[Congressional Record (Bound Edition), Volume 149 (2003), Part 23]
[Senate]
[Pages 32290-32293]
[From the U.S. Government Publishing Office, www.gpo.gov]




        PATENT CHALLENGE PROVISIONS OF THE MEDICARE REFORM BILL

  Mr. HATCH. Mr. President, I rise to make a few comments about the 
historic Medicare legislation that President Bush signed into law 
yesterday.
  I will center my remarks today on the provisions of the bill that 
amend the Drug Price Competition and Patent Term Restoration Act of 
1984. I am a coauthor of the 1984 law and it is of particular interest 
to me. This law, often referred to as the Waxman-Hatch Act or Hatch 
Waxman, is of great importance to my fellow Utahns and the rest of the 
American public as it saves an estimated $8 to $10 billion for 
consumers each year.
  Over the past 2 years, the Senate has spent considerable time and 
effort debating refinements to the 1984 law designed to close some 
loopholes that emerged and were exploited. While I would have preferred 
a more comprehensive reexamination of the statute with the goal of 
assessing how the law might be changed to facilitate new biomedical 
research and how best to disseminate the fruits of this research to the 
public in a quick and fair fashion, the amendments made to Hatch-Waxman 
made under the leadership of Senators Gregg, Schumer, McCain, Kennedy, 
Collins, and Edwards are very significant.
  It has been my position for some time that once the Congress adopts 
and the President signs, as he did yesterday, Medicare reform 
legislation that includes a prescription drug benefit, pressure will 
grow on Congress and the Food and Drug Administration to find new ways 
to bring new biotechnology products to the public when the patents 
expire. The Center for Medicare and Medicaid Services will be compelled 
to look for ways to economize on the purchase of drugs and it seems 
likely to me that the Department of Health and Human Services will have 
to explore regulatory measures that can produce saving. The 
Commissioner of Food and Drugs, Dr. Mark McClellan, has indicated a 
willingness to examine this issue. Few, if any, of my colleagues in 
Congress have to date joined in the discussion surrounding whether and, 
if so, how to create a fast track approval system for biologic 
products, but I believe the bill signed into law yesterday will 
encourage this debate. I welcome this debate and recognize that very 
important public health matters are at its heart. As well, retaining 
America's worldwide leadership in biomedical research is at stake 
whenever we consider legislation that affects pharmaceutical related 
intellectual property.
  We must proceed carefully but we must proceed. Critical to the 
success of this debate is a need to observe the principle of balance 
contained in the original 1984 law so that both research based firms 
and generic firms receive new incentives that will allow them to 
continue to produce and distribute the products that the American 
public deserves.
  As more and more biological products come to the market, the 
pressures on the Federal Government, State governments, private 
insurers, and private citizens to pay for these products will result in 
considerable pressure to create a fast track FDA approval system for 
off-patent biological products. Such a mechanism was not discussed in 
the 1984 negotiations that resulted in Hatch-Waxman largely because the 
biotechnology was still in its infancy. This is not the case today. 
Few, if any, of my colleagues in Congress have to date joined the 
discussion surrounding creating a fast track approval for off-patent 
follow-on biologic products, but I believe the new law signed yesterday 
will encourage this debate.
  As part of an appraisal of the laws relating to the development and 
approval of pharmaceutical products, I would also hope that my 
colleagues and the public will examine the full complement of 
incentives that Senator Lieberman and I have included in our bi-
partisan bioterrorism bill, S. 666. These incentives, which include 
day-to-day patent term restoration and a harmonization of the marketing 
exclusivity period to the 10-year term employed by the EU and Japan, 
will be helpful for the development of countermeasures to bioterrorist 
attacks and they should also be carefully considered with respect to 
developing new vaccines, diagnostics, and preventive and therapeutic 
agents for a host of other diseases and conditions.
  With respect to the patent challenge provisions of the Medicare bill, 
I want especially to commend the efforts of Senator Gregg, Chairman of 
the HELP Committee and the Majority Leader, Senator Frist, for working 
so hard to improve this legislation. There can be no doubt that the 
bill the President signed yesterday is a big improvement compared with 
the McCain-Schumer bill of last year, S. 812, that passed the Senate.
  I must also commend my colleagues in the House including, Commerce 
Committee Chairman Billy Tauzin, Commerce Committee Ranking Democrat 
John Dingell, and my colleagues from the House Judiciary Committee, 
Chairman Jim Sensenbrenner and Ranking Democrat John Conyers, and 
Intellectual Property Subcommittee Chairman Lamar Smith for their help 
in vastly improving the Gregg-Schumer-Kennedy amendments that passed 
the Senate by a 94-1 vote this summer.
  As the sole dissenter in the Senate, I am pleased the conferees were 
able to work in a bipartisan, bicameral spirit to correct the 
constitutional flaw in the Senate-passed bill. I commend the Department 
of Justice for its work that helped dislodge the unconstitutional 
``actual controversy'' language

