U.S. GOVERNMENT PUBLISHING OFFICE

30–235 WASHINGTON : 2018

ANTITRUST CONCERNS AND THE FDA APPROVAL 

PROCESS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JULY 27, 2017 

Serial No. 115–27 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

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COMMITTEE MEMBERSHIP 

ONE HUNDRED FIFTEENTH CONGRESS

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAUL LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DESANTIS, Florida 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

MARTHA ROBY, Alabama 

MATT GAETZ, Florida 

MIKE JOHNSON, Louisiana 

ANDY BIGGS, Arizona 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

THEODORE E. DEUTCH, Florida 

LUIS V. GUTIE ́ RREZ, Illinois 

KAREN BASS, California 

CEDRIC L. RICHMOND, Louisiana 

HAKEEM S. JEFFRIES, New York 

DAVID CICILLINE, Rhode Island 

ERIC SWALWELL, California 

TED LIEU, California 

JAMIE RASKIN, Maryland 

PRAMILA JAYAPAL, Washington 

BRAD SCHNEIDER, Illinois 

SHELLEY HUSBAND, Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

MATT GAETZ, Florida 

DAVID CICILLINE, Rhode Island 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

ERIC SWALWELL, California 

PRAMILA JAYAPAL, Washington 

BRAD SCHNEIDER, Illinois 

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C O N T E N T S 

JULY 27, 2017 

OPENING STATEMENTS 

Page 

The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the Judiciary ......................................................................................................................... 5 

The Honorable John Conyers, Jr., Michigan, Ranking Member, Committee 

on the Judiciary ................................................................................................... 4 

The Honorable Tom Marino, Pennsylvania, Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Committee on the Judiciary ......................................................................................................................... 1 

The Honorable David Cicilline, Rhode Island, Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Committee on the Judiciary ........................................................................................ 3 

WITNESSES 

Hon. Scott Gottlieb, M.D., Commissioner, Food & Drug Administration 

Oral Statement ..................................................................................................... 8 

Mr. Markus H. Meier, Acting Director, Bureau of Competition and Assistant 

Director, Health Care Division, Federal Trade Commission 

Oral Statement ..................................................................................................... 10 

Prof. David S. Olson, Esq., Associate Professor of Law, Boston College Law 

School 

Oral Statement ..................................................................................................... 27 

Prof. Erika Lietzan, Esq., Associate Professor of Law, University of Missouri 

School of Law 

Oral Statement ..................................................................................................... 29 

Mr. Alden Abbott, Esq., Deputy Director and Senior Legal Fellow, The Heritage Foundation 

Oral Statement ..................................................................................................... 31 

Prof. Aaron S. Kesselheim, M.D., M.P.H., Associate Professor of Medicine, 

Harvard Medical School 

Oral Statement ..................................................................................................... 32 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD 

Responses to Questions for the Record from the Hon. Scott Gottlieb, M.D., Commissioner, Food & Drug Administration 

Statement and letters submitted by the Honorable Tom Marino, Pennsylvania, 

Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law, 

Committee on the Judiciary. This material is available at the Committee and can 

be accessed on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115- 

JU05-20170727-SD002.pdf 

Article submitted by the Honorable David Cicilline, Rhode Island, Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law, Committee 

on the Judiciary. These materials are available at the Committee and can be 

accessed on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115- 

JU05-20170727-SD003.pdf 

Page

IV 

Oral Statement —Continued 

Statement submitted by the Honorable Bob Goodlatte, Virginia, Chairman, Committee on the Judiciary. These materials are available at the Committee and can 

be accessed on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/106333/HHRG-115- 

JU05-20170727-SD005.pdf 

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ANTITRUST CONCERNS AND THE FDA 

APPROVAL PROCESS 

THURSDAY, JULY 27, 2017 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON REGULATORY REFORM

COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:00 p.m., in room 

2141, Rayburn House Office Building, Hon. Tom Marino (Chairman 

of the Subcommittee) presiding. 

Present: Representatives Marino, Goodlatte, Gaetz, Cicilline, 

Conyers, Johnson, Swalwell, and Schneider. 

Staff Present: Ryan Dattilo, Counsel; Andrea Woodard, Clerk; 

and Slade Bond, Minority Counsel. 

Mr. MARINO. Good morning. The Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law will come to order. 

We are going to vote in anywhere from 20 to 30 minutes. I may 

be speaking a little faster than I normally do because I would like 

to get our opening statements in and our distinguished witnesses’ 

opening statements in. 

So let’s begin. 

Without objection, the Chair is authorized to declare a recess of 

the committee at any time. 

We welcome everyone to today’s hearing on antitrust concerns 

and the FDA approval process. And I now recognize myself for an 

opening statement. 

The Committee has a robust history of examining competition in 

the healthcare marketplace to ensure patients receive the highest 

quality treatment at the lowest cost. In the past few years, the 

Subcommittee has held four hearings in this area, covering the topics of market consolidation, the impact of the Patient Protection 

and Affordable Care Act on competition, opioid addiction, and 

trends in pharmacy benefit management. We continue that tradition today, focusing on the pharmaceutical industry and antitrust 

concerns surrounding the FDA drug approval process. 

Competition in the pharmaceutical market involves a delicate 

balance. On one hand, we want to encourage pharmaceutical manufacturers to invest in needed, but often expensive research and development in order to bring innovative and life-saving drugs to the 

market. On the other hand, we want to encourage sufficient comVerDate Sep 11 2014 06:19 Jun 07, 2018 Jkt 028040 PO 00000 Frm 00005 Fmt 6633 Sfmt 6602 E:\HR\OC\A235.XXX A235
2 

petition to ensure that there is an appropriate check on consumer 

prices. 

Innovation is one of the hallmarks of our pharmaceutical industry and should be celebrated. However, there have been allegations 

that some companies may be abusing their roles as innovators to 

engage in the manipulation of regulations to preclude generic manufacturers from bringing competing products to the market. Such 

conduct is anticompetitive and should be put to a stop. 

Since its enactment, the Hatch-Waxman Act has provided opportunities for manufacturers to make lower-cost generic versions of 

previously approved drugs available to the people of the United 

States in a timely manner, thereby lowering overall prescription 

drug costs for patients and taxpayers by billions of dollars each 

year. 

An essential piece of this framework is the ability of generic drug 

manufacturers to obtain sufficient samples of branded drugs to conduct the testing necessary to support an application for FDA approval of the drugs’ generic version. Concerns have been raised 

that generic manufacturers have been prevented from obtaining 

such samples, in some instances based on the position that the 

drugs in question are subject to a risk evaluation and mitigation 

strategy with elements to assure safe use under Section 505-1, the 

Federal Food, Drug, and Cosmetic Act. This is more commonly referred to as the REMS program. 

While the enforcement of existing antitrust laws could address 

the refusal by some branded manufacturers to provide samples to 

a generic drug manufacturer, a more tailored legal pathway would 

help to ensure timely resolution of disputes over sample testing, 

provide clear guidelines, and facilitate healthy competition in the 

marketplace, benefiting all consumers. 

For these reasons, Ranking Member Cicilline and I introduced 

the Creating and Restoring Equal Access to Equivalent Samples, 

more commonly known as the CREATES Act. This legislation will 

deter pharmaceutical companies from manipulating sample availability to block cheaper generic alternatives from entering the marketplace. 

The CREATES Act will lead to lower costs for patients by ensuring that they have access to safe and effective FDA-approved generic medicines. It will also ensure consumer safety by maintaining 

safeguard features of the REMS program while closing regulatory 

loopholes that are used to keep prices artificially high. 

The Congressional Budget Office has estimated that the bill 

would result in a $3.3 billion—that’s with a B—billion dollar net 

decrease in the Federal deficit. Savings to consumers and private 

insurers likely would be far greater. 

I look forward to hearing our witnesses’ views on the CREATES 

Act as well as on other areas of the FDA approval process which 

may be subject to anticompetitive measures. 

And just to get a piece of work out of the way, if there are no 

objections, I would like to enter into the record that I have several 

letters in support of the CREATES Act and our efforts with this 

hearing. 

So without objection, I would like to enter this, and I’ll read off 

who sent us letters and statements: FreedomWorks, America’s 

3 

Health Insurance Plans, West-Ward Pharmaceuticals, International Center for Law and Economics, Coalition to Reduce 

Spending, the Academy of Managed Care Pharmacy, Association 

for Accessible Medicines, the American Society of Health-System 

Pharmacists, Pharmaceutical Care Management Association, Consumers Union, Premier Healthcare Alliance, Campaign for Sustainable Rx Pricing, Blue Cross Blue Shield, CVS Health, and Express 

Scripts. 

This Material is available at the Committee or on the Committee 

Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-20170727-SD002.pdf 

The Chair now recognizes the Ranking Member of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, 

Mr. Cicilline of Rhode Island, for his opening statement. 

Mr. CICILLINE. Thank you, Mr. Chairman, for your leadership 

and for holding today’s hearing. 

Every year hardworking Americans pay too much for prescription 

drugs. The cost of prescription drugs has increased by over 200 percent over the past decade. These soaring prices are life threatening. 

Kaiser Health reports that a quarter of Americans cannot afford 

their prescription medicines, while many are skipping or reducing 

their dosages. 

This heartbreaking epidemic is particularly harmful for the hundreds of thousands of cancer patients who are forced to skip or 

delay their treatments because of the immense financial burden of 

prescription cancer drugs, which can cost more than $159,000 a 

year. Leading oncologists report that these skyrocketing costs are 

causing deaths and harming patients on a daily basis. 

And beyond the human toll of this epidemic, spiking drug prices 

have a direct impact on Federal spending because most cancer patients are older than 65 and are enrolled in Medicare. And there 

is no upper limit on out-of-pocket costs for these patients, so they 

can pay as much as $57,000 in lifetime expenses, or about 11 percent of their income, even if they’re insured. 

We must find lasting policy solutions to save lives by lowering 

the cost of prescription drugs. Earlier this week Democrats announced A Better Deal for Americans to stop outrageous prescription drug price increases. 

The American people deserve a government that is in their corner fighting for them to take on drug profiteering and price hikes. 

And that’s why I’m extremely proud of my work with Chairman 

Marino and our introduction of H.R. 2122, the CREATES Act, a 

targeted solution to reduce drugs prices by increasing generic competition. 

The Federal Trade Commission reports that generic drugs can 

reduce the price of branded drugs by more than 85 percent, while 

the presence of just one generic competitor can decrease prescription drug prices by 20 to 30 percent. 

But over the past decade some branded drug companies have 

abused safety protocols at the Food and Drug Administration in 

order to keep affordable drugs out of the market at the expense of 

hardworking Americans. 

4 

Congress never intended these safety programs, called risk evaluation and mitigation strategies, to allow a branded drug company 

to block or delay generic competitors from receiving FDA approval 

and enter the market. 

And yet, some drug companies have exploited these safety programs to delay generic competition, if only by days and months, to 

prolong high drug prices. 

That’s because months of delay could be worth hundreds of millions of dollars in additional monopoly revenues as the generic sits 

on the sideline, as Professor Robin Feldman has noted. 

While this abusive behavior often violates the antitrust laws, as 

the Federal Trade Commission will testify today, these cases are 

often two-timing to provide effective relief. The CREATES Act addresses these delay tactics by creating a tailored path for generic 

drug manufacturers to obtain the samples that are necessary to 

bring low cost drugs to market. 

The Congressional Budget Office estimates, as the Chairman has said, that the bill would result in a $3.3 billion net decrease in the 

Federal deficit, while the estimate of the total cost of this delay for 

consumers is $5.4 billion. 

This bill is supported by numerous physicians, hospitals, health 

insurers, and patient groups, along with public interest organizations, such as Consumer Union and Public Citizen. CVS Health, 

which is located in my district strongly supports this bill because, 

‘‘it is vitally important in end practices that delay competition and 

ultimately lead to higher drug prices.’’ 

I again thank the Chairman for calling today’s hearing, along 

with our esteemed witnesses for their appearances here today. And 

I look forward to working with my colleagues to ensure an end to 

profiteering and price gouging by prescription drug companies. 

And with that, I yield back. 

Mr. MARINO. Thank you, David. 

The Chair now recognizes the Ranking Member of the full Judiciary Committee, Congressman Conyers of Michigan, for his opening 

statement. 

Mr. CONYERS. Thank you, Chairman Marino. 

What we’re doing today is examining the process for the Food 

and Drug Administration’s method of approval for branded and generic drugs and its effect on competition and drug prices. And it 

sure is timely. 

Just this past month, my colleagues in the House, Leader Pelosi 

and Senator Schumer, Mr. Cicilline, and others, have released an 

excellent white paper called ‘‘A Better Deal: Lowering Prescription 

Drug Costs.’’ And it calls for rewriting rules to stop prescription 

drug price increases, lowering drug prices for Medicare, and requiring drug manufacturers to publicly release data justifying any significant price increases. 

I support the idea of making prescription drugs affordable and 

accessible for all Americans, for everybody. Additionally, the ability 

of lower-priced generic drugs to compete against branded drugs is 

a pretty important consideration that I hope we will get into this 

afternoon. 

With this overarching goal in mind, I’d like our distinguished 

witnesses present to consider the following: What extent to which 

5 

the Food and Drug Administration’s use of risk evaluation and 

mitigation strategies make it harder for lower-price generic drugs 

to enter the market in competition with, of course, the branded 

drugs. 

These regulatory requirements are an important safeguard to ensure that drugs with potentially dangerous characteristics and side 

effects are safely and carefully distributed. The process, however, 

may also serve to stifle competition and keep drug prices high, artificially high at that. 

For instance, these requirements may make it difficult for generic drug manufacturers to obtain samples in order to conduct the 

bioequivalence testing necessary to gain regulatory approval of a 

lower-priced generic equivalent to a branded drug. Indeed, some 

have alleged that branded drug companies deliberately cite these 

restrictions as a way of refusing to provide such samples to potential generic competitors. 

In addition, we should of course remain vigilant about pay-fordelay schemes, whereby branded drug manufacturers pay generic 

manufacturers to delay the entry of a version of branded drugs as 

the patent on the branded drug expires. 

These arrangements are cause for some concern—and in some 

areas a lot of concern—because the Supreme Court has already 

held in Federal Trade Commission v. Actavis they may violate the 

antitrust laws. They may contravene longstanding Federal policy 

encouraging the rapid entry of generic drugs into the marketplace 

in order to dramatically reduce drug prices. 

So to what extent should we be concerned about potential abuse 

of the citizen petition process at the Food and Drug Administration? That agency allows any concerned citizen to solicit changes to 

agency regulations and other administrative actions. While in principle this is admirably democratic procedure, branded drug manufacturers may manipulate it to stifle entry of generic drug competition, for example, by challenging generic drug approvals using this 

process. 

Because the agency must review every citizen petition it receives, 

generic drug manufacturers allege that branded manufacturers use 

the petition process to stop or delay agency approval of competing 

generic drugs with multiple and unwarranted petitions. And despite amendments made in 2007 to address such potential abuse, 

the agency reports that it remains concerned that many nonmeritorious citizen petitions are being filed primarily to delay the entry 

of generic drugs into the marketplace. 

Wouldn’t it be nice if we could solve this this afternoon, at this 

hearing? 

I thank Chairman Marino and my Ranking Member Cicilline for 

their work on this important matter. And a word of welcome to our 

witnesses being here today. Thank you so much, Mr. Chairman. 

Mr. MARINO. Thank you, John. 

The Chair now recognizes the Chairman of the full Judiciary 

Committee, Congressman Goodlatte of Virginia, for his opening 

statement. 

Chairman GOODLATTE. Thank you very much, Mr. Chairman. 

And welcome to our witnesses. 

6 

The United States has been and continues to be a champion of 

free and open markets. An open marketplace cultivates competition 

among sellers and is the very foundation of maintaining lower 

prices, higher quality, both in products and services, and superior 

innovation. 

The antitrust laws established in this country serve a valuable 

role in promoting competition, and the Judiciary Committee routinely exercises its oversight authority to ensure that these laws 

are applied in a manner that is transparent, fair, predictable, and 

reasonably stable over time. 

One area of essential antitrust oversight is the healthcare industry. Healthcare and its related markets have long been subject to 

extensive antitrust scrutiny and have been a focal point of the 

Committee for the past several years. 

This hearing marks the fifth in our series focused on competition 

in the healthcare marketplace and continues the Committee’s history of vigilant oversight into this important industry that touches 

nearly every American. 

Today the Committee turns its attention to antitrust concerns 

surrounding the Food and Drug Administration drug approval 

process and its impacts on competition between branded and generic drug manufacturers. As with approval processes for any industry subject to government regulations, the drug approval process can provide a fertile environment to secure and abuse market 

power. 

