Patent laws in the United States have changed a great deal under the General Agreement on Tariffs and Trade (GATT). Additionally, because of the interrelationship between patent laws and prescription drug approval laws, the regulatory review process of pharmaceuticals at the Food and Drug Administration (FDA) has also been greatly disrupted, although this outcome is apparently inadvertent. The result of this unintended effect on FDA procedure has been confusion and uncertainty for the pharmaceutical industry. Meanwhile, an estimated $6 billion cost to consumers hangs in the balance (1).
The way it was
Before the passage of the Uruguay Round Agreements Act (URAA)-the
legislation that enacted the provisions of GATT-the process by which
the FDA approved prescription drugs for sale in the United States was
clear: A pharmaceutical company that had developed a new drug would
file a New Drug Application (NDA). For the purposes of the Food, Drug,
and Cosmetic (FDC) Act (2, 3), a new drug may be
described as
As part of the NDA, the company must convince the FDA that the new drug is safe and effective. This process typically involves conducting quite expensive clinical trials. Indeed, the total cost involved in bringing a new drug to market, including its discovery, research, and approval, is estimated to be in the tens of millions of dollars.
Not surprisingly, the companies that invest in finding these new drugs also typically seek to patent them. If a patent is obtained, the pharmaceutical company can prevent others from making, using, or selling the new drug within the United States during the term of the patent. (Additionally, importing the patented drug into the United States or offering the patented drug for sale within the United States will also be prohibited as acts of patent infringement beginning in Jan. 1996) (5, 6).
This patent information must also be included in the NDA. Specifically, if an NDA applicant holds a patent covering the drug product, then this patent number and its expiration date must be submitted with the application. After the drug is approved, the FDA publishes the patent information associated with the approved drug in a book entitled Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the "Orange Book" (7).
Not all drugs requiring FDA approval have a new active ingredient. Some drug formulations contain the same active compound as an earlier approved drug; these are the so-called generic drugs. Manufacturers of these types of drugs can request expedited FDA approval by filing an Abbreviated New Drug Application (ANDA) (8). Under this filing, the evidence of safety and efficacy submitted to the FDA in connection with the previous "brand name" drug is used to help establish the safety and efficacy of the new drug. However, the FDC Act requires the ANDA to include a patent certification statement listing each patent that claims the drug or which claims a use for the drug (9). The ANDA applicant may rely on the information provided in the Orange Book for the certification statement. Specifically, the ANDA must include one of the following statements:
In the case of the last statement, the NDA holder and the owner of the patent must be notified of the ANDA and the reasons as to why the patent is believed invalid or not infringed by the drug product under review (10). If the NDA holder or patent owner files a patent infringement suit within 45 days of this notification, then the FDA must put a hold on the approval of the drug for 30 months or until a final court decision has been made (11). If no litigation is instituted by the NDA holder (or the patent owner) within 45 days, then the FDA will approve the drug immediately, assuming that all other requirements are met (11). (Failure to bring a patent infringement suit within the 45-day period does not prohibit the patent owner from later filing an infringement suit. The filing of such a later suit simply will not trigger the FDA hold on approval.)
In short, the FDA cannot formally approve a generic drug for sale if its sale would infringe a U.S. patent.
Legal infringement
The enactment of the URAA changed many provisions in U.S. patent law,
including the term of the patent. Under the new law, patents expire 20
years from the filing date of the patent application. In contrast,
under the old law, patents expired 17 years after their issue date. As
a transitional provision, Congress provided that all patents in force
on 8 June 1995 will have a term of 20 years from date of filing or 17
years from the date of issue, whichever is longer (12).
Because 20 years from filing may be a later date than 17 years from
issue, some patents receive an extension of their patent term. This
URAA-induced extension beyond the original 17 years is referred to as
the "delta period".
Recognizing that some companies may have made substantial investments in anticipation of a particular patent expiring and now may have to forestall their plans because of the patent term delta period, Congress provided a safety net, or "safe harbor," in the legislation. Specifically, activities that "were commenced or for which substantial investment was made" before 8 June 1995 and have become infringing by reason of the delta period "may be continued only upon the payment of an equitable remuneration" to the patent owner (13). Under the safe harbor provision, the patent owner cannot obtain an injunction against the infringing competitor to stop the competitor from selling infringing products. However, the competitor must pay the patent owner some fair amount ("equitable remuneration") for the infringement.
