Public Citizen | Congress Watch | Congress Watch - Legislation Closing Loopholes in Drug Patent Law (S. 812/H.R. 5311, H.R. 5272) Will Help Assure Consumers Access to Lower-Priced Generic Drugs

Legislation Closing Loopholes in Drug Patent Law
(S. 812/H.R. 5311, H.R. 5272)
Will Help Assure Consumers Access to Lower-Priced Generic Drugs

On Wednesday July 31, the U.S. Senate passed S. 812, the Greater Access to Affordable Pharmaceuticals Act. Two companion bills have been introduced in the House, one by Reps. John Thune (R-S.D.) and Jo Ann Emerson (R-Mo.), H.R. 5311, the other by Reps. Sherrod Brown (D-Ohio) and Henry Waxman (D-Calif.), H.R. 5272. This legislation will stop brand-name drug companies from using certain legal tricks to extend the lucrative patents on their drugs and thereby keep lower-cost generics off the market. Currently, consumers are being denied access to lower-priced generic drugs that can sell for discounts of as much as 50% off their brand-name counterparts. The main features of S. 812/H.R. 5311, H.R. 5272 include:

· Limits Brand Name Drug Companies to one 30-month stay of generic competition. Under current law, brand-name drug companies can receive multiple automatic 30-month stays of generic competition. All that is required to receive a 30-month stay of competition is for the brand-name company to list a patent with the FDA and claim that its patent would be infringed if a generic company marketed its product. The GAAP Act would limit drug companies to one 30-month stay of generic competition.

Ø Late listed patents would not be eligible for automatic 30-month stay. Only patents listed up to 30 days after the time of approval of the brand-name drug would be eligible for the automatic 30-month stay.

Much of the mischief done by brand-name drug companies is done with late listed patents. For example Bristol-Myers Squibb kept competitors to its anti-anxiety drug BuSpar off the market for almost half a year by obtaining a patent on one of the breakdown products (metabolites) created naturally in the body. Bristol obtained the patent on November 21, 2000, the day before the company's existing patent on the drug was scheduled to expire, and generic competition was set to begin. One of the generic competitors, Mylan Laboratories, was ready to ship its generic version of BuSpar that day and as a result of this late-listed patent had to unload its delivery trucks.

Brand-name companies still would be able to defend their late-listed patents. However, instead of being given an automatic 30-month stay delaying generic competition, as they are under current law, the brand-name company would have to convince a judge that he or she should prevent the generic drug from coming to market by issuing a preliminary injunction.

Ø Generic drug companies given the ability to challenge bogus patents in court. Under current law frivolous patents become the basis for 30-month stays when brand name drug companies ask the FDA to file them in the agency's orange book. Because the FDA does not exercise scrutiny over the appropriateness of these listings and no private actor has the right to challenge these listings, generic companies are limited in their ability to remove frivolous patents from the FDA's orange book. The GAAP Act gives generic companies the ability to go to court to seek the de-listing of patents that are inappropriately listed with the FDA. This provision gives generic companies the legal tool they need to clear away frivolous patents that are preventing lower-cost generics from coming to market. This provision along with the requirement discussed above that all patents eligible for a 30-month stay must be listed by 30 days after the time of a brand name drug's approval means that generic companies not only have the tool they need but also have the time -- approximately 14 years[i] from the time the brand name is approved and when generics would seek to go to market -- to clear the way to bring lower-cost generics to market.

· Stopping collusion between generic and brand-name drug companies that delays consumers access to lower-cost generics. The GAAP Act changes the law so that if a generic-drug company entered into an agreement with a brand-name company to keep its generic product off of the market, this agreement would no longer prevent other generic companies from bringing lower-cost generic products to market.

Under existing law, the first generic to challenge one of a brand-name's patents and bring a drug to market enjoys a six-month monopoly during which no other generic can enter the market. This special provision was created as an incentive to compensate those generic companies willing to take on the brand name companies for the large legal expenses that they sometimes incur in the process of winning the right to market a competing drug. Unfortunately, in the hands of some brand-name drug companies, this provision has become a way to stifle competition. By paying that first generic competitor to stay off the market for their six-month monopoly period, brand-name drug companies have discovered that they are able to stave off competition from any generic.

In one case, which began in 2000, the FTC charged Hoechst Marion Roussel (now Aventis) and Andrx Corporation with engaging in anti-competitive practices intended to keep generic drugs off the market. In 1997, Hoechst, the manufacturer of Cardizem CD, a drug used to treat hypertension and angina, entered into an agreement with Andrx, the potential manufacturer of the generic version of Cardizem CD, in which Hoechst would pay Andrx $10 million per quarter as well as $60 million per year if Andrx would not put the generic on the market. [ii] This case ended with a consent order by the FTC designed to prevent the recurrence of anti-competitive activities by the companies.

· The high price of prescription drugs in the United States. Brand name drug companies charge significantly more for prescription drugs in this country than in other industrialized nations. A Canadian government survey found that consumers in other industrialized countries pay 35-50% less than U.S. consumers for the same medicines.[iii] And U.S. prices are rapidly rising. The 50 top-selling drugs in 2001 posted price increases almost three times greater than the rate of inflation. The price of the 50 top drugs increased 7.8% while the overall inflation rate was just 2.7%.[iv]

· Many U.S. consumers do not have insurance coverage for prescription drugs. Approximately 65 million Americans, including one-third of the elderly, have no insurance coverage to help with the high price of prescription drugs. Millions more Americans have inadequate drug coverage.[v]

· Access to generic drugs can save consumers substantial sums. Given that generic drugs contain active ingredients that are the same as their branded counterparts and sell for 20-50% less, timely access to generic drugs can help to lighten the burden of high drug cost for the U.S. consumer.[vi] According to the Congressional Budget Office (CBO), in 1994 consumers saved between $8 billion and $10 billion by purchasing lower-cost generic alternatives to high-priced brand name drugs.[vii] Today consumers save even more. Some consumers worry that while generic drugs may be cheaper that they are somehow inferior to their brand name counterparts. This is a completely baseless fear. The fact is that the FDA will not approve a generic drug unless it is proven to be equivalent to its brand name counterpart.

[i] National Institute for Health Care Management, "Prescription Drugs and Intellectual Property Protection," August 2000

[ii] Federal Trade Commission, "FTC Charge Drug Manufacturers with Stifling Competition in Two Prescription Drug Markets," FTC Press Release, March 16, 2000.

[iii] Patented Medicines Prices Review Board, Canada, "1999 Annual Report," 2000.

[iv] Families USA, "Bitter Pill: The Rising Prices of Prescription Drugs for Older Americans," June 2002.

[v] Department of Health and Human Services; Prescription Drug Coverage, Spending, Utilization, and Prices, Report to the President, April 2000.

[vi] Congressional Budget Office, "How Increased Competition from Generic Drugs Has Affected Prices and Returns in the Pharmaceutical Industry," July 1998.

[vii] Ibid.

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