[Senate Report 111-123]
[From the U.S. Government Publishing Office]
Calendar No. 183
111th Congress Report
SENATE
2d Session 111-123
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PRESERVE ACCESS TO AFFORDABLE GENERICS ACT
_______
February 2, 2010.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany S. 369]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to which was referred the
bill (S. 369), to prohibit brand name drug companies from
compensating generic drug companies to delay the entry of a
generic drug into the market, having considered the same,
reports favorably thereon, with amendments, and recommends that
the bill, as amended, do pass.
CONTENTS
Page
I. Background and Purpose of the Preserve Access to Affordable
Generics Act.....................................................1
II. History of the Bill and Committee Consideration..................6
III. Section-by-Section Summary of the Bill...........................7
IV. Congressional Budget Office Cost Estimate........................9
V. Regulatory Impact Evaluation....................................17
VI. Conclusion......................................................17
VII. Minority Views..................................................18
VIII.Changes to Existing Law Made by the Bill, as Reported...........25
I. Background and Purpose of the Preserve Access to Affordable Generics
Act
This legislation is intended to prevent anticompetitive
agreements in the pharmaceutical industry between brand name
and generic drug manufacturers that may limit, delay, or
otherwise prevent competition from generic drugs. These
agreements (commonly known as ``reverse payment'' settlements
or ``pay-for-delay'' agreements) occur as part of the
settlement of a patent infringement lawsuit, in which the suit
is brought by a brand name drug firm against a generic firm
that is seeking to market a generic version of the brand name's
drug.
In a reverse payment agreement, the pharmaceutical patent
litigation is settled by the brand name drug manufacturer
paying the generic drug maker cash or other valuable
consideration in exchange for the generic drug maker agreeing
to stay off the market for some period of time. In essence, the
brand name drug maker pays its competitor not to compete. The
agreement may benefit both parties to the settlement, but by
preventing competition, competition which otherwise could cause
drug prices to fall dramatically, consumers are harmed. In June
2009, the Federal Trade Commission (FTC) estimated that these
reverse payment agreements would cost consumers $35 billion and
the Federal Government $12 billion over the next decade.\1\
Additionally, FTC economists, based on a review of the entire
universe of brand-generic settlements, calculate that, on
average, settlements with payments delay generic entry 17
months more than settlements without such payments.\2\
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\1\Jon Leibowitz, ``Pay-for-Delay'' Settlements in the
Pharmaceutical Industry: How Congress Can Stop Anticompetitive Conduct,
Protect Consumers Wallets, and Help Pay for Health Care Reform (The $35
Billion Solution), Speech to the Center for American Progress, Appendix
at 13, available at .
\2\Id.
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The Committee bill, as reported, will provide the FTC with
the tools it needs to prevent these agreements. The legislation
is necessary because The Drug Price Competition and Patent
Restoration Act (``the Hatch-Waxman Act''),\3\ enacted in 1984,
does not adequately deter reverse payment settlements. The
Hatch-Waxman Act was enacted with the intent of encouraging
competition from generic drug manufacturers, while protecting
legitimate patents. Under the Hatch-Waxman Act, generic drug
manufacturers receive accelerated FDA approval of a generic
drug upon showing that the generic drug is the bioequivalent to
an approved drug. This approval can be sought prior to the
expiration of the brand name drug's patent. Generic firms are
further incentivized to challenge weak brand name drug
patents--those that are likely invalid or not infringed--
because the first generic applicant is awarded a 180-day period
of marketing exclusivity.\4\ A successful patent challenge
brings the generic drug to market sooner, and provides a lower
cost drug alternative to consumers. Generic drugs are estimated
to save consumers between $8 billion and $10 billion each
year.\5\
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\3\Drug Price Competition and Patent Term Restoration Act of 1984,
Pub. L. No. 98-417, 98 Stat. 1585. In 2003, this Act was amended. See
Medicare Prescription Drug Improvement, and Modernization Act of 2003,
Pub. L. No. 108-173, tit. XI, subtits. A-B, 117 Stat. 2066, 2448-64.
\4\21 U.S.C. Sec. 355(j)(5)(B)(iv). This exclusivity provision was
intended to provide an economic incentive for generic drug companies to
challenge patent validity and to find alternative, non-infringing forms
of patented drugs. While the promise of marketing exclusivity has
encouraged generic companies to challenge weak patents, it has also
increased the incentive for the brand name firm to enter into a pay-
for-delay settlement with the first generic challenger.
\5\Generic Pharmaceutical Association, Facts at a Glance, available
at . A
recent study by Professor C. Scott Hemphill of Columbia Law School,
analyzing a subset of brand-generic settlements, estimated that if
generic entry on those products were delayed just one year, it would
have cost consumers billions. C. Scott Hemphill, An Aggregate Approach
to Antitrust: Using New Data and Rulemaking to Preserve Drug
Competition, 109 COL. L. REV. 629 (May 2009).
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The Hatch-Waxman Act's success in promoting generic
competition is undermined by the emergence of reverse payment
settlements. Reverse payment settlements can enrich the brand
name and generic drug firms at the expense of consumers who are
denied the benefits of competition from lower-cost generic
drugs.\6\ Paying the first generic applicant to delay its entry
effectively blocks other generic challengers from coming to
market as well, since the FDA may not approve a subsequent
generic application for the same drug product until the first
applicant's 180-day exclusivity expires.\7\
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\6\The economic incentives behind these deals are related to the
market dynamics of the industry. The introduction of a generic drug
provides substantial benefits to consumers, but also unique and
dramatic economic consequences for brand name firms. Studies of
pharmaceutical markets indicate that the first generic competitor
typically enters the market at a price that is 20 to 30 percent lower
than that of the brand name counterpart. Subsequent generic entrants
may enter at even lower prices--discounted as much as 80 percent or
more off the price of the brand name drug--and prompt the earlier
generic entrants to reduce their prices. Because of the policies of
public and private health plans and state generic substitution laws,
the generic drug gains substantial market share from the brand name
product in a short period of time, anywhere from 44 to 80 percent of
brand name sales within the first full year after the generic launch.
See Congressional Budget Office, How Increased Competition from Generic
Drugs Has Affected Prices and Returns in the Pharmaceutical Industry
(July 1998) (``CBO Study''), available at ; see generally David Reiffen & Michael R. Ward,
Generic Drug Industry Dynamics (Feb. 2002), available at .
\7\21 U.S.C. Sec. 355(j)(5)(B)(iv).
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The threat reverse payment agreements pose to competition
in the pharmaceutical industry has been recognized for some
time. In 2003, the Hatch-Waxman Act was amended to require
brand name companies and generic applicants to file patent
settlement agreements with the FTC and the Department of
Justice.\8\ As the Committee on the Judiciary's report
explained, those amendments sought to stamp out the ``abuse''
of Hatch-Waxman law resulting from ``pacts between big
pharmaceutical firms and makers of generic versions of brand
name drugs, that are intended to keep lower cost drugs off the
market.''\9\
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\8\Pub. L. No. 108-173, Tit. XI, Subtit. B, 117 Stat. 2066, 2461.
\9\S. Rep. No. 107-167, at 4 (2002), available at .
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Recent court decisions have made it more difficult for the
FTC or private litigants to challenge reverse payment
settlements under the antitrust laws. In 2005, two appellate
courts adopted an extremely permissive position on reverse
payment settlements.\10\ The Eleventh Circuit reversed the
FTC's decision in Schering-Plough Corp. v. FTC, applying
neither the traditional per se or rule of reason analysis to
the agreement.\11\ The Second Circuit in In re Tamoxifen
Citrate Antitrust Litigation likewise upheld the legality of a
reverse payment settlement.\12\ In 2008, a third appellate
court adopted a similarly lenient view of reverse payment
settlements.\13\ In that case, In re Ciprofloxacin
Hydrochloride Antitrust Litigation, the Federal Circuit held
that in the ``absence of evidence of fraud before the [Patent
and Trademark Office] or sham litigation,'' the mere presence
of a patent entitles the patent holder to purchase protection
from competition until patent expiration.\14\
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\10\Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005),
cert. denied, 548 U.S. 919 (2006); In re Tamoxifen Citrate Antitrust
Litig., 429 F.3d 370 (2d Cir. 2005), amended, 466 F.3d 187 (2d Cir.
2006), cert. denied, 127 S. Ct. 3001 (2007). For a detailed discussion
of the Schering and Tamoxifen cases see the FTC's May 2, 2007 testimony
before the U.S. House of Representatives Energy and Commerce
Committee's Subcommittee on Commerce, Trade and Consumer Protection, at
15-19, available at .
\11\402 F.3d at 1065.
\12\Tamoxifen, 429 F.3d at 370 (2d Cir. 2005), amended, 466 F.3d
187 (2d Cir. 2006).
\13\In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d
1323 (Fed. Cir. 2008), cert. denied sub nom Ark. Carpenters Health &
Welfare Fund vs. Bayer AG, 129 S. Ct. 2828 (2009).
\14\Ciprofloxacin, 544 F.3d at 1336.
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The Schering, Tamoxifen, and Ciprofloxacin rulings have
prompted a resurgence in brand-generic settlements in which the
parties settle with a payment to the generic company and an
agreement by the generic company to delay marketing its
product. An FTC staff report of settlements filed under the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 during the fiscal year ending in September 2007 found
that almost half of all of the final patent settlements (14 of
33) involved compensation to the generic patent challenger and
an agreement by the generic firm to refrain from launching its
product for some period of time.\15\
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\15\Bureau of Competition Report, Federal Trade Commission,
Agreements Filed with the Federal Trade Commission under the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003: Summary
of Agreements Filed in FY 2007: A Report by the Bureau of Competition
(May 2008), available at .
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The Committee bill will provide the FTC with an additional
avenue to challenge and prevent anticompetitive agreements. The
Committee bill creates a new section 28 of the Federal Trade
Commission Act. This new section allows the FTC to initiate a
proceeding under the Federal Trade Commission Act to block a
reverse payment settlement and to impose civil penalties if the
agreement violates the Act.\16\ In this proceeding, an
agreement settling a patent infringement claim is presumed to
be illegal if the company seeking to market a generic drug
receives anything of value\17\ from a brand name drug
manufacturer, and the generic drug company agrees to limit or
forego research, development, manufacturing, marketing, or
sales of the generic drug for any period of time. The settling
parties are given the opportunity to rebut this presumption by
demonstrating by clear and convincing evidence that the
procompetitive benefits of the settlement agreement outweigh
the anticompetitive effects of the agreement. If the parties do
not make such a showing, the presumption of illegality has not
been overcome, and the agreement is illegal.\18\ A proceeding
under this Act must be initiated within three years of the date
that the parties notify the FTC of their agreement, as required
by 21 U.S.C. Sec. 355. Under the new section 28(g)(2)(A) of the
FTC Act, however, the FTC will have a year from the date of a
final administrative order in an action brought under section
28 to pursue an action for civil penalties.
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\16\In recent years, the FTC attempted to take legal action under
section 5 of the FTC Act to invalidate these agreements. However, as
described above, several recent decisions have made it very difficult
for the FTC and the drug purchasers who pay higher prices for
prescription drug products as a result of these reverse payment
settlements to challenge successfully their legality. The Schering,
Tamoxifen, and Ciprofloxacin decisions have essentially nullified
antitrust law in this area and adopted legal rules that permit these
agreements. In the wake of these decisions, reverse payment settlements
have become prevalent. See Bureau of Competition Report, Federal Trade
Commission, Agreements Filed with the Federal Trade Commission under
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003: Summary of Agreements Filed in FY 2007: A Report by the Bureau of
Competition (May 2008), available at Bureau of Competition Report, Federal Trade Commission,
Agreements Filed with the Federal Trade Commission under the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003: Summary
of Agreements Filed in FY 2006: A Report by the Bureau of Competition
(Apr. 2007), available at ; Bureau of Competition Report, Federal Trade
Commission, Agreements Filed with the Federal Trade Commission under
the Medicare Prescription Drug, Improvement, and Modernization Act of
2003: Summary of Agreements Filed in FY 2005: A Report by the Bureau of
Competition (Apr. 2006), available at .
\17\``Anything of value'' is intended to include a cash payment or
any other consideration of value.
\18\While only the FTC can bring an action to enforce the new
section 28 of the FTC Act, the legislation also specifically provides
that it should not be construed to modify, impair or supersede the
applicability of the antitrust laws. See Section 3(a) of S. 369.
Therefore, while there are no private rights of action created by this
legislation, the ability of private parties to bring actions under the
antitrust laws challenging these agreements is similarly not affected
by this legislation.
