of The Federal Trade Commission
Committee on Judiciary
United States Senate
June 17, 2003
Mr. Chairman, I am Timothy J. Muris, Chairman
of the Federal Trade Commission. I am pleased to appear before
the Committee today to testify on behalf of the Commission
regarding competition in the pharmaceutical industry, and,
in particular, findings and recommendations in the July 2002
FTC Study of Generic Drug Entry Prior to Patent Expiration.(1)
Advances in the pharmaceutical industry
continue to bring enormous benefits to Americans. Because
of pharmaceutical innovations, a growing number of medical
conditions often can be treated more effectively with drugs
and drug therapy than with alternative means (e.g.,
surgery). The development of new drugs is risky and costly.
Expenditures on pharmaceutical products continue to grow.
The growth of prescription drug spending at retail outlets
has "exceeded that of other health services by a wide margin,
increasing 17.3 percent in 2000, the sixth consecutive year
of double-digit growth."(2)
Pharmaceutical expenditures are thus a concern not only to
individual consumers, but also to government payers, private
health plans, and employers.
To address the issue of escalating drug
expenditures, and to ensure that the benefits of pharmaceutical
innovation would continue, Congress passed the Hatch-Waxman
or "the Amendments") to the Food, Drug and Cosmetic Act ("FDC
Act").(4) Hatch-Waxman established
a regulatory framework that sought to balance incentives for
continued innovation by research-based pharmaceutical companies
and opportunities for market entry by generic drug manufacturers.(5)
Without question, Hatch-Waxman has increased generic drug
entry. The Congressional Budget Office estimated that, by
purchasing generic equivalents of brand-name drugs, consumers
saved $8-10 billion on retail purchases of prescription drugs
in 1994 alone.(6) With patents
set to expire within the next several years (or those that
have recently expired) on brand-name drugs having combined
U.S. sales of almost $20 billion,(7)
the already substantial savings are likely to increase dramatically.
Yet, in spite of this remarkable record
of success, the Amendments have also been subject to some
abuse. 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.
Responding to these abuses, the Senate last year passed S.
812, the Greater Access to Affordable Pharmaceuticals Act
introduced by Senators McCain and Schumer and S. 754 , the
Drug Competition Act, introduced by Senator Leahy. In addition,
last October, the Food and Drug Administration ("FDA") proposed
rules to limit certain of these abuses,(8)
and just last week the FDA finalized these proposals. This
testimony will describe the Commission's past and present
response to the anticompetitive conduct of some drug manufacturers.
The Commission has pursued numerous antitrust
enforcement actions affecting both brand-name and generic
drug manufacturers.(9) In addition,
the Commission released a study entitled "Generic Drug Entry
Prior to Patent Expiration" ("FTC Study") in July 2002. That
study examines whether the conduct that the FTC has challenged
represented isolated instances or is more typical of business
practices in the pharmaceutical industry and whether certain
provisions of Hatch-Waxman are susceptible to strategies to
delay or deter consumer access to generic alternatives to
brand-name drug products.(10)
The Commission has gained expertise regarding competition
in the pharmaceutical industry through other means as well.
The Commission staff has conducted empirical analyses of competition
in the pharmaceutical industry, including in-depth studies
by the staff of the Bureau of Economics.(11)
The Commission's efforts have included filing comments with
the FDA regarding the competitive aspects of Hatch-Waxman
implementation,(12) as well
as previous testimony before Congress.(13)
Furthermore, individual Commissioners have addressed the subject
of pharmaceutical competition before a variety of audiences,
both to solicit input from affected parties and to promote
discussion about practical solutions.(14)
After reviewing the relevant Hatch-Waxman
provisions, this testimony will address the Commission's vigorous
enforcement of the antitrust laws with respect to branded
and generic drug competition. One type of conduct involves
allegedly anticompetitive settlements between brand-name and
generic companies. Because the Commission became aware of
and challenged such settlements first, this testimony refers
to those matters as "first-generation litigation." Other,
more recent types of conduct, such as allegedly improper Orange
Book listings and potentially anticompetitive settlements
between generic manufacturers themselves, are the subject
of the Commission's "second-generation actions."
Next, the testimony will address the Commission's
industry-wide study of generic drug entry prior to patent
expiration. An understanding of the Commission's cases in
this area will provide the framework for the issues that the
Commission examined in this study. The testimony also provides
a brief overview of how the FDA's new regulations will hep
curb some of the problems identified by the FTC Study.
II. Regulatory Background:
The Hatch-Waxman Drug Approval Process
A. The Hatch-Waxman Balance
One of the stated purposes of Hatch-Waxman
is to "make available more low cost generic drugs."(15)
The concern that the FDA's lengthy drug approval process was
unduly delaying market entry by generic versions of brand-name
prescription drugs motivated Congress's passage of the Amendments.
Because a generic drug manufacturer was required to obtain
FDA approval before selling its product, and could not begin
the approval process until any conflicting patents on the
relevant brand-name product expired, the FDA approval process
essentially functioned to extend the term of the brand-name
manufacturer's patent. To correct this problem, Congress provided
in the Amendments that certain conduct related to obtaining
FDA approval, which would otherwise constitute patent infringement,
would be exempted from the patent laws.
Congress continued to regard patent protection,
however, as critical to pharmaceutical innovation and an important
priority in its own right. Hatch-Waxman thus represented a
compromise: an expedited FDA approval process to speed generic
entry balanced by additional intellectual property protections
to ensure continuing innovation. As one federal appellate
judge explained, the Amendments "emerged from Congress's efforts
to balance two conflicting policy objectives: to induce brand-name
pharmaceutical firms to make the investments necessary to
research and develop new drug products, while simultaneously
enabling competitors to bring cheaper, generic copies of those
drugs to market."(16)
Pursuant to the FDC Act, a brand-name drug
manufacturer seeking to market a new drug product must first
obtain FDA approval by filing a New Drug Application ("NDA").
At the time the NDA is filed, the NDA filer must also provide
the FDA with certain categories of information regarding patents
that cover the drug that is the subject of its NDA.(17)
Upon receipt of the patent information, the FDA is required
to list it in an agency publication entitled "Approved Drug
Products with Therapeutic Equivalence," commonly known as
the "Orange Book."(18)
Rather than requiring a generic manufacturer
to repeat the costly and time-consuming NDA process, the Amendments
permit the company to file an Abbreviated New Drug Application
("ANDA"), which references data that the "pioneer" manufacturer
has already submitted to the FDA regarding the brand-name
drug's safety and efficacy. Under the ANDA process, an applicant
must demonstrate that the generic drug is "bioequivalent"
to the relevant brand-name product.(19)
The ANDA must contain, among other things, a certification
regarding each patent listed in the Orange Book in conjunction
with the relevant NDA.(20)
One form of certification is a "Paragraph IV certification,"
asserting that the patent in question is invalid or not infringed.(21)
Filing a Paragraph IV certification potentially
has significant regulatory implications, as it is a prerequisite
to the operation of two provisions of the statute. The first
of these is the automatic "30-month stay" protection afforded
to patent holders and the NDA filer - most typically, brand-name
companies. An ANDA filer that makes a Paragraph IV certification
must provide notice to both the patent holder and the NDA
filer, including a detailed statement of the factual and legal
basis for the ANDA filer's assertion that the patent is invalid
or not infringed.(22) Once
the ANDA filer has provided such notice, a patent holder wishing
to take advantage of the statutory 30-month stay provision
must bring an infringement suit within 45 days.(23)
If the patent holder does not bring suit within 45 days, the
FDA may approve the ANDA as soon as other regulatory conditions
are fulfilled.(24) If the
patent holder does bring suit, however, the filing of that
suit triggers an automatic 30-month stay of FDA approval of
the ANDA.(25) During this
period, unless the patent litigation is resolved in the generic's
favor, the FDA cannot approve the generic product.