The unintended conflict
Whereas the patent term was modified and a safe harbor provision was added to
the patent laws, there was no amendment to the FDC Act. Tension and
confusion regarding the approval process for generic drugs have resulted.
Specifically, would the ANDA certification be decided on the basis of the
original patent term expiration date, or should it be the new URAA-extended
expiration date?
On 25 May 1995, in response to a citizen petition filed by Glaxo Wellcome, FDA announced its policy on the URAA's patent provisions and their effect on the new drug approval process. In short, FDA determined that it will not approve ANDAs for any drug product until the URAA-extended patent expires. In addition, FDA stated that applicants with pending ANDA applications must amend their patent certification statements to reflect the URAA-extended expiration dates or file a statement indicating that the patent is invalid, unenforceable, or will not be infringed.
The result of this interpretation is that pharmaceutical companies, unlike all other industries, cannot take advantage of the safe harbor provision of the patent laws. For example, if a pending ANDA is amended so as to reflect a new patent expiration date, then the FDA must withhold approval of the drug until the new extended patent expiration date has lapsed. Without FDA approval, the drug cannot be sold. Thus, the FDA regulations serve to impose a de facto injunction on the generic drugmakers during the delta period of the patent.
Furthermore, if an ANDA is amended to state that the patent will not be infringed-on the basis of the theory that there is no true infringement during the delta period pursuant to the safe harbor provision-the patent owner need only file suit for infringement against the applicant to trigger the mandatory FDA hold on approval.
In either event, under the FDA interpretation of the FDC Act and the URAA, the generic drug manufacturer is prohibited from entering the market under FDA regulations. The fact that the patent laws contained a provision wherein the patent could be "infringed" during the delta period does not help the generic drug manufacturer, who must gain clearance from the FDA before selling the generic drug.
This FDA policy has sparked numerous lawsuits as well as proposed "corrective" legislation.
Confusion among the courts
A good illustration of the uncertainties regarding the effect of the delta
period is the conflict between the initial outcomes of two lawsuits involving
the Bristol-Myers Squibb (BMS) patented captopril drug product (Capoten)
(14). This highly successful drug, used in the treatment of
hypertension, was scheduled to lose its patent protection on 8 Aug. 1995. A
variety of drugmakers had filed ANDAs on generic captopril drug products and
were preparing to enter the market after that date. But then came the URAA,
which served to extend the captopril patent protection until 13 Feb.
1996.
In the first lawsuit, three potential generic drug manufacturers of captopril, the DuPont Merck Pharmaceutical Company, Endo Laboratories, L.L.C., and Mylan Pharmaceuticals Inc. sued BMS for a declaratory judgment (15). Among other things, these generic drug manufacturers sought a declaration from the court that, during the delta period, they had the right to make, use, and sell captopril products and, therefore, did not infringe the BMS patent, so long as they paid equitable remuneration. Also, these generic drug manufacturers sought an injunction to compel BMS to waive the FDA's 45-day notice period for filing suit. In this way, the generic drug manufacturers could change their ANDA certification from a patent expiration statement to a noninfringement statement without BMS being able to trigger the FDA mandatory hold on approval. The district court dismissed the lawsuit without deciding these issues.
However, on appeal, the court of appeals for the federal circuit ruled against the generic drug manufacturers (16). The federal circuit specifically held that the safe harbor provision of the patent laws did not affect the definition of infringement. Rather, the safe harbor provision affects only the remedies that are available to a patent owner against an infringer during the delta period. Therefore, contrary to the generic drug manufacturers' argument, the sale of captopril during the delta period, even with the payment of equitable remuneration, is an infringement of the patent, which thereby precludes the FDA from approving the ANDA.
