[Federal Register Volume 72, Number 86 (Friday, May 4, 2007)]
[Notices]
[Pages 25304-25314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-8567]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Comment Request

AGENCY: Federal Trade Commission (``FTC'' or ``Commission'').

ACTION: Notice.

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SUMMARY: The FTC is considering conducting a study to analyze the use 
and likely short- and long-run competitive effects of authorized 
generic drugs in the prescription drug marketplace. Before 
investigating these issues, the FTC is seeking public comments on its 
proposed information requests to firms in the prescription drug 
industry. The information collection requirements described below will 
be submitted to the Office of Management and Budget (``OMB'') for 
review, as required by the Paperwork Reduction Act (``PRA'') (44 U.S.C. 
3501-3520).

DATES: Comments must be received on or before June 4, 2007.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``Authorized Generic Drug Study: FTC Project 
No. P062105'' to facilitate the organization of comments. A comment 
filed in paper form should include this reference both

[[Page 25305]]

in the text and on the envelope and should be mailed or delivered, with 
two complete copies, to the following address: Federal Trade 
Commission/Office of the Secretary, Room H-135 (Annex J), 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Because paper mail in 
the Washington area and at the Commission is subject to delay, please 
consider submitting your comments in electronic form, as prescribed 
below. However, if the comment contains any material for which 
confidential treatment is requested, it must be filed in paper form, 
and the first page of the document must be clearly labeled 
``Confidential.'' \1\ The FTC is requesting that any comment filed in 
paper form be sent by courier or overnight service, if possible.
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    \1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    Comments filed in electronic form should be submitted by clicking 
on the following weblink: https://secure.commentworks.com/AuthorizedGenericStudy and following the instructions on the web-based 
form. To ensure that the Commission considers an electronic comment, 
you must file it on the web-based form at the https://secure.commentworks.com/AuthorizedGenericStudy weblink. If this notice 
appears at www.regulations.gov, you may also file an electronic comment 
through that Web site. The Commission will consider all comments that 
regulations.gov forwards to it.
    Comments should also be submitted to: Office of Management and 
Budget, Attention: Desk Officer for the Federal Trade Commission. 
Comments should be submitted via facsimile to (202) 395-6974 because 
U.S. Postal Mail is subject to lengthy delays due to heightened 
security precautions.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments will be 
considered by the Commission and will be available to the public on the 
FTC Web site, to the extent practicable, at www.ftc.gov. As a matter of 
discretion, the FTC makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC Web site. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Requests for additional information 
should be addressed to Karen A. Goldman, Attorney, Policy Studies, 
Office of the General Counsel, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580; telephone (202) 326-2574.

SUPPLEMENTARY INFORMATION: In the United States, the Food and Drug 
Administration (``FDA'') must approve the marketing of any 
pharmaceutical drug, whether brand-name or generic. The Hatch-Waxman 
Act establishes the regulatory framework under which the FDA may 
approve a generic drug to be marketed. Typically, a brand-name drug 
obtains FDA approval through a New Drug Application (``NDA''), and a 
generic drug manufacturer obtains FDA approval through an Abbreviated 
New Drug Application (``ANDA'') in which it may be allowed to rely on 
the clinical data first submitted by the brand-name drug manufacturer.
    To encourage generic entry as soon as is warranted, the Hatch-
Waxman Act allows generic drug manufacturers, in certain circumstances, 
to market a generic drug prior to the expiration of claimed patent 
protection for the corresponding brand-name drug. To be permitted to do 
so, a generic drug manufacturer must first submit a ``paragraph IV'' 
ANDA in which it certifies that (a) its generic drug will not infringe 
patents listed in the FDA's ``Orange Book'' (``Orange Book patents'') 
as claiming the relevant brand-name drug product, and/or (b) the 
relevant Orange Book patents are invalid. If the paragraph IV ANDA 
leads to litigation, then 30 months after the litigation was filed (or 
after final decision in the litigation, if earlier), the FDA may 
authorize the marketing of the generic drug under the ANDA application.
    At that point, the first-filed paragraph IV ANDA applicant becomes 
entitled to a 180-day marketing exclusivity period, during which the 
FDA cannot approve any other, later-filed paragraph IV ANDA for a 
generic drug corresponding to the same brand-name drug product. This 
protects the first FDA-approved paragraph IV ANDA applicant from 
competition with other ANDA applicants during this time.
    The 180-day marketing exclusivity period does not preclude 
competition from NDA-approved ``authorized generics,'' however.\2\ An 
authorized generic is chemically identical to a particular brand-name 
drug, which the brand-name manufacturer authorizes to be marketed in a 
generic version under the NDA-approval that the FDA granted for the 
brand-name drug. The brand-name manufacturer either sells the 
authorized generic itself through a subsidiary or licenses a generic 
firm to sell the authorized generic. The trade dress typically differs 
for the brand-name drug and its authorized generic equivalent, but the 
drug product is exactly the same.
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    \2\ Teva Pharm. Indus. v. FDA, 410 F.3d 51 (D.C. Cir. 2005).
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    In recent years and with increasing frequency, brand-name drug 
manufacturers have begun to market authorized generic drugs at 
precisely the same time that a paragraph IV generic is beginning its 
period of 180-day marketing exclusivity. The likely effects of this 
practice on generic competition have been subject to some debate. In 
the short run, the entry of an authorized generic drug may benefit 
consumers by creating additional competition that lowers generic prices 
further than if only the paragraph IV generic were marketed. Many 
generic manufacturers assert, however, that in the long run, consumers 
will be harmed because an expectation of competition from authorized 
generics will significantly decrease the incentives of generic 
manufacturers to pursue entry prior to patent expiration. For a generic 
manufacturer, the additional competition from an authorized generic may 
result in significantly less profit during the period of 180-day 
exclusivity than if the generic manufacturer had no authorized-generic 
competition during that time.
    Given the importance of generic drugs in lowering health care 
costs, Senators Grassley, Leahy, and Rockefeller have requested that 
the Commission conduct a study of ``the short term and long term 
effects on competition of the practice of `authorized' generics.'' \3\ 
In addition, Representative Waxman, one of the co-authors of the Hatch-
Waxman Act, has requested that the FTC study ``the impact of so-called 
`authorized generics' on competition in the prescription drug 
marketplace.'' \4\
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    \3\ See Letter to Chairman Deborah Platt Majoras, from Senators 
Grassley, Leahy, and Rockefeller (May 9, 2005).
    \4\ See Letter to Chairman Deborah Platt Majoras from 
Representative Henry A. Waxman (Sept. 13, 2005).
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    The Commission proposes to undertake such a study, as described in 
this notice, to examine both the likely short-term competitive effects 
of authorized generic drug entry and, to the extent possible, the 
likely long-term impact of entry by authorized generic

[[Page 25306]]

