Drug Price Competition and Patent Term Restoration Act

Drug Price Competition and Patent Term Restoration Act
Drug Price Competition and Patent Term Restoration Act
Great Seal of the United States.
Acronym Hatch-Waxman amendments
Legislative history
Major amendments
Relevant Supreme Court cases



The Drug Price Competition and Patent Term Restoration Act, informally known as the "Hatch-Waxman Act" [Public Law 98-417], is a 1984 United States federal law which established the modern system of generic drugs. The informal name comes from the Act's two sponsors, representative Henry Waxman of California and senator Orrin Hatch of Utah.

Hatch-Waxman amended the Federal Food, Drug, and Cosmetic Act. Section 505(j) 21 U.S.C. 355(j) sets forth the process by which would-be marketers of generic drugs can file Abbreviated New Drug Applications (ANDAs) to seek FDA approval of the generic. Section 505(j)(2)(A)(vii)(IV), the so called Paragraph IV, allows 180 day exclusivity to companies that are the "first-to-file" an ANDA against holders of patents for branded counterparts.

Hatch-Waxman Amendments grant generic manufacturers the ability to mount a validity challenge without incurring the cost of entry or risking enormous damages flowing from any possible infringement. Hatch-Waxman essentially redistributes the relative risk assessments and explains the flow of settlement funds and their magnitude. Hatch-Waxman gives generics considerable leverage in patent litigation: the exposure to liability amounts to litigation costs.[1]

Relevant pharmaceutical industry background

There is not much legislative history on the Hatch-Waxman Act. However, because the bill was hard fought, there is much written about it after the fact. Below is a brief history of the condition surrounding the pharmaceutical industry and the prevalence of generic drugs that tie into goals and significance of this act.

Prior to 1962, drugs were approved for safety only. It wasn’t until there was found to be a Thalidomide problem in infants that an efficacy requirement was added. This reconciliation came in the form of the 1962 drug amendments to the Federal Food, Drug, and Cosmetic Act, which added a proof-of-efficacy requirement to new drug approval. Thus requiring that new drugs be proven safe and effective prior to the Food and Drug Administration’s (FDA’s) approval. It is also important to note that for drugs approved prior to 1962, generic versions could be approved with a “paper” new drug application (NDA). The NDA was based solely on published scientific or medical literature. Therefore, a generic manufacturer could get its drug approved by presenting academic articles about the chemical demonstrating that it was safe. Despite this fact, it was found that in the years after 1962 there were 150 drugs that were off-patent, but for which there were no generics because generic companies simply would not spend the time and money doing the clinical trials to get to market, and that there were only fifteen “paper NDAs,” for post-1962 generics.[2]

Main provisions of the bill

The first provision discussed in the Act handles the issue of drug competition. Title I of the Act discusses the authorization of ANDAs and the provision that prohibits the FDA from asking for more than bioavailability studies. This part of the Act is particularly interesting because it is one of few pieces of legislation that restricts the powers and reach of a federal agency.

The Act provides for a period of exclusivity such that once a New Molecular Entity (NME) is approved, a generic version cannot be approved for five years. The Act also calls for a three-year data exclusivity period for supplements requiring clinical trials. It also sets out the condition that must be met when someone files an ANDA. The first is that the drug associated with the ANDA has not been patented. The second is that the patent for the pioneer version has expired. The third is that the generic will not go on the market until the patent for the pioneer has expired. Lastly, it is required that the patent for the pioneer drug has not been infringed or is proven invalid. These requirements are often referred to as the paragraphs I, II, III, and IV certifications.

The paragraph IV certification proved to be fairly controversial in the efforts to get the bill passed. The controversy erupted because of confusion as to how long the FDA would be required to wait before approving generics for marketing if they claimed that the patent for the pioneer was in fact invalid. Initially the wait period was decided to be eighteen months, however, this was later changed to thirty months.

