FTC and DOJ hear from experts on how to increase competition and promote affordability in the U.S. pharmaceutical industry

The Federal Trade Commission (FTC) and Department of Justice Antitrust Division (DOJ) have concluded a series of three listening sessions focused on competition in the pharmaceutical industry. The sessions included a series of panel discussions comprised of legal experts, patient advocates, academics, Congressional staffers, and pharmaceutical industry representatives. The panelists addressed issues related to generic and biosimilar competition; patents; regulatory barriers to the generic/biosimilar approval process; and the role of pharmacy benefit managers (PBMs).

The listening sessions¹ were part of a mandate included in President Trump's April 2025 Executive Order on “Lowering Drug Prices by Once Again Putting Americans First.”² While representatives from the FTC and DOJ³ stressed their agencies' commitments to using the enforcement tools at their disposal to achieve the goals outlined in the Executive Order, they provided no specifics as to how they intend to use the sessions to guide their antitrust enforcement efforts.

Generic and biosimilar competition and patent issues

Throughout the listening sessions, a number of panelists discussed what they alleged to be anticompetitive conduct by brand-name drug manufacturers that hinder the availability of generic and biosimilar drugs. While several panelists emphasized that strong intellectual property (IP) protections are essential for incentivizing pharmaceutical innovation, there was disagreement about whether the pharmaceutical industry is particularly prone to improper use of patents to prevent generic competition. For example, Sneha Dave, Founder & Executive Director of patient advocacy organization Generation Patient, argued that brand name companies are “non-stop patent machines” and exploit the patent system through practices such as product-hopping, pay-for-delay arrangements, and patent thickets. By contrast, Adam Mossoff, Professor of Law at George Mason University Law School, argued that systemic economic evidence shows that the patent system is a key driver of innovation in the pharmaceutical industry. Dave pushed back, contending that the current patent system creates perverse incentives that direct research to incremental modifications rather than real breakthroughs. As a result, she argued, strengthening patent protection reduces rather than increases pharmaceutical innovation.

Pay-for-delay agreements

Professor Mossof and Markus Meier, former Assistant Director of the FTC's Health Care Division, said that the Hatch-Waxman Act has been successful in spurring innovation and lowering drug costs, and creating a generic drug industry that benefits all patients. Meier described his view of the supposed evolution of “pay-for-delay” arrangements over the last 25 years, and recommended that the FTC consider investigating the more complex agreements between name-brand and generic drugmakers that lead to delayed entry of generic products into the market.

Patent Thickets and Product-Hopping

Some panelists argued that the pharma industry is not particularly prone to so-called “patent thickets,” and that the practice of embedding multiple patents into a product is not a practice unique to the pharmaceutical industry. Peter Anthony Pappas, Director of Intellectual Property Policy for the U.S. Senate Judiciary Committee under Senator Thom Tillis (R-NC), said that while patent thickets may be an issue in other sectors, they are not of particular concern in the pharma industry.

The panelists also discussed the tension between incentivizing drugmakers to continue follow-on research to improve their products and concerns about preventing alleged “product-hopping” abuses (whereby patients are transitioned from older versions of drugs to reformulated versions to purportedly hinder generic substitution). Franci Rooney Becker, Chief Counsel to Republican Senator John Cornyn, said that while follow-on research should be incentivized, manufacturers marketing a new version of a brand-name drug should not be able to make misrepresentations or behave anticompetitively towards the original product.

With respect to biosimilar products, Alex Brill, Senior Fellow at the American Enterprise Institute, warned that the collective effects of what he alleged to be a “host of anticompetitive tactics,” such as patent thickets and product-hopping, leads to a “chilling effect” on biosimilar manufacturers, who face unpredictability with respect to the time and cost required to bring potential products to market.

Orange Book listings

FTC Chair Andrew Ferguson said that the FTC is continuing to scrutinize alleged improper Orange Book patent listings that delay generic drug entry as potential violations of Section 5 of the FTC Act.⁴ Panelists also highlighted the issue of brand manufacturers' alleged improper use of Orange Book listings, arguing that these practices can exploit loopholes in Hatch-Waxman to extend exclusivity periods.

Regulatory issues

Biosimilar and interchangeability designations

Certain panelists asserted that regulatory hurdles and agency red tape create unnecessary barriers to entry for generic drugs and biosimilar products. Sarah Yim, Director of the FDA Office of Therapeutic Biologics and Biosimilars, said there are “many challenges” in the U.S. health care ecosystem that make it difficult for biosimilars, and that the FDA must reduce barriers to development while ensuring approval of high quality, safe, and effective biosimilars.⁵

Panelists also discussed the distinction between biosimilar and interchangeable FDA designations. Thomas DeMatteo, Chief Counsel on the Senate Judiciary Committee to Republican Senator Mike Lee, advocated for eliminating regulatory barriers that require approved biosimilars to apply for a separate—and more difficult to achieve—interchangeable designation in order for pharmacists to be allowed to substitute the product for its reference medicine.

Role of Pharmacy Benefit Managers (PBMs) in drug pricing

The majority of panelists agreed that there is a need for increased transparency with respect to what they described as “opaque practices” employed by PBMs and other intermediaries. Panelists asserted that PBMs and other intermediaries may have a compensation structure that encourages them to steer patients to higher-priced branded drugs that provide greater rebates even when equally effective generics are available. Panelists also debated the pros and cons of vertical integration of PBMs,⁶ with some panelists noting the potential efficiencies derived from such corporate structures and others raising concern that vertically integrated PBMs are not conducive to yielding lower prices or better outcomes.

