[Congressional Record (Bound Edition), Volume 148 (2002), Part 11]
[Senate]
[Pages 14431-14439]
[From the U.S. Government Publishing Office, www.gpo.gov]




                 GREATER ACCESS TO PHARMACEUTICALS ACT

  Mr. HATCH. Mr. President, I rise to speak on the pending legislation, 
S. 812, the Greater Access to Pharmaceuticals Act. Even if I had major 
differences of opinion on the substance of this legislation, I commend 
Senators McCain and Schumer, Kennedy and Edwards for their efforts in 
this area.
  I especially wish to recognize the efforts of Senators Kennedy, 
Edwards, and Collins for their work, which was almost a complete 
rewriting of the McCain-Schumer bill. Let me also hasten to commend 
Senators Gregg and Frist for working to improve the bill that emerged 
from the HELP Committee and for their leadership during the debate.
  Mr. President, last week, I provided a brief summary of the existing 
statute that S. 812 seeks to amend, the Drug Competition and Patent 
Term Restoration Act of 1984. I happen to know something about this 
law, which is commonly referred to as the Waxman-Hatch Act, or 
alternatively, the Hatch-Waxman Act.
  Last week, I gave an overview of my concerns with the HELP Committee 
legislation. With those comments in mind, today, I want to delve 
further into the details of the HELP Committee re-write of S. 812 the 
bill originally introduced by Senators McCain and Schumer.
  The central components of S. 812 are aimed at rectifying concerns 
raised in recent years over two features of the 1984 law: first, the 
statutory 30-month stay granted to a pioneer firm's facing legal 
challenges to its patents by generic competitors; and, second the 180-
day period of marketing exclusivity awarded to generic drug firms that 
successfully challenge a pioneer firm's patents.
  During debate on S. 812, there have been a number of comments 
indicating that there is a substantial problem with these two 
provisions. That may or may not be the case. One great disadvantage of 
holding the floor debate at this time is that we do not have the 
benefit of an extensive Federal Trade Commission survey of the 
pharmaceutical industry that focuses on precisely these two issues that 
go to the heart of S. 812 and the substitute adopted by the HELP 
Committee. The results of this long-awaited, extensive, industry-wide 
FTC survey are expected in a few weeks.
  I have stated on numerous occasions that before this body undertakes 
a substantial rewrite of provisions central to the Hatch-Waxman Act, we 
should have the benefit of the FTC study and its implications.
  The Senate could have taken a more prudent course. The Senate could 
have waited for the FTC report. We--and by we I specifically include 
the Senate Judiciary Committee--could have held hearings on the FTC 
study, evaluated the data, and then discussed, debated, and refined the 
actual, now barely two-week old, legislative language that is pending 
on the floor today.
  But this was not possible due to the tactical decision of the 
Majority to dispense with the regular order so as to minimize the 
politically-inconvenient fact that the Senate Finance Committee would 
have most likely have rejected any Democratic Medicare drug proposal in 
favor of the Tripartisan approach.
  To my great disappointment, although not anyone's great surprise, we 
failed to arrive at the 60-vote consensus required to enact a Medicare 
drug bill in the Senate. Make no mistake about it. This is a great 
failure for the American people because for two years now we have set 
aside $300 billion in the federal budget to be spent over 10 years to 
provide prescription drug coverage for Medicare beneficiaries.
  We have all heard from elderly constituents many of whom live on 
limited, fixed-incomes--who have had substantial difficulties in paying 
for prescription drugs. Rather than rise to the occasion and make good 
on our promise to rectify that situation, and we are letting this 
abundant opportunity slip between our fingers.
  I am very disappointed with the outcome of the votes Tuesday. It is 
my hope that we can find a way to come together on the important issue 
of a Medicare drug benefit for our seniors.
  At a minimum, we should use the $300 billion already in the budget to 
expand drug coverage for those seniors who need the most help. What we 
should not do is enact an expensive, government-run scheme that could 
bankrupt our country and plunge our economy further into the abyss when 
the government usurps what should legitimately be a private-sector-run 
benefit.
  The collapse of any 60-vote consensus on the Medicare drug benefit 
does not show the public the type of bipartisan spirit that voters 
across the country say they prefer, in poll after poll after poll.
  And so, we move back to the important, if more mundane, matters in S. 
812.
  One of the real marvels of this debate is that we have finally found 
out who the bad guys are in this debate.
  It is not the government that has failed to make good on the promise 
to provide needy seniors with pharmaceutical coverage.
  No, it's the pharmaceutical industry, an industry that is working day 
and night to bring us the medicines, the miracle cures that seniors 
seek.
  I just had no idea that is who was going to be blamed.
  This game plan comes right out of the Clintoncare play-book. As you 
hear attack after attack on the drug companies, I just want all of you 
listening to this debate to know that a similar tactic was employed by 
the Democrats when they tried to foist Clintoncare on a very 
unreceptive public back in 1993 and 1994.
  Here is how David Broder and Haynes Johnson, two highly respected 
journalists, described the tactics of the Clinton White House in trying 
to pass its too grand health care reform plan:
  This quote is from ``The System,'' a book by Haynes Johnson and David 
Broder, two leading political writers in this town, both of whom write 
for the Washington Post. Neither of them would be considered, by any 
stretch of the imagination, conservative. This is what they had to say 
in this book called ``The System,'' talking about the American way of 
politics and how health care policy is formed:

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

  This is the second quote:

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

  As you can see, here are two liberal political writers who summarized 
the Clinton health plan.
  Villains . . . enemies all this sounds familiar in this debate. So, I 
will stipulate for the purpose of this debate that the pharmaceutical 
industry is the designated villain.
  It strikes me as curious at least that the sector of the economy that 
plows back the highest portion of its revenues back into research--and 
research on life-threatening diseases no less--is treated with such 
disdain, at times even contempt, on the floor of the Senate.
  Mr. President, from what has been said on the floor of the Senate you 
would think that this industry is trying to cause cancer, not trying to 
find cures.
  I note that Senator Kennedy has suggested our nation's biomedical 
research establishment has not really made much progress over the past 
few decades in terms of developing new drugs. I think the facts speak 
otherwise.
  For example, consider the array of medicines that have been developed 
to

[[Page 14432]]

treat HIV infection and the complications of AIDS. Through the unique 
public/private sector partnership that comprises the U.S. biomedical 
research enterprise, AIDS is being transformed from an invariably fatal 
disease into a chronic condition that we are so hopeful one day will 
have a cure.
  These advances do not come easily or on the cheap. I would note the 
exciting reports from the recent International AIDS meeting in 
Barcelona concerning the new class of AIDS medications represented by 
the new drug, T-20. Unlike many of the current anti-retroviral 
medications like AZT that seek to inhibit the replication of the HIV 
virus, T-20 attempts to block entry of the virus into healthy cells.
  Here is what one press account has said about this still unapproved, 
but highly promising drug:

