Hatch-Waxman_overview by lanyuehua

VIEWS: 3 PAGES: 8

									                                       Hatch-Waxman: Overview


       The Drug Price Competition and Patent Term Restoration Act of 1984,
also called the Hatch-Waxman Act (“Hatch-Waxman”), fundamentally redrew the
map of the pharmaceutical industry in the United States. Hatch-Waxman created
the generic industry, as we know it, creating a market for generic copies of older
innovative products that now approaches half of the total pharmaceutical market.
At the same time, the legislation created new incentives to ensure continuing
new therapies and cures for Americans. In fact, the U.S. pharmaceutical industry
has now become the medicine chest to the world, creating more new products
than any other country, and attracting European, Japanese and Indian
companies to conduct their research and development (R&D) in the United
States and to launch products here first.

       Given the importance of Hatch-Waxman, it is understandable that U.S.
trade partners have sought to emulate it, but they have rarely succeeded in
gaining its full benefits. A true Hatch-Waxman system has three components,
which work together to bring generic pharmaceuticals to market quickly, all the
while encouraging innovation:

              The first component lightens the burden of regulatory review for
               generic products, by creating an Abbreviated New Drug Application
               (ANDA) for generic producers to file with the U.S. Food and Drug
               Administration (FDA). It allows generic firms to begin testing, but
               not to undertake commercial activities, before the expiration of the
               innovator's patent.

              The second component, patent term restoration (PTR), mitigates
               the negative impact of the increasingly complex clinical trial and
               FDA review process for innovative pharmaceutical products. PTR
               creates the possibility of patent term extensions to compensate
               innovators for a portion of their market exclusivity term that is lost
               due to lengthy FDA regulatory review periods prior to approval of
               new medicines, and should provide a minimum effective patent
               period of 14 years.1

              The third component was the creation of finite periods of protection
               for commercially valuable and confidential data in the clinical
               dossier, known as data exclusivity. Prior to Hatch-Waxman, the
               clinical dossier for an innovative product was treated as

1
  The patent term restoration component allows patents to be extended by the full length of the
NDA period and half the length of the IND period, or up to 5 years. In addition to the restriction
on the length of the extension, the full effective patent life, after approval, is restricted to no more
than 14 years. U.S. Code, Title 35, Section 156, subsections (c) and (g) (2) (B) (i)
                                                -2-


                 permanently proprietary information. Data Exclusivity represents a
                 benefit provided to the generic industry, which is now allowed to
                 rely on the results of the clinical data after the expiration of a period
                 that should be no less than five years. 2

         Hatch-Waxman sought to "balance the benefits of greater competition
from generic drugs with the benefits of having sufficient intellectual property
protection to preserve the incentives to make the large, up-front, and risky
expenditures necessary to develop new drugs successfully." 3 These three
components are essential elements of the so-called Bolar4 system. Many
countries have sought to emulate the American Bolar system in their national
legislation but have failed to incorporate all three elements, which provide a
critical balance.




2
  In the United States, the period of Data Exclusivity is five years for new products, and three
additional years for new uses for existing products. Data Exclusivity ensures that information
provided by an innovator to regulatory authorities will not be disclosed to the public or to other
manufacturers, or relied upon either directly or indirectly, for this period of time. The significance
of data exclusivity in the context of generic drugs is that an ANDA allows a generic manufacturer
to request approval using the clinical data submitted by the innovator, after expiration of the data
exclusivity period.
3
    FTC Chairman Timothy Muris, "Remarks Before American Bar Association, Antitrust Section
Fall Forum, Washington, DC, November 15, 2001.
4
   In 1984, the Court of Appeals for the Federal Circuit decided that the manufacture, use, or sale
of a patented invention during the term of the patent constituted an act of infringement, see 35
U.S.C. § 271(a), even for the sole purpose of conducting tests needed for regulatory approval.
See Roche Products, Inc. v. Bolar Pharmaceutical Co., 733 F.2d 858 (CA Fed.), cert. denied, 469
U.S. 856 (1984). In response to Roche v. Bolar, Congress, in 1984, wrote this limited exception
into law through the Drug Price Competition and Patent Term Restoration Act (PTR Act) (98 Stat.
1535, better known as Hatch-Waxman.
                            Hatch-Waxman: Early Working


       Hatch-Waxman provides for early entry of generic products of older
innovative medicines by creating an Abbreviated New Drug Application (ANDA)
for generic drug manufacturers to file with the U.S. Food and Drug Administration
(FDA). It allows generic firms to begin testing, but not commercial activities,
before the expiration of the innovator's patent. This component of Hatch-
Waxman,5 gives American generic manufacturers a tremendous advantage over
the status quo ante as well as over local manufacturers in nations lacking early
working. Since 1984, many U.S. trade partners have passed legislation allowing
for early entry of generic manufacturers, but generally have not included effective
data exclusivity or full patent term restoration, both of which are essential
elements of the delicate balance contained in Hatch-Waxman.

