[Congressional Record Volume 148, Number 106 (Tuesday, July 30, 2002)]
[Senate]
[Pages S7565-S7571]
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 again on the pending
legislation--S. 812--the Greater Access to Pharmaceuticals Act.
First, let me say that I am hopeful the on-going talks among
interested Senators and affected parties will succeed in reaching an
acceptable compromise on a Medicare Prescription Drug Benefit. That is
a promise to seniors we need to honor. I remain committed to achieving
that goal.
I think that Senator Snowe made a good point when she said earlier
today that there is no reason to pull the bill down and halt the
negotiations over the Medicare drug benefit at his point. Why not
encourage these talks to continue over the August recess?
Although we got off to a rocky start when the Majority Leader decided
to by-pass the Finance Committee to avoid the Tripartisan bill being
reported by the Committee, I remain hopeful that we can come together
if we stick to it.
Whether those talks succeed or fail, the Senate will have to dispose
of the underlying legislation, S. 812. This is the legislation first
introduced by Senators McCain and Schumer that was almost completely
rewritten by the HELP Committee via the Edwards-Collins substitute
amendment.
In many respects, the Committee substitute is an improvement over the
McCain-Schumer language. Let me hasten to say, though, there are still
major problems with the language.
I have laid out in some detail the shortcomings in the provisions of
the bill that purport to fix the problems associated with the statutory
30-month stay. We designed this stay to permit a reasonable period of
time to litigate the status of pioneer drug patents, but has been used
in several cases by brand name drug manufacturers to forestall
improperly generic competition.
As this barely three-weeks old language is scrutinized by experts,
many are concluding that it comes up short. For example, there is an
interesting and growing correspondence between the architect of the
pending legislation, my friend from Massachusetts, Senator Kennedy, and
the organization that represents the Nation's biotechnology companies--
BIO, the Biotechnology Industry Organization.
In its letter of July 22, 2002 to Senator Kennedy, BIO complains
about the:
carte blanche authority of FDA to determine testing methods
applicable to full NDAs, [New Drug Applications] loss of the
ability to protect our intellectual property because of
failure to meet new filing deadlines under food and drug law,
and an unwarranted private right of action afforded generic
companies to sue members in efforts to ``delist'' patents or
``correct'' patent information. Whatever the purposes of
these provisions, we fundamentally disagree with their
consequences perhaps the result of producing totally new
provisions only 36 hours before mark-up.
Actually, I think this completely new language was not available
until 24-hours before the markup.
It is also my information that a meeting last Friday between Senator
Kennedy's staff and BIO staff did little to clear up these objections.
I have no doubt that Senator Kennedy is aware this bill is opposed by
the Massachusetts-based biotech firm, Millennium Pharmaceuticals, as
well as the Massachusetts Biotechnology Industry Organization.
As I have laid out previously, in addition to the policy question of
the extent to which these new provisions upset the balance of Hatch-
Waxman, a broad spectrum of legal analysts who range from Susan Estrich
to Judge Bork have raised a number of concerns about the pending
legislation on a wide variety of issues, including concerns that the
bill runs afoul of the Takings Clause as well as violates the GATT
Treaty's intellectual property provisions.
Last week, I included in the Record a letter from the American
Intellectual Property Law Association opposing the patent forfeiture
and private right of action provisions of the bill.
This week I want to highlight a letter to Chairman Kennedy from the
Intellectual Property Owners Association expressing severe reservations
about the bill.
The IPO represents U.S.-based owners of patents, trademarks,
copyrights, and trade secrets. The organization includes some 100
American firms that are among the largest patent filers in the United
States. The membership of the Intellectual Property Owners Association
submit about 30 percent of all patents filed with the Patent and
Trademark Office.
The IPO letter raises concerns about how the Substitute to S. 812
might conflict with the international Agreement on Trade Related
Aspects of Intellectual Property Rights--the TRIPS provisions.
Specifically, the IPO complains about the file-it-or-lose-it and sue-
on-it-or-lose-it provisions of the bill. The letter states, in part:
We believe these rigid barriers to enforcement of patent
rights may conflict with ``normal exploitation of patent
rights'' as that term is used in Article 30 of the TRIPS
agreement, or could set a very damaging precedent for
interpretation of Article 30 that would be used against the
U.S. by its trading partners in other areas of intellectual
property enforcement.
The new, untested, Edwards-Collins language has not been embraced by
the intellectual property bar nor by the mainstream organizations that
represent the interests of America's inventors.
The Administration has already issued a statement in opposition to S.
812.
Before we take any action to adopt the language that has agitated
nearly everyone in the IP community, don't you think it would be
prudent to factor in what the Patent and Trademark Office has to say
about this new language that completely re-wrote the McCain-Schumer
bill?