[[Page 32291]]

from the declaratory judgment provision of the bill.
  I am also pleased that the conferees decided to reject the provision 
of the Senate bill that would have resulted in the so-called parking of 
exclusivity in cases in which a generic challenger could show that the 
patents held by a pioneer drug firm were not infringed or were invalid. 
In order to give an incentive for vigorous patent challenges, the 1984 
law granted a 180-day head start over other generic drug firms when the 
pioneer firm's patents failed or were simply not infringed. As I will 
explain in some detail, I think there may be a way to improve this 
language further and to save consumers a considerable sum of money in 
the process.
  The 180-day marketing exclusivity rules were first enacted as part of 
the Waxman-Hatch Act. The policy behind these provisions is to benefit 
the public by creating an atmosphere that ensure vigorous challenges of 
the patents held by innovator drug firms.
  The intent of this section of the 1984 law was to award the 180-day 
head start to the first successful challenger of a pioneer firm's 
patents. Unfortunately, we drafters of the statute employed language 
that has been interpreted by the courts to grant the 180-days of 
exclusivity to the first generic drug applicant to file an application 
with the FDA that challenges the patents.
  I must say that in most cases the first filer and first successful 
applicant was the same applicant. But I believe that the line of court 
decisions that include the Mova and Granutec cases has resulted in the 
establishment of a first filer regime that is not without unintended 
consequences and perverse incentives. The mismatch between the rights 
accorded to the first applicants and first successful challenger 
contributed to an atmosphere in which anticompetitive agreements were 
entered into between certain pioneer and generic drug firms.
  I am pleased that the Medicare reform bill signed into law yesterday 
contained Senator Leahy's Drug Competition Act, which is designed to 
increase enforcement of longstanding provisions of antitrust law that 
prevent anti-consumer agreements. The 2002 FTC study, ``Generic Drug 
Entry Prior to Patent Expiration,'' catalogs the agency's actions in 
this arena including such cases as those involving Hoescht and Andryx 
and Abbott and Geneva.
  I am also pleased that the Senate language prevailed on Senator 
Leahy's Drug Competition Act so that potentially anticompetitive 
agreements between research-based and generic drug firms will be 
reported to both the Department of Justice and the Federal Trade 
Commission. I worked extensively with Senator Leahy on his bill in the 
107th Congress and took the lead, with his cosponsor, Senator Grassley, 
in convincing the House conferees of the wisdom of the Senate's dual 
reporting requirement.
  So, the conferees made a number of important improvements to 
provisions of the legislation affecting challenges to drug patents. At 
our August 1, 2003, Judiciary Committee hearing, both the FDA and FTC 
expressed reservations about some elements of the Senate bill's rules 
pertaining to the 180-day marketing provision. The Administration, 
correctly in my view, took exception to the provisions in the Senate 
bill that would have allowed a sue now/use the exclusivity later--and 
perhaps years later at that--policy on marketing exclusivity.
  At the August 1st hearing, Mr. Robert Armitage, General Counsel of 
the Eli Lilly Company, presented compelling testimony on the matter of 
``parking'' or delaying, the use of the 180-day exclusivity until the 
basic patents expire. The question confronting policymakers centered on 
the wisdom of retaining the Gregg-Schumer-Kennedy provision that would 
have encouraged very early lawsuits by those with, for examples, 
noninfringing formulations of the pioneer product, in order to gain the 
potentially very lucrative 180-days of exclusivity down the road.
  I welcome and expect that day will come when Congress will reexamine 
the whole rationale and operation of the 180-day marketing exclusivity 
provisions. The day will come when the Congress will be forced to 
