[Congressional Record (Bound Edition), Volume 148 (2002), Part 11]
[Senate]
[Pages 15675-15679]
[From the U.S. Government Publishing Office, www.gpo.gov]




                PHARMACEUTICAL RESEARCH AND DEVELOPMENT

  Mr. HATCH. Mr. President, I rise to speak on a subject related to the 
debate that we concluded yesterday--at least for the time-being--and 
that subject is pharmaceutical research and development.
  Yesterday, the Senate was unable to reach consensus on the 
appropriate structure and scope of the much-needed Medicare 
prescription drug benefit. This was unfortunate for millions of senior 
citizens across America, including thousands of Utahns.
  It is my hope that after the August recess it will be possible for 
the Senate to match the success of the House of Representatives and 
pass a Medicare drug bill. I know that we sponsors of the tripartisan 
proposal will not give up. Senators Breaux, Jeffords, Grassley, Snowe, 
and I will redouble our efforts to build support for our plan.
  It was also unfortunate yesterday that the Senate adopted S. 812, the 
Greater Access to Pharmaceuticals Act.
  This is the legislation that was originally introduced by Senators 
McCain and Schumer and virtually re-written in the HELP Committee in 
the form of an amendment sponsored by Senators Edwards and Collins.
  Let me be clear. I am supportive of reasonable changes to the Drug 
Price Competition and Patent Term Restoration Act, commonly referred to 
as Waxman-Hatch, or Hatch-Waxman.
  I do not oppose amending the Act. However, I do oppose the way in 
which it was amended, both in the HELP Committee and here on the floor.
  I have spoken at some length about the deficiencies of this bill--
that appeared only the day before the mark-up on July 10th, and was 
rocketed straight to the Senate floor the next week. While it was 
pending for over 2 weeks, it is accurate to say that the central matter 
under consideration was the

[[Page 15676]]