Although Congress has passed laws aimed at facilitating competition from lower-priced generic drug manufacturers, while maintaining incentives for branded drug manufacturers to invest in developing new and innovative drugs, the Hatch-Waxman Act and 

the surrounding regulatory environment create unique issues that 

are only present in the pharmaceutical marketplace. 

For example, a generic drug manufacturer must rely on its competitor’s product in order to test bioequivalence so that FDA approval may be sought. 

One of the most common antitrust concerns in pharmaceutical 

conduct cases occurs when companies engage in activity aimed at 

delaying the entry of generic drugs, thus leading to higher prices 

for consumers. 

Of particular concern today is the potential abuse of certain Food 

and Drug Administration approval processes intended to ensure 

safety. Although the FDA has no authority to regulate the cost of 

a drug, certain FDA policies and practices have substantial ramifications throughout the drug pricing market. 

Today, the United States has the largest pharmaceutical market 

in the world, accounting for roughly 40 percent of the global market. U.S. firms conduct the majority of the world’s pharmaceutical 

research and development and currently hold the intellectual property rights pertaining to most new medicines. 

While it is imperative that the U.S. continue to remain the world 

leader and innovator in the pharmaceutical market, it is important 

that these antitrust concerns be given significant deliberation. The 

benefits from such leadership and innovation are undermined if our 

consumers unfairly bear the brunt of anticompetitive conduct 

through above-market prices. 

7 

I look forward to hearing the witnesses’ views on these issues 

and whether our existing antitrust laws are equipped to address 

these antitrust concerns in the FDA approval process. 

I’d like to again thank Chairman Marino for holding today’s 

hearing. And today’s testimony will help the Committee gain a better understanding of the seriousness of these issues and how they 

might be addressed. 

Thank you, Mr. Chairman. 

Mr. MARINO. Thank you, Bob. 

Without objection, other members’ opening statements will be 

made part of the record. We’ll begin by swearing in our witnesses 

before introducing them. 

Would you please stand and raise your right arm? 

Do you swear or affirm that the testimony you are about the give 

before this Committee is the truth, the whole truth, and nothing 

but the truth, so help you God? 

Please be seated. 

Let the record reflect that the witnesses have responded in the 

affirmative. 

Dr. Scott Gottlieb was sworn in as the 23rd Commissioner of 

Food and Drug on May 11, 2017. Mr. Gottlieb is a physician, medical policy expert, and public health advocate who previously served 

as the FDA’s Deputy Commissioner for Medical and Scientific Affairs, and before that, as a senior adviser to the FDA Commissioner. Mr. Gottlieb has also served as a senior policy adviser at 

the Centers for Medicare and Medicaid Services. 

Mr. Gottlieb was previously a resident fellow at the American 

Enterprise Institute and a clinical assistant professor at the New 

York University School of Medicine in Manhattan where he also 

practiced medicine as a physician. 

Having authored over 300 articles appearing in leading medical 

journals and other well-respected periodicals, Mr. Gottlieb’s career 

has included working as a staff writer for the British Medical Journal, serving as a senior editor to the Pulse, Journal of the American Medical Association, and serving on multiple editorial boards, 

including Food and Drug Law Institute’s Policy Forum, ValueBased Cancer Care, and Cancer Commons. He is also a member of 

the Leukemia and Lymphoma Society, the Public Policy Committee 

of the Society of Hospitalist Medicine, and a member of the board 

for Keystone Center. 

Mr. Gottlieb received his BA in economics from the Wesleyan 

University and his MD from Mount Sinai School of Medicine in 

New York University, where he completed his residency in internal 

medicine. 

Welcome, Doctor. 

Mr. Meier is the Assistant Director in charge of the Federal 

Trade Commission’s Healthcare Division in Washington, D.C. He 

leads an office of 35 lawyers—that’s got to be a tough job—and 

other professionals who investigate and litigate alleged violations 

of antitrust law by pharmaceutical companies, physicians, and 

other healthcare providers. 

Since November 2015, Mr. Meier has also been serving as the 

Acting Deputy Director, and more recently as the Acting Director 

of the FTC’s Bureau of Competition, where he oversees more than 

8 

280 lawyers and other professionals investigating and litigating 

merger and nonmerger cases. 

Mr. Meier joined the FTC in 1990 and became head of the 

Healthcare Division in 2006. In addition to his work at the FTC, 

Mr. Meier has worked in private practice, where he focused on 

antitrust litigation and represented clients before the FTC and the 

Department of Justice. He has served as a Special Assistant United 

States Attorney—we have a little fraternity going here now—prosecuting criminal cases in the Eastern District of Virginia. 

He was also a resident adviser to the Indonesian Competition 

Commission in Jakarta in 2001. Before joining the FTC, Mr. Meier 

served as an officer in the United States Army. 

Thank you for your service. 

He is a graduate of the George Mason School of Law, has a master’s degree in public administration from Old Dominion University 

and a bachelor’s degree from the University of Virginia. 

Welcome, sir. 

Each of the witnesses’ written statements will be entered into 

the record in its entirety. I will ask that each of you summarize 

your testimony in 5 minutes or less. 

And to help you with that, you have some lights in front of you. 

The light will switch from green to yellow when you have a minute 

left, and then when it switches to red, the time’s out. I’ve been in 

your position and I don’t pay attention to the lights. So what I’m 

going to do is very politely and diplomatically pick up the gavel and 

hopefully that will give you an incentive to wrap up. 

Dr. Gottlieb, the floor is yours. 

TESTIMONY OF MR. SCOTT GOTTLIEB, M.D., COMMISSIONER, 

FOOD & DRUG ADMINISTRATION; AND MR. MARKUS H. 

MEIER, ACTING DIRECTOR, BUREAU OF COMPETITION, ASSISTANT DIRECTOR, HEALTH CARE DIVISION, FEDERAL 

TRADE COMMISSION 

TESTIMONY OF SCOTT GOTTLIEB 

Dr. GOTTLIEB. Thanks a lot, Mr. Chairman and Ranking Member. Thank you for the opportunity to testimony before the Committee. My name is Scott Gottlieb. I’m a physician and Commissioner of the Food and Drug Administration. 

At FDA we’ve undertaken a broad initiative to promote prescription drug competition with the aim of lowering drug costs to consumers. FDA doesn’t oversee any aspect of drug pricing as part of 

our regulatory mandate, but our policies can have a significant impact on the cost of medicines, and ensuring American patients have 

access to affordable medicines is a top priority for FDA and for the 

administration. 

In particular, our policies related to generic drugs can promote 

competition, which lowers drug costs. Similarly, our regulatory 

policies related to the clinical development of new drugs ultimately 

impact the cost of these endeavors. Our requirements and their impact on the risks and costs of new drug development can affect the 

way that entrepreneurs price their finished products in order to 

justify their investments. 

9 

In each case, we’re closely examining the impacts of our policies. 

We want to strike the right balance between access and innovation 

while we hold steadfast to our core consumer protection mandate 

to make sure the drugs we approve are safe and effective. 

Today, I’d like to briefly review with your policies we’re considering and steps we’re taking to promote generic drug competition. 

First, we’re improving the efficiency of the generic review and approval process to help new generic drugs reach consumers more 

quickly, but without sacrificing the assurance of safety and effectiveness. 

Historically, the average generic drug application undergoes four 

cycles of review by FDA. Through new policies we’re implementing, 

we believe we can sharply reduce this number and reduce total development times. 

Our average total time to approval for legacy applications has 

averaged 42 months. We’re significantly bringing down that time. 

Beginning this October, if we get a high quality submission, we’ll 

be able to review and approve it in 8 to 10 months, depending on 

the type of application, and I’ll report on our progress the following 

fall. 

A second major part of our efforts is to improve our policies and 

scientific approach to the approval of generic competitors to complex or difficult-to-duplicate brand name drugs. 

Collectively, this represents a sizable category of medicines that 

in many cases could be subject to generic competition, but are not. 

We’re looking at how to change that, such as developing clear principles for approving generic versions of these products and issuing 

those principles well in advance of the time of the first patent 

expiry. 

The third part of our plan relates most directly to the topics 

we’re here to discuss today. I want to make sure that companies 

aren’t gaming our own rules to extend their monopolies on brand 

drugs and maintain their monopoly pricing by forestalling competition that Congress intended for when it crafted the Hatch-Waxman 

amendment. 

One example of this relates to risk management programs we’ve 

put in place in order to assure the safe use of drugs but where 

brand manufacturers have then denied generic drug manufacturers 

access, even at fair market value and despite assurances from 

FDA, to the doses they need in order to run the bioequivalent studies required for applications. 

This is clearly not what Congress intended. While at least some 

of these restrictions on access may fall outside our direct purview, 

we’re exploring potential measures we could take, including actions 

we might take in concert with our colleagues at CMS and the FTC, 

to prevent this sort of activity. 

We’re also looking at steps we can take to reduce the potential 

for brand companies to block generic entry by extending the negotiations they’re obligated to have over the application of a single 

shared REMS program. 

These are cases where they have a REMS program in place to 

help manage the safe use of a product and the generic entrant is 

seeking to share the REMS program with the brand sponsor. 

10 

Here is the bottom line, in my view. We have a market-based 

system for pricing medicines that functions in part as a way to 

make sure entrepreneurs have appropriate rewards for their risk 

taking. This system has unlocked unprecedented drug innovation 

that’s saving lives and quite literally curing disease. 

But we need to balance access with innovation. We need to make 

sure that when the patent and exclusivity periods have lapsed, the 

point at which Congress intended for vigorous competition to be 

possible, consumers are able to benefit from the savings that come 

from generic drug entry and the choice it enables. 

That’s our goal, to do all that we can to make sure markets are 

efficient and close loopholes that are letting a handful of market 

participants game the rules in ways that hurt consumers. 

Thank you, Mr. Chairman. 

Hon. Gottlieb’s written statement is available at the Committee or 

on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-Wstate-GottliebS-20170727.pdf 

Mr. MARINO. Thank you, Doctor. 

Attorney Meier. 

TESTIMONY OF MARKUS MEIER 

Mr. MEIER. Chairman Marino, Ranking Member Cicilline, and 

members of the Subcommittee, thank you for the opportunity to address the hearing today. It’s a very important subject. And I’m 

pleased to testify about one of the FTC’s top priorities: stopping 

anticompetitive conduct in the pharmaceutical industry. Such conduct harms American consumers through higher drug prices. 

I’m also pleased to be here sitting next to FDA Commissioner Dr. 

Gottlieb. The FTC and the FDA have had a long history of working 

closely together on these issues and many others as well, and the 

FTC looks forward to continuing to build on our relationship with 

the FDA in the months and years to come. 

Unlike the FDA, however, the FTC is not a sector regulator. Instead, we are primarily a law enforcement agency, and the laws 

we’re charged with enforcing are intended to promote competition 

for the benefit of consumers, and they apply across wide ranges of 

industries in the United States, not just the pharmaceutical industry. 

The way we do our job is we do it by challenging three broad categories of business practices known to harm competition. First, we 

challenge agreements among competitors that unreasonably restrain trade. Second, we challenge acts of monopolization. And 

third, we challenge mergers that may substantially lessen competition. The FTC has a long history of applying these laws in the 

pharmaceutical industry. 

With respect to the three topics of today’s hearing, the FTC has 

brought cases and filed amicus briefs addressing antitrust problems with abuse of the FDA processes in each of the three areas. 

First are the abuses that occur when brands use FDA-mandated 

REMS or when they use voluntary distribution systems, either to 

prevent a generic company from gaining access to the samples it 

needs to go through the FDA-approval process, or secondly, by refusing to negotiate a single shared REMS distribution system. 

11 

To date, the FTC’s actions in this area have been to file amicus 

briefs in private litigation, because private parties can also bring 

antitrust cases, not just the FTC, and to explain to courts how the 

REMS abuse can in fact violate the antitrust laws. 

Second are the abuses arising from so-called pay-for-delay agreements. Pay-for-delay agreements occur in the context in which a 

brand and a generic company are in patent litigation, the generic 

is trying to gain entry into the marketplace. It says to the brand 

company, your patent is not valid or I do not infringe your patent. 

They’re fighting out a patent case. And at some point they settle 

the litigation, in which the brand, one, offers money to the generic, 

and two, the generic agrees to stay out for some period of time. And 

we’ve had a lot of cases in this area and currently have cases, a 

case called Actavis, AbbVie, Allergan, Watson and Impax. 

Third are abuses that can occur with the citizen petition process. 

Brands may use the FDA’s citizen petition process to delay generic 

approval by raising scientific or legal issues that the FDA must respond to before approving a generic. Studies have shown that while 

these petitions often lack merit, they delay entry of lower-cost 

generics. FTC actions to date include a recent lawsuit that we filed 

in the case of ViroPharma in the District of Delaware. 

Despite our many efforts, however, there are limits on antitrust 

law enforcement. First, and possibly most importantly, it’s not a 

violation of Federal law simply to charge high prices. Secondly, litigation, which is what I do and what we do at the FTC, can be slow, 

it’s expensive, and it’s uncertain. I personally have been working 

to stop pay-for-delay agreements for more than 17 years, as have 

a handful of my colleagues who have been there from the very beginning, and we’re still years away from court resolutions of some 

of those cases. 

These limitations are the reason why the Commission supports 

the goals of the CREATES Act, and if enacted, the FTC believes 

that the CREATES Act would reduce the incentive for brands to 

use REMS to impede competition from lower-cost generics. 

In closing, I look forward to addressing your questions, and 

again, thank you for inviting me here today. 

Mr. Meier’s written statement is available at the Committee or on 

the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-Wstate-MeierM-20170727.pdf 

Mr. MARINO. Thank you, Attorney Meier. 

We will now begin the Congress members’ 5 minutes of questioning. And I will recognize myself for 5 minutes of questioning. 

Dr. Gottlieb, I want to commend you, first of all, for shining the 

light on the issues that we’re addressing here today. It’s critically 

important. These competition problems have been around for a long 

time, so I want to better understand FDA’s current authorities in 

this area. 

One of the principal objects of the CREATES Act is to allow a 

generic company to seek an injunction from the court to require the 

sale of a brand’s product. To be clear, a court can only order a sale 

once the generic has received FDA authorization to handle the 

product. 

12 

When Congress established REMS authority in 2007, Congress 

included a provision that said a REMS should not be used to delay 

competition. It is my understanding that the FDA has authority to 

level civil monetary penalties when they determine a brand company is delaying competition using the REMS program. Is that correct? 

Dr. GOTTLIEB. There is a provision in the law, Congressman. 

Mr. MARINO. I also understand the FDA has never used that authority. Are you aware of that? 

Dr. GOTTLIEB. I know it’s a complex authority to exercise, Congressman. 

Mr. MARINO. If they did use that authority, it would require the 

development of a lengthy record, be time-consuming, and use resources. Would you agree with me? 

Dr. GOTTLIEB. I know it’s highly complex to develop the administrative record to exercise the authority, so it would take time—it 

would take a lot of time. 

Mr. MARINO. In a determination by the FDA that the brand’s actions were taken to block or delay the generic application, would 

you agree with me concerning that? 

Dr. GOTTLIEB. I’m sorry, I missed the question. 

Mr. MARINO. The brand’s actions, if taken, would delay the generic application. 

Dr. GOTTLIEB. There are a lot of brand actions that delay generic 

entry, yes. 

Mr. MARINO. And once all these steps have happened, you have 

to work with DOJ to level penalties, correct? 

Dr. GOTTLIEB. If we were to exercise that authority, yes. And 

penalties, I believe, are relatively modest. 

Mr. MARINO. This seems, as a prosecutor, as a former U.S. Attorney, these are pretty intense and time-consuming processes, and 

the FDA only has the authority for drugs that are behind a REMS, 

not for voluntary manufacturer’s schemes. That’s correct also? 

Dr. GOTTLIEB. It’s a good point that a lot of the restrictions on 

the ability of the generic companies to get access to the doses are 

commercially driven as well through contracting. 

Mr. MARINO. It would seem to me that we could resolve these 

issues and these disputes quicker if competitors had limited resources in the courts to require the sale of some samples when the 

FDA has found it can safely handle those samples. That’s not a 

question, but could you please share with us some of your insight 

on how we streamline this? 

Dr. GOTTLIEB. Well, Congressman, you’ve raised a lot of concerns 

that are our concerns. The fact that generic companies literally 

can’t get access to the doses they need, the units they need, to run 

the bioequivalent studies to go through the regulatory approval 

process, that is clearly not what Congress prescribed under HatchWaxman. 

Some of these fall within the scope of gaming regulations that 

exist within FDA’s purview, and the REMS is an example. Some 

of them fall within the scope of things branded companies do in the 

context of commercial contracts to deny the ability of generic companies to get the drugs from either specialty pharmacy companies 

or other intermediaries like wholesalers. 