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The Committee bill enumerates factors that the fact-finder
is to consider in determining whether the parties have met
their burden to establish that their agreement's procompetitive
effects outweigh its anticompetitive harms. The list is not
intended to be exhaustive, and the fact-finder is permitted to
consider any other factor it deems relevant to its
determination of competitive effects of the agreement under
challenge.
The Committee bill also provides that, in evaluating
whether the settling drug companies have met their burden to
establish that their agreement is procompetitive, the fact-
finder shall not presume that entry of the generic drug would
not have occurred until expiration of the relevant patent or
statutory period of exclusivity. Further, the fact-finder
cannot presume that the agreement is procompetitive on the
basis that it provided for entry of the generic drug prior to
expiration of the patent or statutory exclusivity, although
such evidence may be relevant to the fact-finder's
determination
Certain forms of consideration are exempted from the
presumption of illegality created by this new section. The
legislation does not prohibit agreements that include only one
or more of the following: (i) the right to market the generic
drug prior to the expiration of patent or other statutory
exclusivity for the drug (i.e., a settlement that allows the
generic drug to enter the market before the patent has expired
but does not involve any payment of money or other
consideration to the generic drug manufacturer); (ii) a payment
to the generic drug company for its reasonable litigation
expenses, not to exceed $7,500,000; or (iii) a covenant not to
sue on any claim that the generic drug infringes a U.S. patent.
It was the judgment of the Committee that these types of
settlements should be carved out from the bill as they would
not likely pose competitive concerns.\19\ The legislation also
empowers the FTC to conduct a rulemaking that will exempt
certain categories of agreements that contain reverse payments,
but which the FTC determines benefit consumers.\20\
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\19\In order to be within the carve-out, a settlement agreement
must consist only of these three categories of agreements (or a
combination of the three). Settlement agreements in which there is
additional consideration of any form paid to the generic drug holder
are not within the safe harbor and are fully subject to the presumption
of illegality contained in the new section 28 of the FTC Act.
\20\The generic drug companies argue that they might be discouraged
from entering the market prior to a finding of non-infringement or
invalidity if they believe that the law would prevent them from
obtaining lawfully a full release of liability as part of a settlement.
As a result, the sponsors of the legislation considered adding a carve-
out for settlement agreements in which the brand name drug company
grants a release of liability for patent infringement to the generic
drug company in situations in which the generic drug company has
entered the market ``at risk''--that is, before adjudication of the
patent dispute. In many situations, this form of consideration may not
harm consumers or competition. However, these settlements are a new
phenomenon in the Hatch-Waxman context, and there may be scenarios in
which such a patent settlement could possibly raise competition
concerns. Therefore, rather than exempting all such settlements, the
Committee expects that the FTC will use the rulemaking authority of new
section 28(e) to consider exempting appropriate forms of these
agreements after it receives comments from affected parties.
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The Committee bill contains strong civil penalties that may
be levied against parties that enter into patent settlement
agreements that violate the Act. A violator faces a civil
penalty of up to three times the value it received from the
agreement that is reasonably attributable to a violation of the
law. If the brand name company has not received any such value
(as in a situation where the evidence shows that, even in the
absence of the agreement, generic entry would not have occurred
prior to the decision finding the agreement illegal), the
penalty to the brand name drug company may be up to three times
the value of the consideration it gave to the generic drug
company under the patent settlement agreement at issue. The
Committee bill lays out additional factors that should be
considered in determining the civil penalty as well. The FTC
also maintains the authority to issue a cease and desist order
enjoining the patent settlement agreement from going into
effect or continuing in force.\21\ A generic drug company
entering into an illegal patent settlement agreement under this
statute will also lose its statutory exclusivity with respect
to that drug--that is, its exclusive right to market a generic
version of the drug for 180 days for having been the first
generic drug filer.
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\21\Such a cease and desist order could be sought as an
administrative remedy before the FTC under section 5(b) of the FTC Act
(15 U.S.C. Sec. 45(b)) or in an action in Federal district court under
section 13(b) of the FTC Act (15 U.S.C. Sec. 53(b)).
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The Committee bill does not prohibit settlement of Hatch-
Waxman patent litigation. The legislation will only impact
those settlement agreements that include both compensation to
the generic drug company and delayed generic entry. Parties are
free to settle cases based on date of entry alone, or to
incorporate any of the legislation's exempted safe harbors into
their agreement.
II. History of the Bill and Committee Consideration
The Preserve Access to Affordable Generics was first
introduced in the 109th Congress by Senator Kohl on June 27,
2006 (S. 3582).\22\ The bill had five cosponsors (Senators
Leahy, Grassley, Schumer, Johnson and Feingold). It was
referred to the Committee on Commerce, Science and
Transportation, where no further action was taken on it during
the 109th Congress.
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\22\The minority views of Senators Sessions, Hatch, Kyl, Cornyn,
and Coburn argue that the Committee bill ``prevent[s] parties that
disagree on the strength of the patent and other key factors from
settling a suit. . . .'' As noted above, not all settlements are
brought within the ambit of the legislation; parties are free to settle
cases based on the date of entry alone or pursuant to the expressly
enumerated safe harbors. And the record shows that even a per se ban on
reverse payment settlements does not prevent parties from settling
cases. From 2000 to 2004 (prior to the Court of Appeals decisions
discussed above), there were 20 settlements of pharmaceutical patent
litigation which, according to the FTC, did not include payments from
the brand name drug manufacturer to the generic competitor. Further,
from 2005 to 2007, 41 out of 74 cases settled without a combination of
payments and entry restrictions. Thus, it is simply incorrect to argue
the Committee bill will destroy the ability of brand name and generic
drug companies to settle pharmaceutical patent litigation.
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On January 17, 2007, Senator Kohl introduced the Preserve
Access to Affordable Generics Act in the 110th Congress (S.
316).\23\ The bill had 10 cosponsors (Senators Leahy, Grassley,
Schumer, Feingold, Kennedy, Durbin, Johnson, Klobuchar, Obama,
and Brown). It was referred to the Committee on the Judiciary.
The Committee held a hearing titled ``Paying Off Generics to
Prevent Competition with Brand Name Drugs'' on January 17,
2007. Testimony was received from Jon Leibowitz, Commissioner,
FTC; Billy Tauzin, CEO, PhRMA; Merrill Hirsch, Partner, Ross,
Dixon & Bell, LLP; Bruce Downey, Chairman and CEO, Barr
Pharmaceuticals, Inc.; and Michael Wroblewski, Consumers Union.
The bill was reported favorably, without amendment, by voice
vote on February 27, 2007. No further action was taken on S.
316 in the 110th Congress.
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\23\That bill, S. 316 in the 110th Congress, was substantially
identical to S. 369 as introduced in the 111th Congress.
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On February 3, 2009, Senator Kohl introduced the Preserve
Access to Affordable Generics Act in the 111th Congress (S.
369). The bill has eight cosponsors (Senators Grassley,
Feingold, Durbin, Brown, Collins, Klobuchar, Bill Nelson and
Franken). It was referred to the Committee on the Judiciary.
On September 24, 2009, the Committee considered the
legislation during its business meeting. Senator Kohl offered
an amendment in the nature of a substitute, which was adopted.
Among other things, under the substitute amendment, agreements
between brand name drug manufacturers and generic drug makers
in settlement of patent disputes in which the generic company
agrees to delay marketing a generic drug and receives a payment
of value are presumed to be illegal (rather than automatically
illegal), but in order to be found illegal the FTC must bring a
legal action under the FTC Act. During such a legal action, the
parties to the agreements at issue can overcome the presumption
of illegality if they can establish by clear and convincing
evidence that the agreement is procompetitive. The substitute
amendment also prescribes penalties for entering into illegal
patent settlements, and establishes a three year statute of
limitations for the FTC to bring an action under the Act.
On October 15, 2009, the Committee concluded its
consideration of the bill. Senator Kohl offered an amendment to
(i) modify the penalty provisions in the bill; (ii) modify the
effective date so that the Act would only apply to agreements
entered into after November 15, 2009; (iii) change the language
of the certification used by parties submitting agreements to
the FTC; (iv) clarify that the FTC has one year after a final
order to seek civil penalties; and (v) make other minor
technical changes. The amendment was adopted by unanimous
consent. No other amendments were offered to the bill.
The Committee then voted to report the Preserve Access to
Affordable Generics Act, as amended, favorably to the Senate.
The Committee proceeded by roll call vote as follows:
Tally: 12 Yeas, 7 Nays.
Yeas (12): Leahy (D-VT), Kohl (D-WI), Feinstein (D-CA),
Feingold (D-WI), Schumer (D-NY), Durbin (D-IL), Cardin (D-MD),
Whitehouse (D-RI), Klobuchar (D-MN), Kaufman (D-DE), Franken
(D-MN), and Grassley (R-IA).
Nays (7): Specter, (D-PA), Sessions (R-AL), Hatch (R-UT),
Kyl (R-AZ), Graham (R-SC), Cornyn (R-TX), Coburn (R-OK).
III. Section-by-Section Summary of the Bill
Section 1. Short title
This section provides that the legislation may be cited as
the ``Preserve Access to Affordable Generics Act.''
Section 2. Congressional findings and declarations of purposes
This section contains congressional findings and
declarations of purposes.
Section 3. Unlawful compensation for delay
Subsection (a). This subsection creates a new section 28 of
the FTC Act, as follows--Sec. 28(a) provides that the Federal
Trade Commission may bring a legal action to enforce this
section with regard to any agreement in settlement of a patent
infringement lawsuit in which a generic drug manufacturer
receives anything of value from a brand name drug manufacturer,
and the generic drug manufacturer agrees to limit or forego
research, development, marketing, manufacturing or sales of the
generic drug. Under this section, such agreements are presumed
to be unlawful. This presumption can be overcome if the parties
to such an agreement demonstrate by clear and convincing
evidence that the procompetitive benefits of the agreement
outweigh the anticompetitive effects of the agreement.
Sec. 28(b) lists factors the fact-finder must consider in
making this determination.
Sec. 28(c) directs the fact-finder to avoid making certain
presumptions.
Sec. 28(d) exempts certain categories of agreements from
the presumption of illegality.
Sec. 28(e) gives the FTC rulemaking authority to implement
and interpret section 28 and to exempt certain types of
agreements if the FTC determines that such agreements will
promote competition and benefit consumers. Any such rulemakings
may be appealed to the U.S. District Court for the District of
Columbia. Further, it provides that a violation of this section
shall be treated as a violation of section 5 of the FTC Act.
The section also provides that any order of the FTC under this
section may be appealed only to the U.S. Court of Appeals to
the D.C. Circuit or the Circuit Court of Appeals where the
ultimate parent entity of either the brand name or generic drug
company is incorporated.
Sec. 28(f) states that nothing in the section supersedes or
modifies the antitrust laws relating to unfair methods of
competition.
Sec. 28(g) provides for civil penalties for violations of
this section sufficient to deter violations, but in no event
greater than 3 times the value received by the party that is
reasonably attributable to violations of the Act. If no such
value has been received by the brand name drug company, the
civil penalty shall be not greater than three times the value
given to the generic drug company reasonably attributable to
violations of the Act. This subsection also lists factors the
court is to consider in assessing the civil penalty under this
section.
Sec. 28(h) provides definitions.
Subsection (b). This subsection provides that section 28 of
the FTC Act applies to all agreements entered into after
November 15, 2009. However, the civil penalty provision Sec.
28(g) does not apply to agreements entered into before the date
of enactment of this Act.
Section 4. Notice and certification of agreements
This section requires settling parties to supplement their
filing to the FTC under the Medicare Prescription Drug
Improvement and Modernization Act of 2003, 21 U.S.C. Sec. 355
(note), with any other agreement they enter into within 30 days
of entering into that agreement. It also requires the Chief
Executive Officer or senior executive responsible for a patent
settlement agreement to certify that the filing is true,
complete, and accurate.
Section 5. Forfeiture of 180-day exclusivity period
Under this section, generic drug companies violating the
new section 28 of the FTC Act forfeit their right to a 180-day
period of exclusivity of marketing of their generic drug.
Section 6. Commission litigation authority
This section allows the FTC to litigate cases and appeals
under the new section 28 of the FTC Act under its own name,
without a requirement that it first give the Attorney General
the right to prosecute such an action.
Section 7. Statute of limitations
This section requires the FTC to bring any action to
enforce section 28 of the FTC Act within three years of being
notified of the agreement under the Medicare Prescription Drug
Improvement and Modernization Act of 2003.
