[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 124 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  1st Session
                                 S. 124

 To prohibit brand name drug companies from compensating generic drug 
    companies to delay the entry of a generic drug into the market.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 12, 2017

 Ms. Klobuchar (for herself and Mr. Grassley) introduced the following 
    bill; which was read twice and referred to the Committee on the 
                               Judiciary

_______________________________________________________________________

                                 A BILL


 
 To prohibit brand name drug companies from compensating generic drug 
    companies to delay the entry of a generic drug into the market.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preserve Access to Affordable 
Generics Act''.

SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSES.

    (a) Findings.--Congress finds the following:
            (1) In 1984, the Drug Price Competition and Patent Term 
        Restoration Act (Public Law 98-417) (referred to in this Act as 
        the ``1984 Act''), was enacted with the intent of facilitating 
        the early entry of generic drugs while preserving incentives 
        for innovation.
            (2) Prescription drugs make up approximately 10 percent of 
        the national health care spending.
            (3) Initially, the 1984 Act was successful in facilitating 
        generic competition to the benefit of consumers and health care 
        payers, although 88 percent of all prescriptions dispensed in 
        the United States are generic drugs, they account for only 28 
        percent of all expenditures.
            (4) Generic drugs cost substantially less than brand name 
        drugs, with discounts off the brand price averaging 80 to 85 
        percent.
            (5) Federal dollars currently account for over 40 percent 
        of the $325,000,000,000 spent on retail prescription drugs, and 
        this share is expected to rise to 47 percent by 2025.
            (6)(A) In recent years, the intent of the 1984 Act has been 
        subverted by certain settlement agreements in which brand name 
        companies transfer value to their potential generic competitors 
        to settle claims that the generic company is infringing the 
        branded company's patents.
            (B) These ``reverse payment'' settlement agreements--
                    (i) allow a branded company to share its monopoly 
                profits with the generic company as a way to protect 
                the branded company's monopoly; and
                    (ii) have unduly delayed the marketing of low-cost 
                generic drugs contrary to free competition, the 
                interests of consumers, and the principles underlying 
                antitrust law.
            (C) Because of the price disparity between brand name and 
        generic drugs, such agreements are more profitable for both the 
        brand and generic manufacturers than competition and will 
        become increasingly common unless prohibited.
            (D) These agreements result in consumers losing the 
        benefits that the 1984 Act was intended to provide.
    (b) Purposes.--The purposes of this Act are--
            (1) to enhance competition in the pharmaceutical market by 
        stopping anticompetitive agreements between brand name and 
        generic drug manufacturers that limit, delay, or otherwise 
        prevent competition from generic drugs; and
            (2) to support the purpose and intent of antitrust law by 
        prohibiting anticompetitive practices in the pharmaceutical 
        industry that harm consumers.

SEC. 3. UNLAWFUL COMPENSATION FOR DELAY.

    (a) In General.--The Federal Trade Commission Act (15 U.S.C. 44 et 
seq.) is amended by inserting after section 26 (15 U.S.C. 57c-2) the 
following:

``SEC. 27. PRESERVING ACCESS TO AFFORDABLE GENERICS.

