Congressional Record, Volume 148 Issue 103 (Thursday, July 25, 2002)

[Congressional Record Volume 148, Number 103 (Thursday, July 25, 2002)]
[Senate]
[Pages S7342-S7350]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

GREATER ACCESS TO PHARMACEUTICALS ACT

Mr. HATCH. Mr. President, I rise to speak on the pending legislation,
S. 812, the Greater Access to Pharmaceuticals Act. Even if I had major
differences of opinion on the substance of this legislation, I commend
Senators McCain and Schumer, Kennedy and Edwards for their efforts in
this area.
I especially wish to recognize the efforts of Senators Kennedy,
Edwards, and Collins for their work, which was almost a complete
rewriting of the McCain-Schumer bill. Let me also hasten to commend
Senators Gregg and Frist for working to improve the bill that emerged
from the HELP Committee and for their leadership during the debate.
Mr. President, last week, I provided a brief summary of the existing
statute that S. 812 seeks to amend, the Drug Competition and Patent
Term Restoration Act of 1984. I happen to know something about this
law, which is commonly referred to as the Waxman-Hatch Act, or
alternatively, the Hatch-Waxman Act.
Last week, I gave an overview of my concerns with the HELP Committee
legislation. With those comments in mind, today, I want to delve
further into the details of the HELP Committee re-write of S. 812 the
bill originally introduced by Senators McCain and Schumer.
The central components of S.812 are aimed at rectifying concerns
raised in recent years over two features of the 1984 law: first, the
statutory 30-month stay granted to a pioneer firm's facing legal
challenges to its patents by generic competitors; and, second the 180-
day period of marketing exclusivity awarded to generic drug firms that
successfully challenge a pioneer firm's patents.
During debate on S. 812, there have been a number of comments
indicating that there is a substantial problem with these two
provisions. That may or may not be the case. One great disadvantage of
holding the floor debate at this time is that we do not have the
benefit of an extensive Federal Trade Commission survey of the
pharmaceutical industry that focuses on precisely these two issues that
go to the heart of S. 812 and the substitute adopted by the HELP
Committee. The results of this long-awaited, extensive, industry-wide
FTC survey are expected in a few weeks.
I have stated on numerous occasions that before this body undertakes
a substantial rewrite of provisions central to the Hatch-Waxman Act, we
should have the benefit of the FTC study and its implications.
The Senate could have taken a more prudent course. The Senate could
have waited for the FTC report. We--and by we I specifically include
the Senate Judiciary Committee--could have held hearings on the FTC
study, evaluated the data, and then discussed, debated, and refined the
actual, now barely two-week old, legislative language that is pending
on the floor today.
But this was not possible due to the tactical decision of the
Majority to dispense with the regular order so as to minimize the
politically-inconvenient fact that the Senate Finance Committee would
have most likely have rejected any Democratic Medicare drug proposal in
favor of the Tripartisan approach.
To my great disappointment, although not anyone's great surprise, we
failed to arrive at the 60-vote consensus required to enact a Medicare
drug bill in the Senate. Make no mistake about it. This is a great
failure for the American people because for two years now we have set
aside $300 billion in the federal budget to be spent over 10 years to
provide prescription drug coverage for Medicare beneficiaries.
We have all heard from elderly constituents many of whom live on
limited, fixed-incomes--who have had substantial difficulties in paying
for prescription drugs. Rather than rise to the occasion and make good
on our promise to rectify that situation, and we are letting this
abundant opportunity slip between our fingers.
I am very disappointed with the outcome of the votes Tuesday. It is
my hope that we can find a way to come together on the important issue
of a Medicare drug benefit for our seniors.
At a minimum, we should use the $300 billion already in the budget to
expand drug coverage for those seniors who need the most help. What
we should not do is enact an expensive, government-run scheme that
could bankrupt our country and plunge our economy further into the
abyss when the government usurps what should legitimately be a private-
sector-run benefit.

The collapse of any 60-vote consensus on the Medicare drug benefit
does not show the public the type of bipartisan spirit that voters
across the country say they prefer, in poll after poll after poll.
And so, we move back to the important, if more mundane, matters in S.
812.
One of the real marvels of this debate is that we have finally found
out who the bad guys are in this debate.
It is not the government that has failed to make good on the promise
to provide needy seniors with pharmaceutical coverage.
No, it's the pharmaceutical industry, an industry that is working day
and night to bring us the medicines, the miracle cures that seniors
seek.
I just had no idea that is who was going to be blamed.
This game plan comes right out of the Clintoncare play-book. As you
hear attack after attack on the drug companies, I just want all of you
listening to this debate to know that a similar tactic was employed by
the Democrats when they tried to foist Clintoncare on a very
unreceptive public back in 1993 and 1994.
Here is how David Broder and Haynes Johnson, two highly respected
journalists, described the tactics of the Clinton White House in trying
to pass its too grand health care reform plan:
This quote is from ``The System,'' a book by Haynes Johnson and David

[[Page S7343]]

Broder, two leading political writers in this town, both of whom write
for the Washington Post. Neither of them would be considered, by any
stretch of the imagination, conservative. This is what they had to say
in this book called ``The System,'' talking about the American way of
politics and how health care policy is formed:

In the campaign period, Clinton's political advisors
focused mainly on the message that, for ``the plain folks,
it's greed--greedy hospitals, greedy doctors, greedy
insurance companies. It was an us versus them issue, which
Clinton was extremely good at exploiting.

This is the second quote:

Clinton's political consultants--Carville, Begala,
Grunwald, Greenberg--all thought ``there had to be
villains.'' At that point, the insurance companies and the
pharmaceutical companies became the enemy.

As you can see, here are two liberal political writers who summarized
the Clinton health plan.
Villains . . . enemies all this sounds familiar in this debate. So, I
will stipulate for the purpose of this debate that the pharmaceutical
industry is the designated villain.
It strikes me as curious at least that the sector of the economy that
plows back the highest portion of its revenues back into research--and
research on life-threatening diseases no less--is treated with such
disdain, at times even contempt, on the floor of the Senate.
Mr. President, from what has been said on the floor of the Senate you
would think that this industry is trying to cause cancer, not trying to
find cures.
I note that Senator Kennedy has suggested our nation's biomedical
research establishment has not really made much progress over the past
few decades in terms of developing new drugs. I think the facts speak
otherwise.
For example, consider the array of medicines that have been developed
to treat HIV infection and the complications of AIDS. Through the
unique public/private sector partnership that comprises the U.S.
biomedical research enterprise, AIDS is being transformed from an
invariably fatal disease into a chronic condition that we are so
hopeful one day will have a cure.
These advances do not come easily or on the cheap. I would note the
exciting reports from the recent International AIDS meeting in
Barcelona concerning the new class of AIDS medications represented by
the new drug, T-20. Unlike many of the current anti-retroviral
medications like AZT that seek to inhibit the replication of the HIV
virus, T-20 attempts to block entry of the virus into healthy cells.
Here is what one press account has said about this still unapproved,
but highly promising drug:

But it takes 106 steps more than 10 times the usual number
of chemical reactions to make the lengthy peptide, making
production a serious factor in its price. Roche refurbished a
plant in Boulder, Colorado, just to make T-20. Almost 100,000
pounds of specialized raw materials are needed to make a
little more than 2,200 pounds of the drug. In all, Roche has
invested $490 million in T-20's development and
manufacturing.

