pattern of unlawful 
conduct charged in the complaint and prevent recurrence of such 
conduct, while maintaining BMS's ability to engage in legitimate 
activities that may promote innovation and benefit consumers.

Background

    The proposed consent order rests in substantial part on charges 
that BMS abused governmental processes to delay generic competition to 
three of its highly successful prescription drug products and, in 
particular, that it misused the regulatory scheme established by 
Congress to expedite the approval of generic drugs.
    A generic drug is a pharmaceutical product that contains the same 
active ingredients as its brand-name counterpart and is 
``bioequivalent'' to the branded drug, that is, the FDA has determined 
there is no significant difference in the rate and extent of absorption 
of the two products. Generic drugs typically are sold at substantial 
discounts from the branded drug's price. A Congressional Budget Office 
report estimates that purchasers saved $8-10 billion on prescriptions 
at retail pharmacies in 1994 by purchasing generic drugs instead of the 
brand-name product.\1\
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    \1\ Congressional Budget Office, How Increased Competition from 
Generic Drugs Has Affected Prices and Returns in the Pharmaceutical 
Industry xiii, 13 (July 1998).
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    Congress enacted the Drug Price Competition and Patent Term 
Restoration Act of 1984, commonly referred to as the ``Hatch-Waxman 
Act,'' to facilitate the entry of lower-priced generic drugs, while 
maintaining incentives for companies to invest in research and 
development of new drugs. A company seeking approval from the FDA to 
market a new drug must file a New Drug Application (NDA) demonstrating 
the safety and efficacy of its product. To receive FDA approval to 
market a generic version of a branded drug, a company files an 
Abbreviated New Drug Application (ANDA) demonstrating that its product 
is bio-equivalent to its branded counterpart, but need not provide 
independent data on safety and efficacy.
    The Hatch-Waxman Act established certain rights and procedures that 
apply when a company seeks approval from the FDA to market a generic 
product prior to the expiration of a patent or patents relating to the 
branded drug upon which the generic is based. An NDA applicant is 
required to submit to the FDA information on certain types of patents 
relating to the approved drug. The FDA lists the approved drug and its 
related patents in a publication entitled

[[Page 12081]]

``Approved Drug Products with Therapeutic Equivalence Evaluations,'' 
commonly known as the ``Orange Book.'' If the PTO grants a patent 
relating to an approved drug after the NDA has been approved, and the 
NDA holder submits it for listing in the Orange Book, then the FDA will 
list it as well.
    The listing of patents in the Orange Book plays a substantial role 
in the timing of FDA approval of generic drugs. As part of the ANDA 
process, the ANDA filer must certify to the FDA regarding its generic 
product and any patents listed in the Orange Book that claim the 
reference branded drug. If the ANDA filer seeks approval before the 
expiration of all listed patents, it must: (1) File what is known as a 
``Paragraph IV certification,'' declaring that the patents listed in 
the Orange Book either are invalid or will not be infringed by the 
manufacture, use, or sale of the drug products for which the ANDA is 
submitted; and (2) notify the patent holder of the filing of the 
certification. If the holder of patent rights files a patent 
infringement suit within 45 days of the notification, FDA approval to 
market the generic drug is automatically stayed for 30 months, 
regardless of the merits of the suit, unless before that time the 
patent expires or a court holds that the patent is invalid or not 
infringed.
    Not all patents are eligible for listing in the Orange Book and the 
special statutory 30-month stay that the Hatch-Waxman Act provides. The 
statute provides for listing only if: (1) The patent ``claims the drug 
* * * or a method of using such drug'' and (2) the patent is one ``with 
respect to which a claim of patent infringement could reasonably be 
asserted if a person not licensed by the owner of the patent engaged in 
the manufacture, use, or sale of the drug.'' \2\ In the case of patents 
not eligible for listing in the Orange Book, a branded firm still can 
sue a generic company for patent infringement, but under ordinary 
federal litigation procedures and without the benefit of an automatic 
30-month stay. To prevent sale of the generic product before conclusion 
of the suit in such cases, a branded firm must obtain a preliminary 
injunction, which requires that it demonstrate a likelihood of success 
on the merits, among other factors.
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    \2\ 21 U.S.C. 355(b)(1); 355(c)(2); 355(j)(7)(A)(iii) (2003).
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    Although Orange Book listings have significant legal and 
competitive implications, it is private parties, rather than the FDA, 
that in practice determine whether patents are listed. The FDA has 
repeatedly stated that its role in patent listings is solely 
ministerial and that it lacks the resources and expertise to scrutinize 
patent information in the Orange Book. Even when a generic applicant 
disputes a patent listing, the FDA merely asks the NDA holder to 
confirm that the listed patent information is correct. Unless the NDA 
holder itself withdraws or amends its listed patent information, the 
FDA will not remove the patent listings from the Orange Book.\3\ Thus, 
as one court has stated, ``the FDA's listing should not create any 
presumption that [a] patent was correctly listed.'' \4\ In addition, 
the Federal Circuit has held that generic applicants have no right to 
bring a declaratory judgment action to challenge an NDA holder's Orange 
Book listing as improper.\5\ As long as the patent remains listed, the 
brand-name company can continue to benefit from the availability of an 
automatic 30-month stay of FDA approval of ANDAs, by initiating a 
patent suit against generic applicants.
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    \3\ See, e.g., American Bioscience, Inc. v. Thompson, 269 F.3d 
1077, 1080 (D.C. Cir. 2001) (recognizing that the FDA ``has refused 
to become involved in patent listing disputes, accepting at face 
value the accuracy of NDA holders' patent declarations and following 
their listing instructions'').
    \4\ Ben Venue Labs., Inc. v. Novartis Pharm. Corp., 10 F. Supp. 
2d 446, 456 (D.N.J. 1998).
    \5\ See Mylan Pharms., Inc. v. Thompson, 268 F.3d 1323, 1329-33 
(Fed. Cir. 2001).
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    The Commission's recent study, Generic Drug Entry Prior to Patent 
Expiration (July 2002), examined the potential for abuse of the Hatch-
Waxman process for Orange Book listings and 30-month stays.\6\ The data 
received by the Commission showed that brand-name companies are 
increasingly listing in the Orange Book, and suing on, multiple 
patents, and that these are frequently patents that have been listed 
after an ANDA has been filed. If patents issued to the brand-name 
company are listed before the generic applicant files its ANDA, then a 
brand-name company's suit on those patents will generate a single 30-
month stay, even though multiple patents are at issue in the 
litigation. If the patent is obtained and listed after the generic 
applicant has filed its ANDA, however, then the brand-name company can 
obtain an additional 30-month stay (which may be consecutive to or 
overlap the first 30-month stay) following a generic applicant's 
certification that it does not infringe the later-issued patent. The 
FTC Study found that for drugs for which there were multiple 30-month 
stays, the additional delay of FDA approval (beyond the first 30 
months) ranged from four to 40 months. The FTC Study also found that 
later-issued patents frequently raise listability or validity concerns. 
Of the eight drug products involving later-issued patents identified in 
the study, all four that had been adjudicated were found invalid or not 
infringed. Of the eight drug products involving later-issued patents 
identified in the study, three involve the BMS products that are the 
subject of the complaint here.\7\
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    \6\ Federal Trade Commission, Generic Drug Entry Prior to Patent 
Expiration: An FTC Study (July 2002), available at http://www.ftc.gov/os/2002/07/genericdrugstudy.pdf.
    \7\ Generic Drug Study at 39-40, 48-50.
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The Challenged Conduct