Section 8. Severability
This section provides if any provision of this Act is found
unconstitutional, the remainder of the Act will be unaffected.
IV. Congressional Budget Office Cost Estimate
The Committee sets forth, with respect to the bill, S. 369,
the following estimate and comparison prepared by the Director
of the Congressional Budget Office under section 402 of the
Congressional Budget Act of 1974:
January 28, 2010.
Hon. Patrick J. Leahy,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 369, the Preserve
Access to Affordable Generics Act. If you wish further details
on this estimate, we will be pleased to provide them. The CBO
staff contact is Julia Christensen.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
S. 369--Preserve Access to Affordable Generics Act
Summary: S. 369 would impose significant restrictions on
certain agreements to settle a claim of patent infringement
between manufacturers of brand-name and generic drugs relating
to the sale of a drug product. CBO anticipates that enacting S.
369 would accelerate, on average, the availability of lower-
priced generic drugs affected by such agreements and generate
savings to public and private purchasers of prescription drugs.
CBO estimates that implementing S. 369 would:
Reduce direct spending by $0.7 billion over
the 2010-2014 period and by $1.8 billion over the 2010-
2019 period.
Increase federal revenues by $0.1 billion
over the 2010-2014 period and by $0.2 billion over the
2010-2019 period. (Social Security payroll taxes, which
are off-budget, would account for almost 30 percent of
those totals.)
Reduce spending subject to appropriation by
$0.1 billion over the 2010-2014 period and by $0.2
billion over the 2010-2019 period, assuming that
appropriation action reflects the estimated reductions
in costs.
Considering both the direct spending and revenue effects,
CBO estimates that enacting S. 369 would reduce unified budget
deficits by approximately $0.8 billion over the 2010-2014
period and by roughly $2.0 billion over the 2010-2019 period.
Pursuant to section 311 of S. Con. Res. 70 (110th
Congress), CBO estimates that S. 369 would not cause a net
increase in deficits in excess of $5 billion in any of the four
10-year periods beginning after fiscal year 2019.
S. 369 contains no intergovernmental mandates as defined in
the Unfunded Mandates Reform Act (UMRA).
S. 369 would impose a mandate on the private sector by
limiting agreements between brand-name and generic drug
manufacturers to settle a claim of patent infringement. CBO
estimates that the aggregate direct cost of complying with this
mandate would exceed the threshold established by UMRA for
private-sector mandates ($141 million in 2010, adjusted
annually for inflation) in each year, beginning with 2010.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 369 is shown in the following table. The
costs of this legislation fall primarily within budget
functions 370 (commerce and housing credit), 550 (health), and
570 (Medicare).
CBO expects that enacting S. 369 would accelerate, on
average, the availability of generic drugs that are the subject
of specific types of agreements to settle a claim of patent
infringement between manufacturers of brand-name and generic
drugs. The legislation would affect settlement agreements
entered into after November 15, 2009, that involve certain
kinds of compensation flowing from the manufacturer of a brand-
name drug to the manufacturer of the generic version of the
drug. Earlier entry of lower-priced generic drugs would reduce
the average price of prescription drugs over the next 10 years.
CBO expects that lower drug prices would reduce the costs of
federal programs that purchase prescription drugs or provide
health insurance that covers prescription drugs. CBO estimates
that savings to mandatory health programs--such as Medicare and
Medicaid and for health insurance provided to certain retirees
by the Federal Employees Health Benefits (FEHB) program and
TRICARE for Life program operated by the Department of
Defense--would total $0.7 billion over the 2010-2014 period and
$1.8 billion over the 2010-2019 period.
Lower prices would also generate savings to federal health
programs subject to appropriation--such as health insurance
provided to federal employees through the FEHB program, and the
health programs of the Departments of Veterans Affairs and
Defense--totaling $0.1 billion over the 2010-2014 period and
$0.2 billion over the 2010-2019 period. CBO estimates that the
Federal Trade Commission (FTC) would also realize discretionary
savings because of lower administrative expenses for the agency
under the bill of $7 million over the 2010-2019 period.
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------------------------------------------------
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010-2014 2010-2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING
Estimated Budget Authority.............. -30 -170 -160 -170 -140 -120 -110 -220 -290 -340 -670 -1,750
Estimated Outlays....................... -30 -170 -160 -170 -140 -120 -110 -220 -290 -340 -670 -1,750
CHANGES IN REVENUES
Effect from Health Insurance Premiums:
On-budget........................... 5 10 10 10 10 10 10 15 20 20 45 120
Off-budget.......................... 3 5 5 5 5 5 5 5 10 10 23 58
---------------------------------------------------------------------------------------------------------------
Subtotal........................ 8 15 15 15 15 15 15 20 30 30 68 178
Collection of Civil Penalties........... 0 0 2 5 5 5 5 5 4 4 12 35
Total Changes in Revenues:
On-budget........................... 5 10 12 15 15 15 15 20 24 24 57 155
Off-budget.......................... 3 5 5 5 5 5 5 5 10 10 23 58
---------------------------------------------------------------------------------------------------------------
Total Changes................... 8 15 17 20 20 20 20 25 34 34 80 213
NET IMPACT ON THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
Net Change in the Deficit1
On-budget........................... -35 -180 -172 -185 -155 -135 -125 -240 -314 -364 -727 -1,905
Off-budget.......................... -3 -5 -5 -5 -5 -5 -5 -5 -10 -10 -23 -58
---------------------------------------------------------------------------------------------------------------
Total Changes................... -38 -185 -177 -190 -160 -140 -130 -245 -324 -374 -750 -1,963
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Federal Health Programs:
Estimated Authorization Level....... -5 -20 -25 -20 -20 -15 -10 -25 -35 -35 -90 -210
Estimated Outlays................... -5 -20 -25 -20 -20 -15 -10 -25 -35 -35 -90 -210
Federal Trade Commission:
Estimated Authorization Level....... * * * -1 -1 -1 -1 -1 -1 -1 -2 -7
Estimated Outlays................... * * * -1 -1 -1 -1 -1 -1 -1 -2 -7
Total Changes:
Estimated Authorization Level....... -5 -20 -25 -21 -21 -16 -11 -26 -36 -36 -92 -217
Estimated Outlays................... -5 -20 -25 -21 -21 -16 -11 -26 -36 -36 -92 -217
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Negative numbers indicate a reduction in budget deficits.
* = between 0 and -$500,000.
S. 369 would affect revenues in two ways. First, the bill
would increase governmental receipts (i.e., revenues) because
it would create new civil penalties for parties that violate
the bill's requirements. Secondly, the bill would also affect
revenues because CBO expects that lower prices for prescription
drugs would reduce premiums for private health insurance and we
assume that part of the savings from lower health insurance
costs would be passed on to workers as increases in taxable
compensation. Taken together, CBO estimates that the bill would
increase federal revenues by $0.1 billion over the 2010-2014
period and by $0.2 billion over the 2010-2019 period.
Basis of estimate: S. 369 would impose significant
restrictions on settlement agreements to resolve patent
litigation between manufacturers of brand-name and generic
drugs relating to the sale of a drug product. Under current
law, such settlement agreements must be reported to the FTC.
The FTC may challenge those agreements in court by alleging
that they constitute an illegal restraint of trade.
S. 369 would limit agreements to settle a claim of patent
infringement where the manufacturer of the generic version of
the drug receives anything of value from the manufacturer of
the brand name drug and the generic drug manufacturer agrees to
limit or forego research, development, manufacturing,
marketing, or sale of the generic drug for any period of time.
The bill would allow the FTC to initiate an enforcement
proceeding where such settlement agreements between drug
companies would be presumed anti-competitive and unlawful; they
would only be allowed if the parties can demonstrate by clear
and convincing evidence that the competitive benefits of the
agreement outweigh the anticompetitive effects of the
agreement.
The bill, however, would permit a brand manufacturer to
grant certain types of consideration to the manufacturer of the
generic version of the drug under settlement agreements. Such
exemptions include the right to market the generic drug before
the expiration of patents or statutory exclusivities that aim
to prevent such marketing. The legislation also would allow the
FTC to establish additional exemptions through rulemaking
procedures.
S. 369 also would establish significant penalties to deter
parties from entering into certain settlement agreements. Such
penalties include the assessment of civil penalties and the
forfeiture by a violator of any rights to the award of 180 days
of market exclusivity to the generic drug company granted such
exclusivity by the Food and Drug Administration (FDA) for
meeting certain statutory requirements. The new restrictions
under S. 369 would apply to all agreements entered into after
November 15, 2009. (Provisions relating to civil penalties,
however, only apply to agreements entered into after the date
of enactment.) For the estimate, CBO assumes that S. 369 will
be enacted in early 2010.
Based on discussions with drug industry experts, CBO
expects that limiting the compensation of manufacturers of
generic drugs within settlement agreements between drug
companies in the manner specified by S. 369 would lead to the
earlier entry of some generic drugs. Since profits of
manufacturers of brand-name drugs are so high relative to those
of generic drug manufacturers, CBO believes that there is an
incentive for brand manufacturers to compensate generic
manufacturers for delaying the availability of the generic drug
within such agreements. If the generic company that is party to
such an agreement is eligible for 180 days of marketing
exclusivity, plans to enter the market by competing generic
manufacturers could also be delayed.
Under the restricted terms of compensation allowed under S.
369, we anticipate that the expected date of market entry for
generic drugs affected by such agreements, on average, would be
earlier regardless of whether that date is ultimately
determined by a court ruling (because the parties decide to
litigate instead of settling with an agreement subject to those
new terms) or by a different settlement agreement negotiated
between the parties.
Direct Spending
Through imposing significant restrictions on certain types
of compensation in agreements to settle a claim of patent
infringement between manufacturers of brand-name and generic
drugs, enactment of S. 369 would accelerate the availability of
lower-priced generic drugs. CBO estimates that change would
reduce federal direct spending for mandatory health programs
such as Medicare, Medicaid, payments for annuitant premiums
under the FEHB program, and the Defense Department's TRICARE
for Life program by $0.7 billion over the 2010-2014 period and
by $1.8 billion over the 2010-2019 period.
To estimate the savings from earlier entry of generics, CBO
focused on the share of national spending for prescription
drugs that might both face competition by generic products over
the next 10 years and involve settlement agreements of patent
litigation with terms of compensation limited by the bill. We
assumed that those products make up roughly one-quarter of the
current market that may face competition by generic drugs. (CBO
estimates that the value of the total drug market in the United
States that may experience generic competition through 2019 is
greater than $100 billion.) Based on information from FTC, CBO
assumes that S. 369 would accelerate the entry of generic drugs
affected by the bill by roughly 17 months, on average. During
that period, CBO expects that the availability of lower-priced
generic drugs would reduce total spending for the drug by
roughly one-half. After accounting for the fact that S. 369
would only restrict settlement agreements entered into after
November 15, 2009, CBO estimates that earlier entry of generic
drugs affected by the bill would reduce total drug expenditures
in the United States by roughly $8 billion over the 2010-2019
period.
A settlement agreement with compensation flowing from the
brand manufacturer to the generic manufacturer is just one of
several possible outcomes to patent litigation. Limiting such
settlement agreements would cause the expected rewards from
challenging a patent to decline, on average. CBO expects that
such a decline in expected returns would lead to fewer
challenges of patents. In some instances, fewer generic
challengers would lead to a higher average price following
generic entry. CBO estimates that such price increases would
increase total drug spending in the United States by roughly $2
billion over the 2010-2019 period. On net, CBO estimates that
S. 369 would reduce total expenditures on prescription drugs in
the United States by about $6 billion over the 10-year period.
To estimate the net effect of the bill on federal spending
by health programs that pay for prescription drugs, CBO applied
the expected rate of savings generated nationally to each
program. (We also took into account that prices paid by federal
programs are generally lower than prices paid by private payers
for brand-name prescription drugs.) CBO estimates that enacting
S. 369 would reduce direct spending for federal health programs
by $0.7 billion over the 2010-2014 period and by $1.8 billion
over the 2010-2019 period.
Revenues
CBO estimates that enacting S. 369 would increase federal
revenues by $0.1 billion over the 2010-2014 period and by $0.2
billion over the 2010-2019 period. That estimate reflects two
effects:
Higher federal tax revenues resulting from
employers passing lower costs for employer-sponsored
health insurance to workers as increases in taxable
compensation; and
Collection of civil penalties associated
with violations of new requirements imposed by the bill
that would be recorded as federal revenues.