       As a result of Hatch-Waxman, generic manufacturers have gained many
advantages and market opportunities, from the creation of the ANDA to the ability
to reference formerly exclusive proprietary data created by the innovator. These
new benefits have enabled generic producers to increase their share of the
pharmaceutical market from less than 20% before Hatch-Waxman was enacted
in 1984 to the growing 47% of the total market that the generics held in 2000.6 In
addition, generic producers are now able to target top-selling innovative drugs.
As a result, nearly all of the top-selling innovative drugs face generic competition
when their patents expire. Foreign generic manufacturers, regardless of their
base country, benefit enormously from ANDAs and are able to reference
innovator clinical data and to seek FDA regulatory approval during the period the
innovator’s products remain under patent.

       As a result of these significant advantages provided under Hatch-
Waxman, foreign generic manufacturers have opened U.S. based subsidiaries.
Ranbaxy, India’s leading pharmaceutical manufacturer, opened an American
subsidiary after entering the American generic market in 1997. Since 1997, its
American generic production has experienced growth two fold.7 Another leading
Indian company, Dr. Reddy’s Labs, also expanded into the U.S. market as a
result of Hatch-Waxman-related benefits, and has received 12 ANDA approvals
and 2 tentative ANDA approvals from the FDA.8 The U.S. market is the focus of
Dr. Reddy’s generic business and the company plans to target more than 60% of

5
  Please see accompanying papers for discussion of Patent Term Restoration and Data
Exclusivity.
6
  There is also considerable room for increased generic expansion as many brand-name products
have gone off patent without generic versions being brought to market. According to the FDA, of
the approximately 10,300 pharmaceutical products on the market, only 530 are patent protected.
7
  Ranbaxy Pharmaceuticals USA calls itself “One of the fastest growing pharmaceutical
companies providing quality generic pharmaceuticals to the US market.”
http://www.ranbaxyusa.com/generic/products.htm
8
  This is compared to a total of 9 other approvals spread through five countries.
http://www.drreddys.com/view_content.asp?div=Div_2&id=F_70&fid=F_70
                                           -4-


the drugs coming off patent in America between 2002 and 2008.9

       Many foreign trade partners have either implemented, or are
contemplating passage of, amendments to their patent laws to allow for early
working. Canada’s Bolar-style provision went beyond early working for
regulatory purposes, and was challenged by the European Union in the WTO.10.
The WTO panel, while upholding the validity of early working for the limited
purpose of gaining regulatory approval, held in favor of the EU on the point that
manufacturing, stockpiling, and any other commercial activities are not
permissible during the period of patent protection.

         In summary, early working has provided substantial benefits to the generic
industry, but has also increased the need for continued innovation. In this light, it
is critical, that any amendments to patent laws to provide for early working of
patented products for limited regulatory purposes also include effective patent
term restoration and data exclusivity to strike the necessary balance between
early entry for generic products and continued innovation of new therapies and
cures.




9
  Testimony of Dr. Gregory Glover, House Energy and Commerce Subcommittee on Health, June
13, 2001.
http://energycommerce.house.gov/107/hearings/06132001Hearing276/Glover413print.htm (data
compiled by the Food and Drug Administration)
10
    World Trade Organization. “Canada- Patent Protection of Pharmaceutical Products – Panel
                               th
Report” WT/DS114/R, March 17 , 2000. Referencing Canadian Patent Act, Sections 42 and 55.
                   Hatch-Waxman: Patent Term Restoration (PTR)


        Patent Term Restoration (PTR) restores some of the effective patent life
that is lost in the increasingly complex clinical trial and FDA review process for
innovative pharmaceutical products. Pharmaceutical inventions receive the
same standard term of 20 years from the date that the patent application is filed,
as do all other patented products, but, after completion of clinical research and
regulatory approval, the effective patent life for a new pharmaceutical product is
approximately 11 years. PTR creates the possibility of patent term extensions to
compensate innovators for a portion of the patent exclusivity period that is lost
due to lengthy FDA regulatory review periods.11

      The patent term restoration component is one of the three elements of
Hatch-Waxman12 and has made its way, in slightly modified form, into the laws of
several nations.

