TheHatchWaxmanAct:
PrescriptionsforInnovativeandInexpensiveMedicines
ByD.ChristopherOhly 1
TheDrugPriceCompetitionandPatentTermRestorationActof1984, 2 commonlyknownastheHatchWaxmanAct,waslegislativelynegotiatedtostrike
“abalancebetweentwopotentiallycompetingpolicyinterests—inducingpioneering
developmentofpharmaceuticalformulationsandmethodsandfacilitatingefficient
transitiontoamarketwithlowcost,genericcopiesofthosepioneeringinventionsat
thecloseofapatentterm.” 3 TheHatchWaxmanActwas,atleastaccordingtotwo
economists,thefirstchangeinpatenttermssince1861. 4
1
Theviewsexpressedinthisarticlearethoseoftheauthoraloneanddonotnecessarilyreflectthe
viewsofSchiffHardin,LLP,orofitsotherattorneys,orofanyofitsclients.
2
Pub.L.No.98417,98Stat.1585(1984)(codifiedat21U.S.C.§§355,360cc;35U.S.C.§§156,271),
asamendedbytheMedicarePrescriptionDrugImprovementandModernizationActof2003,Pub.L.No.
108173,117Stat.2066(2003)(collectively,the“HatchWaxmanAct”).
3SeeNovoNordiskA/S,etal.v.CaracoPharmaceuticalLaboratories,Ltd.,etal.,No.20101001(Fed.
Cir.,April14,2010),at2,citingAndrxPharms.,Inc.v.BiovailCorp.,276F.3d1368,1371(Fed.Cir.2002).See
alsoCaracoPharmaceuticalLaboratories,Ltd.,etal.v.ForestLaboratories,Inc.,etal.,No.20071404(Fed.Cir.,
April1,2008);andB.Randall,TheU.S.DrugApprovalProcess:APrimer(CongressionalResearchService,
June1,2001),SummaryandCRS1,http://www.thememoryhole.org/crs/morereports/RL30989.pdf
(hereinafter“CRSI”).ThepurposeoftheActwas“tomakeavailablemorelowcostgenericdrugsby
establishingagenericdrugapprovalprocessforpioneerdrugsfirstapprovedafter1962.”H.R.Rep.No.98
957,Pt.1,at14(June21,1984).AsstatedinarecentamicusbrieffiledbyRep.HenryWaxman,inFederal
TradeCommissionv.ScheringPloughCorporation,etal.,No.05273(S.Ct.2005),the“Actreflectedtheconcern
thatthenexistingFDAprocedures,whichrequiredgenericdrugmanufacturerstocompletethelengthy
proceduresfornewdrugapprovaloncepatentsprotectingthenamebranddrugexpired,“hadseriousanti
competitiveeffects,”theresultofwhichwas“thepracticalextensionofthemonopolypositionofthepatent
holderbeyondtheexpirationofthepatent.H.R.Rep.No.98857,Pt.2,at4(Aug.1,1984).”
4
SeeH.GrabowskiandJ.Vernon,LongerPatentsforIncreasedGenericCompetition:TheHatch
WaxmanActAfterOneDecade,SSRN40940(DukeUniv.,June1995).
SomecommentatorshavesaidthattheHatchWaxmanActhasplayeda
“criticalrole”inthedevelopmentoftheUnitedStatespharmaceuticalindustry. 5 TheCongressionalResearchService,ina2004reporttoCongress,after
enactmentofthemostrecentHatchWaxmanamendmentsinthe2003MMA,
stated:
ManyexpertsagreethattheActhashadasignificanteffectonthe
availabilityofgenericsubstitutesforbrandnamedrugs.Generics
generallyarerapidlyavailableafterpatentexpirationandatlowerprices.
Concurrently,giventheincreasinginvestmentinresearchand
development(R&D)andthegainsinresearchintensityofthe
pharmaceuticalindustry,itappearsthatthe1984Acthasnotdeterredthe
searchforandthedevelopmentofnewdrugs. 6 5
SeeG.Glover,M.D.,“HatchWaxman”LawHasPlayedACriticalRoleinMedicalAdvances,ISBN
10563059(WashingtonLegalFoundation2002).Dr.Glover,thenapartnerinalawfirm,commentedthat
the“U.S.pharmaceuticalmarketisrobust,competitive,andworkingtothebenefitofconsumers,exactlyas
CongressintendedwhenitpassedtheHatchWaxmanAct,”thatthe“U.S.pharmaceuticalindustry
continuestoleadtheworldininnovation,”andthat
TheHatchWaxmanActhasplayedacriticalroleinthis.Ontheonehand,thegeneric
industryhasflourishedsincethelaweliminatedmajorbarrierstomarketentryandmadeitmuch
easier,farlesscostly,andquickerforlowcostgenericdrugmanufacturerstogettheircopiesof
innovatormedicinestomarketfollowingpatentexpiration.Ontheotherhand,theHatchWaxman
Actprovidedtheresearchbasedpharmaceuticalindustry—thesourceofvirtuallyallnewdrugs
intheU.S.—incentivestoinnovate.Thelawrestoredpartofthepatentlifelostbypioneer
medicinesasaresultofregulatoryreviewbytheFoodandDrugAdministration(FDA),and
providedlitigationprocedurestodecreasethelikelihoodofpatentinfringementwhengenericdrug
productsenteredthemarket.Asaresult,consumersarereceivingthebenefitsofbothan
expandingstreamofevermoreeffective,precise,andsophisticatedmedicines,aswellasearly
accesstolowcostgenericcopies.
SeealsoR.EpsteinandB.Kuhlik,NavigatingtheAnticommonsforPharmaceuticalPatents:Steady the Course on
Hatch-Waxman, http://ssrn.com/abstract_id=536322, at 14 (“Whatever one thinks of the recent changes to
Hatch-Waxman, the legal institutions now in place are not in need of any major repair.”), and Note, The
Hatch-Waxman (Im)Balancing Act, http://leda.law. harvard.edu/leda/ data/551/Paper1.html (the Act was,
in large part, successful at meeting its goals). And see Ernst R. Berndt, Richard Mortimer, Ashoke
Bhattacharjya, Andrew Parcee, and Edward Tuttle, Authorized Generic Drugs, Price Competition and
Consumers’ Welfare, www.aei.org/docLib/20051103_GenericsDraft.pdf (Oct. 2005).
6
W.SchachtandJ.Thomas,TheHatchWaxmanAct:ProposedLegislativeChangesAffecting
PharmaceuticalPatents,http://www.ipmall.fplc.edu/hosted_resources/crs/IB10105.pdf(2004),atCRS1.
Onvariousoccasionssurrogatesforbothgenericandbrandedpharmaceutical
manufacturershavebeenmorecriticaloftheeffectsandeffectivenessoftheAct,
eacharguingthattheotherhadexploitedprovisionsoftheActtotheirbenefit,
andthattimelyintroductionoflowercostdrugsorthattrulyinnovativeresearch
anddevelopment(“R&D”)ofnewdrugproductshadsufferedasaresult. 7
TheHatchWaxmanActisagainunderattackor,atminimum,alteration,
byagency,legislativeandjudicialactions.TheFTChasassertedthatitsterms
havebeenabusedbybothbrandedandgenericmanufacturers,whichhave
enteredintosettlementsoflitigationthattheFTCregardsasanticompetitive.
Authorizedgenericshavebeenintroducedintothemarketplacebybranded
companies,inanefforttoretainaportionofthesaleslostatintroductionof
genericproductsintoaparticularpharmaceuticalproductmarket.With
7
See,e.g.,G.Mossinghoff,OverviewoftheHatchWaxmanActandItsImpactontheDrugDevelopment
Process,54FoodandDrugL.J.187(1999)(“ForthosewhoaskwhetherHatchWaxmanwasagooddealora
baddealfortheresearchbasedpharmaceuticalindustry,themostlearnedresponseis:Itwasnotagood
deal,unlessonebelievedthatFDAwasgoingtogoforwardwithitsplanstoimplementabbreviatednew
drugapplications(ANDAs)throughregulation.Ifonethoughtthatwasgoingtohappen—andFDAwas
workingonit—thenHatchWaxmanprobablywasagoodbalance.Ifonedidnotthinkthatwouldever
happen,HatchWaxmanprobablywasnotagoodbalance,atleastatthetime.”).SeealsoM.Avery,
ContinuingAbuseoftheHatchWaxmanActbyPharmaceuticalPatentHoldersandtheFailureofthe2003
Amendments,60HastingsL.J.171(2009);FederalTradeCommission,PayforDelay:HowDrugCompanyPay
OffsCostConsumersBillions,http://www.ftc.gov/os/2010/01/100112payfordelayrpt.pdf(January2010);T.
Chen,AuthorizedGenerics:APrescriptionforHatchWaxmanReform,93Va.L.Rev.459(2007);D.Reiffinand
M.Ward,“BrandedGenerics”AsaStrategytoLimitCannibalizationofPharmaceuticalMarkets,
www.uta.edu/faculty/mikeward/brandedgenerics.pdf(May2005);Comment,TheDubiousValueofHatch
WaxmanExclusivity,45HoustonL.Rev.555(2008).
significantjustification,genericshavelabeledthispracticeasanticompetitive
andagrossdistortionofthe“delicatebalance”struckintheHatchWaxmanAct.
MembersofCongresshaverecentlyintroducedlegislationtoban
settlementsthatincludesocalled“reversepayments”andtoprohibit
“authorizedgenerics.” 8 Atthesametime,theCongresshasrecentlyenacteda
“pathway”for“followonbiologics”thatgreatlyexpandthedataexclusivity
grantedtobrandedbiologicalproductmanufacturers,makingfuturegeneric
competitionincreasinglydifficult,ifnoteconomicallyinfeasible.
TheFederalCircuithasrecentlydeterminedthatinducedinfringement
maybeprovenbyashowingof“deliberateindifference”totheexistenceofa
patent. 9 AlthoughthedecisionwasmadeinanonHatchWaxmancase,itmay
wellaffectcasesbroughtundertheAct,especiallyagainstforeigngeneric
pharmaceuticalmanufacturers. 10 InExergenCorp.v.WalMartStores,Inc., 11 the
8
See,e.g.,FairPrescriptionDrugCompetitionAct,S.438,110thCong.(2007);S.3695,109thCong.
(2006)(authorizedgenerics);PreserveAccesstoAffordableGenericsAct,S.316(2007)(prohibitingbrand
namedrugcompaniesfromcompensatinggenericdrugcompaniestodelaytheentryofagenericdruginto
themarket).
9
SeeSEB.,S.A.v.TFalCorporation,No.20091009(Fed.Cir.,February5,2010).
10
See,e.g.,AventisPharmaceuticals,etc.v.Lupin,Inc.,403F.Supp.2d484,495(E.D.Va.2005)(“In
ANDAlitigation,anactionforinducedinfringementmaybebroughtpursuanttoSection271(e)(2).Under
Section271(b),[w]hoeveractivelyinducesinfringementofapatentshallbeliableasaninfringer.See35
U.S.C.§271(b).Inordertobeliableforinducement,theinducingpartymustknowinglyactandspecifically
intendtoaidtheinfringement.Pfizer,Inc.v.RanbaxyLab.Ltd.,321F.Supp.2d612,616(D.Del.2004)Allergan,
Inc.v.AlconLab.,Inc.,324F.3d1322,1331(Fed.Cir.2003)Geneva,287F.Supp.2dat585.While“active
inducement”requires“anaffirmativeactofsomekind,”seeid.,themajorityofcourtshaveheldthat
allegationsofactivitiesdoneinthepreparationofanANDAapplicationarenotenough;rather,theclaim
mustincludeaidingandabettinginfringementsothattheprimaryquestionofthesuitmayberesolved,
namely:“whether,ifaparticulardrugwereputonthemarket,itwouldinfringetherelevantpatent.”)
FederalCircuitheldthattopleadthe“circumstances”ofinequitableconduct
withtherequisiteparticularity”apleadingmustidentifythespecificwho,what,
when,where,andhowofthematerialmisrepresentationoromissioncommitted
beforethePTO. 12 Theseeminglyheightenedpleadingrequirementssetforthin
Exergen,whenintroducedinHatchWaxmanlitigation,maywellmakeitfar
moredifficultforgenericpharmaceuticalmanufacturerstoinvalidatepatents
procuredthroughfraudonthePTOor,atleast,inequitableconduct.
And,inNovoNordiskA/S,etal.v.CaracoPharmaceuticalLaboratories,Ltd.,et
al., 13 theFederalCircuitheldthattheamendmentstotheActmadeintheMMA,
in2003,torecognizeacounterclaimbyagenericmanufacturerfordelistingofa
patentimproperlylistedintheFDA’sOrangeBook,“onthegroundthatthe
patentdoesnotclaimeither(aa)thedrugforwhichtheapplicationwas
approved;or(bb)anapprovedmethodofusingthedrug,” 14 lies“onlyifthe
listedpatentdoesnotclaimanyapprovedmethodsofusingthelisteddrug.” 15 11
573F.3d1312(2009).
