Hatch Waxman: Prescriptions for Innovative and Inexpensive Medicines The Generic Perspective May 7, 2010 AIPLA

Purpose of the Hatch-Waxman Act The purpose of the Act was “to make available more low cost generic drugs by establishing a generic drug approval process for pioneer drugs first approved after 1962.” H.R. Rep. No. 98-957, Pt. 1, at 14 (June 21, 1984). The Act was legislatively negotiated to strike “a balance between two potentially competing policy interests—inducing pioneering development of pharmaceutical formulations and methods and facilitating efficient transition to a market with low-cost, generic copies of those pioneering inventions at the close of a patent term.” Novo Nordisk A/S, et al. v. Caraco Pharmaceutical Laboratories, Ltd., et al., No. 2010- 1001 (Fed. Cir., April 14, 2010), at 2.

Basic Structure of the Act I Orange Book Listings by NDA Holder Abbreviated New Drug Applications (ANDA) Bioequivalence vs. Repetitive Clinical Trials Patent Certifications by ANDA Applicants Especially Paragraph IV Certifications Notice Letter to Patent Owner 45-Days for Patent Owner to Sue 30-Month Stay of FDA Approval of ANDA 180-Day Marketing Exclusivity for Successful First-Filer – delayed FDA approval of 2d ANDAs

Basic Structure of the Act II Patent term extension - up to five years to compensate a patent owner for the marketing time allegedly lost in the FDA drug approval process. Total patent term extension of up to 14 years. NDA holder has Data Exclusivity for five years after date of FDA approval of a New Chemical Entity (NCE) NDA holder has Data Exclusivity for three years after date of FDA approval of a new use of an existing and previously approved chemical entity, or new dosage form using that chemical entity.

Basic Structure of the Act III FDA is not permitted to approve an ANDA that relies upon clinical trials during the NDA holder’s Data Exclusivity period. Applicants permitted to file ANDAs one-year prior to expiration of Data Exclusivity period (NCE-1). MMA (2003) provides forfeiture of ANDA First-Filer’s 180-day Marketing Exclusivity under certain circumstances. MMA also creates right to file counterclaim seek correction or de-listing of Orange Book patents.

Where We Are Now: Statistics I In 2008, US national health expenditures totaled $2.33 trillion - 16.2% of our GDP ($7681 per capita).

Health expenditure per capita varies widely across OECD countries. US almost 2x OECD average (for insured population). 1. Health expenditure is for the insured population rather than resident population. 2. Current health expenditure. Source: OECD Health Data 2009, OECD (http://www.oecd.org/health/healthdata) (last visit 5/5/2010).

OECD countries spend about 9% of GDP on health. From 16% in the United States to less than 6% in Turkey. % GDP 1. Public and private expenditures are current expenditures (excluding investments). 2. Current health expenditure.. 3. Health expenditure is for the insured population rather than resident population. Source: OECD Health Data 2009, OECD (http://www.oecd.org/health/healthdata) (last visit 5/5/2010)..

Share of GDP spent on health increasing in all OECD countries, mostly due to new medical technologies and population aging. Source: OECD Health Data 2009, OECD (http://www.oecd.org/health/healthdata).

Higher health spending generally associated with higher life expectancy 2007 (or latest year available) Source: OECD Health Data 2009, OECD (http://www.oecd.org/health/healthdata).

Where We Are Now: Statistics II By 2019, US national health care expenditures will be nearly $4.5 trillion - 19.3% of GDP ($13,387 per capita).

Where We Are Now: Statistics III From 1980 to 2008, expenditures on prescription drugs rose from $12 billion (4.7% of total health care expenditures) to $234.1 billion (10%). By 2019, prescription drug expenditures are projected to increase to $457.8 billion (10%), an increase from $769 per capita in 2008 to $1,367 per capita in 2019. Between January 2000 and December 2004, the price of a one-month supply of the 96 of the most commonly used prescription drugs increased by 24.5%, double that of consumer prices generally.

Where We Are Now: Statistics IV In the year ending September 2009, the 19 largest pharmaceutical manufacturers (not P&G) reported consolidated revenues of $558 billion, an average of $29.39 billion. These companies had net income of $96 billion, an average of $5.08 billion, or 16.5% of revenues, representing an average return of 16.48% on assets, and 21.23% on shareholder equity. These companies spent $88.9 billion on research and development, an average of $4.681 billion, representing 16.28% of average total revenues.