The second significant component of Hatch-Waxman
is the "180-day period of exclusivity." The Amendments provide
that the first generic manufacturer to file an ANDA containing
a Paragraph IV certification is awarded 180 days of marketing
exclusivity, during which the FDA may not approve a subsequent
applicant's ANDA.(26) The
180-day exclusivity period increases the economic incentives
for a generic company to be the first to file an ANDA, because
the generic applicant has the potential to reap the reward
of marketing the only generic product (and, thus, to charge
a higher generic price until more generic products enter).(27)
Through this 180-day provision, the Amendments provide an
increased incentive for companies to challenge patents and
develop alternatives to patented drugs.(28)
The 180-day period is calculated from the date of the first
commercial marketing of the generic drug product or the date
of a court decision declaring the patent invalid or not infringed,
whichever is sooner.(29) Of
course, during the 180 days, the brand-name company is still
marketing its brand-name product. After the 180 days, subject
to regulatory approvals, other generic companies can enter
the market. When additional generic competitors enter the
market, competition drives the price for the generic product
below the price established by the first generic entrant that
was entitled to the 180-day exclusivity.(30)
B. Competitive Implications
The 30-month stay and the 180-day period
of exclusivity were both parts of the Hatch-Waxman balance.
The imposition of a 30-month stay of FDA approval of an eligible
ANDA could forestall generic competition during that period
of time. The 180-day period of exclusivity can, in some circumstances,
limit the number of generic competitors during this 180-day
period. Over the past few years the Commission has observed
through its investigations, law enforcement actions, and industry-wide
study that some brand-name and generic drug manufacturers
may have "gamed" these two provisions, attempting to restrict
competition beyond what the Amendments intended. The next
section of this testimony discusses the Commission's efforts
to investigate vigorously and to prosecute such abuses.
III. Promoting Competition
Through Antitrust Enforcement
A. First-Generation FTC Litigation:
Settlements Between Brand-Name Companies and Generic Applicants
Studies of the pharmaceutical industry indicate
that the first generic competitor typically enters the market
at a significantly lower price than its brand-name counterpart,
and gains substantial share from the brand-name product in
a short period of time.(31)
Subsequent generic entrants may enter at even lower prices
and cause the earlier entrants to reduce their prices. These
are precisely the procompetitive consumer benefits that the
Amendments were meant to facilitate.
This competition substantially erodes the
profits of brand-name pharmaceutical products. Although successful
generic applicants are profitable, their gain is substantially
less than the loss of profits by the brand-name product, because
of the typical difference in prices between brand-name and
generic products. As a result, both parties may have economic
incentives to collude to delay generic entry. By blocking
entry, the brand-name manufacturer may preserve monopoly profits.
A portion of these profits, in turn, can be used to fund payments
to the generic manufacturer to induce it to forgo the profits
it could have realized by selling its product. Furthermore,
by delaying the first generic's entry - and with it, the triggering
of the 180 days of exclusivity - the brand-name and first-filing
generic firms can sometimes forestall the entry of other generic
The Commission has challenged conduct by
firms that allegedly have "gamed" the Hatch-Waxman framework
to deter or delay generic competition. Our "first generation"
of such matters involved agreements through which a brand-name
drug manufacturer allegedly paid a generic drug manufacturer
not to enter and compete. The complaints in these cases also
alleged that the brand-name company used the generic company's
rights to the 180-day exclusivity under Hatch-Waxman to impede
entry by other generic competitors. Two leading cases illustrate
the Commission's efforts in the area: Abbott/Geneva
(32) and Hoechst/Andrx.(33)
The Commission resolved both cases by consent order.(34)
Very recently, the Commission settled another case involving
a drug settlement in which the brand-name company, Bristol-Myers,
allegedly had paid a generic drug manufacturer $72.5 million
to abandon its challenge to a Bristol-Myers patent and to
stay off the market until the patent expired.(35)
B. Second-Generation FTC Actions:
Improper Orange Book Listings
Our "second generation" of enforcement
activities has involved allegations that individual brand-name
manufacturers have delayed generic competition through the
use of improper Orange Book listings(36)
that trigger a Hatch-Waxman provision prohibiting the FDA
from approving a generic applicant for 30 months. Brand-name
drug manufacturers may sometimes act strategically to obtain
more than one 30-month stay of FDA approval of a
particular generic drug. The Commission recently described
the consumer harm that occurs when an invalid patent forms
the basis of such 30-month stays.(37)
1. Clarification of Noerr-Pennington
Doctrine: In re Buspirone
Unlike the settled cases discussed above,
which involved alleged collusion between private parties,
an improper Orange Book listing strategy involves unilateral
abuse of the Hatch-Waxman process itself to restrain trade.
Such conduct has raised Noerr-Pennington antitrust
immunity issues, an area of longstanding Commission interest.
The Noerr doctrine(38)
provides antitrust immunity for parties "petitioning" government.
While the Noerr doctrine is an important limitation
on the antitrust laws that protects the right of parties to
communicate with government entities, some courts have interpreted
the doctrine too broadly in ways that are inconsistent with
Supreme Court precedent and harm consumers.
To address the concern that the Noerr
doctrine was being interpreted too expansively, a Noerr-Pennington
Task Force of Commission staff began work in June 2001. One
of the objectives of the Task Force was to examine certain
aspects of the Noerr doctrine, such as the scope
of "petitioning" conduct and the continuing existence of a
misrepresentation exception to Noerr immunity.
One of the first potential abuses the Task
Force considered was the improper listing of patents in the
FDA's Orange Book. Pursuant to current policy, the FDA does
not review patents presented for listing in the Orange Book
to determine whether they do, in fact, claim the drug product
described in the relevant NDA.(39)
Instead, the FDA takes at face value the declaration of the
NDA filer that the listing is appropriate. As a result, an
NDA filer acting in bad faith can successfully list patents
that do not satisfy the statutory listing criteria. Once listed
in the Orange Book, these patents have the same power to trigger
a 30-month stay of ANDA approval as any other listed patent,
thereby delaying generic entry and potentially costing consumers
millions of dollars without valid cause.
In January of last year, private lawsuits
relating to Bristol-Myers's alleged monopolization through
improper listing of a patent on its brand-name drug BuSpar(40)
presented the Commission with an opportunity to clarify the
Noerr doctrine. Specifically, plaintiffs alleged
that, through fraudulent filings with the FDA, Bristol-Myers
caused that agency to list the patent in question in the Orange
Book, thereby blocking generic competition with its BuSpar
product, in violation of Section 2 of the Sherman Act.(41)
Bristol-Myers responded to these allegations
by filing a motion to dismiss that raised, principally, a
claim of Noerr-Pennington immunity. Given the importance
of the issue to competition in the pharmaceutical industry,
the Commission filed an amicus brief opposing the
motion to dismiss.(42) On
February 14, 2002, the court issued an opinion denying Bristol-Myers's
immunity claim and accepting most of the Commission's reasoning
on the Noerr-Pennington issue.(43)
In light of the Buspirone decision,
the Noerr-Pennington doctrine may not prove as large
an obstacle to using the antitrust laws to remedy improper
Orange Book filings as some may have anticipated. It is worth
noting, and indeed emphasizing, that Buspirone does
not mean that all improper Orange Book filings will give rise
to antitrust liability. Any antitrust liability must be predicated
on a showing of a violation of substantive antitrust law.