But the opposite result was initially reached in a second BMS lawsuit involving captopril. In this second lawsuit, BMS sued Royce Laboratories Inc. for patent infringement, after Royce amended its captopril ANDA from an expiration certification to a noninfringement certification (17). The BMS suit triggered the FDA's mandatory hold on approval. However, the district court reasoned that the actual sale of Royce's captopril drug during the delta period would not be an infringement of the patent because of the safe harbor provision. Accordingly, the court held that the FDA was no longer enjoined from withholding approval. Thus, if it weren't for the inevitable appeal by BMS, this court's decision would have been sufficient to allow Royce to gain immediate FDA approval and entry into the market. On appeal, the federal circuit court reversed the district court's decision and found in favor of BMS (18). This decision that Royce's product would infringe BMS's patent, even during the delta period, forced FDA to withhold approval.
Nonetheless, the difference in initial results between these two lawsuits is remarkable, given that the same patent and the same drug product were under review. In the first case, the appellate court (and the FDA) read the statutes for what they plainly say, despite the seemingly unfair treatment of the generic drug manufacturers. In the second case, the district court interpreted the FDC Act and the URAA so as to carry out the (apparent) intent of Congress' safe harbor provision. Although the district court's decision was reversed on appeal to the federal circuit, the initial discrepancy demonstrates that reasonable minds can differ as to the meaning and effect of the URAA patent extension and the safe harbor provision.
Fixing the laws
The courts and the drug industry are not the only ones having trouble
discerning the meaning of the safe harbor provision. Congress itself cannot
agree on the effect that the safe harbor provision should have had on ANDA
approval. In what has typified an almost comical situation (as if it did not
involve billions of dollars), the two major sponsors of the legislation that
established the ANDA process (the Waxman-Hatch Act) disagreed as to the
course that FDA should have taken in interpreting the URAA. Sen. Orrin
Hatch said that FDA had no choice but to deny approval to any ANDAs for which
the patent term was extended under the URAA. This position favored the brand
name drug companies. In contrast, Congressman Henry Waxman sided with the
generic manufacturers and indicated that an ANDA should be approved at the
start of the delta period.
Sensing a legislative oversight and in response to the FDA's position, Sen. David Pryor has introduced a bill that would direct the FDA to approve ANDAs as of the old patent expiration date (19). When the FDA approval obstacle is removed, the ANDA applicant could then sell the generic drug during the delta period provided that the safe harbor provisions of the patent laws were met: activities commenced, or substantial investment made, before 8 June 1995 and payment of equitable remuneration to the patent owner. The proposed legislation would thus enable the generic drug industry to access the safe harbor provision of the patent laws as do the other industries in the United States.
Nonetheless, Sen. Helms and Sen. Faircloth of North Carolina (where many brand name manufacturers are located) have argued against the Pryor legislation. Although the Pryor bill would only remove an apparent oversight in the URAA, Sen. Faircloth believes that the overall balance of rights between the brand name drug manufacturers and the generic drug manufacturers should instead be reexamined, and he is considering legislation to that effect.
Some final thoughts
The extension of the term of some patents under the URAA and the hardship that
it could cause on those that had planned on the patents' original expiration
date was foreseen by Congress. Accordingly, a safe harbor was provided in
the patent laws whereby the patent owner could not prevent the infringement
of his or her patent during the delta period, if the infringer paid equitable
remuneration to the patent owner.
But the interaction between the patent laws and the FDC Act was apparently overlooked by Congress. Accordingly, no amendment was made to the FDC Act regarding approval of generic drugs during the delta period. Because the FDA cannot approve an ANDA if the sale of the drug will infringe a patent, generic drugs are presently prevented from being sold during the delta period of the patent term by the FDA. The hardship that was supposed to be alleviated by the safe harbor provision of the patent laws is thus fully felt by the generic drug manufacturers.
The FDA position and the court decisions indicate that the generic drug manufacturers will continue to be denied the use of the safe harbor provision unless Congress acts. This conflict has highlighted the turf war between brand name drug manufacturers and generic drug manufacturers. The brand name manufacturers seem to be winning this battle, but the war is far from over. Meanwhile, the drug industry anxiously awaits the final resolution-billions of dollars ride on the outcome.
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