confront the incongruity in the statute, pointed out by my friend and 
skilled patent-challenging lawyer and philanthropist, Al Engelberg, is 
awarding 180 days both for a successful invalidity challenge and an 
non-infringement action. The former, a finding of invalidity, accrues 
to all generic firms while the latter benefits only the specific non-
infringer. This is a distinction with a difference in a sector of the 
economy where a whole cottage industry has grown up fueled in large 
part by non-infringement suits to non-basic patents. It is less than 
clear that the public benefits as much as it can or should under the 
present system which is left largely in place by the new bill language. 
This issues deserves further discussion.
  Nevertheless, I am pleased that the Senate language that allowed 
long-term parking of exclusivity was modified in an important way by 
the conferees. I want to commend the FDA and especially the Chief 
Counsel for Food and Drugs, Mr. Dan Troy, and the soon-to-be betrothed 
Associate Commissioner for Legislative Affairs, Mr. Amit Sachdev, for 
their contributions in this area.
  Having now commended the administration for helping to improve 
materially the Senate version of the 180-day provisions, I must also 
unfortunately report to my colleagues in the Senate and to the American 
public that we have not accomplished as much as possible with respect 
to the 180-day provisions.
  First off, I continue to believe that it is both unfair and ill-
advised to retain the bill language that does not reward a non-first-
filer to gain the 180-days marketing exclusivity in the case, which 
will admittedly be rare, in which the subsequent filer prevails on a 
patent invalidity challenge. I am told that conferee staff first 
thought that the provision as drafted, and now signed into law, would 
result in a subsequent filer's successful invalidity challenge 
forfeiting the first filer's 180 days of marketing exclusivity. 
Although the successful challenger does not get the 180-day head start, 
at least under this reading, the subsequent successful challenger is 
not penalized with respect to market entry. Upon further scrutiny of 
the statutory language, it is my understanding that in such 
circumstances the language may actually work to grant the 180-days of 
marketing exclusivity to the first filer, so that the successful 
subsequent challenger not only does not get the 180-day benefit, but 
actually receives a 180-day penalty for invalidating the patent.
  If this is the correct way to read the statute, the law should be 
changed.
  I am told that the staff of any conferee nor the FDA strongly 
defended this policy. Unfortunately, nor was there agreement to change 
the language to at least clarify that the subsequent challenger's 
success was at least a forfeiture event or, preferable from my 
perspective, would result in the granting of the 180-days to the 
successful challenger in a patent invalidity challenge rather than 
benefitting the fastest paper shuffler.
  This is bad policy.
  Finally, I must unfortunately report to my colleagues that the new 
statute retains the Gregg-Schumer-Kennedy provision that may cost the 
Federal government, according to the Congressional Budget Office, $700 
million over the next 10 years. Moreover, it is my understanding that 
the total cost of this provision to consumers over the next 10 years 
could exceed $3 billion.
  At issue are the sections of the bill that essentially give the first 
filer an exclusive right to the potential 180-day marketing exclusivity 
until its case is decided at the appellate court level. The question 
arises of what happens if a subsequent filer is not sued by the pioneer 
firm and is ready, willing and able to go to market but for waiting for 
the disposition of the first filer's challenge in the appellate court? 
If the first filer prevails in the appellate court, it will receive the 
180-days of exclusive marketing even though one or more subsequent 
filers were ready, willing, and able to go to the market long before 
the first filer's challenge was resolved.
  I would also note the FTC study documents that when the first filer 
wins in

