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Figure 1. Pharmaceutical Divestitures Resolving Federal Trade Commission (FTC) Merger Concerns, 2000-2022

The size of each bubble is proportional to the number of drugs divested. In March 2016, the FTC required a record divestiture of 79 drugs as a condition of Teva’s acquisition of Allergan’s generic pharmaceutical business. “Investigational” refers to a drug that is in development and has not yet received US Food and Drug Administration (FDA) approval. An investigational generic drug is a drug being tested to determine whether it can enter the market as a generic competitor to an existing brand-name drug and has not yet received FDA approval.

Figure 2. Federal Trade Commission (FTC) Enforcement Actions Against Pharmaceutical Manufacturers, 2000-2022

Shows date the action was initiated by the FTC. Two actions, against AbbVie and Bristol Myers Squibb, involved both litigation settlements and unilateral delay and were included in both rows. One action was excluded because it was duplicative of 2 later actions alleging the same underlying misconduct, which the FTC decided to refile separately. “Settlements delaying generic entry” refers to agreements in which a brand-name drug manufacturer provided something of value to a generic drug manufacturer to end patent litigation and delay the introduction of generic competition; “unilateral delay,” independent efforts by a brand-name manufacturer to delay generic competition, including sham lawsuits against the US Food Drug Administration and meritless citizen petitions; “noncompete agreements,” agreements between currently competing manufacturers to allocate sales to 1 party and split revenues; and “monopolization,” actions by a manufacturer to exclude competitors followed by unjustified price increases.