Let us not be too quick to characterize as villains and enemies those
scientists and companies who are working every day to overcome dread
diseases like AIDS. Think of the imagination and expertise required to
design all 106 chemical reaction required to make T-20. How many times
must they have failed to come up with the correct chemical pathway?
I might add, as Senator Frist pointed out on the floor last week,
that infectious disease experts like Dr. Tony Fauci at NIH have said
that despite the substantial promise of T-20, there is still more work
to be done on this drug. Specifically, it is imperative to develop a
tablet form of this currently intravenous preparation if we will be
able to effectively use the product in the Third World.
Some in this debate have minimized the importance of product
formulation patents and have suggested that such patents should not be
eligible for the 30-month stay. But public health experts such as Dr.
Anthony Fauci one of the leading experts in the world, are telling us
that the formulation of drugs like T-20 is critical. Who is to say that
the steps in addition to the 106 steps already painstakingly identified
to make the IV preparation necessary to make a tablet form of the drug
are not worthy of the same protection afforded other pharmaceutical
patents since 1984?
And if it turns out that such a formulation patent issues more than
30-days after FDA can one-day approve a new drug application for a
tablet form of T-20, why should this patent be given less procedural
protection than other related patents? But this differential treatment
of patents is exactly what could occur if we adopt the pending
legislation.
Mr. President, the Hatch-Waxman Act has been called one of the most
important consumer bills in history. It has helped save consumers, by
the Congressional Budget Office reckoning, $8 billion to $10 billion
every year since 1984. It created the modern generic drug industry by
creating this delicate balance between the pioneer research companies,
and the generic companies that could readily copy drugs under Hatch-
Waxman. The scientific work that had taken R & D firms up to 15 years,
$800 million and at least 5,000 to 6,000 failed drug companies for each
successful new drug could be used by general firms under the 1984 law.
I might add, the Hatch-Waxman Act has brought the generic industry
from little over 15 percent of the marketplace to 47 percent as we
speak, and it is going up all the time. That is what we thought should
happen.
We are at $490 million and still counting for this still unapproved
promising new AIDS drug, T-20.
Remarkable progress in the field of drug development has been made
over the past 18 years since Waxman-Hatch was adopted. We have seen
enormous strides in the treatment of heart disease, diabetes,
arthritis, Alzheimer's and many others, including the 200 new drugs
that have been approved to treat lower prevalence, so-called orphan
diseases another bill that I helped author. I am proud to have been an
author of the Orphan Drug Act that has given hope to so many American
families.
If our Nation is going to develop diagnostic tests, treatments, and
vaccines to prevent and counter attacks of bioterrorism and potential
chemical or even nuclear terrorism, just whom do you think is going to
develop these products? I will tell you who. It will be those
``villains'' in the pharmaceutical industry, in partnership with
government and academic researchers, unless we hamper their ability to
do so, if we do not watch ourselves carefully on this Legislation.
At some point we must put aside this one-dimensional, simplistic
vilification of the pharmaceutical industry and examine more closely
the actual substance of the pending legislation.
Are the PhRMA companies always right? No, they are not, and neither
are the generic companies always right. Hatch-Waxman created a delicate
balance so they were competitive against each other, and it has worked
very well.
It is my strong preference to conduct the debate over amending the
Hatch-Waxman Act with our eyes focused on the policies, not the
politics.
As I said last week, the pending legislation, S. 812, addresses
important and complex issues of patent law, civil justice reform and
antitrust policy. A strong case could be made that Senate consideration
of this bill would be improved if the Judiciary Committee were given
the opportunity to study the legislation, review the Federal Trade
Commission report, and make its voice heard in this debate. It seems
unlikely that anything resembling this process will unfold given the
decision to rush the HELP Committee patent, antitrust, civil justice
reform bill to the floor of the Senate.
As a threshold matter, it seems to me that before we adopt S. 812, we
should be certain that this bill is consistent with the longstanding
goals of the statute S. 812 seeks to amend, the Drug Price Competition
and Patent Term Restoration Act.
Let me remind my colleagues, the goals of this law, passed in 1984,
are twofold:
First, to create a regulatory pathway that allows the American public
to gain access to more affordable generic drugs; and,
Second, to create incentives for manufacturers of pioneer drug
products to see that the American public has access to the latest,
cutting-edge medicines.
As I described last week, the 1984 law is a carefully balanced
statute and contains features designed to accomplish