    The complaint makes the following allegations:

A. BuSpar

    BuSpar is used to treat persistent anxiety, a condition affecting 
an estimated 10 million Americans. BMS began selling BuSpar in 1986, 
and by 2000, the year before a generic version became available, BuSpar 
sales in the United States were over $600 million.
    The complaint charges that BMS first entered into an unlawful 
patent settlement agreement, in which it agreed to pay a potential 
generic competitor over $70 million to withhold its generic version of 
BuSpar from the market until BMS's patent expired, and then provided 
false and misleading information to the FDA to induce the FDA to list a 
later patent on BuSpar in the Orange Book, one that did not meet either 
of the statutory requirements for listing. Additionally, the complaint 
alleges that BMS filed baseless patent infringement suits against 
generic applicants on BuSpar.
    The settlement agreement arose out of patent litigation that BMS 
filed after Schein Pharmaceutical, Inc. submitted an ANDA for generic 
buspirone hydrochloride (buspirone), the active ingredient in BuSpar. 
Schein filed a Paragraph IV certification with the FDA in 1992, 
contending that BMS's '763 patent was invalid, because it claimed a use 
of buspirone that had been anticipated by an earlier BMS patent. BMS's 
suit triggered a 30-month stay on FDA approval of Schein's ANDA, which 
would have expired in early 1995.
    In December 1994, BMS entered into an agreement with Schein to 
settle their patent litigation. Pursuant to that agreement, BMS agreed 
to pay Schein $72.5 million over the next four years, and Schein agreed 
to refrain from marketing its ANDA product or any other generic version 
of BuSpar (regardless of whether such product

[[Page 12082]]

would infringe BMS's patent), until the '763 patent expired. Schein 
also agreed to acknowledge the validity of the '763 patent, to refrain 
from assisting others in challenging the '763 patent or in developing 
generic buspirone, and to take other steps to help BMS protect its 
patent from another challenge to its validity.
    Anticipating expiration of its '763 patent in November 2000, BMS 
filed a new patent application with the PTO in 1999, involving the use 
of buspirone to create the metabolite of buspirone (a metabolite is the 
new molecule created when a pharmaceutical agent breaks down in the 
body). The PTO, however, repeatedly rejected BMS's efforts because BMS 
had been making and selling BuSpar to treat anxiety in the United 
States for nearly 14 years. Only after BMS finally requested a patent 
that claimed solely the use of the metabolite of buspirone--not the use 
of buspirone itself--and only hours before the '763 patent was due to 
expire, did the PTO issue what became known as the '365 patent. BMS 
promptly submitted the '365 patent information to the FDA for listing 
in the Orange Book.
    BMS's '365 patent did not meet either of the statutory requirements 
for listing a patent in the Orange Book, because it does not claim 
BuSpar or a method of using BuSpar, and it is not a patent with respect 
to which a claim of patent infringement could reasonably be asserted 
against someone selling BuSpar. Although BMS knew that it had only 
obtained a patent claiming a method of using a metabolite, it 
nonetheless submitted a declaration to the FDA affirming that the '365 
patent claimed a method of using BuSpar, in order to list the patent in 
the Orange Book. Furthermore, BMS intentionally made an additional 
false and misleading statement after ANDA filers on BuSpar asserted to 
the FDA that the '365 patent did not meet the criteria for listing in 
the Orange Book. The FDA asked BMS to provide a declaration that the 
'365 patent contains a claim for an approved use of buspirone. BMS 
responded with a declaration expressly affirming that the '365 patent 
does in fact claim the approved uses of buspirone, a statement that was 
false and directly contradicted representations BMS made to the PTO to 
obtain the '365 patent. Consistent with its ministerial approach to 
Orange Book listings, the FDA simply accepted BMS's statements and 
deemed the '365 patent listed in the Orange Book as of November 21, 
2000. In so doing, FDA noted that it listed the patent solely on the 
basis of BMS's declarations that the patent met the requirements for 
listing and did not make any independent determination regarding the 
'365 patent's scope and coverage.
    The complaint charges that BMS knew that its representations to the 
FDA--to the effect that the '365 patent claimed a method of using 
buspirone--were false and misleading. BMS made these misrepresentations 
purposely and intentionally, to obtain an improper Orange Book listing 
of the '365 patent. Through its wrongful listing in the Orange Book of 
the '365 patent, BMS illegitimately acquired the ability to trigger a 
30-month stay, thereby delaying entry of generic buspirone and 
depriving consumers of lower prices and other benefits of competition.
    Generic competition to BuSpar occurred only after the '365 patent 
was removed from the Orange Book in March 2001, following the decision 
by the district court in Mylan Pharmaceuticals, Inc. v. Thompson, 139 
F. Supp. 2d 1 (D.D.C. 2001), ordering BMS to seek de-listing.\8\ This 
competition occurred substantially later than it would have absent 
BMS's anticompetitive acts. As a consequence, consumers suffered 
substantial economic detriment by paying monopoly prices for an 
unjustifiably extended period.
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    \8\ The Federal Circuit later reversed this ruling on 
jurisdictional grounds. Mylan Pharms., Inc. v. Thompson, 268 F.3d 
1323, 1329-33 (Fed. Cir. 2001) (holding no private right of action 
under the Federal Food, Drug, and Cosmetic Act to seek de-listing).
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    The complaint also charges that the patent infringement suits BMS 
brought against ANDA filers for infringement of the '365 patent were 
objectively baseless and filed without regard to their merits. The '365 
patent could not be both valid and infringed. If the patent claim were 
interpreted to cover the currently-approved uses for which the generic 
applicants submitted their ANDAs--necessary to demonstrate that the 
ANDA products infringed--then the patent necessarily would be invalid, 
because those uses had been known long before BMS applied for the 
patent. A court later so found on summary judgment.\9\ The intent and 
effect of BMS's suits, the complaint states, was to wrongfully trigger 
the 30-month stay as a means of preventing generic buspirone 
manufacturers from marketing their products.
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    \9\ In re Buspirone Patent Litig., 185 F. Supp. 2d 340, 359 
(S.D.N.Y. 2002); In re Buspirone Antitrust Litig., 183 F. Supp.2d 
363, 376 (S.D.N.Y. 2002).
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B. Taxol

