Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
July 01, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3216 words
HEADLINE:
TESTIMONY July 01, 1999 ANDREW M. BERDON VICE PRESIDENT AND GENERAL COUNSEL
FAULDING INC. AND PUREPAC PHARMACEUTICAL COMPANY HOUSE
JUDICIARY COURTS AND INTELLECTUAL PROPERTY PATENT REVIEW
BODY:
TESTIMONY OF THE COALITION FOR AFFORDABLE
PHARMACEUTICALS REGARDING H.R. 1598, "THE PATENT FAIRNESS ACT OF 1999" Before
The House Subcommittee On Courts And Intellectual Property Committee on
Judiciary July 1, 1999 Mr. Chairman, members of the Subcommittee, my name is
Andrew M. Berdon, and I am the Vice President and General Counsel of Faulding
Inc. and Purepac Pharmaceutical Company. Faulding has approximately 450
employees and operates facilities in New Jersey, Tennessee, North Carolina, and
Puerto Rico dedicated to the manufacture, marketing, and distribution of
prescription generic pharmaceutical products. Through your invitation today, I
appear on behalf of "CAP," the Coalition for Affordable Pharmaceuticals. The
Generic Pharmaceutical Industry Association (GPIA), the National Association of
Pharmaceutical Manufacturers (NAPM), and the National Pharmaceutical Alliance
(NPA) formed CAP to increase consumer access to high-quality generic
pharmaceuticals. GPIA, NAPM, and NPA are national, not-for-profit trade
associations representing manufacturers and distributors of finished, multi-
source generic pharmaceuticals, manufacturers and distributors of bulk active
pharmaceutical chemicals, and suppliers of other goods and services to the
generic drug industry. Our combined membership encompasses virtually the entire
U.S. generic pharmaceutical industry. My company is a member of NAPM and NPA.
CAP appreciates the opportunity to present this testimony to the House
Subcommittee on Courts and Intellectual Property of the Committee on Judiciary
regarding H.R. 1598, the "Patent Fairness Act of 1999." We believe it is ironic
that as this Congress debates ways to reduce the high cost of prescription
medications to the elderly and Medicare Reform, we are here today to discuss
H.R. 1598, which would grant patent extensions of up to three
years to eight brand name drug products(1) and numerous others which have not
been identified but are expected to come off patent this year and next year.
H.R. 1598 denies the American consumer the choice of selecting a more affordable
generic version of these brand products. It not only costs the consumer,
particularly the elderly, billions of dollars, but also has a tremendous fiscal
impact on government programs offering a drug benefit, such as Medicaid and
programs offered by the Veterans Administration and the Department of Defense.
This being said, by this testimony, CAP will demonstrate that H.R. 1598 would,
in fact: increase the cost of prescription medicines by foreclosing generic
competition; undo the delicate, agreed-to compromise and policy decision
essential for the passage and success of the Waxman-Hatch Act of 1984; establish
a process which, contrary to its billing, is neither "independent" nor a true
"process" but instead dictates the outcome and fails even to require an
examination of the factors presumably at issue; provide no meaningful role for
the agency with the most intimate knowledge surrounding the scientific issues
and regulatory process; and place the burden of proof with the party that has
access to the least amount of relevant information, instead of the brand name
company asserting the "injustice." In short, CAP strongly opposes H.R. 1598.
This would not be a constructive way to reopen a successful law that put public
health concerns, and not company pocketbooks, first. In 1984, the U.S. Congress
fairly balanced all the interests of the pharmaceutical industry and consumers
by passing the Drug Price Competition and Patent Term Restoration Act of 1984
(Waxman- Hatch Act). This law created a framework for patent term extensions and
non-patent exclusivity periods for brand name drug products and a system for
speeding the Food and Drug Administration (FDA) approval of generic drug
products. As a result of the Waxman-Hatch Act, generic competition entered the
marketplace, which in turn served to motivate the brand name industry to
innovate the next generation of life-saving drugs. Since 1984 brand name drug
companies' profits and research and development expenditures have grown
exponentially. The generic drug industry has enabled American consumers and
taxpayers to save billions of dollars in the purchase of medicines, while
creating new jobs and investment opportunities in every region of the country.
