Businesses Game the FDA to Block Competition

Few topics unite Left and Right more than indignation at the eye-popping prices of prescription drugs. President Trump says that Big Pharma is “getting away with murder.” And Democrats want to enable Medicare to negotiate lower drug prices and create a “price gouging enforcer.”

The Food and Drug Administration (FDA) cannot directly influence drug prices, but FDA Commissioner Scott Gottlieb recently denounced companies that “‘game’ the system,” using FDA rules and review processes to increase their own profits by “keeping competition at bay.” This happens not only with prescription drugs and medical devices but also with food products.

What happens, for example, if a pharmaceutical company questions the safety of a competitor’s product or refuses to provide samples to a generic-drug manufacturer so that it can develop its own product, or if a fast-food chain tells the agency that some egg sandwiches aren’t really made of eggs, or if makers of synthetic wine corks petition the FDA to question the safety of a competing cork product? Though legal, these sketchy business practices illustrate a widespread, but rarely considered problem that can hurt consumers and companies. Statutory and regulatory requirements intended to insure the safety of drugs and foods are too often being “leveraged” to block or delay competitors from introducing competitive products, as Gottlieb said in congressional testimony on “Antitrust Concerns and the FDA Approval Process.”

“Companies try to use the FDA to support their products,” Morris Waxler, the former head of the FDA’s ophthalmic division, said in an interview. Nothing wrong with that — so far. “But,” Waxler continued, “companies often try to get the agency to be on their side” vis-à-vis a competitor. “Big companies file complaints against a competitor and publish in scientific journals to try to sway FDA reviewers and block new products.”

So-called “citizens’ petitions” can delay FDA approval of a generic drug. Unfortunately, 92 percent of the “citizens” filing such petitions are brand drug makers, and they often are filed just before the brand company’s patent expires.

Last year, United Therapeutics, a Maryland company, filed suit to prevent a potential competitor, Actavis Laboratories, from introducing a generic treatment for a rare disease. United Therapeutics argued that the FDA’s 2013 approval should enable it to have the seven years free of competition stipulated under the Orphan Drug Act of 1983. The “standard dance,” as the Wall Street Journal called it, is for a company with exclusive rights to a drug to prevent a generics manufacturer from introducing a competing drug, while the initial company questions the effectiveness of the generic and then slightly modifies its original drug, gets FDA approval, and is competition-free for another seven years.

Two bills were introduced in Congress in 2017 to stop the use of the FDA’s risk-evaluation process to keep brand companies from preventing or delaying generic drugs from entering the market. Such attempts to pass the bills have all been blocked by lawmakers.

Similar games are played in the food industry. Coca-Cola tried to put a small juice company out of business by getting FDA approval for a drink it branded as “Pomegranate Blueberry,” even though Coke’s drink included 0.5 percent of the fruit, compared to 100 percent for its competitor.

Panera, the bakery chain, petitioned the FDA, arguing that fast-food breakfast competitors like Starbucks and Dunkin’ Donuts wrongly claim that their products truly use eggs. Panera has called for the agency to update its definition of what an egg is, saying that its competitors use fillers and additives.

Equally bizarre is the story of a French company that manufactures an innovative wine cork that it guarantees is free of the compound that causes cork taint. Because materials used in some cork closures come into contact with wine, an Italian trade association representing makers of plastic, synthetic corks — which are widely used for less expensive wines — complained to the FDA. The association raised issues about the safety of the binding agent used by competing “micro-agglomerated” cork manufacturers like those made by DIAM Bouchage SAS, based in southern France. “Our competitors stirred unfounded concerns around the safety of our products,” Dominique Tourneix, DIAM’s director general, said. “These efforts were based on fears and rumors, not science.”

The binding agent, toluene disocyanate-based polyurethane (TDI PU), used for building paints and sealants, had been cited by the Environmental Protection Agency for raising the risks of skin and respiratory problems. However, the FDA didn’t buy the scare tactics. No TDI seeps into wine from agglomerated corks, and the FDA initially concluded that “there is no safety concern,” and “no significant impact” requiring agency action. But it took several years of thorough scientific review, which competitors provocatively called an FDA “investigation,” until the agency gave DIAM’s binder a full safety clearance.

Like many accusations lobbed at individuals and businesses that are later proven untrue, the initial accusation has a long half-life. Although pleased with how the FDA handled the matter, Mr. Tourneix said that the ordeal took a toll, since people remember allegations that cloud perceptions.

Competitor companies’ ability to game the regulatory process — by alleging that a drug, an egg, or a wine cork may be risky or ineffective — distorts the FDA’s mission of ensuring safety. As Gottlieb said, such “regulatory arbitrage” undermines competition and innovation with false arguments about public health. It must be stopped.

Andrew L. Yarrow, a former New York Times reporter who writes often on health and economic issues, will have his fifth book published in September.