12
Apleadingthatallegesinequitableconductmust“includesufficientallegationsofunderlying
factsfromwhichacourtmayreasonablyinferthataspecificindividual(1)knewofthewithheldmaterial
informationorofthefalsityofthematerialmisrepresentation,and(2)withheldormisrepresentedthis
informationwithaspecificintenttodeceivethePTO.”Id.,573F.3dat1328–29.
13SeeNote3,supra.
1421U.S.C.§355(j)(5)(C)(ii)(I).
15
NovoNordiskA/S,etal.v.CaracoPharmaceuticalLaboratories,Ltd.,etal.,supra,Note3,at10.
TheNovoNordiskdecisionpermitsbrandedpharmaceuticalmanufacturersto
engageinpractices,throughchangesinlistingsintheOrangeBook,designedto
defeatagenericmanufacturer’s“carveouts”fromlabeledindicationstoavoid
costlypatentlitigation,raisingaspecterthatpracticesdescribedinMylan
Pharms.,Inc.v.Thompson, 16 thattheCongressintendedtoremedyintheMMA
amendmentsin2003,maywellagainbeabusivelyemployedbybranded
pharmaceuticalmanufacturers.
Alloftheserecenttrendsanddevelopmentsraisethequestionwhether
thetermsoftheHatchWaxmanActshouldberevisitedagain,orwhether,even
withitsperceivedflaws,itisbesttoleavethingsastheyare. 17 HatchWaxmanActHistoryandBasicProvisions
Althoughthereisa“paucityoflegislativehistory, 18 itisclearfromthe
accountsofthosewhoparticipatedinthe“congressionallysupervised”process
ofnegotiatingthelegislation, 19 thattheActwasalwaysacompromiseintended
designedtointerferewithandchangethe“freemarket”forpatented
16
268F.3d1323,133233(Fed.Cir.2001).
17
Becarefulwhatyouwishfor,youmightgetit.
18
SeeG.Mossinghoff,supraNote7.
19
SeeA.Engelberg,SpecialProvisionsforPharmaceuticals:HaveTheyOutlivedTheirUsefulness,39J.L.
&Tech.389(1998),http://ipmall.org/hosted_resources/IDEA/39_IDEA/393_IDEA_389_Engelberg.pdffora
detailedaccountofthe“congressionallysupervisednegotiationbetweenthegenericandbrandname
pharmaceuticalindustriesinwhichthepartieswerecompelledtoreachacompromisebythelegislature.”
CompareG.Mossinghoff,supraNote7.
pharmaceuticalproductsthatexistedpriortoitsenactment.In1984,whenthe
HatchWaxmanActwaspassed,thepharmaceuticalmarketwasessentially
devoidofgenericcompetition.No“pathway”existedforapprovalofgeneric
drugsbytheFDA. 20 Eachpharmaceuticalmanufacturerwasrequiredtoconduct
fullclinicaltrialstodemonstratethesafetyandeffectivenessofitsdrugproduct,
evenifan“innovator’s”producthadbeenmarketedforyears.Morethan150
productsexistedwithoutanypatentprotectionandwithoutanygeneric
competition. 21 Hence,priortoenactmentoftheHatchWaxmanAct,althoughit
mayhavebeen“tosociety’sbenefittointroducegenericversionsofasmany
drugsaspossibleasquicklyaspossible,tomaximizeconsumersavings,”
…therewaslittleincentiveforthegenericstodoso.Ifthey
attemptedtoprematurelyresearchacompetingproduct,challengingthe
validityofapatent,theywouldbesubjecttoaninfringementsuit,an
expensetheycouldillaffordwhenthepotentialreturnontheir
investmentwassofarinthefuture.Andoncetheyfinallybroughta
20
SeeA.Engelberg,supraNote9,at396(the1962amendmentstotheFoodandDrugAct,
“containednoprovisionsforaseparateapprovalprocessfordrugswhichwereidenticaltodrugswhichhad
beenpreviouslyapproved.Thus,apartyseekingapprovaltomarketagenericversionofanexistingdrug
wascompelledtofileaNewDrugApplication(NDA)andtoindependentlyprovethatthedrugwassafe
andeffective.ManydrugswereapprovedbasedonasocalledpaperNDAinwhichtheapplicantrelied
uponpublisheddataconcerningthesafetyandefficacyofthepreviouslyapproveddrugastheproofthatits
own,identicalproductwassafeandeffective.However,suchdatawerenotreadilyavailableforall
approvedproducts.Moreover,nothingintheFDAregulationspreventedtheAgencyfromrequesting
additional,expensiveclinicalstudiestodealwithsafetyorefficacyquestionsthatmayhavearisenfrom
adversereactionreportsorotherpublishedinformationpertainingtotheapprovedproductbetweenthe
timeofitsapprovalandthetimeofthepaperNDAfiling.Often,thepaperNDAapplicantlackedthe
financialresourcesorexpertiserequiredtorespondtosuchrequests.”)
21
SeeG.Mossinghoff,supraNote7(“After1962,therewascongressionaltestimonythattherewere
150drugsthatwereoffpatent,butforwhichtherewerenogenericsbecausegenericcompaniessimply
wouldnotspendthetimeandmoneydoingtheclinicaltrialstogettomarket,andthattherewereonly
fifteen“paperNDAs,”forpost1962generics.”)
producttomarket,pricecompetitionwouldhavedramaticallylowered
theirprofitmarginsrelativetothoseenjoyedbybrandnamedrug
companies,despitethegenerics’havingundergoneasignificantoutlayof
expendituresonexpensivehumanclinicaltrials,almostcomparabletothe
brandnamedrugcompanies’clinicalstudiesandresearchand
developmentexpenses,beforebeingabletobringtheirproducttomarket.
Onlythemosttrulyaltruisticordelusionalwouldhavebeenableto
remainintheindustry,whichiswhy,priorto1984,only36%oftop
sellingbrandnamedrugshadacompetinggenericproductonthemarket,
andgenericdrugsaccountedforonly19%ofprescriptiondrugvolume. 22
Allofthiswasmademorecomplicatedbythe1983decisioninRoche
Products,Inc.v.BolarPharmaceuticalCo., 23 inwhichtheFederalCircuitheldthat
theultimatecommercialpurposeunderlyinggenericpharmaceutical
manufacturers’effortstodevelopbioequivalentproductsinordertoseekFDA
approvalwasa“use”ofapatentedinventionandanactofinfringementthat
couldbeenjoinedunderthepatentlawsastheyexistedatthattime.TheCourt
saidthatitcouldnot“construethe“experimentaluse”rulesobroadlyasto
allowaviolationofthepatentlawsintheguiseof‘scientificinquiry,’whenthat
inquiryhasdefinite,cognizable,andnotinsubstantialcommercialpurposes.” 24 22
Note,TheHatchWaxman(Im)BalancingAct,http://leda.law.harvard.edu/leda/
data/551/Paper1.html,citingCONGRESSIONALBUDGETOFFICE,HOWINCREASEDCOMPETITIONFROMGENERIC
DRUGSHASAFFECTEDPRICESANDRETURNSINTHEPHARMACEUTICALINDUSTRYxii(1998),(hereinafter“CBO
CompetitionStudy”).AccordingtotheCBOCompetitionStudy,priorto1984,“competitionfromgeneric
drugsintermsofpriceandmarketsharewaslimitedprimarilytoantibiotics.”CBOCompetitionStudyat
29.
23
733F.2d858(Fed.Cir.1984).
24
733F.2dat363.
ThechangesmadeintheHatchWaxmanActwereintendedtoreversethe
decisioninBolar,topermitgenericmanufacturerstodevelopbioequivalent
productsandrequestFDAapprovalwithoutinstantlyinfringingapatent,andto
createanewregimeforrapidFDAapprovalofgenericbioequivalentsof
brandedpharmaceuticals. 25 TheprincipalquidproquoforenactmentoftheBolar
exceptiontothePatentAct, 26 wastheadditionofprovisions“allowingforthe
extensionofthenormaltermofapatentforuptofiveyearstocompensatea
patentownerforthemarketingtimeallegedlylostin[theFDAdrugapproval
process],” 27 andforatotalpatenttermextensionofupto14years. 28 25
OneofthearchitectsofthelegislativelysupervisednegotiatedHatchWaxmanAct,
RepresentativeWaxmanrecentlystatedthatthe“ultimategoalofalloftheseprovisionswasto‘provide
lowcost,genericdrugsformillionsofAmericans,’resultingin‘asignificantsavingstopeoplewho
purchasedrugs.’130Cong.Rec.24427(Sept.6,1984)(statementofRep.Waxman).”Hestatedthatthe
“legislatorswhovotedfortheActanticipatedthatit‘willdomoretocontainthecostofelderlycarethan
perhapsanythingelsethisCongresshaspassed,becauseitwillbringaboutlowerpricedgenericalternatives
tobrandnamedrugsoncethepatenthasexpiredorifthereisnovalidpatentandthecourtsdecidethereis
novalidpatentinordertogivethatmonopolyprotection.’Id.(statementofRep.Waxman).”SeeAmicus
BriefofRep.HenryWaxman,FederalTradeCommissionv.ScheringPloughCorporation,etal.,No.05273(S.Ct.
2005),at5,http://www.citizen.org/documents/waxmanamicus.pdf(hereinafter“WaxmanAmicus”).
2635U.S.C.§271(e)(1)(1994).
27ThisprocessisbrieflydescribedinB.Randall,TheU.S.DrugApprovalProcess:APrimer,supra,
Note3(CRSI).Itissummarizedasfollows:“Tobeginclinicaltesting,drugcompaniesorsponsorsmustfile
anInvestigationalNewDrug(IND)applicationwiththeFDA.TheINDsmustincludeinformationabout
thestudyprotocol,thequalificationsoftheleadinvestigator,thetrial’slocation,andassurancesthatthe
welfareofthestudyparticipantswillbeprotected.”Id.,SummaryandCRS4toCRS11.Socalled“PhaseI
studiesfocusonassessingthedrug’ssafetyinagroupofhealthyvolunteers,usuallyatverysmalldosesin
fewerthan100patients.”Id.,atCRS9.“PhaseIItrialsarerandomized,wellcontrolled,doubleblind
clinicalinvestigations,”designedto“verifyfurtheradrug’ssafety,”andprimarily“tofindoutwhetherthe
drugiseffectiveornot.”Id.Lastly,“PhaseIIIclinicaltrialscaninvolvebothcontrolledanduncontrolled
studiesandmayincludeasmanyasseveralthousandpatients.Thesetrialsproduceadditionalinformation
aboutsafetyandeffectiveness,helpdefinethedrug’soverallbenefittoriskratio,anddeterminehowits
officiallabelingwillbeworded.Thelargerstudiesareintendedtoprovidemoreinformationonthedrug’s
sideeffects,whetheritinteractswithfoodsand/orothermedications,andwhethercertainpatient
populationsshouldavoiditsusealtogether.”Id.
AsconsiderationfortheiragreementtotheHatchWaxmancompromise,
brandedpharmaceuticalcompaniesalsoreceivedanoveladditionalprotection,
notbasedonanypatents,for“dataexclusivity.” 29 UndertheHatchWaxman
Act,agenericmanufacturerispermittedtofileanAbbreviatedNewDrug
Applicationthatreliesondataacquiredduringabrandedcompany’sclinical
trialsconductedpriortoapprovalofanNDA,withoutconductingallsuchtrials
again. 30 Instead,theActpermitsfilingofanANDAbaseduponmorelimited
tests,demonstratingthe“bioequivalence”ofaproposedgenericproducttoan
FDAapprovedbrandedproduct. 31
Aftercompletionofsuchclinicalstudies,“thesponsorsubmitsaNewDrugApplication(NDA)for
FDAevaluation.Duringtheapplication’sreview,agencyofficialsexaminethedrug’ssafetyandefficacy
data,assaysamples,andconductfactoryinspectionstobesurethefinishedproductwillbemanufactured
properly.FDAalsochecksthedrug’slabelingtobesurethatitisaccurateandcomprehensive.Typically,
whenFDAfinishesitsreview,itnotifiestheapplicantbyletterstatingthatitsNDAiseitherapproved,
wouldbeapprovedifchangesaremade,orcannotbeapprovedduetounresolvedproblems.Onceanew
drugisapproved,itssafetyismonitoredthroughFDA’spostmarketingsurveillancesystem,MedWatch.
…”Id.,SummaryandCRS4toCRS11.
28
35U.S.C.§156(c)(3).