Health Insurance Premiums. As explained above, CBO expects
that enacting S. 369 would reduce the average cost for
prescription drugs. That change would lower costs for private
health insurance plans. CBO anticipates that the reduction in
costs for private health insurance plans would result in lower
insurance premiums, thus reducing the amount spent by employers
for tax-favored health insurance and increasing the amount
spent on taxable wages. That wage effect would increase federal
revenues from income taxes and payroll taxes by an estimated
$0.1 billion over the 2010-2014 period and $0.2 billion over
the 2010-2019 period. Social Security payroll taxes, which are
off-budget, would account for about 30 percent of those totals.
Collection of Civil Penalties. Under the bill, the FTC
would have the authority to assess civil penalties on entities
that enter into a settlement agreement that is subsequently
ruled anti-competitive. The magnitude of those penalties would
be tied to the value received by the parties to the agreement.
CBO assumes that cases for which penalties would be assessed
would take 2 or more years to resolve, thus we anticipate that
the collection of penalties would start in 2012. CBO assumes
that some firms would initially test the evidentiary standards
for lawful agreements, and as those standards become clearer,
fewer agreements would trigger penalties. Based on our
estimates of profits garnered by firms who enter such
agreements, CBO estimates that the bill would increase
collections of civil penalties by about $35 million over the
2012-2019 period.
SPENDING SUBJECT TO APPROPRIATION
CBO estimates that implementing S. 369 would reduce
spending subject to appropriation by $0.1 billion over the
2010-2014 period and by $0.2 billion over the 2010-2019 period.
Spending by Federal Health Programs for Prescription Drugs.
Accelerating the entry of the lower-priced generic drugs would
reduce the costs to administer certain discretionary health
programs, including those of the Veterans Health
Administration, the Indian Health Service, and the Department
of Defense. It also would lower payments by federal agencies
for health insurance premiums for employees enrolled in the
FEHB program. CBO estimates that implementing S. 369 would
reduce discretionary spending by those programs by about $0.1
billion over the 2010-2014 period and by $0.2 billion over the
2010-2019 period, assuming that appropriation actions reflect
the estimated reductions in costs.
Administrative Costs of the Federal Trade Commission. Based
on information from the FTC, CBO expects that the agency's
rulemaking and enforcement activities relating to settlement
agreements between drug companies would decrease over time as
the number of settlements requiring enforcement activities
declines. CBO estimates that any resulting cost reductions
would be insignificant for the first three years after
enactment of S. 369; thereafter, CBO estimates the agency's
costs would be reduced by about $1 million per year. Assuming
that appropriation actions reflect these reductions, CBO
estimates that discretionary spending would fall by about $2
million over the 2010-2014 period and by $7 million over the
2010-2019 period.
Estimated impact on State, local, and tribal governments:
S. 369 contains no intergovernmental mandates as defined in
UMRA. CBO estimates that enactment of this bill would result in
a decline in State Medicaid spending of less than $50 million
over the 2010-2014 period.
Estimated impact on the private sector: S. 369 would impose
a mandate on brand-name and generic drug manufacturers by
limiting agreements to settle a claim of patent infringement
if, in those agreements, the generic manufacturer receives
anything of value and agrees to limit or forgo research,
development, manufacturing, marketing, or sale of the generic
drug for any period of time. Such agreements would be presumed
illegal unless drug manufacturers present clear and convincing
evidence that the competitive benefits of the agreement
outweigh the anticompetitive effects.
CBO anticipates that limiting such agreements would result
in earlier generic entry into the market and, as a result of
lower drug prices, decreased profits for drug manufacturers.
Under UMRA, the cost of this mandate to drug manufacturers
would be the forgone profit, which CBO estimates to be about
$350 million in 2010 and $2.4 billion over the 2010-2014
period. Thus, the costs of the mandate would significantly
exceed the threshold established by UMRA for private-sector
mandates ($141 million in 2010, adjusted annually for
inflation).
Previous CBO estimate: On November 20, 2009, CBO
transmitted a cost estimate for H.R. 3962, the Affordable
Health Care for America Act, as passed by the House of
Representatives on November 7, 2009. H.R. 3962 also contains a
provision that would impose restrictions on certain settlement
agreements between manufacturers of brand-name and generic
drugs. (That provision can be found in section 2573 of the
bill.)
Differences in the estimated costs of the provision in H.R.
3962 and S. 369 reflect differences in the legislation. A key
difference in the proposals is that the provision in H.R. 3962
would not allow the parties the opportunity to demonstrate that
the competitive benefits of the settlement agreement outweigh
the anticompetitive effects. CBO's estimate for the provision
in H.R. 3962 also reflects interactions with other policies in
the bill (such as the expansion of health insurance coverage
and other drug policies.)
Estimate prepared by: Federal Spending: Federal Health
Programs--Julia Christensen and Anna Cook, Federal Trade
Commission--Susan Willie; Federal Revenues: Zachary Epstein;
Impact on State, Local, and Tribal Governments: Lisa Ramirez-
Branum; Impact on the Private Sector: Patrick Bernhardt and
Anna Cook
Estimate approved by: Holly Harvey, Deputy Assistant
Director for Budget Analysis.
V. Regulatory Impact Evaluation
In compliance with rule XXVI of the Standing Rules of the
Senate, the Committee finds that no significant regulatory
impact will result from the enactment of S. 369.
VI. Conclusion
The Preserve Access to Affordable Generics Act, S. 369,
will prevent anticompetitive pharmaceutical patent settlement
agreements between brand name and generic drug companies. This
legislation will provide the FTC with a strong remedy to block
anticompetitive patent settlements that harm consumers, and
also provide a strong deterrent against drug companies entering
into these agreements in the first place.
VII. MINORITY VIEWS
----------
MINORITY VIEWS OF SENATORS SESSIONS, HATCH, KYL, CORNYN, AND COBURN
Although this bill has been substantially improved since it
was first introduced, we cannot support it in its current form.
The original bill would have created a per se violation of the
antitrust laws where the parties to a drug patent infringement
suit settle the suit in a way that gives something of value to
the generic company other than the right to go to market
earlier. The reported bill replaces an express per se ban with
a presumption that such agreements are anticompetitive and
invalid. Because of the way that the bill enforces that
presumption, however, we believe that the bill would amount to
a de facto per se ban on covered settlements--and would entail
all of the evils attendant to a per se ban.
To be clear, we would support creating a legal presumption
against drug patent settlements--in effect, requiring the
parties to such settlements to show why the terms of the
settlement are reasonable and will not harm consumers. Such a
test would require the parties to explain what consideration is
being transferred between them under the agreement, to estimate
the value of that consideration, and to give a neutral and
legitimate reason for the exchange. We think that such a test
would ferret out settlements that are anticompetitive and
designed simply to delay generic market entry, while still
allowing the parties to enter into settlements that are
reasonable.
For a legal-presumption rule to work, however, the parties
must be afforded a forum in which they can quickly and fairly
test whether they have overcome the presumption and whether the
agreement is valid. Unfortunately, under the reported bill,
settlements would be made presumptively unlawful, but the bill
does not create a process for quickly resolving whether the
agreement is unlawful. The issue would not be resolved until
the FTC brings an action to challenge the settlement, which
could be years after the settlement was entered into. Moreover,
the current bill requires the brand and generic companies to
rebut the presumption that the agreement is unlawful by clear
and convincing evidence. This is a heavy burden that is not
appropriate for commercial litigation and that tilts the scales
in a lawsuit sharply in the government's favor.
As a practical matter, few companies will ever agree to
subject their settlements to the reported bill's procedures.
Generic and brand companies simply are not going to take the
risk that, years after they have entered into a settlement,
they will be sued by the FTC, will be unable to overcome the
presumption of invalidity by clear and convincing evidence, and
will have their agreement declared invalid and will be
subjected to treble damages. Parties enter into settlement
agreements so that they can have legal certainty. There is no
certainty--and no reason to enter into the settlement--if the
agreement will be presumed unlawful, with no way to promptly
determine whether the presumption of invalidity has been
overcome.
Parties also settle cases so that they can avoid the burden
and expense of litigation. The reported bill invites the
parties to end their litigation against each other, only to
begin years of discovery and litigation against the FTC.
In its practical effect, the bill reported by this
committee still amounts to a per se ban on settlements of
patent-infringement suits between brand and generic companies.
We are opposed to a per se ban. There are many valid
reasons for a generic drug company to settle a patent
infringement suit for things of value other than the right to
go to market earlier. In the course of discovery and
litigation, the generic company may conclude that the patent
that it is challenging is fairly strong, and that it only has a
10% chance of winning. It thus makes sense for the generic
company to settle for a modest amount of money (an amount that
reflects the 10% chance of winning) rather than litigating to
conclusion. And in this situation, the brand company who owns
the patent may be unwilling to let the generic company go to
market earlier--if that company thinks that it will win the
infringement suit, it will be better off litigating the case
rather than giving the generic company part of its valuable
monopoly. This puts the generic company in a terrible position,
where it can either continue what is very likely pointless
litigation, or walk away with nothing.
By effectively preventing the parties from settling, it is
likely that this bill will discourage generic drug companies
from bringing challenges to brand companies' patents in the
first place--and as a result, the bill will ultimately reduce
competition and raise prices for drugs that are currently
subject to invalid or low-quality patents.
This point is brought into relief in a letter that Senator
Sessions recently received from Wockhardt USA, a smaller
generic drug company that is based in New Jersey.\1\ The letter
describes the considerable expense borne by a generic drug
company in challenging a brand company's patent: ``Patent
challenges already cost approximately $4 to $7 million to
pursue, and with upwards of 5 challenges occurring at any one
time (at least for Wockhardt), the costs can get out of control
quite quickly.'' As a result, generic companies must think
carefully about whether to bring suit--and they rely on the
possibility of settlement when making their decision:
---------------------------------------------------------------------------
\1\A copy of this letter is included as an attachment to these
views.
Since Wockhardt and other similarly situated
companies must marshal limited resources, a thorough
cost versus risk analysis must be conducted before
committing to bringing suit against a well-funded
branded company. Integral to that analysis is
---------------------------------------------------------------------------
consideration of the possibility of settlement.
This particular generic drug company takes a dim view of
the impact that this bill will have on its ability to challenge
brand patents and bring generic drugs to market. First it notes
that it is often difficult if not impossible for parties to
settle if they only are allowed to do so by allowing the
generic to go to market earlier:
the overly simplistic view adopted by this legislation
fails to take into account the different positions of
the parties on a number of critical issues to any
settlement discussion: risk aversion, financial
resources, underlying knowledge of the strength of a
patent and other variables, such as knowledge of the
market. The differences in perception on these and
other issues and their effect on parties coming to an
agreement on an appropriate entry date will most
certainly make it very difficult, and perhaps
impossible, to reach a settlement.
The letter contends that as a result, the committee-
reported bill will effectively deter generic drug companies--
particularly small ones--from bringing challenges to branded
drugs in the first place:
effective removal of settlement as an option, as
contemplated by S. 369, significantly complicates the
risk analysis currently undertaken and leaves small
manufacturers with insufficient incentive to pursue
challenges except in the clearest (and rarest) of cases
where the cost would almost certainly be rewarded.
This particular company has concluded that ``S. 369, in its
current form, would chill competition, discourage generic
challenges and subsequently drive up the cost of affordable
medicines.''
Obviously, this result is the exact opposite of that which
this bill is intended to achieve. It nevertheless seems that
there is a high risk, if not outright likelihood, that the bill
in its current form will achieve exactly this result. By
preventing parties that disagree on the strength of a patent
and other key factors from settling a suit, the bill will deter
generic companies from embarking on the expensive path of
challenging a brand patent in the first place, and will
ultimately result in fewer generic drugs entering the market.
Again, there is much with regard to this bill that the
sponsors and we agree on: brand-generic patent settlements
should be subject to careful scrutiny, and it is appropriate to
create a presumption against such settlements and force the
parties to provide a legitimate justification for all of the
consideration being exchanged. But by failing to provide for
prompt resolution of whether a settlement is invalid, and by
stacking the deck against the settling parties, this bill
amounts to an effective per se ban on settlements. Such a ban
would benefit neither the companies nor consumers. It would
ultimately reduce generic market entry and raise prices for
consumers--a result that we think all would agree is to be
avoided.
Jeff Sessions.
Orrin Hatch.
Jon Kyl.
John Cornyn.
Tom Coburn.
Attachment to Minority Views of Senators Sessions, Hatch, Kyl, Cornyn,
and Coburn
Wockhardt,
Parsippany, NJ,
November 2, 2009.