Table 1. Core Authorities of the Federal Trade Commissiona
Table 2. Enforcement Actions Against Pharmaceutical Manufacturers by the Federal Trade Commission (FTC), 2000-2022a
Table 3. Judgments Concluding Federal Trade Commission (FTC) Pharmaceutical Enforcement Actions, 2000-2022
1.
Federal Trade Commission Act, 5(a), 15 USC 45(a).
2.
Clayton Act, 15 USC 12-27.
3.
Hart-Scott-Rodino Act, 15 USC 18a.
4.
Mulcahy AW, Whaley C, Mahlet TG, Schwam D, Edenfield N, Becerra-Ornelas AU. International prescription drug price comparisons: current empirical estimates and comparisons with previous studies. RAND Research Report. 2021. Accessed April 19, 2024.
5.
Mikulic M. World pharmaceutical sales 2020-2022 by region. September 12, 2023. Accessed November 23, 2023.
6.
Mikulic M. Global pharmaceutical market—revenue distribution 2010-2022, by region. August 29, 2023. Accessed November 23, 2023.
7.
European Federation of Pharmaceutical Industries and Associations. Pharmaceutical industry in figures. 2022. Accessed April 25, 2024.
8.
Kesselheim AS. Strategies that delay market entry of generic drugs. Commonwealth Fund. September 18, 2017. Accessed November 23, 2023.
9.
Dabora MC, Turaga N, Schulman KA. Financing and distribution of pharmaceuticals in the United States. Ѵ. 2017;318(1):21-22. doi:
10.
Guardado JR. Policy research perspectives: competition in commercial PBM markets and vertical integration of health insurers with PBMs: 2023 update. Ƶ. Accessed April 25, 2024.
11.
Seeley E. The impact of pharmaceutical wholesalers on US drug spending. The Commonwealth Fund. July 20, 2022. Accessed November 23, 2023.
12.
Moss DL. American Antitrust Institute. From competition to conspiracy: assessing the Federal Trade Commission’s merger policy in the pharmaceutical sector. September 3, 2020. Accessed April 19, 2024. efaidnbmnnnibpcajpcglclefindmkaj/https://www.antitrustinstitute.org/wp-content/uploads/2020/09/AAI_PharmaReport2020_9-11-20.pdf
13.
Chen V, Garmon C, Rios K, Schmidt D. The competitive efficacy of divestitures: an empirical analysis of generic drug markets. Accessed November 23, 2023.
14.
FTC deepens inquiry into prescription drug middlemen. News release. Federal Trade Commission; May 17, 2023. Accessed November 23, 2023.
15.
Federal Trade Commission. The future of pharmaceuticals: examining the analysis of pharmaceutical mergers (June 14-15, 2022). Accessed November 23, 2023.
16.
FTC challenges more than 100 patents as improperly listed in the FDA’s Orange Book. News release. Federal Trade Commission; November 7, 2023. Accessed November 23, 2023.
17.
FTC Legal Library. Accessed November 23, 2023.
18.
A brief overview of the Federal Trade Commission’s investigative, law enforcement, and rulemaking authority. Accessed November 23, 2023.
19.
Chopra R, Levine SAA. The case for resurrecting the FTC Act’s penalty offense authority. U Pa Law Rev. 2021;170:71.
20.
Kanwit SW. Federal Trade Commission. 2022-2023 ed. Clark Boardman Callaghan, 2022.
21.
Chopra R, Khan L. The case for “unfair methods of competition” rulemaking. U Chi Law Rev. 2020;87:357. Accessed April 25, 2024.
22.
AMG Capital Management v Federal Trade Commission, 141 S Ct 1341 (2021).
23.
Federal Trade Commission. Final rule: premerger notification; reporting and waiting period requirements. 78 Fed Reg 221. 16 CFR Part 801 (2013). Accessed April 25, 2024.
24.
Leibowitz J. Federal Trade Commission. Pay-for-delay settlements in the pharmaceutical industry: how Congress can stop anticompetitive conduct, protect consumers’ wallets, and help pay for health care reform (the $35 billion solution). June 23, 2009. Accessed April 25, 2024.
25.
Agreements filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003: overview of agreements filed in FY 2017: a report by the Bureau of Competition. Accessed April 25, 2024.
26.
Towey J, Albert B. Is FTC v. Actavis causing pharma companies to change their behavior? January 13, 2016. Accessed February 2, 2024.
27.
Gowda V, Beall RF, Kesselheim AS, Sarpatwari A. Identifying potential prescription drug product hopping. Nat Biotechnol. 2021;39(4):414-417. doi:
28.
Rome BN, Tessema FA, Kesselheim AS. US spending associated with transition from daily to 3-times-weekly glatiramer acetate. Ѵ Intern Med. 2020;180(9):1165-1172. doi:
29.
Vokinger KN, Kesselheim AS, Avorn J, Sarpatwari A. Strategies that delay market entry of generic drugs. Ѵ Intern Med. 2017;177(11):1665-1669. doi:
30.
Carrier MA. Helping consumers afford prescription drugs: an antitrust agenda for the new congress. Health Affairs Forefront. Accessed November 23, 2023.
31.
Consumer Protection and Relief Act, HR 2668, 117th Congress (2021).
32.
Competition and Antitrust Law Enforcement Reform Act of 2021, 117th Congress.
33.
1416 Affordable Prescriptions for Patients Act of 2019. 116th Congress.
34.
Alvaro D, Challener CA, Branch E. M&A: fundamental to pharma industry growth. Pharma’s Almanac. March 20, 2020. Accessed November 23, 2023.
35.
FTC announces 2023 update of size of transaction thresholds for premerger notification filings and interlocking directorates. News release. Federal Trade Commission; January 23, 2023. Accessed November 23, 2023.
36.
FTC Budget and Strategy. Accessed November 23, 2023.
37.
Feldman R, Fulton BD, Godwin JR, Scheffler RM. Challenges with defining pharmaceutical markets and potential remedies to screen for industry consolidation. J Health Polit Policy Law. 2022;47(5):583-607. doi:
38.
Daval CJR, Avorn J, Kesselheim AS. Holding pharmaceutical and medical device executives accountable as responsible corporate officers. Ѵ Intern Med. 2022;182(11):1199-1205. doi:
Special Communication
Ѳ20, 2024

Federal Trade Commission Actions on Prescription Drugs, 2000-2022

Author Affiliations
  • 1Program On Regulation, Therapeutics, And Law (PORTAL), Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s Hospital and Harvard Medical School, Boston, Massachusetts
JAMA. Published online May 20, 2024. doi:10.1001/jama.2024.5737
Abstract

Importance The Federal Trade Commission’s (FTC) oversight role in the pharmaceutical market is critical to the health of patients and the health care system. This study characterized the FTC’s policy on the pharmaceutical market in recent decades, identifying the types of actions it has favored, barriers it has faced, and authorities that remain untested.

