A Computerized Business Method Is Patentable Subject Matter, N.Y.L.J., August 6, 1998
1. WWW.NYLJ.COM
Outside Counsel
Drug Patents in the Spotlight
D
rug costs are drawing renewed
attention from the public and each
branch of the government, perhaps
more than any other healthcare issue today.
One major strategy to address drug costs is
to increase generic drug availability while
preserving incentives to develop pioneer
drugs. The main legislation in this regard has
been the Drug Price Competition and Patent
Term Restoration Act of 1984, popularly
known as the Hatch-Waxman Act (the “Act”).1
This article summarizes the Act and explains
why it is currently in the spotlight.
The Act was drafted as compromise
legislation among competing interests. To
obtain approval of a pioneer drug, a company
must perform clinical testing and navigate
through the FDA’s New Drug Application
(NDA) review. Because it often takes much
longer than obtaining a patent, this process
can effectively prevent the drug from entering
the market for years after a patent is granted,
substantially eroding the patentee’s term of
exclusivity. The Act amended the patent laws
to restore some of that patent term, thereby
encouraging continued vigorous investment in
drug development.2
Generic drug producers, on the other
hand, suffered from their own delays. They
could not enter the market immediately
after patents expired because no expedited
approval process existed for bioequivalent
drugs, and significant pre-approval activities
within the patent term were considered
infringement.3
The ANDA Process
The Act addressed such delays by
providing an Abbreviated New Drug
Application (ANDA) process for drugs
bioequivalent to approved drugs.4
In
addition, under the Act it is no longer
infringement for generic companies to
conduct activity directed solely toward
developing and submitting information for
FDA approval.5
The Act includes additional requirements
for the pioneer and generic companies.
A pioneer must
identify in its NDA the
number and expiration
date of any patent which
covers the drug or its
use. That information is
added to the FDA’s list
entitled “Approved Drug
Products with Therapeutic
Equivalence Evaluations,”
commonly known as the
“Orange Book.”6
A generic applicant, on the other hand,
must certify in its ANDA either that: (I) no
patent information has been filed; (II) the
patent has expired; (III) the patent will expire
on a specific date; or (IV) the patent is invalid
or will not be infringed. In the latter instance,
the applicant must notify the NDA and patent
holder and include a detailed statement
explaining the basis for the “paragraph IV”
certification.
Stay of 30 Months
Filing the ANDA is itself a technical act of
infringement. If the patentee sues the ANDA
applicant within forty-five days, the FDA
is prohibited from making ANDA approval
effective pending resolution of the suit, up
to a total stay of thirty months. This period
may be adjusted by court order addressing the
parties’ cooperation in expediting the action.
The stay provision seeks to give patentees
ample time to obtain injunctions when
appropriate, while preventing them from
protracting the litigation to effectively block
approval of their adversaries’ ANDAs.
To encourage generic companies to
be the first to design around or challenge
pioneer patents, the Act rewards the first
ANDA applicant by prohibiting the FDA from
making any other ANDA effective for 180
days. During this exclusivity period, a generic
drug can be priced just slightly lower than the
brand-name product, generating large profits
because the generic company avoids the
research, development and regulatory costs
borne by the pioneer producer.
For example, as the first ANDA applicant
for a generic version of Prozac, Barr
Laboratories generated $311 million in sales
during the exclusivity period, and reported
earnings of $4.63 per share for fiscal year
2002, compared to $1.66 for fiscal 2001.7
Heightened Attention
The Act is currently drawing heightened
attention. President Bush’s budget proposal
to Congress includes a $13 million increase for
the FDA to speed up generic drug reviews by
about two months.8
Substantial attention is
also focused on the concern that some brand-
name drug producers may be submitting
“improper” listings for the Orange Book,
sometimes to obtain multiple 30-month stays,
thereby delaying generic drug introduction
into the marketplace. The FTC released a
study on July 30, 2002,9
which presented
data and observations regarding allegedly
improper listings and multiple stays. The
financial motivation for such listings is
illustrated by the FTC’s data from eight cases
indicating that net sales in the year the second
stay issued ranged from $100 million to over
$1 billion. The study also expressed concerns
about settlement agreements wherein a
brand-name drug company pays the first
generic applicant to stay off the market,
thereby tolling the 180-day exclusivity period
to preclude the FDA from approving ANDAs
for subsequent generic applicants. The FTC
recommended legislative action to require
reporting of certain settlements to the FTC,
and to permit only one 30-month stay
per ANDA.
Meanwhile, courtroom ANDA battles
continue to draw attention. Two major
battles relate to metabolized forms of drugs,
or “metabolites.” In one case, Bristol-Myers
listed a patent for a metabolite of the anti-
anxiety drug, BuSpar, the day before the
drug’s original patent expired.10
Bristol
then sued ANDA filers Mylan and Watson
Pharmaceuticals within forty-five days,
triggering a second 30-month stay blocking
them from entering the marketplace. Mylan,
FRIDAY, FEBRUARY 28, 2003
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VOLUME 255—NO. 14
LAWRENCET. KASS is a partner at Milbank, Tweed,
Hadley & McCloy LLP.
By LawrenceT. Kass
The Hatch-Waxman Act amended the
patent laws to restore some of the patent
term, thereby encouraging continued
vigorous investment in
drug development.