29Thisfiveyearnonpatentexclusivitywasa“key”totheHatchWaxmancompromise.SeeA.
Engelberg,supraNote9,at406.
3021U.S.C.§355(j)(1)and(2).
3121U.S.C.§355§355(j)(2)(A)(iv).SeeNationalInstituteforHealthCareManagementResearch
andEducationalFoundation,APrimer:GenericDrugs,PatentsandthePharmaceuticalMarketplace,at4(2002),
http://www.nihcm.org/~nihcmor/pdf/GenericsPrimer.pdf.A“bioequivalentdrug”isdefinedasonefor
which
(i)therateandextentofabsorptionofthedrugdonotshowasignificantdifferencefromtherate
andextentofabsorptionofthelisteddrugwhenadministeredatthesamemolardoseofthe
therapeuticingredientundersimilarexperimentalconditionsineitherasingledoseormultiple
doses;or
Thenovel“dataexclusivity”provisionincludedintheHatchWaxman
Actasaquidproquoforpermittinggenericcompanyrelianceonpreviousclinical
trials,grantstheNDAholderaperiodoffiveyearsafterthedateofFDA
approvalofaNewChemicalEntity(NCE), 32 duringwhichtheFDAisnot
permittedtoapproveanANDAthatreliesuponsuchtrials. 33 TheHatch
Waxman“dataexclusivity”provisionsalsocreateaperiodofthreeyearsafter
thedateofanyFDAapprovalofanewuseofanexistingandpreviously
approvedchemicalentity,ornewdosageformusingthatchemicalentity,that
wasbasedonclinicaltests,duringwhichtheFDAisnotpermittedtoapprovean
ANDAthatreliesuponsuchtrials. 34 Theeffectofthesedataexclusivity
(ii)theextentofabsorptionofthedrugdoesnotshowasignificantdifferencefromtheextentof
absorptionofthelisteddrugwhenadministeredatthesamemolardoseofthetherapeutic
ingredientundersimilarexperimentalconditionsineitherasingledoseormultipledosesandthe
differencefromthelisteddrugintherateofabsorptionofthedrugisintentional,isreflectedinits
proposedlabeling,isnotessentialtotheattainmentofeffectivebodydrugconcentrationson
chronicuse,andisconsideredmedicallyinsignificantforthedrug.
21U.S.C.§355(j)(8).
32
21CFR314.108(b)definesa“NewChemicalEntity”as“adrugthatcontainsnoactivemoiety
thathasbeenapprovedbyFDAinanyotherapplicationsubmittedundersection505(b)oftheact.”An
“activemoiety”is“themoleculeorion,excludingthoseappendedportionsofthemoleculethatcausethe
drugtobeanester,salt(includingasaltwithhydrogenorcoordinationbonds),orothernoncovalent
derivative(suchasacomplex,chelate,orclathrate)ofthemolecule,responsibleforthephysiologicalor
pharmacologicalactionofthedrugsubstance.”
33
21U.S.C.§§355(c)(3)(D)(ii).SeeW.SchachtandJ.Thomas,PatentLawandItsApplicationtothe
PharmaceuticalIndustry:AnExaminationoftheDrugPriceCompetitionandPatentTermRestorationActof1984
(“TheHatchWaxmanAct”),RL30756,
http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RL3075601102005.pdf,andW.Schacht
andJ.Thomas,TheHatchWaxmanAct:LegislativeChangesAffectingPharmaceuticalPatents,RL32377
http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/IB10105.pdf.
34
21U.S.C.§§355(c)(3)(D)(iii).
provisionsistocreateaneffectivemonopolyfortheinnovatorsthatconducted
clinicaltrials,insulatingthemfromanygenericcompetitionduringthe“data
exclusivity”period.
Hence,undertheHatchWaxmanAct,pharmaceuticalinnovatorsmaybe
entitledto(1)apatenttermextensionofuptofiveyears,basedupondelaysin
FDAapprovalofanNDA, 35 (2)a30monthsasaresultofthe“automaticstay”of
finalFDAapprovalduringHatchWaxmanlitigation, 36 anduptofiveyearsof
dataexclusivity, 37 or12.5yearsofprotectionfromgenericcompetitionafterFDA
approvalofaninnovator’sdrugproduct.Thisperiod,ithasbeenargued,is
necessary,accordingtoindustryadvocates,inordertoaffordandNDAholder
an“opportunitytoearnapositivereturnonthenewtherapeuticcandidatesthat
successfullycompletethelengthyandcostlyR&Dprocess.” 38
Asageneralmatter,theHatchWaxmanActrequirestheFDAtolistthe
officialandproprietarynameofeachdrugwhichhasbeenapprovedbytheFDA
35
35U.S.C.§156(c)and(g)(6).
36
21U.S.C.§355(c)(3)(C).
37
21U.S.C.§355(c)(3)(D)(ii).
38
SeeH.Grabowski,Followonbiologics:dataexclusivityandthebalancebetweeninnovationand
competition,7NatureReviewsDrugDiscovery479(June2008).CompareA.Brill,ProperDurationofData
ExclusivityforGenericBiologics:ACritique,http://www.tevadc.com/Brill_Exclusivity_in_Biogenerics.pdf;
andM.Pugatch,IntellectualPropertyandPharmaceuticalDataExclusivityintheContextofInnovationandMarket
Access,http://www.iprsonline.org/unctadictsd/bellagio/docs/Pugatch_Bellagio3.pdf.
forsale(referencelisteddrugs). 39 Brandedcompaniesarerequiredtoidentifyall
patentsthatclaimthedrugoramethodofusingthedrug,bypatentnumberand
expirationdate. 40 Thesedrugnamesandlistofpatentsarepublishedinwhathas
becomeknownasthe“OrangeBook.” 41
UndertheActagenericpharmaceuticalmanufacturermayfileanANDA
noearlierthanoneyearpriortotheexpirationofthefiveyeardataexclusivity
periodfornewlyapprovedNCEs 42 (theNCE1date). 43 Theapplicationmust
containinformationthatdemonstratesthattheactiveingredientofthegeneric
drugisthesameasthatofadrugthatbeenpreviouslyapprovedbytheFDA,
3921USC355(j)(7).“Notsurprisingly,theopportunitytoextendmarketexclusivitybymerely
listingapatentintheOrangeBookhasencouragedbrandnamedrugcompaniestoseek,obtain,and,
ultimatelylistagreatvarietyofpatentsoflittlescopeormeritexceptfortheirabilitytodelaylegitimate
competition.AcursoryinspectionoftheFDAOrangeBookspatentandexclusivitylistingswillrevealthat
mostapprovedproductshavemorethanonelistedpatent.Sometimes,therearefiveorsixlistedpatentsfor
asingleproduct.Someofthesepatentsclaimunapproveduses,specialcrystallineformsoftheactive
ingredient,specificformulations,tabletshapeorothersubjectmatterwhichcaneasilybecircumvented
whilestillproducinganequivalentgenericversionofanapproveddrug.Thesepatentsnevertheless
preventcompetitionforatleastthirtymonths.”SeeA.Engelberg,supra,Note9,at415.SeealsoNovoNordisk
A/S,etal.v.CaracoPharmaceuticalLaboratories,Ltd.,etal.,supra,Note12.
40
21U.S.C.§355(b)(1)(G).
41
Seewww.fda.gov/cder/ob/default.htm.
42
21USC355(j)(5)(F)(ii).
43Underthepresentstructure,theFDAdoesnotregardanysinglegenericANDAapplicantasthe
solefirstfiler,whenseveralsuchANDAapplicationsaremadeontheNCE1date.Theresulthasbeenthat,
inmanycases,10ormoregenericmanufacturersfileANDAsonanNCE1date,oftenwithdifferent
invalidityandnoninfringementpositions.Inthesecases,theensuingHatchWaxmanlitigationisoften
joinedinasinglejudicialdistrict,forcingthesegenericmanufacturerstogether,eveniftheyhaveseparate
anddifferentinterests.Whilesuchjoindersmaywellyieldefficienciesandfrequentlyresultincooperative
teamsofgenericcompanylawyersthatmayoutnumbertheirbrandedcounterparts,theeconomicsofthe
productmaywellrenderlengthyandcostlylitigationunaffordable,becausetheultimatemarket,afterprice
discountsattendanttointroductionofmultiplegenericcompetitors,willshrinktolevelsofmarginal
profitabilityforsome,mostorevenalloftheANDAapplicants.Theseeconomicconditionsoftenproduce
strongtendenciestosettleHatchWaxmanlitigation,simplytoavoidfurtherlitigationcosts.
listedintheOrangeBook,andthattheproposedgenericproductis
“bioequivalent”totheOrangeBooklistedproduct. 44 Thegenericmanufacturer
mustalsocertify,initsANDA,withrespecttoeachOrangeBooklistedpatent,
that“(I)nosuchpatentinformationhasbeensubmittedtotheFDA;(II)thepatent
hasexpired;(III)thepatentissettoexpireonacertaindate;or(IV)thepatentis
invalidorwillnotbeinfringedbythemanufacture,use,orsaleofthegenericdrug.
21U.S.C.§355(j)(2)(A)(vii).” 45 Thelastandthemostimportantofthese
certifications,commonlyknownasa“ParagraphIVCertification,”spawnsHatch
Waxmanlitigationbetweengenericandbrandedpharmaceuticalcompanies.Itis
themostimportantbecause,whenmakingaParagraphIVcertification:
…agenericfirmisseekingmarketentrypriortopatentexpiration,
whereastheothercertificationssimplyconfirmtherearenoextantpatent
rightsthatwouldpreventgenericentry.Genericapplicantsmaking
ParagraphIVcertificationsmustnotifythepioneerfirm,whichthenhas
fortyfivedaystoinitiateapatentinfringementlawsuit.Pioneerstypically
pursuelitigation,automaticallytriggeringathirtymonthstaythatprevents
FDAapprovaloftheANDAuntiltheearliestofthefollowingdates:patent
expiration,afinalresolutionofthepatentlitigation,orexpirationofthe
thirtymonthperiod. 46
In2002,anFTCstudyfoundthatgenericpharmaceuticalmanufacturerthat
issuedParagraphIVcertifications“prevailedin73%ofthepatentlitigation
44
21U.S.C.§355(j)(2)(A)(iv).
45
NovoNordiskA/S,etal.v.CaracoPharmaceuticalLaboratories,Ltd.,etal.,No.20101001(Fed.
Cir.,April14,2010),at3–4.
46SeeT.Chen,supraNote7,at465.
ultimatelyresolvedbyacourtdecisionbetween1992andJune2002.” 47 Ifthis
figureiscorrect,thengenericmanufacturershaveasignificantreasontomakea
ParagraphIVcertification.
Agenericmanufacturerthatisa“firstapplicant” 48 andthatprevailsina
ParagraphIVchallengetoapatentisrewardedintheHatchWaxmanscheme
with180daysofmarketingexclusivity,duringwhichtheFDAisnotauthorized
toissueafinalANDAapprovaltoanyothergenericpharmaceuticalmanufacturer. 49 This180daymarketingexclusivityperiodeffectively“createsaperiodofduopoly,”
inwhichthebrandedNDAholderandsuccessfulANDAfirstfileraretheonly
twoentitiespermittedtomanufactureandselltheOrangeBooklistedproduct,
evenifallofthepatentsonthatproducthavebeeninvalidated. 50
47
SeeFederalTradeCommission,GenericDrugEntryPriortoPatentExpiration:AnFTCStudy,Exec.
Summaryatviii(July2002),www.ftc.gov/os/2002/07/genericdrugstudy.pdf,citedinFederalTrade
Commission,PayforDelay:HowDrugCompanyPayOffsCostConsumersBillions,supra,Note7,at3.These
ratesofsuccessforgenericmanufacturersmaywellbedifferentfromthesuccessratesofdefendantsin
patentlitigationgenerally.APriceWaterhouseCoopersstudy,entitled2008PatentLitigationStudy:Damages
awards,successratesandtimetotrial,www.pwc.com/us/en/forensicservices/publications/2008patent
litigationstudy.jhtml,studied1,282finaldecisionsissuedattwostagesofthelitigationlifecycle:summary
judgment(666decisions)andtrial(616decisions)between1995and2007.Thestudyreportedthatpatent
holderswereonlysuccessful3740%ofthetime(thatis,“instanceswherealiabilityanddamages(if
included)decisionwasmadeinfavorofthepatentholder”),withsuccessratesattrailincreasing
significantlyinthelastseveralyears,toashighas63%forpatentholders.Itreportedthat,wherealleged
infringers(likegenericmanufacturers)weretheplaintiffs,indeclaratoryjudgmentactions(9%ofthecases
studied),theallegedinfringersweresuccessfulattrial52%ofthetime.Id.¸at8,9,19.
.
