Drug Companies Use Loopholes in Hatch-Waxman Act To Delay Generic Competition, FTC Report Says

The Federal Trade Commission today plans to release a report finding that brand-name pharmaceutical companies have used loopholes in the 1984 Hatch-Waxman Act to delay generic drug competition, the Wall Street Journal reports. The report, which states that the loopholes "continue to have the potential for abuse" and "may have more significance in the future" if they are not closed, is "expected to bolster" efforts in the Senate this week to pass legislation amending the law (Harris/McGinley, Wall Street Journal, 7/30). Under the Hatch-Waxman law, brand-name drug companies can receive a 30-month patent extension from the FDA when they file a lawsuit against generic drug makers for alleged patent infringement (Pear, New York Times, 7/30). The FTC report finds that in eight cases since 1992, brand name drug makers filed for additional patents on products after already receiving a 30-month extension on an original patent. The new patents led to additional delays in generic competition ranging from four to 40 months, the report states (Wall Street Journal, 7/30).

The report, based on documents subpoenaed from pharmaceutical companies, recommends that Congress change the law to allow only one 30-month patent extension for each drug (New York Times, 7/30). The report also asks Congress to close another loophole in the law that gives the manufacturer of the first generic competitor of a drug a six-month window of exclusive selling rights. In addition, the report suggests that Congress require brand-name and generic drug makers to file with the FTC the details of any out-of-court settlements in patent lawsuits, a move designed to ensure competition. In some cases, brand-name companies have paid generic makers to delay their products, the Journal reports.

The report's recommendations are similar to a bill (S 812) under consideration by the Senate that would allow brand-name drug makers to receive only one 30-month extension per product, the Journal reports (Wall Street Journal, 7/30). The bill also would prevent brand-name drug companies from paying generic manufacturers to keep their products off the market and would allow generic drug companies to legally challenge "frivolous patents," including "superficial changes" in a treatment's color or physical design intended only to "stifle competition" (California Healthline, 7/19). Sen. Edward Kennedy (D-Mass.), who supports the legislation, said yesterday that the FTC report "amply demonstrate[s] the abuses" of the Hatch-Waxman law and "provide[s] decisive support" for the proposed bill. Kathleen Jaeger, president and CEO the Generic Pharmaceutical Association, added that her organization was "very pleased" with the FTC findings. But Sen. Orrin Hatch (R-Utah), who co-sponsored the original law, said he "favored alternative approaches" to modifying the loopholes. "We shouldn't be ramming this [new] bill through the Senate," he said, adding, "We need to do what's right -- not what's politically expedient." A spokesperson for the Pharmaceutical Research and Manufacturers of America said the group was "still considering its response" (Wall Street Journal, 7/30).