Commissioner James Rogan wrote to me today to give us PTO's initial
reactions to re-write of S.812. Here is part of what the Commissioner
of Patents and Trademarks says in his letter to me:
USPTO does recognize that some changes to current law may
be necessary to encourage appropriate access to generic
substitutes and prevent abuses of the patent laws. But S. 812
clearly is not the answer. In fact, this bill would likely do
the opposite of what its title suggests by limiting access to
cutting-edge drugs, decreasing innovation, and ultimately
harming the quality of treatments available to patients.
In addition to these significant concerns raised by the PTO, I would
think that the report that was issued earlier today by the Federal
Trade Commission, after a unanimous vote of the Commissioners, would
compel my colleagues in the Senate to question the wisdom of adopting
the HELP substitute to S. 812. While I am still studying the details of
the report, it seems abundantly clear that the major recommendations of
the Federal Trade Commission in no way mirror the legislation pending
on the floor.
With respect to the 30-month stay, the FTC suggests a policy of one
stay per generic drug application for all patents listed in the
official FDA Orange Book prior to the date on which the generic drug
application is filed.
This is precisely the position I advocated before the HELP Committee
back in May.
This is the position that the Ranking Republican Member of the HELP
Committee, Senator Gregg, attempted to get adopted by the HELP
Committee during the mark-up.
The narrowly-tailored FTC recommendation in this area should be
contrasted with the overly-broad Edwards-Collins language that contains
the offensive file-it-or-lose-it and sue-
[[Page S7566]]
on-it-or-lose-it provisions, the new and unprecedented--and
unnecessary--private right of action in the Federal Food, Drug, and
Cosmetic Act, as well as the rule that allows the 30-month stay only
for those patents issued within 30-days of the approval of the pioneer
drug.
I know which policy I prefer--and it came from the FTC after its
comprehensive year-and-a-half study of these issues, not from any
secret backroom drafting sessions of various lawyers and lobbyists.
Let me now focus my comments on another major area addressed by the
HELP Committee substitute to S. 812: the problem of collusion between
brand name and generic drug manufacturers with respect to the rules in
current law that grant 180-days of marketing exclusivity when a generic
drug firm successfully challenges or navigates around a pioneer firm's
drug patents.
The 180-day marketing exclusivity rule has been highly controversial
in recent years.
The reason for this attention is simple. In a few number of
documented cases, generic drug manufacturers entered into agreements
with brand name manufacturers not to sell generic drugs.
As I will explain, due to the way the existing law--the Drug Price
Competition and Patent Term Restoration Act of 1984--is written and has
been interpreted by the courts, some of these arrangements had the
effect of delaying multi-source generic competition well beyond the
contemplated 180-days.
I should first note that the existing statute--the Waxman-Hatch Act--
included this 180-day marketing exclusivity as an incentive to
encourage patent challenges. If patents were found to be invalid, or if
non-infringing ways to produce generic drugs were developed, consumers
could benefit from the earlier-than-anticipated introduction of generic
drugs into the marketplace.
In enacting these provisions, it was the intent of Congress to award
this exclusivity only to a generic drug applicant that was successful
in defeating a pioneer firm's patents.
FDA's 1994 regulations implementing the Hatch-Waxman Act required the
generic drug challenger to defend successfully the lawsuit that a
pioneer firm must initiate within 45-days after being notified that the
generic firm was challenging the patent.
It must be emphasized that the reason the generic drug firm is the
plaintiff in the suit, rather than the defendant, is that the statute
contains a special protection allowing generic firms to conduct what
would normally be infringing activities in order to secure FDA
regulatory approval. This is the so-called Bolar Amendment, a provision
of law that, in my opinion, has not been adequately recognized by the
proponents of S. 812.
Essentially, the Bolar language trumps the general rule against
patent infringement codified in section 271(a) of the patent code. The
Bolar Amendment, codified in section 271(e) of the patent code, allows
generic drug firm to infringe patents in order to win FDA approval and
gear up production and creates an artificial act of patent infringement
at the moment that the generic firm files an abbreviated new drug
application with the FDA.
Once the application is filed, the pioneer firm has 45-days to file a
lawsuit in order to take advantage of the statutory 30-month stay
designed to allow the patent litigation to be completed before generic
may be permitted to enter the marketplace.
For over a decade after Hatch-Waxman was enacted in 1984, it was
thought that only a generic firm that was successful in the litigation,
that is, a firm that had successfully defended the suit brought by the
pioneer firm, could qualify for the 180-days of marketing exclusivity.
In 1997, FDA's successful defense requirement was struck down by the
D.C. Circuit Court of Appeals in the case of Mova Pharma v. Shalala.
The following year, in 1998, the D.C. Circuit decided the case of
Purepac Pharm v. Shalala. This decision 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.
That same year, the Fourth Circuit Court of Appeals issued its
opinion in Granutec v. Shalala. This case held that the exclusivity of
the first filer could be triggered by a court decision with respect to
a second, third, or subsequent filer.