During the negotiations that led to the Waxman-Hatch Act, it was agreed by all
parties, including the brand name industry, that brand name drug companies would
receive up to a two-year patent term restoration for so-called "pipeline drugs"
(a drug for which a patent had been issued and an investigational new drug
application (IND) or a new drug application (NDA) was pending at FDA before the
enactment date of the Waxman-Hatch Act (September 24, 1984)), instead of up to a
five-year patent term restoration granted for later developed products. Patent
term extensions were more generous for future development rather than for
pipeline drugs because a purpose of the Waxman-Hatch Act was to encourage future
investment. Representative Henry Waxman, the co-author of this Act, recently
stated on the House floor that the difference in the times of patent term
restoration were far from arbitrary. He stated "the pipeline drugs were not made
eligible for 5 years of patent extension precisely because the
point of the patent extensions was to encourage the research
and development of future products."(2) This explicitly demonstrates that the
decision to grant a two-year extension to the pipeline drugs was a carefully
considered policy decision to create a process which has proven successful in
assuring high-quality research and development in conjunction with providing
access to affordable pharmaceuticals in a competitive marketplace. With H.R.
1598, certain brand name companies, led by Schering-Plough Corporation, are
selectively attempting to undo the policy decision struck in 1984 -- the policy
that all sides agreed to -- in order to extend their monopoly periods at the
expense of competition, consumer savings, and healthcare costs without a
corresponding benefit to the consumer. These "pipeline drugs" are not new and
innovative drug products, but rather drugs that were already on the market and
under review by the FDA at the time of the Waxman-Hatch negotiation. H.R. 1598
purports to put eight pipeline drugs on an equal footing with later developed
drugs products, a result that was clearly not Congress' intent. Specifically,
H.R. 1598 would permit the holder of a patent that was in force as of 1984 and
remains in force today the opportunity to seek additional patent life by filing
an application with the PTO. A product meeting these criteria and whose NDA was
under review by FDA for at least 60 months would automatically have its patent
term restored for three years, minus any period in which the applicant did not
act with due diligence. The company applying for the restoration would not have
to prove their due diligence; in fact, there is a presumption of due diligence
that would only be overcome by "substantial evidence." Presumably the
"substantial evidence" would be provided by an aggrieved party, though an
aggrieved party would not have access to FDA records or, more importantly, to
the company's records, therefore, making the presumption very unlikely to be
overcome. This is not the sort of "process" most people would label as "fair."
In fact, the bill grants a de facto extension, which brings this debate right
back to where we began -- a process was established under the Waxman-Hatch Act
in 1984, preempting the need for creating a pseudo-process in 1999. H.R. 1598
would place the responsibility for extending patent terms for the pipeline drugs
with the Patent and Trademark Office (PTO), subject to judicial review. PTO
lacks the expertise to evaluate FDA and company records fully to determine if
there was due diligence on the part of the company, though under the bill this
point is somewhat moot -- PTO review of FDA records is not even required, and
company records are not available for scrutiny by PTO or anyone else. Again CAP
would like to point out that this renegotiation of Waxman-Hatch undermines the
public good for the benefit of a few large corporations and is far from the
dictionary's definition of "fair," which is "just to all parties." While
judicial review of PTO's decision appears to offer a modicum of fairness, as
H.R. 1598 is currently written there would, in fact, be quite little to review
beyond PTO's ability to count days. PTO's role is almost totally ministerial
because the primary requirement for the patent extension is
that the application was pending at FDA longer than 60 months. The PTO's only
discretionary decision concerns whether the drug applicant acted with due
diligence in pursuing FDA approval. As noted earlier, the bill creates a
presumption of due diligence. The bill gives PTO the authority to review FDA's
files, but such a review is not required, nor is FDA consultation required. The
bill does not address access to the company's documents, which would be
instrumental in attempting to establish substantial evidence of a lack of due
diligence. The bill also does not address instances in which FDA should move
deliberately and with caution, based on sound scientific and medical judgment --
such as when carcinogenicity concerns arise, as they did with Claritin.
