[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




  RECENT DEVELOPMENTS WHICH MAY IMPACT CONSUMER ACCESS TO, AND DEMAND 
                          FOR, PHARMACEUTICALS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 13, 2001

                               __________

                           Serial No. 107-34

                               __________

       Printed for the use of the Committee on Energy and Commerce


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________

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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania     EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
STEVE LARGENT, Oklahoma              BART GORDON, Tennessee
RICHARD BURR, North Carolina         PETER DEUTSCH, Florida
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
GREG GANSKE, Iowa                    ANNA G. ESHOO, California
CHARLIE NORWOOD, Georgia             BART STUPAK, Michigan
BARBARA CUBIN, Wyoming               ELIOT L. ENGEL, New York
JOHN SHIMKUS, Illinois               TOM SAWYER, Ohio
HEATHER WILSON, New Mexico           ALBERT R. WYNN, Maryland
JOHN B. SHADEGG, Arizona             GENE GREEN, Texas
CHARLES ``CHIP'' PICKERING,          KAREN McCARTHY, Missouri
Mississippi                          TED STRICKLAND, Ohio
VITO FOSSELLA, New York              DIANA DeGETTE, Colorado
ROY BLUNT, Missouri                  THOMAS M. BARRETT, Wisconsin
TOM DAVIS, Virginia                  BILL LUTHER, Minnesota
ED BRYANT, Tennessee                 LOIS CAPPS, California
ROBERT L. EHRLICH, Jr., Maryland     MICHAEL F. DOYLE, Pennsylvania
STEVE BUYER, Indiana                 CHRISTOPHER JOHN, Louisiana
GEORGE RADANOVICH, California        JANE HARMAN, California
CHARLES F. BASS, New Hampshire
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

                         Subcommittee on Health

                  MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas                    SHERROD BROWN, Ohio
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
JAMES C. GREENWOOD, Pennsylvania     TED STRICKLAND, Ohio
NATHAN DEAL, Georgia                 THOMAS M. BARRETT, Wisconsin
RICHARD BURR, North Carolina         LOIS CAPPS, California
ED WHITFIELD, Kentucky               RALPH M. HALL, Texas
GREG GANSKE, Iowa                    EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia             FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      PETER DEUTSCH, Florida
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
HEATHER WILSON, New Mexico           BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona             ELIOT L. ENGEL, New York
CHARLES ``CHIP'' PICKERING,          ALBERT R. WYNN, Maryland
Mississippi                          GENE GREEN, Texas
ED BRYANT, Tennessee                 JOHN D. DINGELL, Michigan,
ROBERT L. EHRLICH, Jr., Maryland       (Ex Officio)
STEVE BUYER, Indiana
JOSEPH R. PITTS, Pennsylvania
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)





                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Delgado, Jane L., President and CEO, National Alliance for 
      Hispanic Health............................................    65
    Downey, Bruce L., Chairman and CEO, Barr Laboratories, on 
      Behalf of the Generic Pharmaceutical Association...........    59
    Geiser, Thomas, General Counsel, Wellpoint Health Networks 
      accompanied by Robert Seidman, Vice President, Pharmacy....    72
    Glover, Gregory J., Ropes & Gray on Behalf of Pharmaceutical 
      Researchers and Manufacturers of America...................    51
    Golenski, John D., Executive Director, RX Health Value.......    70
    Kingham, Richard F., Covington and Burling...................   114
    Woodcock, Janet, Director, Center for Drug Evaluation and 
      Research, Food and Drug Administration.....................    16
Material submitted for the record by:
    Allergy & Asthma Network Mothers of Asthmatics, prepared 
      statement of...............................................   136
    Downey, Bruce L., Chairman and CEO, Barr Laboratories, on 
      Behalf of the Generic Pharmaceutical Association, letter 
      dated July 11, 2001, to Hon. John D. Dingell, enclosing 
      response for the record....................................   141
    Geiser, Thomas, General Counsel, Wellpoint Health Networks, 
      letter dated August 1, 2001 to Hon. Michael Bilirakis, 
      enclosing response for the record..........................   171
    Hansen, Jake, Vice President for Government Affairs, Barr 
      Laboratories, Inc., letter dated August 10, 2001, to Hon. 
      Michael Bilirakis, enclosing response for the record on 
      behalf of Bruce Downey.....................................   194
    Kingham, Richard F., Covington and Burling, letter dated 
      August 1, 2001 to Hon. Michael Bilirakis, enclosing 
      response for the record....................................   190
    National Association of Chain Drug Stores, prepared statement 
      of.........................................................   137
    Nirenberg, Darryl D., Patton Boggs LLP, letter dated July 19, 
      2001, enclosing response for the record....................   164
    Plaiser, Melinda, Associate Commissioner for Legislation, 
      Public Health Service, Food and Drug Administration, 
      Department of Health and Human Services, letter dated 
      August 16, 2001, enclosing response for the record.........   202

                                 (iii)

  

 
  RECENT DEVELOPMENTS WHICH MAY IMPACT CONSUMER ACCESS TO, AND DEMAND 
                          FOR, PHARMACEUTICALS

                              ----------                              


                        WEDNESDAY, JUNE 13, 2001

                  House of Representatives,
                  Committee on Energy and Commerce,
                                    Subcommittee on Health,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2322 Rayburn House Office Building, Hon. Michael Bilirakis 
(chairman) presiding.
    Members present: Representatives Bilirakis, Greenwood, 
Deal, Burr, Norwood, Bryant, Ehrlich, Tauzin (ex officio), 
Brown, Waxman, Strickland, Capps, Towns, Pallone, Deutsch, 
Stupak, and Green.
    Staff present: Brent Del Monte, majority counsel; Marc 
Wheat, majority counsel; Kristi Gillis, legislative clerk; and 
John Ford, minority counsel.
    Mr. Bilirakis. Good morning. This hearing will now come to 
order.
    Today the subcommittee will consider three matters within 
the jurisdiction of the Food and Drug Administration which 
impact the demand for, and the price of, pharmaceuticals.
    Congress is actively seeking to improve access to 
affordable prescription drugs for all Americans, and 
particularly our seniors. As we debate various proposals, we 
cannot ignore the impact of Federal food and drug laws on the 
availability and affordability of drugs. Today, we will focus 
on three specific areas which have received a lot of attention 
recently; access to generic drugs; the authority of the FDA to 
switch drugs from prescription to over-the-counter status 
despite a manufacturer's objections; and direct-to-consumer 
broadcast advertising.
    At our recent Food and Drug Administration Modernization 
hearing I mentioned my intent to examine issues related to 
generic drugs. And that is one of the purposes of today's 
hearing. Generic drugs account for nearly half of all 
prescriptions filled, and yet they amount to less than 20 
percent of pharmaceutical costs. Generics obviously save 
consumers billions of dollars per year, and we should carefully 
consider their role as we work to develop a Medicare 
prescription drug benefit.
    I am particularly interested in learning more about the 
science of generics. For instance, how closely must a generic 
scientifically resemble the innovator drug for it to receive 
FDA approval? I understand that the scientific standard for 
generic approval is bio-equivalence, but what exactly does that 
mean?
    Also, do consumers understand and feel comfortable with, 
generic drugs and their role in the modern marketplace? In 
addition, I'm interested to learn why, on average, it takes the 
FDA longer to approve generic drugs than it does for new drug 
applications.
    Of course, we can't lose sight of the fact that without a 
healthy, vibrant brand-name pharmaceutical industry, there 
would be no generic drugs. And I'd like to commend our 
colleague, Mr. Waxman, for his work as co-author of the Hatch-
Waxman Act, or as we like to call on this side, the Waxman-
Hatch Act, which increased consumer access to generic drugs, 
while strengthening patent protections for new chemical 
entities. The Act has proven quite successful for the past 17 
years. Both the brand name pharmaceutical and generic 
industries have thrived, and consumers have benefited greatly 
by access to both new therapies and to cheaper copies of old 
therapies.
    That being said, concerns have been raised about provisions 
of the Waxman-Hatch Act which may lead to anti-competitive 
behavior. The Federal Trade Commission is presently conducting 
a year-long review to consider this matter. Our witnesses today 
will shed light on the continued utility of the automatic 30-
month stay on FDA approval during patent challenges, as well as 
how the 180-day generic exclusivity provision is working.
    While I know that some of my colleagues may wish to 
consider additional generic issues, we simply do not have the 
time today to consider all of these matters. Thus, I hope we 
can focus on the role of generic pharmaceuticals and not delve 
into other areas today.
    The subcommittee will also consider the authority of the 
FDA to force a drug to be switched from prescription to over-
the-counter status despite the objection of the drug's 
manufacturer. We are not looking at whether FDA should switch 
specific drugs, and I want to make that clear. We're not 
intending to look at whether the FDA should switch specific 
drugs, which have been in the news recently, but rather whether 
FDA can under the law make the switch. And if they can, what 
are the policy impacts of such action?
    Last, we'll hear from witnesses who will discuss the impact 
of direct-to-consumer broadcast advertising on consumers. In 
1997, the FDA changed the guidelines for broadcast drug ads, 
and since then this advertising has increased, as we know, 
dramatically. While the advertising has mostly focused on the 
top selling drugs, it has also served to better inform 
consumers. Today, this subcommittee will consider the full 
impact of broadcast drug advertising on consumers.
    And I now yield with pleasure to Mr. Brown for an opening 
statement.
    [The prepared statement of Hon. Michael Bilirakis follows:]
Prepared Statement of Hon. Michael Bilirakis, Chairman, Subcommittee on 
                                 Health
    This hearing will now come to order. Today the Subcommittee will 
consider three matters within the jurisdiction of the Food and Drug 
Administration which impact the demand for, and the price of, 
pharmaceuticals.
    Congress is actively seeking to improve access to affordable 
prescription drugs for all Americans, and particularly our seniors. As 
we debate various proposals, we cannot ignore the impact of federal 
food and drug laws on the availability and affordability of drugs. 
Today, we will focus on three specific areas which have received a lot 
of attention recently: access to generic drugs; the authority of the 
FDA to switch drugs from prescription to over-the-counter status 
despite a manufacturer's objections; and direct-to-consumer broadcast 
advertising.
    At our recent Food and Drug Administration Modernization Act 
hearing I mentioned my intent to examine issues related to generic 
drugs. That is the purpose of today's hearing. Generic drugs account 
for nearly half of all prescriptions filled, yet they amount to less 
than 20% of pharmaceutical costs. Generics obviously save consumers 
billions of dollars per year, and we should carefully consider their 
role as we work to develop a Medicare prescription drug benefit.
    I am particularly interested in learning more about the science of 
generics. For instance, how closely must a generic scientifically 
resemble the innovator drug for it to receive FDA approval? I 
understand that the scientific standard for generic approval is 
bioequivalence, but what exactly does that mean?
    Also, do consumers understand, and feel comfortable with, generic 
drugs and their role in the modern marketplace? In addition, I am 
interested to learn why, on average, it takes the FDA longer to approve 
generic drugs than it does for new drug applications.
    Of course, we cannot lose sight of the fact that without a healthy, 
vibrant brand-name pharmaceutical industry, there would be no generic 
drugs. I'd like to commend our colleague, Mr. Waxman, for his work as 
co-author of the Hatch-Waxman Act, which increased consumer access to 
generic drugs, while strengthening patent protections for new chemical 
entities. The Act has proven quite successful for the past 17 years. 
Both the brand name pharmaceutical and generic industries have thrived, 
and consumers have benefitted greatly by access to both new therapies 
and to cheaper copies of old therapies.
    That being said, concerns have been raised about provisions of the 
Hatch-Waxman Act which may lead to anti-competitive behavior. The 
Federal Trade Commission is presently conducting a year-long review to 
consider this matter. Our witnesses today will shed light on the 
continued utility of the automatic 30-month stay on FDA approval during 
patent challenges, as well as how the 180-day generic exclusivity 
provision is working.
    While I know that some of my colleagues may wish to consider 
additional generic issues, we simply do not have the time today to 
consider all of these matters. Thus, I hope we can focus on the role of 
generic pharmaceuticals and not delve into other areas today.
    The Subcommittee will also consider the authority of the FDA to 
force a drug to be switched from prescription to over-the-counter 
status despite the objection of drug's manufacturer. We are not looking 
at whether FDA should switch specific drugs which have been in the news 
recently, but rather, whether FDA can, under the law, make the switch. 
And if they can, what are the policy impacts of such action?
    Last, we'll hear from witnesses who will discuss the impact of 
direct-to-consumer broadcast advertising on consumers. In 1997, the FDA 
changed the guidelines for broadcast drug ads, and since then, this 
advertising has increased dramatically. While the advertising has 
mostly focused on the top selling drugs, it has also served to better 
inform consumers. Today, this Subcommittee will consider the full 
impact of broadcast drug advertising on consumers.
    I will now yield to Mr. Brown for an opening statement.

    Mr. Brown. Thank you, Mr. Chairman, very much for holding 
today's hearings. I want to thank Janet Woodcock and also Bruce 
Downey and other witnesses for joining us this morning.
    We're looking, as the chairman said, at three prescription 
drug issues that are in some ways very different but which 
derive their significance in part from the same basic concern; 
they have a significant impact on prescription drug costs in 
the United States.
    Our objective in looking at these issues is not to 
dismantle legitimate incentives and rewards for innovative new 
drugs and biologics. This subcommittee, this committee, this 
Congress have a pressing responsibility to understand the 
factors driving the dramatic increase in prescription drug 
spending and explore what steps w should take to minimize 
wasted spending.
    Inflated drug prices rob seniors of dollars they need for 
basic necessities; they fuel double digit increases in health 
insurance premiums; they drive up the cost of public programs; 
they accelerate the erosion of employer sponsored coverage. 
Responsibility for establishing a prescription drug benefit 
under Medicare rests squarely on our shoulders and we simply 
can't afford to waste a single tax dollar on artificially 
inflated drug prices.
    I want to start with generic drugs and focus on access. I 
want to commend my colleague Mr. Pallone for introducing the 
Generic Drugs Access Act which tackles bio-equivalency disputes 
at the local and State levels. And I want to take this 
opportunity to discuss the Greater Access to Affordable 
Pharmaceuticals or GAAP Act legislation which I introduced with 
Republican Jo Ann Emerson. This is the House version of the Mc-
Cain Shumer Bill.
    The explicit goal of the Brown-Emerson, Shumer-McCain Bill 
is to restore the original intent of the 1984 Waxman-Hatch Act, 
the goal of which was to promote generic competition while 
continuing to encourage drug research and development. At 
friends at PhRMA are going to make other claims about this 
bill. I understand they've already visited some of my 
subcommittee colleagues.
    PhRMA claims that the GAAP Bill undercuts the incentives 
Bill into Waxman-Hatch to reward research and development. In 
fact, the bill doesn't touch the provision of Waxman-Hatch that 
were intended to reward innovation.
    PhRMA claims it would reduce the patent life of brand name 
drugs. This bill would have no effect on the statutory patent 
life of brand name drugs.
    You'll hear it lowers the bio-equivalency standards used to 
ensure that a generic drug is identical to and therefore is 
safe and as effective as it's brand name counterpart. In fact, 
the bill codifies three standards that the FDA already uses to 
determine bio-equivalency. Putting the force of law behind 
these firmly established standards is one way to fend off 
endless and inevitably frivolous lawsuits intended to delay 
generic drug approvals.
    With all due respect to PhRMA, it makes as little sense to 
defer to them on bio-equivalency standards as it does to defer 
to the generic drug industry on bio-equivalency standards. Both 
parties have a vested interest in the outcome of bio-
equivalence analysis. It's kind of like trusting two oil men to 
come up with a balanced global warming policy. Never mind on 
that.
    So what would the GAAP Bill do?
    Mr. Burr's not here, but I didn't want to disappoint him so 
he could say that this hearing is partisan, Mr. Chairman.
    So what would the GAAP Bill do? It would keep brand name 
drug companies from misusing Waxman-Hatch to block legitimate 
generic competition. Brand name companies cut deals with the 
first generic challenger to keep it off the market because they 
know that as Waxman-Hatch is currently written, no generic can 
enter the market if the first one doesn't.
    Brand name companies file last minute patents on their 
drugs because they know that by suing a generic for patent 
infringement they can automatically delay FDA approval by 30 
months. And brand name companies cut deals with generics to 
keep them off the market.
    They claim we should protect their right to ``settle court 
cases.' What they need to remember, Mr. Chairman, is that 
they're settling their case with one generic competitor, not 
with every potential generic competitor and every American 
consumer. We should not all have to pay to reduce their time in 
court.
    I look forward to discussing other provisions of the bill 
and other generic drug issues, including the chronic under 
funding of the Office of Generic Drugs when we hear from our 
witnesses later.
    I want to briefly touch on DTC advertising and over-the-
counter drugs. In the terms of direct-to-consumer advertising 
there clearly are First Amendment implications. But on behalf 
of consumers, FDA requires DTC advertising to strike a balance 
between promoting and explaining the limitations and risks 
associated with prescription drugs. They're also fairly 
explicit truth in advertising laws.
    Tuesday's article you may have seen in the Washington Post 
regarding once-a-week Prozac. There are questions about whether 
DTC ads fairly represent their products. It's certain they 
don't highlight the relative price of their product and how 
that relates to its efficacy. My guess is that if consumers had 
the full picture, DTC ads would be much less inflationary than 
they are today.
    Two thousand increases in sales of just 23 drugs promoted 
directly to consumers accounted for half of the $21 billion 
increase in pharmaceuticals at retail spending.
    In terms of over-the-counter drugs because Congress had the 
authority to modify the relevant law, it's important to assess 
whether FDA has legal authority to consider the safety of an 
over-the-counter determination based on an outside petition. 
But the reason the WellPoint case is so important is because 
it's promoted us to ask the critical question how should these 
determinations be initiated. Is it a conflict of interest when 
an insurer initiates this change? Is it a conflict of interest 
when a drug company initiates this change, which coincidentally 
they do not do until their patent is expired?
    It's in the public's best interest to reevaluate the 
current process and answer these questions. Prescription drugs 
save lives, they prevent illness, they reduce the hardship of 
disabilities; that's why it's important to maintain incentives 
for prescription drug research and development. That's what 
this committee needs to do. But it's also why it's important to 
eliminate any kinks in the current system that artificially 
inflate prescriptions drug prices. Too much is at stake, Mr. 
Chairman, to look the other way.
    Thank you.
    Mr. Bilirakis. The Chair yields to Dr. Norwood for an 
opening statement and would request that we try to stay within 
the 5 minute rule, if we possibly could.
    Dr. Norwood.
    Mr. Norwood. Thank you very much, Mr. Chairman. And I am 
grateful to you for this very important, interesting and 
hopefully bipartisan hearing.
    I don't really think that I can add much to your opening 
statement. It said it all pretty well, other than to thank the 
witnesses, Dr. Woodcock and others, for being here.
    In a sense of timing, I'll yield back my time so we can 
hear from the witnesses.
    Mr. Bilirakis. The Chair thanks the gentleman.
    Mr. Pallone for an opening statement?
    Mr. Pallone. Thank you, Mr. Chairman. I want to thank you 
and Mr. Brown for holding this hearing on these issues, 
particularly the generic drug issue which is very important to 
me.
    As you know, the high cost of prescription drugs is one of 
the most pressing health care issues confronting our country's 
senior citizens, employers, managed care plans, State and 
Federal drug programs. Although controlling drug costs is not 
an easy task, generic competition can have a dramatic impact on 
reducing pharmaceutical costs, and I strongly support necessary 
changes to Waxman-Hatch that would allow timely access and 
availability of generic drugs once the patent on brand name 
drugs expires.
    The inclusion of generic alternatives in the marketplace is 
great for consumers, employers and government purchasers 
because generic competition provides access to less expensive, 
therapeutically equivalent generic versions of brand name 
drugs. Brand name companies have been proficient in 
manipulating the Waxman-Hatch law and launching aggressive 
campaigns to block or delay generic alternatives from reaching 
the market.
    The intent of Waxman-Hatch was to provide a balance between 
brand name drugs and generic drugs in the marketplace. But 
currently the scales are tipped heavily in favor of the brand 
name companies. This is clear from the number of pieces of 
legislation that have successfully extend the patents on 
blockbuster drugs and reaped extraordinary profits for these 
brand name companies.
    The balance in the marketplace needs to be restored for the 
benefit of the consumer and an examination of Waxman-Hatch can 
be done, I think, best through the GAAP Bill which Mr. Brown 
has sponsored and which he mentioned, the Greater Access to 
Affordable Pharmaceuticals Act. I call it GAAP.
    I would like to talk a little bit about how the big name 
drug companies have several frequently used methods to delay 
generic competition. One of their favorite tactics is to make 
insignificant changes to their products and secure new patents 
just as the patent on the original product is set to expire. 
New patents are granted by the Patent Office for frivolous and 
invalid reasons, such as changing the color of the bottle, 
however you know the problem is that once the new patent is 
presented, the current law protects these brand name companies 
by prohibiting a generic from going on the market for 30 
months.
    Another favorite method used by the brand name industry to 
manipulate the intent of Hatch-Waxman--oh, did I say Hatch-
Waxman, I'm sorry. Waxman-Hatch. Is inserting patent extensions 
into legislative vehicles. In the interest of keeping 
pharmaceutical drug costs down, Congress should reject attempts 
by the brand name industry to extend patents on profitable 
drugs by finding sponsors to inconspicuously insert these 
patent extensions into various legislative vehicles.
    And last, the misuse of citizen petitions by brand 
companies is widely used to delay the approval of generic 
drugs. Often times, brand name companies file a citizen 
petition with the FDA as a method of blocking the regulatory 
process, and as a result brand name companies are afforded 
months or even years of monopoly. Agency officials reviewing 
these petitions are administratively challenged, and this 
leaves the review and approval of generic drugs on the back 
burner. Just another example of where legislative changes could 
prevent a citizen petition from delaying the approval of a 
generic drug that would ensure patient safety and improve 
access, and of course the GAAP Bill seeks to accomplish that.
    I don't want to keep talking about all these tactics, but 
the bottom line is that the brand name industry does delay 
generic drugs from entering the marketplace. It's widespread, 
it's well known and I think we have to open up Waxman-Hatch to 
find avenues that would stop these delays.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman.
    Mr. Waxman, for an opening statement.
    Mr. Waxman. Thank you very much, Mr. Chairman.
    By any definition, pharmaceuticals are important to 
Americans. Some people place hope in research toward cures, 
some people are struggling to afford the treatments that are 
already known. This is the balance, progress and access. 
Neither make sense without the other. It is unfair and wasteful 
to develop new products that sick people can't afford. It is 
pointless to get easy access to products that don't help.
    This is a balancing act that I know well. I've been working 
on it for almost 20 years now. I'm pleased and proud that the 
legislation that bears my name has been so uniformly regarded 
as successful in its twin goals.
    I'm also always reluctant to open it up to amendment, 
whether it be for ad hoc patent extensions or response to 
individual court ruling, or for fine tuning to address market 
changes. The road to imbalance is paved with good intentions.
    But while I'm cautious about opening it up, I will not 
stand by as a system is abused. Over the past year I've been 
very troubled by reports of collusive arrangements between 
brand name and generic companies of near frivolous patent 
infringement and of late additions of patents unrelated to the 
basic functioning of the drug. I only wish that the 
manufacturers who benefit from the system were as cautious 
about throwing it into imbalance as I am.
    Such clear abuses invite legislative response, and while 
I'm cautious about amending the law, I will not let my caution 
be abused.
    I look forward to the testimony and questioning today of 
those witnesses that are before us, and I hope I'll have other 
opportunities to explore these very complicated but truly vital 
issues further.
    Mr. Chairman, just on a diplomatic note of clarification, 
both Waxman-Hatch and Hatch-Waxman are acceptable usages. In 
fact, if you did a quick computer search it would show that 
both are widely used.
    It's been the tradition that I refer to this law as the 
Hatch-Waxman Act and Senator Hatch call it the Waxman-Hatch Act 
just out of courtesy to each other and to the other party.
    Again, this is another one of those balancing acts. But I 
want to point out that it is not acceptable to call it the 
``Wax-Hatchman' or the ``Hatchman-Wax Act.' Any other use of 
our names in any order is quite acceptable.
    Mr. Bilirakis. I would say, Mr. Chairman, if I might still 
refer to you as such, that we are not--we personally are not 
bound by that tradition. You may be bound and Mr. Hatch may be 
bound, but not us. So it's still the Waxman-Hatch Act on this 
side of the Capitol.
    Mr. Stupak for an opening statement.
    Mr. Stupak. Well, thank you, Mr. Chairman. And thanks for 
holding this very important hearing on recent developments in 
prescription industry. I believe it's the duty of this 
subcommittee to monitor and take necessary action to approve 
our Nation's healthcare system, of which prescriptions drugs 
play an increasingly large role.
    Here are the indisputable facts. Prescription drug spending 
has increased by $20.8 billion or 18.8 percent just last year. 
Seniors, one-third of whom lack prescription drug coverage, 
received a 2.4 cost of living increase in their Social Security 
benefit last year.
    Less than half of the prescription drug cost inflation is 
linked to the increased use of prescription drugs. The rest is 
attributable to higher prices, annual price increases and 
shifts from lower costs to higher cost drugs.
    The hearing today focuses on three major issues facing the 
American in today's health market: direct-to-consumer 
advertising, over-the-counter drugs, and generic drug issues. 
Each of these three issues are substantial in their own right.
    The speed of generic drugs into the marketplace is one area 
in which I am particularly interested. In 1994 the Waxman-Hatch 
Act was passed during a time when the drug approval process was 
slow. Now, 17 years later, it's the norm rather than the 
exception to have a drug approved in 12 months. This change in 
the FDA approval process should also necessitate a change in 
the speed in which the FDA is able to approve generic drugs. 
Pharmaceutical companies, while indisputably delivering some 
excellent products, are using the loopholes in the Waxman-Hatch 
Act to extend their strong hold on their products and, thus, 
increase their profits.
    Another area of particular concern to me is the direct-to-
consumer advertising. While this is seen by many as a necessary 
way to gain greater knowledge about drugs and healthcare in 
general, I'm alarmed at the incredible amounts of money being 
spent on direct-to-consumer advertising, as well as the fact 
that the drug companies are responsible for outlining the risk 
of their drugs with little oversight from the FDA. Many drug 
companies are failing to outline the risk to consumers.
    The goal of this hearing is to find the best way to lower 
drug prices for consumer while at the same time ensuring 
consumer safety, and it's a goal everyone can support.
    The three issues we will discuss are seen as possible areas 
we can improve upon to lower drug prices, better drugs and 
improve healthcare systems.
    Mr. Chairman, I sincerely hope this hearing resolves 
questions I and others have on these issues. And thank you 
again for holding this hearing.
    Mr. Bilirakis. And I thank the gentleman.
    Mr. Green for an opening.
    Mr. Green. Thank you, Mr. Chairman, for holding this 
hearing on consumer access to and demands for pharmaceuticals. 
It's the interest of all Americans, but especially relevant to 
our committee, as we consider ways to provide an affordable 
Medicare prescription drug benefit for seniors. According to 
the National Institute of Health Management, costs of 
prescription drugs has risen dramatically over the last 15 
years.
    Last year alone, we saw a 19 percent increase in spending 
on outpatient pharmaceuticals. Increases in sales of just 23 
drugs were responsible for half of this increase, including 
Vioxx, Lipitor, Prevacid and Celebrex. It shouldn't be a 
surprise to anyone that these drugs are among the most popular, 
consumers are bombarded with advertisements for these 
medications every time they open a magazine, turn on the 
television or surf the Internet. The proliferation of direct-
to-consumer advertising has a strong effect on the consumer 
utilization of pharmaceuticals.
    Consumers are taking a more activist role in their 
treatment. For the first time they're asking their physicians 
to prescribe a course of treatment including the 
pharmaceuticals that they see advertised.
    Mr. Chairman, I believe it's important for consumers to be 
informed about their healthcare options and they should work 
their doctors for treatment. But it does concern me when we see 
marketing costs for pharmaceuticals almost equaling the 
research and development costs for pharmaceuticals.
    The FDA's recent recommendation to make certain allergy 
medications available over-the-counter has sparked fierce 
debate on the FDA's right to make such a change absent the 
consent of the sponsor. There are questions about how such a 
move would impact consumer's access to such drugs, who would 
bear the economic burden of the shift and whether such a move 
would create a disincentive for the innovation.
    Finally, consumer's access for affordable pharmaceuticals 
is greatly enhanced by the availability of generic 
alternatives. The Drug Price Competition and Patent Term 
Restoration Act of 1984, also know as the Waxman-Hatch Act, was 
a compromise bill which successfully increased the availability 
of generic alternatives and at the same time protecting their 
patents for innovation or innovator companies. At the time it 
passed, this legislation represented a compromise approach to 
meet the needs of both the innovator drug companies and generic 
companies. The balance, though, has shifted in recent years as 
loopholes in the law have created the opportunity for abuse in 
the system.
    For example, innovator companies often file a number of 
patents, staggering patent applications to extend their patent 
protections and, thus, their exclusivity. They're gaming the 
system and I don't think Congress should continue them to allow 
to do that. By staggering the patents, this loophole creates 
the possibility for innovator companies to receive multiple and 
unlimited stays for a single drug. This patent stacking results 
in lengthy delays and excessive litigation before the problems 
are resolved and alternatives can reach the market.
    Additionally, these new patents are often for peripheral 
issues, such as the pharmaceutical's color, its labeling, or 
even are indication. These include minor changes, and that's 
why Congress should update the Waxman-Hatch Act.
    I know my good friend from Ohio, Sherrod Brown has 
introduced legislation which would stem some of these abuses 
and level the playing field for the generic pharmaceuticals. 
While I've not cosponsored my colleague's bill, I grow more and 
more concerned that Congress must take action to close the 
loopholes that we've seen develop since 1984.
    As we in Congress struggle to provide an affordable 
prescription benefit for seniors, we must look at all these 
issues.
    I look forward to the testimony today. And I yield back my 
time, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman.
    Ms. Capps for an opening statement.
    Ms. Capps. Thank you, Chairman Bilirakis. I'm pleased we 
could be here today to address this issue.
    The news just this week of the cost of living compared with 
the exorbitant increases in medications, prescription 
medications, I think is further testimony to the fact that 
something's out of control. The prices have skyrocketed, and so 
it is high time that Congress take a long hard look at some of 
the factors influence the price of prescription drugs.
    Today prescription medications are often the preferred, and 
sometimes the only method of treatment for many illnesses and 
diseases, but the cost in so many cases is a deterrent so that 
patients are not getting this often life saving treatment that 
they need. Therefore, we on this committee need to address this 
issue.
    There are certainly no simple solutions. We will need to 
closely examine the various factors that effect drug pricing, 
such as competition and cost of development and distribution. 
Seventeen years ago Congress took a tremendous step in 
improving competition with the Waxman-Hatch Act. It has had a 
dramatic effect quadrupling the percentage of the market 
represented by the generic drugs while continuing to protect 
the right of patent holders and encouraging new drug 
development. But I'm concerned about reports of abuses by 
pharmaceutical companies of the protections and incentives that 
this law provides. These reported abuses could impede the 
access the generic drugs have to the market and to my 
constituents.
    Claims have been made that brand name companies are using 
loopholes in the 30 month day and the 180 day market 
exclusivity provisions to indefinitely delay the production of 
generic drug competition. In light of these charges, it is time 
for us to look at improving the Act. As we take this up, we 
certainly must not discourage innovation and new ideas. There 
must continue to be strong incentives for companies to spend on 
research and development, but we cannot follow these 
incentives--we cannot allow these incentives to prevent our 
constituents from being able to afford the medications that 
they need.
    The increased competition that generic drugs bring to the 
marketplace has saved purchasers $8 billion to $10 billion 
according to a 1998 CBO study. Clearly, this is important 
because if we are to implement a real prescription drug benefit 
for our seniors, we are going to have to find ways to contain 
costs.
    So I'm looking forward to hearing the panel's perspective 
on how we can do this, eager to hear their thoughts on direct-
to-consumer advertising or DTC. DTC may have the potential to 
improve the public's understanding of their health needs and 
options, but I am concerned about the resources being spent 
here, resources that add to the cost of drugs and ultimately 
come from the consumer's pocket.
    We cannot permit companies looking for a way to increase 
their profits to exploit their consumers, our constituents. And 
I also think we must make sure that any such advertising meets 
the strictest guidelines to protect American safety.
    I want to thank Mr. Waxman for his years of leadership on 
this issue and recognize the leadership of Representatives 
Brown, Pallone, Eshoo and Dingell on these matters. They've 
worked hard to find ways for the public to have more access.
    And I look forward to working with you, Mr. Chairman, to 
continue this work and improve our health system.
    I yield back the balance of my time.
    Mr. Bilirakis. The gentlelady's time has expired.
    I'd like to very much to be able to get through the opening 
statements before we run over to vote.
    Mr. Deal for an opening statement.
    Mr. Deal. I'll assist you, Mr. Chairman, by passing.
    Mr. Bilirakis. I thought you might do that. Thank you.
    Mr. Deutsch.
    Mr. Deutsch. Thank you, Mr. Chairman. I thank the chairman 
and ranking members for calling this hearing.
    Mr. Chairman, while all the issues we will hear about today 
are serious and deserving of attention, there's one aspect of 
this hearing that I think is particularly important to focus on 
today: Patent issues under Waxman-Hatch Act.
    While direct-to-consumer advertising and over-the-counter 
switches may have some impact on the high cost of drugs, 
nothing contributes to the prices our constituents pay at the 
pharmacy like delaying generic entry into the market.
    I hear everyday from constituents who are struggling with 
paying the high cost of drugs. I also frequently hear from the 
pharmaceutical industry giving me reasons why drugs are so 
expensive and why I should help to maintain these extraordinary 
prices. And while I agree that research into life saving 
therapies is a cost and necessary venture, we should address 
how brand name companies game the patent and Orange Book 
Listing, thereby inflating drug prices even further and 
delaying entry of low cost generics into the market.
    We should also address the FDA's role in this system and 
failure to adequately ensure the validity of many patents.
    I have seen and heard of numerous examples during my years 
in Congress of a generic drug set to go to market only to be 
delayed because a brand name company has filed an Orange Book 
Listing with the FDA stating that they deserve additional 
market exclusivity on an active ingredient because they've 
changed some part of the pill, it's shape, color or size.
    And then another generic company is forced to delay entry 
of its product into the market until the new patent expires or 
they can successfully challenge the patent. Amazingly, FDA is a 
full partner in this process, simply listing patents in the 
Orange Book without regard to the value of the patent. That 
makes no sense to me since the FDA deals with patents on drugs, 
devices, cosmetics and other products every single day.
    Recently Biovail, a brand drug company listed a patent in 
the Orange Book that they said applied to their drug Tiazac, 
which was about to lose its original patent coverage. During 
litigation FDA testified that it believed the new patent 
actually did not and could not apply to Tiazac. Additionally, 
the FDA testified that it was unilaterally prepared to delist 
the patent from the Orange Book. Nevertheless, after all this 
testimony the FDA turned around and sent a letter to Biovail 
telling the company that they would continue to list the patent 
as applying to Tiazac as long as Biovail sent a letter to them 
confirming the same.
    Essentially the FDA said to Biovail help us help you lie to 
us. If that is what Congress intended in Waxman-Hatch Act 17 
years ago, I doubt it.
    The question we have before us is what do we do now? 
Frankly, I don't blame the brand companies for exploiting these 
loopholes. That's just plain business sense. It's now up to us 
in Congress to prevent this kind of abuse of the patent and 
Orange Book systems.
    I fully support Ranking Member Brown's legislation, part of 
which requires brand name manufacturers to list all the drugs 
relevant to that and certify with the FDA that the list is 
complete and accurate. This bill also expedites the legal 
process for challenging late listed patents.
    We may also want to look at limiting patents that can be 
listed in the Orange Book to the active ingredient and the 
first mode of use. Whatever we do, we need to ensure that FDA 
becomes a more willing partner in this process.
    I'm interested to hear from the witnesses and what they 
have to say.
    And I yield back the balance of my time.
    Mr. Bilirakis. The Chair thanks the gentleman.
    We will break now. The opening statements are hereby ended. 
The written opening statement of all members of the 
subcommittee are hereby made a part of the record without 
objection.
    [Additional statements submitted for the record follow:]
  Prepared Statement of Hon. Fred Upton, a Representative in Congress 
                       from the State of Michigan
    Mr. Chairman, thank you for holding today's timely hearing on 
recent developments which may have an impact on consumers' access to 
and demand for prescription drugs. These are complex issues, and we 
need to have a good grasp of them as we work together to craft a 
Medicare prescription drug benefit.
    It was my pleasure to serve with you on the House Leadership's 
Prescription Drug Task Force in the last Congress and to see the plan 
we crafted win bipartisan approval by the House. I sought to serve on 
this task force because I strongly believe that no senior citizen 
should be forced to forego needed medication, take less than the 
prescribed dose, or go without other necessities in order to afford 
life-saving medications. Our nation leads the world in the development 
of new drugs that enable us to effectively treat diseases and 
conditions. But if people cannot afford to buy these drugs, their 
benefits are lost to many in our population.
    Mr. Chairman, I am looking forward to working with you and my 
colleagues on both sides of the aisle and with the new Administration 
to craft a plan that can win the bipartisan support necessary to move 
quickly through Congress and be signed into law by President Bush. We 
cannot allow another Congress go by without providing relief to the 
millions of seniors without prescription drug coverage.
                                 ______
                                 
Prepared Statement of Hon. Barbara Cubin, a Representative in Congress 
                       from the State of Wyoming
    Pharmaceutical products have come a long way over the course of the 
past two decades, reaching new heights in innovation and research and 
development.
    Because of that, many lives have been saved. Heaven forbid we 
should do anything to jeopardize that continued success in the future.
    Since passage of the Hatch-Waxman Act in 1984, we have seen more 
generic drugs make their way into the market and into the hands of 
consumers.
    In 1980, before Hatch-Waxman, CBO estimated that 13 % of 
prescriptions filled were generic; by 1998, generics comprised 58 % of 
total prescriptions. Those numbers tell us that Hatch-Waxman has played 
a pivotal role in making generic drugs more accessible to patients.
    At the same time, Hatch-Waxman has helped foster research and 
development. Pharmaceutical companies have increased their R&D spending 
from $3.6 billion in 1984 to over $30 billion in 2001.
    That is very encouraging, especially for those of us, presumably 
most, who depend on drugs everyday for quality of life.
    Hatch-Waxman is not, however, without its controversies--namely 
when it comes to pharmaceutical patents. To the extent Hatch-Waxman has 
caused some grumblings in this area, we will soon discover through the 
course of this hearing today.
    I look forward to hearing the testimony of our witnesses, and yield 
back the balance of my time.
                                 ______
                                 
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Mr. Chairman: I'd like to begin by commending you for calling this 
very important, and timely, hearing today.
    Our purpose today is to consider three important matters: Access to 
generic drugs, direct-to-consumer broadcast advertising, and the 
government's authority to switch prescription drugs to over-the-counter 
status over the objection of drug sponsors. These three issues directly 
impact our constituents who want the best quality pharmaceuticals at 
the lowest possible prices.
    In 1984 the Congress passed the Hatch-Waxman, or as my friends on 
the other side of the aisle call it, the Waxman-Hatch Act. This Act did 
two primary things: it restored patent terms to innovators which had to 
navigate the lengthy FDA drug approval process prior to marketing, and 
it provided an expedited drug approval process for generic drugs. In my 
view, the 1984 Act has proven to be a resounding success. In 1984, the 
market share for generic drugs was less than 20%, and today that figure 
stands at nearly 50%. So consumers now have greater access to lower-
priced therapies. At the same time, we've seen an explosion in 
innovator investment in research and development. Research-based 
pharmaceutical companies have increased their R&D spending from $3.6 
billion in 1984 to over $30 billion today. Knowing that innovator drugs 
will face competition immediately upon patent expiration forces the 
innovators to do what they do best: innovate.
    That being said, there are some who urge that the 1984 Act needs 
some fine-tuning; that certain loopholes have been abused, thus 
delaying consumer access to lower-cost generics. The primary focus of 
these comments concern the automatic 30 month stay on generic approval 
at FDA when the generic challenges an innovator patent as invalid or 
not infringed, and the 180 day generic exclusivity provision of the 
Act.
    There have been a few recent, high profile examples of abuse of the 
30 month stay provision. And while these few examples have led some to 
call for major revisions of Hatch-Waxman, I say let us keep things in 
perspective. While some reforms may be necessary, we cannot lose sight 
of the fact that between 1984 and January, 2001, 8,259 generic 
applications were filed with FDA, and only 478 generic applications, or 
5.8% of the total, raised any patent issues. In essence, the 30 month 
stay is rarely a barrier to generic access to the market. That is not 
to say, however, that the Congress must turn a blind eye if the stay 
acts as an artificial barrier to generic competition. These are issues 
we must consider today.
    Further, we must explore how the 180 day generic exclusivity 
provision is working. I believe there should be incentives for generics 
to challenge weak patents. In 1984 it was thought that 180 days of 
generic exclusivity would ensure this. But the market place has changed 
dramatically since then. Now we see three, four, some times five 
generics lining up to challenge patents on blockbuster drugs, even 
though only the first generic to challenge is eligible for the 
exclusivity. Further, the courts have determined that to be eligible 
for the exclusivity all the generic has to do is file the challenge 
first, not successfully defend a patent infringement case. These 
developments raise many issues we need to explore: For example, should 
the exclusivity roll to subsequent challengers when the first 
challenger settles its case? Or, is the statutory incentive even 
necessary now, given the market incentives which lead to multiple 
generic applicants with no chance of exclusivity challenging patents?
    Regarding direct-to-consumer, or DTC, broadcast advertising, I am 
especially interested in learning whether these ads lead to increased 
utilization of inappropriate therapies, educate consumers to seek 
therapies which lead to healthier lives, or maybe a bit of both. There 
has been a lot of anecdotal information on this subject, and I know 
that FDA is presently conducting a review of DTC's impact.
    While increases in DTC broadcast advertising spending have 
coincided with increases in overall expenditures on pharmaceuticals, I 
think it is premature to draw a causal connection between the two, 
though the existence of a connection must be studied. There is 
information pointing to DTC broadcast ads having an overall positive 
impact. For instance, a 1999 FDA survey found that 27% of those who 
sought information from their doctors after seeing a DTC ad asked their 
physicians about a condition they had not discussed before. Further, a 
recent Prevention Magazine survey found that 76% of Americans believe 
DTC ads help them become more involved in their own health care. At the 
same time, there is no denying that the advertising is concentrated on 
a relatively short list of drugs. The most recent statistics show that 
about 12 drugs accounted for nearly half of all DTC broadcast spending. 
And it probably comes as no surprise that these drugs are some of the 
biggest sellers.
    Last, the Subcommittee will focus on whether the FDA has the 
authority to switch a drug from prescription status to over-the-
counter, or OTC, status over the objection of drug sponsors. This issue 
just recently came to the fore when one of our witnesses before us 
today, WellPoint, filed a citizens petition urging such a switch. The 
issue to me isn't whether the drugs at issue in the WellPoint petition 
are safe enough to be switched, but rather whether the FDA has the 
authority to make the switch without the consent of the sponsor.
    For past decades, it was widely understood that the only way to 
sell an OTC drug was to either comply with a monograph, or to petition 
the FDA for a switch of your prescription drug through a new drug 
application. However, there is no denying that Section 503(b)(3) of the 
Code states that the ``Secretary may by regulation remove drugs [from 
prescription status] when such requirements are not necessary for the 
protection of the public health.'' While this provision in the Code is 
a half-century old, it's plain meaning seems evident. I need to hear 
from our witnesses why my understanding of this provision may be 
misinformed, or whether I understand it correctly.
    And if it turns out that the Secretary does have the authority 
under the Code to make the switch, we must explore what kind of process 
must be afforded to drug sponsors who object to the switch. Are they 
entitled to evidentiary hearings? Will they be forced to conduct label 
comprehension studies? Will the switch amount to a Constitutional 
taking? We should consider all of these issues at our hearing today.
    Thanks again, Chairman Bilirakis, for considering these very 
important issues today. I look forward to the testimony of our 
witnesses.
                                 ______
                                 
Prepared Statement of Hon. Anna G. Eshoo, a Representative in Congress 
                      from the State of California
    Thank you, Mr. Chairman. I share your interest in these issues 
which strike at the core of consumer access to prescription medicines. 
I'm concerned, however, that by dealing with all three in one hearing, 
we are giving them short shrift. Each of these issues raises numerous 
questions. So I hope this will be the first hearing for each.
    That said, I'm looking forward to the testimony from today's 
witnesses. As the representative of California's 14th Congressional 
District, home to the largest concentration of biotech companies in the 
world, I have a keen interest in each of these issues.
    I'm particularly interested in hearing from FDA on their recent 
decision to move three antihistamines from prescription status to over-
the-counter. This has received quite a bit of attention recently and it 
raises numerous legal questions, not the least of which is whether FDA 
has the statutory and constitutional authority to take this kind of 
action over the objections of the drug manufacturer.
    But even more important is the impact on consumers. Will safety be 
compromised and will the risk of this kind of unauthorized ``switch'' 
negatively impact future development of breakthrough medicines? These 
are just some of the questions this Committee and FDA must consider as 
we forge new ground on this issue.
    I'm also keenly interested in the direct-to-consumer advertising 
issue. When FDA finalized its guidance in 1999, it opened the door and 
allowed drug companies to advertise their products--on TV, in 
magazines, even in newspapers. For the first time, doctors weren't the 
only ones holding the knowledge. Consumers were coming to their doctors 
armed with information and demanding a higher level of care.
    Prior to these ads, prescription medicines were a mystery with 
names we couldn't pronounce and side effects we didn't even try to 
understand. Today, consumers know the drugs they're taking, any 
potential side effects, even how they interact with other drugs. Gone 
are the days when we simply accepted what our family doctor told us. We 
read, we surf the web and, yes, we listen to advertisements.
    One of the issues before this Committee is whether the current 
system for direct-to-consumer advertising is providing consumers with 
enough information.
    Finally, we cannot go home today without acknowledging that all 
these issues are tied to a larger policy debate which has plagued this 
Congress and the nation--the need for prescription drug coverage in 
Medicare. We're so wrapped up in trying to get at the pricing issue 
that we're failing to do the one thing that will provide relief--a 
Medicare drug benefit. We're missing the forest for the trees. Rather 
than spending time trying to shorten patent lives and switching drugs 
from prescription to over-the-counter--which may actually increase the 
prices for many beneficiaries--let's put our heads together and come up 
with a meaningful prescription drug benefit for every senior. The 
American people want it, they need it, and they deserve it. It's time 
we paid attention.
                                 ______
                                 
   Prepared Statement of Hono. John D. Dingell, a Representative in 
                  Congress from the State of Michigan
    Mr. Chairman, thank you for scheduling this hearing. All three 
topics of this hearing, Over-the-Counter drugs (OTC) switching, Direct-
to-Consumer (DTC) advertising, and the Waxman-Hatch Act are matters in 
which I have a long-standing interest. The pharmaceutical marketplace 
is of ever-increasing importance to citizens, and Committee attention 
to these matters has been lax for the past several years. We know that 
millions of Americans cannot afford, and therefore do not take, the 
drugs that they need. As a general matter, I will be curious to learn 
what our panel knows about the competitive nature of the 
pharmaceuticals market.
    With respect to DTC advertising, I have long-standing concerns 
about commercialization of the doctor-patient relationship as it 
applies to prescription drugs. I agree that well done advertisements on 
public health issues can provide a substantial public health benefit. 
Ads on tobacco, sexually transmitted diseases, vaccines, domestic 
violence, drug abuse, and other causes of premature death and disease 
have worked. That is an entirely different matter than the case of a 
prescription drug product sponsor running an advertisement for its 
product. The latter case moves from the general message of urging 
people to take some action of benefit to their health to a related, yet 
distinct, effort to urge persons to consume a particular product. Are 
DTC ads improving the health of this country and, if so, how and to 
what extent?
    There is no doubt in my mind that the Waxman-Hatch Act has saved 
consumers billions of dollars in prescription drug costs and, in doing 
so, has improved the health of millions of persons. That said, I wonder 
if this law any longer can realize its full potential as tens of 
billions of dollars of prescription drugs are scheduled to go off 
patent in the next several years. My point is that a very good law has 
acquired some tattered edges due to judicial decisions, administrative 
actions, and clever lawyering by brand name drug manufacturers. This 
law was enacted in 1984 and has not been revised since then. That is a 
long time in the life of any public policy, especially one that affects 
the disposition of many billions of dollars. I understand that our 
witnesses today will not discuss ideas for fundamental reform, but will 
limit their remarks to proposals aimed at restoring the original 
balance of the Waxman-Hatch Act between product innovation and price 
competition.
    Finally, we will hear two very different opinions on the issue of 
who can initiate the switch of a prescription drug to over-the-counter 
status. The arguments pro and con are intriguing and I look forward to 
the testimony.
    Mr. Chairman, I hope this hearing is only the beginning of a 
substantial Subcommittee effort to address pharmaceutical market 
issues. Thank you.

