Copyright 1999 Federal News Service, Inc.
Federal News Service
AUGUST 4, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH:
4575 words
HEADLINE: PREPARED STATEMENT OF
MR.
BRUCE L. DOWNEY
CHAIRMAN
BARR LABORATORIES, INC.
BEFORE THE
SENATE JUDICIARY COMMITTEE
SUBJECT - S. 1172, "DRUG PATENT
TERM RESTORATION
REVIEW PROCEDURE ACT OF 1999"
BODY:
Hearing Before the Senate Judiciary
Committee
Regarding S. 1172 "Drug Patent Term Restoration Review Procedure
Act of 1999"
August 4, 1999 Testimony of Mr. Bruce L. Downey Chairman Barr
Laboratories
Mr. Chairman, members of the Committee, thank you for the
opportunity to testify. My name is Bruce L. Downey, and I am Chairman of Barr
Laboratories, Inc., which has facilities in New York, New Jersey and Virginia
and manufactures and distributes a wide range of prescription medicines for the
treatment of diseases ranging from cancer to heart disease to depression. Barr
Laboratories is a member of the National Pharmaceutical Alliance and the Generic
Pharmaceutical Industry Association, two of the three largest generic
pharmaceutical industry associations.
The future of the generic
pharmaceutical industry is directly linked to a vibrant brand industry that has
appropriate incentives to develop new and innovative pharmaceutical products.
The flow of such products provides patients with improved alternatives to
currently available therapies, and also generates the opportunities for our
industry to develop more cost-effective versions of existing products. The best
way for Congress to preserve the balance amongcompetition, innovation and
intellectual property tights is to preserve and expand the HatchWaxman Act. S.
1172 fails to meet this objective.
The members of the generic pharmaceutical
industry stand together in strong opposition to the approval of S. 1172. We
believe it will upset federal drug policy that has served patients for nearly
two decades for the sole purpose of extending patents protecting a specific
product and thereby delaying genetic competition.
Our industry opposes S.
1172 because it:
Imposes an unwarranted multi-billion dollar burden on
patients through years of lost access to cost-saving genetics;
--
Establishes a process that substantially reduces brand company incentives to
innovate new therapies by delaying competition;
-- Imposes piecemeal changes
to Hatch-Waxman that disrupts the delicate public policy
balance that has generated a decade of increased innovation and patient savings;
-- Invites imitation by other special interests for countless other
products; and
-- Diverts the attention of Congress from concentrating on
ways to dramatically increase patient access to pharmaceutical products at
reasonable costs.
History of Claritin Patent Extensions
Although this
legislation is proposed in part as a mechanism to address suggested deficiencies
within the Hatch-Waxman compromise, the driving force behind
this initiative isSchering-Plough and its efforts to extend the patents that
protect Claritin, a multi-billion dollar international allergy drug.
This is
the sixth effort by Schering-Plough to use the Congress to obtain a third
extension of the patents protecting Claritin. Last month, the House Subcommittee
on Court and Intellectual Property considered a similar legislative proposal for
the second time in two years. While S. 1172 purports to improve upon the House
version addressing procedural deficiencies, in fact the inevitable result - if
not the purpose -- of this bill and the House version are identical - a patent
extension for Claritin.
Previous efforts to extend these patents have been
more direct, and not disguised as public health policy initiatives. In May 1997,
Schering-Plough attempted to add a patent extension amendment to the OminOus
Patent Act of 1997, an effort that was blocked in this very Committee. In the
closing moments of the 1997 congressional session, there was a second attempt to
extend the patent through the appropriation process, while a bill was in
conference. That effort was also rejected. Last year, there was an attempt to
add this proposal to the 1998 Omnibus Appropriations Bill. That initiative
failed as well. I am confident that when you have considered all of the evidence
you will reach the same conclusions that the Congress has previously reached and
reject S. 1172.
A fundamental reason for the previous rejections of an
extension to the Claritin patents is that the government has already granted two
such extensions. If you look at the record, thepatents protecting Claritin have
already been extended far beyond what Schering-Plough could have expected at the
time it was developing this product. The original patents for Claritin were
filed on June 19, 1980 and granted on August 4, 1981. The product was launched
in 1993 and without any extensions the patents would have expired on August 4,
1998, after 17 years of protection.
According to a Federal Register Notice
of August 31, 1993, Schering- Plough sought a two-year patent extension pursuant
to Hatch-Waxman and was successful in extending the patent
until August 4, 2000. As part of the GATT implementation legislation, the patent
was further extended by another 22 months to June 19, 2002. As a result of these
extensions, in June 2002 Claritin will have enjoyed patent life of approximately
21 years - four years beyond the original patent term.
