A Surprising Way Big Pharma Keeps Drug Prices High

Delaying the release of generics drugs can cost consumers millions, and should be illegal, say consumer groups and the FTC

By Steve Mitchell
Last updated: October 13, 2015

Ten years ago, consumers were on the verge of getting a lower-priced, generic version of the brand nameantibiotic Doryx (doxycycline). But the drug's manufacturer, Warner Chilcott, stopped making the drug in its original capsule form and instead began producing it as a tablet. This seemingly minor change meant that generic manufacturer, Mylan, was blocked from being able to market the matching generic tablet it had been developing.

Warner Chilcott is now embroiled in a lawsuit that charges it used those and similar tactics—such as adding score lines to the tablets and ceasing production of the unscored tablets—to manipulate the patent and generic laws to stay one step ahead of generic manufacturers.

That tactic, called “product hopping,” is a strategy drug makers have begun using in recent years to stall the development of generic versions of a medication so they can keep brand-name drug prices high. But it is coming under fire from the Federal Trade Commission and several consumer groups, which charge in a federal court case that it’s a violation of antitrust law that bilks consumers of millions of dollars in high drug prices.

In the case, the generic-drug company Mylan accuses Warner Chilcott of using product hopping to prolong its patent on Doryx. A district court in Pennsylvania sided with Warner in April, ruling that its product hopping tactics did not violate antitrust law.

But Mylan has appealed the decision. And last week it got a boost from several consumer groups, includingConsumers Union, the policy and advocacy arm of Consumer Reports, AARP, Consumer Action, Consumer Federation of America, Families USA, U.S. PIRG, and others, which jointly filed an amicus brief in support of the appeal.

The FTC also flexed its muscles, filing a separate amicus brief in support. The consumer groups and the FTC fear that if the initial decision is left to stand, it will open the door for other drug companies to use product hopping to stifle generic competition and keep drug prices high. And that would mean consumers would be stuck with a hefty bill.

The delay of getting even one generic drug on the market could easily cost consumers hundreds of millions of dollars, says George Slover, a senior policy counsel for Consumers Union. “If product hopping is allowed to become standard practice, the cost to consumers could be staggering."

Slover says there’s hope the courts will declare product hopping illegal. In May, a different federal appeals court, the Second Circuit, upheld a ruling that Actavis’ product hopping with its Alzheimer’s medication Namenda was illegal. In that case, New York state accused Actavis (now Allergan) of switching Namenda from an immediate-release to an extended-release formulation to delay generic immediate-release alternatives from being launched.

When we contacted Allergan, which now owns both Doryx and Namenda, for this story, it declined to comment on either case.

It could take a prolonged battle in the courts to finally settle the law against product hopping. But Slover notes that it took more than a decade for consumer advocates to stop another generic-blocking scheme called “pay for delay.”

Under that tactic, the brand-name drug maker pays off a generic manufacturer to delay the launch of its generic formulation of the drug, so the brand name can continue to sell at a high price. For years, courts ruled that drug companies were shielded from the antitrust laws because of their patent. The FTC ultimately took the fight against pay for delay to the Supreme Court, which ruled in 2013 that the antitrust laws apply to the scheme.


Editor's Note: These materials were made possible by a grant from the state Attorney General Consumer and Prescriber Education Grant Program, which is funded by a multistate settlement of consumer fraud claims regarding the marketing of the prescription drug Neurontin (gabapentin).