Articles & White Papers

Federal Regulation in the Absence of Prescription Drug Legislation: The Bush Administration's Proposal to Speed Generics to Market
 
January 31, 2003
 
Michael M. Gaba- Washington

For the past several years, in response to the growing public demand for affordable and accessible prescription drugs from the seniors lobby and a growing list of other interested parties, the U.S. Congress has attempted, but failed to add a prescription drug benefit to the Medicare program.  The 107th Congress proved no different.  The House and Senate found themselves about $200 billion apart over 10 years on their respective pieces of legislation.[1]  While the Republican-controlled House passed its version of a prescription drug benefit, the Democratic-controlled Senate could not pass its more expensive version of the legislation.  Excluded by the original authorizing statute,[2] prescription drug coverage must be legislated by our elected representatives.  With the mid-term elections behind us, there will be a significant push again during the Republican-controlled 108th Congress to establish a prescription drug benefit under the Medicare program.  The dynamic for success has improved somewhat given that physician and Majority Leader Bill Frist (R-TN) has made this a top health care priority for the new Congress.

And while the Executive Branch does not have the authority to create a prescription drug benefit by federal regulation, it can and has taken steps to try to improve access to prescription drugs not only for Medicare beneficiaries, but for all Americans.  Following an October 21, 2002, Rose Garden ceremony at which President Bush announced the initiative, the U.S. Food and Drug Administration (FDA) published a Proposed Rule intended to improve access and affordability of prescription drugs.[3]  More specifically, the FDA announced its intention to modify its regulations implementing the Drug Price Competition and Patent Term Restoration Act (P.L. 98-417, 98 Stat. 1585 (1984) (Hatch – Waxman Act). 

Nearly 20 years ago, Senator Orin Hatch (R-UT) and Representative Henry Waxman (D-CA) sponsored this legislation to make prescription drugs more affordable and accessible to the public.  They intended to do so by streamlining the FDA's approval process for generic drugs.  At the same time, they provided brand-name manufacturers with additional patent protection to encourage the innovation and investment necessary to bring to market the very drugs the generic companies want to copy and therefore produce at a fraction of the cost.

There is little doubt that the Hatch – Waxman Act has made a significant impact on the availability and cost of prescriptions drugs to the American public.  This past year, generic drugs comprised nearly 47% of the prescriptions filled for pharmaceutical products – this compared to only 19% when the Hatch – Waxman Act was introduced in 1984.[4]  According to the Federal Trade Commission's (FTC) July 2002 Report, however, during the past few years, some brand-name manufacturers and generic drug companies have taken advantage of particular provisions of the implementing regulations, slowing the availability of certain generic drugs.  It is that conduct which has lead to the FTC's call to close the loopholes.

Absent the legislative solution that eluded the 107th Congress, the Administration pressed for regulatory change as a means to deliver some of President Bush's "compassionate conservatism" to the voters just before the mid-term elections.  Whether one concurs with the underlying politics motivating the publication of the Proposed Rule less than two weeks before the mid-term elections, the substance of the proposed changes cannot and should not be ignored.  According to the FDA, it received 32 comments by its December 23rd deadline.  The commenters on the Proposed Rule represent the wide spectrum of interested parties, e.g., brand-name drug manufacturers, generic drug companies, employers, insurers, their respective associations, and key federal agencies as well.  It is clear, however, that given the magnitude of the issue, we all are interested parties.  The following summary of the FDA's Proposed Rule is intended to promote a better understanding of the policy issues as our representatives in Washington engage once again in the prescription drug debate, which necessarily will be informed by the modified regulations implementing the Hatch – Waxman Act.

Background

The Hatch – Waxman Act created the Abbreviated New Drug Application (ANDA), which provided generic drug companies a mechanism to receive the necessary FDA approval to market and sell their products in a more efficient manner.[5]  In exchange for this improved generic drug approval process, the Act granted brand-name drug manufacturers patent-term extensions under particular circumstances.[6]  The Act also requires that certain patent information be disclosed as part of a brand-name manufacturer's New Drug Application (NDA), which is listed in what is commonly known as the Orange Book.[7]  Upon filing of its ANDA, a generic drug company must certify to the FDA that its application does not implicate any brand-name manufacturers' patents.  The certification that has created the most controversy, and therefore is the focus of the Proposed Rule, is commonly known as the paragraph IV certification.  The ANDA filer must certify that the patent in question is invalid or will not be infringed.[8]

The generic drug company would then provide the patent owner and NDA holder with this certification.  Under the Act, the patent owner or NDA holder has 45 days from date of notification to file a patent infringement suit.  If filed within the 45-day time frame, the plaintiff would be the beneficiary of an automatic 30-month stay, prohibiting the FDA from approving the ANDA during that time frame, unless the litigation was resolved in the generic drug company's favor before the 30-month stay expired.