    Taxol is used to treat cancers of the ovaries, breasts and lungs, 
and AIDS-related Kaposi's sarcoma. The drug's active ingredient, 
paclitaxel, is a naturally-occurring substance whose antic-cancer 
properties were discovered and developed by scientists at the National 
Cancer Institute (NCI). In 1991, the NCI gave BMS the exclusive right 
to use existing and future data for FDA approval of paclitaxel, and BMS 
obtained FDA approval to market Taxol in 1992. Prior to generic entry 
in 2000, BMS's annual Taxol sales in the United States were over $1 
billion.
    The complaint charges that BMS used many of the same strategies to 
obstruct generic competition to Taxol that it used with BuSpar: 
improperly listing patents in the Orange Book (three patents in the 
case of Taxol); and abusing the regulatory process through the filing 
of misrepresentations. In addition, the complaint alleges that BMS 
entered into an unlawful agreement with another firm for the purpose of 
furthering its effort to obtain another 30-month stay on FDA approval 
of generic versions of Taxol.
    In 1992, although it told a Congressional committee that ``near-
term generic competition for TAXOL is a certainty,'' because Taxol was 
not a patented product, BMS in fact was actively pursuing a patent 
application before the PTO on Taxol. In prosecuting that patent 
application before the PTO, BMS made representations that were directly 
contrary to what it had previously told the FDA in seeking approval of 
its NDA for Taxol.
    To obtain FDA approval of its NDA, BMS had relied on several 
studies in the public domain to show that Taxol was safe and effective. 
Because the NCI funded the discovery and initial development of 
paclitaxel as an anti-cancer drug, much of the research relating to 
Taxol was in the public domain, so the results of that research were 
unpatentable. To obtain a patent, BMS had to demonstrate to the PTO 
that its claimed method of administering Taxol differed from the 
methods used in those prior studies
    BMS told the PTO that certain studies (ones it had relied on to 
obtain FDA approval for Taxol) did not provide evidence of safety and 
efficacy, and thus made various statements about the studies that are 
directly contrary to those BMS made to the FDA. In addition, BMS also 
deliberately failed to disclose to the PTO material prior art. In 
making false and misleading material statements to the PTO and by 
failing to disclose material prior art, BMS breached its duty of candor 
and good faith in dealing with the PTO. BMS therefore engaged in 
inequitable conduct, rendering the two patents that resulted (the '537 
and '803 patents) unenforceable.

[[Page 12083]]

    Because BMS knew that the '537 and '803 patents were obtained 
through inequitable conduct before the PTO, it could not reasonably 
believe that the patents were enforceable or consequently that they 
were listable under the FDA's Orange Book regulations. Nevertheless, 
BMS promptly submitted the patents to the FDA for listing in the Orange 
Book. Furthermore, after a number of generic pharmaceutical 
manufacturers filed ANDAs with Paragraph IV certifications, BMS brought 
patent infringement suits--based on patents it knew it had obtained 
through inequitable conduct--that triggered Hatch-Waxman's automatic 
30-month stay provision, insulating Taxol from potential generic drug 
competition for that period.
    Finally, BMS improperly listed a third patent in the Orange Book 
and thereby obtained the ability to trigger the Hatch-Waxman provision 
for another 30-month stay as a result of a conspiracy with American 
Bioscience, Inc. (ABI). Shortly after the 30-month stays that BMS had 
obtained from its unlawful listings of the '537 and '803 patents 
expired, but before any ANDAs for generic paclitaxel obtained FDA 
approval, BMS and ABI agreed on the terms of an option to license ABI's 
'331 patent. The agreement provided that ABI would receive royalties 
based on a significant percentage of BMS sales of Taxol, an arrangement 
that would be highly profitable to ABI if BMS continued to enjoy 
protection from generic competition to Taxol.
    BMS submitted the '331 patent to the FDA for listing in the Orange 
Book, but it could not have reasonably believed that the relevant 
claims of the '331 patent were valid, or consequently that the '331 
patent should be listed in the Orange Book as claiming Taxol. BMS knew 
of material prior art that invalidated the relevant claims of the '331 
patent. Moreover, BMS's own experience with the sale and use of Taxol 
prior to that date invalidated the relevant claims of the '331 patent.

C. Platinol

    Platinol is used in chemotherapy to treat various forms of cancer. 
BMS began selling Platinol in 1978 and Platinol-AQ in 1988, and annual 
United States sales of its Platinol products were $100 million by 1998. 
Platinol's active pharmaceutical ingredient is cisplatin.
    Regarding Platinol, the complaint alleges that, as with BuSpar and 
Taxol, BMS wrongfully submitted a patent for listing in the Orange Book 
to obtain an unwarranted 30-month stay on FDA approval of competing 
generic products. By 1996, BMS's patent protection for its Platinol 
products was running out, and four would-be generic rivals were poised 
to enter with their lower-cost, bioequivalent products. Facing likely 
generic competition to its Platinol monopoly for the first time, BMS, 
which held an exclusive license to cisplatin, and the licensor decided 
to amend a patent application then pending at the PTO--an application 
that had been initially filed more than two decades earlier, in 1970. 
In October 1996--just two months before BMS's other Platinol patents 
were to expire--the PTO issued the '925 patent based on this amended 
application. BMS promptly submitted this new patent for listing in the 
Orange Book. This listing, coupled with BMS's initiation of a patent 
infringement lawsuit in federal court against each generic cisplatin 
applicant, triggered an automatic statutory 30-month stay on FDA 
approval of the generic applications.
    According to the complaint, BMS could not have reasonably believed 
that the '925 patent was valid, and its listing of the patent in the 
Orange Book was not made in good faith to comply with FDA regulations. 
In fact, in October 1999, a district court ultimately found, by clear 
and convincing evidence, that the '925 patent was invalid for 
obviousness-type double patenting, a ruling that the Federal Circuit 
later upheld. As a result of BMS's wrongful listing of the '925 patent, 
consumers were deprived, for about two years, of the benefits of a 
lower-priced generic alternative to BMS's branded cisplatin products.

