Biopharmaceutical Industry Representatives Discuss Product Hopping Legislation

Two bills in Congress meant to address “product hopping,” or the anticompetitive practice of introducing a changed product to steer consumers away from an older product and competing versions, illustrate the unique scrutiny that drug manufacturers are subjected to, panelists said at the American Conference Institute’s (ACI) 11th Summit on Biosimilars and Innovator Biologics.

“This is something that’s very specific to the drug industry,” said Melissa Brand, assistant general counsel and director of intellectual property for Biotechnology Innovation Organization, a large trade association.

“You don’t see this sort of thing when a company introduces a new brand of shoe and can’t say anything bad about the old shoes or has to keep marketing the old shoes; or every time a new smartphone comes out, you don’t see a company having to go out and still market its old phone product, so I think it emphasizes the scrutiny on the industry these days,” Brand said.

Bills S-1416 and HR-5133 were introduced in May 2019 and address product hopping, although there are important differences between the two, said David Korn, vice president of intellectual property and law with Pharmaceutical Research and Manufacturers of America.

Anatomy of Product Hopping Legislation

Both bills address “hard switching,” which is when a pharmaceutical company introduces a follow-on product and discontinues an older-but-similar product, and “soft switching,” when a company introduces a follow-on product but “takes action to unfairly disadvantage the older product in a manner that impedes competition for generics or biosimilars,” Korn said.

Current law does not clearly address the practice of soft switching, “and having such a concept could raise significant uncertainty for companies when thinking about planning alternative versions—new innovations—after initial approval,” he asserted.

“Both bills could kill innovation by requiring manufacturers to demonstrate that actions with respect to subsequent innovative products are not as competitive,” he said.

The House bill exempts certain products from the definition of follow-on products, including ones that qualify for Hatch-Waxman Act product exclusivity protections, Korn said. “That’s not in the Senate bill.”

“The House bill also has an exemption for certain activities not constituting unfairly disadvantaging the earlier product under definition of the soft switch,” he added. This exemption covers truthful, nonmisleading promotional activity, and there’s no exemption for this in the Senate bill, Korn said.

“You can imagine a situation where someone comes up with an alternative version and raises a question about what they can or cannot say about what’s truthful and nonmisleading, so there are a lot of questions that would need to be considered,” Korn said.

The Senate bill also includes broader legal remedies, such as disgorgement of “unjust enrichment” gained by the manufacturer and “restitution,” or damages, whereas the House bill does not specify remedies but indicates that enforcement will be in accord with provisions of the Federal Trade Commission Act.

Concerns About Overregulation

ACI panelist Karin Hessler, assistant general counsel for the Association for Accessible Medicines, a trade group representing large biosimilar developers and manufacturers, said that from the biopharmaceutical industry perspective, there’s a concern that that soft switches may become “overregulated,” and this may discourage innovation.

“You may not see the sort of really beneficial follow-on products where someone has really improved a formulation or has a new route of administration, a new indication, so that’s something that I think is definitely a concern,” she said.

A statement from House Judiciary Committee Chairman Jerrold Nadler (D-New York), in justification of the House legislation, explained that preexisting antitrust laws have been a poor fit for addressing product hopping abuses. “Unfortunately, courts have struggled to consistently apply the antitrust laws to this conduct. Moreover, antitrust litigation to address anticompetitive behavior in pharmaceutical markets is costly and slow, often taking years—if not decades—to stop the abusive behavior.

“HR-5133 would prohibit product hopping by establishing that it is an unfair method of competition in violation of the Federal Trade Commission Act. In doing so, not only would this legislation help deter such conduct in the first place—through the FTC’s ability to obtain equitable monetary relief—it would also expedite judicial proceedings by providing much needed clarity to the law,” Nadler said.

According to the Congressional Budget Office, the companion bills, if enacted, will save taxpayers more than half-a-billion dollars over a 10-year period, the statement said.

Click here for more coverage of the ACI virtual 2020 conference.

Reference

Brand M, Korn D, Hessler K, Pearson M. Biosimilars state of the union: regulatory and legislative developments impacting the biopharmaceutical industry. Presented at: ACI 11th Summit on Biosimilars & Innovator Biologics; September 23, 2020.