13 

But it requires between 1,500 and 5,000 physical doses in order 

to run the bioequivalent studies, and quite literally, there are situations, and we see them, where the generics can’t get access to 

those doses in a timely fashion. 

Mr. MARINO. Attorney Meier, while the FTC has expressed concerns about anticompetitive abuse of the REMS process, and I 

think you filed two amicus briefs in disputes between manufacturers, it doesn’t appear to have brought any enforcement suits. Can 

you explain why enforcement suits haven’t been brought and what 

would we do to better improve the system? 

Mr. MEIER. This is an area where we’ve spent a lot of time looking into it. We’ve chased down a lot of leads and taken, heard a 

lot of different complaints. In fact, the FDA sent us a list of approximately 150 inquiries it’s received, and we’ve reviewed those 

very carefully to look for a good test case to bring. 

But in addition to the activities of the FTC, there are private litigations. Private companies can bring antitrust cases, too, and they 

have. And as I said before, we filed amicus briefs in a number of 

those cases to try to assist the court in understanding how the 

antitrust laws can apply to those behaviors. 

Mr. MARINO. Thank you. 

My time has expired, and I do now recognize the Ranking Member of the Committee, Congressman Cicilline, for his questions. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

And thank you again to our witnesses. 

Mr. Meier, you explained in your written testimony that delaying 

generic competition through REMS abuse results in about $5.4 billion dollars in annual costs to consumers. 

Could you please explain how delaying competition through 

REMS abuses increases costs to consumers? You know, sort of explain a little bit, when does the FTC require the REMS safety protocol for a drug and how does it result in that kind of an impact 

on consumers? 

Mr. MEIER. So, first of all, with respect to the testimony and the 

$5.4 billion figure in the testimony, I do want to point out that that 

was a study done by the generic pharmaceutical industry, as we indicated in the report. So we haven’t independently verified that 

number. But it does suggest that this is a problem. 

With respect to your question about what exactly the FDA has 

to do when it does a review process, that’s really a question I think 

that might be better addressed to the FDA. 

But having said that, in a number of instances where we have 

done investigations I’ve come to learn some about the standards 

that the FDA uses. And obviously what they want to do and what 

they have to do is make sure that the drug supply is safe and effective, and I think they do a very good job of doing that. And there 

are certain drugs that, when certain patient populations are exposed to it, can be dangerous for those patients and can be dangerous for other people. 

The classic example that often comes up is the Thalidomide example, which obviously results in horrible, horrible potential birth 

defects if a pregnant woman is exposed to that, and that is in fact 

subject to a REMS program. 

14 

So it’s those types of drugs that I understand are subject to 

REMS programs with what are known as ETASU or elements to 

assure safe use. But, again, I think it might be a question that the 

FDA can better address than I can. 

Mr. CICILLINE. Dr. Gottlieb. 

Dr. GOTTLIEB. Congressman, these are drugs that have certain 

what we call elements to assure safe use, certain provisions that 

are put in place at the time of approval to help ensure their safe 

prescribing by providers. So typically they’ll have certain side effects or risks associated with them that we feel in order to strike 

the right risk-benefit balance we have to have certain measures in 

place, like provider education, or requirements that providers take 

certain measures, to subject patients to certain tests, to look for the 

manifestation of certain side effects. 

Just as a general matter, and you asked the question about how 

would it save consumers money, by and large, the majority of the 

drugs for which we have risk management plans in place tend to 

be specialty drugs, and they tend to be higher priced drugs. 

And to the extent that manipulation of the REMS to forestall the 

ability of the generic companies to get access to the samples they 

need to do the bioequivalent studies would then delay the generic 

from filing the application and getting onto the market, that’s 

going to disadvantage consumers, because it’s just a delay in getting competition where patents might have lapsed that would be 

lower cost. So, you know, just month by month, every month, to 

your point, could add up to a lot of money. 

Mr. CICILLINE. Thank you. 

Mr. Meier, you made reference in your testimony, obviously, to 

one of the ways that brand drug companies realize profits is to prevent—refuse to provide samples that are necessary for the development of the generic, which the CREATES Act attempts to address. 

I think you’ve already said that you consider that anticompetitive 

behavior. 

I guess the question I have is, should we consider simply a prohibition against that, an outright prohibition against these pay-fordelay or refusal to provide? I know they’re two different issues, 

but—— 

Mr. MEIER. So you’re right, they’re two different issues. But with 

respect to the samples, I do want to be careful that it’s not just 

merely the refusal to provide a sample that causes an antitrust 

problem. When we do an antitrust case, the type of case that you 

would have to bring in this instance would be a charge of monopolization. That’s basically a single company acting unilaterally, saying, I’m not going to turn over the samples. 

One of the elements you’d have to show is exclusionary conduct, 

but an additional element in that case you’d have to show is that 

the company actually has a monopoly and is maintaining or holding on to that monopoly as a result. 

So the challenge is not just to say refusing to provide a sample 

is an antitrust problem, but it’s the combination of the refusal to 

provide it by a monopolist under certain circumstances can violate 

the law. 

Mr. CICILLINE. And what about with respect to pay-for-delay? 

What would be— wouldn’t it be sensible public policy simply to proVerDate Sep 11 2014 06:19 Jun 07, 2018 Jkt 028040 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 E:\HR\OC\A235.XXX A235
15 

hibit those outright, that you couldn’t contract with another entity 

to prevent the introduction into the marketplace. I mean, that 

seems pretty, obviously, on its face anticompetitive. 

Mr. MEIER. Well, that have been a number of different bills that 

have been floated over the years that would come close to doing 

what you’re describing, both on the House side and the Senate side, 

and there have been various times when the FTC has been asked 

to look at that and comment on that, and we have. And should 

somebody put together such a bill again in the future, we’d be 

happy to provide whatever technical assistance we could on that. 

Mr. CICILLINE. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Mr. MARINO. The Chair recognizes the Chairman of the full Judiciary Committee, Congressman Goodlatte. 

Chairman GOODLATTE. Thank you, Mr. Chairman. 

Thank you, gentlemen, for your testimony. Let me start with Dr. 

GOTTLIEB. 

I have received several inquiries over the years from constituents 

regarding escalating prices for specific drugs, some of them 100 

years old, that have been on the market in every instance for long 

periods of time, decades. I understand that some of this may be the 

result of the FDA’s Unapproved Drug Initiative. 

Can you explain what the goal of that program is and whether 

you think it’s been effective? 

Dr. GOTTLIEB. Congressman, there’s a large category of drugs 

that were effectively grandfathered in when the modern statute to 

require the demonstration of safety and effectiveness was put in 

place in the 1960s. We refer to them as the DESI drugs. And they 

never went through a traditional approval process. They never had 

to demonstrate safety and efficacy through the traditional clinical 

trial requirements. 

We have a program in place to both take these drugs off the market when we feel that there are certain concerns relative to their 

safety and effectiveness or the way they’re being manufactured. 

We’ve taken over a thousand unapproved drugs off the market. 

And also to try to move certain drugs into the approved space, 

especially for critical medicines where it might have a narrow 

therapeutic window and you want to make sure it’s being manufactured in an appropriate fashion. We’ve moved these drugs into the 

market through the approval process. 

Now, it is the case that when that happens, in some instances, 

and in a lot of instances, when a drug that’s previously unapproved 

becomes an approved drugs and we clear the market of the other 

formulations that might be on the market, they will have some exclusivity. They might have 3 years of exclusivity under Hatch-Waxman for doing clinical studies. They might have 5 years of exclusivity in rare cases where there is a new molecular entity. So they 

will have a period of exclusivity. 

I will say that the juxtaposition here is that you now have a formal reference listed drug for which you can then bring generics 

onto the market when that exclusivity period lapses. 

And the final point I would make is—— 

Chairman GOODLATTE. Why did they get a period of exclusivity 

for a drug that’s not new? 

16 

Dr. GOTTLIEB. If they do clinical studies to demonstrate safety 

and effectiveness as part of the FDA approval process, they get a 

short period of exclusivity. 

Chairman GOODLATTE. How long is a short about? 

Dr. GOTTLIEB. That’s 3 years, is what’s prescribed under HatchWaxman. 

I will say, I’ve been around FDA for about 15 years now and I’ve 

gone through different cycles where at various points in time we’ve 

been criticized for not moving aggressively enough on the unapproved drugs. So it’s a real public health challenge. 

Chairman GOODLATTE. Well, let me ask you about that. Because 

when you take them off the market, is it based on safety? Is it 

based on efficacy? What is your standard? And what kind of research do you do, or does somebody else do that research for you, 

and might it be one of the competitors that does the research for 

you? What do you rely upon to take the drug off the market in the 

first place? 

Dr. GOTTLIEB. We’re careful in how we take the drug off the market in these instances to make sure that the new entrant can actually supply the market. 

Chairman GOODLATTE. You say you’ve done a thousand or more? 

Dr. GOTTLIEB. Those aren’t situations where we’ve necessarily 

cleared the market of all the drugs in a category. Those are situations where there might have been one drug on the market that 

had certain problems associated with it. There’s only 23 cases 

where we’ve had one approved drug come onto the market and 

made an attempt to clear the market of the competitors. And I 

think those are the situations that you’re referencing. I believe it’s 

23. 

You know, it is the case that in order to—and this is a balance, 

and Congress can speak to this because we went through the last 

time I was at the agency and worked very closely with Congress 

on this. 

But you want to provide—if you want these unapproved drugs to 

come through a regulatory process and develop the data to demonstrate safety and effectiveness and go through the manufacturing 

requirements, you have to provide an incentive. And the incentive 

is that if they go through that process and spend the money to do 

it, they’re going to get a short period of exclusivity, and the FDA 

is going to make an attempt to clear the market of potential competitors. 

Chairman GOODLATTE. They’re going to clear the market of people who haven’t done that, even though they don’t want to spend 

the money and they may have exactly the same result if they were 

to do it for their drug, because they may be identical drugs. 

Dr. GOTTLIEB. I understand the concern you’re raising, and I 

would say—— 

Chairman GOODLATTE. I’ve seen drugs that have cost 50 times, 

after they get this exclusivity, what it costs on the—you’re talking 

about some things that cost $2, $3 for a prescription, and suddenly 

they become several hundred dollars or even a thousand dollars for 

a little tube of some kind of a skin ointment or a gout drug. 

Dr. GOTTLIEB. Right. I would simply say, if we want to go down 

the path of unwinding FDA’s current policy, we need to accept that 

17 

the unapproved drugs will stay unapproved in perpetuity. And if 

Congress is comfortable with that, we can contemplate that. But I 

will tell you, I have been at the FDA when we’ve been vigorously 

criticized for not bringing the unapproved drugs through the approval process. 

Chairman GOODLATTE. Surely, there must be other sources of information about the lack of safety. If the issue is, well, the drug 

doesn’t really work, you know, obviously, if it’s been around for 100 

years and people still want to buy it, I’m not sure we should be too 

concerned about it. 

Safety, that’s a different concern. But if the mechanism is to let 

somebody buy into exclusivity as opposed to doing some independent research through universities or something to find out that 

the drug truly is harmful, or based upon medical testimony or medical history with the use of the drug, that’s a different situation to 

me. 

Dr. GOTTLIEB. We focus in situations where there are safety 

questions, and that’s where we tend to focus our resources. The one 

that I remember was, I believe, pancreatic enzymes, which are 

used by patients with cystic fibrosis, there was a lot of variability 

in how those drugs were being formulated that had clinical implications, and the CF community wanted FDA to exert more oversight 

over the safety and efficacy of those products. 

There are situations where these unapproved drugs on the market do present certain questions of safety and effectiveness, and 

that’s where FDA has tended to focus its attention. 

Chairman GOODLATTE. Let me ask one more question, if I may. 

I know I’m over the time. 

But if the company that comes in and does these tests for you 

and gets the exclusivity, if there’s no difference between their drug 

and the drugs that you’re taking off the market based upon the formulation of it, why, what would be in the best interest to do that? 

Just to get the work done to prove the safety and the efficacy of 

the one? 

Because to me, if that’s the case, there ought to be some limitation, some control. And is this authority based upon the law or is 

the authority based upon FDA regulations. 

Dr. GOTTLIEB. The application of this authority is based on what 

we have been told to do by Congress in the past. Congress has 

raised questions around the—— 

Chairman GOODLATTE. With the statutory language. 

Dr. GOTTLIEB. Well, the way Hatch-Waxman is written, this is 

how the statute should be exercised. Congress has told us they 

have concerns around the DESI drugs, the unapproved drugs. And 

I realize when we then take action to move these drugs into the 

approved column and prices go up in certain anecdotal cases, that 

raises concerns as well. So I’m sympathetic to it. 

Chairman GOODLATTE. Look, I would expect they would go up 

something so that the company can recover the cost of doing that. 

Dr. GOTTLIEB. Exactly. 

Chairman GOODLATTE. But a hundred times? 

Dr. GOTTLIEB. Well, that’s a separate question, whether it’s being 

priced to value. 

18 

Chairman GOODLATTE. Yeah, but it all comes together, right? I 

mean, if you’re the consumer who has been relying upon a drug 

that your doctor has told you that you should take, and then it suddenly costs a hundred times as much money—— 

Dr. GOTTLIEB. I fully understand your concerns, Congressman. 

Fully understand them. 

Chairman GOODLATTE. Thank you, Mr. Chairman. 

Mr. MARINO. The Chair now recognizes the Ranking Member of 

the full Committee, the full Judiciary Committee, Mr. CONYERS. Mr. CONYERS. Thank you, Mr. Chairman. 

This is a tremendously important subject. Let me ask Director 

Meier of the bureau about Professor Lietzan’s testimony, which 

characterizes requiring access to drug samples as ‘‘a duty to deal,’’ 

which ‘‘may undermine incentives for investment and innovation.’’ 

What do you think of that characterization of providing drug samples as a duty to deal, sir? 

Mr. MEIER. So the antitrust issue is not whether a brand has a 

duty to deal. Actually, the antitrust issue is the conditions under 

which a brand’s refusal to deal—it’s refusal to deal—results in the 

creation or maintenance of monopoly power. 

And this is a longstanding concept in the law. It goes all the way 

back to a 1919 case involving Colgate in which the Supreme Court 

said, yeah, parties do not have an obligation to deal with each 

other, but there may be certain circumstances in which that refusal 

to deal creates the purpose—has the purpose or the action of creating or maintaining a monopoly, and that’s illegal. 

And that case law has continued to develop all the way through 

the present with a case that is often cited actually by the defense 

bar in these issues, the Trinko case, where Justice Scalia said 

under certain circumstances a refusal to cooperate with rivals can 

constitute anticompetitive conduct and violate Section 2. 

As this Committee knows, when you have—take an action where 

you provide no samples to the generic, it means there’s going to be 

no generic filings with the FDA, there’s going to be no generics, 

and there’s going to be no competition, and that could go on literally forever. Even when all the patents have expired, a company 

could continue to refuse to provide samples and there could still be 

a monopoly that simply wasn’t what Congress intended. 

Mr. CONYERS. How prevalent a problem is this? 

Mr. MEIER. Well, there are different views, and the difficulty is, 

I don’t have any means to get perfect insight into it. On the one 

hand, you have the generic pharmaceutical industry and the study 

that was done by Matrix economics company, by a person, an economist named Alex Brill, that says it costs consumers $5.4 billion 

a year. On the other hand, you have Professor Lietzan suggesting 

that perhaps it really only involves 20, 22 drugs, something like 

that. 

My suspicion or my intuition is that it’s probably somewhere in 

between those numbers. But I think some of these drugs are very 

significant and these prices compete very, very significant. And 

even if it’s only a few drugs, it could be a very, very significant 

problem. 

Moreover, if companies understand that they can get away with 

this, the expectation is not just what the problem is today, but 

19 

what might the problem be tomorrow and further into the future 

as companies recognize that they can adopt this same strategy and 

apply it to drug products that currently aren’t even subject to these 

restricted distribution systems. 

Mr. CONYERS. What can we up here approach—how do we approach this in a sensible way? 

Mr. MEIER. So as we put forward in our testimony, we believe 

that the CREATES Act—that the FTC supports the goals of the 

CREATES Act and that the CREATES Act goes a very far way to 

readjust the incentives to address this problem. 

Mr. CONYERS. You do? What does that mean? 

Mr. MEIER. Well, one of the problems right now is if a brand 

company refuses to provide the samples, it basically can just sit 

back and run out the clock and let it just continue. 

What the CREATES Act does, as I understand it, is it readjusts 

those incentives so that it provides greater incentives for the 

branded company to actually engage in a negotiation and engage 

in bargaining with the generic to ultimately provide them with 

samples. And if the bargain doesn’t work, it gives the generic companies additional rights to pursue—that they could possibly pursue 

through litigation. 