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these two somewhat conflicting goals. This tension is inherent because
of the competing nature of the desire, on one hand, to develop
breakthrough drugs and, on the other hand, to make available generic
copies of these pioneer products.
As legislation is crafted to address the problems that have arisen up
in recent years with respect to the Waxman-Hatch law, we must be
careful not to devise a remedy that upsets the delicate balance of the
law.
I am concerned that the manner in which the HELP Committee substitute
tries to fix the two most widely cited shortcomings of the 1984 law
may, in fact, disturb the balance of the statute by, in some areas,
overcorrecting and, in other areas, undercorrecting for the observed
problems.
Specifically, while the manner in which the Edwards-Collins HELP
Committee substitute addresses the 30-month stay issue represents a
major improvement over McCain-Schumer bill, I am afraid though, the 30-
month stay language represents a case of overcorrection.
Last Thursday, I gave a short summary of the key provisions of the
Hatch-Waxman Act. It only took me 1 hour and 32 minutes. After
providing this background and context, I explained why I thought that
the provisions of the pending legislation relating to patent rights and
the 30-month stay went too far. Let me reiterate my concerns with the
30-month stay.
As has been stated by many during this debate, a pioneer drug patent
holder, whose patents are under challenge by a generic drug
manufacturer, is accorded an automatic 30-month stay. This was not some
giveaway to the innovator pharmaceutical industry. We inserted this
mechanism to protect the intellectual property of companies that
develop patented medications, companies, I might add, that were going
to be afforded less intellectual property protections than any other
industry as part of the 1984 law. We knowingly added this provision
because we wanted to give them a fair opportunity to defend their
patents. We know that patent litigation is itself a risky endeavor with
the federal circuit court overturning about 40 percent of the trial
court decisions in some areas of patent law.
The public policy purpose for this stay is to allow time for the
courts to determine the status of validity of drug patents and/or to
decide whether valid patents are, or are not, infringed by a generic
drug challenger.
That was the intent of the law. Many believe--and I share that view--
that the 30-month stay provision has come to present problems in two
areas: First, later issued patents that trigger last minute 30-month
stays; and, second, multiple uses of the 30-month stay provision in a
consecutive, over-lapping manner that work to bar generic competition
for as long as the litigation can be made to drag on by lawyers who are
paid by the hour.
Some in this debate have characterized that both of these problems
are at epidemic proportions. While I think there is evidence that
problems have occurred and it is important that we work to modify the
law so that the 30-month stay can not be misused in the next few years
when so many blockbuster drugs come off-patent we should all take a
close look at the FTC report before we conclude that as a general
matter the entire research-based pharmaceutical industry has
systematically abused the 30-month stay. That is just a speculation at
this point until we see all the data.
I will be very interested in what the FTC reports on a number of
issues--the frequency of use of multiple 30-month stays; stays stemming
from late issued patents; the outcome of litigation on the merits when
such multiple stays have been employed; and 11th-hour stays exercised
due to late-issued patents.
It seems to me that we should be highly skeptical whenever a patent
is listed in the official FDA records, called the Orange Book, years
after the FDA approved the drug. One would have to think that all key
patents would have been at least applied for prior to the end of the
lengthy FDA review.
We all know of the now infamous case of the drug, Buspar. An attempt
was made to take advantage of the 30-month stay by listing in the
Orange Book a new patent of the metabolite form of the active
ingredient of the drug literally in the last day before the original
patents were set to expire. A Federal district court stepped in to
limit the stay to four months, not 30-months. The appellate court
found, however, that this forced de-listing of the patent was improper.
My opinion is that Congress, after getting the better understanding
of the facts that the FTC report can provide, should address the
consecutive stay and last-minute stay problems.
From what I know today, I am not prepared to conclude that the
Edwards-Collins substitute is a measured solution to the cited
problems. The bill that passed the HELP Committee and is pending on the
floor would limit the 30-month stay to those patents issued within 30-
days of FDA approval of the drug. The pending legislation contains
major improvements over substantial elements of the McCain-Schumer
bill, such as the language that would have completely eliminated the
30-month stay in favor of a system that required case-by-case
application of injunctive relief. It is also better than the language
the HELP Committee Chairman Kennedy circulated briefly before the mark-
up that would have limited to 30-month stay to certain types of
patents.
As I laid out in detail last Thursday, given the facts available at
this time, I think a better policy may be to permit one, and only one,
30-month stay to apply to all patents issued and listed with FDA prior
to the time a particular generic drug application is filed with the
agency, which cannot occur under the law until at least four years have
elapsed in the case of new chemical entities. At a minimum, I do not
see what justification exists to differentiate, for the purpose of the
30-month stay, patents issued prior to four years after the FDA first
approves a drug.
I would also add that in most European nations and in Japan, it is my
understanding that the law provides a 10-year period of data
exclusivity--independent of patent term before a generic copy may be
approved for marketing. The public policy behind these periods of data
exclusivity is to recognize the fact that in approving generic drugs,
the government regulatory agency is relying upon the extensive,
expensive--and prior to enactment of Hatch-Waxman, generally
proprietary, trade secret--safety and efficacy data supplied by the
pioneer firm.
At any rate, as I explained last week, current U.S. law does not even
allow a generic drug applicant to challenge a pioneer firm's patents
until four years have elapsed. Why shouldn't, for example, a
formulation patent issued one year after a drug is approved not be
protected by the 30-month stay if the challenge cannot be made for 3
more years?
The 30-month stay must be understood in the context of the
complexities of the 1984 Waxman-Hatch law that generally provides 5
years of marketing exclusivity to pioneer drug products as part of the
recognition for allowing the generic firms to rely on the pioneer's
expensive safety and efficacy data. Moreover, I think that any
discussion of the 30-month stay is incomplete if it does not include
the fact that, under Hatch-Waxman, generic drug firms are given a
unique advantage under the patent code that allows them to get a head
start toward the market by allowing them to make and use the patented
drug product for the commercial and ordinarily patent infringing
purpose of securing FDA approval and scaling up production.
Let me quickly review the general rule against patent infringement
that is set forth in Title 35 of the United States Code, section
271(a). It says:

. . . whoever without authority makes, uses, offers to sell,
or sells any patented invention . . . during the term of the
patent . . . infringes the patent.

This is a clear, unambiguous protection of property rights, as it
should be to protect the creative genius of America's inventors.
Section 271(e) of title 35 contains the so-called Bolar amendment
that was added to the patent code by the Hatch-Waxman Act to create a
special exception for generic drug manufacturers. Section 271(e)(1)
states:

It shall not be an act of infringement to make [or] use . .
. a patented invention . . . solely for uses reasonably
related to the development and submission of information
under a federal law which regulates the manufacture, use, or
sale of drugs or veterinary biological products.

[[Page S7345]]