drugs on competition by generic manufacturers.\5\ The study will be 
carried out pursuant to Section 6(b) of the FTC Act, 15 U.S.C. 46(b). 
Among other things, the proposed study will examine prices (including 
rebates, discounts, etc.) for brand-name and generic drugs, both with 
and without competition from authorized generics; business reasons that 
support authorized generic entry; factors (including product 
development and litigation costs) relevant to the decisions of generic 
firms about whether and under what circumstances to seek entry prior to 
patent expiration; and licensing agreements regarding authorized 
generics. This information will enable the proposed study to make new 
contributions on the effects of authorized generic drug entry on 
prescription drug prices and, in particular, permit an evaluation of 
the impact of authorized generic drugs on the incentive offered by the 
period of 180-day exclusivity afforded to generic drugs that enter the 
market as the result of an ANDA with a paragraph IV certification.
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    \5\ In its 2002 study of how generic drug competition prior to 
patent expiration has developed, the Commission found that the 
Hatch-Waxman framework had promoted entry by low-cost generic drugs 
prior to patent expiration. Federal Trade Commission, Generic Drug 
Entry Prior to Patent Expiration: An FTC Study (July 2002), 
available at <http://www.ftc.gov/os/2002/07/genericdrugstudy.pdf> 
(``Generic Drug Study'').
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    Pursuant to 5 CFR 1320.8(d), the FTC published on April 4, 2006 a 
Federal Register Notice seeking comments from the public concerning the 
FTC's proposed study.\6\ The comments and the Commission's responses to 
them are set forth below. Based on the comments, the Commission has 
revised the previously published information requests.
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    \6\ Agency Information Collection Activities; Comment Request, 
71 FR 16779 (April 4, 2006).
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    Generally, the Commission's revised Special Orders seek information 
on (i) authorized generic drugs (launched after Jan. 1, 2001) and all 
drugs related to them, i.e., brand-name versions of authorized generic 
drugs and all bioequivalent generic drugs; (ii) brand-name drugs that 
first faced generic competition after Jan. 1, 2001, for which at least 
one ANDA with a paragraph IV certification was filed, and all 
bioequivalent generic drugs; \7\ and (iii) brand-name drugs for which 
at least one ANDA with a paragraph IV certification was filed after 
Jan. 1, 2001, and generic entry has not yet occurred. Within this 
general framework, the Commission has ensured that the requests are 
tailored to the needs if the planned study. For example, reflecting the 
widespread perception that the marketing of authorized generics 
increased markedly beginning in 2003, requests for generic company 
documents are generally limited to documents prepared after Jan. 1, 
2003. In order to collect documents that underlie marketing strategies 
adopted in 2003, requests to brand-name companies seek documents 
prepared after January 1, 2002.
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    \7\ Categories (i) and (ii) are likely to overlap substantially.
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    Similarly, the Commission has confined the study to drugs most 
likely to yield information necessary for evaluating the short- and 
long-run competitive effects of authorized generic drugs. Because no 
comprehensive list of authorized generic drugs is available, the 
Commission plans to identify the authorized generic drugs covered by 
the study via an initial, brief information request asking brand-name 
companies to identify their authorized generic drugs. The Commission 
will use those initial responses to develop subsequent Special Orders 
to generic and authorized generic companies that market authorized 
generic drugs. Based on a preliminary analysis, approximately 80 brand-
name drug manufacturers, several authorized generic drug companies, and 
100 generic companies will receive Special Orders. The revised Special 
Orders are set forth on the OMB Web site on information collection 
review, http://www.reginfo.gov/public/do/PRAMain and on the FTC's web 
page on the authorized generic study, http://www.ftc.gov/os/comments/genericdrugstudy3/.
    Pursuant to the OMB regulations that implement the PRA (5 CFR Part 
1320), the FTC is providing this second opportunity for public comment 
while requesting that OMB grant clearance for the proposed information 
requests. All comments should be filed as prescribed in the ADDRESSES 
section above, and must be received on or before June 4, 2007.

Public Comments/Consultation Outside the Agency and Actions Taken

    The FTC received 13 comments on the proposed information collection 
requests.\8\ All of the public interest organizations that submitted 
comments, which included a nonprofit group dedicated to the use of 
antitrust as a component of competition policy, strongly endorsed the 
study. For example, the American Antitrust Institute, CFA, FUSA, and 
USPIRG stated that by ``initiating this study, the FTC has demonstrated 
its commitment to ensuring that the anticompetitive practices of brand 
name drug manufacturers do not threaten Americans' access to low cost 
generic drugs.'' \9\ Generally, the strong support of public interest 
organizations reflects their representation of consumers and retirees, 
and concern about the rising cost of pharmaceuticals.\10\ Industry 
views, however, varied depending on whether the commenter was a 
marketer of AGs or in competition with marketers of AG drugs.\11\
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    \8\ The comments are available at http://www.ftc.gov/os/comments/genericdrugstudy3/. The 13 submissions are from AARP 
(nongovernmental organization for Americans age 50 and older); 
Actavis Group (Actavis) (generic pharmaceutical company); American 
Antitrust Institute, Consumer Federation of America, Families USA, 
and U.S. Public Interest Research Groups (AAI/CFA/FUSA/USPIRG) 
(nongovernmental public interest organizations); Consumers Union 
(nonprofit organization representing consumers); Ronald W. Davis 
(Davis) (attorney submitting comments ``on behalf of an undisclosed 
client''); Generic Pharmaceutical Association (GPhA) (trade 
association representing generic pharmaceutical manufacturers); 
Gilbert's LLP (Gilbert's) (law firm representing ``one of the 
largest generic pharmaceutical companies in the United States''); 
IMS Health Inc. (IMS) (provider of information and research to the 
health care industry); Eli Lilly and Co. (Lilly) (an innovation-
driven pharmaceutical company); Ohio Public Employees Retirement 
System (OPERS) (Ohio pension system); Pharmaceutical Research and 
Manufacturers of America (PhRMA) (trade association representing 
research-based pharmaceutical and biotechnology companies); Prasco, 
LLC (Prasco) (privately held, independent pharmaceutical company 
that makes AGs); and Prescription Access Litigation (PAL) (coalition 
of ``consumer, healthcare, labor, senior, legal services, and 
women's health organizations'').
    \9\ AAI/CFA/FUSA/USPIRG at 1. OPERS, AARP, PAL, Consumers Union, 
and GPhA also enthusiastically endorsed the study.
    \10\ See OPERS; AARP; PAL; Consumers Union.
    \11\ One industry commenter, IMS, submitted comments that only 
considered the possible use by the study of IMS' commercially 
available data.
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    Generic companies and their trade organization, GPhA, supported the 
study. GPhA ``commend[ed] the FTC for taking initiative on this 
important issue. * * * This Study is no less critical than the FTC's 
earlier efforts on the generic drug front, such as the 2002 FTC study 
of generic pharmaceuticals, which led to a broad and nuanced 
perspective at an important time in the industry's history.'' \12\ No 
generic drug company questioned the practical utility of the study. 
GPhA and one generic company commenter, however, asserted that the 
FTC's requests would be burdensome, and suggested that the FTC narrow 
or otherwise modify its request.\13\ Generic company views on how to 
lessen the burden were somewhat variable, presumably because some 
generic companies market both ANDA-generic and AG drugs. Generic 
companies (and brand-name and AG companies) also

[[Page 25307]]