Objective To review FTC legal actions in the pharmaceutical market from 2000-2022.

Evidence Review Legal actions were determined through manual review of search results from the FTC’s online Legal Library as well as a 2023 FTC report on pharmaceutical actions. The alleged misconduct, type of legal action taken, timing, and outcome were collected from press releases, complaints, orders, and other legal documents.

Findings From 2000-2022, the FTC challenged 62 mergers, brought 22 enforcement actions against allegedly unlawful business practices, and made 1 rule related to pharmaceuticals. Alleged misconduct in enforcement actions involved anticompetitive settlements in patent litigation (n = 11), unilateral actions by brand manufacturers to delay generic competition (n = 6), noncompete agreements (n = 4), and monopolization (n = 3), with 10 outcomes involving monetary payment, totaling $1.6 billion. Of the 62 mergers the FTC challenged, 61 were allowed to continue, 58 after divesting certain drugs to third-party competitors. The FTC’s reliance on drug divestitures decreased from 18 drugs per year from 2000-2017 to 4.3 per year from 2017-2023.

Conclusions and Relevance The FTC brought about 1 enforcement action and 3 merger actions per year against pharmaceutical manufacturers from 2000-2022, pursuing a small fraction of the estimated misconduct and consolidation in the pharmaceutical marketplace. Although the FTC faces substantial legal and practical limitations, important tools remain untested, including a rule defining “unfair methods of competition,” that may allow it to more effectively prevent repetitive patterns of anticompetitive behavior.

Introduction

The Federal Trade Commission (FTC) is an independent agency charged with protecting US consumers and promoting competition. The FTC’s regulatory power is formidable. It can obtain substantial monetary payments and issue binding orders against any company engaged in “unfair methods of competition” or “unfair and deceptive acts or practices.”1 It can also block mergers and acquisitions that it determines may have anticompetitive effects, and all such transactions meeting certain monetary thresholds must be reported to the FTC for review.2,3

The US pharmaceutical market is at particular risk for antitrust violations and unfair business practices. Brand-name prescription drug prices in the US are the highest in the world,4 and pharmaceutical manufacturers routinely earn about half of their global revenues in the US market,5-7 which increases the pressure on companies to maximize their US product sales. In addition, brand-name drug manufacturers earn most of their revenues during periods of market exclusivity provided by patents and other statutes, leading to powerful incentives to employ business strategies that extend those periods and delay price-lowering competition as long as possible.8 Finally, mergers and acquisitions over the past few decades have led to consolidation among pharmaceutical distributors and pharmacy benefit managers (PBMs), such that 3 firms now control well over half of each market, raising the risk of problematic business practices.9-11

The FTC historically has not played an aggressive role in overseeing the pharmaceutical market, although the question of when oversight is warranted is the subject of debate.12 For example, the FTC has long held a policy of allowing drug manufacturers to merge so long as they divested similar drugs in overlapping markets to third-party competitors.13 However, there are signals that the FTC’s approach may be changing; in recent years, the FTC has launched an investigation of PBMs,14 held a workshop with the US Department of Justice on regulatory oversight of the pharmaceutical industry,15 and challenged more than 100 manufacturer patents as improperly listed with the US Food and Drug Administration (FDA).16

The FTC’s oversight role in the pharmaceutical market is critical for the health of patients and the health care system. Therefore, this study sought to characterize the FTC’s regulation of the pharmaceutical industry through an examination of the FTC’s enforcement and regulatory actions between 2000 and 2022, identifying the types of actions it has favored, barriers it has faced, and authorities that remain untested.