    Mr. Bilirakis. And we will break now and show our 
appreciation to Dr. Woodcock for her patience. I'm sure you 
understand what we go through here. Thank you.
    [Brief recess.]
    Mr. Bilirakis. The committee is pleased to welcome as our 
first panelist Dr. Janet Woodcock, who is a Director for the 
Center for Drug Evaluation and Research with the FDA.
    Dr. Woodcock, of course, your written statement is a part 
of the record. I will set the clock at 10 minutes, please do 
the best that you can in that regard. We certainly won't cut 
you off if you should go over. Please proceed.

     STATEMENT OF JANET WOODCOCK, DIRECTOR, CENTER FOR DRUG 
     EVALUATION AND RESEARCH, FOOD AND DRUG ADMINISTRATION

    Ms. Woodcock. Thank you.
    Mr. Chairman and members of the subcommittee, I'm Janet 
Woodcock, Director of the Center for Drug Evaluation and 
Research at the Food and Drug Administration. I'm pleased to be 
here and be able to provide information on FDA programs that 
may effect consumer's demand for, and access to 
pharmaceuticals.
    As you're aware, the FDA is not involved in drug pricing. 
However many of our programs can impact directly or indirectly 
on health care costs related to drugs. Our generic drug review 
program is the best example. The availability of lower cost 
generic versions of innovator drugs has a substantial impact on 
lower cost to consumers in the healthcare system.
    Today I will discuss issues related to three FDA programs: 
Generic review, the agency's regulation of direct-to-consumer 
advertising, and the process of switching drugs available under 
prescription to over-the-counter status.
    The generic drug program has the most straight forward 
impact on drug costs. In fiscal year 2000 alone, FDA approved 
232 generic drugs. Some of these were first time approvals, 
while others represented additional competitive entries into 
the marketplace. It has been well documented that when generic 
competition is introduced, drug prices drop. Because FDA review 
provides assurance that generic products are fully 
substitutable for the innovator drug, patients can save money 
on their medicines without fear of getting a lower quality 
product.
    FDA's generic drug review program implements that Drug 
Price Competition and Patent Term Restoration Act of 1984, also 
known as the Waxman-Hatch Amendments. These amendments were 
intended to balance two important public policy goals. First, 
to provide meaningful market protection incentives to encourage 
the development of valuable new drugs. And second, to provide 
for the rapid availability of generic versions once the 
statutory patent protection and marketing exclusivity of the 
innovator drug expired. And overall, as we've already heard, 
the program has, and is currently achieving these goals. 
However, as might be expected when so much is at stake 
financially, certain provisions have proved challenging to 
implement. In particular, the 180 day generic exclusivity 
procedure has been marked by litigation, court decisions, and 
course directions for FDA. These problems are too complex to 
discuss in my brief statement, but they're fully covered in my 
written testimony, and I'll be glad to answer any questions you 
might have.
    The bottom line is that the generic drug program is 
functioning well, but there are difficulties in implementation 
of certain parts of the statute. And I would like to also add 
that these difficulties have increased in recent years, and we 
may project that the trajectory of problems may be increasing.
    Now I'd like to turn to the issue of direct-to-consumer 
advertising. First, I'd like to point out that direct-to-
consumer advertising has always been legal in the United 
States. Neither the Food, Drug and Cosmetic Act nor the 
implementing regulations, which were first issued in the 
1960's, prohibit promotion to consumers or patients.
    People often ask us when FDA lifted its ban on direct-to-
consumer advertising. In fact, this activity was never banned. 
Product sponsors back in the 1960's just didn't advertise to 
consumers. In the early 1980's, however, a few firms started 
advertising their prescription products directly to patients. 
As a result of the ensuing concerns, FDA requested in 1983 that 
sponsors voluntarily suspend these ads to give FDA time to 
conduct research and hold public meetings, which was done and 
the industry complied with this request.
    In 1985 FDA withdrew the voluntary moratorium stating that 
the regulations provided sufficient safeguards to protect 
consumers. After that there was a steady growth of print 
direct-to-consumer ads for prescription drugs.
    By the late 1990's increasing numbers of reminder ads began 
to appear on television. These ads can mention the name of the 
drug, but don't mention its use, which is very confusing to the 
public, although not to health professionals who are familiar 
with drug names.
    In 1997, in response to the changed information environment 
in the country, as well as the confusing broadcast situation 
and the demand from patients and consumers for understandable 
prescription drug information, FDA issued a draft guidance 
explaining how sponsors could meet the regulatory requirements 
for consumer access to complete label information. Sponsors 
followed this guidance and used it to run broadcast ads.
    In 1999 FDA issued the guidance in final form and stated 
our intention to assess the impact of the guidance and of DTC 
promotion in general on the public health, and we will do this.
    From the public health perspective direct-to-consumer 
advertising is a double edged sword. On one side we know that 
many conditions with preventable, serious consequences are 
severely undertreated in the U.S. population. Examples include 
hypertension, high cholesterol and mental illnesses. Many 
people are suffering, or will die prematurely, because they 
have not utilized available treatments for these conditions. 
This is such a severe problem that some public health advocates 
have suggested to the FDA that certain medicines for 
cardiovascular problems be switched to over-the-counter status 
so more people would have access.
    Advertising and promotion can strongly influence behavior, 
that's why firms pay for it. Ads could reach out to untreated 
individuals and motivate them to seek care. And, in fact, when 
we've looked at broadcast ads, a significant number of them 
target these serious and undertreated disorders.
    The sword's other edge, though, is that patients and 
consumers could be motivated by advertising to seek medication 
that was not right for them and even to pressure prescribers 
into inappropriate choices. We certainly have heard stories 
from some health care professionals of patients coming to the 
office waving such an ad for an inappropriate drug for them.
    Again, I cannot cover all issues raised by DTC advertising 
in a brief statement. When discussing DTC ads and drug costs 
it's important to stress that not all drug cost increases are 
negative from a public health standpoint. If more citizens take 
drugs to prevent heart attacks, strokes, or weakened bones as a 
result of direct-to-consumer advertising, that is for the 
public good. If cost increases reflect inappropriate 
prescriptions or preferential prescribing of more expensive 
choices, then that's a poor bargain indeed for the public.
    Finally, I'd like to say a word about switching drugs from 
prescription to over-the-counter status. Usually when such 
switches are considered, the benefits that we think of at FDA 
involve consumer access and convenience. We do not think about 
drug costs. In the vast majority of cases historically the drug 
manufacturer proposes and supports such a switch.
    Recently FDA was petitioned by a health care payer group to 
switch certain prescription antihistamines to over-the-counter 
status. While FDA does not consider costs in making OTC switch 
decisions, it is likely that both the petitioner's desire for 
the switch and the manufacturer's reluctance about the switch 
is at least in part related to economic factors.
    In summary, FDA operates a number of programs that impact 
people's access to, and knowledge about, available drug 
treatment. We strive to do this in a way that produces the 
maximum public health benefit within the current statutory 
framework that's available to us.
    Thank you.
    [The prepared statement of Janet Woodcock follows:]
    Prepared Statement of Janet Woodcock, Director, Center for Drug 
 Evaluation and Research, Food and Drug Administration, Department of 
                       Health and Human Services
                              introduction
    Mr. Chairman and Members of the Subcommittee, I am Dr. Janet 
Woodcock, Director of the Center for Drug Evaluation and Research 
(CDER), Food and Drug Administration (FDA or the Agency). I am here 
today to update you on three important areas that CDER is continuing to 
work on:

(1) FDA's implementation of provisions of the Drug Price Competition 
        and Patent Term Restoration Act of 1984 (Hatch-Waxman 
        Amendments) that govern the generic drug approval process.
(2) The promotion that manufacturers of prescription drugs (product 
        sponsors) direct toward consumers and patients. This is 
        referred to as ``direct-to-consumer'' promotion or DTC.
(3) The mechanism for reclassification of drugs from prescription to 
        over-the-counter (OTC) status, namely, the request for the OTC 
        switch by a third party, a novel situation FDA is presently 
        facing.
                            i. generic drugs
    FDA's implementation of provisions of the Drug Price Competition 
and Patent Term Restoration Act of 1984 (Hatch-Waxman Amendments) 
govern the generic drug approval process. These provisions give 180 
days of marketing exclusivity to certain generic drug applicants. The 
180-day generic drug exclusivity provision is one component of the 
complex patent listing and certification process, which also provides 
for a 30-month stay on generic drug approvals while certain patent 
infringement issues are litigated.
    The Hatch-Waxman Amendments are intended to balance two important 
public policy goals. First, drug manufacturers need meaningful market 
protection incentives to encourage the development of valuable new 
drugs. Second, once the statutory patent protection and marketing 
exclusivity for these new drugs has expired, the public benefits from 
the rapid availability of lower priced generic versions of the 
innovator drug.
Statutory Provisions
    The Hatch-Waxman Amendments amended the Federal Food, Drug, and 
Cosmetic (FD&C) Act and created section 505(j). Section 505(j) 
established the abbreviated new drug application (ANDA) approval 
process, which permits generic versions of previously approved 
innovator drugs to be approved without submission of a full new drug 
application (NDA). An ANDA refers to a previously approved NDA (the 
``listed drug'') and relies upon the Agency's finding of safety and 
effectiveness for that drug product.
    The timing of an ANDA approval depends in part on patent 
protections for the innovator drug. Innovator drug applicants must 
include in an NDA information about patents for the drug product that 
is the subject of the NDA. FDA publishes patent information on approved 
drug products in the Agency's publication ``Approved Drug Products with 
Therapeutic Equivalence Evaluations'' (the Orange Book) (described in 
more detail below). The FD&C Act requires that an ANDA contain a 
certification for each patent listed in the Orange Book for the 
innovator drug. This certification must state one of the following:

(I) that the required patent information relating to such patent has 
        not been filed;
(II) that such patent has expired;
(III) that the patent will expire on a particular date; or
(IV) that such patent is invalid or will not be infringed by the drug, 
        for which approval is being sought.
    A certification under paragraph I or II permits the ANDA to be 
approved immediately, if it is otherwise eligible. A certification 
under paragraph III indicates that the ANDA may be approved on the 
patent expiration date.
    A paragraph IV certification begins a process, in which the 
question of whether the listed patent is valid or will be infringed by 
the proposed generic product may be answered by the courts prior to the 
expiration of the patent. The ANDA applicant who files a paragraph IV 
certification to a listed patent must notify the patent owner and the 
NDA holder for the listed drug that it has filed an ANDA containing a 
patent challenge. The notice must include a detailed statement of the 
factual and legal basis for the ANDA applicant's opinion that the 
patent is not valid or will not be infringed. The submission of an ANDA 
for a drug product claimed in a patent is an infringing act if the 
generic product is intended to be marketed before expiration of the 
patent, and therefore, the ANDA applicant who submits an application 
containing a paragraph IV certification may be sued for patent 
infringement. If the NDA sponsor or patent owner files a patent 
infringement suit against the ANDA applicant within 45 days of the 
receipt of notice, FDA may not give final approval to the ANDA for at 
least 30 months from the date of the notice. This 30-month stay will 
apply unless the court reaches a decision earlier in the patent 
infringement case or otherwise orders a longer or shorter period for 
the stay.
    The statute provides an incentive of 180 days of market exclusivity 
to the ``first'' generic applicant who challenges a listed patent by 
filing a paragraph IV certification and running the risk of having to 
defend a patent infringement suit. The statute provides that the first 
applicant to file a substantially complete ANDA containing a paragraph 
IV certification to a listed patent will be eligible for a 180-day 
period of exclusivity beginning either from the date it begins 
commercial marketing of the generic drug product, or from the date of a 
court decision finding the patent invalid, unenforceable or not 
infringed, whichever is first. These two events--first commercial 
marketing and a court decision favorable to the generic--are often 
called ``triggering'' events, because under the statute they can 
trigger the beginning of the 180-day exclusivity period.
    In some circumstances, an applicant who obtains 180-day exclusivity 
may be the sole marketer of a generic competitor to the innovator 
product for 180 days. But 180-day exclusivity can begin to run--with a 
court decision--even before an applicant has received approval for its 
ANDA. In that case, some, or all, of the 180-day period could expire 
without the ANDA applicant marketing its generic drug. Conversely, if 
there is no court decision and the first applicant does not begin 
commercial marketing of the generic drug, there may be prolonged or 
indefinite delays in the beginning of the first applicant's 180-day 
exclusivity period. Approval of an ANDA has no effect on exclusivity, 
except if the sponsor begins to market the approved generic drug. Until 
an eligible ANDA applicant's 180-day exclusivity period has expired, 
FDA cannot approve subsequently submitted ANDAs for the same drug, even 
if the later ANDAs are otherwise ready for approval and the sponsors 
are willing to immediately begin marketing. Therefore, an ANDA 
applicant who is eligible for exclusivity is often in the position to 
delay all generic competition for the innovator product.
    Only an application containing a paragraph IV certification may be 
eligible for exclusivity. If an applicant changes from a paragraph IV 
certification to a paragraph III certification, for example upon losing 
its patent infringement litigation, the ANDA will no longer be eligible 
for exclusivity.
Court Decisions and FDA Actions
    This 180-day exclusivity provision has been the subject of 
considerable litigation and administrative review in recent years, as 
the courts, industry, and FDA have sought to interpret it in a way that 
is consistent both with the statutory text and with the legislative 
goals underlying the Hatch-Waxman Amendments. A series of Federal court 
decisions beginning with the 1998 Mova 1 case describe 
acceptable interpretations of the 180-day exclusivity provision, 
identify potential problems in implementing the statute, and establish 
certain principles to be used by the Agency in interpreting the 
statute.
---------------------------------------------------------------------------
    \1\ Mova Pharmaceutical Corp. v. Shalala, 140 F.3d 1060, 1065 (D.C. 
Cir. 1998).
---------------------------------------------------------------------------
    In light of the court decisions finding certain FDA regulations 
inconsistent with the statute, the Agency proposed new regulations in 
August 1999 to implement the 180-day exclusivity. Since then many 
comments have been submitted and there have been additional court 
decisions further interpreting the 180-day exclusivity provision and 
complicating the regulatory landscape. The Agency has not yet published 
a final rule on 180-day exclusivity. As described in a June 1998 
guidance for industry, until new regulations are in place, FDA is 
addressing on a case-by-case basis those 180-day exclusivity issues not 
addressed by the existing regulations.
    One of the most fundamental changes to the 180-day exclusivity 
program that has resulted from the legal challenges to FDA's 
regulations is the determination by the courts of the meaning of the 
phrase ``court decision.'' The courts have determined that the ``court 
decision'' that can begin the running of the 180-day exclusivity period 
may be the decision of the district court, if it finds that the patent 
at issue is invalid, unenforceable, or will not be infringed by the 
generic drug product. FDA had interpreted the ``court decision'' that 
could begin the running of 180-day exclusivity (and the approval of the 
ANDA) as the final decision of a court from which no appeal can be or 
has been taken--generally a decision of the Federal Circuit. FDA's 
interpretation had meant that an ANDA applicant could wait until the 
appeals court had finally resolved the patent infringement or validity 
question before beginning the marketing of the generic drug. FDA had 
taken this position so that the generic manufacturer would not have to 
run the risk of being subject to potential treble damages for marketing 
the drug, if the appeals court ruled in favor of the patent holder. The 
current interpretation means that if the 180-day exclusivity is 
triggered by a decision favorable to the ANDA applicant in the district 
court, the ANDA sponsor who wishes to market during that exclusivity 
period now may run the risk of treble damages if the district court 
decision is reversed on appeal to the Federal Circuit. As a practical 
matter, it means that many generic applicants may choose not to market 
the generic and thus the 180-day exclusivity period could run during 
the pendency of an appeal.
    In one of the cases rejecting FDA's interpretation of the ``court 
decision'' language in the statute, the court determined that the 
applicant who relied in good faith on FDA's interpretation of the 180-
day exclusivity provision should not be punished by losing its 
exclusivity. The court, therefore, refused to order FDA to begin the 
running of 180-day exclusivity upon the decision of the district court 
in the patent litigation at issue. FDA has taken a similar approach in 
implementing the courts' decisions: the new ``court decision'' 
definition will apply only for those drugs for which the first ANDA was 
submitted subsequent to March 30, 2000. In adopting this course, a 
primary concern for the Agency was to identify an approach that would 
minimize further disruption and provide regulated industry with 
reasonable guidance for making future business decisions.
    To advise the public and industry of this position, FDA published a 
Guidance for Industry in March 2000. FDA intends to incorporate the 
courts' interpretation of the ``court decision'' trigger for 180-day 
exclusivity into the final rule implementing the changes in 180day 
exclusivity.
Orange Book Listings
    There have been concerns expressed over FDA's role in the listing 
of patents in the Orange Book, which can have an impact on generic drug 
approvals by delaying approval and 180-day exclusivity. Under the FD&C 
Act, pharmaceutical companies seeking to market innovator drugs must 
submit, as part of an NDA or supplement, information on any patent that 
1) claims the pending or approved drug or a method of using the 
approved drug, and 2) for which a claim of patent infringement could 
reasonably be asserted against an unauthorized party. Patents that may 
be submitted are drug substance (active ingredient) patents, drug 
product (formulation and composition) patents, and method of use 
patents. Process (or manufacturing) patents may not be submitted to 
FDA.
    When an NDA applicant submits a patent covering the formulation, 
composition, or method of using an approved drug, the applicant must 
also submit a signed declaration stating that the patent covers the 
formulation, composition, or use of the approved product. The required 
text of the declaration is described in FDA's regulations. FDA 
publishes patent information on approved drug products in the Orange 
Book.
    The process of patent certification, notice to the NDA holder and 
patent owner, a 45-day waiting period, possible patent infringement 
litigation and the statutory 30-month stay mean there is the 
possibility of a considerable delay in the approval of ANDAs as a 
result of new patent listings. Therefore, these listings are often 
closely scrutinized by ANDA applicants. FDA regulations provide that, 
in the event of a dispute as to the accuracy or relevance of patent 
information submitted to and subsequently listed by FDA, an ANDA 
applicant must provide written notification of the grounds for dispute 
to the Agency. FDA then requests the NDA holder to confirm the 
correctness of the patent information and listing. Unless the patent 
information is withdrawn or amended by the NDA holder, FDA will not 
change the patent information listed in the Orange Book. If a patent is 
listed in the Orange Book, an applicant seeking approval for an ANDA 
must submit a certification to the patent. Even an applicant whose ANDA 
is pending when additional patents are submitted by the sponsor must 
certify to the new patents, unless the additional patents are submitted 
by the patent holder more than 30 days after issuance by the U.S. 
Patent and Trademark Office.
    FDA does not undertake an independent review of the patents 
submitted by the NDA sponsor. FDA does not assess whether a submitted 
patent claims an approved drug and whether a claim of patent 
infringement could reasonably be made against an unauthorized use of 
the patented drug. FDA has implemented the statutory patent listing 
provisions by informing interested parties what patent information is 
to be submitted, who must submit the information, and when and where to 
submit the information. As the Agency has stated, since the 
implementation of the 1984 Hatch-Waxman Amendments began, FDA has no 
expertise or resources with which to resolve complex questions of 
patent coverage, and thus the Agency's role in the patent-listing 
process is ministerial. The statute requires FDA to publish patent 
information upon approval of the NDA. The Agency relies on the NDA 
holder or patent owner's signed declaration stating that the patent 
covers an approved drug product's formulation, composition or use. 
Generic and innovator firms may resolve any disputes concerning patents 
in private litigation. As noted above, if the generic applicant files a 
paragraph IV certification and is sued for patent infringement within 
45 days, there is an automatic stay of 30 months, substantially 
delaying the approval of the generic drug and, thus, the availability 
of lower cost generic drug products.
                               conclusion
    FDA continues to implement the Hatch-Waxman Amendments exclusivity 
provisions in the best manner possible given the text of the 
legislation, the history of the legislation and the numerous court 
challenges. Again, as previously noted, FDA has tried to balance 
innovation in drug development and expediting the approval of lower-
cost generic drugs.
                   ii. direct to consumer advertising
Statutory and Regulatory Authority
    The promotion that manufacturers of prescription drugs (product 
sponsors) direct toward consumers and patients is referred to as 
``direct-to-consumer'' promotion or DTC. Such promotion uses multiple 
avenues for reaching lay audiences, including, but not limited to: 
television and radio advertisements, print advertisements, telephone 
advertisements, direct mail, videotapes and brochures. It is important 
to understand the scope of FDA's authority in this area. It is also 
important to understand the different types of advertisements that are 
directed toward consumer audiences.
    The FD&C Act and regulations do not distinguish between 
professional and consumer audiences. Section 502(n) of the FD&C Act 
specifies that prescription drug advertisements must contain ``a true 
statement of . . . information in brief summary relating to side 
effects, contraindications, and effectiveness'' of the advertised 
product. The implementing regulations (Title 21, Code of Federal 
Regulations [CFR] Section 202.1), originally issued in the 1960s, 
specify, among other things, that prescription drug advertisements 
cannot be false or misleading, cannot omit material facts, and must 
present a fair balance between effectiveness and risk information. 
Further, for print advertisements, the regulations specify that every 
risk addressed in the product's approved labeling must also be 
disclosed in the advertisements.
    For broadcast advertisements, however, the regulations require ads 
to disclose the most significant risks that appear in the labeling. The 
regulations further require that the advertisement either contain a 
summary of ``all necessary information related to side effects and 
contraindications'' or convenient access must be provided to the 
product's FDA- approved labeling and the risk information it contains.
    Finally, the FD&C Act specifically prohibits FDA from requiring 
prior approval of prescription drug advertisements, except under 
extraordinary circumstances. Also, the advertising provisions of the 
FD&C Act do not address the issue of drug product cost.
Types of Advertisements
    There are three different types of ads that product sponsors use to 
communicate with consumers: ``product-claim'' advertisements, ``help-
seeking'' advertisements, and ``reminder'' advertisements. 
Advertisements that include both a product's name and its use, or that 
make any claims or representations about a prescription drug, are known 
as ``product-claim'' advertisements. These ads must include a ``fair 
balance'' of risks and benefits. In addition, they must provide all 
risk information included in the product's FDA-approved labeling or, 
for broadcast advertisements, provide convenient access to this 
information. In our regulations, the phrase ``adequate provision'' is 
used to identify the convenient access option. Unlike the ``product 
claim'' ads, ``help-seeking'' advertisements and ``reminder'' ads need 
not include any risk information.
    A ``help-seeking'' advertisement discusses a disease or condition 
and advises the audience to ``see your doctor'' for possible 
treatments. Because no drug product is mentioned or implied, this type 
of ad is not considered to be a drug ad and FDA does not regulate it.
    The second type of advertisement that does not need to include risk 
information is called a ``reminder'' advertisement. The regulations 
specifically exempt this type of ad from the risk disclosure 
requirements. Like ``help-seeking'' ads, the ``reminder'' ad is 
limited, although in a different way from ``help-seeking'' ads. 
``Reminder'' ads are allowed to disclose the name of the product and 
certain specific descriptive (e.g., dosage form) or cost information, 
but they are not allowed to give the product's indication or dosage 
recommendations, or to make any claims or representations about the 
product. The exemption for ``reminder'' ads was included in FDA's 
regulations for promotions directed toward health care professionals, 
who presumably knew both the name of a product and its use. 
``Reminder'' ads serve to remind health care professionals of a 
product's availability. They specifically are not allowed for products 
with serious warnings (called ``black box'' warnings) in their 
labeling.
Evolution of DTC Promotion
    Prior to the early 1980s, prescription products were not promoted 
directly to consumers and patients. Instead, product sponsors often 
produced materials that were given to health care professionals to pass 
on to patients if they thought this would be appropriate for particular 
patients. In the early 1980s, a few companies started advertising 
products directly to patient audiences (specifically, older people 
concerned about pneumonia and people taking prescription ibuprofen to 
treat arthritis pain). As a result of questions and concerns about 
promotion directed toward non-health care professionals, in 1983 FDA 
requested that sponsors suspend DTC ads to give the Agency time to 
study the issue.
    The industry complied with this request, and during the ensuing 
moratorium FDA conducted research and sponsored a series of public 
meetings. In 1984, the University of Illinois and Stanford Research 
Institute jointly sponsored a symposium to discuss consumer-directed 
prescription drug advertising from a broad research and policy 
perspective. On September 9, 1985, FDA withdrew the moratorium in a 
Federal Register (FR) Notice (50 FR 36677), which stated that the 
``current regulations governing prescription drug advertising provide 
sufficient safeguards to protect consumers.''
    During the early 1990's, product sponsors increasingly used 
consumer magazines to advertise their products. These ads typically 
included a promotional message together with the ``brief summary'' of 
adverse effects, similar to that used in physician directed ads. The 
``brief summary'' statement, which frequently appears in small print, 
is not very consumer friendly. In the 1990s, product sponsors also 
started using television advertisements in a limited fashion. 
Television advertisements were limited because FDA and industry did not 
believe that it was feasible to disseminate the product's approved 
labeling in connection with the ad. The extensive disclosure needed to 
fulfill this requirement essentially precluded the airing of such ads. 
For example, one way to satisfy this requirement would be to scroll the 
``brief summary,'' which would take a minute or more even at a barely 
readable scrolling rate. The industry, therefore, resorted to 
television ads that did not require risk disclosure.
    By the mid-1990s, product sponsors started placing ``reminder'' ads 
on television. Because these ads only mentioned the name of the drug, 
however, they were extremely confusing to consumers, who, unlike health 
care professionals, were not knowledgeable about the name and the use 
for these products.
    In response to increasing consumer demand for information, FDA 
began to consider whether broadcast advertisements could be constructed 
to ensure access to product labeling, the only alternative to including 
all of an advertised product's risk information. FDA considered 
suggestions about providing access to multiple sources of product 
labeling as a means of satisfying the requirement that consumers have 
convenient access to FDA-approved labeling when manufacturers broadcast 
a ``product-claim'' advertisement.
    In August 1997, FDA issued a draft guidance entitled: ``Guidance 
for Industry: Consumer-Directed Broadcast Advertisements'' that 
clarified the Agency's interpretation of the existing regulations. The 
Guidance described an approach for ensuring that audiences exposed to 
prescription drug advertisements on television and radio have 
convenient access to the advertised product's approved labeling. The 
proposed mechanism consisted of reference in the broadcast 
advertisement to four sources of labeling information: a toll-free 
telephone number, a website address, a concurrently running print 
advertisement, and health care professionals. Following a comment 
period, and detailed review and consideration of the comments, FDA made 
only minor changes to the draft guidance, and issued it in final form 
in August 1999 (64 FR 43197, also found at http://www.fda.gov/cder/
guidance/1804fnl.htm). In announcing the final guidance, FDA advised 
that the Agency intended to evaluate the impact of the guidance, and of 
DTC promotion in general, on the public health, within two years of 
finalizing the guidance.
Stakeholder Perspectives
    A number of stakeholder groups have expressed strong interest in 
DTC promotion. Those that are positive about DTC promotion assert that 
this practice will:

 Improve consumers' knowledge of drugs and drug availability.
 Encourage consumers to talk with their health care providers 
        about their health problems.
 Allow consumers and patients to have a greater role in 
        decisions about their own health care that they say they 
        desire.
 Improve communication between patients and their physicians.
 Improve appropriate prescribing by allowing physicians to get 
        more information about their patients from their patients.
 Lower the cost of prescription drugs. Not all stakeholders are 
        positive about DTC promotion. Opponents assert that DTC 
        advertising will:
     Confuse consumers about drugs.
     Make it appear that prescription drugs are safer than they 
            are.
     Interfere with the patient-physician relationship because 
            patients will insist that their physicians prescribe the 
            advertised products.
     Increase inappropriate prescribing.
     Raise the cost of prescription drugs.
    Finally, there is a group of stakeholders with a less polarized 
view of DTC promotion. They believe that such promotion has both 
benefits and risks, but that it should be strictly regulated, and that, 
preferably, all DTC materials should be ``pre-approved'' by FDA. They 
often assert that there are potential public health benefits associated 
with patients visiting health care providers about untreated diseases 
or conditions, particularly those that appear to be under treated in 
the population and that are responsible for long-term harm (for 
example, high cholesterol, high blood pressure, diabetes and 
osteoporosis).
Current Situation
    FDA recognizes that drug promotion raises certain issues for health 
care professionals and different issues for consumers, in light of 
differences in medical and pharmaceutical expertise. For this reason, 
FDA has monitored DTC promotion, and especially broadcast promotion, 
very closely to help ensure that adequate contextual and risk 
information, presented in understandable language, is included to 
fulfill the requirement for fair balance and to help the consumer 
accurately assess promotional claims and presentations.
    Product sponsors of prescription advertisements are required to 
submit their promotional materials to FDA around the time these 
materials are initially put into public use. FDA receives approximately 
32,000 of these submissions per year, for all types of promotion, 
including promotion to health care professionals. Product Sponsors also 
can submit draft materials to FDA for review and comment prior to using 
them. Division of Drug Marketing, Advertising and Communications 
(DDMAC) has made it a high priority to provide comments to product 
sponsors on voluntarily submitted draft broadcast advertisements within 
a reasonable time. In fact, although it is not required, a majority of 
product sponsors voluntarily submit their broadcast advertisements to 
DDMAC for prior review and comment at some point as advertising 
materials are being produced. Product sponsors may ask for review and 
comment at the very initial stages of production (by supplying the 
words they intend to use along with rough drawings of their proposed 
graphics), or at the later stages of final videotape production. DDMAC 
only gives final comments on final videotapes because inappropriate 
presentations can turn an otherwise acceptable advertisement into an 
unacceptable one (for example, by pacing the risk disclosure too 
rapidly, including multiple distracting visual images during the risk 
disclosure, or including images that overstate the efficacy of the 
product beyond what is supported by substantial clinical evidence).
    Since January 1997, sponsors of about 65 prescription drugs have 
aired ``product-claim'' advertisements on television or radio. A small 
number of prescription biological products also have been advertised. 
Nine products fall into the allergy category (nasal and ocular anti-
histamines, and nasally administered corticosteroids), while another 
eight products treat skin or hair-related problems (acne, cold sores, 
rosacea, baldness, unwanted facial hair, nail fungus). More 
importantly, ten products are designed to treat diseases that are 
believed to be under treated, including high cholesterol and heart 
disease, and mental health problems like depression. Five products to 
treat or prevent osteoporosis or menopausal symptoms have been 
advertised. Other advertised products are approved to treat such 
conditions or diseases as asthma, Alzheimer's Disease, arthritis, 
chronic obstructive pulmonary disease, diabetes, insomnia, migraine, 
obesity, overactive bladder, serious heartburn, smoking cessation, and 
sexually transmitted diseases. Most of these are serious problems where 
patients are in the best position to recognize symptoms.
    It is important to note that DDMAC does not know how many different 
advertisements have aired in broadcast media for these 65 drugs. There 
have been multiple campaigns for a number of the products, including 
the allergy and high cholesterol products. In addition, many campaigns 
include different length ``product-claim'' commercials, as well as 
multiple short ``reminder'' commercials. DDMAC does not track the 
number of different broadcast advertisements that are submitted. 
Further, because ``help-seeking'' advertisements, if done properly, are 
not considered to be drug ads, most product sponsors do not send them 
to DDMAC under the submission requirements for prescription drug 
promotional materials. Therefore, we have no measure of how many of 
these have been in the public domain.
Enforcement Related to DTC Promotion
    Since August 1997, FDA has issued:

 26 ``untitled'' (or ``Notice of Violation'') letters on 
        ``product-claim'' broadcast advertisements. Such letters 
        request that the violative promotion be stopped immediately. 
        Product sponsors virtually always comply immediately with this 
        request.
 3 ``warning letters'' on broadcast advertisements. This is a 
        higher-level enforcement action, and requests that a remedial 
        campaign be conducted by the company to correct the impressions 
        left by the ad.
 13 ``untitled'' letters on purported ``reminder'' broadcast 
        advertisements.
 3 ``untitled'' letters on purported ``help-seeking'' broadcast 
        advertisements.
    Most of the violations cited were because the ad overstated or 
guaranteed the product's efficacy, expanded the indication or the 
patient population approved for treatment, or minimized the risks of 
the product, through either inadequate presentation or omission of 
information.
    Since January 1997, the Agency has issued:

 43 ``untitled'' letters that addressed DTC print 
        advertisements or other promotional materials, including 
        purported ``reminder'' and ``help-seeking'' materials.
 1 ``warning letter'' that included a DTC print advertisement 
        as part of an overall misleading campaign.
    Generally, the violations involving print ads making ``product-
claim'' ads were similar to those cited above. Nearly all ``reminder'' 
ad violations were the result of representations about the product that 
triggered the need for full disclosure of benefits and risks. ``Help-
seeking'' ad violations were due to a particular product being implied 
in the message. As noted above, however, FDA cannot determine how many 
specific advertisements serve as the denominator for assessing how many 
have resulted in enforcement action compared with those that have not.
Research on DTC Promotion
    A number of groups have been conducting research on DTC promotion. 
Much publicly available research consists of surveys utilizing samples 
of consumers or patients to examine attitudes about DTC promotion and 
self-reported behaviors related to DTC promotion in the context of 
patient-physician visits and use of prescription drugs. The groups 
sponsoring this research include: Prevention magazine, TIME Inc., the 
National Consumers League, and American Association of Retirement 
People. A few surveys of physicians have been made partially publicly 
available. FDA remains concerned, however, about the representation of 
the physician surveys. In 1999, FDA sponsored a telephone survey that 
focused on a national probability sample of patients who had seen a 
physician for a problem on their own within the three months prior to 
the survey. The results of this patient survey suggested that patients 
are seeking additional information as a result of DTC promotions that 
they have seen. This information was sought primarily from health care 
professionals, and secondarily from reference texts and family. 
Generally, between 10 and 20 percent of respondents said that they 
sought additional information from the sources referenced in broadcast 
advertisements--toll-free telephone numbers, web sites, print 
advertisements. A major result, and one that is consistent with results 
of Prevention's national surveys, is that a significant minority of 
respondents said that a DTC ad has caused them to ask a doctor about a 
medical condition or illness they had not previously discussed. This 
could represent a significant and positive public health benefit, 
particularly if these patients are talking about undiagnosed heart 
disease or other serious disorders.
    The survey results also suggest that DTC advertisements are not 
significantly increasing visits to a physician's office. For the most 
part, patients said that they had recently visited their doctors for 
the traditional reasons: because it was time for a check-up (53 
percent), because they were feeling ill (42 percent), or because they 
had had a sudden symptom or illness (41 percent). Only two percent said 
that they had visited their doctor because of something they had seen 
or heard. Of those patients who had a conversation with their doctor 
about a prescription drug: 81 percent said that their doctor had 
welcomed the question, 79 percent said that their doctor discussed the 
drug with them, and 71 percent said that their doctor had reacted as 
though the conversation was an ordinary part of the visit. Only four 
percent said that their doctor seemed upset or angry when the patient 
asked about a prescription drug. According to the patients, therefore, 
physicians seem to be reacting well to questions about prescription 
drugs. Finally, only 50 percent of these patients said that their 
doctor gave them the medication discussed. Thirty-two percent said that 
the doctor recommended a different drug. Twenty-nine percent of the 
respondents indicated that behavioral or lifestyle changes were 
suggested by the doctor. It therefore appears, from FDA's data, that 
physicians are comfortable denying prescriptions when the prescription 
would not be right for the patient.
    A small number of patients who were denied prescriptions said that 
their doctors told them why. Reasons included: the drug wasn't right 
for the patient; the doctor wanted the patient to take a different 
drug; the drug had side effects of which the patient was unaware; the 
patient did not have the condition treated by the drug; the patient did 
not need a prescription drug; the patient could use a non-prescription 
drug; and, there was a less expensive drug available.
    Patients also were asked about their attitudes about prescription 
drug advertisements. Their answers indicated somewhat mixed feelings. 
Eighty-six percent agreed that these ads help make them aware of new 
drugs, 70 percent agreed that the ads give enough information to help 
the patient decide if they should discuss the product with a doctor, 
and 62 percent agreed that ads help the patients have better 
discussions with their doctors about their health. Only 24 percent 
agreed that DTC ads make it seem like a doctor is not needed to decide 
whether a drug is right for someone. In contrast, 58 percent agreed 
that DTC ads make drugs seem better than they really are, 59 percent 
agreed that ads do not give enough information about the advertised 
product's risks and negative effects, and 49 percent agreed that these 
ads do not give enough information about the benefits and positive 
effects of the advertised product.
Next Steps
    In issuing both the draft and the final broadcast advertisement 
guidance, FDA stated its intent to assess the impact of the guidance, 
and of DTC promotion in general, on the public health. FDA is also 
aware that privately funded research is being planned to examine the 
effects of DTC promotion. At present, FDA is not aware of any evidence 
that the risks of DTC promotion outweigh its benefits. FDA intends to 
carefully examine all available data, to determine whether the public 
health is adequately protected.
        iii. prescription drug switch to over-the-counter status
    The FDA is responsible for the reclassification of many drugs from 
prescription to OTC status. These are often referred to as ``switch 
drugs,'' and the reclassification process is referred to as ``switching 
from prescription to OTC.'' Nearly forty ingredients incorporated into 
drug products have been reclassified since 1972 when the OTC drug 
review began.
    Under the FDA's Office of OTC Drug Evaluation, a process was 
established for producing a final regulation to set standards for each 
drug product-treatment category. Nearly forty ingredients has been 
reclassified using this process since 1972 using this process.
    Switches are covered by the prescription exemption procedures, 
found in 21 CFR 310.200. Switches can be initiated by FDA, the sponsor 
of a new drug application, or by any interested party. The OTC drug 
product can be marketed under a NDA or under the process established by 
regulation. The switch may be:

1. A complete switch whereby all of the indications and dosage forms 
        are switched from prescription to OTC status;
2. A partial switch whereby some of the prescription indications and 
        dose regimens are switched to OTC status and the others remain 
        prescription.
    Historically, the majority of drugs that have been switched from 
prescription-only to OTC marketing were at the initiated by the 
sponsor. The FD&C Act restricts drugs to prescription only status if a 
learned intermediary is required for the proper use of the drug. As 
written, the default assumption of the Act is for drugs to be marketed 
OTC without a prescription unless a decision is made that consumers are 
not able to appropriately diagnose their condition nor able to 
correctly choose the remedy and safely use it based on OTC labeling.
    Anyone may submit a citizen petition. Individuals sometimes submit 
petitions, but most come from the regulated industry or consumer 
groups. For the first time, a third party has asked the FDA to 
reclassify a drug through the citizen petition process. Because the 
petition is still under review, we cannot comment on it at this time. 
FDA may use a wide range of public procedures (e.g., conferences, 
meetings, correspondence, hearings) during the process of evaluating 
the petition and to assist in the formulation of a final response.
    In the process of responding to a petition, the Agency creates an 
administrative record, a comprehensive documentary foundation for the 
agency's final decision. The Agency's grant or denial of a petition, 
which usually is in the form of a letter to the petitioner, constitutes 
a final agency action. The Agency may also issue a tentative response 
explaining that the Agency has not yet reached a final decision on 
whether to grant or deny the petition. When FDA issues a final 
decision, however, it may be appealed through the court system.
    As with any petition, FDA is studying the scientific and legal 
issues it raises in an effort to make the best science-based decision 
under the law.
    We look forward to the Committee's continued interest in this area 
and would be happy to answer any questions.

