Here’s a detailed look at the fine print of S. 812

The bill aims to get generics to market sooner

On July 31, the Senate passed a bill that would change patent laws to make it more difficult for brand-name drug manufacturers to block generics from the market. (The House has yet to pass such a bill.) This month, Drug Utilization Review asks Timothy M. Murphy, Esq., a registered patent attorney and partner at Bromberg & Sunstein LLP in Boston, to explain the bill and how it would affect the drug patent process. Murphy has an extensive background in patent prosecution matters, intellectual property litigation, and licensing.

Q: How is the patent process different for pharmaceutical companies?

A: For the most part, the patent process is the same for pharmaceutical patents as it is for any other type of patent. The primary differences are:

• A pharmaceutical patent owner can apply for an extension of the term of the patent in situations where an owner of a different type of patent would not be able to.

• A generic drug company’s acts of making and using a patented product or process are not considered patent infringement if they are performed to obtain FDA approval of the generic drug. This exception allows the generic drug company a head start in performing the testing necessary to obtain FDA approval.

• The act of filing in the FDA an application for a generic drug is considered an act of infringement. This exception allows the pioneer drug company to bring an infringement action at the time the generic drug manufacturer files its Abbreviated New Drug Application (ANDA), instead of waiting until the generic drug manufacturer starts marketing. Such an infringement action must be based on one or more patents listed by the pioneer drug company in the FDA’s Orange Book (the FDA’s official listing of patents). When such an infringement action is brought, an automatic 30-month stay takes effect on the generic drug company’s ANDA.

The Hatch-Waxman Act of 1984 created these differences. The Hatch-Waxman Act also permitted generic drug manufacturers to rely on the clinical studies done by the pioneer drug company and instead submit only evidence that the generic drug is bioequivalent to the branded drug. Previously, generic drug companies had to perform their own expensive clinical studies in order to obtain approval for their products.

Q: How have pharmaceutical companies tried to extend their patents?

A: In addition to the extensions discussed above, pioneer drug companies can effectively extend their monopoly by obtaining secondary patents that cover different aspects of the drug or different methods of using the drug and then listing these secondary patents in the Orange Book. Then, when a generic drug company files an ANDA, the pioneer drug company brings suit based on one or more patents listed in the Orange Book. As a result of the automatic 30-month stay provision provided for by the Hatch-Waxman Act, the pioneer drug company obtains an additional 30 months of exclusivity.

Some pioneer drug companies have gone to great lengths to obtain as many secondary patents related to a drug as they can. After obtaining the original patent for the chemical composition of the active ingredient, patents are often pursued for: (a) different indications, (b) different methods of administering the drug, (c) different ways the drug may be co-administered with other drugs, (d) the biological mechanism activated by the drug, (e) metabolites of the drug, (f) crystalline or amorphous forms of the drug, (g) different formulations for the drug, and (h) to define the product in terms of the process used to manufacture it.

Q: How does this bill close the law’s loopholes?

A: S. 812 limits somewhat the availability of the automatic 30-month stay. Under this bill, a pioneer drug company would be entitled to such a stay only for patents listed in the Orange Book within 30 days of the brand-name drug’s approval. Thus, for instance, a 30-month stay would not be automatically granted for a patent based on an application that was not even filed until years after the pioneer drug company had received approval from the FDA to market the drug (as had happened in some of the lawsuits brought by pioneer drug companies).

This provision has the additional effect of limiting the ability of the pioneer drug company to obtain two or more consecutive 30-month stays for the same drug.

This bill also provides a way for generic drug manufacturers to challenge the listing of patents in the Orange Book. Before this provision, there had been no effective way to challenge the listing of inappropriate patents in the Orange Book. Thus, there had been no effective way of stopping an aggressive pioneer drug manufacturer from automatically obtaining a 30-month stay based on a patent that should not have been listed in the first place.

Q: Why do you think this bill was successful in the Senate? Did it pass mainly because of the deadlock on the prescription drug plans?

A: In my view, the various investigations by the FTC (Federal Trade Commission) and state attorneys general — as well as the combined lobbying efforts by insurance companies, employers, and unions, all of whom have to foot the bills for expensive prescription drugs — have highlighted the "loopholes" in the Hatch-Waxman Act. These loopholes have created undue incentives for pioneer drug companies to list patents in the Orange Book that are, in some cases, only marginally relevant or even irrelevant to the drug in question, and then to bring weak lawsuits on such patents.

There is a legitimate public policy issue as to how long the effective term of a patent should be to provide optimum balance between providing incentive to the pioneer drug manufacturers to continue developing new drugs, on the one hand, and allowing generic drug manufacturers into the market to keep the price of drugs low, on the other. However, permitting pioneer drug companies to take advantage of the "loopholes" of the Hatch-Waxman Act to obtain automatic 30-month stays seemed too much of an inefficient and ad hoc means of providing incentives to develop new drugs to warrant leaving the loopholes open.

Thus, in my view it would have passed regardless of what happened to the prescription drug plans.

Q: What do you expect to happen with this type of legislation in the House?

A: I expect it will pass, perhaps with some modifications, which would then have to be ironed out.

Q: Do you think this bill would actually accomplish what it aims to do?

A: By limiting the availability of the automatic 30-month stay to only those patents the pioneer drug manufacturer had listed at the time the brand-name drug was originally approved, much of the incentive to bring weak patent infringement suits based on later-filed secondary patents will be eliminated in many cases. This limitation on automatic 30-month stays may cut down on some of the worst abuses of the Hatch-Waxman Act.

Nevertheless, given the large amounts of potential profit involved, we should expect that both pioneer drug companies and generic drug companies would aggressively litigate to ascertain the limits of their respective rights.

Even if the amount of litigation is not significantly reduced, the lack of an automatic 30-month stay in certain cases will permit the generic drug manufacturer to come onto the market even though litigation is pending. This should reduce the cost of the drugs. It should be noted that the generic drug manufacturer assumes a potentially significant risk: If the generic drug manufacturer loses the patent infringement suit after having sold its product, that manufacturer could be forced to pay a huge amount in damages.

The provision for permitting re-importation of drugs from Canada into the United States might — at least in the short run — put downward pressure on some drug prices. However, if it is successful in this, it may then also have the unintended consequence of making the drugs more expensive and/or less available in Canada.