Essentially, these decisions added up to one thing: mischief.
Once the exclusivity was awarded to the first filer of a generic drug
application divorced from any requirement for a successful patent
challenge, it became apparent to some that the first filer--with a
financial inducement from the patent holder--could effectively
forestall multi-firm generic competition by simply not going to market.
If the 180-day clock never started, multi-source generic competition
could be forestalled until the patents expired.
This could last for years.
As a coauthor of the Drug Price Competition and Patent Term
Restoration Act, I can tell you that I find these type of reverse
payment collusive arrangements appalling.
I must concede, as a drafter of the law, that we came up short in our
draftsmanship. We did not wish to encourage situations where payments
were made to generic firms not to sell generic drugs and not to allow
multi-source generic competition.
To date, there are known to have been relatively few such agreements.
The FTC has obtained consent decrees in two cases: with Hoescht and
Andrx over the drug, Cardizem, and with Abbott and Geneva over the
drug, Hytrin.
The agency suffered a set-back recently in the third case it brought
in this area which involved an agreement between Schering-Plough,
Upsher-Smith, and American Home Products with respect to the compound
K-Dur 20, a widely prescribed potassium chloride supplement. While the
FTC settled with American Home products, an Administrative Law Judge
recently rejected the agency's argument in the case against Schering
and Upsher-Smith. The ALJ's opinion looked at the facts of competition
in the potassium chloride market and concluded that FTC had not proven
its case given the highly-competitive nature of this particular market.
However the K-Dur case ultimately is decided, I commend FTC Chairman
Tim Muris for indicating he will continue the agency's policy of
zealously reviewing these type of reverse payments cases to determine
whether such agreements run afoul of the antitrust laws.
In my earlier statements, I commended both the enforcement actions of
the FTC and the development of the Drug Competition Act, S.754, by
Senator Leahy for creating a climate unfriendly to the execution of any
additional collusive deals not to compete between generic and brand
name companies.
Today's release of the report: Generic Drug Entry Prior to Patent
Expiration: An FTC Study underscores the importance of Senator Leahy's
work in developing the Drug Competition Act. This bill was reported by
the Judiciary Committee last year.
I was pleased to work with him to refine the bill before the
Committee adopted this measure. I am particularly pleased that he
became convinced it was wise to abandon a patent forfeiture feature
very similar to the provisions contained in the Edwards-Collins
substitute to S. 812 that so many biotech and pharmaceutical firms and
intellectual property experts find so objectionable.
I did have a few additional suggestions for improving S. 754, but in
the interest of moving the legislation forward in a bipartisan fashion,
I supported the bill in Committee.
Frankly, one of my suggestions is very simple and amounts to
recognition of the importance of the bill. This simple suggestion would
be to codify the bill as part of the Clayton Act, rather than let the
language float as a statute-at-large.
Here are the other concerns that I have with S. 754.
The Leahy bill exempts three types of agreements: first, purchase
orders for raw material supplies; second, equipment and facility
contracts; and third, employment or consulting contracts.
These three categories were also exempted by the FTC in its recently
completed study of the pharmaceutical industry. To these three, I would
suggest adding two other classes of non-germane agreements: first,
packaging and labeling agreements and, second, confidentiality
agreements. It seems to me
[[Page S7567]]
that the thrust of the legislation is to get a quick review of actual
executed agreements relating to settlements of patent non-infringement
or patent invalidity cases arising out of Hatch-Waxman Paragraph IV
certifications.
Garden variety packaging and licensing agreements or mere agreements
to talk about possible settlements in a confidential manner are not
what we are after with this legislation.
I think we should start with the presumption that the law will be
followed. Given this perspective, I favor the total deletion of
proposed Section 8, subsection (b) which creates a special rule for
contract unenforceability. My understanding is that this is a relative
recent addition to the Leahy bill and that only current sections 8(a)
and 8(c) were in the original Leahy bill and, in fact, precisely mirror
the long-standing Hart-Scott-Rodino enforcement language. In short,
what does this new section 8(b) accomplish that is not included in the
more general provision of section 8(c) that grants a broad authority
for equitable relief?
And what is the real chance that one or both parties will not comply
with the statute in the first place? And if one party reports, what
could possibly be gained by the other party not reporting the
agreement? For that matter, it might be preferable to change the bill
to require a joint submission of a certified copy of the agreement
because one can hardly imagine some poor FTC staff attorney doing a
side-by-side, word-by-word reading of documents to make sure both
parties sent the same agreement.
In addition, I think that language should be added to make explicit
that nothing in this Act should be construed to discourage or prohibit
legitimate settlements between brand name and generic drug companies.
