Hatch-Waxman 101

Fish & Richardson

Fish & Richardson

Pharmaceutical patents have proven to be a highly effective incentive for groundbreaking innovation. However, corresponding drug prices have long been an animating issue in American law and policy. Many proposals to lower the cost of prescription medications have been put forward over the years, but one of the longest-standing and most effective is the Hatch-Waxman Act and the legal scheme it established to regulate the relationship between branded and generic drugmakers.

This article is a high-level overview of the core concepts of the Hatch-Waxman Act and related Hatch-Waxman litigation.

The Hatch-Waxman Act: The great compromise

The Hatch-Waxman Act (officially the Drug Price Competition and Patent Term Restoration Act) was enacted in 1984. The Act is, at its core, a compromise that was intended to strike “a balance between two potentially competing policy interests—inducing pioneering development of pharmaceutical formulations and methods and facilitating efficient transition to a market with low-cost, generic copies of those pioneering inventions at the close of a patent term.” Novo Nordisk A/S, et al. v. Caraco Pharmaceutical Laboratories, Ltd., et al., No. 2010-1001 (Fed. Cir., April 14, 2010), at 2.

To balance these two competing interests, the Hatch-Waxman Act grants both the branded industry and the generic industry a set of benefits.

Branded drug companies receive:

  • A five-year filing exclusivity for new chemical entities, during which time no other drugmaker may file an application for approval of a generic version of the product
  • A three-year market exclusivity for improvements to new chemical entities that have already been approved (e.g., extended-release formulations, nano-particulate forms of a drug, etc.)
  • Eligibility for a patent term extension for the period of time the patented product was under Food and Drug Administration review

Generic drugmakers receive:

  • The ability to rely on branded drugmakers’ clinical data when submitting applications for approval of generic versions of branded products
  • A 180-day generic drug exclusivity for the first generic drugmaker to file a Paragraph IV certification against a branded drugmaker’s patents (more on exclusivities and Paragraph IV certifications below)
  • A safe harbor, under which the generic drugmaker may develop its product free of the threat of a patent infringement suit

Both parties receive the opportunity for a court to decide patent disputes prior to the launch of a product.

Key Hatch-Waxman concepts

Routes to approval

Branded drugmakers (also known as “innovator” drugmakers) seek FDA approval for their products through New Drug Applications (NDAs) under § 505(b)(1) of the Federal Food, Drug, and Cosmetic Act. Approval of an NDA requires the sponsor to conduct several phases of clinical trials showing that the drug is safe and effective for its proposed use. The sponsor then submits its data to FDA for review. This process is lengthy and expensive; the approval timeline for NDA applicants generally is about 9-15 years, and clinical trials can cost tens of millions of dollars to conduct. (See Figure 1 below.)

Figure 1: Drug development – a long and risky road

Graphic showing a typical drug development timeline, which takes about 9-15 years to complete.

Generic drugmakers seek approval for their products through Abbreviated New Drug Applications (ANDAs) under § 505(j) of the FDCA. Prior to the passage of the Hatch-Waxman Act, generic drugmakers were prohibited from relying on the proprietary data that branded drugmakers submitted to FDA, meaning that generics were required to run their own safety and efficacy trials when developing generic versions of branded drugs. The Hatch-Waxman Act permits generics to rely on such data. Rather than repeating clinical trials, the generic applicant need only show that its product is “bioequivalent” to the branded product (i.e., the drug works the same way and is as effective as the reference product). This relaxed standard results in significant time and cost savings for generic applicants, with the approval timeline for an ANDA applicant generally being about 18-36 months. (See Figure 2 below.)

Figure 2: Drug development, patent protection, and generic competition timelines

Graphic showing overlays of the drug development, patent protection, and generic competition timelines. Generics enjoy a much shorter timeline to drug approval than branded drugmakers.

Both branded and generic drugmakers may also submit NDAs under § 505(b)(2) of the FDCA, which are commonly referred to as “paper NDAs.” These applications are for products that contain modifications to previously approved products for which clinical trials are required. These modifications could include, for example, changes in strength, changes to the active ingredient, and new indications. Paper NDAs are somewhat of a hybrid of NDAs and ANDAs; the clinical trials required are not as extensive as those required for NDAs, but not as relaxed as those for ANDAs.


Branded drugmakers are entitled to certain exclusivities under the Hatch-Waxman Act. Generally, an exclusivity is a period of time when a branded drug is protected from generic drug competition in the market. Such exclusivities are available for drugs, combinations of drugs that are regulated as drugs, and new antibiotics. Regulatory exclusivities operate independently of patents, and the terms of exclusivities and patents may or may not run concurrently.

