Authorized Generic SS-4-25-07 FINAL

Supporting Statement for a Paperwork Reduction Act
Submission to OMB
FTC Study on Authorized Generic Drugs
The Federal Trade Commission (FTC or Commission) proposes to conduct an analysis of
the effects of authorized generic drugs (AGs) on competition in the prescription drug
marketplace. The Commission will seek the information for this study through compulsory
process under Section 6 of the FTC Act, 15 U.S.C. § 46.
1.

Necessity for Information Collection

The proposed collection of information is necessary for a congressionally-requested study
of the likely effects on competition in the prescription drug marketplace of entry by authorized
generic drugs. AGs are drugs that are identical to brand-name drugs approved under New Drug
Applications1 (NDAs), but typically are marketed under the drug’s generic (active ingredient)
name,2 and are distributed through channels generally associated with generic drugs approved
under Abbreviated New Drug Applications (ANDAs).3 The issue is whether AGs reduce generic
drug companies’ incentives to challenge pharmaceutical patents and compete in the
pharmaceutical market prior to patent expiration.4
Given the importance of generic drugs in lowering health care costs, Senators Grassley,
Leahy, and Rockefeller have requested that the Commission conduct a study of “the short term
and long term effects on competition of the practice of ‘authorized’ generics.”5 In addition,
Representative Waxman, one of the co-authors of the Hatch-Waxman Act, has requested that the
FTC study “the impact of so-called ‘authorized generics’ on competition in the prescription drug

1

See 21 U.S.C. § 35 5(b), (c).

2

Sometimes, a trade name different from that of the brand-name drug is used. The National Drug Code number of
the AG is also different from that of the brand-name drug.
3

See 21 U.S.C. § 355(j). Generic drugs approved through the filing of an ANDA will be referred to as “ANDAgeneric” drugs when nec essary to distinguish them from AGs.
4

Under the Hatch-W axman Act, generic drugs may enter the market upon the expiration of patent protection on the
brand-name drug, or in certain circumstances, prior to patent expiration if the generic company has challenged the
validity of the patents or claimed that its drugs are no ninfringing. See 21 U.S.C. § 355. ANDAs that challenge a
paten t on a b rand-name drug must co ntain a “p aragraph IV certification” asserting invalid ity or noninfringement.
See 21 U.S.C. § 35 5(j)(2)(A)(vii)(IV). To p rovide an incentive to generic companies to initiate such challenges and
to market less expensive generic drugs as soon as is warranted, the Hatch-Waxman Act provides the first filer of an
AND A with a paragraph IV certification a 180-day exclusivity period during which other ANDA -generic drugs
cannot be marketed. See 21 U.S.C. § 355(j)(5)(B)(iv)(I)(2004). AGs, however, are marketed pursuant to an
approved N DA and thus can be marketed during the 180-day exclusivity period, reducing the value of any incentive
derived fro m the exclusivity granted to the A ND A-gen eric manufac turer. See Teva Pharm. Indus., Ltd. v. Crawford,
410 F.3d 51 (D.C. Cir. 2005 ).
5

See Letter to Chairman Deborah Platt Majoras, from Senators Grassley, Leahy, and Rockefeller (May 9, 2005)
(Appendix A, attached).

marketplace.”6
Although the Commission has obtained some information on authorized generic drugs that
have been marketed, no comprehensive list of such products is available.7 Consequently, the
Commission will rely primarily on requests to brand-name manufacturers to develop such a list.
The Commission will use known information about the filing of ANDAs regarding brand-name
products that first faced generic competition after January 1, 2001, or are subject to ANDAs filed
after that date, to tailor each request to obtain information about specific drug products made by a
particular manufacturer that have competed with generic drugs or will do so in the future. Based
on information obtained from the FDA regarding relevant brand-name and generic drugs, the
Commission proposes to send requests to approximately 80 brand-name drug companies, a small
number of authorized generic companies, and 100 ANDA-generic drug companies.

2.

How the Data Will Be Used

The FTC proposes to study company documents and financial data to assess the effects of
AGs on competition. The FTC will obtain the information sought through interrogatories and
document requests in Special Orders issued pursuant to Section 6(b) of the FTC Act, 15 U.S.C. §
46(b). Recipients of the Special Orders (information requests) will include brand-name
pharmaceutical companies that have marketed authorized generic drugs and/or received notice of
the filing of an ANDA with a patent challenge regarding a brand-name drug; generic drug
companies that have filed ANDAs regarding those brand-name drugs, some of which companies
also have marketed authorized generic drugs on behalf of brand-name pharmaceutical companies;
and independent authorized generic drug companies that have marketed AGs.8
The information will be used to develop a report on (i) the short-term effects of AGs

marketed during the 180-day exclusivity granted to the first generic company challengers to a
patent on a particular drug, including effects on price, market share, revenues, profits, and return
on investment; and (ii) long-term effects of AGs on generic companies’ incentives to challenge
patents. Qualitative information from company documents will inform the quantitative data
obtained from companies and the FDA. Information in company documents is especially
important for the assessment of long-term effects of AGs on generic companies’ incentives and
their likelihood of pursuing generic entry, which is central to the planned study. This
complementary approach, relying on both quantitative and qualitative information, has been

6

See Letter to Chairman Deborah Platt Majoras from Rep resentative H enry A. W axman (Sept. 13, 20 05) (Appendix
B, attached).
7

Minor adjustments to a drug’s label, e.g. to indicate a distributor, do not raise safety or efficacy concerns, and thus
the FDA allows manufacturers to notify it of such changes in the NDA holder’s annual report. The FDA does not
track whether the marketing of an authorized generic version of a drug or other marketing considerations prompt
such changes. See Letter from W illiam K. H ubbard, FD A, to Stuart A. Williams, Mylan Pharmac euticals, Inc., and
James N. Czab an, Heller Ehrman W hite & McA uliffe 5 (July 2, 2004).
8

Proposed Special Orders to brand-name, generic, and authorized generic companies are attached as Appendices C,
D, an d E, respectively.

2

successfully used by the FTC in past reports. The report on AGs will be published by the FTC and
made available not only to the Congressmen who requested the study but also to the public.
Senators and Representatives may consult it in developing or considering legislation in this area.9
The documents and information collected could provide a basis for initiating a law
enforcement investigation, but that is not the primary purpose of the study. The Commission will
not exercise its enforcement authority solely on the basis of information provided by the companies
in response to the proposed information collection request. Rather, it would do so only after
gathering additional information from a company and/or other sources apart from the proposed
study. The Commission would evaluate whether the evidence examined suggests unfair methods
of competition.10

3.

Information Technology
Improved information technology may assist in gathering and producing this information.

Consistent with the aims of the Government Paperwork Elimination Act, 44 U.S.C. § 3504, the
FTC will encourage respondents to submit as much data as possible in electronic form, and will
provide electronic templates in which to enter the requested information. Database software also
will be used to compile information and thereby facilitate review and analysis.

4.

Efforts to Identify Duplication/Availability of Similar Information

There is no sufficiently comprehensive information available that can be used for these
purposes. Efforts to identify duplicate sources of information included a review of published and
unpublished studies and articles from industry, trade associations, governmental agencies, and
academic researchers; news articles; and information available through the internet. The available
information is not sufficient for the purpose of this study because it is not based on a

comprehensive list of AGs, and does not rely on well-documented sources. Even the most
comprehensive studies available are based only on AGs generally known to be on the market at
one particular point in time. Such studies likely do not cover all drugs on the market even at that
particular time. Moreover, the sales and price information that they present are incomplete or
insufficient in various respects, e.g., retail prices are not presented, wholesale prices fail to account
for rebates and discounts, or price information has not been appropriately weighted.11 Finally,
available sources are not based on pharmaceutical company internal documents, such as could be
obtained by the Commission through compulsory process, and thus lack the insights that such
documents might provide.

9

See S. 3695, 109 th Cong. (2006) and H.R. 5993, 109 th Cong. (2006 ) (bills “[t]o amend the Federal Food, Drug, and
Cosmetic Act to prohibit the marketing of authorized generic drugs”).
10

See FTC Act Section 5, 15 U.S.C. § 45.

11

See IMS Consulting, Assessment of Authorized Generics in the U.S., spring 2006 (prepared for PhRM A); Aidan
Hollis & Bryan A. Liang, An Assessment of the Effect of Authorized Generics on Consumer Prices, July 31, 2006.

