Opioid Addiction Crisis: Prof. Robin Feldman’s House Testimony on Soaring Prices and Shortages for Addiction Medicine
WASHINGTON, September 22, 2016 -- Professor Robin C. Feldman, Director of the Institute for Innovation Law at the University of California Hastings College of the Law, testified today before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law at a hearing titled “Treating the Opioid Epidemic: The State of Competition in the Markets for Addiction Medicine.” Members of Congress heard testimony about soaring prices, anticompetitive conduct, and dire shortages in medicine for treating opioid addiction.
“Open and vigorous competition is the backbone of US markets, but we are not seeing that in the market for addiction medicine,” Professor Feldman began. Instead, drug companies are engaging in regulatory game-playing to keep competitors out and prices high.
During question and answer, Professor Feldman explained that delaying competition for five months can be worth half a billion dollars in sales for a blockbuster drug, and that companies pile these games on one after another, “A billion here, a billion there; pretty soon you are talking real money,” she noted dryly.
Regarding Drug Company Game-Playing:
“The games come in two baskets: one set manipulating the Hatch-Waxman system for rapid entry of generics when a drug’s patent expires; the other set manipulating non-patent exclusivities known as “regulatory exclusivities.”
Generics are priced as much as 85% below their brand name equivalent. Given the price differential, delay can be worth billions of dollars for brand name companies.
Examples of games she cited include:
- - Petitions to oppose granting generic versions of a drug. “The Agency denies 80% of these petitions . . . but the process takes time, even for silly petitions”;
- - Blocking generics from getting samples of the drug needed to show the FDA that the generic is equivalent and refusing to cooperate with generics on safety plans;
- - Making slight modifications to a drug’s dosage or delivery mechanism just before the patent expires, and then shifting the market to the new version, protected by shiny new patents. Although the patents may be weak, and FDA studies show that when generics challenge patents, they win 75% of the time, the challenge process takes years;
- - Carving out competition-free zones with one of thirteen regulatory exclusivities companies can obtain by doing things like new clinical studies or pediatric studies. “These zones were set up for very appealing reasons, but they are now being exploited . . . in ways never intended."
- Professor Feldman concluded that, “The spotlight today is on the market for addiction medicine, but the game-playing is epidemic. Companies throughout the pharmaceutical industry pile these games on, one after another, manipulating the regulatory system.”
Professor Feldman’s written testimony for the record cited her empirical work studying more than a decade of FDA data. Below are three papers that identify and describe the games pharmaceutical companies are currently playing:
- Drug Wars: A New Generation of Generic Pharmaceutical Delay, Harvard Journal on Legislation (Summer 2016), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2659308
This article presents a comprehensive overview of three generations of games pharmaceutical companies play to keep generics off the market and maintain monopoly pricing. The first two generations were dominated by anticompetitive collusion. With the third generation, the industry has moved toward obstruction, using administrative processes, regulatory schemes and drug modifications to prevent generics from entering the market. The paper describes behavior in the opioid addiction treatment market in key examples throughout.
- Regulatory Property: The New IP, Columbia Journal of Law & the Arts (forthcoming), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2815667
This article describes a sprawling system of regulatory property which has developed alongside traditional intellectual property over the past thirty years, and which pharmaceutical companies have been relying on to gain market advantage. Appendix A, a chart aggregating all thirteen regulatory regimes in one place, may be particularly helpful.
- Empirical Evidence of Drug Pricing Games: A Citizen’s Pathway Gone Astray, Stanford Technology Law Review (forthcoming), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2833151
This article presents an empirical study we conducted using more than a decade of FDA data. The study found that pharmaceutical companies are systemically using the FDA’s citizen petition process to delay approval of generic competitors. The timing of citizen petition filings suggests that companies are using them as a last-ditch effort to maintain market monopoly.
Professor Feldman’s full prepared remarks, below:
Testimony of Professor Robin Feldman, Director of the Institute for Innovation Law, University of California Hastings College of the Law
House of Representatives, Judiciary Subcommittee on Regulatory Reform Commercial and Antitrust Law Hearing on “Treating the Opioid Epidemic: The State of Competition in the Markets for Addiction Medicine”
September 22, 2016
Mr. Chairman and esteemed Committee Members, I am honored to address competition issues in the market for addiction medicine. Open and vigorous competition is the backbone of U.S. markets, but we are not seeing that in the market for addiction medicine. Rather, drug companies are engaging in regulatory games, stringing these out, one after another, while competition languishes on the sidelines. The games come in two baskets: one set involves manipulating Hatch-Waxman, the system for rapid entry of generics when the patent on a drug expires; the other set of games involves manipulating the system of non-patent exclusivities, also called “regulatory exclusivities.”
