Prescription drug spending in the United States has increased by 92 percent over the past five years to almost $120 billion. These soaring costs are a particular burden for the millions of uninsured Americans as well as for those seniors on Medicare who lack prescription drug coverage. Many of these individuals are simply priced out of the market, or forced to choose between paying the bills or buying the pills that keep them healthy.
Skyrocketing prescription drug costs also are putting the squeeze on our nation's employers who are struggling in the face of double-digit annual premium increases to provide health care coverage for their workers. High prescription drug prices also are exacerbating the Medicaid funding crisis facing state governments as they struggle to bridge growing shortfalls in their budgets.
In 1984, the Hatch-Waxman Act made significant changes in our patent laws that were intended to encourage pharmaceutical companies to make the investments necessary to develop new drug products, while simultaneously enabling their competitors to bring lower-cost, generic alternatives to the market. As a consequence, consumers are saving anywhere from $8 billion to $10 billion a year by purchasing generic drugs. Despite its past success, it is becoming increasingly apparent that the Hatch-Waxman Act has been subject to abuse.
News reports, for example, have detailed how the manufacturer of the lucrative drug Prilosec, whose patent was set to expire last fall, has used the automatic 30-month stay in current law to tie generic manufacturers up in litigation in order to keep a generic version of the drug off the market. In 2000, Prilosec was the best-selling drug in the world and generated an estimated $4.7 billion in U.S. sales. Maine's Medicaid program spent $8.2 million on Prilosec — a cost that could be cut in half if a generic alternative were available. In Maine, $4 million is a great deal of money — money that could be spent on other equally important health care.
I was disturbed by the recent testimony of the Chairman of the Federal Trade Commission, Timothy Muris, before the Commerce Committee, which cited other abuses in the law. Mr. Muris provided examples where branded and generic drug manufacturers have "gamed" the system and attempted to restrict competition. For example one brand-name manufacturer paid off a generic manufacturer so that it would not bring its lower-cost generic to market.
To stop this abuse, I have written legislation with Sen. John Edwards (D-NC) to tighten the Hatch-Waxman Act that will lead to more affordable generic drugs, thus saving consumers billions of dollars. It will make lower-cost generic drugs more available by restoring the original intent of Hatch-Waxman and by closing the loopholes that are delaying competition and slowing the availability of generic drugs.
Currently, brand-name companies can delay a generic drug from going to market for years. A "new" patent for an existing drug is awarded for merely changing the color of a pill. The proposed legislation would limit brand name manufacturers to a single 30-month stay for patents listed at the time of the brand product approval. This will eliminate the brand-name manufacturers' ability to "stack" multiple and sequential automatic 30-month stays during patent litigation in order to keep generic medicines off the market and extend their market exclusivity indefinitely.
Litigation may arise when a generic company challenges a brand-name patent. If the generic company succeeds, it receives an exclusive 180 day period to market its product before other generic manufacturers are allowed to do the same. Under my proposed legislation, failure by the generic company to market a lower-cost drug within the 180 day period forfeits the right to another manufacturer. In addition, a generic company successful in challenging a patent will lose its exclusive marketing right if it enters into an agreement with a brand-name company deemed by the Federal Trade Commission as anti-competitive.
The original Hatch-Waxman Act was a carefully constructed compromise that balanced an expedited Food and Drug Administration approval process to speed the entry of lower-cost generic drugs into the market with patent protections to ensure continuing innovation. The amendment that I coauthored restores balance by closing the loopholes that have reduced the original law's effectiveness in bringing low-cost generic drugs to consumers more quickly. Increasing access to these lower-cost alternatives is all the more important as we begin work to provide an affordable and sustainable Medicare prescription drug benefit.