[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.

                          ____________________