Last week, Senator Orrin Hatch (R-UT), co-author of the Hatch-Waxman Act, introduced an amendment in the Senate Judiciary Committee called the Hatch-Waxman Integrity Act of 2018. According to Senator Hatch, the purpose of the amendment is to restore the careful balance the Hatch-Waxman Act struck to incentivize generic drug development while protecting drug innovators. The amendment is in response to what many consider to be an abusive practice of filing inter partes review (IPR) against brand name pharmaceuticals. According to Senator Hatch:
“I have a keen interest in ensuring we have a well-functioning generic drug industry. Well, there are two sides to that coin. One is ensuring that generic companies are able to develop drugs. The other is ensuring that brand companies have sufficient protections in place to recoup their investments. It won’t do to give generics the ability to develop and market low-cost medications if brand companies don’t have the incentive to create those medications in the first place. And so Hatch-Waxman struck a careful balance, one that has endured for decades.”
While the new Act is far from being enacted, it is helpful to analyze the motivation behind the new Act and its possible impact on the pharmaceutical industry. To this end, the two sides to this coin are summarized here, along with details about the consequences of enacting Senator Hatch’s proposed new amendment.
In 1984, the Hatch-Waxman Act was passed to encourage generic drug manufacturers to challenge patents of brand name drugs by filing Abbreviated New Drug Applications with the Food and Drug Administration. The law allowed generic manufacturers to rely on the Food and Drug Administration's safety and efficacy findings for the original branded drug, while also allowing brand makers to automatically invoke 30 months of guaranteed exclusivity for their products simply by filing a patent infringement lawsuit against any generics applications. At the end of the day, the generic was able to enter the market faster and cheaper while the brand product was still allowed to maintain its market exclusivity and recoup its expenses. The Hatch-Waxman Act is considered to be a win-win for both sides.
Since the IPR process became available under the America Invents Action of 2011, however, its availability has threatened to upend the careful Hatch-Waxman balance. Originally created in response to the practices of “patent trolls,” deemed abusive by some, IPRs offer petitioners a faster and cheaper way to challenge patent validity apart from traditional litigation. The results have been staggering. Of those patents that have been challenged and review has been instituted, more than 80 percent are either completely overturned or amended. By providing a backup challenge to a drug patent even after losing in Hatch-Waxman litigation, Senator Hatch argues, IPRs add additional pressure on drug innovators beyond pressure already inherent in the Hatch-Waxman Act, thereby upsetting the careful balance Senator Hatch attempted to establish.
Senator Hatch’s proposed amendment seeks to rebalance the pharmaceutical industry competitive equation by giving generic manufactures as well as biosimilar manufacturers, a choice between pursuing a Hatch-Waxman challenge or an IPR challenge, but not both.
Under the new amendment, the generic or biosimilar manufacturer would need to make the choice upon seeking seek FDA clearance on “abbreviated” pathways, which requires the company to make certain certifications to the agency. Senator Hatch’s amendment seeks to add another certification to that process, which would require applicants to state that they have not used the America Invents Act’s inter partes review or post-grant review (PGR) processes for patents related to that therapy, and that they will not use those processes in the future.
Senator Hatch’s amendment would also bar applicants from relying “in whole or in part” on PTAB decisions from an IPR or PGR proceedings. According to Senator Hatch’s office, this would require a certification from the applicant that the application is not relying on an IPR or PGR determination in its certification that the relevant listed patent is ‘invalid or will not be infringed by the manufacture, use, or sale of the new drug.” The purpose of this separate certification is likely to ensure that the applicant will: 1) not institute a post-grant proceeding against the challenged patent in addition to seeking invalidity of the patent through the regular court system, and 2) not already have challenged the patent in question by means of the AIA post-grant proceeding avenues and now rely on those results to seek FDA approval.
Additionally, the amendment seeks to curtail hedge funds from profiting off of an IPR challenge by short-selling a company’s stock. In practice, Hatch’s amendment would treat short-selling a company’s stock within 90 days before or after filing an IPR on a patent held by that company as a “manipulative or deceptive device” barred by the Securities Exchange Act.
Senator Hatch’s amendment is supported by the Pharmaceutical Research and Manufacturers of America or PhRMA, a powerful trade association for brand makers. According to the group, Hatch-Waxman should be the only means by which generics patent disputes should be resolved. Brand makers feel that having two different systems with different standards and procedural rules creates business uncertainty for brand companies.
Opposing the amendment is the Association for Accessible Medicines (AAM), which was formerly known as the Generic Pharmaceutical Association, a trade association for generics drug makers. According to the group, Hatch-Waxman and IPR proceedings serve different functions and Congress intended to make both systems available. By preventing generic and biosimilar manufacturers from using both systems, brand companies, according to the AAM, would be allowed “to use the patent system to extend their monopolies well past congressional intent.”
We will continue to keep you informed of developments in this field as they occur.
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