Antitrust enforcement is becoming increasingly crucial as consumers face many markets with limited choice and escalating prices.
We invest tremendous resources in antitrust enforcement, but we must recognize where those efforts fail to protect competition and consumers. Nowhere is this problem as significant as the use of pharmaceutical rebate walls — a tactic that prevents healthcare plans from choosing the lowest cost and most efficacious drugs — leading to higher prices.
Congress needs to encourage the Federal Trade Commission (FTC) to open antitrust investigations and bring enforcement actions against pharmaceutical manufacturers, insurers and pharmacy benefit managers that engage in this type of exclusionary behavior that harms consumers and patients.
Pharmaceutical rebate walls are means of structuring drug rebates to economically coerce insurers and pharmacy benefit managers to keep rival drugs off drug formularies.
A rebate wall, or trap, is erected when a manufacturer secures preferred formulary access for its drug by offering volume-based rebates to payors, on the condition that they deny or limit the formulary access of rival drugs. If a rival drug is granted formulary access, the manufacturer claws back the rebates, which means the payor loses millions of dollars.
Although debates on many pharmaceutical competition issues break along a partisan divide, there is compelling bipartisan concern over rebate walls.
Major drug manufacturers from Novartis to Pfizer; key administration regulators including Health and Human Services Secretary Alex Azar; and Scott Gottlieb, former Food and Drug Administration (FDA) commissioner; have called for action to stop branded drug companies from using rebate walls that foreclose competition.
Sen. Amy Klobuchar, ranking member on the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, and Rep. David Cicilline, chair of the House Judiciary Subcommittee on Antitrust, have asked the GAO to investigate rebate walls.
And in the AbbVie/Allergan and Bristol Myers/Celgene mergers, members on both sides of the aisle in the House and Senate asked the FTC to examine rebate walls as part of pharmaceutical merger investigations.
Rebate walls block patient access to new innovative branded medications, biosimilars and generics. The costs to patients is high.
Former FDA Commissioner Scott Gottlieb has suggested that Congress should prohibit these schemes as they are a major obstacle to acceptance of biosimilars, which can save consumers billions in drug costs.
In Europe, where biosimilars have entered the market without obstacles, biologics such as AbbVie’s Humira have been discounted by 80 percent. Most recently, a study showed how within weeks of biosimilar entry, Humira’s share in Denmark dropped to 5 percent against biosimilar competition, and hospital costs dropped by 83 percent.
In the United States, however, patients continue to pay high costs for Humira, which last year raked in $15 billion.
Patients’ access to biosimilar and generic drugs is critically important to lowering overall drug spending and costs to patients, and alleviating the rebate wall would help in that effort. Further, ensuring that patients have access to more innovative and effective medicines is vital to patient well-being.
Fortunately, the FTC and FDA are engaged in collaborative efforts to ensure that biosimilar markets will be competitive in the future, and the FTC should be commended for its efforts to stop baseless litigation and pay for delay agreements that defer the entry of medicines.
But the FTC has been slow to address publicly what it is doing to prohibit rebate walls that foreclose competition.
For example, the FTC had the opportunity to address rebate walls in the recently approved AbbVie/Allergan merger. And while FTC commissioners Rohit Chopra and Rebecca Kelly Slaughter raised concerns, the commission ultimately decided this issue was outside the scope of the Clayton Act.
Congress must act.
First, Congress should urge the FTC to prioritize investigations into rebate walls and the effect that this contracting practice has on competition and access to new branded therapies, biosimilars and generics. The FTC has the tools to investigate and bring enforcement actions against those who use rebate walls and other contracting practices to foreclose competition.
Second, Congress should request that the FTC provide further transparency to the agency’s efforts to address rebate walls and use its powers to secure information under Section 6 of the FTC Act to report to Congress on rebate walls.
Third, Congress should encourage the FTC to coordinate with the Centers for Medicare and Medicaid Services and the FDA to optimize its enforcement and consumer education activities regarding rebate walls.
Rebate walls limit patients’ choices and raises patients’ costs. The time has come for Congress to prod the FTC to act to make it clear that these schemes harm consumers.