The FDA's original regulations implementing the Act interpreted the statute to permit an automatic 30-month stay opportunity for each patent listed in the Orange Book related to the NDA in question.  As a result, some brand-name manufacturers were getting patent approvals listed in the Orange Book after an ANDA was filed.  As such, the generic drug company would then be required to provide a paragraph IV certification for each such patent, giving the brand-name manufacturer an opportunity to extend its patent-term by another 30 months.  Producing the unintended consequence of extending a patent term for up to 40 months beyond the original 30-month stay,[9] this element of the implementing regulations was one that the FDA is attempting to correct through the Proposed Rule.

A related problem identified by the FTC is the Orange Book listing of patents not intended by Congress to be included in the first instance.  Taking advantage of the lack of FDA authority to delist inappropriately listed patents, i.e., those unrelated to the essence of the NDA, some brand-name companies have inappropriately utilized the Orange Book, forcing generic drug companies to issue paragraph IV certifications on patents that should not be on the list.  By engaging in this conduct, particularly after the original ANDAs were filed, brand-name companies were in effect obtaining wholly inappropriate patent-term extensions of 30-months.[10]

Proposed Rule Content

Recognizing the need to recalibrate the balance between innovation and cost, the FDA's Proposed Rule attempts to address three issues:  the types of patents that must and must not be listed in the Orange Book; a patent certification statement accompanying the NDA, an amendment to the NDA, or a supplement to the NDA; and, limiting a patent owner or NDA holder to one 30-month stay per filed ANDA.

More specifically, the Proposed Rule establishes two criteria for patents to qualify for Orange Book listing:  (1) the patent must claim the approved drug product or a method of using the approved drug product; and (2) the patent must be one with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the patent owner sought to engage in the drug's manufacture, use, or sale.[11]  The FDA is intending to clarify a position it has successfully litigated, i.e., that "drug product" does not include as a stand-alone item the drug substance or active ingredient.[12]  Therefore, a brand-name manufacturer cannot assert patent infringement if the only common element is the active ingredient.  The Proposed Rule also clarifies that patents claiming packaging, metabolites, or intermediaries must not be submitted to the Orange Book for listing.  Eligible for listing would be product by process patents as distinguished from process patents.[13]  The FDA makes the distinction on the basis that with respect to the product-by-process patent, the patented invention is the product.  The process patent is only patenting the process itself.[14] 

Recognizing that its own interpretation of the Act has lead to some abuse on the automatic, 30-month stay issue, the FDA has re-assessed its interpretation of the Act in the Proposed Rule.  Originally interpreting the Act to permit multiple automatic, 30-month stays, as described above, the FDA believes there is another "reasonable interpretation" of the Act.  Relying upon 21 U.S.C. § 355(j)(2(B)(iii) (2001), the FDA concludes that it may interpret the Act to require only one 30-month stay per ANDA.  It is proposing to revise its regulations accordingly. 

There is some dispute among the commenters as to which patent the one 30-month stay opportunity should attach.  The FDA is attempting to limit the stay opportunity to the original paragraph IV certification, regardless of whether the patent owner or NDA holder files an infringement suit.  Some commenters have argued that the one automatic stay opportunity should attach to the first paragraph IV certification challenged via an infringement lawsuit.  While the FDA's proposal could effectively undermine a brand-name company's right to one 30-month stay (if it chooses not to challenge the first of many such certifications), the notion that the patent owner or NDA holder could wait to challenge a subsequent paragraph IV certification could lead to a gaming of the process, which further delays the resolution of patent disputes and delays generic drugs from entering the market.  This is no simple solution to this problem.  We'll need to see how the FDA chooses to respond to commenters' concerns on this issue.

It should also be noted that the Proposed Rule recommends new language to be incorporated with a patent certification statement, the intent of which is to discourage NDA applicants from including patents inappropriate for Orange Book listing with their original applications, amendments or supplements.  To provide this proposal some meaning, some commenters have suggested that the Final Rule include an express statement by the submitter acknowledging the criminal nature of a false statement to the federal government.  This is another area where we'll have to wait for the FDA's Final Rule to see how far the agency is willing to go on this point.

What Changes Require Legislation

As indicated at the outset, the FDA is necessarily limited to the four corners of the Act when making judgments about what it can and cannot do to improve the intended balance between prescription drug innovation and access.  There is an opportunity for Congress to take up several Hatch – Waxman type issues in the context of the Medicare prescription drug debate.  For instance, should federal law provide for an automatic, 30-month stay at all?  And should there be a 180-day period of market exclusivity for the first generic drug company to successfully challenge a brand-name drug manufacturer's patent?  The FTC Report identified instances of collusion between brand-name and generic drug companies to delay the entry of generic drugs to market.  Given the fact that the 180-day issue is written into the statute, the FDA does not have the authority to regulate a solution to that problem.  If the 108th Congress is going to take steps necessary to improve prescription drug availability to all Americans by lowering costs without undermining innovation, then it must take a long, hard look at these issues in the coming months.

For more information, contact Michael Gaba, toll free, at 1-888-688-8500.