[Federal Register Volume 80, Number 165 (Wednesday, August 26, 2015)]
[Notices]
[Pages 51807-51810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21071]
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FEDERAL TRADE COMMISSION
[File No. 151 0030]
Par Pharmaceutical, Inc. and Concordia Pharmaceuticals, Inc.;
Analysis of Proposed Consent Orders to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreements.
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SUMMARY: The consent agreements in this matter settle alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the draft complaint and the terms of the two consent
orders-- embodied in the consent agreements--that would settle these
allegations.
DATES: Comments must be received on or before September 17, 2015.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/concordiaparconsent online or on paper,
by following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Concordia
Pharmaceuticals, Inc., et al--Consent Agreements; File No. 151-0030''
on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/concordiaparconsent by following the
instructions on the web-based form. If you prefer to file your comment
on paper, write ``Concordia
[[Page 51808]]
Pharmaceuticals, Inc., et al.--Consent Agreements; File No. 151-0030''
on your comment and on the envelope, and mail your comment to the
following address: Federal Trade Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC
20580, or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Bradley S. Albert, Bureau of
Competition, (202-326-3670), 600 Pennsylvania Avenue NW., Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 Sec. CFR
2.34, notice is hereby given that the above-captioned consent
agreements containing consent orders to cease and desist, having been
filed with and accepted, subject to final approval, by the Commission,
have been placed on the public record for a period of thirty (30) days.
The following Analysis to Aid Public Comment describes the terms of the
consent agreements, and the allegations in the complaint. An electronic
copy of the full text of the each consent agreement package can be
obtained from the FTC Home Page (for August 18, 2015), on the World
Wide Web, at http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before September 17,
2015. Write ``Concordia Pharmaceuticals, Inc., et al--Consent
Agreements; File No. 151-0030'' on your comment. Your comment--
including your name and your state--will be placed on the public record
of this proceeding, including, to the extent practicable, on the public
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission tries to remove individuals' home
contact information from comments before placing them on the Commission
Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. Sec. 46(f), and FTC Rule 4.10(a)(2), 16
Sec. CFR 4.10(a)(2). In particular, do not include competitively
sensitive information such as costs, sales statistics, inventories,
formulas, patterns, devices, manufacturing processes, or customer
names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 Sec. CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR Sec. 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/concordiaparconsent by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also may file a comment through that Web site.
If you file your comment on paper, write ``Concordia
Pharmaceuticals, Inc., et al--Consent Agreements; File No. 151-0030''
on your comment and on the envelope, and mail your comment to the
following address: Federal Trade Commission, Office of the Secretary,
600 Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC
20580, or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If
possible, submit your paper comment to the Commission by courier or
overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before September 17, 2015. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreements Containing Consent Orders to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, Agreements Containing Consent Orders with Par
Pharmaceutical, Inc., Par Pharmaceutical Holdings, Inc., TPG Partners
VI, L.P. (hereinafter ``Par''), and with Concordia Pharmaceuticals
Inc., and Concordia Healthcare Corp. (hereinafter ``Concordia''). The
proposed orders are designed to settle allegations that Par and
Concordia violated Section 5 of the Federal Trade Commission Act, 15
U.S.C. Sec. 45, by entering into an unlawful agreement not to compete
relating to generic versions of Concordia's prescription drug known as
Kapvay.
The proposed orders have been placed on the public record for 30
days in order to receive comments from interested persons. Comments
received during this period will become part of the public record.
After 30 days, the Commission will again review the agreements and the
comments received and will decide whether it should withdraw from the
agreement or make the proposed orders final.
The purpose of this analysis is to facilitate public comment on the
proposed orders. This Analysis to Aid Public Comment is not intended to
constitute an official interpretation of the agreement, the complaint,
or the proposed consent orders, or to modify their terms in any way.
The proposed consent orders have been entered into for settlement
purposes only and do not constitute admissions by Par or Concordia that
either violated the law or that the facts alleged in the complaint,
other than the jurisdictional facts, are true.
Background and the Challenged Conduct
The complaint charges that Par and Concordia entered an unlawful
agreement that Concordia would refrain from launching an ``authorized
generic'' version of its brand-name drug Kapvay in exchange for a share
of the supra-competitive profits Par would earn as the sole seller of
generic Kapvay.
[[Page 51809]]
An authorized generic is a prescription drug that has been approved
by the FDA as a brand-name drug product, but is marketed by the brand
company (or its representative) as a generic drug product, without the
trademark of the brand-name drug. An authorized generic can be sold
under the approval the FDA granted under a new drug application (NDA)
at any time.\2\ Brand-name drug companies frequently introduce
authorized generics upon entry of the first generic to stem large
losses resulting from the rapid shift of sales from brand-name drugs to
lower-priced generic products. Empirical evidence from the Federal
Trade Commission's Authorized Generic Study shows that competition
between the first generic entrant and an authorized generic typically
drives down both retail and wholesale generic drug prices.\3\
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\2\ See Teva Pharm. Indus. v. Crawford, 410 F.3d 51 (D.C. Cir.