urged the Commission to broaden the scope of the study by addressing a 
number of topics relevant to their marketing strategies.
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    \12\ GPhA at 2.
    \13\ See GPhA at 5; Actavis at 1-2.
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    Comments from the brand-name pharmaceutical industry, which markets 
or authorizes the marketing of AGs, generally accepted the core 
concepts of the study, but expressed concerns primarily focused on the 
breadth of the originally proposed document requests. The PhRMA 
comments, which were endorsed by Lilly, stated that the ``proposed 
empirical study will show whether authorized generics benefit consumers 
by lowering prices for generic drugs,'' but also asserted that the 
proposed ``information requests are overbroad.'' \14\ Davis, apparently 
representing a brand-name pharmaceutical company, asserted that a very 
recent statutory change could sufficiently change the marketing of AGs 
to render a study based on recent historical data outdated.\15\
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    \14\ PhRMA at 1, 7. See also Lilly at 1.
    \15\ See Davis at 9-11.
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    The FTC received only one comment from an independent authorized 
generic drug company; most AGs are either marketed by a subsidiary or 
division of a brand-name company or by a generic drug company under a 
license from a brand-name company. The independent AG drug company, 
Prasco, did not express a view of the study as a whole but rather 
commented on substantive issues that should be addressed, and ways to 
minimize burden.
    As discussed below, the Commission has incorporated many of the 
suggestions to narrow the requests, especially for documents, which 
were the focus of the commenters' concerns about burden. In doing so, 
the FTC will avoid requesting information that is not necessary for the 
study and will substantially reduce the burden of the study. The 
Commission has not, however, adopted suggestions that would limit the 
study's usefulness. Indeed, the Commission has adopted a number of 
substantive suggestions that will enhance the utility of the study 
without imposing additional burden.
    The following discussion of issues raised by the comments is 
organized into five sections: (A) The practical utility of the proposed 
study and why it is necessary for the proper performance of the FTC's 
functions; (B) suggestions to narrow the scope of the study; (C) 
suggestions to use alternative sources of information; (D) comments 
requesting limitations on the use of the information submitted; and (E) 
suggestions to broaden the scope of the study.
A. Practical Utility of the Proposed Study and Its Necessity for the 
Proper Performance of the FTC's Functions
    The Commission has proposed to obtain factual information that 
would provide a comprehensive picture of how generic competition is 
affected by the marketing of AG drug products.
    Comments: Most comments stated that the proposed study will have 
practical utility, that it is necessary for the proper performance of 
the FTC's functions, or otherwise stressed the importance of the study. 
For example, Consumers Union stated, ``We strongly believe that the 
collection of `the information will have practical utility,' because we 
believe the data will show serious anti-competitive consequences of 
these arrangements.'' \16\ GPhA stated that the study ``will be crucial 
to a proper understanding of authorized generics, and is a prudent use 
of the Commission's resources.'' \17\ AAI/FUSA/USPIRG asserted that 
``It is particularly important for the FTC to study authorized generics 
and other forms of anticompetitive conduct in the pharmaceutical market 
at this time, as over the next three years alone, prescription drugs 
worth over an estimated $50 billion in U.S. sales will go off patent.'' 
\18\ PAL ``commend[ed] the FTC for its decision to conduct this study. 
This information will be particularly useful as a tool for Congress to 
make an informed decision on whether further legislation needs to be 
adopted surrounding the marketing of authorized generics.'' \19\
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    \16\ Consumers Union at 2.
    \17\ GPhA at 2.
    \18\ AAI/FUSA/USPIRG at 2.
    \19\ PAL at 6. See also OPERS at 1; AARP at 1 (supporting the 
proposed study).
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    While acknowledging that the proposed study ``should enhance public 
understanding of how authorized generics impact consumers,'' \20\ PhRMA 
asserted that some of the information sought by the proposed document 
requests would have little practical utility. PhRMA took this position 
because in its view the document requests were broader than necessary 
and would require the production of many documents unrelated to the 
topic of AGs.\21\ Thus, PhRMA's concerns about utility are a 
restatement of its concerns about burden. PhRMA did not assert that the 
proposed study and the planned report on AG drugs lacks utility. Davis, 
however, asserted that ``the practical utility of the information [that 
the FTC proposes to collect] will be limited, because of a recent 
material change in the regulatory environment: The enactment of Section 
6003 of the Deficit Reduction Act [``DRA''] of 2005.'' \22\ Davis 
stated that by changing the definition of the Medicaid ``best price'' 
to include AGs, Section 6003 will increase manufacturers' Medicaid 
rebates \23\ and thereby ``fundamentally reduce the incentives of 
branded firms to introduce authorized generics. ''\24\
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    \20\ PhRMA at 2.
    \21\ See PhRMA at 14-15 (``The proposed document requests-by 
encompassing future competition documents, by focusing on documents 
unrelated or indirectly related to authorized generics, by reaching 
much deeper within the organizations than is customary, and by 
requiring a catalog of information relating to each responsive 
document-lack practical utility in light of the objective of this 
study.'') See also PhRMA at 2, 6, 9, 17; Lilly at 1.
    \22\ Davis at 3. Section 6003 of the Deficit Reduction Act of 
2005, P.L. 109-171, amends Section 1927(b)(3)(A) of the Social 
Security Act (42 U.S.C. 1396r-8(b)(3)(A)) to include in the 
manufacturer's report of the best price and average manufacture 
price of sole source and innovator drugs pursuant to the Medicaid 
program, ``all such drugs that are sold under a new drug application 
approved under section 505(c) of the Federal Food, Drug, and 
Cosmetic Act,'' a requirement that would include AGs.
    \23\ Generally, manufacturers pay rebates to Medicaid that help 
to ensure that the price of drugs sold through the Medicaid program 
matches the generally available best price. In general, the rebate 
is equal to ``the difference between the average manufacturer price 
and the best price * * *.'' 42 U.S.C. 1396r-8(b)(3)(A)(ii)(I).
    \24\ Davis at 3. See also PhRMA at footnote 17 (discussing the 
possible effect of the Deficit Reduction Act's provisions on 
incentives to market AGs).
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    Response: As discussed below, the Commission has addressed concerns 
about the breadth of the study by modifying the requests to ensure that 
they are limited to relevant documents.
    Contrary to Davis' assertion, the available information indicates 
that the enactment of Section 6003 of the DRA will have little effect 
on the marketing of AGs. Section 6003 was enacted to increase brand-
name pharmaceutical manufacturer Medicaid rebates to states by ensuring 
that AGs, as versions of brand-name drug approved under an NDA, are 
included in the Medicaid rebate calculation for sole source and brand-
name multiple source drugs.\25\ The price of an AG may be the best 
price available for a brand-name drug and, consequently, their 
inclusion may increase the Medicaid rebate. AGs are

[[Page 25308]]

thought to be launched at the onset of generic competition, however, 
when brand-name sales drop off rapidly due to mandatory generic 
substitution requirements in most states' Medicaid programs.\26\ Thus, 
the inclusion of AGs in the calculation of the best price is unlikely 
to substantially decrease brand-name company revenues for most 
drugs.\27\ Indeed, the Office of the Actuary in CMS projected that the 
anticipated savings to the Medicaid program from Section 6003 are 
likely to be modest, a total of only $229 million for both federal and 
state programs over a period of five years.\28\
    Accordingly, the FTC concludes that Section 6003 is unlikely to 
have a sufficient effect on the marketing of AGs to impair the 
practical utility of this study based on recent historical data. 
Nonetheless, the FTC has revised its Special Orders to include requests 
for information that will allow it to follow the marketing of AGs 
throughout 2007, after Section 6003 has gone into effect.
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    \25\ See 151 CONG. REC. S12069 (Oct. 31, 2005) (statement of 
Senator Grassley) (``My committee's title also achieves savings by 
helping State Medicaid Programs obtain millions in payments owed by 
third-party payers each year. It also produces savings by ending 
drug manufacturers' gaming of the system by closing the authorized 
generic loophole so that appropriate rebates are paid to the 
States.''). The amendment equalizes treatment of AGs by FDA--which 
treated them as branded drugs so that they could be marketed during 
the 180-day exclusivity period--and Centers for Medicare and 
Medicaid Services (CMS), which previously treated them as generic 
drugs for purposes of the rebate calculation.
    \26\ States use a variety of strategies to encourage the use of 
generic drugs in the Medicaid program, and ``[s]ince 2000, there has 
been a steady trend toward increased mandatory generic substitution. 
In 2005, nearly all states * * * reported that they require generics 
to be dispensed when available.'' THE HENRY J. KAISER FAMILY 
FOUNDATION, STATE MEDICAID OUTPATIENT PRESCRIPTION DRUG POLICIES: 
FINDINGS FROM A NATIONAL SURVEY, 2005 update (October 2005).
    \27\ Section 6003 might have a bigger effect on drugs that are 
particularly heavily used within the Medicaid program or must be 
dispensed without generic substitution and in states that do not 
have mandatory generic substitution requirements in their Medicaid 
programs.
    \28\ See Medicaid Program; Prescription Drugs; Proposed Rule, 71 
FR 77174, 77190 (Dec. 22, 2006). See also U.S. CONG. BUDGET OFFICE, 
COST ESTIMATE: S. 1932, DEFICIT REDUCTION ACT OF 2005 35 (Jan. 27, 
2006) (Table 15. Estimated Budgetary Effects of Title VI, Subtitle 
A--Medicaid, period from 2006-2010, projecting federal Medicaid 
savings of $150 million).
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B. Suggestions To Reduce Burden by Narrowing the Scope of the Proposed 
Information Requests

