Since passage of the Hatch-Waxman Act in 1984, generic drug companies have used its Abbreviated New Drug Application (ANDA) process to bring cheaper versions of brand-name drugs to market after their patents expire. In the past decade or so, generic drug companies have commonly applied for the Act’s Paragraph IV certification, which can let them sell generics years before patent expiration.
“We’ve seen a broader recognition among sophisticated businesspeople and investors of the economic opportunities associated with Paragraph IV filings,” says Morrison & Foerster partner David Doyle.
A Paragraph IV certification asserts that the branded drug patents are invalid or won’t be infringed by the generic drug. The branded drug company frequently responds with an infringement suit. The suit can trigger a 30-month stay of FDA approval. Last year the number of Paragraph IV suits reached an all-time high of 242, according to ParagraphFour.com, which tracks Paragraph IV activity.
Pursuing Paragraph IV can be a more expensive and riskier route to approval than waiting for expiration: if the generic drug company ends up losing a Paragraph IV infringement suit after it has begun marketing its generic version, it may have to pay damages. But a successful first-to file Paragraph IV applicant is entitled to a six-month market exclusivity period, during which the FDA can’t approve any other generic competitors. And that can be worth hundreds of millions to generic drug makers, says Doyle, especially in the case of blockbuster drugs such as Prozac, which was the subject of a Paragraph IV filing.