    ``(a) In General.--
            ``(1) Enforcement proceeding.--The Commission may initiate 
        a proceeding to enforce the provisions of this section against 
        the parties to any agreement resolving or settling, on a final 
        or interim basis, a patent infringement claim, in connection 
        with the sale of a drug product.
            ``(2) Presumption and violation.--
                    ``(A) In general.--Subject to subparagraph (B), in 
                such a proceeding, an agreement shall be presumed to 
                have anticompetitive effects and shall be a violation 
                of this section if--
                            ``(i) an ANDA filer receives anything of 
                        value, including an exclusive license; and
                            ``(ii) the ANDA filer agrees to limit or 
                        forego research, development, manufacturing, 
                        marketing, or sales of the ANDA product for any 
                        period of time.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                if the parties to such agreement demonstrate by clear 
                and convincing evidence that--
                            ``(i) the value described in subparagraph 
                        (A)(i) is compensation solely for other goods 
                        or services that the ANDA filer has promised to 
                        provide; or
                            ``(ii) the procompetitive benefits of the 
                        agreement outweigh the anticompetitive effects 
                        of the agreement.
    ``(b) Limitations.--In determining whether the settling parties 
have met their burden under subsection (a)(2)(B), the fact finder shall 
not presume--
            ``(1) that entry would not have occurred until the 
        expiration of the relevant patent or statutory exclusivity; or
            ``(2) that the agreement's provision for entry of the ANDA 
        product prior to the expiration of the relevant patent or 
        statutory exclusivity means that the agreement is 
        procompetitive.
    ``(c) Exclusions.--Nothing in this section shall prohibit a 
resolution or settlement of a patent infringement claim in which the 
consideration granted by the NDA holder to the ANDA filer as part of 
the resolution or settlement includes only one or more of the 
following:
            ``(1) The right to market the ANDA product in the United 
        States prior to the expiration of--
                    ``(A) any patent that is the basis for the patent 
                infringement claim; or
                    ``(B) any patent right or other statutory 
                exclusivity that would prevent the marketing of such 
                drug.
            ``(2) A payment for reasonable litigation expenses not to 
        exceed $7,500,000.
            ``(3) A covenant not to sue on any claim that the ANDA 
        product infringes a United States patent.
    ``(d) Enforcement.--
            ``(1) Enforcement.--A violation of this section shall be 
        treated as a violation of section 5.
            ``(2) Judicial review.--
                    ``(A) In general.--Any party that is subject to a 
                final order of the Commission, issued in an 
                administrative adjudicative proceeding under the 
                authority of subsection (a)(1), may, within 30 days of 
                the issuance of such order, petition for review of such 
                order in--
                            ``(i) the United States Court of Appeals 
                        for the District of Columbia Circuit;
                            ``(ii) the United States Court of Appeals 
                        for the circuit in which the ultimate parent 
                        entity, as defined in section 801.1(a)(3) of 
                        title 16, Code of Federal Regulations, or any 
                        successor thereto, of the NDA holder is 
                        incorporated as of the date that the NDA is 
                        filed with the Commissioner of Food and Drugs; 
                        or
                            ``(iii) the United States Court of Appeals 
                        for the circuit in which the ultimate parent 
                        entity of the ANDA filer is incorporated as of 
                        the date that the ANDA is filed with the 
                        Commissioner of Food and Drugs.
                    ``(B) Treatment of findings.--In a proceeding for 
                judicial review of a final order of the Commission, the 
                findings of the Commission as to the facts, if 
                supported by evidence, shall be conclusive.
    ``(e) Antitrust Laws.--Nothing in this section shall modify, 
impair, limit, or supersede the applicability of the antitrust laws as 
defined in subsection (a) of the first section of the Clayton Act (15 
U.S.C. 12(a)), and of section 5 of this Act to the extent that section 
5 applies to unfair methods of competition. Nothing in this section 
shall modify, impair, limit, or supersede the right of an ANDA filer to 
assert claims or counterclaims against any person, under the antitrust 
laws or other laws relating to unfair competition.
    ``(f) Penalties.--
            ``(1) Forfeiture.--Each party that violates or assists in 
        the violation of this section shall forfeit and pay to the 
        United States a civil penalty sufficient to deter violations of 
        this section, but in no event greater than 3 times the value 
        received by the party that is reasonably attributable to the 
        violation of this section. If no such value has been received 
        by the NDA holder, the penalty to the NDA holder shall be 
        sufficient to deter violations, but in no event greater than 3 
        times the value given to the ANDA filer reasonably attributable 
        to the violation of this section. Such penalty shall accrue to 
        the United States and may be recovered in a civil action 
        brought by the Commission, in its own name by any of its 
        attorneys designated by it for such purpose, in a district 
        court of the United States against any party that violates this 
        section. In such actions, the United States district courts are 
        empowered to grant mandatory injunctions and such other and 
        further equitable relief as they deem appropriate.
            ``(2) Cease and desist.--
