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Greater Access to Affordable Pharmaceuticals Act (GAAP) Will Save Consumers Billions by Making Less-Costly Generics Available

May 8, 2002

Greater Access to Affordable Pharmaceuticals Act (GAAP) Will Save Consumers Billions by Making Less-Costly Generics Available

Bill Would Close Loopholes in Hatch-Waxman Act That Allow Drugmakers to Keep Generics Off the Market

WASHINGTON, D.C. ? A measure being considered today by Senate lawmakers would provide consumers with more timely access to lower-priced generic drugs, ultimately saving people billions of dollars in prescription drug costs.

The bill, the Greater Access to Affordable Pharmaceuticals Act (GAAP), S. 812, is being heard by the Senate?s Health, Education, Labor and Pensions Committee. Its original sponsors are Sens. Chuck Schumer (D-N.Y.) and John McCain (R-Ariz.).

“This legislation will close loopholes that brand name drug companies exploit to extend their lucrative patents and deny consumers access to lower-cost generics,” said Frank Clemente, director of Public Citizen?s Congress Watch. “This will translate into billions of dollars of savings for consumers. We applaud Senator Kennedy for holding this hearing.”

The GAAP Act closes loopholes in the Drug Price Competition and Patent Restoration Act of 1984 (Hatch-Waxman Act) that have allowed brand name drug companies to keep generic drugs off the market.

Hatch-Waxman was designed to increase timely access to generic drugs while ensuring that drug manufacturers have adequate patent protection to justify their investment in research and development. But loopholes in the act have allowed drug companies to delay generic drugs from coming to market by doing such things as paying firms to withhold generic drugs from the market and filing nuisance lawsuits that automatically delay the introduction of generics. Although the Hatch-Waxman Act has succeeded in opening the prescription drug market to generic competition, generics now constitute less than 10 percent of the dollar value of all prescription drugs sold in the United States.

Solutions in the Schumer-McCain bill include:

  • Eliminating the automatic 30-month stay in current law that has allowed brand name drug companies to keep generic drugs off the market by filing nuisance suits. The bill would require that brand name drug companies, just like patent holders in any other industry, prove in court why they ought to be granted a temporary restraining order preventing a competitor?s product from coming to market;
  • Limiting collusion between brand name companies and generic firms that agree to withhold their drugs from the market. The bill would deny 180-day exclusivity to a generic company if it does not aggressively attempt to bring a generic version of the brand name company?s product to market; and;
  • Requiring entities filing citizens petitions to disclose if they are acting on behalf of a brand name drug company to keep a generic off the market. Such petitions can be filed with the U.S. Food and Drug Administration (FDA) by anyone seeking to prevent a drug from being marketed. Brand name drug manufacturers increasingly use these petitions to keep generic competition at bay. Such petitions can delay the introduction of a generic alternative for a long time because the FDA is required by law to consider each one.

The brand name drug companies claim that by eliminating the automatic 30-month stay, this legislation would reduce their incentives to develop new medicines, because they would be denied the ability to defend their intellectual property. This is inaccurate. The GAAP Act is not a threat to drug companies? legitimate patents. By eliminating the automatic 30-month stay, this legislation would make it more difficult for companies to hide behind weak patents. Under this legislation companies would still be able prevent a generic, which is infringing on a well-founded patent, from coming to market. The only difference is that instead of automatically receiving 30 months of protection from competition, under GAAP, brand name companies will have to prove to a judge why a competitor?s generic drug should be kept off the market.

“The passage of this legislation will be a boon for research in the pharmaceutical industry,” said Clemente. “If drug makers know that they will not be able to extend their monopolies with frivolous patents and legal shenanigans they will be forced to invest in real innovation.”

The new legislation comes at an important time. Brand name drug companies often charge U.S. consumers nearly twice as much as they charge consumers in other industrialized nations for the same prescription drugs. In the next five years, prescription drugs with annual sales of approximately $20 billion will be coming off patent. Given that generic drugs cost, on average, less than a fifth of what brand name drugs cost under the Medicaid program, the potential savings to taxpayers, consumers and patients from the timely availability of generic drugs is substantial.

Despite the Hatch-Waxman Act?s loopholes, the legislation has been successful in saving consumers huge amounts of money by increasing their access to generic drugs. The Congressional Budget Office has concluded that Americans saved $8 billion to $10 billion in 1994 alone by purchasing generic drugs. But if the act?s loopholes were closed, consumers would save even more, Clemente said.