The Joint DOJ/FTC guidelines smile upon such settlements so long as
they do not run afoul of other laws such as the antitrust statutes. The
FTC Administrative Law Judge's decision in the K-Dur 20 case reminds us
of this fact, no matter how the case is finally decided.
The essence of S. 754 is to see that every agreement between pioneer
and generic firms that raises antitrust questions are promptly reported
to the FTC and DOJ for appropriate scrutiny.
I think the emergence of the Leahy bill--and I must give credit as
well to the McCain-Schumer bill, coupled with the strict FTC
enforcement in this area and the agency's extensive industry-wide
survey helps explain why these so-called reverse payment cases appear
to be dwindling, and perhaps have completely halted for the time being.
Senator Leahy should be pleased that the chief recommendation that
the FTC is making today with respect to the collusive 180-day marketing
exclusivity agreements amounts to an endorsement of S. 754.
The FTC report recommends that Congress:
Pass legislation to require brand-name companies and first
generic applicants to provide copies of certain agreements to
the Federal Trade Commission.
This straight-forward recommendation is a far cry from the complex,
barely comprehensible, 180-day marketing exclusivity fix that emerged
from the HELP Committee.
As a Wall Street Journal article yesterday described the discussion
of the Edwards-Collins substitute: ``In a remarkable session, it became
clear that many lawmakers didn't understand the complex bill.''
Why should that be surprising given the fact that this completely
new, incredibly- intricate, highly-technical language was made
available the day before the mark-up? A review of proceedings of the
two-day HELP Committee mark-up is very revealing and I would urge that
the press and the public make the effort to review this discussion. I
can see why Senators Gregg and Frist are so frustrated about some
changes in language that appear to have been agreed to one moment, only
to vanish the next. One can only wonder who, how, where, when, and why
such language was drafted--although yesterday's Wall Street Journal
article may shed some light on some of the actors behind the scenes.
In many ways, the Edwards-Collins substitute misses the mark, and is
too complicated to boot.
Nevertheless, I do think we need to re-examine the statute in this
area in light of the potential for these type--or perhaps new types
of--anticompetitive agreements to crop up in the future given how the
current statutory language and court decisions work together to help
create a climate for mischief.
The McCain-Schumer bill addressed the 180-day collusive reverse
payments situation by a so-called rolling exclusivity policy. This
rolling exclusivity means that 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.
I do not favor rolling exclusivity.
I agree with what Gary Buehler, then Acting Director of FDA's Office
of Generic Drugs, told 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.
I believe a better course of action was advanced by FDA in its 1999
proposed rule which suggested a use it or lose it policy. This simple
rule is that 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.
My first reading of the summary of the new FTC Report leads me to
conclude that the agency favors a very aggressive use it or lose it
policy. In this regard I must point out that the FTC Report contains
three minor recommendations that center on the 180-day provision:
First, the agency would run the 180-day clock if a generic firm
marketed the pioneer's product under a license, not an ANDA.
Second, FTC would codify current case law and run the 180-day clock
from the time of any court decision, not an appellate decision as
allowed under the HELP Committee language.
Third, the Commission would trigger the 180-days if a court dismissed
a declaratory judgment for lack of case or controversy.
While I am just beginning my review of the FTC report, it appears
that the FTC is advocating a very aggressive form of a use-it-or-lose-
it policy.
As I have argued on a number of occasions, my view is that rolling
exclusivity delays the day when multi-generic competition can commence.
It appears to me that the FTC shares this view.
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 a use it or lose it approach over the
McCain-Schumer brand of rolling exclusivity.
I 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 am disturbed to learn that during the HELP Committee mark-up
Senator Edwards and HELP Committee staff stated that, in fact, the
exclusivity could roll indefinitely.
I understand the intent is to transfer the exclusivity once and only
once, but having reviewed the language of the bill and the discussion
at the mark-up, I am not convinced that the exclusivity will roll over
only once.
In any event, even if the exclusivity only rolled over once, I
question the rationale behind a policy that only delays the day when
multi-source generic competition can commence.
It is only after the time when many generics enter the market that
consumers receive the full benefits of price competition.
During the first 180-days when only one generic is on the market, the
change in price may be marginal. This is so because when there is only
one generic competitor during this 180-day time frame, neither the
pioneer firm nor the generic firm is under any tremendous pressure to
cut the price. The report, Drug Trend: 2001, published by Express
Scripts, notes this dynamic:
The A.P. [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. Moreover, it
appears that the value of the 180-day
[[Page S7568]]
marketing exclusivity incentive may be worth much more today
that it was back in 1984.
I understand that, in 1984, the number-one selling drug in the United
States was Tagamet, with U.S. sales of about $500 million.
Today, it is estimated that Lipitor, the anti-cholesterol medicine,
has a domestic market of over $5 billion annually. In nominal dollars,
Lipitor sales today are 10-times higher than Tagamet sales were in
1984. In real dollars, I am told that this amounts to about a six-fold
increase.