    Mr. Bilirakis. Thank you, Dr. Woodcock.
    I'll start the questioning and depending on how the day 
goes and calls for votes, we might go into a second round of 
questioning of Dr. Woodcock. I've already discussed this with 
Mr. Brown.
    In this first round at least, Dr. Woodcock you used the 
term, if I heard you correctly, directly substitutable 
referring to the approval of generics. Do you believe that the 
public recognizes the fact--well, maybe I should ask you. Do 
you believe that generics are bio-equivalent directly 
substitutable to innovator drugs when they've been approved by 
the FDA?
    Ms. Woodcock. Yes. We have scientific basis for our 
decisions on bio-equivalence and substitutability. And we would 
not approve a generic drug that was not fully substitutable for 
the innovator drugs.
    Mr. Bilirakis. Do you believe that the public recognizes 
the fact that they are in fact directly substitutable and use 
the term bio-equivalent to those drugs?
    Ms. Woodcock. I know that members of the public, the 
pharmacy community and the medical community, some of them have 
serious doubts about substitutability perhaps for certain drug 
classes or perhaps overall. There's a lot of misunderstanding 
about the program.
    Mr. Bilirakis. We've heard physicians on both sides of the 
aisles. We had Dr. Coburn who served on this panel who used to 
make comments, at least to me personally, that he didn't think 
that all the drugs that were approved as being bio-equivalent 
actually fell into that category.
    What does it mean when we say the drug is bio-equivalent to 
another drug?
    Ms. Woodcock. What we mean is that the active ingredient in 
the drug is available in the same concentration in the pill or 
injection, or whatever it might be, it's exactly the same as 
the innovator product and that we know that the rate and extent 
of absorption into the body of that active ingredient is 
equivalent. That's what we mean by bio-equivalence; that when 
you take that pill, for example, you get the same drug level 
within the body as you would by taking the innovator product.
    Mr. Bilirakis. Is there any room for error? Is there a 
safety factor in there somewhere?
    Ms. Woodcock. All of these measurements have variability to 
them, particularly bio-equivalence. If you took a drug and I 
took a drug, it would be very likely we would wind up with 
slightly different blood levels for a variety of reasons. We 
have to take that into account when we test generic drugs for 
bioavailability. But a recent survey that was done showed that 
innovator products and generic products on absorption into the 
body, looking at the actual data there was less than 3 percent 
difference in the tests.
    Now, if you tested an innovator product from day-to-day or 
lot-to-lot, you may well see the same amount of variability, 
and that's what people don't understand.
    Mr. Bilirakis. If a patient were on a drug therapy using an 
innovator drug, could they in the middle of the stream, so to 
speak, switch into a generic drug that is considered to be bio-
equivalent and no problems develop from that essentially?
    Ms. Woodcock. That is correct.
    Mr. Bilirakis. That is correct?
    Ms. Woodcock. And there's no need for additional tests or 
titration or changes of the dose if they switch to an 
equivalent generic product.
    Mr. Bilirakis. In my opening statements, Doctor, thank you 
for that statement, there's a concern out there I think among 
many members of the public and still among the medical 
profession, as we both already said, that they are not bio-
equivalent.
    Ms. Woodcock. That's right.
    Mr. Bilirakis. I think that's one of the things that I 
wanted to do in this hearing. I know the subject matter is 
varied in this hearing, but I wanted to be sure that we were 
able to project to the American people a feeling of confidence.
    In my opening statement I made the comment that FDA seems 
to take longer to approve generic drugs. Is that true?
    Ms. Woodcock. The mean time for generic drug approval right 
now is about 18 months, whereas for a new drug it's around 12 
months. That's correct.
    Mr. Bilirakis. Is there a reason why it takes longer?
    Ms. Woodcock. Well, significant resources were placed into 
the new drug review process. FDA added over a 1,000 scientists 
and reviewers as a result of the Prescription Drug User Fee Act 
and subsequent changes to that.
    Mr. Bilirakis. Should it be 18 months versus 12 months? 
Why? Is there a greater emphasis on safety there, just the fact 
that we are saying that this non-innovator drug is bio-
equivalent and thereof it takes us longer to do it?
    Ms. Woodcock. The reason the generic drug takes longer, 
usually, is that the application goes through several cycles. 
We are responsible for reviewing a generic drug within 180 days 
and getting an answer back. We only do that right now--we do 
that about 55 percent of time. We get them reviewed within 180 
days. But that's much shorter than 18 months.
    The problem is the answer is frequently no, that the 
generic drug applicant does not meet all the standards and 
there are remaining questions. Therefore, it must go back to 
the sponsor. The application must be resubmitted and then 
another review cycle occurs, and sometimes even a third review 
cycle occurs that's causing the actual time to getting on the 
market to be up to 18 months.
    Mr. Bilirakis. Thank you.
    I think we're having problems with the clock. But my time, 
I believe, has expired.
    Mr. Brown to inquire?
    Mr. Brown. Thank you, Mr. Chairman.
    I'm not sure I understood that. I understand that it's 12 
months--typically an NDA is 12 months and ANDA amended for the 
generic is 18 months. Part of the reason for that is Congress 
passing--I understand part of the reason is Congress passing 
PDUFA 2 or whatever we ended up calling it under the New 
Prescription Drug User Fee Act. There are no generic user fees, 
correct?
    Ms. Woodcock. That's correct.
    Mr. Brown. But explain why beyond resources, and 
understanding resources are a big part of it, why is the 
generic company not able when submitting its application to, in 
a sense, do it right the first time? Is that a product of 
inadequate resources in the agency?
    Ms. Woodcock. I believe there are several factors, and that 
if the agency were able to provide more assistance to generic 
firms, then we would have better applications and we would have 
lower cycles. That's actually what happened under the 
Prescription Drug User Fee Act. Much of the resources that we 
have under the User Fee Act go to providing advice and 
explaining the standards to the sponsors so that the 
applications are of good quality when they are first submitted.
    So, of course, there are other factors that are involved. 
Some generic firms are smaller, they may be inexperienced, it 
may be the first time they put a product forward and they have 
to go through many cycles.
    Mr. Brown. If you assume that name brands have--the name 
brand approval process, the NDA approval process is adequately 
resourced, funded, staffed, whatever from the FDA's vantage 
point and if you would make that same assumption for ANDA if we 
could in fact fund it however it might be done at an equally 
adequately, what would the time be--the 18 months would be able 
to be knocked down to what time period?
    Ms. Woodcock. It's probably unlikely that we could get to 6 
months or something like that.
    Mr. Brown. But certainly less than 12, correct?
    Ms. Woodcock. Probably that's correct.
    Mr. Brown. I mean it shouldn't--let me interrupt. Sorry.
    It should be easier--we should be able to accomplish it 
more quickly the ANDA than the NDA, right?
    Ms. Woodcock. I was just going to say that. Exactly, it is 
a simpler application.
    One of the issues is to what extent can we get the generic 
drug sponsors to submit an approvable application on the first 
cycle so that it could be reviewed and approved on the first 
cycle. If that doesn't happen, then the clock will run twice, 
at least, and it's going to be 1 year.
    Mr. Brown. It seems, Mr. Chairman, that one of the goals of 
this subcommittee and this full committee should be to bring 
that period down, that should be something we can agree on 
across the board in both parties. If it takes 12 months for the 
new application, that we can't get it to 12 or fewer months for 
the ANDA. And I know we've talked about it, and your interest 
is that for sure, too, that it's something we ought to be able 
to do.
    Ms. Woodcock. Could I say one more thing about this? There 
are several factors that are related.
    Many of the drug manufacturers for generic drugs are 
located overseas, particularly the bulk drug applications. And 
to try and--bulk drug manufacturers. To get to those overseas 
firms in a timely manner is a challenge, because they're all 
over the world.
    Also, right now we have queues, waiting time, within the 
Office of Generic Drugs before picking up an application. They 
have to wait in a queue until the ones in front. We have very 
strict timeframes. So that's another factor that impacts on our 
ability to get these out quickly.
    Mr. Stupak. We'll run this point on the drugs. The generic 
drugs when they do an application do they pay a fee under the 
User Fee Act?
    Ms. Woodcock. No.
    Mr. Stupak. But a regular drug, a new drug applications 
pays about $309,000 I think is the average for a fee?
    Ms. Woodcock. That's correct.
    Mr. Stupak. So what you're really saying, the process is 
really driven by whose paying the fee at the time of the 
application?
    Ms. Woodcock. The process is driven by the statutory 
structure that's set up. The fees for prescription drugs--the 
prescription drug user fees are only allowed to be used for the 
process of review of new human drugs.
    Mr. Stupak. Well, what you're telling this committee is if 
you're a generic when you make your application, your chance of 
being approved in 180 days is 55 percent. But now the new drug 
companies when they put down a $309,000 fee, the last 2 years 
you've approved all those within a 100 percent of the time 
isn't that correct?
    Ms. Woodcock. This is a continual source of confusion. The 
review time, time to answer for a generic would be 180 days. It 
might often be no. That's----
    Mr. Stupak. What's the time to answer on a regular drug, a 
new drug application?
    Ms. Woodcock. Twelve months.
    Mr. Stupak. Twelve months.
    Ms. Woodcock. Yes.
    Mr. Stupak. But you do those 100----
    Ms. Woodcock. Ten to 12 months.
    Mr. Stupak. [continuing] percent of the time for the last 2 
years, right?
    Ms. Woodcock. We make those deadlines, right. We don't 
approve them all in that time, but we get an answer back 100 
percent of the time, that is correct.
    Mr. Stupak. Thank the gentleman for yielding.
    Mr. Bilirakis. The gentleman's time has expired.
    Mr. Deal to inquire.
    Mr. Deal. Thank you, Mr. Chairman.
    And thank you, Dr. Woodcock, for being here today.
    I'd like to explore with you briefly the issue of switching 
a drug from a prescription drug status to an over-the-counter 
status. And in order to understand that, let me first of all 
ask you are there some drug applications that FDA approves that 
are initially nonprescription and over-the-counter? And if so, 
what percentage would you estimate that might be of 
applications?
    Ms. Woodcock. The answer is yes, there are some drugs that 
are approved directly for the first time as an over-the-counter 
drug under a new drug application. And it's a very small 
percentage, perhaps 1 percent. I can't--I don't have the data.
    Mr. Deal. Are those usually at the request of the 
manufacturer that they be over-the-counter or is that a 
decision that FDA makes initially in those cases?
    Ms. Woodcock. We might discuss it. Frequently it is the aim 
of the manufacturer from the start, but we have discussed it 
with some manufacturers as to whether--what market their 
product is most appropriate for.
    Mr. Deal. So in 99 percent of the cases or roughly 
thereabouts they are asking for a protected prescription type 
status?
    Ms. Woodcock. That's correct.
    Mr. Deal. And is the determination in most cases to switch 
it from prescription to over-the-counter status made during the 
timeframe of their initial patent protection exclusivity period 
or is it normally made after that exclusivity has expired?
    Ms. Woodcock. It's normally made afterward, and there are 
several factors that go into that.
    Mr. Deal. But normally they have had their initial 
protected period in which they are allowed to be by 
prescription only in most cases?
    Ms. Woodcock. Yes, these things are not exactly linked, all 
right, and they may be linked economically. But the 
prescription status has to do with safety and effectiveness 
concerns about the drug, prescription versus nonprescription 
status. But you're right.
    Mr. Deal. But in that regard your statement was that the 
determination by FDA to switch it was not based on a cost 
factor?
    Ms. Woodcock. That's correct.
    Mr. Deal. So therefore I assume it is based on a 
determination that it is now safe to be in a nonprescription 
status. Does that mean then that FDA conducts ongoing 
investigations and research to make that determination?
    Ms. Woodcock. No, we usually do not. I think I ought to 
stress that most drugs never switch to over-the-counter. The 
vast majority of drugs remain prescription, and this has to do 
with what we call OTC-ness, if you'll excuse the term. And that 
has to do with, can the consumer diagnose this condition 
themselves, all right, No. 1. And then No. 2, is the drug safe 
enough to be used in the consumer's hands as far as side 
effects and so forth.
    So we go through a series of factors. Most drugs never 
switch off prescription status, either because the doctor is 
needed to diagnose the condition or monitor the condition or 
because the drug has safety or other issues around it that 
would not permit it to be used by a consumer. But in cases 
where there is a possibility for a switch, typically the 
manufacturer will pursue the additional studies required to 
demonstrate that OTC-ness.
    Mr. Deal. But I gathered from your initial testimony that 
in most cases the switches are without the consent and 
sometimes over the objection of the manufacturer. If that is 
the case and FDA does not conduct ongoing research to make the 
determination about whether or not the individual is able to 
prescribe his own medication, in effect, then how is that 
determination made? If the manufacturer is in effect saying 
they don't think it is ready to be over-the-counter, but you're 
saying that it is but you've conducted no research, how do you 
arrive at that conclusion?
    Ms. Woodcock. I'm afraid I was unclear. The vast majority 
of manufacturers want to switch their products, but in this 
current situation that we're facing, in fact, FDA had to do--
had to assume some of the burden of evaluating the safety of 
these products in response to citizen petition, and also the 
petitioner submitted data to us as well.
    Mr. Deal. One final question, Mr. Chairman.
    Does FDA take the position that it has the authority to 
switch from prescription to over-the-counter status without the 
request being made by the manufacturer?
    Ms. Woodcock. Yes, we have that authority.
    Mr. Deal. And what is the basis, in your opinion, of that 
authority, which statute?
    Ms. Woodcock. The Food, Drug and Cosmetic Act, Durham-
Humphrey Amendments. We feel there is a presumption of 
nonprescription marketing of drugs unless there is a need for 
the learned intermediary to be interposed for safety or 
effectiveness reasons.
    Mr. Deal. Would that be the authority of Section 503(d)(3)? 
That's all right to ask, I was given that number myself.
    Ms. Woodcock. We can get back to you.
    Mr. Deal. All right.
    Ms. Woodcock. Sorry.
    Mr. Deal. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Pallone to inquire.
    Mr. Pallone. Thank you, Mr. Chairman.
    Dr. Woodcock, in your testimony you went through some 
detail about this Orange Book Listing, and I have to say it's a 
little confusing to me. But it's my understanding that with the 
patent listing process that the FDA is required to list all 
patents in this Orange Book and you're not in the business of 
determining the validity of the patents coming out of the 
Patent Office, you state that, you just list the submitted 
patents. And then further on you said if the generic applicant 
files a paragraph IV certification and is sued for patent 
infringement within 45 days, there's an automatic stay of 30 
months substantially delaying the approval of the generic drug 
and the availability of lower cost generic drug products.
    Now, I guess what I wanted to ask is that it seems like 
this is an open invitation to submit frivolous patents, you 
know, just to trigger the 30 month hold on approval for a 
generic. And in our--Mr. Brown's bill in the GAAP Bill we 
eliminate this automatic 30 day delay, you know, when the brand 
name sues a generic. And, you know, I think that is a good 
thing because, you know, the public has a lot to gain from 
eliminating these frivolous suits. And, as you say, trying to 
bring the generics on the market so we can low cost affordable 
drugs.
    I just wanted you--if you would comment on that? I mean, 
would you be in favor of this provision in the bill, in the 
GAAP Bill?
    Ms. Woodcock. The Administration has not finalized its 
position on that, so I really can't comment.
    I will say that, as I indicated in my oral testimony, that 
in recent years we have seen an increase in paragraph IV 
certifications and all the ramifications around that, it's been 
a fairly remarkable increase. And this may reflect the impact 
of court cases in the last decade and those decisions. And I am 
concerned about the implications of this for our continuing to 
operate the generic drug review program.
    Mr. Pallone. Do you have any kind of analysis of that that 
we could have that you could send us?
    Ms. Woodcock. We can provide that, yes.
    Mr. Pallone. All right. I'd certainly appreciate it.
    Ms. Woodcock. We'd be glad to do that.
    Mr. Pallone. But the problem is, it's not so much the law 
doesn't allow you to look at this, but you just don't have the 
resources, is that what you're saying?
    Ms. Woodcock. The statute, if I understand correctly, says 
FDA shall list--is that correct? Shall publish patent submitted 
by the innovator----
    Mr. Pallone. So you don't think you legally have the right 
to look into it?
    Ms. Woodcock. No, I'm not a lawyer, but that is what our 
legal interpretation----
    Mr. Pallone. It's more resources, the law's not clear.
    Ms. Woodcock. Well, I can't interpret the law. I'm sorry.
    But if we were asked to do such a thing, I would have to 
say it would significantly divert resources from the scientific 
review of generic drugs that we are currently undertaking.
    Mr. Pallone. Okay. Well, I appreciate it if you could send 
us some information of what you've seen develop in that regard. 
That would be helpful, I think.
    I also wanted to ask you a question about generic 
biologics. Senator Hatch in a recent speech pointed out that 
unless a way is found for the FDA to approve generic biologics 
with the same efficiency that it currently approves other 
generic drug products, neither the government nor I guess the 
private sector would be able to afford to pay for the drugs of 
the future. Do you agree with that? Does the FDA have the 
authority to approve generic biologics?
    Ms. Woodcock. Products that are approved under the Public 
Health Service Act are often considered biologics. It depends 
on what you mean by biologics. But that statute does not have 
the provision for generics. So, there's actually no statutory 
framework.
    There are also major scientific issues that relate to the 
approval of recombinant protein products.
    Mr. Pallone. So, again, it's partially you think that the 
statute impartially, you know, resources or ability to do it?
    Ms. Woodcock. That's correct. There are some recombinant 
products that are approved as drugs and regulated by the Center 
for Drugs under Section--under the Food, Drug and Cosmetic Act 
and we are certainly evaluating what path we could follow, 
because those are subject to Waxman-Hatch Act.
    Mr. Pallone. Okay. Thank you.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Bryant to inquire.
    Mr. Bryant. Thank you, Mr. Chairman.
    And let me add my welcome to Dr. Woodcock.
    Also, in just following up, I have a couple of quick 
questions about the advertising issue and understanding that 
your testimony I think reenforces to some extent an 
appropriateness of advertising insofar as it reaches under 
treated conditions and diseases. Could you elaborate on that 
just a little bit more? Very quickly. I know you referenced it 
earlier.
    Ms. Woodcock. Certainly. We looked at, for example, the top 
causes of death, the diseases that are top causes of death in 
the United States now, and we looked at the direct-to-consumer 
advertising that is currently occurring, and many of the 
conditions leading to death, premature death in the United 
States are subject to direct-to-consumer ads that have been 
aired in the last few years.
    Now, we recognize that the ads being driven by commercial 
considerations may not advertise all drugs that are available, 
only the ones probably that are on patent, for example. But 
they may have the potential to increase awareness among 
consumers and patients of these conditions and the availability 
of effective treatments.
    Mr. Bryant. And ultimately a down side, of course, is that 
the patient goes to the doctor's office and demands this drug 
whether it's necessary or not? Of course, the ultimate in that 
case, too, as the gatekeeper in this situation the doctor has 
clearly, you know, a duty to say you don't need that drug, you 
don't have that condition or whatever. So that should work 
itself out in most every case, I would hope, if the doctor's a 
competent physician he certainly wouldn't prescribe a drug for 
a patient that he believed did not need it?
    Ms. Woodcock. One would hope so. I think we have done some 
surveys of patients, and that's detailed in my written 
testimony, and from the patient's point of view this 
advertising has provided an opportunity for them to go and talk 
to their doctor and mention their condition and ask is the drug 
right for me. In many of those cases their physician has said 
the drug is not right for you, and there have been a variety of 
reasons; you don't have the condition, this drug is too 
expensive you should use another drug, or these are side 
effects you may not wish to face.
    Mr. Bryant. Good. On the over-the-counter issue I 
understand your testimony that the bulk of FDA's decisions to 
move it over from a prescribed status over to OTC status, by 
far and away the majority of these decisions are with the 
manufacturer's agreement and consent. And, in fact, I assume 
these are all initiated by the manufacturer. But now----
    Mr. Bilirakis. Is that right, are they all initiated----
    Ms. Woodcock. Generally, a vast majority. That's correct.
    Mr. Bryant. Who else would initiate it if not the 
manufacturer?
    Ms. Woodcock. Well, sometimes the FDA in past cases have 
said ``Look, this drug looks a lot more like an over-the-
counter drug than a prescription drug, maybe you ought to 
reassess your target or your market.''
    Mr. Bryant. Based on what types of studies to show that it 
was safe to do so?
    Ms. Woodcock. Right, and based on the----
    Mr. Bryant. Well, who would make the those studies when the 
FDA initiates it?
    Ms. Woodcock. The sponsor has agreed with that and gone 
ahead and targeted the product toward the OTC world.
    Mr. Bryant. Do you have other entities or groups that have 
initiated these types of requests before?
    Ms. Woodcock. Not historically, but we can't foresee what 
the future may hold. It may become more common.
    Mr. Bryant. Can you give me any example of where there's 
been another party, particularly a third party payer or an 
insurance company that's done this before?
    Ms. Woodcock. We tried to search our memory banks for this, 
and we could not come up with an example where this exact 
scenario has occurred before.
    Mr. Bryant. The reason I asked this is that I take one of 
the drugs that's in play here, and I was back in my District 
over the weekend and I had a constituent come up to me 
unsolicited not knowing we were going to have this hearing and 
ask about this, and they take that same drug. And they're not 
really happy, as I'm not really happy about this being perhaps 
transferred over to an OTC category simply based on economic 
reasons. And I know an awful lot of the physicians out there 
that originally were in this business also are concerned with 
this. And I would hope that the FDA would take all this into 
consideration.
    I think we're breaking new ground here, if I'm not wrong, 
and perhaps setting some bad precedent and perhaps too much 
interference in allowing economic driven reasons to have too 
much of a play in terms of medical treatment.
    So, again, I would hope that if indeed--and I stress the 
word if the FDA has that authority to make this switch even 
over the objection of the manufacturer, I would hope the FDA 
would look down the road also and say ``Well, whose going to do 
the safety testing'' if you've got a manufacturer who opposes 
this transfer and, again, to look at those types of 
considerations, too.
    Do you have an opinion? This would be my last question in 
this round. You know, over the objection of manufacturer, who 
would perform the safety tests that are necessary before the 
FDA would--to allow the FDA in effect to make this switch in 
categories?
    Ms. Woodcock. These are very product line specific. In the 
case of the antihistamines, as you know, all sorts of allergy 
medicines and antihistamines are over-the-counter already. In 
addition, there's been a marketing history of these products in 
question. That would be quite different for some other product 
at some other stage of its marketing, for example.
    So I can't give a specific question, but obviously we need 
the safety data base, FDA, to make these kind of evaluations. 
And I can assure you that economics will not play a role in our 
decisionmaking. I understand, and we all understand there are 
economic factors on both sides of this particular issue. And 
that's not the basis for FDA's evaluation of these issues.
    Mr. Bilirakis. Should the FDA have that authority, the 
unilateral authority that you insist they have? Should they 
have it?
    Ms. Woodcock. To switch a product over-the-counter? Yes, 
we----
    Mr. Bilirakis. You think you should have or you shouldn't 
have that authority?
    Ms. Woodcock. Yes, I think that is appropriate. We think 
that's appropriate. We have that authority now.
    Mr. Bilirakis. And you think it's appropriate.
    Mr. Bryant. Mr. Chairman, again, could I just follow up, 
and I'm not sure I had the answer on who will do the safety 
testing under those----
    Mr. Bilirakis. We're going to have a second round, Ed.
    Mr. Bryant. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Stupak?
    Mr. Stupak. Thank you, Mr. Chairman.
    Doctor, in the direct-to-consumer advertising in your 
testimony you said in August 1999 that you did a final 
regulation on it and then you go on to say that in announcing 
the final guidance, the FDA advised the agency intended to 
evaluate the impact of the guidance and of direct-to-consumer 
promotion in general on the public health within 2 years of 
finalizing the guidance.
    Ms. Woodcock. Yes.
    Mr. Stupak. So it'll be August of this year? Two years from 
1999?
    Ms. Woodcock. Yes.
    Mr. Stupak. So are you going to wait until August of 2001 
or have you been reviewing the impact?
    Ms. Woodcock. We have been reviewing the impact. We have 
some addition--as I said, we've done consumer survey, which of 
course doesn't totally evaluate public health impact. It gives 
one side of the picture. We're trying to work with private 
parties in academia and do further surveys.
    Mr. Stupak. So in response to I think it was Mr. Bryant's 
question, you said something about deaths related to--you were 
concerned about that. Explain that again to me.
    Ms. Woodcock. Death?
    Mr. Stupak. Yes, I thought you said deaths, maybe I 
misheard you.
    Ms. Woodcock. No. I'm sorry. I don't know what part of----
    Mr. Stupak. All right. Okay. So thus far in your 2 year 
review that's been going on how is direct-to-consumer 
advertising working? You mentioned about patients coming in 
saying I want this. Has it increased the risks of improper 
drugs being supplied and have all the risk with direct-to-
consumer advertising then been given to the consumer before 
they go into that doctor waving this advertisement to them?
    Ms. Woodcock. Right. As I said, we have done a consumer 
survey. We have--the Consumer's Report about their encounters 
with physicians, and that is detailed in my testimony. And what 
they have said is that this has spurred their conversations 
with their doctors, but in not all cases have they received the 
drug that they went to ask about or the condition.
    Mr. Stupak. You know, consumers tell us that they spend 
less time with their doctors. Are you saying direct-to-consumer 
advertising actually have patients spending more time with 
their doctors discussing?
    Ms. Woodcock. Well, what we hope that one of the benefits 
is that it will focus on the discussion between the physician 
and the patient on what is appropriate therapy, if any, for 
that condition.
    Mr. Stupak. And the final decision for the therapy, though, 
is left to the physician, correct?
    Ms. Woodcock. Always for prescription drugs.
    Mr. Stupak. Let's get back to the application fee submitted 
by new drug applications and generic drugs. In PDUFA, it was, 
wasn't it? Prescription Drug User Fee Act, when that came about 
did it distinguish that the money as generated from these new 
applications would only be used for new drug applications or 
did it distinguish that--did it say that generics could not be 
used?
    Ms. Woodcock. Yes. It restricted the use of the funds to 
new drug applications or the process of review of new human 
drugs. We also use it for IND investigational drug review.
    Mr. Stupak. But would it exclude generics?
    Ms. Woodcock. Yes. We have to keep very careful books and 
we cannot expend any funds from user fees on generic review.
    Mr. Stupak. Well, if the generics put forth the user fee, 
would that get them processed quicker?
    Ms. Woodcock. Well, I guess that would be up to the 
Congress.
    Mr. Stupak. Well, you tell me that, you know, you have 180 
days to make a decision on generic.
    Ms. Woodcock. That's correct.
    Mr. Stupak. But on a new drug, it's 1 year?
    Ms. Woodcock. Yes.
    Mr. Stupak. And generics have to go through two or three 
cycles, but it seems like new drug applications only have to go 
through one cycle, which is a 12 months deal and they get 
approved.
    Ms. Woodcock. Many of them. By no means all of them.
    Mr. Stupak. But in the last 2 years according to the L.A. 
Times article they would have been approved 100 percent. So for 
the last 2 years those new drug applications been a 100 percent 
approval within the cycle?
    Ms. Woodcock. No. People mix up approval and making our 
review times. We've 100 percent met our review times, many of 
those are a turn down.
    Mr. Stupak. Okay. What about review time with generic 
drugs, do you meet all of those?
    Ms. Woodcock. No, only 55 percent.
    Mr. Stupak. 55 percent?
    Ms. Woodcock. Right now.
    Mr. Stupak. So if you meet a 100 percent review time but 
only 55 with generics, would that number improve if there was 
money attached to the application?
    Ms. Woodcock. I think we could always do more with more.
    Mr. Stupak. Sure. So it really comes down to whether or not 
you're dedicating the resources to generic drugs is really the 
issue?
    Ms. Woodcock. It's certainly one of the factors that goes 
into the current approval times, which are 18 months.
    Mr. Stupak. Okay. So it's really not poor application by 
generic drug applications, it's just you don't have the 
resources available at the FDA to process them in a timely 
manner?
    Ms. Woodcock. Well, for example, in the Prescription Drug 
User Fee program back in the 1990's when this was started, one 
of the factors that was identified in the 3 year time to 
approval was that a poor quality of applications.
    Mr. Stupak. Okay.
    Ms. Woodcock. And part of that program was to work to 
develop very clear standards and guidance and assistance in 
meeting the standards.
    Mr. Stupak. Okay.
    Ms. Woodcock. And having high quality applications. That is 
something that could--we could ramp up our effort in the 
generic drug program.
    Mr. Stupak. You haven't done that with the generics saying 
here's how you improve your applications, the standards and 
here's what you've got to meet?
    Ms. Woodcock. We've done it within--we've done a lot within 
our limits of our ability and we have brought the times down.
    Mr. Stupak. Thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Burr to inquire.
    Mr. Burr. Thank you, Mr. Chairman.
    Welcome, Dr. Woodcock.
    Ms. Woodcock. Thank you.
    Mr. Burr. It's been a while. We're glad to have you back.
    Ms. Woodcock. Thank you.
    Mr. Burr. Let me ask you a few questions, if I could. I've 
tried to do catch up and reading your testimony that the FDA 
fully feels they have the authority to make a switch. Let me 
ask you about the process of that. Is that a written procedure 
of what the FDA goes through when petitioned either by a 
company for a switch to over-the-counter status, an outside 
group or in this most recent case, a third party?
    Ms. Woodcock. Yes. The OTC office established procedures 
that we go through.
    Mr. Burr. And how much interaction would they have with the 
line folks who actually go through the new drug applications on 
prescription drugs? How much are they involved in the process?
    Ms. Woodcock. They're very deeply involved in the process.
    Mr. Burr. Well, we would hope that they are.
    If the FDA can make a switch over the objection of a drug 
manufacturer, which I think we conclude you believe you can, 
can it do so without disclosing information which is otherwise 
protected by the Food, Drug Act and the Trade Secrets Act?
    Ms. Woodcock. I don't think so. I'd like to ask our 
lawyers. I have Kim Dettelbach here. Would you like to comment 
on that? You'll have to come up to the table. Or would you 
prefer not to comment?
    Mr. Burr. Would one interrupt that all the information is 
available post approval or is there information that is 
protected?
    Ms. Woodcock. I think the answer, perhaps, to your question 
is that we obviously can't disclose trade secret information 
and that is an issue that we would have to deal with.
    Mr. Burr. And is there a written process as to how you deal 
with that?
    Ms. Woodcock. As I said in my testimony, we really haven't 
faced this particular set of issues previously.
    Mr. Burr. If a manufacturer objects to a forced switch to 
over-the-counter status and refuses to remove the Rx from its 
label, the prescription from its label, what recourse would the 
FDA have and would this be misbranding in violation of Food, 
Drug and Cosmetic Act?
    Ms. Woodcock. I'd prefer not to answer that question right 
now, because it's a legal question. But I believe we would have 
legal recourse that we could take.
    Mr. Burr. Okay. That's sufficient.
    Ms. Woodcock. All right.
    Mr. Burr. Upon the submission of a new drug application can 
the FDA force a drug to be sold over-the-counter though the 
manufacturer may wish to sell the drug by prescription only? In 
other words, can you make the determination of an over-the-
counter direction at the beginning of the application based 
upon your authority today?
    Ms. Woodcock. Yes, I believe that would be the same as our 
authority to force a switch. It would be much less likely 
because of the lack of data available on that particular drug 
at the beginning of the process.
    Mr. Burr. So it is unlikely that the FDA would use their 
authority to make that determination at the beginning of the 
filing process of an application?
    Ms. Woodcock. Only if adequate data were available to 
satisfy all the criteria for OTC-ness.
    Mr. Burr. Are there any other classification of drugs that 
you can think of that would be considered today for over-the-
counter status?
    Ms. Woodcock. The FDA had a meeting, a public meeting in 
June of this year, last year. I'm sorry. Of last year to 
discuss the whole OTC program, and at that time a wide variety 
of medicines, classes of medicines were brought up and 
discussed as far as being candidates for OTC switching. In the 
vast majority of cases, in all the other cases I think except 
the one we're talking about here today, the antihistamines, the 
manufacturers were supportive of such switches.
    Mr. Burr. So there's no other classification that the FDA 
can perceive today where one would consider it a forced switch 
where a manufacturer was not in agreement?
    Ms. Woodcock. Not to my knowledge.
    Mr. Burr. Okay. One last question if I could. How much 
money is spent today on direct-to-consumer advertising by 
pharmaceutical companies?
    Ms. Woodcock. I think $2.5 billion.
    Mr. Burr. $2.5 billion. Is the FDA fairly confident of that 
number, because I think Members of Congress have heard--per 
year, yes.
    Ms. Woodcock. Per year.
    Mr. Burr. But I think the trade journals have had it as 
high as $11 billion at some point, and I'd love to have an 
accurate number of direct-to-consumer advertising?
    Ms. Woodcock. Yes. Well, we're not an economic agency. We 
don't go out and directly survey these things. We rely on 
commercially published information. The information that we 
have is that the vast majority of pharmaceutical advertising is 
still directed toward the physicians or other prescribers, and 
that's about $13-14 billion a year total advertising, of 
which----
    Mr. Bilirakis. Does the FDA keep track of dollars that are 
spent for that type of advertising?
    Ms. Woodcock. That's not required to be submitted to us. We 
do not have jurisdiction over that, over those type of 
economics.
    Mr. Bilirakis. So where did we get this? That's from the 
broadcasters?
    Ms. Woodcock. This is from published information on firms 
that commercially keep track of these matters. And we can 
provide you our sources.
    Mr. Burr. Dr. Woodcock, I'm told that $2.5 billion is 
inclusive of samples and other marketing efforts, not--11 is 
inclusive?
    Ms. Woodcock. Yes.
    Mr. Burr. $2.5 is broadcast?
    Ms. Woodcock. That's correct.
    Mr. Burr. Okay.
    Ms. Woodcock. No, not broadcast. Direct-to-consumer.
    Mr. Burr. Direct-to-consumer advertising.
    Mr. Bilirakis. The gentleman's time has expired.
    Mr. Burr. I thank Dr. Woodcock. I hope she won't be a 
stranger to this committee.
    And, Mr. Chairman, let me say that I'm disappointed that I 
wasn't here for Mr. Brown's opening statement. He told me it 
was elegant, and I believe every word of it.
    Mr. Bilirakis. It was directed to the gentlemen.
    Mr. Green to inquire.
    Mr. Green. Thank you, Mr. Chairman.
    And to follow up my colleague from North Carolina, I 
appreciate the chairman calling this hearing today so we can 
talk about Mr. Brown's legislation.
    Dr. Woodcock, I appreciate your being here, and I know the 
issue is the over-the-counter versus prescription, and I know 
the FDA's interest is only the consumer safety. It's 
interesting that for the protagonists in this case, whether 
they are WellPoint or the pharmaceutical industry, obviously 
their interest is cost. And our concern overall is the cost to 
our constituents, whether it's cheaper over-the-counter because 
they have insurance coverage, or if it's cheaper on 
prescription.
    In knowing that it didn't--the FDA didn't move into this 
area very quickly. This was actually filed in 1998, so it's 
taken 3 years. The FDA didn't move very lightly in making this 
decision.
    But also, you did not look at all into the cost factors, it 
was only in the consumer safety?
    Ms. Woodcock. Right. We have not made a decision. We have 
completed an advisory committee that has advised us on safety. 
And we're still evaluating what we're going to do. But, no, we 
did not move quickly, very quickly. We had to gather a lot of 
data, as was already alluded to, and we did not take cost into 
account.
    Mr. Green. The committee didn't take cost? Will the FDA 
take the cost into consideration?
    Ms. Woodcock. No. We've certainly heard a lot about it on 
both sides from many parties, but that's not part of our role.
    Mr. Green. Okay. Let me go on and ask some questions about 
a lot of our concern on the generics.
    Out of the approximately 500 cases where a generic has 
filed for a paragraph IV certification, how many of these cases 
were settled out of court, do you know, just a rough 
percentage? I understand it's about 90 percent. Is that 
correct?
    Ms. Woodcock. All right. Well, I don't know. I don't have 
that data right now. I can provide it to you to the extent we 
know that.
    Mr. Green. So 90 percent, use that as an example and that's 
what I understood that 90 percent. And does the FDA have any 
jurisdiction over these settlement agreements?
    Ms. Woodcock. No.
    Mr. Green. And so the Waxman-Hatch statute requires that 
settlement agreements contain provisions to ensure that 
generics market their products immediately, and yet the FDA 
doesn't have any authority under Waxman-Hatch Act to be able to 
overlook or oversee those settlement agreements that extend the 
patent?
    Ms. Woodcock. Right, that's correct. That's correct.
    Mr. Green. But the FTC, Federal Trade Commission, has 
authority or jurisdiction over anti-competitive behavior?
    Ms. Woodcock. That's correct.
    Mr. Green. Is there ever any correlation or work between 
the FDA and the FTC?
    Ms. Woodcock. Certainly. We talked to them when these 
issues first arose, in fact.
    Mr. Green. Okay. And it seems like if the percentages are 
500 cases are filed and there's 90 percent settlement, and yet 
our regulatory agency the FDA is taken out of it, it seems like 
that would impact the cost to the consumers in generics versus 
the patent drugs.
    If a brand company could file a new patent at the end of 
the original patent expiration and receive an automatic 30 
month stay and then negotiate for additional time because of 
the 180 day exclusivity this could result really in years of 
patent extension?
    Ms. Woodcock. Yes.
    Mr. Green. And that's a concern I know, and like I said, I 
haven't really focused on my colleague Mr. Brown's bill until 
today and this hearing has caused me to do that and realize 
that, and even Mr. Waxman agrees that we need to fix it.
    The other concern we hear from the next panel the talk 
about the patent stacking. And I understood I think in one of 
your answers you were interested or the FDA was going to look 
at the issue of patent stacking?
    Ms. Woodcock. Yes.
    Mr. Green. So where a brand company introduces a new patent 
toward the end of the patent's original expiration date to give 
it even longer time of market exclusivity. Is there anything in 
the statute that would prevent these brand companies from doing 
this now?
    Ms. Woodcock. Not to my knowledge.
    Mr. Green. There's no regulatory authority FDA would have?
    Ms. Woodcock. No.
    Mr. Green. In fact, again, these companies receive an 
automatic 30 month stay if their patents are challenged.
    Ms. Woodcock. That's correct.
    Mr. Green. So another 2\1/2\ years?
    Ms. Woodcock. That's right.
    Mr. Green. And again, my colleague who used to sit here, 
but Peter Deutsch and I, we actually in our opening statements 
didn't collaborate but both of us were concerned about it, and 
I don't fault someone who is a lawyer in an earlier life for 
using the system but, obviously, they're gaming the system to 
the detriment of our consumers.
    So, thank you, Mr. Chairman.
    Mr. Bilirakis. Mr. Ehrlich.
    Mr. Ehrlich. Doctor, thanks first of all.
    Your testimony is very illuminating and it's not only 
educational for us but it helps us educate our constituents 
with regard to--in fact, I'm meeting a number of my 
constituents in an hour. I'm going to relay some of your 
observations, but particularly over weekends when we go home we 
get a lot of these questions.
    I think your observation with regard to truth in 
advertising is well taken. It certainly can be consumer 
friendly with regard to education, but it also obviously drives 
demand, which is one of the issues we're trying to deal with 
here.
    Just a couple observations with regard to what you said. 
Clearly an application fee with regard to generics and the 
additional income that would bring into the agency would 
shorten the review time. That's your testimony today, is that 
fair?
    Ms. Woodcock. Well, as I said, we can do more with more. I 
think we are performing well in getting generic drugs out, but 
clearly there are limitations now.
    Mr. Ehrlich. With regard to clearly a lot of questions on 
the OTC process, and that's really the purpose of this hearing 
today, your testimony in that regard has been educational as 
well. You've cited individual criteria, and that's one of the 
most important pieces of your testimony that we're going to 
take away today as we go back and talk to our constituents are 
those individual elements that really make up the process. And 
what I've heard you talk about, you've been very clear that 
money, cost is irrelevant and you've talked about convenience, 
clearly.
    Ms. Woodcock. Yes.
    Mr. Ehrlich. And safety, obviously. And this more 
subjective, I guess, test with regard to self diagnoses. I'd 
like to hear a little more about that. And then with regard to 
a number of questions from colleagues, in that you've talked 
about available data not generated in house, but generated by 
manufacturers?
    Ms. Woodcock. Yes.
    Mr. Ehrlich. Any other individual criterion that you would 
cite today with regard to the entire process and then a 
further--if you can, further objective description with regard 
to the self-analysis?
    Also, a personal note as a sufferer at this time of the 
year I appreciate what you all have been doing with regard to 
bringing this stuff out quicker, including antihistamines and 
the like. So, that's a personal note.
    But if you can just give me your comments with regard to 
the process?
    Ms. Woodcock. Well, certainly. For all OTC drugs, if I 
understand your question, you're asking what kind of criteria 
are there for a drug to be OTC versus prescription, is that 
right?
    Mr. Ehrlich. Correct. Correct. The list?
    Ms. Woodcock. The list? All right.
    One of the major criteria would be that the condition that 
the patient is able to figure out that they have the condition. 
And there has been an evolution over the last 20 years on what 
we as a society feel, think that patients can diagnose and 
manage. And we've already basically decided that patients can 
diagnose what we all allergic rhinitis. In other words, hay 
fever. They can tell when they have hay fever and select 
choices, because there are many choices out in the OTC market. 
So that's very important.
    For many of the other drugs that there's a lot of debate 
about right now about OTC switching, there are still 
significant questions that remain about self-diagnoses, and 
those are drugs--we're requests for drugs for cholesterol 
lowering, for example, to go over-the-counter. And the question 
is can the consumer adequately diagnose the fact they have high 
cholesterol and that this would be appropriate intervention for 
them. And that story is still evolving.
    So, that's the major criterion. If the consumer cannot 
appropriately select for themselves, diagnose their condition, 
then OTC is off the table.
    Then for any particular drug to treat that condition would 
have to have certain characteristics. It would have to have an 
adequate safety profile. It wouldn't have to need medical 
monitoring to maintain its safety or its effectiveness.
    As you know, when you go to the doctor sometimes they will 
take tests of your blood or whatever while you're taking a drug 
or an EKG, or they'll do different things to make sure that 
drug is still right for you; it's working or it's safe. Those 
kind of interventions can't be used in the OTC setting.
    We also frequently have what's called label comprehension 
studies. And that sounds complex, but what it means is can you 
write directions for use for that product that the average 
consumer who has that condition can read and understand and 
then will go ahead and use the product appropriately? Because 
people do all sorts of things, as we all know. Sol that's 
another piece that we look at. Can a label be written that's 
comprehensible to a consumer.
    So those are the kind of criteria. Effectiveness also would 
need to be something that the consumer in some way could tell 
whether the drug was working or not. And traditional OTC drugs 
have been for symptomatic conditions where you know you have a 
problem.
    Mr. Bilirakis. The gentleman's time has expired. And we do 
have a second record.
    Mr. Ehrlich. Thank you for the specificity. I appreciate 
that.
    Ms. Woodcock. Certainly.
    Mr. Bilirakis. Mr. Towns inquire.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Dr. Woodcock, given the explosion in the use of the 
Internet, even if the FDA modified its guidance on advertising, 
aren't we still likely to have product promotion occur? Only 
this time it won't be from the manufacturer, but from users of 
the Internet?
    Ms. Woodcock. That's true, and that's been going on for a 
long time in the print and other media. And the Internet is no 
different, except that the information can get around a lot 
faster to a lot more people. But FDA only regulates promotion 
by sponsors or manufacturers, distributors, repackers and so 
forth. We don't regulate statements by other citizens about 
drug use.
    Mr. Towns. Well, I think the problem here is how likely is 
that Internet generated promotional information to be accurate 
and contain the necessary safety warnings for the consumers? I 
mean, you have to be concerned about that.
    Ms. Woodcock. We certainly have been monitoring that, and 
there's a wide variety of quality of information on the 
Internet. Some of it is very high quickly and some of it is 
highly inaccurate, and that is a general safety problem.
    Mr. Towns. And that's going to get--I mean continue.
    Ms. Woodcock. Right. Well, that's part of the importance of 
the prescriber in making sure that when people get prescription 
drugs that they're appropriate for them.
    Mr. Towns. Right. I think you might have answered this 
question before. I think when I came in I thought I heard part 
of it.
    In your experience do generic manufacturers have the 
expertise to produce the kind of information that the FDA would 
require to move a prescription to over-the-counter status?
    Ms. Woodcock. Could you repeat the question?
    Mr. Towns. Yes. I asked do generic manufacturers have the 
expertise to produce the kind of information that the FDA would 
require to move a prescription to over-the-counter status?
    Ms. Woodcock. Absolutely not. We have generic copies of 
innovator over-the-counter drugs available.
    Mr. Towns. In your opinion why have there been so few 
patent issues raised in regard to the generic applications with 
the FDA since the inception of the Waxman-Hatch Act in 1984?
    Ms. Woodcock. I don't know. That would require me to read 
into the minds of the people who would file these, and I don't 
know.
    Mr. Towns. No, in your opinion?
    Ms. Woodcock. Well, I think there have been quite a few in 
recent years, and they were fewer in the past and the 
prominence of different court decisions and the impact of those 
court decisions has changed the landscape, that's what I 
believe.
    Mr. Towns. Well, let me ask this then: In your opinion if 
there was one element of the Waxman-Hatch Act that should be 
changed to promote the production of more generics, what would 
it be?
    Ms. Woodcock. Well, as I said, the Administration hasn't 
finalized its evaluation of that and I don't have an opinion at 
this point.
    Mr. Towns. All right. Let me try it another way. I'm not 
going to give up.
    If there was one element that should be changed to protect 
the interests of brand name products, in your opinion what 
would it be?
    Ms. Woodcock. The interests of brand name products?
    Mr. Towns. Yes. Then I'll try it another way. No, go ahead.
    Ms. Woodcock. Well, it hasn't really been posed to me that 
way. Much of this hearing has been about protecting the 
interests of brand name products yet providing for prompt 
availability of generic products once the patents expire. I 
think that is the central issue that we're discussing here.
    Mr. Towns. I agree, but I mean in your opinion--I mean, 
could you--you wouldn't want to make a comment on it?
    Ms. Woodcock. Well, I believe that the subjects that have 
been discussed here today, the 180 day exclusivity, the 30 
month stay are central issues that we're going to have to deal 
with.
    Mr. Towns. All right. Thank you.
    I yield back, Mr. Chairman.
    Mr. Bilirakis. Are you suggesting that we should take 
another look at the 180 day exclusivity and the 30 month stay?
    Ms. Woodcock. Well, I believe FDA has really been 
struggling with these issues, with the court decisions and the 
changing landscape. It's been difficult for us.
    Mr. Bilirakis. Let me ask you on the OTC situation, does 
FDA have set up any sort of a remedy, if you will, or an appeal 
process or whatever on the part of--since you feel that you 
have the unilateral authority to make that decision, do you 
have any sort of a process for the manufacturer to take or even 
the public? Because as long as it's prescription, there would, 
depending on the insurance policy and that sort of thing, there 
would be coverage to a large degree. But once it goes over-the-
counter generally there won't be any coverage.
    Ms. Woodcock. Well, there's administrative--we have a 
formal appeals process with the center for appealing decisions. 
And there's also the administrative process, formal 
administrative process in hearings and so forth that could be 
pursued by anyone who disagrees with an FDA decision.
    Mr. Bilirakis. You haven't experienced that yet insofar as 
this particular issue is concerned?
    Ms. Woodcock. No. No, but this is a new issue.
    Mr. Bilirakis. Yes. And you're expecting to experience it 
on this issue?
    Ms. Woodcock. I don't know.
    Mr. Bilirakis. You don't know? All right.
    Just very quickly, Doctor. You're an M.D., have you 
practiced medicine?
    Ms. Woodcock. Yes.
    Mr. Bilirakis. You have? Okay. So as a medical doctor 
because you're concerned and care about patients, would say 
without any hesitation that if a generic drug is approved by 
the FDA, that it is directly substitutable and bio-equivalent 
to the innovative drug?
    Ms. Woodcock. That's correct. I use generics when they're 
available. I use generics for my family. Prescribe generics for 
patients. I believe there's a lot of ignorance and 
misunderstanding out there about the generic program.
    Mr. Bilirakis. Good. Thank you for that.
    Mr. Brown, we're in the second round now, and we're going 
to have to break right after Mr. Brown inquires. We will break 
until we have the vote, and then unfortunately we'll have to 
ask you to wait.
    Mr. Brown. Thank you for that very direct answer to the 
chairman, too, and putting people's mind at rest I think in 
large part. And the chairman and I have talked about that from 
time-to-time. Thank you for that.
    The PhRMA witness in the next panel wrote that ``generic 
applications have not raised or encountered any patent issues 
that have delayed their approval.'' Is that statement 
essentially correct in your experience?
    Ms. Woodcock. I've not encountered any patent issues----
    Mr. Brown. I mean generic applications according to the 
former witness in the next panel, ``have not raised or 
encountered any patent issues that have delayed their 
approval.''
    Ms. Woodcock. No, they have not. Okay. I'd like to ask Gary 
Buehler, who is the head of the Office of Generic Drugs to 
answer that question, if I may.
    Mr. Brown. Mr. Chairman?
    Mr. Bilirakis. It's all right with me if he'll speak up.
    Mr. Buehler. We presently have nine active litigation cases 
going in the Office of Generic Drugs. Five of them involve 
patents. And each of these cases involves basically a challenge 
that is holding up generic drug work or could possibly.
    Mr. Brown. And that's another word, phrase for delay their 
approval, correct?
    Mr. Buehler. Correct.
    Mr. Brown. Okay.
    Mr. Buehler. It may not actually right now be delaying the 
approval, but it could if it continues.
    Ms. Woodcock. For any of them?
    Mr. Buehler. Yes.
    Ms. Woodcock. There are some that are actually delaying 
approval is your comment.
    Mr. Brown. So I wonder why PhRMA would make that statement? 
I guess is that a good reason for all of you to stick around 
and find out in the next panel.
    Most of the blockbuster drugs coming off their initial 
patents in recent years, Prozac and Prilosec and others, have 
been involved in paragraph IV certifications that challenge in 
many cases successfully essentially invalid patents designed to 
perpetuate the monopoly of the innovator firm well after their 
original patent has expired, right? I mean, it's done through 
these paragraph IV applications, correct?
    Ms. Woodcock. Yes.
    Mr. Brown. Okay. Well, Mr. Chairman, one thing I would like 
to also ask and ask consent if you could to keep the record 
open for written questions for other panelists?
    Mr. Bilirakis. Yes. That is routine. By all means that will 
be the case and I'm sure you don't mind responding to those as 
soon as you can?
    Ms. Woodcock. Not a bit.
    Mr. Bilirakis. We should really break now unless Mr. 
Pallone wants to limit his inquiry to maybe about a minute or 
so.
    Mr. Pallone. You don't want her to wait until we come back?
    Mr. Bilirakis. Well, I'd rather excuse her if we can. But 
on the other hand, I don't want to cut you off.
    Mr. Pallone. There could be others, too, that want to ask. 
Why don't we wait.
    Mr. Bilirakis. All right. I guess we'll have to wait.
    Ms. Woodcock. That's fine.
    Mr. Bilirakis. All right. We're going to recess for a few 
minutes until we cast this vote.
    [Brief recess.]
    Chairman Tauzin. The committee will please come back to 
order. Mr. Bilirakis has had to be excused for a while. I 
apologize for that.
    I understand we're on the second round of questions right 
now, and the clerk will advise me as to whose up next. Mr. 
Pallone is recognized for a round of questions.
    Mr. Pallone. I just wanted to yield to Mr. Brown briefly.
    Mr. Brown. Thank you. And, Mr. Chairman, welcome, good to 
have you here.
    Chairman Tauzin. Good to be here.
    Mr. Brown. I wanted to correct a statement of so that it's 
not that I do not misconstrue PhRMA's testimony. I'd said that 
there were no patent delays--PhRMA's actual words was that 
there are an overwhelming number of cases there are no delays. 
And I would content, while I apologize for the slight 
misquoting that I did, I think that they're still as, Dr. 
Woodcock said, there are several very significant very costly 
issues involved there where there are delays. And it's not just 
a significant problem, it's a growing problem. So for the 
slight misquote, I apologize, but I think the issue is still 
very much in front of us.
    And I thank the gentleman.
    Mr. Pallone. Thank you.
    I wanted to ask Dr. Woodcock, following up on your 
statement you made to Mr. Brown about the bio-equivalency of 
generics and your use of generics, I have a bill the Generic 
Drug Access Act that prohibits states from passing laws keeping 
generic drugs off the market once the FDA has determined that a 
generic drug is therapeutically equivalent to a brand name 
product. And I guess I wanted to ask you two things.
    First of all, if you can express an opinion on that whether 
you think that's a good idea, which you probably won't. But 
second, you know, to what extent you have seen states act in 
this to go beyond that in ways that you think are really not 
effective or really don't make sense and if you have any 
reports or anything on that?
    Ms. Woodcock. Yes, I can't comment specifically on the 
bill, proposed bill. But I can say that I think there is a lot 
of misunderstanding about the generic program. I think 
sometimes it is promulgated by innovator companies either in a 
sincere belief that their product is different than the generic 
product, or through other motives. And that believe is 
widespread in the community and some of the pharmacy and 
medical community that some generics are not equivalent to the 
innovator product. And these misconceptions are really a 
problem because we've never--we always follow up on reports we 
get of therapeutic in equivalence. We get many reports; we 
switched our patient and the drug didn't work. We've never 
found a problem with these products when we followed up.
    Mr. Pallone. Have you any--I mean I believe strongly that a 
lot of times these efforts are made in the State legislature 
by, you know, brand names just to basically create more 
problems for generics to come to the market. I mean, is there 
evidence of that or would you comment on that?
    Ms. Woodcock. Well, we certainly have seen efforts by 
innovator firms to state that their product is different than 
the generics and that there are problems with the generics. We 
certainly have seen that. We feel--we've had to tell firms they 
can't make these statements because it's kind of comparative 
claim that they can't make.
    We don't feel these warrant. But you recognize human 
behavior, you get a pill that's a different color or it looks 
different or something, and then you think well this is 
different and I'm really worried it's going to have a different 
effect.
    Mr. Pallone. Okay. Let me ask you a second question. You 
know, again, I have difficulty following these things. You 
commented extensively on the 180 day exclusivity period and the 
court decisions, and your having to come up with new 
guidelines, I guess some of which are still outstanding. And, 
you know, it seems to me again going back to our GAAP Bill, 
under the GAAP Bill the 180 day exclusivity period granted to 
the first to file generic applicant would become available to 
the next filed applicant if the first to file generic company 
reaches a financial settlement with the brand name to stay out 
of the market or fails to go to market within reasonable 
period. It seems to me that that's a way of preventing, you 
know, some of the problems that you've identified with the 180 
day market exclusivity, and I just wanted to know if you would 
comment on that? I mean, it seems that if we could change the 
law, then when we don't have you constantly having to deal with 
all these court decisions and coming up with new guidelines. If 
you'd comment on that?
    Ms. Woodcock. I can't comment specifically on the bill, 
however I think whatever legislation is approached would have 
to be approached very carefully because of the law of 
unintended consequences.
    I'm sure when the Waxman-Hatch Amendments were put into 
place some of these outcomes were not necessarily foreseen at 
the time. And now our regiment or statutory and regulatory 
regiment is extremely complicated and----
    Mr. Pallone. Do you have any other suggestions maybe in 
lieu of that to deal with the problem, in lieu of what GAAP 
proposed?
    Ms. Woodcock. No, I can't comment. I can't make 
suggestions. Sorry.
    Mr. Pallone. Okay. Thank you.
    Thank you, Mr. Chairman.
    Chairman Tauzin. I thank the gentleman.
    The Chair is going to going to ask a round of questions.
    And, Dr. Woodcock, I want to ask you to give your own 
opinion on this. I understand you cannot--are not prepared to 
give FDA's position on this, but I want to ask you with 
reference to the 180 day generic exclusivity provision of 
Waxman-Hatch Act, and basically I want to know whether you 
think it's still necessary?
    The fact is that some people, including the original folks 
who negotiated the bill for the generic industry, Mr. Engleberg 
and I understand Liz Dickinson of the FDA's general counsel's 
office speaking for herself have both commented that there's so 
much of a financial incentive to challenge patents, that 
challenges will occur irrespective of exclusivity. What's your 
personal opinion on that?
    Ms. Woodcock. I'm not qualified, you know, I'm a physician. 
I'm not really qualified to comment on the financial incentives 
for companies. I would defer to those trade associations and 
other people who really----
    Chairman Tauzin. But you're aware of the fact that people 
are lining up to challenge, isn't that correct?
    Ms. Woodcock. Yes, that's correct.
    Chairman Tauzin. And isn't that quite evident now in the 
history of Waxman-Hatch Act that challengers do in fact line up 
because the financial incentives are so great?
    Ms. Woodcock. No, they're lining up----
    Chairman Tauzin. I suppose it must be because financial 
incentives are great.
    Ms. Woodcock. They're lining up to challenge, but also at 
this point there's a 180 day exclusivity is provided.
    Chairman Tauzin. Yes, but again only through the first 
challenge?
    Ms. Woodcock. Right.
    Chairman Tauzin. So there's still a lot of other people 
challenging?
    Ms. Woodcock. Sure.
    Chairman Tauzin. And, you know, the comments of the folks 
who negotiated this are basically questioning whether you still 
need the 180 day exclusivity provision if in fact challengers 
are lining up without the benefit of it. And without asking you 
again to comment on the financial incentives, you will concede 
that that is in fact the case that there is a growing list of 
challenges now, right?
    Ms. Woodcock. That's correct.
    Chairman Tauzin. Okay. Second, has the FDA perceived any 
recent trends wherein manufacturers of larger selling drugs are 
listing patents in the Orange Book shortly before the previous 
patents are set to expire?
    Ms. Woodcock. Yes, we feel that we have observed this 
trend.
    Chairman Tauzin. It's a clear trend, is it not?
    Ms. Woodcock. That we believe, yes.
    Chairman Tauzin. If so, does that concern you at all?
    Ms. Woodcock. As I said earlier, we are concerned with the 
recent court cases, with the other problems that we're 
encountering in implementing this provision it's going to 
become even more complicated and difficult to promptly approve 
generic drugs.
    Chairman Tauzin. Okay. And finally, does the FDA believe 
that the rolling exclusivity provision contained within the 
Brown-Emerson legislation would be an impedient to generic 
competition in that the exclusivity would continue to bounce 
from the first to the second to the third challenger if the 
previous challenge is lost in court?
    Ms. Woodcock. I'm sorry, but again I'm not able to comment 
on that. I feel, based on my experience in trying to administer 
some of----
    Chairman Tauzin. We understand there was testimony on the 
Senate side indicating that on a personal level again, that the 
FDA representative there believed that that was of great 
concern. You're not ready to share that concern?
    Ms. Woodcock. Not as--no. No. What I was going to say, 
though, is that with many of these provisions simplicity is a 
virtue.
    Chairman Tauzin. All right. Thank you very much.
    Mr. Greenwood is next, right. Mr. Deal in the Chair.
    Mr. Greenwood is recognized for 5 minutes.
    You want to Chair?
    Mr. Deal. No, no, you go ahead. Play musical chairs.
    Mr. Greenwood.
    Mr. Greenwood. Mr. Chairman, I'm going to pass for the 
moment. I just arrived and I need to get a little organized. 
So, if Mr. Brown----
    Mr. Brown. I don't have any second round questions.
    Mr. Greenwood. Well then neither do I. I'll just pass and 
wait for the next ones.
    Mr. Deal. Dr. Woodcock, we want to thank you very much for 
being here today. We apologize for the fact for the fact that 
some of us had to come in and out, the votes and other things 
conflicted, but we do appreciate your appearance today. And I 
do recall that there were several issues that you indicated you 
would get back to us in writing, and we would appreciate a 
follow up response.
    Ms. Woodcock. That's correct. I will do that. And thank 
you.
    Mr. Deal. Thank you.
    We'll call the second panel today, would they please to 
come to the table.
    Lady and gentlemen, we wish to thank you for appearing here 
today, and I'll introduce the panel very briefly.
    First of all, Dr. Gregory Glover who is partner with a 
Washington firm and is appearing on behalf of the 
Pharmaceutical Research and Manufacturers of America.
    Mr. Bruce Downey, who is the Chairman and CEO of Barr 
Laboratories and also, I understand, is appearing on behalf of 
the Generic Pharmaceutical Association.
    And Dr. Jane Delgado, who is President and CEO of the 
National Alliance for Hispanic Health.
    And Mr. John Golenski, who is the Executive Director of 
RxHealthValue here in Washington.
    Mr. Thomas Geiser, who is General Counsel for WellPoint 
Health Networks. And I believe Dr. Seidman is accompany you as 
well and Vice President of Pharmacy.
    And Mr. Richard Kingham, who is a partner in Covington & 
Burling here in Washington.
    Lady and gentlemen, we appreciate your patience in waiting 
for your appearance here on this panel.
    And, Dr. Glover, we will begin with you.