Methods
Data Sources

We conducted searches of the FTC’s online Legal Library for actions taken from January 2000 through December 2022.17 We searched using the filters prescription drugs (127 results), pharmaceuticals (34), drug stores and pharmacies (10), and over the counter drugs and devices (46). We manually reviewed each result, as well as each entry in a report published by the FTC in 2023 titled “Overview of FTC Actions in Pharmaceutical Products and Distribution” (see Supplement 1). From these sources, we identified FTC actions involving the prescription drug market between 2000 and 2022 (see eMethods in Supplement 2 for excluded actions).

Data Extraction

For each action, we reviewed and collected information from press releases, complaints, orders, motions, opinions, and other legal documents available on the FTC website, as well as case summaries in the 2023 report regarding pharmaceutical actions. Legal actions included any of the FTC’s core authorities (Table 1).18

For enforcement actions, we collected the alleged misconduct; type of legal action taken; date the first complaint was filed; outcome characteristics including date and defendants; whether the action resulted in a judgment, FTC order, withdrawal of the complaint, or settlement; and the terms of settlements. In 1 case, a manufacturer’s parent company was sued separately for the same underlying conduct, which we counted as 1 action with 2 outcomes. We also collected the type and quantity of resulting monetary payments, including equitable relief, which forces a company to disgorge earnings or compensate consumers, and civil penalties, which punish the company for misconduct (Box).19,21

Box Section Ref ID
Box.

Federal Trade Commission (FTC) Pharmaceutical Enforcement: Barriers and Unused Legal Tools

  • When FTC seeks to address unlawful behavior, it can bring an enforcement action in 1 of 2 ways. First, FTC can sue companies in federal court seeking an injunction—a court order requiring compliance with the law. Second, FTC can pursue an internal adjudication before an FTC administrative law judge, which can result in a binding final order issued by FTC that can be appealed in court. From 2000-2022, FTC brought 14 suits in federal court and 8 internal adjudications against pharmaceutical manufacturers.

  • Legal barriers have impeded these enforcement efforts, especially in the context of recovering payment from manufacturers (Table 3). For example, FTC dropped 1 case, against AbbVie, after the Supreme Court’s 2021 holding in AMG v FTC, which limited FTC’s ability to seek payment in federal court—the means by which it had obtained nearly all payments from pharmaceutical manufacturers since 2000. Even when misconduct was essentially undisputed, FTC was hindered by its lack of clear authority to recover payment after misconduct had stopped. When FTC did obtain payment, the payment was almost always limited to forcing the manufacturer to pay back the money it wrongfully obtained. This kind of equitable payment is likely insufficient to deter misconduct, because manufacturers face no meaningful financial risk for unlawful actions such as might come from a monetary penalty. However, FTC issued only 1 such penalty, which was capped at a statutory maximum of $2.1 million, a meager sum given that large drug manufacturers can earn tens of billions of dollars in revenue each year.

  • Unused legal tools to combat anticompetitive pharmaceutical behavior remain at FTC’s disposal. These include the power to make a rule defining “unfair methods of competition” in a particular market, such as the pharmaceutical industry (Table 1). To help prevent unlawful conduct from occurring, FTC can make rules with the force of law after a notice-and-comment process. These rules can define companies’ obligations or prohibit certain conduct as “unfair” or “deceptive,” and thus unlawful. The 1 rule FTC issued in the pharmaceutical industry, on reporting requirements, was unrelated to this authority. Although FTC has never issued such a rule, legal scholars, including former FTC Commissioner Rohit Chopra and current FTC Chair Lina Khan, have argued it could.21 FTC could also take greater advantage of its authority to issue monetary penalties for conduct that is unlawful for manufacturers under a prior FTC order.19 Both of these tools allow FTC to predefine categories of conduct—such as false regulatory filings to delay generic approval—as unlawful, thus deterring them under threat of monetary penalties. This approach may prove more effective than seeking compensation after the misconduct occurs.