Congressional Budget Office, Pharmaceutical R&D and the Evolving Market for Prescription Drugs, at 2 (October 2009)

Where We Are Now: ANDA Filings Food and Drug Administration, Office of Pharmaceutical Science, Generic Drugs: Overview of ANDA Review Process, http://www.fda.gov/downloads/Drugs/NewsEvents/ UCM182553.pdf

Where We Are Now: ANDA Approvals Food and Drug Administration, Office of Pharmaceutical Science, Generic Drugs: Overview of ANDA Review Process, http://www.fda.gov/downloads/Drugs/NewsEvents/ UCM182553.pdf

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DATA EXCLUSIVITY: Should be Left As-Is Grabowski’s Chart

DATA EXCLUSIVITY: Should be Left As-Is Brill’s Charts I

DATA EXCLUSIVITY: Should be Left As-Is Brill’s Charts II

DATA EXCLUSIVITY: Should be Left As-Is Brill’s Charts III

DATA EXCLUSIVITY: Should be Left As-Is Real-world conclusions about investment behavior, including the behaviors of branded pharmaceutical companies in making investments in research and development of both NCEs and new biological entities (NBEs), can only be seen partially through the lens of these studies. Real-world data strongly suggests that branded companies and their shareholders continue to make substantial investments in research and development, and that they realize significant returns on those investments. Until greater evidence is provided of a need to change, the data exclusivity provided to NCEs in the Hatch-Waxman Act should not be enlarged.

180-day Exclusivity – Should be “Rolling” I 180-day Marketing Exclusivity created to encourage Paragraph IV challenges by rewarding First Filers for undertaking the costs and risks of patent litigation, to challenge weak or improperly obtained patents, or to defend non-infringing generic products. At one time, “very valuable to generic manufacturers, as they can sell product at a price significantly higher than they could if multiple generics were on the market.”

180-day Exclusivity – Should be “Rolling” II “Perhaps no single provision of the 1984 law has caused so much controversy as the 180-day marketing exclusivity rule.” (Sen. Hatch) Recent MMA Amendments have not solved all problems, have reduced the incentive, and have created new issues. Settlement agreements are still made that have the effect of delaying market competition, even after the MMA, and have continued to raise antitrust concerns.

180-day Exclusivity – Should be “Rolling” III Branded companies still employ strategies designed to eliminate or diminish the “reward” for successful First Filers, built into the Act, in the 180-day provision. Litigation over FDA actions affecting 180-day Marketing Exclusivity continues. See, e.g., Teva Pharmaceuticals, Inc. v. Kathleen Sebelius, et al., No. 09-5281 (D.C.Cir., March 2, 2010); and Millenium Pharmaceuticals, Inc., et al. v. Teva Parental Medicines, Inc., et al., 2010 WL 1507655 (D.Del., April 14, 2010).

180-day Exclusivity – Should be “Rolling” III The Act should be amended to provide 180-day exclusivity to a second, successful ANDA applicant, in the event the NDA holder settles with the First-Filer and the First Filer does not enter the market within 180 days after such settlement.

Orange Book Delisting Provisions Should be Strengthened I In Teva, the D.C. Court of Appeals ruled that Teva had standing to challenge a patent de-listing, broadly applying the purposes of the Act. Teva commented: “...letting brand makers delist challenged patents in order to trigger a forfeiture of exclusivity would be completely ineffective; given the incentives for the brand manufacturer, it will be used only where its impact on Congress’s scheme is most destructive. ... If the generic appears unlikely to park its exclusivity, the brand maker can delist well before the generic can go to market, thus eviscerating the exclusivity incentive altogether.” Teva held that the FDA may not de-list an Orange Book patent, if, after serving a Paragraph IV notice with respect to one of three Orange Book patents, the NDA Holder asks that the challenged patent be withdrawn from the Orange Book.

