Copyright 1999 Federal News Service, Inc.
Federal News Service
JULY 1, 1999, THURSDAY
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2723 words
HEADLINE: PREPARED STATEMENT OF
PETER
BARTON HUTT
BEFORE THE HOUSE COMMITTEE ON THE JUDICIARY
SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
SUBJECT - H.R. 1598
THE PATENT FAIRNESS ACT OF 1999
BODY:
Mr.
Chairman and Members of the Subcommittee, I am Peter Barton Hutt. I am a partner
in the Washington, D.C. law firm of Covington & Burling.
I have been
asked by the Subcommittee to present testimony on patent term restoration and
H.R. 1598. For almost forty years, I have been engaged in the practice of food
and drug law. During 1971-1975, I served as Chief Counsel for the Food and Drug
Administration (FDA). I am the co-author of the casebook used to teach food and
drug law in law schools throughout the country.1 I teach a full course on food
and drug law during Winter Term at Harvard Law School and I have taught the same
course during Spring Term at Stanford Law School. When the Drug Price
Competition and Patent Term Restoration Act of 1984 was being considered during
1983-1984, I served as counsel to the Pharmaceutical Manufacturers Association
(now the Pharmaceutical Research and Manufacturers of America) and was deeply
involved in the development, negotiation, and drafting of the provisions in that
statute.2 I have published articles on the subject of patent term restoration
both before/3 and after/4 enactment of the 1984 Act. Finally, I have twice
before testified on legislation intended, and ultimately enacted, to provide
patent term restoration for specific products as a matter of fairness and
equity.5
THE ORIGIN AND PURPOSE OF THE DRUG PRICE COMPETITION AND PATENT
TERM RESTORATION ACT OF 1984
In 1962, Congress enacted new legislation to
increase the regulatory requirements for new drugs. The Drug Amendments of 1962
/6 replaced the 1938 requirement of premarket notification with a more stringent
requirement of premarket approval, and added a requirement of proof of
effectiveness to the 1938 requirement of proof of safety. In the years that
followed, the time required to obtain the necessary evidence of safety and
effectiveness increased, and the time required for FDA review and approval of a
new drug application (NDA) also increased. As a result, instead of receiving the
full statutory patent term of seventeen years, the effective patent life for a
new drug gradually was reduced to less than ten years and at times to zero. The
longer it took a company to prove safety and effectiveness and the longer it
took FDA to review and approve the NDA, the shorter the effective patent life
became.
By 1980, the average effective patent life of new drugs had
deteriorated to such an extent that many concluded it required remedial
legislation. During 1981 and 1982, Congress considered legislation relating
solely to patent term restoration. This legislation narrowly missed enactment in
September 1982.
Following enactment of the Drug Amendments of 1962, FDA
approved the marketing of generic versions of pioneer drugs under abbreviated
NDAs for those pioneer new drugs first marketed before the 1962 Amendments, but
not for new drugs with NDAs approved after the 1962 Amendments. For two decades,
generic versions of post-1962 new drugs were virtually precluded from the
market. Both administrative and legislative approaches were considered during
this time to permit FDA approval of generic drugs, but none was successful.
In 1983 and 1984, the pending patent term restoration legislation was
combined with legislation authorizing FDA approval of genetic versions of
post-1962 new drugs through an abbreviated NDA. That legislation was ultimately
enacted in September 1984 as the Drug Price Competition and Patent Term
Restoration Act of 1984 (which is shortened in this testimony to the "Patent
Term Restoration Act" or the "1984 Act").7
The 1984 Act was an attempt to
balance two competing interests. The research-based drug industry obtained up to
five years of patent term restoration for pioneer new drugs, to compensate for
part of the diminished effective patent life resulting from the FDA requirements
for the investigation and approval of a new drug. The genetic drug industry
received the assurance that generic versions of a pioneer drug would be approved
by FDA following expiration of applicable patents and market exclusivity through
an abbreviated NDA that did not require duplicative testing for safety and
effectiveness.
THE PIPELINE DRUG EXCEPTION
As noted above, the general
rule under the Patent Term Restoration Act of 1984 was that the pioneer drug
received up to five years of patent term restoration. There was, however, one
important exception to this general rule. A pipeline drug was limited to two
years of patent term restoration. Pipeline drugs are defined in what is now 35
U.S.C. 156(g)(6)(C) as any drug for which a patent had been issued and an
investigational new drug (IND) application had been submitted to FDA prior to
the date of enactment of the 1984 Act, which was September 24, 1984.
Accordingly, there was a full three years difference in patent term restoration
between two new drugs that were being developed at the same time, simply by
reason of the fact that the IND for one was submitted shortly before the
enactment date and the other was submitted shortly after the enactment date.
THE CONGRESSIONAL RATIONALE FOR THE REDUCED PATENT TERM RESTORATION FOR
PIPELINE DRUGS
The three-year disparity between the two years of patent term
restoration provided where an IND had been submitted before the date of
enactment and the five years provided for all other new drugs has provoked
substantial interest and concern. Two years ago, the Chief Counsel for the
Senate Committee on Government Affairs asked about the origin of this disparity.