Competitive Analysis

    The complaint alleges that the relevant product markets in which to 
assess the competitive effects of BMS's conduct are:
    [sbull] Buspirone-based products (BuSpar and generic bioequivalent 
versions of BuSpar);
    [sbull] Paclitaxel-based products (Taxol and generic bioequivalent 
versions of Taxol); and
    [sbull] Cisplatin-based products (Platinol and generic 
bioequivalent versions of Platinol).
    In each market, according to the complaint, entry of a lower-priced 
generic version of BMS's product resulted in a significant, immediate 
decrease in the sales of the BMS product and led to a significant 
reduction in the average price for products in the relevant market. 
Conversely, the complaint states that the availability of other 
therapeutic agents for the conditions that BuSpar, Taxol, and Platinol 
treat was not sufficient to prevent the effects from BMS's conduct. As 
a result of this competitive relationship between each of the three BMS 
branded products and its generic bioequivalents, each of these groups 
of products comprises a distinct relevant product market for purposes 
of analyzing the challenged conduct here.
    According to the complaint, the relevant geographic market in which 
to assess the competitive effects of BMS's conduct is the United 
States, given the FDA's elaborate regulatory process for approving 
drugs for sale in the United States, and the fact that the marketing, 
sales, and distribution of pharmaceuticals such as those at issue here 
occur on a nationwide basis.
    The complaint alleges that, prior to the entry of generic versions 
of its BuSpar, Taxol, and Platinol products, BMS had monopoly power in 
each of the three relevant antitrust markets. BMS is charged with 
engaging in acts that willfully maintained its monopolies in buspirone, 
paclitaxel, and cisplatin products, thereby violating Section 5 of the 
FTC Act. In addition, the complaint charges that BMS agreed with Schein 
to settle patent litigation by paying Schein not to compete until the 
patent expired, and agreed with ABI to wrongfully list ABI's '331 
patent, and challenges those agreements as acts of monopolization and 
as unreasonable restraints of trade in violation of Section 5.
    Exclusionary conduct by a monopolist that is reasonably capable of 
significantly contributing to the maintenance of the firm's dominance 
gives rise to substantial competitive concerns.\10\ The conduct alleged 
in the complaint creates such concerns.
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    \10\ Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 230 
(1st Cir. 1983) (Breyer, J.) (citing 3 P. Areeda & D. Turner, 
Antitrust Law, [para] 626 at 83 (1978)); see also Aspen Skiing Co. 
v. Aspen Highlands Skiing Co., 472 U.S. 585, 596 n.20 (1985); Lorain 
Journal Co. v. United States, 342 U.S. 143, 154 n.7 (1951).
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    By listing patents in the Orange Book that did not meet the 
statutory requirements for such listings, BMS, according to the 
complaint, acquired the ability to trigger the Hatch-Waxman 30-month 
stay provision on FDA approval of competing generic products. An NDA 
with monopoly power has an incentive to make improper listings to 
protect its monopolies. In addition, NDA holders have the ability to 
make wrongful listings because the FDA does not police listings to 
ensure they meet regulatory requirements prior to publishing them in 
the Orange Book.\11\ The Orange Book

[[Page 12084]]

listing scheme established by Congress assumes and requires that NDA 
holders act in good faith in listing patents. Listings that are not 
based on a reasonable, good faith belief that the patent is listable 
thus cannot be justified on grounds that the NDA holder was merely 
complying with Hatch-Waxman listing regulations.\12\ The complaint 
alleges for each of the challenged listings that BMS lacked a 
reasonable belief that the patents were listable, and that it listed 
the patents to block generic competition, not in good faith compliance 
with FDA regulations.
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    \11\ As a recent court decision expressly recognized, ``[t]he 
duty to ensure that the Orange Book only lists patents that actually 
claim approved drugs * * * lies with NDA holders.'' Purepac Pharm. 
v. Thompson, 2002 WL 31840631, at *5 (D.D.C. Dec 16, 2002).
    \12\ See, e.g., Southern Pac. Communications Co. v. AT&T, 740 
F.2d 980, 1009 (D.C. Cir. 1984) (AT&T's conduct in meeting 
regulations governing its obligations for interconnecting other long 
distance carriers with its local service network can only be 
justified if it ``is reasonable and if AT&T actually made its 
decision at the time in good faith on that basis rather than solely 
on the basis of competitive considerations.'').
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    Indeed, the complaint charges that BMS misled the FDA about the 
scope, validity, and enforceability of its patents. In listing the '365 
patent on BuSpar, the complaint alleges, BMS intentionally made false 
and misleading statements to the FDA to obtain a wrongful Orange Book 
listing. Similarly, the charges concerning two of the Taxol patents 
(the '537 and '803 patents) involve allegations that BMS submitted the 
patents for listing knowing that it had engaged in inequitable conduct 
before the PTO, deliberately making misleading statements and 
concealing material prior art, as part of a scheme to abuse Hatch-
Waxman processes and thereby extend its monopoly in paclitaxel. Under 
well-established patent law, inequitable conduct in obtaining a patent 
makes the patent unenforceable.\13\ But the Orange Book listing scheme 
is susceptible to opportunistic behavior. The NDA holder can exploit 
the listing scheme by obtaining patents and listing them in the Orange 
Book to block FDA approvals of generic rivals for 30 months, even when 
the NDA holder does not reasonably expect the patents to ultimately 
hold up in court.
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    \13\ Precision Instrument Mfg. Co. v. Automotive Maintenance 
Mach. Co., 324 U.S. 806 (1945).
---------------------------------------------------------------------------