2005).
\3\ Fed. Trade Comm'n, Authorized Generic Drugs: Short-Term
Effects and Long-Term Impact (2011) (hereinafter ``Authorized
Generic Study'') at 41-48, available at https://www.ftc.gov/reports/authorized-generic-drugs-short-term-effects-long-term-impact-report-federal-trade-commission.
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Competition from an authorized generic has significant financial
implications for the first generic entrant, for two reasons: (1) The
authorized generic typically takes substantial sales from the first
entrant; and (2) the competition from an authorized generic means that,
on average, sales are made at lower prices. When the first generic
entrant is the sole seller of the generic drug product, it enjoys
approximately double the revenues that it would otherwise make in the
first six months on the market if it faced competition from an
authorized generic.\4\
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\4\ Authorized Generic Study at iii.
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As alleged in the complaint:
Concordia owns and markets various brand-name drug products. It
acquired the rights to Kapvay in May 2013. Kapvay is a non-stimulant
medication for the treatment of attention deficit hyperactivity
disorder, approved for sale in the United States in September 2010.
Par develops and markets generic drugs. Par filed an application
seeking FDA approval to sell a generic version of Kapvay in March 2011.
The timing of FDA approval for an independent generic drug is
subject to certain patent and regulatory exclusivity protections. The
federal law commonly known as the Hatch-Waxman Act requires a brand-
name drug manufacturer to notify the FDA of patents that could
reasonably be asserted against a party making or selling its drug. The
FDA publishes patent information in a document known as the ``Orange
Book.'' If a generic drug manufacturer seeks FDA approval to market a
generic product prior to the expiration of a listed patent or patents
relating to the brand-name drug upon which the generic is based, the
applicant must: (1) Certify to the FDA that the patent in question is
invalid or is not infringed by the generic product (known as a
``paragraph IV certification''); and (2) notify the patent holder of
the filing of the certification. If the holder of patent rights files a
patent infringement suit within 45 days of the notification, FDA
approval to market the generic drug is automatically stayed for 30
months, unless before that time the patent expires or is judicially
determined to be invalid or not infringed.
In the case of Kapvay, the single patent listed in the FDA's Orange
Book expired on October 13, 2013 (U.S. Patent No. 5,869,100 (``the '100
patent'')). When Par filed its application for approval of its generic
Kapvay product in 2011, it submitted a paragraph IV certification
concerning this patent. The company that held the rights to Kapvay at
the time did not assert any claim for patent infringement.
Approximately five weeks before the '100 patent was due to expire,
however, Par and Concordia entered into a ``License Agreement''
relating to Kapvay. The agreement granted Par a license effective one
week before expiration of the '100 patent. Under this agreement,
Concordia agreed not to market an authorized generic version of Kapvay
for five years. Par in turn agreed to pay Concordia at least 35 percent
(and as much as 50 percent) of the net profits from the sale of Par's
generic Kapvay product.
Although the License Agreement purports to grant Par rights under
the '100 patent and other unspecified current or future intellectual
property (and a waiver of unspecified regulatory exclusivities), the
parties provided no evidence that Concordia held any rights that might
have prevented Par from selling generic Kapvay after expiration of the
'100 patent. Aside from the '100 patent, which expired a week after the
effective date of the license, no patent claiming Kapvay has ever been
listed in the FDA Orange Book.
Par received final FDA approval for its generic Kapvay ANDA on
September 30, 2013. It began selling generic Kapvay on October 7, 2013.
Until May 15, 2015, Par was the only generic drug manufacturer to
receive FDA approval for a generic Kapvay product.
Concordia launched an authorized generic Kapvay product in December
2014, after learning that the FTC was investigating its agreement with
Par concerning Kapvay.
Competitive Analysis
The complaint charges that the challenged agreement between Par and
Concordia constituted an unreasonable restraint of trade that was
likely to harm competition and consumers by enabling Par to price its
generic Kapvay product without facing competition from an authorized
generic version of the drug. By agreeing to share a portion of its
likely supra-competitive profits with Concordia, Par protected itself
from competition from an authorized generic for five years. The
agreement was not plausibly related to any efficiency-enhancing joint
undertaking. It is therefore appropriate to analyze the challenged
conduct here as a straightforward agreement not to compete.
The evidence in this case indicated that, without a competing
generic Kapvay product, consumers and other private and public
purchasers were likely forced to pay higher prices for generic Kapvay.
In addition, as noted above, empirical evidence from the FTC's
Authorized Generic Study confirms what economic theory predicts: when
the brand company cedes all generic sales to the first generic entrant
by agreeing not to introduce an authorized generic, the generic drug
company on average captures substantially more sales and sells at
significantly higher prices. Consumers, meanwhile, are forced to pay
supra-competitive prices for the generic product.\5\
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\5\ See Authorized Generic Report at vi, 41-48, 57-59.