  STATEMENTS OF GREGORY J. GLOVER, ROPES & GRAY ON BEHALF OF 
PHARMACEUTICAL RESEARCHERS AND MANUFACTURERS OF AMERICA; BRUCE 
 L. DOWNEY, CHAIRMAN AND CEO, BARR LABORATORIES, ON BEHALF OF 
   THE GENERIC PHARMACEUTICAL ASSOCIATION; JANE L. DELGADO, 
PRESIDENT AND CEO, NATIONAL ALLIANCE FOR HISPANIC HEALTH; JOHN 
   D. GOLENSKI, EXECUTIVE DIRECTOR, RX HEALTH VALUE; THOMAS 
GEISER, GENERAL COUNSEL, WELLPOINT HEALTH NETWORKS ACCOMPANIED 
  BY ROBERT SEIDMAN, VICE PRESIDENT, PHARMACY; AND RICHARD F. 
                 KINGHAM, COVINGTON AND BURLING

    Mr. Glover. Thank you. Mr. Chairman and members of the 
subcommittee, on behalf of the Pharmaceutical Research and 
Manufacturers of America I thank you for inviting me here today 
to testify on the Waxman-Hatch Act. I am a licensed physician 
and a practicing attorney with the law firm of Ropes & Gray, 
and I specialize in intellectual property law and FDA 
regulatory issues.
    PhRMA companies are the source of virtually all new drugs 
in the United States and the evidence confirms that our 
innovation in our industry benefits consumers. The research 
based pharmaceutical industries investment in R&D has jumped 
more than $30 billion this year. During the last decade the 
industry has developed more than 370 new life saving cost 
effective medicines and the pace of innovation is increasing. 
Our industry now has more than 1,000 medicines in development.
    We strongly believe the U.S. pharmaceutical market is 
robust, competitive and working to the benefit of consumers and 
patients. It is working, in fact, as Congress intended when it 
passed the Waxman-Hatch Act.
    We believe that advocates of change have a burden to show 
that change is necessary and would not upset the balance 
between innovation and generic competition achieved by 
Congress. But advocates for change have not met that burden. 
Today almost all innovative medicines face generic competition 
after their patents expire. The generic industry's share of the 
prescription drug market is almost 50 percent today compared to 
less than 20 percent in 1984. And today generic copies often 
come to market as soon as the patent in an innovative produce 
expires, whereas before in 1984 it took 3 to 5 years for a 
generic drug to enter the market.
    Contrary to the assertions of the generic industry, this 
system is working well. Of the more than 8,000 generic 
applications that have been filed since 1984, fewer than 500 
have raised any patent issues, meaning 94 percent have raised 
no patent issues whatsoever.
    Despite the success of the Waxman-Hatch Act generic 
manufacturers are advocating major change in the legislation 
that would jeopardize future innovation. I would like to 
respond specifically to four of the issues that have been 
raised.
    The first issue is patent dispute settlements between 
pioneers and generics. The actions of the Federal Trade 
Commission in challenging some recent settlements demonstrate 
that the anti-trust authorities are actively and adequately 
monitoring settlements between partner companies and generic 
manufacturers. Accordingly, there is no need to amend the 
Waxman-Hatch Act to deal with this issue.
    The second issue is Orange Book Listings. FDA's Orange Book 
serves two purposes. First, it provides notice to a generic 
applicant of the patents that cover a pioneer product, and 
second it provides a mechanism by which innovator companies can 
initiate litigation of patent disputes prior to FDA approval of 
a potentially infringing product.
    The generic industry proposes to restrict the ability of 
pioneers to litigate patent disputes prior to FDA approval by 
limiting the types of patents that can be listed. Restricting 
Orange Book Listings will hurt both the pioneer and the generic 
companies. It is in the interest of both parties to have 
complete and full listings of patents.
    The third issue is the 30 month stay of approval. The 
generic industry contends that it is unfair for FDA to be 
barred from approving a generic application for up to 30 months 
while the pioneer attempts to resolve any patent disputes. The 
generics cannot have it both ways. If it were not for the 
Waxman-Hatch compromise, an innovator could sue an infringing 
generic manufacturer when it begins product development. The 
generic industry cannot reasonably claim the right to engage in 
development activity that normally would be considered patent 
infringement and at the same time assert there should no 
opportunity to resolve these patent disputes prior to product 
approval. The research based industry should not be condemned 
for defending patents that are presumed to be valid under U.S. 
law.
    The fourth issue is the so called late listed patents. The 
purpose of the preapproval litigation procedure is to protect 
innovator companies from the injury that would occur if generic 
manufacturers sell infringing products and are unable to pay 
the potentially large amounts that would be due at the 
conclusion of the litigation. This rationale applies to all 
patents regardless of when the patent is issued. Innovator 
companies should not be deprived of one of the most important 
rights conferred by the Waxman-Hatch Act simply because a 
patent is issued by the Patent and Trademark Office after NDA 
approval and is timely listed in the Orange Book.
    None of the proposed changes have merit, none can be made 
without jeopardizing future innovation and, accordingly, none 
of these changes should be considered in isolation from the 
needs of those patients awaiting cures.
    I'll be pleased to answer any questions that members of the 
committee may have.
    Thank you.
    [The prepared statement of Gregory J. Glover follows:]
    Prepared Statement of Gregory J. Glover, for the Pharmaceutical 
                 Research and Manufacturers of America
    Mr. Chairman and Members of the Subcommittee: On behalf of the 
Pharmaceutical Research and Manufacturers of America, I am pleased to 
appear at this hearing today on the Hatch-Waxman Act, direct-to-
consumer advertising of prescription drugs, and the switching of drugs 
from prescription to over-the-counter status. I am a physician and an 
attorney with the law firm of Ropes & Gray, specializing in 
intellectual-property and FDA regulatory issues. PhRMA represents the 
country's major research-based pharmaceutical and biotechnology 
companies, which are leading the way in the search for new cures and 
treatments that will enable patients to live longer, healthier, and 
more productive lives.
                              hatch-waxman
    Turning first to Hatch-Waxman, PhRMA strongly believes that the 
U.S. pharmaceutical market is robust, competitive, and working to the 
benefit of consumers and patients--is working, in fact, as Congress 
intended when it passed the delicately-balanced Drug Price Competition 
and Patent Term Restoration Act of 1984 (commonly known as the Hatch-
Waxman Act after its principal sponsors). We believe that advocates of 
change have a heavy burden to clearly show that change is needed and 
would not upset the careful balance achieved by Congress, as discussed 
immediately below. They have not met that burden.
Generics Flourish
    On the one hand, the generic industry has flourished since the 
passage of the 1984 compromise law eliminated the barriers to entry and 
made it much easier, far less costly, and quicker for low-cost generic 
drug manufacturers to get their copies of innovator medicines to market 
following patent expiration.

 Since 1984, the generic industry's share of the prescription-
        drug market has jumped from less than 20 percent to almost 50 
        percent.
 Before 1984, it took three to five years for a generic copy to 
        enter the market after the expiration of an innovator's patent. 
        Today, generic copies often come to market as soon as the 
        patent on an innovator product expires. And in most cases, 
        sales of pioneer medicines drop as much as 75 percent within 
        weeks after a generic copy enters the market.
 Prior to 1984, only 35 percent of top-selling innovator 
        medicines had generic competition after their patents expired. 
        Today, almost all innovator medicines face such competition.
Research Incentives Preserved
    On the other hand, the research-based pharmaceutical industry--the 
source of virtually all new drugs in the U.S.--was provided limited 
incentives for innovation under the 1984 law, which restores part of 
the patent life lost by pioneer medicines as a result of regulatory 
review by the Food and Drug Administration (FDA). The industry, spurred 
by accelerating scientific and technological advances, continues to 
increase its investment in R&D and to develop new, more advanced, and 
more effective medicines.

 The industry's investment in pharmaceutical R&D has jumped 
        from $3.6 billion in 1984 to more than $30 billion this year.
 During the 1990s, the industry developed 370 new life-saving, 
        cost-effective medicines--up from 239 in the previous decade.
 The research-based pharmaceutical industry now has more than 
        1,000 new medicines in development--either in human clinical 
        trials or at FDA awaiting approval. These include more than 400 
        for cancer; more than 200 to meet the special needs of 
        children; more than 100 each for heart disease and stroke, 
        AIDS, and mental illness; 26 for Alzheimer's disease; 25 for 
        diabetes; 19 for arthritis; 16 for Parkinson's disease, and 14 
        for osteoporosis.
The Public Benefits
    What these data show is that the Hatch-Waxman compromise is both 
promoting competition--by making it easier, cheaper, and quicker for 
low-cost generic copies of pioneer medicines to enter the market--and 
providing limited incentives for innovation--by restoring part of the 
patent life lost by pioneer products due to FDA regulatory review. As a 
result, consumers are receiving the benefits of early access to low-
cost generic copies and of an expanding stream of new, more precise, 
and more sophisticated medicines.
The Hatch-Waxman Compromise
    How has the Hatch-Waxman compromise both promoted competition and 
preserved incentives for innovation? A little history helps to explain.
    Prior to 1984, there were few generic copies of pioneer drugs that 
had been approved after 1962. The safety and effectiveness data 
supporting the approval of a post-1962 drug was considered to be trade-
secret information that could not be used to approve generic copies. 
Apart from repeating the long, costly clinical studies performed by an 
innovator company, a generic applicant could obtain approval of a post-
1962 drug only by using a literature-based (so-called ``paper'') New 
Drug Application (NDA), which was possible only when published 
scientific literature demonstrated a drug's safety and effectiveness.
    To permit the approval of generic copies of all post-1962 drugs, 
the Hatch-Waxman compromise in effect revoked the trade-secret status 
of innovators' safety and effectiveness information. Instead of proving 
safety and effectiveness, a generic manufacturer was allowed to show 
only that its copy is ``bioequivalent'' to a pioneer product and FDA 
could rely on the pioneer's safety and efficacy data to approve the 
copy.
    Bioequivalence means that a copy's active ingredient is absorbed at 
the same rate and to the same extent as that of the pioneer medicine. 
As a result of the 1984 law, generic manufacturers are able to avoid 
the huge cost (estimated at $500 million on average) of discovering and 
developing a new drug. It costs only a very small fraction of that 
amount for generic manufacturers to demonstrate bioequivalence--which 
is why they can market their copies at reduced prices.
    The Hatch-Waxman compromise also helped generic manufacturers by 
overruling a 1984 Court of Appeals decision in the Bolar case. The 
Court had held that it constituted patent infringement for a generic 
company to manufacture and test a medicine before its patent expired 
even if its only purpose was to prepare a marketing application. In a 
unique exception to patent law, the Hatch-Waxman compromise allows 
generic manufacturers to use innovator medicines still under patent to 
obtain bioequivalency data for their FDA applications (a use that 
ordinarily would be a patent infringement) so they can be ready to 
market their copies as soon as the pioneer patents expire.
    The 1984 law also sought to increase the number of generic copies 
by providing an incentive for generic manufacturers to challenge 
pioneer patents. The first generic manufacturer to certify to FDA that 
a patent on an innovator medicine is invalid or is not infringed by its 
product obtains 180 days of exclusive marketing rights if the copy is 
approved before the patent expires. During that 180-day period, FDA 
cannot approve any other copies.
    To attempt to balance the generic provisions, the Hatch-Waxman 
compromise provided limited incentives to pioneer companies to help 
spur innovation. The law restores part of the patent life--but not 
all--lost by innovator products as a result of FDA review:

 A pioneer drug receives a half-day in restored patent life for 
        every day the product is in clinical trials prior to FDA 
        review.
 A pioneer drug receives day-for-day restoration of patent life 
        for the time it is under review by FDA. However, the effective 
        patent life of a drug cannot exceed 14 years, regardless of how 
        much time is lost in clinical testing and review. And the total 
        time restored is limited to no more than five years (even if 
        more than five years is lost during drug development and 
        review).
    Innovator drugs introduced in the 1990s that obtained patent 
restoration enjoyed an average effective patent life of less than 11.5 
years--substantially less than the 18.5 years enjoyed by inventors of 
other products. (The full patent term in the U.S., as with all member 
nations of the World Trade Organization, is 20 years from the date a 
patent application is filed with the Patent and Trademark Office.)
    In addition to partial patent restoration, the Hatch-Waxman law 
provides that FDA is prohibited from approving generic copies of a 
pioneer drug for five years after approval of an innovator product in 
the case of new chemical entities and for three years in the case of 
other drugs and innovations in existing drugs. These exclusivity 
periods are to protect an innovator's data when there is no patent 
protection. The law also creates a procedure for litigating patent 
disputes before FDA approves an allegedly infringing generic copy.
Few Patent Disputes
    Despite the generic industry's arguments to the contrary, data 
compiled by FDA conclusively show that, in the overwhelming majority of 
cases, generic applications have not raised or encountered any patent 
issues that have delayed their approval. The facts speak for 
themselves:

 From 1984 through January 2001, 8,259 generic applications 
        were filed with FDA.
 Of these applications, 7,781--94 percent--raised no patent 
        issues.
 Only 478 generic applications--5.8 percent--asserted a patent 
        issue, either challenging a patent's validity or claiming non-
        infringement of a patent.
    Further research shows that:

 Only 58 court decisions involving just 47 patents have been 
        rendered resolving generic challenges to innovator patents--a 
        tiny fraction of the number of generic applications.
 Only 3 of the patent disputes settled between innovator and 
        generic companies have reportedly been challenged by the FTC--
        an infinitesimal percentage of the applications.
A Heavy Burden to Justify Change
    Even though the Hatch-Waxman compromise stimulates competition and 
provides limited research incentives, generic manufacturers are 
advocating major changes in the legislation. We believe that, in view 
of the balanced nature of the law, any proponent of change has a heavy 
burden to clearly demonstrate that change is necessary and would not 
upset the delicate compromise achieved in 1984. We do not believe this 
burden has been met with regard to any of the changes that have been 
proposed. Therefore, we strongly oppose such changes that would, we 
believe, unfairly skew the law in favor of generic manufacturers and 
impede the ability of the research-based industry to realize in a 
timely way the promises that the accelerating biomedical advances hold 
for patients in all parts of the world.
    The generic industry has raised concerns in four areas in 
particular, which are addressed to various extents and in various ways 
in the Brown-Emerson bill, H.R. 1862. (See also the Schumer-McCain 
bill, S. 812.) The research-based industry is convinced that the 
changes sought by the generic industry would overturn some of the main 
trade-offs of the Hatch-Waxman compromise, as briefly described below. 
We would be pleased to discuss these and other such issues in more 
detail with any Member of the Committee or staff member who so desires.
    Patent-Dispute Settlements: The generic industry has proposed to 
place limits on settling patent litigation between innovators and 
generic manufacturers that are different from the rules that apply to 
the settlement of other types of patent litigation. There is no need to 
amend the Hatch-Waxman compromise to deal with this issue. Settling 
cases is encouraged by the courts, it avoids the expenses of 
litigation, and it can create results that accommodate the interests of 
both parties.
    Any settlements that are anti-competitive are subject to regulatory 
challenge under existing law. The actions of the Federal Trade 
Commission (FTC) in challenging some recent settlements demonstrate 
that the antitrust authorities are actively and adequately monitoring 
settlements between pioneer companies and generic manufacturers.
    Orange-Book Listings: The generic industry would change the 
procedure by which innovator companies can litigate patent disputes 
prior to FDA approval of an allegedly infringing product. This would 
upset a major feature of the Hatch-Waxman compromise. The provision was 
intended to offset the loss by pioneer companies of trade-secret status 
for their safety and effectiveness data and the loss of patent rights 
that had been recognized in the Bolar case that was overruled by the 
1984 law.
    Prior to 1984, FDA approved a marketing application for a generic 
product even if the patent holder contended that the product would 
infringe its patent. Although patent holders could sue infringers, 
recovery of damages was questionable, particularly when the infringer 
was a small generic manufacturer that was potentially responsible for 
treble damages that accumulate during the patent litigation.
    Under Hatch-Waxman, innovators are required to have their patents 
listed in the FDA Orange Book, and a generic applicant must file a 
``Paragraph IV certification'' if it wants the agency to approve its 
application before the listed patent expires. A generic applicant may 
file such a certification only if it contends that the unexpired patent 
is invalid or would not be infringed by its product. The generic 
applicant must send a copy of the certification to the patent holder 
and the manufacturer of the innovator drug. If the patent holder sues 
for infringement within 45 days, FDA is automatically barred from 
approving the generic application for up to 30 months while the case is 
litigated.
    The generic industry has complained that this process has been 
abused and has argued that the law should be changed to limit the 
patents that can be listed, such as only listing patents on active 
ingredients. The data presented earlier conclusively show that the 
process has not been abused as the overwhelming majority of generic 
applications--94 percent--have not raised or encountered any patent 
issues.
    There is no sound rationale why a generic manufacturer should be 
able to avoid pre-approval patent litigation by making small changes 
from the marketed product, such as by changing the crystalline form, 
when the changed product still infringes an innovator's patent. Pre-
approval patent litigation should be linked to a generic applicant's 
reliance on an innovator's safety and effectiveness data--that was one 
of the trade-offs in the Hatch-Waxman compromise.
    If a generic product would both rely on an innovator's data and 
infringe one of the innovator's patents, pre-approval patent litigation 
should be allowed. Thus, any patent that covers a product that could be 
approved based on an innovator's data should be listed in the Orange 
Book to permit pre-approval litigation.
    Thirty-Month Bar: The generic industry contends that, once the 
patent-dispute procedure is triggered as described above, FDA should 
not be automatically barred from approving a generic application for up 
to 30 months. The industry also contends that innovator companies 
should be required to post a bond that a generic manufacturer could 
collect if it prevails in patent litigation.
    Patent disputes involving generic drugs are a special case under 
the law because the Hatch-Waxman compromise overruled the Bolar case 
and permits generic manufacturers to develop and test a competitive 
product before its patent expires, thus barring patent holders from 
asserting their rights during this period. Such otherwise-infringing 
testing is not permitted in any other U.S. industry.
    Since the 1984 compromise gave generic manufacturers a multi-year 
head start on getting to market by authorizing product-development that 
would otherwise constitute patent infringement, innovator companies 
were given the offsetting benefit of being allowed to litigate a patent 
before FDA approves the product.
    If it were not for the Hatch-Waxman compromise, an innovator could 
sue a generic manufacturer when it begins product development and the 
litigation might well be concluded by the time a product is ready for 
FDA approval. The generic industry cannot reasonably claim the right to 
engage in development activity that normally would be considered patent 
infringement and at the same time assert that there should be no 
special rules governing the related patent litigation.
    ``Late-Listed'' Patents: The Hatch-Waxman compromise requires that, 
if a patent has been issued at the time an NDA is submitted to FDA, the 
patent information must be included in the NDA. If a patent is issued 
after FDA approves an NDA, the patent information must be submitted to 
FDA within 30 days after the issuance of the patent for listing in the 
Orange Book.
    If a patent is listed in the Orange Book within 30 days of 
issuance, it is treated the same as all other listed patents. The 
generic industry has argued that the pre-approval litigation process 
should not apply to patents issued when generic drugs are close to 
being approved. The generic industry refers to these as ``late-listed'' 
patents even though they are listed promptly after they are issued in 
accordance with the Hatch-Waxman compromise.
    The purpose of the pre-approval litigation procedure is to protect 
innovator companies from the injury that would occur if generic 
manufacturers sell infringing products and are unable to pay the 
potentially large amounts that would be due at the conclusion of 
litigation. This rationale applies to all patents, regardless of when 
issued. Innovator companies should not be deprived of one of the 
important rights conferred by the Hatch-Waxman compromise simply 
because a patent was issued after a drug was approved or because the 
Patent and Trademark Office (PTO) was slow in processing a patent 
application.
    There are sufficient protections in existing law against abuse of 
the pre-approval litigation procedure. For example, patents are issued 
only if the PTO determines that they meet the statutory standards; 
innovator companies are subject to criminal penalties if they knowingly 
make a false statement to FDA to obtain listing of a patent in the 
Orange Book, and the Federal Rules of Civil Procedure provide sanctions 
if an innovator files a frivolous or improper patent suit. Further, if 
a patent is truly late-listed--i.e., listed more than 30 days after it 
is issued--FDA's rules exempt generic applicants with pending 
applications from filing a certification regarding the patent.
                            dtc advertising
    On DTC advertising, PhRMA strongly supports direct-to-consumer 
advertising of prescription medicines as currently regulated by FDA and 
opposes any further restrictions on this pro-patient, pro-health 
activity. Left sitting on pharmacy shelves, medicines don't do anyone 
any good. Unless they are prescribed for patients, prescription 
medicines cannot prolong life, ease pain, reduce disability or improve 
the quality of life. And unless medicines are prescribed and used, they 
will not generate the funds needed for private industry to continue to 
research and develop new and more effective medicines.
    In 1997, FDA under the Clinton Administration issued guidelines 
that clarified the agency's broadcast requirements. FDA no longer 
required radio and television ads to contain voluminous information 
about a drug's side effects. Under the draft guidance, ads still have 
to list major health risks as well as side effects and must set forth 
four ways for consumers to receive additional information.
    FDA's 1997 decision was in reaction to a policy that had generated 
ineffective and confusing advertisements. Prior to the guidance, FDA 
required that a brief summary of the prescribing information for a drug 
had to be included in all advertisements--including broadcast 
advertisements--that both named a prescription drug and stated its 
purpose. The brief summary is an FDA-approved document that advises 
physicians, in very technical language, how to appropriately use a 
drug. Because of its technical, scientific wording, this summary is 
very difficult for ordinary patients and consumers to understand.
    In announcing the clarifying guidance in August 1997, then FDA Lead 
Deputy Commissioner Michael Friedman, M.D., said: ``Today's action can 
help promote greater consumer awareness of prescription drugs.'' Robert 
Temple, M.D., Associate Director for Medical Policy at FDA's drug 
division, added that, under the new guidance, ads could inform 
consumers about new products they might not learn about through other 
means. As an example, he cited a new generation of antihistamines that 
do not cause drowsiness. ``You need to be told by someone that those 
products are out there or you'll never know,'' he said.
    Patients are now more actively involved in their own health care 
than ever before. The consumer movement and the information explosion 
have empowered patients to participate in these decisions. Armed with 
information, patients have become active partners with health-care 
professionals in managing their own health care and they are savvy 
consumers. Rather than remaining uninformed and relying entirely on an 
increasingly complex health-care system, patients are asking questions, 
evaluating information, and making choices.
    Direct-to-consumer advertising provides a valuable resource for 
patients to obtain information about specific diseases and conditions, 
particularly in rural areas of the country where access to providers 
and health-care information may be difficult. Too often, many common 
yet serious conditions go untreated even though effective treatments 
are available. Affected individuals may not realize they have a health 
condition. Others are aware of their symptoms, but may not know that 
treatment is available. Patients suffering from chronic conditions may 
be dissatisfied with current treatment, but are unaware that different 
options are available with fewer side effects or easier dosing 
regimens.
    Pharmaceutical advertisements raise awareness of conditions and 
diseases that often go undiagnosed and untreated. For example, the 
American Diabetes Association estimates that of the 16 million 
Americans who have diabetes, 5.4 million don't know it. One third of 
the people with major depression do not seek treatment and millions of 
Americans are unaware that they have high blood pressure. By informing 
people about the symptoms of such diseases and the availability of 
effective, non-invasive treatments, direct-to-consumer advertising can 
improve public health.
    There are encouraging signs that this is happening:

