House Oversight Committee Hears from Antitrust Agency Heads

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The heads of the federal antitrust agencies provided an update to members of the House Judiciary Committee's Courts and Competition Policy Subcommittee this morning on their agencies' enforcement priorities and recent actions.

The July 27 hearing was the subcommittee's first oversight hearing to examine antitrust enforcement under the Obama Administration.

FTC Competition Priorities

A top competition priority at the Commission is to stop “pay-for-delay” agreements between branded and generic drug makers, according to the FTC testimony delivered by FTC Chairman Jon Leibowitz. The agency estimates that these sweetheart deals cost consumers $3.5 billion a year.

Efforts are under way in the courts and congress to reign in patent settlement agreements under which the brand-name drug firm pays its potential generic competitor to abandon a patent challenge and delay entering the market.

The agency is currently pursuing two major pay-for-delay cases: one against Solvay Pharmaceuticals (owned by Abbott Laboratories) and generic manufacturers (Watson Pharmaceuticals, Par Pharmaceutical, and Paddock Laboratories) regarding AndroGel, a testosterone replacement drug often used by victims of testicular cancer, and the other against Cephalon regarding the drug Provigil, a sleep disorder medication with nearly $1 billion in annual U.S. sales.

According to the FTC testimony, the agency is continuing to initiate new investigations into other pay-for-delay agreements. However, the testimony noted that legislation would be the most effective way to stop these deals.

The FTC’s tactics in investigating the patent settlement agreements have come under scrutiny. At the House subcommittee’s oversight hearing and a Senate subcommittee oversight hearing in June, the FTC chairman was questioned about the agency’s misuse of a subpoena in the Cephalon case.

A U.S. Magistrate Judge on July 13 ruled that the president and CEO of Watson Pharmaceuticals made a “colorable claim that the FTC may have exceeded its authority by using its investigative power to pressure Watson to enter into a business deal that the FTC considers desirable.” The CEO was entitled to limited discovery to determine if the agency acted outside its authority.

Today's FTC testimony also outlined other agency priorities, including revising the Horizontal Merger Guidelines. The FTC and the Department of Justice Antitrust Division in April released for public comment a proposed update of the Horizontal Merger Guidelines.

Since the last major revision to the Guidelines was in 1992, the agencies proposed revisions to more accurately reflect the way the FTC and Department of Justice currently conduct merger reviews. Last month, the comment period closed. According to the testimony, the agencies are currently considering the viewpoints of 31 commenters as they work to finalize the new guidelines.

Antitrust Division Enforcement Activities

Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, also noted the joint, ongoing review of the Horizontal Merger Guidelines in testifying on behalf of the Antitrust Division. She cited the effort as an example of the Antitrust Division's efficient and effective collaboration with the FTC on a number of fronts.

Assistant Attorney General Varney also discussed merger enforcement, which “continues to be a core priority for the Antitrust Division.” She cited the Antitrust Division's pending action against Dean Foods—the nation’s largest dairy processor—to undo the company's 2009 merger with Foremost Dairy.

“[T]his enforcement action is indicative of this Department of Justice's commitment to our nation's farming industries,” according to the testimony.

Commissioner Leibowitz’s testimony is available here on the FTC website. Assistant Attorney General Varney’s statement appears here on the Department of Justice website.