    Most comments concerning burdens focused on the document requests. 
Both brand-name and generic pharmaceutical companies asserted that the 
proposed document requests would be excessively burdensome, and 
proposed ways to limit the scope of the requests. By contrast, 
commenters generally did not express concern about burden due to 
requests for economic data, except regarding the request for cost data. 
They did not assert that the requests for sales and price data were 
excessive. As discussed in the following responses to the comments, the 
FTC has taken multiple steps to reduce substantially the burden arising 
from document requests, and it also has addressed concerns about cost 
data.
1. Comments on Document Requests
a. Request Documents Closely Related To Authorized Generics
    Comment: Both brand-name and generic pharmaceutical companies 
asserted that the FTC's proposed document requests are too broad, and 
should be limited to documents that closely relate to AGs. PhRMA 
expressed concern about the large number of documents that could be 
required by the FTC's ``broad requests for documents that relate 
generally to competition between brand name and generic drug 
companies.'' \29\ PhRMA suggested that ``document requests should be 
focused exclusively on those drug products for which a company has 
manufactured or licensed an authorized generic that has been sold in 
the marketplace,'' because otherwise the response ``would encompass 
large volumes of documents unrelated to authorized generics.'' \30\ 
Davis and PhRMA also suggested that tangentially relevant documents 
could be eliminated by deleting the phrase, `` `any documents' '' from 
the request for `` `any documents, including studies, surveys, 
analyses, and reports * * * that evaluated, considered, analyzed, or 
discussed how to respond * * * to * * * future or current generic 
competition * * *.' '' \31\ Similarly, a generic pharmaceutical 
company, Actavis, asserted that the FTC's proposed request to generic 
companies for `` `any documents, including studies, surveys, analyses, 
and reports * * * that evaluated, considered, analyzed, or discussed 
whether or how to proceed with generic entry * * *' '' \32\ is too 
broad, because ``[a]s a generic firm, most of Actavis' documents will 
relate to whether or how to proceed with generic entry.'' \33\ Actavis 
also suggested eliminating the ``any document'' language and limiting 
the requests to final strategy documents.
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    \29\ PhRMA at 2. See also PhRMA at 7-9.
    \30\ PhRMA at 8.
    \31\ See Davis at 13 (quoting 71 FR at 16781); see also PhRMA at 
7. See also Davis at 4-7, 11-13 (expressing concern about the 
breadth of the study and suggesting that the FTC focus on ``the 
central question'').
    \32\ Actavis at 2 (quoting 71 FR at 16782).
    \33\ Actavis at 3.
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    Response: We have narrowed the proposed document requests by better 
tailoring them to focus on AG drugs. Accordingly, the FTC has 
eliminated the requests for documents relating generally to competition 
and generic entry, and rephrased all companies' requests to focus 
specifically on AGs and issues arising from them.\34\ In addition, 
consistent with the FTC's previous Special Orders to the pharmaceutical 
industry, the `` `any document' '' language has been eliminated,\35\ 
and the request has been revised to seek only high-level planning, 
decisional, and strategy documents.\36\
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    \34\ See Brand-Name Drug Company Special Order, Item 27; 
Authorized Generic Drug Company Special Order, Item 10; and Generic 
Drug Company Special Order, Items 18, 19.
    \35\ See GENERIC DRUG ENTRY PRIOR TO PATENT EXPIRATION at A-20 
(July 2002) (requesting ``all studies, surveys, analyses and 
reports.''); PHARMACY BENEFIT MANAGERS: OWNERSHIP OF MAIL-ORDER 
PHARMACIES A-2 (August 2005) (requesting ``all business plans, 
strategic plans, planning documents, industry studies, analyses, and 
consultant reports * * *.'').
    \36\ The request has not been limited to ``final'' documents, 
however, because of the difficulty of ascertaining what is 
``final.''
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b. Reduce the Document Requests by Focusing on Generic Company 
Documents
    Comments: PhRMA asserted that the study should focus on generic 
company documents, because ``[t]he best documentary source for 
information on the costs and profitability of entry is generic drug 
company documents. The generic drug companies' market analyses, 
studies, surveys, and reports will most directly respond to the core 
question of whether authorized generics have removed the companies' 
financial incentives to enter.'' \37\ PhRMA also recommended that any 
request for brand-name company documents be limited to those that 
retrospectively analyze the effects of AGs on price competition and 
other matters, rather than consider future competitive strategies 
involving AGs. In PhRMA's view, documents providing prospective 
analyses should not be required because they are subjective; consider 
the intent of brand-name companies, which is not relevant to whether 
patent challenges are profitable for generic companies; and address 
events that may not have occurred.\38\
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    \37\ PhRMA at 5.
    \38\ PhRMA at 3, 5, 9-11.
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    Response: The FTC will request the relevant documents of brand-
name, AG, and ANDA-generic companies. While generic company documents 
may be the most informative as to generic companies' financial 
incentives to enter and challenge patents, documents from brand-name 
and AG companies, including prospective documents also, are relevant. 
Brand-name companies are sophisticated and knowledgeable market 
participants, and their strategies and views on the use of AGs should 
provide insight into the likely effects of AGs. The FTC will take into 
account the

[[Page 25309]]

limitations expressed by PhRMA regarding documents that consider 
prospective matters in assessing the weight they should be accorded.
c. Limit the Required Document Search
    Comment: The FTC's proposed request asked for documents that ``were 
prepared or received by or for any senior vice president (or equivalent 
position) with product line responsibility for the specified drug 
product or any officer(s) or director(s) of the company * * *.'' \39\ 
PhRMA suggested, however, that the documents requested by the FTC be 
limited to those ``maintained in the files of current officers or 
directors.'' \40\ PhRMA asserted that this would be consistent with the 
approach taken for previous FTC reports on competition in the 
pharmaceutical industry and with practices under the Hart-Scott-Rodino 
Act, and would ``avoid confusion, reduce the burden, and focus the 
review on the most probative company documents.'' \41\
---------------------------------------------------------------------------

    \39\ 71 FR at 16781-2.
    \40\ PhRMA at 12.
    \41\ See PhRMA at 11; see also PhRMA at 12-13 (discussing Item 4 
(c) of the Hart-Scott-Rodino notification report, FTC Form C4, rev. 
06/06/06).
---------------------------------------------------------------------------

    Response: The Commission believes that for the purpose of this 
study, which should cover decisions at the individual drug level as 
well as a company's general views on marketing AGs, it is necessary to 
consider documents at the level of product-line decisions as well as 
company-wide. However, to reduce the burden arising from this request, 
the Commission has limited the request for documents of senior vice 
presidents to documents maintained in their files. For the presumably 
smaller number of documents related to officers and directors, the 
Commission has retained the ``prepared by or for'' language. The 
Commission believes that this arrangement, plus the reduction in the 
number of drugs covered (discussed below), should reduce burden without 
jeopardizing the production of important, high-level, planning, 
decisional, and strategy documents. Moreover, depending on turnover, a 
request limited to the files of current officers and directors could 
eliminate all but the most recent documents. Such a limitation could 
impair the practical utility and quality of the information collected.
d. Limit Sorting of Documents and Information About Their Preparation
    Comment: PhRMA objected to the FTC's requirement that companies 
indicate on each document ``the date of preparation and the name and 
title of each individual who prepared the document, and group the 
documents by identified drug product.'' \42\ PhRMA asserted that this 
requirement will be very burdensome, and noted that sorting of 
documents is no longer required by the FTC in second requests in merger 
investigations.\43\ Accordingly, PhRMA requested that companies be 
required to produce documents ``as they are maintained in the regular 
course of business along with a list or index identifying the person 
whose files the document came from.'' \44\
---------------------------------------------------------------------------

    \42\ 71 FR at 16781.
    \43\ See PhRMA at 13-15.
    \44\ PhRMA at 14.
---------------------------------------------------------------------------

    Response: The FTC believes that its ability to evaluate and analyze 
the information submitted in response to the Special Orders for this 
study would be greatly enhanced by a requirement to ``group the 
documents by identified drug product.'' \45\ Eliminating this 
requirement could make it difficult to ascertain the relevance of many 
documents, and would slow analysis of the information by FTC staff. 
Given that the FTC has reduced the number of drugs covered by the 
requests (discussed below), sorting documents by drug should not be as 
burdensome as originally anticipated. Moreover, it is likely that 
information about different drugs is maintained separately in the 
regular course of business. The FTC recognizes, however, that some 
documents may generally address a topic, and relate to more than one 
drug. Accordingly, the FTC has modified the Special Orders to require 
all companies to group documents by identified drug product, and to 
respond separately regarding documents that discuss AGs generally.
---------------------------------------------------------------------------

    \45\ 71 FR at 16781.
---------------------------------------------------------------------------

    The Commission believes that in most cases the date of preparation 
and the name and title of each individual who prepared the document 
will be evident from the document itself. However, to reduce burden, 
the FTC will require firms that respond to the Special Orders to 
specify only the name of the person from whose files the document came 
and whether the document was generated within the Company, or the name 
of the source if generated externally. This information should help the 
FTC determine the relevance of each document.
2. Comments on Matters Affecting Both Document and Data Requests
a. Limit the Time Period Covered by the Request
    Comments: The FTC's proposed request asked for documents dated 
after Jan. 1, 1998. GPhA and Actavis recommended that the FTC not seek 
documents from before Jan. 1, 2003, because the marketing of AGs, 
especially during 180-day exclusivity periods, began to increase around 
that time.\46\ Moreover, Actavis asserted that older information is 
especially burdensome to obtain because it may be available only ``in 
off-site storage facilities or on back-up tapes,'' and may exist in 
older formats and systems that companies no longer support.\47\
---------------------------------------------------------------------------

    \46\ See GPhA at 4 n.5; Actavis at 2.
    \47\ Actavis at 1-2. See also GPhA at 4 (noting that agreements 
to market AGs did not become prevalent until late 2003).
---------------------------------------------------------------------------