Buspirone makes it clear, however, that Orange Book
filings are not immune from those laws or exempt
from their scrutiny.
The Commission's own, more recent, law enforcement
action against Bristol-Myers also raised a significant Noerr-Pennington
issue. Specifically, the case provided an opportunity for
the Commission to emphasize the continuing existence of a
"pattern exception" to Noerr. As the Analysis to
Aid Public Comment that accompanied the proposed consent agreement
explains, "the logic and policy underlying the Supreme Court's
decision in California Motor Transport . . . support
the application of a pattern exception for BMS's alleged pattern
of conduct . . . and thus provide a separate reason to reject
Noerr immunity here."(44)
California Motor Transport(45)
involved allegations that a group of trucking companies had
agreed to routinely oppose every application of additional
motor carrier operating rights filed with state or federal
agencies. After evaluating the competitive implications of
this conduct, the Court concluded that "a pattern of baseless,
repetitive claims . . . effectively barring respondents from
access to the agencies and courts . . . cannot acquire immunity
by seeking refuge under the umbrella of 'political expression.'"(46)
In the Bristol-Myers Analysis, the Commission contends
that this pattern exception to Noerr should not be
limited to repetitive lawsuits, but rather should be applicable
to any predatory, repetitive use of government process. Specifically,
the Analysis states that "[j]ust as the repeated filing of
lawsuits brought without regard to the merits . . . warrants
rejection of Noerr immunity," so too does the repeated
filing of knowing and material misrepresentations with the
PTO and FDA.(47)
2. Enforcement Action Against
Improper Orange Book Listings: Biovail (Tiazac)
and Bristol-Myers Squibb (BuSpar, Taxol, and Platinol)
In October 2002, the Commission issued a
consent order against Biovail Corporation,(48)
settling charges that Biovail illegally acquired an exclusive
patent license and wrongfully listed that patent in the Orange
Book for the purpose of blocking generic competition to its
brand-name drug Tiazac. This was the Commission's first enforcement
action to remedy the effects of an allegedly improper, anticompetitive
Orange Book listing.
Prior to the events giving rise to the Commission's
complaint, Biovail already had triggered a 30-month stay of
FDA final approval of Andrx's generic Tiazac product, by commencing
an infringement lawsuit against Andrx. Andrx prevailed in
the courts, however, so that the stay would have been lifted
by February 2001. According to the Commission's complaint,(49)
Biovail, in anticipation of pending competition from Andrx,
undertook a series of anticompetitive actions to trigger a
new stay and maintain its Tiazac monopoly. Just before the
stay was to terminate, Biovail acquired exclusive rights to
a newly issued patent from a third party and listed that patent
in the Orange Book as claiming Tiazac - thereby requiring
Andrx to re-certify to the FDA and opening the door to Biovail's
suit against Andrx for infringement of the new patent and
commencement of a second 30-month stay.
The Commission's complaint alleged that
Biovail's patent acquisition, wrongful Orange Book listing,
and misleading conduct before the FDA were acts in unlawful
maintenance of its Tiazac monopoly, in violation of Section
5 of the Federal Trade Commission Act(50)
("FTC Act"), and that the acquisition also violated Section
7 of the Clayton Act.(51)
The consent order requires Biovail to divest the exclusive
rights to their original owner with certain exceptions; to
achieve dismissal with prejudice of any and all claims relating
to enforcement of the patent in relation to Tiazac; and to
refrain from any action that would trigger another 30-month
stay on generic Tiazac entry. Further, the order prohibits
Biovail from unlawfully listing patents in the Orange Book
and requires Biovail to give the Commission prior notice of
acquisitions of patents that it will list in the Orange Book
for Biovail's FDA-approved products. These measures should
not only remedy Biovail's allegedly unlawful conduct, but
also send a strong message that the Commission will act decisively
to eliminate anticompetitive practices in the pharmaceutical
In a second, more recent case, the Commission
alleged a decade-long pattern of anticompetitive acts by Bristol-Myers
to obstruct the entry of low-price generic competition for
three of Bristol-Myers' widely-used pharmaceutical products:
two anti-cancer drugs, Taxol and Platinol, and the anti-anxiety
agent BuSpar, as noted earlier. Bristol-Myers allegedly abused
FDAregulations to block generic entry, misled the U.S. Patent
and Trademark Office (PTO) to obtain unwarranted patent protection,
and filed baseless patent infringement lawsuits to deter entry
by generics. According to the FTC's complaint, Bristol-Myers'
illegal conduct protected nearly $2 billion in annual sales
at a high cost to cancer patients and other consumers, who
- being denied access to lower-cost alternatives - were forced
to overpay by hundreds of millions of dollars for important
and often life-saving medications.
The FTC resolved these allegations through
a consent order with Bristol-Myers that contains strong --
and in some respects unprecedented -- relief.(53)
This consent order, among other restrictions, is designed
to eliminate Bristol-Myers' alleged ability to abuse FDA regulations,
and thereby reduce Bristol-Myers' incentive to engage in improper
behavior before the PTO. The order includes a provision that
prohibits Bristol-Myers from triggering a 30-month stay based
on any patent Bristol-Myers lists in the Orange Book after
the filing of an application to market a generic drug, and
limits Bristol-Myers' ability to provide information about
a patent to the FDA that is inconsistent with information
it provided to the PTO.
C. Settlements Between Generic Manufacturers
Although agreements between first and second
generic entrants have attracted significantly less attention
to date, they too can raise competitive concerns and may draw
antitrust scrutiny. As in the case of agreements between brand-name
companies and generic applicants, the economic incentives
to collude can be strong. Studies indicate that the first
generic typically enters the market at 70 to 80 percent of
the price of the corresponding brand(54)
and rapidly secures as much as a two-thirds market share.
The second generic typically enters at an even lower price
and, like the first, rapidly secures market share. Collusion
between the generic firms can thus be a means of preventing
price erosion in the short term, though it may become substantially
less feasible if subsequent ANDAs are approved and additional
competitors enter the market.
In August 2002, the Commission issued a
consent order against two generic drug manufacturers to resolve
charges that they entered into an agreement that unreasonably
reduced competition in the market for a generic anti-hypertension
drug.(55) According to the
Commission's complaint, Biovail Corporation (Biovail) and
Elan Corporation PLC (Elan) agreed not to compete in marketing
30 mg and 60 mg generic Adalat CC products, and that the agreement
lacked any countervailing efficiencies.(56)
The order, which has a ten-year term, remedies
the companies' alleged anticompetitive conduct by requiring
them to terminate the agreement and barring them from engaging
in similar conduct in the future.(57)
The order maintains commercial supply of the incumbent generic
Adalat products while the companies unwind their agreement,
and eliminates the anticompetitive obstacles to entry of a
second 30 mg and a second 60 mg generic Adalat CC product.