 A survey by Prevention magazine found that, as a result of DTC 
        advertising, an estimated 24.7 million Americans talked to 
        their physicians about a medical condition they had never 
        previously discussed with a doctor. In other words, millions of 
        people who had suffered in silence were encouraged to seek 
        help.
 A 1999 survey by FDA found that 27 percent of respondents 
        asked their doctors about a condition they had not discussed 
        before. These conditions ranged from diabetes and heart disease 
        to arthritis and depression.
 In the two years that ads for a medicine for erectile 
        dysfunction have appeared, millions of men have visited their 
        doctors to request a prescription for the drug. For every 
        million men who asked for the medicine, it was discovered that 
        an estimated 30,000 had untreated diabetes; 140,000 had 
        untreated high blood pressure, and 50,000 had untreated heart 
        disease. These numbers are striking--and this is just one drug.
 A study by IMS Health, a health-information company, found 
        that, in the one year after an advertising campaign for an 
        osteoporosis drug began, physician visits by women concerned 
        about the disease doubled.
    A growing body of evidence suggests that consumers like DTC 
advertising. A 1999 survey by FDA found that those who liked these ads 
outnumbered those who did not by nearly two to one. Eighty-six percent 
said the ads ``help make me aware of new drugs,'' while 62 percent said 
the ads helped them to have better discussions with their physician 
about their health. A survey by Prevention magazine found that 76 
percent of respondents thought the DTC ads ``help people be more 
involved in their health care'' and 72 percent felt the ads ``educate 
people about the risks and benefits of prescription medicines.''
    Advertising is only one source of user-friendly information 
available to consumers. Some 50 consumer magazines that deal with 
health care are published every month. The Physicians' Desk Reference, 
or PDR, once confined to doctors' offices, is now available in a 
consumer edition at pharmacies. Internet users can surf tens of 
thousands of sites dedicated to health-care topics. In fact, according 
to health-care consultant Lyn Siegel, about 25 percent of online 
information is health-related, and more than half of the adults who go 
on the web use it for health-care information. So, while DTC 
advertising is an important source of information for consumers, it is 
clearly not their sole source of information--even though it is the 
most accurate because it is regulated by FDA.
    Critics contend that increasing expenditures on DTC advertising are 
driving up the price of drugs, but the amount spent by pharmaceutical 
companies on advertising has remained fairly constant and price 
increases have been relatively modest. As health care shifts from a 
physician-directed to a patient-directed system, companies are shifting 
the allocation of expenditures within their marketing budgets away from 
doctors to patients, although the distribution of free samples by 
pharmaceutical companies (provided to physicians for trial use by 
patients) continues to grow and remains by far the largest part of 
their advertising budgets.
    And, while total pharmaceutical expenditures are rising, price 
increases have been in line with inflation in recent years. According 
to IMS Health, a health-information company, total drug expenditures 
rose 14.7 percent in 2000. Of that figure, only 3.9 percent of the 
increase resulted from price increases. Most of the increase in drug 
expenditures came from the increased use of prescription medicines, 
including the use of newer, more expensive, and more effective 
therapies. The increased use of prescription drugs is a healthy trend. 
Drugs not only save lives--they save money in many cases by reducing 
the need for alternative, more expensive care. They keep patients out 
of hospitals, out of nursing homes, out of surgery, out of doctors' 
offices--and on the job. Still, only 8.2 percent of every health-care 
dollar is spent on prescription medicines, compared to 32 percent on 
hospital care and 22 percent on physician and clinical services.
    In summary, direct-to-consumer advertising helps to meet the 
increased demands of consumers for information about diseases and 
treatments. It fosters competition among products, which can improve 
the quality of care for consumers. Most important, DTC advertising can 
improve public health. It is intended to start a dialogue between 
patients and doctors. Often, the dialogue will not result in a 
physician prescribing the drug mentioned by a patient. But it will 
prompt a discussion that may lead to better understanding and treatment 
of a patient's condition. And, whatever happens, it is important to 
remember that it is a physician who ultimately decides whether a drug 
should be prescribed and, if so, which medicine is most appropriate for 
a particular patient.
                            rx/otc switches
    The issue has recently arisen as to whether a party other than a 
sponsor of a New Drug Application (NDA) can request that FDA switch a 
prescription medicine to over-the-counter (OTC) status. It has been a 
long-term policy of FDA that such a request can be made only by an NDA 
sponsor, or by another with its approval, through the submission of an 
NDA supplement with extensive data to support safe and effective OTC 
use with appropriate OTC labeling. PhRMA strongly supports this 
practice that has long been followed for good reasons.
    There are compelling legal reasons against forced switches of 
prescription drugs. These reasons have been spelled out in submissions 
to FDA. Without elaboration in this testimony, such switches would 
violate the confidentiality provisions of the Federal Food, Drug, and 
Cosmetic Act, the Trade Secrets Act, and the Fifth Amendment to the 
U.S. Constitution.
    The process of discovering and developing new medicines, and new 
uses for existing medicines, is risky, expensive, and time-consuming. 
It is undertaken principally by private companies at their own 
initiative through the investment of huge sums in research and 
development ($500 million on average for one drug). This process has 
led to enormous progress in preventing and treating disease and in 
improving public health.
    The sponsor of an NDA has the most comprehensive and detailed 
knowledge of its drug and is in the best position to design, finance, 
and conduct additional studies necessary to evaluate the safety and 
effectiveness of the drug for OTC use and to prepare the appropriate 
OTC labeling. Every recent switch has been based on the development and 
submission of substantial amounts of data demonstrating that a 
prescription drug would be safe, effective, and properly labeled for 
OTC use.
    Such data have been almost universally submitted through NDA 
supplements, which give manufacturers the opportunity to earn 
exclusivity rights established by Congress as an incentive to invest in 
the necessary research. The NDA holder is in the best position to take 
all of the relevant information into account and to decide whether and 
when to initiate a switch. Forced switches are being proposed by 
insurers seeking to shift costs to patients. These third parties lack 
the necessary data to determine whether a switch is appropriate and are 
not themselves proposing to conduct the extensive studies needed to 
support a switch. Rather, they are seeking switches on the basis of 
assertions, anecdotal evidence, and other flawed and incomplete data.
    FDA would be acting arbitrarily and capriciously if it applied a 
lower standard to switches initiated by the agency itself or by third 
parties than it applies when an NDA sponsor seeks such action. Forced 
switches also would alter revenue streams and expose manufacturers to 
different product-liability risks than anticipated when they planned 
their research investments.
    There are good reasons to retain the process that has been of great 
benefit to FDA, industry, and the public for many years. It is the 
process most likely to generate the needed data and to ensure that only 
drugs that are actually safe for over-the-counter use can be obtained 
without a prescription. Switches based on insufficient data could put 
the public at risk. In fact, the one time FDA initiated a switch 
without the active support of the NDA holder--for a bronchodilator 
almost 20 years ago--the agency quickly rescinded its decision after 
receiving numerous adverse comments.
    If third parties were allowed to initiate switches, moreover, there 
likely would be an outpouring of such requests--and it would be 
difficult, if not impossible, for FDA to control the process and decide 
who should and should not be permitted to seek these changes.
    FDA certainly plays a critical role in the drug-development process 
in general and in switching drugs in particular. If the agency believes 
that a drug is an appropriate candidate to be switched, it can consult 
with the NDA holder to determine whether there is an interest in such a 
change and in developing a study program to support an application for 
a switch. Industry has long cooperated with FDA on issues of mutual 
interest and is ready to do the same on this important issue. But 
forced switches would be unprecedented, would violate the rights of NDA 
holders, and could be detrimental to public health.
    This concludes my written testimony. I would be pleased to answer 
any questions or to supply any additional materials requested by 
Members or Committee staff on these or any other issues.

    Mr. Deal. Thank you, Dr. Glover.
    Mr. Downey.

                  STATEMENT OF BRUCE L. DOWNEY

    Mr. Downey. Thank you, Mr. Chairman.
    At the outset I'd like to thank the committee for holding 
this hearing. I think it addresses some very important subjects 
and I hope to contribute to that dialog.
    As the chairman noted, I'll be testifying not only on 
behalf of myself, but also on behalf of the Generic 
Pharmaceutical Association and its 150 members that provide 
virtually all the generic drugs in this country.
    I have submitted a written statement. I would ask that that 
statement be made a part of the record before I expand on those 
remarks.
    Mr. Deal. Without objection.
    Mr. Downey. Thank you. I'd also like to thank Congressman 
Brown and Congressmen Emerson for introducing their 
legislation. I think that legislation has many very positive 
features that would help speed generic products to market and 
add considerable savings to American consumers and to 
Congressman Pallone for his legislation which, if enacted, 
would eliminate some of the artificial barriers that we 
confront state-to-state as we try to market our products.
    It really is a privilege to be here today because this 
legislation that we're addressing, the Waxman-Hatch 
legislation, was transforming. It created an entire industry. 
It's saved consumers tens of billions of dollars over the last 
15 years. It's increased the amount of investment in R&D from 
the pharmaceutical companies, the branded companies. And it's 
done all of this in the context of free markets where there is 
really little State or Federal participation in that. It's all 
been done in the marketplace, which I think is a tremendous 
accomplishment.
    On a personal level, it's also given me a very good job in 
an exciting industry, and I'm very pleased for that.
    I would like to really respond to some of the questions 
that have been asked today and try to put or thoughts together 
to respond on several issues. First the patent process.
    As we have discussion about the 180 days of exclusivity and 
patent settlements and the 30 month stay, it really glosses 
over what I think is the underlying problem. And the underlying 
problem I think is twofold. One, the process in which you 
obtain a patent is loaded in favor of patent issuance and many 
patents that are not patent worthy get issued. And second, we 
have a broad definition of what's patentable in the United 
States, such that ideas that I don't believe necessarily merit 
patents earn them.
    I want first to talk about the process. As you go to the 
Patent Office to make an application, you make a submission, 
there's an examiner, there's no opponent. So there's no one 
saying to the examiner or the judge this patent should not be 
issued because or this idea is not patent worthy because. All 
of the disclosure is made by the proponent. And in that 
context, it shouldn't be surprising when billions of dollars, 
literally, are at stake. Many proponents push the envelop to 
the bursting point in advocating in favor of patentability in 
the absence of opponent advocating to restrict the patent. 
Unpatentworthy ideas obtain patent protection. So I think that 
basic system leads to some of the problems that we've tried to 
overcome.
    Also, I think some of the ideas that we consider patent 
worthy in this country really shouldn't be. Things like 
formulation patents on how to use an active ingredient in 
combination with other compounds to deliver a dose to a 
patient. How to score the tablets so they can be broken in a 
certain way to titrate the dose. All of these ideas are 
patentable under current law, but in my view add very little to 
the intellectual capital of the country.
    Given this situation it seems to me the 180 days of 
exclusivity is our only line of defense. It's that exclusivity 
which gives us in the generic industry the incentive to go out 
after the patents issued, attack that patent in a way to get 
our products to market earlier than the patent law would 
otherwise provide.
    Those who would say the 180 days of exclusivity is not 
important aren't responsible to shareholders and to the public 
for the profitability of our firms. We invest literally 
millions of dollars in these patent challenges and we do so, as 
Dr. Glover pointed out, in the face of a presumption of 
validity of the patent and in face of a situation where if we 
launch the product in the market that's subject to the patent, 
we could be subject to treble damages. In a company of our 
size, even one of the largest generic companies, we would be 
bankrupt if we were to launch, say, a Prozac into the market, 
market it for a year or so, and ultimately lose the patent 
case.
    And Prozac is a very good example, because recently we did 
challenge the patents on Prozac, and there were two; one that 
expired in February 2001 and one scheduled to expire in 
December 2003. The 30 months passed before we got to trial. We 
could have theoretically launched that product to market and 
subjected ourselves to treble damages prior to the final 
decision of the case.
    We lost the first patent, the one that expires in 2001, and 
we would have been out of business. But we won the second 
patent, and as a consequence of winning that second patent 
we'll bring generic Prozac to market 30 months in advance of 
that patent expiry at a savings of literally $4 or $5 billion 
to the healthcare system.
    We invested 5 or 6 years in that case. We invested with our 
partner in excess of $8 or $10 million. And we did it all in 
the face of a presumption of validity that we had to overcome 
to bring the product to market. Without the exclusivity, 
without the return on that investment, we would simply not have 
undertaken that process.
    We at Barr have undertaken six and completed six patent 
cases. We've won two, we've lost two and we've settled two. And 
I want to take up the question of settlements, because it's not 
the settlement that keeps you out of the market, it's the 
patent. If the patent's valid, you can't launch the product in 
defiance of that patent without subjecting yourself to 
unacceptable risks.
    In our settlements, for example, in both cases we'll be 
launching a product under license from the innovator into the 
market prior to the patent expiry. In one case, 10 years prior 
to patent expiry. So that settlement brought economic benefits 
to us, less than we would have earned if we had taken the case 
to trial and won but more than we'd have earned if we had gone 
to trial and lost. And I think it's very significant because 
both cases we settled the subsequent challengers lost. And I 
think in retrospect that shows the wisdom of the settlement and 
I think an essential part of the patent process to be able to 
settle cases in order to keep--or actually to bring products to 
market faster to provide the incentive for the cases and bring 
generic products to the consumer.
    I have lots of other remarks that I'd like to make, but I 
think the stop sign is on, and I'll pass the mike and answer 
questions when everyone's finished.
    [The prepared statement of Bruce L. Downey follows:]
  Prepared Statement of Bruce L. Downey, Chairman, Barr Laboratories, 
                                  Inc.
    Mr. Chairman, members of the Sub-committee, thank you for the 
opportunity to testify. My name is Bruce L. Downey, and I am Chairman 
of Barr Laboratories, Inc., which has facilities in New York, New 
Jersey and Virginia and manufactures and distributes a wide range of 
prescription medicines for the treatment of diseases ranging from 
breast cancer to heart disease to depression. Barr Laboratories is a 
member of the Generic Pharmaceutical Association.
    Today, I am speaking on behalf of the GPHA and its more than 140 
member companies, which manufacture nearly all generic pharmaceuticals 
distributed in the United States today. No other industry has made, nor 
continues to make, the contribution to affordable health care that is 
made by a robust generic pharmaceutical industry.
    I want to thank Chairman Bilirakis, Chairman Tauzin, Congressman 
Dingell and Congressman Brown for focusing on an issue that has such 
significance for our industry and for the American consumer. This is 
the first House-sponsored hearing in some time that has looked 
specifically at the value and contribution of generic pharmaceuticals 
to consumers, and how our industry makes a significant contribution to 
affordable healthcare.
    Often, when industries come to Congress, they bring an agenda that 
would impose significant costs on American taxpayers. The generic 
industry comes before you today to discuss ways to create a direct and 
immediate benefit for consumers by reducing health care costs by 
billions of dollars. A strong generic industry will allow the 
government to do much more for all Americans--particularly the elderly, 
under-insured and uninsured--for much less. The opportunity to create 
immediate consumer benefits, at no additional cost, deserves serious 
consideration.
    As I intend to demonstrate in my testimony, the generic 
pharmaceutical industry has saved, and continues to save, consumers 
billions of dollars a year in prescription costs. The problem is, 
however, that the legislative balance that created significant annual 
savings for consumers has gradually been eroded.
    In just the past week, the value of America's pharmaceutical 
industry has been in the spotlight, as articles in newspapers and 
magazines across the nation focused on the 20th anniversary of the AIDS 
crisis. Universally, these stories addressed two issues: the 
extraordinary power of pharmaceutical research and development; and the 
extraordinary financial burden that has been created by these life-
saving pharmaceutical therapies.
    I want to stress that the generic pharmaceutical industry 
recognizes the risks in the investment made by the brand pharmaceutical 
industry in new pharmaceutical therapies. We also recognize that the 
brand industry deserves to receive incentives for its innovation. In 
addition, the health of the generic industry is tied substantially to 
the health of the brand industry and our future is directly linked to 
the ability of the brand industry to innovate and to bring new 
therapies to market.
    As always, however, in the nearly 20-year history of the generic 
pharmaceutical industry, the challenge continues to be rewarding 
innovation but assuring competition at the end of brand exclusivity. 
Both the House and Senate, through recently introduced legislation, 
have taken the first steps in an effort to restore that balance. We 
welcome these initial first steps, but we respectfully call upon 
Congress to do much more to preserve the consumer savings that result 
from a healthy brand and generic pharmaceutical industry.
    Since its inception in 1984, with the implementation of the Drug 
Price Competition and Patent Term Restoration Act, (commonly called the 
Hatch-Waxman Act), the generic pharmaceutical industry has been 
responsible for saving consumers and taxpayers billions of dollars each 
year.
    According to the Congressional Budget Office Report of 1998, 
generic pharmaceutical competition returns a minimum of $8-10 billion a 
year in savings into the pockets of American consumers. With 
pharmaceutical sales in the United States in excess of $138 billion in 
the past year, sales of generic medicines accounted for less than 10% 
of the total dollars, but accounted for nearly one out of every two 
prescriptions filled. In fact, when you rank the top five 
pharmaceutical companies on the basis of prescriptions dispensed, three 
of the top five are generic pharmaceutical companies: Watson, Mylan and 
Teva, all members of our association.
    Interestingly, this savings has not come at the expense of 
innovation. According to the same CBO Report, ``Between 1983 and 1995, 
investment in R&D as a percentage of pharmaceutical sales by brand name 
drug companies increased 14.7 percent to 19.4 percent. Over the same 
period, U.S. pharmaceutical sales by those companies rose from $17 
billion to $57 billion.''
    The evidence is compelling. The underlying premise of the Hatch-
Waxman Act works--consumers benefit if a proper balance is maintained 
between rewarding innovation and guaranteeing competition.
    Unfortunately, the delicate balance struck by Congress in 1984 has 
gradually grown lopsided in favor of the brand pharmaceutical industry, 
hostile to the generic industry, and as a direct result, become a 
threat to the expansion of consumer savings. The reason is simple: the 
brand industry discovered years ago that competition is good for 
consumers but bad for their bottom line.
    When Hatch-Waxman was implemented, the assumption was that the 
brand products would lose about 30% of their market, but would recover 
this loss through price increases. However, the introduction of a 
generic product often results in such a significant market share loss--
as much as 80-90%--that the brand company is not able to recover its 
loss. After starting their own generic businesses, and implementing 
other strategies, it became clear to brand companies that the only way 
to succeed was to delay competition for as long as possible.
    Additionally, laboring under the burden of significant expectations 
from the financial markets to maintain strong profits, brand companies 
have increasingly found that they are unable to generate a consistent 
pipeline of new products to meet profit and growth expectations. The 
investment in new product innovation continues, but the value of 
extending the market exclusivity of existing products is increasingly 
viewed as a prudent financial investment.
    The results of this investment in delaying competition have been 
significant. Delays in the introduction of generic competition, 
combined with the nearly $3 billion spent annually on direct-to-
consumer marketing for new products that often displace generic sales, 
have resulted in a stagnation of the growth of generic substitution. 
Nearly two decades after Hatch-Waxman, generic substitution rates hover 
in the low 40% area, rather than the 50-65% that was predicted by many 
experts just a few years ago.
    Since 1984, no less than a half dozen different acts of Congress 
have delayed the introduction of generic competition for specific 
products. According to a National Institute for Health Care Management 
(NIHCM) Foundation study issued earlier this year, the slow erosion of 
Hatch-Waxman through legislation, and the increasing exploitation of 
legal and regulatory loopholes in the Act, has extended anticipated 
market exclusivity from approximately 12 years to more than 18 years 
for some drug products.
    The cumulative effect of these actions has resulted in extending 
product monopolies by almost 50%. With national prescription drug 
spending continuing to increase at an alarming rate, it is incumbent 
upon Congress to re-set the 1984 balance. In other words, its time to 
put the health of Americans first, with the challenge of re-achieving 
the optimal balance of rewarding innovation and assuring public access 
of affordable medicines immediately at the end of brand exclusivity.
    Over the past decade, as it has become clear to the brand industry 
that delaying competition is one sure bet to ensuring a healthy profit 
stream, the number of other gimmicks applied to extend the life-cycle 
of products nearing the end of their patent life has increased 
dramatically.
    Certainly, the stakes in this game are high. Products representing 
annual sales of more than $37 billion are due to lose patent protection 
in the next five years. Many of these are the blockbuster names that we 
all know. To preserve their monopolies, brand companies have turned to 
such tactics as patent evergreening, citizen petitions, application of 
the automatic 30-month stay in patent litigation, application for 
pediatric exclusivity, and other techniques that delay generic approval 
or prevent timely introduction of generic competitors.
    I would like to cite two recent examples of the techniques used to 
``game the system.''
    The cancer agent Taxol enjoyed nearly 8 years of market 
exclusivity. But tactics employed by the brand manufacturer, Bristol-
Myers Squibb, resulted in a two-and-one-half year delay in generic 
approval.
    Taxol, an anti-cancer agent, was originally discovered and 
developed by federal researchers over a thirty-year period. Although 
BMS testified before Congress in 1991 that the compound was neither 
patented nor patentable and, therefore, BMS would not have any 
intellectual property rights, BMS received several patents on certain 
methods of administration and stabilizing the compound following FDA 
product approval. Another egregious fact is that prior to the 
expiration of five years of product exclusivity granted under Hatch-
Waxman, BMS unsuccessfully appealed to Congress for additional market 
protection.
    In a complex series of legal maneuvers involving patent listings in 
the Orange Book, that followed, BMS was able to delay generic approval. 
Part of these delays resulted from the 30-month stay provision of 
Hatch-Waxman that automatically prevents approval of a generic product 
for this period, while patent litigation is underway. These tactics, 
assuming a modest generic penetration of only 50%, at a 50% price 
reduction, cost consumers more than $500 million.
    Another recent example is the anti-anxiety drug, Buspar, which had 
annual sales of $700 million. The product was in its 14th year of 
market exclusivity, when the brand company, again Bristol-Myers Squibb, 
filed a surprise last-minute new patent on Buspar one day ahead of 
generic competition.
    The last-minute patent sought to protect a metabolite created by 
digestion of the drug in the human body. Again, because of the patent 
filing, the company was able to invoke the 30-month stay of approval of 
a generic competitor. Although this listing was ultimately overturned, 
these tactics, assuming a modest generic penetration of only 50%, at a 
50% price reduction, cost consumers more than $57 million.
    Both of these examples highlight two issues that Congress must 
address. First, patent law allows the listing of any number of patents 
on drug products, making it impossible for generic competition to begin 
on a date certain, as long as the brand company can find some aspect of 
the product that can be patented. This issue is an area where Congress 
could make significant and immediate changes, simply by conforming U.S. 
patent law to that practiced throughout the world.
    The second issue is that of the 30-month stay. Delay equates to 
profit preservation, so the brand company has much to gain by 
initiating patent litigation against the generic competitor. They face 
no financial or other penalty if the case is ultimately found to be 
groundless. But they do get an automatic extension of their exclusivity 
while the case is in review. The burden rests entirely on the generic 
competitor. Congress could address this deficiency in Hatch-Waxman by 
requiring the brand holder to post a bond as part of any patent 
litigation. This would place them at risk for taking actions that have 
no other purpose than to delay competition.
    These are only two examples of a systematic process of investing in 
legal and regulatory innovation to prevent generic competition. These 
types of abuses need to be curbed.
    How can we work together to fix this problem, and increase both 
access and cost savings? I believe that the answer rests in the 
combination of encouraging the increased usage of generic medicines 
today and strengthening Hatch-Waxman to restore the balance first 
established in 1984. Each of these steps can generate billions of 
dollars in savings for America's health care system, while increasing 
access to medicines that can improve and prolong life.
    I would like to briefly address both points.
    First, I would like to address the potential and immediate savings 
that can result from increasing the utilization of generic medicines. 
The price difference between an equivalent generic product and its 
brand equivalent can be as much as 70-80%. A decade ago, the price 
differential between a brand product and an equivalent generic product 
was approximately $17. Last year, that price differential had grown to 
approximately $46.
    According to a study published last September by Tim R. Covington, 
Executive Director of The Managed Care Institute at Samford University, 
``An increase of only 1% in the nation's generic prescription 
utilization rate (approximately 27 million scripts) would generate a 
payer savings of $1.3 billion each year.'' Action by Congress to 
encourage the maximum utilization of generic medicines in federal and 
state prescription drug programs, and to develop national educational 
programs that communicate the sameness, safety and savings of generic 
medicines would be an investment that could return significant and 
immediate value to taxpayers.
    Estimates suggests that total pharmaceutical spending in the next 
decade will triple to more than $330 billion by 2010. Clearly, 
increased utilization of generic drugs represents the only immediate, 
significant opportunity to put the brakes on this runaway escalation of 
America's pharmaceutical bill.
    Second, I am encouraged that Congress has begun the process of 
considering ways to restore the intended balance of Hatch-Waxman. While 
it is too early in the legislative process for the generic industry to 
unconditionally endorse any current proposal, we strongly support 
Congressional initiatives that represent meaningful and substantive 
reforms of Hatch-Waxman, and that restore the balance necessary to 
remove the barriers that delay the introduction of more affordable 
generic pharmaceuticals.
    Proposals that have been introduced on the Hill have been 
criticized for being too pro-generic. If that is the case, then they 
must also be criticized for being too pro-consumer. The facts are 
simple: investment by brand industry innovation in the legal and 
regulatory arenas can carry less risk and more reward than new product 
development.
    Working together, I am confident that our industry and members of 
the House of Representatives and the Senate can find ways to increase 
consumer savings by restoring balance to the competitive landscape.
    The membership of GPHA has identified a number of areas where 
Hatch-Waxman reform would accelerate the introduction of more 
affordable generic medicines. These proposals include eliminating the 
30-month stay component of patent challenges, and requiring brand 
manufacturers to post a bond if they challenge generic product 
applications.
    We believe that these and other proposals would dramatically 
encourage the competition that saves consumers more than $10 billion a 
year in prescription drug costs. GPHA is committed to working with the 
Senate and the Congress to ensure that any legislative initiatives: 
preserve the intent of Hatch-Waxman; result in a balance between the 
interests of the brand and generic industries; and, create a vibrant 
competitive environment in which substantial pharmaceutical savings 
reach American consumers.
    In summary, the brand and generic industry agree that affordable 
medicines are the key to longer, healthier and more productive lives. 
We also agree that innovation must be rewarded. But the generic 
pharmaceutical industry is unwavering in its belief that after the 
expiration of a fair and equitable period of patent protection and 
market exclusivity, consumers should be allowed to enjoy the benefits 
that competition creates in lower costs and increased access.
    Let us work together with you to resolve the problems of dispensing 
medicines to all Americans, including the under-insured and uninsured, 
by promoting the increased usage of generic medicines and working to 
ensure the timely introduction of generic competition.
    I am happy to answer any questions you might have.

    Mr. Deal. Thank you, Mr. Downey.
    Dr. Delgado.

                  STATEMENT OF JANE L. DELGADO

    Ms. Delgado. Good afternoon. My name is Dr. Jane Delgado. 
I'm President, CEO of the National Alliance for Hispanic 
Health, known as the Alliance.
    It's been very interesting for me to sit here, read my 
testimony and think I have so much more to say, but I only have 
5 minutes.
    I should let you know I was also the consumer member of the 
Edwards Commission, which worked to restructure the FDA in the 
late 1980's, early 1990's. So I'm very familiar with some of 
the issues that were raised. I'm also familiar with the saying 
``to tell the truth, the whole truth and nothing but the 
truth.'' And two out of three is not enough, so I will do all 
three and my daughter is here, and I'm here in front of you.
    So let me tell you what our concerns are. One of the major 
concerns we have, and it's not in my testimony, is this whole 
discussion about generic and brand. And I raise it because of 
the issue that what we know about physical science is changing.
    For example, in our community, Hispanics, many people know 
things about us. They know that we're overweight, they know 
that we're diabetic, but they didn't know that we have less 
heart disease than non-Hispanic whites. They didn't know that 
what we also do is we live longer than non-Hispanic whites. 
They didn't know we have less breast cancer. They also didn't 
know how the differences are in how we metabolize our drugs.
    So when people say generics, I say generic for whom? The 
FDA will also be able to tell you that if you look at who 
participates in these clinical trials, there are very few 
people who represent the diversity in this Nation. And there 
are differences.
    As Dr. Woodcock says ``Well, you know, you can take one 
medicine and you can take another one and it's okay, and it's a 
little different for you and it's a little different for 
them.'' Well, that little difference can mean a big difference 
for a patient. And I think in terms of your constituents, they 
can tell you what has happened with them when they use drugs.
    Constituents don't take drugs or medicines because one is 
cheaper, one is expensive. That may help. They take them 
because it works. If it's cheaper and it doesn't work for them, 
they're not going to take it. So please go back to the idea 
that we want things that work for the patient.
    I want to move on to one of the important facts that we 
also think is important is the idea of information to 
consumers. Someone said well, you know, these consumers are 
coming in and they're asking the doctor ``I'm diabetic, I want 
some Zoloft.'' And it's the wrong thing they're asking for. 
Well, we have changed our healthcare system from a physician 
hospital based system to one which is more patient driven and 
one which is more at home. And that patient should be 
congratulated for having the nerve to come in and ask for 
something, even if it's the wrong thing. And if the 
communication is incorrect, well great. What a great way to 
start a discussion. If we only talk to people who knew 
everything, we'd be very bored. We need new viewpoints, even 
mistakes to correct them; that's why we're here because 
obviously some people are saying one thing, other people saying 
another thing, and we're trying to make more sense of it. But 
this idea of correcting or talking to a patient is something 
which is not part of our healthcare system, is driven too often 
by factors of cost.
    I got this publication yesterday from the American Academy 
of Family Physicians, and it said ``life balance from doctor-
to-doctor. Tip One: Don't try to be too efficient. Take time to 
really listen to a couple of patient's stories a day. We need 
to be fed by our patients.'' That is where medicine is today, 
and that's why direct to consumer advertising is important.
    If more people are getting more medicines, good, they're 
getting treatment. If we have generic and we have brand, let 
the decision be made by the healthcare provider and the 
patient, not by anyone else. Those are the challenges we face, 
because our system is changing.
    And if you look at the way is science is ongoing, they will 
look back upon us and say ``Can you believe those people 
thought that if you gave 100 people the same medicine, they 
were supposed to respond the same. Ha, ha, ha.'' They will 
laugh because in the future medicine's going to be tailored to 
the individual.
    And as medicines change, what becomes law or the policies 
we develop have to be able to incorporate those changes. 
Medicine is not of the past, it is of the future. And those are 
the things that we as Hispanics are very concerned about.
    We know that we are now 12 percent of the population of the 
United States, that's even though the Census didn't include the 
3.5 million people in Puerto Rico. But we're there, 12 to 13 
percent. For us there are differences.
    We also know for people who are over 75 only 2 years ago 
the FDA started to record what was going on with them.
    If you add all the groups for which we really don't have 
the specificity of data on drugs and their impact, you have 
most of your constituents, gentlemen.
    So, thank you very much. I'll be open for questions later.
    [The prepared statement of Jane L. Delgado follows:]
  Prepared Statement of Jane L. Delgado, President and CEO, National 
                      Alliance for Hispanic Health
    Good morning. My name is Dr. Jane L. Delgado and I am President and 
CEO of the National Alliance for Hispanic Health (the Alliance). I am 
pleased to be here today to present the Alliance's perspective on 
pharmaceutical access and direct to consumer advertising. Before 
presenting these views, however, I'd like to provide you with a short 
background on who the Alliance is so that you may better understand our 
perspective and our reasons for being here today.
    The Alliance is the oldest and largest network of Hispanic health 
and human service providers. Alliance members serve over 10 million 
(one in four) Hispanic health consumers annually. Our members are 
community-based organizations, provider organizations, government, 
national organizations, universities, for-profit corporations, and 
individuals. We have a bi-partisan board and three things make the 
Alliance unique: (1) belief in community-based solutions, (2) 
representation of all Hispanic groups, and (3) refusal of funding from 
alcohol or tobacco companies. We are a principled and strong 
organization.
    To meet the needs of our communities, the Alliance operates state-
of-the-art services in four program centers: Consumers, Providers, 
Technology, and Science. We develop national model community-based 
initiatives for service delivery in areas currently covering: cancer, 
environmental health, HIV/AIDS, prenatal care, substance abuse, tobacco 
control, and women's health. In addition, we directly reach Hispanic 
health consumers nationwide by connecting them to local services and 
information (using zip code) through our

--National Hispanic Family Health Helpline (1-866-SU-FAMILIA),
--National Hispanic Prenatal Helpline (1-800-504-7081), and
--National Hispanic Indoor Air Quality Helpline (1-800-SALUD-12)which 
        have bilingual (Spanish and English) information specialists.
    As one of the organizations that established the field of cultural 
proficiency for health providers, the Alliance operates a significant 
support network for health professionals including training and 
education programs for cultural proficiency. We maintain and update a 
national database of 16,000 community health providers, representing 
the largest network of health providers serving Hispanic communities.
    As the organization that established the first Hispanic on-line 
presence in 1991, the Alliance continues to foster cutting edge 
initiatives in science and technology. We operate hispanichealth.org 
and this year will unveil a redesign of the site that will include 
community health chats, training resources, and a portal to accurate 
health information that will continue the Alliance's role as the 
Hispanic community's trusted source for the best in health information.
    An innovator in health science, the Alliance operates a national 
network of university-based researchers working with community-based 
organizations. Alliance research was the first to show over eight years 
ago that the Hispanic community was growing at a faster rate than 
Census predictions and would be the largest racial or ethnic minority 
group by the year 2000. Our research has challenged long held notions 
of health and well-being by showing that while Hispanics are more 
likely to be uninsured and in poverty, we also live longer than non-
Hispanic whites. We have demonstrated the positive role of community, 
culture, family, and faith in a healthy life and the negative impact of 
some U.S. cultural norms on health and well-being.
    Alliance research has also shown, that while Hispanics live longer 
than non-Hispanic whites, it is a life often marked by chronic illness 
and disease. Hispanics are more likely to suffer from diabetes, 
depression, asthma, and other chronic illnesses and diseases yet we 
live longer than non-Hispanic whites. Our chronic conditions benefit 
from early identification and a treatment plan that includes the 
appropriate pharmaceutical regimen. For this reason, full access to 
available pharmaceuticals and information made available through 
direct-to-consumer (DTC) advertising is a critical issue for the 
Hispanic community.
                       access to pharmaceuticals.
    Hispanics are the group least likely to have regular access to 
health care services. More than one third (37%) of Hispanics are 
uninsured compared to 14% of non-Hispanic whites.1 The 
impact is that about one-third of the uninsured reported no usual 
source of health care (38%), skipping a recommended medical test or 
treatment (39%), or not filling a prescription (30%).2 This 
lack of access to health care, including pharmaceuticals, is a 
significant barrier for Hispanic communities. The picture for 
pharmaceutical access is further complicated by formularies and other 
administrative strategies that limit access to the full range of 
pharmaceutical products. This is of particular concern to Hispanic 
consumers as research has shown that a number of pharmaceutical 
products have a different metabolic pathway for Hispanics. Finding the 
right product with the least side effects requires access to the full 
range of pharmaceutical products in a given class. However, many 
Hispanic consumers find that while a pharmaceutical product that works 
well for a majority of the population is on their formulary, other 
products which work better for them may not be accessible. The goal of 
a responsible pharmaceutical policy should be to make the full range of 
approved pharmaceuticals available to all so that a medical rather than 
cost-limiting decision can be made between a doctor and patient. It is 
disturbing that the discussion on pharmaceutical policy has focused on 
pharmaceutical spending as a negative for the health care system. Quite 
the opposite, pharmaceutical products are the most cost effective 
sector of health care. Increased spending on pharmaceuticals is a sign 
of our evolving health system, which has less of a focus on 
hospitalization. With improved products coming to market and a healthy 
research base there are new alternatives for those currently without 
adequate treatment options.
---------------------------------------------------------------------------
    \1\ The Kaiser Commission on Medicaid and the Uninsured. Uninsured 
in America: A Chart Book. May 2000.
    \2\ Ibid.
---------------------------------------------------------------------------
    The facts of increased pharmaceutical spending argue for a 
responsible and patient-based policy that will expand rather than limit 
access to pharmaceutical products.
    More than two-thirds (71%) of increased spending on pharmaceuticals 
is a result of increased utilization. According to IMS Health, in 2000, 
total prescription drug spending increased 14.7 percent. Of that 
amount, only 3.9 percent represented price increases, the remaining 
10.8 percent reflects the fact that more patients are getting new and 
better medicines. Also according to IMS Health, the rate of increase in 
drug spending in 2000 (14.7%) was substantially lower than the rate in 
both 1999 (18.8%) and 1998 (16%).3
---------------------------------------------------------------------------
    \3\ IMS Health Reports. A 14.9% Growth in U.S. Prescription Sales 
to $145 billion in 2000. May 31, 2001.
---------------------------------------------------------------------------
    Value of new prescription drugs explains increased utilization. 
Utilization of pharmaceuticals is increasing because untreated patients 
are coming in for treatment and patients have access to new and better 
medicines. In the 1990's, according to the industry trade association 
PhRMA, over 300 new medicines were made available to patients. These 
mean new and better options for patients. For example, in a study 
published in The New England Journal of Medicine, it was reported that 
in the 16 months following the introduction of antiretroviral therapy 
for HIV, there was a 43 percent decrease in hospital inpatient care. 
According to Samuel A. Bozzette, a physician with the Veterans Affairs 
San Diego Healthcare System, who headed the study, ``The drugs are 
almost a perfect substitute for hospital care. We can afford them 
because, in fact, we were already spending the money on HIV care'' in 
the form of hospitalization.4
---------------------------------------------------------------------------
    \4\ ``Providing Antiretroviral Therapy for HIV Infection,'' The New 
England Journal of Medicine, Vol. 344, No. 11, March 15, 2001.
---------------------------------------------------------------------------
    Increased utilization is good news--decreases spending on more 
expensive treatments and means improved health care for consumers. 
Since the 1960s, spending on prescription drugs as a percent of total 
national heath expenditures has remained below 10%; with nearly four 
times as much spent on hospital care.5 Pharmaceuticals 
remain the most cost effective segment of the health care industry. The 
real story of increased pharmaceutical spending is that patients are 
getting treated with improved regimens or untreated patients are 
getting treated before a more costly acute episode arises, leading to 
reduced spending on other more expensive health care treatments and 
improved patient satisfaction. For example, a recent study of patients 
with severely weakened hearts due to heart failure found that use of a 
new beta blocker, not only reduced deaths by 35 percent compared with 
patients given a placebo, it also sharply reduced hospital admissions, 
hospital stays and the use of tests and procedures in the 
hospital.6 Another study published in The New England 
Journal of Medicine found that the use of ACE inhibitors for patients 
with congestive heart failure reduced mortality by 16%, avoiding $9,000 
in hospital costs per patient over a three-year period. Considering the 
number of people with congestive heart failure, additional use of ACE 
inhibitors could potentially save $2 billion annually.7
---------------------------------------------------------------------------
    \5\ Health Care Financing Administration, Office of the Actuary, 
National Health Statistics Group, 2001.
    \6\ Ron Winslow, ``GlaxoSmithKline's Coreg Benefits Heart Patients 
in Two Big Studies,'' The Wall Street Journal, March 21, 2001.
    \7\ The SOLVD Investigators, The New England Journal of Medicine, 
Vol.325, No.5, pp.293-302, 1991; Walsh/America/PDS.
---------------------------------------------------------------------------
    Pharmaceutical innovation is critical to improved health care. The 
aging of the population means that chronic illness and disease in this 
country will increase. The most cost effective to this evolving health 
challenge is access to the full range of pharmaceutical products and 
development of new and improved products to avoid hospitalization and 
costly (in human and economic terms) impact of not treating chronic 
illness and disease early. For example, about 70% of seniors (28 
million) now suffer from cardiovascular disease. If this trend 
continues, over 50 million elderly could face this disease by 
2050.8
---------------------------------------------------------------------------
    \8\ Scott-Levin, Integrated Share of Voice Services IMSHEALTH/CMR, 
2001.
---------------------------------------------------------------------------
    Access to Information. New research is showing that health care 
disparities among black, Hispanic, and white Americans cannot be 
explained wholly by disparities in income and health insurance coverage 
among these groups, but that other factors such as lack of information 
play a critical role. Indeed, a new study sponsored by the federal 
Agency for Healthcare Research and Quality (AHRQ) has found that one-
half to three-fourths of the disparities observed in 1996 would have 
remained even if racial and ethnic disparities in income and health 
insurance were eliminated.9 Access to information is a 
critical piece in the access picture for Hispanic and other underserved 
communities.
---------------------------------------------------------------------------
    \9\ Weinick, Robin, et. al. ``Racial and ethnic differences in 
access to and use of health care services, 1977 to 1996,'' Medical Care 
Research and Review, November 2000, No. 57 (Suppl. 1), pp. 36-54.
---------------------------------------------------------------------------
    DTC pharmaceutical advertising is a responsible approach of 
discussing benefits and risks. DTC pharmaceutical advertising is more 
in the model of public health patient education rather than the Madison 
Avenue tradition of advertising. Indeed, a survey by the U.S. Food and 
Drug Administration (FDA) found that as many consumers recalled seeing 
DTC ads that contained information about ``benefits of the drug'' (87%) 
as did seeing ``risk or side effects'' (82%).10 The FDA 
plays a vital and appropriate role in ensuring the patient's concerns 
are primary in DTC advertising. Unlike other sectors of the health care 
market (e.g. dietary supplements, over-the-counter drugs), DTC 
pharmaceutical advertising is required to use a ``fair balance'' of 
potential risks and benefits in consumer-friendly language. In 
addition, print advertising must include a brief summary of product 
information and broadcast advertising must make reference to label 
information sources (toll-free number, print ad, web site) and 
encourage discussion with a health care professional. Furthermore, all 
advertising is submitted to the FDA at first use. This responsible 
approach to advertising is one that should be used as a model for other 
sectors of the industry whose advertising by focusing on benefits 
without adequate discussion of risks does little to empower and inform 
consumers.
---------------------------------------------------------------------------
    \10\ FDA 1999 Survey, question 7.
---------------------------------------------------------------------------
    DTC advertising helps health consumers recognize untreated disease. 
The $2.5 billion spent by the pharmaceutical industry of DTC 
advertising in 2000 is less than 10% of the $26 billion spent in 2000 
by the industry on research on development. Furthermore, this spending 
has dramatically increased patients' awareness of and ability to 
recognize untreated disease. A survey by Prevention Magazine found that 
since 1997, DTC advertising has prompted an estimated 54.2 million 
health consumers in the U.S. to talk to their doctors about a medical 
condition or illness they had never discussed with their physician 
before. This is critical to the 50% (6-8 million) people with diabetes 
who are not being treated as well as individuals with a range of other 
untreated conditions for which treatments are available. Furthermore, 
the Prevention Magazine survey of DTC advertising and consumers found 
that one-third (33%) of patients using a prescription medication were 
reminded to take their medication by a DTC ad.11 This 
compliance benefit is significant for many chronic illnesses and 
conditions that require long-term compliance with a treatment regimen.
---------------------------------------------------------------------------
    \11\ Prevention Magazine. International Survey on Wellness and 
Consumer Reaction to DTC Advertising of Prescription Drugs: 2001.
---------------------------------------------------------------------------
    DTC advertising encourages discussion between patients and health 
providers. Patient-provider communication is being improved with DTC 
advertising. A study conducted by Harris Interactive found that 64% of 
doctors thought DTC ads help educate and inform the 
public.12 Furthermore, a 1999 FDA survey of DTC advertising 
found that 81% of patient's reported that their doctor welcomed their 
question about a drug as a result of DTC advertising.13 In 
addition, the FDA study also found that 27% of people who spoke to 
their physician as a result of DTC advertising, talked to them about a 
previously undisclosed medical condition.14 Also, of 
consumers who spoke to their physician as a result of DTC advertising, 
a majority (53%) of physicians discussed non-drug therapy with their 
patient.15
---------------------------------------------------------------------------
    \12\ Prevention Magazine. International Wellness and DTC Study. 
2001.
    \13\ FDA 1999 Survey, question 7.
    \14\ FDA 1999 Survey, question 7.
    \15\ Prevention Magazine. International Wellness and DTC Study. 
2001.
---------------------------------------------------------------------------
    Health care is in transition from a physician-directed, hospital-
based system to a patient driven, at-home system. Responsible DTC 
advertising is another tool that empowers consumers with information 
that includes both benefits and risks so that the consumer can make an 
informed choice. Unfortunately, much information for consumers 
available through the internet and other venues is not subject to FDA 
standards nor does it benefit from a balance or benefit and risk 
information found in responsible DTC advertising.
    Our challenge is to maintain the information, rather than image, 
base of DTC advertising and carry-over the high standards employed in 
pharmaceutical DTC advertising to other health care product 
advertising.

