PHARMACEUTICAL MANUFACTURERS ASSOCIATION (PMA)
COMMENTS ON DRAFT PATENTS AMENDMENT BILL
PUBLISHED AS NOTICE 1734 OF 2002 IN GOVERNMENT GAZETTE 23841 OF 16 SEPTEMBER 2002
The Drug Price Competition and Patent Term Restoration Act of 1984, also called the Hatch-Waxman Act ("Hatch-Waxman"), fundamentally redrew the map of the pharmaceutical industry in the United States. Hatch-Waxman created the generic industry, as we know it, creating a market for generic copies of older innovative products that now approaches half of the total pharmaceutical market. At the same time, the legislation created new incentives to ensure continuing new therapies and cures for Americans. In fact, the U.S. pharmaceutical industry has now become the medicine chest to the world, creating more new products than any other country, and attracting European, Japanese and Indian companies to conduct their research and development (R&D) in the United States and to launch products here first.
Given the importance of Hatch-Waxman, it is understandable that U.S. trade partners have sought to emulate it, but they have rarely succeeded in gaining its full benefits. A true Hatch-Waxman system has three components, which work together to bring generic pharmaceuticals to market quickly, all the while encouraging innovation:
The first component lightens the burden of regulatory review for generic products, by creating an Abbreviated New Drug Application (ANDA) for generic producers to file with the U.S. Food and Drug Administration (FDA). It allows generic firms to begin testing, but not to undertake commercial activities, before the expiration of the innovator's patent.
The second component, patent term restoration (PTR), mitigates the negative impact of the increasingly complex clinical trial and FDA review process for innovative pharmaceutical products. PTR creates the possibility of patent term extensions to compensate innovators for a portion of their market exclusivity term that is lost due to lengthy FDA regulatory review periods prior to approval of new medicines, and should provide a minimum effective patent period of 14 years.
The third component was the creation of finite periods of protection for commercially valuable and confidential data in the clinical dossier, known as data exclusivity. Prior to Hatch-Waxman, the clinical dossier for an innovative product was treated as permanently proprietary information. Data Exclusivity represents a benefit provided to the generic industry, which is now allowed to rely on the results of the clinical data after the expiration of a period that should be no less than five years.
Hatch-Waxman sought to "balance the benefits of greater competition from generic drugs with the benefits of having sufficient intellectual property protection to preserve the incentives to make the large, up-front, and risky expenditures necessary to develop new drugs successfully." These three components are essential elements of the so-called Bolar system. Many countries have sought to emulate the American Bolar system in their national legislation but have failed to incorporate all three elements, which provide a critical balance.
Hatch-Waxman: Early Working
Hatch-Waxman provides for early entry of generic products of older innovative medicines by creating an Abbreviated New Drug Application (ANDA) for generic drug manufacturers to file with the U.S. Food and Drug Administration (FDA). It allows generic firms to begin testing, but not commercial activities, before the expiration of the innovator's patent. This component of Hatch-Waxman, gives American generic manufacturers a tremendous advantage over the status quo ante as well as over local manufacturers in nations lacking early working. Since 1984, many U.S. trade partners have passed legislation allowing for early entry of generic manufacturers, but generally have not included effective data exclusivity or full patent term restoration, both of which are essential elements of the delicate balance contained in Hatch-Waxman.
As a result of Hatch-Waxman, generic manufacturers have gained many advantages and market opportunities, from the creation of the ANDA to the ability to reference formerly exclusive proprietary data created by the innovator. These new benefits have enabled generic producers to increase their share of the pharmaceutical market from less than 20% before Hatch-Waxman was enacted in 1984 to the growing 47% of the total market that the generics held in 2000. In addition, generic producers are now able to target top-selling innovative drugs. As a result, nearly all of the top-selling innovative drugs face generic competition when their patents expire. Foreign generic manufacturers, regardless of their base country, benefit enormously from ANDAs and are able to reference innovator clinical data and to seek FDA regulatory approval during the period the innovator’s products remain under patent.
As a result of these significant advantages provided under Hatch-Waxman, foreign generic manufacturers have opened U.S. based subsidiaries. Ranbaxy, India’s leading pharmaceutical manufacturer, opened an American subsidiary after entering the American generic market in 1997. Since 1997, its American generic production has experienced growth two fold. Another leading Indian company, Dr. Reddy’s Labs, also expanded into the U.S. market as a result of Hatch-Waxman-related benefits, and has received 12 ANDA approvals and 2 tentative ANDA approvals from the FDA. The U.S. market is the focus of Dr. Reddy’s generic business and the company plans to target more than 60% of the drugs coming off patent in America between 2002 and 2008.
Many foreign trade partners have either implemented, or are contemplating passage of, amendments to their patent laws to allow for early working. Canada’s Bolar-style provision went beyond early working for regulatory purposes, and was challenged by the European Union in the WTO.. The WTO panel, while upholding the validity of early working for the limited purpose of gaining regulatory approval, held in favor of the EU on the point that manufacturing, stockpiling, and any other commercial activities are not permissible during the period of patent protection.
In summary, early working has provided substantial benefits to the generic industry, but has also increased the need for continued innovation. In this light, it is critical, that any amendments to patent laws to provide for early working of patented products for limited regulatory purposes also include effective patent term restoration and data exclusivity to strike the necessary balance between early entry for generic products and continued innovation of new therapies and cures.