Mr. CONYERS. So when you combine CREATES with the antitrust laws, you may get an effective strategy. Do you think that’s 

right? 

Mr. MEIER. I think that’s a fair statement. 

Mr. CONYERS. Now, I think you’ve noted that there are several 

ways that branded firms can use programs strategically to delay 

generic entry. And at least some of these methods will be difficult 

to reach effectively under antitrust laws. Is that a fair assessment? 

Mr. MEIER. That’s a fair statement also. Antitrust law doesn’t 

necessarily break down every possible barrier to entry and barrier 

to competition. We are limited, as I said during the prepared remarks, to bringing cases that fit within one of these three broad 

categories of antitrust violation. 

Mr. CONYERS. So what ought we do? 

Mr. MEIER. I think, as I’ve said before, I think the CREATES Act 

goes a long way to trying to resolve some of these issues. 

Mr. CONYERS. Now, last question, about vertical agreements. 

Could this be a violation of the Sherman Act? 

Mr. MEIER. Yes. It can be under certain circumstances. 

Mr. CONYERS. So how do we approach that? 

Mr. MEIER. As the Congress or as an antitrust enforcer? 

Mr. CONYERS. Well, we’re not antitrust enforcers, although we 

oversee that because it’s the law. But, you know, in our congressional capacity here with our Chairman and the rest of my colleagues, how do we deal with this Sherman Act challenge? 

Mr. MEIER. So if you are talking about the specific challenge of 

how do you deal with vertical agreements under the antitrust laws, 

it is my view, and speaking for myself, that we have adequate 

means under the antitrust laws as currently written to address 

ourselves to vertical agreements. That might be anticompetitive. 

Mr. CONYERS. Okay. This is a good start. 

Thank you, sir, very much. 

Mr. MEIER. Thank you. 

20 

Mr. CONYERS. Thank you, Mr. Chairman. 

Mr. MARINO. If you want to continue when we come back, you 

are very welcome to do that. They have called votes. We have about 

20 minutes or 25 minutes we are going to be delayed. But we stand 

in recess, and we will return as quickly as possible. 

[Recess.] 

Mr. MARINO. The hearing will begin. Sorry for the delay. The 

Chair now recognizes the gentleman from Georgia, Mr. Hank Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman, and thank the witnesses for their appearance today. 

I have heard reports that a significant portion of the patients either skip, delay, or reduce doses of prescription medication because 

of high drug prices. What is the FDA doing to address soaring drug 

prices? And do you believe that the FDA has adequate statutory 

authority to meaningfully address drug price increases, Dr. Gottlieb. 

Dr. GOTTLIEB. Thanks for the question. I share your concerns 

when patients forego necessary doses because they can’t afford 

their drugs. That is a concern of ours. It falls squarely on our public health mandate to worry about issues of access to needed medications. 

With respect to your question about do we have adequate authority, I would answer by saying I think we have untapped authority. 

I think there are things we could do within the scope of our current 

authorities to try to provide for more competition in the marketplace consistent with what Congress intended when it passed 

Hatch-Waxman. So, for example, we are looking at places we can 

make our generic drug approval process more efficient without sacrificing on the safety and effectiveness that people depend on. With 

respect to that, the standard that we maintain the markets so that 

people can’t come into the market, buy—for example, buy off lowvolume generics that might be used infrequently, raise the price 

substantially knowing that it might take us an average of 42 

months, which was the old standard, to get a subsequent generic 

drug approved in that category. 

So they are taking advantage of what I have called a regulatory 

arbitrage knowing that they could raise prices. And even if competition comes into the market, it is going to take us a long time 

to approve that. So we have committed to reviewing generic applications in eight to ten months for high-quality applications going 

forward. 

I think there is a number of places like this where we could address issues of access which would give people more low-cost options. Clearly, another one is the topic of today’s hearing, which is 

places where the generic companies can’t get access to the samples 

they need where the branded companies might be gaining certain 

rules to deny them the access that the bio—the sample they need 

to do their bioequivalent studies. 

Mr. JOHNSON. Well, with the authority that can be expanded 

that would enable drug pricing to be more competitive, do you believe that the FDA needs additional resources to address that challenge, or are the resources that you are getting now and what is 

projected for you to get according to the Trump budget plan—— 

21 

Dr. GOTTLIEB. Well, we could always do more with more, Congressman. And the generic drug approval group that offers generic 

drugs in particular has a very heavy burden and a very heavy 

workload. And we are not at the point we are at steady state with 

respect to generic applications where we will—we will always have 

a certain cohort in-house that are being worked. But we are continuing to build that number. So we are not—we are not getting 

out generic applications at the same pace we are getting them in. 

We will get there shortly, I believe. But it is a very—it is a challenging dynamic, because the market is continuing to expand, we 

are getting more applications. And so that group works very hard. 

I wouldn’t say that we—there is not an opportunity to look at 

new authorities that could address some—— 

Mr. JOHNSON. No. No. I am speaking of resources. 

Dr. GOTTLIEB. Resources. 

No. I was—when I was addressing resources, we also researched 

about authorities. But we can always do more with more, Congressman. There is no question that there—— 

Mr. JOHNSON. Do you need more to do your job more effectively? 

Dr. GOTTLIEB. I feel confident that we are going to meet our 

goals with the resources we have if the user fees are passed in a 

timely fashion by the deadline. 

Mr. JOHNSON. I understand. You don’t really want to delve into 

that issue—— 

Dr. GOTTLIEB. Fair enough. 

Mr. JOHNSON [continuing]. Forthrightly. But let me turn to Mr. 

Meier. 

And—some have suggested that there is no need for legislation 

to address reverse settlements, also known as pay-for-delay agreements, in light of the Supreme Court’s holding in FTC versus 

Actavis, that these agreements, ‘‘have significant adverse effects on 

competition.’’ 

Do you agree? 

Mr. MEIER. What I would say is we have made a great deal of 

progress, and it is not just the FTC. There are private cases. There 

are cases brought by States’ attorneys general. And I have lost the 

exact count, but there may be more than 20 cases going on right 

now across the country. And I do think, based on evidence we have 

seen, that pharmaceutical companies have pulled back on how frequently they are doing these and to what degree and how long the 

delay is. 

You know, the Commission itself hasn’t taken a position on any 

specific legislation. But, again, I think if there -- if somebody’s got 

a legislative proposal and thinks that they can address the problem 

more rapidly and better than what we are able to do through law 

enforcement, I am sure that we would be happy to help in any way 

that we can to provide any technical assistance that we could. 

Mr. JOHNSON. Thank you. 

I yield back. 

Mr. MARINO. The Chair recognizes the Congressman from Florida, Mr. Gaetz. 

Mr. GAETZ. I thank for the Chairman, and I am grateful for the 

hearing. 

22 

Currently, the Federal Government maintains a patent on Cannabis. And for those that may find that surprising, it is Patent No. 

6,630,507. And I also believe that the Federal Government, 

through its various appendages, has engaged in anticompetitive 

practices as it relates to Cannabis. And so I am grateful for the 

Chairman calling a hearing, having the FDA here. 

Dr. Gottlieb, marijuana is a schedule 1 drug, right? 

Dr. GOTTLIEB. Yes, that is right, Congressman. 

Mr. GAETZ. And for those watching, a schedule 1 drug means 

that the Federal Government has taken the position that marijuana has no medical use. Is that right? 

Dr. GOTTLIEB. It has not demonstrated to be safe and effective 

for clinical use. That is right, Congressman. 

Mr. GAETZ. And so as we look schedule 1 in some context with 

the schedules of other drugs, hydrocodone is a schedule 2, right? 

Dr. GOTTLIEB. I believe so, Congressman. 

Mr. GAETZ. And raw opium is a schedule 2, right? 

Dr. GOTTLIEB. I believe it has certain clinical applications. That 

is right. 

Mr. GAETZ. And powdered opium is a schedule 2, right? 

Dr. GOTTLIEB. You probably have a list. 

I believe that is correct, yes. 

Mr. GAETZ. And fentanyl is a schedule 2, right? 

Dr. GOTTLIEB. That is correct. 

Mr. GAETZ. And methamphetamine is a schedule 2, right? 

Dr. GOTTLIEB. That is correct. 

Mr. GAETZ. And even cocaine is a schedule 2, right? 

Dr. GOTTLIEB. It has certain clinical uses. Yes, Congressman. 

Mr. GAETZ. And so when assessing whether or not it has—a drug 

has these acceptable medical uses, there is a five-part test that assesses the merits. Is one of the elements of that test that there 

must be adequate safety studies demonstrating appropriate medical use? 

Dr. GOTTLIEB. I believe so. I am not intimately familiar with the 

five-part test. I know what you are referring to. I believe it is. 

Mr. GAETZ. And so in order to meet that test and demonstrate 

potential medical use, one would presumably need to do research, 

right? 

Dr. GOTTLIEB. You would need to do clinical studies. 

Mr. GAETZ. And how does one do a clinic study on a schedule 1 

drug, currently? 

Dr. GOTTLIEB. It is currently the ability to study marijuana. And 

there is a number of INDs. There is probably a few dozen INDs inhouse right now studying either the ingredient itself or an extract 

from it. And there is an—there is some approved therapies based 

on the extract from medicinal—from marijuana. 

Mr. GAETZ. If the University of Florida in my State wanted to 

engage in studies regarding the medical use of Cannabis, would 

that be more or less difficult than if they wanted to study the medical use of cocaine? 

Dr. GOTTLIEB. I don’t know, Congressman. I would have to get 

back to you on that and ask the experts at the—my drug center. 

Mr. GAETZ. Well, I would very much like to hear that. If anyone 

in the Federal Government and anyone who works at the FDA is 

23 

taking the position that it is not more difficult to study medical application of a schedule 2 drug, like cocaine, than a schedule 1 drug, 

like marijuana, I would be very eager to see what the basis for that 

was. 

Right now, I have been told by universities in my State that, 

were they to engage in research on the medical application of marijuana, they could potentially impair over $100 million dollars in 

other Federal grants that they receive. Is that something that you 

are familiar with? 

Dr. GOTTLIEB. Congressman, it probably wouldn’t fall within our 

purview if there are issues with getting access to it. It falls outside 

the scope of our jurisdiction. A lot of that falls within the jurisdiction of DEA. 

Mr. GAETZ. Well, as a physician yourself, as an FDA commissioner, do you have an opinion on whether or not marijuana ought 

to be listed as a schedule 1 drug? 

Dr. GOTTLIEB. I haven’t reviewed the literature, Congressman. 

There is no—there is no clinically demonstrated use for marijuana 

right now. There is no approved use for smoked marijuana. It has 

not gone through clinical studies to prove safety and effectiveness 

for any indication. 

Mr. GAETZ. Does it seem like a logical tautology that we say we 

cannot declassify marijuana as a schedule 1 drug because we don’t 

have the clinical studies and its status as a schedule 1 drug impairs further clinical studies? 

Dr. GOTTLIEB. Well, look. Congress has the authority to take this 

up. And I think it has been taken up in some forms in the past 

and contemplated by Congress. 

The clinical studies, as I understand it, and I made the point 

that there is a number of INDs in-house, some of that is, I believe, 

for the raw ingredient, which I think is the subject of your question. Some of it is for the extracts of marijuana. So there are clinical studies going on in people who are studying the safety and effectiveness in rigorous trials that could potentially lead to an approved indication if they are successful. 

Mr. GAETZ. Yeah. And I know that right now—I believe it is the 

University of Mississippi that is the only place where they can 

grow the product in order to do the studies. Are you familiar with 

that dynamic? 

Dr. GOTTLIEB. The issues around access and growing—growing 

and then access to product to do clinical studies for regulatory purposes falls outside of our direct jurisdiction, Congressman. 

Mr. GAETZ. Well, I want to take my remaining few moments to 

thank Chairman Goodlatte for the public commitment that he 

made at a recent Judiciary Committee meeting that we are going 

to study this question of research. I also want to thank the Ranking Member of this Subcommittee for his desire to work on research applications for medical Cannabis. It seems entirely unacceptable to me that we block research that could potentially show 

us the medical use that would then justify delisting Cannabis. 

And I yield back. 

Mr. MARINO. The Chair now recognizes the Congressman from 

California, Congressman Swalwell. 

24 

Mr. SWALWELL. Thank you, Chair. And, Chair, the beauty of our 

democracy is that I sat here for hours yesterday, and I think I disagreed with 100 percent of the things that Mr. Gaetz said yesterday. But today I sit here, and I agree 100 percent with what he 

just said. So I am glad that he and I, and Mr. Cicilline, and others 

can work together on what I agree is an important issue. 

But I do thank the Chair and the Ranking Member for calling 

us here to talk about how we can lower drug prices and increase 

the therapeutic drugs—the therapies and drugs that can get to the 

market to help people. 

I did have some questions. Dr. Gottlieb and Mr. Meier, thank you 

both for appearing. With respect to REMS, Risk Evaluation and 

Mitigation Strategies, what is the percentage of REMs on the market with respect to total number of drugs on the market? 

Dr. GOTTLIEB. I don’t know what—I couldn’t tell you what the 

total is right now. In 2016, there were 115 new drugs or new biologics approved, and nine were approved with REMS. So that gives 

you sense of the proportion by year. And it has been fairly steady 

with respect to the number of drugs that are getting approved with 

REMs. So it is not something that is spiking up. 

Mr. SWALWELL. Do you believe that all REMs are created equally? And what I mean is, for example, certain controlled substances 

like opioids, and fentanyl, and sodium oxybate, which is, you know, 

commonly referred to as the date rape drug, they are regulated 

under REMs, but they seem to be quite unique in that they are, 

to me, at least, in the category of those that you especially want 

to control and protect. Would you agree with that? 

Dr. GOTTLIEB. Yeah, there are some common situations where 

you see REMS apply drugs that have abuse potential. It can be diverted. Drugs, for example, that have risk of teratogenicity associated with them where you might want to implement certain testing 

before the application of drugs. So there are some standard categories. If you look to all the drugs that have REMs, you will see 

some patterns appearance for sure. 

Mr. SWALWELL. And, Commissioner, you wrote, on July 6, 2017, 

in a JAMAnetwork.com article entitled ‘‘Marshaling FDA BenefitRisk Expertise to Address the Current Opioid Abuse Epidemic’’ 

that the FDA limits prescribing of sodium oxybate to certified prescribers. In addition, the drug may be dispensed only to enrolled 

patients by a certified pharmacy and only by a certified pharmacy 

that shifts drugs directly to patients. Sodium oxybate is not available in retail pharmacies. Then you actually laid out, I think, a 

good case as to why opioids should also, you know, be controlled 

and regulated, you know, in that same manner in talking about the 

opioid crisis. 

Do you foresee, as we look at making sure that drugs can get to 

the market and that, you know, we are not allowing anticompetitive practices to take place, that there is a special category, though, 

for those types of drugs that have, as I just mentioned, those certain characteristics that you really want to make sure controls are 

in place? 

Dr. GOTTLIEB. That is absolutely true, Congressman. It has been 

the case that, for certain drugs, historically, certain controls have 

25 

been put in place when there are special circumstances where 

there are very unique risks associated with them. 

The thrust of that article was related to an imperative by the 

FDA to consider the risks associated with the potential illicit use 

of the drugs and how it looks at risk-benefit balance both pre and 

post-market as well as the risks associated with the labeled use of 

the drugs. And we were laying out the basis for why we believe we 

need to look at the illicit risk as well. 

But it is the case, to your underlying point, that there are certain 

risks associated with drugs where, historically, we have applied 

REMS, and historic—and we will likely apply them going forward. 

And a lot of them are well-defined. 

Mr. SWALWELL. Right. It sounds like a challenge for us, Mr. 

Meier. I would be interested in your thoughts, as lawmakers, to 

make sure that we don’t have anticompetitive practices but that we 

are still doing everything we can to protect the public from, you 

know, God forbid, a date rape drug being, you know, widely accessible without any reigns or controls. 

Mr. MEIER. Well, I think that is precisely right is finding that 

balance. 

Mr. SWALWELL. Thank you, Mr. Chairman. 

I yield back. 

Mr. MARINO. Thank you. Seeing no other Congress Members on 

the dais for questioning, this concludes our first panel. I want to 

thank Dr. Gottlieb. I want to thank Attorney Meier for being here. 

You were very helpful, and you are excused. 

Now we call the second panel to come up and—to the table. 

Now that you-all are comfortably seated, I would ask you to 

stand and raise your right hand to be sworn in. 

Do you swear or affirm that the testimony you are about to give 

before this Committee is the whole truth, nothing but truth, so 

help you God? 

