[Congressional Record Volume 153, Number 9 (Wednesday, January 17, 2007)]
[Senate]
[Pages S679-S681]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KOHL (for himself, Mr. Grassley, Mr. Leahy, Mr. Schumer, 
        and Mr. Feingold):
  S. 316. A bill to prohibit brand name drug companies from 
compensating generic drug companies to delay the entry of a generic 
drug into the market; to the Committee on the Judiciary.
  Mr. KOHL. Mr. President, I rise today to introduce the Preserve 
Access to Affordable Generics Act. This legislation will stop one of 
the most egregious tactics used by the brand-name pharmaceutical 
industry to keep generic competitors off the market, leaving consumers 
with unnecessary high drug prices.
  The way it is done is simple--a drug company that holds a patent on a 
blockbuster brand-name drug, pays a generic drug maker off to delay the 
sale of a competing generic product that might dip into their profits. 
The brand name company profits so much by delaying competition that it 
can easily afford to pay off the generic company, leaving consumers the 
big losers who continue to pay unnecessarily high drug prices.
  Last year, the Supreme Court refused to consider an appeal by the 
Federal Trade Commission to reinstate anti-trust charges against a 
brand-name drugs maker. Since the recent court decisions allowing these 
backroom deals, there has been a sharp rise in the number of 
settlements in which brand-name companies pay off generic competitors 
to keep their cheaper drugs off the market. In a report issued last 
year, the FTC found that more than two-thirds of the 10 settlement 
agreements made in 2006 included a pay-off from the brand in exchange 
for a promise by the generic company to delay entry into the market.
  The decision by the Supreme Court is a blow to consumers who save 
billions of dollars on generics every year. When brand, name drugs lose 
patent rights, this opens the door for consumers, employers, third-
party payers, and other purchasers to save billions--63 percent on 
average--by using generic versions of these drugs. A recent study 
released earlier this year by Pharmaceutical Care Management 
Association, showed that health plans and consumers could save $26.4 
billion over the next 5 years by using the generic versions of 14 
popular drugs that are scheduled to lose their patent protections 
before 2010.
  Last year, I was successful in including an additional $10 million in 
the fiscal year 07 Agriculture Appropriations bill for the Food and 
Drug Administration's Office of Generic Drugs, an effort to help reduce 
the growing backlog of generic drug applications. The FDA Office of 
Generic Drugs has reported a backlog of more than 800 generic drug 
applications with more applications for new generics being received 
than ever before.
  But even approval by the FDA doesn't always guarantee that consumers 
will have access to these affordable drugs. Brand-name pharmaceutical 
manufacturers have learned to circumvent the Drug Price Competition and 
Patent Term Restoration Act, commonly referred to as Hatch-Waxman, 
using litigation and other means to extend the life of patents and keep 
generics from entering the market Of the six approved first generics 
for LA popular brand-name drugs taken by seniors over the last year, 
only two have actually reached the market, while the others are being 
kept of the shelves by patent disputes.
  We cannot profess to care about the high cost of prescription drugs 
while turning a blind eye to anticompetitive backroom deals between 
brand and generic drug companies. It's time to stop these drug company 
pay-offs that only serve the companies involved and deny consumers to 
affordable generic drugs. I urge my colleagues to join me in this 
effort.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 316

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

     SECTION 1. SHORT TITLE.