    Response: To avoid imposing an unnecessary burden, the FTC has 
substantially reduced the period for which documents are being sought. 
The FTC agrees that generic company documents dated after Jan. 1, 2003 
are likely to be the most useful for understanding the effects of AGs 
on generic companies' incentives to file ANDAs and to challenge patents 
via paragraph IV certifications. Therefore, we are changing the initial 
year for generic company documents from 1998 to 2003. The FTC's request 
for brand-name and AG company documents will be limited to those dated 
after Jan. 1, 2002, so that the reasons for any increased marketing of 
AGs beginning in 2003 might be ascertained.
    The FTC also is reducing the time period covered by its data 
requests. Under the first Federal Register Notice, a data request 
potentially could have extended back until Jan. 1, 1999. To ensure 
consistency in reporting, the FTC is requesting sales and price data on 
brand-name, AG, and generic drugs after Jan. 1, 2001, or whenever 
marketing began. A request for this data is necessary to ensure the 
availability of sufficient comparison data on drugs for which no AG was 
marketed, to assess possible trends over time, and to examine possible 
correlations between sales or price levels and various business 
strategies such as patent challenges, marketing of AGs, and sharing of 
180-day exclusivity.
b. Reduce the Number of Drugs Covered
    Comments: Both brand-name and generic drug companies suggested 
limiting the documents requested (and to some extent the data) by 
reducing the number of drugs covered by the study. PhRMA suggested that 
the FTC reduce the number of drug products covered by the study by 
limiting the sample for which information would be requested to those 
drugs for which an AG version has been marketed and a random

[[Page 25310]]

stratified sample of other drugs, e.g., by studying a percentage of the 
drugs in various dollar sales ranges.\48\ Actavis recommended that the 
FTC limit the request for documents to ``drugs for which there was an 
AG launch or an announced agreement for an authorized generic launch.'' 
\49\ Davis also suggested limiting the drugs covered by the study by 
asking generic companies to identify drugs for which they did not file 
an ANDA because of concerns about competition from an AG, and initially 
request ``relevant decisional documents as to these products.'' \50\ 
Prasco, on the other hand, appears to be concerned that by limiting the 
number of drugs or companies, e.g., by considering only drugs for which 
generic competition began with a period of 180-day exclusivity, the FTC 
might not examine the full range of situations in which AGs are 
marketed.\51\
---------------------------------------------------------------------------

    \48\ PhRMA at 8-9, 18-19. Note that PhRMA, which asserted that 
the FTC's requests ``would cover not only brand drug `products that 
have first faced generic competition since January 1, 1999' but also 
products `that have received notice of the filing of an ANDA,' 
misinterpreted the FTC's Federal Register Notice and thus 
incorrectly believed that the study would cover a very large number 
of drugs. See PhRMA at 18 (quoting 71 FR at 16781). The FTC's 
Federal Register Notice stated that ``the brand-name companies to 
which the information requests would be sent include those companies 
with products that have first faced generic drug competition since 
January 1, 1999 or those that have received notice of the filing of 
an ANDA * * *.'' 71 FR at 16781. Thus the criteria quoted by PhRMA 
refer to the companies that would receive notice, not the drugs that 
would be covered. These criteria would likely cover many companies, 
but the number of drugs for which each company will be required to 
provide data will be limited to AGs, brand-name and ANDA-generic 
versions of AGs, and drugs for which an ANDA with a paragraph IV 
certification has been filed. Thus, the number of drugs should not 
be large.
    \49\ Actavis at 2-3.
    \50\ Davis at 12.
    \51\ See Prasco at 2.
---------------------------------------------------------------------------

    Response: The FTC agrees that the number of drugs covered by the 
study should be reduced by focusing on AGs \52\ and a limited number of 
other drugs necessary to illuminate the issues addressed by this study.
---------------------------------------------------------------------------

    \52\ Focusing requests on AGs is not straightforward because no 
comprehensive list of AGs is available. Thus, the first request 
proposed for this study is a request to brand-name companies to 
identify all AGs initially marketed after January 1, 2001. Although 
the FTC will provide a list of putative AGs (drugs for which an AG 
is believed to have been marketed) and drugs subject to ANDAs with 
paragraph IV certifications, the Special Orders assume that brand-
name companies are better aware of drugs that have been marketed 
pursuant to their NDAs, and thus can identify their AGs, even if 
they are not on a list provided by the FTC.
---------------------------------------------------------------------------

    Accordingly, the Commission has limited the data requests to both 
brand-name and generic companies to (i) AGs and all related drugs, 
i.e., brand-name versions of AGs and bioequivalent ANDA-generic drugs; 
and (ii) brand-name drugs for which at least one ANDA with a paragraph 
IV certification has been filed, and all bioequivalent ANDA-generic 
drugs.\53\ The data requests must address all such drugs so that the 
FTC has a complete and accurate basis upon which to evaluate relative 
prices, market shares, and sales levels sufficient to support paragraph 
IV patent challenges.
---------------------------------------------------------------------------

    \53\ These two groups are likely to overlap. Also, price data 
will not be requested regarding brand-name drugs for which an ANDA 
with a paragraph IV certification has been filed, but generic entry 
has not yet occurred.
---------------------------------------------------------------------------

    Moreover, the FTC recognizes that the scope of drugs necessary for 
purposes of document requests is narrower than the set of drugs needed 
to undertake a reliable economic analysis, which must include 
comparison drugs for which no AG was marketed. Consequently, document 
requests to brand-name companies have been modified to focus on 
documents that discuss specific AGs or related brand-name drugs 
identified by the brand-name company, or documents that generally 
discuss the marketing of AGs. Such documents should shed light on the 
brand-name companies' economic and strategic reasons for marketing AGs. 
The scope of document requests to generic drug companies, however, is 
not limited to drugs for which an AG has been marketed. Rather, to 
fully explore concerns that AGs are inhibiting generic entry and patent 
challenges, generic companies are required to submit documents that 
discuss AGs in regard to a decision to submit an ANDA and/or make a 
paragraph III or IV certification with respect to any specific drug, 
and documents that generally discuss AGs in regard to submission of 
ANDAs and/or making paragraph III or IV certifications, but not in 
regard to a particular drug. This approach takes account of the 
possibility that generic companies make decisions about whether to 
pursue marketing of a generic drug before it is known whether an AG 
will be launched, and thus relevant documents may concern drugs for 
which no AG has been marketed, drugs for which the generic company 
decided to file an ANDA with a paragraph III certification rather than 
a paragraph IV, or drugs for which the company decided not to file an 
ANDA.
3. Data
a. Quantitative vs. Qualitative Information
    Comments: Brand-name pharmaceutical companies asserted that the 
study should be based primarily on quantitative information, rather 
than documents, while generic companies stressed the importance of 
qualitative information found in documents. PhRMA asserted that ``data, 
rather than documents, best meet the needs of the study'' because it 
believes that pricing and output data as well as data on generic entry 
in the presence of an AG will ``show most clearly and directly whether 
authorized generics have benefited consumers by increasing availability 
of prescription drugs at lower prices.'' \54\ By contrast, generic 
companies argued that while quantitative data are useful for analyzing 
short-term effects of AGs, qualitative information is essential to 
gauge the extent to which AGs will affect generic drug entry decisions 
in the future.\55\ Similarly, AAI/FUSA/USPIRG stated that ``the more 
significant long-term effects will not be identified by current 
quantitative data'' because the ``more profound impact of authorized 
generics may be on the long-term incentive and ability of generic firms 
to engage in the costly and risky conduct of attempting to invent non-
infringing drugs and challenge questionable patents.'' \56\
---------------------------------------------------------------------------

    \54\ PhRMA at 2-3; see also Lilly at 1 (endorsing the comments 
of PhRMA on the scope and extent of the proposed request for 
information).
    \55\ See, e.g., PAL at 6 (``Much of the information concerning * 
* * longer-term effects is qualitative and narrative in nature, 
rather than quantitative.''); GPhA at 4-5 (data collection must 
include both quantitative and qualitative data).
    \56\ AAI/FUSA/USPIRG at 6.
---------------------------------------------------------------------------