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

  Let us not be too quick to characterize as villains and enemies those 
scientists and companies who are working every day to overcome dread 
diseases like AIDS. Think of the imagination and expertise required to 
design all 106 chemical reaction required to make T-20. How many times 
must they have failed to come up with the correct chemical pathway?
  I might add, as Senator Frist pointed out on the floor last week, 
that infectious disease experts like Dr. Tony Fauci at NIH have said 
that despite the substantial promise of T-20, there is still more work 
to be done on this drug. Specifically, it is imperative to develop a 
tablet form of this currently intravenous preparation if we will be 
able to effectively use the product in the Third World.
  Some in this debate have minimized the importance of product 
formulation patents and have suggested that such patents should not be 
eligible for the 30-month stay. But public health experts such as Dr. 
Anthony Fauci one of the leading experts in the world, are telling us 
that the formulation of drugs like T-20 is critical. Who is to say that 
the steps in addition to the 106 steps already painstakingly identified 
to make the IV preparation necessary to make a tablet form of the drug 
are not worthy of the same protection afforded other pharmaceutical 
patents since 1984?
  And if it turns out that such a formulation patent issues more than 
30-days after FDA can one-day approve a new drug application for a 
tablet form of T-20, why should this patent be given less procedural 
protection than other related patents? But this differential treatment 
of patents is exactly what could occur if we adopt the pending 
legislation.
  Mr. President, the Hatch-Waxman Act has been called one of the most 
important consumer bills in history. It has helped save consumers, by 
the Congressional Budget Office reckoning, $8 billion to $10 billion 
every year since 1984. It created the modern generic drug industry by 
creating this delicate balance between the pioneer research companies, 
and the generic companies that could readily copy drugs under Hatch-
Waxman. The scientific work that had taken R & D firms up to 15 years, 
$800 million and at least 5,000 to 6,000 failed drug companies for each 
successful new drug could be used by general firms under the 1984 law.
  I might add, the Hatch-Waxman Act has brought the generic industry 
from little over 15 percent of the marketplace to 47 percent as we 
speak, and it is going up all the time. That is what we thought should 
happen.
  We are at $490 million and still counting for this still unapproved 
promising new AIDS drug, T-20.
  Remarkable progress in the field of drug development has been made 
over the past 18 years since Waxman-Hatch was adopted. We have seen 
enormous strides in the treatment of heart disease, diabetes, 
arthritis, Alzheimer's and many others, including the 200 new drugs 
that have been approved to treat lower prevalence, so-called orphan 
diseases another bill that I helped author. I am proud to have been an 
author of the Orphan Drug Act that has given hope to so many American 
families.
  If our Nation is going to develop diagnostic tests, treatments, and 
vaccines to prevent and counter attacks of bioterrorism and potential 
chemical or even nuclear terrorism, just whom do you think is going to 
develop these products? I will tell you who. It will be those 
``villains'' in the pharmaceutical industry, in partnership with 
government and academic researchers, unless we hamper their ability to 
do so, if we do not watch ourselves carefully on this legislation.
  At some point we must put aside this one-dimensional, simplistic 
vilification of the pharmaceutical industry and examine more closely 
the actual substance of the pending legislation.
  Are the PhRMA companies always right? No, they are not, and neither 
are the generic companies always right. Hatch-Waxman created a delicate 
balance so they were competitive against each other, and it has worked 
very well.
  It is my strong preference to conduct the debate over amending the 
Hatch-Waxman Act with our eyes focused on the policies, not the 
politics.
  As I said last week, the pending legislation, S. 812, addresses 
important and complex issues of patent law, civil justice reform and 
antitrust policy. A strong case could be made that Senate consideration 
of this bill would be improved if the Judiciary Committee were given 
the opportunity to study the legislation, review the Federal Trade 
Commission report, and make its voice heard in this debate. It seems 
unlikely that anything resembling this process will unfold given the 
decision to rush the HELP Committee patent, antitrust, civil justice 
reform bill to the floor of the Senate.
  As a threshold matter, it seems to me that before we adopt S. 812, we 
should be certain that this bill is consistent with the longstanding 
goals of the statute S. 812 seeks to amend, the Drug Price Competition 
and Patent Term Restoration Act.
  Let me remind my colleagues, the goals of this law, passed in 1984, 
are twofold:
  First, to create a regulatory pathway that allows the American public 
to gain access to more affordable generic drugs; and,
  Second, to create incentives for manufacturers of pioneer drug 
products to see that the American public has access to the latest, 
cutting-edge medicines.
  As I described last week, the 1984 law is a carefully balanced 
statute and contains features designed to accomplish these two somewhat 
conflicting goals. This tension is inherent because of the competing 
nature of the desire, on one hand, to develop breakthrough drugs and, 
on the other hand, to make available generic copies of these pioneer 
products.
  As legislation is crafted to address the problems that have arisen up 
in recent years with respect to the Waxman-Hatch law, we must be 
careful not to devise a remedy that upsets the delicate balance of the 
law.
  I am concerned that the manner in which the HELP Committee substitute 
tries to fix the two most widely cited shortcomings of the 1984 law 
may, in fact, disturb the balance of the statute by, in some areas, 
overcorrecting and, in other areas, undercorrecting for the observed 
problems.
  Specifically, while the manner in which the Edwards-Collins HELP 
Committee substitute addresses the 30-month stay issue represents a 
major improvement over McCain-Schumer bill, I am afraid though, the 30-
month stay language represents a case of overcorrection.
  Last Thursday, I gave a short summary of the key provisions of the 
Hatch-Waxman Act. It only took me 1 hour and 32 minutes. After 
providing this background and context, I explained why I thought that 
the provisions of the pending legislation relating to patent rights and 
the 30-month stay went too far. Let me reiterate my concerns with the 
30-month stay.
  As has been stated by many during this debate, a pioneer drug patent 
holder, whose patents are under challenge