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

     SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) prescription drugs make up 11 percent of the national 
     health care spending but are 1 of the largest and fastest 
     growing health care expenditures;
       (2) 56 percent of all prescriptions dispensed in the United 
     States are generic drugs, yet they account for only 13percent 
     of all expenditures;
       (3) generic drugs, on average, cost 63 percent less than 
     their brand-name counterparts;
       (4) consumers and the health care system would benefit from 
     free and open competition in the pharmaceutical market and 
     the removal of obstacles to the introduction of generic 
     drugs;
       (5) full and free competition in the pharmaceutical 
     industry, and the full enforcement of antitrust law to 
     prevent anticompetitive practices in this industry, will lead 
     to lower prices, greater innovation, and inure to the general 
     benefit of consumers.
       (6) the Federal Trade Commission has determined that some 
     brand name pharmaceutical manufacturers collude with generic 
     drug manufacturers to delay the marketing of competing, low-
     cost, generic drugs;
       (7) collusion by the brand name pharmaceutical 
     manufacturers is contrary to free competition, to the 
     interests of consumers, and to the principles underlying 
     antitrust law;
       (8) in 2005, 2 appellate court decisions reversed the 
     Federal Trade Commission's long-standing position, and upheld 
     settlements that include pay-offs by brand name 
     pharmaceutical manufacturers to generic manufacturers 
     designed to keep generic competition off the market;
       (9) in the 6 months following the March 2005 court 
     decisions, the Federal Trade Commission found there were 
     three settlement agreements in which the generic received 
     compensation and agreed to a restriction on its ability to 
     market the product;
       (10) the FTC found that more than \2/3\ of the 
     approximately ten settlement agreements made in 2006 include 
     a pay-off from the brand in exchange for a promise by the 
     generic company to delay entry into the market; and
       (11) settlements which include a payment from a brand name 
     manufacturer to a generic manufacturer to delay entry by 
     generic drugs are anti-competitive and contrary to the 
     interests of consumers.
       (b) Purposes.--The purposes of this Act are--
       (1) to enhance competition in the pharmaceutical market by 
     prohibiting anticompetitive agreements and collusion between 
     brand name and generic drug manufacturers intended to keep 
     generic drugs off the market;
       (2) to support the purpose and intent of antitrust law by 
     prohibiting anticompetitive agreements and collusion in the 
     pharmaceutical industry; and
       (3) to clarify the law to prohibit payments from brand name 
     to generic drug manufacturers with the purpose to prevent or 
     delay the entry of competition from generic drugs.

     SEC. 3. UNLAWFUL COMPENSATION FOR DELAY.

       The Clayton Act (15 U.S.C. 12 et seq.) is amended--
       (1) by redesignating section 25 as section 29; and
       (2) by inserting after section 27 the following:

[[Page S680]]

     ``SEC. 28. UNLAWFUL INTERFERENCE WITH GENERIC MARKETING.

       ``(a) It shall be unlawful under this Act for any person, 
     in connection with the sale of a drug product, to directly or 
     indirectly be a party to any agreement resolving or settling 
     a patent infringement claim which--
       ``(1) an ANDA filer receives anything of value; and
       ``(2) the ANDA filer agrees not to research, develop, 
     manufacture, market, or sell the ANDA product for any period 
     of time.
       ``(b) Nothing in this section shall prohibit a resolution 
     or settlement of patent infringement claim in which the value 
     paid by the NDA holder to the ANDA filer as a part of the 
     resolution or settlement of the patent infringement claim 
     includes no more than the right to market the ANDA product 
     prior to the expiration of the patent that is the basis for 
     the patent infringement claim.
       ``(c) In this section:
       ``(1) The term `agreement' means anything that would 
     constitute an agreement under section 1 of the Sherman Act 
     (15 U.S.C. 1) or section 5 of the Federal Trade Commission 
     Act (15 U.S.C. 45).
       ``(2) The term `agreement resolving or settling a patent 
     infringement claim' includes, any agreement that is 
     contingent upon, provides a contingent condition for, or is 
     otherwise related to the resolution or settlement of the 
     claim.
       ``(3) The term `ANDA' means an abbreviated new drug 
     application, as defined under section 505(j) of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)).
       ``(4) The term `ANDA filer' means a party who has filed an 
     ANDA with the Federal Drug Administration.
       ``(5) The term `ANDA product' means the product to be 
     manufactured under the ANDA that is the subject of the patent 
     infringement claim.
       ``(6) The term `drug product' means a finished dosage form 
     (e.g., tablet, capsule, or solution) that contains a drug 
     substance, generally, but not necessarily, in association 
     with 1 or more other ingredients, as defined in section 
     314.3(b) of title 21, Code of Federal Regulations.
       ``(7) The term `NDA' means a new drug application, as 
     defined under section 505(b) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 355(b)).
       ``(8) The term `NDA holder' means--
       ``(A) the party that received FDA approval to market a drug 
     product pursuant to an NDA;
       ``(B) a party owning or controlling enforcement of the 
     patent listed in the Approved Drug Products With Therapeutic 
     Equivalence Evaluations (commonly known as the `FDA Orange 
     Book') in connection with the NDA; or
       ``(C) the predecessors, subsidiaries, divisions, groups, 
     and affiliates controlled by, controlling, or under common 
     control with any of the entities described in subclauses (i) 
     and (ii) (such control to be presumed by direct or indirect 
     share ownership of 50 percent or greater), as well as the 
     licensees, licensors, successors, and assigns of each of the 
     entities.
       ``(9) The term `patent infringement' means infringement of 
     any patent or of any filed patent application, extension, 
     reissue, renewal, division, continuation, continuation in 
     part, reexamination, patent term restoration, patents of 
     addition and extensions thereof.
       ``(10) The term `patent infringement claim' means any 
     allegation made to an ANDA filer, whether or not included in 
     a complaint filed with a court of law, that its ANDA or ANDA 
     product may infringe any patent held by, or exclusively 
     licensed to, the NDA holder of the drug product.''.