If we are going to open up the 180-day provisions of the 1984 law--
and I think we should so long as we do it carefully and thoughtfully--I
think we should reexamine other aspects of the 180-day rule such as
whether we should retain the 180-days or some other number of days
given the substantial six-fold growth in potential value of this
incentive.
Why should we be locked into 180-days? The dirty little secret of the
180-day provision is that both the pioneer firms and generic firms like
this provision because it delays the full price competition that only
occurs when many generic enter the market.
I think that the mutual economic interest of the generic and the
pioneer firms is not in perfect alignment with the interests of
consumers with respect to the 180-day incentive.
Moreover, even if we could perfect the modified use it or lose it
language of the Edwards-Collins substitute and the first qualified
generic manufacturer could not, or would not, commence marketing and
the exclusivity moved to the next qualified applicant, why should the
second manufacturer get the full 180-days? Why not 90 days? Why not 60
days?
Frankly, I am disturbed that, in some circumstances, the Edwards-
Collins language appears to grant exclusivity not to the successful
generic litigant--but to a firm which was merely first to file papers
with the FDA that triggered a legal proceeding.
I understand the rationale for this is that it will supposedly ensure
multiple patent challenges. But, when we start rewarding the first to
trigger lawsuits in place of actually winning the challenge, it strikes
me as out of sync with the traditional American value of rewarding the
actual winner.
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 potentially enormous profits back to consumers?
While I have not seen any formal estimates, one would think that 180-
days of marketing exclusivity for a $5 billion seller like Lipitor must
mean hundreds of millions of dollars, and perhaps even $1 billion, in
lost consumer savings.
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 that at least some of those funds earmarked for attorneys' fees be
channeled to help citizens lacking access to prescription drugs?
Shouldn't we get more 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, but we don't want to set the incentives too high either.
As a matter of fact, some have questioned the need for retaining the
180-day marketing exclusivity at all.
For example, Liz Dickinson, FDA's senior, career attorney in this
area, 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, a fine lawyer with no political axe to grind, 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.
Similarly, Gary Buehler, FDA's top official in the Office of Generic
Drugs agreed with his colleague's assessment when he testified before
the Senate Judiciary Committee last year:
. . . 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.
I personally favor retaining some incentive to ensure
vigorous patent challenges. But in light of this testimony
and other factors, I do not believe there is a need to be
locked into the current incentive--the 180-day exclusivity
benefit.
I find it curious that neither the McCain-Schumer bill, nor the
Kennedy mark, nor the Edwards-Collins amendment, proposed any changes
in the current 180-day regime in light of the views of the FDA
officials, the dramatic increase of the potential value of 180-days of
exclusivity, and other factors.
This may have been partly due to the fact that neither the FDA nor
FTC nor any representatives from the Administration testified at the
HELP Committee hearing on May 8th. In fact, no committee of Congress
has ever held a hearing of the language that was marked-up and reported
by the HELP Committee.
On any number of occasions, I have heard Senator Schumer and others
argue that the simple goal of this legislation is to close loopholes in
order to return to the original balance in the 1984 law.
But what if conditions have changed and the original policies of the
1984 need to be reassessed?
Or what if there were 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. These are lumped
together, and both, if proven, can result in identical 180-day
marketing exclusivity awards. In truth, invalidity and non-infringement
are two very different types of claims.
I want to remind my colleagues of, and challenge them to question the
implications of, lumping these two concepts together. We need to re-
think this policy. As Al Engelberg, a smart and tough-as-nails 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.
Once again, as one of the drafters of this law, I accept my share of
responsibility for failing to fully appreciate the implications of this
distinction.
The 180-day rule acts as only a floor in non-infringement cases. A
particular non-infringer's marketing exclusivity can extend beyond the
statutory 180-days. This period of marketing exclusivity can last until
such time as another non-infringer might enter the picture or until the
underlying patents are invalidated or expire.
Conversely, it can be argued that the 180-day floor actually works to
the detriment of consumers whenever the 180-days of exclusivity acts to
block entry of a second non-infringing generic product 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 could enjoy the savings that accrue from immediate price
competition.
I would hope that my colleagues working on the bill, and others
interested in this debate carefully consider the distinctions between
invalidity and non-infringement challenges. This is an area where we
might have gone off-base in 1984.
While I am of the mind to retain a strong financial incentive to
encourage vigorous patent challenges by generic drug firms, I am
unconvinced at this point that we should retain the old language that
grants identical rewards for
[[Page S7569]]
successful invalidity and non-infringement claims. I welcome debate and
discussion on this matter.
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.
