The Evolution of Pharmaceutical Regulatory Gaming Practices

Seton Hall Law Review, May 2017

By Chelsea E. Ott, Published on 05/02/17

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The Evolution of Pharmaceutical Regulatory Gaming Practices

THE EVOLUTION OF PHARMACEUTICAL REGULATORY GAMING PRACTICES Chelsea E. Ott 1 0 Mylan Pharms., Inc. v. Warner Chilcott Pub. Ltd. , No. 12-3824, 2015 U.S. Dist. LEXIS 50026, at 1 36 (E.D. Pa. Apr. 16, 2015), internal citations omitted Brand name drug manufacturers invest approximately $2.6 billion and a decade's worth of time bringing a drug to market.1 Generic drug manufacturers are able to enter the market quickly after a brand name drug's patent expires without costly clinical research trials. After generic competitors enter the market, brand name drugs usually lose upwards of ninety percent of their market share.2 Brand name companies are upset with generic manufacturers' ability to “freeride” on their investment in research and development (R&D) and marketing. Generics claim that they are primarily able to offer lower priced products because they do not have to market their drugs or details to physicians in order to get their product into the hands of patients.3 Both brand and generic drug manufacturers serve important roles in treating and curing diseases. They are also extremely profitable. Nonetheless, in an effort to continue profiting from their initial investment, brand name manufacturers have engaged in questionable practices, such as pay-for-delay settlements and product hopping. Federal courts have reviewed such practices using nuanced antitrust frameworks and arrived at differing conclusions. Generics, meanwhile, have traditionally been protected by the federal and state government because they help to limit health care costs, but in recent - [Vol. 47:849 years it is unclear if all generics are as well-intentioned as they have been portrayed. It is unclear what steps government agencies can take at this time without being given additional powers from Congress. Part II provides a primer of the drug approval processes of both brand name and generic drugs. It examines the unique quality of the pharmaceutical market, explains the current patent system, and lays the foundation for understanding relevant antitrust law. Part III delves into how federal agencies are involved in regulating anticompetitive practices that have the potential to harm patients, specifically pay-fordelay settlements and product hopping. Part IV explores three recent product hopping cases and explains how they reached differing results. Lastly, Part V concludes. II. A PRIMER ON THE LEGAL LANDSCAPE REGARDING DRUG APPROVAL A. The Drug Approval Process, Patents, and the Hatch-Waxman Act Drug patents, while similar to U.S. Food and Drug Administration (FDA) market exclusivity rights, are distinct.4 Drug patents are property rights approved by the United States Patent and Trademark Office (USPTO).5 Patents allow their holders “to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States” for twenty years in exchange for public disclosure when the patent is granted.6 Patents may be granted at any point in the course of drug development and drugs are eligible to receive more than one patent if they meet appropriate criteria.7 Patents expire twenty years from the date of filing.8 Patents and exclusivity may run concurrently, but it is not a requirement that they do so.9 Brand name drugs are those that initially seek approval from the FDA using a New Drug Application (NDA). FDA approval is required before a drug may be introduced into interstate commerce.10 A company that has submitted a NDA will “undergo a long, comprehensive, and costly testing process, after which, if successful, 4 Frequently Asked Questions on Patents and Exclusivity, U.S. FDA (July 18, 2014), http://www.fda.gov/Drugs/DevelopmentApprovalProcess/ucm079031.htm#Whatist hedifferencebetweenpatentsandexclusivity?. 5 How Can I Better Understand Patents and Exclusivity?, U.S. FDA (Jan. 16, 2015), http://www.fda.gov/ForIndustry/FDABasicsforIndustry/ucm238582.htm. 6 35 U.S.C. § 154(a) (2006). 7 U.S. FDA, supra note 5. 8 U.S. FDA, supra note 4. 9 Id. 10 21 U.S.C. § 355(a) (2006). COMMENT the manufacturer will receive marketing approval.”11 In addition to marketing approval, the FDA will confer market exclusivity upon a drug that receives NDA approval.12 This protection can prevent the approval or market entrance of certain 505(b)(2) applications,13 as well as abbreviated new drug applications (ANDAs) for prescribed periods of time.14 The duration of the exclusivity varies by type of drug.15 The Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the Hatch-Waxman Act, has had two important effects on the pharmaceutical industry. First, generic drug manufacturers are permitted to use the streamlined ANDA process.16 Second, the first generic ANDA paragraph IV certification filer is eligible for 180 days of marketing exclusivity.17 “A generic drug product is one that is comparable to an innovator drug product in dosage form, strength (...truncated)


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Chelsea E. Ott. The Evolution of Pharmaceutical Regulatory Gaming Practices, Seton Hall Law Review, 2017, Volume 47, Issue 3,