3

The Commission is requesting data on cost, sales, and prices directly from manufacturers
because other sources are either inadequate for a number of reasons, or are not accessible to the
Commission. Cost information is not available from any other source, and must be obtained by
compulsory process. Commercially available sales and price data are inadequate because they have
not been adjusted for manufacturer rebates. 12 Although pursuant to the Medicaid program,
manufacturers are required to report the Average Manufacturer Price (AMP) of their drugs to the
Centers for Medicare and Medicaid Services (CMS), by statute the CMS cannot disclose historical
information except to the Comptroller General or the Congressional Budget Office.13
Sales and price data must be obtained directly from manufacturers to ensure consistency in
the definitions applied to these terms, so that relative price and market share calculations are
accurate. The Commission’s focus on this study is on the financial incentives for manufacturers to
market generic drugs, and thus the Special Orders require that manufacturers submit the “total
sales, net of discounts, rebates, promotions, returns and chargebacks.” 14 In contrast, when
reporting to the CMS, manufacturers do not always reduce their AMP values for rebates paid to
pharmacy benefit managers because the issue of how to treat such rebates has not been resolved.15
Finally, the FTC will not require respondents to provide any documents that have been
previously submitted to the Commission pursuant to the Medicare Prescription Drug,
Improvement, and Modernization Act (“MMA”), 16 although responding companies will be
required to identify any such documents.

5.

Efforts to Minimize the Burden on Small Organizations

The information collection request is not likely to impose an undue burden on small
entities, such as small generic drug companies. Generally, the number of drugs about which a

12

Also, although som e other government agencies o btain p rice informatio n by sub scription, such comm ercial d ata
are not available to the FT C under the terms of the licenses.
13

See 42 U.S.C. § 1396r-8(b)(3)(D) (2004). Section 6001(b)(2)(C) of the Deficit Reduction Act of 2005, P.L. 109171, provides for the public availability of AMP after July 1, 2006. This provision has not yet been implemented,
and in any case will not provide the historic info rmatio n nece ssary for this study. See Medicaid Program;
Prescription Drugs; Proposed Rule, 71 Fed . Reg. 77,174, 77,186 (Dec. 22, 2006 ).
14

This definition is based on that used for calculation of the manufacturer’s average sales price under M edicare Part
B. See 42 U .S.C. § 13 95w-3a(c)(3) (manufacturer’s average sales price is calculated ne t of “volume disco unts,
prompt pay discounts, cash discounts, free goods that are contingent on any purchase requirement, chargebacks, and
rebates . . . .”).
15

See O FFICE OF I NSPECTOR G ENERAL, D EPART MEN T OF H E A LT H A N D H U M A N S ERVICES , D ETERMINING A VERAGE
M ANUFACTURER P RICES FOR P R E SC R IP T IO N D RUGS U NDER THE D EFICIT R E D U C TIO N A CT OF 2005 5-6 (May 2006)
(neither the statute nor the rebate agreements with CMS add ress how rebates to PBM s should be treated when
repo rting the A MP); see also 42 U .S.C. § 139 6r-8(k)(1); G OVERNM ENT A C C O U N TA B IL IT Y O FFICE , M E D IC A ID D R U G
R EBATE P ROGRAM : I NADEQU ATE O VERSIGHT R AISES C ONCERNS ABO UT R EBATES P A ID T O S TATES , GAO-05-102
(Feb. 2005).
16

See P.L. 108-173 , tit. XI, Subtit. B, § 1112, 11 7 Stat. 2066, 2461-2 (20 03).

4

company will be asked to provide information will be proportional to a company’s size. In other
words, the more drug products specified in the information collection request, the less likely that
the respondent will be a small business. Based on initial information obtained from the FDA, the
brand-name and generic drug companies with the largest number of drug products for which
information will be sought are not small businesses. Independent AG companies, which the
Commission anticipates will provide information essential to the understanding of AGs, may be an
exception to the rule that the burden will be proportional to a company’s size, because AG drugs
make up a large percentage of their products. The FTC is only aware of one such company,
however, and will consider possible modifications to avoid any undue burden on small entities
based on the specific factual circumstance.

6.

Consequences to Federal Program and Policy Activities/Obstacles to Reducing
Burden

If the information is not collected, the FTC will not be able to prepare a well-documented
study of how AGs affect short- and long-term competition in the pharmaceutical industry. The
Commission believes that the proposed study will enable it to provide a comprehensive picture not
only of how AGs affect competition, but also of the incentive to challenge pharmaceutical patents
provided by the 180-day exclusivity period, and the value to consumers of generic entry resulting
from such challenges. The collection is not a repetitive, periodic collection. One update requested
by the Commission is necessary, however, to evaluate whether certain changes in the law effective
Jan. 1, 2007, affect the marketing of AGs. 17 This update requests only the basic information
necessary to identify and track AGs released during 2007. As described in the responses to the
comments, the Commission has minimized the paperwork burden of the primary request by
carefully limiting it to the information necessary for the study.

7.

Circumstances Requiring Collection Inconsistent with Guidelines

The collection of information in the proposed survey is consistent with all applicable
guidelines contained in 5 C.F.R. § 1320.5(d)(2).

8.

Public Comments/Consultation Outside the Agency and Actions Taken

As required by 5 C.F.R.§ 1320.8(d), the FTC published a notice seeking public comment
on the proposed collections of information.18

The FTC received 13 comments on the proposed information collection requests.19 All of

17

See the discussion of Se ction 600 3 of the Deficit Reduction A ct of 2005 in the responses to com ments.

18

See Agency Information Collection Activities; Comment Req uest, 71 Fed. Reg. 16,779 (Ap ril 4, 2006).

19

The com ments are available at http://www.ftc.gov/os/comments/genericdrugstudy3/ . The 13 submissions are
from AARP (nongove rnmental organization for A mericans age 50 and o lder); A ctavis G roup (Actavis) (generic
pharmaceutical company); American Antitrust Institute, Consumer Federation of America, Families USA, and US

5

the public interest organizations that submitted comments, which included a nonprofit group
dedicated to the use of antitrust as a component of competition policy, strongly endorsed the
study. For example, the American Antitrust Institute, CFA, FUSA, and USPIRG stated that by
“initiating this study, the FTC has demonstrated its commitment to ensuring that the
anticompetitive practices of brand name drug manufacturers do not threaten Americans’ access to
low cost generic drugs.”20 Generally, the strong support of public interest organizations reflects
their representation of consumers and retirees, and concern about the rising cost of
pharmaceuticals.21 Industry views, however, varied depending on whether the commenter was a
marketer of AGs or in competition with marketers of AG drugs.22
Generic companies and their trade organization, GPhA, supported the study. GPhA
“commend[ed] the FTC for taking initiative on this important issue. . . .This Study is no less
critical than the FTC’s earlier efforts on the generic drug front, such as the 2002 FTC study of
generic pharmaceuticals, which led to a broad and nuanced perspective at an important time in
the industry’s history.”23 No generic drug company questioned the practical utility of the study.
GPhA and one generic company commenter, however, asserted that the FTC’s requests would be
burdensome, and suggested that the FTC narrow or otherwise modify its request.24 Generic
company views on how to lessen the burden were somewhat variable, presumably because some
generic companies market both ANDA-generic and AG drugs. Generic companies (and brandname and AG companies) also urged the Commission to broaden the scope of the study by
addressing a number of topics relevant to their marketing strategies.
Comments from the brand-name pharmaceutical industry, which markets or authorizes
the marketing of AGs, generally accepted the core concepts of the study, but expressed concerns

Public Interest Research Groups (AAI/CFA/FU SA/USP IRG) (nongove rnmental public interest organizations);
Consumers Union (nonp rofit organization representing consumers); Ronald W . Davis (Davis) (attorney submitting
comments “on behalf of an undisclosed client”); Generic Pharmaceutical Association (GPhA) (trade association
representing generic pharmaceutical manufacturers); Gilbert’s LLP (G ilbert’s) (law firm representing “one of the
largest generic pharmaceutical companies in the United States”); IMS Health Inc. (IMS) (provider of information
and research to the health care industry); Eli Lilly and Co. (Lilly) (an innovation-driven pharmaceutical company);
Ohio Pub lic Employees Retirement System (OP ERS) (O hio pension system); Pharmaceutical Research and
Manufacturers of America (PhRM A) (trade association representing research-based pharmaceutical and
biotechnology companies); Prasco, LLC (Prasco) (privately held, independent pharmaceutical company that makes
AG s); and Prescription Access Litigation (PAL ) (coalition of “consum er, healthcare, labor, senior, legal services,
and women’s health organizations”).
20

AAI/CFA/FU SA/U SPIRG at 1. OPE RS, AARP , PAL, Co nsumers U nion and G PhA also enthusiastically
endorsed the study.
21

See OPE RS; AAR P; PAL; Co nsumers Union.

22

One industry commenter, IMS, submitted comments that only considered the possible use by the study of IMS’
commercially available data.
23

GPhA at 2.

24

See GPhA at 5; Actavis at 1-2.

