FTC Role in Regulating Prescription Drugs: 2000 to 2022


To assess the extent of FTC regulation, researchers collected data from the group’s merger and enforcement actions in a 22-year span.

From 2002 to 2022, the Federal Trade Commission (FTC) carried out an average of 1 enforcement action and 3 merger actions per year, demonstrating what researchers agreed is a weak hand for regulating competition and consolidation in the prescription drug market.1

The FTC is an independent government agency that oversees the country’s rights to consumerism and promotes competition within respective markets. In the case of the pharmaceutical industry, however, the FTC has been known to be lax in its regulation.

“The FTC historically has not played an aggressive role in overseeing the pharmaceutical market, although the question of when oversight is warranted is the subject of debate. However, there are signals that the FTC’s approach may be changing; in recent years, the FTC has launched an investigation of PBMs, held a workshop with the US Department of Justice on regulatory oversight of the pharmaceutical industry, and challenged more than 100 manufacturer patents as improperly listed with the [FDA],” wrote the authors.1

Key Takeaways

  • Researchers analyzed the FTC's merger and enforcement actions from 2002 to 2022.
  • They found a total of 22 enforcement actions, 62 merger actions, and 1 rule change over the 22-year period.
  • Researchers agreed that the FTC needs more power to regulate the pharmaceutical industry.

Despite the FTC’s regulatory power being deemed “formidable,”1 it has done little to make a change within the prescription drug market. Although recent actions have shown an increase in the group’s regulatory power over prescription drug entities, market consolidation and non-competitiveness continue to reign supreme in the battle between government regulators and Big Pharma.

The FTC building in Washington, DC | image credit: BRIAN_KINNEY / stock.adobe.com

The FTC building in Washington, DC | image credit: BRIAN_KINNEY / stock.adobe.com

On June 7, 2022, the FTC announced it was launching an investigation into the 6 largest pharmacy benefit managers (PBMs). Inquiring records regarding business practices of companies like CVS Caremark and Express Scripts, the FTC’s investigation was aimed to scrutinize and quantify the impact PBMs have on prescription drug affordability.2

However, as recently as this year, the investigation was stalled. “Despite the urgency and focus of the FTC’s work, the results of the agency’s investigation have been delayed because PBMs have not fully complied with FTC orders to turn over documents and data.”3

In Daval et al’s study, researchers addressed FTC data from the organization’s online Legal Library and the 2023 FTC report on pharmaceutical actions. To quantify FTC actions, researchers separated them into 3 categories: enforcement actions against manufacturers, merger actions involving the consolidation of pharmaceutical entities, and rule changes directed at pharmaceutical companies.

“A total of 92 legal actions initiated or concluded by the FTC between January 2000 and December 2022 related to the pharmaceutical market were identified. There was a pharmaceutical manufacturer defendant in 85 (92%), with the remaining 7 (8%) involving pharmacies. Of the 85 involving manufacturers, 22 (26%) were enforcement actions, 62 (73%) were merger actions, and 1 (1%) was a rule,” they wrote.1

Observing the 22 enforcement actions from the FTC, cases of alleged misconduct were separated into 4 non-mutually exclusive categories: settlements of patent litigation (n=11), unilateral delay (n=6), noncompete agreements (n=4), and monopolization (n=3).1

For the settlements of patent litigation, the FTC found that brand-name manufacturers were providing value to generic manufacturers in return for litigation to be settled or avoided as well as a delay in generic competition. Unilateral efforts were taken by brand-name manufacturers to further delay generic competition and the contents of the 4 noncompete agreements were to “stop competing, allocate all sales to 1 party, and split the revenues,” wrote the authors.1

Further highlighting the FTC’s weak hand in controlling market consolidation, 61 out of 62 pharmaceutical merger actions were executed, with only 1 merger being abandoned. However, the FTC was able to enforce 58 of the 61 settlements to require drug divestitures.

“Divestiture requirements often included provisions meant to ensure the competitiveness of the divested drug, including supplying the drug until the competitor could manufacture it, assisting a competitor in obtaining FDA approval, and helping complete clinical trials,” they continued.1 “In total, the FTC required the divestiture of 332 drugs, including 38 (11%) approved brand-name drugs, 184 (55%) approved generic drugs, 15 (5%) novel investigational drugs, and 95 (29%) generic drugs in development.”

The one rule change the FTC introduced in 2013 “amended existing regulations on premerger notification, deeming certain patent rights to be reportable assets for antitrust review.”

With the FTC only acting on 61 mergers from 2000 to 2022, it confirms the group’s inability to truly clamp down on the expanded consolidation of the pharmaceutical market. In the first quarter of 2024 alone, there were 430 mergers and acquisitions accounting for a $68.8 billion value.4

While the FTC cannot regulate all the happenings within the corporate atmosphere of the pharmaceutical industry, researchers suggest Congress should step in to give even more regulatory power back to the FTC.

“Although the FTC faces substantial legal and practical limitations, tools such as rulemaking to define unfair business practices remain untested and may allow the FTC to more effectively prevent repetitive patterns of anticompetitive behavior. In light of the barriers the FTC faces, including its limited enforcement capacity, Congress may need to strengthen the FTC’s hand to reduce the burden of pharmaceutical consolidation and unfair practices on the health care system and patients,” concluded the authors.1

READ MORE: Government, Industry Leaders Address the Growing Issue of PBM Practices

Pharmacy practice is always changing. Stay ahead of the curve: Sign up for our free Drug Topics newsletter and get the latest drug information, industry trends, and patient care tips, straight to your inbox.

1. Daval CJR, Egilman AC, Sarpatwari A, Kesselheim AS. Federal Trade Commission actions on prescription drugs, 2000-2022. JAMA. Published online May 20, 2024. doi:10.1001/jama.2024.5737
2. FTC launches inquiry into prescription drug middlemen industry. FTC. June 7, 2022. Accessed May 23, 2024. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry
3. FTC continues investigation into PBM practices. Epstein Becker Green Law. March 21, 2024. Accessed May 23, 2024. https://www.ebglaw.com/insights/publications/ftc-continues-investigation-into-pbm-practices
4. M&A activity in the pharmaceutical industry decreased in 2023. Pharmaceutical Technology. June 1, 2023. Accessed May 23, 2024. https://www.pharmaceutical-technology.com/data-insights/global-ma-activity-pharmaceutical-industry/?cf-view
Related Videos
Related Content
© 2024 MJH Life Sciences

All rights reserved.