How the FTC Protects Patients in Healthcare

— Challenging "bogus" patents that stifle competition and inflate costs is one way, says Lina Khan

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    Jeremy Faust is editor-in-chief of ľֱ, an emergency medicine physician at Brigham and Women's Hospital in Boston, and a public health researcher. He is author of the Substack column Inside Medicine.

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    Emily Hutto is an Associate Video Producer & Editor for ľֱ. She is based in Manhattan.

In Part 1 of this exclusive video interview, ľֱ editor-in-chief Jeremy Faust, MD, and Lina Khan, JD, chair of the Federal Trade Commission (FTC), discuss the agency's role in healthcare.

The FTC oversees consumer protections, competition, and drug pricing -- recently challenging hundreds of what Khan called "bogus" patents on 20 brand name drugs for weight loss, diabetes, asthma, and chronic obstructive pulmonary disease.

The following is a transcript of their remarks:

Faust: Hello, I'm Jeremy Faust, editor-in-chief of ľֱ. Today, we're joined by Chair Lina Khan.

Lina Khan is the chair of the Federal Trade Commission, the FTC. The FTC enforces antitrust and consumer protection laws at the federal level. Prior to joining the FTC, Chair Khan served as counsel to the U.S. House Judiciary Committee's Subcommittee on Antitrust, Commercial, and Administrative Law.

Chair Lina Khan, thank you so much for joining us.

Khan: Thanks for having me.

Faust: I want to start with a conversation for our audience of a lot of physicians and healthcare providers -- but it's really an economics one. Where do you think the free market ends with respect to healthcare?

Khan: There are a whole set of laws and policies that govern how we do healthcare in the United States. The FTC's role is really focused on ensuring that we have open, fair, and competitive markets. We also enforce the nation's consumer protection laws, and so that requires making sure companies aren't deceiving consumers or engaging in unfair or coercive practices.

And so in instances where Congress and policymakers have decided that we're really going to have free enterprise, we're going have open competitive markets, the job of the FTC is to make sure that those rules of the road get enforced.

Faust: All right. One of the places where this really comes in is an area [where] you've spent a lot of time, which is on competition. [There's been] a lot of news -- the FTC issuing a rule basically banning non-compete clauses outside of the nonprofit sector.

I was wondering, how will this rule apply to places that are sort of in the middle? They are nonprofits, but they kind of behave like for-profits.

Khan: So just to step back, this is an area that the FTC has been studying for years. We've seen a lot of economic research that showed that these non-compete clauses had become very prevalent across sectors, including in healthcare.

After we proposed the rule, we got 26,000 comments in response, and a pretty sizable chunk of those actually came from healthcare workers. It was really interesting to hear firsthand from so many healthcare workers about how these non-competes had devastated their lives, required them to uproot their families if they needed to change employers -- with the effect of leaving their patients behind -- and how these non-competes were both contributing to burnout among medical professionals and making their quality of life much worse. That, in turn, was also resulting in worse patient care and making it so that patients couldn't follow their doctors and their healthcare providers.

So, we recently finalized a rule that would eliminate non-compete clauses going forward for everybody, and retroactively for everybody but senior executives.

The FTC in the past has determined that it does not have jurisdiction over certain nonprofits. We've made it clear that we're going to be scrutinizing to make sure that companies are not just taking advantage of the nonprofit label, even though they're actually organized for the profit of their members. The FTC has a history of really looking under the hood and saying, "Is this a sham nonprofit or is this a legitimate nonprofit?" So we will continue to do that in our work.

Faust: All right. We'll come back to this, but I also want to talk about patents and drug pricing because the FTC has sort of announced -- I think you've announced through your actions -- that drug pricing is something that you're interested in as a kind of a service to the public. How can we keep this under control?

And if I have this right, Senator Sanders said in an interview with you recently that you're one of the few people in the whole country who knows what the FDA's Orange Book is. Now, there are people even in this audience who don't know what the Orange Book is, so please tell us a little bit of what it is and how you see its use, how you can leverage that to actually lower a drug price.

Khan: The FDA's Orange Book is this repository where companies are able to list certain patents or certain underlying medical active ingredients -- kind of the core parts of drugs. When you successfully list a patent in the Orange Book, it results in an automatic 30-month stay of any competitors that are looking to compete. So, being able to successfully list a patent in the Orange Book can basically allow you to shut out competitors.

In practice, the FTC has found that companies are listing in the Orange Book patents that really shouldn't be eligible. We have found, for example, companies listing the cap of inhalers or certain components of devices, which is really different from the underlying medical ingredient or drug ingredient.

We've been challenging these patent listings and making clear that you can't get away with engaging in Orange Book fraud, effectively, where you're listing in their patents that really shouldn't be eligible.

So, we did one round of letters challenging these patent listings a few months ago. In response to that, a whole set of companies dropped their listings. We had especially focused on the manufacturers of asthma inhalers and COPD [chronic obstructive pulmonary disease] inhalers, because inhalers have been around for decades but Americans still routinely pay hundreds of dollars for inhalers, even though in other countries people pay as little as $20. And so we thought, "Something doesn't look right here. Let's take a closer look."

After we challenged these patent listings, companies not only dropped their listings, but three of the four major manufacturers have announced that in the coming months, they're going to be capping how much Americans pay for inhalers to $35, which is a pretty significant win. So, we're continuing to scrutinize these patent listings in the Orange Book.

Just this week, we sent out 300 new listings that we're challenging, including for drugs around Ozempic [semaglutide] and some type 2 diabetes, because we want to make sure that as investors and as companies are thinking about what drugs to be developing in the future, those decisions are not being distorted by bogus listings.

That's just one component of our drug pricing work. We also scrutinize pharmaceutical mergers, and in the last year alone we've challenged two big Pharma mergers: Horizon-Amgen and Sanofi-Maze. In each instance, we believe that these transactions would have eliminated competition in ways that ultimately would've been bad for patients.

Faust: So with respect to these listings, which some people call "junk patents," it makes total sense when you're looking at something like some part of some device that really isn't part of this, but could, as you say, stifle competition and could stifle access to these important compounds and drugs.

What's the FTC's quarrel on the Ozempic question, for example, with Novo Nordisk being one of the listings that you've recently added?

Khan: It's one of the listings we've added, in part, because we realized this could be a pretty significant drug for Americans.

We want to make sure that -- you know, a core premise of our patent system is that inventors have the reward of patent protection for a certain number of years. But once those patent protections expire, competitors should be able to get into the market. Ensuring that companies are not illegitimately or illegally extending those patent protections or illegitimately listing them in the Orange Book to shut competitors out really needs to be a core goal so that the fundamental promise at the heart of our drug system, which is, "OK, you get certain years of patent protection, but once those protections expire, competitors should be able to come into the market," -- we need to make sure that that's actually happening here.

We also need to make sure that the Orange Book's protections are not being abused and misused for certain components that are not supposed to be eligible for those types of protections.

Faust: But with the semaglutide -- these glucagon receptor agonists like Wegovy, Ozempic, and Mounjaro [tirzepatide] -- there is healthy competition. So what's the problem here? I mean this, as you say, is an overpriced drug. I agree. The price needs to come down. I applaud efforts to get that price down so the cost curve and the benefit is there. But on this one there is competition. What's the quarrel?

Khan: So, the issue is trying to identify the specific aspects where we think there are patents listed for components that shouldn't be eligible. Eliminating those would actually be able to result in even greater competition, rather than, because of certain components being listed in there, competition being shut out.