    Mr. Deal. Thank you.
    Mr. Golenski.

                  STATEMENT OF JOHN D. GOLENSKI

    Mr. Golenski. Thank you, Mr. Chairman. My name is John 
Golenski. I'm the Executive Director of RxHealthValue, a 
national coalition of consumer groups, labor unions, provider 
groups, business groups and employers, insurers and health 
plans, pharmacy benefit management organizations and academic 
researchers committed to improving American's access to health 
improving prescription drugs.
    As you can understand, a deliberative body comprised of 
nearly 40 organizations will rarely arrive at a full consensus 
regarding any issue. Remarkably, our membership has achieved 
consensus regarding the recommendations that I'm offering about 
direct-to-consumer advertising of pharmaceutical drugs to 
consumers and patients. I believe the fact of these consensus 
recommendations indicates the fundamental importance of this 
issue for the members of RxHealthValue. It is our belief that 
this form of advertising affects the health and safety of 
American patients and consumers.
    The tremendous increase in the extent of DTC advertising of 
prescription drugs since the FDA removed the requirement for 
the brief summary of risk information in 1997 is well 
documented. It is almost impossible to open a general news 
magazine or view a prime time television program or listen to 
the radio and not see or hear advertising for prescription 
drugs. Given that the prescribing physician is the 
decisionmaker regarding the use of these medications, it is all 
the more startling that so many resources are expended by drug 
manufacturers to affect the attitudes of consumers and 
patients.
    Although there is little evidence currently available 
regarding whether consumer and patient attitudes affect 
physician choice in prescribing, no stakeholder in the health 
system and health economy has suggested that the impact of such 
advertising is insubstantial. Given the FDA's expressed 
interest in assessing the effects of DTC advertising, we expect 
more direct evidence of impact will be available in the near 
term future.
    While we await the results of planned and pending studies 
on the effects of DTC advertising on attitudes, behaviors and 
medical outcomes of the consumers and patients, RxHealthValue 
members are concerned that risk information in particular is 
not adequately reflectively conveyed in DTC advertising.
    One of our member organizations, AARP, recently conducted a 
survey of members to assess the impact of DTC advertising 
finding that nearly a third of those surveyed could not recall 
ever seeing risk information in the ads. Two-thirds of the 
survey population felt that the information presented in such 
advertising was not particularly helpful in assessing 
recommendations about whether to take prescription medications. 
This poses a serious safety risk to consumers and patients.
    In our first recommendation to the FDA presented publicly 1 
year ago at the National Press Club RxHealthValue emphasized 
the fundamental importance of protecting the safety of patients 
and consumers who are confronted with DTC advertising. Thus, 
RxHealthValue recommends that the Congress direct the FDA first 
to convene a task force of key stakeholders, including the 
pharmaceutical manufacturers who advertise prescription drugs, 
as well as consumer groups, patient organizations, provider 
groups, payers and relevant experts to develop and test 
standards for information disclosure on DTC advertising.
    Second, to more carefully define the concrete meaning of 
``fair balance'' in disclosing benefits and risks of advertised 
medications to include disclosure of other appropriate 
therapies in addition to alternative medications.
    And third, to further define ``fair balance'' to mean that 
full disclosure of risks and side effects be given equal print 
and air time as the description of benefits in the same 
communication.
    RxHealthValue recommends that the Congress direct that the 
appropriate agencies of the Federal Government conduct on-going 
research to evaluate the effects of DTC advertising on the 
health of American consumers and patients. It is a given that 
many Americans appreciate the increased awareness of diseases 
and conditions and potential therapies which DTC advertising 
makes possible. It is also true that such advertising can 
obscure potential hazards of the pharmaceutical advertised and 
neglect the relative value of other forms of therapy. Only 
thorough, independent research can demonstrate the differential 
impact of such advertising upon the health choices of American 
patients and physicians.
    In conclusion, the members of RxHealthValue applaud the 
committee for engaging this dialog about the effects of this 
increasingly pervasive influence on the therapeutic choices of 
American consumers and patients. We pledge our assistance in 
implementing any of the recommendations we have offered and 
thank the committee for this opportunity to comment. And we 
will be glad to answer questions.
    [The prepared statement of John D. Golenski follows:]
         Prepared Statement of John D. Golenski, RxHealthValue
    Mr. Chairman, Members of the Committee, I am John D. Golenski, 
Executive Director of RxHealthValue, a national coalition of consumer 
groups, labor unions, provider groups, business groups and employers, 
insurers and health plans, pharmacy benefits management organizations, 
and academic researchers committed to improving Americans' access to 
health-improving prescription drugs. (Our membership list is appended 
below.) As you can understand, a deliberative body comprised of nearly 
30 organizations will rarely arrive at full consensus regarding any 
issue. Remarkably, our membership has achieved consensus regarding the 
recommendations I am offering regarding Direct-to- Consumer (DTC) 
advertising of prescription drugs to consumers and patients. I believe 
the fact of these consensus recommendations indicates the fundamental 
importance of this issue for the members of RxHealthValue. It is our 
belief that this form of advertising affects the health and safety of 
American patients and consumers.
    The tremendous increase in the extent of DTC advertising of 
prescription drugs since the FDA removed the requirement for the 
``brief summary'' of risk information in 1997 1 is well 
documented.2 It is almost impossible to open a general news 
magazine, view a prime time television program or listen to the radio 
and not see or hear advertising for prescription drugs. Given that the 
prescribing physician is the decision-maker regarding the use of these 
medications, it is all the more startling that so many resources are 
expended by drug manufacturers to affect the attitudes of consumers and 
patients. Although there is little evidence 3 currently 
available regarding whether consumer and patient attitudes affect 
physician choice in prescribing, no stakeholders in the health system 
and health economy have suggested that the impact of such advertising 
is insubstantial. Given the FDA's expressed interest in assessing the 
effects of DTC advertising, we expect more direct evidence of impact 
will be available in the near term future.
---------------------------------------------------------------------------
    \1\ Draft Guidance for Industry: Consumer Directed Broadcast 
Advertisements: Availability. Federal Register 1997; 62:43171.
    \2\ Findlay, Stephen. Prescription Drugs and Mass Media 
Advertising. NIHCM, Sept. 2000.
    \3\ Bero, Lisa A. & Lipton, Shira. Methods for Studying the Effects 
of Direct-to-Consumer Pharmaceutical Advertising on Health Outcomes and 
Health Services Utilization. (Paper to be presented at ASPE Conference 
on Methods to Assess Effects of DTC Advertising, May 30, 2001).
---------------------------------------------------------------------------
    While we await the results of planned and pending studies on the 
effects of DTC advertising on the attitudes, behaviors and medical 
outcomes of consumers and patients, RxHealthValue members are concerned 
that risk information in particular is not adequately or effectively 
conveyed in DTC advertising. One of our member organizations, AARP, 
recently conducted a survey of members to assess the impact of DTC 
advertising 4 finding that nearly a third of those surveyed 
could not recall ever seeing risk information in the ads. Two thirds of 
the survey population felt the information presented in such 
advertising was not particularly helpful in assessing recommendations 
about whether to take prescription medications. This poses a serious 
safety risk to consumers and patients. In our first recommendations to 
the FDA, presented publically one year ago at the National Press Club, 
RxHealthValue emphasized the fundamental importance of protecting the 
safety of patients and consumers who are confronted by DTC 
advertising.5
---------------------------------------------------------------------------
    \4\ Foley, Lisa A. & Gross, David J. Are Consumers Well Informed 
About Prescription Drugs? The Impact of Printed Direct-to-Consumer 
Advertising. AARO: Public Policy Institute, April 2000.
    \5\ Policy Recommendations. RxHealthValue May 10, 2000.
---------------------------------------------------------------------------
    Thus, RxHealthValue recommends that the Congress direct the FDA:

 To convene a task force of key stakeholders, including the 
        pharmaceutical manufacturers who advertise prescription drugs, 
        as well as consumer groups, patient organizations, provider 
        groups, payers and relevant experts, to develop and test 
        standards for information disclosure in DTC advertising.
 To more carefully define the concrete meaning of ``fair 
        balance'' in disclosing benefits and risks of advertised 
        medications to include disclosure of other appropriate 
        therapies in addition to alternative medications.
 To further define ``fair balance'' to mean that full 
        disclosure of risks and side effects be given equal print and 
        air time as the description of benefits in the same 
        communication.
    RxHealthValue recommends that the Congress direct that the 
appropriate agencies of the Federal Government conduct on-going 
research to evaluate the effects of DTC advertising on the health of 
American consumers and patients. It is a given that many Americans 
appreciate the increased awareness of diseases and conditions and 
potential therapies which DTC advertising makes possible. It is also 
true that such advertising can obscure potential hazards of the 
pharmaceutical advertised and neglect the relative value of other forms 
of therapy. Only thorough, independent research can demonstrate the 
differential impact of such advertising upon the health choices of 
American patients and physicians.
    In conclusion, the members of RxHealthValue applaud the Committee 
for engaging this dialogue about the effects of this increasingly 
pervasive influence on the therapeutic choices of American consumers 
and patients. We pledge our assistance in implementing any of the 
recommendations we have offered and thank the Committee for this 
opportunity to comment.

    Mr. Deal. Thank you, sir.
    Mr. Geiser.

                   STATEMENT OF THOMAS GEISER

    Mr. Geiser. Mr. Chairman and members of the committee, I'm 
Thomas Geiser, General Counsel of WellPoint Health Networks. 
I'm here with Dr. Robert Seidman, our chief pharmacy officer 
who is also available to answer your questions today.
    Three years ago Dr. Seidman wrote a letter to the Food and 
Drug Administration pointing out that the safety profiles of 
the prescription allergy drugs Claritin, Zyrtec and Allegra may 
have been candidates for a switch to over-the-counter status. 
He asked that the FDA consider his letter a citizen's petition 
for FDA to undertake the switch. On May 11, 2001 the FDA 
convened an expert advisory committee to determine whether 
Claritin, Allegra and Zyrtec were safe for OTC use. The FDA 
noted that the other conditions for OTC use that laypeople 
could self diagnose allergies, that appropriate labeling could 
be prepared and that the products were effective to relieve the 
symptoms of allergic rhinitis, that is runny nose, itchy watery 
eyes had already been settled. What remained for the expert 
advisory committee to determine was that the drugs were safe 
for use by laypeople OTC.
    After hearing testimony from two of the three drug 
manufacturers from WellPoint and from other interested parties 
for a full day, the expert committee voted overwhelming that 
each of the drugs was, indeed, safe for OTC use.
    Most importantly, these products surpassed the safety 
profiles of drugs already available OTC for use in connection 
with allergies. More than 1000 combinations of antihistamine 
products that were once Rx are now available OTC. These first-
generation products have more significant side-effects, 
including drowsiness, dizziness, blurred vision, and dry mouth 
than any of the second-generation prescription antihistamines. 
The FDA's expert advisory committee noted their superior safety 
profiles throughout the discussion at the hearing.
    We were asked by this committee today to address the legal 
authority of the FDA to switch prescription drugs to OTC use as 
a result of a citizen's petition such as that provided by 
WellPoint. A number of comments submitted to the FDA in 
connection with the May 11 hearing questioned the FDA's 
authority to make such a switch, and therefore WellPoint has 
submitted to the FDA a supplement to our citizen's petition to 
address those comments. The text of the supplement's contained 
in my written statement, which I'd like to summarize for you.
    The Food, Drug and Cosmetic Act and the FDA's implementing 
regulations make it clear that Congress gave FDA the expressed 
legal authority to compel a switch from Rx to OTC status. Under 
the statute drugs are to be marked OTC with adequate directions 
for use by the lay public, unless they're exempted from this 
requirement. Section 502(f) of the Act states that a drug is 
misbranded unless it bears adequate directions for use.
    Section 503(b) in turn grants the FDA the authority to 
exempt prescription drugs from the adequate directions for use 
requirement when a drug is safe for use only under the 
supervision of a medical practitioner.
    Viewed in combination, these sections show that Congress 
intended that all drugs, unless exempted, bear directions for 
use that permit the lay public to use the drug safely OTC.
    Now within the framework where all drugs must be available 
OTC unless exempted, the Act also grants FDA the authority to 
switch a product to OTC use where the product no longer fits 
the prescription labeling exemption. Again, the statutory grant 
of this authority is very, very clear. Section 503(b)(3) 
provides that the Secretary may by regulation remove drugs 
subject to Section 505--that's the new drug application 
section--when the requirements of paragraph 1 of this 
subsection--that is the prescription labeling exemption--when 
such requirements are not necessary for the protection of the 
public health.
    Based on the plain meaning of the statute, it's difficult 
for me to come to any conclusion other than that Congress 
intended to grant the FDA the authority to perform the type of 
action we have requested. In addition, under its regulations, 
the FDA is actually required to make a switch when the agency 
finds that the exemption is no longer necessary to protect the 
public health. The regulation, like the statute, I believe is 
very clear and unambiguous. It reads ``Any drug limited to 
prescription use shall be exempted from prescription dispensing 
requirements when the Commissioner finds such requirements are 
not necessary for the protection of the public health.''
    Furthermore, the regulation states that the proposal to 
switch may be initiated by the Commissioner or by any 
interested party.
    We believe the plain meaning of both the statute and the 
regulations could not be more clear.
    In conclusion, the Food, Drug and Cosmetic Act, under that 
Act the FDA clearly poses statutory authority to initiate a 
switch. And, in fact, under its own regulations the FDA is 
actually required to initiate the switch when the Rx only 
requirement is not necessary for the protection of the public 
health.
    Mr. Chairman, Dr. Seidman and I would be happy to answer 
any questions the members of the committee may have.
    [The prepared statement of Thomas Geiser follows:]
Prepared Statement of Thomas Geiser, General Counsel, WellPoint Health 
                             Networks, Inc.
    Mr. Chairman and members of the Committee. My name is Thomas Geiser 
and I am the General Counsel for WellPoint Health Networks, Inc. 
WellPoint Health Networks (``WellPoint'') serves the health care needs 
of nearly 9.8 million medical and more than 40 million specialty 
members nationally through Blue Cross of California, Blue Cross and 
Blue Shield of Georgia, and UNICARE. I am pleased to have the 
opportunity to testify before you today regarding WellPoint's Citizen 
Petition to the Food and Drug Administration (``FDA'').
    Let me introduce to you Rob Seidman, PharmD, MPH, our Chief 
Pharmacy Officer. Three years ago, in 1998, as Vice President of 
Pharmacy for Blue Cross of California, Dr. Seidman wrote a letter to 
the FDA pointing out that the safety profiles of the prescription 
(``Rx'') allergy drugs Allegra, Claritin, and Zyrtec made them 
candidates for a switch to over-the-counter (``OTC'') status. He asked 
that the FDA consider his letter, which is appended to our testimony, a 
Citizen Petition for FDA to undertake the switch. Six months later, Dr. 
Seidman received a reply from the FDA, which said that it was studying 
the issue. Eighteen more months passed, and last June (2000) the FDA 
held a two-day hearing, at which Dr. Seidman testified, on the process 
of switching a variety of types of drugs from Rx to OTC status.
    In May this year, the FDA convened a joint meeting of two expert 
advisory committees to determine whether Allegra, Claritin and Zyrtec 
were safe for OTC use. The FDA noted that the two additional conditions 
for OTC use--that lay people could self-diagnose allergies and use 
appropriately labeled OTC antihistamines safely without supervision of 
a licensed professional--had already been settled. What remained for 
the advisory committees to determine was that the drugs were safe for 
use by lay people OTC. After reviewing volumes of medical data 
collected over many years and hearing testimony from two of the three 
drug manufacturers, WellPoint, and other interested parties for a full 
day, the two committees voted overwhelmingly that each of the three 
drugs was, indeed, safe for OTC use. We have attached WellPoint's May 
11 presentation to today's testimony for your reference.
    In fact, these products surpass the safety profiles of drugs 
already available for use in the treatment of allergies OTC. More than 
100 combinations of antihistamine products that were once Rx are now 
available OTC. These first-generation products have more significant 
side effects, including drowsiness, dizziness, blurred vision, and dry 
mouth, than any of the three leading second-generation prescription 
antihistamines. The FDA's advisory panels noted their superior safety 
profiles throughout discussion at the hearing.
    We were asked by the Committee today to address the legal authority 
of the FDA to effectuate the conversion of prescription drugs to OTC 
use as a result of a Citizen Petition. A number of comments submitted 
to the FDA contested the FDA's authority to make such a switch, and so 
WellPoint has submitted to the FDA a supplement to our Citizen Petition 
to address those comments. The text of that supplement is restated 
below and will constitute the bulk of my testimony.
    Whether a switch is initiated by a manufacturer, the FDA, or a 
third party through a Citizen Petition, it is WellPoint's position that 
the FDA has express legal authority to compel a switch to OTC status 
from Rx if the FDA finds that a given drug or drugs meet the 
requirements NOT to be exempted from the labeling requirements for OTC 
drugs. Indeed, we would argue that the Food, Drug, and Cosmetics Act 
(``FDCA'' or the ``Act''), as amended, requires the FDA to make the 
switch. These arguments are outlined below.
                                summary
    On July 22, 1998, WellPoint (through its subsidiary Blue Cross of 
California) submitted a Citizen Petition requesting that the FDA remove 
the prescription exemption for three second-generation antihistamines: 
Allegra' and Allegra-D' (fexofenadine), 
Claritin' and Claritin-D' (loratidine), and 
Zyrtec' (cetirizine). On May 11, 2001, the FDA convened the 
Non-Prescription Drugs Advisory Committee and the Pulmonary-Allergy 
Drug Advisory Committee for a joint meeting and vote on whether the 
above three allergy drugs were safe and effective for OTC status. See 
66 Fed. Reg. 17,431 (March 20, 2001). The two committees voted 
overwhelmingly that the data presented demonstrated that the 2nd 
generation antihistamine products were safe and that adequate 
directions for use by the lay public can be developed for OTC 
use.1
---------------------------------------------------------------------------
    \1\ The advisory committee's votes were 19-4 for Claritin and 
Zyrtec and 18-5 for Allegra.
---------------------------------------------------------------------------
    Despite the overwhelming votes by the scientific expert advisory 
committees that the safety data fully support an OTC switch for these 
products, there have been comments suggesting that either the FDA does 
not have the legal authority to initiate a switch of its own accord, or 
that for reasons not related to safety and effectiveness, the agency 
should choose not to initiate such a switch. However, an analysis of 
both the FDCA and FDA's implementing regulations demonstrate that not 
only does the FDA possess the statutory authority to initiate a switch, 
but under the FDA's regulations the Agency is required to initiate a 
switch when it finds that ``such requirements are not necessary for the 
protection of the public health by reason of the drug's toxicity or 
other potentiality for harmful effect, or the method of its use, or the 
collateral measures necessary to its use, and [the Commissioner] finds 
that the drug is safe and effective for use in self-medication as 
directed in proposed labeling.'' See 21 CFR Sec. 310.200. The FDA 
acknowledged as much in its April 5, 2001, Memorandum on the Advisory 
Committee Meeting to Discuss OTC Antihistamines when it stated that it 
interprets the FDCA to mean, ``any drug that can be used safely over 
the counter should be.''
    For the reasons explained below, because: (1) the safety and 
effectiveness of these 2nd generation antihistamine drug products have 
been examined by a committee of scientific experts and by overwhelming 
majority were found to be safe and effective for OTC drug use; (2) the 
FDA clearly possesses the statutory and regulatory authority; and (3) 
there has been ample opportunity for substantive public input and 
comment, the agency should, without due delay, initiate a switch from 
Rx to OTC status for these 2nd generation antihistamine drug products 
since the Rx exemption from adequate directions for use is no longer 
necessary for the protection of public health.
i. the federal food, drug, and cosmetic act establishes a clear mandate 
that all drug products must be sold otc unless they meet the exemption 
                criteria for prescription classification
    Section 502(f) of the FDCA states that a drug is misbranded unless 
its labeling bears:
        (1) adequate directions for use; and
        (2) such adequate warnings against use in those pathological 
        conditions or by children where its use may be dangerous to 
        health, or against unsafe dosage or methods or duration of 
        administration or application, in such manner and form, as are 
        necessary for the protection of users . . .
        Provided, that where any requirement of clause (1) is not 
        necessary . . . [FDA] shall promulgate regulations exempting 
        [the product].
21 U.S.C. Sec. 352(f). This section was passed in the original 1938 Act 
in order to protect the public from drugs that did not clearly explain 
their usage or potential dangers and required all such drugs to bear 
labeling that the lay public could understand. Although the Act has 
undergone significant changes since its passage in 1938, this provision 
has never been removed. FDA regulations have documented this 
interpretation by defining ``adequate directions for use'' as 
``directions under which the layman can use a drug safely and for the 
purposes under which it is intended.'' See 21 CFR Sec. 201.5. Thus, 
under this provision of the Act, all drug products, unless exempt, are 
to be labeled OTC with adequate directions for use for the average 
consumer.
    Section 503(b) of the Act provides a definition of an Rx drug and 
then authorizes the exemption from the OTC labeling requirement for Rx 
drugs. This section reads:
        A drug intended for use by man which--
          (A) because of its toxicity or other potentiality for harmful 
        effect, or the method of its use, or the collateral measures 
        necessary to its use, is not safe for use except under the 
        supervision of a practitioner licensed by law to administer 
        such drug; or
          (B) is limited by an approved application under section 355 
        of this title to use under the professional supervision of a 
        practitioner licensed by law to administer such drug;
          hall be dispensed only upon a written prescription of a 
        practitioner licensed by law to administer such drug . . .
                                *  *  *
          Any drug dispensed by filling or refilling a written or oral 
        prescription of a practitioner licensed by law to administer 
        such drug shall be exempt from the [adequate directions for 
        use], if the drug bears a label containing the name and address 
        of the dispenser, the serial number and date of the 
        prescription or of its filling, the name of the prescriber, 
        and, if stated in the prescription, the name of the patient, 
        and the directions for use and cautionary statements, if any, 
        contained in such prescription.
21 U.S.C. Sec. 353(b). This section provides a classification structure 
for Rx drugs, grants an exemption from OTC labeling requirements, and 
authorizes separate Rx labeling for products dispensed upon the 
prescription of a licensed practitioner.
    Viewed in combination, these two sections unequivocally demonstrate 
that Congress intended that all drugs, unless exempted, bear directions 
for use that permit the lay consumer to use the drug safely OTC. An 
analysis of the legislative history of the Act further supports this 
analysis.2
---------------------------------------------------------------------------
    \2\ Comments from the statement of Sen. Copeland shed light on what 
Congress was attempting to do, ``There is no more common or mistaken 
criticism of this bill than that it denies the right to self-
medication, or as the objector usually fit it, ``You can't take an 
aspirin tablet with a doctor's prescription.'' Nothing could be further 
from the truth. The proposed law simply contributes to the safety of 
self-medication by preventing medicines from being sold as ``cures'' 
unless they are really cures . . . There must be plain and explicit 
directions for use, as well as warnings that in certain pathological 
conditions the use of drugs would not be safe . . . When public health 
cannot be protected otherwise, the bill authorizes control through 
licensing.'' 79 Cong. Rec. 4567 (1934) (reprinted in, Charles Wesley 
Dunn, Federal Food, Drug, and Cosmetic Act: A Statement of Its 
Legislative Record 90 (FDLI 1987)). Sen. Copeland further stated, ``It 
requires that all drugs bear explicit directions for use and 
appropriate warnings against their consumption by children or in 
certain disease conditions where the use is contra indicated and may be 
dangerous to health.'' Id. at 162.
    Comments of Mr. Walter G. Campbell, Chief of the Food and Drug 
Administration of the Department of Agriculture, ``But what is desired 
by this particular paragraph [requiring that the product bear the 
common name of the drug and the ingredients] and by others which impose 
restrictions on statements made about the remedial properties of the 
drugs is to make self-medication safe.'' Id.
---------------------------------------------------------------------------
    Although today most new drugs that are approved under section 505 
of the FDCA are exempted from the adequate directions for use provision 
because they are found unsafe for use except under the supervision of a 
medical practitioner and thus have the ``Rx Only'' designation, this 
longstanding statutory scheme and classification system has (1) served 
as the foundation for development of product labeling, (2) despite many 
changes to the FDCA, has never been removed or questioned by Congress; 
and (3) is only being questioned by certain factions of the 
pharmaceutical industry in the effort to prevent wide access to the 2nd 
generation antihistamines.
   ii. the fdca is clear in its granting of this authority to the fda
A. The FDCA Clearly and Unambiguously Grants the FDA the Authority to 
        Remove Drugs Subject to Section 505 From the Prescription 
        Labeling Requirements
    Section 503(b)(3) of the FDCA grants the agency the clear authority 
to remove drugs that have been approved by the new drug application 
(``NDA'') process from the prescription labeling requirement where it 
is no longer necessary to protect the public health. It states:
          [FDA] may by regulation remove drugs subject to section 505 
        [i.e., NDAs] from the requirements of paragraph (1) of this 
        subsection [the prescription labeling exemption] when such 
        requirements are not necessary for the protection of the public 
        health.
21 U.S.C. Sec. 503(b)(3).
    This section of the Act was added in 1951 by the Durham-Humphrey 
Amendment (``DH Amendment''). See ch. 578 Sec. 1, 65 Stat. 648 (Oct. 
26, 1951).3 Congress passed the DH Amendment to give the FDA 
greater authority over the labeling of products which due to the 
circumstances of the time had created inconsistencies among similar or 
even identical products. Its stated dual purposes were to (1) protect 
the public from abuses in the sale of potent prescription drugs and (2) 
to relieve pharmacists and the public from unnecessary restrictions on 
the dispensing of drugs that are safe for use without the supervision 
of a physician. See Sen. R. No. 946 at 1, reprinted in 1951 
U.S.C.C.A.N. 2454. The clear language of this statutory provision and 
its underlying purpose is applicable to the situation presented in the 
WellPoint petition, as it was to the situation that existed when the 
provision was promulgated in 1951. In the instant situation, 
pharmacists and the public should be and would greatly benefit from 
being relieved from unnecessary restrictions on the dispensing of 
drugs, i.e., the 2nd generation antihistamines that are safe for use 
without the supervision of a physician.
---------------------------------------------------------------------------
    \3\ The 1938 Act had set up a new drug application process whereby 
manufacturers would submit an NDA and unless FDA objected to the 
application, it would be deemed approved. Thus, the DH Amendment was 
passed during a period where many new drug applications had become 
effective by the NDA process. In addition to these drug ``approvals,'' 
large numbers of products came onto the market as ``me-too'' versions 
of drugs already marketed, where manufacturers concluded on their own 
that their products were ``generally recognized as safe.'' As a result 
of this system, at the time of the DH Amendment, it was not unusual for 
numerous drug products, each with the same active ingredient, each 
bearing different labeling. In fact, it was not unusual for some 
products to be labeled as prescription while others with the same 
active ingredient were marketed as OTC.
---------------------------------------------------------------------------
B. When the Statute's Plain Meaning is Clear and Unambiguous the 
        Analysis Stops
    Under the well-established laws of statutory interpretation, when 
the statute is clear and unambiguous in its granting of authority, 
there is no need to conduct any further analysis. That is the case in 
the instant situation. The FDCA clearly grants the agency the authority 
to remove the exemption from adequate directions for use. When the 
plain meaning of the statute is clear and unambiguous, the inquiry must 
end.
    Chevron Step I--Under Chevron U.S.A. Inc. v. Natural Resources 
Defense Council, Inc., 467 U.S. 837 (1984), courts employ a two-step 
test in determining whether an agency has presented a permissible 
interpretation of a statute it administers. See id. at 842-43. First, 
courts consider the plain meaning of the statute. The plain meaning of 
a statute is derived from both the statutory language itself ``as well 
as the language and design of the statute as a whole.'' See K Mart 
Corp. v. Carter, Inc., 486 U.S. 281, 291 (1988); Bethesda Hospital 
Ass'n. v. Bowen, 485 U.S. 399, 403-405 (1988). If the court determines 
that Congress has spoken to the precise question presented by the 
parties, the court must give effect to the unambiguously expressed 
intent of Congress. See Chevron, 467 U.S. at 842.
    Congress clearly and unambiguously granted FDA the authority to 
remove the prescription exemption when it said ``[FDA] may by 
regulation remove drugs subject to section 505 . . .'' It is difficult 
to imagine a more clear, concise, and unambiguous statement than 
section 503(b)(3) of the Act. The plain meaning of the statute makes it 
wholly unnecessary and inappropriate to look any further beyond the 
language of the statute.
C. Assuming Arguendo that the Statute is Ambiguous, the FDA's 
        Interpretation is Followed as long as it is Reasonable
    Chevron Step II--Although the statute is clear on its face, 
assuming for the sake of argument that section 503(b)(3) is ambiguous 
in its granting of authority, the FDA's regulations at Sec. 310.200 are 
a reasonable and permissible interpretation of the statute.
    If a court determines that Congress has not spoken to the precise 
issue because ``the statute is silent or ambiguous with respect to the 
specific issue,'' the court advances to the second step of Chevron. See 
Chevron, 467 U.S. at 843. Under Chevron step two, the court determines 
whether the agency's answer is based on a permissible construction of 
the statute. Id. Chevron step two is not invoked when the court first 
encounters a potential ambiguity:
          [G]iven that the judiciary remains the ``final authority on 
        issues of statutory construction,'' abdication of that 
        authority and deference to an administrative construction is 
        legitimate only where the court confronts a gap in the statute 
        that cannot be bridged by traditional tools of statutory 
        construction and which can properly be characterized as an 
        express or implied delegation of authority by Congress to an 
        agency.
See Abbott Lab. v. Young, 920 F.2d 984, 995 (D.C. Cir. 1990) (Edwards, 
C. J., dissenting o.g.) (citing Chevron, 467 U.S. at 843 n. 9).
    If, however, the court advances to Chevron step two, the court must 
defer to the agency's reasonable interpretation so long as it does not 
conflict with the statute's plain meaning. See K Mart, 486 U.S. at 281. 
With respect to section 503(b)(3), although it is difficult to discern 
any ambiguity, to the extent there may be an ambiguity in the statute, 
the agency's regulatory interpretation in 21 CFR Sec. 310.200 is 
clearly reasonable.
    Given that statute is so clear and unambiguous on this issue it is 
not surprising that other comments have argued not that the statute 
does not grant FDA the authority, but rather that the statute does not 
really mean what it clearly says. Such arguments should be dismissed. 
Attempts have also been made to argue that the section is obsolete, or 
has been superseded. Such arguments are also without merit however, 
since Congress has several times made major alterations to the statute 
(including 1962, 1984, and 1997) which did not include or even 
contemplate removing this section. Further, whether an agency has used 
its power in the past has no bearing on whether it possesses that power 
in the first instance. See Jones Et Ex. v. Alfred H. Mayer Co., 392 
U.S. 409, 437 (1968); Sanders v. Dobbs Houses, Inc, 431 F.2d 1097 (5th 
Cir. 1970).
 iii. fda's implementing regulations give it clear authority to remove 
   the labeling exemption for products that are safe for use without 
medical supervision and in fact require it to do so when the exemption 
                         is no longer necessary
A. The FDA's Regulations Require the Agency to Switch a Product to OTC 
        Status When Prescription Labeling Is No Longer Necessary for 
        the Protection of Public Health and Authorize the Agency to Do 
        So On Its Own Initiative
    With a classification system where drugs are presumptively OTC, it 
is not surprising that the statute and FDA regulations permit the 
agency to switch a product from Rx to OTC status where Rx labeling is 
no longer necessary to protect the public health. In spite of several 
comments challenging this authority, not only does the statute permit 
FDA to make such an Rx to OTC switch, but the FDA's implementing 
regulations require that the FDA remove the prescription drug 
dispensing requirements when it finds the requirements are no longer 
necessary for the protection of public health. 21 CFR Sec. 310.200 
reads:
        [a]ny drug limited to prescription use [under the FDCA] shall 
        be exempted from prescription-dispensing requirements when the 
        Commissioner finds such requirements are not necessary for the 
        protection of the public health by reason of the drug's 
        toxicity or other potentiality for harmful effect, or the 
        method of its use, or the collateral measures necessary to its 
        use, and he finds that the drug is safe and effective for use 
        in self-medication as directed in proposed labeling. A proposal 
        to exempt a drug from the prescription-dispensing requirements 
        of section 503(b)(1)(C) of the act may be initiated by the 
        Commissioner or by any interested person. Any interested person 
        may file a petition seeking such exemption, which petition may 
        be pursuant to part 10 of this chapter, or in the form of a 
        supplement to an approved new drug application
21 CFR Sec. 310.200 (emphasis added).
    This regulation is consistent with the FDCA's granting of this 
authority in section 503(b)(3) and the Act's presumption that drug 
products should be available to consumers OTC if medical supervision is 
not required.
    Certain comments have stated that the Kefauver-Harris Drug 
Amendments (``KH Amendments'') in 1962 fundamentally altered the FDCA 
so that section 503(b)(3) and its implementing regulations were 
rendered ineffective. This argument is belied by an examination of the 
history and timing of 21 CFR Sec. 310.200. In fact, the regulation 
stating FDA shall switch products OTC when the agency finds the 
restrictions are no longer necessary was proposed in 1963, shortly 
after the passage of the KH Amendments. See 28 Fed. Reg. 1449 (February 
14, 1963). This disputes any argument that the KH Amendments so altered 
section 503(b)(3) as to render them inoperative. Based on the final and 
proposed rule it is clear that FDA considered the KH Amendments 
consistent with their authority to mandate an Rx to OTC switch. The 
final rule published on June 20, 1963 is substantially similar to that 
which remains today.
    The provisions of the final rule published on June 20, 1963 are set 
forth below:
          Any drug limited to prescription use under section 
        503(b)(1)(c) of the act shall be exempted from prescription-
        dispensing requirements when the Commissioner finds such 
        requirements are not necessary for the protection of the public 
        health by reason of the drug's toxicity or other potentiality 
        for harmful effect, or the method of its use, or the collateral 
        measure necessary to its use, and he finds that the drug is 
        safe and effective for use in self-medication as directed from 
        proposed labeling. A proposal to exempt a drug from the 
        prescription-dispensing requirements of section 503(b)(1)(c) of 
        the Act may be initiated by the Commissioner or by any 
        interested person. Any interested person may file a petition 
        seeking such exemption, stating reasonable grounds therefor, 
        which petition may be in the form of a supplement to an 
        approved new-drug application. Upon receipt of such a petition, 
        or on his own initiative at any time, the Commissioner will 
        publish a notice of proposed rule making and invite written 
        comments. After consideration of all available data, including 
        any comments submitted, the Commissioner may issue a regulation 
        granting or refusing the exemption, effective on a date 
        specified therein''.
21 CFR Sec. 130.101 (published at 28 Fed. Reg. at 6385 (June 20, 1963), 
(emphasis added).4
---------------------------------------------------------------------------
    \4\ 21 CFR Sec. 130.101 was re-codified by the agency in 1974 and 
is now Sec. 310.200. See 39 Fed. Reg. 11,680 (March 29, 1974).
---------------------------------------------------------------------------
    Thirteen years later, the FDA again opined on this regulation. In 
1976, the agency published a final rule on the OTC review procedure 
found at Part 330. See 41 Fed. Reg. 32,580 (August 4, 1976). In the 
proposed rule the FDA outlined the two procedures ``by which a 
prescription drug ingredient may lawfully be marketed for OTC use.'' 
See 40 Fed. Reg. 56,675 (December 4, 1975). In the preamble the agency 
explains:
        Prior to the OTC drug review, the procedures for obtaining 
        approval to market a prescription ingredient as an OTC 
        ingredient were by petition to the [FDA] following procedures 
        set forth under Sec. 310.200 . . . This procedure may be 
        initiated by the Commissioner or by a petition from any 
        interested person . . .
Id. Section 310.200 clearly grants the FDA the authority for the type 
of switch requested by WellPoint and arguments that it is an obsolete 
provision are not supported by the FDA's actions and preambles to its 
regulations. Moreover, the FDA's regulations were promulgated through 
notice and comment rulemaking. The final regulations were adopted 
without any substantive comments from the industry or public. The only 
comments have come forth recently, after the expert advisory panel 
voted that the 2nd generation antihistamines are safe and can be 
adequately labeled for OTC use.
B. The Regulations Do Not Require that A Manufacturer Consent to a 
        Switch in a Product's Status from Rx to OTC
    The regulations require a medical, scientific and factual based 
inquiry to determine whether Rx labeling is required for the protection 
of public health. Once these protections are no longer medically/
scientifically justified, the regulations specify they should be 
removed. For this reason, the regulations do not require that a switch 
be initiated by the drug manufacturer or that the manufacturer agrees 
to the proposal. Although for obvious reasons in such a situation it is 
preferable that the manufacturer concurs with the switch, there is no 
basis in either the regulations or the statute for a manufacturer to be 
permitted to ignore a determination that Rx labeling is no longer 
necessary for the product. Clearly, the manufacturers of Allegra, 
Claritin and Zyrtec have a right to be heard and submit data on the 
issue, but it is the FDA and not the drug manufacturers who have the 
final say on whether a product is safe and effective or in this case 
whether is a product is safe and effective for self-medication. Both 
Schering and Aventis were unable to specifically identify any safety 
concern or study, whether contemplated or underway, to address a safety 
concern with respect to the OTC marketing of the products. Two expert 
scientific advisory committees have reviewed the data, evaluated the 
issues presented by Pfizer, Schering, Aventis and the FDA, and voted 
overwhelmingly that Allegra, Claritin and Zyrtec are safe for OTC use.
  iv. the comments are incorrect when they claim that removal of the 
                 exemption is a deprivation of property
A. Companies May Possess a ``Property Right'' in Their Approval and 
        Proprietary Data
    Several comments have argued that drug companies possess a 
``property right'' in the ownership of a drug's approval and the data 
contained in the NDA. This fact is not disputed. The issue is whether 
the switch in labeling from Rx to OTC would be considered a regulatory 
``taking.'' It is clear that no court has ever found a government 
``taking'' in a regulatory switch of a product's marketing status from 
Rx to OTC. This seems logical since in most cases such a switch is 
desired by the drug manufacturer because such a switch may lead to 
further exclusivity 5 and/or increased sales.
---------------------------------------------------------------------------
    \5\ At the May 11, 2001 Advisory Committee meeting, Agency staff 
clearly stated that no additional information would be essential for 
approval of the switch. Thus, the companies would not be eligible for 
three years of market exclusivity under Section 505(j)(5)(D)(iv).
---------------------------------------------------------------------------
    The Supreme Court has treated the issue of whether a taking has 
occurred as ``essentially an `ad hoc, factual,' inquiry . . . [but] has 
identified several factors that should be taken into account when 
determining whether a governmental action has gone beyond `regulation' 
and effects a `taking'.'' Ruckelshaus v. Monsanto Co., 467 U.S. 986, 
1005 (1984). This examination entails inquiry into such factors as the 
``character of the governmental action, its economic impact, and its 
interference with reasonable investment-backed expectations.'' Id. A 
taking has been held to not only include an actually physical invasion 
of property but also an action the effect of which is to deprive the 
owner of all or most of his or her interest in the subject matter. See 
United States v. General Motors Corp., 323 U.S. 373 (1945). The claim 
that a switch in regulatory status of a drug from Rx to OTC is a 
``taking'' is a novel legal argument, but ultimately meritless.
B. The Comments are Mistaken in Their Belief that the Removal of the 
        Prescription Drug Exemption Would Constitute a ``Deprivation of 
        Property''
    As noted above, a ``takings'' claim here would be predicated on the 
belief that a change in marketing status from Rx to OTC would 
constitute a ``deprivation of property.'' It may be helpful here to 
note initially what changes the agency could require in order to 
effectuate a change, and conversely what types of changes the agency 
cannot compel under a switch.
    Changes that would be required:

 removal of Rx designation;
 proposed labeling for OTC use
    The status quo (i.e., things that would not be changed):