Essentially, this particular provision I have just read gives generic
drug manufacturers a head start over virtually all other producers of
generic products. In other words, it gives the generic industry a
tremendous advantage. Normally, making and using a patented product for
the purpose of securing regulatory approval would be a clear case of
patent infringement under section 271(a), but the Bolar Amendment--
which overrode a 1984 Federal Circuit Court of Appeals decision that
precluded generic drug firms from using on-patent drugs to secure FDA
approval or gear up production, in other words, the case overruled that
right--allows the generic firms to violate customary patent rights
because we put it in Hatch-Waxman. Section 271(e) is the Hatch-Waxman
language.
The public policy purpose of the Bolar Amendment meaning the Bolar
amendment provided by the Hatch-Waxman Act is to allow generic drug
makers to secure FDA approval and come onto the market the day after
the patent on the pioneer drug expires. As I explained last week, there
is a balance between the head start that the Bolar Amendment gives to
generic manufacturers and the protection that the 30-month stay gives
pioneer firms to litigate the validity of their patents.
Given the unique head start that the Bolar Amendment grants generic
drug manufacturers over virtually all other generic product
manufacturer and the other factors I have discussed, I question whether
restricting the 30-month stay to only those patents issued within 30-
days of FDA approval is either necessary, fair, or wise.
Moreover, the HELP Committee bill contains file-it-or-lose-it and
sue-on-it-or-lose-it provisions as well as a new private right of
action which also act to further diminish the value of pharmaceutical
patents, or should say pharmaceutical patents, to be more accurate.
Let me first address my concerns regarding the creation of a private
right of action, and then move on to the serious and detrimental
effects that the file-it-or-lose-it and sue-on-it-or-lose-it provisions
would have on pharmaceutical patent holders.
I have two fundamental concerns with authorizing a private cause of
action that would allow applicants to bring declaratory actions to
correct or delete patent information contained in the FDA ``Orange
Book.''
First, over the past 30 years, the courts have explicitly held that
no private right of action is authorized under the Federal Food, Drug,
and Cosmetic Act or ``FDCA'' e.g., ``It is well settled . . . that the
FDCA creates no private right of action.'' In re: Orthopedic Bone Screw
Products Liability Litigation, 193 F.3d 781, 788 (3d Cir. 1999).
Moreover, the Court of Appeals for the Federal Circuit specifically
addressed whether the Waxman-Hatch amendments to the FDCA did not
indicate any congressional intent to create a private right of action,
stating that the court could ``see nothing in the Hatch-Waxman
Amendments to alter'' the conclusion that private parties are not
authorized to bring suit to enforce the FDCA.
By seeking to create a private right of action, this provision
represents a truly unprecedented step that runs contrary to 30 years of
judicial interpretation. I believe that this would create an unwise,
and potentially dangerous precedent that could be used to justify
future legislation authorizing private suits to enforce the numerous
and varied provisions of the FDCA. Although I understand--and am
sympathetic to--the underlying rationale for this provision, I simply
do not think that creating a private right of action is an appropriate
answer to the problems cited by the advocates of this provision.
Second, as the Administration has succinctly stated: ``this new cause
of action is not necessary to address patent abuses,'' and may
``unnecessarily encourage litigation'' surrounding the approval of new
drugs. I certainly agree. Authorizing this new cause of action will not
effectively address the alleged patent abuses.
Now, I want to emphasize here that I strongly support efforts to halt
anti-competitive abuses of the patent laws and the laws and regulations
involving the listing of patent information in the FDA ``Orange Book.''
I am willing to work with members from either side of the aisle on this
issue. However, I am convinced that creating a private right of action
will not only fail to stop the patent abuses at issue, but will likely
have substantial unintended detrimental effects on the drug approval
process.
The file-it-or-lose-it provision that says patent rights are waived
if each new patent is not promptly filed with FDA and the sue-on-it-or-
lose-it provision that would result in the forfeiture of patent rights
if a pioneer drug firm does not sue within 45 days of being notified of
a patent challenge should be contrasted with current law for all other
types of patents. Section 286 of the federal patent code establishes a
six-year statute of limitations on seeking damages for patent
infringement. Why should this usual six-year period be decreased to 45-
days for pharmaceutical patents?
I should also note the section 284 of the patent code explicitly
authorizes the courts to award treble damages in patent infringement
actions. This is a strong signal that Congress wants to protect
intellectual property. We should think twice when we are considering
adopting measures, such as the Edwards-Collins language, that act to
undermine longstanding patent rights such as the six-year statute of
limitation on patent damage actions.
As I said last week, I am mindful that the treble damage provision
places a generic firm patent challenger in a difficult decision if the
firm were forced to go to market upon a district court decision in a
patent challenge situation. That is why I am generally sympathetic to
the argument of generic manufacturers that current law should be
overturned and any marketing exclusivity a generic firm might earn by
beating a pioneer firm's patents should toll from an appellate court
decision. In the case of multiple patents and multiple challengers, the
policy might have to be refined if the result is that no generic
product can reach the market within a reasonable period of time.
As I pointed out, HELP Committee Edwards-Collins language is barely
two weeks old, I am not alone in raising concerns about this new
language. The Administration opposes this language. The Statement of
Administration Policy states, in part, that:

S. 812 would unnecessarily encourage litigation around the
initial approval of new drugs and would complicate the
process of filing and protecting patents on new drugs. The
resulting higher costs and delays in making new drugs
available will reduce access to new breakthrough drugs.

That is important.
I look forward in the next weeks to hearing the detailed comments
from Administration experts on these matters as we get the FTC report.
We are also starting to hear from others on this new, substantially
changed, language. Senator Frist placed in the Record last week a
letter from the Biotechnology Industry Organization that complains
about the manner in which the bill undermines existing patent
protection.
I would just note that the organization representing our nation's
cutting edge biotechnology companies, BIO, expressed great
dissatisfaction with this new bill language. The July 15th BIO letter
says in part:

If enacted, these proposals would significantly erode the
measures in Hatch-Waxman to ensure an effective patent
incentive for new drug development, and would create
undesirable precedents for sound science-based regulations of
drug products in the United States.

BIO also has some sharp criticism of the patent forfeiture provisions
set forth in the file-it-or-lose-it and sue-on-it-or-lose-it clauses in
the bill. BIO says:

This forfeiture will occur without compensation, without a
right of appeal and without any recourse. This provision is
probably unconstitutional, and in any event is totally
unconscionable.

Also adding its voice to the debate over this new, unvetted language
is the American Intellectual Property Law Association. The AIPLA is a
national bar association representing a diverse group of more than
14,000 individuals from private, corporate, academic and governmental
practice of intellectual property law.
Mr. President, I ask unanimous consent to have printed in the Record
a copy of a July 22, 2002 letter from the AIPLA.

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There being no objection, the material was ordered to be printed in
the Record, as follows:
American Intellectual Property Law Association
Arlington, Virginia
Hon. Orrin G. Hatch,
U.S. Senate,
Washington, DC.
Dear Senator Hatch: I am writing on behalf of the American
Intellectual Property Law Association to express our concerns
about provisions in S. 812 that would undercut long standing
principles of patent law and would set an unfortunate example
for other nations to emulate.
The AIPLA is a national bar association of more than 14,000
members engaged in private and corporate practice, in
government service, and in the academic community. The AIPLA
represents a wide and diverse spectrum of individuals,
companies and institutions involved directly or indirectly in
the practice of patent, trademark, copyright, and unfair
competition law, as well as other fields of law affecting
intellectual property. Our members represent both owners and
users of intellectual property.
While we take no position on the need for revisions in the
practice of ``patent listings'' in applications for drug
approvals before the FDA, AIPLA believes that providing a new
civil action to delist patents is ill advised. Such actions
would involve the issues of (a) whether the innovator's
product is actually covered by the patent-at-issue and (b)
potentially, the validity of the patent. Irrespective of the
merits of allowing challenges to the listing on the basis of
its accuracy, vesting courts with jurisdiction over patent
issues in this circumstance where there is no case or
controversy is inappropriate. Such proposed new civil actions
would be invitations to increased litigation and threats of
litigation over such issues without corresponding public
benefit.
If a generic drug company wished to challenge the validity
of a listed patent, we would suggest that a far better
alternative would be to require that it be through the normal
procedure of a request for patent reexamination. To the
extent that the existing proceedings might not be considered
adequate for such challenges, not only are there bills to
strengthen them (H.R. 1866, H.R. 1886, and S. 1754), but
there is currently a proposal being developed by the U.S.
Patent and Trademark Office to establish a post-grant
opposition proceeding that would provide a more robust
challenge procedure. Such proceedings are not only handled by
the experts in the U.S. Patent and Trademark Office in the
first instance, but all appeals would go to the Court of
Appeals for the Federal Circuit which handles almost all
patent appeals from normal infringement litigation.
Another aspect of S. 812 which we find troubling is the
proposed prohibition against a patentee bringing a patent
infringement action against a generic drug company for a
patent not listed (and/or not properly listed) in an
application for FDA approval. Under current provisions in the
law, a patent owner loses the right to file a patent
infringement law suit which has the effect of staying the
FDA's approval of a generic drug for 30 months to allow
resolution of the law suit if (a) the patent is not listed
with the FDA or (b) the suit is not brought against the
generic drug company within 45 days of receiving an
appropriate certification notice that is listed patent is
either invalid or not infringed. They do, however, retain the
right to bring an infringement suit at a later date. The
effect of the present amendments would be to take that right
away from the patent holder. This would be an arbitrary
denial of a remedy guaranteed to patent holders in all fields
of technology.
We also point out that the denials of relief noted in the
preceding paragraph would be limitations on pharmaceutical
patents which could implicate certain non-discriminatory
obligations of the United States under the Agreement on the
Trade-Related Aspects of Intellectual Property Rights
(TRIPs), part of the Uruguay Round Agreements. At a time when
the Agreement is under challenge from many quarters following
the Doha Ministerial Conference, certainly these provisions
of S. 812 should be vetted with the Office of the U.S. Trade
Representative for their consistency with TRIPs.
In summary, while we take no position on the need for
legislation to change the provisions of the 1984 Hatch-Waxman
Act or on the merits of the respective positions of innovator
drug companies and generic drug companies, we are concerned
that these provisions of S. 812 are contrary to good patent
law policy and enforcement. Indeed, they would establish
principles that would do great harm to the ability of
innovators to realize adequate and effective patent
protection and set bad examples by the United States when
viewed by other nations that are seeking ways to avoid
providing such protection. If reform is needed, it should
take other forms and directions.
Sincerely,
Michael K. Kirk,
Executive Director.