[[Page 32292]]

the district court, they almost always prevail on appeal. The FTC 
opposed reinstating the earlier policy of the appellate court trigger 
because it believes that, on average, consumers will lose out while 
generic firms get an extra measure of certainty.
  In any event, subsequent to the Judiciary Committee hearing in August 
and throughout the fall as the conference committee met, I was involved 
in participating and facilitating discussions designed to craft 
language to close this new loophole sanctioned by the Gregg-Schumer-
Kennedy language as well as to make a few other clarifications to the 
parking language. Specifically, I preferred statutory language that 
would automatically convert unsuccessful Paragraph IV invalidity/
noninfringement challenges to standard Paragraph III--``the patents 
expire on''--applications. FDA believes it can accomplish this by rule 
or guideline, but the courts have not been kind to FDA rulemaking with 
respect to Hatch-Waxman in recent years.
  While I am mindful that the forces behind the first filer system of 
challenge have won the day in this legislation, I think in the 
circumstance when the subsequent challenger has not been sued, and may 
have even been issued a covenant not to be sued by the pioneer firm, 
that the first filer should at least forfeit its 180 days if it is not 
prepared to go to market in the 75-day grace period the new provision 
creates. This is good for the consumer and sound policy since the 
rationale behind the 180-day provision is to create an incentive for 
challenges to the pioneer's patents, not to create an entitlement to 
the first applicant to file a patent challenge with the FDA in the 
Parklawn Building. It seems to me that the first time that a 
blockbuster product is kept off the market, perhaps for over a year, 
due to the application of this new law and there is a second generic 
ready, able and willing to go to market, there will be a great public 
clamor, as there should be.
  At one point, I thought I was close to agreeing to language with 
Senator Kennedy and others to close this new loophole. Unfortunately, 
we did not reach agreement and since this was a part of the legislation 
in which the Senate and House language was virtually identical, it is 
understandable the conferees concentrated their efforts on those many 
provisions in which there were substantial differences. On the very 
last days before the conference report was completed, Senator Schumer 
and I also came close to closing this newly created loophole, but time 
ran out on this effort.
  Let me just say I am mindful that the politics and financial 
interests with respect to this issue among those in both the research-
based firms and generic drug companies are a very sensitive matter. I 
also recognize it will be exceedingly difficult to reopen these 
provisions now that the President has signed the bill into law. 
Nevertheless, I think we got this aspect wrong and we should try to fix 
it. I pledge to continue to work with Senator Gregg, McCain, Schumer, 
Kennedy as well as Representatives Tauzin, Dingell, Sensenbrenner, 
Smith, and Conyers and other interested members of Congress and other 
affected parties to fix this problem before consumers have to pay for 
this ill-advised policy.
  In the interest of moving this issue along in a constructive fashion, 
I have developed a discussion draft that emerged out of my discussions 
with Senator Kennedy and others that addresses these issues. Frankly, 
much of this draft reflects refinements to a draft that Senator Kennedy 
prepared in part as a response to a draft prepared largely by several 
private sector parties earlier this year that I submitted to the 
Medicare conferees for their consideration. It is my understanding that 
the administration does not oppose this language but, unfortunately, 
neither did it support this approach due, in some measure, to the fact 
that it was not anxious to open new issues in the already complex 
Medicare conference.
  Although they both opposed the underlying Medicare reform bill, I 
commend my colleagues, Senators Kennedy and Schumer for their interest 
in improving this particular aspect of the legislation.
  In closing, let me say again that Senators Gregg, Kennedy, Schumer, 
McCain, and Frist have worked hard to improve the patent challenge 
provisions of current law and all deserve our thanks.
  I am very proud of the Drug Price Competition and Patent Term 
Restoration Act, which has done so much to help consumers have access 
to more affordable medications.
  The underpinning of this great consumer measure is a very complex, 
legal framework. Any changes to the law must be carefully scrutinized 
to assure they achieve their intended effect.
  I plan to monitor very carefully the implementation of the first, 
substantial Waxman-Hatch amendments in almost two decades and intend to 
work with my colleagues to make certain they achieve their intended 
purpose.
  I welcome the views of any interested parties who wish to comment on 
this discussion draft, as well as other implementation issues that the 
Congress should consider.
  At the same time, I think there are broader issues here it behooves 
the Congress to consider. These include the issue of follow-on 
biologics as well as whether the law today contains the appropriate 
incentives, including intellectual property incentives, for 
pharmaceutical research and development in light of the fact that 
science appears to be moving away from an era of large patient 
population, small-molecule medicine to small patient-population, large 
biological molecule therapies.
  Mr. President, I ask unanimous consent that the draft be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 812