Please be seated. 

Let the record reflect that the witnesses have responded in the 

affirmative. 

I am going to read each of your bios, and then we will begin with 

you then making your 5 minute statements. But I will go through 

all four bios first. 

David Olson is an associate professor at Boston College Law 

School teaching patents, intellectual property, and antitrust law. 

Prior to joining Boston College, he worked at Stanford Law School’s 

Center for Internet and Society where he researched in patent law 

and litigated copyright fair use impact cases. 

Before entering academia, Professor Olson practiced as a patent 

litigator at the law of the Kirkland & Ellis, LLP, and clerked for 

Judge Jerry Smith of the U.S. Court of Appeals for the Fifth Circuit. He earned his bachelor’s degree from the University of Kansas 

and his JD from Harvard Law School. 

Welcome, Professor. 

Professor Erika Lietzan is an associate professor of law at the 

University of Missouri School of Law. Professor Lietzan researches, 

writes, and teaches primarily in the areas of drug and device regulations, intellectual property, and administrative law. She recently 

completed a historical and empirical examination of the new drug 

26 

research and development paradigm in the United States and the 

relationship between the length of that process and incentives to 

innovate. 

Prior to teaching, she was in private practice, including eight 

years as a partner at Covington & Burlington in Washington, D.C. 

Professor Lietzan was involved in every major amendment to the 

Federal Food Drug and Cosmetic Act between 1997 and 2014 working as outside counsel and sometimes lobbyist for various individual companies as well as the trade association PhRMA. 

She serves in the leadership of the Food and Drug Law Institute 

and served for many years in the leadership of the Science and 

Technology section of the American Bar Association. The professor 

received a bachelor’s degree in history from the University of North 

Carolina where she graduated with honors, her master’s degree in 

history from UCLA, and a law degree with high honors from Duke 

Law School. Professor, welcome. 

Alden Abbott is the Rumpel Senior Legal Fellow and Deputy Director of the Meese Center for legal and judicial studies at the Heritage Foundation. Prior to joining the Heritage Foundation, he 

served as director of Patent and Antitrust Strategy for BlackBerry 

and in a variety of senior Government positions, including director 

of antitrust policy for the Federal Trade Commission, acting general counsel of the Commerce Department, chief counsel for the 

National Telecommunications and Information Administration, and 

senior counsel in the Justice Department. 

Mr. Abbott is an adjunct professor at the Antonin Scalia Law 

School at George Mason University and was a visiting fellow at All 

Souls College, Oxford University, and a Wasserstein Fellow at Harvard Law School. He is also a member of the Leadership of the 

American Bar Association’s Antitrust Section and a Non-Governmental Advisor to the International Competition Network. 

Attorney Abbott received his bachelor’s degree from the University of Virginia, his master’s degree in economics from Georgetown 

University, and his JD from Harvard Law School. Welcome. 

Aaron Kesselheim is an associate professor of medicine at Harvard Medical School and a faculty member in the Division of 

pharmacoepidemiology and Pharmacoeconomics in the Department 

of Medicine at Brigham and Women’s Hospital. His research focuses on the effects of intellectual property law and regular policies 

on pharmaceutical development, the drug approval process, and the 

cost, availability, and use of prescription drugs both domestically 

and in resource-poor settings, Jen Center for primary care at 

Brigham and Women’s Hospital. 

He is a member of the New York State Bar and is a patent attorney. And within the Division, Dr. Kesselheim leads the program on 

regulation, therapeutics and law, an interdisciplinary research core 

focuses on intersections among prescription drugs and medical devices, patent health outcomes, and regulatory practices and the 

law. And modernizing clinical trials and served as a consultant for 

the NIH, FDA, Institute of Medicine, USPTO, and numerous state 

government offices. 

He has been a visiting scholar at the Yale School of Medicine and 

School of Management and the visiting associate professor of law 

at Yale Law School. 

27 

Dr. Kesselheim earned his bachelor’s degree from Harvard College, his JD from the University of Pennsylvania Law School, his 

MD from the University of Pennsylvania School of Medicine, and 

his MBH from Harvard School of Public Health. Doctor, welcome. 

Each of the witness’s written statements will be entered into the 

record in its entirety. I ask that each of you summarize your statements in 5 minutes or less. And to help you, you have lights in 

front of you. When that light switches from the green to yellow, you 

have a minute left, and from yellow to red means your time’s expired. But as I told the last group, when I sit there, I never look 

at the lights. So I will diplomatically pick up the gavel, and maybe 

that will give you an indication to wrap it up. 

Now we are going to hear from our distinguished panel. And, 

Professor, the floor is yours. 

TESTIMONY OF PROFESSOR DAVID S. OLSON, ESQUIRE, ASSOCIATE PROFESSOR OF LAW, BOSTON COLLEGE LAW 

SCHOOL; PROFESSOR ERIKA LIETZAN, ESQUIRE, ASSOCIATE 

PROFESSOR OF LAW, UNIVERSITY OF MISSOURI SCHOOL OF 

LAW; ALDEN ABBOTT, ESQUIRE, DEPUTY DIRECTOR AND 

SENIOR FELLOW, THE HERITAGE FOUNDATION; AND PROFESSOR AARON KESSELHEIM, M.D., M.P.H., ASSOCIATE PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL 

TESTIMONY OF PROFESSOR DAVID S. OLSON 

Mr. OLSON. Thank you, Chairman Marino, Ranking Member 

Cicilline, and members of the Subcommittee. I appreciate the opportunity to testify today. A more detailed version of my remarks 

is available in the written testimony, as you said. 

Let me state from the outset my firm belief that patents are necessary to give adequate incentive to develop new drugs. After patent expiration, however, market competition from generics is the 

best way to provide patients with lifesaving drugs that they need 

at the best prices. I believe that the CREATES Act, which is one 

of the things being considered at this hearing, can be an important 

step in addressing abuse of FDA regulations. 

Forcing brand companies to share samples with generics is necessary, will not undermine incentives to invest in inventing new 

drugs, and does not violate patent or antitrust policy. Moreover, 

the narrowly tailored approach of the CREATES Act is superior to 

antitrust litigation. 

I would be pleased to discuss these issues more with the Subcommittee. But I want to focus my oral remarks on the problem 

abuse of REMs patents and the FDA approval process. In addition 

to performing bioequivalent studies to support an ANDA, FDAAA— 

the FDAAA Act requires that generic and brand manufacturers use 

a single shared REMS system for risk mitigation unless the brand 

manufacturer’s system is either, one, too burdensome or, two, is 

protected by a patent or a trade secret that the brand company will 

not license. 

The problem that has arisen is that some brand companies have 

patented their REMs systems, or their REMs, with Elements to Assure Safe Use, ETASU, and then have refused to license generics. 

This means the generics cannot use that system. But more probVerDate Sep 11 2014 06:19 Jun 07, 2018 Jkt 028040 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 E:\HR\OC\A235.XXX A235
28 

lematically, in some cases, the brand companies have then gone on 

to file citizen petitions arguing that a generic may not use another 

or comparable version of a REMs with ETASU program that the 

generic comes up with on its own because no other system would 

be as safe or effective as the patented ETASU. What this effectively does is keep generics off the market for the entirety of the 

period of the REMS with ETASU patent if successful. 

This has been done—asserted more than once. For example, 

Celgene took this approach in arguing that generic versions of 

Thalomid could not be sold. Besides this, brand companies also list 

REMs patents in the Orange Book notwithstanding the fact that a 

REMS patent is for a method of—is not for a method of use but, 

rather, a method of distribution. This could result in extension of 

the monopoly over a drug for almost 20 more years depending on 

the data filing of the REMS patent. 

It is worth noting that the parameters for a REMS with ETASU 

system are set forth in the FDAAA of 2007, and specific requirements for ETASU are given in the act. For instance, the FDAA sets 

out the requirements for ETASU including very simple and 

straightforward things like only—like educating doctors and hospitals, only allowing doctors and hospitals that have been educated 

and certified to prescribe the drug, having restricted distribution of 

the drug, patient testing and information, counseling patients, 

monitoring patients to make sure the drug is administered safely, 

and maintaining the database to coordinate all this information. 

This is set out in the statute. 

If you look at REMs with ETASU patents, which I have spent 

some time doing, what you note is that they track very closely to 

the statute. For example, claim 1 from Merck’s REMS patent for 

Entereg contains the following steps: Identifying relevant hospitals; 

providing such hospitals with literature about the drug, wherein 

the drug is Entereg or a generic; identifying a subpopulation of 

hospitals which have measures in place to limit use of the drug 

wherein said measures comprise order sets, protocols, or guidelines; 

then registering the subpopulation using a computer-readable storage medium, authorizing them to dispense the drug, and monitoring the patients. Very closely track the statute and yet this is 

being patented. 

The problem with this is that not only might this be obvious, but 

if generics may not use the patented system, they may not be able 

to safely distribute the drugs and may be kept off the market. 

There is no solution to this problem under the status quo. 

The CREATES Act does provide a narrowly tailored and appropriate solution. By requiring branded and generic drugs to—companies to enter into a shared single REMS system within 120 days 

of a request, this forces them to share unless a comparable system 

can be approved by the Secretary. The beauty of this is that what 

it will do—this approach will do is it will stop REMS companies 

from abusing REMS patents if they argue that there is no ability 

to distribute the drug except through the REMS process. Then 

what the statute does force them to do is to share their process. 

And I would just wrap up by saying that that forced sharing is 

neither a violation of patent policy nor of antitrust law. And I 

29 

would be happy to speak more to that in the question and answer. 

Thank you. 

Mr. Olson’s written statement is available at the Committee or on 

the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-Wstate-OlsonD-20170727.pdf 

Mr. MARINO. Thank you, Professor. Professor Lietzan. 

TESTIMONY OF PROFESSOR ERIKA LIETZAN, ESQUIRE 

Ms. LIETZAN. Chairman Marino, Ranking Member Cicilline, and 

members of the Subcommittee, thank you for this opportunity to 

speak with you today. 

I was asked to talk about three aspects of the FDA framework 

that are the focus of complaints that brand companies are acting 

improperly and may be violating antitrust law. 

The first is FDA’s citizen petition process which furthers the 

open Government principles of transparency, public access, and accountability. Anyone may petition FDA to take any administrative 

action, and the petition and any comments on it are public documents. Petitions play an important role in our political system. The 

public has a strong interest in ensuring that executive branch 

agencies work within the constraints of the laws that Congress 

writes, and a robust petitioning practice adds a layer of surveillance to complement the oversight function of the legislative branch 

and the review function of the judicial branch. 

You have been told that brand companies file frivolous petitions 

that delay generic drug approval. These claims rest on anecdotes 

and a rhetoric, not evidence. Congress passed a law in 2007 stating 

that FDA may not delay approval of a generic drug due to a petition, unless necessary, to protect the public health. Since then, 

FDA reports only five generic drugs have been delayed without 

public health justification out of more than 4,000 copies approved. 

A high denial rate is not proof that petitions are frivolous. Drug 

approval decisions can require difficult judgment calls about appropriate regulatory policy in the face of scientific uncertainty and 

about the flexibility of the law to accommodate new facts. Differences in opinion and perspective are natural. A valid petition 

may simply lack persuasiveness at the end of the day. 

Congress has also been told that innovative companies use 

REMS restrictions to block generic drug approval. To the best of 

my knowledge, though, innovators refuse to provide samples primarily because they have concerns that requesting companies lack 

adequate safeguards to address the risks presented by these drugs. 

And these concerns are reasonable. 

Access restrictions are usually imposed to mitigate severe side effects, like birth defects or irreversible organ damage. And even 

minor lapses in safety protocols by any party at any point can have 

horrific consequences. 

If Congress wants to encourage innovators to provide samples, it 

should protect them from liability arising out of the actions of the 

third party once a restricted drug has left the innovator’s special 

access system. We should not force innovators to provide their 

products to generic companies. If a drug is under patent, this 

would require the company to practice its patent for the benefit of 

30 

a competitor. It is a bedrock principle of U.S. law that a patent 

owner has no duty to practice its patent at all. 

We lack evidence of a systemic problem that would justify such 

a fundamental change to the intellectual property system. Only 22 

brand drugs have access restrictions and no generic application. 

And more than half of those are so new that FDA statute doesn’t 

allow approval of a generic or by a similar anyway. It is not clear 

how many, if any, lack generic competition because an innovator 

didn’t share its drug. 

Finally, there are concerns when the price jumps on a drug that 

has been inexpensive for years. Sometimes this results from FDA’s 

unapproved drugs initiatives. And it is important to understand 

why this happens. Several thousand drug products are marketed 

without the required FDA approval. 

Many have been used for half a century or longer, and some are 

even covered by insurance. Some are not safe. Others are not effective, which is a problem because it keeps patients from drugs that 

do work. 

FDA focuses its enforcement efforts on the companies that sell 

these drugs which present a public health concern. FDA can’t force 

the other companies to file applications. They would have to threaten enforcement action. And enforcement action threats are effective 

only if backed up. This would require resources that FDA doesn’t 

have. It would also take medicines away from patients. 

So after approving an application, FDA removes the competing 

products from the market. This ensures that patients receive the 

specific product that was studied, and it preserves the integrity of 

the approval system. It also encourages applications. 

Usually generics can be approved three years later. But in the 

meantime, the company that submitted the application can recover 

its costs. This company hasn’t done anything wrong. In fact, it is 

the one company that chose to comply with the law to bring an illegally marked product into the FDA system, but the system has 

taken away a cheap medicine from patients. Clearly we need a better solution that maintains the integrity of the drug-approval 

scheme but doesn’t deprive patients of drugs they rely on. 

In sum, regulated industries, consumers, and other stakeholders 

share responsibility with FDA for the public health mission enshrined in the statute. When the rhetoric and anecdote are laid 

aside, the evidence suggests that regulated entities generally operate in good faith within this framework. And when companies protect their property rights, participate in open Government, or protect themselves from unfair liability exposure, it would be a mistake to take action against them. Instead we should look for ways 

to support FDA in its public health mission and to encourage private choices that we prefer as a public policy matter. Thank you. 

Ms. Lietzan’s written statement is available at the Committee or 

on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-Wstate-LietzanE-20170727.pdf 

Mr. MARINO. Thank you, Professor. Attorney Abbott. 

31 

TESTIMONY OF ALDEN ABBOTT, ESQUIRE 

Mr. ABBOTT. Chairman Marino, Ranking Member Cicilline, and 

distinguished members of the Subcommittee, I applaud you for convening this hearing on a very important public policy matter. 

The views I express today are my own and should not necessarily 

be construed as representing any official position of the Heritage 

Foundation. 

Today I will briefly note the interplay between regulation of the 

competitive process before commenting specifically on the potential 

abuse of FDA citizen petitions. And I will summarize my views on 

a CREATES Act of 2017. 

Extensive economic research demonstrates that regulated entities may manipulate regulatory process to undermine competition. 

Such regulatory manipulation is harmful to the American economy. 

It often defers entry into a market and thus precludes competition 

on the merits thereby raising prices above competitive levels, reducing product quality spawning economic inefficiency and deterring innovation which is a key driver of economic growth. 

As a general matter, in order to maximize economic welfare, Federal regulators should seek to devise rules that are as procompetitive and adds little subject to an anticompetitive manipulation 

by private parties as possible consistent with statutorily set goals. 

And I am not commenting specifically on FDA rules, but I think 

the FDA certainly should and probably will go about doing that. 

There are principles of guidance provided by organizations such as 

the OECD/International Competition Network in which I am involved. And there is also general guidance available from competition economists, for example, at the Federal Trade Commission and 

Justice Department, who actually, in the past, in the 1970s, provided a very important role in promoting regulatory reform and 

transportation, in aviation. 

Now, one particular sort of regulatory manipulation that undermines competition is a taking of actions by an incumbent firm to 

forestall entry into the market by a potential competitor. References have been made to potential abuse of FDA citizen petitions 

to delay entry from producers of generic versions of branded drugs. 

Our current regulations require the FDA review and respond to 

every citizen petition receives creating the potential of delay. 

Now, claims have been made that citizen petitions have been 

filed to undermine competitive generic entry into certain pharmaceutical matters. Those concerns have been noted by the FDA, for 

example, in a 2015 report. And most recently, in February 2017, 

the Federal Trade Commission filed a complaint in Federal District 

Court alleging that Shire ViroPharma, a branded pharmaceutical 

company, engaged in a series of meritless filings, including 24 FDA 

citizen petitions to delay generic entry into a particular market. 

Now, clearly, baseless FDA filings made by brand name Pharma 

firms lacking any plausible efficiency justification used solely to 

forestall competition undermine the competitive process. FDA and 

Congress certainly should consider what, if any, additional legislative or regulatory steps may be appropriate to curb such abusive 

filings including, but not necessarily limited to, reform of citizen 

petition process. 