Mr. HATCH. While taking no position on the need for changing the
patent listing provisions of Hatch-Waxman, the AIPLA said that it
believes that:

Providing a new civil action to delist patents is ill
advised . . . Irrespective of the merits of allowing
challenges to the listing on the basis of its accuracy,
vesting courts with jurisdiction over patent issues in this
circumstance where there is no case or controversy is
inappropriate.

The AIPLA also red flags the file-it-or-lose-it patent forfeiture
provisions of the pending legislation by pointing out that these, and I
quote,

. . . would be limitations on pharmaceutical patents which
could implicate certain nondiscriminatory obligations of the
United States under the Agreement on the Trade Related
Aspects of Intellectual Property Rights (TRIPS). At a time
when the Agreement is under challenge from many quarters
following the Doha Ministerial Conference, certainly these
provisions of S. 812 should be vetted with the Office of the
U.S. Trade Representative for their consistency with TRIPS.

I agree we should hear from United States Trade Representative on
this matter. I also agree with the American Intellectual Property Law
Association when it closed its letter with the following statement:
``If reform is needed, it should take other forms and directions.''
Finally, Mr. President, I would like to make my colleagues aware of,
and ask unanimous consent to have printed in the Record, a statement
from the law offices of David Beier.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Innovation in Health Care and the Resulting Improvements in Mortality
and Health Outcomes Will Suffer From the Retroactive Taking of Property
Rights Posed by the Senate H.E.L.P. Committee Passage of the Edwards
Substitute to S. 812

In the last 50 years there have been dramatic improvements
in life expectancy and better health care outcomes, in
pertinent part, because of new drugs and therapies. These
advances have occurred because the United States, unlike some
other nations, has used a strong patent system to help create
a balanced set of incentives. That system of incentives for
innovation is at risk, if as proposed in the pending bill,
the investment backed and settled property rights in patents
are retroactively taken away.
The substitute amendment to the Schumer-McCain bill adopted
July 11 proposes to deprive property owners--in this case
patent holders--of the most fundamental of property rights,
the right to exclude others from using their property without
just compensation. The bill works this result by taking away
the right to sue. As explained in greater detail, the bill
proposes to prevent holders of valid patents from suing
generic drug companies. This proposal is not only bad policy
but poses at least three serious legal problems.
First, the proposed bill takes away an essential attribute
of a patent--the right to enforce it against copiers. This
deprivation is either a per se taking of property under the
relevant Supreme Court case law, or works a taking in light
of the case by case constitutional test outlined by the same
court. The pending bill would work a per se taking if a Court
determined that the loss of a fundamental right--like the
right to sue--was the equivalent of a total physical
occupation of a piece of real property. There is a good case
that a court would so find. But regardless of whether this
proposal would meet that test, the courts would most surely
find that the loss of the right to sue would be a taking of
property that required just compensation under the other
applicable constitutional test.
Under current Supreme Court precedent, if enacted, these
amendments would be evaluated under a taking analysis that
would measure the nature of the property involved, the nature
of the economic right and the degree of governmental
interference. In this case, it is well settled law that a
patent is a property right. It would be absurd to uphold that
right and then claim that barring access to the courthouse
does not violate that right. Because this amendment would
work a fundamental and retroactive deprivation of those
economic rights courts would likely hold that these changes
are a taking. Such a finding triggers a requirement of
government compensation of the property owners. At the
President's Council of Economic Advisers recognized in
their report to the President earlier this year, the kinds
of inventions at risk here--both breakthroughs and
incremental improvements in existing products--are
critical to improved health outcomes. That same report
also recognized that these products require the free
market possibility of substantial profits to sustain the
magnitude of the R+D necessary to overcome the risk of
research failures, and competition from others also racing
to be first on the market with new medical innovations.
This reality would mean that a successful taking suit
would implicate many claims of significant economic loss.
Thus, it is likely that any finding would have very
serious implications for the Federal budget.
Second, there is a strong argument that this amendment
interferes with the right of

[[Page S7347]]

patent holders to petition their government through the
judicial system for a redress of their grievances. In this
case, much like the efforts of others in an earlier time,
seeks to prevent courts from enforcing rights guaranteed by
the Constitution. This approach can not be justified in light
of the compelling constitutional right to have full and fair
access to redress grievances.
Third, and finally, this amendment makes artificial and
illegal distinctions between types of patents in violation of
the United States' obligations under international law. One
of the important advances in law, secured at the request of
the United States, in the World Trade Organization's Trade
Related Intellectual Property system was a bar on
discrimination between different technologies. In this case,
the amendment proposes to withdraw significant patent rights
from the holders of certain innovative drug patents that
continue to be guaranteed to all other patent holders.
Imagine if another nation proposed to cut off the right to
sue for infringement for the violation of an aerospace,
computer or computer software patent, we certainly would
assert that it violated our Nation's rights under TRIPS. The
pending amendment offers the same kind of flawed and illegal
approach. In the case of a TRIPS violation the penalty could,
after adjudication in the WTO, result in the imposition of
retaliatory tariffs on American exports.
In sum, the pending amendment is a bad idea on policy
grounds, procedurally suspect and legally subject to
challenge. Congress should carefully consider the risks to
the Federal Treasury that could result if this bill were
enacted and the courts uphold a strong ``taking'' of property
claim. Moreover, legislators should also be cognizant of the
bad precedent they would be creating by barring access to
judicial remedies. Finally, Congress should recognize that if
approaches to international obligations like this are
adopted, other countries will be more likely to punish
American inventions in other sectors, including information
technology and aerospace.
Mr. HATCH. Mr. Beier was a member of the staff of the House Judiciary
Committee when Hatch-Waxman was adopted in 1984. After that, for many
years he headed the Washington office of the biotechnology company,
Genentech. Mr. Beier then spent four years serving as the chief
domestic policy advisor for Vice President Gore. He is recognized as an
expert in high technology issues and is now a partner in highly
respected Washington law firm. David is certainly not a conservative
Republican although I still have my hopes for him!
In Mr. Beier's view, ``the pending amendment is a bad idea on policy
grounds, procedurally suspect and legally subject to challenge.'' Mr.
Beier lays out the Takings Clause problems, the procedural due process
concerns, and the TRIPS considerations.
With respect to the potential for negative impact on foreign trade
Mr. Beier warns:

Imagine if another nation proposed to cut off the right to
sue for infringement for the violation of an aerospace,
computer or computer software patent. We would certainly
assert that it violated our Nation's rights under TRIPS. The
pending Amendment offers the same kind of flawed and illegal
approach. In the case of a TRIPS violation the penalty could,
after adjudication in the WHO, result in the imposition of
retaliatory tariffs on American exports.