My purpose in raising these points is to get an indication from the
sponsors of this legislation and other interested parties, such as
patient advocacy organizations, state Medicaid agencies, and insurers,
whether there is interest in discussing the advisability of passing on
more of the value associated with the current 180-day marketing
exclusivity to consumers if it appears it is fair and appropriate 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. While we want to ensure vigorous patent challenges, we don't
want to set the benefit too high at the expense of consumers.
I think we can and should explore this area further.
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. I understand that this language was the source
of much confusion during the mark-up in the HELP Committee.
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 may be supportive of the
general concept. I do wonder if the language in the HELP substitute
overturns the effect of the MOVA, Purepac, and Granutec cases that I
described earlier?
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, easy to understand use-it-or-lose-it
proposal.
I will continue to study the particulars of the three minor
recommendations that the FTC has made in connection to the 180-day
issue.
I must also indicate that part of the confusion concerning the effect
of this new Edwards-Collins language stems from the discussion of the
provision at the mark-up. I understand that when Senator Edwards first
explained this section of the bill he said that the exclusivity could
roll over one time if the first qualified applicant did not use it. I
am told that Senator Edwards indicated his language would eliminate the
possibility that this could just continue to roll over and over and
over during which time the exclusivity in the marketplace continues.
However, upon questioning from Senators Gregg, Frist, and Sessions,
the Committee staff then explained that if the second generic firm
qualified does not use the exclusivity then the process would start all
over again. The HELP Committee staff went on to explain, apparently in
direct contradiction to Senator Edward's first explanation, that the
exclusivity could roll indefinitely if there is no generic ready to go
to market.
On the second day of the mark-up, Senator Edwards seemed to indicate
that the Committee staff had it right and he had it wrong when he at
first said that the provisions of Section 5 of the bill eliminated the
policy of rolling exclusivity. In fact, I am told that Senator Edwards
then acknowledged that if there were nobody to compete, then the
exclusivity could keep rolling over and over.
I am afraid that the Edwards-Collins brand of modified-use-it-or-
lose-it is, at least, very confusing. At worst, it is just another
version of rolling exclusivity.
I want to learn what the FTC thinks about the Edwards-Collins
language.
What the proponents of this language have failed to do is to explain
why any third, fourth, fifth, or subsequent filer should be given 180-
day of very valuable marketing exclusivity?
Moreover, why for example should a fifth filer be treated any
differently than a sixth filer if neither has won a patent challenge
and both are ready to go to market?
This dog just won't hunt.
Recall that some experts at FDA don't even think this incentive is
necessary.
As I stated earlier, I am somewhat 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 are attacking on non-infringement.
Frankly, in light of the FTC report just issued this morning, I feel
compelled to reconsider if my sympathies are consistent with my use-it-
or-lose-it view even in the case, increasingly rare, I am told, of one
patent and one challenger.
I am troubled by the provision of the bill that appears to grant each
generic firm that qualifies for the benefit of the 180-day marketing
exclusivity incentive a 30-month period to secure FDA approval. This is
measured from the time of the filing of the generic drug application.
If the first firm eligible to take advantage of the 180-day benefit
drops out for some reason, it seems to me that the best thing for
consumers would be to approve all applications that are ready to go
without singling out any of these applications for 180-days of
exclusivity. If, for example, the second firm eligible under the terms
of Section 5 is in a dispute with FDA over a good manufacturing
practice inspection and can't go to market, it is consumers who will
suffer. In a case where, say, there are 14-months remaining on the 30-
month clock allowed under Edwards-Collins, it does not seem fair if the
next firm eligible on the list already has satisfied all of the FDA
requirements and is ready to go to market.
I would 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. The discussion at the HELP
Committee mark-up suggests that the language is, in fact, just another
elaborate version of the flawed rolling exclusivity policy. While I can
readily see why rolling exclusivity is attractive to generic drugs
firms--and their lawyers--who routinely challenge patents, I don't see
where this policy is good for the American people.
Whatever happened to the American tradition that rewards success in
litigation, not just filing papers with FDA and making a claim in
court?
For all of the reasons I have just discussed, I think it would be
wise for Congress to take time and reassess the wisdom of retaining the
180-day marketing exclusivity provision in essentially the same form as
enacted in 1984.
As I argued last night, the Senate would be well-served if we had a
more orderly discussion of the facts and recommendations contained in
the new FTC study.
I see that my friend from Massachusetts is trying to spin the FTC
study as supporting the changes in patent law contained in the HELP
Committee substitute.
But the fact is, and it is a fact that will be better understood over
time, that the FTC recommendations are at variance with the major
provisions of the bill on the floor.
Let me just spell some of them out for you.
The FTC urges adoption of legislation that would allow one 30-month
stay, measured from the time that each generic drug application is
submitted while S. 812 limits the stay to
[[Page S7570]]
those patents issued within 30-days of the approval of the pioneer
drug.