I provided a letter in May 1997 describing the two reasons for the two-year
limitation on pipeline drugs. A copy of that letter is attached to this
testimony.As already noted, I participated in the development, negotiation, and
drafting of the 1984 Act on behalf of the industry trade association. My clear
recollection of the reasons for the two-year limitation for pipeline drugs, as
set forth in that May 1997 letter, are as follows:
There were two
fundamental reasons why the two-year limitation was included for pipeline drugs
in what is now 35 U.S.C. 156(g)(6)(C). These reasons were frequently discussed
among those of us who were involved in the daily negotiations.
First, it was
felt that the pipeline drugs would be approved by FDA shortly after enactment of
the 1984 legislation. Accordingly, it was thought that the five year period of
patent term restoration granted to all post-enactment drugs would be unjustified
for pipeline drugs, and that a twoyear period of patent term restoration would
more appropriately reflect the anticipated short period of time between the date
of enactment and the date of FDA approval for pipeline drugs.
(While
this assumption has in large part proved to be true, I understand that for a
handful of pipeline drugs the time between date of enactment and FDA approval
has extended beyond the time needed for approval of post enactment drugs and has
in fact exceeded ten years - something clearly not contemplated by any of us
when we were drafting the legislation in 1984.)
Second, it was felt that,
for any drug for which an IND had been submitted to FDA prior to the date of
enactment, the manufacturer had already made the decision to invest resources in
the drug and therefore less of an economic incentive was needed to assure
continued pursuit of the drug to final FDA approval -- particularly when it was
anticipated that approval would come not long after enactment of the
legislation. Accordingly it was concluded that two years, rather than five,
would provide sufficient economic incentive to assure that a pipeline drug would
not be abandoned.These were the two considerations that led to the two-year
limitation on patent term restoration for pipeline drugs, as contrasted with the
five-year grant of patent term restoration for post-enactment drugs, in the 1984
Act. To the best of my recollection, they were the only two considerations that
were discussed at that time.
In October 1997, I discussed this matter with
John P. McLaughlin when I saw him at a meeting and then sent him my May 1997
letter to ask his recollection. Mr. McLaughlin had served as Counsel to the
Subcommittee on Health and the Environment of the House Committee on Energy and
Commerce, and was involved in the legislation on a daily basis, throughout 1983
and 1984. At the time I wrote him, Mr. McLaughlin was Executive Vice President
of Genentech, a highly successful biotechnology company. Genentech has no
interest of any kind in any pipeline drug. Mr. McLaughlin wrote back to confirm
my recollection of the above reasons for the pipeline drug limitation. Copies of
my letter to Mr. McLaughlin and his reply are also attached to this testimony.
THE OUTLIER PIPELINE DRUGS'
For most of the pipeline drugs, the
assumption that FDA approval would come shortly after enactment of the 1984 Act
mined out to be accurate. At that time, the average time for FDA approval of an
NDA was approximately 2.25 years.8
For a few outliers, however, this
assumption turned out to be quite inaccurate. For these outlier pipeline drugs,
the time for FDA review and approval of an NDA was more than twice the average,
and they therefore suffered an even greater reduction in effective patent life.
A number of post-1984 new drugs that received a full five years of patent term
restoration were in fact approved by FDA before the agency approved these
pre-1984 outlier pipeline drugs that received only two years of patent term
restoration. This produced the anomalous result that the outlier pipeline drugs,
whose NDA approval time was more than twice the average, received less than half
the normal patent term restoration. None of us who participated in the drafting
of the 1984 Act anticipated or intended this result.
These outlier
situations, with approval times more than double the average, reflect the large
new drug review workload imposed on FDA in the late 1980s and early 1990s, the
increasingly restricted resources available to the agency to do this work, and
thus the growing shortfall in the personnel assigned to these tasks. FDA was
doing everything it could to meet its new drug review obligations throughout
this time. But the resources simply were not there to satisfy the workload
needs.
Congress squarely faced this issue in the early 1990s and found a
solution in the Prescription Drug User Fee Act of 1992.9-/ Using the additional
funds made available under the 1992 Act, FDA hired approximately 650 new
employees to handle NDAs in a more expeditious manner. As a result, the time for
NDA approval was cut in half. If this approach had been adopted earlier, there
would have been no outlier pipeline drugs and no need for legislation to redress
the inequity in patent term restoration that has in fact occurred for these
drugs.
LEGISLATIVE ATTEMPTS TO REDRESS THE INEQUITY FOR OUTLIER PIPELINE
DRUGS
The two-year limitation for pipeline drug patent term restoration in
the 1984 Act was intended to deal with the expected FDA average approval time of
about 2.25 years. It made no attempt to address unusual or unique situations of
lengthy regulatory review for which accepted principles of fairness and equity
would justify exceptions.