Commission's Industry-Wide Generic Drug Competition Study
A. Background and Introduction
In light of the questions its various generic
drug investigations raised, the Commission proposed an industry-wide
study of generic drug competition in October 2000. The FTC
Study focused solely on the procedures used to facilitate
generic drug entry prior to expiration of the patent(s)
that protect the brand-name drug product - that is, generic
entry through the procedures involving Paragraph IV certifications.(58)
The Commission undertook the study for three reasons:
(1) To determine whether alleged anticompetitive
agreements that relied on certain Hatch-Waxman provisions
were isolated instances or more typical, and whether particular
provisions of the Amendments are susceptible to strategies
to delay or deter consumer access to generic alternatives
to brand-name drug products;
(2) To respond to Representative Henry
Waxman's request for the Commission to "investigate and produce
a study on the use of agreements between and among pharmaceutical
companies and potential generic competitors and any other
strategies that may delay generic drug competition throughout
the U.S."; and
(3) To ensure that there are no roadblocks
in the way of generic competition for the substantial sales
volume of brand-name drug products coming off patent in the
next several years.(59) Brand-name
companies seeking to protect the sales of brand-name drugs
may have an incentive and ability to enter into agreements
with would-be generic competitors, or engage in other types
of activities, that would slow or thwart the entry of competing
generic drug products.
In April 2001, the Commission received
clearance from the Office of Management and Budget ("OMB")
to conduct the study.(60)
The Commission issued nearly 80 special orders - pursuant
to Section 6(b) of the FTC Act(61)
- to brand-name companies and to generic drug manufacturers,
seeking information about certain practices that were outlined
in the Federal Register notices that preceded OMB clearance
to pursue the study.(62) The
Commission staff focused the special orders on brand-name
drug products that were the subject of Paragraph IV certifications
filed by generic applicants. Only those NDAs in which a generic
applicant notified a brand-name company with a Paragraph IV
certification after January 1, 1992, and prior to January
1, 2001, were included in the FTC Study. The selection criteria
resulted in 104 drug products, as represented by NDAs filed
with the FDA, within the scope of the study and included so-called
"blockbuster" drugs such as Capoten, Cardizem CD, Cipro, Claritin,
Lupron Depot, Neurontin, Paxil, Pepcid, Pravachol, Prilosec,
Procardia XL, Prozac, Vasotec, Xanax, Zantac, Zocor, Zoloft,
Responses from the 28 brand-name companies
and nearly 50 generic applicants generally were completed
by the end of 2001. The Commission staff compiled the information
received to provide a factual description of how the 180-day
marketing exclusivity and 30-month stay provisions affect
the timing of generic entry prior to patent expiration. The
FTC Study did not provide an antitrust analysis of each of
the types of agreements submitted, nor did it examine other
issues involved in the debate over generic drugs, such as
bioequivalence or the appropriate length of patent restorations
B. Findings: Litigation Frequency
The FTC Study sought to determine the frequency
with which brand-name companies have triggered the 30-month
stay provision by suing generic applicants for patent infringement
within the required 45-day period. For 72 percent of drug
products the study covered, brand-name companies initiated
patent infringement litigation against the first generic applicant.
There was no suit in the other 28 percent, and the FDA has
approved most of the generic products, thus allowing generic
entry to occur. FDA approval of these ANDAs took, on average,
25.5 months from the ANDA filing date.
In 70 percent of the cases (53 of the 75
drug products) in which the brand-name company sued the first
generic applicant, either there has been a court decision
(30 of the 53 drug products) or the parties have agreed to
a final settlement without a court decision on the merits
of the patent infringement lawsuit (20 of the 53 drug products).(63)
In the other 30 percent of the cases (22 of the 75 drug products),
a district court had not yet ruled as of June 1, 2002.
Of all the patent infringement cases (with
the first generic applicant) in which a court had rendered
a decision as of June 1, 2002, generic applicants prevailed
in 73 percent of the cases (22 out of 30) and brand-name companies
prevailed in 27 percent (8 out of 30). Of the decisions favoring
the first or any subsequent generic applicant, there were
slightly more non-infringement decisions (14) than patent
invalidity decisions (11). The U.S. Court of Appeals for the
Federal Circuit overturned district court decisions of patent
invalidity for drug products in this study in only eight percent
In 62 percent of the cases involving litigation
with the first and second generic applicants, brand-name companies
initiated patent litigation in just five federal judicial
districts - the District of New Jersey, the Southern District
of New York, the Southern District of Indiana, the Northern
District of Illinois, and the Southern District of Florida.
C. Findings: Orange Book Patent
The 30-month stay provision of the Amendments
protects brand-name companies beyond their existing intellectual
property rights. It has received increased attention because
it can have a significant impact on market entry by generic
drugs. Since 1998, two new phenomena appear to be emerging
in relation to patent listing practices that affect patent
litigation: (1) an increase in the number of patents listed
in the Orange Book for "blockbuster" drug products; and (2)
the listing of patents after an ANDA has been filed for the
particular drug product.
The Commission found that, for drug products
with substantial annual net sales, brand-name companies are
suing generic applicants over more patents. Since 1998, for
five of the eight "blockbuster" drug products for which the
brand-name company filed suit against the first generic applicant,
the brand-name company alleged infringement of three or more
patents. In comparison, in only one of the nine "blockbuster"
suits filed before 1998 by a brand-name company against the
first generic applicant did the complaint allege infringement
of three or more patents.
In the future, patent infringement litigation
brought by brand-name companies against generic applicants
that have filed ANDAs with Paragraph IV certifications may
take longer to resolve. The data suggest that cases involving
multiple patents take longer than those involving fewer patents.
As of June 1, 2002, for six out of the seven cases that were
pending for more than 30 months before a decision from a district
court, the brand-name company has alleged infringement of
three or more patents.
By the timely listing of additional patents
in the Orange Book after a generic applicant has filed its
ANDA ("later-issued patents"), brand-name companies can obtain
additional 30-month stays of FDA approval of the generic applicant's
ANDA. In eight instances, brand-name companies have listed
later-issued patents in the Orange Book after an ANDA has
been filed for the drug product. For those eight drug products,
the additional delay of FDA approval (beyond the first 30
months) ranged from four to 40 months. In the five cases so
far with a court decision on the validity or infringement
of a later-issued patent, the patent has been found either
invalid or not infringed by the ANDA.(64)
Moreover, several of the later-issued patents
in the Orange Book raise questions about whether the FDA's
patent listing requirements have been met. For example, several
of the later-issued patents do not appear to claim the approved
drug product or an approved use of the drug. The FTC Study
describes three categories of patents that raise significant
listability questions - i.e., issues concerning whether
the listed patents fall within the statutorily defined class.
These categories include: (1) patents that may not be considered
to claim the drug formulation or method of use approved through
the NDA; (2) product-by-process patents that claim a known
drug product produced by a novel process; and (3) patents
that may constitute double-patenting because they claim subject
matter that is obvious in view of the claims of another patent
obtained by the same person.
D. Recommendations: The 30-Month
To reduce the possibility of abuse of the
30-month stay provision, the Commission recommended in its
study that only one 30-month stay be permitted per drug product
per ANDA to resolve infringement disputes over patents listed
in the Orange Book prior to the filing date of the generic
applicant's ANDA. This should eliminate most of the potential
for improper Orange Book listings to generate unwarranted
30-month stays. One 30-month stay period alone has historically
approximated the time necessary for FDA review and approval
of the generic applicant's ANDA(65)
or a district court decision on the patent infringement litigation
that caused the 30-month stay. Moreover, generic applicants
generally have not entered the market until a district court
has held that the brand-name company's patent was invalid
or not infringed.(66) Thus,
it does not appear that, on average, one 30-month stay provision
per drug product per ANDA would have a significant potential
to delay generic entry beyond the time already necessary for
FDA approval of the generic applicant's ANDA or a district
court decision in the relevant litigation.
