The Drug Price Competition and Patent Term Restoration Act of 1984 (i.e., the Hatch-Waxman Amendments) first established the ANDA approval pathway for generic drugs. Subsequently in 2003, the Medicare Prescription Drug, Improvement, and Modernization Act revised certain statutory provisions related to the 180-day exclusivity. As the FDA recently noted, "the statute provides an incentive and a reward to generic drug applications that expose themselves to the risk of patent litigation." Under the existing statutory framework, the first generic applicant to file a substantially complete ANDA with a paragraph IV certification will get a 180-day period of exclusivity against all other subsequent filers. However, the 180-day period does not start running until the first filer is granted final FDA approval and markets its generic product, e.g., after the resolution of patent litigation.
Proposed Amendment
On February 12, 2018, President Donald Trump's proposed FY2019 budget recommended a change to when the 180-day exclusivity period starts to run. Specifically, rather than starting the 180-day clock when the first filer markets its product; the proposed amendments would allow the FDA to start the 180-day period by tentatively approving a subsequent generic application. The FY2019 budget cites the goal to "provide substantial cost savings to American consumers" as the reasoning behind this proposed change.
Significance of Change
As the FDA noted, the 180-day exclusivity period incentivizes generic drug companies to file their Paragraph-IV certification first. Under the current regime, the benefit of the generic drug sales during this exclusivity period weighs against the costs and risks associated with patent litigation with the Orange Book patent holder. The new recommendation threatens to abrogate financial incentives to the first filer by placing first-filer exclusivity in jeopardy without achieving its stated goal. The comments include descriptive, albeit vague, language that indicates the purpose of this change is to stop intentional parking by the first filer by triggering the exclusivity period with "the tentative approval of a subsequent generic drug applicant that is blocked solely by a first applicant's 180-day exclusivity, where the first applicant has not yet received final approval." However, it is unclear that there will be any safeguards in place to limit the application of this change to solely "parking" situations where the first filer delays in introducing its generic product in bad-faith—on its face, the proposal would also threaten exclusivity in non-parking situations. For example, the 180-day exclusivity period could expire while the Hatch-Waxman litigation is still ongoing and the first filer unable to obtain final approval, e.g., if a second filer obtains tentative approval during the first filer's 30-month litigation stay. Moreover, the proposed change does not appear to require that the subsequent applicant ever obtain final approval or market a product, or even intend to do so. Therefore, it is not certain that it will result in increased generic competition. Finally, there are already ways for a second filer to avoid parking and trigger the exclusivity period, e.g., by obtaining a favorable judgement in patent litigation.
Furthermore, the proposed amendments ironically benefit brand name drug companies more so than American consumers. As discussed above, the amendments will likely discourage paragraph IV certifications and chill Hatch-Waxman litigation. This effectively requires American consumers to pay more by prolonging the market exclusivity for the brand name drug. In conclusion, the proposed amendment would achieve the opposite result of its touted outcome.