As a result, Congress has on seven specific
occasions enacted legislation to address particular FDA-regulated products where
application of the general rules in the 1984 Act would have been unfair and
inequitable. Two of those occurred in the middle of the congressional
consideration of the 1984 Act, two occurred at the end of the congressional
consideration of the 1984 Act and were enacted a month later, and the remaining
three occurred in 1988, 1993, and 1996. In all seven instances, Congress
concluded that the general rules applicable under the 1984 Act were insufficient
to address the particular situations involved, and thus that legislation was
necessary and appropriate. The following table lists those seven
statutes:Statutory Patent Term Restorations Since 1980 Product Statute
Aspartame (food additive) 95 Stat. 2049, 2065 (January 4, 1982) Forane (new
drug) 97 Stat. 831,832 (October 13, 1983) Impro (new animal drug) 98 Stat. 3430
(October 19, 1984) Glyburide (new drug) Stat. 3434 (October 19, 1984) Lopid (new
drug) 102 Stat. 1107, 1569 (August 23, 1988) Olestra (food additive) 107 Stat.
2040 (December 3, 1993) Daypro (new drug) Stat. 1321, 1321-320 (April 26, 1996)
In a number of other instances, similar legislation has been considered by
Congress for other FDA-related products but has not been enacted.
I have in
the past supported this type of legislation, because I believe it is entirely
appropriate for Congress to enact legislation addressing the inequities that
inevitably arise in the application of general rules to unique situations. It
is, however, time-consuming and inefficient for Congress to examine and take
action on each specific product where a general problem has been identified,
such as outlier pipeline drugs. During a Senate hearing held in August 1991 to
consider patent term restoration bills for three specific products, Brace
Lehman, who later served as Commissioner of Patents and Trademarks, offered the
thoughtful suggestion that Congress establish some type of new administrative
procedure to consider identified problems of fairness and equity rather than to
handle each individual product on an ad hoc legislative basis,l0/ As Mr. Lehman
pointed out at that time, this alternative way of approaching the matter offers
substantial advantages. This approach for outlier pipeline drugs has been
discussed since 1991, and legislation incorporating it has recently been
introduced as H.R. 1598.
CONCLUSION
Without doubt, outlier pipeline
drugs have not been treated fairly. These drugs received only two years of
patent term restoration, whereas competitors who submitted their IND
applications later but received their NDA approvals earlier received a full five
years of patent term restoration. This result cannot be justified on any
principled basis. The assumptions on which the two-year pipeline drug limitation
was based have turned out to be erroneous for this limited category of drugs.
Under these circumstances, Congress has in the past enacted legislation to
redress the resulting inequity. In the case of outlier pipeline drugs, this
could be accomplished either by drug- specific legislation or, more efficiently,
by establishing a new administrative procedure to evaluate the few remaining
outlier pipeline drugs involved as set forth in H.R. 1598.
FOOTNTOES:
1/
Peter Barton Hutt & Richard A. Merrill, Food and Drug Law: Cases and
Materials (lst ed. 1980 & 2d ed. 1991).
2/ See, e.g., my testimony on
behalf of PMA in "Patent Term Extension and Pharmaceutical Innovation," Hearing
before the Subcommittee on Investigations and Oversight of the Committee on
Science and Technology, U.S. House of Representatives, 97th Cong., 2d Sess. 123
(1982).
3/ Peter Barton Hutt, The Importance of Patent Term Restoration to
Pharmaceutical Innovation, 1 Health Affairs, No. 2, at 6 (Spring 1982).
4/
Ellen J. Flannery & Peter Barton Hutt, Balancing Competition and Patent
Protection in the Drug Industry: The Drug Price Competition and Patent Term
Restoration Act of 1984, 40 Food Drug Cosmetic Law Journal, No. 3, at 269 (July
1985).
5/ Lopid Patent Term Restoration and Fairness Act of 1987," Hearing
before the Subcommittee on Courts, Civil Liberties, and the Administration of
Justice of the Committee on the Judiciary, House of Representatives, 100th Cong.
1st Sess. 41, 72 (1987), 101 Stat. 1107, 1569 (August 23, 1988); "Patent
Extension Hearing," Hearing before the Subcommittee on Patents,
Copyrights and Trademarks of the Committee on the Judiciary, United States
Senate, 102d Cong., 1st Sess. 44 (1991), 107 Stat. 2040 (December 3, 1993).
6/ 76 Stat. 780 (1962).
7/ 98 Stat. 1585 (1984).
8/ FDA, New Drug
Evaluation Statistical Report 53 (October 1985) (FDA mean approval time of 26.9
months for new molecular entities approved in 1984).
9/ 106 Stat. 4491
(1992). The 1992 Act, which was limited to five years, was reauthorized for an
additional five years in the Food and drug Administration Modernization Act of
1997, 111 Stat. 2296, 2298 (1997). 10/ Patent Extension
Hearing," note 5 supra, at 218.
END
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July 2, 1999 
