|
|||||||
|
|
|
|
|
|
|
|
 |
|
The CRE Report Card on
the FTC's Proposed Collection
of Information Generic Drug Study - FTC File No. V000014
The Center for Regulatory
Effectiveness 
December 18, 2000
Secretary Dear Sir or Madam, Attached are comments by the Center for Regulatory Effectiveness on the FTC’s Proposed Collection of Information regarding the Hatch-Waxman Act, 65 Fed. Reg. 61334 (October 17, 2000). CRE’s comments address a number of issues, but we wish to emphasize one important pont in this cover letter. In order for the public to exercise its right to comment on whether the information is necessary for the proper performance of the FTC’s functions, the Paperwork Reduction Act ("PRA") requires that the public be provided with the Commission’s planned methodology for using the requested information to achieve the Commission’s "proper functions." Furthermore, the Commission is required by the PRA to have a plan for the use of the data. 44 U.S.C. §§ 3506(c)(3)(H); 506(c)(1)(A)(vi). The Federal Register notice for this proposed collection of information does not provide the FTC’s planned methodology or plan for using the requested information. Nowhere does it explain with any specificity how the FTC will use the information to determine whether anti-competitive activity is occurring. In order to comply with the PRA, the FTC must explain what its enforcement standard is in this context, and how the sought information will be used to determine compliance with that standard. Otherwise, the public will be denied its right guaranteed by the PRA to comment on these issues. This statutorily required information is not provided by the FTC’s current Federal Register notice. Consequently, in order to comply with the PRA, it must be included in the package that the FTC sends to OMB for review and approval under the PRA. In order to comply with the PRA, the FTC’s submission to OMB must include a specific discussion of how the FTC will use the requested information to determine whether the agreements at issue are illegal, even if they comply with the Hatch-Waxman Act and the FDA’s implementing rules. And the public has the right to notice of and an opportunity to comment on the FTC’s submission to OMB. 44 U.S.C. § 3507 (a)(1)(D); 5 C.F.R. §§ 1320.8(d)(1); 1320.11(a).
Attachment
The CRE Report Card Table of Contents
The CRE Report
Card
The FTC'S Proposed Collection
of Information Generic Drug Study - FTC File No. V0000414 I. Introduction The Center for Regulatory Effectiveness submits these comments on the Federal Trade Commission's notice of its proposed collection of information published at 65 Fed. Reg. 61334 (October 17, 2000). The FTC explained in its Federal Register notice that it,
Id. CRE's comments are submitted in the form of a "Report Card" scoring the proposed information collection request's ("ICR") compliance with the requirements of the Paperwork Reduction Act ("PRA"). The Report Card delineates instances of compliance and non-compliance with the requirements of the PRA. At the onset, however, CRE emphasizes two very important points:
In regard to the first point, the FTC's ICR seeks information as to the potentially anti-competitive effects of a regulatory regime that is in a state of flux. The Hatch-Waxman Act is implemented by regulations promulgated by the Food and Drug Administration ("FDA"). Some of those regulations have been set aside by recent court decisions. E.g., Teva Pharmaceuticals, USA, Inc. v. FDA, 182 F. 3d 1003 (D.C. Cir. 1999); Mova Pharmaceutical Corp. v. Shalala, 140 F. 3d 1060 (D.C. Cir. 1998); Granutec, Inc. v. Shalala, 139 F. 3D 889 (4th Cir. 1998). The FDA has proposed new regulations under the Hatch-Waxman Act. 64 Fed. Reg. 42873 (Aug. 6, 1999). The stated goals of these proposed new rules are to address the adverse court decisions and to resolve competition-related issues that are the subject of the FTC's ICR. Id. at 42874-85. The FTC itself filed comments on the proposed new FDA rules. The FTC's comments correctly noted that "the Proposed Rule is designed to address problems that have arisen with generic and branded companies entering into certain types of agreements that result in hindering, rather than speeding, generic competition" (Exhibit A, p. 1). The FTC's comments further note "that the Proposed Rule to clarify the circumstances in which applicants may obtain a 180-day exclusive marketing period may remedy the delayed generic competition that has resulted from certain types of agreements between generic and innovator companies." (Exhibit A, p. 2). Under these circumstances, and given the FTC's stated purposes for its ICR, collecting information now regarding a regulatory scheme that is still evolving and completely within the legal jurisdiction of another agency would (1) have no practical utility and (2) is not necessary to the FTC's proper functions, both of which result in non-compliance with the