 FDA's decision would have no effect on the validity of the 
        patents or any other exclusivity on the product (i.e., generic 
        competition would not be introduced);
 FDA's decision would have no effect on the price at which the 
        product may be sold;
 FDA's decision would not require FDA to disclose trade secret 
        or privileged information;
    Although no court has ruled on this specific issue, an examination 
of other takings clause cases that are similar demonstrates that a 
takings claim in this case has no merit. In the Ruckelshaus case cited 
above, the Monsanto Company objected to the Environmental Protection 
Agency (``EPA'') using its safety data to evaluate another application 
for registration. Ruckelshaus is easily distinguished from an Rx-to-OTC 
switch because in such a switch, the agency action does not involve 
using a company's ``property right'' for the benefit of another party. 
It is simply a change in the marketing status of the drug to be 
available without a prescription. Further still, in Ruckelshaus the 
Supreme Court determined that Monsanto, while possessing a property 
right in its data, did not have a takings claim where Monsanto was 
``aware of the conditions under which the data are submitted, and the 
conditions are rationally related to a legitimate Government interest, 
a voluntary submission of data by an applicant in exchange for the 
economic advantages of a registration can hardly be called a taking'' 
Ruckelshaus, 467 U.S. at 1007. These ``conditions'' included the fact 
that the data could be used with out Monsanto's permission.
    Similarly, a drug is marketed as an Rx drug only under certain 
conditions. If a drug no longer meets the conditions upon which an 
exemption from adequate directions for use was granted, it must be 
regulated as an OTC drug. As with Monsanto, this regulatory condition 
is well known by drug companies and often utilized to their benefit. 
Therefore, as in Ruckelshaus, it is no ``taking'' to change the 
regulatory status of a drug product, even if the drug company objects 
to the switch. To further support this position, it is also clear that 
the regulatory action has no effect on the companies' ability to market 
or sell the product. For these reasons it is clear that neither the 
character of the act, nor the economic impact, fit into the category of 
actions that would constitute a regulatory taking.
v. when promulgating regulations specifically related to the requested 
 removal of the prescription status exemption, fda is not required to 
    disclose information that is subject to trade secret protection.
    Comments have argued that under the APA, FDA must publicly disclose 
the data upon which any proposed rule is based. However, no trade 
secret data must be disclosed by FDA in order to promulgate a 
regulation removing the exemption from adequate directions for use. Of 
course, the general disclosure rules exempts the disclose of trade 
secret information.6 It is well known that certain data and 
information in an NDA is trade secret protected.7 However, 
these comments fail to note that much of the information contained in 
an NDA is not protected as trade secret information and in fact is 
disclosable under the Freedom of Information Act. See 5 U.S.C. Sec. 552 
et seq. Under 21 CFR Sec. 314.430, the following information contained 
in an NDA is already made available to the public:
---------------------------------------------------------------------------
    \6\ See United States v. Nova Scotia Food Products Corp. 568 F.2d 
240, 251 (2d Cir. 1977) (the general rule is that an agency disclose 
scientific material that is the basis of a rule making, but there is 
``an exception for trade secrets or national security'').
    \7\ See 21 CFR Sec. 20.61 for FDA's definition of ``trade secret'' 
and ``commercial or financial information which is privileged or 
confidential.''

 the summary basis of approval;
 study protocols;
 adverse event reports;
 lists of inactive ingredients;
 assay methods; and
 correspondence and summaries of verbal communications with 
        FDA.
    Only information that qualifies as trade secret or commercial and 
financial information that is confidential is not able to be disclosed. 
This information would not be relevant in an Rx to OTC switch. What is 
most relevant here is primarily the adverse events reports concerning 
the three products. These reports demonstrate a low incidence of 
significant adverse reactions associated with the three drug products. 
FDA has reviewed the data and presented a summary of the data at the 
public advisory committee meeting held on May 11, 2001. This 
information is not trade secret protected.
    Furthermore, what is relevant in this instance has already been 
narrowed by the agency. The agency has not raised any questions as to 
the effectiveness of the 2nd generation antihistamines for the relief 
of symptoms of allergic rhinitis. The only item at issue is whether the 
products are safe for OTC use. This is a much more limited inquiry than 
a full NDA approval. The issue of whether trade secret information 
needs to be disclosed in order to evaluate this matter has already been 
answered. The advisory committee members have fully examined the safety 
information provided by the agency and voted on May 11, 2001, by a 
overwhelming majority, that these products are safe for OTC use. This 
determination did not require the disclosure of trade secret 
information. There is no reason that FDA cannot promulgate its 
rulemaking without the disclosure of protected information. summary 
basis of approval;
vi. the comments' claim of a lack of due process are incorrect in that 
 the due process requirement is met by the citizen petition and notice 
                         and comment procedure
A. Section 505(e) of the FDCA Requires the FDA to Provide a Formal 
        Hearing Only When the FDA is Seeking to Withdraw an NDA
    Several of the comments to the docket claim that any 
``modification'' of an NDA requires the agency to provide a formal 
hearing. However, the FDCA and the FDA's implementing regulations do 
not provide for a hearing for a ``modification'' of an NDA. In fact, 
both the statute and regulations provide for a hearing only when the 
FDA proposes to withdraw an NDA. The statute at section 505(e) states 
in pertinent part:
        [FDA] shall, after due notice and opportunity for hearing to 
        the applicant, withdraw approval of an application with respect 
        to any drug under this section if the Secretary finds . . .
21 U.S.C. Sec. 355 (emphasis added). The statute then enumerates five 
different situations under which approval can be withdrawn. They are:

1. data shows that the drug is unsafe;
2. new evidence shows that the drug is not safe;
3. new information shows that the drug is not effective;
4. patent information was not timely filed; and,
5. the application contains an untrue statement of material fact.
Id.8 If the FDA proposes to withdraw an NDA based on one of 
the above reasons, a formal evidentiary hearing is required. However, 
the statute does not require a hearing for a proposal to modify an 
application, i.e., a change from Rx to OTC status or for any other 
change to an application other than withdrawal. As the FDA is not 
proposing to withdraw approval of any of these products, section 505(e) 
is inapplicable.
---------------------------------------------------------------------------
    \8\ FDA's regulations at 21 CFR Sec. 314.150 provide a hearing only 
for situations where the agency has proposed to withdraw an 
application.
---------------------------------------------------------------------------
B. Arguments that the Administrative Procedure Act (``APA'') Requires a 
        Formal Hearing are Incorrect and Further, Any Due Process 
        Concerns Are Adequately Addressed In The Notice And Comment 
        Procedure Utilized In This Process
    Several comments have argued that the APA, 5 U.S.C. Sec. 551 et 
seq., itself provides an independent source of authority for a hearing 
were the FDA to initiate a switch of a product from Rx to OTC. However, 
a close examination of the provisions of the APA and relevant case law 
demonstrate that this is not correct.
    Assuming first that an NDA meets the requirements for a 
``license,'' 9 section 558 of the APA provides that, 
``except in cases of willfulness or those in which public health, 
interest, or safety requires otherwise, the withdrawal, suspension, 
revocation, or annulment of a license is lawful only if, before the 
institution of agency proceedings therefor, the licensee has been given 
notice . . . and opportunity to demonstrate or achieve compliance with 
all lawful requirements.'' 5 U.S.C. Sec. 558. Again it is clear that 
the switch of a product from Rx to OTC does not constitute the 
``withdrawal, suspension, revocation, or annulment'' of a license. 
Therefore this provision of the APA is not applicable.
---------------------------------------------------------------------------
    \9\ A ``license'' is defined as ``a whole or a part of an agency 
permit, certificate, approval, registration, charter, membership, 
statutory exemption or other form of permission.'' 5 U.S.C. 
Sec. 551(8).
---------------------------------------------------------------------------
    Under the APA an agency may act through either rulemaking or 
adjudicatory procedures. In adjudication, a formal hearing on the 
record is required. The adjudication procedures are defined in section 
554 of the APA. The adjudication provisions apply, ``in every case of 
adjudication required by statute.'' See 5 U.S.C. Sec. 554(a) (emphasis 
added). However, the APA in itself ``imposes no requirement of an 
adversary hearing before an agency, but only specifies the procedure to 
be followed when a hearing is required by some other statute.'' See 
Conley Electronics Corp. v. FCC, 394 F.2d 620 (10th Cir. 1968); see 
also Democratic Nat'l Committee v. FCC, 460 F.2d, 891, 912 (D.C. Cir. 
1972) (``Since there is no requirement of a hearing under the 
Communications Act this section of the APA is clearly inapplicable''); 
Joseph E. Seagram & Sons, Inc. v. Dillion, 344 F.2d 497, 501 (D.C. Cir. 
1965). Since the FDCA does not provide for a hearing in this instance, 
and in fact specifies that the agency may ``by regulation,'' remove the 
prescription exemption, no hearing is required in this case.
    In any event, issues of due process, and notice and comment are 
dubious since the Citizen Petition requesting this action has been 
pending for three years and no party can claim to not have had an 
opportunity for its voice to be heard. Moreover, there has been ample 
opportunity to provide input and comment through the public Advisory 
Committee meetings that have been held to hear discussion of the 
issues. One can only surmise what type of information the drug 
companies would provide at a hearing that has not already been provided 
to the agency. One wonders whether it is due process at issue or due 
delay. To the extent that due process is at issue, the notice and 
comment procedure that FDA is required to perform is sufficient to meet 
those demands.
    In conclusion, under the Food, Drug, and Cosmetic Act and FDA's 
implementing regulations the FDA clearly possesses the statutory 
authority to initiate a switch and under FDA's regulations, the agency 
is required to initiate a switch when the Rx only requirement is not 
necessary for the protection of the public health. The statutory and 
regulatory scheme has been in effect for a very long time and has 
served to protect the health and safety of the public. The Advisory 
Committees fully evaluated the scientific evidence and overwhelmingly 
voted that Allegra, Claritin, and Zyrtec are safe and can be adequately 
labeled for use by the lay public.
    INSERT OFFSET FOLIOS 1 TO 31 HERE



    Mr. Bilirakis. I am told that Mr. Kingham is the next 
witness.
    I do want to apologize to all of you for not being here, 
but I really couldn't help it.
    Please proceed, sir.

                 STATEMENT OF RICHARD F. KINGHAM

    Mr. Kingham. Mr. Chairman and members of the subcommittee, 
my name is Richard Kingham, I'm a partner in the law firm of 
Covington & Burling in Washington, D.C. specializing in matters 
of food and drug regulatory law. I've been practicing in that 
field for nearly 30 years and have served in committees of the 
National Academy of Sciences, the National Institutes of 
Health, the World Health Organization and taught food and drug 
law in universities in the United States and the United 
Kingdom. And perhaps most relevant, I was counsel to one of the 
parties in what I believe remains the only judicial challenge 
to an Rx OTC switch in at least my memory.
    I appear today on my own behalf, but I do of course 
represent pharmaceutical manufacturers in my day-to-day 
practice.
    I thank you for the opportunity to appear and request that 
my written statement be entered into the record.
    I start with the premise that as a matter of public health 
policy consumers should have access to safe and effective 
medicines that can be appropriately used and labeled for self-
care. At the same time, it is absolutely critical that any 
switch of a product from prescription to OTC status be 
supported by adequate data demonstrating that the products can 
be used safely and effectively by consumers without a 
physician's supervision.
    The manufacturer of the drug is in the best position to 
provide this data and the manufacturer's active involvement in 
a switch is crucial. Recent proposals to impose a switch 
without the manufacturer's support reflect, in my view, poor 
public policy and raise serious legal issues. I oppose those 
proposals which I believe would depart from 50 years of 
precedent concerning OTC switches since the enactment of the 
Durham-Humphrey Amendments in 1951.
    First, I believe that collaboration between the drug 
manufacturer and the FDA is key to any switch. In evaluating a 
switch candidate, the FDA requires evidence to show that the 
drug is intended to treat a condition that can be self-
diagnosed and self treated, that the drug will be safe and 
effective as used in an OTC setting, and that there is a safety 
margin based on prior prescription marketing experience. It is 
also critical to show that OTC labeling will be understood by 
consumers and provide adequate warnings and instructions so 
that consumers will not diagnose and self-medicate if they 
experience symptoms that should be evaluated by a physician.
    A manufacturer's knowledge of all facets of a drug is 
indispensable to assessment of whether a drug meets the 
standards for a switch. The manufacturer has undertaken and 
maintains the full clinical development data concerning the 
drug and the manufacturer's in the best position to perform the 
new studies that are ordinarily required to support switch from 
prescription to nonprescription status. There are significant 
issues that can arise when drugs are switched and testing is 
ordinarily required to look into those issues. The manufacturer 
is the one that carries out those studies.
    Simple comparisons of a switch candidate to existing OTC 
drugs cannot substitute for genuine study of the drug's safety 
and effectiveness under OTC conditions of use and they don't 
meet the legal standards for a switch. Current law clearly 
provides that drugs must be evaluated on their individual 
merits and does not permit comparative assessments of safety or 
effectiveness. This makes good sense because attempts to rely 
on comparative evaluation of different compounds are prone to 
error.
    Next, switching a drug over the manufacturer's suggestions 
would in my view implicate the manufacturer's established legal 
rights under the Federal Food, Drug and Cosmetic Act, under 
mantel precepts of administrative law and the United States 
Constitution.
    A forced OTC switch would fundamentally change the terms of 
the manufacturer's approved license for the prescription drug 
and upset the settled expectations that the manufacturer had 
when it invested in development of the drug. Any compelled 
switch would also necessarily rely without the manufacturer's 
consent on proprietary data developed by the manufacturer. 
These actions would trigger core due process and property 
rights issues for the manufacturer and would, at a minimum, 
require that the manufacturer be afforded a hearing and 
potentially just compensation.
    Finally, mandated switches would constitute unprecedented 
governmental interference in the drug development and marketing 
decisions of private firms. Since the passage of the Durham-
Humphrey Amendments in 1951 FDA has never switched a 
prescription product to over-the-counter status over the active 
objection of the manufacturer. In the one prominent instance in 
which the FDA effectuated a switch without fully consulting all 
interested parties including the manufacturer and gaining the 
support of the manufacturers, the agency ultimately had to 
rescind that decision and the Commissioner of Food and Drug had 
to appear in a subcommittee of this committee to explain the 
action that the agency had taken.
    Departure from the agency's otherwise settled precedent 
could seriously disrupt the drug development process. Firms 
carefully establish research plans and development strategies 
for a product's life cycle. These plans would be jeopardized by 
unanticipated switches triggered by a third party. To allow 
such a practice would create uncertainty and unnecessarily 
complicate the already highly risky business of drug 
development. New research and development could be chilled as a 
result.
    I'll be happy to answer any questions.
    [The prepared statement of Richard F. Kingham follows:]
     Prepared Statement of Richard F. Kingham, Covington & Burling
    Mr. Chairman and Members of the Subcommittee:
    My name is Richard F. Kingham. I am a partner at the law firm of 
Covington & Burling in Washington, D.C., specializing in matters of 
food and drug law and regulation. I have been practicing in the field 
for nearly 30 years, and have served on committees of the National 
Institutes of Health, the Institute of Medicine of the National Academy 
of Sciences, and the World Health Organization. I have lectured on 
pharmaceutical regulation at universities in the United States and the 
United Kingdom. Although I represent both prescription and 
nonprescription drug researchers and manufacturers, I appear today on 
my own behalf. I thank the Subcommittee for the opportunity to present 
my views on the switching of drugs from prescription to over-the-
counter status.
    I start with the premise that, as a matter of basic public health 
policy, consumers should have access to safe and effective medicines 
that can be appropriately used and labeled for self-care. At the same 
time, it is absolutely critical that any switch of a product from 
prescription to OTC status be supported by adequate data demonstrating 
that the products can be used safely and effectively by consumers 
without a physician's supervision. The manufacturer of a drug is in the 
best position to provide those data, and the manufacturer's active 
involvement in a switch is crucial. Recent proposals to impose a switch 
without the manufacturer's support reflect poor public health policy 
and raise serious legal issues. I therefore strongly oppose these 
proposals, which would depart from the 50 years of precedent governing 
OTC switches since enactment of the 1951 Durham-Humphrey Amendments to 
the Federal Food, Drug, and Cosmetic Act.
Historical Development of FDA's Approach to Rx-OTC Switches
    Historically, FDA has used three mechanisms for switching drugs. 
First, following enactment of the Durhman-Humphrey Amendments in 1951, 
FDA switched a number of drugs to OTC status using a rulemaking 
approach referred to as the ``switch regulation,'' which was authorized 
under section 503(b)(3) of the Federal Food, Drug, and Cosmetic Act. 
This rulemaking process made sense in the 1950s and 1960s as a way for 
the agency to gain control over a variety of drugs that were marketed 
by different companies under different conditions, some Rx and some 
OTC, some with new drug applications (NDAs) and others without. The 
very same drug, with identical dosage and indications, might have been 
sold Rx by one company and OTC by another. Of course, that situation 
does not exist today, and FDA has not used this process to switch a 
drug for some 30 years (the last time being in 1971).
    Second, beginning in the early 1970s, FDA relied on the ``OTC Drug 
Review'' as the principal vehicle for switching drugs to OTC status. 
This, too, made a great deal of sense for its time, since it was part 
of the agency's comprehensive review of the safety, effectiveness, and 
labeling of OTC drugs following the landmark 1962 amendments to the 
Federal Food, Drug, and Cosmetic Act. FDA switched approximately 32 
drugs through the OTC Drug Review in the 1970s and 1980s. However, the 
OTC Drug Review has largely run its course, and it is not the focus of 
switch activity today.
    FDA entered the third, and current, switch era in the mid-1980s 
when it began switching drugs through the NDA process. With very few 
exceptions, every switch today is accomplished through approval of an 
NDA or NDA supplement. This is suited to today's environment. FDA 
comprehensively regulates new drugs, both Rx and OTC, through the NDA 
process. The NDA process gives the agency the maximum degree of 
authority over all aspects of a drug, and provides the means by which 
manufacturers may invest in the development of proprietary data for 
submission to FDA in support of approval.
Collaboration Between the Drug Manufacturer and the Food and Drug 
        Administration is Key to a Switch.
    In evaluating a switch candidate, FDA requires evidence to show 
that the drug is intended to treat a condition that can be self-
diagnosed and self-treated, that the drug will be safe and effective as 
used in an OTC setting, and that there is a safety margin based on 
prior prescription marketing experience. It is also critical to show 
that OTC labeling will be understood by consumers and provide adequate 
warnings and safety information, so that consumers do not self-diagnose 
and self-medicate if they experience symptoms that should be evaluated 
by a physician. These standards are vital to the continued integrity of 
the nonprescription market.
    For the past decade, the switch of a prescription product to OTC 
status has in nearly all cases been initiated by the holder of an 
approved NDA, or with its approval, through the submission of a new 
application or a supplement with extensive data to support safe and 
effective OTC use and appropriate OTC labeling for the specific drug. 
This makes public health sense. The company that developed the drug in 
the first place and obtained the approval for the prescription drug 
knows the most about the drug.
    Evaluation of a switch is necessarily conducted product by product, 
based on the specific data and merits of each product. Extensive 
prescription use is essential to the full characterization of a drug's 
clinical profile, and is thus is a prerequisite for OTC consideration. 
New information is often learned through commercial use that cannot be 
identified based on the limited number of patients involved in the 
clinical trials conducted for initial product approval. Sponsors 
seeking OTC switches are routinely required to provide a large body of 
safety experience reflecting both clinical trial and actual use, as 
well as updated scientific information developed since the time of 
initial NDA approval providing an enhanced understanding of the 
underlying disease, current medical practice, and the pharmacology of 
the drug.
    A manufacturer's knowledge of all facets of a drug is indispensable 
to assessment of whether a drug meets the standards for a switch. The 
manufacturer has undertaken and maintains the full clinical development 
of the prescription drug, and is in the best position to understand the 
existing clinical and post-marketing surveillance data, evaluate a 
drug's current safety profile, and determine if an appropriate safety 
margin would support use without a physician's care.
    The manufacturer is also in the best position to perform the new 
studies that are typically essential to ensuring that a drug will be 
safe as used in an OTC setting, and that labeling can effectively 
communicate information to consumers about warnings and precautions. 
Significant issues can arise under OTC use that do not exist, or are of 
considerably less concern, when a drug is used in accordance with a 
physician's prescription and supervision. For example, use of a drug 
may cause interactions with other drugs that a physician could identify 
and manage, if closely monitoring a patient. These risks need to be 
carefully scrutinized, and data collected to ensure that consumers will 
properly comprehend product labeling and will not self-diagnose and 
self-medicate if they experience symptoms that should trigger a 
physician consultation. Actual use and labeling comprehension studies 
can address these questions. A switch should generally not be permitted 
unless considerable data are developed in addition to the data already 
present in the NDA for prescription use. The drug manufacturer is best 
situated to design, fund, perform, analyze, and submit the needed 
studies.
Simple Comparisons of a Switch Candidate to Existing OTC Drugs Cannot 
        Substitute for Genuine Study of the Drug's Safety and 
        Effectiveness Under OTC Conditions, and Do Not Meet the Legal 
        Standards for a Switch.
    Current law clearly provides that drugs must be evaluated on their 
individual merits, and does not permit comparative assessments of 
safety or effectiveness. This makes good sense, as attempts to rely on 
a comparative evaluation of different compounds are prone to error. 
Either data exist to support OTC use of a drug or they do not, and 
considerations of relative safety or effectiveness are not germane.
    No more permissive standard may be applied to allow third parties 
without adequate data to initiate a switch based on purported product 
comparisons. To do so could put the public at risk. It would also 
constitute arbitrary and capricious action for the FDA to apply one 
standard to a manufacturer-initiated switch and another to a third-
party switch. See, e.g., Independent Petroleum Ass'n v. Babbitt, 92 
F.3d 1248, 1258 (D.C. Cir. 1996); Airmark Corp. v. FAA, 758 F.2d 685, 
691-92 (D.C. Cir. 1985); United States v. Diapulse Corp., 748 F.2d 56 
(2d Cir. 1984).
Switching a Drug Over the Manufacturer's Objections Would Implicate the 
        Manufacturer's Established Legal Rights under the Federal Food, 
        Drug, and Cosmetic Act, Fundamental Precepts of Administrative 
        Law, and the United States Constitution.
    A forced OTC switch would fundamentally change the terms of the 
manufacturer's approved license for the prescription drug, and upset 
the settled expectations that the manufacturer had when it invested in 
development of the drug. Any compelled switch would also necessarily 
rely without the manufacturer's consent on proprietary data developed 
the manufacturer. These actions would trigger core due process and 
property rights of the manufacturer, and would, at a minimum, require 
that the manufacturer be afforded a hearing and potentially just 
compensation.
    Section 505(e) of the Federal Food, Drug, and Cosmetic Act 
specifically requires that FDA provide notice and a hearing in order to 
seek basic changes to an approved application. Section 505(e) provides 
important due process protections for the holders of approved NDAs, and 
is a central part of the current regulatory scheme.
    These statutory protections are directly reinforced by the due 
process clause of the Constitution and longstanding principles of 
administrative law, which hold that an administrative agency must 
provide an individualized hearing before taking specific action to 
modify or withdraw an approved license. The due process rights of 
license-holders are recognized in a long line of judicial decisions 
tracing back to the seminal Supreme Court case of Bi-Metallic Inv. Co. 
v. State Bd. of Education, 239 U.S. 441 (1915), and its progeny. These 
due process protections are a fundamental safeguard against arbitrary 
and unreasonable agency action, and must be preserved.
    In addition to raising due process concerns, almost any switch 
would also have to rely in part on data contained in the original NDA 
for the prescription drug to support OTC use. The company has 
proprietary rights in its NDA data, which could not be used without its 
consent, regardless of the regulatory procedures followed. Companies 
make substantial investments to generate the data that are contained in 
an NDA, and such non-public commercial information is protected from 
disclosure by federal statutes such as the Freedom of Information Act 
and the Trade Secrets Act. The unauthorized appropriation of 
proprietary data would also implicate the Takings Clause of the 
Constitution. This is particularly true because a company would be 
deprived of the benefits of a prior investment of millions of dollars 
in the research and development of a new drug with no prior notice that 
it might be compelled to convert the product from prescription to 
nonprescription use.
Mandated Switches Would Constitute Unprecedented Governmental 
        Interference in the Drug Development and Marketing Decisions of 
        Private Firms.
    Since the passage of the Durham-Humphrey Amendments in 1951, FDA 
has never switched a prescription product to over-the-counter status 
over the active objection of a manufacturer. In one prominent instance 
in which FDA effectuated a switch without the manufacturer's support 
(involving the bronchodilator metaproterenol), the agency had to 
rescind its decision. 1 This episode provides a cautionary 
tale for subsequent switches.
---------------------------------------------------------------------------
    \1\ See 48 Fed. Reg. 24926 (June 3, 1983).
---------------------------------------------------------------------------
    Further departures from the agency's settled precedent could 
seriously disrupt the drug development process. As indicated above, 
firms carefully establish research plans and development strategies for 
a product's life cycle. These plans would be jeopardized by 
unanticipated switches triggered by a third party. To allow such a 
practice would create uncertainty and unnecessarily complicate the 
already highly risky business of drug development. As it is, the 
Pharmaceutical Research and Manufacturers of America reports that only 
one in 5,000-10,000 compounds synthesized in the laboratory ever makes 
it to market, over 12-15 years at an average cost of $500 million. 
Adding greater uncertainty to the drug development process could chill 
new research and investment.
Once the Door is Open for Insurers and Other Third Parties to Initiate 
        Switches, it Will be Difficult to Establish Appropriate Limits.
    Insurers have significant incentives to compel OTC switches, 
because a switch effectively shifts drug costs from the health plan to 
consumers. If current law and
    practice are changed to permit insurers and other third parties to 
seek switches, there could be an outpouring of requests. It would then 
be difficult, if not impossible, for FDA to control the process and 
decide who should and should not be permitted to seek a switch. I 
strongly caution against any changes in law or policy that would 
produce such a result.
    This concludes my written testimony. I would be pleased to answer 
any questions or to supply any additional materials requested by 
Members or Subcommittee staff on these or any other issues.