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The Proposed Orders
The proposed orders are designed to remedy the unlawful conduct
charged in the complaint and to prevent recurrence of similar conduct.
The orders prohibit Par and Concordia from (1) enforcing the relevant
provisions of their 2013 License Agreement and (2) entering into
similar ``no-authorized-generic'' agreements in the future.
In the Par order, Paragraph II.A prohibits Par from seeking to
enforce any provision in its 2013 License Agreement with Concordia that
restricts Concordia's ability to market an authorized generic Kapvay
product. Paragraph II.B provides that Par may not enter into any
agreement that (1) limits a brand-name drug manufacturer's ability to
market an authorized generic
[[Page 51810]]
version of a drug product for which Par is seeking FDA approval to sell
a generic counterpart; and (2) the limitation extends beyond the
expiration of any Orange-Book listed patents for the drug in
question.\6\
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\6\ This provision applies to actions taken on behalf of Par
Pharmaceutical, Inc., and Par Pharmaceutical Holdings, Inc., but
would not apply to conduct by Respondent TPG Partners VI, L.P. that
is not taken on behalf of the Par entities.
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In the Concordia order, Paragraph II requires Concordia to
relinquish any and all rights to payment under the License Agreement
and to provide written notice to Par and the FTC of that
relinquishment. Paragraph III bars Concordia from entering any
agreement with a generic applicant for a reference-listed drug for
which Concordia holds the NDA, if the agreement (1) limits marketing of
an authorized generic version of that drug and (2) the limitation
extends beyond the expiration of any Orange-Book listed patents for the
drug in question.
The proposed orders' prohibitions on future agreements limiting an
authorized generic cover only agreements in which the restraint extends
beyond patent expiration. Agreements to restrict the sale of an
authorized generic sometimes appear in patent litigation settlements
and can serve as a means of compensating the generic patent challenger
for agreeing to stay off the market for a period of time.\7\ These
arrangements can raise the same antitrust concerns that the Supreme
Court addressed in FTC v. Actavis, 133 S. Ct. 2223 (2013).\8\ That is
not this case, however, and the proposed orders are not designed to
address that type of conduct. As discussed above, the challenged
agreement here did not arise out of pending or threatened patent
litigation and nearly the entire five-year term of the agreement
covered the period after expiration of the Kapvay patent.
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\7\ See, e.g., Authorized Generic Study at 139-53.
\8\ See King Drug Co. of Florence Inc.v. Smithkline Beecham
Corp., No. 14-1243 (3rd Cir. June 26, 2015). See also Brief of
Federal Trade Commission as Amicus Curiae, American Sales Co.v.
Warner-Chilcott Co., LLC, Nos. 14-2071 and 15-1250 (1st Cir. June
16, 2015).
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For purposes of these proposed orders, ``authorized generic'' means
a drug product distributed by or on behalf of an NDA holder, but
marketed as a generic, regardless of whether it is manufactured
pursuant to an NDA, an ANDA, or a 505(b)(2) application.\9\
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\9\ A company seeking to market a generic product typically
files an abbreviated new drug application (ANDA). In that case,
instead of providing independent evidence of safety and
effectiveness, the applicant must demonstrate that its drug is
bioequivalent to its branded counterpart. In some circumstances, a
generic drug manufacturer may need to submit reports of
investigations of the safety and effectiveness of its product in
addition to relying on existing data, under what is known as a
``505(b)(2)'' application.
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The proposed orders each include a notice provision designed to
assist in monitoring the respondents' future conduct with respect to an
agreement to restrict the sale of an authorized generic product--
without regard to whether the agreement extends beyond expiration of
any listed patent. Par is required to notify the Commission and provide
certain specified information if it enters certain agreements with a
party that markets a brand-name drug for which Par has filed an
application to sell a generic equivalent. Covered agreements are those
that (1) limit the sale of an authorized generic and (2) take effect
before the expiration of all Orange-Book listed patents for the
relevant brand-name drug. A comparable provision in the Concordia order
requires Concordia to provide such notice for agreements with a party
seeking FDA approval to market a generic version of a brand-name drug
for which Concordia holds the NDA. Both notice provisions terminate ten
years after issuance of the orders.
These notice provisions differ from the filing requirements
contained in Section 1112 of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (MMA). The notice required by
the orders must be filed at least 30 days prior to the effective date
of the agreement; MMA filings must be made within ten days after
execution of the agreement.
The proposed orders also require that for five years Par and
Concordia maintain compliance programs with certain prescribed
features. Finally, the proposed orders contain certain reporting and
other provisions that are designed to assist the Commission in
monitoring compliance and are standard provisions in Commission orders.
The proposed orders will expire in 20 years.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2015-21071 Filed 8-25-15; 8:45 am]
BILLING CODE 6750-01-P