48A“firstapplicant”isdefinedby21U.S.C.§355(j)(5)(B)(iv)(II)(bb)as“anapplicantthat,onthe
firstdayonwhichasubstantiallycompleteapplicationcontaininga[ParagraphIV]certification…is
submittedforapprovalofadrug,submitsasubstantiallycompleteapplicationthatcontainsandlawfully
maintainsa[ParagraphIV]certification…forthedrug.”
4921U.S.C.§355(j)(5)(B)(iv).
50Comment,TheDubiousValueofHatchWaxmanExclusivity,supra,Note7,at558(duopoly).
The180daymarketingexclusivityperiodwascreatedintheHatch
WaxmanActtoencourageParagraphIVchallengesbyrewardingthefirstfiling
applicantforundertakingthecostsandrisksofpatentlitigation,inwhichweak
orimproperlyobtainedpatentsarechallenged,orinwhichappropriatenon
infringingproductsaredefended. 51 The180dayexclusivitywas,atonetime,
“veryvaluabletogenericmanufacturers,astheycansellproductataprice
significantlyhigherthantheycouldifmultiplegenericswereonthemarket.” 52
AsSenatorHatchhasnoted,“Perhapsnosingleprovisionofthe1984law
hascausedsomuchcontroversyasthe180daymarketingexclusivityrule.” 53 FollowingenactmentoftheHatchWaxmanAct,theFDAandlitigantsdisagreed
overwhatnecessaryforafirstfilertobeentitledtoexclusivity. 54 TheHatch
WaxmanAct“originallyprovidedfortwoeventsthatwouldtriggerthe180day
51See,e.g.,W.SchachtandJ.Thomas,PatentLawandItsApplicationtothePharmaceutical
Industry:AnExaminationoftheDrugPriceCompetitionandPatentTermRestorationActof1984(“The
HatchWaxmanAct”),RL30756,atCRS24andCRS26;A.Mehl,TheHatchWaxmanActandMarket
ExclusivityforGenericDrugManufacturers:AnEntitlementoranIncentive?,81ChicagoKentL.Rev.649,
651(2006).The180dayexclusivityperiodwasincluded“toencouragegenericdrugmakerstoincurthe
potentiallysubstantiallitigationcostsassociatedwithchallengingpioneerdrugmakerspatents.”Mylan
Pharmaceuticals,Inc.v.Shalala,81F.Supp.2d30,33(D.D.C.2000).SeealsoA.Engelberg,supra,Note9,at
403–404(provisionincludedtoallowfirstfilertorecoupitslitigationcosts);andJ.Thomas,Authorized
GenericPharmaceuticals:EffectsonInnovation,RL33605,atCRS6andCRS7.
52M.Avery,supra,Note7,at178.SeeMovaPharm.Corp.v.Shalala,140F.3d1060(D.C.Cir.1998).
53SeeSen.OrrinHatch,CommitteeStatement,RevisingHatchWaxmanAct,May8,2002,at4,
http://hatch.senate.gov/newsite/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=182648&Mon
th=5&Year=2002.
54SeeA.Mehl,supra,Note48,at657.
exclusivityperiod:(1)commercialmarketingofthedrug,or(2)afinalcourt
decisionholdingtherelevantdrugpatent(s)invalidornotinfringed.” 55 Priorto
amendmentoftheActin2003,settlementsofHatchWaxmanlitigationwere
concludedthatincludedanagreementby“thefirstParagraphIVapplicantto
refrainfromenteringthemarkettoexploitits180dayexclusivityinreturnfor
substantialmonetarypayments.”The“resultwasthatapioneercouldblockall
subsequentgenericcompetitors,whosemarketentrywascontingentuponthe
triggeringandexpirationof180dayexclusivity,whichhadnowbeen‘parked’
indefinitely.” 56
AfterchallengesbytheFTC, 57 amplecriticismbyothers, 58 andcomplex
litigationinthecourts, 59 the180dayexclusivityprovisionswereamendedbythe
55
SeeT.Chen,supraNote7,at465466.
56
SeeT.Chen,supraNote7,at466;A.Engelberg,supra,Note9,at416418.
57See,e.g.,FederalTradeCommission,GenericDrugEntryPriortoPatentExpiration:AnFTC
Study,supra,Note44.
58See,e.g.,Note,RecentAdministrativeReformsoftheHatchWaxmanAct:LowerPricesNowin
ExchangeforLessPharmaceuticalInnovationLater?,81Wash.Univ.L.Q.829(2002);N.Derzko,The
ImpactofRecentReformsonOrangeBookStrategicBehaviorandPharmaceuticalInnovation,45J.ofLaw&
Tech.165,195–203(2005);andJ.Bulow,TheGamingofPharmaceuticalPatents,
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=412123(May2003).
59See,e.g.,TevaPharmaceuticalIndustriesv.Crawford,410F.3d51(D.C.Cir.2005);andMylanPharm.
v.FDA,454F.3d270,276(4thCir.2006)
.
MMA. 60 Theeffectsoftheseamendmentsweredescribedinapaperbythe
BiotechnologyIndustryOrganization(BIO):
Underthenewprovisions,agenericapplicantgains180daysof
exclusivitybeginningonthedateoffirstcommercialmarketingunlessone
ofthefollowingforfeitureeventsoccurs:
•Theapplicantfailstomarketthedrugwithin75daysofapprovalor
within30monthsaftersubmissionoftheANDA;
•Theapplicantfailstomarketthedrugwithin75daysafteranycourt
decision(fromwhichnoappealcanbetaken)oneachofthepatents
thatearnedtheapplicanteligibilityfortheexclusivity;
•TheapplicantwithdrawstheANDAoramendseachoftheparagraph
IVcertifications;
•Theapplicantfailstoobtainatentativeapprovalwithin30months;
•Theapplicantentersintoanagreementfoundtobeinviolationofthe
antitrustlaws;or
•Allthepatentsthatearnedtheapplicanteligibilityfortheexclusivity
expire.
UnderthenewlawthefirstgenericdrugapplicanttofileaparagraphIV
certificationonanypatentreceivesexclusivityregardlessofcertifications
thatmightbemadebyotherapplicantstodifferentpatents. 61 The2003MMAamendmentshavenotcuredallproblemswiththe180
dayperiodofexclusivityprovidedintheHatchWaxmanAct.Significant
problemsremainwithauthorizedgenerics,whichmaybedeployedbybranded
60
MedicarePrescriptionDrugImprovementandModernizationActof2003,Pub.L.No.108173,
117Stat.2066(2003).
61SeeBIO,HatchWaxmanReformProvisions,at2(December2003),http://bio.org/
healthcare/archive/medicare/HatchWaxman_120303.pdf;andN.Derzko,supra,Note55,at243–245.
pharmaceuticalmanufacturerstodeprivesuccessfulgenericlitigantsofa
significantportionofthe“reward”conferredbythe180dayexclusivity
provisions.Settlementagreementsarestillmadethathavetheeffectofdelaying
marketcompetition,evenafterenactmentofthe2003MMAexclusivityforfeiture
provisions.Thelawfulnessof“reversepayments”inexchangeforafirstfiler’s
agreementtorefrainfrommarketingagenericproductuntilafuturedate,
continuestobechallengedbytheFTCandiswithoutfinaldeterminationbythe
courtsorCongress. 62 Inaddition,astherecentdecisioninNovoNordiskhasshown,evenafter
enactmentoftheMMAamendmentsin2003,whichexplicitlyauthorized
counterclaimsbyaggrievedgenericmanufacturersseeking“anorderrequiring
theholdertocorrectordeletethepatentinformationsubmittedby[anNDA]
holder”forinclusionintheOrangeBook,“onthegroundthatthepatentdoes
notclaimeither…thedrugforwhichtheapplicationwasapproved;or…an
approvedmethodofusingthedrug.” 63 WhereWeAreNow:Statistics
62
See,e.g.,C.Holman,DoReversePaymentSettlementsViolatetheAntitrustLaws?,23SantaClara
Computer&HighTechL.J.489(2007),http://www.chtlj.org/sites/default/files/media/
articles/v023/v023.i3.Holman.pdf;FederalTradeCommission,PayforDelay:HowDrugCompanyPayOffs
CostConsumersBillions,supra,Note7.
6321U.S.C.§355(j)(5)(C)(ii)(I).
HoweversuccessfultheHatchWaxmanActhasbeen,staggeringstatistics
willlikelydefineinquiryintofuturechangestotheAct.AsRepresentative
Waxmansuccinctlyputit,“TheescalatingcostofhealthcareintheUnitedStates
—and,inparticular,ofprescriptiondrugs—isanenormous,nationwide
problem.” 64 Thetendencytolookforwaystocontrolhealthcareexpenditures
maywellleadtoeffortstochangethe“delicatebalance”struckintheHatch
WaxmanAct,topromotethemanufactureandsaleoflowercostdrugproducts,
withoutsacrificingournation’sleadershiproleinpharmaceuticalinnovation.
In2008,nationalhealthexpendituresintheUnitedStatestotaled$2.33
trillion,or16.2%ofourGrossDomesticProduct. 65 Ourpopulationof304million
peoplespentsome$7,681percapitaonhealthcare.In1980,shortlybeforethe
HatchWaxmanActwasenrolledintolaw,whenourcountrywasamere230
millionsouls,ournationalhealthexpenditureswere$253.4billion,amere9.1%
ofourGDP,amountingto$1,100percapita. 66 Inthenext10years,by2019,
whenourpopulationisexpectedtoriseto335million,thenationalbillforhealth
64
SeeWaxmanAmicus,at2.
65
http://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp#TopOfPage.Seealso
http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html,and
http://www.cdc.gov/nchs/hus/healthexpenditures.htm
66
Incomparison,between1980and2007,nationalhealthcareexpendituresinCanadarosefrom
7.0%to10.1%ofGDP.InGermany,theyrosefrom8.4%to10.4%ofGDP;inFrance,from7.0%to11.0%of
GDP;intheUnitedKingdom,from5.6%to8.4%ofGDP;andinJapan,from6.5%to8.1%ofGDP(2006).
http://www.oecd.org/document/16/0,3343,en_2649_34631_2085200_1_1_1_1,00.html.
careinexpectedtorisetonearly$4.5trillion,comprising19.3%ofGDP,and
about$13,387percapita.
Duringtheperiodfrom1980to2008,expendituresonprescriptiondrugs
rosefrom$12billion(4.7%oftotalhealthcareexpenditures)to$234.1billion
(10%).“Prescriptiondrugspendingasashareofnationalhealthexpenditures
increasedfrom5.8percentin1993to10.7percentin2003andwasthefastest
growingsegmentofhealthcareexpenditures.” 67 By2019,prescriptiondrug
expendituresareprojectedtoincreaseto$457.8billion(10%),anincreasefrom
$769percapitain2008to$1,367percapitain2019.
TheGAOstudy,citedinrepresentativeWaxman’samicusbriefinSchering
Plough,analyzed“thepricesof96ofthemostcommonlyusedprescription
drugs”intheperiodbetweenJanuary2000andDecember2004.TheGAOstudy
“showedthataveragepricesforaonemonthsupplyincreasedby24.5%”inthat
period,an“annualrateofincreasewasnearlydoublethatofconsumerprices
generallyoverthesameperiod.” 68 RepresentativeWaxman’sdescriptionofthe
currentstateofeconomicconditionsinthepharmaceuticalmarketplace
continued:
67
WaxmanAmicus,supra,Note62,at2,citingGovernmentAccountabilityOffice,PRESCRIPTION
DRUGS:PriceTrendsforFrequentlyUsedBrandandGenericDrugsfrom2000through20041(Aug.2005),at
www.gao.gov/new.items/d05779.pdf(GAOStudy).
68
WaxmanAmicus,supra,Note62,at2,citingGAOStudy,at7.