PRA. Furthermore, the FTC has failed to comply with a number of mandatory PRA requirements distinct from the practical utility/necessity issue, such as failing to provide a specific objective estimate of burden. Congress has delegated responsibility for implementing the Hatch-Waxman Act to the FDA, not the FTC. The FTC should wait until the FDA promulgates final new rules under the Hatch-Waxman Act and then determine whether any ICR or investigation of this issue is necessary. In regard to the second point, in order for the public to exercise its right to comment on whether the information is necessary for the proper performance of the FTC's functions, the PRA requires that the public be provided with the FTC's planned methodology for using the information to achieve the FTC's "proper functions." Furthermore, the FTC is required by the PRA to have a plan for the use of the data. 44 U.S.C. §§ 3506(c)(3)(H); 506(c)(1)(A)(vi). The Federal Register notice for the proposed collection of information does not provide the FTC's planned methodology or plan for using the requested information. Nowhere does it explain with any specificity how the FTC will use the information to determine whether anti-competitive activity is occurring. In order to comply with the PRA, the FTC must explain what its enforcement standard is in this context, and how the sought information will be used to determine compliance with that standard. Otherwise, the public will be denied its right guaranteed by the PRA to comment on these issues. The statutorily required information is not provided by the FTC's current Federal Register notice. Consequently, in order to comply with the PRA, it must be included in the package that the FTC sends to OMB for review and approval under the PRA. In order to comply with the PRA, the FTC's submission to OMB must include a specific discussion of how the FTC will use the requested information to determine whether the agreements at issue are illegal, even if they comply with the Hatch-Waxman Act and the FDA's implementing rules. And the public has the right to notice of and an opportunity to comment on the FTC's submission to OMB. 44 U.S.C. § 3507(a)(1)(D); 5 C.F.R. §§ 1320.8(d)(1); 1320.11(a). II. Comments Accompanying CRE's Report Card on The FTC's Proposed Information Request of the Hatch-Waxman Act 1. Adequacy of Notice and Opportunity to Submit Comments to OMB Requirement: Under the Paperwork Reduction Act, 44 U.S.C. §§ 3501, et seq., an agency must obtain OMB's approval before imposing record keeping or reporting requirements (referred to as "information collection requirements") on the public. The notice must provide the public with a minimum of 60 days within which to submit comments to the appropriate "desk officer" at OMB. See 44 U.S.C. § 3507 (a)(1)(D); 5 C.F.R. §§ 1320.8(d)(1), 1320.11(a). Compliance/Noncompliance: The FTC has solicited public comment on its proposed ICR. However, the public has not been provided an adequate opportunity to comment for the reasons stated in Items 2 and 4 below. Moreover, to ensure full compliance, OMB will need to establish a second round of comments on any actual materials submitted by FTC to OMB. Suggested Remedial Action: FTC must provide the public with the information described in Items 2 and 4 below so that they can comment on the FTC's compliance with the PRA's requirements. Moreover, OMB is obliged to carry out the second comment period. 2. Purpose, Need and "Practical Utility" Requirements Requirement: Before imposing a paperwork requirement on the public, the sponsoring agency must demonstrate that "the proposed collection is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility." 44 U.S.C. § 3506(c)(2)(A)(i), (c)(3)(A). "Practical utility" is defined as "the actual, not merely the theoretical or potential, usefulness of information to or for an agency, taking into account its accuracy, validity, adequacy, and reliability, and the agency's ability to process the information it collects...in a useful and timely fashion." 5 C.F.R. §1320.(l). Moreover, a proposed information collection should be approved only if it would "enhance the quality, utility, and clarity of the information to be collected." 44 U.S.C. § 3506(c)(2)(A)(iii). Compliance/Noncompliance: The proposed ICR notice states that the purpose of the information collection is to investigate whether, "[P]rovisions of the Hatch-Waxman Act encourage generic competition or facilitate the use of anticompetitive strategies..." The NPRM also indicates that the information would be used to assess whether certain strategies or actions may merit law enforcement action. To facilitate their goals, the Commission has requested very broad categories of information, such as "[A]ll studies, surveys, analyses and reports which were prepared by or for any officer(s) or director(s) (or in the case of unincorporated entities, individuals exercising similar functions)" which may have been prepared in support of certain possible agreements. However, the FTC's proposed request for information fails to adhere to the requirements of the PRA for two key reasons:
Suggested Remedial Action:
3. Accuracy of Burden Estimates Requirement: The "sponsoring agency" is required to "evaluate the accuracy of the agency's estimate of the burden of the proposed information to be collected." 44 U.S.C. § 3506(c)(2)(A)(ii). OMB's ongoing and consistent practice is to require sponsoring agencies to submit accurate estimates of burden. When a sponsoring agency's burden estimate is demonstrably and materially inaccurate, e.g., due to the failure to assess whole categories of burden, OMB's practice is to return the "clearance package" containing the proposed paperwork requirements to the sponsoring agency, and to require the agency to resubmit the clearance package with corrected burden estimates. The reason for this practice is that OMB cannot make key determinations without possessing accurate burden data. For example, without accurate data, OMB cannot determine whether the paperwork burdens to be imposed on respondents are justified based on the benefits to be provided by the information to be collected by the agency. Compliance/Noncompliance: The FTC is required by the PRA, 44 U.S.C. § 3506 (c)(1)(A)(iv), to provide a "specific, objectively supported estimate of burden." The FTC has not complied with the requirement to provide the mandated specific, objective estimate. Such an estimate may not even be possible for the proposed ICR because the FTC has not quantified the volume of the information requested. For example, the FTC has not provided an objectively supported estimate of the number of documents being requested nor of the size of such documents nor of the number of locations around the world such documents may be stored in nor of the number of individuals within each company who would have to search for such documents. The "Estimated Burden Hours" section of the Federal Register notice recognizes the vagueness of the information request by providing a ten-fold range (15-150 hours) for identifying requested information. Furthermore, the FTC provides absolutely no support, let alone objective support, for its burden estimate. It is important to note that the requirement for a "specific, objectively supported estimate of burden" is not a minor element of the Act but is essential to the very purpose of the PRA. Specifically, through the PRA, Congress forbade agencies from undertaking broad "fishing expeditions" of the type used in discovery proceedings. It is also important to note that the onus is on the requesting agency to develop the "specific, objectively supported estimate of burden." Industry, in their comments on a proposed ICR, have no responsibility to provide the information needed to develop the specific burden estimate. Finally, the public has been denied its right to comment on the FTC's burden estimates because the FTC has not provided the public with the basis for its burden estimates. Suggested Remedial Action: The agency needs to provide for public comment, a specific, objectively supported estimate of the burden that the proposed information collection request would impose on the private sector. If the FTC cannot provide such an estimate, then it cannot conduct the proposed ICR. 4. Preparedness of Designated Agency Office to Process the Information to Be Collected; Plan for Effective and Efficient Management of the Information Requirement: The agency must certify to OMB that the proposed information collection requirement "has been developed by an office that has planned and allocated resources for the efficient and effective management and use of the information to be collected, including the processing of information in a manner which shall enhance, where appropriate, the utility of the information to agencies and the public." 44 U.S.C. § 3506(c)(3)(H). Moreover, prior to submitting the proposed information collection to OMB, the agency is required to have established "a plan for the efficient and effective management and use of the information to be collected, including necessary resources." Id. § 3506(c)(1)(A)(vi). Compliance/Noncompliance: The Commission is required to have a plan for the management and use of the information to be collected through the proposed ICR. It is incumbent on the FTC to make such a plan public in order for that the public is not deprived of their right to comment on the necessity and practical utility of the information collection. Furthermore, without such a public release and explanation of the data plan, it is not possible for the public to know whether the agency has a plan which complies with the requirements of 44 U.S.C. § 3506(c)(3)(H). Thus, the agency has not demonstrated compliance with this requirement The Commission is also required to have allocated the resources necessary for the efficient and effective management and processing of the requested information. Not only has the agency not demonstrated to the public that they have allocated the necessary resources but also, given the Commission has not quantified the amount of data to be processed, it does not appear even theoretically possible for the Commission to have allocated the necessary resources as required by the Act. Suggested Remedial Action: The FTC should present for public comment:
If the FTC attempts to comply with this PRA requirement by submitting its plan to OMB, then that plan must be made available for public comment at the time it is sent to OMB or earlier. 5. Testing of Proposed Information Collection Requirement: The agency must "review each collection of information before submission to the Director [i.e., of OMB] for review under this chapter, including...(V) a test of the collection of information through a pilot program, if appropriate." 44 U.S.C. § 3506(c)(1)(A)(v). Compliance/Noncompliance: If the FTC has complied with this PRA requirement, then it has not explained how in the notice of its proposed ICR. If the FTC believes that a pilot program is inapplicable, then it has not explained why in the proposed ICR. Suggested Remedial Action: If the FTC has already conducted a pilot program, then it needs to describe that program. If the FTC believes that a pilot program is inapplicable, then it needs to explain why. Otherwise, the FTC should perform a pilot program before it conducts the proposed ICR. 6. Duplicativeness with Information Otherwise Available to the Agency Requirement: The agency must certify to OMB that, based on public comments received, the proposed information collection "is not unnecessarily duplicative of information otherwise reasonably accessible to the agency." 44 U.S.C. § 3506(c)(3)(B). Compliance/Noncompliance: The FTC has not complied with this requirement because:
Some of the data to be requested in the FTC's proposed information collection are already reasonably available to the FTC from public source such as other federal agencies. For example, the FDA's Orange Book contains some of the information sought by the ICR. The FDA's new rules may also provide the FTC with some of this information (Exhibit A, at p. 2). The Congressional Budget Office has already analyzed the issue that FTC claims as the primary justification for the proposed ICR, assessing how the Hatch-Waxman Act has affected competition from generic drugs in the pharmaceutical industry. Specifically, in July 1998, the Congressional Budget Office published a study, How Increased Competition from Generic Drugs Has Affected Prices and Returns in the Pharmaceutical Industry." Chapter Four of this study is titled "The Effects of the Hatch-Waxman Act on the Returns from Innovation." This government study determined that, "The Hatch-Waxman Act helped increase the supply of generic drugs by lowering the cost of getting them approved by the Food and Drug Administration." The study also found that the patent extensions contained in the Hatch-Waxman Act, "did not completely protect the returns of brand name manufacturers from the dramatic rise in the marketshare for generic drugs." Although the existence of a previous federal study on the competitive impact resulting from the Hatch-Waxman Act does not, in and of itself, prevent the FTC from studying the issue, the FTC's failure to discuss the sufficiency of this study in the Federal Register notice demonstrates that the Commission has not considered using reasonably available sources of information before requesting permission for an ICR. The FTC is not the only agency addressing the issue of whether the 180-day exclusivity period may impede competition. As the FTC acknowledges, the FDA is also addressing this issue in its Hatch-Waxman Act rule making. 64 Fed. Reg. 42873, 42874-85; Exhibit A. p. 2. Much of the information sought by the FTC's proposed ICR should be available from the FDA rule making record. Failure of the FTC to utilize reasonably available information, whether from the FDA, Patent Office, CBO, etc., prior to seeking to collect information from the private sector is a violation of the PRA. Suggested Remedial Action: The FTC needs to determine what potentially relevant information it seeks is available from public sources including, but not limited to, federal agencies, Congress, and academia. The FTC is required, by the PRA, to reshape and present for public comment, its proposed Information Collection Request to exclude information which can be reasonably obtained from other sources. 7. Understandability Requirement: The agency must certify to OMB that, based on the public comments received, the proposed information collection "is written using plain, coherent, and unambiguous terminology and is understandable to those who are to respond." 