                    ``(A) In general.--If the Commission has issued a 
                cease and desist order with respect to a party in an 
                administrative adjudicative proceeding under the 
                authority of subsection (a)(1), an action brought 
                pursuant to paragraph (1) may be commenced against such 
                party at any time before the expiration of 1 year after 
                such order becomes final pursuant to section 5(g).
                    ``(B) Exception.--In an action under subparagraph 
                (A), the findings of the Commission as to the material 
                facts in the administrative adjudicative proceeding 
                with respect to the violation of this section by a 
                party shall be conclusive unless--
                            ``(i) the terms of such cease and desist 
                        order expressly provide that the Commission's 
                        findings shall not be conclusive; or
                            ``(ii) the order became final by reason of 
                        section 5(g)(1), in which case such finding 
                        shall be conclusive if supported by evidence.
            ``(3) Civil penalty.--In determining the amount of the 
        civil penalty described in this section, the court shall take 
        into account--
                    ``(A) the nature, circumstances, extent, and 
                gravity of the violation;
                    ``(B) with respect to the violator, the degree of 
                culpability, any history of violations, the ability to 
                pay, any effect on the ability to continue doing 
                business, profits earned by the NDA holder, 
                compensation received by the ANDA filer, and the amount 
                of commerce affected; and
                    ``(C) other matters that justice requires.
            ``(4) Remedies in addition.--Remedies provided in this 
        subsection are in addition to, and not in lieu of, any other 
        remedy provided by Federal law. Nothing in this paragraph shall 
        be construed to affect any authority of the Commission under 
        any other provision of law.
    ``(g) Definitions.--In this section:
            ``(1) Agreement.--The term `agreement' means anything that 
        would constitute an agreement under section 1 of the Sherman 
        Act (15 U.S.C. 1) or section 5 of this Act.
            ``(2) Agreement resolving or settling a patent infringement 
        claim.--The term `agreement resolving or settling a patent 
        infringement claim' includes any agreement that is entered into 
        within 30 days of the resolution or the settlement of the 
        claim, or any other agreement that is contingent upon, provides 
        a contingent condition for, or is otherwise related to the 
        resolution or settlement of the claim.
            ``(3) ANDA.--The term `ANDA' means an abbreviated new drug 
        application filed under section 505(j) of the Federal Food, 
        Drug, and Cosmetic Act (21 U.S.C. 355(j)) or a new drug 
        application filed under section 505(b)(2) of the Federal Food, 
        Drug, and Cosmetic Act (21 U.S.C. 355(b)(2)).
            ``(4) ANDA filer.--The term `ANDA filer' means a party that 
        owns or controls an ANDA filed with the Commission of Food and 
        Drugs or has the exclusive rights under such ANDA to distribute 
        the ANDA product.
            ``(5) ANDA product.--The term `ANDA product' means the 
        product to be manufactured under the ANDA that is the subject 
        of the patent infringement claim.
            ``(6) Drug product.--The term `drug product' has the 
        meaning given such term in section 314.3(b) of title 21, Code 
        of Federal Regulations (or any successor regulation).
            ``(7) NDA.--The term `NDA' means a new drug application 
        filed under section 505(b) of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 355(b)).
            ``(8) NDA holder.--The term `NDA holder' means--
                    ``(A) the holder of an approved NDA application for 
                a drug product;
                    ``(B) a person owning or controlling enforcement of 
                the patent listed in the Approved Drug Products With 
                Therapeutic Equivalence Evaluations (commonly known as 
                the `FDA Orange Book') in connection with the NDA; or
                    ``(C) the predecessors, subsidiaries, divisions, 
                groups, and affiliates controlled by, controlling, or 
                under common control with any of the entities described 
                in subparagraphs (A) and (B) (such control to be 
                presumed by direct or indirect share ownership of 50 
                percent or greater), as well as the licensees, 
                licensors, successors, and assigns of each of the 
                entities.
            ``(9) Party.--The term `party' means any person, 
        partnership, corporation, or other legal entity.
            ``(10) Patent infringement.--The term `patent infringement' 
        means infringement of any patent or of any filed patent 
        application, extension, reissue, renewal, division, 
        continuation, continuation in part, reexamination, patent term 
        restoration, patents of addition, and extensions thereof.
            ``(11) Patent infringement claim.--The term `patent 
        infringement claim' means any allegation made to an ANDA filer, 
        whether or not included in a complaint filed with a court of 
        law, that its ANDA or ANDA product may infringe any patent held 
        by, or exclusively licensed to, the NDA holder of the drug 
        product.
            ``(12) Statutory exclusivity.--The term `statutory 
        exclusivity' means those prohibitions on the approval of drug 
        applications under clauses (ii) through (iv) of section 
        505(c)(3)(E) (5- and 3-year data exclusivity), section 527 
        (orphan drug exclusivity), or section 505A (pediatric 
        exclusivity) of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 355(c)(3)(E), 360cc, 355a).''.
    (b) Effective Date.--Section 27 of the Federal Trade Commission 
Act, as added by this section, shall apply to all agreements described 
in section 27(a)(1) of that Act entered into after June 17, 2013. 
Section 27(f) of the Federal Trade Commission Act, as added by this 
section, shall apply to agreements entered into on or after the date of 
enactment of this Act.