Hatch-Waxman: Patent Term Restoration (PTR)
Patent Term Restoration (PTR) restores some of the effective patent life that is lost in the increasingly complex clinical trial and FDA review process for innovative pharmaceutical products. Pharmaceutical inventions receive the same standard term of 20 years from the date that the patent application is filed, as do all other patented products, but, after completion of clinical research and regulatory approval, the effective patent life for a new pharmaceutical product is approximately 11 years. PTR creates the possibility of patent term extensions to compensate innovators for a portion of the patent exclusivity period that is lost due to lengthy FDA regulatory review periods.
The patent term restoration component is one of the three elements of Hatch-Waxman and has made its way, in slightly modified form, into the laws of several nations.
In some countries, PTR was introduced as a result of U.S. bilateral trade agreements, as in the 2000 Free Trade Agreement between the United States of America and Jordan. This Agreement, which was designed to open trade between the United States and Jordan and encourage Jordanian economic reform, provides that "Each Party shall make available an extension of the patent term to compensate the patent owner for unreasonable curtailment of the patent term as a result of the marketing approval process."
In contrast, patent term restoration was introduced in Israel in 1998 as part of the legislation allowing for early working of patented products for the purpose of gaining regulatory approval in Israel, the U.S. and Europe. The extension is limited to 14 years from the first marketing approval in any country belonging to the Paris Convention, and, as a result, an effective patent term of 14 years is generally not ensured in Israel.
While the Law in Australia is modeled on the Hatch-Waxman Act, it provides less patent term restoration than do the Israeli Bolar-style amendments. The Australian Patent Act of 1990 provides for patent term extensions only if the regulatory process lasted more than 5 years and caps the extension at five years. In addition, the law facilitates generic access by permitting otherwise infringing activities during the period of patent term extension. That is, the extended term does not carry with it the same bundle of patent rights against infringement, as does the original patent term.
The EU provides patent term restoration, through the use of Supplementary Protection Certificates (SPCs), as a stand-alone measure. SPCs provide an effective patent term of 15 years from the date of first marketing approval. The extension covers only the pharmaceutical product that was the subject of the regulatory process, not the entire scope of the original patent.
All of the different forms of PTR cited above strive to encourage innovation, but their efficacy in doing so is dependent on whether they provide a reasonable effective patent term. Any patent term restoration component of Bolar legislation that is modeled on the US statute should establish a minimum patent term of no less than 14 years, as set or exceeded in American, European, and Jordanian law.
Hatch-Waxman: Data Exclusivity
Hatch-Waxman created a new intellectual property right, with its own term of protection, known as data exclusivity. Data Exclusivity protects commercially valuable and confidential data in the clinical dossier submitted by innovative firms to the U.S. Food and Drug Agency (FDA). Prior to Hatch-Waxman, the clinical dossier for an innovative product remained permanently proprietary, which the FDA would never disclose or use to evaluate generic products; no third party could ever access or cite the innovator’s data. The largest beneficiary of the finite period of data exclusivity that was included in Hatch-Waxman is the generic industry, which since 1984 has been able to rely on the results of the clinical data after the expiration of the period of data exclusivity.
Hatch-Waxman defined the period of confidentiality or protection from use or reliance as 5 years for new chemical entities and 3 years for novel applications of old chemical entities. By not even permitting the submission of an ANDA during the first five years after the originator’s drug received marketing approval, regardless of the patent status of the originator’s drug, the American data exclusivity term restricts the actions of regulatory bodies involved in the approval of pharmaceutical products. In order for data exclusivity to be effective as a component of a Bolar system, it must include protection for all clinical and preclinical data including dosing, drug interactions, and drug efficacy. It must also not be linked in any way to the existence of a patent.
The World Trade Organization (WTO) Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) requires its Member countries to provide data exclusivity. TRIPS Article 39.3 requires WTO members to provide a period of data exclusivity during which all proprietary information submitted to a regulatory body is to be protected from unfair commercial use. Other WTO members have adopted a variety of conforming data exclusivity provisions.
European Union members have two options for terms of data exclusivity. The minimum set by Article 10 of Directive 2001/83 is six years, with ten years assigned to "high technology" products. Countries also have the option of granting ten years of exclusivity for all products; about half of the EU countries have done this. The EU is in the process of convergence for a standard ten-year period of data exclusivity. As additional EU-aspirants complete accession, they will come under the same directive and will enact data exclusivity legislation or extend the term of their current legislation. In September 2001, Poland, for example, enacted legislation ensuring the combination six and ten year exclusivity terms, effective on accession to the EU.
China, as part of its obligations undertaken in association with its recent accession to the WTO, agreed to implement data exclusivity with a term of protection of six years. The language of the Report of the WTO Working Party on the Accession of China, in which China committed itself to provide TRIPS-compliant data protection, is indicative of the protection envisaged by the negotiators of TRIPS Article 39.3. In the report, the representative of China confirmed that China would introduce and enact laws and regulations "to make sure no person, other than the person who submitted such data, could, without the permission of the person who submitted the data, rely on such data in support of an application for product approval for a period of at least six years from the date on which China granted marketing approval to the person submitting the data. During this period, any second applicant for market authorization would only be granted market authorization if he submits his own data. This protection of data would be available to all pharmaceutical and agricultural products which utilize new chemical entities, irrespective of whether they were patent-protected or not."
Because Hatch-Waxman ended the prior practice of treating the innovator’s clinical dossier as permanently proprietary information, the creation of a fixed period of protection through the mechanism of data exclusivity is an integral element of Hatch-Waxman. Data Exclusivity actually represents a benefit provided to the generic industry, which is now allowed to rely on the results of the clinical data after the expiration of a period of Data Exclusivity. Any Bolar-style system that omits data exclusivity, or fails to provide a minimum period of protection of at least five years or more, fails to strike the necessary balance and unduly favors generic manufacturers at the expense of innovation.