    Finally, with respect to two other patents (ABI's '331 patent on 
Taxol and the '925 patent on Platinol), the complaint alleges that BMS 
submitted the listings while fully aware of facts and law that made the 
patents invalid. Although the Hatch-Waxman Paragraph IV certification 
process contemplates that some patents that are listed may ultimately 
be found invalid or unenforceable, it does not contemplate NDA holders 
listing a patent without a reasonable belief that the patent meets the 
listing requirements in order to use the 30-month stay provision as a 
weapon against generic rivals. Moreover, the pattern of conduct that 
BMS is charged with having engaged in reinforces the charge that BMS 
acted with an intent to abuse the listing process to extend its 
monopolies in all three drugs.
    BMS's alleged initiation of baseless lawsuits to trigger the 30-
month stay provision and inflict competitive harm through the process, 
rather than through the outcome, of the suit likewise amounts to 
exclusionary conduct to maintain BMS's monopoly in buspirone products.
    Two of BMS's challenged acts were taken in concert with other 
firms, and the complaint challenges these acts both as monopoly 
maintenance and as agreements that unreasonably restrain trade in 
violation of Section 5. First, BMS's settlement with Schein, in which 
BMS is alleged to have agreed to pay its potential competitor in the 
buspirone market to withhold competition until patent expiration, 
eliminated the only potential generic threat to BuSpar for the entire 
patent period. Such action not only would have deprived consumers of 
the potential, albeit uncertain, competition from Schein, but also 
would have given BMS time to implement what the complaint charges was a 
further strategy to obstruct competition to BuSpar, obtaining and 
wrongfully listing the '365 patent. The complaint alleges that the 
settlement agreement has no legitimate justification, harms consumers, 
and is unlawful.
    BMS's agreement with ABI to list ABI's '331 patent likewise 
involves charges of an unjustified agreement to obstruct generic 
competition and share monopoly profits. As set forth in the complaint, 
for both parties, the value of the patent license that ABI agreed to 
sell to BMS lay in its ability to trigger a 30-month stay under Hatch-
Waxman: Delayed generic entry would protect BMS's revenues, and the 
terms of the option to license meant that ABI would receive more in 
royalty payments from BMS if BMS continued to hold a monopoly in 
paclitaxel products.
    Because most of the acts challenged in this matter involve use of 
governmental processes, the complaint also affirmatively pleads that 
BMS's conduct is not immune from antitrust liability under the Noerr-
Pennington doctrine, which protects private parties' petitioning for 
governmental action. First, BMS's Orange Book submissions of five 
patents (one on BuSpar, three on Taxol, and one on Platinol) cannot 
qualify for Noerr immunity because they do not constitute petitioning 
behavior. As the court in In re Buspirone Antitrust Litigation, 185 F. 
Supp. 2d 363, 370 (S.D.N.Y. 2002), observed in rejecting BMS's claim of 
Noerr protection, Orange Book filings involve no petitioning because 
the FDA merely accepts the NDA holder's representations and exercises 
no intervening judgment. In addition, Orange Book filings are not 
entitled to Noerr protection as conduct incidental to petitioning by 
means of a patent infringement suit. The fact that infringement 
litigation triggers a statutory delay in FDA approval does not render 
the Orange Book listing incidental to the litigation. An NDA holder can 
bring an infringement suit regardless of whether its patents are listed 
in the Orange Book. Id. at 372.\14\ Furthermore, BMS's filings and 
other statements to the FDA are alleged to involve knowing and material 
misrepresentations, and would therefore fall outside the protection of 
the Noerr doctrine for that reason as well.
---------------------------------------------------------------------------

    \14\ See also Memorandum of Law of Amicus Curiae Federal Trade 
Commission in Opposition to Defendant's Motion to Dismiss (Jan. 8, 
2002) in In re Buspirone Antitrust Litig., 185 F.Supp. 2d 363 
(S.D.N.Y. 2002), available at http://www.ftc.gov/os/2002/01/busparbrief.pdf.
---------------------------------------------------------------------------

    The challenged settlement agreement between BMS and Schein likewise 
is neither petitioning nor the kind of action incidental to petitioning 
that the Noerr doctrine immunizes.\15\
---------------------------------------------------------------------------

    \15\ See Andrx Pharms. v. Biovail Corp. Int'l, 256 F.3d 799, 
817-19 (D.C. Cir. 2001).
---------------------------------------------------------------------------

    Second, with respect to challenged BMS actions that do involve 
petitioning of government (for example, the patent infringement suits 
involving BuSpar), the complaint alleges that BMS's actions fall 
outside the protections of the Noerr doctrine. Regarding the lawsuits, 
the complaint alleges that they were objectively baseless and brought 
to injure a competitor through the process, rather than the outcome, of 
the litigation. As a result, they satisfy the two-part test for the 
sham litigation exception to Noerr set forth in Professional Real 
Estate Investors, Inc. v. Columbia Pictures Industries., Inc., 508 U.S. 
49 (1993).
    Finally, the logic and policy underlying the Supreme Court's 
decision in California Motor Transport Co. v. Trucking Unlimited, 404 
U.S. 508 (1972), which held a pattern of filings undertaken without 
regard to their merits to be outside the protections of Noerr, supports 
the application of a pattern exception for BMS's alleged pattern of 
conduct across its buspirone, paclitaxel, and cisplatin products, and

[[Page 12085]]

thus provides a separate reason to reject Noerr immunity here. As is 
reflected in the complaint, the overall course of conduct challenged 
here constitutes a clear and systematic pattern of anticompetitive 
misuse of governmental processes, that is, abusive filings undertaken 
without regard to the merits, in order to use administrative and 
judicial processes--rather than the outcome of those processes--as a 
weapon to obstruct competition. Just as the repeated filing of lawsuits 
brought without regard to the merits, and for the purpose of using the 
judicial process (as opposed to the outcome of the process), warrants 
rejection of Noerr immunity, so too do the alleged repeated filing of 
patents on the Orange Book without regard to their validity, 
enforceability, or listability; repeated filing of recklessly or 
deliberately false statements with government agencies; and filing of 
lawsuits brought with or without regard to the merits, also cause the 
actions challenged here to fall outside the scope of Noerr's 
protection.
    By issuing the complaint in this matter along with the proposed 
consent agreement, the Commission finds reason to believe that BMS 
engaged in the alleged violations of law set forth in the complaint.