Potential Lost
Savings to Patients
The two-year Hatch-Waxman extension
protected approximately $5 billion in Claritin sales from generic competition.
The two-year GATT extension is estimated to protect approximately $7 billion in
sales, based on projections by ABN AMRO Associates of Boston. From the patient's
point of view, anywhere from 30-80% of this $12 billion cost could have been
saved if generic competitive market forces were in play. While analysts'
projections for Claritin's growth end with the patent expiry, if one were to
assume the same growth levels through 2005, S. 1172 would protect more than $20
billion from competition.Extending the patents will delay generic competition
and force Claritin patients to continue to pay more than $80 per month for a
typical prescription for three more years. For those patients covered by
insurance these costs will be borne by the insurance firm subscribers and
employers who pay for medical coverage. For those who must cover prescription
costs themselves, the monthly cost will come directly out of their pockets. And
taxpayers will be forced to pay the additional federal costs that these patent
extensions will create.
Inhibiting Innovation and Investment in New
Product Development
Clearly, if Claritin were not protected from
competition, the pressure on Schering-Plough to innovate new, equally effective
and profitable therapies would increase significantly. In fact, it is this very
pressure to innovate, while simultaneously providing an economic benefit to
patients upon patent expiry, that was the heart of the
Hatch-Waxman compromise.
Mr. Chairman, any senior corporate
executive can appreciate Schering- Plough's corporate
P
motives in
working to preserve its Claritin profit stream from competition. But there are
few
instances in our nation's history where corporate monopoly interests
have made sound public policy. We don't need to tell you that competition in the
pharmaceutical industry is good for the consumer, and our most needy citizens.
When a product patent expires, it is not unusual for multiple generic
pharmaceutical companies to launch versions of the product. As a result, prices
fall rapidly and dramatically, as competition increases. One need only look at
Zantac, an ulcer medication, for a good example.Following introduction, generics
rapidly climbed to 80% of the units sold in the market in less than three
months. The cost savings were equally as dramatic for patients, falling from
more than $80 a month to less than $12 per month.
But perhaps as important,
working with a finite period of protection promotes investment in new product
innovation, encourages creativity and results in new and improved therapies.
Last summer, the Congressional Budget Office considered the very issue of
innovation when it examined the value and impact of generic competition. The CBO
study concluded that, "Between 1983 and 1995, investment in R&D as a
percentage of pharmaceutical sales by brand name drug companies increased 14.7
percent ($2.7 billion) to 19.4 percent ($14.4 billion). Over the same period,
U.S. pharmaceutical sales by those companies rose from $17 billion to $57
billion. Overall, then, the changes that have occurred since 1984 (the
Hatch-Waxman Act) appear to be favoring investment in drug
development."
Since the Hatch-Waxman Act, brand sales have
increased steadily, exceeding $80 billion in 1998. Generic companies and
consumers also have benefited. Since 1984, the generic industry has grown
steadily and today has total annual revenues of approximately $11 billion. In
fact, 42% of all prescriptions filled today are for generics. Because of generic
competition, consumers have saved literally billions of dollars by having access
to generic pharmaceuticals that are priced as much as 70% - 80% below their
brand counterparts.
There is compelling evidence today that the underlying
premise of the Hatch-Waxman Actworks - the entire
pharmaceutical industry and all consumers will benefit if there is a proper
balance between rewarding innovation and guaranteeing competition. A study
recently commissioned by Warner Lambert and prepared by the Boston Consulting
Group explored issues related to access to brand pharmaceuticals as related to
market interventions outside the U.S. marketplace.
The study considered
market interventions, including government price controls, and concluded that,
"the net effect of reducing the degree of market intervention would be to
encourage competition later in the product life cycle, and reward and encourage
innovation in the early years... It is ultimately the patient who suffers from a
poorly designed and ineffective intervention regime." S. 1172 contradicts this
conclusion.
Piecemeal Amendments to Hatch-Waxman
The
Hatch-Waxman Act was a delicate compromise that sought to encourage
competition from generic pharmaceuticals while maintaining the brand industry
incentives to invest in the development of innovative drugs. It has also
provided American consumers and taxpayers with more than 15 years of
multi-billion dollar savings in health care costs. The generic industry strongly
encourages Congress to maintain the fundamental provisions of the Act while
simultaneously expanding the benefits of this landmark consumer legislation
through appropriate legislation. S. 1172 is not the vehicle for the
consideration or approval of mechanisms to extend the benefits of
Hatch-Waxman.However, two of the arguments made in support of
S.1172 would significantly recast the effect of this legislation. One of the
arguments for extending the patents on Claritin is related to the product's
status at the time of Hatch-Waxman, and the other argument is
that the Claritin product was unnecessarily delayed by the FDA.