For actions involving mergers, we collected the date the complaint was filed and information on the outcome, including whether it resulted in a settlement or dismissal, and the type and quantity of drugs required to be divested as a condition of the merger. We used complaints, press releases, consent orders, FTC analyses, and other documents available on the FTC website to determine whether each divested drug was branded or generic and whether it was FDA approved or in development at the time of the divestiture. We also noted whether any other conditions were required as part of the settlement.

For rules, we collected the date the rule was promulgated, the effect of the rule, the rule’s legal basis, and any litigation challenging the rule, including the date of complaints, named plaintiff, and outcome.

Data Analysis

We analyzed the timing of FTC actions, including their date of initiation and duration, as well as the frequency of alleged misconduct (for enforcement actions) and divestitures stratified by drug type (for merger actions). Because 1 enforcement action can result in multiple outcomes, the duration for enforcement actions was calculated using action-outcome pairs, matching the date of the initial complaint with the date of each individual settlement, judgment, or other resolution. The duration for mergers was not calculated because the FTC’s general practice is to announce and file merger settlements at the same time as the complaint.

Results

A total of 92 legal actions initiated or concluded by the FTC between January 2000 and December 2022 related to the pharmaceutical market were identified. There was a pharmaceutical manufacturer defendant in 85 (92%), with the remaining 7 (8%) involving pharmacies. Of the 85 involving manufacturers, 22 (26%) were enforcement actions, 62 (73%) were merger actions, and 1 (1%) was a rule.

Enforcement Actions Against Manufacturers

Among the 22 enforcement actions, 14 were complaints filed in federal district court and 8 internal adjudications. The alleged misconduct fell into 4 non–mutually exclusive categories: settlements of patent litigation (n = 11), unilateral delay (n = 6), noncompete agreements (n = 4), and monopolization (n = 3) (Table 2). All defendants were corporations with 2 exceptions: Martin Shkreli and Kevin Mulleady, both drug manufacturer executives sued for anticompetitive monopolization of the antibiotic pyrimethamine (Daraprim).

In the 11 actions involving settlements of patent litigation, the FTC alleged that a brand-name drug manufacturer provided something of value to a generic drug manufacturer to avoid or settle litigation over the brand-name manufacturer’s drug patents and delay the introduction of generic competition. In 5 of the 11 cases, brand-name manufacturers made deals, such as licensing agreements, that were ostensibly unrelated but excessively one-sided in favor of the generic manufacturer; in 4 cases, brand-name manufacturers offered monetary payment in lump sums, revenue-sharing deals, or other arrangements; in 4 cases, the brand-name manufacturer agreed that it would not launch an authorized generic to compete with the generic; in 2 cases, the brand-name manufacturer offered to supply the generic firm with inventory to sell as an authorized generic; and in 1 case, the brand-name manufacturer purchased an exclusive license to the competitor generic drug, thus eliminating its only competitor.

Of the 6 actions in which the FTC alleged unilateral efforts taken by a brand-name firm to delay generic competition, 4 involved sham filings with the FDA, including false patent listings in the Orange Book (the FDA’s official compendium of drug approvals and patents) and repetitive citizen petitions that the FDA sought to respond to before approving a generic version. Two actions involved sham litigation against potential competitors and 1 alleged that the manufacturer repeatedly filed meritless lawsuits against the FDA to delay generic approval.

In 4 actions against noncompete agreements, the FTC alleged agreements between manufacturers to stop competing, allocate all sales to 1 party, and split the revenues. Three involved agreements between generic manufacturers and 1 involved an agreement between a generic and brand-name manufacturer after the generic had entered the market.

In the 3 monopolization actions, the FTC alleged unilateral actions by a firm to dominate a drug’s market, including 2 in which manufacturers purchased a competing drug and then raised prices and 1 in which a manufacturer cornered the market for ingredient suppliers through exclusive supply agreements to cut out all competitors, and then raised the price.

Enforcement Outcomes

Among the 22 enforcement actions, 1 remained ongoing as of February 2024. The remaining 21 were linked to 29 outcomes: 23 settlements, 4 court judgments, 1 final FTC order, and 1 withdrawal by the FTC (Table 3).