32 

Now, the Federal Trade Commission’s suit against Shire 

ViroPharma appears to advance sound policy. I would note, however, a slight bit of caution. Although antitrust actions occurred 

clearly pretextual petitioning, at a potential to reduce harmful regulatory delays, such cases need to be selected with great care by 

public officials. I believe the Federal Trade Commission certainly 

appears to have done that in this case. But certainly, you want to 

be careful. And the Supreme Court in its case law is sort of cavil 

to bringing suits of that kind. 

Now, the CREATES Act of 2007 is a modified, and I believe, an 

improved version of its 2016 CREATES Act on which I testified favorably before Senate Judiciary. Now, the 2017 act gives the FDA 

more discretion than 2016 act to approve alternative safety protocols for high-risk drugs rather than require parties to develop 

shared safety protocols, and it does away with a concern of alleged 

free riding on safety protocols developed by the branded company. 

Now, that 2017 act also creates a statutory gap. I explain in my 

testimony, as I did my testimony last year, there are real limitations in the application of the antitrust laws to cases of regulatory 

violations and refusals to supply. Not that it is necessarily impossible, but these cases are very hard to bring. And because of that, 

I think the CREATES Act is appropriate and narrowly tailored to 

fill a niche that antitrust may not really be able to address appropriately. 

Thank you once again. I look forward to your questions. 

Mr. MARINO. Thank you, Attorney Abbott. Dr. Kesselheim. 

Mr. Abbott’s written statement is available at the Committee or on 

the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-Wstate-AbbottA-20170727.pdf 

Dr. KESSELHEIM. Chairman Marino, Ranking Member Cicilline, 

and other members of the Subcommittee, thank you for this opportunity to join you today. 

The reason today’s hearing is so important is that low-cost 

generics and biosimilars improve patient adherence and clinical 

outcomes. And generics have led to trillion dollars in healthcare 

system savings over the last decade. However, too often branding 

manufactures work to delay the availability of generics using different business strategies. I am going to mention, briefly, five. 

First, most drugs have patents covering their active ingredients, 

but manufacturers will seek secondary patents on peripheral features such as the drug’s metabolite or method of administration. 

Generic manufacturers then have to design around these patents 

or challenge their validity in court. One classic example with the 

anti-ulcer medication, Prilosec, which was protected for additional 

years by a patent on the pill’s coating. 

In one study I led, we found that Medicaid alone could have 

saved $600 million on this single drug had a low-cost generic been 

available before this delay. In another study of two HIV drugs, we 

found nearly 200 such secondary patent claims threatening to 

delay generic availability for 12 years. 

Another strategy aided by these secondary patents is product 

hopping in which manufacturers switch to different products, sometimes trivially different, pulling their old generic—their old product 

33 

off the market to stay one step ahead of generic manufacturers. For 

one antibiotic drug, the manufacturer switched first from a capsule 

to a tablet, then to a slightly different dose, then to a tablet with 

a single score, and finally to be tablet with two scores. 

Problematic patents may be challenged in court. But a third delaying strategy is for branding manufacturers to make substantial 

payments to generics to end these cases in so-called pay-for-delay 

settlements. 

The FTC estimated in 2010 that such settlements would cost 

Americans $3.5 billion annually extra over the subsequent decade. 

An analysis revealed that, when these cases were litigated to completion, two-thirds of the cases related to secondary patents. And 

in those cases, generics were victorious. Pay-for-delay settlements 

are naturally much more likely to cover challenges over secondary 

patents. 

A fourth strategy involves preventing generic manufacturers 

from getting samples or other key information that they need for 

FDA approval. And we have talked about that a lot today already. 

To help the HIV drug Daraprim sustain its 5000 percent price increase, the manufacturer restricted the distribution through a single specialty pharmacy in part so the generics couldn’t get it. 

The FDA has received about 150 inquiries from generic manufacturers regarding inability to secure samples. For drugs protected by 

special REMS-prescribing restrictions, generic manufacturers need 

to be able to use the same system for their interchangeable drugs. 

But branding manufacturers have delayed generic entry by refusing to share information about their REMS or getting secondary 

patents covering their REMS processes. 

Finally, as Mr. Abbott explained, manufacturers use citizen petition requests to the FDA to delay generic drug entry. One review 

of 5 years of petitions found that 87 percent of these petitions were 

filed by manufacturers of brand-name drugs, and 92 percent were 

ultimately denied. 

Relying on FDC antitrust enforcement is not sufficient to stop 

these tactics. Patients need Congress to step in. A first step would 

be to pass the CREATES Act which provides a process for requiring manufacturers to provide key drug samples and to prevent 

some REMS abuses. But this Committee should also consider other 

potential reforms. I am going to mention four, and I have other 

suggestions in my written comments. 

First, to prevent improper secondary patents from delaying generic entry, Congress should require formal patent review when 

these patents are listed with the FDA. Many secondary patents 

would not pass such scrutiny and could be weeded out before 

lengthy litigation is required. 

Second, the Committee should consider additional mechanism to 

address problematic pay-for-delay settlements that continue to this 

day even after the FTC versus Actavis case. Including preventing 

settlements with transfers of value for delayed entry over the cost 

of the litigation or increasing the penalties for settlements found to 

be anticompetitive, such as full disclosure of profits or treble damages. 

Third, all terms of REMS should be public information, and 

REMS patents should not be able to be listed with the FDA. UltiVerDate Sep 11 2014 06:19 Jun 07, 2018 Jkt 028040 PO 00000 Frm 00037 Fmt 6633 Sfmt 6602 E:\HR\OC\A235.XXX A235
34 

mately, I believe we should move to a system in which it is the 

FDA with sufficient resources that controls and manages the 

REMS as a public good, because it will increase efficiency for patients if brand names and their interchangeable generics are all 

part of the same REMs. 

To address the misuse of citizen petitions, the Committee could 

also expand the opportunities for the FDA to summarily reject petitions without requiring an in-depth review. 

Manufacturers of brand-name drugs use many strategies to delay 

generic entry, of which I have only highlighted some of them today. 

That is bad for patients, bad for the economy, and it reduces innovation. One study found that it was the ending of market exclusivity periods in contrast to their indefinite extension that was 

most associated with the introduction of new branding products. 

The CREATES Act is a laudable first step in helping address 

some of these strategies, but other policy reforms are also needed. 

I appreciate the Committee’s commitment to solving these issues 

and would be happy to continue to be involved in the deliberative 

process. 

Mr. Kesselheim’s written statement is available at the Committee 

and on the Committee Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-Wstate-KesselheimA-20170727.pdf 

Mr. MARINO. Thank you, Doctor. We will now begin with questioning. There will be other members that may come in and out. 

I am going to start off with a question for each, you if you care 

to answer it. I will start with Professor Olson and work our way 

down to Dr. Kesselheim, and then I have another question that I 

would like each of you to respond to, if you care to. Then I would 

start with Dr. Kesselheim. Okay. 

Concerns have been raised that the approval of a generic alternative REMS distribution system will inevitably lead to patent infringement systems. Given the likely overlap with the branded 

manufacturers original distribution system, do you anticipate this 

being a problem? And I have been a critic of bringing—wanting to 

so much bring the Patent and Copyright Office into the 21st Century. 

So Professor Olson. 

Mr. OLSON. Yes, Mr. Chairman. I do think that the way that patents are written, the fact that they have to track the statute very 

closely, means that it will be very easy to bring infringement suits. 

Even if the patent is found invalid or the suit is not successful, this 

listing them in the Orange Book and the litigation can significantly 

delay generic entrance. 

Furthermore, there is no additional incentive that is given by 

granting REMS patents that is needed, because there is already an 

incentive to create the REMS in ETASU systems because you don’t 

get to market your drug unless you create it. They are a tiny fraction of a cost of drug development. And so by forcing sharing, or 

at stopping companies from arguing that if generics don’t share 

they may not market the drug, we are not going to be losing anything. We are not going to lose any benefit. 

Mr. MARINO. Professor. 

35 

Ms. LIETZAN. Well, first of all, I disagree with Professor Olson 

that there isn’t much difference between the statutory language 

and the REMS patents the statute describes in very general terms 

the type of access restrictions that are permitted. And anyone who 

has ever worked on designing a risk management plan or negotiating a REMS with FDA can tell you that there are many ways to 

mitigate a risk. And the REMS themselves are very detailed, and 

there are a lot of decision points along the way. 

I think the question that matters is whether it is possible to 

mitigate a particular risk more than one way. And that is a clinical 

question and a regulatory question. It has to be answered case-bycase. But having worked on REMS issues for companies, my instinct is, yes, there is—there is absolutely more than one way to 

design a system. 

Mr. MARINO. Thank you. 

Attorney Abbott, do you care to comment? 

Mr. ABBOTT. Well, it is certainly possible, Mr. Chairman, as I 

mentioned, the possibility of designing around a patent. That may 

be tricky. There is certainly a possibility of infringement lawsuits. 

It could also, perhaps, be dealt with legislative. And if Congress 

wanted to, could make it clear that any actions taken to develop 

sort of a REMS system by potential entrant, is not going to constitute patent infringement, I am just not saying good it is a good 

idea or not, but there may be ways to have very, very narrow modifications to try and forestall the problem of opportunistic patent 

litigation here. You have to be very careful, you know, and maintain appropriate incentives to innovate. 

But I think, as Professor Olson mentioned, they probably already 

are given the need to meet FDA regulatory requirements to develop 

these systems. But I am not an expert in this area, but that is just 

my initial reaction. 

Mr. MARINO. Doctor. 

Dr. KESSELHEIM. I think that here we should be thinking about 

what is best for the patient. And to me the best thing for our patients is to have a single REMS system, because, again, these are 

otherwise interchangeable drugs. It doesn’t make any sense if you 

are a clinician or a patient to be enrolling people in different REMS 

for otherwise interchangeable drugs based on a manufacturer that 

you may not know. 

And so I think that ultimately we should be trying to develop a 

system where shared REMS are able to be done and are able to be 

established in an efficient way. And I think that we can do that 

by, for example, creating royalty free licenses for patented REMS 

so that generic manufacturers can use them or other mechanisms 

to try to encourage the development of shared REMS for patients’ 

benefits. 

Mr. MARINO. I am going to play a little devil’s advocate with myself here, and I would like to hear what you folks have to say about 

it. And we will start with you, Dr. Kesselheim. 

I am very familiar with, because I have a very dear friend who 

is now retired from his 90s, who was a researcher, Ph.D., and come 

working in with drug companies, which I won’t mention. And I 

saw, and he has explained to me over the years, the time, the 

labor, the expense that goes into developing a drug. 

36 

How do we—or should be even think about that concept of the 

profit or not meeting the profit to make sure that companies still 

are in the research aspect of creating life-saving drugs. 

Do you understand my question? 

Dr. KESSELHEIM. Sure. So, I mean, I—obviously I think it is very 

important for there to be a period of time when companies can 

make back the investment that they had in their product and make 

a profit on that. But at some point that period has to end. And currently, manufacturers on average get about 12 to 16 years of market exclusivity. 

How much longer—how much more market exclusively is necessary? I mean, you know, manufacturers—pharmaceutical manufacturers currently make about 22 percent profit margins as compared to 7 percent profit margins for the rest of the Fortune 500, 

you know. 

And so—I mean, I think that it is—it is important both for there 

to be a fair return on investment but then at some point for that 

to end and for a competitive market to be in so that patients can 

get the benefit of lower-cost generic products. 

And I don’t think what we are talking about here has any, necessarily, bearing on the questions of innovation. We are talking 

about getting timely access to generic products after an extended 

period of market exclusivity that already exists. 

Mr. MARINO. Thank you. 

Attorney Abbott. 

Mr. ABBOTT. I think, yes, one may agree or disagree about the 

appropriate length of exclusivity. I think once the exclusivity period 

is over, whatever decision you make, you want to get the competitive products to the market as quickly as possible. 

I will just note very briefly. It is beyond the scope of this hearing, 

but it is very important. One issue that American pharma firms 

face that is very serious is a single purchaser. Many foreign countries are sort of monopsony purchasers of American pharmaceuticals. And they say if you want to enter our market, you know, 

we are going to dictate these price terms. 

So, unfortunately, the American consumer has sort of been losing 

because of that. In the cross subsidization, American consumers 

and the American economy has paid more for drugs than foreign 

countries. But often that is an artifact of the foreign systems. And 

I don’t know if you can talk about international agreements or 

something to deal with it. But it is part of the bigger again that 

is beyond the scope of this hearing. 

Mr. MARINO. Thank you. 

Professor Lietzan. 

Ms. LIETZAN. Yes. Thank you. This is actually an area in which 

I have done a fair amount of research recently. 

You are right about the cost. In addition, there is a high degree 

of risk. There are a lot of products that are—compounds that look 

promising at the beginning and fail through the long process. It is 

expensive and risky. And a company that does this research has to 

recover not only the cost of researching the drug that actually got 

approved but the cost of starting to research, starting the process 

with the drugs that failed. 

37 

So I have serious concerns about the adequacy of our incentives 

right now. And I am particularly concerned about the products that 

take a really long time—products, for example, that might prevent 

Alzheimer’s, things that—things for which we may need to do trials 

that exceed 10 or 15a years. 

Dr. Kesselheim is right about the average market exclusivity 

data. But I think recent economic data suggests suggestion the 

break-even point for new molecular entities is somewhere in that 

12- to 16-year range. And innovators and other industries benefit 

from 17 to 20 years of patent life. And if you compare that with 

12 to 14 for the drugs that we desperately need, that leaves me 

concerned. 

Thank you. 

Mr. MARINO. Thank you. 

Professor Olson. 

Mr. OLSON. I echo the comments of Dr. Kesselheim. And just to 

add one thing to that. Professor Lietzan’s right, of course, that the 

risk is very high. But the profit margin overall tells you that you 

are getting high risk and a pretty high reward. That takes into account all the failures. 

The other thing I would just add is that in my proud city of Boston, we have many biological biotech companies. Some of them are 

taking 20 or 30 years to get a pathway to a drug. And yet we have 

this amazing ecosystem that supports that. 

The system has worked without needing extension. When we 

grant extensions of exclusivity or if we can end the granting of 

some of these extensions of exclusivity, the drug companies will 

also stop focusing on trying to extend and move back to focus on 

R&D. And that is where we want them to focus once their drug has 

been patented. 

Mr. MARINO. Thank you. 

The Chair now recognizes Congressman Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Professor Lietzan, in your written testimony you state that requiring branded drug companies to provide drug samples to generic 

drug competitors is a duty to deal that will undermine innovation. 

How would requiring samples to all patent drugs or drugs nearing the ending of their patent exclusivity harm innovation? 

Ms. LIETZAN. So I do believe that requiring the sale of a product 

ultimately requires—if it is a patented product, it requires the company to manufacture enough of the product to satisfy all of the generic applicants, all the biosimilar applicants that wanted that. 

And if a product is under patent, that requires the company to 

practice its patent for the benefit of one of its competitors. That is 

contrary to bedrock principles of U.S. patent law right now and in 

and of itself will devalue the patent, which, to me, is concerning 

because decades of research show that robust patent protection is 

essential for pharmaceutical innovation. 

Mr. JOHNSON. All right. 

And, Mr. Abbott, do you agree with Professor Lietzan’s characterization that providing drug samples is a duty to deal? Do you agree 

with that? 

Mr. ABBOTT. Well, Congressman, I think one has to look at this 

duty as a general matter, non-regulated contacts. There isn’t norVerDate Sep 11 2014 06:19 Jun 07, 2018 Jkt 028040 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 E:\HR\OC\A235.XXX A235
38 

mally a duty to deal here. The problem is that, in order to enter 

the market, you need to get hold of these samples. 

So, yes, you are, in some sense, constraining potentially intellectual property right. But it may be near the end of the patent life, 

and it is sort of necessary to be able to entry—to enter. And if it 

is necessary to be able to enter, that is, you know, one of the tradeoffs. 

I think that—so I—that would be my response. 

Mr. JOHNSON. Dr. Kesselheim, as a practicing doctor, are you 

concerned that requiring access to branded drug samples would undermine—— 

Dr. KESSELHEIM. No, I’m not. I mean, I feel like the statute is 

well constructed to try to prevent any risk of patient safety. 

But, again, these samples are not being collected to then be distributed to patients. They are being collected to be put into laboratory and other clinical testing that is necessary to demonstrate to 

the FDA that the drug is bioequivalent and therefore the generic 

drug and be approved. 

