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190 Drug Firms May Get FTC Subpoenas

The agency is probing practices in the generic market that may be anti-competitive.

March 30, 2006|From the Associated Press

WASHINGTON — The Federal Trade Commission said Wednesday it planned to subpoena nearly 200 pharmaceutical companies in a probe of possible anti-competitive practices in the prescription drug industry.

The subpoenas, which require Office of Management and Budget approval, would form part of an investigation into whether pharmaceutical companies are stifling competition by releasing authorized generic copies of their own brand-name drugs to coincide with the debut of generic challengers made by rivals.

Eighty brand-name manufacturers would be among the recipients of the 190 subpoenas, which could go out late this summer, the FTC said. A final report would be completed in late 2007.

Federal law gives a generic pharmaceutical company -- after it has successfully challenged a patent held by a brand-name manufacturer -- six months of exclusivity during which it is supposed to have the generic market for the drug to itself. Generic drug makers rely on that brief period to recoup their costs and make a profit because their lower prices allow them to immediately grab market share from the brand-name firms.

When the period expires, other manufacturers can seek approval for their own generic versions of a drug, further increasing competition and cutting profit margins.

However, a loophole in the law lets brand-name companies authorize their own generic versions, which increasingly enter the market at the start of the supposed six-month exclusivity period relied upon by generic challengers.

That practice can harm the brand-name company's business in the short term because the larger number of players further erodes its share of the market for a drug. However, it benefits consumers who generally see lower prices.

The FTC intends to examine whether the authorized-generic loophole can benefit brand-name companies in the long run by dissuading generic manufacturers from challenging patents in the first place, according to the agency.

Lawmakers asked the FTC to undertake the investigation in May. The Generic Pharmaceutical Assn. has said it welcomes the probe.

The Pharmaceutical Research and Manufacturers of America couldn't be reached for comment.

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