       In some countries, PTR was introduced as a result of U.S. bilateral trade
agreements, as in the 2000 Free Trade Agreement between the United States of
America and Jordan.13 This Agreement, which was designed to open trade
between the United States and Jordan and encourage Jordanian economic
reform, provides that "Each Party shall make available an extension of the
patent term to compensate the patent owner for unreasonable curtailment of the
patent term as a result of the marketing approval process."14

        In contrast, patent term restoration was introduced in Israel in 1998 as part
of the legislation allowing for early working of patented products for the purpose
of gaining regulatory approval in Israel, the U.S. and Europe.15 The extension is
11
   The patent term restoration component allows patents to be extended by the full length of the
NDA period and half the length of the IND period, or up to 5 years. In addition to the restriction
on the length of the extension, the full effective patent life, after approval, is restricted to no more
than 14 years. U.S. Code, Title 35, Section 156, subsections (c) and (g) (2) (B) (i)

12
     Please see accompanying papers for discussion of Data Exclusivity and Early Working.

13
   Ruebner, J. "CRS Report for Congress: U.S.-Jordan Free Trade Agreement" updated May 1,
2001. http://usembassy-amman.org.jo/CRC.pdf

14
    "Agreement between the United States of America and the Hashemite Kingdom of Jordan on
the Establishment of a Free Trade Area" Section 23, October 24, 2000.
www.ajex.org/pdf/textagr.pdf, see also the text of the Agreement available on the USTR website
at: http://ustr.gov/regions/eu-med/middleeast/US-JordanFTA.shtml
15
      Goldman, N. "Between a patent and a hard place" Jerusalem Post, February 3, 1998.
http://www.jpost.com/com/Archive/03.Feb.1998/Companies/Article-5.html, see also Luzzatto,
Dr, K. "Pharmaceutical Patents in Israel," World Markets Research Center.
http://www.wmrc.com/businessbriefing/pdf/pharmatech2001/tech/Luzzatto.pdf
                                               -6-


limited to 14 years from the first marketing approval in any country belonging to
the Paris Convention, and, as a result, an effective patent term of 14 years is
generally not ensured in Israel.

        While the Law in Australia is modeled on the Hatch-Waxman Act, it
provides less patent term restoration than do the Israeli Bolar-style amendments.
The Australian Patent Act of 1990 provides for patent term extensions only if the
regulatory process lasted more than 5 years and caps the extension at five
years.16 In addition, the law facilitates generic access by permitting otherwise
infringing activities during the period of patent term extension. That is, the
extended term does not carry with it the same bundle of patent rights against
infringement, as does the original patent term.

      The EU provides patent term restoration, through the use of
Supplementary Protection Certificates (SPCs), as a stand-alone measure.17
SPCs provide an effective patent term of 15 years from the date of first marketing
approval. The extension covers only the pharmaceutical product that was the
subject of the regulatory process, not the entire scope of the original patent.

       All of the different forms of PTR cited above strive to encourage
innovation, but their efficacy in doing so is dependent on whether they provide a
reasonable effective patent term. Any patent term restoration component of
Bolar legislation that is modeled on the US statute should establish a minimum
patent term of no less than 14 years, as set or exceeded in American, European,
and Jordanian law.




16
    Patents Act of 1990, Sec. 70, 77 "Applications for Extension of Patent" p. 47-51
http://scaleplus.law.gov.au/html/pasteact/1/545/pdf/Patents90.htm Accessed, 6/19/2002

17
  Council Regulation (EEC) No 1768/92 of June 18, 1992.
http://europa.eu.int/scadplus/printversion/en/lvb/l21156.htm
                             Hatch-Waxman: Data Exclusivity


        Hatch-Waxman created a new intellectual property right, with its own term
of protection, known as data exclusivity. Data Exclusivity protects commercially
valuable and confidential data in the clinical dossier submitted by innovative firms
to the U.S. Food and Drug Agency (FDA). Prior to Hatch-Waxman, the clinical
dossier for an innovative product remained permanently proprietary, which the
FDA would never disclose or use to evaluate generic products; no third party
could ever access or cite the innovator’s data. The largest beneficiary of the
finite period of data exclusivity that was included in Hatch-Waxman is the generic
industry, which since 1984 has been able to rely on the results of the clinical data
after the expiration of the period of data exclusivity. 18

        Hatch-Waxman defined the period of confidentiality or protection from use
or reliance as 5 years for new chemical entities and 3 years for novel applications
of old chemical entities. By not even permitting the submission of an ANDA
during the first five years after the originator’s drug received marketing approval,
regardless of the patent status of the originator’s drug, 19 the American data
exclusivity term restricts the actions of regulatory bodies involved in the approval
of pharmaceutical products. In order for data exclusivity to be effective as a
component of a Bolar system, it must include protection for all clinical and
preclinical data including dosing, drug interactions, and drug efficacy. It must
also not be linked in any way to the existence of a patent.

