Promoting generic drug availability: Reforming the Hatch-Waxman Act to prevent unnecessary delays to consumers

St. John's Law Review, Spring 2001 by Giles, Laura

INTRODUCTION

The cost of prescription drugs has skyrocketed in the past decade.1 The increase is partially attributed to the costs associated with the extensive research a drug must undergo before it can be made available to consumers.2 As a result of these price increases, many consumers can no longer afford vital prescription drugs.3 Furthermore, generic drugs, which are less expensive than their brand name counterparts, are taking a longer time to become available and are facing dramatic price increases.4 Is there any way that a drug company can perform its research while keeping market prices lower? Perhaps.

The purpose of this Note is to explore some of the obstacles that pioneer pharmaceutical companies create to prevent generic pharmaceuticals from getting to the market. The pharmaceutical companies' tactics include patent infringement suits and secondary patents, pioneer acquisition of generic drug companies, and collusion between pioneer companies and generic companies to keep generic drugs off the market. This Note will examine the drug approval process for both pioneer and generic pharmaceuticals, with a particular focus on the Hatch-Waxman Act5 (the "Act"). Finally, it will examine possible reforms in the pharmaceutical industry that may prevent companies from engaging in these tactics.

I. DRUG APPROVAL PROCESS

A. Pioneer Approval Process

The approval process for a new drug is extremely time consuming.6 No new drug may enter the U.S. market without approval from the Food and Drug Administration (FDA) as to its safety and efficacy.7 The process begins after a drug manufacturer has completed an initial laboratory research program that can take thirty to fifty-seven months to complete.8 If the pioneer company believes that the pre-clinical testing shows that the drug may help to treat a certain condition, it may "sponsor" the drug and file a Notice of Claimed Investigational Exemption for a New Drug (IND) with the FDA.9 If there is no objection from the FDA, the drug is labeled "investigational new drug" and clinical trials may commence thirty days after filing.10

The approval process has four phases.11 Three of these phases are completed during the clinical testing period. The three phases of clinical testing can often take up to nine years.12 Once these three phases have been completed the pioneer company or "sponsor" submits a New Drug Application (NDA).13 "The NDA has become the principal regulatory device for controlling pharmaceutical companies in the United States."14 The NDA requires that the sponsor provide extensive documents demonstrating the safety and efficacy of the drug.15 The FDA thoroughly reviews these documents for "clinical, chemical, statistical, and pharmacological" evidence that the drug is effective and safe.16 A "full review can take years."17

Once the drug receives approval from the FDA, the pioneer company may market it in the United States.18 At this point, the pioneer company has expended a great deal of money on research in an effort to get this new drug approved for marketing. 19 The pioneer company, however, will quickly regain their investment through their exclusive sale of the drug.20 The pioneer company will seek to retain exclusive control over the drug for as long as possible in order to maximize profits. To maintain exclusive control, the pioneer company uses several tactics to extend or manipulate the period of exclusivity it has been given.21 To understand the period of exclusivity the pioneer company obtains, it is necessary to examine the patent of a pioneer pharmaceutical.

In general, a federal patent grants the patent holder the right to exclude others from using a patented invention for a twenty-year term from the date of filing.22 "For products requiring government regulatory approval prior to marketing, such as drugs and medical devices, the length of the term often is altered."23 If the term were not altered, the patent would have substantially less value because the patent holder cannot sell its product during this approval period. This loss of patent protection as a result of regulatory delay is referred to as "front end distortion."24 One of the purposes of the Hatch-Waxman Act was to remedy such distortions.25 To reduce front-end distortion, the Act extended patent terms for products that are subject to regulatory delays for up to five years.26

B. Generic Approval Process

A generic drug is a copy of a name brand drug whose patent or period of exclusivity has expired.27 It typically costs much less than the brand name version.28 The generic drug approval process varies greatly from that of new pioneer drugs. The Hatch-Waxman Act29 is the leading legislation governing the generic drug approval process.30 The Act serves two purposes: (1) to "reduce health care costs by making generic drugs available more rapidly," and (2) to "foster new innovations in drug treatment by granting back patent protection for time lost during the process of drug approval by the Food and Drug Administration (FDA)."31 In addition, the Act also had the effect of increasing competition.32