At the time
the compromise for extending patents under Hatch-Waxman was
forged, all of the parties recognized that one of the key objectives of the Act
was to promote innovation. The formula for these incentives was straightforward.
The Act recognized the need to provide incentives for drag products in the early
stages of development, and research projects initiated after the implementation
of the Act. Hatch-Waxman also recognized that there was no need
to provide incentives for those products that were already on the market, and
therefore they received no patent extension. The parties recognized that there
was no obligation to offer an incentive for investing in products that had
already reached the marketplace because the investment in innovation had already
been made. For those products that were in the middle stages of development,
including Claritin, it was agreed that the Act should provide some incentive for
the work remaining to be completed, so a partial extension of patents was
granted for these products.
The amount of time granted was based on the
point in development when the Act was implemented. S. 1172 would repudiate this
deal.
In addition, Schering-Plough argues that Claritin deserves additional
patent protection because FDA approval was unusually delayed. The facts,
however, do not support this argument. The IND for the product was filed with
the FDA in January 1983, and the NDA was filed inOctober 1986. An FDA advisory
committee recommended approval for Claritin one year after the NDA was filed.
Normally, prompt FDA approval would have followed. Schering-Plough, however,
amended the application to change Claritin from a capsule product to a tablet
product. This decision ultimately delayed the approval process by several years.
In the pharmaceutical industry, changes in the dosage form require
bioequivalence tests to ensure -- as in the case of Claritin -- that the capsule
and tablet will work the same way. That is, Schering- Plough was required to
prove that the active ingredient in the tablet would be absorbed into the
patient's blood stream at the same rate and to the same extent as the capsule
version. Schering-Plough twice provided failing bioequivalence data, which
further delayed Claritin's approval.
Had Schering-Plough proceeded with
approval to market the capsules as originally intended, and as it did in 46
other countries, the product could have been launched years earlier and we would
not be here today. Had it submitted appropriate bioequivalence data, the
approval could have proceeded normally. Clearly the delay in entering the U.S.
market rests solely with Schering-Plough's management and scientists and cannot
be blamed on an FDA delay.
Another defect in S. 1172 is the requirement that
the patent holder exercise due diligence during the NDA review process. In the
context of this bill, "due diligence" is a meaningless standard. The most
minimal efforts to communicate with FDA during the review process, for example,
would likely satisfy "due diligence." This standard does not permit a
properdetermination of whether the patent holder was responsible for any delay
or to apportion accountability.
Proponents of S. 1172 suggest that they have
corrected a deficiency in the House version (HR 1598) by placing the burden of
proof for gaining an extension on the patent holder. (H.R. 1598 placed the
burden of proof on those opposing the extension.) The problem with this argument
is that engaging in the discussion of where the burden of proof belongs
legitimizes the consideration of the validity of the patent extension process
proposed under S. 1172. Congress has already established the appropriate period
of patent life and the appropriate process for extending patents within the
Hatch-Waxman Act. Only an act of Congress should extend the
life of patents beyond the original and already generous extensions already
existing. S. 1172 would substitute an administrative procedure that upsets the
balance of Hatch-Waxman and replaces congressional scrutiny
with an inappropriate bureaucratic decision-making process.
As was
true with H.R. 1598, S. 1172 would place the technical decisions of the FDA
under scrutiny of a separate agency ill-qualified to address them. The bill
requires the Commissioner of the United States Patent and Trademark Office to
make a legal determination about whether a separate agency, the Food and Drug
Administration, performed its responsibilities in accordance with its statutory
mandate. At no time during the entire consideration of this legislation has
there been a credible demonstration that the Commissioner of Patents has
sufficient knowledge and understanding of the FDA and its processes or
pharmaceutical policy to justify this delegation of authority. In addition, if
Congress wanted to
give PTO this type of authority, it would have specified
it in the Hatch-Waxman Act. Instead, Congress made a conscious
decision to give FDA the responsibility for reviewing and calculating agency
delay to support an extension.
