Case Overview, Extending the Patent Term for Drugs Undergoing FDA Review During the Enactment of Hatch-Waxman

This document provides background information and summarizes the debate over patent extension. The links to the left will lead you to public documents that we have found.

           As pharmaceutical manufacturers have become more successful in developing drugs to treat our illnesses, the policy issues surrounding drugs have become more complex and more contentious. As a company develops a new drug and obtains government approval to market it, its patent is time limited. When the patent expires other manufacturers are allowed to produce a copy or "generic" version. Since the generic manufacturers don't pay for the development or marketing costs of the drug they reproduce, they can sell it at a considerably lower price. Once the generic becomes available, the original manufacturer's sales and profits drop precipitously as consumers move to the lower cost but otherwise identical version.

           The Drug Price Competition and Patent Term Restoration Act of 1984 (better known as the Hatch-Waxman Act) was designed to extend manufacturers' patent terms to compensate for the time a drug spent under federal regulatory review (the so-called regulatory pipeline). The idea underlying the legislation is that if a drug manufacturer acted with "due diligence" to test and develop a drug, and to comply with requirements for marketing the drug, the time for that manufacturer to recover research and development costs should not be further limited by a lengthy review at the FDA. A consumer lobbyist described Hatch-Waxman as "a compromise [because] Congress had to accommodate a lot of concerns. . . The basic balancing act that they had to deal with was protecting the intellectual property rights of prescription drug manufacturers in allowing them to recoup their investment and make a profit, while at the same time insuring that generic drugs . . . are brought to the market on a timely basis."

           But even with the patent extension that came through Hatch-Waxman, some drug manufacturers have argued that lengthy FDA approval times have left them with insufficient protection for their drugs. A congressional staffer sympathetic to the pharmaceutical manufacturers' position explained, "Congress needs a better way of addressing inequitable-or potentially inequitable-situations in which regulatory delay has diminished the useful life of a drug. Congress, in short, needs to enact a process to handle these issues rather than tackling each situation on an ad hoc basis."

           One of the companies with a drug in the "pipeline" during Hatch-Waxman is Schering-Plough, the developer and manufacturer of Claritin, the immensely successful allergy medication. It asked Congress to enact a law giving the company an additional three years for its patent on Claritin. Initial efforts on Schering-Plough's part were not successful but consumer groups were monitoring Congress closely and were prepared fight any renewed effort to extend drug patents. As the cost of prescription drugs has mounted and as seniors have found it increasingly difficult to afford the drugs they need, the drug companies have faced a more challenging legislative environment. As the106th Congress wound down, neither a reform of Hatch-Waxman nor specific relief legislation aimed at helping Schering-Plough had passed.