The Proposed Order

    The proposed order is designed to maintain BMS's incentives to 
engage in legitimate conduct that could promote innovation, while 
ensuring protection of consumers through:
    [sbull] Prohibitions regarding the listing and enforcement of 
patents relating to specific BMS products at issue here;
    [sbull] General prohibitions concerning the listing and enforcement 
of patents; and
    [sbull] Prohibitions concerning settlement of patent litigation and 
other agreements between an NDA holder and an ANDA filer.

Product-Specific Provisions

    Paragraphs II through V directly address complaint charges 
concerning BMS's unlawful conduct regarding patents relating to BuSpar 
and Taxol. The proposed order does not provide similar specific relief 
for Platinol, because the only unexpired Platinol patent was 
conclusively held invalid.
    The complaint alleges that the '365 patent relating to BuSpar does 
not cover any uses of buspirone, and a district court has so held.\16\ 
Accordingly, to prevent future abusive listing of the '365 patent,\17\ 
Paragraph II bars BMS from seeking to list the '365 patent in the 
Orange Book in relation to any NDA in which the active ingredient is 
buspirone. This provision will prevent BMS from seeking to list the 
'365 patent in connection with another buspirone product, for example a 
new dosage strength or formulation of BuSpar, as well as with its 
current BuSpar NDA.
---------------------------------------------------------------------------

    \16\ In re Buspirone Patent Litig., 185 F. Supp. 2d 340, 359 
(S.D.N.Y. 2002).
    \17\ In March 2001, a district court ordered BMS to seek de-
listing of the patent. Mylan Pharms., Inc. v. Thompson, 139 F. Supp. 
2d 1 (D.D.C. 2001). The Federal Circuit later reversed this ruling. 
Mylan Pharm., Inc. v. Thompson, 268 F.3d 1323, 1329-33 (Fed. Cir. 
2001) (holding no private right of action under the Food, Drug, and 
Cosmetic Act to seek de-listing). By that time, generic buspirone 
had entered the market, and BMS did not seek to re-list the '365 
patent.
---------------------------------------------------------------------------

    The limitation on attempts to enforce the '365 patent is similar, 
but allows for the possibility that BMS might in the future have a 
legitimate claim of infringement. Thus, Paragraph V bars BMS from 
seeking to enforce the '365 patent against a product, or use of a 
product, that contains buspirone, except that such enforcement is 
permitted if the drug product in question also contains the metabolite 
that is the subject of the '365 patent (the 6-Hydrodroxy-metabolite of 
Buspirone) and the infringement claim is based on that metabolite.\18\ 
Should such a case arise, BMS would not obtain an automatic 30-month 
stay on FDA approval (because of the bar on listing in Paragraph II), 
but, like any patent holder, it could seek a preliminary injunction 
from the court hearing the infringement case.
---------------------------------------------------------------------------

    \18\ The proposed order defines ``Patent Infringement Claim'' to 
include threats of enforcement and other allegations that an ANDA 
product infringes the NDA holder's patent.
---------------------------------------------------------------------------

    With respect to Taxol, the proposed order generally bars BMS from 
seeking to enforce, or collecting royalties on, any ``Taxol Patent'' if 
the infringement claim involves the use of ``Taxol.'' The proposed 
order defines ``Taxol'' to be any BMS paclitaxel drug product sold as 
of October 2002. As a result, this provision would not apply to any new 
form of Taxol that BMS might develop, and thus it would maintain BMS's 
incentives to pursue such innovation. With respect to BMS's existing 
Taxol product, however, the proposed order's bar on enforcement and 
royalties would apply not only to BMS's '537 and '803 patents (patents 
that the complaint alleges are unenforceable because of inequitable 
conduct by BMS before the PTO), but also to any other U.S. patent 
claiming Taxol as a composition of matter or a method of using Taxol 
(by virtue of the definition of ``Taxol Patent'' in Paragraph I.EE). 
Any such patent for the existing Taxol product would almost certainly 
be invalid, as a result of the sale of Taxol since 1992 and the 
extensive prior art in the public domain.
    Paragraph IV of the proposed order bars BMS from taking any action 
to obtain or maintain a statutory 30-month stay on FDA approval with 
respect to an ANDA that references BuSpar or Taxol. There have already 
been multiple 30-month stays in connection with both of these drugs, 
and this provision makes it clear that further stays would be improper. 
At the same time, the proposed order would preserve incentives to 
innovate by allowing 30-month stays on new NDAs, even if those NDAs are 
related to BuSpar and Taxol.

General Prohibitions Concerning the Listing and Enforcement of Patents

    Because improper Orange Book listings have a significant potential 
to obstruct competition and harm consumers, the proposed order contains 
general prohibitions designed to deter improper listings and to prevent 
BMS from triggering the Hatch-Waxman automatic 30-month stay in 
circumstances that could improperly block generic entry. Thus, the 
proposed order's Paragraph VI would bar BMS from Orange Book listings 
that are contrary to the statutes and regulations governing such 
listings. For example, this provision would prohibit listing patents in 
the Orange Book that do not actually claim the drug product at issue. 
This provision is similar to one contained in the consent order issued 
in Biovail Corp., FTC Dkt. No. C-4060 (Oct. 2, 2002).
    In addition, Paragraph VII bars BMS from acting to obtain or 
maintain a Hatch-Waxman 30-month stay on FDA approval in certain 
specified situations. Because this provision does not bar Orange Book 
listings, ANDA filers would continue to get notice through the Orange 
Book of patents relating to the reference drug. Although the provision 
prohibits BMS from suing to trigger the automatic 30-month stay, BMS 
could still bring an infringement suit and avail itself of the 
procedures available to patent holders generally, including seeking a 
preliminary injunction against market entry by the generic applicant.
    Paragraph VII.A prohibits BMS from triggering a 30-month stay when 
the patent is listed after the filing of any ANDA referencing the NDA. 
The Commission's Generic Drug Study found that the listing of patents 
after a generic applicant has filed its ANDA led to substantial delay 
of FDA approval. The report identified two reasons for this delay. 
First, ``later-issued patents'' often enabled the NDA holder to obtain 
multiple 30-month stays, resulting in an