6

primarily focused on the breadth of the originally proposed document requests. The PhRMA
comments, which were endorsed by Lilly, stated that the “proposed empirical study will show
whether authorized generics benefit consumers by lowering prices for generic drugs,” but also
asserted that the proposed “information requests are overbroad.”25 Davis, apparently representing
a brand-name pharmaceutical company, asserted that a very recent statutory change could
sufficiently change the marketing of AGs to render a study based on recent historical data
outdated.26
The FTC received only one comment from an independent authorized generic drug
company; most AGs are either marketed by a subsidiary or division of a brand-name company or
by a generic drug company under a license from a brand-name company. The independent AG
drug company, Prasco, did not express a view of the study as a whole but rather commented on
substantive issues that should be addressed, and ways to minimize burden.
As discussed below, the Commission has incorporated many of the suggestions to narrow
the requests, especially for documents, which were the focus of the commenters’concerns about
burden. In doing so, the FTC will avoid requesting information that is not necessary for the study
and will substantially reduce the burden of the study. The Commission has not, however, adopted
suggestions that would limit the study’s usefulness. Indeed, the Commission has adopted a number
of substantive suggestions that will enhance the utility of the study without imposing additional
burden.
The following discussion of issues raised by the comments is organized into five sections:
(A) the practical utility of the proposed study and why it is necessary for the proper performance of
the FTC’s functions; (B) suggestions to narrow the scope of the study; (C) suggestions to use
alternative sources of information; (D) comments requesting limitations on the use of the
information submitted; and (E) suggestions to broaden the scope of the study.
A.

Practical Utility of the Proposed Study and its Necessity for the Proper
Performance of the FTC’s Functions

The Commission has proposed to obtain factual information that would provide a comprehensive
picture of how generic competition is affected by the marketing of AG drug products.
Comments: Most comments stated that the proposed study will have practical utility, that it is
necessary for the proper performance of the FTC’s functions, or otherwise stressed the importance
of the study. For example, Consumers Union stated, “We strongly believe that the collection of

‘the information will have practical utility,’ because we believe the data will show serious anticompetitive consequences of these arrangements.”27 GPhA stated that the study “will be crucial
25

PhR MA at 1, 7. See also Lilly at 1.

26

See Davis at 9-11.

27

Consumers Union at 2.

7

to a proper understanding of authorized generics, and is a prudent use of the Commission’s
resources.”28 AAI/FUSA/USPIRG asserted that “It is particularly important for the FTC to study
authorized generics and other forms of anticompetitive conduct in the pharmaceutical market at
this time, as over the next three years alone, prescription drugs worth over an estimated $50
billion in U.S. sales will go off patent.”29 PAL “commend[ed] the FTC for its decision to
conduct this study. This information will be particularly useful as a tool for Congress to make an
informed decision on whether further legislation needs to be adopted surrounding the marketing
of authorized generics.”30
While acknowledging that the proposed study “should enhance public understanding of
how authorized generics impact consumers,”31 PhRMA asserted that some of the information
sought by the proposed document requests would have little practical utility. PhRMA took this
position because in its view the document requests were broader than necessary and would
require the production of many documents unrelated to the topic of AGs.32 Thus, PhRMA’s
concerns about utility are a restatement of its concerns about burden. PhRMA did not assert that
the proposed study and the planned report on AG drugs lacks utility. Davis, however, asserted
that “the practical utility of the information [that the FTC proposes to collect] will be limited,
because of a recent material change in the regulatory environment: the enactment of Section 6003
of the Deficit Reduction Act [“DRA”] of 2005.”33 Davis stated that by changing the definition of
the Medicaid “best price” to include AGs, Section 6003 will increase manufacturers’ Medicaid
rebates34 and thereby “fundamentally reduce the incentives of branded firms to introduce
authorized generics.”35

28

GPhA at 2.

29

AAI/FUSA/USPIRG at 2.

30

PAL at 6. See also OPE RS at 1; AAR P at 1 (supporting the proposed study).

31

PhRMA at 2.

32

See PhRMA at 14-15 (“The proposed document requests–by encompassing future competition documents, by
focusing on documents unrelated or indirectly related to authorized generics, by reaching much deeper within the
organizations than is customary, and by requiring a catalog of information relating to each responsive document–lack
practical utility in light of the objective of this study.”) See also PhRMA at 2, 6, 9, 17; Lilly at 1.
33

Davis at 3. Section 6003 of the Deficit Reduction Act of 2005, P.L. 109-171, amends Section 1927(b)(3)(A) of
the Social Security Act (42 U.S.C. 139 6r–8(b)(3)(A)) to include in the manufacturer’s report of the best price and
average manufacture price of sole source and innovator drugs pursuant to the Medicaid program, “all such drugs that
are sold und er a new drug app lication approved und er section 50 5(c) of the Federal Food, D rug, and Cosmetic Act,”
a requirem ent that would include AGs.
34

Generally, manufacturers pay rebates to M edicaid that help to ensure that the price of drugs sold through the
Medicaid program matches the generally available best price. In general, the rebate is equal to “the difference
between the average manufacturer price and the best price . . . .” 42 U.S.C. § 1396r-8(b)(3)(A)(ii)(I).
35

Dav is at 3. See also PhR MA at footnote 17 (discussing the p ossible effect of the Deficit Reduction Act’s
provisions on incentives to market AGs).

8

Response: As discussed below, the Commission has addressed concerns about the breadth of
the study by modifying the requests to ensure that they are limited to relevant documents.
Contrary to Davis’ assertion, the available information indicates that the enactment of
Section 6003 of the DRA will have little effect on the marketing of AGs. Section 6003 was
enacted to increase brand-name pharmaceutical manufacturer Medicaid rebates to states by
ensuring that AGs, as versions of brand-name drug approved under an NDA, are included in the
Medicaid rebate calculation for sole source and brand-name multiple source drugs.36 The price
of an AG may be the best price available for a brand-name drug, and, consequently, their
inclusion may increase the Medicaid rebate. AGs are thought to be launched at the onset of
generic competition, however, when brand-name sales drop off rapidly due to mandatory generic
substitution requirements in most states’ Medicaid programs.37 Thus, the inclusion of AGs in the
calculation of the best price is unlikely to substantially decrease brand-name company revenues
for most drugs.38 Indeed, the Office of the Actuary in CMS projected that the anticipated savings
to the Medicaid program from Section 6003 are likely to be modest, a total of only $229 million
for both federal and state programs over a period of five years.39 Accordingly, the FTC
concludes that Section 6003 is unlikely to have a sufficient effect on the marketing of AGs to
impair the practical utility of this study based on recent historical data. Nonetheless, the FTC has
revised its Special Orders to include requests for information that will allow it to follow the
marketing of AGs throughout 2007, after Section 6003 has gone into effect.
B.

Suggestions to Reduce Burden by Narrowing the Scope of the Proposed
Information Requests

Most comments concerning burdens focused on the document requests. Both brand-name

36

See 151 C O N G . R EC . S12069 (Oct. 31, 2005) (statement of Senator Grassley) (“My committee’s title also achieves
savings by helping State Medicaid Program s obtain millions in payments owed by third-party payers each year. It
also produces savings by ending drug man ufacture rs’ gaming of the system b y closing the authorized generic
loophole so that appropriate rebates are paid to the States.”). The amendment equalizes treatment of AGs by
FDA –which treated them as branded drugs so that they could be marketed during the 180-day exclusivity period–and
CM S, which previously treated them as generic drugs for purposes of the rebate calculation.
37

States use a variety of strategies to encourage the use of generic drugs in the Medicaid program, and “[s]ince
200 0, there has be en a stea dy trend toward incre ased mand atory ge neric substitution. In 2005, nearly all states . . .
reported that they require generics to be dispensed when available.” T HE H E N R Y J. K AISER F A M IL Y F O U N D A TIO N ,
S TATE M E D IC A ID O UTPATIENT P R E SC R IP T IO N D RUG P OLICIES : F INDINGS FROM A N ATIO NA L S URVEY , 200 5 update
(October 20 05).
38

Section 6003 might have a bigger effect on drugs that are particularly heavily used within the Medicaid program
or must be dispensed without generic substitution and in states that do not have mandatory generic substitution
requirements in their Med icaid programs.
39

See Med icaid Program; Prescription Drugs; Proposed Rule, 71 Fed . Reg. 77,174, 77,190 (Dec. 22, 2006 ). See
also U.S. C O N G . B UDGET O FFICE , C OST E STIMATE : S. 1932, D EFICIT R E D U C TIO N A C T O F 2005 35 (Jan. 27, 2006)
(Table 15. E stimated Budgetary Effects of Title VI, Subtitle A— Med icaid, period from 2006-2010 , projecting
federal Medicaid savings of $150 million).

