Promoting generic drug availability: Reforming the Hatch-Waxman Act to prevent unnecessary delays to consumers

St. John's Law Review, Spring 2001 by Giles, Laura

The FDA may respond to a citizen petition in one of three ways: it may approve the petition,75 deny the petition,76 or provide a tentative response, indicating why the agency has been unable to reach a decision on the petition.77 Whichever decision the FDA reaches, the ultimate result is the same-delaying the approval of an ANDA in an attempt to extend the exclusivity period of a pioneer drug.

III. COLLUSION BETWEEN PIONEER AND GENERIC DRUG COMPANIES

The Hatch-Waxman Act78 served to decrease the market share that a pioneer drug has once its patent expires. "When the Act was passed in 1984, generic drug companies held eight percent of the market. By 1989, however, the generic drug companies' market share had increased to thirty-three percent."79 This has led the companies to implement extreme measures to retain their market share. Pioneer companies collude with generics as a market control strategy to prevent competition.80

Four drug companies have recently come under fire for delaying the sale of generic drugs.81 The companies involved are Andrx Corporation and Hoechst A.G., for a deal involving Cardizem, and Abbott Laboratories and Geneva Pharmaceuticals, for a deal involving Hytrin.82 They are accused of entering into agreements wherein the pioneer company would pay the generic company in exchange for not releasing the generic version of the drug, enabling the pioneer to keep its market share.83 These tactics may violate antitrust laws by substantially reducing competition and creating monopolies.84

In 1998, Abbott Laboratories, the manufacturer of Hytrin, a brand name high blood pressure medication, entered into an agreement with Geneva Pharmaceuticals, a generic drug maker seeking to market terazonin, a generic version of Hytrin.85 Under the terms of the agreement, Abbott would pay Geneva $4.5 million a month not to produce the generic version of the drug.86 A similar deal was struck between Andrx and Hoechst A.G. over the generic version of Cardizem CD, one of the nation's top-selling heart drugs.87 Hoechst agreed to pay Andrx $100 million a year to withhold the release of its generic version of the drug.88 Fear of antitrust investigation forced these companies to abandon the agreements.89

The Federal Trade Commission (FTC) filed complaints against these companies regarding the delays.90 In In Re: Cardizem CD Antitrust Litigation,91 the court found that the agreement between Hoechst and Andrx was an unreasonable restraint of trade and was per se invalid under 1 of the Sherman Antitrust Act.92

The essential elements of a violation of 1 of the Sherman Act include a (1) contract, combination, or conspiracy, (2) which affects interstate commerce and (3) imposes an "unreasonable" restraint on trade.93 The courts use two methods to analyze whether an agreement is a violation of the Act. The first method is a per se approach, the second is a rule of reason approach.94 A per se approach is used if the agreement involves practices, such as horizontal price fixing among competitors, which are inherently anti-competitive.95 Such agreements are considered per se invalid without an inquiry into the actual harm caused.96 The court in In Re: Cardizem determined that the agreement was horizontal97 and thus per se invalid. In other words, the court found that the agreement between Hoechst and Andrx restricted competition, allocated the entire U.S. market for Cardizem and its bioequivalent to Hoechst, and allowed Hoechst to maintain or fix the price of Cardizem at a non-competitive level during the life of the agreement.98