44 U.S.C. § 3506(c)(3)(D). [emphasis added] Compliance/Noncompliance: Although much of the language in the proposed ICR is understandable, certain elements of the proposed information collection are ambiguous. For example, the proposed ICR asks for "all studies, surveys analyses and reports...that evaluate or analyze the reasons for making such agreement..." Is the FTC seeking disclosure of trade secret, attorney-client privileged, or otherwise confidential information? If so, then the FTC must explain its authority to obtain such information and, assuming arguendo that the FTC has any such authority, how it intends to preserve its confidentiality, especially in light of the possibility that the information sought by the FTC could possibly lead to litigation or enforcement actions. Suggested Remedial Action: The FTC needs to reword the ICR so as to clearly explain how it pertains to trade secret or otherwise confidential information, and how that information will be protected from disclosure. The FTC needs to reword the ICR to clearly state that it does not require disclosure of attorney-client or attorney-work-product privileged information. 8. Implementation Consistent and Compatible with Existing Requirements Requirement: The agency must certify to OMB that, based on the public comments received, the proposed information collection "is to be implemented in ways consistent and compatible, to the maximum extent practicable, with the existing reporting and recordkeeping practices of those who are to respond." 44 U.S.C. § 3506(c)(3)(E). Compliance/Noncompliance: Until public comments are received and the FTC responds to them, the ICR's compliance with this PRA requirement cannot be graded. Suggested Remedial Action: None yet. 9. Duration of Record Retention Period Requirement: The agency must indicate "for each recordkeeping requirement the length of time persons are required to maintain the records specified." 44 U.S.C. § 3506(c)(3)(F). Compliance/Noncompliance: No recordkeeping requirements are associated with the proposed ICR. The proposed ICR clearly states what the relevant time frame for the proposed ICR. Suggested Remedial Action: None. 10. Allowance of Reduced or Alternate Requirements for Small Businesses Requirement: The agency must sign a certification to OMB stating that the proposed paperwork requirements "reduce[] to the extent practicable and appropriate the burden on persons who shall provide information to or for the agency, including with respect to small entities...(i) establishing differing compliance or reporting requirements or timetables that take into account the resources available to those who are to respond;...and (iii) an exemption from coverage of the collection of information, or any part thereof." 44 U.S.C. § 3506(c)(2)(C). Compliance/Noncompliance: The FTC has completely failed to: 1) acknowledge that many of the potential respondents, particularly among generic drug companies, may be small businesses; and 2) minimize the paperwork burden on these small companies. Pharmaceutical preparation manufacturing, according to the North American Industry Classification System (NAICS) is code 325412. This NAICS designation replaces SIC codes in SBA regulations. The SBA definition of a small business size standard for pharmaceutical industry, effective October 1, 2000, is 750 employees. In an apparent direct contravention to the requirement to minimize the burden on small businesses, the proposed ICR has more questions for generic drug companies than for innovator companies. Suggested Remedial Action: The FTC needs to: 1) Determine and present for public comment the number of respondents which would be small business (according to SBA definition); and 2) set alternative compliance requirements for small business to minimize the burden on these firms. 11. Use of Information Technology to Reduce Burden Requirement: The agency must certify to OMB that, based on the public comments received, the proposed information collection "to the maximum extent practicable, uses information technology to reduce burden and improve data quality, agency efficiency and responsiveness to the public." 44 U.S.C. § 3506(c)(2)(I) [emphasis added]. Compliance/Noncompliance: The FTC adequately considered the use of technology in the proposed ICR. Suggested Remedial Action: None. 12. Consideration of, and Certification Regarding, Public Comments on Items 2-11 Requirement: The agency is required to "certify (and provide a record supporting such certification, including public comments received by the agency) that each collection of information submitted to the Director" of OMB complies with the ten specified standards set forth at section 3506(c)(3). (44 U.S.C. § 3506(c)(3)). Compliance/Noncompliance: To Be Determined. Suggested Remedial Action: None yet.
Comment of the Staff of the Bureau of
Competition and of Policy of Planning |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