Limiting brand-name drug companies to one
30-month stay per drug product per ANDA is likely to eliminate
most problems related to potentially improper Orange Book
listings. Nonetheless, the Commission notes that there is
no private right of action to challenge an improper listing,
nor does the FDA review the propriety of patent listings.(67)
The lack of a mechanism to review or delist patents may have
real-world consequences. For example, the Commission is aware
of at least a few instances in which the first 30-month stay
was generated solely by a patent that raised legitimate listability
questions. One proposal to deal with this problem has been
to establish an administrative procedure through which generic
applicants could obtain substantive FDA review of listability.
The FTC Study recommends, at a minimum, that it would be useful
for the FDA to clarify its listing requirements as the Commission
suggests.(68) Another remedy
that may warrant consideration would be to permit a generic
applicant to raise listability issues as a counterclaim in
the context of patent infringement litigation that the brand-name
company already initiated in response to a Paragraph IV notice
from the generic applicant. A challenge limited to a counterclaim
would avoid generating additional litigation.
One minor change to the patent statute,
which would clarify when brand-name companies can sue generic
applicants for patent infringement and allow for the resolution
of patent issues prior to commercial marketing of a generic
drug, would ensure that brand-name companies have recourse
to the courts to protect their intellectual property rights
in later-issued patents. To do this, the FTC Study suggested
that Congress may wish to clarify that Section 271(e)(2) of
the Patent Act permits a brand-name company to sue a generic
applicant for patent infringement regarding patents not listed
in the Orange Book.(69)
E. Findings: Patent Settlements
and the 180-Day Marketing Exclusivity
Certain patent settlement agreements between
brand-name companies and potential generic competitors have
received antitrust scrutiny in recent years because not only
might they affect when the generic applicant may begin commercial
marketing, but they also may affect when the FDA can approve
subsequent generic applicants after the first generic applicant's
180-day exclusivity runs. Parties have debated whether these
settlements increased or harmed consumer welfare. Twenty final(70)
and four interim(71) agreements
that settled litigation between the brand-name company and
the first generic applicant were produced in response to the
FTC's special orders.
The final patent settlements can be classified
into three categories:
(1) Nine of these settlements contained
a provision by which the brand-name company, as one part
of the settlement, paid the generic applicant (settlements
involving "brand payments");
(2) Seven of the 20 settlements involved
the brand-name company licensing the generic applicant to
use the patents for the brand-name drug product prior to
patent expiration; and
(3) Two of the settlements allowed the
generic applicant to market the brand-name drug product
as a generic product, under the brand-name company's NDA
but not under not the generic applicant's own ANDA.(72)
Fourteen of the final settlements with
the first generic applicant had the potential to "park" the
180-day marketing exclusivity for some period of time such
that the first generic applicant would not trigger the exclusivity,
and thus FDA approval of any subsequent eligible generic applicant
would be delayed. (If the 180-day exclusivity for the first
generic applicant does not run, the FDA cannot approve subsequent
eligible generic applicants.) The data from the FTC Study
suggest, however, that the 180-day exclusivity provision by
itself generally has not created a bottleneck to prevent FDA
approval of subsequent eligible generic applicants.
In addition to the final settlements with
the first generic applicant, brand-name companies entered
final patent settlements with the second generic applicant
in seven instances. In six of the seven, the brand-name company
also had settled with the first generic applicant.
F. Recommendations: The 180-Day
To mitigate the possibility of abuse of
the 180-day exclusivity provision, the FTC Study recommended
that Congress pass the Drug Competition Act(73)
to require brand-name companies and first generic applicants
to provide copies of certain agreements to the Federal Trade
Commission and the Department of Justice. The Commission believes
that review of these agreements by these agencies will help
ensure that the 180-day provision is not manipulated in a
way to delay entry of additional generic applicants. Indeed,
the Senate did pass the Drug Competition Act last year and
the Commission urges passage of the Act again this year.
Empirical research demonstrates that as
additional generic competitors enter the market, generic prices
decrease to lower levels, thus benefitting consumers. The
FTC Study makes three minor recommendations to ensure that,
once a subsequent generic applicant is ready to market, the
180-day exclusivity is not a roadblock to that entrant's beginning
commercial marketing. Under the second and third recommendations,
we note that the first generic applicant does not lose the
180-day period, but rather it is triggered by one of two events.
During this 180-day period, the first generic applicant can
then decide whether to enter the market prior to a subsequent
applicant entering after the 180-day period has expired.
Recommendation 1: To clarify that "commercial
marketing" includes the first generic applicant's marketing
of the brand-name product.
The data revealed two instances when the
brand-name company and the first generic applicant settled
the patent infringement lawsuit with a supply agreement. These
agreements contemplated that the brand-name company would
supply the generic applicant with the brand-name drug product,
so that the generic applicant could market the brand-name
product as a generic version, rather than seeking approval
of its ANDA. To avoid the situation in which the running of
the 180 days is not triggered and, thus, forestalling a second
generic from obtaining FDA approval, the Commission recommended
this type of marketing be deemed sufficient to trigger the
180-day exclusivity period.
Recommendation 2: To clarify that the
decision of any court on the same patent being litigated by
the first generic applicant constitutes a "court decision"
sufficient to start the running of the 180-day exclusivity.
There is some question about which
court's decision is sufficient to activate the "court
decision" trigger of the 180-day exclusivity. Two courts of
appeal have held,(74) and
the FDA has issued guidance,(75)
that any court's decision on whether the patent at
issue is invalid or not infringed is sufficient to trigger
the running of the first generic applicant's 180-day exclusivity.
On balance, the Commission believes that
this is the correct result, but there are pros and cons. On
the one hand, the rule would make it less likely that agreements
between brand-name and generic companies that had the effect
of "parking" the 180-day exclusivity for some period of time
could forestall FDA approval of a subsequent eligible generic
applicant. If the brand-name company sues the second (or later)
generic applicant, and that generic applicant won its patent
litigation, then the 180-day exclusivity of the first generic
applicant would begin to run from the date of the later generic
applicant's favorable court decision. Such circumstances may
arise; the data showed that brand-name companies sued later
generic applicants in nearly 85% of the cases. The rule would
be consistent with the mandate in the legislative history
of Hatch-Waxman to "make available more low-cost drugs,"(76)
because the rule would assist in eliminating potential bottlenecks
to FDA approval of subsequent eligible generic applicants.
Such a rule also could speed generic entry
when the second generic applicant's lawsuit is resolved prior
to that of the first applicant. This appears to be appropriate
given the low reversal rate of district court opinions of
patent invalidity and non-infringement. For example, under
this rule, if both the first and second generic applicants
are sued, but the court hearing the second generic applicant's
case is the first to arrive at a decision, then that court's
decision would trigger the running of the first generic applicant's
180-day exclusivity, regardless of whether the first generic
applicant had received FDA approval. The data revealed one
On the other hand, the operation of this
rule could deprive the first generic applicant of its ability
to market under the 180-days exclusivity if the district court
hearing its suit had not yet ruled, even though the first
generic applicant had been diligently pursuing resolution
of its patent litigation. This result could dampen the incentive
to become the first generic applicant.(77)
Moreover, if the later court issues a non-infringement decision,
the reasoning underlying the holding may not apply to the
first generic applicant's ANDA, depending upon the facts of
Recommendation 3: Clarify that
a court decision dismissing a declaratory judgment action
for lack of subject matter jurisdiction constitutes a "court
decision" sufficient to trigger the 180-day exclusivity.