Medicare drug benefit issues and that there was relatively little focus 
on the specifics of the underlying bill.
  Despite the lopsided vote yesterday, I have explained why I thought, 
and still think, that it would have been preferable to hold hearings on 
this potentially important but largely un-vetted bill.
  As ranking Republican member of the Senate Judiciary Committee, I 
have made known my objections to the manner in which the HELP Committee 
has acted to usurp the jurisdiction of the Judiciary Committee. When 
all is said and done, S. 812 is fundamentally an antitrust bill colored 
by civil justice reform and patent law considerations.
  We all know that S. 812 became the floor vehicle for the Medicare 
drug debate for one major reason the Democratic leadership recognized 
that if the regular order were observed and a mark-up were held in the 
Finance Committee, it was almost certain that the tripartisan bill 
would have been reported to the floor.
  I would point out to my colleagues that have just secured final 
passage of the conference report to accompany the omnibus bipartisan 
trade package. This bipartisan bill--perhaps the most important 
economic legislation of this Congress and a bill that will have lasting 
impact for years to come--came out of the Finance Committee.
  I think most would agree that the Finance Committee has a long track 
record of reaching bipartisan consensus on major issues facing our 
country.
  Perhaps if the Democratic leadership had given the Finance Committee 
the opportunity to do its job, the great success of the trade 
legislation would have been duplicated with respect to the Medicare 
drug benefit.
  Instead, we come to the August recess without a Senate Medicare drug 
benefit bill to conference with the House.
  We also come to August, almost as punishment for failing on the 
Medicare drug benefit issue, with the flawed HELP Committee substitute 
to S. 812 now adopted by the full Senate.
  We could have held hearings on the actual language of the substitute.
  We could have taken time to study the facts and recommendations of 
the major Federal Trade Commission report of the very provisions of law 
that S. 812 amends.
  We could have learned why the Patent and Trademark Office opposes the 
language of the bill.
  We could have learned what the Food and Drug Administration and 
Department of Justice, and the Office of the United States Trade 
Representative had to say about the bill.
  But we did not.
  Instead of taking the time for a careful evaluation of a potentially 
important change in the law, for the sake of short-term political 
tactics in an election year, we brought this bill to the floor in a 
poisonous atmosphere designed in part to vilify one segment of the 
pharmaceutical industry.
  While S. 812 completely revised most of the McCain-Schumer language 
and made several significant steps in the right direction, there are 
significant problems in several of the new features that so 
mysteriously found their way into the bill on the day before the mark-
up.
  Since I have done so in some detail previously, I will not catalog 
these problems again today.
  And even though I still oppose various aspects of key provisions of 
the bill that passed the Senate in the denouement of the Medicare 
debate yesterday, I want to congratulate Senators McCain, Schumer, 
Kennedy, Edwards, and Collins for the substantial vote yesterday.
  Nevertheless, I hope that our colleagues in the House will study the 
Senate legislation, and consult with experts in the Administration, 
including the FTC, PTO, DOJ, FDA, and USTR, and other affected parties 
as they decide how best to address the matters taken up by the still 
barely three weeks' old language of the HELP Committee substitute to S. 
812.
  Again, let me reiterate that I do not oppose legislation in this 
area. I concur with the majority of the HELP Committee and the Senate 
that changes need to be made. They just need to be made in a more 
measured fashion, taking into account the latest recommendations of the 
Federal Trade Commission.
  I plan to continue to participate in this debate as action moves to 
the House. I will work with the House, the administration, and others 
with a stake in the outcome of this legislation.
  Frankly, my first impression is that the FTC report provides some 
critical information and thoughtful recommendations for legislation. I 
was, of course, pleased that the FTC's first major recommendation--
allowing only one 30-month stay for all patents listed with FDA at the 
time that each particular generic drug application is filed with the 
agency--was precisely what I have advocated.
  The Senate-adopted version of S. 812 goes way beyond this policy. 
Why?
  I am also supportive of the FTC's second, and final, major 
recommendation, to require that any potentially anti-competitive brand 
name-generic agreements be submitted for FTC review. This is consistent 
with the suggestions I made to Chairman Leahy in connection with his 
bill, the Drug Competition Act, S. 754.
  I am still studying the three minor FTC recommendations that aim to 
promote price competition and hinder the type of collusive arrangements 
that on a few but very unfortunate occasions have grown out of the 180-
day marketing exclusivity provisions of the law.
  Taken together these three recommendations appear to promote a very 
aggressive version of the use-it-or-lose-it policy I have advocated. 
Not that I pretend to understand the very complicated exclusivity, 
forfeiture, and transfer provisions of section 5 of the Edwards-Collins 
Amendment--and a review of the transcript of the mark-up suggests that 
I am not alone in my confusion--the HELP Committee adopted quasi-
rolling exclusivity policy triggered only by an appellate court 
decision appears to be significantly at odds with where the FTC and I 
come out on this issue.
  It is very unfortunate that the rushed timing brought about by the 
tactically convenient decision to mesh S. 812 with the volatile 
politics of Medicare acted to minimize the value of this over-a-year-
in-the-making, but still only 2 days' old, FTC study. As was 
demonstrated over the past two-and-a-half weeks, the charged atmosphere 
of election year Medicare debates on the Senate floor is not conducive 
to fine-tuning of complex and nuanced matters of antitrust and patent 
law.
  As co-author, with my House colleague, Henry Waxman, of the statute 
that S. 812 seeks to amend--the Drug Price Competition and Patent Term 
Restoration Act of 1984--I have a longstanding interest in legislation 
affecting pharmaceutical research and development and the continued 
growth of the generic drug sector.
  A key principle of the 1984 Hatch-Waxman Act is balance between the 
interests of developing the next generation of new medicines and making 
available generic copies of existing drugs. For reasons I have spelled 
out over the last two weeks, I am unable to conclude that this 
principle of balance has been observed in the bill the Senate adopted 
yesterday.
  No law as complex of the 1984 Act is so perfect that it cannot be 
improved as it measures up to the tests of time and changing 
conditions. In my view, there have been several unintended and 
unanticipated consequences of the 1984 law and other changes in the 
pharmaceutical sector that bear attention by Congress.
  I would like to spend a few minutes today to outline several issues 
beyond the 30-month stay and the 180-day marketing exclusivity rule 
that, along with the manner in which the drafters attempt to codify 
FDA's current bioequivalence standards, have dominated the recent 
Hatch-Waxman reform debate.
  On any number of occasions, I have heard proponents of S. 812 cite as 
their rationale for this legislation the need to restore the old 
balance and original intent of the Waxman-Hatch Act.

