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Robust pharmaceutical antitrust enforcement is likely to continue under the direction of four new FTC commissioners.
The Senate will soon vote on the Federal Trade Commission nominations, including that of a new chairman.
“I expect that they will continue the robust bipartisan enforcement in the industry that has been a constant in the agency for decades,” Michael A. Carrier, a law professor at Rutgers Law School in Camden, N.J., and co-director of the Rutgers Institute for Information Policy and Law, told Bloomberg Law March 8.
For example, the FTC will likely take a close look at the Albertsons Co.'s takeover of drugstore chain Rite Aid Corp. If the deal goes through, the combined companies would have about 4,900 stores, including 4,350 pharmacy locations. Albertsons pharmacies will be rebranded under the Rite Aid name.
The commission has been operating at half-strength for more than a year. At full strength, the FTC has five presidentially appointed and Senate-confirmed commissioners. Its two sitting members, acting Chairman Maureen Ohlhausen (R) and Democratic commissioner Terrell McSweeny are expected to leave when the nominees are confirmed by the full Senate. If the current slate of nominees is confirmed without a fifth, the FTC would have a 3-1 Republican-Democrat ratio. This is unusual because traditionally administrations will present a full slate of nominees.
Even without a fifth Democratic nominee to bring the Commission back to full strength, pharmaceutical companies should expect the FTC will continue to be active in the pharmaceutical arena. The pharmaceutical industry is one of the top product markets in terms of the number of reported mergers and acquisitions, with 129 total deals reported in the FTC’s most recent competition report.
The Department of Justice and FTC share authority to review mergers for anticompetitive effect but tend to divvy up reviews based on their areas of expertise. In general, the FTC investigates mergers in the pharmaceutical industry. The most recently available statistics reflect the FTC’s activity in this area: in 2016, the FTC investigated 27 pharmaceutical mergers and the DOJ investigated only 2. The new commissioners, once confirmed, aren’t likely to change that direction.
“Under the new administration, both the FTC and the DOJ have shown a strong interest in aggressive antitrust enforcement in healthcare, and I would expect that to continue going forward,” James M. Burns, an antitrust lawyer with Akerman LLP in Washington and a Bloomberg Law advisory board member, told Bloomberg Law March 9.
That aggressiveness will likely extend beyond mergers to policing anticompetitive schemes in the pharmaceutical industry such as patent litigation settlements that delay the entry of cheaper, generic drugs to the market, according to Alexis James Gilman with Crowell & Moring LLP in Washington.
“I would also expect the FTC to continue actively challenging pharmaceutical patent settlements, given the agency’s extensive investment in that enforcement program and its success at the Supreme Court in the Actavis case,” Gilman said. Gilman was formerly the assistant director of the FTC’s Mergers IV Division in the Bureau of Competition, which investigates, among other things, transactions involving hospitals and other health-care providers.
In FTC v. Actavis, Inc., 133 S. Ct. 2223, 2013 BL 158126 (U.S. 2013), the high court ruled patent litigation settlement agreements between brand-name and generic drug companies are subject to antitrust scrutiny under a rule-of-reason analysis—whether the challenged conduct unreasonably restricts competition.
That robust enforcement likely will reach beyond reverse payment settlements in drug patent litigation to scrutiny of developments in citizen petitions, Carrier said. Citizen petitions ask the Food and Drug Administration to take action on pending generic drug applications. The petitions often raise concerns about the agency’s drug approval or testing process requirements. Brand-name drugmakers have used them as one tactic to delay approval of generic competitors.
Enforcement will also likely extend to the denial of samples under Risk Evaluation and Mitigation Strategy (REMS) programs, Carrier said. The FDA may impose REMS restrictions on a drug to ensure the drug’s benefits outweigh its risks. Sometimes, branded drug companies use FDA-required REMS to deny generic companies access to samples of branded drug products needed to conduct bioequivalence testing for generic approval.
The nominees indicated they would continue an active enforcement policy in written testimony submitted to the Senate subcommittee considering their nominations.
Among the four nominees, only one—Joseph Simons (R), who’s slated for the chairmanship—is an antitrust veteran. Simons, who recently resigned as a partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP, was a former director of the FTC’s Bureau of Competition during the George W. Bush administration.
The other nominees, Rohit Chopra (D), Noah Phillips (R), and Christine Wilson (R), would fill commissioner slots. Phillips is chief counsel for Texas Sen. John Cornyn (R). Chopra is a senior fellow at the Consumer Federation of America and former assistant director of the FTC’s Consumer Financial Protection Bureau who dealt with student loan issues at the FTC. Wilson, senior vice president for regulatory affairs at Delta Airlines, was chief of staff to former FTC Chairman Timothy Muris from 2001 to 2004.
Wilson said health care would be one of the top priorities for the FTC. She also told the subcommittee she was concerned about preserving competition in health-care markets. The vote isn’t scheduled yet.
For his part, Simons promised to address concerns about the robustness of the FTC’s merger enforcement program.
“The FTC needs to devote substantial resources to determine whether its merger enforcement has been too lax, and if that’s the case, the agency needs to determine the reason for such failure and to fix it,” Simons said in a filing submitted to the Senate Commerce Committee.
“On the merger side, the Commission has voted to challenge numerous provider mergers on a bipartisan and unanimous basis,” Gilman said. Both Simons and Wilson worked with former FTC Chairman Muris, who initiated the resurgence of the FTC’s hospital merger-enforcement program in the early 2000s after a series of court loses in the 1990s, Gilman said. “I expect they will continue that legacy,” he said.
Meanwhile, the commission also faces fiscal challenges. The budget for the FTC’s competition division, which conducts merger reviews and enforcement of anti-competitive conduct, would shrink by $1.1 million under President Donald Trump’s fiscal 2019 government spending plan. Congress still has to approve the budget.
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The FTC's most recent competition report is at http://src.bna.com/w0g.
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