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From the Director
By Catherine R. May, Executive Director
This is Part Two of the Article Games the RX Industry Plays, Reprinted from Health Action, June 2002, Families USA, 1334 G Street, NW, Washington, D.C. 20005. Included with permission of author, Ingrid VanTuinen.
How Does the Drug Industry Take Advantage of Hatch-Waxman (the law intended to make the drug industry play fair)?
FDA approval of a generic drug usually takes about 18 months. However, if a generic manufacturer wants to sell a generic equivalent of a brand-name drug that is still protected by a patent, it must "certify" to the FDA that the generic will not infringe on that patent. One type of certification is referred to as a Paragraph IV Certification, which acknowledges that there is a patent on a brand-name drug but asserts that the patent is either bogus or will not be violated.
When a generic manufacturer applies for a patent using Paragraph IV Certification, the brand manufacturer has an immediate right to file a patent infringement lawsuit. This sets in motion a process that can stall approval of the generic for up to 30 months - two and a half years. At the end of that timeframe, the FDA can approve the generic drug for marketing even if the suit hasn't been decided. However, the generic manufacturer may elect to keep its drug off the market until the litigation is concluded because if it loses the lawsuit, it has to pay damages to the brand manufacturer. Litigation in these cases lasts an average of 36 months (three years), but several cases lasted more than 77 months (over six years). During that time, the brand manufacturer is able to retain its monopoly.
The first generic manufacturer to file a Paragraph IV Certification receives 180 days - six months - of market exclusivity, meaning that no other generics can be approved. However, the 180-day clock doesn't start ticking until the generic is actually marketed. So, the generic company is in a position to delay the beginning of the 180-day exclusivity period - and generic competition - indefinitely. It is at this point that some "creative" brand manufacturers have stepped in and entered into sweetheart deals with generic manufacturers, where the generic is paid to withhold the generic drug from the market. One such arrangement brought a generic manufacturer nearly $90 million. (See side box re Andrx Corporation)
A brand manufacturer may also patent multiple attributes of its drug - aspects of the manufacturing process, tablet color, even a chemical produced by the body when the drug is digested. This forces the generic manufacturer to choose between waiting for all of the patents (even if bogus) to expire and filing a Paragraph IV Certification, which risks litigation and the attendant costs and delays.
Two-Pronged Approach: Going to Court, Legislative Reform
Numerous individuals and groups, including consumers, consumer organizations (including Families USA and PAL-The Prescription Access Litigation Project), pharmacy benefit managers (PBMs), employer-sponsored health plans, generic manufacturers, and state attorneys general have filed class-action lawsuits against brand manufacturers. The lawsuits allege that brand manufacturers have engaged in at least one of three kinds of anticompetitive practices:
1) squashing generic competition through manipulating Hatch-Waxman or by other means,
2) engaging in fraud relating to drug pricing, or
3) engaging in deceptive marketing.
While a few of these suits have been resolved, resulting in settlements in the tens of millions of dollars, many are ongoing, with some in the very early stages of litigation. To combat further abuses of Hatch-Waxman, several senators and representatives have introduced the Greater Access to Affordable Pharmaceuticals Act, more commonly known as McCain-Schumer (after its cosponsors, Sen. John McCain [R-AZ] and Sen. Charles Schumer [D-NY]). This legislation is aimed at closing loopholes in Hatch-Waxman: It would eliminate the automatic 30-month delay of approval for generic drugs when brand manufacturers sue generics for "patent infringement." It would also undercut the creation of sweetheart deals between brand and generic manufacturers. While there has been quite a dustup over this bill in recent weeks, no action has been taken on it since its introduction in May 2001. Sen. John D. Rockefeller (D-WV) has also introduced a bill aimed at reforming the generic approval process. Language from that bill is included in the House Democratic Medicare prescription drug bill.
SIDE BOX 1
It is estimated that Bristol-Myers Squibb accumulated at least $160 million in additional sales for just one drug (the anti-anxiety drug BuSpar) by illegally manipulating the patent process under Hatch-Waxman to keep a generic from entering the market for a period of only four months.
SIDE BOX 2
Hoechst Marion Roussel, Inc., manufacturer of Cardizem CD (used to treat high blood pressure and chest pain) paid generic manufacturer Andrx Corporation $10 million per quarter not to market its generic version of Cardizem CD. Hoechst also agreed to make a final payment of over $50 million to Andrx, bringing total payments to Andrx to nearly $90 million.
September 4, 2002