Copyright 1999 Federal News Service, Inc.
Federal News Service
AUGUST 4, 1999, WEDNESDAY
SECTION: IN THE NEWS
LENGTH:
2150 words
HEADLINE: PREPARED STATEMENT OF
RICHARD
JAY KOGAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SCHERING-PLOUGH
CORPORATION
BEFORE THE SENATE JUDICIARY COMMITTEE
BODY:
My name is Richard Jay Kogan. I am
Chairman and Chief Executive Officer of the Schering-Plough Corporation. I
appreciate this opportunity to testify in support of S.1172, the Drug Patent
Term Restoration Review Procedure Act of 1999.
This Bill would establish an
independent review process within the Patent and Trademark Office (PTO) to
consider the possibility of patent term restoration for seven pipeline drugs.1
These seven drugs lost significant patent life because of lengthy review in the
new drug approval process. In each case, FDA's review of the new drug
application (NDA) took over five years. Yet these drugs received only two years
of patent term restoration under the 1984 Hatch-Waxman Act,
compared to the five years of patent term restoration that other drugs received.
S.1172 is a major departure from the private patent extension bills that
Congress has considered in the past. The Bill does not extend any patent or
guarantee that any patent will be extended. Rather it creates a nonpolitical
process in which the PTO determines if it is fair and equitable to restore
patent term on any of these seven drugs. In providing this process, Congress
will reaffirm its commitment to strong intellectual property protection which
drives new drug research and development (R&D).
Schering-Plough's
Commitment to R&D
Schering-Plough has been successful because we know
our future will be determined by research and by how well we identify discovery
targets and conduct our development projects. We also understand that the
development of new drug therapies is an extremely capital-intensive endeavor.
Schering-Plough's R&D expenditures in 1998 exceeded $1 billion, which
was an increase of 19 percent over the prior year. R&D expenditures for 1999
will increase by more than 15 percent. Within our peer group of large
research-driven pharmaceutical companies, Schering-Plough ranks fourth in
termsof research expenditures as a percentage of total sales. Our R&D
expenditures have increased steadily and significantly in the 1990s, as shown in
Table 1.
Table 1. Schering-Plough Corporation's lnvestment in Pharmaceutical
Research and Development (NOTE: table not transmittable)
R&D is a
High-Cost and High-Risk Endeavor
Because of the cost and time it takes to
bring a new drug to the market, it is essential that we maintain, if not
increase, our high level of R&D investment. Schering-Plough continues to
invest steadily in new research and technologies. Through new technologies we
have increased the number of sample compounds tested from around 400,000
annually to an estimated 1.3 million this year.Even with the research advances
of today, only one in every 5,000 chemical compounds ever reaches the U.S.
market. Bringing a drug to the market place takes 12 to 15 years and costs up to
$500 million.
R&D Funding is Dependent on Revenues From Currently
Marketed Products
The market introduction of our product Claritin in 1993,
and its ongoing success since then, has fueled Schering-Plough's R&D
efforts. Revenues generated in the current year from our marketed products are
utilized to fund ongoing and future research initiatives. Strong sales support
increases in R&D investment, which in turn delivers important new drug
products to consumers. Especially critical are the revenues from a small number
of very successful products.
Pharmaceuticals Critically Impact Public Health
Schering-Plough's researchers are pursuing novel therapies that address
important medical needs. Their efforts focus on cancer, infectious diseases
(like hepatitis C), cardiovascular disease, central nervous system diseases
(like Alzheimer's disease), and allergic and inflammatory disorders. Our
scientists are developing drugs that can directly target the causes of disease,
with the hope of offering significant improvements over existing treatments that
only address disease symptoms.But many of these promising drug candidates are
years away from marketing. A potential new drug must be evaluated for many years
- in laboratory testing, animal testing, and human clinical studies - in order
to develop the necessary data for a new drug application (NDA). The speed with
which we are able to pursue this innovative research is directly dependent on
earnings from marketed products, and those earnings are directly dependent on
strong and fair patent protection.
The Outlier Pipeline Drug Problem
Recognizing the importance of patent protection to pharmaceutical R&D,
Congress enacted the Drug Price Competition and Patent Term Restoration Act of
1984, also known as the Hatch-Waxman Act.2 Under that Act, the
holder of a patent for a new drug can apply to the Patent and Trademark Office
for restoration of part of the effective patent life lost due to regulatory
review. For most drugs, the Hatch- Waxman Act limits the
restoration period to five years. For drugs whose patent issued and whose
regulatory review straddled the enactment date of the legislation - so-called
"pipeline" drugs - the statute limits the restoration period to two years.
In 1984 when Hatch-Waxman was enacted, the average time for
FDA approval of an NDA was 2.25 years.3 However, for the seven pipeline drugs
that are covered by S.1172, regulatory review took many years longer than
Congress would have anticipated based on this 2.25 years average review time.
FDA approval of the NDAs for these drugs took over 5 years, more than twice the
amount of time that would have been expected.
The unfairness of applying the
2-year limitation on patent restoration to Claritin and the other six pipeline
drugs can be seen by comparing these drugs to drug products which began clinical
trials just after the Hatch-Waxman enactment date and thus were
not subject to the 2- year limit on patent term extension. Products with much
shorter NDA review periods than Claritin received much longer patent term
extensions. For example, a blockbuster lipid lowering agent that just missed
being classified as a pipeline drug spent 4.19 years in NDA review, received
over 4.6 years of patent extension, and has an effective patent life of 14
years. Similarly, a well-known antibiotic that just missed being classified as a
pipeline product spent only 1.56 years in NDA review, received 3.4 years of
patent extension, and has an effective patent life of 14 years. In comparison to
these successful drugs, Claritin had an NDA review time of 6.45 years, received
only 2 years of patent extension, and has an effective patent life of just over
9 years. These are but two examples. There are numerous others.
