The last twenty years have witnessed dramatic pharmaceutical breakthroughs that have helped reduce deaths and disability from heart disease, cancer, diabetes, and many other diseases. As a consequence, millions of people around the world are leading longer, healthier, and more productive lives. These medical miracles, however, often come with hefty price tags, raising vexing questions about how patients, employers, and public and private health plans can continue to pay for them.
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 are also 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. And they are exacerbating the Medicaid funding crisis that all of us are hearing about from our Governors back home as they struggle to bridge growing shortfalls in their State 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. To that end, the legislation has succeeded to a large degree. Prior to Hatch-Waxman, it took three to five years for generics to enter the market after the brand-name patent expired. Today, lower-cost generics often enter the market immediately upon the expiration of the patent. As a consequence, consumers are saving anywhere from $8 to $10 billion a year by purchasing generic drugs.
Moreover, there are even greater potential savings on the horizon. Within the next four years, the patents on brand name drugs with combined sales of $20 billion are set to expire. If Hatch-Waxman were to work as it was intended, consumers could expect to save between 50 and 60 percent on these drugs as lower-cost generic alternatives become available after these patents expire.
Despite its past success, it is becoming increasingly apparent that the Hatch-Waxman Act has been subject to abuse. While many pharmaceutical companies have acted in good faith, there is mounting evidence that some brand and generic drug manufacturers have attempted to "game" the system in order to maximize their profits at the expense of consumers.
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 to tie generic manufacturers up in litigation over secondary patents 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, and this bill 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 issues.
I was also disturbed by the testimony of the Chairman of the Federal Trade Commission, Timothy Muris, before the Commerce Committee. Mr. Muris' testimony cites a number of examples where branded and generic drug manufacturers have "gamed" the system and attempted to restrict competition beyond what the Hatch-Waxman Act intended.
One case cited in Mr. Muris' testimony involved the producer of the heart medication Cardizem CD, which brought a lawsuit for patent and trademark infringement against the generic manufacturer in early 1996. Instead of asking the generic company to pay damages, however, the brand name manufacturer offered a settlement to pay the generic company more than $880 million in return for keeping the generic drug off the market. Meanwhile, users of Cardizem – which treats high blood pressure, chest pains and heart disease – were paying about $73 a month when the generic would have cost about $32 a month.
The compromise we are introducing today will make cost-effective generic drugs more available by restoring the original intent of Hatch-Waxman and closing the loopholes which are delaying competition and slowing generics' entry into the market.
First, our amendment 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 generics off the market and extend their market exclusivity indefinitely. It will ensure that key patent issues are adjudicated before the generic goes to market while, at the same time, ensuring that improper, late-listed patents are not able to obstruct market competition. For subsequent patents for which no automatic 30-month stay is available, a brand name company can still obtain a preliminary injunction based on merit to protect their patent rights and keep the generic product off the market.
Our amendment would also prevent the current 180-day exclusivity provision of Hatch-Waxman from becoming a bottleneck for subsequent generic competitors. Under Hatch-Waxman, the first generic drug company to file an application with the FDA certifying that the patents on a brand name product are either invalid or will not be infringed is granted 180 days of market exclusivity once their application is approved. Entry to the market for other generics is therefore frozen until the 180-day period runs out on the first-to-file. The 180-day clock does not begin running until the generic company goes to market or litigation is resolved.
This provision has made it attractive for a brand name to pay the first-to-file generic company to stay off the market, which effectively staves off other competition for an extended period. Under our amendment, the first generic applicant would forfeit its 180-day exclusivity period if it failed to go to market or entered into an agreement with a brand-name company that the FTC determines to be anti-competitive. If the first generic applicant forfeits its 180-day exclusivity, it would roll to the next generic company in line. If there is no second company in the pipeline with a product ready to go, any generic with an approved application can go to market immediately.
Mr. Chairman, the original Hatch-Waxman Act was a carefully constructed compromise that balanced an expedited FDA approval process to speed the entry of lower-cost generic drugs into the market with additional patent protections to ensure continuing innovation. Our amendment restores this balance by closing the loopholes that have reduced the original law's effectiveness in bringing lower-cost generic drugs to market 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.
In closing, I want to thank my colleague from North Carolina for his leadership. I also want to thank the Ranking Minority Member, Senator Gregg and his staff for all of their hard work. I know that he is committed to addressing these problems so that we can bring more affordable generic products to the market more quickly, and I sincerely regret that the clock ran out before we were able to complete negotiations that would certainly have resulted in a more broadly bipartisan bill. I do, however, look forward to working with him to resolve some of these few remaining issues prior to going to the Floor.
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