Hatch-Waxman 2003 - Patented V. Generic Drugs: Regulatory, Legislative and Judicial Developments

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TABLE OF CONTENTS  I.   INTRODUCTION   A.   Overview of Hatch-Waxman     1. Pre-Hatch-Waxman     2. Hatch-Waxman Amendments     3. Summary of FDA Approval Process   B.   FTC Recommendations II.  REGULATORY DEVELOPMENTS   A.   FDA Regulations     1. One 30-Month Stay Per ANDA     2. Patent Listing Regulations       a. Polymorphs       b. Method-of-Use Patents   B.   FTC Enforcement     1. Bristol-Myers Squibb     2. Schering-Plough III. LEGISLATIVE DEVELOPMENTS   A.   Limits to 30-Month Stay   B.   Agreements By Generic Applicants   C.   Declaratory Judgment Actions   D.   Orange Book Listing Remedies IV.  JUDICIAL DEVELOPMENTS   A.   [section] 271(e)(l) Safe Harbor   B.   [section] 271(e)(2) and Method-of-Use Patents   C.   Battle of the Generics--TorPharm and Purepac   D.   Antitrust Issues--In re Cardizem and Valley Drug V.   CONCLUSION 

I. INTRODUCTION

Enacted twenty years ago, the Hatch-Waxman Amendments (1) sought to balance the two competing policy interests of (1) inducing pioneering research and development of new drugs, and (2) enabling competitors to bring low-cost generic copies of those drugs to market. (2) The increasing costs of drug development and public concerns over consumer drug prices have resulted in a renewed focus on the desired balance between these competing policy objectives.

A. Overview of Hatch-Waxman

1. Pre-Hatch-Waxman

The regulatory framework of the drug approval process before the Hatch-Waxman Amendments created a number of obstacles, both for brand-name and generic pharmaceuticals. Notwithstanding the substantial time and expense of drug discovery and development, brand-name pharmaceutical companies often had the effective terms of their patents shortened due to issuance of the patents before FDA approval of the corresponding drugs and the time required for the FDA to ensure the safety and efficacy of the brand-name drug. (3) Generic pharmaceutical companies also faced hurdles, such as the requirement to perform their own safety and efficacy studies. (4) In addition, a generic company could not begin the required FDA approval process until after patents on the relevant brand-name product had expired, since to begin earlier would typically have infringed the patents of the brand-name company. (5) As a result, by 1984 there were approximately 150 brand-name drugs whose patents had expired but for which there was no generic equivalent. (6)

2. Hatch-Waxman Amendments

The Hatch-Waxman Amendments provided brand-name pharmaceutical companies with the opportunity to extend the term of a patent in certain circumstances, thereby restoring patent protection as compensation for the time used to obtain FDA approval. (7) Generic drug companies were also provided substantial relief from the approval time delays in two ways. First, generic companies were allowed to rely on the innovators' safety and efficacy data and merely demonstrate that their generic drug was "bioequivalent" to the relevant brand-name product. (8) Second, the patent statute was amended to clarify that it was not an act of infringement to make, use, or sell a patented invention "solely for uses reasonably related to the development and submission of information" to the FDA. (9)

3. Summary of FDA Approval Process (10)

A pharmaceutical company seeking to manufacture a new drug must file a New Drug Application ("NDA") for consideration by the FDA. (11) Preparing an NDA is a time-intensive and costly process since it must contain, among other things, detailed clinical studies of the drug's safety and efficacy, as well as a list of patents that claim the drug. (12) If the FDA approves the NDA, it publishes a listing of the drug and patents on the drug's approved aspects in Approved Drug Products with Therapeutic Equivalence Evaluations, referred to as the "Orange Book." (13)