Brandnamedrugs,manyofwhichclaimpatentprotection,accountfor
mostoftheincreaseindrugcosts.Genericdrugs—chemicallyand
pharmacologicallyidenticalbutlackingthebrandname—aretypically
muchlesscostly,onaverageabouthalfthepriceofcomparablebrand
namedrugs.FederalTradeCommission,GenericDrugEntryPriorto
PatentExpiration:AnFTCStudy9(2002),at
www.ftc.gov/os/2002/07/genericdrugstudy.pdf.TheGAOfound,for
example,thatthepriceofbrandnamedrugsinitssampleincreasedby
28.9%overthefiveyearperiodcoveredbyitsstudy,whilethepriceofthe
genericdrugssurveyedincreasedbyanaverageofonly9.4%overthe
sametime.GAOStudyat4.Theannualrateofincreaseforthegeneric
drugswassignificantlylessthantheoverallinflationrateforconsumer
goods,whichwasapproximately2.5%annually,id.at7,meaningthatthe
genericdrugsstudiedactuallydeclinedinpriceinrealterms.The
tremendoussavingsassociatedwithgenericdrugsareillustratedbythe
factthat,in2001,genericdrugspendingaccountedforonly$11billionof
theapproximately$130billionspentonprescriptiondrugs,yetthat$11
billion“bought45percentofthetotalprescriptiondrugspurchasedin
2001.”149Cong.Rec.S8187(June19,2003)(statementofSen.Kohl). 69
Themajormanufacturersofpharmaceuticalproducts,the“innovators,”
havedoneverywell.IntheyearendingSeptember2009,the19largest
pharmaceuticalmanufacturers(otherthanProctor&Gamble,whosereporting
differsfromothers)reportedconsolidatedrevenuesofsome$558billion,an
averageof$29.39billion.These19companieshadnetincomeof$96billion,or
anaverageof$5.08billion,some16.5%ofrevenues.Theyhadassetstotaling
$972billion,averaging$51billion.Shareholderequityamountedtonearly$470
billion,oranaverageof$24.7billion.Netincomethusrepresentedanaverage
returnof16.48%onassets,and21.23%onshareholderequity.
69
WaxmanAmicus,supra,Note62,at2–3.
Inthesameyear,these19largestmanufacturersspentatotalof$88.9
billiononresearchanddevelopment,oranaverageof$4.681billion,
representing16.28%oftheaveragetotalrevenues. 70 Theseareallsubstantial
amounts,inbothabsoluteandrelativeterms.Byanymeasure,theriskbornby
these19manufacturersinmakingtheseexpendituresyieldedahealthyreturnon
assets,andahealthierreturnonequity.
Agreatdealwasspentonadvertising.Inthecalendaryear2009,Pfizer,
Inc.spent$1.4billionondirecttoconsumeradvertising;Johnson&Johnson
spentmorethan$1.25billion. 71 Atleastonestudy,basedonanalysisofindustry
standardIMSandCAMdata,reportedthatin2004,includingsamples,detailing,
meetings,mailings,journaladvertisinganddirecttoconsumeradvertising,at
least$27.7billion(IMSdata)andasmuchas$57.5billion(combinedIMSand
CAMdata)wasspentbypharmaceuticalmanufacturersonpromotionoftheir
products.Thesamestudyreported,basedonIMSdatathat,inthesameyear,
thosepharmaceuticalmanufacturersspent$29.6billiononR&D. 72
70
SeeTable1,attached(basedondataavailableinMedAdNews,September2009).
71
SeeKantarMediaReportsU.S.AdvertisingExpendituresDeclined12.3Percentin2009,
http://finance.yahoo.com/news/KantarMediaReportsUSbw699808888.html?x=0&.v=1
72SeeGagnonandLexchn,TheCostofPushingPills:ANewEstimateofPharmaceuticalPromotion
ExpendituresintheUnitedStates,http://www.plosmedicine.org/article/
info:doi/10.1371/journal.pmed.0050001(PLoSMedicine,January2008).
Duringtheperiodsince1970,formanyreasons,thenumberofnew
chemicalentitiesapprovedbytheFDAformarketingintheUnitedStateshas
significantlyslowed.
ArecentstudybytheCongressionalBudgetOfficereportedthat“Drug
introductionsspikedinthemidtolate1990sbuthavedeclinedsince2000—in
mostyears,backtolevelsnotseensincethe1980s.Theintroductionofpriority
drugs—drugsthat,accordingtotheFoodandDrugAdministration(FDA),
providea‘significanttherapeuticorpublichealthadvance’—hasalsoslowed,
fromanaverageofmorethan13ayearinthe1990stoabout10ayearinthe
2000s.” 73 Inpart,thisisattributabletothecomplexityofnewproducts,ortothe
shiftfrom“smallmolecules”tobiologics.Inpart,itisalsoduetotheFDA’s
qualitystandards.DrugapprovalstandardsintheUnitedStatesareconsidered
bymanytobethemostdemandingintheworld. 74 Partmayhavebeendueto
changingeconomicsofresearchanddevelopment.Whateverthespecific
reasons,theintroductionofNCEshasslowed,evenwhile“innovator”company
profitabilityhasbeenmaintainedorimproved.
Thegenericindustryhasalsodonewell.Intheperiodbetween2000and
2008,theFDAreportedhavingreceivedanaverageof587ANDAsperyear,ora
totalof5284genericdrugapplications. 75
73
SeeCongressionalBudgetOffice,ResearchandDevelopmentinthePharmaceuticalIndustry,at
20(2006)(hereafter,“CBOR&DStudy”),at11.SeealsoCongressionalBudgetOffice,PharmaceuticalR&D
andtheEvolvingMarketforPrescriptionDrugs,at2(October2009)(chartintextreproducedfromthis
report),http://www.cbo.gov/ftpdocs/106xx/doc10681/1026DrugR&D.pdf(hereafter“CBO2009R&D
Study”).AccordingtoIMSHealth,theFDAapproved28NCEsin2009.
http://www.imshealth.com/portal/site/imshealth/menuitem.
a46c6d4df3db4b3d88f611019418c22a/?vgnextoid=b523257373a96210VgnVCM100000ed152ca2RCRD&vgnext
fmt=default.
74CRSI,atCRS2.
75SeeFoodandDrugAdministration,OfficeofPharmaceuticalScience,GenericDrugs:Overviewof
ANDAReviewProcess,http://www.fda.gov/downloads/Drugs/NewsEvents/UCM182553.pdf(chartatslide
43).
Inthesameperiod,theFDAreportedhavingapprovedortentatively
approvedsome4012ANDAs,oranaverageof446peryear. 76
76
Id.(chartatslide45).
InFY2009,accordingtoFDAdatainits2011budgetrequest,“CDER
approved,ortentativelyapproved,599applications,theequivalentofmorethan
twoapprovalsandtentativeapprovalsmadeeachbusinessdayoftheyear.” 77 Asof
February2010,morethan2000ANDAswereawaitingFDAaction. 78 IMSHealth,anindustrystandardsourceforpharmaceuticalindustry
data,reportedinFebruary2010that“unbrandedgenerics”drovegrowthinthe
numberof“prescriptiontransactions”in2009,accountingfor65.9%ofall
prescriptions,butonly10.7%ofpharmaceuticalrevenuesfromprescriptionsales.
77
FoodandDrugAdministrationFY2011CongressionalBudgetRequest,at103(2010),
http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/Reports/BudgetReports/UCM202321.pdf
.
78SeeGenericDrugApprovalsLanguishatFDA,http://www.fiercepharma.com/story/genericdrug
approvalslanguishfda/20100222;andhttp://www.nytimes.com/2010/02/20/
business/20generics.html?ref=health.
“Brandedgenericsaccountedfor8.6%ofallprescriptionsand12.4%ofrevenues
fromprescriptionsales.Brandedpharmaceuticalsaccountedfor25.6%ofall
prescriptionsand76.9%ofrevenuesfromprescriptionsales. 79 TotalUS
pharmaceuticalsalessurpassed$300billionforthefirsttimein2009, 80 withglobal
genericsalesexceeding$78billionin2008. 81 Moreover,theincreasingpresenceofgenericpharmaceuticalsinthe
marketplacehasbenefittedconsumerswithlowerprices,afactorthatmayalso
accountforincreasingpharmaceuticalsalesoverall.TheCongressionalBudget
Officehasnotedthat“Asgenericdrugsaresubstitutedfortheirmoreexpensive
brandnamecounterparts,theaveragepriceofaprescriptionfalls.” 82 79
SeeD.Long,2009U.S.PharmaceuticalMarketTrends:APictureofIncreasingTrends,
http://www.imshealth.com/portal/site/imshealth/menuitem.a46c6d4df3db4b3d88f611019418c22a/?vgnextoid
=b523257373a96210VgnVCM100000ed152ca2RCRD&vgnextfmt=default.
80Id.
81SeeIMSHealthReportsAnnualGlobalGenericsPrescriptionSalesGrowthof3.6Percent,to$78Billion,
http://www.imshealth.com/portal/site/imshealth/menuitem.a46c6d4df3
db4b3d88f611019418c22a/?vgnextoid=2943d52288d1e110VgnVCM100000ed152ca2RCRD&vgnextfmt=defaul
t.
82TheCBOCompetitionStudycommentedthat,initsretailpharmacydataset,“theaverageretail
prescriptionpriceforabrandnamedrugwithgenericsubstituteswas$37in1994.However,including
prescriptionsthatwerefilledwithagenericdrug,theaverageprescriptionpriceforamultiplesourcedrug
wasonly$26.Thus,genericsubstitutionloweredtheaveragecostforamultiplesourceprescriptionby$11.
Thatresultisonlyaroughestimate,however,sinceprescriptionsmaysomewhatmisrepresenttherelative
quantitiesofbrandnameandgenericdrugssold.”CBOCompetitionStudyat28.Thereportcontinuedto
state:“Severaleconomistshavestudiedwhathappenstothepricesofinnovatordrugswhengenericcopies
enterthemarket.”TheCBOCompetitionStudyreportedthat“Allofthestudiesagreethattheeffecton
innovatorspricesisverysmall,althoughthereissomedisputeaboutthedirectionofthateffect.…Overall,
brandnamepricesfrequentlycontinuetoriseaftergenericentry.Whethertheyrisemorequicklyormore
slowlythanwouldbethecasewithoutcompetitionfromgenericdrugs,however,isunclearbasedonthese
studies.”CBOCompetitionStudy,at30.
TheHatchWaxmanActhasencouragedcontinuedinnovationbybranded
pharmaceuticalcompanies,withsomegenericmanufacturersrecentlyentering
themarketwiththeirownnewdrugproducts.Ithasfacilitatedthegrowthofa
robustgenericpharmaceuticalmanufacturingindustry,bothintheUSand
aroundtheglobe.Ithasresultedinlowerdrugpricesandwideravailabilityof
prescriptionpharmaceuticalproducts.Whiletherearecertainlyaspectsofthe
HatchWaxmanlegislativeschemethatcauseinterestedparticipantstocomplain,
viewedinhistoricalcontextandasawhole,itisreasonabletosaythattheAct
hasplayeda“criticalrole”inthedevelopmentoftheUnitedStates
pharmaceuticalindustry. 83 ItisreasonabletosuggestthatmajorchangestotheActshouldoccurwith
greatcaution,baseduponempiricalevidenceofcurrentandhistoricaleconomic
effects,andbaseduponsoundanalysisofpotentialfutureeconomiceffectsof
anyproposedrevisions.Thateconomicevidencemaybeavailable.Careful
economicanalysisofthatevidencemaynotyetexist.Whethersuchevidence
andanalysishasbeenemployedinpolicymakingaboutadditionsandchanges
totheHatchWaxmanlegislativecompromise,includingrecentlegislationto
clarifyorcreatea“pathway”forfollowonbiologics,isunclear.
83
SeeNote5,supra.
WhatShouldBeChanged?
WhatShouldbeLeftAlone?
Weareacountrydedicatedtoinnovation,especiallyinhealthcare.We
arealsoacountryinsearchofwaysinwhichtocontrolextraordinaryincreases
inhealthcareexpenditures.Thesametwourgentobjectivesmotivatedthe
enactmentoftheHatchWaxmanAct;theyaretheimpulseforfurtherreforms
today.Notallthoseimpulsesshouldbefollowed.SomeaspectsoftheHatch
Waxmancompromisearebestleftastheyare.
1. DataExclusivity–ShouldbeLeftAsIs
In1984,whennegotiatingthetermsoflegislationthatbecametheHatch
WaxmanAct,“innovator”companiesaskedforadditionalprotectionsagainst
competitionfromgenericpharmaceuticalmanufacturersarguingthatsuch
measureswerenecessarytoattractandmakeinvestmentinpharmaceutical
researchanddevelopmentbyprovidinggreatercertaintythatsignificant
investmentstakeninnewdrugdevelopmentwouldberepaidwithareturnon
investmentcommensuratewiththerisk.Then,asnow,theyarguedthat,in
ordertoensurethatinnovationwouldcontinue,anexpansionofthemonopoly
grantedinpatentswasrequired,bothinthelifeofissuedpatentsandin
legislativerequestsfor“dataexclusivity.”