Even drug
products that were approved by FDA just prior to enactment of the
Hatch-Waxman Act received better treatment than many of the
outlier pipeline drugs covered under S.1172. While these already approved drugs
did not receive any patent extension, they did receive 10 years of market
exclusivity under other provisions of that Act. Thus, they received ten years of
protection against generic drug competition.
Pharmaceutical companies are
under tremendous competitive pressure.
Companies that do not discover
and develop new products oftentimes do not survive. The number of pharmaceutical
companies that have disappeared through mergers and acquisitions in recent years
is evidence of this fact. Given this environment, and because so few compounds
ever make it through the development process and to the market, it is critical
that the rare successful product receive fair patent protection.
Solution to
the Outlier Pipeline Drug Problem
Senator Torricelli has introduced
legislation that would create a process by which the PTO could consider
applications for patent term restoration for seven outlier pipeline drugs. The
bill, S.1172, would authorize the PTO to determine whether pipeline drugs that
were subjected to more than five years ofNDA review by FDA should be awarded
patent term restoration of up to three years. The period of patent term
restoration would be reduced for any period of time in which the applicant did
not exercise due diligence in pursuing approval.
In past years, Congress has
been asked to award patent term extension directly to a specified drug product.
In fact, Congress has enacted product-specific patent extensions for pipeline
drugs three times since enactment of Hatch-Waxman. But this
private bill approach has been criticized for politicizing the patent term
restoration process.
In contrast, S.1172 creates a neutral administrative
process. Under the Bill, the PTO - an informed decisionmaker with expertise on
patent matters conducts an administrative proceeding in which interested parties
- including generic drug manufacturers - can participate. FDA is given a
significant consultative role and PTO has access to all relevant documents and
information. All seven outlier pipeline drugs would be eligible to participate
in the process. No drug would automatically receive patent term restoration. We
believe this processoriented approach can effectively address the outlier
pipeline drug problem.
Under the Bill, the applicant must show that it acted
with "due diligence." This is the same standard an applicant must meet to
currently receive an extension under Hatch-Waxman. Due
diligence is defined as "that degree of attention, continuous directed effort,
and timeliness as may reasonably be expectedfrom, and are ordinarily exercised
by," an applicant during an NDA review period.4 Due diligence focuses on the
applicant's actions, not on FDA's actions. As a result, the PTO is not put in
the position of second-guessing FDA's scientific judgments.
I was President
and Chief Operating Officer of Schering-Plough Corporation and Executive Vice
President - Pharmaceutical Operations during the time that Claritin was awaiting
FDA approval. Less than a year after the NDA for Claritin was submitted to FDA,
on October 23, 1987, an FDA advisory committee recommended that FDA approve the
Claritin NDA. FDA often promptly approves a drug that has received a favorable
recommendation from an advisory committee. In the case of Claritin, however,
approval did not come until April of 1993. Schering-Plough had to wait more than
six years after the NDA was submitted to market Claritin in the United States.
When the Claritin approval finally came, the public received access to a
once-a-day, nonsedating antihistamine that did not present the kinds of cardiac
risks that existed with the other nonsedating antihistamine products on the
market at the time.
Two unanticipated scientific issues arose after the FDA
advisory committee recommended approval of Claritin in 1987 - one involved
toxicology data and the other involved bioequivalence. FDA addressed both of
these issues with caution. Schering-Plough acted with due diligence during the
entire process.
The review of the Claritin NDA was complicated by FDA's
reorganization of the Center for Drug Evaluation and Research (CDER) which began
in 1987 and continued until 1989. Moreover, FDA reviewed Claritin prior to
enactment of the Prescription Drug User Fee Act (PDUFA) in 1992. Before
enactment of PDUFA, FDA lacked the funding and resources to review NDAs
expeditiously, particularly for drugs that were not designated for "priority"
review. During the CDER reorganization Claritin was assigned to the same
division that reviewed cancer drugs, all of which received "priority"
designations. Claritin received a "standard" review designation.
All of
these factors certainly had an adverse impact on the time the Claritin NDA spent
in the regulatory review. In contrast to the 6.5 years spent in regulatory
review in the United States, Claritin received approval in 2.5 years or less in
many countries with sophisticated regulatory agencies, including Germany,
France, Ireland, Italy and the United Kingdom.
Claritin is a good example of
why the manufacturers of the seven outlier pipeline drugs should be given an
opportunity to present their case to the PTO for up to three years of patent
term restoration. Claritin received the worstof both worlds, extraordinarily
lengthy regulatory review, and minimum patent restoration.
Congress
recognized the importance of, and relationship between, fair and strong patent
protection and pharmaceutical R&D when it enacted HatchWaxman. In order to
properly fund R&D, successful products must have fair patent protection.
S.1172, in providing a nonpolitical forum and a fair process, furthers this
goal. That is why Schering-Plough supports this Bill. That is why we urge you to
do the same.
FOOTNOTES:
1 The seven drugs are Cardiogen-82, Claritin,
Dermatop, Eulexin, Nimotop, Penetrex, and Relafen.
2 Pub. L.No. 98-41 7, 98
Stat. 1 585 (Sept. 24, 1 984).
3 FDA, "New Drug Evaluation Statistical
Report" 53 (Oct. 1985) (FDA mean approval time of 26.9 months for new molecular
entities in 1984).
4 35 U.S.C. Section 156(d)(3).
END
LOAD-DATE: August 5, 1999