A company seeking approval of a generic drug may file an Abbreviated New Drug Application ("ANDA"). (14) In addition to containing sufficient information to demonstrate that the generic drug is "bioequivalent" to the relevant brand-name product, the ANDA process also requires a certification regarding each patent listed in the Orange Book that relates to the relevant NDA product for which the applicant is seeking to make a generic version. (15) In particular, the ANDA applicant must certify that: (I) no such patent information has been submitted to the FDA; (II) the patent has expired; (III) the patent is set to expire on a certain date; or (IV) such patent is invalid or will not be infringed by the manufacture, use, or sale of the new generic drug for which the ANDA is submitted. (16)

When an ANDA applicant makes a paragraph IV certification, two additional provisions of the Hatch-Waxman Amendments are implicated. The first is the automatic "30-month stay" protection afforded brand-name companies. (17) When an ANDA contains a paragraph IV certification, the ANDA applicant must give notice to the patentee and NDA holder, providing a detailed basis for its belief that the patent is invalid or will not be infringed. (18) The patentee is then given 45 days to sue the ANDA applicant for infringement. (19) If the patentee does not file suit, the ANDA application may be approved, provided other regulatory requirements (such as bioequivalence) are satisfied. (20) If the patentee files suit within the 45-day period, the FDA may not approve the ANDA until the expiration of the 30-month period beginning on the date of receipt of notice. (21) However, if before the expiration of such period the district court decides that the patent is invalid or not infringed, the approval will be made effective on the date of the judgment, settlement order or consent decree reflecting the court's decision. (22) If the district court decides the patent has been infringed and the judgment of the district court is appealed, the approval shall be effective on the date the appellate court decides the patent is invalid or not infringed, or the date of a settlement order or consent decree signed by the appellate court stating that the patent is invalid or not infringed. (23) If the court decides that the patent has been infringed, and the judgment is not appealed or is affirmed, the approval is effective on the date the district court orders pursuant to 35 U.S.C. [section] 271(e)(4)(A). (24)

The second provision implicated by a paragraph IV certification is the 180-day period of exclusivity. (25) The first generic applicant to file an ANDA containing a paragraph IV certification is eligible for 180-days of market exclusivity, during which the FDA may not approve subsequent ANDAs for the same drug product. (26) This exclusivity period increases the economic incentives for a generic company to be the first to file an ANDA containing a paragraph IV certification, as well as an incentive for generic companies to litigate patents that may be invalid or not infringed. (27)

B. FTC Recommendations

In July 2002, the Federal Trade Commission published the final results of its industry-wide study focused on certain aspects of generic drug competition under the Hatch-Waxman Amendments. (28) The automatic 30-month stay and 180-day period of exclusivity implicated by a generic ANDA applicant making a paragraph IV certification were at the heart of the FTC Report. (29) The FTC Report concluded with two recommendations:

   Recommendation 1: Permit only one automatic 30-month stay    per drug product per ANDA to resolve infringement disputes    over patents listed in the Orange Book prior to the filing date    of the generic applicant's ANDA. (30) 

The FTC cited several reasons for this recommendation. It noted that one 30-month period historically has approximated the time needed for FDA review and approval of the generic's ANDA. (31) Further, the data uncovered by the FTC indicated that court decisions in ANDA-related patent litigation typically are not reached much earlier than 30 months from notice of the generic's ANDA. (32) Against these findings, the FTC noted that the history of multiple 30-month stays caused by the filing of later-issued patents appeared "problematic." (33) The FTC further noted that multiple 30-month stays prevented FDA approval of the generic applicants' ANDAs for 4 to 40 months beyond the initial 30-month period. (34)

Regarding this recommendation, the FTC also surmised that permitting only one 30-month stay per drug product per ANDA should eliminate most of the potential for improper Orange Book listings to generate unwarranted 30-month stays. (35) The FTC made some suggestions in this regard, including clarification of the FDA listing requirements and permitting a generic applicant to raise listability issues as a counterclaim in the context of patent infringement litigation initiated by the brand-name company. (36)

   Recommendation 2: Pass legislation to require brand-name    companies and first generic applicants to provide copies of    certain agreements to the Federal Trade Commission. (37) 

In making this recommendation, the FTC noted that generic applicants …