Re The Preserve Access to Affordable Generic Drugs Act (S. 369).
Hon. Patrick Leahy,
Chairman, Senate Judiciary Committee,
Washington, DC.
Dear Mr. Chairman: I am the Senior Vice President and Head of
Global Legal Affairs for Wockhardt, a global pharmaceutical and
biotechnology company. Wockhardt, through its subsidiaries in
Parsippany, New Jersey and Morton Grove, Illinois, is an active
participant in the United States generic pharmaceuticals market. We
take great pride in our role in saving American consumers and taxpayers
billions of dollars each year in prescription drug costs, and it is in
that spirit that I write to you today to express my deep reservations
about 8.369, ``The Preserve Access to Affordable Generic Drugs Act''.
Given that most of the pharmaceutical companies with a ``presence''
in Washington generate significantly more revenue than Wockhardt, we
felt it critical to provide another perspective--that of a smaller
generic whose strategy and decision-making process will most certainly
and significantly be adversely affected by S. 369. In theory, and
according to its proponents, S. 369 will reduce the anti-consumer
practice of brand-name drug manufacturers using ``pay-off'' agreements
to keep cheaper generic equivalents off the market by making such
practices presumptively illegal. While this may look promising in
theory, in practice, this overly broad and sweeping approach will cause
a significant decline in patent challenges in the United States,
resulting in strengthened market monopolies for branded companies and,
unfortunately, limited competition.
What is most surprising about the evolution of this particular
legislation is the legal standard that has somehow found its way into
the analysis. Looking back throughout history, with a particular focus
on antitrust law, courts traditionally apply a per se rule only when
considerable judicial experience identifies a category of conduct that
almost invariably reduces output and raises price. In the present
situation, however, the proponents of S. 369 do not seem to be
advocating this legislation because they seek to codify an emerging
judicial consensus about a harmful category of conduct. In fact, the
situation is quite the opposite. A review of the legal landscape over
the past several years reveals that there is a growing judicial
consensus that many of these settlements are not categorically
problematic. Many economists, jurists and legal scholars have studied,
analyzed and evaluated these settlements and consistently concluded
that there are obvious pro-consumer effects to these settlements. Even
the Federal Trade Commission (``FTC''), at one time, has joined in this
conclusion. Former FTC Chairman Deborah Platt Majoras acknowledged this
in stating, ``Undoubtedly, there can be significant pro-competitive
benefits of settling patent litigation between brand and generic
manufacturers. Further, we recognize the importance of settlements
generally to the judicial system.'' Neither these ``significant
procompetitive benefits'' nor the understanding that the per se
standard is inappropriate is reflected in the FTC's current support of
S. 369. I would submit that simply because a settlement between a brand
and generic company has the potential to have an anti-competitive
effect, does not warrant this type of shift, while seemingly completely
ignoring the benefits these types of agreements have had on the cost of
health care in this country to date.
S. 369, for all practical purposes, enacts a per se standard by
shifting the burden to companies entering into a settlement to prove,
by clear and convincing evidence, that a settlement is pro-competitive,
and it would remove from the trier of fact the ability to determine
whether a patent is valid and a valuable intellectual property right.
Together, these burdens would add layers of cost, time, and risk to the
current process, substantially harming small generic manufacturers'
ability to aggressively pursue challenges. Since Wockhardt and other
similarly situated companies must marshal limited resources, a thorough
cost versus risk analysis must be conducted before commiting to
bringing suit against a well-funded branded company. Integral to that
analysis is consideration of the possibility of settlement.
Determining whether to challenge a patent is often exacerbated by
the complexity of the products and patents at issue, and the outcomes
of even the best cases are uncertain. As such, effective removal of
settlement as an option, as contemplated by S. 369, significantly
complicates the risk analysis currently undertaken and leaves small
manufacturers with insufficient incentive to pursue challenges except
in the clearest (and rarest) of cases where the cost would almost
certainly be rewarded. It simply cannot be assumed that brand and
generic companies will even be able to reach agreements moving forward
under this legislation.
As various critics of this proposed legislation have pointed out,
the overly simplistic view adopted by this legislation fails to take
into account the different positions of the parties on a number of
critical issues to any settlement discussion: risk aversion, financial
resources, underlying knowledge of the strength of a patent and other
variables, such as knowledge of the market. The differences in
perception on these and other issues and their effect on parties coming
to an agreement on an appropriate entry date will most certainly make
it very difficult, and perhaps impossible, to reach a settlement.
In fact, this sort of incentive re-alignment is out of sync with
the balancing of rights originally sought under the Hatch-Waxman
statute. Inherent and systemic conflicts will always exist between
patent law and antitrust law, but the Hatch-Waxman statute was and
continues to be successful in challenging monopolies in the interest of
American consumers. However, if faced with the risks and costs
associated with settlement under S. 369, generic companies will have to
make an earlier and very complicated assessment as to whether to
challenge a patent and how much it will cost to litigate that case all
the way through appeal. With the shifting of the burden, there will be
no result other than a substantial increase in expenses and litigation
budgets (not to mention additional waste of judicial resources), which
cannot be sustained by companies like Wockhardt. Patent challenges
already cost approximately $4 to $7 million to pursue, and with upwards
of 5 challenges occurring at any one time (at least for Wockhardt), the
costs can get out of control quite quickly. We will have to evaluate
very closely whether we can sustain our current program should this
legislation be implemented.
In fact, the costs noted above appear not to factor in costs
associated with trying to prove to a trier of fact that a settlement is
pro-competitive. It is not at all clear how the process is to work and
how it will be implemented, but one thing is certain: these additional
layers of significant time, cost and risk will cause Wockhardt and
similarly situated generic companies to challenge fewer patents. Fewer
patent challenges will result in fewer product offerings and will most
certainly adversely impact the downward pressure on drug prices
associated with multiple generic entrants.
To provide some perspective, Wockhardt, despite our relatively
small market share, received 23 Abbreviated New Drug Application
(``ANDA'') approvals from the FDA in 2008 alone, placing us, we
believe, among the top 5 companies in the world in that regard. Since
2005, we have filed 106 ANDAs with the FDA, 14 of which have resulted
in litigation and several of which having been settled in the past
eighteen months. Those settlements each will result in our launching of
the generic product in advance of the expiration date associated with
the relevant patents. However, should S. 369 be implemented, our number
of challenges will most certainly shrink significantly due to the
factors previously set forth above. For context, think about a market
with only two or three participants, as opposed to four, five, six or
greater.
In conclusion, one observer noted that public policy must ``take
into account and balance all three relevant social policies--pro-
competition, pro-patent and pro-settlement--and formulate rules leading
to the lowest net social cost when all relevant costs are factored.''
(Daniel A. Cranem Exit Payments in Settlement of Patent Infringement
Lawsuits: Antitrust Rules and Economic Implications, 54 FLA. L. REV.
747, 750 (2002)). While the current regulatory framework encourages
patent challenges and rewards generic companies for engaging in the
research and development and litigation necessary to bring products to
market and lower the prices of medicines, S. 369, in its current form,
would chill competition, discourage generic challenges and subsequently
drive up the cost of affordable medicines.
Thank you for considering our views.
Sincerely,
Jerome D. Jabbour.
MINORITY VIEWS FROM SENATOR HATCH
For years, the Senate Judiciary Committee has been
considering legislation that would curtail abuses that may
exist in the way pharmaceutical companies enter into patent
litigation settlements. Unfortunately, in an effort to curb
anti-consumer practices, the proponents of the Preserve Access
to Affordable Generics Act (S. 369) fail to acknowledge that
consumers benefit when generic and brand companies are able to
set aside reasonable differences and reach agreements that
allow generics to enter the marketplace earlier.
When Representative Henry Waxman and I were drafting the
Drug Price Competition and Patent Term Restoration Act of 1984,
commonly referred to as the ``Hatch-Waxman Act,'' we created a
system that allows generic manufacturers to challenge patents
when they believe the patents should not prevent them from
entering the market and we provided them incentives to make
every effort to get to the market early. There is no doubt that
consumer access to generic medicines is expedited any time
these important products come to market prior to the patents
expiring.
What seems to have been forgotten during consideration of
S. 369 is the reality that patent litigation settlements
between brand and generic drug companies give consumers the
ability of using generic drugs earlier than can be anticipated.
In other words, generic competition is infused into the market
sooner rather than later--providing savings to the health care
system. This was the purpose of the Hatch-Waxman Act, and it
has worked. Consequently, it is important that before we change
the law, we have a clear understanding of the proposed
legislation and a complete appreciation of the consequences of
its implementation.
While it is true that S. 369 no longer has a bright-line
rule that all settlements are per se illegal, the hurdles that
would be imposed on settling parties could effectively
discourage proconsumer settlements. Specifically, the
legislation provides that certain patent settlement agreements
are presumed to have anti-competitive effects and are unlawful.
That presumption can only be overcome if the parties
demonstrate by ``clear and convincing'' evidence that the
precompetitive benefits of the agreement outweigh the anti-
competitive effects. This high burden of proof creates a strong
disincentive for parties to settle. Additionally, the ``clear
and convincing evidence'' standard, as opposed to the
traditional preponderance of the evidence standard, gives the
Federal Trade Commission (FTC) an unprecedented and unfair
amount of discretion. It unduly benefits the Commission by
making it very difficult for companies to rebut the presumption
even in cases that have merit.
Adding to the power of the FTC is the fact that S. 369
requires violators to pay a civil penalty of up to three times
the value of the consideration given to the generic
manufacturer. Historically the FTC has used injunctions and
disgorgement as enforcement tools. The authority under S. 369
to penalize drug manufacturers by making them pay potentially
millions of dollars in fines is overbroad and unnecessary.
If S. 396 is enacted in its current form, generic companies
that might have brought actions in the past and ultimately
settled for early entry may be deterred from doing so.
Moreover, the bill could create uncertainty among industry
participants, their investors, and the public. And that
uncertainty--as to the duration of patent protection, ability
to resolve good faith disputes, and investment in new
applications for existing medicines--will have a significant
adverse impact on innovation and the quality of health care in
the United States.
Orrin G. Hatch.
VIII. Changes to Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 369, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
UNITED STATES CODE
TITLE 15--COMMERCE AND TRADE
* * * * * * *
CHAPTER 2--FEDERAL TRADE COMMISSION; PROMOTION OF EXPORT TRADE AND
PREVENTION OF UNFAIR METHODS OF COMPETITION
SUBCHAPTER I--FEDERAL TRADE COMMISSION
FEDERAL TRADE COMMISSION ACT (15 U.S.C. Sec. Sec. 41 et seq.)
* * * * * * *
SEC. 16 (15 U.S.C. Sec. 58). COMMENCEMENT, DEFENSE, INTERVENTION, AND
SUPERVISION OF LITIGATION AND APPEAL BY COMMISSION
OR ATTORNEY GENERAL
(a) Procedure for Exercise of Authority To Litigate or
Appeal.--
(1) Except as otherwise provided in paragraph (2) or
(3), if--
(A) before commencing, defending, or
intervening in, any civil action involving this
subchapter (including an action to collect a
civil penalty) which the Commission, or the
Attorney General on behalf of the Commission,
is authorized to commence, defend, or intervene
in, the Commission gives written notification
and undertakes to consult with the Attorney
General with respect to such action; and
(B) the Attorney General fails within 45 days
after receipt of such notification to commence,
defend, or intervene in, such action;
the Commission may commence, defend, or intervene in,
and supervise the litigation of, such action and any
appeal of such action in its own name by any of its
attorneys designated by it for such purpose.
(2) Except as otherwise provided in paragraph (3), in
any civil action--
(A) under section 53 of this title (relating
to injunctive relief);
(B) under section 57b of this title (relating
to consumer redress);
(C) to obtain judicial review of a rule
prescribed by the Commission, or a cease and
desist order issued under section 45 of this
title;
(D) under the second paragraph of section 49
of this title (relating to enforcement of a
subpena) and under the fourth paragraph of such
section (relating to compliance with section 46
of this title); [or]
(E) under section 57b-2a of this title; or
(F) under section 28;
the Commission shall have exclusive authority
to commence or defend, and supervise the
litigation of, such action and any appeal of
such action in its own name by any of its
attorneys designated by it for such purpose,
unless the Commission authorizes the Attorney
General to do so. The Commission shall inform
the Attorney General of the exercise of such
authority and such exercise shall not preclude
the Attorney General from intervening on behalf
of the United States in such action and any
appeal of such action as may be otherwise
provided by law.