[[Page 12086]]

automatic stay period that significantly exceeds 30 months. BuSpar and 
Taxol involve allegations relating to improper efforts to obtain such 
additional stays. Second, later-issued patents also typically presented 
significant questions whether they met the criteria for listing, and, 
when courts had ruled, the later-issued patents had been found to be 
invalid or not infringed.\19\ BuSpar, Taxol, and Platinol all are 
alleged to have involved improper listings. By eliminating the 
availability of a 30-month stay on later-issued patents, this provision 
reduces the rewards for obtaining and listing patents improperly. 
Moreover, by denying BMS the benefit of the 30-month stay on later-
issued patents, the proposed order should reduce BMS's incentives to 
engage in improper behavior before the PTO and the FDA to obtain and 
list a patent for the purpose of obtaining an unwarranted automatic 30-
month stay. This remedy is consistent with the Commission's 
recommendation to Congress that, to reduce the possibility of abuse of 
the 30-month stay provision, an ANDA filer only be subject to a 30-
month stay for patents listed in the Orange Book prior to the filing of 
its ANDA.
---------------------------------------------------------------------------

    \19\ Generic Drug Study at iii-iv, 40, 48-54.
---------------------------------------------------------------------------

    Paragraph VII also bars a 30-month stay, regardless of when the 
patent was listed, if BMS engages in certain types of misconduct in 
connection with obtaining or listing the patent: inequitable conduct 
before the PTO in obtaining the patent (VII.B); making a false or 
misleading statement to the FDA in connection with listing the patent 
(VII.C); or providing information about the patent to the FDA that is 
inconsistent with information it provided to the PTO (VII.D). These 
provisions reflect particular types of unlawful conduct charged in the 
complaint.
    Finally, Paragraph VII would also prevent BMS from obtaining a 30-
month stay when it has listed a patent that does not claim an approved 
use of the drug (VII.E) or when the patent is for a metabolite of an 
active ingredient listed in the NDA (VII.F). These provisions directly 
respond to the complaint allegations that BMS obstructed generic 
competition to BuSpar by listing the '365 patent, which did not comply 
with the standards for listing in the Orange Book. These provisions 
would not bar BMS from bringing a patent infringement action triggering 
a 30-month stay if the action is based on a patent claim that is 
distinct from those identified in these two subparagraphs, and the 
listing of that distinct additional claim does not conflict with 
regulations governing Orange Book listings.
    To ensure that BMS does not seek to obstruct generic competition 
through false statements to the FDA outside the Orange Book listing 
context, such as through the citizen petition process, the proposed 
order also contains a general prohibition on false statements to the 
FDA. Paragraph VIII bans false and misleading statements to the FDA 
that are material to the approvability or sale of a generic version of 
a BMS brand-name drug product, unless BMS had a reasonable belief that 
the statement was neither false nor misleading.
    To address complaint allegations that BMS engaged in sham 
litigation, the proposed order's Paragraph IX bars BMS from: asserting 
any patent infringement claim that is objectively baseless; or seeking 
to enforce a patent that BMS knows is invalid, unenforceable, or not 
infringed.
    Paragraphs X and XI deal with the acquisition of patents, patent 
licenses, and conduct in connection with such acquisitions or licenses. 
These two provisions address complaint allegations that, as one part of 
its unlawful scheme to delay generic competition to Taxol, BMS entered 
into an unlawful agreement with ABI that BMS acquire a license to and 
list an invalid ABI patent in the Orange Book to maintain BMS's 
monopoly in Taxol.
    As in Biovail Corp., FTC Dkt. No. C-4060 (Oct. 2, 2002), the 
proposed order would require BMS to provide notice to the Commission 
before it acquires a patent, or an exclusive license to a patent 
(whether exclusive by its terms or otherwise),\20\ if BMS intends to 
list that patent in the Orange Book. Patents obtained through internal 
development activities or research joint ventures existing at the time 
of NDA approval, however, do not present the competitive concerns that 
the arrangement between BMS and ABI does and are excluded from the 
proposed order's prior notice requirement.
---------------------------------------------------------------------------

    \20\ The definition of ``Exclusive License'' in Paragraph I.O 
includes a license that ``reduces the incentives of the licensor to 
license the intellectual property to other persons.'' This 
definition reflects that a license may be nominally non-exclusive, 
but its terms may be such (for example, when royalties paid to the 
patent holder would be higher if no generic entry occurs) that the 
patent holder would have no incentive to license the patent to 
anyone other than the manufacturer of the brand-name drug to which 
the patent relates.
---------------------------------------------------------------------------

    If BMS acquires a non-exclusive license to a patent, Paragraph XI 
bars it from participating in enforcement of, licensing of, or setting 
royalties for, that patent with respect to an ANDA filer. This 
prohibition applies only to acquisitions that occur after an ANDA 
referencing the NDA to which the patent relates has been filed. It is 
intended to ensure that BMS does not attempt to obstruct generic 
competition by influencing the conduct of the patent holder.

Provisions Concerning Settlement of Patent Litigation and Other 
Agreements

    Paragraphs XII though XV address the challenged settlement 
agreement between BMS and Schein Pharmaceutical, Inc., concerning 
generic BuSpar. Schein was acquired by Watson Pharmaceuticals in August 
2000, and the Commission has determined that under the circumstances 
here it is not necessary to seek an order against Watson to ensure 
effective relief.
    This aspect of the proposed order would essentially prohibit two 
categories of conduct:
    [sbull] Agreements in which the brand-name drug company (the NDA 
holder) makes payments to a potential generic competitor (an ANDA 
filer) and the ANDA filer agrees not to market its product for some 
period of time (except in certain limited circumstances); and
    [sbull] Agreements between the NDA holder and an ANDA filer in 
which the generic competitor agrees not to enter the market with a non-
infringing generic product, or agrees not to relinquish exclusivity 
rights.
    Paragraph XII of the proposed order covers agreements to resolve 
patent infringement disputes. It bars agreements wherein (1) the NDA 
holder makes payments or otherwise transfers something of value to the 
ANDA filer and (2) the ANDA filer agrees not to market its product for 
some period of time, subject to two exceptions described below. The ban 
in Paragraph XII includes not only final settlements of ongoing patent 
infringement litigation, but also agreements resolving claims of patent 
infringement that have not resulted in a lawsuit (see definition in 
Paragraph I.X.). In addition, by virtue of the definition of 
``Agreement'' in Paragraph I.G., the proposed order makes it clear that 
the prohibition on payments for delayed generic entry would cover such 
arrangements even if they are achieved through separate agreements (for 
example, when one agreement resolves the patent infringement dispute 
and another provides for the payment for delayed entry).
    The proposed order prohibits not merely cash payments to induce 
delayed entry, but, more broadly, agreements in which the NDA holder 
provides something of value to the potential generic entrant, and the 
ANDA filer agrees in some fashion not to sell

