Waxman-Hatch changes are on the way

Aug 1, 2003
By: Fred Gebhart
Drug Topics Supplements


Waxman-Hatch changes are on the way

All bets are off on whether generic drugs will be approved more quickly in the future as Congress wrestles with a legislative overhaul of the Waxman-Hatch act.

The Food & Drug Administration issued final rules on generic drug approvals under the Waxman-Hatch amendments in early June. But new regulatory provisions to limit brand-name companies to one 30-month delay in the introduction of generic competitors appeared just in time to disappear in the glare of even more sweeping legislative reforms.

Both House and Senate passed provisions that went beyond the FDA's own changes. Each adopted language that effectively bans arrangements that let a drugmaker delay competition by paying another manufacturer to stay out of the market.

The two Houses attached similar Access to Affordable Pharmaceuticals provisions to Medicare prescription drug benefit bills that passed just before the July 4 recess. The goal is to bring more generics to market more quickly. But that is where question marks begin to appear. House and Senate generic drug provisions are close, but not identical. Other Medicare Rx benefit provisions are dramatically different in the two bills.

Political differences are also sharp. The Senate Medicare Rx benefit passed by an easy 76 to 21 margin with support from both sides of the aisle. The House passed its version of the bill in a dramatic 216-215 roll call vote. Conservative Republicans joined most Democrats in voting against the proposal, which got strong personal support from the White House.

The stage is set for tough bargaining over the summer. "Anything can happen in conference," said Susan Winckler, VP of policy and advocacy for the American Pharmacists Association. APhA, and most other pharmacy organizations, backed both the new FDA regulations and the House/Senate Waxman-Hatch changes. "But it is to everyone's advantage to move a drug bill," she said.

Congressional Republicans and Democrats both want a Medicare prescription drug benefit to bolster 2004 reelection bids. So does the Bush Administration. But it is not clear what kind of Medicare bill, if any, House and Senate conferees will produce. If a compromise drug benefit emerges from the Conference Committee, it may—or may not—include Waxman-Hatch reform language. Conferees hope to send a bill to the President before the August recess. Provisions would take effect in 2006.

"We're glad to see that the FDA recognizes the abuses that have occurred under Waxman-Hatch," said an aide to Rep. Henry Waxman (D, Calif.), coauthor of the original 1984 Drug Price Competition and Patent Restoration Act. "But the agency didn't go far enough."

Balancing act
Waxman-Hatch was envisioned as a balancing act, explained Edward Snyder, dean and professor of economics at the University of Chicago Graduate School of Business. The goal was to create incentives for generic companies to enter the market while protecting brand-name company patents and profits.

"Waxman-Hatch succeeded in making generic competition pretty much of a sure thing for commercially attractive products," Snyder told an Alliance for Health Reform briefing for congressional staffers in June.

On the brand-name side, Waxman-Hatch extended the original patent term for up to five years. The longer patent term helped make up for delays in the FDA approval process.

On the generic side, the law created an Abbreviated New Drug Application (ANDA). The ANDA lets manufacturers of generic drugs rely on clinical trials submitted by innovator drugmakers as part of their original New Drug Application (NDA). Instead of duplicating existing clinical trials, the generic maker simply had to establish bioequivalence with the innovator product to gain FDA approval.

Waxman-Hatch also allowed generic drugmakers to begin the ANDA process before innovator patents expired. Generic makers can claim that their product does not infringe on an existing patent or claim that an innovator patent is invalid.

The innovator company must be informed of the ANDA. If the patent holder agrees that the generic can proceed, the first generic company gets 180 days of exclusive marketing rights for its new product.

Or the innovator company can protect its product by bringing suit to defend the patent. Filing suit automatically triggers a 30-month delay on marketing the new generic, even if the FDA approves the ANDA.

Changing the rules
Provisions that look good on Capitol Hill don't always work well in practice, however. Critics, including the Federal Trade Commission, charge brand-name drugmakers with manipulating the generic approval process to delay competition.

"Although many drug manufacturers—including both brand-name and generic companies—have acted in good faith, others have attempted to 'game' the system, securing greater profits for themselves without providing a corresponding benefit to consumers," FTC chairman Timothy Muris told the Senate Judiciary Committee in June. "The commission has pursued numerous antitrust enforcement actions affecting both brand-name and generic drug manufacturers."