I don’t really see the risk that, for example, a drug that is used 

in elderly patients with a type of cancer called multiple myeloma, 

but also, unfortunately, has a birth defect risk, because it’s being 

transmitted to a generic for the purpose of conducting clinical testing so that the generic can get on the market, would somehow end 

up in the hands of patients for whom it would cause risk. 

I don’t see that as a reasonable safety risk. And I do think that 

to the extent that there are weird ways that we could think of that 

that might exist, the statute does a good job of trying to prevent 

that from happening by forcing the company to develop a plan and 

register that with the FDA. 

Mr. JOHNSON. Professor Lietzan, I feel compelled to offer you the 

opportunity to respond. 

Ms. LIETZAN. Yes. So these drugs are—they present very serious 

risks to patients, and some of them are toxic. And many times the 

generic companies that request samples have no experience with 

drugs of this sort. Some of sophisticated, but some do not. 

And I think that the concern has always been that if anybody in 

the process of conducting, especially when you get to the clinical 

trials, if there’s any sort of lapse by anybody, the contract—the 

clinical research organization, not the generic company, the group 

that they contracted with to do the bioequivalent study, if there’s 

any sort of lapse, the consequences can be horrific. 

And my own view is that the concerns that the companies have 

are valid, and I know that many of the companies that have been 

the focus of attention, because they have demanded assurances 

about safety protocols, have in fact sold their products to generic 

companies that have adequate safety protocols. And to me that is 

very strong evidence of good faith. 

Mr. JOHNSON. Mr. Abbott, would you care to respond? 

Mr. ABBOTT. Well, I don’t know if you’re asking about the questions of safety and risk. I mean, perhaps Dr. Kesselheim might be 

best. 

I do know that most generic companies, they have to meet very 

rigorous—generic companies, some of the largest pharmaceutical 

companies in the United States, they have to meet, in general, very 

39 

rigorous safety controls. They are subject to potential liability of 

various sorts. 

But perhaps Dr. Kesselheim might want to have some additional 

comments. 

Mr. JOHNSON. Doctor. 

Dr. KESSELHEIM. Sure. I mean, I think I said—I mean, I said 

what I said before. But I think you also have to take into account 

the risk of not allowing this kind of normal business practice to 

happen, which is that very expensive drugs do not get timely generic competition, which keeps the price high, reduces access to important drugs for patients who are unable to afford access. 

And I think you also have to take into account that whole risk 

of not having a system in which businesses can exchange the product that they need in order to do the various basic FDA testing as 

well. 

Mr. JOHNSON. Thank you. And I yield back. 

Mr. MARINO. The Chair now recognizes the Ranking Member, 

Congressman Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. 

I’d like to begin, if I may, with you, Professor Lietzan. I wonder 

if you’re familiar with the Harvard Law—Harvard Journal on Legislation written by Robin Feldman that spoke specifically about 

this pay-for-delay problem. And in her writing, she gives an example, In Re: Flonase Antitrust Litigation. 

At its peak, Flonase, a steroid nasal spray for allergy treatment, 

received $1.3 billion a year in sales. Through a complicated series 

of citizen petitions, GlaxoSmithKline was able to stave off generic 

entry for 23 months. Thus, the delay achieved through citizen petitions was worth approximately $2.5 billion, assuming it maintained 

the peak $1.3 billion in sales per year. 

They ended up settling that case for $185 million. So even with 

that large settlement, the delay may have been worth $2.3 billion. 

That’s just a single example. So I just wonder how you square 

that with the suggestion in your testimony that this doesn’t continue to be a problem and that citizen petitions aren’t used by 

brand companies for the specific purpose of delaying entry into the 

market and causing them to realize significant financial gains. 

Ms. LIETZAN. Sure. I appreciate the question. 

I’m not familiar with that particular article that Professor Feldman wrote, and I haven’t looked at this particular example. And 

I don’t know the date on it, if it might be prior to the change in 

the law that Congress enacted in 2007. 

Mr. CICILLINE. I think it was written last year. 

Ms. LIETZAN. No, no, I’m sorry, the actual Flonase example. 

Because I do know that FDA itself has told Congress that there 

have only been five generic drug approvals delayed that didn’t have 

a public health justification since that law was enacted. So it’s possible, I’m not familiar with that particular example, it’s possible 

that predates the current situation. 

Mr. CICILLINE. Thank you very much. 

Dr. Kesselheim, am I pronouncing that correctly. 

Dr. KESSELHEIM. Yes. 

Mr. CICILLINE. Thank you again for your testimony. 

40 

I’m wondering whether you could speak a little bit about whether 

or not the Supreme Court’s decision in FTC v. Actavis has affected 

the use for pay-for-delay settlements. Do you assess that this continues to be a problem? Even if it’s not a lot of instances, these instances can impose significant costs on the consumer and significantly enrich the brand companies. 

Dr. KESSELHEIM. Sure. I mean, I do think that the FTC v. 

Actavis case has caused some shifts in—you know, the FTC v. 

Actavis case was really about the FTC being able to review payfor-delay settlements that included extremely large monetary 

transfers like handing over of suitcases full of cash. 

But since then, pay-for-delay settlements have continued. Many 

of them also still involve monetary settlements. But many of them 

also now involve more complex co-marketing arrangements or other 

kinds of business deals, some of which may not necessarily be at 

the sort of fair value that they might have otherwise been, and 

these kinds of agreements persist. 

And I think the problem is that allowing FTC to review them is 

great, but it takes a really long time and a lot of resources to get 

through this. The Actavis case itself, which was the subject of the 

Supreme Court case, was started back in 2006, and we still haven’t 

had really a full trial of it. 

So I do think that congressional action is needed to try to prevent settlements that are—that go beyond mere exchanges of litigation costs. 

Mr. CICILLINE. And do you think we ought to consider as well enactment of a prohibition, a statutory prohibition of pay-for-delay, 

like completely prohibit that activity as a matter of law? 

Dr. KESSELHEIM. Well, I do think that the FTC in the past has 

said that it would prefer kind of a per se rule where these kinds 

of agreements are presumed not to be legitimate unless there is a 

sort of compelling justification that is provided for them. 

Mr. CICILLINE. Other than the enrichment of the brand drug 

company. 

Dr. KESSELHEIM. Right, a compelling public health justification, 

not a compelling personal or market profit justification. And I do 

think that that might be a good model to consider. 

Mr. CICILLINE. Professor Olson, would you—I’d like your 

thoughts on that as well. 

Mr. OLSON. Yes, I agree. I think that there is a case to be made 

for per se treatment. The Supreme Court did not do that in 

Actavis. But I think the Court eventually is getting to the right answer, but it will take many, many years. And it’s hard to come up 

with much significant harm that would come from simply prohibiting transfers of value to the generic company for basically delaying. 

Mr. CICILLINE. And I’m wondering whether any of the members 

of the panel, it’s my last question, have any suggestions of improvements that we might make to the CREATES Act or consider. 

I expect that, Professor Olson, you were nice enough to describe 

the CREATES Act as an elegant narrowly tailored fix. Nobody has 

ever called our legislation elegant, so we like that. But I’m just curious to know whether or not you think there are ways that we 

could improve the legislation that you’ve reviewed. 

41 

Mr. OLSON. Yes, sir. 

So I, you know, I do think that it’s narrowly tailored, and I’ll 

stick by the word ‘‘elegant.’’ I think there could be some leeway on 

the period of, you know, is it 30 days or 45 days. I wouldn’t go, you 

know, is 120 or 150 days, but I wouldn’t go much farther. 

And I would point out that coming up with an ETASU in the 

first place, the company is only given 120 days. So I think the 

timeframes you’ve chosen are very good. 

And I think there are other ways to address the issues you’re 

getting at that would go beyond the CREATES Act, but for what 

the CREATES Act is specifically getting at, I think it does a very 

good job. 

Mr. CICILLINE. Thank you. 

Doctor. 

Dr. KESSELHEIM. I guess I would just go back to my point that 

I think that—if you want to focus on just the issues that the CREATES Act covers, which is the REMS and the products, I mean, I 

think that you could add provisions that would again require 

REMS information to be public so there is no proprietary information about REMS, so that everybody knows what’s in REMS and 

generic manufacturers can create their own REMS without having 

to haggle with the manufacturer for proprietary information. And 

I think you could include provisions that do not allow REMS patents to be listed with the FDA so that they don’t block entry of generic drugs as secondary patents. 

Mr. CICILLINE. Great. 

Mr. ABBOTT. I’ll just briefly say, it’s interesting, this notion of 

REMS as sort of a regulated public utility model. And it’s certainly 

possible, there are to the extent—and again, I don’t know enough 

about the science—but to the extent you have do have one sort of 

optimal set of safety protocols, there are some issues. 

I think in that situation, though, if you wanted access to this, 

you would not necessarily—the brand name drug company might 

say, wait a second, okay, I can see that argument, but we shouldn’t 

have to bear all the costs and the risks of developing it. There 

should be some way of having the FDA or getting some compensation, making sure that everyone has sort of access to this efficient 

public facility. You have to also take that potential cost to the 

brand companies as well. 

Dr. KESSELHEIM. I just want to echo that. And I agree. And I 

think that managing the REMS through the FDA instead of making it be—making them be managed through the companies would 

be helpful, again, with the proper resources, because, as I said before, it is optimal for patients who are otherwise—who don’t know 

who their generic manufacturer is. 

Because generic drugs are interchangeable with each other, to 

have to go to different REMS based on whoever the generic manufacturer is, is inefficient and would be frustrating for me as a clinician to try to figure out, well, who should I be calling, which registry should I be calling. 

It should all be centralized. And maybe the optimal way to do 

that would be to have the REMS authority be within the FDA and 

the FDA to be properly resource to run the single central REMS 

and then none of these issues would exist. 

42 

Mr. CICILLINE. Great. I know my time. I thank the Chairman for 

indulging me. Thank you very much. I yield back. 

Mr. MARINO. Would each of you, if you care to respond to my 

question, give an explanation for the general public, because we’re 

throwing around a lot of language here in testing and retesting, 

what an originator of a drug has to go through to get that drug to 

the market? And what difference is there, if any, for the generic 

company to get that drug to the market? 

So, please. 

Dr. KESSELHEIM. I’ll start. So, you know, a brand name manufacturer usually has to go through a period of preclinical testing that 

leads ultimately to an investigational new drug application, and 

then a period of clinical trials that takes on average about 6 to 7 

years, and then files a new drug application with the FDA that 

then is reviewed in, on average, about 8 months. 

Brand name manufacturers—that’s brand name manufacturers— 

generic manufacturers have to prove that their drug is bioequivalent, which is to say, you know, based on preclinical and very limited clinical trials, show that the bioavailability of the drug and the 

blood levels of the drug for their version is the same as the brand 

name version, which is why, of course, the samples of brand name 

version are so critical, and then go through sort of, again, a more 

limited FDA review process only because there’s less data that the 

generic manufacturer is submitting to the FDA. And then the generic manufacturer’s drug may be evaluated with the FDA as being 

interchangeable and be able to go on the market. 

Mr. MARINO. Could you give an estimate of some time? Because 

you did bring out estimates for the original company of 7 to 8 years 

of just one segment of testing. 

Dr. KESSELHEIM. Right. I think that that pre—the bioequivalence 

testing can take far less than that. It probably takes, you know, in 

the sort of months to small number of years, rather than, on average, about 6 to 7 years. 

And the generic review period by the FDA, as of 5 years ago, was 

actually much longer than the brand name review period because 

of far less resources that are dedicated to the Office of Generic 

Drugs. That’s changed in the last few years and now the generic 

drug review process is faster, although still, I think, averages more 

like 12 to 18 months, rather than on average about 8 months for 

brand name drugs. 

Mr. MARINO. Anyone else? 

Ms. LIETZAN. No. I think, actually, Dr. Kesselheim’s description 

of the approval—the two different approval pathways is entirely 

right. The only thing I would add is that I believe the Federal 

Trade Commission wrote a few years ago that the process for developing and getting a generic drug approved was 3 to 5 years. I don’t 

know if that remains true, but that’s what they said in, I think, 

2009. 

Mr. MARINO. Professor Olson. 

Mr. OLSON. Yes. I just wanted to—I agree with that process. I 

want to add on, though, it’s a little bit different for large molecule 

biologics. 

So for large molecule biologics, the testing for a generic takes 

longer and it’s much more complex because it’s a more complex 

43 

molecule and because the cell lines can change over time. So it’s 

key that these generics are provided samples not just once, but several times over a period of could be a year or so. 

And that actually make the CREATES Act or some approach like 

it very important, because a brand name could basically disrupt 

and ruin the testing of someone trying to do a biosimilar simply by 

not providing samples in the middle of a testing procedure. 

Ms. LIETZAN. Congressman, could I just make one comment on 

that? 

Mr. MARINO. Sure. 

Ms. LIETZAN. FDA has actually said that a biosimilar company 

can use a foreign-sourced version of the reference product for much, 

probably not all, but much of that application. I just wanted to 

make sure you were aware of that. 

Mr. MARINO. Obviously, there’s no other—Congressman Cicilline 

has something. 

Mr. CICILLINE. Yeah. Mr. Chairman, I would just ask unanimous 

consent to make a part of the record this article, ‘‘Drug Wars: A 

New Generation of Generic Pharmaceutical Delay,’’ by Robin Feldman and Evan Frondorf, as a part of the record. 

Mr. MARINO. Without objection. 

This material is available at the Committee or on the Committee 

Repository at: 

https://docs.house.gov/meetings/JU/JU05/20170727/ 

106333/HHRG-115-JU05-20170727-SD003.pdf 

Mr. MARINO. This concludes today’s hearing. I want to thank you 

very much. We could sit here for another 24 hours and I got a million questions in my head. But, as always, if you have anything to 

offer us. Mr. Cicilline has what we usually say, either one of us, 

is, what do you think of our legislation? That’s important to us. 

You’re the experts. We’re the legislators and we need your assistance as well. 

So, again, thank each and every one of you for being here. I’m 

sure we’ll see each other in the future at some time. 

So without objection, all members will have 5 legislative days to 

submit additional written questions for the witnesses or additional 

materials for the record. 

This hearing is adjourned. And we’re going to go vote again 

shortly. 

[Whereupon, at 3:48 p.m., the Subcommittee was adjourned.] 

44 


Insert offset folio 101 here 30235A.001

The Honorable Bob Goodlatte 

Chainnan 

Committee on the Judiciary 

House of Representatives 

Washington, D.C. 20515-6216 

Dear Chairman Goodlatte: 

APR 20 2018 

Thank you for providing the Food and Drug Administration (FDA or the Agency) with the 

opportunity to testify at the July 27, 2017, hearing before the Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law, House Committee on the Judiciary, entitled ''Antitrust 

Concerns and the FDA Approval Process.'' This letter is a response for the record to questions 

posed by the committee. 

If you have further questions, please let us know. 

U.S. Food & Drug Adrrinistration 

10903 New Ha111Jshire Avenue 

Silver Spring, M:l 20993 

Sio=cltfi!UtiJ~•rt;o Principal Associate Commissioner 

for Legislative Affairs 
45 


Insert offset folio 102 here 30235A.002

Page 2 -The Honorable Robert Goodlatte 

We have restated your questions below in bold, followed by our responses. 

The Honorable Tom Marino 

I. Under the DESI process, FDA has discretion to remove generics from the marketplace, 

ease generics off the marketplace, or allow them to remain if it is in the best interest of 

the patient community. What factors or criteria are used to make these determinations? 

DES! drugs are not the same as "generic dmgs" subject to section 505(j) of the FD&C Act and 

these DES! drugs have not been approved by FDA. FDA assumes that the question's reference 

to "generics'' was intended to mean drug products related to the DES! process, which is 

explained below. 

By way of background and context, the Drug Efficacy Study Implementation (DES!) is the 

FDA's administrative implementation of the 1962 Kefauver-Harris amendments to the Federal 

Food, Drug, & Cosmetic (FD&C) Act. The 1962 amendments required FDA to conduct a 

retrospective evaluation of the effectiveness of the drug products that FDA had approved as safe 

between 1938 and 1962 through the new dmg approval process. FDA contracted with the 

National Academy of Science/National Research Council (NAS/NRC) to initially evaluate the 

effectiveness of these products. FDA reviewed and re-evaluated the findings of the NAS/NRC 

panels and published its findings on the effectiveness of these products, sometimes referred to as 

''DES! drugs:· in the Federal Register. The Agency provided a notice of opportunity for hearing 

(NOOH) for any indication for which a product subject to a DES! proceeding was found to be 

less than fully effective. Currently, there are very few DES! proceedings for which a final 

detennination regarding eflectivencss has not yet been made. 