The HELP Committee Substitute contains several provisions that
require innovator firms to list all, and sue on, their patents related
to each particular pioneer drug or forfeit their customary patent
rights; the FTC makes no such recommendations regarding patent
forfeiture.
The HELP Committee Substitute creates a new private right of action
to attack the listing of patents with FDA, while the FTC report makes
no such recommendation.
The HELP Committee Substitute embraces a form of 180-day marketing
exclusivity that allows the exclusivity to roll from one generic drug
manufacturer to another in, I might add, a very complicated fashion
that potentially has no clear endpoint. The FTC Report appears to
support a very aggressive form of a use-it-or-lose-it policy which, for
example, would trigger the 180-day period from the time of a district
court decision. The pending legislation allows generic competition to
be delayed until after an appellate court rules.
The FTC recommends that certain potentially anti-competitive
arrangements between pioneer and generic firms be reported to the FTC
in a fashion similar to Senator Leahy's legislation, S. 754, the Drug
Competition Act. The HELP Committee is silent in this respect.
So the differences are significant between the bill on the floor and
what the FTC recommends.
No amount of spinning in the press will change these facts. In light
of the FTC study and some of the arguments that I have made here today,
I wonder if some of those who are backing S. 812 because they were told
it is a good bill will now reconsider what the bill does and decide
that they are being sold something of a bill of goods?
I would 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 balance of the old Hatch-Waxman Act.
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 even if I still have major problems with this hastily
considered floor vehicle, I commend them again today. I just hope that
they, and Senators Kennedy, Frist, Collins, and Edwards will work to
improve this legislation.
I think that over the last two weeks that I have made a case for
taking the time to get this legislation right.
We all know that S. 812 was plucked from the calendar to be used as a
vehicle to debate the Medicare Prescription Drug Benefit, not because
it was some finely tuned consensus bill.
As I said last night, let us not rush to adopt legislation in this
area before the ink is dry on the FTC report. We need to understand and
debate the FTC report and its recommendations. My first reading of the
Executive Summary of the FTC Study reveals a fundamental disconnect
between the agency's recommendations and the legislation that emanated
from the HELP Committee. The floor of the Senate is not the best place
for the type of discussion the FTC Report warrants.
We need to allow the Judiciary Committee to play a role in fashioning
legislation that is fundamentally an anti-trust bill with patent law
and civil justice reform implications. Certainly, the FTC smiled upon
what the Judiciary Committee was doing in this area. And just as
certainly, the PTO did not smile upon how the substitute to S.812
treats longstanding patent rights.
The detailed criticism that I have made to the pending bill in no way
minimizes the importance of the matters that are the subject of the
pending legislation, because they deserve Congressional attention.
Let me be clear. We should make some changes in the Hatch-Waxman Act.
No law so complex cannot be improved.
But let's do it the right way because the American public deserves
both the newest medicines and the most affordable medicines.
I do not believe, moreover, that S. 812 even identifies the most
important issues we should address in Hatch-Waxman reform.
I hope to return to the floor to discuss some ideas for a more
comprehensive approach to reforming the Drug Price Competition and
Patent Term Restoration Act. I suspect that many others, including my
friend, Henry Waxman, will want to participate in such a discussion.
I am unconvinced that focusing on how best to bring the law back to
the old days of 1984 is the right way to go about reforming the Hatch-
Waxman Act.
I think we may be well served if we attempt to modify the law in
order to help usher in a new era of drug discovery while, at the same
time, increasing patient access to the latest medicines.
Let us not adopt this hastily-crafted bill in the last week before
August recess. Please do not hold your nose and close your eyes and
vote for this bill by telling yourself that we can fix it in
conference. We can do better.
We would do better in the long run for the American people if we put
S. 812 aside for the time being and devote our attention to passing the
Omnibus Trade Promotion Authority, Trade Adjustment Assistance, and
Andean Pact legislation before this week runs out. We need to get the
economy going again and trade can help us achieve that goal.
Let's face it. S. 812 is not ready for adoption, but the trade
legislation is long overdue.
I ask unanimous consent that the letters from the PTO and BIO,
discussed earlier in my speech, be made part of the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Biotechnology Industry
Organization,
Washington, DC, July 22, 2002.
Hon. Edward Kennedy,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Dear Senator Kennedy: Thank you for your prompt response to
my letter of July 15 objecting to several new provisions of
S. 812, the Schumer-McCain legislation. No one was more
surprised than members of the biotechnology industry at these
last-minute changes, which pose significant problems for our
companies. At this stage in the debate, we must strongly
object to these provisions and urge that they be deleted from
the bill under consideration on the floor of the Senate.
The Biotechnology Industry Organization quite intentionally
took no position on the particulars of the original version
of the Schumer-McCain bill, leaving debate on the practices
described in your letter to others. But the bill has been
changed radically, without opportunity for members of our
industry to provide legal and policy reaction to the new
provisions on bioequivalence, loss of rights to sue for
patent infringement, and a right of action for generics to
sue our companies to ``correct'' patent information filed
with the Food and Drug Administration.