In a July 2002 report, FTC found two significant problems in Waxman-Hatch. Brand-name companies had begun to file questionable patents and frivolous patent violation suits. Each alleged patent violation effectively delayed entry of a generic product for an additional 30 months.

FTC identified eight blockbuster drugs with potential generic competitors that were delayed with sequential 30-month stays. In supporting the new FDA rules, Muris noted that seven of the eight products that were delayed could have come to market in 30 months under new FDA rules.

The typical patent challenge is resolved in just over 25 months, the report noted. By filing sequential challenges to patents on computer programs, labels, and other nonessential items, brand-name makers have delayed generic rivals by more than 70 months.

The commission brought actions against Biovail and Bristol-Myers Squibb for listing inappropriate, improper, and misleading patents in the FDA's Orange Book in order to trigger additional 30-month stays.

FTC also found that both brand-name and generic companies abuse the 180-day exclusive marketing period. By paying the first generic company with rights to market a generic to stay out of the market, the brand-name company effectively keeps all generic competitors at bay for six months.

One of FTC's more publicized drug industry actions settled an allegation that Bristol-Myers Squibb paid a generic maker $72.5 million not to market generic buspirone until its BuSpar patent expired. FTC said the deal on BuSpar, plus alleged violations on Taxol (paclitaxel) and Platinol (cisplatin), protected nearly $2 billion in BMS sales.

FTC has also gone after generic companies, including a complaint against Biovail and Elan over an agreement not to compete in marketing 30-mg and 60-mg formulations of nifedipine SA (Adalat CC, Bayer).

FTC recommended two changes be made to Waxman-Hatch:

• Permit only one automatic 30-month stay per drug product and only for patents listed in the Orange Book prior to an ANDA filing.

• Require drugmakers to file agreements that affect the 180-day exclusive marketing period with FTC for review.

The FDA made a good start, said an FTC spokesman. Starting on Aug. 19, the agency will allow just one 30-month stay for each ANDA. The agency did not address the 180-day exclusive marketing period.

New rules also clarify the types of patents that can be listed in the Orange Book as the basis for an ANDA patent challenge. Patents based on active ingredient, formulation/composition, or methods of use are allowed. Patents claiming packaging, metabolites, drug intermediates, process, or product-by-process will not be listed. Patents not listed in the Orange Book cannot be used to challenge a new generic.

The agency estimates the changes will save consumers $35 billion in drug costs over the next decade by speeding generic approvals. "The new rule is a step in the right direction," said Christine Simmons, VP of policy and public affairs for the Generic Pharmaceutical Association. "It is complementary to the legislation, but it is not complete. The FDA does not go far enough to guarantee access."

Generic access legislation began in the Senate. It was introduced by Judd Gregg (R, N.H.) and Charles Schumer (D, N.Y.). The legislation was then folded into the Senate's Medicare Rx drug benefit bill.

"We support the [Senate] bill absolutely," Simmons said. "It removes barriers to generic competition, but it is also politically palatable. It contains substantial compromises on both sides."

The bill allows only one 30-month stay and does not allow innovator drugmakers to list additional patents in the Orange Book once an ANDA has been filed.

The bill also forfeits the 180-day exclusivity period for drug manufacturers that enter anticompetitive deals or fail to bring a new generic to market in a timely fashion.

Other provisions grant the FDA statutory authority to establish tests in lieu of bioequivalence for products such as topical and inhaled medications that do not fit current definitions of bioequivalence.

The House adopted all three proposals in its own generic access provisions. But the Senate proposals go further, said an aide to Rep. Waxman. It allows generic companies to seek declaratory judgment that a generic does not infringe a valid innovator patent. Once a declaratory judgment has been issued, an innovator company cannot file for patent violation.

The Senate version also allows judges to waive or lower patent violation damages against a generic company if the company is found to violate an innovator patent that was not listed in the Orange Book. Without that provision, innovator companies have an incentive to hide patents and file irrelevant patents in the hope of tripping up an unwary generic competitor.

Both provisions were dropped after intensive lobbying by PhRMA, the aide said.

"PhRMA tried to remove numerous Senate provisions in the House," Waxman's aide said. "But all they could get out were these two, which they particularly hate. Lobbying in the Conference Committee is going to be hot and heavy this summer."

Fred Gebhart


Fred Gebhart. Waxman-Hatch changes are on the way. Drug Topics Generic Supplement;147:6s.