Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Sixteen years ago, two lawmakers from opposing sides of the aisle hashed out a deal that transformed the pharmaceutical business. It was a delicate compromise; the legislation not only protected the profits of the industry’s biggest players, but also carved out a niche for their rivals — the generic drug sector. Today, those two lawmakers are still in office. And both are drawing close to reopening the Drug Price Competition and Patent Term Restoration Act of 1984. The law, enacted when the pharmaceutical industry was dominated by manufacturers of brand-name products born of research and development, is out of date. Court rulings have complicated its provisions. And the popularity of lower-cost generic drugs and the advent of bioengineered products that few foresaw in the early 1980s further point toward change. Indeed, the 1990s found the regulated industries asking Sen. Orrin Hatch, R-Utah, and Rep. Henry Waxman, D-Calif., to fix the 1984 act. But in today’s political environment, just as the lawmakers are thinking of making changes, many companies and their advocates have suddenly grown reluctant. The makers of both brand-name and generic drugs are trying to solve a complicated political equation involving election-year politics and the political backlash against health care costs to decide if revisiting the Hatch-Waxman Act soon is in their best interests. “The biggest problem is that both of the major interested groups — the research-based industry and the generics — each of them is concerned that a reopening of the bill would mean they would lose more than they could gain,” says Peter Barton Hutt, a Washington, D.C., partner at Covington & Burling, who specializes in food and drug law. “Finding a middle ground is going to be extremely difficult.” As chairman of the Senate Judiciary Committee and member of the Senate’s ruling party, Hatch has the most powerful seat from which to persuade the various groups to compromise. He has been seriously moving toward refashioning the act over the last year, setting up private stakeholder meetings with various pharmaceutical, generic, biotech, and consumer groups. It’s a strong priority for his office for the post-election Congress, but he does not want to move forward without the participation of all the affected groups. “I intend to conduct a bipartisan re-examination of the 1984 law which will successfully balance the interests of American consumers in obtaining both innovative and affordable medicines,” Hatch says. “He is the best at finding the salable common denominator,” says Ron Docksai, a former senior staff member in Hatch’s office, now a lobbyist for the Bayer Corp. “If there is one guy who can breach this gap with all the competing interests, it would be Hatch.” COMMON GROUND Hatch and Waxman found the compromise grounds in 1984, melding the needs of both the generics and the so-called innovators or brand-name companies. The generic industry lacked a way to sell copies of brand-name drugs without going through the long and expensive process of full clinical trials. And prescription drug makers were finding the patents on their very expensive research drugs almost useless; so much time was spent on testing and getting approval from the Food and Drug Administration that patents were expiring almost as soon as the drugs hit the market. The Hatch-Waxman Act provided the way out. Makers of generics could get FDA approval without clinical tests as long as they provided documentation showing that the brand-name and generic drugs were effectively the same. Brand-name manufacturers got patent extensions for time lost during clinical trials and the FDA approval process. But between broad intentions and specific situations arise the complications that always twist the meaning of legislation. Both sides have plenty of complaints. The brand-name pharmaceuticals are not happy with their patent extensions. Companies get a year extension for every year spent waiting for FDA approval, but each year spent in pre-application trials is matched by only a half-year patent extension. What’s more, there is a five-year cap on the time extensions. Patent terms themselves have changed. New inventions used to get patent protection for 17 years from the date the patent was issued. Now, they can have 20 years from the date the patent application is submitted. With complex drugs, companies complain that their effective patent terms are significantly shorter than those of any other invention, like a new golf club, for example. One study cited by the Pharmaceutical Research and Manufacturers Association says pharmaceuticals get an average of only 11-1/2 years of patent protection, compared with the average 18-1/2 years enjoyed by other patent products. “The pharmaceutical industry is going after much more sophisticated and complicated scientific targets,” says Gregory Glover, a D.C. partner at Boston-based Ropes & Gray who represents innovators. “If you link that to the time companies spend on the clinical trial process, more of your effective patent life is being eaten up.” But any efforts to extend patent time will face