One court of appeals has held that a dismissal
of a declaratory judgment action for lack of a case or controversy
is a "court decision" of non-infringement sufficient to trigger
the 180-day exclusivity.(78)
In the FTC Study, the Commission found the court's reasoning
persuasive, and recommended that Congress adopt such a rule.
The U.S. Court of Appeals for the District
of Columbia confronted a situation in which the brand-name
company did not sue any of the generic applicants for patent
infringement. To trigger the first generic applicant's 180-day
exclusivity (because it had not yet been approved by the FDA),
the second generic applicant sought a declaratory judgment
that its ANDA did not infringe the brand-name product's patents.
The district court hearing the case dismissed the lawsuit
for lack of subject matter jurisdiction, because the brand-name
company indicated that it would not sue the second generic
applicant for patent infringement, thus eliminating its reasonable
apprehension of a patent infringement suit and the existence
of a case or controversy. This dismissal also estopped the
brand-name company from suing the generic applicant in the
The Court of Appeals determined that the
dismissal for lack of case or controversy was, in fact, a
court decision, because the brand-name company indicated that
the second generic applicant's ANDA did not infringe the relevant
patent. As a result, the dismissal activated the court decision
trigger. Such a rule eliminates the potential for a bottleneck
created if a first generic applicant does not exercise its
commercial marketing rights.
G. The FDA's New Rules on the 30-Month
Stay and Orange Book Listings
Last week the FDA published final rules
amending its regulations governing patent listing in the Orange
Book and eligibility for the 30-month stay of ANDA approval.(79)
The FDA had proposed this rule last year, in part, based on
the competitive problems with the current generic drug approval
process the Commission identified in the FTC Study.
The final rule limits brand-name companies
to one 30-month stay per drug product. Although this rule
is not identical to the FTC Study's recommendation, it is
an important reform that would eliminate most of the potential
for unwarranted delay of FDA approval of generic drugs the
FTC Study identified. In particular, the rule, if upheld against
legal challenge, would eliminate seven of the eight instances
the Commission identified in the Study in which brand-name
companies filed patents in the Orange Book after a generic
applicant had filed an ANDA application and, thus, delayed
FDA approval of the ANDA for an additional 30 months. The
final rule does not cover those situations in which the generic
applicant has filed an ANDA with a paragraph III certification
on a particular patent and seeks FDA approval after the expiration
of that patent. If on the eve of that patent's expiration,
the brand-name company files a new patent in the Orange Book,
there is a potential for a 30-month stay to be granted. This
is the situation for the drug product Platinol (the eighth
of the eight drug products the FTC Study identified with multiple
The final rule also tightens up the Orange
Book patent listing requirements. The FTC Study had identified
several types of patents that raise questions about whether
they are properly listed in the Orange Book, and which can
form the basis for a 30-month stay. The final FDA rule prohibits
the listing of two of these types of patents (metabolites
and product-by-process), and requires additional information
from the brand name company if it seeks to list in the Orange
Book the third type of patent (polymorphs) identified by the
Thank you for this opportunity to share
the Commission's views on competition in the pharmaceutical
industry. As you can see, the Commission has been and will
continue to be very active in protecting consumers from anticompetitive
practices that inflate drug prices. The Commission looks forward
to working closely with the Committee, as it has in the past,
to ensure that competition in this critical sector of the
economy remains vigorous. In keeping with this objective,
the Commission will likewise endeavor to ensure that the careful
Hatch-Waxman balance - between promoting innovation and speeding
generic entry - is scrupulously maintained.
1. The written statement
represents the views of the Federal Trade Commission. My oral
presentation and responses are my own and do not necessarily
reflect the views of the Commission or of any other Commissioner.
2. K. Levit, C. Smith,
C. Cowan, H. Lazenby & A. Martin, "Inflation Spurs Health
Spending in 2000," 21:1 Health Affairs 179 (2002),
citing data from the Centers for Medicare and Medicaid Services,
Office of the Actuary, National Health Statistics Group, of
which the authors are members.
3. Drug Price Competition
and Patent Restoration Act of 1984, Pub. L. No. 98-417, 98
Stat. 1585 (1984) (codified as amended 21 U.S.C. § 355 (1994)).
4. 21 U.S.C. § 301 et
5. See infra
note 15 and accompanying text. The Amendments also were intended
to encourage pharmaceutical innovation through patent term
6. Congressional Budget
Office, How Increased Competition from Generic Drugs Has
Affected Prices and Returns in the Pharmaceutical Industry
(July 1998) ("CBO Study"), available at <http://www.cbo.gov/showdoc.cfm?index=655&sequence=0>.
7. Id. at 3.
8. Department of Health
and Human Services, Food and Drug Administration, Applications
for FDA Approval to Market a New Drug; Patent Listing Requirements
and Application of 30-Month Stays on Approval of Abbreviated
New Drug Applications Certifying That a Patent Claiming a
Drug is Invalid or Will Not be Infringed, 67 Fed. Reg. 65,448
(Oct. 24, 2002).
9. See, e.g., Bristol-Myers
Squibb Co., Dkt. No. C-4076 (Apr. 14, 2003) (consent
order); Biovail Corp. and Elan Corp. PLC, Dkt. No.
C-4057 (Aug. 20, 2002) (consent order); Biovail Corp.,
Dkt. No. C-4060 (Oct. 2, 2002) (consent order); Abbott
Laboratories, Dkt. No. C-3945; Geneva Pharmaceuticals,
Inc., Dkt. No. C-3946 (May 22, 2000); Hoechst Marion
Roussel, Inc., Dkt. No. 9293; FTC v. Mylan Laboratories,
Inc. et al., 62 F. Supp. 2d 25 (D.D.C. 1999).
10. Federal Trade Commission,
Generic Drug Entry Prior to Patent Expiration: An FTC
Study (July 2002), available at <http://www.ftc.gov/os/2002/07/genericdrugstudy.pdf>.
11. Bureau of Economics
Staff Report, Federal Trade Commission, The Pharmaceutical
Industry: A Discussion of Competitive and Antitrust Issues
in an Environment of Change (Mar. 1999), available
David Reiffen and Michael R. Ward, Generic Drug Industry
Dynamics, Bureau of Economics Working Paper No. 248 (Feb.
2002) ("Reiffen and Ward"), available at <http://www.ftc.gov/be/econwork.htm>.
12. FDA: Applications
for FDA Approval to Market a New Drug; Patent Listing Requirements
and Application of 30-Month Stays on Approval of Abbreviated
New Drug Applications Certifying That a Patent Claiming a
Drug is Invalid or Will Not be Infringed, Comment of
the Federal Trade Commission (Dec. 23, 2002) ("30-Month Stay
Comment"), available at <http://www.ftc.gov/be/v030002.pdf>
(recommending modifications to FDA proposed rule on patent
listing requirements and providing suggestions to the proposed
patent declaration); FDA: Citizen Petition, Comment
of the Staff of the Bureau of Competition and of the Office
of Policy Planning of the Federal Trade Commission Before
the Food and Drug Administration (Mar. 2, 2000), available
(recommending modifications to the FDA's Proposed Rule on
citizen petitions intended to discourage anticompetitive abuses
of the FDA's regulatory processes); FDA: 180-Day Marketing
Exclusivity for Generic Drugs, Comment of the Staff of
the Bureau of Competition and of the Office of Policy Planning
of the Federal Trade Commission Before the Food and Drug Administration
(Nov. 4, 1999) ("Marketing Exclusivity Comment"), available
(recommending that the FDA's Proposed Rule on 180-day marketing
exclusivity be modified to limit exclusivity to the first
ANDA filer and to require filing of patent litigation settlement
13. Testimony of the
Federal Trade Commission before the Committee on Energy and
Commerce, Subcommittee on Health, United States House of Representatives,
Study of Generic Drug Entry Prior to Patent Expiration
(Oct. 9, 2002), available at <http://www.ftc.gov/os/2002/10/generictestimony021009.pdf>;
Testimony of the Federal Trade Commission before the Committee
on Commerce, Science, and Transportation, United States Senate,
Competition in the Pharmaceutical Industry (Apr.
