Pharmaceutical companies and drug manufacturers must act with caution when it comes to establishing sales prices for their drug products, particularly when seeking to raise the price of the drugs. Anticompetitive conduct in the pharmaceutical space is quickly becoming a key focus for the Federal Trade Commission (FTC). In light of this trend, any action that could be viewed as raising the cost of drugs, restricting access, and thwarting generic competition may face harsh legal scrutiny and consequences.
This is seen in the recent example of specialty drugmaker, Turing Pharmaceuticals. Turing gained notoriety in the wake of its drastic increase in the price of Daraprim, a drug used to treat complications of AIDS. Turing allegedly conditioned its deal to buy Daraprim from Impax Laboratories Inc. on its willingness to pull the drug from the regular distribution chain of wholesalers and drugstores. Turing recently vaguely declared that it would initiate a set of “improvements” in the “accessibility and affordability” of the medication and stated that it would cut Daraprim’s price, although the terms and timeline remain uncertain. Regardless of any potential remedial action, Turing remains the focus of regulatory scrutiny.
In addition to the public outcry and response to Turing’s action, FTC Chairwoman Edith Ramirez has declared that antitrust in the pharmaceutical context is a top priority for the agency, expressing its concern surrounding significant price hikes of certain drugs. While rate hikes alone do not necessarily constitute a violation of Federal antitrust law, actions intended to stave off generic competition by restricting the distribution of a drug that has no longer has patent protection raise regulatory red flags. Substantial price increase for a prescription medication, paired with a closed distribution system, arguably prevents or delays generic competition thus subjecting consumers to unnecessarily high prescription drug prices in the eyes of the FTC.
On top of FTC leadership declaring increased scrutiny of company’s purchasing older drugs and hiking prices on them to the possible detriment of consumers, Congress is also considering new legislative solutions for drugmakers using similar tactics to raise drug prices, restrict access, and deter generic competition.
Pharmaceutical companies engaging in activities similar to Turing may also face potential violation of State Antitrust laws. Earlier this week, New York Attorney General Eric T. Schneiderman sent a letter admonishing Turing for allegedly preventing generic companies from obtaining samples of Daraprim. The letter stated that “while competition might ordinarily be expected to deter such a massive price increase, it appears that Turing may have taken steps to prevent that competition from arising.” The New York Attorney General has confirmed its investigation concerning Turing’s alleged restrictions on the distribution of the drug as a means of preventing generic competition.
Accordingly, drug companies are cautioned against taking action that can be construed as anticompetitive. With all eyes on drug companies from the FTC and Congress, companies working in the life sciences should anticipate rigorous antitrust enforcement and ensure that they are in compliance with all applicable laws, regulations, and industry standards to avoid potential liability. For assistance in ensuring your pharmaceutical company’s compliance with state and federal antitrust law and the Federal Trade Commission Act, contact Frier Levitt.