Twenty-five outcomes, including 23 settlements, 1 FTC order, and 1 judgment in FTC’s favor, involved conduct restrictions that required the manufacturers to cease the disputed conduct, avoid similar conduct in the future, or notify the FTC of certain types of agreements that might tend to be anticompetitive. One manufacturer agreed to divest a disputed license agreement.

Of the 4 court judgments, the FTC prevailed in 1, against Martin Shkreli. The FTC lost 2 cases by failing to convince courts that the companies were engaging in unlawful behavior and lost 1 because the court held the FTC could not address past misconduct. The FTC voluntarily withdrew 1 case concerning allegedly anticompetitive behavior by AbbVie after it became clear it could not obtain monetary payment due to an intervening Supreme Court ruling in a different case.22

Ten outcomes, consisting of 9 of the 23 settlements (39%) and 1 judgment, included monetary payment, totaling $1.6 billion. The largest payment was $1.2 billion from Cephalon to compensate payers for alleged anticompetitive settlements of patent litigation delaying generic competition of the stimulant modafinil (Provigil). Of the 10 payments, 9 were equitable payments to compensate consumers or disgorge unlawfully obtained money and 1 penalized a company for unlawful behavior. The penalty, imposed against Bristol Myers Squibb for failing to report a settlement in violation of a prior agreement with the FTC, was statutorily capped at $2.1 million.

Merger Actions

The FTC took 62 actions against pharmaceutical mergers. It allowed the execution of 61 mergers after a settlement in which the manufacturers agreed to conditions, and 1 merger was abandoned. Of the 61 settlements, 58 (95%) required the companies to divest drugs, selling them to a third-party competitor as a condition of merging (Figure 1). Divestiture requirements often included provisions meant to ensure the competitiveness of the divested drug, including supplying the drug until the competitor could manufacture it, assisting a competitor in obtaining FDA approval, and helping complete clinical trials.

In total, the FTC required the divestiture of 332 drugs, including 38 (11%) approved brand-name drugs, 184 (55%) approved generic drugs, 15 (5%) novel investigational drugs, and 95 (29%) generic drugs in development. The median number of drugs divested as part of a settlement was 3 (IQR, 1-5; full range, 0-79).

Seven settlements with the FTC involved additional conditions unrelated to divestiture, including 3 that required the manufacturer to grant a competitor a license or exclusive supply agreement, 1 that limited the future acquisition of certain drugs without prior FTC approval, 1 that prohibited bundling drugs in negotiations with payers and PBMs to leverage higher prices, 1 that prevented reporting inflated average sales prices to the government, and 1 that prohibited a reverse payment agreement.

Rulemaking

The FTC promulgated 1 notice-and-comment rule applying to the pharmaceutical industry in 2013.23 The rule amended existing regulations on premerger notification, deeming certain patent rights to be reportable assets for antitrust review. When the rule became effective, the manufacturer trade organization Pharmaceutical Research and Manufacturers of America sued, but the rule was ultimately upheld in court.

Timing of Actions

As shown in Figure 2, the FTC initiated an enforcement action about once a year, except from 2009-2014, when none were initiated. The alleged misconduct the FTC targeted did not shift noticeably over time, with all 4 types of cases similarly represented between 2000-2011 and 2012-2022.

As shown in Figure 1, the FTC’s reliance on drug divestitures changed over time, including a substantial decrease after 2017. The FTC required 26 total drug divestitures from 2017-2023 (4.3 per year) compared with 306 from 2000-2017 (18 per year). Divestiture of approved brand-name drugs became less common over time, with the FTC requiring 24 brand-name drug divestitures from 2000-2010 (2.4 per year), compared with 13 from 2010-2022 (1 per year). By contrast, the FTC required no generic divestitures until 2005, after which generic divestitures became more common than brand-name divestitures.

Discussion
Enforcement Actions

From 2000-2022, the FTC brought on average 1 enforcement action per year against pharmaceutical manufacturers. There was little change in the alleged misconduct over time—the FTC’s actions in the late 2010s sought to correct comparable types of underlying conduct as in the early 2000s. Although most outcomes required the manufacturer to cease the disputed conduct, most did not include monetary penalties or payments. These findings suggest that although the FTC’s limited enforcement actions may have reduced the harm of anticompetitive pharmaceutical conduct, they have not effectively deterred the persistent patterns of misconduct or addressed their causes.