Therefore, there would be little in the record for a court to review other than
the application's date of filing at FDA and the FDA date of approval -- so
judicial review would provide no relief from this "process" that requires no
actual showing of fact. H.R. 1598 would also allow for an "interim restoration"
period if the patent that is the subject of an application under this bill
expires before the PTO has made a final determination on the application. This
provision would extend the otherwise expired patent until the PTO made a
decision on whether to grant the three years of restoration. Although the focus
of the bill is on eight brand name drug products, the criteria for submission of
an extension application are so broad that brand name drug companies might be
able to assert that other drugs whose patents are due to expire also qualify
under H.R. 1598. In essence, a company could file an application under this bill
for a drug whose patent was in force on September 24, 1984, and which was about
to expire, and secure a 60-day patent extension regardless of
whether the drug otherwise meets the "standards" set forth in the bill.
Therefore, depending on when this bill is enacted, a variety of companies could
file frivolous restoration applications with the PTO within the 90-day time
frame and receive a 60-day extension regardless of whether they meet the
qualifications. Keep in mind the applicant can appeal the denial and, while the
court is reviewing the case, the applicant may apply for an order directing PTO
to extend the interim restoration pending judicial review. There is no
limitation to the interim restoration pending judicial review and subsequent PTO
action following that review. Such a provision serves no discernible purpose
other than to give a potential windfall to companies that cannot be identified
at this time. Certainly the 1984 Congress could not have intended this result,
and CAP hopes the 1999 Congress will quickly recognize the ludicrous nature of
this provision. The bill would provide compensation to an ANDA applicant with an
application pending at FDA for one of the pipeline drugs at the time of
enactment. Such an applicant would be entitled to compensation of $1 million
from the patent owner. A holder of a Type II DMF that has permitted a reference
to its DMF in such an application would be entitled to compensation of $500,000
from the patent owner. The patent owner's liability would be capped at $5
million to drug applicants and $2,500,000 to DMF holders. This provision is yet
another thinly veiled attempt at an appearance of "fairness," but in reality
there is nothing fair about this provision to the ANDA applicant, the DMF
holder, and the consumer. The generic industry is committed to bringing quality
generic medicines to the public, not receiving renumeration for unexpected
delays. The extra costs to consumers and taxpayers from this legislation would
be enormous. A Congressional Budget Office (CBO) study found that, in the first
full year of generic competition, generics account for an average of 44% of
prescriptions dispensed through pharmacies.(3) The CBO study also found that,
with one to ten generic manufacturers in the marketplace, the average generic
retail price is 61% of the brand name price; the average generic retail price is
even lower with more competing generic manufacturers.(4) If we assume that
generic versions of Claritin would capture 44% of the Claritin market at an
average of 61% of the price of Claritin, generic competition for Claritin would
save U.S. consumers $300 million each year. For all eight pipeline drugs, the
annual savings to U.S. consumers would be $450 million. If this legislation is
allowed to pass, these savings would be lost for each of three years. While the
national association representing the interests of brand name pharmaceutical
firms, PhRMA, has not, to our knowledge, supported or taken any position on this
special interest legislation, Schering has been most vigorous in promoting H.R.
1598 because it would reap a huge unanticipated windfall by the patent
extensions for its blockbuster drug, Claritin, and its cancer drug,
Eulexin. This is not their first money grab. Schering has pressed Congress on
this issue on multiple occasions. Schering lobbied tenaciously to add this
monopoly extension to last year's Omnibus Appropriations Act for fiscal year
1999, an effort that continued until the bitter end despite news reports
exposing the provision as another infamous "special interest" rider. Schering
had already attempted to add this extension onto the Omnibus Patent Act of 1997.
And, at the end of the 1997 session, there was an effort to award additional
market exclusivity for specific products in exchange for a 3% royalty payment to
the National Institutes of Health, with no prohibition against the companies
passing on this royalty payment to consumers. These mostly behind-the-scenes,
secret efforts to secure longer monopoly times were rightly denied by the
Congress, but Schering has clearly not given up -- even though it received a
two-year Waxman-Hatch extension and a 22.5-month extension under the General
Agreement on Trade and Tariffs (GATT). These extensions were "unanticipated" by
Schering when it first began development of Claritin. Schering argues that this
legislation is fair because of unanticipated delays in FDA's review of Claritin.