Finally, the argument is made that S. 1172
provides a benefit to the genetic industry by resolving issues related to the
listing of product patents. In essence, this legislation is designed to offer
something to the generic industry in exchange for their support for granting
extensions to brand product patents. This proposal, however, offers the generic
industry no real benefits. The genetic industry believes that there are a number
of more substantive, critical problems, that if corrected, would strengthen the
Hatch-Waxman Act and directly benefit consumers. Unfortunately,
the proposals put forth in S. 1172 are extremely limited and would generate
additional inequities by benefiting some manufacturers at the expense of others.
The bill is further evidence that the development of effective drug policy
or the improvement of Hatch-Waxman can not be achieved by
periodic, limited legislation designed to award a specific benefit to one or two
companies. These issues are far too complex to be addressed in a procedural bill
whose primary purpose is to protect one drug from the very competition
envisioned by the Hatch-Waxman Act.
For example, Section
2(a) of S. 1172 does attempt to limit the breadth of required Paragraph IV
certifications to only the patents that claim, in one form or another, the
active ingredient. In this way, the bill tries to exclude Paragraph IV
certifications for extraneous patents.However, the bill's Paragraph IV
limitation only applies to patents for the eight or so "pipeline" drugs affected
by the bill itself and would apply only after the pipeline drugs had received
the additional three years of patent protection proposed by S. 1172. Generic
companies have already filed Paragraph IV certifications for some of these
pipeline drugs, and have relied on the existing law in making investment
decisions about the development of generic versions of these drugs. S. 1172 does
not address that investment or the resulting inequity to the generic companies
pursuing these products.
The limitation also does not apply to the hundreds
of patents that are presently listed erroneously in the Orange Book (FDA's
Approved Drag Products With Therapeutic Equivalence Evaluations), or in any way
limit future improper patent listings attempted by the brand industry.
The
generic industry has been concerned for some time about the brand industry's
abuse of patent listings in the Orange Book. The Hatch- Waxman
Act requires that FDA compile the Orange Book, and that NDA applicants submit
patent information to FDA for inclusion in the Orange Book. FDA may not approve
a generic drug application until the listed patent terms have expired. For
generic applicants, the listing of patents in the Orange Book triggers the
Paragraph IV certification requirement discussed above.
Thus, whenever an
NDA holder has a patent listed in the Orange Book, the NDA holder is eligible to
exercise the statutory 30-month stay against generic competition, thereby
extending its product monopoly. With such a lengthy monopoly period at stake, it
is no surprise that NDAapplicants submit patent information to FDA that is
voluminous or only tangentially related to the drug at issue. For example, some
products, such as the osteoporosis drug Evista, have more than 100 patents
listed in the Orange Book.
The generic industry believes that only compound
patents should be listed in the Orange Book and entitled to Paragraph IV
certification and the 30-month stay. A separate "Grey" Book could then be
created to provide industry notification of other patents. To accomplish this,
the industry proposes three statutory changes to prevent the Orange Book listing
of irrelevant patents.
-- Limit patents eligible for listing in the Orange
Book. Congress should amend the Act's patent listing and protection provisions
to limit listings to patents that claim a new active molecule(s) of a
pharmaceutical product. Only those new molecule patents would require a
Paragraph IV or other patent certification. Furthermore, if eligible patents are
submitted to FDA later than 30 days after the date the patents are issued, as
required by Section 505(c)(2) of the Act, generic drug applicants would be
excused from making the patent certification.
-- Develop a "Grey Book"for
patents that are merely related to the drug product. In addition, Congress
should require that all NDA holders list all other patents related to a new drug
product, including the use of the drug product or the method of manufacturing
the drug product, in a new book to be compiled by FDA calledt
the "Grey
Book." Patents listed in the Grey Book would not require patent certification by
genetic drug applicants.
-- Provide administrative relief for improperly
listed patents. Congress should authorize FDA, with assistance from the Patent
and Trademark Office, to identify and remove improperly listed patents from the
Orange Book. As a penalty for submitting improper patents to FDA, the patent
holder and NDA applicant should lose the fight to enforce the patent against a
genetic drug applicant.
S. 1172 also purports to address the complex issue
of market exclusivity. While clearly an area where there has been a great deal
of controversy and litigation, this bill is not the appropriate vehicle for that
debate. According to the Hatch-Waxman Act, FDA is to award 180
days of market exclusivity to the first company that seeks to market a genetic
drag product and, in so doing, challenges the scope or validity of an existing
patent coveting the brand drug product.