[[Page 15677]]

  I am afraid that--not only does the legislation fall short on the 
balance test but this misdirected attempt to look backward to the 
intent of 1984 may result in missing important opportunities to 
facilitate the future of drug discovery and increasing patient access 
to these new medicines.
  If you do not ask the right question, you will get the wrong answer.
  I wish to share my perspective on how the science of drug discovery 
and the pharmaceutical marketplace are changing.
  Historians will record the recently-completed mapping of the human 
genome as a major achievement in the history of science.
  Each day, progress is made on new avenues of biomedical research. For 
example, developments proceed apace in the field of nanotechnology--the 
precise manipulation of molecules at a sub-molecular level. Similarly, 
there is great excitement related to proteomics--the study of the 
structure and function of proteins and the interaction among proteins. 
We know that genes regulate proteins and, as our understanding of human 
genes becomes more complete, we will spend more and more time and 
effort on learning about the relationship between genes and proteins 
and how proteins carry out these assigned roles.
  As has been debated on this floor earlier this year and will 
undoubtedly be debated again this fall, there is great interest in the 
promising field of stem cell research. While there are a host of 
ethical issues that need to be addressed in this area, many leading 
scientists tell us that stem cell research may one day virtually 
revolutionize the practice of medicine. The nascent field of embryonic 
stem cell research may succeed in bringing forth the knowledge that 
will yield new diagnostics and treatments for a host of currently 
incurable diseases.
  We know that many, including more than 40 Nobel Laureates and 
virtually all leading science organizations, have concluded that the 
highly promising, emerging science of regenerative medicine will be 
advanced by the use of human somatic cell nuclear transfer as a method 
to develop stem cells.
  I mention this to comment on how our almost exponential growth in 
biomedical knowledge is affecting the pharmaceutical industry.
  Looking at all these developments compels me to make the following 
observation:
  When we adopted the 1984 Hatch-Waxman law, we were in an era of small 
molecule medicine and large patient population blockbuster drugs. Times 
have changed.
  It appears that we are rapidly entering an era of large molecule 
medicine and small patient population drugs. Some believe that we may 
be entering an age of literally single patient, person-specific drugs 
and genetic therapies.
  We are already in something of a transition away from old-fashioned 
chemical-based drug products to futuristic biologicals. This will not 
occur overnight and there will always be a place for old-style drugs in 
the therapeutic armamentarium. Experts remind us that this new wave of 
therapeutic protein molecules are more complex than the type of drugs 
developed in the past. To cite but one example, the molecular weight of 
Prozac is 345 daltons, compared with the biologic, EPO, which is 30,400 
daltons and about 10 times the size of many common old-line drugs.
  Over the next decade and into the future, a great deal of inventive 
energy will be concentrated on developing biological products.
  The list of 66 approved medications using cloned recombinant DNA will 
almost certainly expand. The future of the pharmaceutical industry may 
one day be dominated by biological products.
  As we enter this new era of drug discovery, certain policy questions 
should be considered by Congress:
  Are our intellectual property laws relating to pharmaceuticals 
adequate to promote the large molecule, small patient population 
medicine?
  For example, currently under Waxman-Hatch, process patents are not 
eligible to receive any patent term restoration. Why should this be the 
case? If targeted patient populations get smaller and smaller and the 
production process patents become relatively more important than 
composition of matter patents, should we make process patents eligible 
for Waxman-Hatch partial patent term restoration?
  Is it possible that one day in the future there will be more drugs 
intended for patient populations under the 200,000 patient limit 
established by the Orphan Drug Act or even patient-specific biological 
cocktails and gene or protein therapies? If so, would it be appropriate 
to re-think and re-design any of our intellectual property laws?
  Unfortunately, S. 812 as passed by the Senate appears to give less 
value to patents and treats them more as targets for litigation than 
valuable insights to be respected.
  Another key question is whether Hatch-Waxman, as a general matter, 
adequately values pharmaceutical intellectual property relative to 
other fields of discovery?
  The American Inventors Protection Act which passed with a broad 
bipartisan consensus in 1999 permits all patents to be restored up to 
17 years of patent life if there is undue administrative delay at the 
PTO. The 1984-adopted Hatch-Waxman law caps patent term restoration for 
drug patents due to FDA delay at 14 years. Moreover, most patent 
applications are reviewed by PTO in one and one-half to two years, so 
that the effective patent life for most products is actually 18 to 18.5 
years.
  When all is said and done, most patents run appreciably longer than 
patents related to drugs due to the 14-year Waxman-Hatch cap. We must 
ask why time lost at PTO should be treated differently than time lost 
at FDA? Why should the proverbial better mousetrap be treated better 
under the patent code than a life-saving drug?
  Similarly, the Hatch-Waxman Act provides for five years of marketing 
exclusivity for all new chemical entity drugs, independent of patent 
protection. In contrast, it is my understanding that most European 
nation's and Japan have adopted a 10-year data exclusivity rule. Why 
not consider harmonizing and move to the European standard for this 
important information which, but for Hatch-Waxman, would be considered 
proprietary information?
  I want to commend Senator Lieberman, with whom I am working, for his 
advocacy of an aggressive set of intellectual property incentives in 
his bioterrorism legislation, S. 1764, that are designed to stimulate 
the private sector to direct its inventive energies and financial 
resources to develop the necessary measures to counter biological, 
chemical, or nuclear terrorism. I will continue to work with Senator 
Lieberman as he refines his legislation, which among other provisions, 
provides for day-for-day-patent term restoration for time lost at FDA.
  The Senator from Connecticut understands the value of intellectual 
property incentives in facilitating biomedical research. We should all 
look closely at this approach in the area of bioterrorism and consider 
applying these principles to other important areas of medical research.
  Another major issue will be whether the current lack of Waxman-Hatch 
authorization for the review and approval of generic biologicals is 
sound public policy?
  Although the Senate failed to adopt a Medicare drug benefit this 
week, I remain hopeful and committed to working toward the day when we 
will get the job done for America's seniors.
  Part of the impetus behind the McCain-Schumer bill and other efforts 
for Hatch-Waxman reform is to help seniors reduce the sometimes 
staggering out-of-pocket costs of their prescription drugs.
  Given the enormous costs associated with providing only limited 
pharmaceutical coverage under Medicare, that for catastrophic expenses 
last year estimated by CBO to cost $368 billion over 10 years it is 
absolutely essential for policymakers to explore enacting regulatory 
pathways for biological products to enter the market once patents have 
expired.