The FTC’s enforcement actions and the remedies it obtained are dwarfed by the estimated scope and costs of anticompetitive pharmaceutical behavior. For example, the FTC estimated in 2009 that anticompetitive settlements in which brand-name manufacturers induce generic manufacturers to delay selling cheaper drugs would cost $35 billion by 2019,24 but from 2000-2022, the FTC recovered just over $1 billion in total from such cases. The FTC reported that dozens of brand-generic settlements each year from 2004-2017 involved both restrictions on generic entry and compensation, the highest being 40 in fiscal year 2012,25 but addressed only 11 such settlements in the 23-year study window. Although these potentially problematic settlements may have decreased after 2013,26 when the Supreme Court held they were subject to antitrust scrutiny, the vast majority were never addressed by the FTC.

Other potentially anticompetitive strategies received still less attention, such as “product hops,” in which manufacturers shift patients to different brand-name versions of the same drug in the face of impending generic competition,27 sometimes even going so far as to remove the original drug version from the market, a practice that can cost patients and payers billions of dollars more per year for a single drug.28 Only 1 FTC action, against Indivior concerning the switch from the tablet to film formulation of Suboxone, involved a product hop. Further areas that the FTC did not address included layering multiple patents in “thickets” on a single drug and filing misleading applications to the US Patent and Trademark Office.29

The limited number of enforcement actions underscores how the FTC must make decisions in the context of limited resources and uncertain outcomes. The FTC’s Health Care Division currently consists of only about 40 lawyers and investigators responsible for identifying and pursuing all enforcement and merger actions in the US health care industry (see Supplement 1). This capacity may help explain the low number of enforcement actions, which involve dozens of time-consuming legal filings and usually take more than a year to resolve. Even the duration of enforcement actions measured likely does not reflect the full scope of the FTC’s involvement in those cases, which may involve nonpublic investigations and negotiations with the defendant long before a complaint is filed.

Action by Congress may be warranted to reinforce the FTC’s authority.30 In recent years, bills have proposed fixes such as reversing the Supreme Court ruling AMG Capital Management v FTC (AMG v FTC) to allow the FTC to obtain equitable monetary relief in federal court,31 increasing funding for FTC enforcement and merger review32 and empowering the FTC to prohibit strategies such as product hops.33 To help deter future misconduct, Congress might investigate whether the daily caps on civil penalties, currently set at $46 517 per violation per day, are properly calibrated in light of industry revenues and consider increasing them if necessary.

Merger Actions

The FTC challenged about 3 merger actions per year from 2000-2022, and allowed all but 1 to continue with conditions. These conditions usually required divesting certain drugs to a competitor, the majority of which were approved generic drugs. Changes were observed in drug divestitures over time, including an overall decrease after 2017, a decrease in brand-name divestitures since the early 2000s, and a rise and fall in generic divestitures from 2007-2017.

Mergers challenged by the FTC represented a small fraction of all biopharmaceutical mergers and acquisitions. Trade publications reported hundreds of biopharmaceutical mergers and acquisitions worth hundreds of billions per year, with 2019 being a record year for both number and value.34 The FTC had challenged 8 mergers since 2017 and 1 in 2019. Some of these deals may be beyond the FTC’s power to scrutinize due to the size-of-transaction threshold needed to trigger reporting requirements, currently set at $111.4 million.35 The FTC may also be limited in its capacity to review the quantity of transactions reported, with a fiscal year 2023 budget of only $430 million.36

The changes observed in divestitures may reflect a combination of shifting pharmaceutical merger patterns and FTC priorities. However, they likely do not reflect merger activity alone; scholars have found that the pharmaceutical industry has undergone “waves” of consolidation that do not coincide with the shifts in divestitures found in this study, including 1 from 1996-2002 and another starting in 2010 and continuing to the present day.37

Limitations

This study has limitations. It did not address related legal actions by private parties or other government actors and thus does not capture the full scope of manufacturer liability. For example, the FTC’s enforcement action against Indivior accompanied a prosecution by the Department of Justice for the same set of business practices.38 The findings also likely do not reflect the entirety of the FTC’s actions in the pharmaceutical industry because some of the FTC’s work on pharmaceuticals, including investigations, is nonpublic, and only published actions could be evaluated.