In BIO's July 15 letter, I pointed out the potentially
damaging consequences to our emerging industry that could
result from these provisions--carte blanche authority of FDA
to determine testing methods applicable to full NDAs, loss of
the ability to protect our intellectual property because of
failure to meet new filing deadlines under food and drug law,
and an unwarranted private right of action afforded generic
companies to sue members in efforts to `'delist'' patents or
``correct'' patent information. Whatever the purposes of
these provisions, we fundamentally disagree with their
consequences--perhaps the result of producing totally new
provisions only 36 hours before markup.
We also point out that we were assured by committee staff
that the bioequivalence provision was intended only to
confirm FDA's authority to craft tests for bioequivalence for
products not easily absorbed in the bloodstream. We were also
assured that this provision (section 7) would be worked out
before floor consideration. This has not occurred, despite
the fact that BIO provided draft language that accomplishes
precisely the stated purposes of the bioequivalence section.
BIO retains its admiration for you and your staff and
appreciate very much your past efforts to respond to
challenges that confront our industry in Massachusetts and
across the nation. We have no doubt that you did not intend
that the bill's new provisions pose threats to BIO companies,
and look forward to an opportunity to work with you to remove
from S. 812 the provisions on bioequivalence, loss of rights
to sue for infringement and the private cause of action
during its consideration on the Senate floor.
Sincerely yours,
Carl B. Feldbaum,
President.
[[Page S7571]]
____
United States Patent
and Trade Office,
Washington, DC, July 30, 2002.
Hon. Orrin Hatch,
U.S. Senate,
Washington, DC.
Dear Senator Hatch: In a few months, the United States
Patent and Trademark Office (USPTO) will celebrate its 200th
year in existence. During that time, we have been the only
Federal agency charged with administering this Nation's
patent laws and determining whether inventions are
patentable. USPTO plays a critical role in promoting and
protecting intellectual property and the work of our Agency
helps to stimulate American innovation and investment.
At your request, USPTO is providing its views on the
advisability of the changes in patent laws in S. 812, the
Greater Access to Affordable Pharmaceuticals Act. This letter
is intended to inform you of our objections to the current
language in S. 812.
First, in some cases, S. 812 would forfeit unnecessarily
the core right of patent holders--the right to exclude others
from practicing the invention for the entire patent term.
After years of research and development and significant
investment, the patent right is extinguished for the mere
failure to satisfy an administrative task or respond in a
timely manner. For example, if a patent holder fails to list
the patent with the Food and Drug Administration within a
certain time period, the patent is invalidated. Furthermore,
if a patent owner fails to bring an infringement action
within 45 days of receiving notice (also known as `Paragraph
IV') from a drug manufacturer that the patent is invalid or
not infringed by the generic drug, then the patent right is
forfeited. In this circumstance, the patent owner is barred
from ever bringing an infringement case in connection with
the generic drug at issue.
Second, we are concerned with the bill's disparate
treatment of patents depending on issue date. The Hatch-
Waxman Act gives a patent holder an automatic 30-month stay
to defend a challenge to the patent by a generic drug
company. S. 812 would apply this 30-month stay only to
patents that issue within 30 days of the new drug application
approval. This limitation is arbitrary and unrealistic. The
timing of issuance bears no relation to the importance of
innovation. Moreover, the patent applicant often has no
control over when a patent issues. Therefore, affording
certain benefits to patents that issue only within a certain
time frame would be unworkable and unjust.
Finally, USPTO believes it is vital to consider each patent
rigorously and uniformly to determine whether the application
satisfies the standards of patentability. All patent
applications are examined with equal scrutiny and all patents
must satisfy the same criteria of utility, novelty, and
nonobviousness before they are issued. Each pharmaceutical
patent, like all other patents, is entitled to a presumption
of validity and should be judged accordingly.
USPTO does recognize that some changes to current law may
be necessary to encourage appropriate access to generic
substitutes and prevent abuses of the patent laws. But S. 812
clearly is not the answer. In fact, this bill would likely do
the opposite of what its title suggests--by limiting access
to cutting-edge drugs, decreasing innovation, and ultimately
harming the quality of treatments available to patients.
Before considering any future legislative efforts, we
should applaud the success of the time-tested Hatch-Waxman
Act and respect the delicate industry balance it forged. In
all cases, any changes should incorporate the expertise of
the Committees on the Judiciary of Congress, in addition to
the appropriate Government agencies. Only through a carefully
conducted analysis can a result be reached that benefits
consumers while promoting the progress of science and
innovation.
I hope this information is helpful and I would welcome the
opportunity for consultation on future endeavors.
Sincerely,
James E. Rogan,
Under Secretary and Director.
____________________