In closing remarks, Daniel Guarnera, Director of the FTC Bureau of Competition, cited the agency's ongoing 6(b) study⁷ on PBMs, and expressed hope that the report will “bring needed transparency” regarding the effect that pharmaceutical distribution has on drug prices, hopefully informing future legislation.

Policy recommendations

Increased transparency. A consistent theme across panels was the importance of increasing transparency in the pharmaceutical supply chain. For example, Cheryl Damberg, Director of the RAND Center of Excellence on Health System Performance, warned that a lack of transparency into the complex contractual arrangements for purchasing and for payments in the pharmaceutical supply chain make it harder to see where anticompetitive practices may occur.

Increasing use of generics. Kathleen Yaeger, president and CEO of consulting firm MedSecurian and founder and CEO of the Center for American Medicine Resiliency, advocated for the implementation of a generics-first policy across all federal drug programs to drive efficiency and ensure fair procurement reimbursement for generics. She also suggested designing programs (such as implementing star ratings and other “creative solutions”) to incentivize insurers and different entities to encourage the uptake of biosimilars. Finally, she highlighted the need to make sure PBM fees are based on net pricing.

Rebates. Joe Shields, Founder and CEO of Transparency Rx, encouraged the FTC and DOJ to increase scrutiny of rebate-based PBM contracts. Shields also recommended asking Congress and other stakeholders to examine the role of group purchasing organizations (GPOs) consistent with President Trump's recent Executive Order on Delivering Most-Favored Nation Prescriptions Drug Pricing to American Patients. James Gelfand, President and Chief Executive Officer of The ERISA Industry Committee (ERIC), recommended requiring PBMs to pass on negotiated discounts and rebates from drug manufacturers to payers.

Interchangeability. Panelists also advocated for eliminating interchangeability designations by instead waiving trials and deeming biosimilars interchangeable upon approval as a biosimilar. Yaeger argued that FDA-approved biosimilars are safe and effective and should be automatically considered interchangeable.

Legislative proposals

A number of representatives from the offices of Republican lawmakers stated that members of Congress are looking at legislative proposals to address vertical integration of health care entities, transparency, and alleged misaligned incentives by PBMs.

In addition, according to J. John Lee, Chief Counsel at Chief Counsel for Intellectual Property, U.S. House of Representatives, the House Judiciary Committee is looking to address the balance of patent rights, and considering solutions that would: (1) improve Patent and Trade Office (PTO) prosecution accuracy so that patents issued by the PTO are properly scoped; (2) preserve the ability of Congress to challenge patents; and (3) allow generic and biosimilar companies to market their products for areas where the relevant patents do not cover all of the uses of the drug (so-called “skinny labeling”). Another piece of legislation would target the alleged withholding by drug companies of information from the U.S. Patent & Trademark Office in order to seek secondary patents later.

Looking ahead

A consistent theme across the three sessions was the need for regulators to preserve incentives for robust innovation in the pharmaceutical industry while also targeting barriers that prevent patients from accessing lower-cost drugs. Taylor Hoogendoorn, Deputy Director of FTC Bureau of Competition, argued that the listening sessions demonstrated that the health care industry is “rife with misaligned incentives, dominant oligopolies, and structures that are opaque by design.”

Chair Ferguson said that information from the panels will feed into the FTC's final report and recommendations that will be submitted to the President in response to his Executive Order. Chair Ferguson stressed that the goal of the FTC's report and recommendations is to guide legislation and regulatory reform to ensure safe, affordable, and competitive access to prescription drugs.

References

1. The listening sessions were hosted by the FTC and DOJ along with the Department of Health and Human Services (HHS) and the Department of Commerce.
2. The Executive Order states that “within 180 days of the date of this order, the Secretary or his designee shall conduct joint public listening sessions with the appropriate personnel from the Department of Justice, the Department of Commerce, and the Federal Trade Commission and issue a report with recommendations to reduce anti-competitive behavior from pharmaceutical manufacturers.”
3. DOJ and FTC representatives served as panel moderators and provided opening and closing remarks for some of the sessions.
4. Under the leadership of Chair Ferguson, on May 21, 2025 the FTC issued renewed warning letters to five companies regarding over 200 allegedly improperly-listed patents in the Food and Drug Administration (FDA)'s Orange Book. Announcing the renewed challenges, Republican FTC Chair Ferguson said that the FTC intends to continue to “vigorously pursue firms using practices that harm competition” as part of an effort to promote “transparent, competitive, and fair health care markets.” The patent listings at issue were initially challenged by the FTC during the Biden administration, and the renewals signal that, under the leadership of Chair Ferguson, the FTC will continue to pursue enforcement based on some of the more novel theories of harm originally promulgated by the agency under Democratic leadership. Indeed, there is no indication in the warning letters that any of the challenged patent listings have actually harmed competition by deterring, delaying, or blocking entry. See Hogan Lovell client alert available here.
5. In May 2024 Dr. Yim made comments that indicated a potential move away from differentiating non-interchangeable biosimilars and interchangeable biosimilars. For more on Dr. Yim's comments and other actions taken by FDA and the Biden administration that reflect a “flattening” of the biosimilar and interchangeable biosimilar regulatory framework, please see our May 23, 2024 Hogan Lovells client alert, available here.
6. Vertically integrated PBMs may be affiliated with retail pharmacies, insurers, and/or providers.
7. To date, the FTC has released two interim staff reports as part of its PBM study. See Federal Trade Commission press release, “FTC Releases Second Interim Staff Report on Prescription Drug Middlemen” (Jan. 14, 2025) available here; see also Federal Trade Commission press release, “FTC Releases Interim Staff Report on Prescription Drug Middlemen” (July 9, 2024) available here.

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