Awidelycirculatedstudyestimatedthatin2000,theaveragecostof
developingan“innovativenewdrug”was“morethan$800million,including
expendituresonfailedprojectsandthevalueofforgonealternative
investments.” 84 Morerecentcommentshavesuggestedthattheaveragecostof
developingandbringinganNCEtomarketmaynowbeasmuchas$1.2
billion. 85 Halfofthisamount,thestudyconcluded,wasforthedirectcostsof
drugdevelopment,and,assumingacapitalcostof11%perannumandan
averageperiodofabout12yearstobringanewdrugtomarket,halfwasfor
opportunitycosts,thatis,“indirect,financialcostsoftyingupinvestmentcapital
foryearsinresearchprojects.” 86 Initscommentsaboutthatstudy,in2006,the
CongressionalBudgetOfficenoted:
Althoughthataveragecostsuggeststhatnewdrugdiscoveryand
developmentcanbeveryexpensive,itreflectstheresearchstrategiesand
drugdevelopmentchoicesthatcompaniesmakeonthebasisoftheir
84
JosephA.DiMasi,RonaldW.Hansen,andHenryG.Grabowski,“ThePriceofInnovation:New
EstimatesofDrugDevelopmentCosts,”JournalofHealthEconomics,vol.22,no.2(March2003),pp.151
185(hereafterÐiMasi”).SeeCBOCompetitionStudy,at20.
85See,e.g.,PHARMA,Profile2008,http://www.phrma.org/files/attachments/2008%20Profile.pdf
($1.3billion);andK.Kaitin,CreatingaPolicyEnvironmentforDynamicR&DGettingR&DWorkingforGrowth,
http://www.law.gwu.edu/Academics/research_centers/ciec/Documents/roundtables/Rd_Table_Kenneth%20
Kaitin.pdf(Tuftsstudy,$1.2billion).The“averageR&Dcostofdevelopinganincrementallymodified
drugwasprobablymuchlowerthanthatamount.Availabledataindicatethat,roughlyspeaking,spending
tomodifyexistingdrugsaccountsforlessthanonethirdoftotalR&Dexpenditures,althoughmodified
versionsofexistingdrugsmakeupabouttwothirdsofallnewdrugproducts.”CBOR&DStudy,at21.
86
CBOR&DStudy,at19.DiMasi’sstudyreportedthat,theaveragesuccessfulnewmolecular
entity(newdrug)initssample“required4.3yearsfordiscoveryandpreclinicaldevelopmentandanother
7.5yearsforclinicaltrialsandFDAapproval,”oratotalof11.8years.CBOStudy,at19.FDAApproval,at
thattime,tookanaverageof1.5years(partofthe7.5years).Id.
expectationsaboutfuturerevenue.Ifcompaniesexpectedtoearnless
fromfuturedrugsales,theywouldaltertheirresearchstrategiestolower
theiraverageR&Dspendingperdrug.Moreover,thatestimaterepresents
onlyNMEsdevelopedbyasampleoflargepharmaceuticalfirms.Other
typesofdrugsoftencostmuchlesstodevelop(althoughNMEshavebeen
thesourceofmostofthemajortherapeuticadvancesinpharmaceuticals).
*****
Researchanddevelopmentcostsvarywidelyfromonenewdrugtothe
next.Thosecostsdependonthetypeofdrugbeingdeveloped,the
likelihoodoffailure,andwhetherthedrugisbasedonamoleculenot
usedbeforeinanypharmaceuticalproduct(anewmolecularentity,or
NME)orinsteadisanincrementalmodificationofanexistingdrug. 87
Brandedpharmaceuticalcompanies’apparentcallsforincreasedtimeof
dataexclusivityarebased,inlargepart,uponananalysisofthe“ideal”timefor
delayofapprovalofanyabbreviatednewdrugapplication“untilinnovators
havehadtheopportunitytoearnareturnonthenewtherapeuticcandidatesthat
successfullycompletethelengthyandcostlyR&Dprocess.” 88 Themodel
employedintheanalysisreliesupontheassumptionthatthe“capitalizedR&D
costsforarepresentativeNBE[will]rangefrom$1.24billionto$1.33billion
whentherealcostofcapitalis11.5–12.5%,”withdataderivedfrom“acapital
assetpricingmodelanalysisforasmallsetofbiotechnologyfirmswithahistory
ofprofitabilitybasedonmultiplemarketedproducts,”which“companiesalso
87
CBOStudy,at12.
88
SeeGrabowski,supra,Note38,at1.ItisworthnotingthattheGrabowskistudywas“supported
inpartbygrantsfromthePharmaceuticalResearchandManufacturersofAmerica.”
hadanextensiveportfolioofnewbiologicalproductcandidatesovertheperiod
1990–2003.” 89 The“breakeven”analysisfeaturedinthestudy“combinesdatafrom
analysisofresearchanddevelopment(R&D)costsandcashflowsfromthis
cohortof1980–1984introductions,”thatis,NCEs,manypriortotheenactmentof
theHatchWaxmanAct. 90 Thestudydefinesthe“breakeven”pointasthetime
when“thenetpresentvalues(NPV)ofinflowjustequalsoutflows,”thatis,the
“pointatwhichafirmrecoversitsR&Dinvestmentandearnsariskadjusted
rateofreturn.” 91 Thestudystatesthatthe“breakevenlifetimeforthemean
druginthis[19801984]portfolioisjustover16years,”addingthata“similar
analysisforthe1990–1994portfolioofNCEsgivesabreakevenlifetimeof15
years.” 92 Thestudyconcludesthatinthemodelportfolio,the“breakeven”point
occurs“at12.9yearsinthecaseofan11.5%realcostofcapital,”orat16.2years
whena12.5%realcostofcapitalisused.
89
Id.,at480–481.“ThekeyassumptionsarethatpreapprovalR&Dcostsarebasedonpost
approvaloutofpocketcostsequalto35%ofpreapprovalcosts;postapprovalR&Dcostsarespreadevenly
overthefirst8yearsafterlaunch;salesarebasedonhistoricaldistributionofsuccessfulbiotechnology
marketintroductions;apretaxcontributionmarginof50%;andallsalesaremeasuredinconstant2005US
dollars.”Id.,at486(Figure6).
90Id.,at483(Figure3).
91Id.,at486(Figure6).
92Id.
Theresultsofthestudyhavebeenoftenrepeated,withoutsignificant
reviewofitsunderlyingassumptions.Thestudywassubjectedtoacademic
reviewafewmonthsafteritsinitialpublication. 93 Usingthesamedataasthe
“branded”study,andthesame“simple”cumulativeNetPresentValue“break
even”model,butvaryingonlythecostofcapital(10%,insteadof11.5%or
12.5%),andthe“contributionmargin,” 94 from50%to60%,bothofwhich
alternativeassumptionsweresaidtobe“moreplausible,”the“generic”study
concludedthatthe“breakeven”durationrangesfromlessthan9yearsto12
years. 95 Thelaterstudystronglysuggestedthat“greatcare”betakenin
interpretingthestudyresults,“forpublicpolicyapplicationsrelatedtothe
optimaldurationofdataexclusivityrules.” 96 Importantly,thestudycontinued,
the“breakevendurationwillalwaysbegreaterthantheoptimaldurationof
dataexclusivityinamarketsuchasbiologicdrugs,whereitcanbeexpectedthat
theinnovatordrugwillcontinuetoearneconomicprofitsfollowingtheentrance
93
SeeA.Brill,supra,Note38.TheBrillstudywassupportedbyagenericpharmaceutical
manufacturer,TevaPharmaceuticals.
94The“contributionmargin”wasdefinedintheGrabowskistudyas“salesminusthecostsof
goodssold(includingdepreciationchargesforplantandequipment),marketing,promotionand
administrativecostsinthenumerator.Thisisexpressedasapercentageofsalesinthedenominator.”See
Grabowski,supra,Note38,at483.TheBrillstudyusedthesamedefinition.SeeA.Brill,supra,Note38,at9.
The“contributionmargin”isthenumeratorusedinthesenetpresentvaluecalculations;the“costof
capital”isusedinthedenominatorasthediscountrate.
95SeeA.Brill,supra,Note38,at9. 96Id.,at10.
ofbiogenericcompetition.”Itnotedthat“Asaresultofthefactthateconomic
profitscanbeearnedbeyondthebreakevenpoint,optimaldataexclusivitywill
beatatimepriortothebreakevenpoint,”adding
Grabowski(2008)andthevariationstothatmodelpresentedhere
arestylizedapproximationsofthemarketforbiologics.Importantother
factors,includingotherpatentprotectionissuesandtheaforementioned
evergreeningissue,notmodeledherewillaffectincentivestoinnovate
andaffecttheabilityofbiogenericcompetitiontoimproveaccesstodrugs.
Nevertheless,acriticalfactorinanylegislationcreatingapathwayfor
followonbiologicswillbethedurationgrantedfordataexclusivity.
Resultspresentedhereindicatethatsevenyearsisareasonableduration
tobalanceincentivesforinnovatorswiththemarketbenefitsof
competition. 97
Whatisclearfromthesestudies,usedtolobbyCongressinthecourseof
therecentdebatesaboutHealthCareReformand,inparticular,abouttheneed
foralengthyperiodofdataexclusivityforfollowonbiologics,isthatrealworld
conclusionsaboutinvestmentbehavior,includingthebehaviorsofbranded
pharmaceuticalcompaniesinmakinginvestmentsinresearchanddevelopment
ofbothNCEsandnewbiologicalentities(NBEs),canonlybeseenpartially
throughthelensofacademiceconomicresearch.Therealworlddata,setforth
above,stronglysuggeststhatbrandedcompaniesandtheirshareholders
continuetomakesubstantialinvestmentsinresearchanddevelopment,andthat
theyrealizesignificantreturnsonthoseinvestments.Althoughthisrecentreal
97
Id.,at10,11.
worlddataisavailable,atleastintheaggregatemannerdisplayedincorporate
auditedfinancialstatements,noneoftheeconomicanalysesusedinrecent
legislativedebateshasbeenbaseduponsuchrecentdata.Whetherthemodels
usedintheGrabowskiandBrillstudies,describedabove,areevensensitive
enoughtochangingbusinessenvironments,includingloweredinterestratesfor
borrowing,lowinflation,rapidtechnologicalinnovation,costcuttingthrough
outsourcing,rationalizationthroughmergersandacquisitions,alteredpatterns
ofpaymentforbothmedicinesandmedicalresearch,andothervariables,may
alsobequestioned.Whetherthebrandedpharmaceuticalindustrywillcontinue
tothriveonthe“blockbuster”modelthathasdrivenitsresearchinvestments,or
willbereplacedbyanothermodel,willundoubtedlyalsobedependentupona
numberofvariables,andnotmerelyondataexclusivity.
Atleastwithrespectto“smallmolecule”NCEs,theevidencestrongly
suggeststhatinvestmentinresearchanddevelopmentofnewproductswill
continue,althoughitmaybechangedincharacterandefficiency.Ifpatentson
smallmoleculeNCEsthatareobtainedby“innovators”arenotsufficiently
strongtowithstandnoveltychallenges,ornotsufficientlybroadtoprecludelater
designsthatavoidinfringement,greaterprotectionforwhat,intheend,isnot
realinnovationorinvention,isnotintheinterestsofoursociety.Whilereal
innovationshouldbeprotectedandrewarded,andwhileinvestmentsinresearch
anddevelopmentshouldbecompensated,itisnoteconomicallywiseorefficient
toprovideanalternativeformofmonopolypower,topreventintroductionof
genericcompetition,throughalteredorenlargeddataexclusivity,toproducts
thatareneitherinnovativenorrealinventions.
Untilgreaterevidenceisprovidedofaneedtochange,thedata
exclusivityprovidedtoNCEsintheHatchWaxmanActshouldnotbe
enlarged. 98
2. 180dayExclusivity–Shouldbe“Rolling”
98
Agreatdealmorecanbesaidaboutargumentsthatrelyuponthenotionthata“datacentric”
regime,insteadofa“patentcentric”regime,shouldbeadoptedandshouldgovernintroductionofgeneric
medicines.Theseargumentssuggestthat“patentlinkage”shouldnotdeterminethedateuponwhichthe
FDAmayapproveagenericpharmaceuticalproductfromarketingintheUnitedStates.
ManyofthesameargumentswererecentlyconsideredbytheHighCourtofDelhi,inBayer
Corporation&Ors.V.UOI&Ors.(Cipla),WP(C)No.7833/2008(August18,2009),
http://lobis.nic.in/dhc/SRB/judgement/18082009/SRB18082009MATC78332008.pdf.Somelargebranded
pharmaceuticalmanufacturersargue,intheUnitedStates,that“patentcentricity”shouldbeabandoned,
becausethe“patentlinkage”inherentintheHatchWaxmanbargaincreatesalargeandexpensivelitigation
burden,createsunnecessaryuncertainties,increasesriskandthecommensuratecostofcapital,andresults
indistortions.InIndia,intheBayercase,otherlargebrandedpharmaceuticalmanufacturersarguedfor
“patentlinkage,”claimingthattheIndianDrugsAct,readtogetherwiththeIndianPatentsAct,“haveanin
builtprovisionof‘patentlinkage.’”Id.,Opinionat10.