Conclusions

The FTC brought about 1 enforcement action and 3 merger actions per year against pharmaceutical manufacturers from 2000-2022, pursuing a small fraction of the estimated misconduct and consolidation in the pharmaceutical marketplace. Although the FTC faces substantial legal and practical limitations, tools such as rulemaking to define unfair business practices remain untested and may allow the FTC to more effectively prevent repetitive patterns of anticompetitive behavior. In light of the barriers the FTC faces, including its limited enforcement capacity, Congress may need to strengthen the FTC’s hand to reduce the burden of pharmaceutical consolidation and unfair practices on the health care system and patients.

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Article Information

Accepted for Publication: March 18, 2024.

Published Online: May 20, 2024. doi:10.1001/jama.2024.5737

Corresponding Author: Aaron S. Kesselheim, MD, JD, MPH, Brigham and Women’s Hospital, 1620 Tremont St, Ste 3030, Boston, MA 02120 (akesselheim@bwh.harvard.edu).

Author Contributions: Mr Daval had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.

Concept and design: All authors.

Acquisition, analysis, or interpretation of data: All authors.

Drafting of the manuscript: Daval, Sarpatwari.

Critical review of the manuscript for important intellectual content: All authors.

Statistical analysis: Daval.

Obtained funding: Kesselheim.

Administrative, technical, or material support: Sarpatwari.

Supervision: Sarpatwari, Kesselheim.

Conflict of Interest Disclosures: Dr Kesselheim reported receiving personal fees from the Federal Trade Commission (FTC) by serving as an outside expert for the FTC in 2 merger cases in 2023, 1 involving Sanofi and Maze and 1 involving Amgen and Horizon (both now settled), as well as for a class of state Attorneys General and payers in a case involving generic drug price fixing during the conduct of the study. No other disclosures were reported.

Funding/Support: Funding for this study was provided by Arnold Ventures.

Role of the Funder/Sponsor: Arnold Ventures had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.

Disclaimer: This article was prepared while Mr Daval was a research fellow at PORTAL. The opinions expressed in this article are the authors’ own and do not reflect the views of the US Food and Drug Administration, the Department of Health and Human Services, or the US government.

References
1.
Federal Trade Commission Act, 5(a), 15 USC 45(a).
2.
Clayton Act, 15 USC 12-27.
3.
Hart-Scott-Rodino Act, 15 USC 18a.
4.
Mulcahy AW, Whaley C, Mahlet TG, Schwam D, Edenfield N, Becerra-Ornelas AU. International prescription drug price comparisons: current empirical estimates and comparisons with previous studies. RAND Research Report. 2021. Accessed April 19, 2024.
5.
Mikulic M. World pharmaceutical sales 2020-2022 by region. September 12, 2023. Accessed November 23, 2023.
6.
Mikulic M. Global pharmaceutical market—revenue distribution 2010-2022, by region. August 29, 2023. Accessed November 23, 2023.
7.
European Federation of Pharmaceutical Industries and Associations. Pharmaceutical industry in figures. 2022. Accessed April 25, 2024.
8.
Kesselheim AS. Strategies that delay market entry of generic drugs. Commonwealth Fund. September 18, 2017. Accessed November 23, 2023.
9.
Dabora MC, Turaga N, Schulman KA. Financing and distribution of pharmaceuticals in the United States. Ѵ. 2017;318(1):21-22. doi:
10.
Guardado JR. Policy research perspectives: competition in commercial PBM markets and vertical integration of health insurers with PBMs: 2023 update. Ƶ. Accessed April 25, 2024.
11.
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