The Gaming of Pharmaceutical Patents Brief Overview

Hatch-Waxman Act Hatch-Waxman was designed to speed entry of generic drugs to compete with patented pharmaceuticals The results of the act seek to balance the interests of the branded manufacturers with those of generics The reality has been that as branded manufacturers learned how to “change the game”, they gained an advantage in keeping generics out Average time keeping generics out increased from 9 to 11.5 years

The Mechanics of Hatch-Waxman Branded manufacturer files a New Drug Application (NDA) to market branded pharmaceutical There’s an automatic five-year exclusivity period for a successful NDA Successful NDA listed in the FDA “Orange Book”

Hatch-Waxman: Enter the Generics Generics seek to “engineer around” the branded patent. They file a less expensive ANDA asserting bioequivalence In the interesting case, this is a “Paragraph IV Certification” invalidity or non-infringement of branded patent This triggers an automatic 30-month stay while litigation occurs. If successful, the first to file an ANDA has a 180 exclusivity period.

Branded Strategy: Hoechst-Andrx Andrx is first to file a Paragraph IV ANDA for a generic bioequivalent to Hoechst’s popular drug Cardizem Hoechst sues alleging infringement and the suit is settled as follows The Settlement Andrx agrees not to market its generic for at least 18 months after the 30 month stay expires Andrx is paid $40 million/year to stay off in the event it loses the suit and $60 million/year if it wins Andrx agreed to retain the 180 day exclusivity

Questions: Why would Hoechst do this? How is the agreement structured to take advantage of the Hatch-Waxman game?.

More Tactics: Many Orange Book Filings In response to the FTC, branded manufacturers have evolved new strategies Successive Orange Book filings Settlements of non-infringement as opposed to invalidity Why might this be useful?

Take Aways The 180 day exclusivity provides leverage for the branded manufacturer to block multiple generics while negotiating with only one The 30 month stay allows for creative delaying tactics By negotiating to delay the entry of the first filer, the brand effectively delays entry by all filers Thinking strategically pays: Clever strategies by brands in the legal environment of Hatch-Waxman have unambiguously increased their profitability.