Cheating around the Hatch-Waxman Act and an Unlikely Solution to the Problem


    Gaming Hatch-Waxman

    What is Hatch-Waxman?

    The Hatch-Waxman Amendment of 1984 was originally issued by Congress to speed up the approval of generic drugs through Abbrieviated NDAs (ANDAs).  The intent of Congress for this act was to promote pioneering research in the development of new drugs and to bring down the cost of competing generic drugs on the market.  A generic manufacturer who can establish that a new drug has bioequivalence to a previously approved drug can speed through the approval process with an ANDA.  They can “piggyback” on studies previously submitted in the NDA by the original brand drug company. Companies who apply for the ANDA must make four certifications regarding the patent that applies to the drug in question as required by Hatch-Waxman:

    (i) No such patent information has been submitted to the FDA

    (ii) The patent has expired

    (iii) The patent is set to expire on a certain date

    (iv) The patent is in valid or will not be infringed by the drug covered in the ANDA

    When a generic drug manufacturer successfully files an ANDA, they gain a 180-day exclusivity period and a 30-month stay of FDA approval pending any subsequent litigation.  This reward is given only to the first generic manufacturer to file the ANDA so any subsequent generic manufacturers would not be allowed onto the market at all.

    The Gaming Problem

    Paragraph IV certifications are a source of much legal contention.  Every time a generic drug manufacturer files an ANDA under the paragraph IV certification, the owner of the original branded drug patent can institute infringement proceedings.  However, because no other generic manufacturers would be entitled to file an ANDA after the first company filed it, patent owners often settle the dispute with a large sum of money to the first generic drug manufacturer.  The result is that the generic manufacturer agrees not to enter the market and gets a handsome “reverse payment”, while the brand drug manufacturer gains monopoly (or sometimes an oligopoly) of the market to satisfy their company shareholders.  Thus, the original intent of the Hatch-Waxman act to speed up generic drug marketing has been subverted.  This has become an increasingly frequent occurrence in the industry and is not likely to go away soon.

    Inter Partes Review (IPR) of pharmaceutical patents

    Inter Partes Review (IPR) was introduced by the America Invents Act (AIA) of 2012 as a counterpart to post-grant review at the US Patent and Trademark Office.  Both IPR and post-grant review are procedures used to challenge the validity of patent claims.  IPR was initiated as a way to challenge new patents after the 9-month eligibility window of post-grant review expired – ie. IPRs can be used for any patents filed after 2012.  As of the last year 32 IPRs have already been filed concerning Hatch-Waxman litigations by generic manufacturers.  Most IPRs are filed challenging the licenses to pharmaceutical composition, formulations and methods of treatment.

    On the face of it, IPRs have added another layer of complexity in the effort to bringing generics drugs to market efficiently.  Last week, several Senators voted against a new bill called the Protecting American Talent and Entrepreneurship Act (PATENT Act), which contains requirements concerning IPRs.  Senators Chuck Grassley, Chuck Schumer and John Coryn stated concerns that the language of new IPR rules would enable companies to game the Hatch-Waxman act.  This comes on the back of challenges like Kyle Bass, who have petitioned the use of IPRs to invalidate drug patent claims as a way to short company stocks.

    Why IPRs could in fact be a solution to gaming Hatch-Waxman

    There are some who argue that IPRs do not make it difficult for generic drugs to enter the market.  In fact a successful IPR on a pharmaceutical patent would render it invalid, enabling other generic manufacturers to immediately enter the market.  It would also make it impossible for generic manufacturers to sue the federal district court whenever they dispute a patent claim.  This would place a roadblock on the system of “reverse payments” through Hatch-Waxman litigations.  Thus, in a way, the IPR process would be detrimental for generic manufacturers who are looking for a quick way to make money through the court system – one wonders whether some Senators who are concerned with the new IPR rules are in fact protecting the monopoly held by drug companies within their constituents.  Never the less, instituting IPRs would pave the way around the dysfunctional Hatch-Waxman Act for generic drugs to become competitive in the market, bringing prices to more affordable levels for consumers.

    What can you do?

    If you are planning to become a generic drug manufacturer and file your first ANDA today, it is essential you recognize the pitfalls in legal proceedings that can affect your drug approval.  The best way to avoid delays in getting your generic drug to the market is to fully understand the latest bills affecting patent issues. Please refer to the PATENT Act for more information.  From the perspective of a consumer or a patient seeking the cheapest drugs it is essential you place pressure on the government.  Write letters to your state’s Senator and Congressmen to ask for amendments to the Hatch-Waxman Act and to the IPR procedure to prevent companies from gaming the system.  You should also reach out to the Public Patent Advisory Committeeof the USPTO and aim to attend their monthly public meetings online or in Alexandria VA.


    Gene Quinn, IPWatchdog; Senators mistaken, IPRs do not frustrate Hatch-Waxman. June 4 2015

    Gene Quinn, IPWatchdog; Patent abuse or genius? Is Kyle Bass abusing the patent system? April 8 2015.

    Christopher Noyes, Law360, New York; When Inter Partes Review Meets Hatch-Waxman Patents. September 09, 2014

    Fish and Richardson; Inter Partes Review

    The PATENT Act 2015