    Response: Quantitative and qualitative data are complementary, and 
both are necessary for a full exploration and analysis of the short- 
and long-term effects of AGs on competition in the prescription drug 
marketplace. Of the quantitative data that the FTC is seeking, price 
data show the short-term effects of AGs on consumers, while data on 
sales, market share, and return on investment are more relevant to the 
long-term effects of AGs on ANDA-generic companies' incentives to file 
ANDAs and challenge patents. Quantitative data on recent filings of 
ANDAs with paragraph IV certifications should also be relevant to the 
long-term picture, because recent filings have been made in light of 
the current climate regarding the marketing of AGs.
    Qualitative information, including company documents, however, is 
essential to evaluate the long-term effects of AGs on generic company 
decisions to file ANDAs and challenge patents. Generic company 
documents prepared before the first Federal Register Notice for this 
study was published are essential to interpret the

[[Page 25311]]

quantitative data and to understand what factors or conditions, 
including AGs, might have contributed to any quantitative trends that 
we might observe. Generic company documents are also necessary to 
understand how AGs actually affect generic company decision-making. 
Brand-name company documents could further elucidate the likely effects 
of AGs on generic company decisions to challenge patents, and aid in 
the interpretation of the quantitative data.
b. Cost Accounting Data
    Comment: PhRMA suggested that the FTC eliminate its request for 
cost accounting data from brand name firms because ``cost accounting 
and margin data for brand name drug companies will not show whether 
generic entry has become unprofitable'' and therefore such data are not 
useful for that analysis.\57\ Similarly, Davis urged that the FTC drop 
its request for all cost data, because he believes that cost data are 
of limited relevance to the study and would be very burdensome to 
collect and analyze.\58\
---------------------------------------------------------------------------

    \57\ PhRMA at 17.
    \58\ See Davis at 14.
---------------------------------------------------------------------------

    Both PhRMA and Prasco, however, asserted that to evaluate whether 
AGs have deterred ANDA-generic entry, cost data from generic companies 
on the profitability of entry and return on investment are 
essential.\59\ Prasco emphasized that the FTC should obtain data that 
would enable it to determine the ``return-on-investment generated by 
generic products with and without competition from authorized 
generics,'' and whether that return is a sufficient incentive for 
challenging patents.\60\
---------------------------------------------------------------------------

    \59\ See PhRMA at 20; Prasco at 3.
    \60\ Prasco at 3.
---------------------------------------------------------------------------

    Response: The FTC agrees that the request for cost data from brand-
name companies should be eliminated because it is not useful for 
evaluating generic companies' incentives to file ANDAs and make 
paragraph IV certifications. Cost data regarding brand-name drugs will 
no longer be required.
    Cost data regarding generic drugs, however, are necessary to 
evaluate the effects of AGs on profitability and return on investment, 
particularly during 180-day exclusivity. Thus, the revised requests 
require generic companies to submit cost data. Companies generate cost 
data in the ordinary course of business, so the request will not be 
excessively burdensome. To enhance uniformity and minimize burden, the 
FTC has modified the Special Orders to request the overall cost to 
manufacture, and has eliminated the request that companies separately 
provide data for cost subcategories, e.g., material cost, labor cost, 
manufacturing cost, distribution cost, API cost, and overhead cost. The 
FTC is also requesting generic companies' costs for research and 
development and for paragraph IV litigation, to ensure that it can 
completely evaluate the investment necessary for generic entry that 
entails a patent challenge.

C. Suggestions on Alternative Sources of Information

1. Comments on Holding Hearings
    Comment: Several commenters, including GPhA, suggested that the FTC 
hold hearings to gather information on the likely long-term effects of 
AGs because they believe that the effects of AGs would not be reflected 
adequately in data on currently marketed ANDA-generic drugs, for which 
entry decisions and strategies may have been made before the marketing 
of AGs became more common in 2003.\61\ Unlike the other commenters, 
however, GPhA also suggested that the FTC not use subpoenas: 
``[S]ubpoenas are an unnecessarily forceful mechanism by which to 
gather information, as many generic companies are interested in this 
issue and will be inclined to voluntarily submit information in 
response to FTC's request.'' \62\
---------------------------------------------------------------------------

    \61\ See GPhA at 1, 4, 6-7. See also AAI/FUSA/USPIRG at 6; PAL 
at 6; Gilbert's at 2-3 (suggesting that the FTC hold hearings 
because the effects of AGs may not be reflected in pre-existing 
documents which ``may show that generic companies have continued 
developing certain products despite the threat of authorized 
generics in the hope that the practice is curtailed by the courts, 
regulation or legislation'').
    \62\ GPhA at 5.
---------------------------------------------------------------------------

    Response: While the FTC recognizes the value of hearings for 
gathering information from industry and economic experts and enhancing 
our understanding of an issue, hearings cannot substitute for pre-
existing, often confidential documents and data that can be acquired 
only by compulsory process. The use of Special Orders to gather pre-
existing information was critical to the FTC's reports on GENERIC DRUG 
ENTRY PRIOR TO PATENT EXPIRATION (July 2002) \63\ and PHARMACY BENEFIT 
MANAGERS: OWNERSHIP OF MAIL-ORDER PHARMACIES (August 2005).\64\ As the 
FTC reviews the information it receives in response to the Special 
Orders, it will consider whether hearings should be held to supplement 
the responses with up-to-date views on particular issues.
---------------------------------------------------------------------------

    \63\ Hereinafter GENERIC DRUG REPORT.
    \64\ Hereinafter PBM REPORT.
---------------------------------------------------------------------------

2. Comments on the Requests for IMS Information
    Comments: IMS, a provider of economic data on pharmaceuticals, 
asserted that rather than obtaining IMS data from individual companies, 
``the Commission could obtain information it seeks more efficiently by 
licensing the information directly from IMS.'' \65\ IMS believes that 
licensing would be more efficient because IMS data frequently are 
customized to a particular customer, and the FTC's request could 
involve numerous companies. Accordingly, the FTC would likely receive 
data in inconsistent formats, which would not be comparable across 
``manufacturers, products, and time periods.'' \66\ IMS also suggested 
that the FTC eliminate its proposed request for ``any other IMS data, 
or the equivalent thereof, used in the ordinary course of business,'' 
because it is too broad and would at least in part yield IMS 
information unrelated to the study.\67\ Several pharmaceutical 
companies also suggested that the FTC obtain IMS data directly from 
IMS,\68\ because ``IMS Health sells its data under licenses that 
restrict licensees from disclosing the data to third parties.'' \69\
---------------------------------------------------------------------------

    \65\ IMS at 2.
    \66\ IMS at 2.
    \67\ IMS at 3-4. See also Prasco at 1-2 (suggesting that ``IMS 
Integrated Promotional Services Total Promotion Reports'' are 
unrelated to the topic of the study).
    \68\ See Actavis at 3; Davis at 14; PhRMA at 15-16.
    \69\ PhRMA at 15-16. IMS also stated that whether FTC obtains 
data from IMS directly or from individual companies, ``IMS 
information constitutes confidential trade secret and commercial 
information that is protected from disclosure under section 6(f) of 
the FTC Act, 15 U.S.C. 46(f).'' IMS at 3.
---------------------------------------------------------------------------

    Response: The FTC agrees that obtaining data directly from IMS 
would be more efficient, and would enhance the FTC's ability to analyze 
and interpret the data. It would also reduce the burden on industry 
respondents, who would not have to find and produce this information. 
In addition, licensing data from IMS would facilitate obtaining 
complete data, especially retail-level sales and price data necessary 
for an evaluation of the effects of AGs on consumers.\70\ Accordingly, 
the FTC has eliminated the requests for IMS information from the 
proposed Special Orders.
---------------------------------------------------------------------------

    \70\ See Gilbert's at 3 (urging ``the FTC to specifically 
request information on the pricing of drugs at the retail level, as 
this data may not be captured by the request as currently stated'').
---------------------------------------------------------------------------

D. Comments Requesting Limitations on Use of the Information Submitted

    Comment: GPhA requested that ``the FTC give assurances that 
information

[[Page 25312]]

gathered in conducting this study will be used solely for the purposes 
of the study.'' \71\
---------------------------------------------------------------------------

    \71\ GPhA at 5.
---------------------------------------------------------------------------

    Response: Although the purpose of the proposed information 
collection is to provide a basis for the proposed study, the Commission 
cannot give assurances that the documents and information collected 
will not be used for other purposes such as law enforcement 
investigations. The Commission would not exercise its enforcement 
authority solely on the basis of information collected in response to 
the Special Orders, however. Rather, it would do so only after 
gathering additional information from a company and/or other sources 
through an investigation separate from the proposed study. Also, 
although materials submitted may be covered by one or more stringent 
confidentiality constraints, the Commission cannot rule out that, under 
circumstances specified by law, the information could be used by other 
agencies for law enforcement purposes, by Congress, or in judicial 
proceedings.

