The federal government is tackling a thorny legal issue that affects the pocketbooks of employers who provide health insurance and millions of consumers who face annual double-digit increases in the cost of prescription drugs: how to bring low-cost generic drugs to the marketplace more quickly while protecting the interests of brand-name drug makers, who invest millions of dollars in research, development and testing.

	Daniel Marsula/Post-Gazette

Last summer, the Federal Trade Commission issued a report summarizing the findings of a study that sought to determine if the current law governing generic drug entry into the marketplace serves as a barrier to entry. Specifically, the study looked at situations where generic companies tried to enter the market before the expiration of a brand-name pharmaceutical company's patent covering the drug for which generic approval was sought.

The study found that certain provisions of the law were susceptible to manipulation or "gaming" and actually delayed the availability of generic drugs. Since the report was issued, there has been a flurry of activity both in Congress and at the Food and Drug Administration, including new proposed FDA guidelines, to address some of the issues raised in the report.

Congress first addressed this issue in 1984. At that time brand-name companies were losing much of their 20-year patent term because of the long FDA approval process. Generic companies were reluctant to invest in developing and testing their own drugs for fear of infringing on brand-name company's patents. Generic companies were required to submit safety and efficacy studies to the FDA to obtain approval of the generic drug, even though the brand-name companies had already done these kinds of studies on the drug to win FDA approval. This testing was a significant barrier to the development of generic versions of many drugs. The FDA estimated that by 1984 there were 150 brand-name drugs whose patents had expired for which there was still no generic equivalent.

Congress passed the Drug Price Competition and Patent Term Extension Act, also known as the Hatch-Waxman Act, to balance the competing interests of brand-name and generic pharmaceutical companies and to eliminate perceived inequities in the patent and drug approval process.

It takes an average of 12 years from initial testing of a drug to FDA approval. Fewer than 1 percent of drug compounds make it through this long and costly process. To reward the "pioneer" companies for their efforts in developing new drugs and yet clear the path for generic drug entry, the Hatch-Waxman Act allowed for a patent term extension if any part of the term was lost due to regulatory delay. The act also provided an expedited approval process for generic drugs known as the "abbreviated new drug application" (ANDA), which allowed generic companies to bypass safety and efficacy testing if they could prove that their drug was bioequivalent, i.e., had the same effect in the body, to the brand-name drug.

Under the Hatch-Waxman Act, however, a generic company that files an ANDA claiming that the patent covering the drug is either invalid or not infringed upon by the generic company's activities or is otherwise unenforceable may encounter a major stumbling block to bringing generic drugs to market.

When a generic drug company files an ANDA, the brand-name pharmaceutical company receives notice that an ANDA referencing the brand-name company's patent has been filed. The brand-name company then has 45 days within which to file suit for patent infringement. If it files suit, the FDA automatically puts approval of the generic drug on hold for 30 months. The FDA may not approve the generic drug until the 30 months elapse, the patent expires or the brand-name company loses its infringement suit.

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The FTC study found that the 30-month stay provisions were susceptible to manipulation. A generic company would file an ANDA. The brand-name company would sue within the requisite 45-day period, triggering a 30-month stay, and then list an additional patent on the drug with the FDA. The generic company then had to modify its ANDA, notice would be sent, suit filed and an additional 30-month stay would be triggered. In the case of the drug Paxil, for example, the brand-name company obtained five 30-month stays, each related to a different patent listed after the initial filing. The FTC found that manipulation of the 30-month stay provisions in many cases delayed entry of the generic drug, ultimately harming consumers, who are denied the benefit of lower-cost drugs.

The FTC made several recommendations, including limiting to one the number of automatic 30-month stays available to a brand-name company on a generic challenge for a drug. A number of new bills have been introduced in the House and Senate, including Senate Bill 54, the "Greater Access to Affordable Pharmaceuticals Act of 2003," which follows through on the FTC recommendation and limits the number of 30-month stays to one per ANDA.

When a brand-name pharmaceutical company files a new drug application, it must provide information to the FDA on U.S. patents with claims that cover the drug or a method of using the drug, or which might be infringed on by a party manufacturing, selling or using the drug if that party did not have a license. These patents are then listed in the FDA Orange Book, a publication that lists all approved drug products. The FDA is considering new regulations that would change the listing requirements, making it more difficult for generic companies to design around or avoid infringing the brand-name companies' existing patents.

Much work remains, both at the legislative and regulatory levels, to address the problems identified by the FTC. Much will be changing in the coming months as the federal government grapples with the complex problem of promoting the development of new drugs and providing consumers access to existing drugs at affordable prices.

Employers struggling to cover ever-increasing employee health insurance premiums have a stake in this issue and may want to weigh in on it with their congressmen.