Mr. President, I share these concerns. I urge my colleagues to
consider the views of BIO, the AIPLA, and David Beier, as well as the
other organizations cited by Senator Frist last week, before we rush to
adopt this virtually unvetted, far-reaching language that has not been
the subject of a hearing in any committee of Congress. Not the HELP
Committee, not the Judiciary Committee, not the Commerce Committee, and
not the Finance Committee which has jurisdiction over matters of
international trade.
But more important than any payments that the Treasury might be
compelled to pay due to judgments related to the Takings Clause or than
any retaliatory trade sanctions that the WHO may impose on the United
States down the road, we need to consider what the public health
consequences might be if we unjustifiably lower protections on
pharmaceutical patents.
Don't get me wrong. I am in favor of fierce price competition in the
pharmaceutical marketplace. I favor not just less expensive general
drugs today, but also better breakthrough drugs tomorrow. We need to
keep in mind the relationship between public health and intellectual
property. As David Beier has observed with respect to this linkage and
the threat of this bill:

In short, while better in some key respects than McCain-Schumer, I am
afraid that the HELP Committee-reported bill goes too far with respect
to the 30-month stay. As I testified before the HELP Committee in May,
if the problems we are trying to solve are the multiple use of 30-month
stays and 11th hour-issued patents that unfairly trigger the stay, it
seems to me that a more appropriate--and more narrowly-tailored--
legislative response might be a rule that allows one stay, and one stay
only.
Further, it might be appropriate to restrict the use of the sole stay
only with respect to those patents listed in the FDA Orange Book at the
time when a particular generic drug application is submitted. I will be
interested if such a rule satisfies the problems that the FTC finds
with respect to abuses of the 30-month stay and how the FTC, FDA, DOJ
and other experts and interested parties think about this perspective.
I am open to other alternatives as more information becomes available
and more discussion takes place among interested parties.
For now at least, I am forced to conclude that this new NDA-plus 30-
day rule coupled with the file-it-or-lose-it and sue-on-it-or-lose-it
provisions and the new private right of action amounts to legislative
overkill that creates a host of new problems.
In contrast to this over-correction with regard to the 30-month stay,
I am concerned that the Edwards-Collins HELP Committee Substitute
under-corrects in fixing the 180-day marketing exclusivity issue.
Perhaps no single provision of the 1984 law has caused so much
controversy as the 180-day marketing exclusivity rule.
As I explained last week, the statute contains this incentive to
encourage challenges that help test the validity of pioneer drug
patents and to encourage the development of non-patent infringing ways
to produce generic drugs. The policy motivation behind the 180-day rule
is to benefit consumers by earlier entry of cost-saving generic
products onto the market in situations where patents were invalid or
could be legally circumnavigated.
For many years as we intended and envisioned FDA awarded this 180-day
exclusivity only to a generic drug applicant that was successful in
patent litigation against the pioneer firm. In 1997, FDA's longstanding
successful defense requirement was struck down by the D.C. Circuit
Court of Appeals in the case of Mova Pharma v. Shalala.
The next year, the D.C. Circuit issued its opinion in Purepac Pharm
v. Shalala which upheld FDA's new system of granting the 180-day
exclusivity to the first filer of a generic drug application even if
the pioneer firm did not sue for patent infringement. Also in 1998, the
Fourth Circuit Court of Appeals held in Granutec v. Shalala that a
court decision with respect to a second or third filer could trigger
the exclusivity period of a first filer.
Taken together, these decisions, which strictly construed the
statutory language, awarded the exclusivity to the first filer of a
generic drug application. As a co-author of the legislation, I will be
the first to concede that we drafters of the 1984 law came up short in
this area because we were attempting to reward the first successful
challenger, not the first to file papers with the FDA.
Once the successful defense requirement was struck down, the mismatch
between first filers of generic drug applications and the generic drug
firms actually litigating the patents resulted in a number of
controversial contractual arrangements in which generic firms in the
first-to-file blocking position were paid by pioneer firms not to go to
market. These agreements prevented the 180-day marketing exclusivity
clock from ever starting, and the statute prevented FDA from approving
second and subsequent filers from going to market.
Here is how my good friend, Bill Haddad, an astute political analyst,
generic drug manufacturer, gifted writer, incorrigible liberal, and
participant in

[[Page S7348]]

the 1984 negotiations recalled the intent of the 180-day marketing
exclusivity provision:

There was never any doubt that the goal .. was to bring
generics to the market earlier using the route of legal
challenge with a reward to be paid to the entrepreneur with
the courage and facts to successfully challenge.
It was and is very clear that the law was not designed to allow deals
between brand and generic companies to delay competition.

Unfortunately, the string of court decisions that interpreted these
imprecisely drafted statutory clauses has resulted in a wholly
unintended result.
As David Balto, a former senior official at the FTC, has described
the problem:

The 180-day exclusivity provision appears to have led to
strategic conduct that has delayed and not fostered the
competitive process.

Mr. Balto assessed:

The competitive concern is that the 180-day exclusivity
provision can be used strategically by a patent holder to
prolong its market power in ways that go beyond the intent of
the patent laws and the Hatch-Waxman Act by delaying generic
entry for a substantial period.