[[Page 14433]]

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

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

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

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

  Essentially, this particular provision I have just read gives generic 
drug manufacturers a head start over virtually all other producers of 
generic products. In other words, it gives the generic industry a 
tremendous advantage. Normally, making and using a patented product for 
the purpose of securing regulatory approval would be a clear case of 
patent infringement under section 271(a), but the Bolar Amendment--
which overrode a 1984 Federal Circuit Court of Appeals decision that 
precluded generic drug firms from using on-patent drugs to secure FDA 
approval or gear up production, in other words, the case overruled that 
right--allows the generic firms to violate customary patent rights 
because we put it in Hatch-Waxman. Section 271(e) is the Hatch-Waxman 
language.
  The public policy purpose of the Bolar Amendment meaning the Bolar 
amendment provided by the Hatch-Waxman Act is to allow generic drug 
makers to secure FDA approval and come onto the market the day after 
the patent on the pioneer drug expires. As I explained last week, there 
is a balance between the head start that the

[[Page 14434]]

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

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

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

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

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

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

  Also adding its voice to the debate over this new, unvetted language 
is the American Intellectual Property Law Association. The AIPLA is a 
national bar association representing a diverse group of more than 
14,000 individuals from private, corporate, academic and governmental 
practice of intellectual property law.
  Mr. President, I ask unanimous consent to have printed in the Record 
a copy of a July 22, 2002 letter from the AIPLA.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
         American Intellectual Property Law Association
                                               Arlington, Virginia
     Hon. Orrin G. Hatch,
     U.S. Senate,
     Washington, DC.
       Dear Senator Hatch: I am writing on behalf of the American 
     Intellectual Property Law Association to express our concerns 
     about provisions in S. 812 that would undercut long standing 
     principles of patent law and would set an unfortunate example 
     for other nations to emulate.
       The AIPLA is a national bar association of more than 14,000 
     members engaged in private and corporate practice, in 
     government service, and in the academic community. The AIPLA 
     represents a wide and diverse spectrum of individuals, 
     companies and institutions involved directly or indirectly in 
     the practice of patent, trademark, copyright,

[[Page 14435]]

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

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

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

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

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

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

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

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

[[Page 14436]]

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

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

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

       In the last 50 years there have been dramatic improvements 
     in life expectancy and better health care outcomes, in 
     pertinent part, because of new drugs and therapies. These 
     advances have occurred because the United States, unlike 
     other nations, has used a strong patent system to help create 
     a balanced set of incentives. That system of incentives for 
     innovation is at risk, if as proposed in the pending 
     legislation, the investment backed and settled property 
     rights in patents are retroactively taken away.

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

       There was never any doubt that the goal . . . was to bring 
     generics to the market earlier using the route of legal 
     challenge with a reward to be paid to the entrepreneur with 
     the courage and facts to successfully challenge.


[[Page 14437]]


  It was and is very clear that the law was not designed to allow deals 
between brand and generic companies to delay competition.

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

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

  Mr. Balto assessed:

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

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

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

  In 1999, FDA proposed a rule which embraced a use it or lose it 
policy whereby if the first eligible generic drug applicant did not 
promptly go to market, all other approved applicants could commence 
sales. Molly Boast, Director of the FTC Bureau of Competition, 
testified last May that, at the staff level, FTC supported FDA's use it 
or lose it proposal. If our goal is to maximize consumer savings after 
a patent has been defeated, I find it difficult to see how rolling 
exclusivity achieves this goal. I certainly prefer FDA's use it or lose 
it policy over the McCain-Schumer brand of rolling exclusivity.
  In that regard, I must again commend the sponsors of the Edwards-
Collins Substitute for rejecting the McCain-Schumer rolling exclusivity 
policy in favor of what Senator Edwards calls modified use-it-or-lose-
it. Having said that, I was alarmed to learn that during mark-up 
Senator Edwards responded to a question by stating it was conceivable 
that his modified use-it-or-lose-it language might actually roll 
indefinitely. This disturbs me. Every time the exclusivity would roll 
to another drug firm, consumers will be further away from the day when 
multi-firm generic price competition can begin in the marketplace.
  Frankly, I am not certain that I completely understand how the 
forfeiture language in Section 5 of the bill works. I do not think I am 
alone in this confusion. At some point, I would like to engage in a 
colloquy with the bill managers to ask some questions designed to 
clarify precisely how this provision works.
  Let me say that if the bill reinstates the successful defense 
requirement and gives awards to the successful challenger so long as 
the firm goes to market in a timely fashion, I am supportive of the 
general concept. But I must say that I think that there are some real 
advantages to Senator Gregg's simple and straight-forward policy of 
more closely following FDA's old-fashioned use-it-or-lose-it proposal.
  As I stated earlier, I am generally sympathetic to the concerns of 
generic drug firms that any exclusivity awarded should be measured from 
the time of an appellate court decision. But this principle may not 
hold up if any form of rolling exclusivity is adopted or if we have 
multiple patents and multiple challengers, some of whom are attacking 
on invalidity and some of whom are attacking on non-infringement.
  I must say I am troubled by the provision of the bill that appears to 
grant each generic firm that qualifies for the benefit of the 18-month 
marketing exclusivity incentive a 30-month period to secure FDA 
approval, measured from the from the time of the filing of the generic 
drug application.
  Let's say that the first firm eligible to take advantage of the 180-
day benefit drops out for some reason. Assume also that the next firm 
eligible under the terms of Section 5 is in the midst of, for example, 
a negative good manufacturing inspection and can't go to market, but 
has say 14 months remaining on the 30-month clock. It would hardly seem 
like an appropriate outcome if, for example, the next firm eligible on 
the list already has satisfied all of the FDA requirements and has 
received tentative final approval, but must wait until the 30-month 
clock runs out.
  I hope that the proponents of the substitute amendment will help us 
all understand just how Section 5 is intended to work. It is difficult 
for me to see why we should adopt a policy whereby the balance of the 
30-month period

described in Section 5(a)(2)``(D)(i) (III)(dd)'' on page 44 of the 
bill, could conceivably be greater than the 180-days of marketing 
exclusivity. Upon default of the first qualified applicant, why should 
we wait for a second eligible drug firm to obtain FDA approval when 
there may be a third, fourth, or fifth applicant in line with FDA 
approval ready to go?
  I hope the sponsors of the legislation are not locked into their so-
called modified use it or lose it policy, because I think it would be 
wise for Congress to step back and reassess the wisdom of retaining the 
180-day marketing exclusivity provision in essentially the same form as 
enacted in 1984. Why not take this opportunity to re-think the 180-day 
rule?
  At one extreme are those who have suggested that the 180-day 
marketing exclusivity provision may not even be necessary at all. Liz 
Dickinson, a top-notch career attorney at FDA, has asked: ``I suggest 
we look at whether 180-day exclusivity is even necessary, and I know 
that there is this idea that it is an incentive to take the risk. I say 
the facts speak otherwise. If you have a second, third, fourth, fifth 
generic in line for the same blockbuster drug . . . undertaking the 
risk of litigation without the hope of exclusivity, is that exclusivity 
even necessary?''
  Ms. Dickinson went on to make the following observation with respect 
to the 180-day rule, ``We have got a provision that is supposed to 
encourage competition by delaying competition. It has got a built in 
contradiction, and

[[Page 14438]]

that contradiction . . . is bringing down part of the statute.''
  At the Judiciary Committee hearing on May 24, 2001, Gary Buehler, 
FDA's top official in the Office of Generic Drugs agreed with his 
colleague's assessment:

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

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

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

  As one of the drafters, I must accept my share of responsibility for 
not fully appreciating the implications of this distinction. I think 
what Mr. Engelberg is pointing out that the 180-day rule acts as only a 
floor in non-infringement cases. As long as any patents stand, a 
particular non-infringer's marketing exclusivity can extend well beyond 
180 days until such time as another non-infringer comes along. 
Conversely, doesn't the 180-day floor work to the detriment of 
consumers whenever it acts to block market entry of a second non-
infringer during the 180-day period? Why shouldn't a second or third 
non-infringer be granted immediate access to the market as would occur 
in any other industry? Consumers would reap immediate benefits for 
price competition.
  I hope that my colleagues working on the bill will consider the 
distinction between invalidity and non-infringement as this debate 
continues over the next week. While I am of the mind to retain a strong 
financial incentive to encourage vigorous patent challenges by generic 
drug firms, we must ask why identical rewards are granted for 
successful invalidity and non-infringement claims. I welcome the 
comments and suggestions of my colleagues and other interested parties 
on this matter
  Frankly, I think we need more public discussion and debate about the 
wisdom of retaining--lock, stock, and barrel--the old 180-day 
exclusivity award.
  For example, even if we adopt the modified use it or lose it approach 
of the HELP Committee bill and the first qualified generic manufacturer 
cannot, or will not, commence marketing and the exclusivity moves to 
the next qualified applicant, why should the second manufacturer get 
the full 180-days? Why not 90 days? Why not 60 days?
  After all, once the exclusivity begins to roll and roll and we move 
away from granting the marketing exclusivity to the successful generic 
litigant and Americans always prefer actual winners--we may end up with 
a mere second filer--and since when does our society grant such 
lucrative rewards to someone who merely files some papers?
  And what is so sacrosanct about 180-days in the first place? It is my 
information that in 1984 the number-one selling drug in the United 
States was Tagamet, with domestic sales of about $500 million. I am 
told that today 
the cholesterol-controlling medicine, Lipitor, has domestic U.S. sales 
of over $5 billion. Lipitor sales are 10-times higher in the U.S. than 
domestic Tagamet sales were in 1984. I understand that worldwide sales 
of Lipitor are about $7 billion.
  Even adjusting for inflation, it seems clear that 180-days of 
marketing exclusivity is worth more, and a lot more, today than it was 
worth in 1984.
  What might 180-days of marketing exclusivity for today's blockbuster 
drugs be worth in profits to the generic firm holding the 180-day 
marketing exclusivity rights?
  Let's be frank about what is going on here: Retention of the 180-day 
marketing exclusivity provision is one of those areas in which both the 
generic sector and the R&D sector have something of a mutual interest. 
And when all is said and done, I think that the joint interest of the 
generics and the pioneer firms is not in perfect alignment with the 
interests of consumers.
  This is so because during the 180-day time frame, when there is only 
one generic competitor, the pioneer firm does not take anywhere near 
the hit on market share and profits that occurs when multiple generic 
firms enter the market. Similarly, the first generic on the market is 
under no pressure to cut the price anywhere near as much as when there 
is competition from multiple generic firms.
  The report, Drug Trend: 2001, published by Express Scripts, notes 
this dynamic:

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

  Given the dramatic increase in drug sales for today's blockbuster 
products, it does not seem far-fetched to project that the 180-
marketing exclusivity reward can amount to hundreds of millions of 
dollars--and perhaps over one billion dollars--in profits to the 
fortunate generic drug manufacturer. I am all for assuring that there 
are sufficient incentives to ensure patent challenges, but isn't there 
a limit beyond which we should direct these excess profits back to 
consumers?
  Would we rather see 25 percent to 40 percent of that money in the 
hands of the trial attorneys who brought the case? Or, would we rather 
see at least some of those funds earmarked for attorneys' fees, be 
channeled to help citizens lacking access to prescription drugs?
  Shouldn't we get the facts concerning the change in value of the 180-
day marketing exclusivity today compared to 1984 and make any 
appropriate adjustment to this incentive? We don't want to set the 
incentive so low as to discourage challenges to non-blockbuster 
patents.
  My purpose in rasing these points is to get an indication from the 
sponsors of this legislation and other interested parties, such as 
patient advocacy organizations, state Medicaid agencies, and insurers, 
whether there is interest in discussing the advisability of passing on 
more of the value associated with the marketing exclusivity to 
consumers if it appears it is fair to do so.
  If there is interest, I would be willing to help fashion an 
appropriate amendment. It seems to me that we need to

[[Page 14439]]

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

                          ____________________