Details regarding Hatch-Waxman Act, focusing on patents, competition, antitrust and generic drugs, citing the conflicts in the courts

1. PATENTS, COMPETITION,
ANTITRUST AND GENERIC DRUGS:
RESOLVING HATCH-WAXMAN ISSUES
BY:
KIRBY DRAKE

2. Hatch-Waxman Act
• Drug Price Competition and Patent Term
Restoration Act of 1984
• Easier for generic manufacturer to enter market
by permitting it to file an Abbreviated New Drug
Application (ANDA)
• ANDA must show that generic version is
“bioequivalent” to approved drug
• May include Paragraph IV certification

3. Hatch-Waxman Act
• Incentive to generic manufacturer to be first to
file ANDA with Paragraph IV certification:
• 180-day period of marketing exclusivity with respect to
other generic manufacturers
• No provisions in original version of Act for
review of settlements of Paragraph IV patent
litigation

4. Bayer-Barr Cipro Litigation
• Bayer patent relates to
active ingredient in Cipro -
ciprofloxacin hydrochloride
• Bayer patent issued in 1987
• Bayer received approval
from FDA to market Cipro in
October 1987

5. Bayer-Barr Cipro Litigation
• 1991: Barr applied to FDA to bring generic to
market claiming Bayer patent related to Cipro
was invalid and unenforceable
• 1992: Bayer sued Barr for patent infringement
• 1997: Bayer started paying Barr in exchange
for agreement not to manufacture generic Cipro

6. Bayer-Barr Cipro Settlement
• Bayer-Barr settlement terms
• Bayer agreed to pay approximately $49.1M to Barr
(initial payment)
• Barr converted Paragraph IV certification to Paragraph
III certification
• Barr agreed not to challenge validity or enforceability
of Bayer patent
• Barr could sell a competing product beginning 6
months before the expiration of Bayer patent

7. Follow-On Cipro Patent Litigation
• Bayer filed for reexamination of its patent and validity of
claims affirmed by PTO
• Bayer defended its patent against 4 other generic
challengers
• Two on summary judgment (Schein, Mylan)
• One after trial (Carlsbad)
• One after generic company withdrew its Paragraph IV
certification (Ranbaxy)
• Validity and enforceability of the Bayer patent upheld in
lawsuits

8. Cipro Antitrust Litigation
• Lawsuits filed in 2000 and 2001 by private
plaintiffs to challenge Bayer-Barr settlement
• Various lawsuits consolidated in federal court in
New York

9. Cipro Antitrust Litigation
• Policy bases for antitrust lawsuit:
• Prop-up drug price at expense of consumers and
health insurance companies
• Blocking access to adequate suppliers and cheaper,
generic versions of Cipro
• Generic manufacturers forced to abandon efforts to
bring generic Cipro to market
• Manipulation of price and supply of drug

10. Cipro Antitrust Litigation
• Argued violations of Sections 1 and 2 of the
Sherman Act and violations of state antitrust
and consumer protection laws
• Summary judgment granted – no antitrust
violations
• Relevant market is Cipro
• Bayer had the market power
• Settlement was in exclusionary zone of the Bayer
patent

11. Cipro Antitrust Litigation
• NY court assessed rulings in Hytrin and
Cardizem litigation where courts applied per se
analysis and found settlement agreements
illegal

12. Hytrin Litigation
• Abbott settled patent litigation with Geneva and
Zenith Goldline
• Agreement was “interim” agreement and did
not finally resolve patent issues
• Settlement agreement found per se unlawful

13. Cardizem Litigation
• “Interim” settlement of patent litigation between
HMRI and Andrx
• Settlement agreement found to be per se
unlawful - reduces competition in market

14. Cipro Antitrust Litigation
• Found Cipro settlement distinguishable from
settlements in Hytrin and Cardizem litigation
• Agreements did not finally dispose of litigation
• Agreements potentially blocked competition from non-
infringing products

15. Cipro Antitrust Litigation – Federal Circuit
• Arguments on appeal to Federal Circuit
• Agreement was per se unlawful
• Agreement did not fall within exclusionary zone of the
Bayer patent
• Failure to consider law of the regional circuits
• Failure to appreciate effects of agreement on other
generic manufacturers
• Failure to consider that agreements may preserve
Barr’s claim to 180-day exclusivity period

16. Cipro Antitrust Litigation – Federal Circuit
• NY court properly applied rule of reason
analysis
• Determined relevant market
• Found that Bayer had market power within market
• No bottleneck on challenges to patent or restraint on
competition outside “zone of exclusion” of patent
• Reverse payment within “zone of exclusion” is
not illegal

17. Cipro Antitrust Litigation – Federal Circuit
• Patents are naturally anticompetitive
• Bayer-Barr agreement within rights of patent
holder
“The essence of the agreements was to exclude
the defendants from profiting from the patented
invention. This is well within Bayer’s right as the
patentee.”
Judge Prost

18. Cipro Antitrust Litigation – Federal Circuit
• Not problematic that Barr agreed not to
challenge patent
• Typical provision in settlement of patent cases
• Settlement did not prevent others from challenging
patent
• Settlements favored even when anticompetitive

19. Cipro Antitrust Litigation – Federal Circuit
• No antitrust violation by settlement if:
• Patent holder makes payments to generic
manufacturer who filed ANDA with Paragraph IV
certification
• Generic manufacturer agrees not to market its product
until expiration of the patent
• Patent lawsuit dismissed and generic manufacturer
agrees not to challenge the validity or enforceability of
the patent

20. Cipro Antitrust Litigation – Federal Circuit
• Must prove that patent litigation was objectively
and subjectively baseless
• Did not find Bayer enforced patent without
reasonable basis

21. Changing Times Since Cipro
• Hatch-Waxman Act now includes “forfeiture”
events that may eliminate the first filer’s 180-day
period of exclusivity
• Settlement agreements must now be filed with
the FTC and the DOJ for review

22. Congressional Action
• S.369 – Preserve Access to Affordable Generics
Act
• Adds new section to Clayton Act
• Generic manufacturer who violates would forfeit 180-
day period of exclusivity
• Prohibit reverse payments

23. Congressional Action
• H.R. 1902 – Protecting Consumer Access to
Generic Drugs Act of 2007
• Includes same or similar prohibited conduct as in
recently proposed Senate act
• Did not specifically propose to amend Clayton Act

24. Resolving Hatch-Waxman Issues
• Conflict in the courts
• Conflict between courts and Congress and/or
private consumers
• Conflict between importance of patents in the
pharma sector and suggestion that pharma
companies do not have right to protect their
patents