TheFDA“hasconsistentlyheldthepositionthatitsroleinlistingpatentsintheOrangeBookis
‘ministerial,’andthatestablishinganadministrativeprocessforreviewingpatents,assessingpatent
challenges,anddelistingpatentswouldinvolvepatentlawissuesthatarebeyonditsexpertiseand
authority.See,e.g.,ReportandOrderAccompanyingthePatentListingRule,68Fed.Reg.at36,683.”See
NovoNordisk,supra,Note3(Dyk,dissenting),atn.3.TheBayercourtsimilarlyfoundthattheIndianDrug
Actdidnotcreate“patentlinkage,”becausetheIndianDrugauthoritieslack“institutionalexpertisetodeal
withcomplexpatentissues.”BayerCorporation,Opinionat17–18.
Whatcanbegleanedfromthesevaryingpositionsisthat,asmightbepredicted,branded
pharmaceuticalmanufacturerswilltakepositionsaboutissues,like“patentlinkage,”dependingupontheir
perceptionsofwhatmayyieldthegreatestprotectionfortheirfranchisesandthegreatesteconomicreward
fortheirinvestors.
EvenafterenactmentoftheMMAamendmentsin2003,problemsremain
withthe180dayHatchWaxmanexclusivityprovisions.Somehavesuggested
thattheyshouldberepealed. 99 Othershavetakenalessextremeviewandhave
suggestedthatproblemswith“blocking”andconsequentpotentiallyanti
competitivelitigationsettlementscanbeamelioratedthroughamendmentsthat
wouldcreatea“rolling”exclusivity. 100
TheActshouldbeamended,intheviewofthiswriter,toprovide180day
exclusivitytoasecondANDAapplicantthatissuccessfulininvalidatingan
assertedOrangeBookpatent,orthatsuccessfullydemonstratesthatitsproductis
noninfringing,intheeventtheNDAholdersettleswiththefirstfilerandthe
firstfilerdoesnotenterthemarketwithin180daysaftersuchsettlement.An
exclusivitygranttoasuccessfulsecondfilercouldbecraftedtobe“shared”with
thefirstfiler,ifonlytoavoidlitigationbetweenthefirstandsecondfilersandto
avoidpotentialdistortionsthatmaybegeneratedinsettlementsifsuch“sharing”
didnotoccur.Such“rolling”exclusivity”wouldlikelydeter“reverse
payments,”becauseitwouldbe“lessfeasibleforthepatentholdertoentersuch
settlementswithmultiplegenericchallengers.” 101 Moreover,such“rolling
99
See,e.g.,A.Engelberg,supraNote9,at423–425.
100
SeeM.Avery,supra,Note7,at194.Butsee,SeeSen.OrrinHatch,CommitteeStatement,supra,
Note53,at4(donotfavor“rollingexclusivity”).
101SeeM.Avery,supra,Note7,at194.
exclusivity,”especiallyif“shared”wouldrestoreasignificantportionofthe
incentiveor“bounty”thatCongressintendedforgenericmanufacturerswhenit
originallyenactedtheHatchWaxmanact;itwouldreduceoreliminatetherush
totheFDAbyNCE1applicants,whichnowhaveanincentivetobefirstfilers,
evenifjointly;itwouldlikelyresultinfewer“bottlenecks”andfaster
introductionofmultiplegenericcompetitors;anditwould,inthelongrun,lower
consumerpricesforneededpharmaceuticalproducts. 102 Atthesametime,it
wouldensurethatpatentholderscouldrecovertheirinvestmentsinR&D,ina
mannerunchangedfromthepresentlegalregime.
Whilesuch“rollingexclusivity”maynotsolveallproblems,andmay
createnewones,thepurposeoftheHatchWaxmanAct,toencouragegeneric
companiestocontestweakandinvalidpatents,toensurethatlowercostgeneric
productsaremarketedatanearliertime,andtocompensatesuccessfulgeneric
patentchallengers,wouldbefurthered.
3. OrangeBookDelistingProvisionsShouldbeStrengthened
TherecentdecisioninNovoNordiskstronglysuggeststhatfurther
amendmentoftheHatchWaxmanAct,topermittheFDAorgenericpatent
102
Id.SeealsoA.Mehl,supra,Note48,at674,676.“AsexplainedbySenatorHatchhimself,”the
articlenotes,“therationalebehindthe180dayprovisionistocreateanincentiveforchallengestothe
pioneer’spatents,nottocreateanentitlementtothefirstapplicanttofileapatentchallengewiththeFDAin
theParklawnBuilding.”Id.,citing149CONG.REC.at16105–06.
litigantstopreventmanipulationoftheOrangeBook, 103 arenecessary.The
“counterclaimprovision”oftheHatchWaxmanAct 104 wasaddedbyCongressin
theMMA,“inordertopreventmanipulativepracticesbypatentholderswith
respecttotheOrangeBooklistings.”Thesemanipulativepractices“weredesigned
todelaytheonsetofcompetitionfromgenericdrugmanufacturers.”105 CongressionalconcernwithproperlistingofOrangeBookpatents,expressedinthe
MMA,“doesnotremotelysuggestamyopiccongressionalfocusonsituationswhere
thepatentbelongednowhereintheOrangeBook,”asthemajorityopinioninNovo
Nordisksuggests. 106 Instead,thelegislativehistoryoftheMMA“makesclearthat
CongresswasconcernedwithcorrectingOrangeBookinformationgenerally.”It
“suggestsabroadconcernwithpreventingbrandmanufacturersfrommanipulating
thepatentlistingsystemintheOrangeBookinordertodelayentryofgenericsinto
themarket.” 107 TheholdinginNovoNordisk,that“theHatchWaxmanActauthorizesa
counterclaimonlyifthelistedpatentdoesnotclaimanyapprovedmethodsofusing
103
CompareN.Derzko,supra,Note55,at212–221.
104
See21U.S.C.§355(j)(5)(C)(ii).
105
NovoNordiskA/S,etal.v.CaracoPharmaceuticalLaboratories,Ltd.,etal.,supra,Note3(Dyk,
dissenting).
106Id.,DissentingOp.at10.
107Id.,DissentingOp.at15(quotingSen.Schumer,oneoftheMMAsponsors,at149Cong.Rec.
31,200(2003))/.
thelisteddrug,” 108 mayormaynotmisconstruetheMMA“counterclaim
amendments.”Itis,untilreversed,thelaw.Itshouldbemodifiedbyfurther
amendmenttotheHatchWaxmanActthatspecificallyendowsgenericlitigants
withacauseofaction,foradeclaratoryjudgment,byclaimorcounterclaim,to
reviewtheappropriatenessofanypatentlistingintheOrangeBook.IftheFDAis
correctinitsconsistentassertionthat“thatitsroleinlistingpatentsintheOrange
Bookis‘ministerial,’andthatestablishinganadministrativeprocessforreviewing
patents,assessingpatentchallenges,anddelistingpatentswouldinvolvepatentlaw
issuesthatarebeyonditsexpertiseandauthority,” 109 thenthereisnomeansof
reviewvideofsuchlistings,topreventtheirabuse,otherthaninthecourts.TheAct
shouldbeamendedtoclearlyprovideforjurisdiction,intheUnitedStatesDistrict
Courts,overdeclaratoryjudgmentactionsbroughtbygenericANDAapplicants
whoseektoreviewtheproprietyoflistingofanypatentintheOrangeBook.Ifthe
standardsforsuchlistingsarenotsufficientlyprecise,oraretooprecise,because
theyrequireNDAholderstolist“thepatentnumberandtheexpirationdateofany
patentwhichclaimsthedrugforwhichtheapplicantsubmittedtheapplicationor
whichclaimsamethodofusingsuchdrugandwithrespecttowhichaclaimof
patentinfringementcouldreasonablybeassertedifapersonnotlicensedbythe
ownerengagedinthemanufacture,use,orsaleofthedrug,”thenthosestandards
108
Id.,MajorityOp.at10.
109
Id.,DissentingOp.at4,n.3.
shouldalsobeamended,toensurethatonlythosepatentsarelistedthatactuallybe
assertedagainstanygenericapplicant,andthatpatentsthathaveonlytangential
relationshipstothereferencelisteddrugwillberemoved.
4. StandardsforMeasuringIntentShouldbeUniform
Asnotedabove,inExergenCorp.v.WalMartStores,Inc., 110 theFederal
CircuitappliedRule9(b)oftheFederalRulesofCivilProceduresandheldthat
topleadthe“circumstances”ofinequitableconductwiththerequisite
particularity”apleadingmustidentifythespecificwho,what,when,where,and
howofthematerialmisrepresentationoromissioncommittedbeforethePTO.
Thedecisionheldthatapleadingassertinginequitableconductmust“include
sufficientallegationsofunderlyingfactsfromwhichacourtmayreasonably
inferthataspecificindividual(1)knewofthewithheldmaterialinformationor
ofthefalsityofthematerialmisrepresentation,and(2)withheldor
misrepresentedthisinformationwithaspecificintenttodeceivethePTO.”111 Exergenapplied37C.F.R.§1.56(2008),whichprovidesthat“Each
individualassociatedwiththefilingandprosecutionofapatentapplicationhas
adutyofcandorandgoodfaithindealingwiththe[PTO]...,”andwhich
110
573F.3d1312(2009).
111
Id.,surpa,Note11,573F.3dat1328–29.
imposesa”dutytodisclosetotheOfficeinformation”ofwhichsuchindividuals
“areaware”andthat“ismaterialtotheexaminationoftheapplication.”112
ThePTOregulationonwhichanassertionofinequitableconductisbased
is,inturn,foundedgenerallyonthePatentAct.NothinginthePatentAct
explicitlyprovidesforunenforceabilityofapatentbaseduponafindingof
inequitableconduct,andnothinginthePatentActexpresslyprovidesalevelof
intentthatmustbefoundbeforeimpositionofinequitableconductremedies.In
itscurrentform,thejudiciallycraftedinequitableconductdoctrinepermitsa
judgetorenderapatentunenforceable,evenifitisvalidandinfringed,ifthe
patentwasobtainedbymisleadingstatementsoromissionsofmaterial
informationwhichwereintendedtodeceivetheUSPTO. 113
Somecommentatorshaveobservedthatallegationsofinequitableconduct
canunnecessarilydrawoutthetimeandincreasethecostoflitigation,sincesuch
allegationsrequireanalysisoftheknowledgeandintentofthepatent
Id.,573F.3dat1329,citing37C.F.R.§1.56(a)and(c)(identifyingclassesofindividuals);andManualof
112
PatentExaminingProcedures§2001.01(8thed.,rev.2,May2004)(explainingthat“thedutyappliesonlyto
individuals,nottoorganizations”).ThesePTOregulationsprovidethatinformationis“materialwhere
thereisasubstantiallikelihoodthatareasonableexaminerwouldconsideritimportantindecidingwhether
toallowtheapplicationtoissueasapatent,”andthatthedutyofdisclosure“iscommensuratewiththe
degreeofinvolvementinthepreparationorprosecutionoftheapplication.”37C.F.R.§1.56(a).Thewords
“areaware”mightbeequatedwithmere“knowledge.”Thewordsarenotthesameas“knowingly”or
“willfully,”whicharewellknowninthelaw.SeeInreSeagateTechnology,LLC,497F.3d1360,1365(Fed.Cir.
2007)(enbanc)(decidedunder35U.S.C.§284,andrecognizingthatthisenhanceddamagesprovisionis
“devoidofanystandardforawardingthem,”andthat,intheabsenceofanystatutoryguide,theFederal
Circuithas“heldthatanawardofenhanceddamagesrequiresashowingofwillfulinfringement.”
113
SeeDippin’Dots,Inc.,v.Mosey,476F.3d1337,1345(Fed.Cir.2007).
applicants. 114 Basedontheirperceptionsofthesepotentialburdens,some
commentatorsandadvocacygroupshavecalledfortheeliminationofthe
114
See,e.g.,ScottD.Anderson,“InequitableConduct:PersistentProblemsandRecommended
Solutions,”82MarquetteLawReview(1999),845.
inequitableconductdefense. 115 Othershavedefendedthedoctrineasnecessary
tothepropersupervisionandfunctioningofthepatentacquisitionprocess. 116
Recently,amendmentshavebeenproposedinthePatentReformAct,
relatingtoinequitableconduct,motivatedbytheperceivedfailureoftheFederal
Lynch,supra,Note69,at44.Seealsohttp://www.patentsmatter.com/;andNational
AcademyofSciences,APatentSystemforthe21stCentury(2004).TheNASarguesthatelimination
oftheinequitableconductdefensewould“reducethecostandincreasethepredictabilityof
patentinfringementlitigationoutcomes,and…avoidotherunintendedconsequences,”id.,at
143,“withoutsubstantiallyaffectingtheunderlyingprinciplesthattheseaspectsofthe
enforcementsystemweremeanttopromote.”Id.,at198.Itargueshatdeterrenceofinequitable
conduct,especiallyoutrightfraudonthePatentOffice,canbeandisachievedby“otherciviland
evencriminalremedies”suchasactionsfor“antitrust,unfaircompetition,commonlawfraud,
andtortiousinterference.”Id.,at206.Itsuggeststhat“thirdpartyandUSPTOinitiatedre
examinationonwithheldpriorart,publicationofpendingapplications,andthirdpartyaccessto
pendingprosecutionpapersandtheabilitytosubmitmaterialinformation,”id.,at206–07,
providesystemicprotectionagainstinequitableconduct,andthattheinequitableconduct
defenseinpatentlitigationisunnecessaryandcostly.Itstatesthateliminationofthedefenseor
changesinitsimplementation“wouldalmostcertainlysimplifylitigationandcurbunproductive
discoveryandtherebyreduceitsexpense.”Id.,at207.