Orange Book Delisting Provisions Should be Strengthened II The Federal Circuit ruled, in Novo Nordisk A/S, et al. v. Caraco Pharmaceutical Laboratories, Ltd., et al., No. 2010- 1001 (Fed. Cir., April 14, 2010), that “the Hatch-Waxman Act authorizes a counterclaim only if the listed patent does not claim any approved methods of using the listed drug.” Novo Nordisk involved a change by the NDA Holder in the “use code narrative” that expanded the use description for the product, Prandin®, a change that caused the FDA to deny Caraco’s “carve out,” based upon the original “use code.” Caraco, the generic manufacturer, counterclaimed under MMA provisions, to challenge the change in “use code.” The Federal Circuit reversed the trial court’s grant of summary judgment on this “de-listing” issue, and its grant of an injunction requiring Novo Nordisk to reinstate the prior “use code.” 29

Orange Book Delisting Provisions Should be Strengthened III The “counterclaim provision” of was added in the MMA, “in order to prevent manipulative practices by patent holders with respect to the Orange Book listings,” that “were designed to delay the onset of competition from generic drug manufacturers.” “Strict” construction of the MMA counterclaim provision lead to the decision in Novo Nordisk, a result that defeats the purpose of the MMA amendments. “Purposive” construction, like that used in Teva, has lead to other results or conclusions that may not be entirely satisfactory. The Act should be amended to clearly provide for US District Court jurisdiction over declaratory judgment actions brought by ANDA applicants to review the propriety of any listing related to any patent in the Orange Book. 30

Standards for Measuring Intent Should be Uniform I Exergen Corp. v. Wal-Mart Stores, Inc., 573 F.3d 1312 (2009) applied FRCP Rule 9(b) and 37 C.F.R. § 1.56, and held that to plead the “circumstances” of inequitable conduct with the requisite particularity” a pleading must identify the specific who, what, when, where, and how of the material misrepresentation before the PTO. In SEB., S.A. v. T-Fal Corporation, the Federal Circuit determined that induced infringement may be proven by a showing of “deliberate indifference” to the existence of a patent. The CAFC recently granted en banc review in Therasense, Inc. v. Becton Dickinson and Co., No. 2008-1511o (April 26, 2010), to consider standards for assessing materiality in inequitable conduct cases, and whether the standards should “be tied directly to fraud or unclean hands.”

Standards for Measuring Intent Should be Uniform II The most recent drafts of the Patent Reform Act of 2009, especially the “Manager’s Amendment,” omit previously suggested provisions relating to inequitable conduct, that were motivated by the perceived failure of the Federal Circuit “to establish one clear standard of materiality for inequitable conduct purposes.” . The absence of clear standards for assessment of intent has lead or may lead to confusing and inconsistent results. There is no valid reason for applying different standards of intent in Hatch-Waxman cases involving different portions of Patent Act, or applying a PTO regulation based on the Act generally, when none of those provisions contain any legislative standard. Instead, a single standard should apply. 32

Standards for Measuring Intent Should be Uniform III The Hatch-Waxman Act should be amended to provide that, in cases arising under the Act, where no other standard is provided in the Patent Act, the level of intent that should be required is “willfulness,” as that term has been and may be applied in the courts, generally. The Hatch-Waxman Act should be amended to provide a clear statutory basis for the doctrine of inequitable conduct that, in cases arising under the Act, should be applied based upon a showing of “knowing” statements or omissions of material information which were or had the effect of misleading the USPTO. Liability for such inequitable conduct, in the view of the author, should not be limited, in Hatch-Waxman cases, to “individuals” involved in the prosecution of a patent, but should extend to corporate “knowledge,” as in cases of fraud under other statutes that prohibit false statements to the Federal government. 33

Authorized Generics Should be Abolished I Authorized generics contravene the purposes of the Hatch-Waxman legislatively supervised, negotiated compromise. They “disrupt the ‘bounty’ system established by the Hatch-Waxman Act.’” The “loophole” in the Hatch-Waxman scheme that permits introduction of authorized generics during the 180-day exclusivity period, diverts a significant portion of sales that would be realized by a successful generic challenger to the authorized generic and its branded sponsor. Authorized generics negatively affect the incentive given to generic manufactures to challenge drug patents.

Authorized Generics Should be Abolished II Authorized generics may help consumers by lowering short-term prices. Authorized generics should “be banned as a strategic response to impending Paragraph IV entry, but should be allowed in their absence or after 180-day exclusivity expiration. The Hatch-Waxman Act should be amended to prohibit the introduction of an authorized generic equivalent to a branded product, either directly or indirectly, by an NDA holder, during the 180-day Hatch-Waxman exclusivity period. 35

Email DCOhly@SchiffHardin.com Thank You. D. Christopher Ohly Schiff Hardin LLP 1666 K Street, N.W. Suite 300 Washington, D.C. Phone 202-778-6458 Email DCOhly@SchiffHardin.com