(3)(A) If the Commission makes a written request to
the Attorney General, within the 10-day period which
begins on the date of the entry of the judgment in any
civil action in which the Commission represented itself
pursuant to paragraph (1) or (2), to represent itself
through any of its attorneys designated by it for such
purpose before the Supreme Court in such action, it may
do so, if--
(i) the Attorney General concurs with such
request; or
(ii) the Attorney General, within the 60-day
period which begins on the date of the entry of
such judgment--
(I) refuses to appeal or file a
petition for writ of certiorari with
respect to such civil action, in which
case he shall give written notification
to the Commission of the reasons for
such refusal within such 60-day period;
or
(II) the Attorney General fails to
take any action with respect to the
Commission's request.
(B) In any case where the Attorney General represents
the Commission before the Supreme Court in any civil
action in which the Commission represented itself
pursuant to paragraph (1) or (2), the Attorney General
may not agree to any settlement, compromise, or
dismissal of such action, or confess error in the
Supreme Court with respect to such action, unless the
Commission concurs.
(C) For purposes of this paragraph (with respect to
representation before the Supreme Court), the term
``Attorney General'' includes the Solicitor General.
(4) If, prior to the expiration of the 45-day period
specified in paragraph (1) of this section or a 60-day
period specified in paragraph (3), any right of the
Commission to commence, defend, or intervene in, any
such action or appeal may be extinguished due to any
procedural requirement of any court with respect to the
time in which any pleadings, notice of appeal, or other
acts pertaining to such action or appeal may be taken,
the Attorney General shall have one-half of the time
required to comply with any such procedural requirement
of the court (including any extension of such time
granted by the court) for the purpose of commencing,
defending, or intervening in the civil action pursuant
to paragraph (1) or for the purpose of refusing to
appeal or file a petition for writ of certiorari and
the written notification or failing to take any action
pursuant to paragraph 3(A)(ii).
(5) The provisions of this subsection shall apply
notwithstanding chapter 31 of Title 28, or any other
provision of law.
(b) Certification by Commission to Attorney General for
Criminal Proceedings.--Whenever the Commission has reason to
believe that any person, partnership, or corporation is liable
for a criminal penalty under this subchapter, the Commission
shall certify the facts to the Attorney General, whose duty it
shall be to cause appropriate criminal proceedings to be
brought.
(c) Foreign Litigation.--
(1) Commission attorneys.--With the concurrence of
the Attorney General, the Commission may designate
Commission attorneys to assist the Attorney General in
connection with litigation in foreign courts on
particular matters in which the Commission has an
interest.
(2) Reimbursement for foreign counsel.--The
Commission is authorized to expend appropriated funds,
upon agreement with the Attorney General, to reimburse
the Attorney General for the retention of foreign
counsel for litigation in foreign courts and for
expenses related to litigation in foreign courts in
which the Commission has an interest.
(3) Limitation on use of funds.--Nothing in this
subsection authorizes the payment of claims or
judgments from any source other than the permanent and
indefinite appropriation authorized by section 1304 of
Title 31.
(4) Other authority.--The authority provided by this
subsection is in addition to any other authority of the
Commission or the Attorney General.
* * * * * * *
SEC. 28 (15 U.S.C. Sec. 58). PRESERVING ACCESS TO AFFORDABLE GENERICS
(a) In General.--
(1) Enforcement proceeding.--The Federal Trade
Commission may initiate a proceeding to enforce the
provisions of this section against the parties to any
agreement resolving or settling, on a final or interim
basis, a patent infringement claim, in connection with
the sale of a drug product.
(2) Presumption.--
(A) In general.--Subject to subparagraph (B),
in such a proceeding, an agreement shall be
presumed to have anticompetitive effects and be
unlawful if--
(i) an ANDA filer receives anything
of value; and
(ii) the ANDA filer agrees to limit
or forego research, development,
manufacturing, marketing, or sales of
the ANDA product for any period of
time.
(B) Exception.--The presumption in
subparagraph (A) shall not apply if the parties
to such agreement demonstrate by clear and
convincing evidence that the pro-competitive
benefits of the agreement outweigh the
anticompetitive effects of the agreement.
(b) Competitive Factors.--In determining whether the
settling parties have met their burden under subsection
(a)(2)(B), the fact finder shall consider--
(1) the length of time remaining until the end of the
life of the relevant patent, compared with the agreed
upon entry date for the ANDA product;
`(2) the value to consumers of the competition from
the ANDA product allowed under the agreement;
(3) the form and amount of consideration received by
the ANDA filer in the agreement resolving or settling
the patent infringement claim;
(4) the revenue the ANDA filer would have received by
winning the patent litigation;
(5) the reduction in the NDA holder's revenues if it
had lost the patent litigation;
(6) the time period between the date of the agreement
conveying value to the ANDA filer and the date of the
settlement of the patent infringement claim; and
(7) any other factor that the fact finder, in its
discretion, deems relevant to its determination of
competitive effects under this subsection.
(c) Limitations.--In determining whether the settling
parties have met their burden under subsection (a)(2)(B), the
fact finder shall not presume--
(1) that entry would not have occurred until the
expiration of the relevant patent or statutory
exclusivity; or
(2) that the agreement's provision for entry of the
ANDA product prior to the expiration of the relevant
patent or statutory exclusivity means that the
agreement is pro-competitive, although such evidence
may be relevant to the fact finder's determination
under this section.
(d) Exclusions.--Nothing in this section shall prohibit a
resolution or settlement of a patent infringement claim in
which the consideration granted by the NDA holder to the ANDA
filer as part of the resolution or settlement includes only one
or more of the following:
(1) The right to market the ANDA product in the
United States prior to the expiration of--
(A) any patent that is the basis for the
patent infringement; or
(B) any patent right or other statutory
exclusivity that would prevent the marketing of
such drug.
(2) A payment for reasonable litigation expenses not
to exceed $7,500,000.
(3) A covenant not to sue on any claim that the ANDA
product infringes a United States patent.
(e) Regulations and Enforcement.--
(1) Regulations.--The Federal Trade Commission may
issue, in accordance with section 553 of title 5,
United States Code, regulations implementing and
interpreting this section. These regulations may exempt
certain types of agreements described in subsection (a)
if the Commission determines such agreements will
further market competition and benefit consumers.
Judicial review of any such regulation shall be in the
United States District Court for the District of
Columbia pursuant to section 706 of title 5, United
States Code.
(2) Enforcement.--A violation of this section shall
be treated as a violation of section 5.
(3) Judicial review.--Any person, partnership or
corporation that is subject to a final order of the
Commission, issued in an administrative adjudicative
proceeding under the authority of subsection (a)(1),
may, within 30 days of the issuance of such order,
petition for review of such order in the United States
Court of Appeals for the District of Columbia Circuit
or the United States Court of Appeals for the circuit
in which the ultimate parent entity, as defined at 16
C.F.R. 801.1(a)(3), of the NDA holder is incorporated
as of the date that the NDA is filed with the Secretary
of the Food and Drug Administration, or the United
States Court of Appeals for the circuit in which the
ultimate parent entity of the ANDA filer is
incorporated as of the date that the ANDA is filed with
the Secretary of the Food and Drug Administration. In
such a review proceeding, the findings of the
Commission as to the facts, if supported by evidence,
shall be conclusive.
(f) Antitrust Laws.--Nothing in this section shall be
construed to modify, impair or supersede the applicability of
the antitrust laws as defined in subsection (a) of the 1st
section of the Clayton Act (15 U.S.C. 12(a)) and of section 5
of this Act to the extent that section 5 applies to unfair
methods of competition. Nothing in this section shall modify,
impair, limit or supersede the right of an ANDA filer to assert
claims or counterclaims against any person, under the antitrust
laws or other laws relating to unfair competition.
(g) Penalties.--
(1) Forfeiture.--Each person, partnership or
corporation that violates or assists in the violation
of this section shall forfeit and pay to the United
States a civil penalty sufficient to deter violations
of this section, but in no event greater than 3 times
the value received by the party that is reasonably
attributable to a violation of this section. If no such
value has been received by the NDA holder, the penalty
to the NDA holder shall be sufficient to deter
violations, but in no event greater than 3 times the
value given to the ANDA filer reasonably attributable
to the violation of this section. Such penalty shall
accrue to the United States and may be recovered in a
civil action brought by the Federal Trade Commission,
in its own name by any of its attorneys designated by
it for such purpose, in a district court of the United
States against any person, partnership or corporation
that violates this section. In such actions, the United
States district courts are empowered to grant mandatory
injunctions and such other and further equitable relief
as they deem appropriate.
(2) Cease and desist.--
(A) In general.--If the Commission has issued
a cease and desist order with respect to a
person, partnership or corporation in an
administrative adjudicative proceeding under
the authority of subsection (a)(1), an action
brought pursuant to paragraph (1) may be
commenced against such person, partnership or
corporation at any time before the expiration
of one year after such order becomes final
pursuant to section 5(g).
(B) Exception.--In an action under
subparagraph (A), the findings of the
Commission as to the material facts in the
administrative adjudicative proceeding with
respect to such person's, partnership's or
corporation's violation of this section shall
be conclusive unless--
(i) the terms of such cease and
desist order expressly provide that the
Commission's findings shall not be
conclusive; or
(ii) the order became final by reason
of section 5(g)(1), in which case such
finding shall be conclusive if
supported by evidence.
(3) Civil penalty.--In determining the amount of the
civil penalty described in this section, the court
shall take into account--
(A) the nature, circumstances, extent, and
gravity of the violation;
(B) with respect to the violator, the degree
of culpability, any history of violations, the
ability to pay, any effect on the ability to
continue doing business, profits earned by the
NDA holder, compensation received by the ANDA
filer, and the amount of commerce affected; and
(C) other matters that justice requires.
(4) Remedies in addition.--Remedies provided in this
subsection are in addition to, and not in lieu of, any
other remedy provided by Federal law. Nothing in this
paragraph shall be construed to affect any authority of
the Commission under any other provision of law.
(h) Definitions.--In this section:
(1) Agreement.--The term ``agreement'' means anything
that would constitute an agreement under section 1 of
the Sherman Act (15 U.S.C. 1) or section 5 of this Act.
(2) Agreement resolving or settling a patent
infringement claim.--The term ``agreement resolving or
settling a patent infringement claim'' includes any
agreement that is entered into within 30 days of the
resolution or the settlement of the claim, or any other
agreement that is contingent upon, provides a
contingent condition for, or is otherwise related to
the resolution or settlement of the claim.
(3) ANDA.--The term ``ANDA'' means an abbreviated new
drug application, as defined under section 505(j) of
the Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355(j)).
(4) ANDA filer.--The term ``ANDA filer'' means a
party who has filed an ANDA with the Food and Drug
Administration.
(5) ANDA product.--The term ``ANDA product'' means
the product to be manufactured under the ANDA that is
the subject of the patent infringement claim.
(6) Drug product.--The term ``drug product'' means a
finished dosage form (e.g., tablet, capsule, or
solution) that contains a drug substance, generally,
but not necessarily, in association with 1 or more
other ingredients, as defined in section 314.3(b) of
title 21, Code of Federal Regulations.
(7) NDA.--The term ``NDA'' means a new drug
application, as defined under section 505(b) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355(b)).
(8) NDA holder.--The term ``NDA holder'' means--
(A) the party that received FDA approval to
market a drug product pursuant to an NDA;
(B) a party owning or controlling enforcement
of the patent listed in the Approved Drug
Products With Therapeutic Equivalence
Evaluations (commonly known as the ``FDA Orange
Book'') in connection with the NDA; or
(C) the predecessors, subsidiaries,
divisions, groups, and affiliates controlled
by, controlling, or under common control with
any of the entities described in subparagraphs
(A) and (B) (such control to be presumed by
direct or indirect share ownership of 50
percent or greater), as well as the licensees,
licensors, successors, and assigns of each of
the entities.
(9) Patent infringement.--The term ``patent
infringement'' means infringement of any patent or of
any filed patent application, extension, reissue,
renewal, division, continuation, continuation in part,
reexamination, patent term restoration, patents of
addition and extensions thereof.
(10) Patent infringement claim.--The term ``patent
infringement claim'' means any allegation made to an
ANDA filer, whether or not included in a complaint
filed with a court of law, that its ANDA or ANDA
product may infringe any patent held by, or exclusively
licensed to, the NDA holder of the drug product.