9

and generic pharmaceutical companies asserted that the proposed document requests would be
excessively burdensome, and proposed ways to limit the scope of the requests. By contrast,
commenters generally did not express concern about burden due to requests for economic data,
except regarding the request for cost data. They did not assert that the requests for sales and
price data were excessive. As discussed in the following responses to the comments, the FTC
has taken multiple steps to reduce substantially the burden arising from document requests, and it
also has addressed concerns about cost data.
1. Comments on Document Requests
a.

Request Documents Closely Related to Authorized Generics

Comment: Both brand-name and generic pharmaceutical companies asserted that the FTC’s
proposed document requests are too broad, and should be limited to documents that closely relate
to AGs. PhRMA expressed concern about the large number of documents that could be required
by the FTC’s “broad requests for documents that relate generally to competition between brand
name and generic drug companies.”40 PhRMA suggested that “document requests should be
focused exclusively on those drug products for which a company has manufactured or licensed
an authorized generic that has been sold in the marketplace,” because otherwise the response
“would encompass large volumes of documents unrelated to authorized generics.”41 Davis and
PhRMA also suggested that tangentially relevant documents could be eliminated by deleting the
phrase, “‘any documents’” from the request for “‘any documents, including studies, surveys,
analyses, and reports . . . that evaluated, considered, analyzed, or discussed how to respond . . . to
. . . future or current generic competition . . . .’”42 Similarly, a generic pharmaceutical company,
Actavis, asserted that the FTC’s proposed request to generic companies for “‘any documents,
including studies, surveys, analyses, and reports . . . that evaluated, considered, analyzed, or
discussed whether or how to proceed with generic entry . . . .’”43 is too broad, because “[a]s a
generic firm, most of Actavis’ documents will relate to whether or how to proceed with generic
entry.”44 Actavis also suggested eliminating the “any document” language and limiting the
requests to final strategy documents.
Response: We have narrowed the proposed document requests by better tailoring them to focus
on AG drugs. Accordingly, the FTC has eliminated the requests for documents relating generally
to competition and generic entry, and rephrased all companies’ requests to focus specifically on

40

PhR MA at 2. See also PhRMA at 7-9.

41

PhRMA at 8.

42

See Davis at 13 (quo ting 71 Fed. Reg. at 16,7 81); see also P hRM A at 7. See also Davis at 4-7, 11-13 (expressing
concern about the breadth of the study and suggesting that the FTC focus on “the central question”).
43

Actavis at 2 (quoting 71 Fed. Reg. at 16,782 ).

44

Actavis at 3.

10

AGs and issues arising from them.45 In addition, consistent with the FTC’s previous Special
Orders to the pharmaceutical industry, the “‘any document’” language has been eliminated,46 and
the request has been revised to seek only high-level planning, decisional, and strategy
documents.47
b.

Reduce the Document Requests by Focusing on Generic
Company Documents

Comments: PhRMA asserted that the study should focus on generic company documents,
because “[t]he best documentary source for information on the costs and profitability of entry is
generic drug company documents. The generic drug companies’ market analyses, studies,
surveys, and reports will most directly respond to the core question of whether authorized
generics have removed the companies’ financial incentives to enter.”48 PhRMA also
recommended that any request for brand-name company documents be limited to those that
retrospectively analyze the effects of AGs on price competition and other matters, rather than
consider future competitive strategies involving AGs. In PhRMA’s view, documents providing
prospective analyses should not be required because they are subjective; consider the intent of
brand-name companies, which is not relevant to whether patent challenges are profitable for
generic companies; and address events that may not have occurred.49
Response: The FTC will request the relevant documents of brand-name, AG, and ANDAgeneric companies. While generic company documents may be the most informative as to
generic companies’ financial incentives to enter and challenge patents, documents from brandname and AG companies, including prospective documents also, are relevant. Brand-name
companies are sophisticated and knowledgeable market participants, and their strategies and
views on the use of AGs should provide insight into the likely effects of AGs. The FTC will take
into account the limitations expressed by PhRMA regarding documents that consider prospective
matters in assessing the weight they should be accorded.

45

See Brand-Name Drug Company Special Order, Item 27; Authorized Generic Drug Company Special Order, Item
10; and Generic Drug Company Special Order, Items 18, 19.
46

See G ENERIC D RUG E N T R Y P R IO R T O P ATENT E X P IR A TIO N at A-20 (Ju ly 2002) (requesting “all studies, surveys,
analyses and repo rts.”); P H A R M A CY B ENEFIT M ANAGERS : O WN ERSH IP OF M AIL -O RDER P HARMAC IES A-2 (August
2005) (requesting “all business plans, strategic plans, planning documents, industry studies, analyses, and consultant
reports . . . .”).
47

The request has not be en limited to “final” d ocuments, however, because of the difficulty of asc ertaining what is
“final.”
48

PhRMA at 5.

49

See PhRMA at 3, 5, 9-11.

11

c.

Limit the Required Document Search

Comment: The FTC’s proposed request asked for documents that “were prepared or received by
or for any senior vice president (or equivalent position) with product line responsibility for the
specified drug product or any officer(s) or director(s) of the company . . . .”50 PhRMA suggested,

however, that the documents requested by the FTC be limited to those “maintained in the files of
current officers or directors.”51 PhRMA asserted that this would be consistent with the approach
taken for previous FTC reports on competition in the pharmaceutical industry and with practices
under the Hart-Scott-Rodino Act, and would “avoid confusion, reduce the burden, and focus the
review on the most probative company documents.”52
Response: The Commission believes that for the purpose of this study, which should cover
decisions at the individual drug level as well as a company’s general views on marketing AGs, it
is necessary to consider documents at the level of product-line decisions as well as companywide. However, to reduce the burden arising from this request, the Commission has limited the
request for documents of senior vice presidents to documents maintained in their files. For the
presumably smaller number of documents related to officers and directors, the Commission has
retained the “prepared by or for” language. The Commission believes that this arrangement, plus
the reduction in the number of drugs covered (discussed below), should reduce burden without
jeopardizing the production of important, high-level, planning, decisional, and strategy
documents. Moreover, depending on turnover, a request limited to the files of current officers
and directors could eliminate all but the most recent documents. Such a limitation could impair
the practical utility and quality of the information collected.
d.

Limit Sorting of Documents and Information about their
Preparation

Comment: PhRMA objected to the FTC’s requirement that companies indicate on each
document “the date of preparation and the name and title of each individual who prepared the
document, and group the documents by identified drug product.”53 PhRMA asserted that this
requirement will be very burdensome, and noted that sorting of documents is no longer required
by the FTC in second requests in merger investigations.54 Accordingly, PhRMA requested that
companies be required to produce documents “as they are maintained in the regular course of

50

71 Fed. Reg. at 16,781-2.

51

PhRMA at 12.

52

See PhR MA at 11; see also PhR MA at 12-13 (discussing Item 4 (c) o f the Hart-Sco tt-Rod ino no tification report,
FTC Form C4 , rev. 06/06/06).
53

71 Fed. Reg. at 16,781.

54

See PhRMA at 13-15.

12

business along with a list or index identifying the person whose files the document came from.”55
Response: The FTC believes that its ability to evaluate and analyze the information submitted in
response to the Special Orders for this study would be greatly enhanced by a requirement to
“group the documents by identified drug product.”56 Eliminating this requirement could make it
difficult to ascertain the relevance of many documents, and would slow analysis of the
information by FTC staff. Given that the FTC has reduced the number of drugs covered by the
requests (discussed below), sorting documents by drug should not be as burdensome as originally
anticipated. Moreover, it is likely that information about different drugs is maintained separately
in the regular course of business. The FTC recognizes, however, that some documents may
generally address a topic, and relate to more than one drug. Accordingly, the FTC has modified
the Special Orders to require all companies to group documents by identified drug product, and
to respond separately regarding documents that discuss AGs generally.
The Commission believes that in most cases the date of preparation and the name and
title of each individual who prepared the document will be evident from the document itself.
However, to reduce burden, the FTC will require firms that respond to the Special Orders to
specify only the name of the person from whose files the document came and whether the
document was generated within the Company, or the name of the source if generated externally.
This information should help the FTC determine the relevance of each document.
2. Comments on Matters Affecting Both Document and Data Requests
a.

Limit the Time Period Covered by the Request

Comments: The FTC’s proposed request asked for documents dated after January 1, 1998.
GPhA and Actavis recommended that the FTC not seek documents from before January 1, 2003,
because the marketing of AGs, especially during 180-day exclusivity periods, began to increase
around that time.57 Moreover, Actavis asserted that older information is especially burdensome
to obtain because it may be available only “in off-site storage facilities or on back-up tapes,” and
may exist in older formats and systems that companies no longer support.58
Response: To avoid imposing an unnecessary burden, the FTC has substantially reduced the
period for which documents are being sought. The FTC agrees that generic company documents
dated after Jan. 1, 2003 are likely to be the most useful for understanding the effects of AGs on
generic companies’ incentives to file ANDAs and to challenge patents via paragraph IV

55

PhRMA at 14.

