The History and Political Economy of the Hatch-Waxman Amendments

LIETZAN (DO NOT DELETE) 11/28/2018 1:51 PM The History and Political Economy of the Hatch-Waxman Amendments Erika Lietzan  Associate Professor of Law, University of Missouri School of Law. This Article was supported by a Thomas Edison Innovation Fellowship from the Center for the Protection of Intellectual Property at Scalia Law School. I benefitted from the opportunity to speak with many people involved in the process leading to enactment of the Hatch-Waxman Amendments, including Peter Hutt (then primary outside counsel for the Pharmaceutical Manufacturers of America), Gerald Mossinghoff (then-Commissioner of Patents and Trademarks), William Corr (then-Counsel to the Subcommittee on Health and the Environment of the U.S. House of Representatives Committee on Energy and Commerce under Henry Waxman), William Schultz (then attorney at Public Citizen), Henry Grabowski (then professor of economics at Duke University), and a senior member of the Congressional Office of Technology Assessment (who wished to remain anonymous). I am grateful to the faculty of the Scalia Law School for inviting me to present this paper at a faculty workshop. I am thankful for comments from Jonathan Barnett, David Bernstein, Eric Claeys, James Cooper, Rebecca Eisenberg, Brook Gotberg, Dmitry Karshtedt, Kristina Acri, Adam MacLeod, Adam Mossoff, Michael Risch, Mark Schultz, Brenda Simon, and Todd Zywicki. Finally, I am grateful for the research support of Cynthia Shearrer, Associate Law Librarian at the University of Missouri School of Law, and the research assistance of Max Mauldin (class of 2018), Alex Weidner (class of 2019), and Alec Larsen (class of 2019). 53 LIETZAN (DO NOT DELETE) 54 11/28/2018 1:51 PM SETON HALL LAW REVIEW [Vol. 49:53 I.INTRODUCTION ............................................................................ 54 II.BACKGROUND ............................................................................ 61 A. Distorted Patent Terms ..................................................... 61 1. Early Filings................................................................ 61 2. Premarket Regulation ................................................. 62 3. Patent Term Distortion ............................................... 65 4. An Emergent Problem ................................................ 66 5. Scope of the Problem .................................................. 68 B. Policy Proposals to Address Patent Term Distortion ....... 70 III.HISTORY OF THE HATCH-WAXMAN AMENDMENTS ........ 71 A. Patent Term Restoration ................................................... 74 1. The Kastenmeier Proposals ........................................ 75 2. Bipartisan Support and Passage in the Senate ............ 76 3. Emergence of Opposition in the Winter of 19811982 ............................................................................ 83 4. House Vote on the Proposal........................................ 89 B. Generic Industry Policymaking Defeats ........................... 91 1. Potential Pathways for Generic Drugs ........................ 92 i. Two Pathways for Copies of Pre-1962 Drugs ...... 92 ii. Copying Post-1962 Drugs .................................... 93 2. Developments in 1982 and 1983 ................................ 96 C. Development and Passage of the Generic Drug Bill ........ 98 D. Splinter Legislation ........................................................ 107 IV.POLITICAL ECONOMY OF THE HATCH-WAXMAN AMENDMENTS ................................................................... 111 V.CONCLUSION............................................................................. 125 I. INTRODUCTION Reform of the Hatch-Waxman generic drug framework is in the air. Changes in how the U.S. Food and Drug Administration (FDA) implements the law, as well as changes to the law itself, are under serious consideration. These policymaking discussions are taking place against a backdrop of shared assumptions about the origins and nature of the original HatchWaxman legislation—assumptions that this Article claims are wrong. The Hatch-Waxman statute, enacted more than thirty years ago and modestly revised fifteen years ago, authorized the FDA to approve generic drugs based on “abbreviated” marketing applications.1 These applications 1 See Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585; Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066. LIETZAN (DO NOT DELETE) 2018] 11/28/2018 1:51 PM HATCH-WAXMAN AMENDMENTS 55 do not contain safety and effectiveness data; instead they rely on data submitted by the companies whose drugs they copy.2 Congress also created an exemption from patent infringement so that generic firms could make and test their drugs during the terms of patents covering the original drugs.3 The scheme provided drug patent owners with an extension of their patents (one per drug)—also known as “patent term restoration”—to make up for time spent generating safety and effectiveness data before approval.4 It also promised them a window of time before generic applications could be submitted (or approved, depending on the provision).5 And it created a mechanism for generic firms and innovators to resolve patent infringement issues before generic drug launch.6 Many scholars urge reform on the ground that drug innovators “abuse” the scheme to enjoy more time on the market without generic competition. Professors Lemley, Dogan, and Carrier argue, for instance, that innovators introduce new versions of their products in a way that enables them to enjoy, inappropriately, a longer period before generic drug launch than they would otherwise enjoy.7 Professors Carrier, Paradise, and Kesselheim argue that innovators improperly decline to share samples of their patented products with generic firms that seek to use the abbreviated pathway.8 Professor Feldman argues that innovators take advantage of the Hatch-Waxman requirement that generic drugs have the same labeling as the drugs they copy, to prevent approval of generic drugs for longer than appropriate. 9 Some scholars, like Professor Shepherd, defend the status quo in the face of these arguments.10 Others urge policy reform on the ground that the scheme provides inadequate incentives for innovation. Professor Goldman and colleagues suggest, for example, that Congress should amend the statute to 2 21 U.S.C. § 355(j)(2)(A) (2018). 35 U.S.C. § 271(e)(1) (2018). 4 35 U.S.C. § 156 . 5 E.g., § 355(j)(5)(F)(ii). 6 §§ 355(b)(2)(j), 271(e)(2). 7 Michael A. Carrier & Steve D. Shadowen, Product Hopping: A New Framework, 92 NOTRE DAME L. REV. 167 (2016); Stacey L. Dogan & Mark A. Lemley, Antitrust Law and Regulatory Gaming, 87 TEX. L. REV. 685 (2009). 8 Michael A. Carrier & Brenna Sooy, Five Solutions to the REMS Patent Problem, 97 B.U. L. REV. 1661 (2017); Aaron S. Kesselheim & Jonathan J. Darrow, Hatch-Waxman Turns (...truncated)