Senator Tammy Baldwin (D-WI) sent letters this week to companies warning of improper Orange Book listings of patents for inhalers, following up on the FTC’s focus on potential anticompetitive harm of improper listings. According to Senator Baldwin’s letters, the recipients of the letters were warned by the FTC in November regarding the listing of inhaler patents, but have not removed the patents from the Orange Book. The letters follow an investigation launched earlier this month by the Senate Committee on Health, Education, Labor, and Pensions (of which Senator Baldwin is a member) into the prices of inhalers.
FTC and DOJ Finalize 2023 Merger Guidelines
Today, the Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”) (collectively, the “Agencies”) jointly released the 2023 Merger Guidelines . The 2023 Merger Guidelines outline the “factors and frameworks the agencies utilize when reviewing mergers and acquisitions,” including both horizontal and vertical transactions. The 2023 Merger Guidelines finalize the draft merger guidelines that were released in July 2023 and effectively update and replace the 2010 Horizontal merger Guidelines and Vertical Merger Guidelines that were issued in 2020 and later rescinded by the FTC in 2021. The 2023 Merger Guidelines are not law, but past merger guidelines have been persuasively cited by courts, and they give insight as to how the Agencies view the competitive impact of transactions.
Given the Agencies’ focus on competition in the Life Sciences space, companies should be aware of all of the factors and frameworks outlined in the 2023 Merger Guidelines. In particular, certain components of the 2023 Merger Guidelines reflect recent enforcement trends, including the threshold for when the Agencies consider certain transactions presumptively illegal, an emphasis on elimination of potential entrants in concentrated markets, a focus on how transactions will affect access to products or services used by rivals, an examination of whether a transaction furthers an already-dominant market position or is part of a trend towards consolidation, and concerns with both cross-ownership and common ownership in firms that have competitive relationships.
Sanofi Abandons Licensing Deal With Maze Therapeutics After FTC Challenges The Proposed Transaction
On December 11, 2023, Sanofi released a statement that it will terminate its proposed $755 million licensing agreement with Maze Therapeutics (Maze) shortly after the Federal Trade Commission (FTC) issued an administrative complaint and authorized filing a complaint for preliminary injunction in the United States District Court for the District of Massachusetts to block the deal.
Under the terms of the proposed licensing agreement between Genzyme Corporation, a wholly-owned subsidiary of Sanofi, and Maze, Sanofi would acquire an exclusive license to Maze’s glycogen synthase 1 products and related technology, including its candidate MZE001, a drug in development to treat the potentially fatal genetic order Pompe disease. According to a statement by Jason Coloma, Ph.D., Maze’s CEO, the FTC’s challenge “is the first time ever the FTC has moved to block a license of a Phase 1 investigational medicine.” The challenge seems consistent, however, with revised draft merger guidelines proposed by the FTC and Department of Justice that indicate that transactions “should not entrench or extend a dominant position” by, for example, “[e]liminating a nascent competitive threat.”
Federal Trade Commission Issues Notice Letters Regarding Allegedly Improper Orange Book Listings
On November 7, 2023, the Federal Trade Commission (“FTC”) announced that it had issued notice letters to 10 life sciences companies regarding 100 patents that the FTC contends are improperly listed in the Orange Book, the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations. The announcement comes of the heels of the FTC’s policy statement warning drug companies that improper listing of patents in the Orange Book could violate Section 5 of the FTC Act. Pursuant to the FTC’s policy, the companies have 30 days to either withdraw or amend their listings or certify under penalty of perjury that the listings are proper.
The FTC believes that improper listings in the Orange Book could constitute an unfair method of competition under Section 5 of the FTC Act because a patent listed in the Orange Book could lead to a statutory stay that generally blocks the introduction of competing products for 30 months. According to the FTC, costs associated with challenging patents could frustrate innovation and/or market entry. The FTC has said that even a brief delay in generic entry harms consumers in the form of artificially high drug prices.
We will be watching how companies choose to respond to the recent notice letters and the policy’s impact on Orange Book listings and competition with respect to brand drugs going forward.
FTC Issues Policy Statement Cautioning Branded Drug Companies Against Improper Orange Book Listings
Duane Morris Takeaways: On Thursday September 14, 2023, the FTC issued a policy statement warning brand drug companies that improper listing of patents in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the “Orange Book” could violate Section 5 of the FTC Act. The Hatch-Waxman Act and FDA regulations outline the criteria that brand drug companies must follow for listing patents in the Orange Book. Brand drug manufacturers that list patents in the Orange Book may obtain a 30-month stay of generic competition. According to the FTC, certain brand drug manufacturers have failed to follow that criteria, in some cases by submitting patents for listing in the Orange Book that claim neither the reference listed drug nor a method of using it. Under the new policy statement, FTC will scrutinize improper listings as a potential method of unfair competition under Section 5 of the FTC Act.
The policy statement is required reading for any corporate counsel involved in the submission of patent information in the Orange Book.
Implications for Brand Drug Manufacturers: Under the regulatory processes set up by Congress, the person who submits the patent information in the Orange Book listing must attest under penalty of perjury that the submission complies with the regulations. Drug manufacturers and individuals responsible for submitting such information are now on notice that the FTC intends to scrutinize improper Orange Book listings to determine whether they constitute an unfair methods of competition under Section 5 of the FTC Act or illegal monopolization. The policy statement also warns that individuals who submit or cause the submission of improper Orange Book patent listings may be held individually liable, including potentially having such cases referred to the U.S. Department of Justice for further investigation.