     SEC. 4. NOTICE AND CERTIFICATION OF AGREEMENTS.

       (a) Notice of All Agreements.--Section 1112(c)(2) of the 
     Medicare Prescription Drug, Improvement, and Modernization 
     Act of 2003 (21 U.S.C. 3155 note) is amended by--
       (1) striking ``the Commission the'' and inserting ``the 
     Commission (1) the''; and
       (2) inserting before the period at the end the following: 
     ``; and (2) a description of the subject matter of any other 
     agreement the parties enter into within 30 days of an 
     entering into an agreement covered by subsection (a) or 
     (b)''.
       (b) Certification of Agreements.--Section 1112 of such Act 
     is amended by adding at the end the following:
       ``(d) Certification.--The Chief Executive Officer or the 
     company official responsible for negotiating any agreement 
     required to be filed under subsection (a), (b), or (c) shall 
     execute and file with the Assistant Attorney General and the 
     Commission a certification as follows: `I declare under 
     penalty of perjury that the following is true and correct: 
     The materials filed with the Federal Trade Commission and the 
     Department of Justice under section 1112 of subtitle B of 
     title XI of the Medicare Prescription Drug, Improvement, and 
     Modernization Act of 2003, with respect to the agreement 
     referenced in this certification: (1) represent the complete, 
     final, and exclusive agreement between the parties; (2) 
     include any ancillary agreements that are contingent upon, 
     provide a contingent condition for, or are otherwise related 
     to, the referenced agreement; and (3) include written 
     descriptions of any oral agreements, representations, 
     commitments, or promises between the parties that are 
     responsive to subsection (a) or (b) of such section 1112 and 
     have not been reduced to writing.'.''.

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

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

     SEC. 6. STUDY BY THE FEDERAL TRADE COMMISSION.

       (a) Requirement for a Study.--Not later than 180 days after 
     the date of enactment of this Act and pursuant to its 
     authority under section 6(a) of the Federal Trade Commission 
     Act (15 U.S.C. 46(a)) and its jurisdiction to prevent unfair 
     methods of competition, the Federal Trade Commission shall 
     conduct a study regarding--
       (1) the prevalence of agreements in patent infringement 
     suits of the type described in section 28 of the Clayton Act, 
     as added by this Act, during the last 5 years;
       (2) the impact of such agreements on competition in the 
     pharmaceutical market; and
       (3) the prevalence in the pharmaceutical industry of other 
     anticompetitive agreements among competitors or other 
     practices that are contrary to the antitrust laws, and the 
     impact of such agreements or practices on competition in the 
     pharmaceutical market during the last 5 years.
       (b) Consultation.--In conducting the study required under 
     this section, the Federal Trade Commission shall consult with 
     the Antitrust Division of the Department of Justice regarding 
     the Justice Department's findings and investigations 
     regarding anticompetitive practices in the pharmaceutical 
     market, including criminal antitrust investigations completed 
     by the Justice Department with respect to practices or 
     conduct in the pharmaceutical market.
       (c) Requirement for a Report.--Not later than 1 year after 
     the date of enactment of this Act, the Federal Trade 
     Commission shall submit a report to the Judiciary Committees 
     of Senate and House of Representatives, and to the Department 
     of Justice regarding the findings of the study conducted 
     under subsection (a). This report shall contain the Federal 
     Trade Commission's recommendation as to whether any amendment 
     to the antitrust laws should be enacted to correct any 
     substantial lessening of competition found during the study.
       (d) Federal Agency Consideration.--Upon receipt of the 
     report required by subsection (c), the Attorney General or 
     the Chairman of the Federal Trade Commission, as appropriate, 
     shall consider whether any additional enforcement action is 
     required to restore competition or prevent a substantial 
     lessening of competition occurring as a result of the conduct 
     or practices that were the subject of the study conducted 
     under subsection (b).