Five-year filing exclusivity

Also known as the five-year “data” exclusivity, the filing exclusivity prohibits the filing of an ANDA or paper NDA for five years after the approval of a new active moiety. However, if the branded drugmaker has listed patents in FDA’s Orange Book and a generic drugmaker plans to challenge those patents, the generic drugmaker can file an ANDA after only four years (more on the Orange Book and patent challenges below).

Three-year marketing exclusivity

The three-year marketing exclusivity prohibits FDA from approving an ANDA or paper NDA for three years following the approval of an NDA for a drug product that was previously approved but that contains an improvement for which clinical trials are required. Examples of such improvements include changes in indications and dosing regimens and switches from prescription to over-the-counter availability. While an applicant may submit an ANDA or paper NDA during this time, FDA will not approve it until the expiration of the exclusivity period.

Pediatric exclusivity

Pediatric exclusivity is available for drugs requiring clinical studies in pediatric populations and is intended to encourage the development of drugs for children. It applies to both drugs and biologics and protects the product’s active moiety, as well as all indications, dosages, and strengths. The exclusivity period is six months in addition to all other exclusivities. Orange Book-listed patents for pediatric drugs also receive an extra six months of protection (more on the Orange Book below).

Orphan drug exclusivity

An orphan drug is a drug with a target patient population of less than 200,000 or for which there is no expectation of cost recovery. The orphan drug exclusivity is for a period of seven years and is intended to encourage drugmakers to invest money into developing drugs for small patient populations that may not be profitable. During the exclusivity period, FDA may not approve any other application containing the same active ingredient for the same indication unless the product is clinically superior to the approved product.

Listings of patents: The Orange Book

The Orange Book is FDA’s official record of approved drug products, as well as any patents covering those drugs and any exclusivities to which they are entitled. To be eligible for listing in the Orange Book, a patent must claim a drug or a method of using a drug for which a claim of patent infringement reasonably could be asserted. This includes drug substance patents (i.e., active ingredients), drug product patents (i.e., formulations and compositions), and method of use patents. Patents related to the packaging of a drug, the process by which a drug is manufactured, or any metabolites or intermediates of a drug are ineligible for listing in the Orange Book.

To submit a patent for listing in the Orange Book, the NDA sponsor must submit certain patent information (FDA Form 3542) under penalty of perjury, including:

  • The patent number
  • The date on which the patent was issued
  • The expiration date of the patent
  • The name and contact information of each owner of the patent
  • The name and contact information of the agent or representative
  • The name and contact information of the NDA holder
  • Whether the patent has previously been submitted for listing in the Orange Book in connection with the drug product
  • A drug substance code (for active ingredient patents), drug product code (for formulation or composition patents), or patent use code (for method of use patents)

Critically, the NDA sponsor must submit its Form 3542 within 30 days of approval of an NDA or supplement. If submitted after 30 days, generic applicants with pending ANDAs are not required to certify against the NDA sponsor’s patents (more on patent certification below). NDA sponsors must also submit new patents (i.e., those issued after NDA approval) within 30 days to perfect their issue date in the Orange Book.

Safe harbor

Prior to the Hatch-Waxman Act, generic drugmakers could not begin the process of developing their products until the expiration of the branded drugmaker’s patents, as performing clinical trials with the patented drug prior to patent expiration was an act of patent infringement. This scheme created an artificial period of exclusivity for branded drugmakers, who continued to enjoy market exclusivity for the period after their patents expired but before generics had completed drug development and received FDA approval to launch. The Hatch-Waxman Act eliminated this extra period of protection by placing generic drug development activities within a “safe harbor” that protected them from patent infringement lawsuits. Under § 271(e)(1) of the Hatch-Waxman Act, “[i]t shall not be an act of infringement to make, use, offer to sell within the United States or import into the United States a patented invention…solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use or sale of drugs or veterinary biological products.”

The Supreme Court has interpreted the scope of the safe harbor broadly, holding that it “extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the FDCA. This necessarily includes preclinical studies of patented compounds that are appropriate for submission to FDA in the regulatory process. There is simply no room in the statute for excluding certain information from the exemption on the basis of the phase of research in which it is developed or the particular submission in which it could be included.” Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005).