(11) Statutory exclusivity.--The term ``statutory
exclusivity'' means those prohibitions on the approval
of drug applications under clauses (ii) through (iv) of
section 505(c)(3)(E) (5- and 3-year data exclusivity),
section 527 (orphan drug exclusivity), or section 505A
(pediatric exclusivity) of the Federal Food, Drug, and
Cosmetic Act .
(b) Effective Date.--Section 28 of the Federal Trade
Commission Act, as added by this section, shall apply to all
agreements described in section 28(a)(1) of that Act entered
into after November 15, 2009. Section 28(g) of the Federal
Trade Commission Act, as added by this section, shall not apply
to agreements entered into before the date of enactment of this
Act.
SEC. 29.
This subchapter may be cited as the ``Federal Trade Commission Act''.
* * * * * * *
TITLE 21--FOOD AND DRUGS
* * * * * * *
CHAPTER 9_FEDERAL FOOD, DRUG AND COSMETICS ACT
* * * * * * *
SUBCHAPTER V--DRUGS AND DEVICES
Part A--DRUGS AND DEVICES
* * * * * * *
Sec. 355. New Drugs
* * * * * * *
(j) Abbreviated New Drug Applications.--
* * * * * * *
(5)(A) Within one hundred and eighty days of the
initial receipt of an application under paragraph (2)
or within such additional period as may be agreed upon
by the Secretary and the applicant, the Secretary shall
approve or disapprove the application.
(B) The approval of an application submitted under
paragraph (2) shall be made effective on the last
applicable date determined by applying the following to
each certification made under paragraph (2)(A)(vii):
(i) If the applicant only made a
certification described in subclause (I) or
(II) of paragraph (2)(A)(vii) or in both such
subclauses, the approval may be made effective
immediately.
(ii) If the applicant made a certification
described in subclause (III) of paragraph
(2)(A)(vii), the approval may be made effective
on the date certified under subclause (III).
(iii) If the applicant made a certification
described in subclause (IV) of paragraph
(2)(A)(vii), the approval shall be made
effective immediately unless, before the
expiration of 45 days after the date on which
the notice described in paragraph (2)(B) is
received, an action is brought for infringement
of the patent that is the subject of the
certification and for which information was
submitted to the Secretary under subsection
(b)(1) or (c)(2) of this section before the
date on which the application (excluding an
amendment or supplement to the application),
which the Secretary later determines to be
substantially complete, was submitted. If such
an action is brought before the expiration of
such days, the approval shall be made effective
upon the expiration of the thirty-month period
beginning on the date of the receipt of the
notice provided under paragraph (2)(B)(i) or
such shorter or longer period as the court may
order because either party to the action failed
to reasonably cooperate in expediting the
action, except that--
(I) if before the expiration of such
period the district court decides that
the patent is invalid or not infringed
(including any substantive
determination that there is no cause of
action for patent infringement or
invalidity), the approval shall be made
effective on--
(aa) the date on which the
court enters judgment
reflecting the decision; or
(bb) the date of a settlement
order or consent decree signed
and entered by the court
stating that the patent that is
the subject of the
certification is invalid or not
infringed;
(II) if before the expiration of such
period the district court decides that
the patent has been infringed--
(aa) if the judgment of the
district court is appealed, the
approval shall be made
effective on--
(AA) the date on
which the court of
appeals decides that
the patent is invalid
or not infringed
(including any
substantive
determination that
there is no cause of
action for patent
infringement or
invalidity); or
(BB) the date of a
settlement order or
consent decree signed
and entered by the
court of appeals
stating that the patent
that is the subject of
the certification is
invalid or not
infringed; or
(bb) if the judgment of the
district court is not appealed
or is affirmed, the approval
shall be made effective on the
date specified by the district
court in a court order under
section 271(e)(4)(A) of Title
35;
(III) if before the expiration of
such period the court grants a
preliminary injunction prohibiting the
applicant from engaging in the
commercial manufacture or sale of the
drug until the court decides the issues
of patent validity and infringement and
if the court decides that such patent
is invalid or not infringed, the
approval shall be made effective as
provided in subclause (I); or
(IV) if before the expiration of such
period the court grants a preliminary
injunction prohibiting the applicant
from engaging in the commercial
manufacture or sale of the drug until
the court decides the issues of patent
validity and infringement and if the
court decides that such patent has been
infringed, the approval shall be made
effective as provided in subclause
(II).
In such an action, each of the parties shall reasonably
cooperate in expediting the action.
(iv) 180-day exclusivity period.--
(I) Effectiveness of application.--
Subject to subparagraph (D), if the
application contains a certification
described in paragraph (2)(A)(vii)(IV)
and is for a drug for which a first
applicant has submitted an application
containing such a certification, the
application shall be made effective on
the date that is 180 days after the
date of the first commercial marketing
of the drug (including the commercial
marketing of the listed drug) by any
first applicant.
(II) Definitions.--In this paragraph:
(aa) 180-day exclusivity
period.--The term ``180-day
exclusivity period'' means the
180-day period ending on the
day before the date on which an
application submitted by an
applicant other than a first
applicant could become
effective under this clause.
(bb) First applicant.--As
used in this subsection, the
term ``first applicant'' means
an applicant that, on the first
day on which a substantially
complete application containing
a certification described in
paragraph (2)(A)(vii)(IV) is
submitted for approval of a
drug, submits a substantially
complete application that
contains and lawfully maintains
a certification described in
paragraph (2)(A)(vii)(IV) for
the drug.
(cc) Substantially complete
application.--As used in this
subsection, the term
``substantially complete
application'' means an
application under this
subsection that on its face is
sufficiently complete to permit
a substantive review and
contains all the information
required by paragraph (2)(A).
(dd) Tentative approval.--
(AA) In general--The
term ``tentative
approval'' means
notification to an
applicant by the
Secretary that an
application under this
subsection meets the
requirements of
paragraph (2)(A), but
cannot receive
effective approval
because the application
does not meet the
requirements of this
subparagraph, there is
a period of exclusivity
for the listed drug
under subparagraph (F)
or section 355a of this
title, or there is a 7-
year period of
exclusivity for the
listed drug under
section 360cc of this
title.
(BB) Limitation.--A
drug that is granted
tentative approval by
the Secretary is not an
approved drug and shall
not have an effective
approval until the
Secretary issues an
approval after any
necessary additional
review of the
application.
(C) Civil action to obtain patent certainty.--
(i) Declaratory judgment absent infringement
action.--
(I) In general.--No action may be
brought under section 2201 of Title 28,
by an applicant under paragraph (2) for
a declaratory judgment with respect to
a patent which is the subject of the
certification referred to in
subparagraph (B)(iii) unless--
(aa) the 45-day period
referred to in such
subparagraph has expired;
(bb) neither the owner of
such patent nor the holder of
the approved application under
subsection (b) of this section
for the drug that is claimed by
the patent or a use of which is
claimed by the patent brought a
civil action against the
applicant for infringement of
the patent before the
expiration of such period; and
(cc) in any case in which the
notice provided under paragraph
(2)(B) relates to
noninfringement, the notice was
accompanied by a document
described in subclause (III).
(II) Filing of civil action.--If the
conditions described in items (aa),
(bb), and as applicable, (cc) of
subclause (I) have been met, the
applicant referred to in such subclause
may, in accordance with section 2201 of
Title 28, bring a civil action under
such section against the owner or
holder referred to in such subclause
(but not against any owner or holder
that has brought such a civil action
against the applicant, unless that
civil action was dismissed without
prejudice) for a declaratory judgment
that the patent is invalid or will not
be infringed by the drug for which the
applicant seeks approval, except that
such civil action may be brought for a
declaratory judgment that the patent
will not be infringed only in a case in
which the condition described in
subclause (I)(cc) is applicable. A
civil action referred to in this
subclause shall be brought in the
judicial district where the defendant
has its principal place of business or
a regular and established place of
business.
(III) Offer of confidential access to
application.--For purposes of subclause
(I)(cc), the document described in this
subclause is a document providing an
offer of confidential access to the
application that is in the custody of
the applicant under paragraph (2) for
the purpose of determining whether an
action referred to in subparagraph
(B)(iii) should be brought. The
document providing the offer of
confidential access shall contain such
restrictions as to persons entitled to
access, and on the use and disposition
of any information accessed, as would
apply had a protective order been
entered for the purpose of protecting
trade secrets and other confidential
business information. A request for
access to an application under an offer
of confidential access shall be
considered acceptance of the offer of
confidential access with the
restrictions as to persons entitled to
access, and on the use and disposition
of any information accessed, contained
in the offer of confidential access,
and those restrictions and other terms
of the offer of confidential access
shall be considered terms of an
enforceable contract. Any person
provided an offer of confidential
access shall review the application for
the sole and limited purpose of
evaluating possible infringement of the
patent that is the subject of the
certification under paragraph
(2)(A)(vii)(IV) and for no other
purpose, and may not disclose
information of no relevance to any
issue of patent infringement to any
person other than a person provided an
offer of confidential access. Further,
the application may be redacted by the
applicant to remove any information of
no relevance to any issue of patent
infringement.
(ii) Counterclaim to infringement action.--
(I) In general.--If an owner of the
patent or the holder of the approved
application under subsection (b) of
this section for the drug that is
claimed by the patent or a use of which
is claimed by the patent brings a
patent infringement action against the
applicant, the applicant may assert a
counterclaim seeking an order requiring
the holder to correct or delete the
patent information submitted by the
holder under subsection (b) or (c) of
this section on the ground that the
patent does not claim either--
(aa) the drug for which the
application was approved; or
(bb) an approved method of
using the drug.
(II) No independent cause of action--
Subclause (I) does not authorize the
assertion of a claim described in
subclause (I) in any civil action or
proceeding other than a counterclaim
described in subclause (I).
(iii) No damages.--An applicant shall not be
entitled to damages in a civil action under
clause (i) or a counterclaim under clause (ii).
(D) Forfeiture of 180-day exclusivity period.--
(i) Definition of forfeiture event.--In this
subparagraph, the term ``forfeiture event'',
with respect to an application under this
subsection, means the occurrence of any of the
following:
(I) Failure to market.--The first
applicant fails to market the drug by
the later of--
(aa) 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; or
(bb) with respect to the
first applicant or any other
applicant (which other
applicant has received
tentative approval), the date
that is 75 days after the date
as of which, as to each of the
patents with respect to which
the first applicant submitted
and lawfully maintained a
certification qualifying the
first applicant for the 180-day
exclusivity period under
subparagraph (B)(iv), at least
1 of the following has
occurred:
(AA) In an
infringement action
brought against that
applicant with respect
to the patent or in a
declaratory judgment
action brought by that
applicant 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.
(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 that includes
a finding that the
patent is invalid or
not infringed.
(CC) The patent
information submitted
under subsection (b) or
(c) of this section is
withdrawn by the holder
of the application
approved under
subsection (b) of this
section.
(II) Withdrawal of application.--The
first applicant withdraws the
application or the Secretary considers
the application to have been withdrawn
as a result of a determination by the
Secretary that the application does not
meet the requirements for approval
under paragraph (4).
(III) Amendment of certification.--
The first applicant amends or withdraws
the certification for all of the
patents with respect to which that
applicant submitted a certification
qualifying the applicant for the 180-
day exclusivity period.
(IV) Failure to obtain tentative
approval.--The first applicant fails to
obtain tentative approval of the
application within 30 months after the
date on which the application is filed,
unless the failure is caused by a
change in or a review of the
requirements for approval of the
application imposed after the date on
which the application is filed.
(V) Agreement with another applicant,
the listed drug application holder, or
a patent owner.--The first applicant
enters into an agreement with another
applicant under this subsection for the
drug, the holder of the application for
the listed drug, or an owner of the
patent that is the subject of the
certification under paragraph
(2)(A)(vii)(IV), the Federal Trade
Commission or the Attorney General
files a complaint, and there is a final
decision of the Federal Trade
Commission or the court with regard to
the complaint 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 agreement
has violated section 28 of the Federal
Trade Commission Act or the antitrust
laws (as defined in section 12 of Title
15, except that the term includes
section 45 of Title 15 to the extent
that that section applies to unfair
methods of competition).
(VI) Expiration of all patents.--All
of the patents as to which the
applicant submitted a certification
qualifying it for the 180-day
exclusivity period have expired.
(ii) Forfeiture.--The 180-day exclusivity
period described in subparagraph (B)(iv) shall
be forfeited by a first applicant if a
forfeiture event occurs with respect to that
first applicant.
(iii) Subsequent applicant.--If all first
applicants forfeit the 180-day exclusivity
period under clause (ii)--
(I) approval of any application
containing a certification described in
paragraph (2)(A)(vii)(IV) shall be made
effective in accordance with
subparagraph (B)(iii); and
(II) no applicant shall be eligible
for a 180-day exclusivity period.