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

     SECTION 1. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.

       (a) Maintenance of Certification That Patent Is Invalid or 
     Will Not Be Infringed.--Section 505(j)(2) of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(2)) (as 
     amended by section 1101(a)(1)(B) of the Medicare Prescription 
     Drug, Improvement, and Modernization Act of 2003) is amended 
     by adding at the end the following:
       ``(E) Maintenance of certification that patent is invalid 
     or will not be infringed.--An applicant shall not be 
     permitted to maintain a certification under subparagraph 
     (A)(vii)(IV) with respect to a patent as of the date on which 
     any of the following occurs:
       ``(i) The Secretary notifies the applicant that the 
     Secretary has granted and made effective a request by the 
     holder of the application approved under subsection (b) to 
     withdraw the patent that is the subject of the certification 
     or the information with respect to the patent is otherwise no 
     longer contained in the application approved under subsection 
     (b), except that no request to withdraw the patent, if based 
     on a court decision or court judgment with respect to the 
     patent, shall be made effective for at least 75 days after 
     the court decision or court judgment and shall not be made 
     effective during the 180-day exclusivity period of the 
     applicant if the exclusivity period commences during the 75-
     day period.
       ``(ii) The patent that is the subject of the certification 
     expires.
       ``(iii) A court enters a final decision from which no 
     appeal (other than a petition to the Supreme Court for a writ 
     of certiorari) has been or can be taken that the patent that 
     is the subject of the certification is infringed by the 
     product at issue in the application submitted by the 
     applicant, or a court signs a settlement order or consent 
     decree that enters a final judgment and includes a finding 
     that the patent that is the subject of the certification is 
     infringed by the product at issue in the application 
     submitted by the applicant and, in addition, the patent that 
     is the subject of the certification is not found to be 
     invalid or unenforceable in the final decision or the final 
     judgment.''.
       (b) Failure To Market.--Section 505(j)(5) of the Federal 
     Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)) (as 
     amended by section 1102(a)(1) of the Medicare Prescription 
     Drug, Improvement, and Modernization Act of 2003) is amended
       (1) in subparagraph (B)(iv)--
       (A) in subclause (I), by inserting after ``certification,'' 
     the following: ``is thereafter permitted to maintain such a 
     certification, and has thereafter maintained such a 
     certification with respect to a patent for which such a 
     certification was submitted by the first applicant on the 
     first applicant date,''; and
       (B) in subclause (II)--
       (i) by redesignating items (cc) and (dd) as items (dd) and 
     (ee), respectively; and

[[Page 32293]]