He is right. He is absolutely right.
This wholly unintended dynamic has properly brought intense antitrust
scrutiny. As a matter of fact, in May of 2001, the Judiciary Committee
examined the antitrust implications of pharmaceutical patent
settlements inspired by the 180-day rule.
The Federal Trade Commission has been very active in this area. The
FTC has brought and settled three of these cases in which brand name
companies pay generic firms not to compete. At this point I will not go
into the details of the consent decrees in the Abbott--Geneva case, the
Hoescht--Andrx agreement, and the FTC's settlement with American Home
Products. FTC Chairman Tim Muris provided a great deal of information
in his testimony before the Senate Commerce Committee in April.
The FTC is doing the right thing in taking enforcement actions
against those who enter into anti-competitive agreements that violate
our Nation's antitrust laws. Probably in no small part due to the FTC's
vigorous enforcement under the existing antitrust laws and the
development of Senator Leahy's Bill, The Drug Competition Act, S. 754,
I understand that no more of these type of anti-competitive agreements
have been initiated for over two years. The FTC report will no doubt
shed light on this area In a post-Enron, post-WorldCom environment, who
would be so reckless as to enter into such an agreement? Nevertheless,
I must also point out that the agency recently suffered a set back when
the FTC administrative law judge issued a ruling in the on-going K-Dur
litigation that reminds us that not all pharmaceutical patent
settlements are per se violations of federal antitrust law.
In any event, the McCain-Schumer bill addressed the 180-day collusive
reverse payments situation by adopting a so-called rolling exclusivity
policy. If the eligible generic drug filer does not go to market within
a specified time period, the 180-day exclusivity rolls to the next
filer.
As I testified before the HELP Committee, I do not favor rolling
exclusivity. Here's what Gary Buehler, then Acting Director of FDA's
Office of Generic Drugs, said before the Judiciary Committee last year:

We believe that rolling exclusivity would actually be an
impediment to generic competition in that the exclusivity
would continue to bounce from the first to the second to the
third if, somehow or other, the first was disqualified.

In 1999, FDA proposed a rule which embraced a use it or lose it
policy whereby if the first eligible generic drug applicant did not
promptly go to market, all other approved applicants could commence
sales. Molly Boast, Director of the FTC Bureau of Competition,
testified last May that, at the staff level, FTC supported FDA's use it
or lose it proposal. If our goal is to maximize consumer savings after
a patent has been defeated, I find it difficult to see how rolling
exclusivity achieves this goal. I certainly prefer FDA's use it or lose
it policy over the McCain-Schumer brand of rolling exclusivity.
In that regard, I must again commend the sponsors of the Edwards-
Collins Substitute for rejecting the McCain-Schumer rolling exclusivity
policy in favor of what Senator Edwards calls modified use-it-or-lose-
it. Having said that, I was alarmed to learn that during mark-up
Senator Edwards responded to a question by stating it was conceivable
that his modified use-it-or-lose-it language might actually roll
indefinitely. This disturbs me. Every time the exclusivity would roll
to another drug firm, consumers will be further away from the day when
multi-firm generic price competition can begin in the marketplace.
Frankly, I am not certain that I completely understand how the
forfeiture language in Section 5 of the bill works. I do not think I am
alone in this confusion. At some point, I would like to engage in a
colloquy with the bill managers to ask some questions designed to
clarify precisely how this provision works.
Let me say that if the bill reinstates the successful defense
requirement and gives awards to the successful challenger so long as
the firm goes to market in a timely fashion, I am supportive of the
general concept. But I must say that I think that there are some real
advantages to Senator Gregg's simple and straight-forward policy of
more closely following FDA's old-fashioned use-it-or-lose-it proposal.
As I stated earlier, I am generally sympathetic to the concerns of
generic drug firms that any exclusivity awarded should be measured from
the time of an appellate court decision. But this principle may not
hold up if any form of rolling exclusivity is adopted or if we have
multiple patents and multiple challengers, some of whom are attacking
on invalidity and some of whom or attacking on non-infringement.
I must say I am troubled by the provision of the bill that appears to
grant each generic firm that qualifies for the benefit of the 18-month
marketing exclusivity incentive a 30-month period to secure FDA
approval, measured from the from the time of the filing of the generic
drug application.
Let's say that the first firm eligible to take advantage of the 180-
day benefit drops out for some reason. Assume also that the next firm
eligible under the terms of Section 5 is in the midst of, for example,
a negative good manufacturing inspection and can't go to market, but
has say 14 months remaining on the 30-month clock. It would hardly seem
like an appropriate outcome if, for example, the next firm eligible on
the list already has satisfied all of the FDA requirements and has
received tentative final approval, but must wait until the 30-month
clock runs out.
I hope that the proponents of the substitute amendment will help us
all understand just how Section 5 is intended to work. It is difficult
for me to see why we should adopt a policy whereby the balance of the
30-month period described in Section 5(a)(2)``(D)(i)(III)(dd)'' on page
44 of the bill, could conceivably be greater than the 180-days of
marketing exclusivity. Upon default of the first qualified applicant,
why should we wait for a second eligible drug firm to obtain FDA
approval when there may be a third, fourth, or fifth applicant in line
with FDA approval ready to go?
I hope the sponsors of the legislation are not locked into their so-
called modified use it or lose it policy, because I think it would be
wise for Congress to step back and reassess the wisdom of retaining the
180-day marketing exclusivity provision in essentially the same form as
enacted in 1984. Why not take this opportunity to re-think the 180-day
rule?
At one extreme are those who have suggested that the 180-day
marketing exclusivity provision may not even be necessary at all. Liz
Dickinson, a top-notch career attorney at FDA, has asked: ``I suggest
we look at whether 180-day exclusivity is even necessary, and I know
that there is this idea that it is an incentive to take the risk. I say
the facts speak otherwise. If you have a second, third, fourth, fifth
generic in line for the same blockbuster drug . . . undertaking the
risk of litigation without the hope of exclusivity, is that exclusivity
even necessary?''
Ms. Dickinson went on to make the following observation with respect
to the 180- day rule, ``We have got a provision that is supposed to
encourage competition by delaying competition. It has got a built in
contradiction, and that contradiction . . . is bringing down part of
the statute.''

[[Page S7349]]

At the Judiciary Committee hearing on May 24, 2001, Gary Buehler,
FDA's top official in the Office of Generic Drugs agreed with his
colleague's assessment:

. . . we often have the second, third, fourth, fifth
challengers to the same patent, oftentimes when the
challengers actually realize that they are not the first and
there is no hope for them to get the 180-day exclusivity. So
with that in mind, I would agree with Liz's statement that
generic firms will continue to challenge patents. Whether the
180-day exclusivity is a necessary reward for that challenge
is unknown, but it does not appear that it is.

Keep in mind that both of these FDA officials are career civil
servants with no political axe to grind. I personally favor retaining
some financial incentive to encourage patent challenges, but in light
of this testimony and other factors, I do not think we need to be
wedded to the current form of the 180-day exclusivity benefit.
Frankly, I am surprised that neither the McCain-Schumer bill, nor the
Kennedy mark, nor the Edwards-Collins amendment, proposed any changes
in the current regime in light of the views of the FDA officials among
other considerations. But, of course, neither the FDA nor FTC nor any
representatives from the Administration testified at the HELP Committee
hearing on May 8th.
Senator Schumer argues that the task of this legislation is to curb
excesses in order to return to the original balance in the 1984 law.
But what if conditions have changed and the original balance of the
1984 need to be reassessed? Or what if there was an area that we didn't
get right the first time?
For example, consider how Paragraph IV litigation treats patent
invalidity and patent non-infringement challenges identically under the
180-day marketing exclusivity rule. But invalidity and non-infringement
are two very different theories of the case. Here is what Al Engelberg,
a smart and tenacious attorney who specialized in attacking drug
patents on behalf of generic drug firm clients, has said about this
difference:

In cases involving an assertion of non-infringement, an
adjudication in favor of one challenger is of no immediate
benefit to any other challenger and does not lead to multi-
source competition. Each case involving non-infringement is
decided on the specific facts related to that challenger's
product and provides no direct benefit to any other
challenger. In contrast, a judgment of patent invalidity or
enforceability creates an estoppel against any subsequent
attempt to enforce the patent against any party. The drafters
of the 180-day exclusivity provision failed to consider this
important distinction.