[[Page 12087]]

its product. Although the pharmaceutical agreements that the Commission 
has challenged to date have involved cash payments, a company could 
easily evade a prohibition on such agreements by substituting other 
things of value for cash payments. Thus, to protect against a recurrent 
violation, the proposed order is not limited to cash payments.
    The proposed order would create two exceptions to Paragraph XII's 
ban on giving value for delayed entry. First, the ban would not apply 
if the value BMS provided to the ANDA filer was only: (1) The right to 
market the ANDA product prior to expiration of the patent that it is 
alleged to infringe; and/or (2) an amount representing BMS's expected 
future litigation costs, up to a maximum of two million dollars. This 
exception reflects that a payment limited to the NDA-holder's expected 
future litigation costs is not likely to result in a later generic 
entry date than would be expected to occur absent the payment. As a 
fencing-in provision, the proposed order sets a two-million dollar 
limit on expected litigation cost payments. In addition, the exception 
requires that BMS notify the Commission at least 30 days in advance of 
consummating such an agreement, to allow an assessment of potential 
harm to competition that could arise as a result of the exclusivity 
provisions of the Hatch-Waxman Act. Paragraph XVI sets forth a 
notification process similar to that used for mergers under the Hart-
Scott-Rodino Act, which is designed to permit the Commission to obtain 
additional information when an agreement's potential effect on the 
triggering of the 180-day exclusivity period may raise competitive 
concerns.
    A second exception addresses the possibility that there might be 
some agreements that fall within the terms of the prohibition in 
Paragraph XII that the Commission would not wish to prohibit. Thus, the 
proposed order includes a mechanism that would permit the Commission to 
consider and permit such arrangements.
    Paragraph XIII prohibits agreements between an NDA holder and an 
ANDA filer in which the ANDA filer agrees not to develop or market a 
generic drug product that is not the subject of a claim of patent 
infringement. The complaint alleges that BMS's settlement agreement 
with Schein not only barred sale of the ANDA product, but also 
prohibited marketing of any other generic version of BuSpar, regardless 
of whether it infringed a BMS patent.
    The proposed order would also ban agreements in which a first ANDA 
filer agrees not to relinquish its right to the 180-day exclusivity 
period provided under Hatch-Waxman (Paragraph XIV). Under a proviso, 
however, such agreements are permitted in the context of a licensing 
arrangement if: (1) The first ANDA filer comes to market immediately 
with a generic version of the reference drug product; (2) the ANDA 
filer either triggers or relinquishes the 180-day exclusivity period; 
and (3) BMS complies with the notice requirements of Paragraph XVI. 
Although a ban on relinquishing exclusivity rights was not part of the 
challenged settlement agreement between BMS and Schein, such agreements 
have been used to thwart generic entry and the prohibition of such 
agreements will help to prevent future unlawful conduct.\21\
---------------------------------------------------------------------------

    \21\ See Abbott Labs., FTC Dkt. No. C-3945 (May 22, 2000); 
Geneva Pharms, FTC Dkt. No. C-3946 (May 22, 2000); Hoechst Marion 
Roussel, et al., FTC Dkt. No. D.9293 (May 8, 2001).
---------------------------------------------------------------------------

    Paragraph XV bars agreements that involve payment to an ANDA filer 
and in which the ANDA filer agrees not to enter the market for a period 
of time, but the patent infringement litigation continues. As with 
Paragraph XII's treatment of final settlements, it extends beyond cash 
payments to cover the NDA holder's providing ``anything of value'' to 
the ANDA filer. The proposed order also provides for an exception to 
the provision on interim settlements if BMS presents the agreement to a 
court in connection with a joint stipulation for a preliminary 
injunction, and the following conditions are met:
    [sbull] BMS must provide certain information to the Commission at 
least 30 days before submitting the joint stipulation to the court, and 
must also provide certain information to the court along with the joint 
stipulation;
    [sbull] BMS may not oppose Commission participation in the court's 
consideration of the request for preliminary injunction; and
    [sbull] Either: (1) The court issues a preliminary injunction and 
the parties' agreement conforms to the court's order; or (2) the 
Commission determines that the agreement does not raise issues under 
Section 5 of the FTC Act.

Notice and Compliance Provisions

    The form and timing of the notice that BMS must provide to the 
Commission under Paragraphs X, XII, XIV, and XV of the proposed order 
is set forth in Paragraph XVI. In addition to supplying a copy of the 
proposed agreement at least 30 days in advance of its consummation, BMS 
is required to provide certain other information to assist the 
Commission in assessing the potential competitive impact of the 
agreement. Accordingly, the proposed order requires BMS to identify, 
among other things, all others known by BMS to have filed an ANDA for a 
product containing the same chemical entities as the product at issue, 
as well as the court that is hearing any relevant legal proceedings 
involving BMS. In addition, BMS must provide the Commission with 
certain documents that evaluate the proposed agreement.
    The proposed order also provides a Hart-Scott-Rodino-type ``second 
request'' process in connection with the notice required by Paragraph 
XII.
    The proposed order also contains certain reporting and other 
provisions that are designed to assist the Commission in monitoring 
compliance with the order and are standard provisions in Commission 
orders.
    The proposed order would expire in 10 years.

Opportunity for Public Comment

    The proposed order has been placed on the public record for 30 days 
in order to receive comments from interested persons. Comments received 
during this period will become part of the public record. After 30 
days, the Commission will again review the agreement and the comments 
received and will decide whether it should withdraw from the agreement 
or make the proposed order final.
    The purpose of this analysis is to facilitate public comment on the 
agreement. The analysis is not intended to constitute an official 
interpretation of the agreement, the complaint, or the proposed consent 
order, or to modify their terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-6078 Filed 3-12-03; 8:45 am]
BILLING CODE 6750-01-P