opposition from consumer advocates, already angered at drug prices. Tricia Smith, senior coordinator of health issues at the AARP, says lengthening patents would be “a hard sell.” Generic drug companies, on the other hand, have their own problems. For the upstarts, one of the major perks in Hatch-Waxman was a 180-day market exclusivity period for the first generic to successfully challenge a brand-name patent. When producing a knockoff drug, generics can wait for all the patents on the drug to expire, or they can challenge the patents. If the generic wins the challenge in court, the generic is essentially given a head start on other generics companies — awarded a period of exclusivity during which no other generic can come on the market. The idea was to reward a company that spent substantial money challenging a patent. “Being out there as the first generic on a billion dollar a year product is a huge, huge amount of money for a small company,” says James Czaban, a senior associate at the D.C. office of Baltimore’s Venable who is running a conference at the Food and Drug Law Institute on Hatch-Waxman in December. “It’s like winning the lottery for them.” But court decisions have complicated the issue. The FDA, generics manufacturers, and the courts have all fought over interpretations; does a district court or an appeals court decision trigger the exclusivity period? Can other generic applicants be approved while the first is still battling in court? And if only one of several patents is overturned, when exactly does the 180-day period begin? The upshot is that the court decisions have ended up constricting and expanding the 180-day period in a variety of different cases. The future of the 180-day exclusivity period is murky, and generic companies want it clarified. Unfortunately, the generic industry is divided over how to fix the situation. Companies pushing generics that are the first on a market tend to support protecting the 180-day period; companies with generic drugs waiting in the wings look for ways to weaken it. “No one has come up with a solution, and that seems to be the problem,” says David Weeda, a partner at D.C.’s Olsson, Frank & Weeda, which specializes in food and drug law. “Depending on whose ox is being gored, companies can take one position one day with one product line, and another position the next day.” Generic drug makers also want tougher regulations on the patents that brand-name drug companies take out for their products. Generics tell nightmare stories of innovator drug companies that patent the color of a drug’s bottle or the way a tablet is scored. Generics must then challenge those patents before they can get the cheaper version on the market. BRAVE NEW WORLD In addition to all the issues involving traditional pharmaceutical parties, there is a whole other problem the Hatch-Waxman bill may be called upon to solve: what to do with “generic biologics.” Biotech pharmaceutical companies now produce medicines that aren’t simple chemical compounds like aspirin, but genetically engineered proteins. They are infinitely more complex and more difficult to manufacture. They have also blurred the traditional distinction between brand name and generic. Under the current regulations, there is no way to get a generic version of a biologic approved. All products must go through the same rigorous testing and application process. Generics are pushing for a way to manufacture those biologics once their patents expire, without reinvesting in all the clinical trials. Biotech companies say it can’t be done because of the difficulty in producing biologics. In fact, they don’t believe there is such a thing as a generic biologic. The 1984 act is not equipped to regulate the new bioengineered drugs. The question is whether lawmakers can retool the law to do so. And it’s unclear whether Hatch and Waxman can broker a deal between all the groups, with all their complaints. It will come down to politics, skill, and luck. “Whether it will happen or not will depend a lot on the outcome of the election,” says William Vodra, a D.C. partner at Arnold & Porter and former associate chief counsel at the FDA. The research pharmaceutical industry is nervous about Democratic nominee Al Gore after the lambasting he has given the big drug companies on the campaign trail. They are more comfortable with the GOP’s George W. Bush, who has been less hostile on the hustings. “The innovators will not be bringing it up during a Gore presidency,” Vodra says. The other issue will be the legislative agenda of the next Congress. The recent discussions of drug price controls in Congress, spurred on by an outraged electorate, puts the research companies in an even more difficult situation. For most drug companies, dealing with that situation is a higher priority. Many say drug pricing will have to be resolved or shelved before all the parties will sit down to bargain on Hatch-Waxman. What everyone wants to ensure is that they don’t end up ruining a good law in an effort to make it better. “The devil they know,” says Venable’s Czaban, “may be better than the devil they don’t know.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.