23, 2002), available at <http://www.ftc.gov/os/2002/04/pharmtestimony.htm>.
Testimony of the Federal Trade Commission before the Committee
on the Judiciary, United States Senate, Competition in
the Pharmaceutical Marketplace: Antitrust Implications of
Patent Settlements (May 24, 2001), available at
14. See, e.g.,
Sheila F. Anthony, Riddles and Lessons from the Prescription
Drug Wars: Antitrust Implications of Certain Types of Agreements
Involving Intellectual Property (June 1, 2000), available
Thomas B. Leary, Antitrust Issues in Settlement of Pharmaceutical
Patent Disputes (Nov. 3, 2000), available at
Thomas B. Leary, Antitrust Issues in the Settlement of
Pharmaceutical Patent Disputes, Part II ("Part II")
(May 17, 2001), available at <http://www.ftc.gov/speeches/leary/learypharmaceuticalsettlement.htm>;
Timothy J. Muris, Competition and Intellectual Property
Policy: The Way Ahead, at 5-6 (Nov. 15, 2001), available
15. H.R. Rep. No. 98-857,
pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N.
16. Abbott Labs.
v. Young, 920 F.2d 984, 991 (D.C. Cir. 1990) (Edwards,
J., dissenting) (citations omitted). See also Warner-Lambert
v. Apotex, 316 F.3d 1348, 1358 (Fed. Cir. 2003).
17. 21 U.S.C. § 355(b)(1).
18. Id. § 355(j)(7)(A).
19. Id. § 355(j)(2)(A)(iv).
20. Id. §
21. 21 Id.
22. Id. §
355(j)(2)(B). Although the patent holder and the NDA filer
are often the same person, this is not always the case. Hatch-Waxman
requires that all patents that claim the drug described in
an NDA be listed in the Orange Book. Occasionally, this requires
an NDA filer to list a patent that it does not own.
23. Id. §
24. Id. For
example, the statute requires the ANDA applicant to establish
bioequivalence. Id. § 355(j)(2)(A)(iv).
25. Id. §
26. Id. §
27. There has been
litigation over what acts trigger the 180-day period of exclusivity.
Study, supra note 10. This study is discussed
in detail below.
28. See Granutec,
Inc. v. Shalala, 139 F.3d 889, 891 (4th Cir. 1998).
29. 21 U.S.C.§ 355(j)(5)(B)(iv).
30. See Reiffen
and Ward, supra note 11.
31. See CBO
Study, supra note 6; see generally Reiffen
and Ward, supra note 11.
32. Abbott Laboratories,
Dkt. No. C-3945 (May 22, 2000) (consent order), complaint
available at <http://www.ftc.gov/os/2000/05/c3945complaint.htm>;
Geneva Pharmaceuticals, Inc., Dkt. No. C-3946 (May
22, 2000) (consent order), complaint available at
33. Hoechst Marion
Roussel, Inc., Dkt. No. 9293 (May 8, 2001) (consent order),
complaint available at <http://www.ftc.gov/os/2000/03/hoechstandrxcomplaint.htm>.
34. The consent order
in Abbott Laboratories is available at <http://www.ftc.gov/os/2000/03/abbot.do.htm>.
The consent order in Geneva Pharmaceuticals is available
The consent order in Hoechst/Andrx is available at
In another matter, Schering-Plough,
the Commission resolved all claims against one of three respondents,
American Home Products ("AHP"), by issuing a final consent
order. Schering-Plough Corp., Dkt. No. 9297 (consent
order as to AHP issued Apr. 2, 2002), available at <http://www.ftc.gov/os/2002/02/ahpdo.pdf>.
The case against the other two respondents is on appeal before
the Commission. See Schering-Plough Corp., Dkt.
No. 9297 (July 2, 2002) (initial decision)(appeal pending),
available at <http://www.ftc.gov/os/2002/07/scheringinitialdecisionp1.pdf>.
Squibb Company, Dkt. No. C-4076, available at
36. The Commission
first raised concerns about the potential anticompetitive
impact of improper Orange Book listings in American Bioscience,
Inc. v. Bristol-Myers Squibb Co., et al., Dkt. No. CV-00-08577
(C.D. Cal. Sept. 7, 2000). See Federal Trade Commission
Brief as amicus curiae, available at <http://www.ftc.gov/os/2000/09/amicusbrief.pdf>.
In that case, the parties sought court approval of a settlement
containing a specific factual finding that Bristol-Myers was
required to list American Bioscience's patent of Bristol-Myers's
branded drug Taxol in the Orange Book. The Commission was
concerned that the court's approval of the settlement would
amount to a judicial finding that the patent met the statutory
requirements for listing in the Orange Book and would prejudice
parties who might later challenge the listing.
37. See Memorandum
of Law of Federal Trade Commission As Amicus Curiae
Concerning Torpharm's Cross Motion for Entry, SmithKline
Beecham Corporation et al. v. Apotex Corporation, Apotex,
Inc. and Torpharm, Inc., and Other Related Cases (E.D.
PA, Jan. 28, 2003), available at <http://www.ftc.gov/ogc/briefs/smithklineamicus.pdf>.
38. 38 The
Noerr doctrine was first articulated as an interpretation
of the Sherman Act in Eastern R.R. Presidents Conf. v.
Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United
Mine Workers of America v. Pennington, 381 U.S. 657 (1965).
39. 39 See
21 C.F.R. § 314.53(f); see also Abbreviated New Drug
Application Regulations - Patent and Exclusivity Provisions,
59 Fed. Reg. 50338, 50343 (1994) ("FDA does not have the expertise
to review patent information. The agency believes that its
resources would be better utilized in reviewing applications
rather than reviewing patent claims."); Abbreviated New Drug
Application Regulations, 54 Fed. Reg. 28872, 28910 (1989)
("In deciding whether a claim of patent infringement could
reasonably be asserted . . . the agency will defer to the
information submitted by the NDA applicant.").
40. In re Buspirone
Patent Litigation/In re Buspirone Antitrust Litigation,
185 F. Supp. 2d 363 (S.D.N.Y. 2002) ("In re Buspirone").
Some of the same plaintiffs previously had brought suit under
the FDC Act, requesting that the court issue an order compelling
Bristol-Myers to de-list the objectionable patent. Although
plaintiffs prevailed at the district court level, the Federal
Circuit reversed that decision, holding that the FDC Act did
not provide a private right of action to compel de-listing
of a patent from the Orange Book. See Mylan Pharmaceuticals,
Inc. v. Thompson, 268 F.3d 1323, 1331-32 (Fed. Cir. 2001).
Although free to do so, Bristol-Myers chose not to re-list
the patent after the Federal Circuit decision.
41. 41 15
U.S.C. § 2.