56

71 Fed. Reg. at 16,781.

57

See GPhA at 4 n.5; Actavis at 2.

58

Actavis at 1-2. See also GP hA at 4 (noting that agreem ents to m arket A Gs d id not beco me p revalent until late
2003).

13

certifications. Therefore, we are changing the date for generic company documents from 1998 to
2003. The FTC’s request for brand-name and AG company documents will be limited to those
dated after Jan. 1, 2002, so that the reasons for any increased marketing of AGs beginning in
2003 might be ascertained.
The FTC also is reducing the time period covered by its data requests. Under the first
Federal Register Notice, a data request potentially could have extended back until Jan. 1, 1999.
To ensure consistency in reporting, the FTC is requesting sales and price data on brand-name,
AG, and generic drugs after Jan. 1, 2001, or whenever marketing began. A request for this data
is necessary to ensure the availability of sufficient comparison data on drugs for which no AG
was marketed, to assess possible trends over time, and to examine possible correlations between
sales or price levels and various business strategies such as patent challenges, marketing of AGs,
and sharing of 180-day exclusivity.
b.

Reduce the Number of Drugs Covered

Comments: Both brand-name and generic drug companies suggested limiting the documents
requested (and to some extent the data) by reducing the number of drugs covered by the study.
PhRMA suggested that the FTC reduce the number of drug products covered by the study by
limiting the sample for which information would be requested to those drugs for which an AG
version has been marketed and a random stratified sample of other drugs, e.g., by studying a
percentage of the drugs in various dollar sales ranges.59 Actavis recommended that the FTC limit
the request for documents to “drugs for which there was an AG launch or an announced
agreement for an authorized generic launch.”60 Davis also suggested limiting the drugs covered
by the study by asking generic companies to identify drugs for which they did not file an ANDA
because of concerns about competition from an AG, and initially request “relevant decisional
documents as to these products.”61 Prasco, on the other hand, appears to be concerned that by
limiting the number of drugs or companies, e.g., by considering only drugs for which generic
competition began with a period of 180-day exclusivity, the FTC might not examine the full

59

PhRM A at 8-9, 18-19. Note that PhRM A, which asserted that the FTC’s requests “would cover not only brand
drug ‘products that have first faced generic competition since January 1, 1999’ but also products ‘that have received
notice of the filing of an ANDA,’ misinterpreted the FTC’s Federal Register Notice and thus incorrectly believed
that the stud y would cove r a very large numbe r of dru gs. See PhRM A at 18 (quoting 71 Fed. Reg. at 16,781 ). The
FTC’s Federal Register Notice stated that “the brand-name companies to which the information requests would be
sent include those companies with products that have first faced generic drug competition since January 1, 1999 or
those that have received notice of the filing of an ANDA . . . .” 71 Fed. Reg. at 16,781. Thus the criteria quoted by
PhRM A refer to the com panies that would rec eive no tice, not the drugs that wo uld be cov ered. The se criteria would
likely cov er many com panies, but the numb er of drugs for which each comp any will be required to provide d ata will
be limited to AGs, brand-name and AN DA-generic versions of AGs, and drugs for which an ANDA with a
paragraph IV certification has been filed. Thus, the number of drugs should not be large.
60

Actavis at 2-3.

61

Davis at 12.

14

range of situations in which AGs are marketed.62
Response: The FTC agrees that the number of drugs covered by the study should be reduced by
focusing on AGs63 and a limited number of other drugs necessary to illuminate the issues
addressed by this study.
Accordingly, the Commission has limited the data requests to both brand-name and
generic companies to (i) AGs and all related drugs, i.e., brand-name versions of AGs and
bioequivalent ANDA-generic drugs; and (ii) brand-name drugs for which at least one ANDA
with a paragraph IV certification has been filed, and all bioequivalent ANDA-generic drugs.64
The data requests must address all such drugs so that the FTC has a complete and accurate basis
upon which to evaluate relative prices, market shares, and sales levels sufficient to support
paragraph IV patent challenges.
Moreover, the FTC recognizes that the scope of drugs necessary for purposes of
document requests is narrower than the set of drugs needed to undertake a reliable economic
analysis, which must include comparison drugs for which no AG was marketed. Consequently,
document requests to brand-name companies have been modified to focus on documents that
discuss specific AGs or related brand-name drugs identified by the brand-name company, or
documents that generally discuss the marketing of AGs. Such documents should shed light on
the brand-name companies’ economic and strategic reasons for marketing AGs. The scope of
document requests to generic drug companies, however, is not limited to drugs for which an AG
has been marketed. Rather, to fully explore concerns that AGs are inhibiting generic entry and
patent challenges, generic companies are required to submit documents that discuss AGs in
regard to a decision to submit an ANDA and/or make a paragraph III or IV certification with
respect to any specific drug, and documents that generally discuss AGs in regard to submission of
ANDAs and/or making paragraph III or IV certifications, but not in regard to a particular drug.
This approach takes account of the possibility that generic companies make decisions about
whether to pursue marketing of a generic drug before it is known whether an AG will be
launched, and thus relevant documents may concern drugs for which no AG has been marketed,
drugs for which the generic company decided to file an ANDA with a paragraph III certification
rather than a paragraph IV, or drugs for which the company decided not to file an ANDA.

62

See Prasco at 2.

63

Focusing requests on AGs is not straightforward because no co mprehensive list of AGs is available. Thus, the
first request proposed for this study is a request to brand-name companies to identify all AGs initially marketed after
January 1, 2001. Although the FTC will provide a list of putative AGs (drugs for which an AG is believed to have
been marketed) and drugs subject to ANDAs with paragraph IV certifications, the Special Orders assume that brandname com panies are b etter aware of drugs that have been marketed p ursuan t to their N DA s, and thus can identify
their AGs, even if they are not on a list provided by the FTC.
64

These two groups are likely to overlap. Also, price data will not be requested regarding brand-name drugs for
which an ANDA with a paragraph IV certification has been filed, but generic entry has not yet occurred.

15

3.

Data
a.

Quantitative vs. Qualitative Information

Comments: Brand-name pharmaceutical companies asserted that the study should be based
primarily on quantitative information, rather than documents, while generic companies stressed
the importance of qualitative information found in documents. PhRMA asserted that “data,
rather than documents, best meet the needs of the study” because it believes that pricing and
output data as well as data on generic entry in the presence of an AG will “show most clearly and
directly whether authorized generics have benefited consumers by increasing availability of
prescription drugs at lower prices.”65 By contrast, generic companies argued that while
quantitative data are useful for analyzing short-term effects of AGs, qualitative information is
essential to gauge the extent to which AGs will affect generic drug entry decisions in the future.66
Similarly, AAI/FUSA/USPIRG stated that “the more significant long-term effects will not be
identified by current quantitative data” because the “more profound impact of authorized
generics may be on the long-term incentive and ability of generic firms to engage in the costly
and risky conduct of attempting to invent non-infringing drugs and challenge questionable
patents.”67
Response: Quantitative and qualitative data are complementary, and both are necessary for a full
exploration and analysis of the short- and long-term effects of AGs on competition in the
prescription drug marketplace. Of the quantitative data that the FTC is seeking, price data show
the short-term effects of AGs on consumers, while data on sales, market share, and return on
investment are more relevant to the long-term effects of AGs on ANDA-generic companies’
incentives to file ANDAs and challenge patents. Quantitative data on recent filings of ANDAs
with paragraph IV certifications should also be relevant to the long-term picture, because recent
filings have been made in light of the current climate regarding the marketing of AGs.
Qualitative information, including company documents, however, is essential to evaluate
the long-term effects of AGs on generic company decisions to file ANDAs and challenge patents.
Generic company documents prepared before the first Federal Register Notice for this study was
published are essential to interpret the quantitative data and to understand what factors or
conditions, including AGs, might have contributed to any quantitative trends that we might
observe. Generic company documents are also necessary to understand how AGs actually affect
generic company decision-making. Brand-name company documents could further elucidate the
likely effects of AGs on generic company decisions to challenge patents, and aid in the
interpretation of the quantitative data.
65

PhR MA at 2-3; see also Lilly at 1 (endorsing the comments of PhRMA on the scope and extent of the proposed
request for information).
66

See, e.g., PA L at 6 (“M uch of the inform ation concerning . . . longer-term effects is qualitative and narrative in
nature, rather than quantitative.”); GPhA at 4-5 (data collection must include both quantitative and qualitative data).
67

AAI/FUSA/USPIRG at 6.

16

b.