(E) If the Secretary decides to disapprove an
application, the Secretary shall give the applicant
notice of an opportunity for a hearing before the
Secretary on the question of whether such application
is approvable. If the applicant elects to accept the
opportunity for hearing by written request within
thirty days after such notice, such hearing shall
commence not more than ninety days after the expiration
of such thirty days unless the Secretary and the
applicant otherwise agree. Any such hearing shall
thereafter be conducted on an expedited basis and the
Secretary's order thereon shall be issued within ninety
days after the date fixed by the Secretary for filing
final briefs.
(F)(i) If an application (other than an abbreviated
new drug application) submitted under subsection (b) of
this section for a drug, no active ingredient
(including any ester or salt of the active ingredient)
of which has been approved in any other application
under subsection (b) of this section, was approved
during the period beginning January 1, 1982, and ending
on September 24, 1984, the Secretary may not make the
approval of an application submitted under this
subsection which refers to the drug for which the
subsection (b) application was submitted effective
before the expiration of ten years from the date of the
approval of the application under subsection (b) of
this section.
(ii) If an application submitted under subsection (b)
of this section for a drug, no active ingredient
(including any ester or salt of the active ingredient)
of which has been approved in any other application
under subsection (b) of this section, is approved after
September 24, 1984, no application may be submitted
under this subsection which refers to the drug for
which the subsection (b) application was submitted
before the expiration of five years from the date of
the approval of the application under subsection (b) of
this section, except that such an application may be
submitted under this subsection after the expiration of
four years from the date of the approval of the
subsection (b) application if it contains a
certification of patent invalidity or noninfringement
described in subclause (IV) of paragraph (2)(A)(vii).
The approval of such an application shall be made
effective in accordance with subparagraph (B) except
that, if an action for patent infringement is commenced
during the one-year period beginning forty-eight months
after the date of the approval of the subsection (b)
application, the thirty-month period referred to in
subparagraph (B)(iii) shall be extended by such amount
of time (if any) which is required for seven and one-
half years to have elapsed from the date of approval of
the subsection (b) application.
(iii) If an application submitted under subsection
(b) of this section for a drug, which includes an
active ingredient (including any ester or salt of the
active ingredient) that has been approved in another
application approved under subsection (b) of this
section, is approved after September 24, 1984, and if
such application contains reports of new clinical
investigations (other than bioavailability studies)
essential to the approval of the application and
conducted or sponsored by the applicant, the Secretary
may not make the approval of an application submitted
under this subsection for the conditions of approval of
such drug in the subsection (b) application effective
before the expiration of three years from the date of
the approval of the application under subsection (b) of
this section for such drug.
(iv) If a supplement to an application approved under
subsection (b) of this section is approved after
September 24, 1984, and the supplement contains reports
of new clinical investigations (other than
bioavailability studies) essential to the approval of
the supplement and conducted or sponsored by the person
submitting the supplement, the Secretary may not make
the approval of an application submitted under this
subsection for a change approved in the supplement
effective before the expiration of three years from the
date of the approval of the supplement under subsection
(b) of this section.
(v) If an application (or supplement to an
application) submitted under subsection (b) of this
section for a drug, which includes an active ingredient
(including any ester or salt of the active ingredient)
that has been approved in another application under
subsection (b) of this section, was approved during the
period beginning January 1, 1982, and ending on
September 24, 1984, the Secretary may not make the
approval of an application submitted under this
subsection which refers to the drug for which the
subsection (b) application was submitted or which
refers to a change approved in a supplement to the
subsection (b) application effective before the
expiration of two years from September 24, 1984.
(6) If a drug approved under this subsection refers
in its approved application to a drug the approval of
which was withdrawn or suspended for grounds described
in the first sentence of subsection (e) of this section
or was withdrawn or suspended under this paragraph or
which, as determined by the Secretary, has been
withdrawn from sale for safety or effectiveness
reasons, the approval of the drug under this subsection
shall be withdrawn or suspended--
(A) for the same period as the withdrawal or
suspension under subsection (e) of this section
or this paragraph, or
(B) if the listed drug has been withdrawn
from sale, for the period of withdrawal from
sale or, if earlier, the period ending on the
date the Secretary determines that the
withdrawal from sale is not for safety or
effectiveness reasons.
(7)(A)(i) Within sixty days of September 24, 1984,
the Secretary shall publish and make available to the
public--
(I) a list in alphabetical order of the
official and proprietary name of each drug
which has been approved for safety and
effectiveness under subsection (c) of this
section before September 24, 1984;
(II) the date of approval if the drug is
approved after 1981 and the number of the
application which was approved; and
(III) whether in vitro or in vivo
bioequivalence studies, or both such studies,
are required for applications filed under this
subsection which will refer to the drug
published.
(ii) Every thirty days after the publication of the
first list under clause (i) the Secretary shall revise
the list to include each drug which has been approved
for safety and effectiveness under subsection (c) of
this section or approved under this subsection during
the thirty-day period.
(iii) When patent information submitted under
subsection (b) or (c) of this section respecting a drug
included on the list is to be published by the
Secretary, the Secretary shall, in revisions made under
clause (ii), include such information for such drug.
(B) A drug approved for safety and effectiveness
under subsection (c) of this section or approved under
this subsection shall, for purposes of this subsection,
be considered to have been published under subparagraph
(A) on the date of its approval or September 24, 1984,
whichever is later.
(C) If the approval of a drug was withdrawn or
suspended for grounds described in the first sentence
of subsection (e) of this section or was withdrawn or
suspended under paragraph (6) or if the Secretary
determines that a drug has been withdrawn from sale for
safety or effectiveness reasons, it may not be
published in the list under subparagraph (A) or, if the
withdrawal or suspension occurred after its publication
in such list, it shall be immediately removed from such
list--
(i) for the same period as the withdrawal or
suspension under subsection (e) of this section
or paragraph (6), or
(ii) if the listed drug has been withdrawn
from sale, for the period of withdrawal from
sale or, if earlier, the period ending on the
date the Secretary determines that the
withdrawal from sale is not for safety or
effectiveness reasons.
A notice of the removal shall be published in the
Federal Register.
(8) For purposes of this subsection:
(A)(i) The term ``bioavailability'' means the
rate and extent to which the active ingredient
or therapeutic ingredient is absorbed from a
drug and becomes available at the site of drug
action.
(ii) For a drug that is not intended to be
absorbed into the bloodstream, the Secretary
may assess bioavailability by scientifically
valid measurements intended to reflect the rate
and extent to which the active ingredient or
therapeutic ingredient becomes available at the
site of drug action.
(B) A drug shall be considered to be
bioequivalent to a listed drug if--
(i) the rate and extent of absorption
of the drug do not show a significant
difference from the rate and extent of
absorption of the listed drug when
administered at the same molar dose of
the therapeutic ingredient under
similar experimental conditions in
either a single dose or multiple doses;
or
(ii) the extent of absorption of the
drug does not show a significant
difference from the extent of
absorption of the listed drug when
administered at the same molar dose of
the therapeutic ingredient under
similar experimental conditions in
either a single dose or multiple doses
and the difference from the listed drug
in the rate of absorption of the drug
is intentional, is reflected in its
proposed labeling, is not essential to
the attainment of effective body drug
concentrations on chronic use, and is
considered medically insignificant for
the drug.
(C) For a drug that is not intended to be
absorbed into the bloodstream, the Secretary
may establish alternative, scientifically valid
methods to show bioequivalence if the
alternative methods are expected to detect a
significant difference between the drug and the
listed drug in safety and therapeutic effect.
(9) The Secretary shall, with respect to each
application submitted under this subsection, maintain a
record of--
(A) the name of the applicant,
(B) the name of the drug covered by the
application,
(C) the name of each person to whom the
review of the chemistry of the application was
assigned and the date of such assignment, and
(D) the name of each person to whom the
bioequivalence review for such application was
assigned and the date of such assignment.
The information the Secretary is required to maintain under
this paragraph with respect to an application submitted under
this subsection shall be made available to the public after the
approval of such application.
* * * * * * *
Historical and Statutory Notes
* * * * * * *
Amendments
* * * * * * *
Federal Trade Commission Review
Pub. L. 108-173, Title XI, 1111 to 1118, Dec. 8, 2003, 117
Stat. 2461-64, provided that:
SEC. 1112. NOTIFICATION OF AGREEMENTS.
(a) Agreement With Brand Name Drug Company.--
(1) Requirement.--A generic drug applicant that has
submitted an ANDA containing a certification under
section 505(j)(2)(A)(vii)(IV) of the Federal Food,
Drug, and Cosmetic Act [subsec. (j)(2)(A)(vii)(IV) of
this section] and a brand name drug company that enter
into an agreement described in paragraph (2) shall each
file the agreement in accordance with subsection (c)
[of this note]. The agreement shall be filed prior to
the date of the first commercial marketing of the
generic drug that is the subject of the ANDA.
(2) Subject matter of agreement.--An agreement
described in this paragraph between a generic drug
applicant and a brand name drug company is an agreement
regarding--
(A) the manufacture, marketing or sale of the
brand name drug that is the listed drug in the
ANDA involved;
(B) the manufacture, marketing, or sale of
the generic drug for which the ANDA was
submitted; or
(C) the 180-day period referred to in section
505(j)(5)(B)(iv) of the Federal Food, Drug, and
Cosmetic Act [subsec. (j)(5)(B)(iv) of this
section] as it applies to such ANDA or to any
other ANDA based on the same brand name drug.
(b) Agreement with Another Generic Drug Applicant.--
(1) Requirement.--A generic drug applicant that has
submitted an ANDA containing a certification under
section 505(j)(2)(A)(vii)(IV) of the Federal Food,
Drug, and Cosmetic Act [subsec. (j)(2)(A)(vii)(IV) of
this section] with respect to a listed drug and another
generic drug applicant that has submitted an ANDA
containing such a certification for the same listed
drug shall each file the agreement in accordance with
subsection (c) [of this note]. The agreement shall be
filed prior to the date of the first commercial
marketing of either of the generic drugs for which such
ANDAs were submitted.
(2) Subject matter of agreement.--An agreement
described in this paragraph between two generic drug
applicants is an agreement regarding the 180-day period
referred to in section 505(j)(5)(B)(iv) of the Federal
Food, Drug, and Cosmetic Act [subsec. (j)(5)(B)(iv) of
this section] as it applies to the ANDAs with which the
agreement is concerned.
(c) Filing.--
(1) Agreement.--The parties that are required in
subsection (a) or (b) [of this note] to file an
agreement in accordance with this subsection shall file
with the Assistant Attorney General and the Commission
the text of any such agreement, except that such
parties are not required to file an agreement that
solely concerns--
(A) purchase orders for raw material
supplies;
(B) equipment and facility contracts;
(C) employment or consulting contracts; or
(D) packaging and labeling contracts.
(2) Other agreements.--The parties that are required
in subsection (a) or (b) [of this note] to file an
agreement in accordance with this subsection shall file
with the Assistant Attorney General and [the Commission
the] the Commission--
(A) the agreements between the parties that
are not described in such subsections and are
contingent upon, provide a contingent condition
for, or are otherwise related to an agreement
that is required in subsection (a) or (b) [of
this note] to be filed in accordance with this
subsection[.]; and
(B) any other agreements the parties enter
into within 30 days of entering into an
agreement covered by subsection (a) or (b).
(3) Description.--In the event that any agreement
required in subsection (a) or (b) [of this note] to be
filed in accordance with this subsection has not been
reduced to text, each of the parties involved shall
file written descriptions of such agreement that are
sufficient to disclose all the terms and conditions of
the agreement.
(d) Certification.--The Chief Executive Officer or the
company official responsible for negotiating any agreement
required to be filed under subsection (a), (b), or (c) shall
execute and file with the Assistant Attorney General and the
Commission a certification as follows: I declare that the
following is true, correct, and complete to the best of my
knowledge: The materials filed with the Federal Trade
Commission and the Department of Justice under section 1112 of
subtitle B of title XI of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, with respect to the
agreement referenced in this certification: (1) represent the
complete, final, and exclusive agreement between the parties;
(2) include any ancillary agreements that are contingent upon,
provide a contingent condition for, or are otherwise related
to, the referenced agreement; and (3) include written
descriptions of any oral agreements, representations,
commitments, or promises between the parties that are
responsive to subsection (a) or (b) of such section 1112 and
have not been reduced to writing.''