E. Suggestions To Broaden the Scope of the Proposed Study

    The FTC received a number of suggestions from generic, brand-name, 
and AG companies to broaden the scope of the study. Some of the 
suggestions addressed new topics not contemplated by the Federal 
Register Notice of April 4, 2006, and would require the submission of 
information not contemplated by that notice. Other suggested topics 
were more closely related to the proposed study and might require 
little or no additional information. Although the agency cannot be 
certain that it will be possible to address particular topics because 
the nature of the information to be collected cannot entirely be 
predicted, the Commission will make every effort to maximize the 
practical utility of the information it receives by using it to address 
as many issues relevant to the study as possible.
1. Topics Closely Related to the Scope of the Proposed Study
    Comment: Davis and PhRMA suggested that the FTC study take into 
account possible beneficial effects of AGs on generic companies that 
license them, e.g., from licensing revenues, by enhancing a company's 
portfolio of products, or by allowing a company to offer all dosages or 
strengths of a drug.\72\
---------------------------------------------------------------------------

    \72\ See Davis at 15-16; PhRMA at 20.
---------------------------------------------------------------------------

    Response: The FTC agrees that its study should encompass all 
aspects of the impact of AGs on generic companies, including both 
positive and negative effects. The Commission has revised its document 
requests to ensure that it is clear that information requests to 
generic companies extend to documents that discuss possible benefits to 
a company of marketing an AG drug.
    Comment: Several commenters suggested examining a number of complex 
issues regarding the purposes, effects, limits, and necessity of 180-
day exclusivity. Lilly suggested that the FTC analyze whether and to 
what extent consumers benefit from accelerated generic entry due to 
patent challenges; whether 180-day exclusivity undermines those 
benefits by delaying competition; and whether 180-day exclusivity is a 
necessary incentive for generic companies to undertake patent 
challenges.\73\ Prasco suggested that the Commission assess whether the 
effects of AGs on competition differ from the effects of shared 
exclusivity by multiple first filers of ANDAs with paragraph IV 
certifications under the MMA.\74\ Prasco also recommended that the FTC 
take into account the ``apparent diminishing number of brand products 
available for paragraph IV ANDA challenges'' when considering whether 
AGs have caused a decrease in the number of paragraph IV 
certifications.\75\
---------------------------------------------------------------------------

    \73\ See Lilly at 2.
    \74\ See Prasco at 3. The MMA defined ``first applicant'' in 
such a way that all applicants who submit a substantially complete 
application containing a paragraph IV certification on the first day 
the FDA receives such an application may be granted 180-day 
exclusivity. See 21 U.S.C. 355(j)(5)(B)(iv)(II)(bb). The MMA 
codified a policy that had been adopted by the FDA not long before 
the enactment of the MMA in 2003. See FDA, GUIDANCE FOR INDUSTRY: 
180-DAY EXCLUSIVITY WHEN MULTIPLE ANDAS ARE SUBMITTED ON THE SAME 
DAY (July 2003), available at http://www.fda.gov/CDER/GUIDANCE/5710fnl.pdf. Before that time, the FDA granted exclusivity on a 
patent-by-patent basis, so that two companies that were first filers 
with respect to challenges to different patents might share 
exclusivity for the drug product. See Letter from Gary Buehler, 
Office of Generic Drugs, FDA, to Diane Servello, Andrx 
Pharmaceuticals, Inc. (Nov. 16, 2001).
    \75\ Prasco at 3.
---------------------------------------------------------------------------

    Response: These issues are related to the proposed study, and the 
FTC anticipates that the information to be obtained from companies and 
other sources may allow the Commission to address aspects of many of 
them. Such information includes price data, the timing of generic 
entry, dates of patent expiration, the extent of multiple entry, 
profitability, return on investment, and trends in paragraph IV 
certifications, and documents related to these issues. The Commission, 
however, will not broaden its information requests in order to expand 
the scope of its study beyond the previously announced analysis of the 
effect of AG drugs on competition.
2. Topics Outside the Scope of the Proposed Study
    Comment: Several commenters suggested considering the full range of 
strategies that brand-name companies might use to delay generic entry 
and competition or otherwise promote the use of brand-name drugs at the 
expense of generics, regardless of whether the strategies involve AG 
drugs.\76\ Practices suggested for inclusion in the study included the 
filing of citizen petitions or the use of the declaratory judgment 
system to delay generic entry; \77\ the use of ``product hopping'' or 
other strategies to switch consumers from one brand-name drug to 
another at the onset of generic competition; \78\ and the use of 
``reverse payments'' and purportedly problematic patent 
settlements.\79\
---------------------------------------------------------------------------

    \76\ See PAL at 6; AAI/FUSA/USPIRG at 5; Gilbert's at 3; GPhA at 
6.
    \77\ See AAI/FUSA/USPIRG at 4 (citizen petitions and declaratory 
judgment system); Gilbert's at 3 (citizen petitions); GPhA at 6 
(citizen petitions).
    \78\ See GPhA at 6 (product hopping); Gilbert's at 3 (product 
switches); AAI/FUSA/USPIRG at 5 (product switches).
    \79\ See Gilbert's at 3; AAI/FUSA/USPIRG at 5; PAL at 6.
---------------------------------------------------------------------------

    Response: While the FTC appreciates the importance of studying 
strategies that might adversely affect generic competition, these 
topics are generally beyond the scope of the congressional request to 
study the competitive effects of AGs. Given finite resources, 
examination of these issues through expansion of the Special Orders 
would detract from the quality and timeliness of the study of AGs. To 
the extent that the study finds that AGs are marketed pursuant to the 
settlement of paragraph IV litigation, however, the FTC will examine 
the competitive implications of the arrangements as part of its ongoing 
review of such settlements.
    Comment: Other commenters suggested that the FTC broaden the study 
to examine practices of generic pharmaceutical companies that might be 
anti-competitive and chill brand-name manufacturers' incentives to 
innovate. In particular, Lilly suggested that the FTC examine ``early 
and speculative patent challenges,'' which ``can have a chilling effect 
on innovation.'' \80\
---------------------------------------------------------------------------

    \80\ Lilly at 3. See also Davis at 15.
---------------------------------------------------------------------------

    Response: The possible effects of early and speculative patent 
challenges and other practices on innovation are outside the scope of 
the congressionally requested study. An analysis of this complex issue, 
which would involve

[[Page 25313]]

assessing innovation or measuring branded firms' pharmaceutical 
research and development efforts, would detract from the FTC's ability 
to carry out a complete and timely study of the effects of AGs on 
competition.
    Comment: AARP suggested that the Commission broaden the scope of 
the study by ``assess[ing] how different generics offer different 
levels of savings over the brand name drug; examin[ing] whether, in 
order to get better prices, consumers must search for a generic not 
produced by the manufacturer of the brand name drug; examin[ing] the 
cost impact of authorized generics on public programs, such as Medicare 
and Medicaid, and on private health insurance; and assessing] how the 
use of authorized generics impacts access to lower cost generic drugs, 
particularly for low-income individuals.'' \81\
---------------------------------------------------------------------------

    \81\ AARP at 2.
---------------------------------------------------------------------------

    Response: The first suggestion, that the FTC assess the savings 
offered by different types of generic drugs relative to the brand-name 
drug, is within the scope of the proposed study and one that the 
Commission plans to address. The other topics, however, are outside the 
scope of the congressionally requested study, which is designed to 
examine the short- and long-term effects of AGs on competition in the 
prescription drug marketplace, focusing on their impact on generic 
company incentives to market generic drugs and undertake patent 
challenges. The FTC does not anticipate addressing issues such as the 
impact of AGs on consumer behavior or specific classes of consumers, 
and on public or private programs not administered by this agency, 
because to do so would detract from the quality and timeliness of the 
congressionally requested study.

Destruction of Documents

    It should be noted that subsequent to this notice, any destruction, 
removal, mutilation, alteration, or falsification of documentary 
evidence that may be responsive to this information collection within 
the possession or control of a person, partnership or corporation 
subject to the FTC Act may be subject to criminal prosecution. 15 
U.S.C. 50; see also 18 U.S.C. 1505.