Cost accounting data

Comment: PhRMA suggested that the FTC eliminate its request for cost accounting data from
brand name firms because “cost accounting and margin data for brand name drug companies will
not show whether generic entry has become unprofitable” and therefore such data are not useful
for that analysis.68 Similarly, Davis urged that the FTC drop its request for all cost data, because
he believes that cost data are of limited relevance to the study and would be very burdensome to
collect and analyze.69
Both PhRMA and Prasco, however, asserted that to evaluate whether AGs have deterred
ANDA-generic entry, cost data from generic companies on the profitability of entry and return on
investment are essential.70 Prasco emphasized that the FTC should obtain data that would enable
it to determine the “return-on-investment generated by generic products with and without
competition from authorized generics,” and whether that return is a sufficient incentive for
challenging patents.71
Response: The FTC agrees that the request for cost data from brand-name companies should be
eliminated because it is not useful for evaluating generic companies’ incentives to file ANDAs
and make paragraph IV certifications. Cost data regarding brand-name drugs will no longer be
required.
Cost data regarding generic drugs, however, are necessary to evaluate the effects of AGs
on profitability and return on investment, particularly during 180-day exclusivity. Thus, the
revised requests require generic companies to submit cost data. Companies generate cost data in
the ordinary course of business, so the request will not be excessively burdensome. To enhance
uniformity and minimize burden, the FTC has modified the Special Orders to request the overall
cost to manufacture, and has eliminated the request that companies separately provide data for
cost subcategories, e.g., material cost, labor cost, manufacturing cost, distribution cost, API cost,
and overhead cost. The FTC is also requesting generic companies’ costs for research and
development and for paragraph IV litigation, to ensure that it can completely evaluate the
investment necessary for generic entry that entails a patent challenge.

68

PhRMA at 17.

69

See Davis at 14.

70

See PhRMA at 20; Prasco at 3.

71

Prasco at 3.

17

C.

Suggestions on Alternative Sources of Information

1.

Comments on Holding Hearings

Comment: Several commenters, including GPhA, suggested that the FTC hold hearings to
gather information on the likely long-term effects of AGs because they believe that the effects of
AGs would not be reflected adequately in data on currently marketed ANDA-generic drugs, for
which entry decisions and strategies may have been made before the marketing of AGs became
more common in 2003.72 Unlike the other commenters, however, GPhA also suggested that the
FTC not use subpoenas: “[S]ubpoenas are an unnecessarily forceful mechanism by which to
gather information, as many generic companies are interested in this issue and will be inclined to
voluntarily submit information in response to FTC’s request.”73
Response: While the FTC recognizes the value of hearings for gathering information from
industry and economic experts and enhancing our understanding of an issue, hearings cannot
substitute for pre-existing, often confidential documents and data that can be acquired only by
compulsory process. The use of Special Orders to gather pre-existing information was critical to
the FTC’s reports on G ENERIC D RUG E NTRY P RIOR TO P ATENT E XPIRATION (July 2002)74 and
PHARMACY BENEFIT MANAGERS : OWNERSHIP OF MAIL -ORDER PHARMACIES (August 2005).75
As the FTC reviews the information it receives in response to the Special Orders, it will consider
whether hearings should be held to supplement the responses with up-to-date views on particular
issues.
2.

Comments on the Requests for IMS Information

Comments: IMS, a provider of economic data on pharmaceuticals, asserted that rather than
obtaining IMS data from individual companies, “the Commission could obtain information it
seeks more efficiently by licensing the information directly from IMS.”76 IMS believes that
licensing would be more efficient because IMS data frequently are customized to a particular
customer, and the FTC’s request could involve numerous companies. Accordingly, the FTC
would likely receive data in inconsistent formats, which would not be comparable across

72

See GP hA at 1, 4, 6-7. See also AAI/FUSA/USPIRG at 6; PAL at 6; Gilbert’s at 2-3 (suggesting that the FTC
hold hearings because the effects of AGs may not be reflected in pre-existing documents which “may show that
generic companies have continued developing certain products despite the threat of authorized generics in the hope
that the practice is curtailed by the courts, regulation or legislation”).
73

GPhA at 5.

74

Hereinafter G ENERIC D RUG R EPORT .

75

Here in afte r P BM R EPORT .

76

IMS at 2.

18

“manufacturers, products, and time periods.”77 IMS also suggested that the FTC eliminate its
proposed request for “any other IMS data, or the equivalent thereof, used in the ordinary course
of business,” because it is too broad and would at least in part yield IMS information unrelated to
the study.78 Several pharmaceutical companies also suggested that the FTC obtain IMS data
directly from IMS,79 because “IMS Health sells its data under licenses that restrict licensees from
disclosing the data to third parties.”80
Response: The FTC agrees that obtaining data directly from IMS would be more efficient, and
would enhance the FTC’s ability to analyze and interpret the data. It would also reduce the
burden on industry respondents, who would not have to find and produce this information. In
addition, licensing data from IMS would facilitate obtaining complete data, especially retail-level
sales and price data necessary for an evaluation of the effects of AGs on consumers.81
Accordingly, the FTC has eliminated the requests for IMS information from the proposed Special
Orders.
D.

Comments Requesting Limitations on Use of the Information Submitted

Comment: GPhA requested that “the FTC give assurances that information gathered in
conducting this study will be used solely for the purposes of the study.”82
Response: Although the purpose of the proposed information collection is to provide a basis for
the proposed study, the Commission cannot give assurances that the documents and information
collected will not be used for other purposes such as law enforcement investigations. The
Commission would not exercise its enforcement authority solely on the basis of information
collected in response to the Special Orders, however. Rather, it would do so only after gathering
additional information from a company and/or other sources through an investigation separate from
the proposed study. Also, although materials submitted may be covered by one or more stringent

confidentiality constraints, the Commission cannot rule out that, under circumstances specified
by law, the information could be used by other agencies for law enforcement purposes, by
77

IMS at 2.

78

IMS at 3-4 . See also Prasco at 1-2 (suggesting that “IMS Integrated Promotional Services Total Promotion
Reports” are unrelated to the topic of the study).
79

See Actavis at 3; Davis at 14; PhRMA at 15-16.

80

PhRM A at 15-16. IMS also stated that whether FTC obtains data from IMS directly or from individual
companies, “IMS information constitutes confidential trade secret and commercial information that is protected from
disclosure under section 6(f) of the FTC Act, 15 U.S.C. § 46(f).” IMS at 3.
81

See Gilbert’s at 3 (urging “the FTC to specifically request information on the pricing of drugs at the retail level, as
this data may not be captured by the request as currently stated”).
82

GPhA at 5.

19

Congress, or in judicial proceedings.
E.

Suggestions to Broaden the Scope of the Proposed Study

The FTC received a number of suggestions from generic, brand-name, and AG companies
to broaden the scope of the study. Some of the suggestions addressed new topics not
contemplated by the Federal Register Notice of April 4, 2006, and would require the submission
of information not contemplated by that notice. Other suggested topics were more closely related
to the proposed study and might require little or no additional information. Although the agency
cannot be certain that it will be possible to address particular topics because the nature of the
information to be collected cannot entirely be predicted, the Commission will make every effort
to maximize the practical utility of the information it receives by using it to address as many
issues relevant to the study as possible.
1.

Topics Closely Related to the Scope of the Proposed Study

Comment: Davis and PhRMA suggested that the FTC study take into account possible
beneficial effects of AGs on generic companies that license them, e.g., from licensing revenues,
by enhancing a company’s portfolio of products, or by allowing a company to offer all dosages or
strengths of a drug. 83
Response: The FTC agrees that its study should encompass all aspects of the impact of AGs on
generic companies, including both positive and negative effects. The Commission has revised its
document requests to ensure that it is clear that information requests to generic companies extend
to documents that discuss possible benefits to a company of marketing an AG drug.
Comment: Several commenters suggested examining a number of complex issues regarding the
purposes, effects, limits, and necessity of 180-day exclusivity. Lilly suggested that the FTC
analyze whether and to what extent consumers benefit from accelerated generic entry due to
patent challenges; whether 180-day exclusivity undermines those benefits by delaying
competition; and whether 180-day exclusivity is a necessary incentive for generic companies to
undertake patent challenges.84 Prasco suggested that the Commission assess whether the effects
of AGs on competition differ from the effects of shared exclusivity by multiple first filers of
ANDAs with paragraph IV certifications under the MMA.85 Prasco also recommended that the
83

See Davis at 15-16; PhRMA at 20.

84

See Lilly at 2.