     SEC. 7. AUTHORIZATION OF APPROPRIATIONS.

       There are authorized to be appropriated to the Federal 
     Trade Commission such sums as may be necessary to carry out 
     the provisions of this Act.

  Mr. LEAHY. Mr. President, I am pleased to join Senators Kohl, 
Feingold, Grassley and Schumer in introducing the Preserve Access to 
Affordable Generics Act of 2007. This legislation is a continuation of 
a longstanding, bipartisan effort to provide consumers with more 
choices for medications at lower costs. Better access to affordable 
prescription medication is of vital importance to seniors, families, 
and consumers across the Nation who are struggling to keep up with the 
ever increasing costs of health care.
  This legislation builds on the Drug Competition Act, which I authored 
in 2001 and which became law in 2003 in the Medicare Modernization Act. 
Recently, two Federal courts undermined the intent of this law; the 
legislation we introduce today will address that problem. The Preserve 
Access to Affordable Generics Act will result in lower prescription 
drug costs for all Americans by preventing a pernicious practice in 
which brand-name pharmaceutical companies pay other drug companies not 
to produce and market generic drugs--which can be 80 percent less 
expensive than their brand-name counterparts--as part of private patent 
settlement agreements.
  The Hatch-Waxman Act was intended to facilitate the entry of lower-
cost generic drugs into the market, making medication more affordable, 
while protecting patent rights to foster innovation. It created a 
process, known as the Abbreviated New Drug Application, ANDA, to speed 
approval of generics. Under ANDA, an applicant can receive expedited 
approval from the FDA to market a generic product. An applicant using 
ANDA may certify that the manufacturing of its new drug will either not 
infringe on a previously patented drug on which it is based, or that 
the existing patent is invalid. After certifying an ANDA, the generic 
applicant must give notice to the patent-holder, at which point the 
patent-holder has 45 days to file a patent infringement against the 
applicant.
  More times than not, disputes over an ANDA are resolved through 
private settlements. Unfortunately, the

[[Page S681]]

underpinnings of these private settlements are becoming more and more 
questionable; drug companies are abusing Hatch-Waxman provisions, and 
using settlement opportunities to limit consumer choices and keep 
consumer prices artificially high. The FTC had been policing these 
deals to ensure they were not anticompetitive until two recent 
appellate court decisions limited it's role.
  Hatch-Waxman created a good framework for promoting innovation while 
speeding the market entry of affordable drugs. The trend of 
anticompetitive agreements between brand-name pharmaceutical companies 
and generic companies to delay entry into the market is a troubling 
abuse of that good law. Some drug firms have colluded to pad their 
profits by forcing consumers to pay higher prices than they would pay 
for lower-cost generics. Congress never intended for brand-name drug 
companies to be able to grease the palms of generic companies by paying 
them not to produce generic medicines.
  Rarely do we have such a clear-cut opportunity as this to remove 
obvious impediments that prevent the marketplace from working as it 
should--to the benefit of consumers. Congress should seize this 
opportunity and enact legislation that plainly makes anticompetitive 
deals, such as those I have outlined, illegal.
  The Preserve Access to Affordable Generics Act will accomplish this 
goal. I look forward to working with my colleagues on both sides of the 
aisle to pass this timely and needed legislation.
                                 ______