Numerous administrative challenges
and court cases have ensued over the statutory provision itself and over how FDA
has interpreted it. While the generic industry agrees that Congress should
address the confusion by clarifying the meaning of the 180-day exclusivity
provisions, the limited provision proffered in Section 2(b) is inadequate. The
proposed amendment would not begin to address the numerous and complicated fact
patterns that have arisen to make this section of the
Hatch-Waxman Act such a controversial matter. It also does not
provide relief for companies that have invested based on the current reading of
the law. OnlyB
prospective application of solutions to these questions would
be equitable for the generic industry and a benefit for consumers. Without
prospective application, the delay in introduction and cost savings to consumers
could be very significant.
The generic industry believes that these are only
a few of the areas where the HatchWaxman Act could be clarified, strengthened
and expanded. However, these complex issues require measured consideration and
complete, knowledgeable debate. Amending significant provisions of
Hatch-Waxman, which is what is proposed in S. 1172, would occur
without the benefit of such a comprehensive debate. It is bound to produce
further inequities, disrupt innovation, and harm patient access to new and more
affordable medicines, all in the name of extending the patent protecting
Claritin from competition.
Even though S. 1172 attempts to resolve
procedural flaws contained in earlier proposals and tries to provide some a very
limited benefit to some generic companies, it still fails what should be the
fundamental test of any legislation affecting federal drug policy - namely, will
this proposal benefit consumers by encouraging innovation while ensuring
affordability or will it simply protect a product from competition?
Schering-Plough has not demonstrated a true injustice that would support such an
upset of the Hatch-Waxman balance.
The Problem with
Imitation
Success in moving S. 1172 will breed imitation. There is no reason
to believe that the proposed legislation will not be amended to provide other
companies with additional patent relief.
f In fact, some brand
pharmaceutical firms have made it clear that they will attempt to amend this
legislation to provide patent relief to other products should it be considered
seriously by Congress. Thus, one of the real dangers of S. 1172 is its
inexorable and inevitable disruption of the Hatch-Waxman Act,
opening the door for the ultimate reversal of the most significant consumer
health care access and savings act in history.
Summary
In closing, I
would like to pose a question, and then answer it. What will happen to
Schering-Plough if they are unsuccessful in getting Congress to extend their
Claritin patents? The answer comes directly form Schering-Plough's Chief
Executive, Richard Jay Kogan. In a story published in the Wall Street Journal on
June 28, Mr. Kogan is quoted as saying that his company had several add-on
patents on Claritin that may protect the drag for years beyond 2002, when the
first patent expires on the chemical compound. The story went on to note that
the "company was in late-stage human testing of desloratadine, a metabolite of
the chemical in Claritin, whose patents expire in 2004 and 2014," and as such
Schering-Plough is in a "good position to compete on its own and isn't
interested in a merger at this time."
It is our hope that when Congress
considers the issues of federal pharmaceutical policy, the debate will not focus
on how to construct a process designed to achieve only one outcome the endless
preservation of one company's product monopoly. Instead, we urge that the focus
should be on how to protect the public health policy issue of balancing brand
pharmaceuticalI
research and development with the introduction of new
generic medicines, and the economic balance of rewarding innovation while
promoting competition.
The American people would be better served by a
debate on ways to extend access to affordable medicines, such as looking for
ways to expand the benefits of the Hatch-Waxman Act. Some
examples might include closing loopholes, speeding approvals, and expanding
coverage to new classes of drugs such as biotechnology products.
Today, the
biotechnology industry is unique in the pharmaceutical industry in that it does
not have genetic competition. There is no explicit regulatory pathway for
generic biotech approval, despite the fact that a number of blockbuster biotech
products are already off patent or will be by the turn of the century. Not only
would consumers and government purchasers benefit greatly from the cost savings
attributed to genetic biotech products, but allowing new competition from
generic manufacturers would serve as an incentive for the biotech industry to
innovate the
P
next generation of biotech drugs. In this way, we could
save money for all consumers, rather than
tax consumers to the benefit of
select companies.
When you look at the headlines from the past several
months, the cost of pharmaceutical products is of paramount concern to a broad,
bipartisan group of legislators deeply concerned about the ability of Americans
to afford their medicine. The generic industry encourages Congress to turn its
back on this debate over special interest legislation and focus instead on the
more important discussion over how to give every citizen access to the medicines
they need.The brand and generic industries agree that affordable medicines are
the key to longer, healthier and more productive lives. Let us work together
with you to resolve the problems of dispensing medicines to all Americans,
including the under-insured and uninsured, and not waste time debating the
dispensation of special corporate favors that drive up the cost of medicines.
We urge the Committee to reject S. 1172. I am happy to answer any questions.
END
LOAD-DATE: August 5, 1999