       The World Trade Organization (WTO) Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPS) requires its Member countries to
provide data exclusivity. TRIPS Article 39.3 requires WTO members to provide a
period of data exclusivity during which all proprietary information submitted to a
regulatory body is to be protected from unfair commercial use.20 Other WTO
members have adopted a variety of conforming data exclusivity provisions.

18
   Data Exclusivity ensures that information provided by an innovator to regulatory authorities will
not be disclosed to the public or to other manufacturers, or relied upon either directly or indirectly,
for this period of time. The significance of data exclusivity in the context of generic drugs is that
an ANDA allows a generic manufacturer to request approval using the clinical data submitted by
the innovator, after expiration of the data exclusivity period.
19
     Data protection is not a form of “ever greening” for patented products. First, the protection
runs concurrent, and not subsequent, to the patent term. Second, it is typically for only half the
length, or less, of the time of the patent term. Third, the protection is provided purely in
recognition of the investment of hundreds of millions of dollars made in expensive and time-
consuming preclinical and clinical trials that constitute the majority of the $800 million dollar
investment needed, on average, to bring one successful product to market. There is and should
be no connection between patent protection and data exclusivity.
20
     World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS), Article 39.3. Article 39.3 of TRIPS states: “Members, when requiring,
as a condition of approving the marketing of pharmaceutical or of agricultural chemical products
which utilize new chemical entities, the submission of undisclosed test or other data, the
origination of which involves a considerable effort, shall protect such data against unfair
                                              -8-



       European Union members have two options for terms of data exclusivity.
The minimum set by Article 10 of Directive 2001/83 is six years, with ten years
assigned to "high technology" products.21 Countries also have the option of
granting ten years of exclusivity for all products; about half of the EU countries
have done this. The EU is in the process of convergence for a standard ten-year
period of data exclusivity. As additional EU-aspirants complete accession, they
will come under the same directive and will enact data exclusivity legislation or
extend the term of their current legislation. In September 2001, Poland, for
example, enacted legislation ensuring the combination six and ten year
exclusivity terms, effective on accession to the EU.22

       China, as part of its obligations undertaken in association with its recent
accession to the WTO, agreed to implement data exclusivity with a term of
protection of six years. The language of the Report of the WTO Working Party
on the Accession of China, in which China committed itself to provide TRIPS-
compliant data protection, is indicative of the protection envisaged by the
negotiators of TRIPS Article 39.3. In the report, the representative of China
confirmed that China would introduce and enact laws and regulations “to make
sure no person, other than the person who submitted such data, could, without
the permission of the person who submitted the data, rely on such data in
support of an application for product approval for a period of at least six years
from the date on which China granted marketing approval to the person
submitting the data. During this period, any second applicant for market
authorization would only be granted market authorization if he submits his own
data. This protection of data would be available to all pharmaceutical and
agricultural products which utilize new chemical entities, irrespective of whether
they were patent-protected or not.”23

       Because Hatch-Waxman ended the prior practice of treating the
innovator’s clinical dossier as permanently proprietary information, the creation of
a fixed period of protection through the mechanism of data exclusivity is an
integral element of Hatch-Waxman. Data Exclusivity actually represents a
benefit provided to the generic industry, which is now allowed to rely on the
results of the clinical data after the expiration of a period of Data Exclusivity. Any
Bolar-style system that omits data exclusivity, or fails to provide a minimum
period of protection of at least five years or more, fails to strike the necessary
balance and unduly favors generic manufacturers at the expense of innovation.



commercial use. In addition, Members shall protect such data against disclosure, except where
necessary to protect the public, or unless steps are taken to ensure that the data are protected
against unfair commercial use.”
21
    All EU countries are covered by Directive 2001/83, Article 10(1)(a)(iii). (This directive was
originally Article 4(8)(a)(iii) of Directive 65/65/EEC).
22
    Pharmaceutical Law Article 15.1, Act of September 6, 2001.
23
    Report of the Working Party on the Accession of China, WT/MIN(01)/3, November 10, 2001

								
To top