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.
On June 4, 2018, Director Andrei Iancu discussed his goals for improving the U.S. patent system at the BIO International Convention taking place in Boston. Director Iancu was sworn in on February 8, 2018 as the new director of the USPTO. Director Iancu spoke very thoughtfully on his vision for bringing clarity to Section 101, modifying the amendment process during an inter partes review (IPR), and celebrating the achievements of the U.S. patent system.
First on his agenda as he begins his new role as Director of the USPTO is to clarify and simplify the requirements for patentable subject matter under 35 U.S.C. § 101 (Section 101) so that inventors, investors, and patent attorneys alike understand which inventions qualify for patent protection. Director Iancu lamented that innovators are discouraged from applying for a patent because they are uncertain as to whether they, first, will be able to obtain a patent, and second, whether that patent will withstand post-grant challenges. According to Director Iancu, such uncertainty is not good for the economy or the system.
Since Section 101 has changed very little since the beginning of the U.S. Patent System in 1793 while technology has changed greatly, Director Iancu views this problem as an opportunity to update the laws to reflect the current state of innovation. He believes that changes to Section 101 should be technology and industry neutral rather than being tailored to any one specific area. In other words, Director Iancu believes that guidance from the USPTO needs to apply to biotech just as it needs to apply to computers. Initial guidance from the USPTO addressing Step 2 in Alice/Mayo is already available and Director Iancu promises that additional guidance on Section 101 will be forthcoming. Initial guidance addressing Step 2 in Alice/Mayo is already available and Director Iancu promises that more will come in the upcoming months. Moreover, Director Iancu cautions that any further changes must operate within the framework set forth by the courts, including U.S. Supreme Court decisions. Given the lack of certainty surrounding the requirements of Section 101, any clarification and simplification of those requirements would certainly be welcomed by many in the industry.
Second, Director Iancu wants to focus on modifying the IPR amendment process during an IPR such that patent holders are provided the opportunity to amend their patents rather than losing their patents entirely. Director Iancu does not want the IPR process to be “all or nothing.” Rather he wants both parties to work together, within the 12 to 18 month timeframe allotted by the IPR process, to come up with patent claims that could be workable in view of the findings of the IPR. The amended patent claims, according to Director Iancu, would then be examined by the PTO. The obvious benefit of having such an amendment process would be that patent holders would be given the opportunity to save their patents, and thus their investments, from loss.
Finally, as we near the ten millionth issued patent, Director Iancu wants to focus on the brilliance of inventors and the patent system rather than focusing on its shortcomings. He believes that focusing on the negatives of the patent system undermines the overall patent system and everything it is trying to achieve. Instead, Director Iancu wants to work within the scope provided by the courts to improve the system so that the next generation has role models to aspire to.
Overall, I was inspired by Director Iancu’s goals for his tenure. I look forward to seeing how his visions translate into specific actions in the upcoming months.
On May 25, 2018 the new and far reaching General Data Protection Regulation (GDPR) went into effect in the European Union. The key goals of GDPR are to strengthen transparency and accountability of data security. The rights afforded to individuals to control their personal data is unprecedented in scope and extend beyond companies headquartered in the EU and its citizens to cover all residents of any EU member country. The changes affect every industry and every company doing business within the EU including US based life science companies that are conducting clinical trials in the EU.
Clinical research has long been governed by strict consent rules and therefore many of the requirements of the GDPR are not new to companies in the clinical research sector. However, there are some important changes that sponsors of clinical trials and CROs need to keep in mind. The most important ones related to clinical trials are:
Extra-Territorial Effect of The Law
Going forward one of the first questions to ask and answer before undertaking a clinical trial that touches one of the EU member states is: “Does GDPR apply?”. The answer is not as clear cut as one might hope. Let’s look at the easy case first: if the sponsor of a clinical trial is located in the EU, GDPR automatically applies. However, if the sponsor is not based in the EU, GDPR may still apply depending on the specific circumstances. If the sponsor has an office in the EU that is involved in any aspect of the clinical trials, GDPR likely still applies. In addition, clinical trials that include data subjects located in the EU fall under GDPR regardless of where the sponsor and/or CRO are located, where the clinical data is processed, and where the sponsor plans regulatory submission. This applies even if the trial participants are not EU citizens but are simply in the EU while their data is collected.
Accountability Extends to Data Processors
GDPR makes it easier for individuals to not only hold data controllers (sponsors) but also data processors, e.g. CROs, investigators or statisticians, responsible for any breach of privacy and obtain compensation even for infringement that lead to non-material damages. The ramifications for the data controllers include that they might have to hire a data protection officer and maintain documents proving compliance with GDPR.
New Rights for “Data Subjects”
One of the phrases one hears frequently in connection with GDPR is the “right to be forgotten”. This is one of a number of new rights given to individuals under GDPR. Also known as the Right to Erasure this provision enables the “data subject”, in this case the clinical trial participant, to have their personal data deleted without undue delay, which is defined as within one month of receipt of the request. A helpful exception for clinical trials is, that the right to be forgotten does not apply if processing of the data is necessary for scientific research. It will be interesting to see if this exception will be used as a loophole that could open the door to fairly creative interpretation of what scientific research might entail.
Other rights of the data subject include: the right of access, i.e. the right to know whether or not personal data are being processed and if so, to obtain access to that data. In addition, the right to rectification gives the individual the right to have inaccurate data corrected within a month, and the right to data portability gives the individual the right to receive the data and to transfer these data to another data controller.
Changes to Consent and the Definition of Sensitive Data
The conditions for consent, already a cornerstone of privacy related to clinical trials, has been further strengthened through GPDR. The regulation requires consent to be stated in clear, unambiguous terms, to be distinguishable from other matters, and the purpose for collecting the data must be made clear in the consent. Withdrawing consent has to be just as easy as giving it.
In addition, the definition of “sensitive data” has been broadened compared to HIPAA to include genetic and biometric data.
Where Things Get Tricky
While GDPR mentions clinical trials specifically only twice, the provisions of Regulation (EU) No 536/2014 apply and regulate the specifics. This interface between 536/2014 and GDPR is where it can get tricky, specifically with regards to clinical studies done outside the EU but referenced in a clinical trial application within the EU. These trials must now comply with regulatory requirements that are at least equivalent to those in the EU – and that is now GDPR. That means that even clinical trials that are conducted entirely outside the EU but which the sponsor might want to include as background for an EU trial need to be carefully evaluated for compliance with GDPR.
For pharma and biopharma companies as well as CROs it is critically important to carefully review whether they need to comply with GDPR. Running afoul of the new European Data Protection Regulation can be very expensive – fines up to 4% of worldwide revenue or € 20 million, whichever is higher, apply.
BioPharma Law Blog posts updates and analyses on IP topics, FDA regulatory issues, emerging legal developments, and other news in the constantly evolving world of biotech, pharma, and medical devices.