On 8 August 2012, the Federal Trade Commission (FTC) issued an advisory letter concluding that an initiative proposed by the Generic Pharmaceutical Association (GPhA) to address drug shortages is unlikely to harm competition. The advisory opinion responds to GPhA’s request for review of its proposed Accelerated Recovery Initiative (ARI), pursuant to which generic manufacturers of drugs in short supply will compile and provide to the U.S. Food and Drug Administration (FDA) competitively sensitive information to help FDA address drug shortages. The FTC concluded that the program contains sufficient safeguards to ensure that the sharing of competitively sensitive information that could raise antitrust concerns does not occur.
Drug shortages have been a growing problem in the U.S. in recent years. As noted in the advisory letter, the FDA reports that the number of drug shortages nearly tripled between 2005 and 2010. And the vast majority of shortages relate to generic drugs, particularly “generic injectables,” which are “more complex [[drugs] and require more specialized processes and equipment to manufacture.”
Under the ARI, the GPhA will engage IMS Health to collect inventory data, as well as current and projected production and supply schedules, from manufacturers of drugs on the FDA shortage list. IMS will “use this data, along with market data it currently collects, to analyze whether, and to what extent, the anticipated supply of a given drug is likely to fall short of the projected demand.” IMS will then report its findings to the FDA.
The FTC observed that “an agreement among competitors to pool information about their output, both present and future,” when “undertaken for a legitimate purpose, may serve to promote rather than injure competition and consumer welfare.” However, under other circumstances, “such data gathering programs can serve to facilitate collusion among competing sellers and thereby present a substantial risk of anticompetitive harm.” The FTC thus analyzed the ARI under the rule of reason.
According to the FTC, certain characteristics of the ARI increase the potential for harm to competition. In particular, the ARI will pool competitively sensitive information regarding both present and future output. Additionally, there are generally only a few manufacturers of any particular generic injectable drug, and thus the potential for collusion is greater.
The FTC concluded, however, that several elements of the ARI sufficiently limit the potential for harm to competition:
- Use of a third party to collect data. IMS, a third party, will collect the competitively sensitive information, and generic manufacturers and the GPhA will not have access to the data.
- Well-defined role of the third party collection agent. IMS will be permitted to disclose the data and its subsequent analyses to only the FDA, and IMS will not be allowed to use the data for any other purpose. Furthermore, IMS will not function as an intermediary between generic manufacturers and the FDA. IMS also will not be permitted to advise the FDA on how to resolve shortages. Instead, IMS will merely provide the FDA “objective data and gap analysis reports.”
- Confidentiality safeguards. The participation agreement and program rules expressly prohibit participants from exchanging competitively sensitive information and emphasize the obligation of participants to ensure adherence to confidentiality provisions.
- Non-exclusivity. All manufacturers of drugs covered by the ARI, including non-members of GPhA, may participate. Also, participation will be voluntary and participants will be free to participate in other comparable programs.While the FTC advisory letter is specific to the facts of the GPhA initiative, it illustrates that although information sharing among competitors can raise antitrust issues, such concerns often can be ameliorated through careful program design. Companies considering participation in such programs should bear in mind that the antitrust risks associated with such programs vary significantly depending on factors such as the type of information shared, the characteristics of the market at issue, and the presence of safeguards to protect against anticompetitive activity.
A copy of the advisory opinion is available here.