LegiStorm

Summary:

Congress has for many years expressed interest in both medical innovation and the growing cost of health care. The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, addressed each of these concerns. Through amendments to both the patent law and the food and drug law, the Hatch-Waxman Act established several practices intended to facilitate the marketing of generic pharmaceuticals while providing brand-name firms with incentives to innovate. The Hatch-Waxman Act established an expedited pathway for generic drug companies to obtain Food and Drug Administration (FDA) approval for their products. It also created a statutory "safe harbor" that shields generic applicants from charges of patent infringement until such time as they request approval to market their products from the FDA. The legislation also encourages brand-name firms to identify to the FDA any patents that cover their products. If they do so, the patents are listed in the "Orange Book"—a publication that identifies approved drugs and the intellectual property rights associated with them. When a generic firm seeks marketing approval from the FDA, it must account for any Orange Book-listed patents—typically by delaying marketing of its products until they expire, or by asserting that the patents are invalid or do not cover the generic's proposed product. This latter assertion exposes the generic drug company to charges of patent infringement by the brand-name firm. The Hatch-Waxman Act also created periods of "regulatory exclusivity" that protect an approved drug from competing applications for marketing approval under specified conditions. These FDA-administered regulatory exclusivities typically operate alongside patents to block generic competition for a period of time. Generic firms may sell their own versions of brand-name drugs once these intellectual property rights expire. Several issues relating to the Hatch-Waxman Act remain of interest to Congress. One of them pertains to the legitimacy of "authorized generics," pharmaceuticals that are marketed by or on behalf of a brand-named drug company, but are sold under a generic name. Although authorized generics may be pro-consumer in that they potentially increase competition and lower prices, some observers argue that such products may discourage independent generic firms both from challenging drug patents and from selling their own generic products. In addition, the Hatch-Waxman Act requires generic drug companies to prove that their proposed products are bioequivalent to the brand-name drug. Bioequivalence testing therefore requires that the generic firm use the brand-name product as a basis for comparison. Some generic firms have expressed concerns, however, that certain brand-name firms have refused to sell them samples of their drugs for use in developing competing products. Cases litigated under the auspices of the Hatch-Waxman Act have often ended with a settlement between the parties. In some of these cases, a generic firm agrees to neither challenge the brand-name company's patents nor sell a generic version of the patented drug for a period of time. In exchange, the brand-name drug company agrees to compensate the generic firm, often with substantial monetary payments over a number of years. Because the payment flows counterintuitively, from the patent owner to the accused infringer, this compensation has been termed a "reverse" payment. While some observers believe that this outcome results from the structure of the Hatch-Waxman Act, others believe that these settlements are anti-competitive and harmful to consumers.