    Mr. Bilirakis. Thank you very much, Mr. Kingham.
    I think it's of note that Dr. Woodcock has chosen to remain 
in the hearing room to listen to all of this testimony. That is 
a very positive thing, and I want you to know, Doctor, that we 
appreciate it.
    Mr. Brown. Mr. Chairman, Dr. Woodcock, the chairman has 
asked people to do this for 5 years and finally someone did it. 
So, thank you. You made him so happy when you walked back into 
the room.
    Mr. Bilirakis. Ordinarily I have to sort of recommend that 
they do it. Thank you very much, Doctor.
    The Chair recognizes Mr. Greenwood for him to inquire.
    Mr. Greenwood. Probably Ms. Woodcock was going to sit here 
for another 5 or 10 minutes, and now she's stuck for the rest 
of the afternoon.
    Mr. Downey, I believe you said that your company filed two 
patent challenges to Prozac, is that your testimony?
    Mr. Downey. It was a single patent challenge, but it 
challenged two different patents.
    Mr. Greenwood. Could you specify--and you lost the first 
one and won the second one, is that correct?
    Mr. Downey. Correct.
    Mr. Greenwood. Could you specify exactly what was at issue 
in this cases?
    Mr. Downey. Yes. In the patent that expired in 2001, in 
February of this past year, the principle issue is whether the 
best mode for making the product and practicing invention was 
disclosed in the patent, which is one of the legal obligations 
of the patent applicant. The courts ultimately concluded that 
the best mode was disclosed or the disclosure was adequate and 
the patent was sustained.
    The second patent was the one that expired, and it would 
expire in 2003, and we challenged that patent on the grounds 
that it was not sufficiently different from this patent 
expiring in 2001 to be independently patentable. And that, 
generally, was the idea of one invention/one patent. If you get 
a second invention--a second patent for the same invention, 
that runs afoul of the rule of double patenting--against double 
patenting. And that was the grounds in which the Court of 
Appeals for the Federal Circuit in an en banc decision--well, 
in a panel decision directed by the en banc panel struck down 
that patent just a week or so ago.
    Mr. Greenwood. Now, in your testimony you also said that 
you thought that at the time when a patent is asserted, you 
noted that there was not an adversarial situation, that there 
was no one to argue at that time against the patent. Are you 
actually arguing that there ought to be and that that would be 
the case for all patents?
    Mr. Downey. No. I'm suggesting that that is--I'm not making 
that suggestion. What I'm saying is the system we have is the 
product of that process, and that process had led in my 
judgment to a number of unpatentable ideas obtaining patents 
which once they're obtained, are entitled to presumption of 
validity. That is the basic problem we confront in getting our 
products to market.
    I'm not suggesting that it's a--that the solution to that 
is to create the patent application as an adversarial process--
--
    Mr. Greenwood. Well, are you suggesting that there is a 
solution to that?
    Mr. Downey. I think the best solution is one that's in the 
current law and one that's carried over into the Brown-Emerson 
Bill, and that is to ensure that there's incentive once the 
patent has been granted to challenge that patent if it's weak 
or challengeable. In the case of the Waxman-Hatch Act and the 
Brown-Emerson legislation that incentive is the 180 days of 
exclusivity for the successful patent challenger.
    I also think the Brown-Emerson Bill improves current law by 
providing that if the first challenger settles the case, 
subsequently the exclusivity for a successful challenger then 
rotates to the second in the line. So, I think that's a 
significant improvement. I also think that's an improvement 
that will eliminate the 30 month stay, which is another 
problem.
    In the normal patent case if it's a chemical compound or 
electronics patent and you're challenging the patent, normally 
you'd be going to market and the patent holder would have to 
obtain an injunction to stop you from marketing. If they get 
that injunction, they have to post a bond. And if the patent 
challenger ultimately wins the case, they recover their lost 
profits.
    In the case of the automatic 30 month stay, there is no 
bond. In essence, that gives the patent holder and the 
pharmaceutical industry a free preliminary injunction with no 
downside risk. And I think that's an area where the current law 
also needs to be changed so if there is a challenge during the 
case of Prozac and we're kept off the market by a patent 
ultimately declared invalid, we would recover our loss profits 
for that period that we're kept off the market. I think that's 
an improvement that needs to be made in the current 
legislation. But those are some of the problems that I see.
    Mr. Greenwood. Does the generic industry support user fees 
to help speed products to market the way----
    Mr. Downey. As an industry we do not, and I think I can add 
why. In the case of the Office of Generic Drugs has 
approximately 125 people. I think with as few 150 or 175 you 
could have products actually approved in the 6 months. And I 
personally believe, and I think our industry believes, that a 
user fee program for 50 full time equivalents is not--is the 
wrong response to a fairly small problem. I think that simply a 
line item appropriation that would maintain the Office of 
Generic Drugs in an appropriate level to process the 
applications in a timely basis is the right approach. And I 
would say in response to some Dr. Woodcock's testimony, many 
firms have a much shorter than 18 month approval cycle. I know 
that in our case it's more like 12 or 15 months. I know your 
constituent Teva would also have something in the neighborhood 
of 12 or 15 months. And usually the period over a year has to 
do with characteristics of the product.
    For example, the United States Pharmacopeia establishes 
standards for most products. And if a product is in the 
Pharmacopeia, you get a much shorter approval time. But I can 
tell you if it's not and we submit an application, we get 
extensive chemistry comments because those specifications 
haven't been worked out in advance. So there's some other 
factors that figure into the approval process and really a 
small increment--the Office of Generic Drugs I believe could 
really bring the process down to 6 months.
    Mr. Greenwood. Thank you.
    Mr. Bilirakis. Mr. Brown to inquire.
    Mr. Brown. Thank you, Mr. Chairman.
    I don't know where to start. Dr. G;over on behalf of PhRMA 
says we shouldn't attempt to improve upon Waxman-Hatch Act 
because any changes would jeopardize research and development. 
Yet, PhRMA member companies enjoy--PhRMA member companies, 
first of all, charge U.S. consumer often times two and three 
and four times what consumer and other wealthy developed 
industrial democracies are charged. PhRMA companies have been 
the most profitable businesses industry in the U.S. for 20 
years running, whether it's return on investment, return on 
equity, return on sales. PhRMA companies have enjoyed the 
lowest tax rate of any industry in America because of the 
research they do, something I in fact support. PhRMA companies 
have spent more money in marketing than they have research and 
development. And also government and foundations taxpayers 
through NIH foundations, other government agencies spend half--
do half of the research and development in dollar terms have of 
the research and development in this country on prescription 
drugs.
    And then PhRMA tells Congress, Dr. Glover has told Congress 
and told the American people in very expensive ad campaigns 
that anything Congress does that might effect prices will 
curtail research and development.
    Now, Dr. Glover in his testimony said ``There's no need to 
amend Waxman-Hatch Act to deal with this issue, and settling 
cases, and he is encouraged by the courts it avoids the 
expenses of litigation and it can create results that 
accommodate the interests of both parties.'' While the 
corporate special interest flavor of this Congress and this 
Administration might suggest otherwise, our job in this 
institution is in fact to protect the public interest. You're a 
lawyer, you do a good job I'm sure for your client, that's why 
you're here. You're impressive. You've lad out a good case 
today. But how does it serve the public interest when, you 
know, one party, the generic is happy. The PhRMA company is 
happy. Yet prices don't come down when generics in the 
marketplace would in fact bring prices down. How does that 
compromise under Waxman-Hatch Act the way it works now, how 
does that serve the public interest?
    Mr. Glover. In the pharmaceutical industry there are two 
ways in which the public interest can be served. The first is 
that we make sure that we have a system in place that will 
allow for innovation for the current population as well as 
innovation that will prevent future generations from suffering 
from the same diseases that we currently suffer from.
    The other, which we tend to focus on in these debates, is 
that the generic industry by virtue of providing drugs at lower 
costs is another way to provide protection to the public 
health.
    Now, in a circumstance where there is a patent settlement, 
in some cases it will result in the innovator's patent being 
protected. That, by itself, does not mean that the public 
interest is not being served. It is in our interest and the 
interest of the system that we've designed that the patents are 
sometimes protected. In other cases, as Mr. Downey described in 
his testimony, the generic interest gets to the market prior to 
the expiration of the patent that would have otherwise kept it 
off the market. And in one of the cases that he described, the 
subsequent challenges to the patent did not get on the market 
because they lost their patent infringement cases. So in those 
circumstances, both of them are circumstances in which the 
public was better off by having the parties settle the case 
than it would have been to expend further sums and more time in 
litigation to the end.
    Mr. Brown. But in case after case this settlement between 
two parties, both of whom can profit immensely from those 
settlements, keeps a less expensive identical drug from going 
to the market giving consumers choice and giving consumer lower 
prices?
    Mr. Glover. It is not true that simply by having lower cost 
you give consumers choice. You give consumers choice today, you 
take away choice tomorrow.
    And with respect to this being case after case, please bear 
in mind that there are only three cases in which there have 
been supposedly any complaints by the FTC regarding settlements 
between pioneers and generics. It is simply not the case that 
this is a common place occurrence that the FTC has deemed to be 
anti-competitive.
    Mr. Brown. Well, if it's three cases, then it's cases where 
as we see this happening more and more, and it's obviously 
going to happen more tomorrow than it did yesterday, that's 
clearly the trend----
    Mr. Glover. I actually think that's unlikely given that we 
now see the FTC's interest in these matters and we now have 
some clarification with respect to the way the courts are going 
to interpret the 180 day exclusivity, I think it is unlikely 
that you're going to see more and more of the settlements 
between pioneers and generics. In fact, that is a downside of 
the ambiguity of the scrutiny that is coming out of the FTC is 
that it will make the system substantially less efficient 
because you cannot have efficient settlements where they're 
appropriate.
    Mr. Brown. Well, I would argue it won't be less likely or 
PhRMA wouldn't be putting the kind of resources into opposition 
of this bill.
    But let me make one other point with Dr. Delgado. It's not 
really--it's a simple question. My understanding there are 11 
members of the National Alliance for Hispanic Health and the 
corporate advisory council, six of those, if I could name them 
quickly, Karen Katen whose with Pfizer, Karen Dawes whose with 
Bayer, David Anstice is with Merek, Aldrage Cooper is with 
Johnson & Johnson, Gino Santine with Eli Lilly, Kevin Reilly 
with Wyeth. Is that correct what I just said, those 6 out of 
the 11 and those people are actually under----
    Ms. Delgado. Yes, they are on our corporate council. They 
contribute less than .25 percent of our budget, and we are a 
health organization that does not accept money from tobacco or 
alcohol companies. We work with people who try to save lives, 
yes.
    Mr. Brown. Thank you.
    Mr. Bilirakis. I thank the gentleman.
    Mr. Bryant to inquire.
    Mr. Bryant. I thank you, Dr. Delgado. Let me just ask you 
one question I had intended to----
    Mr. Bilirakis. You might lift that mike up closer to you.
    Mr. Bryant. Oh, okay. Let me slide closer here.
    Based on your testimony and the statistics that I think 
have been recited several times today by panelists, would you 
care to characterize the direct to consumer advertising that is 
being done in this area as successful in terms of reaching 
people who would otherwise be untreated?
    Ms. Delgado. Yes. I think it gets people to think about 
their illness. And not just in the sense of having them go in 
for care, but also thinking about maybe I should take my 
medicines or things like that.
    Mr. Bryant. Let's see, I wanted to ask Dr. Glover a 
question also. I have a short period of time here, and I don't 
find it right now.
    But in essence my understand is that on average the drug 
companies spend something like $500 million in developing a 
drug. I don't know if that's--is that ball park?
    Mr. Glover. That's correct. That's an estimate, yes.
    Mr. Bryant. And do you know, and I know Mr. Downey next to 
you may well know this perhaps better than you, what the cost 
would be that would be associated with bringing a generic to 
market on average? A generic drug?
    Mr. Glover. I will pass to Bruce, but our expectation is 
that it is a fraction less than 1 percent of the cost to bring 
the pioneer to market.
    Mr. Bryant. And what is your source representing the 
pharmacy side of recovering those R&D costs?
    Mr. Glover. We need to recover the R&D costs by virtue of 
marketing our drug and the income that we receive from 
marketing our drugs. And as the economics will show that of the 
drugs that are approved by FDA only a small fraction of those 
drugs generate enough income to cover the average $500 million 
cost for those drugs. And as a result, just virtue of the 
economics, it is necessary that a certain percentage of all 
drugs approved must be drugs that far exceed the $500 million 
cost in order to make up for the cost of the other drugs.
    The additional thing that we have to keep in mind that 
we're doing with the income from the drugs that are being sold, 
is that we're not merely recovering the R&D for drugs that have 
already been developed, but we're also trying to have enough 
money to fund the R&D for the next generation of cures which 
are likely to be more complex, more expensive and take a longer 
time to get to approval.
    Mr. Bryant. In your R&D do you have drugs that strike out, 
that fail, that don't work?
    Mr. Glover. Absolutely. In the drug development process, 
failure occurs everywhere in the process. It occurs starting 
with animal studies, starting with first generation, second 
generation animal studies, first trials into humans. You may 
find toxicity in certain populations that you didn't find in 
other populations.
    Mr. Bryant. Let me ask you this, and again I want to jump 
down to Mr. Kingham and then go back and let Mr. Downey talk.
    To your knowledge do the generics have strike outs and 
failures? They have a better batting average than you do, don't 
they?
    Mr. Glover. They have a substantially better batting 
average in the sense that they are relying on us having found 
the magic bullet amongst many that are not magic bullets. So 
they are simply faced with the task of making a copy of what we 
have determined to be the effective drug.
    Mr. Bryant. Okay. Mr. Kingham, let me ask you very quickly, 
in terms of section 503(b)(3) of the FDA are you aware of any 
instance of this Act, are you aware of any instance where the 
FDA itself moved a prescription drug, converted it over to a 
OTC drug over the objection of the manufacturer of that drug?
    Mr. Kingham. No, I'm not. I'd also point out that that 
provision has not been used for 30 years. The last time it was 
invoked was in 1971 for a drug called Tolnaftade. It's 
essentially been superseded by other legislation.
    Mr. Bryant. Well, would forcing a switch to this former Rx 
over to an over-the-counter drug over the objection of a 
manufacturer, would it result in the consumers being forced to 
pay more out of pocket expenses for the drugs that they use? In 
my case, I use one of those, would I have to start paying for 
it myself if my insurance company didn't pay for it?
    Mr. Kingham. I would assume that for those people who have 
drug benefits under their insurance policies that don't cover 
OTCs, that would presumably be the result.
    Mr. Bryant. And to be sold OTC a drug must be safe, a 
consumer must be able to self-diagnose what the problem is and 
the label itself on the container must be comprehensible to the 
consumers. If the FDA is allowed to do these switches over the 
objection of manufacturers, who would perform these label 
comprehensive studies?
    Mr. Kingham. Well, I don't know of anybody but the 
manufacturers who do them, and usually in addition to label 
comprehension studies, some actual clinical trials are required 
as well. And the only people who do those in our system are the 
manufacturers.
    Mr. Bryant. Do you think this forced switch might impact on 
the ability of pharmaceutical companies to innovate?
    Mr. Kingham. It could affect, it's one of a number of 
factors that effect investment decisions that companies make, 
yes.
    Mr. Bryant. All right.
    Mr. Chairman, if I might ask for a unanimous consent to 
have perhaps an additional minute?
    Mr. Bilirakis. Without objection. I hear no objection.
    Mr. Bryant. Mr. Downey, if we could go back to you now, I 
wanted you to get the last word in in terms of responding to 
Dr. Glover on those numbers and statistics I mentioned.
    Mr. Downey. Well, it's highly variable the amount of 
investment required to bring a generic product to market. In 
the least expensive case, $1 million, $2 million for a very 
simple product. In other case we've spent at Barr $30 to $40 
million to attempt to bring a generic Premarin to market, and 
we still haven't done it. And that's for a variety of reasons, 
mostly regulatory. So there's no set answer to that question.
    I will point out, and I'd be happy to document this in 
supplementing my testimony, R&D is a percentage of gross 
profit. Our company spends more than Merck or Johnson & Johnson 
or I believe any of the innovative companies. They always say 
the percentage of investment in R&D versus sales, well their 
margins are almost 95 percent, so sales and gross profit are 
the same. In our case gross margins are much lower percentage 
basis.
    So if you look at the gross profit as disposable income for 
a company, Barr and many of our competitors in our generic 
industry spends a higher percentage of our gross profit on R&D 
than the innovator company. So I think we really are a 
research-based firm, and frankly we spend a much lower 
percentage of our gross profit on sales and marketing costs. 
Much, much lower.
    Mr. Bryant. Thank you.
    Mr. Bilirakis. Mr. Pallone to inquire.
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to ask Mr. Downey a couple of questions.
    If I listen Mr. Glover's testimony where he talks about how 
there are few patent disputes. You know, he says despite the 
generic industry's arguments to the contrary, data show generic 
applications have not raised or encountered any patent issues 
that have delayed their approval, and he gave us some facts in 
that regard. But then Mr. Downey, you go on to talk about the 
stagnation of the growth of generic substitution. Nearly two 
decades after Waxman-Hatch Act, generic substitution rates, 
however, in the low 40's area. You talk about how this National 
Institute for Health Care Management foundation study showed 
that they through legislation and exploitation of legal and 
regulatory loopholes, the brand names have extended the 
anticipated market exclusivity from 12 to 18 years. An 
accumulative effect has resulted in extending product 
monopolies by almost 50 percent.
    I mean, I know you're mainly talking about price and you 
know to the extent that price is an issue here. But how do you 
explain the two? I mean, it's almost like opposites?
    Mr. Downey. Well, I think in my testimony I indicated 
BusPar. BusPar is a product recently where generics were kept 
off the market by a late listed patent.
    I think a recent example of Nicorette gun which was kept 
off the market by--sort of a nightmarish system of regulatory 
questions about the labeling and the patient materials. I think 
there are a number of instances where products have been kept 
off the market, either through regulatory manipulation or 
through patent manipulation. And I think both are important and 
I think Congressman Brown's bill addresses both. You have 
questions about bio-equivalence, which would be modified in the 
new legislation. You'd have questions about citizen's petitions 
tightened up in the new legislation. You would eliminate the 30 
month stay so if people really did want to market at risk that 
had the ability to do it. So, I think there are a number of 
things that can be done and are in the Brown-Emerson Bill that 
would clear these pathways to bring our products to market.
    But I think the fundamental thing, the biggest single 
incentive to work to bring these products to market is the 180 
days of exclusivity to challenge patents. And without that, 
you're going to have a long, long delay in market entry.
    Mr. Pallone. We didn't have much mention today about the 
citizen petition process.
    Mr. Downey. Yes.
    Mr. Pallone. You just mentioned that. Do you want to tell 
us a little bit about that, because again that's addressed in 
the Brown bill, you know, the effort to--I guess under the GAAP 
you have to require to certify that petitions are factually 
based, that they can't be used for any competitive purposes, 
otherwise they'd be investigated by the FTC. I mean, tell us 
how this process is used and how we can improve it?
    Mr. Downey. I'll give you a real life example. Our company 
brought to market a generic version of Coumadin, warfarin 
sodium, been off patent for 40 years. As our application neared 
approval and was within, in my judgment, 30 days of approval 
the innovator firm filed a citizen's petition in which they 
recited almost comically in the first page that they learned 
the previous day that a generic product was about to be 
approved and they were filing this 50 page petition saying why 
approval of that product would be imprudent. So if you read it 
literally, they prepared this document within--this 50 page 
document overnight to file with the FDA.
    I believe that petition--as a practical matter, I believe 
the FDA chooses for reasons they think are sufficient to not 
approve the products until they can resolve the citizen's 
petition issues. And if you time your citizen's petition 
correctly, as in the case that I just described, working 
through the petition, preparing a response takes months and 
results in months of delay.
    Mr. Pallone. But how do we improve on that? I see what 
we're proposing in the Brown bill. How would it improve on it?
    Mr. Downey. Well, I think the Brown bill would have 
attached some consequences if you filed a petition that was 
ultimately denied. I think, frankly, it's a very difficult 
problem because people do have First Amendment rights and you 
don't want to stop people from making legitimate safety 
petitions to the FDA.
    I personally believe the best way to do it is decouple the 
two processes. And that is if you have a product in the market 
and you have established approval processes for the generic 
product, let it go forward. And then if there's a problem, that 
will manifest it later.
    If you as an innovator think there's a problem with a 
generic product being approved, you have years in advance of 
the application to make that known to the FDA. Only in an 
emergency, an unusual situation would something come up at the 
last minute that should delay the approval.
    So, it's a difficult problem but I think the Brown-Emerson 
Bill addresses it in a sensible way.
    Mr. Pallone. Thank you.
    Thank you, Mr. Chairman.
    Mr. Bilirakis. I thank the gentleman.
    Ms. Delgado, I know your role here is to sort of support, 
if you will, the direct-to-consumer TV advertising, is that 
correct?
    Ms. Delgado. Well, my role here is to represent our 
membership, which are Hispanic consumers.
    Mr. Bilirakis. I'm glad you said that. That being the case, 
let me shift over to you. You've sat in the audience, and I'm 
not sure whether you know if it's unfair of me to bring it up, 
please let me know, the OTC situation where the prescription 
drug might be shifted over to the over-the-counter.
    Ms. Delgado. I'm very familiar with that, yes.
    Mr. Bilirakis. You are familiar with it. What is your 
organization's, on behalf of your people, what is your opinion 
on that?
    Ms. Delgado. I think that the FDA has a very important role 
that should not be pushed by people who are more concerned 
about the cost to themselves rather than consumers. I am 
concerned that the decision is driving more by pushing the 
costs off to consumers.
    For example, we know some of the managed care companies 
encourage their members to take part in alternative health 
because they don't have to cover those costs. And I think that 
when you have an OTC, your consumer already has limited funds 
will cover more of those costs. So we're concerned about that.
    We would like the FDA to proceed as they always did on good 
science and not to feel pushed in way or another.
    Mr. Bilirakis. Well, I'm not sure how to interpret all 
that.
    Ms. Delgado. That means that when the big boys fight, that 
science should be the one who rules the day. And what's good 
for consumers, that--I mean medications need to be out for a 
while before we know that they're really as good, as effective 
as they are supposed to be. We in the United States are very 
different than in other countries, and I'm very concerned when 
they compare us to other place and say ``Well, there we can get 
a drug out quicker and it's over-the-counter and you can get 
it.''
    Mr. Bilirakis. You heard me say, and nobody's disputed it, 
the insurance companies that cover drugs will cover 
prescription drugs.
    Ms. Delgado. Right.
    Mr. Bilirakis. So if drugs shift to over-the-counter, I 
guess conceivably it probably would be less expensive to the 
consumer. But I'd say, whether it is or whether it isn't, the 
point of the matter is that it will probably not be covered by 
the insurance policy. Is that right?
    Ms. Delgado. Exactly. Exactly. And that we don't see as 
good.
    Mr. Bilirakis. All right. That being the case, how do you 
feel about that?
    Ms. Delgado. Let me back up. I think one of the problems is 
when we look at health coverage in America from that hospital-
based position system to more in-home and patient-driven, which 
means that in fact somehow the patient's going to have more 
medical home care costs. And our system doesn't do that. So we 
do this patchwork approach of solving it.
    I don't think it's good to just making OTC and then make 
the consumer pay for it. Because even though the costs are low, 
those costs may still be higher than their co-pay, or whatever 
they may have to pay for that medicine. It's a very complicated 
issue and it's unfair that whenever the price of drugs go up, 
we oh, or there's more expenses on it. Because I'm happy people 
are spending less time in hospitals.
    We work very much on HIV/AIDS. We're happy to see less time 
in hospitals, more part with medicine.
    Mr. Bilirakis. Let me ask you then about the direct-to-
consumer TV advertising. I don't know whether it was mentioned 
while I was gone, and Mr. Downey may have been alluding to it 
earlier, but in one of our prior hearings just a few days ago, 
we had a witness who put up a chart that indicated that direct-
to-consumer TV advertising--at least that's the way I 
interrupted it and I've checked with some staff here and I 
think they kind of agree would amount to about $300 billion 
over 10 years. I know it seems out of the ordinary. And I am 
relating it to the $300 billion that's been allocated in the 
budget to prescription drug coverage for seniors.
    So, regardless of whether this $300 billion is a correct 
figure or something considerably less than that, still we're 
talking about an awful lot of money.
    Ms. Delgado. But the other side is what's the cost of not 
getting care.
    Mr. Bilirakis. Yes. But whether it be $300 billion or 
whether it be $2.5 billion times 10 years, or whatever the 
figure might be, that's going to be a part of the price that 
your consumers will pay, will it not?
    Ms. Delgado. Yes.
    Mr. Bilirakis. All right. And you still feel that the 
advantages of that advertising outweigh the advantages or the 
disadvantage of additional costs?
    Ms. Delgado. The advantages of advertising is having people 
going for care, and I want healthy people not people who are 
working that are ill or not able to work. So I think with----
    Mr. Bilirakis. Are those same people paying more for their 
drugs because of that advertising?
    Ms. Delgado. I would assume that they probably are paying 
more, but they're also going in for care.
    Mr. Bilirakis. Yes.
    Ms. Delgado. So I think it's a tradeoff. I mean, it's very 
difficult but people need to go in for care. And if it gets 
them in, that's the first step.
    Mr. Bilirakis. Yes.
    Mr. Geiser. Mr. Chairman?
    Mr. Bilirakis. Yes, sir.
    Mr. Geiser. We request permission to present two charts 
that have a bearing on this discussion.
    Mr. Bilirakis. You want to put them into the record, is 
that what you're saying, sir?
    Mr. Geiser. Yes. And to have Dr. Seidman speak to them for 
a moment?
    Mr. Bilirakis. I don't know about that. But we are very 
glad to consider anything that you have to present for a matter 
of the record.
    Mr. Geiser. Well, the two charts demonstrate and speak to 
the issue that was just discussed and present our best guess on 
what the impact of the OTC switch would be and compare what we 
project the price to be to----
    Mr. Bilirakis. Mr. Geiser, your time was up, obviously, but 
if there's no objection and if there is objection--actually, at 
this point in time I'm going to have to call on Mr. Burr to 
inquire, because you haven't had your opportunity to inquire 
Mr. Burr. The Chair is correct.
    Mr. Bilirakis. All right. We'll do that.
    After Mr. Burr testifies if you make that request, and if 
there's no objection, I will allow the charts. But I think I 
will just allow you to explain them if you wanted to very, very 
briefly.
    Mr. Geiser. Thank you.
    Mr. Bilirakis. All right, Mr. Burr, please.
    Mr. Burr. I thank the Chair and let me take this 
opportunity, Mr. Chairman, to point out to those that are left, 
even though I've been absent, Dr. Woodcock has stayed. This is 
probably one of the first times, whether it's the FDA or any 
other agency, that I've seen somebody who testified actually 
take the time to stay and listen to the other panels. And I 
want to commend her for it, because----
    Mr. Bilirakis. I've already done that, Richard. I 
appreciate you concerning that.
    Mr. Burr. I felt if I didn't do it, she would think that I 
had slacked off a little bit.
    Let me also say to Dr. Delgado, it's refreshing to find 
somebody with the focus in the right place. Your answers are 
genuine and for the right reason; it's because your focus is on 
what's best for patients. And I think, hopefully, most would 
agree with you that the better educated consumers are in the 
market place, the easiest that we can make it for patients to 
access care, care a big umbrella. Hopefully the sooner they do 
it, the healthier they are. And I think we've lost focus up 
here of the fact that one of the impacts that we can have from 
a legislative standpoint is actually to prevent people from 
visiting the hospital for extended periods of time. Some of 
that is the pharmaceutical regiment, some of it's the 
technology that's in devices that we can now do in doctor's 
offices versus a hospital stay. And I think we lost track of 
that when we had a debate not long ago as it relates to severe 
cuts in home care, which was originally designed to keep people 
out of the hospital. And we're trying to make up for the 
mistakes that we make.
    Let me ask each one of you: Is there anybody that disagrees 
that the FDA currently has the authority to make a 
determination that switches a drug from prescription to over-
the-counter? Is there anybody that feels the authority does not 
exist at FDA today to make that determination?
    Mr. Kingham. Representative Burr, if you mean over the 
objection of the manufacturer through the procedure that has 
been suggested that's I think one of the instigation for this 
issue to be discussed here today, yes, I think there are a 
couple of very serious problems that are presented by that.
    Mr. Burr. I understand that in your testimony, I'm sorry I 
missed it but I have familiarized myself with it, that you 
don't feel that there should be a decision to move over-the-
counter based upon the pharmaceutical company's objection. My 
question is technical though. Does the FDA have the authority 
to make that determination in your opinion?
    Mr. Kingham. I think that in the procedure that is under 
discussion some very serious legal questions are raised by the 
proposed procedure that's intended to be used. The first has to 
do with whether due process would be accorded through the 
rulemaking procedure that is proposed in the context of the 
recent request. I don't think that it would be, and I don't 
think that provisions of the statute requiring a hearing would 
be satisfied as well.
    Perhaps even more important because it's fundamental to the 
outcome is that the court decisions relating to FDA rulemakings 
have held that the agency when it engages in a rulemaking 
process that is based on science, must disclose the scientific 
basis, the full scientific basis for the decisions that it's 
making, otherwise its rulemaking can be set aside.
    The problem here is that the key data or certainly some of 
the key data relating to a switch are proprietary data that are 
trade secret or confidential. They either belong to a drug 
manufacturer and cannot be disclosed on the record without a 
violation of the Trade Secrets Act, the Federal Food, Drug and 
Cosmetic Act and the agency's own regulation.
    So it's a very difficult question in the situation that has 
been represented here. It's never arisen before. We've never 
had to deal with it because there's always been a collaborative 
process with the manufacturers and the FDA.
    Mr. Burr. I certainly raised that question earlier with Dr. 
Woodcock, and I think she, with the advise of others from the 
FDA felt that there was a protection that they had to adhere to 
on trade secrets. I take from yours the protection of those 
trade secrets would preclude them from living up to all of the 
hurdles that they had to overcome?
    Mr. Kingham. I believe that's right.
    Mr. Burr. I'm sure that we'll get some additional legal 
interpretation from the FDA on their views, but I appreciate 
your personal views.
    Yes, sir?
    Mr. Golenski. Mr. Burr, if you meant asking all of us the 
question, RxHealthValue gave a statement to the FDA expert 
panel regarding the safety issue of OTC transfer of the 
antihistamines on behalf of WellPoint, and we did that for two 
reasons. One was we felt that the only way these kinds of 
questions that you're essentially raising are going to be asked 
given the unprecedented nature of the request would be to 
actually do it. And we supported WellPoint's right, and in fact 
supported them aggressively to bring the question.
    And second, a content issue and I think it's a question 
that your colleague Mr. Bryant asked earlier in the morning of 
Dr. Woodcock but I don't think was specifically addressed, and 
that is we were concerned that much of the safety data that you 
would need to have for an OTC switch in fact exhibits in the 
world and that unfortunately is not within the boundaries of 
the United States, but these medications specifically have been 
over-the-counter for years in Europe and we felt that the 
quality of the scientific work that was done in that part of 
the world was adequate and we felt it should be used, and we 
said that in our statement to the FDA panel.
    Mr. Bilirakis. Would the gentleman yield briefly?
    Mr. Burr. Be happy to yield.
    Mr. Bilirakis. Even though his time has expired.
    Mr. Burr. I don't think the Chair has started the clock.
    Mr. Bilirakis. Mr. Kingham, what's the remedy? I asked this 
question of Dr. Woodcock. What is the remedy for the 
manufacturer in the case where a unilateral decision has been 
made to go OTC without the approval of the manufacturer?
    Mr. Kingham. Well, it's very unclear because the system, 
despite what's been said, is not really set up with that in 
mind and it hasn't happened, so it isn't clear what would play 
out if in fact the FDA went forward and tried to compel a 
switch. It would be an unprecedented act.
    There are a variety of possible ways in which the issue 
could be raised. It could be raised in the context that the 
change could not be made, except through a full evidentiary 
hearing process under section 505 of the Federal Food, Drug and 
Cosmetic Act. Another possibility is that a suit could be 
brought to challenge the regulation itself, either----
    Mr. Bilirakis. Well, the suit is always available.
    Mr. Kingham. That's right.
    Mr. Bilirakis. I mean within the FDA itself.
    Mr. Kingham. Within the FDA, of course, there's an 
administrative review process. There's an appellate process 
within the Center for Drugs which Dr. Woodcock mentioned in her 
testimony earlier, and one can go above that up to the 
Commissioner and that sort of thing.
    But one question here is if there were simple notice and 
comment rulemaking of the type that some people are advocating, 
there wouldn't be a hearing in the usual sense of the word. 
There would be an exchange of paper, but no hearing in which 
people would be given an opportunity to confront the other 
side's evidence of witnesses in the way that we ordinarily 
understand.
    Mr. Bilirakis. All right. I'm just going to take the 
purgative if I may. I'm sure Mr. Brown won't mind.
    Dr. Glover, you're an M.D. You're also an attorney. J.D. 
and M.D.
    Mr. Glover. Yes.
    Mr. Bilirakis. You have heard the testimony of Dr. Woodcock 
earlier on the direct substitution the bio-equivalency, 
etcetera, of generic drugs. Do you agree?
    Mr. Glover. There are----
    Mr. Bilirakis. And I might add, Dr. Delgado made the 
comment before I came in, but as I understand it for certain 
ethnic groups they may not work. Maybe she was speculating? I 
don't know whether there's any----
    Ms. Delgado. No, I'm not speculating.
    Mr. Bilirakis. No speculation. It's based on facts?
    Ms. Delgado. Yes.
    Mr. Bilirakis. All right. Go ahead.
    Mr. Glover. Mr. Chairman, I think that therefore there are 
two issues here. The difference in ethnic groups is something 
that we've known about for many, many years. We know, for 
example, that certain populations have a different degree of 
activity, the enzymes in their liver where many drugs are 
cleared, certain populations are more susceptible to the 
effects of certain drugs that act on certain receptors or vice 
versa and things of that nature. And as a result for certain 
drugs you will want to test that drug, whether it's pioneer or 
generic, in a particular population where it might be used and 
to make sure that it is effective or not toxic in each of those 
various populations. And we also see this played out on the 
international scene where in certain foreign countries, 
particularly Japan comes to mind, where many drugs that might 
be on the market here need to be separately tested on the 
Japanese population to make sure that there are no unusual 
metabolic properties of the Japanese population that may have a 
difference in the drug.
    You then take that to the next issue, which is what is the 
impact of that or anything else on bio-equivalence for 
pharmaceutical products.
    With respect to generics, Dr. Woodcock focused on the idea 
that generics were to be directly substitutable. We started, I 
believe her first comment was that they were identical and then 
got to a position with some questioning that there was indeed 
some variation that would exist between the generic and the 
pioneer. And indeed as she testified, between pioneer products 
from batch-to-batch.
    We believe, however, that the variation that FDA allows is 
substantially wide. That is, FDA permits a variation of as much 
as plus or minus 20 percent of the bio availability of the 
pioneer drugs----
    Mr. Bilirakis. Is that enough of a safety factor to cover 
their concerns?
    Mr. Glover. The plus or minus 20 percent is a very large 
factor in the view of the pioneer companies. Moreover, even to 
the extent that we could get comfortable with a 20 percent 
variation with respect to a generic, with respect to the 
pioneer, that then allows for a possible 40 percent 
differentiation between one generic versus another generic.
    As you very well know if you have any experience in getting 
generic drug products filled at the pharmacy, you can go in 1 
week and get generic drug A and the next week generic drug B by 
a different manufacturer, both generic to the same pioneer 
product. But with respect to each other they could be on either 
side of the variation. And so it's that degree of variability I 
believe is substantially troublesome and there are particular 
products in the marketplace where that kind of variation may 
very well cause a difference in a toxicity or certainly a 
difference in efficacy in the population.
    Mr. Bilirakis. I didn't expect all of that.
    Mr. Brown. Mr. Chairman, since we begun a new debate here, 
I think it's only fair that's Mr. Downey----
    Mr. Bilirakis. You're reading my mind. I had planned to do 
that, yes.
    Mr. Brown. Mr. Chairman, I've been----
    Mr. Bilirakis. We don't always agree----
    Mr. Brown. I've sat next to you so long I can read your 
mind.
    Mr. Bilirakis. I guess that's the case.
    Mr. Brown. I was just saving you the effort. Thank you.
    Mr. Downey. Well, we do agree with Dr. Woodcock and I would 
strongly disagree with Dr. Glover on this point. The whole 
structure of the FDA approval process is to have pioneer 
products proven safe and efficacious. And then the generic 
product to be proved same as the brand.
    In the case of the approval process we have all sorts of 
requirements. We have to do the same chemical warranty, the 
same mode of administration, we have to prove that the active 
ingredients absorb the same rate and at the same extent as the 
brand product. And we do that in this context of the same 
standards that the brand products use to take the products they 
use in their clinical studies to the marketplace. They also do 
bio-equivalence studies to show what they're actually going to 
market is bio-equivalent to what they actually use in their 
chemical studies. So it's the same set of standards applying 
both to the brand industry providing that their products are 
the same as it is to us proving we're the same as the brand.
    So, we agree 100 percent with Dr. Woodcock. And, in fact, I 
think her testimony forms the basis that we ought to mandate 
generic substitution in Federal programs and ought to support 
Congressman Pallone's bill to preempt all the State 
requirements that don't recognize these very rigorous standards 
imposed by the FDA.
    Mr. Bilirakis. I had hoped that this hearing would be sort 
of the unanimity in terms of the efficacy of generics.
    I'm going to have to cut it off somewhere. Mr. Geiser has a 
couple of charts he's requesting we show.
    Dr. Delgado very briefly and Mr. Golenski very briefly.
    Mr. Golenski. Okay.
    Ms. Delgado. All right. I'm a clinical psychologist also in 
private practice licensed in the District. I work with an 
internist. My specialty is patients who have depression. And I 
can tell you that when people talk about therapeutic 
substitution there's a wide range. And that those decisions 
need to be made.
    I don't make them. I work with someone who prescribes and 
sees patients and does that. And he works with the patient to 
do that. And I'm very concerned about creating a system where 
everyone says cheaper is better. Cheaper is not better. Cheaper 
may be better, but let that be based on the individual patient 
and their provider.
    And as for cost, just like we like to have seat belts and 
that was an added cost for the consumer, it did save lives. I 
think we have to be very careful about just focusing on cost.
    Mr. Bilirakis. If the provider were to prescribe a generic, 
that's the provider doing it, right?
    Ms. Delgado. But it didn't work. Then they should have the 
ability to give the patient something else. What happens is 
when Congress says this is how we're going to do and this is 
what we're going to pay, all those other drugs get taken off 
the list and you can't give them to patients. And I can tell 
you, I treat people with depression. Some of them do well with 
one, some with another and you have to change until you find 
the right medicine for the person.
    And it's just inconceivable to me to put that decision away 
from the specific patient and provider. That's not the way--and 
formularies. I mean----
    Mr. Bilirakis. So what you're saying is when we do the 
prescription drug for seniors among the Medicare Act, that we 
should take all that into consideration?
    Ms. Delgado. Especially since we know since it was only 2 
years ago that FDA said companies had to start keeping records 
on people over 75 when they were doing their drug trials. Since 
most people--the fastest growing segment of the population is 
people over 80 we need to know.
    Mr. Bilirakis. Isn't what you're saying and what Dr. Glover 
said also applicable to brand name drugs?
    Ms. Delgado. Sure.
    Mr. Bilirakis. So it's not just generics, is it?
    Ms. Delgado. No, my thing is----
    Mr. Bilirakis. It might react----
    Ms. Delgado. My thing is the decision is between the 
patient and provider based on effectiveness. If you'll notice 
in the language when we talked about generics is we want the 
outcome to the patient to be the same. Not that it's the same 
absorption rate, that's good. That's not enough. If it's 
absorbed the same, but the reaction to the patient is not the 
same, that's what I'm concerned about.
    Mr. Bilirakis. Mr. Golenski, very briefly do you have 
anything you wanted to add?
    Mr. Golenski. Yes, quite specifically to that, Mr. 
Chairman. RxHealthValue strongly endorsed the Schumer-McCain 
and Brown-Emerson Bills. And the reason we did that is because 
we believe that cheaper is not better; cheaper is the same. And 
we realized that therapeutic and bio-equivalence is determined 
by the FDA. In addition to that, we have memberships 
representing 75 health plans in the United States. Some of them 
are nonprofit health plans. We have two large pharmacy benefit 
management organizations. And they all have generic 
substitution programs aggressively in place. We have no 
evidence of negative outcomes to the patients in generic 
substitution.
    Mr. Burr. Mr. Chairman----
    Mr. Golenski. But the reason we endorsed those bills is 
because we believe cheaper isn't----
    Mr. Bilirakis. But if there were evidence, you would like 
to know that a substitute would be available?
    Mr. Golenski. Well, we also aggressively support, of 
course, in all of these organizations that the physician and 
the patient are the people who make the determination of which 
medication the patient should be taking. But we'd like to have 
the generic available to the patient.
    Mr. Bilirakis. Mr. Burr?
    Mr. Burr. Mr. Chairman, I want to break the tie that you 
Mr. Brown had. Everybody here is right, but the reality is that 
we asked the FDA to be the gold standard for the approval 
process of pharmaceuticals, generics, medical devices in this 
country. And what we have done is we have created an atmosphere 
where it's tough for them to do their job because there's all 
sorts of legal attacks on different pieces. And it causes an 
agency like the FDA to sit back and look for an arbitrator or 
for the courts to make determinations. Unfortunately, the 
patient's the one that loses. Even though we're hearing 
different slices about where they can benefit and where they 
lose, and the reality is that if you want to maintain a gold 
standard--and I don't think that there's anybody here that's 
saying let's lower the bar. That's one of the reasons we can't 
harmonize our standards with the European Union. We can't do it 
around the world. Because we won't accept what they're willing 
to accept. We won't.
    Mr. Golenski, we've been trying to do it for 6 years now. 
And the reality is that there's not too many people in America 
that want to adopt the standards that the Italians use, which 
is they use model because all members.
    If we're going to maintain this gold standard, then the 
question is how do we make this system function? We were 
briefly on Waxman-Hatch Act. From a policy standpoint it is not 
perfect. It was not a policy document. It was political 
document. It's where different components of the industry gave 
in the waning hours up something, one got something, somebody 
gave up something, and it was their recommendation stay away 
from this.
    It works pretty good right now. But when you look at it 
from a policy standpoint, it's certainly not perfect.
    And I would only suggest to all of us that where we've got 
something to contribute that we think maintains the gold 
standard and presents a better option for patients across the 
country, present it. If it doesn't, then understand that we're 
not necessarily here to change the functions of the FDA. We had 
that opportunity in 1997. It was the FDA Modernization Act. We 
choose to maintain the standard, and I don't think there's 
willingness on the part of members to go back through and to 
change that standard.
    I thank the chairman for the opportunity to editorialize. 
Let's see whether we can get a second set of questions.
    Mr. Bilirakis. Mr. Geiser, I want to be fair. You can 
devote an all day hearing to each one of these subjects. We've 
crammed three in here. And we've got to try to limit, 
obviously, the gist of the issues. What we wanted to do in the 
case of the OTC was to try to determine whether in fact, as you 
heard, whether FDA has the authority and if they do have the 
authority, should they retain the authority to do it on a 
unilateral basis.
    If you have charts toward that end, we would be glad to 
receive them. I would hope that it doesn't take much of an 
explanation. Are they so difficult to be able to understand 
that you'd have to explain them, because I don't want to delay 
this hearing much longer.
    Mr. Geiser. I think it can be explained in very, very short 
order, Mr. Chairman.
    Mr. Bilirakis. Short order means what?
    Mr. Geiser. In 1 minute.
    Mr. Bilirakis. One minute. And you would explain those?
    Mr. Geiser. Yes, I will do that.
    Mr. Bilirakis. If there's no objection, let's do that.
    Mr. Geiser. The two charts speak to this question of access 
to care and to make it clear as the committee is considering 
this topic to inform the committee's consideration as to what 
we believe the outcome of the OTC switch would be.
    This chart demonstrates, basically, the monthly cost of OTC 
products. Claritin OTC in the UK and Canada, and the current 
monthly cost on a prescription basis here in the United States.
    The second chart demonstrates that we believe, and we 
cannot be certain of this, but if the OTC switch is granted and 
the drugs are marketed over-the-counter that these second-
generation antihistamines will be offered at substantially 
monthly cost than is currently the case, that in fact that cost 
in addition to benefiting the uninsured and seniors or the 
people that are not covered, will in fact result in lower out-
of-pocket cost for the insured.
    We've shown here that our blended brand drug co-pay is 
about $17, this is just a blended average of our health plans 
everywhere. And for a physician office visit about $17 if you 
need a physician office visit to secure the prescription. So 
we're looking at even an insured member incurring substantially 
more out-of-pocket cost in comparison to what we anticipate a 
post-OTC switch price of these drugs will be.
    Mr. Bilirakis. Do you have those charts in the form that we 
can put them into the record?
    Mr. Geiser. They are attached to my statement.
    Mr. Bilirakis. They are attached. Without objection, it 
will be made a part of the record Mr. Brown.
    Mr. Brown. Well, without prolonging the debate, I will 
speak even shorter than Mr. Geiser. And I just wanted to 
comment on something Dr. Delgado said. She over and over from 
her written testimony through several questions talked about 
quality and not worrying so much about price. And I agree with 
that. I think we all do. But, you know, this is a Congress 
unwilling to spend money on prescription benefit. It's a 
Congress unwilling to spend money on universal coverage. It 
may, I hope not, but be a Congress unwilling to spend money on 
the speeding up the approval process for ANDA. But a Congress 
that gives tax cuts to the richest people in the country----
    Mr. Burr. I take back those nice things I said about your 
earlier.
    Mr. Brown. But, you know, the fact is that overshadows, 
that's an umbrella on everything we do here; on universal 
coverage, on prescription drug prices. on prescription drug 
coverage. And I would hope that you would use the National 
Alliance for Hispanic Health to push for that, because we can't 
have the quality of healthcare that you keep talking about if 
we're unwilling to pay for it.
    Ms. Delgado. I agree, but part of it is when you talk about 
costs you have to talk about the cost saving of keeping 
somebody out of the hospital.
    Mr. Brown. Of course you do.
    Ms. Delgado. That's also the other side of it.
    Mr. Brown. We don't think in those terms----
    Ms. Delgado. I'm with you. I'm here. Don't worry.
    Mr. Bilirakis. Dr. Delgado, all legislation we have up here 
is costed by the Congressional Budget Office.
    Ms. Delgado. I understand.
    Mr. Bilirakis. And you know what? They do not give us ever 
any credit for preventative healthcare or the keeping them out 
of the hospital unfortunately.
    Ms. Delgado. Right.
    Mr. Bilirakis. And that makes our job so much more 
difficult.
    Ms. Delgado. But we're with you.
    Mr. Brown. Wrap it up, Mr. Chairman.
    Mr. Bilirakis. Yes. We customarily ask if you would be 
receptive to, I haven't heard anybody ever say no. If you said 
no, I'm not sure what we could do about it. But we would like 
to furnish you with written questions and ask you for your 
written response within a matter of just a few days or so. We 
appreciate it.
    Thanks so much for your patience. Thanks for sitting here 
through a couple of votes. You've been an awful lot of help.
    [Whereupon, at 2:15 p.m. the hearing was adjourned.]
    [Additional material submitted for the record follows:]
  Prepared Statement of Allergy & Asthma Network Mothers of Asthmatics
    As a patient advocate and the founding president of Allergy & 
Asthma Network Mothers of Asthmatics (AANMA), I am writing to oppose 
OTC status of nonsedating antihistamines due to lack of tangible 
evidence that patients can use these medications safely without 
physician diagnosis or guidance. In the absence of such compelling 
data, the FDA should not grant OTC status for nonsedating 
antihistamines.
    For the last four years and with support from more than 100 members 
of Congress, AANMA has conducted an annual Asthma Awareness Day on 
Capitol Hill. We've worked to make members of Congress aware of the 
issues that affect patient lives and to promote patient access to 
improved medications, specialty care, school nurses, and medications 
while on school property.
    Allergies and asthma are increasing at epidemic rates in our 
country and no one knows why. While NIH, EPA, HHS, CDC, AANMA, and 
others work tirelessly to reach underserved populations suffering with 
these conditions, health insurers (companies we pay to insure our 
health) lobby Congress and the FDA to transfer their financial burden 
for these medications to the backs of patients and families.
    If health insurers want to save money, place patient outcomes 
first. Don't whittle away at our benefits. We want to be well at home, 
work, school, and play.
    Take the case of the harried father at CVS whose tiny, glassy-eyed, 
frail daughter coughed relentlessly at his side while he struggled to 
read the packaging of a combination cough and antihistamine medication. 
He looked at me and said, ``You are a mom. What do you give a little 
girl who can't stop coughing?'' I said, ``A trip to the doctor's 
office.''
    The father snapped back, ``I'm not going to give one more dollar to 
those money-grubbing b----,'' then took four different cough 
preparations to the checkout counter.
    Is this father safely using OTC medications? No. Will more choices 
lining the store shelves help? No.
    If nonsedating antihistamines cannot be safely and strategically 
introduced in today's market so that all people can make informed 
purchases, then patients and parents of children with allergies and 
asthma are not ready for OTC nonsedating antihistamines.
    OTC medications have their place on store shelves across America, 
but not without the evidence that patients can safely use them. Drug 
safety and patient use safety are one and the same on the OTC market.
                                 ______
                                 
  Prepared Statement of the National Association of Chain Drug Stores
    The National Association of Chain Drug Stores (NACDS) appreciates 
the opportunity to submit a statement for the record on Federal and 
state policies affecting the availability of generic pharmaceuticals. 
NACDS membership consists of nearly 180 retail chain community pharmacy 
companies that operate over 33,000 retail community pharmacies with 
annual sales totaling over $400 billion. Chain operated community 
retail pharmacies fill over 60 percent of the 3 billion prescriptions 
dispensed annually in the United States.
                   generic drugs save patients money
    Generic pharmaceuticals are a cost-effective way of providing 
prescription drug therapy. Pharmacists in community-based practice 
settings work with patients and physicians to maximize the use of 
lower-cost generics when they are available on the market. The savings 
from using generics are unmistakable. If a generic substitute is not 
available, a pharmacist works with the physician to determine if the 
patient can take a generic version of another drug.
    With billions of dollars in brand name drugs coming off patent over 
the next few years, we believe that it is critical that any new 
Medicare drug benefit have both patient and pharmacy incentives to 
encourage greater generic use. We are concerned, however, about some of 
the tactics being used by brand name companies that may delay the 
availability of many of these lower cost generics, and thus raise costs 
for all prescription drug users.
    According to IMS Health, the average brand-name prescription drug 
price was about $65.29 in 2000, while the average generic prescription 
drug price was about $19.33, less than a third of the brand 
price.1 Because the average cost of a brand name 
prescription has escalated so rapidly over the last 10 years, the gap 
between the average brand name and generic prescription price has 
significantly widened. In 1990, the average gap was about $16.87. In 
2000, that gap had almost tripled, increasing to about $46.
---------------------------------------------------------------------------
    \1\ Data presentation given by IMS in April 2001.
---------------------------------------------------------------------------
    Although more generic drugs are on the market today, the percent of 
all prescriptions being dispensed with low-cost generic drugs has 
remained relatively flat over the last few years, about 42 percent of 
all prescriptions. However, despite this relatively stable trend in the 
dispensing of generic drugs, the share of all generic prescription 
dollars as a percent of total prescription dollars has decreased 
significantly. For example, in 1995, generic drugs accounted for 12.2 
percent of all prescription sales; today, they represent only 7.1 
percent.
                  generic drugs are safe and effective
    In almost all states, a pharmacist can dispense a generic drug, 
unless the physician has specifically stated in his or her own 
handwriting that the brand name pharmaceutical is ``medically 
necessary.'' We encourage and support laws that leave the substitution 
of generic drugs to the professional discretion of the pharmacist.
    However, in some states, generic substitution is prohibited for 
certain drugs, unless the pharmacist expressly obtains the permission 
of the physician, regardless of what the prescription states. Some 
states have passed these laws in response to misrepresentations by 
brand name drug companies regarding the safety of generic versions of 
their drugs. These are so-called ``narrow therapeutic index'' drugs, 
such as Coumadin or Theophylline, where the brand name manufacturer 
argues that the potential for problems for the patient from switching 
from the brand to a generic are so great that only a physician should 
authorize the switch. This obviously reduces the generic substitution 
rate of the drug.
    Policymakers should be aware, however, that the Food and Drug 
Administration (FDA) has compiled a list of every prescription drug 
produced by every manufacturer including all information about safety 
and effectiveness for patients. The FDA exhaustively compared all 
generics to all brands and developed a directory, commonly called the 
``Orange Book,'' available to every pharmacy that lists which drug 
products are truly equivalent. In fact, the FDA Commissioner has said, 
``. . . be assured that if the FDA declares a generic drug to be 
therapeutically equivalent to an innovator drug, the two products will 
provide the same intended clinical effect''.
    The importance of assuring maximum access to generic drugs is 
important for a very simple reason. Savings from generic substitution 
should significantly increase when several high-volume brand name drugs 
come off patent in the next twelve months. According to IMS America, 
brand-name drugs with $8 billion in sales are scheduled to come off 
patent next year, and drugs with about $25 billion in retail sales are 
scheduled to come off patent between the years 2002-2005. Importantly, 
some brand name drugs within the anti-depressant and cholesterol-
lowering therapeutic classes come off patent in the next year.
    The potential for savings from the use of generics in these 
categories is significant, since public and private payors spent 
billions of dollars on anti-depressants and on cholesterol-lowering 
drugs last year.
   community pharmacies dispense more generics than pbms, mail order
    The use of generic drugs varies significantly by the source of 
prescription coverage. For example, generic drugs are used in about 55 
percent of all prescriptions provided by community pharmacies to cash-
paying customers. However, the percentage of generic pharmaceuticals 
used in private third-party plans and PBM coverage programs is much 
lower. In fact, the generic substitution rate for all mail order 
prescriptions is only 32.5 percent, while it is only 44 percent for all 
prescriptions paid by PBM or third-party prescription coverage 
plans.2 Both patients and providers should be given 
incentives to use and dispense generic drugs in any new senior Medicare 
pharmacy benefit. These would include lower generic copays, as well as 
reimbursement incentives to the pharmacy to dispense generic drugs.
---------------------------------------------------------------------------
    \2\ NACDS Analysis of 1996, 1997 MEDS data and NAMCS data. In 
addition, according to Brenda Motheral, Senior Director of Research for 
Express Scripts, generic fill rates are noticeably higher for retail 
than mail, as reported in ``Pharmacy Benefit Design: What We Have 
Learned,'' April 6, 2000.
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    There are many factors that affect the ability of pharmacists to 
dispense generic drugs. These include state pharmacy practice laws; 
incentives used by third party plans to encourage generic use, such as 
lower copays and pharmacy generic dispensing fees; and the rebates paid 
by brand name manufacturers to third party payors, including mail 
order, to dispense brand name drugs rather than lower-cost generics.
    Unfortunately, brand name manufacturer rebates have created 
perverse incentives for third party payors to switch from one expensive 
brand name drug, for which the plan does not receive a rebate, to a 
brand name drug for which they receive a rebate. The plan should be 
switching to a lower-cost generic. However, because generic 
manufacturers do not pay rebates and these payors make much of their 
money from these rebates, there is significant over-utilization of 
brand name drugs and under-utilization of generic drugs.
   brand name manufacturers' tactics limit generic drug availability
    Ultimately, a generic cannot be used unless it is available on the 
market. We are very concerned that some brand name manufacturers are 
employing multiple schemes to delay the availability of generic 
versions of their drugs, contributing unnecessarily to health care 
costs, increased spending for Medicaid, private prescription drug 
programs, and millions of seniors and uninsured individuals.
    NACDS believes that brand name manufacturers should have 
appropriate incentives to research and develop new pharmaceuticals, and 
have sufficient marketing exclusivity time to allow them to recoup 
their investment with an appropriate profit. We do not believe, 
however, that many of these schemes are defensible, and we believe 
appropriate action should be taken by policymakers to correct these 
abuses.
    For example, we are concerned with the abuses that have developed 
surrounding the awarding of the 180-day exclusivity provision for the 
generic company that successfully challenges a brand name patent; the 
practice of some brand name companies to ``late list'' patents in the 
Orange Book, resulting in a 30-month stay of the generic drug approval; 
and the filing of frivolous ``citizens petitions'' with the FDA, which 
slows down generic drug approval. These citizen petitions can delay 
generic availability for six to eight months, and the overwhelming 
majority of them are rejected by the FDA.3
---------------------------------------------------------------------------
    \3\ Wall Street Journal, November 1998.
---------------------------------------------------------------------------
    For these reasons, we support H.R. 1862, and its companion bill 
S.812, the ``Greater Access to Affordable Pharmaceuticals Act,'' also 
known as the Emerson/Brown and McCain/Schumer bills. We look forward to 
working toward its enactment.
    We also support the FTC's investigation into the extent to which 
brand manufacturers have paid generic manufacturers not to market 
competing generic drug products. The FTC also plans to investigate 
brand manufacturers' abusive patent listings and patent litigation, 
which stall generic competition, whether or not the listed patents are 
valid.
    After the FTC completes its study, we recommend implementation of a 
four-stage strategy with the goal of preventing such anticompetitive 
practices in the future.

 First, the FTC should immediately halt all anticompetitive 
        practices it discovers.
 Second, the FTC should issue new rules or guidances preventing 
        such anticompetitive arrangements in the future.
 Third, the FTC should work closely with the Food and Drug 
        Administration to revise the FDA's policies regarding citizens' 
        petitions, the 180-day exclusivity rule and the 30-month stay 
        rule.
 Fourth, the FTC should recommend revisions to the relevant 
        provisions of the Hatch-Waxman Act to permanently eliminate the 
        ability of brand and generic drug manufacturers to conspire to 
        restrain competition.
    We are also concerned with certain brand-name manufacturer 
``evergreening'' strategies, which, when combined with the explosion in 
direct-to-consumer (DTC) advertising, are further minimizing the cost 
savings impact of generics, even if they are successful at reaching the 
marketplace.
    For example, before a patent expires on a brand name drug, a 
manufacturer will seek to switch the patient to a slightly-different 
``next generation'' of the brand name drug, or seek to move the patient 
over to a long-acting or single-day dosage of the drug, making it 
difficult for the generic to penetrate the market. This process has 
been made easier by DTC advertising, which encourages patients to ask 
their physicians about new drug therapies. While we believe that some 
patients would logically benefit from the new generation drug, or the 
new daily dosage form, it is highly likely that the patient could use 
the generic version of the brand name drug and experience the same 
medical results at a much lower cost.
    We are also concerned about a new ``evergreening'' tactic in which 
a brand name company seeks a different ``use patent'' for a drug whose 
original patent is about to expire, and sells the drug under a 
different name and for a different indication. Even though the original 
product may be off patent, the pharmacist cannot substitute the generic 
version of the off patent brand for the identical new patented drug 
because of the new use patent that the manufacturer was successful in 
obtaining. Take, for example, Sarafem, which contains the same active 
ingredient as the popular anti-depressant Prozac, but which was 
approved for the new use indication of premenstrual dysphoric disorder 
(PMDD).
    Finally, we understand that the Congress will be reauthorizing the 
pediatric exclusivity provisions of the FDAMA this year. NACDS fully 
supports the testing of drugs in children, and believes that it is 
important that many older, off patent drugs, which are commonly used in 
children today, should be among those tested.
    However, we question whether the six-month additional exclusivity 
afforded to some block buster drugs is an appropriate public policy 
incentive to encourage brand name companies to do these studies. 
Pharmaceutical companies should be rewarded for doing these studies, 
but it may be the case that the hundreds of millions of dollars in 
additional revenue generated for these manufacturers in brand name drug 
sales are skewed in favor of drug manufacturers rather than consumers. 
The value of this exclusivity should be directly tied to the value and 
usefulness of the pediatric studies. Moreover, this additional six 
months gives manufacturers additional time to execute their various 
``evergreening'' strategies, which further delays generic entry and 
erodes generic penetration.
                               conclusion
    NACDS strongly urges Congress to examine current laws and 
regulations that determine the market availability of generic 
pharmaceuticals. It is critical for life and health that brand name 
manufacturers are given appropriate incentives to research and develop 
new drugs and to study the effects of drugs in children. On the other 
hand, it is also necessary to assure that generic pharmaceuticals know 
the ``rules of the road'' without being hit with every detour and delay 
that a brand name manufacturer can use to limit the availability of 
generic drugs. We think that the current market is out of balance, and 
generic availability and the savings to consumers is the primary 
casualty of this brand name drug bias.
    We believe that Congress should act soon to rectify this situation. 
Undoubtedly, increasing the availability of generic drugs will help 
make a new Medicare senior pharmacy benefit more affordable, as well as 
help struggling state Medicaid programs control their drug spending. We 
also believe that this will help uninsured Americans better obtain 
their medications and slow the rate of growth in private sector drug 
programs, which have also been experiencing double-digit rates of 
growth in their pharmaceutical budgets. We appreciate the opportunity 
to submit this statement for the record. Thank you.
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