Some of these games just blatantly delay the entry of competition. With addiction medicine, for example, we have seen petitions asking the FDA not to approve any generic versions. Among its many demands, one addiction medicine company petitioned the FDA to require things for generic Suboxone that the agency doesn’t have the ability to do, and that we wouldn’t want them to. Now, the Agency denies 80% of these petitions, as it denied this one, but the process takes time, even for silly petitions. With Suboxone, the FDA was so troubled by the petitioning motives that it referred the company’s conduct to the Federal Trade Commission.
In other games, companies block competitors from getting the samples they need for approval. Generics have to show that their drugs are the same as the brand, but some brand companies flatly refuse to sell samples to generics or to work with them on safety plans. Even when the FDA tells them to do so, they refuse. With addiction medicine, the FDA so despaired of getting one brand-name company to cooperate, it took the unprecedented step of granting the generic a waiver to go forward on its own. Again, competition languished for another stretch.
In other games, companies make slight modifications to a drug’s dosage or delivery mechanism, just before the patents expire. The company then pushes doctors to prescribe the new version, or removes the old one from the market altogether. If successful, there is no market for the old drug—just a market for the new one, protected by shiny new patents. We see this in the addiction medicine market, where a company switched from tablets to melt-aways, just before the patents expired.
These modification patents are often quite weak. And in fact, when generics challenge patents, they win three-quarters of the time. But these challenges take years. And again, competition is thwarted and prices stay high.
In addition to gaming Hatch-Waxman, companies carve out competition-free zones in ways that have nothing to do with patents. There are 13 forms of regulatory exclusivities that companies can obtain, for doing things like new clinical studies or pediatric studies. With these, companies can keep competitors out, even if the patent on the drug has expired. These zones were set up for very appealing reasons, but they are now being exploited to block competition in ways never intended. As a side note, the key drug in the addiction medicine market benefited from the most powerful of these—the orphan drug exclusivity.
The spotlight today is on the market for addiction medicine, but the game-playing is epidemic. Companies throughout the pharmaceutical industry pile these games on, one after another, manipulating the regulatory system. As always, society pays the price with higher taxes (to pay for soaring Medicare costs), higher insurance premiums, higher treatment costs, and more suffering for those who cannot afford treatment. Nowhere is this more apparent than in the market for addiction medicine.
About Professor Robin Feldman, Director, Institute for Innovation Law
Professor Robin Feldman received a bachelor’s degree from Stanford University and a J.D. from Stanford Law School, graduating the Order of the Coif and receiving the Urban A. Sontheimer Award for graduating second in the class. She also served in the Articles Department of the Stanford Law Review. After graduation, Professor Feldman clerked for The Honorable Joseph Sneed of the U.S. Court of Appeals for the Ninth Circuit. Professor Feldman specializes in Law and Science and is the Director of the Institute for Innovation Law. Professor Feldman’s first book, The Role of Science in Law, was published by Oxford University Press in 2009. Her second book, Rethinking Patent Law was published by Harvard University Press in 2012. Her articles have appeared in journals at law schools including Georgetown, Stanford, Texas, USC, UCLA and Virginia. Professor Feldman has received the Rutter Award for Teaching Excellence. Her piece, Patent and Antitrust: Differing Shades of Meaning, was judged one of the best intellectual property articles published in the United States in 2008. Professor Feldman has chaired the Executive Committee of the Antitrust Section of the American Association of Law Schools. In 2007, she served as the Herman Phleger Visiting Professor of Law at Stanford Law School.
About the Institute for Innovation Law
The Institute for Innovation Law is a public interest academic center at UC Hastings. The Institute engages in academic research and education to encourage innovation through the practice and development of law and policy. The Institute’s mission is to identify and promote the tools, knowledge, and skills needed to encourage innovation through the practice and development of law and policy. For more information, visit innovation.uchastings.edu.
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