85

See Prasco at 3. The M MA de fined “first ap plicant” in such a way that all applicants who sub mit a sub stantially
complete application containing a paragraph IV certification on the first day the FDA receives such an application
may b e granted 180-d ay exclusivity. See 21 U.S.C. § 355(j)(5)(B)(iv)(II)(bb). The MM A codified a policy that had
been ado pted by the FDA not long befo re the enactm ent of the MMA in 2003 . See FDA, G UIDANCE FOR I NDUSTRY :

20

FTC take into account the “apparent diminishing number of brand products available for
paragraph IV ANDA challenges” when considering whether AGs have caused a decrease in the
number of paragraph IV certifications.86
Response: These issues are related to the proposed study, and the FTC anticipates that the
information to be obtained from companies and other sources may allow the Commission to
address aspects of many of them. Such information includes price data, the timing of generic
entry, dates of patent expiration, the extent of multiple entry, profitability, return on investment,
and trends in paragraph IV certifications, and documents related to these issues. The
Commission, however, will not broaden its information requests in order to expand the scope of
its study beyond the previously announced analysis of the effect of AG drugs on competition.
2.

Topics Outside the Scope of the Proposed Study

Comment: Several commenters suggested considering the full range of strategies that brandname companies might use to delay generic entry and competition or otherwise promote the use
of brand-name drugs at the expense of generics, regardless of whether the strategies involve AG
drugs.87 Practices suggested for inclusion in the study included the filing of citizen petitions or
the use of the declaratory judgment system to delay generic entry;88 the use of “product hopping”
or other strategies to switch consumers from one brand-name drug to another at the onset of
generic competition;89 and the use of “reverse payments” and purportedly problematic patent
settlements.90
Response: While the FTC appreciates the importance of studying strategies that might adversely
affect generic competition, these topics are generally beyond the scope of the congressional
request to study the competitive effects of AGs. Given finite resources, examination of these
issues through expansion of the Special Orders would detract from the quality and timeliness of
the study of AGs. To the extent that the study finds that AGs are marketed pursuant to the

180 -D A Y E X C LU S IV IT Y W H E N M ULTIPLE ANDA S A RE S UBMITTED ON THE S AME D AY (July 20 03), available at
http://www.fda.gov/CDER/GUIDANCE/5710fnl.pdf . Befo re that time, the FD A granted exclusivity on a patent-bypatent basis, so that two comp anies that were first filers with respect to challenges to different patents might share
exclusivity for the d rug product. See Letter from Gary Buehler, Office of Generic Drugs, FDA, to Diane Servello,
Andrx Pharm aceuticals, Inc. (Nov. 16, 2001).
86

Prasco at 3.

87

See PAL at 6; AAI/FUSA/USPIRG at 5; Gilbert’s at 3; GPhA at 6.

88

See AAI/FUSA/USPIRG at 4 (citizen petitions and declaratory judgment system); Gilbert’s at 3 (citizen
petitions); GPhA at 6 (citizen petitions).
89

See GPhA at 6 (product hopping); Gilbert’s at 3 (product switches); AAI/FUS A/USP IRG at 5 (prod uct switches).

90

See Gilbert’s at 3; AAI/FUSA/USPIRG at 5; PAL at 6.

21

settlement of paragraph IV litigation, however, the FTC will examine the competitive
implications of the arrangements as part of its ongoing review of such settlements.
Comment: Other commenters suggested that the FTC broaden the study to examine practices of
generic pharmaceutical companies that might be anti-competitive and chill brand-name
manufacturers’ incentives to innovate. In particular, Lilly suggested that the FTC examine “early
and speculative patent challenges,” which “can have a chilling effect on innovation.”91
Response: The possible effects of early and speculative patent challenges and other practices on
innovation are outside the scope of the congressionally requested study. An analysis of this
complex issue, which would involve assessing innovation or measuring branded firms’
pharmaceutical research and development efforts, would detract from the FTC’s ability to carry
out a complete and timely study of the effects of AGs on competition.
Comment: AARP suggested that the Commission broaden the scope of the study by
“assess[ing] how different generics offer different levels of savings over the brand name drug;
examin[ing] whether, in order to get better prices, consumers must search for a generic not
produced by the manufacturer of the brand name drug; examin[ing] the cost impact of authorized
generics on public programs, such as Medicare and Medicaid, and on private health insurance;
and assessing] how the use of authorized generics impacts access to lower cost generic drugs,
particularly for low-income individuals.”92
Response: The first suggestion, that the FTC assess the savings offered by different types of
generic drugs relative to the brand-name drug, is within the scope of the proposed study and one
that the Commission plans to address. The other topics, however, are outside the scope of the
congressionally requested study, which is designed to examine the short- and long-term effects of
AGs on competition in the prescription drug marketplace, focusing on their impact on generic
company incentives to market generic drugs and undertake patent challenges. The FTC does not
anticipate addressing issues such as the impact of AGs on consumer behavior or specific classes
of consumers, and on public or private programs not administered by this agency, because to do
so would detract from the quality and timeliness of the congressionally requested study.
9.

Payments and Gifts to Respondents
Not applicable.

91

Lilly at 3. See also Davis at 15.

92

AARP at 2.

22

10.

Assurances of Confidentiality

Section 6(f) of the FTC Act, 15 U.S.C. § 46(f), bars the Commission from publicly
disclosing trade secrets or confidential commercial or financial information it receives from
persons pursuant to, among other methods, special orders authorized by Section 6(b) of the FTC
Act. Such information also would be exempt from disclosure under the Freedom of Information
Act. 93 Moreover, under Section 21(c) of the FTC Act, 15 U.S.C. § 57b-2(c), a submitter who
designates a submission as confidential is entitled to 10 days’ advance notice of any anticipated
public disclosure by the Commission, assuming that the Commission has determined that the
information does not, in fact, constitute 6(f) material. Although materials covered under one or
more of these various sections are protected by stringent confidentiality constraints, the FTC Act
and the Commission’s rules authorize disclosure in limited circumstances (e.g., official requests by
Congress, requests from other agencies for law enforcement purposes, administrative or judicial
proceedings). Even in those limited contexts, however, the Commission’s rules may afford the
submitter advance notice to seek a protective order.94
Finally, the information presented in the study will not reveal company-specific data.95
Rather, the Commission anticipates using anonymized data and aggregated totals, on a level
sufficient to protect individual companies’ confidential information. Because the Commission will
be obtaining documents from a large number of companies, the planned report will be able to
summarize the common features of many such documents, as well as present less common
responses, without disclosing any confidential information. The Commission has used this
approach before, e.g., in the PBM R EPORT. Indeed, such an approach is consistent with the
Commission’s goal of providing a comprehensive analysis of the short- and long-term competitive
effects of authorized generic drugs in the prescription drug marketplace, rather than merely
anecdotal or otherwise limited information.

11.

Matters of a Sensitive Nature

The collection of information does not include any questions of a sensitive nature
involving matters that are commonly considered personal and private. The requests for
confidential proprietary information and the FTC’s ability to ensure confidentiality are discussed
above.

93

See 5 U.S.C. § 552 (b)(4).

94

See 15 U.S.C. § 57b-2(c); 16 C.F.R. §§ 4.9 - 4.11.

95

See 15 U.S.C. § 57 b-2(d)(1)(B).

23

12.

Estimated Annual Hours and Labor Cost Burden

The proposed study is a one-time endeavor that will not involve repeated responses,
although brand-name companies will be required to provide a brief supplemental response
identifying AGs marketed during 2007. The supplemental response will not require the
production of any documents or financial data. In its prior Federal Register notice, the FTC
estimated that a company’s burden for the AG study would range from 140 to 408 hours
depending upon the number of a company’s drugs covered by the study. 96
Two commenters asserted that the FTC’s estimates for complying with its document
requests understated the burden hours. PhRMA asserted that “the FTC’s estimates understate by
several multiples the amount of time and money it would likely take to comply with the requests
as written.”97 In contrast, the AG company Prasco had no “comment on the accuracy of the
FTC’s estimates” but noted that the “burden of providing the requested information can only be
assessed in relation to the size of the company responding.”98 GPhA also did not comment on
the FTC’s estimates.
The initial hour burden estimates are consistent with previous PRA estimates and the
FTC’s experience with information requests that require financial data, answers to questions, and
production of pre-existing documents. The GENERIC DRUG REPORT , like the proposed AG study,
involved document requests and financial data, and the estimated burden hours depended on the
number of drugs covered. The estimated burden hours for that study ranged from 100-500 hours
regarding a similar range of the number of drugs per company. 99 The estimated burden range in
another study conducted pursuant to the Commission’s compulsory process authority, a study of
alcohol industry advertising practices, was 220-440 hours, including document production and
other response preparation activities.100 The only other PRA hour burden estimate that we are
aware of that addresses the burden of producing documents is an FTC study of marketing in the
entertainment industry. Although the scope of the document requests for that study was broad,
covering multiple areas of marketing policies and practices, the estimated company burden

96

71 Fed. Reg. 16,77 9, 16,783 (Ap ril 4, 2006).

97

PhR MA at 7. See also Davis at 11 (the FTC’s Federal Register notice “materially underestimates the burden of
compliance”). PhRMA did not comment on the Commission’s burden estimates for complying with requests for
financial data.
98

Prasco at 2.

