SUMMARY OF FEDERAL LAWS WITH PARTICULAR EFFECTS ON THE U.S. GENERIC DRUG INDUSTRY

I. DRUG PRICE COMPETITION AND PATENT TERM RESTORATION ACT OF 1984 ("HATCH-WAXMAN AMENDMENTS")

A. PATENT TERM RESTORATION AND NON-PATENT MARKET EXCLUSIVITY PERIODS FOR BRAND NAME PHARMACEUTICAL PRODUCTS
The Hatch-Waxman Amendments grant patent term extensions of up to five years for brand name drugs (including antibiotics) to compensate for time lost during the FDA review process and for up to one-half of the time spent during clinical testing to support an FDA application; the extended patent term is capped at 14 years from the date of FDA approval. (The patent term restoration provisions of Hatch-Waxman Amendments also apply to certain other FDA-regulated products subject to premarket approval requirements.)

As enacted in 1984, the Hatch-Waxman Amendments granted:

• Five years of market exclusivity, unrelated to patent protection, for non-antibiotic drug products containing new chemical entities.

• Three years of non-patent market exclusivity for non-antibiotic drug products not containing a new chemical entity, when the approval is supported by clinical studies. (Three-year exclusivity typically involves new formulations, new dosing schedules, new routes of administration, or additional indications for existing products.)

B. GENERIC DRUG APPROVAL PROCESS
As enacted in 1984, the Hatch-Waxman Amendments established for the first time an abbreviated new drug application (ANDA) approval process applicable to copies of brand name non-antibiotic drug products first approved by FDA after 1962. (Under pre-1984 law and FDA policy, abbreviated applications were available only for copies of brand name drug products first approved by FDA before 1962 and for copies of antibiotics.)

• The sponsors of brand name non-antibiotic drugs were required to submit to FDA information concerning patents that claim the drug or a method of using the drug. FDA publishes this information in the publication commonly known as the "Orange Book."

• ANDA applicants for non-antibiotic drugs were required to file a certification with respect to each relevant patent listed in the Orange Book.

• If the ANDA applicant does not contest the validity of a listed patent, the effective date of its ANDA approval will be delayed until after expiration of the patent.

• If the ANDA applicant certifies that a listed patent is invalid, unenforceable, or will not be infringed (known as a "Paragraph IV" certification), it must provide written notice to the brand name drug sponsor and patent holder, who then have 45 days to file a patent infringement lawsuit against the ANDA applicant. If a lawsuit is filed in timely fashion, FDA may not approve the ANDA for 30 months unless the patent infringement litigation is resolved in the ANDA applicant's favor before then.

The first ANDA applicant filing a certification that challenges a listed patent is entitled to 180 days of market exclusivity vis-à-vis subsequent ANDA applicants challenging the same patent.

ANDAs are based on bioequivalency to the brand name product, appropriate chemistry and manufacturing information, and appropriate labeling. In most cases, bioequivalency is established by scientific testing, in which the brand name and generic products are administered to individuals in whom the rate and extent of absorption of the drug is measured and compared. (Generic drug sponsors are no longer faced with the practically impossible task of duplicating the full safety and effectiveness testing that supported the brand name drug product's approval.)

II. FOOD AND DRUG ADMINISTRATION MODERNIZATION ACT OF 1997
Although a number of provisions of the 1997 FDA reform legislation affect the entire pharmaceutical industry, the following two provisions are of particular significance to the generic drug industry as they have amended the Hatch-Waxman Amendments, which will delay the market entry of certain lower cost, safe and effective generic drug products.

A. ANTIBIOTICS
Under prior law, antibiotic drugs were regulated differently than non-antibiotic drugs.

Beginning in 1945, antibiotic drugs were regulated under Section 507 of the Federal Food, Drug, and Cosmetic Act (FDC Act). From the outset, under Section 507, it was possible to obtain FDA approval for generic antibiotic products based on an abbreviated application without having to duplicate all safety and effectiveness testing supporting approval of the brand name antibiotic. (As noted above, before enactment of the Hatch-Waxman Amendments in 1984, there was no abbreviated approval mechanism for generic versions of non-antibiotic drug products first approved after 1962.)

As noted above, some -- but not all -- provisions of the Hatch- Waxman Amendments as enacted in 1984 applied to antibiotic drugs. In particular, the ANDA patent certification, automatic stay of ANDA approval pending resolution of patent litigation, and non-patent exclusive marketing period provisions did not apply to antibiotics.

Section 507 of the FDC Act was repealed by the 1997 FDA reform legislation, effective immediately (November 21, 1997). Except for antibiotic drugs that were then the subject of an approved or pending application, applications for generic antibiotic drugs are now subject to delays in approval as a result of the non-patent exclusive marketing period, patent certification, and automatic stay of FDA approval pending resolution of patent infringement litigation provisions previously applicable only to non-antibiotic drug products.

B. PEDIATRIC STUDIES OF DRUGS
Effective February 19, 1998, sponsors of certain brand name drugs are entitled to six additional months of non-patent market exclusivity in exchange for conducting studies to support pediatric labeling. The purpose of the provision is to encourage sponsors of brand name drug products to develop labeling to support the use of their products in pediatric populations.

The six-month exclusivity provisions apply to both new (unapproved) products, and to approved products for which three- or five-year Hatch-Waxman Amendments exclusive marketing periods or patents have not yet expired at the time acceptable studies are submitted to FDA. (The new provisions have no practical applicability to marketed products for which applicable patents and exclusivity periods have already expired.)

III. URUGUAY ROUND AGREEMENTS ACT (U.S. GATT IMPLEMENTING LEGISLATION
The Uruguay Round Agreements Act of 1994 (URAA) is the U.S. enabling legislation for the General Agreement on Trade and Tariffs. The URAA changed the patent term for all patents filed on or after June 8, 1995 from the former term of 17 years from the date of patent award to a patent term of 20 years from the date of patent application.

In implementing the URAA's transition provisions, the U.S. Patent and Trademark Office extended the terms of all patents in effect on June 8, 1995 to 20 years from date of application, if that resulted in a longer patent term than the original term of 17 years from date of patent award.

On average, the URAA extended U.S. patents for pharmaceutical products by an average of 14 months, with some pharmaceutical patents receiving extensions of over 28 months.

The URAA's transitional provisions included an exception so that an extended patent would not block market entry (as of the original patent expiration date) by a person that had made "substantial investment" in reliance on the original patent expiration date. However, Congress did not amend the Hatch-Waxman Amendments to allow this exception for pharmaceuticals. As a result, the generic pharmaceutical industry is the only industry that did not receive the benefit of this "substantial investment" exception.