       (ii) by striking item (bb) and inserting the following:
       ``(bb) First applicant.--The term `first applicant' means 
     an applicant that submits on the first applicant date a 
     substantially complete application for approval of the drug 
     that contains the certification described in paragraph 
     (2)(A)(vii)(IV) with respect to a patent for which 
     information was filed under subsection (b) or (c) and is 
     thereafter permitted to maintain and has thereafter 
     maintained the certification described in paragraph 
     (2)(A)(vii)(IV) with respect to the patent.
       ``(cc) First applicant date.--The term `first applicant 
     date' means the first day on which a substantially complete 
     application is submitted for approval of a drug containing 
     the certification described in paragraph (2)(A)(vii)(IV) with 
     respect to a patent for which information was filed under 
     subsection (b) or (c)''; and
       (2) in subparagraph (D), by striking subclause (I) and 
     inserting the following:

       ``(I) Failure to market.--

       ``(aa) In General.--Except as provided in item (bb), a 
     first applicant fails to market the drug by the earlier of 
     the date that is--
       ``(AA) 75 days after the date on which the approval of the 
     application of the first applicant is made effective under 
     subparagraph (B)(iii); or
       ``(BB) 30 months after the date of submission of the 
     application of the first applicant;
       ``(bb) Exception.--If the first applicant has on the first 
     application date submitted the certification described in 
     paragraph (2)(A)(vii)(IV) with respect to a patent, and the 
     first applicant is thereafter permitted to maintain and has 
     thereafter maintained the certification with respect to the 
     patent, the forfeiture under this subclause shall not take 
     effect before the date that is 75 days after the date on 
     which any of the following occurs with respect to the patent:
       ``(AA) In an infringement action brought against the first 
     applicant or any other applicant (which other applicant has 
     obtained tentative approval) with respect to the patent or in 
     a declaratory judgment action brought by the first applicant 
     or any other applicant (which other applicant has obtained 
     tentative approval) with respect to the patent, a court 
     enters a final decision from which no appeal (other than a 
     petition to the Supreme Court for a writ of certiorari) has 
     been or can be taken that the patent is invalid or not 
     infringed (including any dismissal for lack of subject matter 
     jurisdiction as a result of a representation of the patent 
     owner, and any other person with the right to enforce the 
     patent, that the patent will not be infringed by, or will not 
     be enforced against, the product of the applicant).
       ``(BB) In an infringement action or a declaratory judgment 
     action described in subitem (AA), a court signs a settlement 
     order or consent decree that enters a final judgment and 
     includes a finding that the patent is invalid or not 
     infringed.
       ``(CC) The Secretary notifies the first applicant that a 
     certification has been received by the Secretary from another 
     applicant that had obtained tentative approval and was 
     eligible as of the date of the certification to receive final 
     approval, but for 180-day exclusivity period, stating that 
     the 45-day period referred to in subparagraph (B)(iii) had 
     ended without a civil action for patent infringement having 
     been brought against such other applicant and, in addition, 
     such other applicant had received from the patent owner (and 
     from and any other person with the right to enforce the 
     patent) a written representation that the patent will not be 
     infringed by the commercial manufacture, use, offer for sale, 
     or sale of the product at issue in the application submitted 
     by such other applicant, or will not be enforced against the 
     commercial manufacture, use, offer for sale, or sale of the 
     product at issue in the application submitted by such other 
     applicant.''.
       [Alternative language for (CC)--equivalent treatment to 
     (AA) and (BB).]
       [``(CC) The Secretary notifies all applicants that, after 
     the forty-five day period referred to in subparagraph 
     (B)(iii) has expired without a civil action for patent 
     infringement having been brought against the first applicant 
     or against any other applicant that has obtained tentative 
     approval, that applicant has certified to the Secretary that 
     that applicant has received from the patent owner (and from 
     and any other person with the right to enforce the patent) a 
     written representation that the patent will not be infringed 
     by the commercial manufacture, use, offer for sale, or sale 
     of the product at issue in the application submitted by that 
     applicant, or will not be enforced against the commercial 
     manufacture, use, offer for sale, or sale of the product at 
     issue in the application submitted by that applicant.]

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