As one of the drafters, I must accept my share of responsibility for
not fully appreciating the implications of this distinction. I think
what Mr. Engelberg is pointing out that the 180-day rule acts as only a
floor in non-infringement cases. As long as any patents stand, a
particular non-infringer's marketing exclusivity can extend well beyond
180 days until such time as another non-infringer comes along.
Conversely, doesn't the 180-day floor work to the detriment of
consumers whenever it acts to block market entry of a second non-
infringer during the 180-day period ? Why shouldn't a second or third
non-infringer be granted immediate access to the market as would occur
in any other industry? Consumers would reap immediate benefits for
price competition.
I hope that my colleagues working on the bill will consider the
distinction between invalidity and non-infringement as this debate
continues over the next week. While I am of the mind to retain a strong
financial incentive to encourage vigorous patent challenges by generic
drug firms, we must ask why identical rewards are granted for
successful invalidity and non-infringement claims. I welcome the
comments and suggestions of my colleagues and other interested parties
on this matter
Frankly, I think we need more public discussion and debate about the
wisdom of retaining--lock, stock, and barrel--the old 180-day
exclusivity award.
For example, even if we adopt the modified use it or lose it approach
of the HELP Committee bill and the first qualified generic manufacturer
cannot, or will not, commence marketing and the exclusivity moves to
the next qualified applicant, why should the second manufacturer get
the full 180-days? Why not 90 days? Why not 60 days?

After all, once the exclusivity begins to roll and roll and we move
away from granting the marketing exclusivity to the successful generic
litigant and Americans always prefer actual winners--we may end up with
a mere second filer--and since when does our society grant such
lucrative rewards to someone who merely files some papers?
And what is so sacrosanct about 180-days in the first place? It is my
information that in 1984 the number-one selling drug in the United
States was Tagamet, with domestic sales of about $500 million. I am
told that today the cholesterol-controlling medicine, Lipitor, has
domestic U.S. sales of over $5 billion. Lipitor sales are 10-times
higher in the U.S. than domestic Tagamet sales were in 1984. I
understand that worldwide sales of Lipitor are about $7 billion.
Even adjusting for inflation, it seems clear that 180-days of
marketing exclusivity is worth more, and a lot more, today than it was
worth in 1984.
What might 180-days of marketing exclusivity for today's blockbuster
drugs be worth in profits to the generic firm holding the 180-day
marketing exclusivity rights?
Let's be frank about what is going on here: Retention of the 180-day
marketing exclusivity provision is one of those areas in which both the
generic sector and the R&D sector have something of a mutual interest.
And when all is said and done, I think that the joint interest of the
generics and the pioneer firms is not in perfect alignment with the
interests of consumers.
This is so because during the 180-day time frame, when there is only
one generic competitor, the pioneer firm does not take anywhere near
the hit on market share and profits that occurs when multiple generic
firms enter the market. Similarly, the first generic on the market is
under no pressure to cut the price anywhere near as much as when there
is competition from multiple generic firms.
The report, Drug Trend: 2001, published by Express Scripts, notes
this dynamic:

The AWP [average wholesale price] for the first generic is
usually about 10 percent below the brand. After the six month
exclusivity granted to the first generic manufacturer, the
price paid . . . for the generic quickly falls, often by 40
percent or more, as multiple manufacturers of the same
generic product compete for market share. It seems likely
that the value of the 180-day marketing exclusivity award
today may be worth much more that it was back in 1984--
perhaps several hundred million dollars more per blockbuster
drug.

Given the dramatic increase in drug sales for today's blockbuster
products, it does not seem far-fetched to project that the 180-
marketing exclusivity reward can amount to hundreds of millions of
dollars--and perhaps over one billion dollars--in profits to the
fortunate generic drug manufacturer. I am all for assuring that there
are sufficient incentives to ensure patent challenges, but isn't there
a limit beyond which we should direct these excess profits back to
consumers?
Would we rather see 25 percent to 40 percent of that money in the
hands of the trial attorneys who brought the case? Or, would we rather
see at least some of those funds earmarked for attorneys' fees, be
channeled to help citizens lacking access to prescription drugs?
Shouldn't we get the facts concerning the change in value of the 180-
day marketing exclusivity today compared to 1984 and make any
appropriate adjustment to this incentive? We don't want to set the
incentive so low as to discourage challenges to non-blockbuster
patents.
My purpose in rasing these points is to get an indication from the
sponsors of this legislation and other interested parties, such as
patient advocacy organization, state Medicaid agencies, and insurers,
whether there is interest in discussing the advisability of passing on
more of the value associated with the marketing exclusivity to
consumers if it appears it is fair to do so.
If there is interest, I would be willing to help fashion an
appropriate amendment. It seems to me that we need to provide enough of
an incentive to assure vigorous patent challenges, but we should give
away no more exclusivity than is necessary. Every day of marketing
exclusivity awarded to a generic firm comes at the expense of
consumers.
I think we can and should explore this area further.
Let us not too quickly and too blindly retain the basic structure of
reward

[[Page S7350]]

under the 180-day marketing exclusivity provision. Before we change the
law, let us have a serious re-examination of whether to retain the 180-
day marketing exclusivity in its current form both in terms of the
length of the exclusivity period and whether the rewards for successful
invalidity and non-infringement challenges should be treated
identically.
I urge my colleagues, as well as consumer organizations and
pharmaceutical purchasers such as insurers and self-insured businesses
to reflect upon what I have said on this subject today.
This is an area in which I think we would be wise to reject Senator
Schumer's argument that all we are doing with this legislation is
restoring the integrity of the old Hatch-Waxman Act. But why should we
be governed by the world of 1984 when, for example, the best selling
drugs in this country have increased sales by a factor of 10? Why
should the value of the marketing exclusivity reward increase in direct
proportion?
On a number of occasions, I have commended Senator Schumer and
Senator McCain for moving their legislation forward, even if the bill
that came out of the HELP Committee does not resemble very closely
their bill, and I still have problems with the floor vehicle as I have
laid out in some detail. I commend them again today.
I hope to return to the floor before this debate ends to offer a few
suggestions for a more comprehensive approach to reforming the Drug
Price Competition and Patent Term Restoration Act.
This in no way minimizes the importance of he matters that are the
subject of the pending legislation, because they are important areas. I
do not believe, however, that these are the most important issues we
can address.
Rather than focusing on how best to bring the law back to the old
days of 1984, as Senator Schumer suggests, I want to discuss ways to
modify the law to help usher in a new era of drug discovery while, at
the same time, increasing patient access to the latest medicines.
Mr. President, I yield the floor.

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