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  As we learned in the 1980s when 
Congress first passed, than unceremoniously repealed, a law which 
included Medicare drug coverage, the cost-estimates of providing this 
benefit will only go in one direction: ever higher and higher, and 
upward and upward.
  According to CBO's March 2002 estimates, those seniors who will spend 
greater than $5,000 in annual prescription drug costs amount to 10 
percent of all Medicare beneficiaries. Astonishingly, they account for 
38 percent of total prescription drug spending by Medicare 
beneficiaries today.
  By 2012, CBO estimates that these numbers will skyrocket. Fully 80 
percent of all spending for drugs by Medicare beneficiaries will go to 
those 38 percent of the total Medicare beneficiaries with greater than 
$5,000 in annual prescription drug spending. This will represent the 
lion's share of total projected Medicare beneficiary prescription drug 
spending of $278 billion just ten years from now.
  We know that biological products are likely to be more expensive than 
old-line drug products. Sooner or later, we must face up to the generic 
biologics challenge. We literally cannot afford to continue avoiding 
this issue.
  Now that the HELP Committee has finished, for the time being at 
least, its foray into antitrust policy, patent law, and civil justice 
reform, perhaps it could find the time to hold hearings on matters that 
are actually within the committee's jurisdiction, such as the legal, 
scientific, and policy issues related to the FDA review of generic 
biologics.
  As far as I am concerned, the sooner we change the law, the better. 
As more and more biologics come onto the market, we will face 
transitional products issues and carve out requests that will greatly 
complicate the legislative process. I speak from experience--I lived 
through the so-called pipeline issues in 1984 and it was not pretty.
  Congress simply cannot, and should not, attempt to enact and sustain 
over time a Medicare drug benefit unless we seriously explore what 
steps must be taken to end an FDA regulatory system that acts as a 
secondary patent for biological products. Patient safety must never be 
jeopardized. The task will not be easy.
  In this regard I must cite an article by Lisa Raines, published in 
The Journal of Biolaw & Business in 2001 entitled, ``Bad Medicine: Why 
the Generic Drug Regulatory Paradigm is Inapplicable to Biotechnology 
Products.'' Lisa was a special friend to all of us interested in 
biotechnology. She had experience both in the public sector--at the old 
Congressional Office of Technology Assessment--and in the private 
sector--with the Biotechnology Industry Organization and Genzyme. One 
of the many tragedies of September 11 was that Lisa was among the 
passengers on the plane that was crashed into the Pentagon. We all miss 
her indomitable spirit and friendship.
  Let me stipulate, as the article points out, that it will be 
difficult to manufacture generic equivalents of biologicals. However, I 
do not think it is an impossible task. As we attack this problem we 
will need to adopt one of the mottos of the Marine Corps: the difficult 
we do immediately, the impossible takes a little longer.
  I think it would be wise to charge an expert organization such as the 
United States Pharmacopeia to convene a group of experts, in alliance 
with the FDA, to begin to identify the technical issues that need to be 
addressed in order to bring about bioequivalent generic biologicals, 
including clinical trials if necessary.
  Some will argue that generic biologics cannot be manufactured, but 
unless we try to invent a fast track approval process for biologics, I 
do not see how we will ever know how to overcome the technical 
obstacles.
  It seems to me that one of the highest priorities of the next 
Commissioner of Food and Drugs will be to make certain that the 
leadership of FDA's Center for Biologics is committed, in partnership 
with the private sector and academic researchers, to identifying the 
issues and attempting to find solutions to the many issues that need to 
be resolved in order to make generic biologics.
  I want to acknowledge that Senator Rockefeller has introduced a 
legislative proposal in this area although I have problems with his 
study and automatic pilot features.
  The last overarching issue that I will raise today is how the 
structure and strength of the research-based segment of the American 
pharmaceutical industry has changed since 1984.
  On the one hand, we have seen substantial growth in the biotechnology 
industry. There are now some 1,400 U.S. biotech firms, although only 41 
of these biotech companies have any revenues from FDA-approved 
products.
  On the other hand, I think that Congress should consider whether 
there are any appropriate actions we can, or should, take today to make 
sure that America retains a vibrant research-based large-firm 
pharmaceutical sector. I have nothing against the several new 
consolidated multinational drug firms but we must never allow our 
national leadership in biomedical research to erode. I suggest my 
colleagues review the transcript of the March Commerce Committee 
hearing on the McCain-Schumer legislation and examine the thoughts of 
Senator Wyden related to the financial health and status of the product 
pipeline of the large drug firms.
  Senator Wyden, with his long ties to consumer groups like the Gray 
Panthers, is certainly no patsy of the drug industry. But the Senator 
from Oregon clearly understands that while we politicians always want 
to focus on how to help distribute the golden eggs--the new medicines--
to our constituents, we also need to pay attention to the health of the 
goose. It is true that the pharmaceutical industry has had a great run 
of success since about 1994 when the Clinton health care plan was 
rejected. But today's dry pipelines presage problems tomorrow.
  The fact is that the drug discovery business is a high risk, high 
reward endeavor and Congress can do real, and perhaps irreversible 
harm, to some firms if we choose the wrong intellectual property 
policies. We need to discuss if there are appropriate ways to increase 
our nation's biomedical research capacity, such as the set of proposals 
set forth in the Lieberman bill.
  We should not be so quick to vilify the research-based pharmaceutical 
industry as was done repeatedly for the last three weeks. We know what 
happened. Political and tactical considerations led some to believe 
there needed to be a villain in this Medicare debate. In a sense, 
history repeated itself as some took a page right out of the Clinton 
Administration play book.
  Here is how the book, The System, authored by 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 in 1993 and 1994:

       . . . Clinton's political advisers 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.''
       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.

  Unfortunately, that strategy reappeared over the last few weeks and 
we lost an opportunity to debate in a more reasoned fashion the complex 
set of issues and delicate balance required in pioneer-generic issues 
that I have just described. Nor did we do any great justice in delving 
beyond the surface and into the substance of the issues addressed in S. 
812.
  I have made it clear that my vision and preference for Waxman-Hatch 
reform is to help facilitate a constructive dialogue among interested 
parties. We all could benefit by a fair exchange of viewpoints on a 
broad range of innovator/generic firm issues, including the matters I 
have just outlined.
  The issues that are addressed in the HELP Committee Substitute to S. 
812 are important issues. So are the notice provisions contained in 
Senator Leahy's bill, S. 754.
  Unfortunately, the politics of Medicare prevented the debate over S. 
812 from unfolding in a manner that encouraged a thoughtful discussion 
of

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even these narrower set of issues, let alone the initiation of a public 
dialogue of the broader--and perhaps more significant in the long run--
Hatch-Waxman reform issues that I have just described.
  I wanted to take this opportunity to set forth these ideas for the 
future consideration of my colleagues and other interested parties.
  I look forward to debating these issues in the future and to working 
with the House and other interested parties to further perfect the 
Senate-passed version of S. 812.

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