If this is the argument, wouldn't it also be fair to reduce any new extension by
the lengths of the unanticipated extensions it has already secured? Schering has
also failed to adequately address openly the reasons why Claritin's review was
delayed. Schering instead has blamed FDA and the reviewers for moving too
slowly. While we have no access to internal company documents nor to FDA review
documents, trade press articles discussed two reasons for the length of the
review time. After Claritin received an FDA advisory committee recommendation
for approval on October 23, 1987, Schering decided to market Claritin in a
tablet form as opposed to the capsule form used in its clinical trials. This
change -- which was purely a marketing decision made by Schering -- raised
bioequivalency questions that had to be addressed by FDA. Schering cannot
possibly claim that it was unaware such questions would be raised by their
internal decision that they wanted to market a tablet instead of a capsule, and
this delay cannot be blamed on FDA. By 1991 FDA was examining carcinogenicity
concerns with Claritin. Certainly even Schering cannot blame FDA for requiring
clinical studies into concerns as serious as cancer. FDA's mission is to ensure
efficacy and safety, and carcinogenicity concerns cannot be and should not be
resolved overnight.(5) Last year the Subcommittee heard testimony from Peter
Barton Hutt, Esq., that brand name drug companies had received a maximum
two-year rather than five-year patent extension for pipeline
drugs under the Waxman-Hatch Act because (1) it was anticipated that pipeline
drugs would be approved by FDA shortly, and (2) "less of an economic incentive
was needed to assure continued pursuit of pipeline drugs to final FDA
approval."(6) Mr. Hutt argued that several pipeline drugs were not approved by
FDA as quickly as anticipated by the negotiators of the Waxman-Hatch Act. Yet,
Mr. Hutt failed to establish that additional patent time was needed as an
economic incentive to brand name drug companies to pursue final approval of
these pipeline drugs. The fact is, pipeline drugs did not need more than two
years of extra monopoly time because the companies making those drugs were at a
point in the review process where it was highly unlikely the development of the
drugs would be abandoned. The 1984 Congress obviously recognized this situation
and, therefore, passed into law the language which Schering is trying to undo
today. Extending these patent terms would not be consistent with Congressional
intent, nor would the establishment of a sham "process" that merely purports to
examine the merits of each application. Perhaps the brand name drug companies
are correct in labeling this issue as one of "fairness" and "equity" -- it is
not fair and equitable for the Federal Government and consumers, especially the
elderly on fixed incomes, to continue to pay inflated prices for pharmaceuticals
in a competition-free market. Congress has told Schering "no" before. Congress
must tell Schering "no" again, for what will hopefully be the final time.
Schering claims that it only wants to set up a process. CAP hopes that the
Congress can recognize not only that H.R. 1598's version of a process is a
stacked deck against consumers and the generic drug industry, but also that a
process was created and is still in place under the Waxman-Hatch Act. Congress
should send the message now that this special interest legislation is not about
intellectual property rights or about fairness and equity. Congress should send
the message that it is serious about containing healthcare costs and about
ensuring a competitive marketplace to the benefit of all Americans. We
appreciate the opportunity to present our views. 1. The eight drugs are
Claritin, Eulexin, Nimtop, Relafen, Dermatop, Penetrex, Cardiogen-82, and
Daypro. 2. Congressional Record, H4220, June 14, 1999. 3. How Increased
Competition From Generic Drugs Has Affected Prices And Returns In The
Pharmaceutical Industry, Congressional Budget Office, at 28 (July 1998). 4. Id.
at 32. 5. The Pink Sheet, articles dated October 31, 1986, November 9, 1987,
November 27, 1989, June 24, 1991, and April 19, 1993. 6. Testimony of Peter
Barton Hutt, Esq., before the Subcommittee on Courts and Intellectual Property
of the Committee on the Judiciary, U.S. House of Representatives, on the Impact
of Regulatory Delay on Patents, at 8 (May 21, 1998).
LOAD-DATE: July 7, 1999 