Patent certifications

While the Hatch-Waxman Act relieved generic drugmakers from the threat of patent infringement suits during the drug development process through the safe harbor, it created a new act of infringement for filing ANDAs. Under § 271(e)(2) of the Act, the filing of an ANDA or a paper NDA is an act of infringement “if the purpose of such submission is to obtain approval...to engage in the commercial manufacture, use, or sale of a drug...before the expiration of such patent.” The act of infringement under § 271(e)(2) is the filing of the ANDA rather than the activities leading up to the filing of the ANDA, as those activities are within the safe harbor. The filing of an ANDA is an artificial act of infringement that can trigger Hatch-Waxman litigation.

When a generic drugmaker submits an ANDA, it must make one of the following four certifications about its standing with respect to each patent listed in the Orange Book that covers the product at issue:

  • Paragraph I: No patent information in the Orange Book
  • Paragraph II: The relevant patent(s) have expired
  • Paragraph III: The relevant patent(s) are in force, but the generic will not launch until patent expiration
  • Paragraph IV: The relevant patent(s) are invalid or will not be infringed by the manufacture, use, or sale of the drug for which the application is submitted

FDA may approve Paragraph I and Paragraph II ANDAs whenever the applications are ready for approval. It may approve Paragraph III ANDAs whenever the relevant patent(s) expire and the applications are ready for approval. Paragraph IV ANDA applicants face a more complex FDA approval process.

Paragraph IV certifications

ANDA applicants who make Paragraph IV certifications must state:

  • That an application that contains data from a bioequivalence or bioavailability study has been accepted for filing
  • That it is seeking approval to engage in the commercial manufacture, use, or sale of the listed drug before the expiration of the listed patent(s)
  • The factual and legal basis the applicant believes that the patent(s) are invalid or will not be infringed

Once a Paragraph IV ANDA applicant receives an acknowledgement from FDA that its ANDA has been received, the generic drugmaker has 20 days to send a notice letter to the branded drugmaker informing it that the generic drugmaker has filed a Paragraph IV certification.

Section viii “carve-outs” and “skinny labels”

Section 505(j)(2)(A)(viii) of the FDCA allows generic drugmakers to launch generic versions of branded drugs even when certain of the branded drugmaker’s patents are still in force so long as the generic drugmaker “carves out” those patented uses from its product label. To illustrate: Assume that Drug X is approved for methods of treating Condition A, Condition B, and Condition C. While the branded drugmaker holds patents on all three methods of treatment, only the patent for Condition C is in effect at the time the generic drugmaker wishes to launch its product. The generic drugmaker may launch its generic product for Conditions A and B but must carve out Condition C from its label. This is known as launching with a “skinny label” and is an effective strategy for generic drugmakers to get their products to market without waiting for the carved-out patents to expire or challenging them through Paragraph IV certifications.

Patent challenges and Hatch-Waxman litigation

As discussed above, the filing of an ANDA for a generic version of a patented drug is an artificial act of infringement. As such, a branded drugmaker can initiate patent infringement litigation against a Paragraph IV ANDA applicant as soon as it receives the generic drugmaker’s Paragraph IV notice letter. If the branded drugmaker files suit within 45 days of receiving the Paragraph IV notice letter, FDA will stay approval of the ANDA for up to 30 months (more on the 30-month stay below). If the drugmaker does not file suit within 45 days, FDA may approve the ANDA at its discretion.

Benefit to branded drugmakers: 30-month stay of approval of ANDA

Branded drugmakers who file patent infringement suits within 45 days of receiving a generic drugmaker’s Paragraph IV notice letter are entitled to a stay of approval of the ANDA pending the outcome of the patent infringement suit (up to 30 months, although this period can be extended or shortened by the court). If FDA determines that the ANDA is ready for approval but is blocked by a patent, exclusivity period, or stay, it will grant tentative approval. Upon the expiration of the blockage (e.g., the stay expires, the generic wins the infringement suit, or the parties settle the matter), the ANDA applicant may request full approval from FDA.

Benefit to generics: 180-day market exclusivity

Filing an ANDA with a Paragraph IV certification is risky for generic drugmakers, as it exposes them to patent infringement liability. To encourage generics to challenge branded drugmakers’ patents — thereby potentially getting their products to market sooner than the expiration of those patents — the Hatch-Waxman Act provides a 180-day period of market exclusivity for the first generic drugmaker to successfully challenge a branded drugmaker’s patent. During that 180-day period, FDA may not approve any other ANDA for the relevant product, but this exclusivity may be shared if the first ANDAs are filed on the same day. This exclusivity can be immensely valuable for generic drugmakers due to state-level mandatory substitution laws, which require substitution of a therapeutically equivalent generic product for a branded product.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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