Confidentiality

    The information presented in the study will not identify company-
specific data. See 15 U.S.C. 57b-2(d)(1)(B). Rather, the Commission 
anticipates using primarily aggregated totals, on a level sufficient to 
protect individual companies' confidential information, to provide a 
factual summary of the effect of authorized generic entry since 1999. 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), bars the Commission from 
publicly disclosing trade secrets or confidential commercial or 
financial information it receives from persons pursuant to, among other 
methods, special orders authorized by Section 6(b) of the FTC Act. Such 
information also would be exempt from disclosure under the Freedom of 
Information Act. 5 U.S.C. 552(b)(4). Moreover, under Section 21(c) of 
the FTC Act, 15 U.S.C. 57b-2(c), a submitter who designates a 
submission as confidential is entitled to 10 days' advance notice of 
any anticipated public disclosure by the Commission, assuming that the 
Commission has determined that the information does not, in fact, 
constitute 6(f) material. Although materials covered under one or more 
of these various sections are protected by stringent confidentiality 
constraints, the FTC Act and the Commission's rules authorize 
disclosure in limited circumstances (e.g., official requests by 
Congress, requests from other agencies for law enforcement purposes, 
administrative or judicial proceedings). Even in those limited 
contexts, however, the Commission's rules may afford the submitter 
advance notice to seek a protective order. See 15 U.S.C. 57b-2(c); 16 
CFR 4.9--4.11.

Estimated Burden Hours and Labor Cost Burden

    In its prior Federal Register notice, the FTC estimated that a 
company's burden for the AG study would range from 140 to 408 hours 
depending upon the number of a company's drugs covered by the 
study.\82\
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    \82\ 71 FR 16779, 16783 (April 4, 2006).
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    Two commenters asserted that the FTC's estimates for complying with 
its document requests understated the burden hours. PhRMA, for example, 
asserted that ``the FTC's estimates understate by several multiples the 
amount of time and money it would likely take to comply with the 
requests as written.'' \83\ In contrast, the AG company Prasco had no 
``comment on the accuracy of the FTC's estimates'' but noted that the 
``burden of providing the requested information can only be assessed in 
relation to the size of the company responding.'' \84\ GPhA also did 
not comment on the FTC's estimates.
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    \83\ PhRMA at 7. See also Davis at 11 (the FTC's Federal 
Register notice ``materially underestimates the burden of 
compliance''). PhRMA did not comment on the Commission's burden 
estimates for complying with requests for financial data.
    \84\ 84 Prasco at 2.
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    The initial hour burden estimates are consistent with previous PRA 
estimates and the FTC's experience with information requests that 
require financial data, answers to questions, and production of pre-
existing documents. Even assuming, however, that due to the nature of 
the questions and the time frame covered in the first Federal Register 
notice, the FTC's initial estimate understated the burden, the 
Commission believes that its estimates are realistic given the 
modifications to the requests, which largely adopt industry suggestions 
for reducing burden. Previously, the study covered drug products that 
first faced generic competition after Jan. 1, 1999, for which an ANDA 
with a paragraph III or IV patent certification was filed. It now 
covers drugs subject to competition after Jan. 1, 2001, for which at 
least one ANDA with a paragraph IV certification was filed. Our 
preliminary review suggests that there are approximately 200 such drugs 
subject to generic competition, and that this set of drugs will also 
capture many of the AGs that have been marketed during this time 
frame.\85\ The reduction in the number of drugs covered resulting from 
the changes in time frame and criteria for inclusion in the study 
should reduce the hour burden by more than one-half.
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    \85\ In addition, to obtain a complete picture of industry 
practices in marketing AGs, we are asking companies to identify and 
provide information on all AGs (tablet or capsule form) that were 
launched after Jan. 1, 2001, regardless of what certifications were 
made regarding patents on the brand-name drug. Brand-name companies 
will also be requested to provide sales data on brand-name drugs for 
which at least one ANDA with a paragraph IV certification was filed 
after Jan. 1, 2001, and generic entry has not yet occurred.
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    Other changes should reduce the burden even more. The time period 
covered by the document requests, which previously began on Jan. 1, 
1998, now begins on Jan. 1, 2002 or 2003, depending on company type, 
and ends on April 3, 2006. This should reduce the burden of document 
production by more than half, and probably much more because older 
documents often are harder to obtain. Moreover, the document requests 
are now limited to planning, decisional, and strategy documents that 
specifically address AGs. Although any estimate of the expected 
decrease in burden due to the changes that focus the requests on AGs is 
necessarily imprecise because no complete list of AGs is available, the 
Commission believes, from preliminary information, that these changes 
alone should reduce the burden markedly.
    Finally, the requests for IMS Health data and cost data from brand-
name companies have been eliminated. The request for cost data from 
generic firms has been simplified by requesting

[[Page 25314]]

annual operating statements. In sum, as a result of the combined 
effects of the changes to reduce the burden of both financial and 
document requests, the hour burden of the study should be a fraction of 
what it would have been pursuant to the requests of the first Federal 
Register notice.
    After taking account of the public comments and the burden-reducing 
changes that we have made in response, the FTC believes that its 
previously published estimate of the total burden hours remains 
reasonable. The Commission has retained a three-tier estimate of burden 
hours depending upon the number of drug products for which a company is 
required to provide a response: Companies with one to five drug 
products, companies with six to 10 drug products, and companies with 
more than 10 drug products. As before, the Commission anticipates that 
the majority of burden hours will result from document production. 
However, given that the Commission seeks only high-level documents 
strongly relevant to the AG study, the Commission has revised its 
burden estimates to reflect a greater amount of time spent on 
identifying responsive documents, and less time spent on retrieving and 
copying. The Commission has also increased its estimates of the maximum 
hours for these tasks to reflect the possibility that a few companies 
will have a relatively large number of drugs responsive to its 
requests.
    Based on preliminary information, the FTC anticipates that it will 
seek information for 1 to 5 drug products from approximately 130 
companies, 6 to 10 drug products from 20 companies, and for greater 
than 10 drug products from 40 companies. Thus, the cumulative hours 
burden to produce documents and prepare the response sought will be 
approximately 40,780 hours. [(138 hours x 130 companies) + (230 x 20 
companies) + (456 hours x 40 companies)] As previously discussed, the 
Commission anticipates that in general the number of drugs, and thus 
the number of burden hours, will be proportional to company size.\86\ 
The following table shows the estimated burden hours for different 
tasks for companies with different numbers of drugs covered by the 
study:
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    \86\ The Commission recognizes, however, that this may not apply 
to independent AG companies, for which a large fraction of the 
company's drugs may be covered. The FTC anticipates that there are 
few such companies, and that their responses are especially 
important to this study.

----------------------------------------------------------------------------------------------------------------
                                                                     1-5 Drug        6-10 Drug       > 10 Drug
                              Task                                   Products        Products        Products
                                                                      (hours          (hours)         (hours)
----------------------------------------------------------------------------------------------------------------
Organize document and information retrieval.....................              12              24              48
Identify requested documents....................................              40              80             200
Retrieve and copy requested documents...........................              10              20              48
Identify requested financial information........................              40              50              60
Obtain financial information....................................              12              16              20
Prepare response................................................              24              40              80
                                                                 -----------------------------------------------
    Total.......................................................             138             230             456
----------------------------------------------------------------------------------------------------------------

    It is not possible to calculate with precision the labor costs 
associated with answering the planned questions and producing the 
documents requested, because responses will entail participation by 
management and/or support staff at various compensation levels within 
many different companies. Individuals within some or all of those labor 
categories may be involved in the information-collection process. 
Nonetheless, the FTC has assumed that mid-management personnel and 
outside legal counsel will handle most of the tasks involved in 
gathering and producing the responsive information, and has applied an 
average hourly wage of $250/hour for their labor. Thus, the labor costs 
per company should range between $34,500 (138 hours x $250/hour) and 
$114,000 (456 hours x $250/hour).

Estimated Annual Capital or Other Non-labor Costs

    The capital or other non-labor costs associated with the 
information requests will be minimal. Industry members should already 
have in place the means to store information of the volume requested. 
In addition, respondents may have to purchase office supplies such as 
file folders, computer CDs or DVDs, photocopier toner, or paper in 
order to comply with the Commission's requests. The FTC estimates that 
such costs will be minimal.

    By direction of the Commission, Commissioner Harbour recused.
Donald S. Clark,
Secretary.
 [FR Doc. E7-8567 Filed 5-3-07; 8:45 am]
BILLING CODE 6750-01-P