The Drug Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act ("Hatch-Waxman" or "Hatch-Waxman Act"), was passed to bring generic drugs to market more quickly. While recognizing the need to maintain incentives for pioneer research and innovation in the pharmaceutical industry, Hatch-Waxman greatly benefits the generic drug industry by providing a method for expedited review and approval of generic products by the Food and Drug Administration (FDA). Although Hatch-Waxman has been successful in substantially increasing generic competition, evidence suggests that manufacturers of brand-name drugs have discovered loopholes in the Act and have engaged in tactics to "game the system" to prolong the life of patents, thereby delaying the market entry of generic competitors. Generic manufacturers have also been accused of abusing provisions of Hatch-Waxman to the detriment of competitors and consumers. Provisions of the Act may tempt generic manufacturers to enter into collusive agreements with brand-name manufacturers. In December of 2003, President Bush signed into law the Medicare Prescription Drug and Modernization Act of 2003. Title XI of the Act amends Hatch-Waxman, in an effort to close loopholes that delay the market entry of generic drugs. The new legislation implements two major changes in the Hatch-Waxman process of generic drug approval and patent challenges. First, the law prevents the innovator drug patentee from filing multiple patents with the FDA, in the hopes of triggering Hatch-Waxman's thirty-month stay provision. When a generic applicant seeks FDA approval of its product and claims that its product will not infringe a patent or that the patent is invalid, an innovator that files a patent infringement suit is granted an automatic thirty-month stay of FDA approval. This provision has enticed innovators to list with the FDA those patents that may not properly claim the drug in question. The improper listing of patents has allowed innovators to stack successive thirty-month stays to delay market entry of generic competition. The new legislation allows an innovator the benefit of only one thirty-month stay per generic applicant per drug. Second, the law prevents collusive agreements between innovator and generic manufacturers as well as such agreements between generic manufacturers that might delay market entry of generic products. The first generic applicant that challenges an innovator's patent and receives FDA approval is entitled to 180 days of market exclusivity under Hatch-Waxman. Subsequent generic applicants may not receive FDA approval for their products until this 180-day exclusivity period has run. New provisions in the law subject agreements that relate to the 180-day exclusivity period to FTC scrutiny. Furthermore, new provisions ensure timely market entry of generic products by specifically enumerating incidents that trigger the commencement of the 180 day exclusivity period and incidents that cause the generic applicant to forfeit its 180-day monopoly.
In 2002, the Federal Trade Commission (FTC) published a study investigating the behavior of brand-name pharmaceutical companies and their generic competitors with regard to the market entry of generic drugs.1 The FTC Study sought to determine whether drug companies, both brand-name and generic, were taking advantage of loopholes in the laws to delay the market entry of generic drugs in the market. The FTC Study concluded that several provisions of the Hatch-Waxman Act, the law that regulates the approval process for brand-name and generic drugs, were exploited by both brand-name companies and generic drug companies, costing consumers billions of dollars. Based on its Study, the FTC made several recommendations to curb such abuse. The FTC's Study and recommendations served as the basis for changes in the Hatch-Waxman Act that were signed into law by President George W. …