42. 42 Memorandum
of Law of Amicus Curiae Federal Trade Commission
in Opposition to Defendant's Motion to Dismiss, available
(The Commission argued that Orange Book filings are not "petitioning
activity" immune from antitrust scrutiny.)
43. 43 In
re Buspirone, 185 F.Supp.2d at 367-77.
Squibb Co., File Nos. 001-0221, 011-0046, 021-0181 at
11 (Mar. 7, 2003) (Analysis to Aid Public Comment) available
Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508
46. Id. at
513. See also Primetime 24 Joint Venture v. National Broadcasting
Co., 219 F.3d 92, 101 (2d Cir. 2000) (district court
should not have dismissed on Noerr grounds plaintiff's
allegations that defendants violated Section 1 of the Sherman
Act by filing repeated, baseless signal strength challenges
under the Satellite Home Viewer Act); USS-POSCO Indus.
v. Contra Costa County Bldg. & Constr. Trades Council,
31 F.3d 800, 811 (9th Cir. 1994) ("When dealing with a series
of lawsuits, the question is not whether any one of them has
merit - some may turn out to, just as a matter of chance -
but whether they are brought pursuant to a policy of starting
legal proceedings without regard to the merits and for the
purpose of injuring a market rival.").
Analysis to Aid Public Comment, supra note 44, at
48. Biovail Corp.,
Dkt. No. C-4060.
49. The Commission's
complaint against Biovail is available at <http://www.ftc.gov/os/2002/04/biovailcomplaint.htm>.
50. 15 U.S.C. § 45.
51. Id. §
52. The Commission
also recently described the competitive harm of having invalid
patents listed in the FDA's Orange Book in a case involving
the drug product Paxil. See Memorandum of Law of
Federal Trade Commission As Amicus Curiae Concerning
Torpharm's Cross Motion for Entry, SmithKline Beecham
Corporation et al. v. Apotex Corporation, Apotex, Inc. and
Torpharm, Inc., and Other Related Cases, supra note
Squibb Company, Dkt. No. C-4076 (Apr. 14, 2003).
54. See CBO
Study, supra note 6; Reiffen and Ward, supra
note 11, at 22.
55. Biovail Corp.
and Elan Corp. PLC, Dkt. No. C-4057 (Aug. 15, 2003).
56. The Commission's
complaint against Biovail and Elan is available at <http://www.ftc.gov/os/2002/08/biovalcmp.pdf>.
57. The consent order
in the Biovail/Elan matter is available at <http://www.ftc.gov/os/2002/08/biovaldo.pdf>.
58. The FTC Study does
not address other procedures for generic entry.
59. 59 National
Institute for Health Care Management, Prescription Drugs
and Intellectual Property Protection at 3 (Aug. 2000),
available at <http:\\www.nichm.org/prescription.pdf>.
60. The Commission
was required to obtain OMB clearance before it could begin
the study because the number of special orders to be sent
triggered the requirements of the Paperwork Reduction Act
of 1995, 44 U.S.C. Ch. 35, as amended.
61. 15 U.S.C. § 46(b).
62. See 65
Fed. Reg. 61334 (Oct. 17, 2000); 66 Fed. Reg. 12512 (Feb.
63. There were three
additional suits that had other resolutions: either the patent
expired before completion of the litigation or the brand-name
company withdrew the product prior to completion of the litigation.
64. This number includes
one drug product (Paxil) for which the generic applicant has
challenged multiple patents. The district courts hearing the
patent infringement suits have ruled so far that many of the
relevant claims of three patents are invalid and that one
patent is not infringed by the generic applicant's ANDA. There
has not yet been a ruling on the other patents and ANDA applicants
involved in the case.
65. FDA approval of
ANDAs submitted by first generic applicants who were not sued
by the brand-name company took, on average, 25.5 months from
the ANDA filing date.
66. The only instances
in which a generic applicant has entered the market prior
to a district court resolving the patent infringement litigation
has been when the litigation involved a patent that was listed
in the Orange Book after the generic applicant had
filed its ANDA.
67. See supra
note 39 and accompanying text. Although the FDC Act does
not create a private right of action that would permit a generic
drug manufacturer to bring a suit to de-list a patent in the
first instance, or to seek de-listing via a counterclaim,
the Federal Circuit has held that a district court may order
de-listing as a remedy when, in the course of patent infringement
litigation, a listed patent is held to be invalid or unenforceable.
Abbott Laboratories v. Novopharm Ltd., 104 F.3d 1305,
1309 (Fed. Cir. 1997); Mylan Pharmaceuticals, Inc. v.
Thompson, 268 F.3d 1323, 1333 (Fed. Cir. 2001). See
also Memorandum of Law of Federal Trade Commission as
Amicus Curiae Concerning Torpharm's Cross Motion for
Entry of an Amended Order, supra note 37.
68. Last week, the
FDA issued a final rule amending its regulations governing
the availability of, and triggers for, the 30-month stay provisions
and to clarify its patent listing requirements. See supra
note 8. This rule is discussed in Section G infra.
69. The Federal Circuit's
recent decision in Allergan may implicate whether
a patentee can sue under Section 271(e)(2) of the Patent Act
for patents covering unapproved uses of the drug. See
Allergan, Inc. v. Alcon Labs, Docket No. 02-1449 (Fed.
Cir. Mar. 28, 2003). We recommended that the analysis of whether
an infringement suit is appropriate is distinct from the analysis
of whether a patent is appropriately listed in the Orange
Book and, therefore, a potential basis for a 30-month stay.
70. One of these agreements
is subject to litigation currently pending at the FTC. See
Schering-Plough Corp., Dkt. No. 9297 (complaint issued
Mar. 30 2001).
71. For three out of
the four interim agreements, see Abbott Laboratories,
Dkt. No. C-3945 (May 22, 2000) (consent order) (relating to
two drug products, Hytrin tablets and Hytrin capsules); Geneva
Pharmaceuticals, Inc., Dkt. No. C-3946 (May 22, 2000)
(consent order); and Hoechst Marion Roussel, Inc.,
Dkt. No. 9293 (May 8, 2001) (consent order), all supra
72. The remaining two
settlements do not fit into any of these three categories.
73. S. 754, 107th Cong.
(2001) (introduced by Sen. Leahy).
74. See Teva Pharmaceuticals,
USA, Inc. v. FDA, 182 F.3d 1003 (D. C. Cir 1999); Granutec,
Inc. v. Shalala, 139 F.3d 889 (4th Cir. 1998).
75. See FDA
Guidance for Industry: 180-Day Exclusivity Under the Hatch-Waxman
Amendments to the Federal Food, Drug and Cosmetic Act (Jun.
1998). See also Teva Pharmaceuticals, USA, Inv.
v. FDA, 182 F.3d 1003, 1005 (D.C. Cir. 1999).
76. H.R. Rep. No. 98-857,
pt. 1, 98th Cong., 2d Sess., at 14 (1984), reprinted
in 1984 U.S.C.C.A.N. 2647, 2647.
77. By contrast, the
absence of such a rule also could dampen the incentive for
later generic applicants to develop eligible ANDAs containing
paragraph IV certifications.
78. Teva Pharmaceuticals,
USA, Inc. v. FDA, 182 F.3d 1003 (D. C. Cir 1999).
79. Department of Health
and Human Services, Food and Drug Administration, Applications
for FDA Approval to Market a New Drug; Patent Listing Requirements
and Application of 30-Month Stays on Approval of Abbreviated
New Drug Applications Certifying That a Patent Claiming a
Drug is Invalid or Will Not be Infringed, Final Rule (June