SEC. 4. NOTICE AND CERTIFICATION OF AGREEMENTS.

    (a) Notice of All Agreements.--Section 1112(c)(2) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (21 
U.S.C. 355 note) is amended by--
            (1) striking ``the Commission the'' and inserting the 
        following: ``the Commission--
                    ``(A) the'';
            (2) striking the period and inserting ``; and''; and
            (3) inserting at the end the following:
                    ``(B) any other agreement the parties enter into 
                within 30 days of entering into an agreement covered by 
                subsection (a) or (b).''.
    (b) Certification of Agreements.--Section 1112 of such Act is 
amended by adding at the end the following:
    ``(d) Certification.--The Chief Executive Officer or the company 
official responsible for negotiating any agreement under subsection (a) 
or (b) that is required to be filed under subsection (c) shall execute 
and file with the Assistant Attorney General and the Commission a 
certification as follows: `I declare that the following is true, 
correct, and complete to the best of my knowledge: The materials filed 
with the Federal Trade Commission and the Department of Justice under 
section 1112 of subtitle B of title XI of the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003, with respect to the 
agreement referenced in this certification--
            ```(1) represent the complete, final, and exclusive 
        agreement between the parties;
            ```(2) include any ancillary agreements that are contingent 
        upon, provide a contingent condition for, or are otherwise 
        related to, the referenced agreement; and
            ```(3) include written descriptions of any oral agreements, 
        representations, commitments, or promises between the parties 
        that are responsive to subsection (a) or (b) of such section 
        1112 and have not been reduced to writing.'.''.

SEC. 5. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

    Section 505(j)(5)(D)(i)(V) of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 355(j)(5)(D)(i)(V)) is amended by inserting ``section 27 
of the Federal Trade Commission Act or'' after ``that the agreement has 
violated''.

SEC. 6. COMMISSION LITIGATION AUTHORITY.

    Section 16(a)(2) of the Federal Trade Commission Act (15 U.S.C. 
56(a)(2)) is amended--
            (1) in subparagraph (D), by striking ``or'' after the 
        semicolon;
            (2) in subparagraph (E), by inserting ``or'' after the 
        semicolon; and
            (3) inserting after subparagraph (E) the following:
                    ``(F) under section 27;''.

SEC. 7. STATUTE OF LIMITATIONS.

    The Federal Trade Commission shall commence any enforcement 
proceeding described in section 27 of the Federal Trade Commission Act, 
as added by section 3, except for an action described in section 
27(f)(2) of the Federal Trade Commission Act, not later than 6 years 
after the date on which the parties to the agreement file the Notice of 
Agreement as provided by section 1112(c)(2) and (d) of the Medicare 
Prescription Drug Improvement and Modernization Act of 2003 (21 U.S.C. 
355 note).

SEC. 8. SEVERABILITY.

    If any provision of this Act, an amendment made by this Act, or the 
application of such provision or amendment to any person or 
circumstance is held to be unconstitutional, the remainder of this Act, 
the amendments made by this Act, and the application of the provisions 
of such Act or amendments to any person or circumstance shall not be 
affected.
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