FTC’s Pattern of Abuses Will Lead to Higher Drug Prices for America’s Patients

Today’s Biosimilars Council guest blog by William Jay provides expert analysis of the constitutionality of Senate legislation under consideration. William Jay is a partner in Goodwin Procter LLP’s Appellate and Supreme Court Litigation practice and was named Appellate Lawyer of the Year by Benchmark Litigation. He has litigated before the U.S. Courts of Appeals and the U.S. Supreme Court, where in recent years he has argued five of the most significant intellectual-property cases at the Court, involving patent, copyright, and trademark law.

Recently, Judge Ada Brown in the U.S. District Court of the Northern District of Texas tossed out the Federal Trade Commission’s ban on noncompete agreements. In her ruling, Judge Brown stated that the commission overstepped its power, writing “The FTC lacks substantive rulemaking authority with respect to unfair methods of competition.” Unfortunately, this latest development only highlights a pattern of abuse by the FTC that could lead to higher drug prices for Americans if we’re not careful.

Congress is currently considering legislation (S. 142, the misnamed “Preserve Access to Affordable Generics and Biosimilars Act”) that would grant Lina Khan’s FTC – the most politicized, least impartial agency in Washington – new powers to determine guilt or innocence in the market for prescription drugs.

As approved by the Senate Judiciary Committee, S.142 would punish generic drug companies that settle patent litigation unless they can prove that their conduct is legal—the opposite of “innocent until proven guilty.” And accused companies must make their defense not to a jury, but to the FTC. That violates the constitutional guarantee of trial by an impartial jury—a right that Congress has repeatedly tried to get around, and that the Supreme Court has firmly refused to water down.

In SEC v. Jarkesy, the Supreme Court recently held that the SEC’s system for punishing citizens before its own in-house courts violates the jury-trial right protected by the Seventh Amendment because it “concentrate[s] the roles of prosecutor, judge, and jury in the hands of the Executive Branch.” The made clear that Congress may not “conjure away the Seventh Amendment by mandating that traditional legal claims be taken to an administrative tribunal.” That is exactly what S. 142 would do.

The FTC has five commissioners, all political appointees, with the President’s party traditionally holding a 3-2 edge. That partisan split has been weaponized since President Biden made Lina Khan the chair of the FTC. The agency has been split by a series of party-line votes on enforcement, rulemaking, and policy, with Chair Khan refusing ethics advice to recuse herself from some critical votes.

A congressional investigation has shown that the FTC’s own staff see and protest the agency’s politicization. One internal email from an FTC manager stated that he sensed “outside influences … have an undue impact on [FTC] priorities, investigation management, and enforcement decisions,” and warned that the agency “should never make an enforcement-related decision for the sake of PR.” Perhaps because it is following “outside influences” and not the law, the agency has lost case after case in court. So S. 142 would not make the agency go to court.

Instead, all the facts are found by the agency’s own in-house judges, and those findings are “conclusive”—no court can re-examine them. Guilt or innocence is decided by the FTC. The only role for a federal trial court is to decide the penalty. Even then, there is no jury, just a judge—and the judge is not allowed to disagree with the FTC’s decision on liability. That means companies will face penalties based on the FTC’s skewed view of the law—making the law unpredictable, unfair, and unconcerned with the important mission of allowing patients to access the lower cost generic and biosimilar medicine they need.

Fair competition is an important issue and true violations of the law should be taken seriously. But the Senate must take the Constitution seriously as well. Congress can provide for punishments for those who violate the law, but the Constitution requires the government to prove any violation to the satisfaction of a group of ordinary citizens with no political axe to grind—not a politicized agency looking to avoid more losses in court.

An impartial jury is a bedrock protection of liberty. Congress should reject S. 142 as an unconstitutional attempt to evade that protection.