99

66 Fed. Reg. 12,51 2, 12,522-23 (20 01). PhRM A asserts that the request for agreements in the G ENERIC D R U G
R EPORT was narrower than the req uest for d ocuments in the propo sed A G stud y. See PhRM A at 4. While this may
be correct, the FTC’s experience with Hart-Scott Rodino notifications suggests that the burden estimate for the
G ENERIC D RUG R EPORT may have b een quite gene rous.
100

71 Fed. Reg. 62,26 1, 62,265-66 (20 06).

24

specifically for responding to the document requests ranged from 225-450 hours.101
The FTC’s experience with administering the Hart-Scott Rodino (HSR) Notification and
Report Form, with an average estimated burden of 39 hours,102 also suggests that the initial
published estimate of hour burden for the AG study was reasonable.103 Question 4(c) of that
form, which requests “studies, surveys, analyses, and reports” and underlies the wording of the
document requests for the AG study, is only a small part of the financial information and
documents collected pursuant to a HSR Notification and Report Form. Yet, the estimated hour
burden for responding to the entire form ranges from 8 to 160 hours.
Even assuming that due to the nature of the questions and the time frame covered in the
first Federal Register notice, the FTC’s initial estimate understated the burden, the Commission
believes that its estimates are realistic given the modifications to the requests, which largely
adopt industry suggestions for reducing burden. Previously, the study covered drug products that
first faced generic competition after Jan. 1, 1999, for which an ANDA with a paragraph III or IV
patent certification was filed. It now covers drugs subject to competition after Jan. 1, 2001, for
which at least one ANDA with a paragraph IV certification was filed. Our preliminary review
suggests that there are approximately 200 such drugs subject to generic competition, and that this
set of drugs will also capture many of the AGs that have been marketed during this time frame.104
The reduction in the number of drugs covered resulting from the changes in time frame and
criteria for inclusion in the study should reduce the hour burden by more than one-half.
Other changes should reduce the burden even more. The time period covered by the
document requests, which previously began on Jan. 1, 1998, now begins on Jan. 1, 2002 or 2003,
depending on company type, and ends on April 3, 2006. This should reduce the burden of
document production by more than half, and probably much more because older documents often
are harder to obtain. Moreover, the document requests are now limited to planning, decisional,

101

See 64 Fed. Reg. 63,045, 63,047 (1999); 64 Fed. Reg. 46,392, 46,392-93 (1999). Very recently the FTC
submitted for OMB review a Paperwork Red uction Act burden estimate that potentially calls for document
production in co njunction with its interroga tories. Jo int burd en estimates for the relevant items ranged from 50 to
190 hours. See 72 Fed. Reg. 19 ,505, 19,511 (2 007) (FT C Study of Food M arketing to Children and Ado lescents).
102

Notification and Report Form for Certain Mergers and Acquisitions, FTC Form C4 (rev. 6/06/06), at 1.

103

W hile PhRM A asserts that HS R requests for docum ents “are much m ore targeted, involve far fewer documents,
and are necessarily limited in time frame” (PhRMA at 13), the Notification and Report form requires broad
information on many aspects of a company’s business, yet the estimated burden hours are far fewer than for the
prese nt study.
104

In add ition, to obtain a com plete p icture of industry p ractices in marketing A Gs, we are asking co mpa nies to
identify and provide information o n all AGs (tab let or capsule form ) that were launched after Jan. 1, 200 1, regardless
of what certifications were made regarding patents on the brand-name drug. Brand-name companies will also be
requested to provide sales data on brand-name drugs for which at least one ANDA with a paragraph IV certification
was filed after Jan. 1, 2001, and generic entry has not yet occurred.

25

and strategy documents that specifically address AGs. Although any estimate of the expected
decrease in burden due to the changes that focus the requests on AGs is necessarily imprecise
because no complete list of AGs is available, the Commission believes, from preliminary
information, that these changes alone should reduce the burden markedly.
Finally, the requests for IMS Health data and cost data from brand-name companies have
been eliminated. The request for cost data from generic firms has been simplified by requesting
annual operating statements. In sum, as a result of the combined effects of the changes to reduce
the burden of both financial and document requests, the hour burden of the study should be a
fraction of what it would have been pursuant to the requests of the first Federal Register notice.
After taking account of the public comments and the burden-reducing changes that we
have made in response, the FTC believes that its previously published estimate of the total
burden hours remains reasonable. The Commission has retained a three-tier estimate of burden
hours depending upon the number of drug products for which a company is required to provide a
response: companies with one to five drug products, companies with six to 10 drug products, and
companies with more than 10 drug products. As before, the Commission anticipates that the
majority of burden hours will result from document production. However, given that the
Commission seeks only high-level documents strongly relevant to the AG study, the Commission
has revised its burden estimates to reflect a greater amount of time spent on identifying
responsive documents, and less time spent on retrieving and copying. The Commission has also
increased its estimates of the maximum hours for these tasks to reflect the possibility that a few
companies will have a relatively large number of drugs responsive to its requests.
Based on preliminary information, the FTC anticipates that it will seek information for 1
to 5 drug products from approximately 130 companies, 6 to 10 drug products from 20 companies,
and for greater than 10 drug products from 40 companies. Thus, the cumulative hours burden to
produce documents and prepare the response sought will be approximately 40,780 hours. [(138
hours x 130 companies) + (230 x 20 companies) + (456 hours x 40 companies)] As previously
discussed, the Commission anticipates that in general the number of drugs, and thus the number
of burden hours, will be proportional to company size.105 The following table shows the
estimated burden hours for different tasks for companies with different numbers of drugs covered
by the study:

105

The Co mmission recognizes, however, that this may not apply to independent AG com panies, for which a large
fraction of the company’s drugs may be covered. The FTC anticipates that there are few such companies, and that
their resp onses are especially impo rtant to this study.

26

Task

1 - 5 Drug

6 - 10 Drug

> 10 D rug

Pro ducts

Pro ducts

Pro ducts

Organize document and information retrieval

12 hours

24 hours

48 hours

Identify requested documents

40

80

200

Retrieve and copy req uested do cuments

10

20

48

Identify requested financial information

40

50

60

Obtain financial information

12

16

20

Prep are respo nse

24

40

80

Total

138 hours

230 hours

456 hours

It is not possible to calculate with precision the labor costs associated with answering the
planned questions and producing the documents requested, because responses will entail
participation by management and/or support staff at various compensation levels within many
different companies. Individuals within some or all of those labor categories may be involved in
the information-collection process. Nonetheless, the FTC has assumed that mid-management
personnel and outside legal counsel will handle most of the tasks involved in gathering and
producing the responsive information, and has applied an average hourly wage of $250/hour for
their labor. Thus, the labor costs per company should range between $34,500 (138 hours x
$250/hour) and $114,000 (456 hours x $250/hour).
13.

Estimated Annual Capital or Other Non-labor Costs

The capital or other non-labor costs associated with the information requests will be
minimal. Industry members should already have in place the means to store information of the
volume requested. In addition, respondents may have to purchase office supplies such as file
folders, computer CDs or DVDs, photocopier toner, or paper in order to comply with the
Commission’s requests. The FTC estimates that such costs will be minimal.

14.

Estimate of Cost to the Federal Government

The cost of the information collection to the federal government will include the cost of
staff time used to design the information requests, analyze the data collected, and produce a
report. It is difficult to quantify the total cost to the Commission to complete the study because
multiple factors may vary, including how quickly and completely companies respond to the

27

information collection requests106 and the actual amount of time needed to complete the study.
Nonetheless, staff estimates that approximately two attorney work years ($174,000 per work
year, inclusive of benefits), 600 economist hours ($50,000, inclusive of benefits), and one
research assistant work year ($65,000, inclusive of benefits) will be necessary to complete the
study. Thus, the total remaining cost to the Commission is about $463,000. Clerical and other
support services and costs of conducting the study are included in this estimate.
15.

Program Changes or Adjustments
Not applicable. This is a new information collection.

16.

Plans for Tabulation and Publication of Information

The information provided by the respondents will be used to prepare a report for the
Commission to release publicly. The collection of the information will begin shortly after
completion of the OMB review process. The projected duration of the information collection is
approximately eight months. The estimated date for the completion of the report is mid-2008.
17.

Display of Expiration Date for OMB Approval

Upon OMB clearance and receipt of the assigned control number, the FTC will display
this number in its written document request.
18.

Exceptions to Certification
Not applicable.

106

Under the Com mission’s rules, the recipient of a 6(b) order (i.e., an information collection request) may file a
petition to quash, and the Commission may seek a court order requiring compliance.

28