TheAIPLAhassupportedtheNAS’srecommendation“thatthe‘inequitableconduct’
defensetotheenforceabilityofapatentberemovedfrompatentlitigation,”conditioningits
support,however,“onenactmentofanewadministrativeenforcementmechanismproviding
thatdeterminationsofinequitableconductwouldbeundertakenbyanadequatelyfunded(and
otherwisefullycapable)officeintheU.S.PatentandTrademarkOfficeandthattheUSPTO
wouldimposeappropriatesanctionsformisconduct,including–inthecaseofanactualfraudon
theUSPTO–cancelingthepatent.”AIPLA,ResponsetotheNationalAcademiesReportentitled“A
PatentSystemforthe21stCentury”,at33,foundat
http://www.promotetheprogress.com/ptpfiles/patentreform/misc/AIPLA_response_to_NAS_report.pdf.It
suggeststhatanadjudicationofmisconductbytheUSPTO,whichotherswouldargueisalready
overburdenedandinefficient,“wouldprovideapredicateforpossibleliabilityinsituationsother
thanapatentinfringementcase,”since“[c]ausesofactionbaseduponadjudicatedmisconduct…
wouldnotbepreemptedunder[theAIPLA]proposal…baseduponinvalidpatentclaimsthat
wereobtainedasaconsequenceoftheadjudicatedmisconduct,”id.,at34,andthatthe
“administrativeprocess[suggestedbytheAIPLA]wouldprovideafullyeffectivedeterrentto…
misconduct.”Id.
115
116
See,e.g.,GPhA,PositiononPatentReform,http://www.gphaonline.org/issues/patentreform(“itis
criticalthatgenericdrugcompaniesbeabletousetheinequitableconductdoctrineasadefenseinpatent
infringementsuitsfiledbyinnovatorsundertheprovisionsofHatchWaxman.”)
Circuit“toestablishoneclearstandardofmaterialityforinequitableconduct
purposes.” 117 DraftsofaproposedPatentReformActintroducedinthecurrent
sessionofCongressomitpreviouslysuggestedlanguagerelatingtoinequitable
conduct. 118 Noneofthesecurrentproposalsincludedlanguagethatwould
establishaclearstatutorybasisforthedoctrine,orthatwouldclearlydefinethe
levelofcorporateorindividualintentthatisrequiredforapplicationofthe
doctrine.
InSEB.,S.A.v.TFalCorporation,theFederalCircuitdeterminedthat
inducedinfringementmaybeprovenbyashowingof“deliberateindifference”
SeeReportoftheSenateJudiciaryCommitteeonS.1145(PatentReformActof2007),at
http://thomas.loc.gov/cgibin/cpquery/T?&report=sr259&dbname=110&,at32.TheReportcitedDigital
117
Controlv.CharlesMachineWorks,437F.3d1309(Fed.Cir.2006),wheretheFederalCircuitheld
thereisnosinglestandardtodefine‘‘materiality’’forinequitableconduct,”and,instead,
“discussedfivedifferentstandardsformateriality.”
TheJudiciaryCommitteeReportcontinued:“Havingmultiplematerialitystandards,”the
Reportconcluded,“ishardlyhelpfultothedistrictcourtsthatarechargedwithmaking
inequitableconductdeterminationsinthefirstinstance,andpatentholdersareleftwithlessthan
clearguidanceaboutwhattheyshoulddisclosetotheUSPTO.TheReportnotedthat“direct
evidenceofanintenttodeceiveisuncommon,sosomecourtscollapsetheissueofintentintothe
issueofmateriality,sothatintenttodeceiveisofteninferredfrommateriality.”And,ifstated
that“ifinequitableconductisfound,judgeshavenodiscretionastotheremedy—noclaimofthe
patentcaneverbeenforcedagainstanyone.”Id.Asapracticalmatter,theCommitteestated,this
lackofclarity“hasledtotwotypesofconductthatfrequentlyoccurduringpatentprosecution.
Eitherpatentholders(i)‘‘dump’’everythingtheyhaveontheUSPTO(sometimesmanyboxesof
printeddocuments),or(ii)donotsearchthepriorart,andthusinturnhavelittleornothingto
givetheUSPTO.Neitherapproachishelpfultothepatentexaminerorthepatentsystemin
general.”Id.,atn.152.
118
SeeS.515(2010),athttp://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=111_cong_bills&
docid=f:s515rs.txt.pdf,andManager’sAmendment,
http://judiciary.senate.gov/legislation/upload/PatentReformAmendment.pdf.
totheexistenceofapatent. 119 TheholdinginSEBwasbasedontheFederal
Circuit’sreadingof35U.S.C.§271(b),whichsimplyprovides“Whoeveractively
inducesinfringementofapatentshallbeliableasaninfringer.”Likeotherparts
ofthePatentAct,thissectionisdevoidofanystandardofintent.Nevertheless,
inSEBtheFederalCircuitreiterateditspreviouslyholdingthat,underthis
section,“theplaintiffmustshowthattheallegedinfringerkneworshouldhave
knownthathisactionswouldinduceactualinfringements.” 120
Theabsenceofclearstandardsforassessmentofintenthasleadormay
leadtoconfusingandinconsistentresults.Thereisnovalidreasonforapplying
differentstandardsofintentinHatchWaxmancasesinvolvingdifferentportions
ofPatentAct,orapplyingaPTOregulationbasedontheActgenerally,when
noneofthoseprovisionscontainanylegislativestandard.Instead,asingle
standardshouldapply.
Intheviewoftheauthor,theHatchWaxmanActshouldbeamendedto
providethat,incasesarisingundertheAct,inanycaseinwhichaprovisionof
thePatentActisapplied,wherenootherstandardisprovidedinthePatentAct,
thelevelofintentthatshouldberequiredis“willfulness.”Hence,infuture
HatchWaxmancases,anyactionthatreliesupontheinducedinfringement
119
SeeSEB.,S.A.v.TFalCorporation,supra,Note9.
120
Id.,at22,citingDSUMed.Corp.v.JMSCo.,471F.3d1293,1304(Fed.Cir.2006)(enbanc).
provisionof35U.S.C.§271(b)should,asisnowthelawincasesunder35U.S.C.
§284,demandproofof“willfulness,”asthattermhasbeenandmaybeapplied
inthecourts,generally.
Further,intheviewoftheauthor,theHatchWaxmanActshouldbe
amendedtoprovideaclearstatutorybasisforthedoctrineofinequitable
conductthat,incasesarisingundertheAct,shouldbeappliedbasedupona
showingof“knowing”statementsoromissionsofmaterialinformationwhich
wereorhadtheeffectofmisleadingtheUSPTO.Liabilityforsuchinequitable
conduct,intheviewoftheauthor,shouldnotbelimited,inHatchWaxman
cases,to“individuals”involvedintheprosecutionofapatent,butshouldextend
tocorporate“knowledge,”asincasesoffraudunderotherstatutesthatprohibit
falsestatementstotheFederalgovernment. 121 5. AuthorizedGenericsShouldbeAbolished
121
See,e.g.,31U.S.C.§3729(FalseClaimsAct)(“Anypersonwhoknowinglypresents,orcausesto
bepresented,toanofficeroremployeeoftheUnitedStatesGovernmentoramemberoftheArmedForces
oftheUnitedStatesafalseorfraudulentclaimforpaymentorapproval…isliabletotheUnitedStates
Governmentforacivilpenaltyofnotlessthan$5,000andnotmorethan$10,000,plus3timestheamountof
damageswhichtheGovernmentsustainsbecauseoftheactofthatperson…”)
AuthorizedgenericscontravenethepurposesoftheHatchWaxman
legislativelysupervised,negotiatedcompromise.They“disruptthe‘bounty’
systemestablishedbytheHatchWaxmanAct.’” 122
NeithertheHatchWaxmanAct,northeMedicareModernizationAct
addressedtheissueofauthorizedgenericsdirectly.BecauseCongresshas
remainedsilentonthisissue,courtscannoteffectivelydealwiththis
problemsincethestatutesmakeitclearthattheexclusivityprovisions
onlyapplytogenericmanufacturerswhoenterthemarketviaANDA
applications.Themarketexclusivityprovisionsdonotprohibitpioneers
frommarketingauthorizedgenericsduringthefirstANDAapplicant’s
180dayexclusivityperiod. 123
Thepresenceofauthorizedor“branded”genericsinthemarketplaceis
keenlyfelt.Asnotedabove,in2009brandedgenericsaccountedfor8.6%ofall
prescriptionsand12.4%ofrevenuesfromprescriptionsales.Wereitnotforthe
“loophole”intheHatchWaxmanschemethatpermitstheintroductionof
authorizedgenericsevenduringthe180dayexclusivityperiod,asignificant
portionofthesesaleswouldberealizedbyasuccessfulgenericchallenger.It
mayalsobetruethatauthorizedgenerics“helpconsumersbyloweringshort
termprices.”Asaresult,evenauthorizedgenericsmighthavesocialutilityafter
expirationoftheHatchWaxman180dayexclusivityperiod,becausetheywill
simplypermitapatentholdertoexercise,albeitinadelayedmanner,rightsthat
itmightotherwisepossess,andtocompeteonequalfootingwithallofthe
122
SeeJ.Thomas,AuthorizedGenericPharmaceuticals:EffectsonInnovation,supra,Note57,atCRS21.
123
SeeM.Avery,supra,Note7,at196.
potentialgenericentrants,thusreducingconsumerpricesmorerapidlytoan
optimumlevel.
Nevertheless,itcannotbedoubtedthatallowanceofauthorizedgenerics,
especiallyduringthe180dayexclusivityperiod,“willnegativelyaffectthe
incentivegiventogenericmanufacturestochallengedrugpatents.” 124 Authorizedgenericscreatedandoperatedbybrandedcompaniesmayalsobe
usedasavehicletoforcegenericmanufacturersintounfavorabledispositionsof
litigation,sincethethreatofsuchauthorizedgenericcompetitionfurtherreduces
theincentivesforgenericmanufacturerstorisklossofpotentialrevenueseven
afterasuccessfulchallengetoaweakorinvalidpatent.
Authorizedgenericsshouldthus“bebannedasastrategicresponse to
impendingParagraphIVentrybutshouldbeallowedintheirabsenceorafter180
dayexclusivityexpiration.” 125 TheHatchWaxmanActshouldbeamendedto
prohibittheintroductionofagenericequivalenttoabrandedproduct,either
directlyorindirectly,byanNDAholder,duringthe180dayHatchWaxman
exclusivityperiod.
Conclusion
124
SeeM.Avery,supra,Note7,at197;andT.Chen,supraNote7,at511(Prohibitingauthorized
genericsduring180dayexclusivityperiod“wouldassurepotentialANDAIVapplicantsoffirstmover
advantagesandanadequateeconomicprizeinreturnforbearingtherisksandcostsofpatentlitigation.”)
125SeeT.Chen,supraNote7,at512.
TheHatchWaxmanActshouldberevisitedagain,butwithacarefuland
deliberateapproach.Evenwithitsperceivedflaws,theActhasfunctionedwell,
asageneralmatter,producingbothcontinuedinnovationandlowercostdrugs.
Reformsmayoccurinotherareas,suchasinamorecomprehensivePatent
ReformAct,thatmaywellimpactthe“delicatebalance”struckintheHatch
Waxmancompromise.LimitedreformstoHatchWaxmanaredesirable,to
restorethebalancetoitsoriginalequilibriumandtoeliminateincentivesforanti
competitivebehaviors.ThenextvisittotheHatchWaxmanActshouldnoteffect
amajoralterationinthestructureoftheAct:effortstochangeits“patent
centricity,”toeliminateits“patentlinkage,”andtocreatea“datacentric”
regime,shouldberejected.TheActhasbeenandwill,absentmajorchange,
remainaneffectprescriptionforpharmaceuticalinnovationandforinexpensive
medicines.