Federal Trade Commission Agress to Conduct Study on Impact of "Authorized" Generics

Date: Nov. 8, 2005
Location: Washington, DC
Issues: Trade Drugs


Grassley, Leahy, Rockefeller Made Request in May

Sens. Chuck Grassley of Iowa, Patrick Leahy of Vermont, and John D. (Jay) Rockefeller IV of West Virginia, announced today that the Federal Trade Commission will initiate a study on the short term and long term competitive effects of the use of "authorized" generics. "Authorized" generics are name brand drugs sold under the label of a generic drug.

The Senators requested the study in May 2005. At that time, they expressed concerns that the practice "could have a negative impact on competition for both blockbuster and smaller drugs, because the generic industry would be less inclined to invest in their production. Consequently, if the generic industry were to be less incentivized to produce such generic drugs to compete with name brand drugs, it is possible that fewer generic drugs would come to market and the prices for certain drugs would remain high for consumers."

According to the letter from the Commission, the study will look into the circumstances under which innovator companies launch authorized generics; provide data and analysis of how competition between Paragraph IV generics and authorized generics during the 180-day exclusivity period has affected short-run price competition and long-run prospects for entry by Paragraph IV generics; and build on the economic literature about the effect of generic drug entry on prescription drug prices.

"This is good news for consumers. I'm concerned that the practice of ‘authorized' generics might give reason for the generic industry to stay away from investing in generic drugs as well as possibly jeopardize the vitality of the industry in the long term. We want to make sure consumers have as many choices of drugs in the safest, fastest and least expensive way possible," Grassley said.

"Generic drugs are an important component of providing safe and less expensive health care to millions of Americans, including many in my home state of Vermont," said Leahy, the ranking member of the Judiciary Committee. "I am pleased that the FTC has agreed to address our concerns that the production and marketing of such drugs might be impeded by certain practices, including the sale of "authorized generics. I look forward to the outcome of this study, and to continuing work with Senators Grassley and Rockefeller on this issue."

"This study is long overdue. If brand-name pharmaceutical companies are gaming the system to maintain patents on their drugs and keep true generic companies out of the marketplace, we need to know about it. We cannot stand by watching the price of brand-name drugs skyrocket while seniors struggle to get the prescription drugs they need," Rockefeller said.