Between 1938 and I 962, if a drug obtained approval, FDA considered drugs that were identical, 

related, or similar (IRS) to the approved dmg to be covered by that approval, and allowed those 

IRS drugs to be marketed without independent approvaL Drug products that arc IRS to the 

products listed in a DES I notice are also considered to be subject to the DESI proceeding. As 

noted above, these IRS drugs are not the same as "generic drugs" subject to section 505(j) of the 

FD&C Act. In addition, they have not been approved by FDA. 

FDA's current policy on drug products subject to an ongoing DES! proceeding, including IRS 

dmg products, is outlined in FDA's Compliance Policy Guide (CPG) (Marketed Unapproved 

Drugs CPG, at p. I 0) published in 201 I. Specifically, the CPG in part states that "[i]t is the 

Agency's longstanding policy that products subject to an ongoing DES! proceeding may remain 

on the market during the pendency of the proceeding.'' 

Once a DES! proceeding is completed, if the products subject to it are found not effective 

tor a particular indication, FDA generally will evaluate on a case-by-case basis whether 

the Agency does not intend to object to a period of continued marketing for IRS products. 

The factors we may consider in such a situation are enumerated in the Marketed 

Unapproved Dmgs CPG (at pp. 6-7), and include the following: 
46 


Insert offset folio 103 here 30235A.003

Page~ The Honorable Robcti Goodlatte 

• the effects on the public health of proceeding immediately to remove the 

illegal products from the market (including whether the product is medically 

necessary and, if so, the ability of legally marketed products to meet the needs 

of patients taking the drug); 

• the difficulty associated with conducting any required studies, preparing and 

submitting applications, and obtaining approval of an application; 

• the burden on affected pmiies of immediately removing the products from the 

market; 

• the Agency's available enforcement resources; and 

• any special circumstances relevant to the patiicular case under consideration. 

For additional infotmation on DES! proceedings and related enforcement aspects, see 21 

CFR 310.6 and the Marketed Unapproved Drugs CPG. Sec 

https:IIH'Hcwfda.govldo>~nloads!Drugs!GuidanceComplianccRcgulatol)'fnjormation!Guid 

anccs/UCMIJ71!290.pdf 

2, What is FDA doing to ensure that there are no drug shortages when, under the DES! 

process, the agency asks generic manufacturers to leave the marketplace? I am greatly 

concerned that we will be in a situation where my constituents don't have access to 

potentially life-saving drugs. 

As discussed in the response to Question 1 and in the Marketed Unapproved Dmgs CPG, one 

factor FDA may consider when deciding whether it does not intend to object to continued 

marketing for a period of time is ·'the efTects on the public health of proceeding immediately to 

remove the illegal products from the market (including whether the product is medically 

necessary and. if so, the ability oflegally marketed products to meet the needs of patients taking 

th~ drug)"' (Marketed Unapproved Drugs CPO. p. 6). 

FDA's Center for Drug Evaluation and Research's Office of Compliance consults with FDA's 

Drug Shortages Staff before instituting any regulatory action to remove a drug from the market. 

to proactively prevent or mitigate any shortage which may occur from its removaL This process 

is used regardless of the regulatory status of the drug being removed from the market. For more 

information that describes FDA"s efforts to prevent the shortage of potentially life-saving drugs, 

please visit FDA's Drug Shortages website: 

https:I!H'H1i',(da.gov!Drugs/DrugSa(ezv!DrugShortages/de(ault.htm. 

3. While companies are going through the ANDA approval process, what steps can FDA 

do to ensure that there is a smooth transition in the marketplace thereby ensuring that 

patients arc not harmed nor lose access to lower cost alternatives? I want to ensure that 

my constituents maintain access to lower cost alternatives and not held hostage to the 

pricing decisions of one manufacturer. 

FDA strongly agrees it is important to expand access to affordable medicines. First, FDA's 

Office of Generic Drugs ptioritizes and expedites the review of certain generic drug applications, 

including potential first generics that can open the market to competition for the first time. FDA 

recognizes these applications as public health priorities and expedite their review with the goal of 
47 


Insert offset folio 104 here 30235A.004

Page 4 - The Honorable Robc1i Goodlatte 

expanding access to affordable medicines. This policy is set forth in the Center for Drug 

Evaluation and Research's Manual of Policy and Procedures (MAPP) 5240.3. Revision 3, 

"Prioritization of the Review of Original ANDAs, Amendments and Supplements." 1 

Second, FDA has taken steps to target the specific problem you reference- namely, sole source 

dmg products vulnerable to potential price gouging by unscrupulous bad actors. It recently 

published an updated list2 of off~ patent, off-exclusivity brand drugs for which FDA has not 

approved a generic, and encouraged generic companies to submit applications for these drugs. 

FDA will expedite the review of any such applications. This, too, is described in the MAPP 

referenced above. By law, FDA generally cannot approve a generic drug until patent and 

exclusivity protections on the innovator product have been exhausted. 

Third, to foster competition broadly, FDA has developed a Drug Competition Action Plan. 

Under the plan, FDA is implementing new initiatives to streamline the generic drug application 

review process, enhance the development and review of difficult-to-develop complex generic 

drug products, and crack down on brand company "gaming" that frustrates and delays the 

approval and/or marketing of generic drugs that would compete with the branded drug. FDA 

held a public meeting on July 18, 2017, to solicit stakeholder input on these initiatives. It 

received feedback from stakeholders in the public docket f(Jr these initiatives, which closed 

November 17, 2017. For your reference, the public docket comments can be accessed at 

www.rcgulations.gov using docket number FDA-2017-N-3615. 

About half of all generic drugs FDA has approved are no longer marketed, marketed 

intennittently, or were not initially marketed until long after approvaL Sometimes this is for 

valid commercial reasons or because the standard of care has evolved. In other cases, generic 

drug manufacturers view FDA approval as an option to market, and realize the value of the 

option by deferring marketing pursuant to patent settlement or like agreements with the brand 

company. Anticompetitive conduct is within the purview of the Federal Trade Commission 

(FTC). A senior FTC official was a co-panelist at FDA's recent public meeting, and FDA is 

exploring opportunities to further collaborate with FTC. 

4. On June 23, 2017, the Subcommittee on the Constitution and Civil Justice held a 

hearing titled "Examining Ethical Responsibilities Regarding Attorney Advertising," 

That hearing examined the ethical issues around some attorney advertising about FDA 

regulated and approved products. Does the FDA have the authority to regulate legal 

advertising about FDA approved and regulated products including biopharmaccuticals, 

1 Center for Drug Evaluation and Research's Manual of Policy and Procedures (MAPP) 5240.3, Revision 3, 

"Prioritization of the Review of Original AND As, Amendments and Supplements". See 

httjJ.·/IJ,••n"Jda.gol'idoH'nioads~4houtFDAICentcrs0ffices/OjficeofMcdicalProductsandTobacco!CDER!ManuaiojPo 

liciesProcedurcs/UCM407849pd( 

2 FDA's List of Oft~Patent, Off~Exclusivity Drugs without an Approved Generic. See 

ht!ps:IIH'\1'\I'.fila.gol'ldrm·n/vads!DrugsiResourcesForYou/Consumers/BuyingUsing!YJedicineSqfi.'f.v/GenericDrugs/U 

CM564441.p</( 
48 


Insert offset folio 105 here 30235A.005

Page 5 The Honorable Robert Goodlatte 

medical devices, and regulated consumer healthcare products is sufficient to ensure 

patient safety? 

The FD&C Act and its implementing regulations provide authority for FDA to regulate 

advertising for prescription drugs. By way of background, under section 502(n) of the FD&C 

Act (21 U.S.C. 352(n)) and 21 CFR Pati 202, a prescription drug marketed in the United States is 

misbranded unless advertisements issued by the "manufacturer, packer, or distributor thereof' 

meet specific requirements, including that they contain accurate infonnation about the drug, 

addressing both risks and benefits, and that the advertising is truthful, balanced and not 

misleading. 1t is a prohibited act under section 301 (a) of the FD&C Act (21 USC 331 (a)) to 

introduce (or cause to be introduced) or deliver (or cause to be delivered) into interstate 

commerce a misbranded drug. 

The FD&C Act also gives the Agency authority over the advertising of restricted medical 

devices (21 U.S.C. 352(q) and (r)). Devices may become restricted by regulation issued under 

section 520(e) of the FD&C Act (21 U.S.C. 360j(e)), by pcrfonnancc standard issued pursuant to 

section 514(a)(2}(B)(v) (21 U.S.C. 360d(a)(2)(B)(v)), or by order approving an application for 

premarkct approval (i.e., a PMA) pursuant to section515(d)(l)(B)(ii) (21 U.S.C. 

360c(d)(l )(B)(ii)). Section 502(r) of the FD&C Act requires a ''brief statement of intended 

uses" and relevant risk information in restricted-device advertising issued by the device 

manufacturer. packer, or distributor. Section 502(q) of the FD&C Act provides that restricteddevice advertising that "is fi1lse or misleading in any particular'' misbrands the device. 

The legal advertisements you refer to are disseminated by lawyers seeking clients t(lr their legal 

services; they are not advertisements for the medical product itself issued by a manufacturer or 

other party responsible for marketing the drug or restricted device within the scope of section 

502 of the FD&C Act. 

5. Some legal advertising about FDA approved and regulated products use the FDA's logo 

as part of that advertising. Is the usc of the FDA's logo sanctioned by the FDA? If not, 

should Congress prohibit the usc of the term "Food and Drug Administration," "FDA," 

the FDA's insignia or provide the FDA the authorit)• to regulate the use of those or 

related terms and insignia'? 

FDA has not authorized, or sanctioned, the use of the FDA logo in attorney advertising. FDA 

notes that there are existing legal authorities that may be applicable to use of the FDA logo in 

attomey advertising, such as the Lanham Act (15 U.S.C. 1125 et seq.), section 5 of the Federal 

Trade Commission Act (I 5 U.S.C. 45), and relevant case law, which address the fair use ofterrns 

and logos (alk/a ·'trade names" and "marks"). the infringement of trade names and marks, and 

unfair or deceptive acts or practices affecting commerce. 

6. With respect to citizen petitions, several scholars have called for increased transparency 

to make data on citizen petition filings and dispositions more publicly available. Do you 

have any concerns about increasing the disclosure of such information? 
49 


Insert offset folio 106 here 30235A.006

Page 6 The Honorable Robert Goodlatte 

All citizen petitions received by FDA are assigned a docket number and made available on 

ww,,·.regulations.gm·. The website currently has several features that allow the public to identify 

citizen petitions filed with the Agency, detennine the status of citizen petitions, and be notified 

when a change to the status occurs. The public can identify citizen petitions that have been 

submitted to FDA by using the advanced search feature available on M'ww.regulations.gov 

(wHw.regulations.gov/AdvancedSearch) by using both the "By Agency .. (i.e., FDA) and 

Document Type (i.e .. Citizen Petition) filters. The public can identify the status of citizen 

petitions by opening the relevant docket folder, which will allow them to see whether comments 

have been submitted and whether FDA has issued a response (interim or final). Additionally, 

www.regulalions.gov includes a feature that allows any individual to receive email updates if 

there arc changes to a citizen petition docket. Any individual who does not have access to the 

internet can view citizen petition dockets by visiting FDA "s Dockets Management StafTat 5630 

Fishers Lane. Rm. l 061. Rockville, MD 20852. 

FDA believes the availability of citizen petitions through the www.regulations.gov website and 

through FDA ·s Dockets Management Staff provides an appropriate level of transparency. 

Tbe Honorable Darrell !<:. lssa 

1. Tbe FDA website currently lists forty-two products with FDA authorized risk 

evaluation and mitigation strategies (REMS) with elements to assure safe use (ET ASU). 

Of those forty-two reference products, bow many have been subject to at least one 

abbreviated new drug application filed or biologics license application? How many of 

the forty-two reference products have been subject to multiple ANDA filings? 

As of December 15, 2017, there are 43 approved drugs that have risk evaluation and mitigation 

strategies (REMS) with elements to assure safe use (ETASU), covering a total of68 new drug 

applications (NDAs). Of these 68 NDAs, 23 have at least one approved abbreviated new drug 

application (ANDA). Fifteen of the 68 have multiple pending AND As, eight have just one 

pending ANDA, and 22 have no pending ANDAs. In addition, 10 of these 43 REMS are for 

products approved under biologic license applications (BLAs) licensed under section35l(a) of 

the Public Health Service Act (i.e., '"stand-alone .. BLAs). There are no biological products that 

have been licensed under section 351 (k) as biosimilar to any of the biological products on this 

list. In addition. FDA is not aware of any company that has publicly announced the submission 

of a 351 (k) BLA for a proposed biosimilar to any biological product on the list. 

2. How many products are in shared systems? How many times has FDA exercised its 

existing authority to grant a waiver from shared REM:S? 

There arc seven approved single, shared systems (i.e., REMS shared between NDA and the 

ANDAs referencing them). Collectively these seven shared REMS cover 130 applications (38 

NDAs and 92 ANDAs). To date, FDA has granted three waivers of the single, shared system 

REMS requirement and pcnnitted ANDA holders to usc a separate system for the ETASU. 

These programs are: the Buprcnorphine-containing Transmucosal Products for Opioid 

Dependence (BTOD) REMS, the Shared System for Alosetron, and Shared System REMS 

Program for Sodium Oxybatc Oral Solution. 
50 


Insert offset folio 107 here 30235A.007

Page 7 The Honorable Robert Goodlattc 

3. How many of those forty-two REMS ET ASU refe1·cnce products arc considered by the 

FDA to be older, off-patent, off-exclusivity drugs without an approved generic or 

biosimilar? If any REMS ETASU are considered to be older, off-patent, off-exclusivity 

drugs without an approved generic please name them. 

The only reference product with an ETASU REMS considered by FDA to be an older, offpatent, oft:exclusivity drug without an approved generic is Bosentan (NDA 021290}. The 

Agency's defined criteria for an off-patent, off-exclusivity drug can be found at 

htlps:IIH'\1Wjda.go1/downloads!Drugs!RcsourccsForYou/Consumers/BuvingUsingMcdicincSafel 

_v/UndcrstandingGcncricDrugs/UCM56444/.pdf 

The Honorable Doug Collins 

l. I would like to hear what the Agency is doing to enforce the [FDA's unapproved drugf 

policy, !Compliance Policy Guide Sec. 440.100 "Marketed New Drugs Without 

Approved NDAs and ANDAs" (CPG}f, which was published in 2006 and revised in 

20 Ill as well as what action the Agency plans to take to complete removal of 

phenobarbital products that have come to the market in contravention of FDA policy 

after September 19, 20 I I. 

Phenobarbital is an example of a medically necessary drug that has never been approved by 

FDA. Because patients rely on phenobarbital. it has been a low priority for FDA enforcement 

action. FDA ·s position is that the best course of action is to encourage manufacturers to seek 

FDA approval of their phenobarbital products. 

FDA's current policies regarding marketed unapproved drugs are articulated in the Compliance 

Policy Guide Sec. 440.100 "Marketed New Drugs Without Approved NDAs and ANDAs'' 

(CPG}, which was published in 2006 and revised in 2011. Both versions of the CPG made clear 

that "any product that is being marketed illegally is subject to FDA enforcement action at any 

time'" and encouraged f]nns to submit applications for their unapproved new drugs. 

Despite the publication of the CPG in 2006, new unapproved dmgs continued to be added to the 

market each year. FDA issued an update to the CPG on September 19, 2011, clarifying how the 

Agency expects to prioritize its compliance actions. 

The purpose of the revisions to the CPG was to further discourage manufacturers from 

introducing new unapproved drugs on the market, not to provide special marketing rights to 

unapproved drugs already being marketed. Nevertheless, manufacturers ofprc-20 11 unapproved 

drugs often advocate for FDA enforcement action against their post-2011 competitors based 

upon the revisions in the 2011 CPG, while ignoring that all illegally marketed unapproved drugs, 

whether prc-2011 or post-2011, are subject to FDA enforcement action at any time, as clearly 

stated in both the 2006 and 2011 versions of the CPG. 
51 


Insert offset folio 108 here 30235A.008

Page 8 ·-The Honorable Robert Goodlatte 

There are both pre-2011 and post-2011 unapproved versions of phenobarbital on the market. 

Before taking action against any unapproved phenobarbital product, FDA would carefully 

evaluate whether the action might cause a shortage. The initial marketing date of specific 

unapproved versions of phenobarbital is not necessarily the best public health criterion to use 

when deciding whether to remove medically necessary unapproved products such as 

phenobarbital from the market. FDA does not have infonnation supporting a conclusion that the 

pre-20 11 unapproved phenobarbital drug products are any better in tenns of safety, efficacy, or 

quality than the post-2011 unapproved versions. However, FDA will evaluate any infonnation 

that becomes available about the marketed products and will continue to encourage finns to 

submit applications for approval. 

0