In terms of patent term restoration, the bill provides that a pioneer drug can receive an extension term equal to one-half of the time of the investigational new drug (IND) period, which runs from the time human clinical trials begin to the time the NDA is submitted. In addition to getting credit for the IND period the complete period of NDA review is added as the second part of the extension. This is so long as half of the IND period plus the NDA review period is less than or equal to 5 years. Furthermore the time the after the drug has been approved and is on the market cannot exceed fourteen years. This numbers are strictly arbitrary numbers that were deemed to be sufficiently long to provide incentive for research based pharmaceuticals companies to develop new drugs. The regulations also speak as to how extensions for pipeline drugs, drugs currently under FDA review should be handled. The Act provides that pipeline drugs would receive two years or less of extended term. This was based on the assumption that if they were under review already that they would be approved in a year or two, making there no need to provide a larger extension. However, some pipeline drugs have taken eight years for approval, which exposes the flaws in this logic. (This patent term restoration part of the Act appears in title 35 of the United States Code.)

Lastly, the Act provides that if the pioneer company fails to exercise due diligence when seeking patent term restoration a period amounting to the time delay will be subtracted from the patent extension period.[3]

Impact of the new bill

The Hatch-Waxman Act had a significant impact on the U.S. healthcare system in many respects. The primary being the robust generic drug industry that only began to flourish as a result of the policies enacted through the Act, and the patent term extensions or restorations that make up a very important part of the research based pharmaceutical industry. However, the act makes many assumptions that since being proved invalid or inappropriate have caused the act to come under scrutiny.

A major assumption within the Hatch-Waxman Act concerns the sameness of a generic drug to the pioneer. Currently the FDA’s method of determining similarity between drugs is through a comparison of the bioavailability, the amount of active ingredient in the blood over a period of time. The FDA holds that if the proposed generic comes within plus-or-minus twenty percent of the bioavailability of the pioneer drug, then the drugs are sufficiently similar. Similarly many medical professionals believe twenty percent is a fairly good margin in many cases, however, there are instances with drugs where there is a very narrow therapeutic band where plus-or-minus twenty percent may not be appropriate and in fact dangerous. This is true particularly if a patient receives a drug is at that higher end the plus twenty percent scale and then switches to a generic that falls at the lower end (minus twenty percent). This could potentially lead to a forty percent differential that may not be safe or effective. It is interesting that FDA has not altered this particular aspect of the regulation given the advances in modern pharmaceutics, which would allow these standards to be tightened.

A second assumption was that establishing similarity using the above means was an effective substitute for the previous safety and efficacy requirements. This said that products associated with an approved ANDA would meet the same regulatory standards as the initial brand name version. It may seem like a good assumption, but that there is more leniency in the approval process for generics that could be symbolic of some bias within the FDA. However the Hatch-Waxman Act, made it so that ANDA applicants need not meet additional requirements, and that bioavailability is the only test FDA can require.

Another assumption was that drugs that were under FDA review during the time the Act was passed would be approved shortly after the Act’s enactment, and that two-year extensions were adequate. However this was not the case, in fact there was one famous case where the drug was not approved for eight years. In addition to making this it was also assumed that five years of extension and fourteen years of market exclusivity were sufficient to stimulate research and development within the research based drug industry.

Potential revisions

There are several important potential revisions to the Hatch-Waxman Act. One of theses revisions includes a one-for-one extension, and a change from the one-half of IND period to a full IND. Furthermore; there is the issue of decreasing NDA review time. Initially the legislation was enacted because of the concern that overall drug development time was getting longer and longer however, the FDA has done a remarkably good job in cutting back the time for NDA review. Despite this major improvement the human clinical trials are taking even longer. Another proposal has been to remove the two-year extension limit for drugs under review and the arbitrary five and fourteen year limitations. This last particular revision also would permit multiple extensions of the same patent and change the five-year limit to ten years to match competing international standards.[4]

See also


  1. ^ Schering-Plough v. FTC (11th Cir. 2005)
  2. ^ Mossinghoff, Gerald. "Overview of the Hatch-Waxman Act and Its Impact on the Drug Development Process." Food and Drug Law Journal. 54. (1999): 187-194. Print.
  3. ^ Mossinghoff, Gerald. "Overview of the Hatch-Waxman Act and Its Impact on the Drug Development Process." Food and Drug Law Journal. 54. (1999): 187-194. Print.
  4. ^ Mossinghoff, Gerald. "Overview of the Hatch-Waxman Act and Its Impact on the Drug Development Process." Food and Drug Law Journal. 54. (1999): 187-194. Print.

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