Empirical Evidence of Drug Companies Using Citizen Petitions to Hold Off Competition

• Jurisdiction: United States,Federal
• Citation: Vol. 27 No. 1
• Publication year: 2018
• Author: By Robin Feldman, John Gray, & Giora Ashkenazi
• topic: Antitrust and Competition,Intellectual Property,Health Law

EMPIRICAL EVIDENCE OF DRUG COMPANIES USING CITIZEN PETITIONS TO HOLD OFF COMPETITION

By Robin Feldman,¹ John Gray,² & Giora Ashkenazi³

I. INTRODUCTION

The United States patent system is designed to reward innovation and spur new technological growth. While this is incredibly effective in most fields, it can be especially problematic in the pharmaceutical industry where the inelasticity of demand for products has allowed for exorbitant drug prices. This is most clearly seen in the effect that the entry of generic drugs has on the market. Since 1984, more than 10,000 generics have entered the market,⁴ and the percentage of prescriptions filled with generics rose from just 13 percent in 1980⁵ to around 86 percent by 2013.⁶ Notably, the dramatic rise of generics has saved the public inordinate amounts of money. The Food and Drug Administration (FDA) estimates that consumers saved more than $217 billion through the use of generics in 2012 alone, with total savings of $1.68 trillion from 2005 to 2014.⁷ It is, therefore, of the utmost importance to ensure that generic drugs enter the market properly as patents expire. Brand-name pharmaceutical companies have long been known to play a myriad of games to delay generic entry for as long as possible.

In a recently published book and article,⁸ co-authored by team members at the UC Hastings Institute for Innovation Law, we expose troubling behavior in which pharmaceutical companies use the FDA's citizen petition process to delay entry of generic competitors. Examining more than a decade of FDA data related to citizen petitions, along with data related to generic drug approvals, the study provides broad empirical evidence that citizen petitions at the FDA have become an important pathway for strategic behavior by pharmaceutical companies.

[Page 62]

Improper citizen petition behavior arises against the backdrop of soaring drug prices in the United States, a problem exacerbated by the lack of effective competition in pharmaceutical markets.⁹ Although citizen petitions provide only one pathway for delaying competition, the study examines this essential piece of the puzzle. Key results from the study include the following:

• The FDA's citizen petition process is one of the critical pathways involved in the modern generation of generic drug delay, playing a role in various game-playing strategies.
• Citizen petitions from brand name and generic companies seeking to delay competitors have effectively doubled since 2003.
• Of all citizen petitions at the FDA (including those concerning tobacco, food, dietary supplements, medical devices, etc.), nearly 15 percent have the potential to delay generics, climbing to 20 percent in some years.
• Many citizen petitions from competitor companies appear to be an eleventh-hour effort to hold off generic competition. In fact, the most common category of delay-related petitions was that of petitions filed within six months of generic approval. This is particularly noteworthy given that the overwhelming majority of citizen petitions are denied.¹⁰
• In short, the results suggest that many competitor petitions are filed late in the game, as a last-ditch attempt to delay competition just a little longer, even though the petitions are unlikely to be successful.
• Congressional reforms enacted in 2007 have not stemmed the tide.

II. BACKGROUND

The Hatch-Waxman Act of 1984 revolutionized the pharmaceutical industry, creating a streamlined pathway for approval of generic drugs. The goal was to frontload the approval process of generics during the patent term to allow them to enter the market as soon as the patent on the original drug expired, thereby increasing competition and driving down prices for patients and the healthcare system as a whole. The Act introduced the concept of an Abbreviated New Drug Application ("ANDA"), allowing prospective generics to use clinical data from approval of the original, brand-name drug to demonstrate safety and efficacy. Rather than repeating the lengthy and costly clinical trials, a generic hopeful need only demonstrate that its own product is bioequivalent to the brand-name drug. Hatch-Waxman also provides a complex process for generic applicants to initiate and resolve patent issues prior to bringing the drug to market. Complexity breeds opportunity,¹¹ however, and Hatch-Waxman's complicated language opened the door to strategic behaviors that drug companies have deployed to maintain competition-free zones for as long as possible. The tactics have evolved over time, and the modern generation of strategic behaviors frequently involves obstruction tactics to prevent or delay approval of generic competitors. One such method involves filing citizen petitions with the FDA.

[Page 63]

Citizen petitions were designed as a mechanism for independent scientists and citizens to raise concerns about a food product or a drug. The process, however, has been hijacked by pharmaceutical companies to challenge and delay drug applications from potential competitors. Drug companies use a variety of approaches in their citizen petitions, including asking the FDA to require of the generic what it already requires for any generic application, raising safety concerns, and asking the FDA to preserve or add new exclusivities for the brand-name drug. Although the FDA eventually rejects the vast majority of these demands, it spends time and resources to review them; time and resources that are diverted from considering the generic competitor's application. In addition, although the FDA must respond to a citizen petition within five months, a delay of such time period can be worth hundreds of millions of dollars in revenue for a blockbuster drug. Significantly, those five months can be added onto other delay tactics, which the branded company strings out, one after the other. While competitors languish on the sidelines, the brand-name company remains free to charge sky-high prices.

Anecdotal evidence has suggested that drug companies abuse the citizen petition process, but little empirical evidence had existed. This leaves the pharmaceutical industry free to suggest that the behavior is limited to a few bad apples. For example, in testifying before a U.S. House Judiciary Subcommittee this summer, one witness sympathetic to the pharmaceutical industry argued emphatically that suggestions of improper citizen petition behavior were no more than "anecdote and rhetoric."¹²

III. Method

To examine whether widespread abuse of the citizen petition process exists, we set out to assemble a database of all citizen petitions filed with the FDA between the years 2000 and 2012, which could potentially delay generic entry. This task was tremendously difficult, to say the least. Some of the most important information about citizen petitions must be pieced together or estimated; at other times, it simply does not exist. For example, the FDA does not expressly reveal the date on which the generic application for a drug was filed, making it difficult to determine the timing relationship between a generic application's filing date and the date upon which a potentially delaying citizen petition was filed. Selected details of the methodology include the following:

[Page 64]

• We compiled all FDA citizen petitions and related documents filed between 2000 and 2012.
• We identified citizen petitions related to pharmaceuticals, with a particular focus on generic drugs.
• We read each remaining citizen petition and...