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73–735CC 2001

RECENT DEVELOPMENTS WHICH MAY IMPACT

CONSUMER ACCESS TO, AND DEMAND FOR,

PHARMACEUTICALS

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

JUNE 13, 2001

Serial No. 107–34

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

TOM DAVIS, Virginia

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

CHARLES F. BASS, New Hampshire

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

MICHAEL F. DOYLE, Pennsylvania

CHRISTOPHER JOHN, Louisiana

JANE HARMAN, California

DAVID V. MARVENTANO, Staff Director

JAMES D. BARNETTE, General Counsel

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON HEALTH

MICHAEL BILIRAKIS, Florida, Chairman

JOE BARTON, Texas

FRED UPTON, Michigan

JAMES C. GREENWOOD, Pennsylvania

NATHAN DEAL, Georgia

RICHARD BURR, North Carolina

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

Vice Chairman

BARBARA CUBIN, Wyoming

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES ‘‘CHIP’’ PICKERING, Mississippi

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

STEVE BUYER, Indiana

JOSEPH R. PITTS, Pennsylvania

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

(Ex Officio)

SHERROD BROWN, Ohio

HENRY A. WAXMAN, California

TED STRICKLAND, Ohio

THOMAS M. BARRETT, Wisconsin

LOIS CAPPS, California

RALPH M. HALL, Texas

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

PETER DEUTSCH, Florida

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

3

C O N T E N T S

Page

Testimony of:

Delgado, Jane L., President and CEO, National Alliance for Hispanic

Health ............................................................................................................ 65

Downey, Bruce L., Chairman and CEO, Barr Laboratories, on Behalf

of the Generic Pharmaceutical Association ................................................ 59

Geiser, Thomas, General Counsel, Wellpoint Health Networks accompanied by Robert Seidman, Vice President, Pharmacy ............................. 72

Glover, Gregory J., Ropes & Gray on Behalf of Pharmaceutical Researchers and Manufacturers of America .............................................................. 51

Golenski, John D., Executive Director, RX Health Value ............................. 70

Kingham, Richard F., Covington and Burling ............................................... 114

Woodcock, Janet, Director, Center for Drug Evaluation and Research,

Food and Drug Administration .................................................................... 16

Material submitted for the record by:

Allergy & Asthma Network Mothers of Asthmatics, prepared statement

of ..................................................................................................................... 136

Downey, Bruce L., Chairman and CEO, Barr Laboratories, on Behalf

of the Generic Pharmaceutical Association, letter dated July 11, 2001,

to Hon. John D. Dingell, enclosing response for the record ...................... 141

Geiser, Thomas, General Counsel, Wellpoint Health Networks, letter

dated August 1, 2001 to Hon. Michael Bilirakis, enclosing response

for the record ................................................................................................. 171

Hansen, Jake, Vice President for Government Affairs, Barr Laboratories,

Inc., letter dated August 10, 2001, to Hon. Michael Bilirakis, enclosing

response for the record on behalf of Bruce Downey ................................... 194

Kingham, Richard F., Covington and Burling, letter dated August 1,

2001 to Hon. Michael Bilirakis, enclosing response for the record ........... 190

National Association of Chain Drug Stores, prepared statement of ............ 137

Nirenberg, Darryl D., Patton Boggs LLP, letter dated July 19, 2001,

enclosing response for the record ................................................................ 164

Plaiser, Melinda, Associate Commissioner for Legislation, Public Health

Service, Food and Drug Administration, Department of Health and

Human Services, letter dated August 16, 2001, enclosing response for

the record ....................................................................................................... 202

(III)

(1)

RECENT DEVELOPMENTS WHICH MAY IMPACT CONSUMER ACCESS TO, AND DEMAND

FOR, PHARMACEUTICALS

WEDNESDAY, JUNE 13, 2001

HOUSE OF REPRESENTATIVES,

COMMITTEE ON ENERGY AND COMMERCE,

SUBCOMMITTEE ON HEALTH,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m., in room

2322 Rayburn House Office Building, Hon. Michael Bilirakis (chairman) presiding.

Members present: Representatives Bilirakis, Greenwood, Deal,

Burr, Norwood, Bryant, Ehrlich, Tauzin (ex officio), Brown, Waxman, Strickland, Capps, Towns, Pallone, Deutsch, Stupak, and

Green.

Staff present: Brent Del Monte, majority counsel; Marc Wheat,

majority counsel; Kristi Gillis, legislative clerk; and John Ford, minority counsel.

Mr. BILIRAKIS. Good morning. This hearing will now come to

order.

Today the subcommittee will consider three matters within the

jurisdiction of the Food and Drug Administration which impact the

demand for, and the price of, pharmaceuticals.

Congress is actively seeking to improve access to affordable prescription drugs for all Americans, and particularly our seniors. As

we debate various proposals, we cannot ignore the impact of Federal food and drug laws on the availability and affordability of

drugs. Today, we will focus on three specific areas which have received a lot of attention recently; access to generic drugs; the authority of the FDA to switch drugs from prescription to over-thecounter status despite a manufacturer’s objections; and direct-toconsumer broadcast advertising.

At our recent Food and Drug Administration Modernization

hearing I mentioned my intent to examine issues related to generic

drugs. And that is one of the purposes of today’s hearing. Generic

drugs account for nearly half of all prescriptions filled, and yet they

amount to less than 20 percent of pharmaceutical costs. Generics

obviously save consumers billions of dollars per year, and we

should carefully consider their role as we work to develop a Medicare prescription drug benefit.

I am particularly interested in learning more about the science

of generics. For instance, how closely must a generic scientifically

resemble the innovator drug for it to receive FDA approval? I unVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 E:\HEARINGS\73735 pfrm04 PsN: 73735
2

derstand that the scientific standard for generic approval is bioequivalence, but what exactly does that mean?

Also, do consumers understand and feel comfortable with, generic

drugs and their role in the modern marketplace? In addition, I’m

interested to learn why, on average, it takes the FDA longer to approve generic drugs than it does for new drug applications.

Of course, we can’t lose sight of the fact that without a healthy,

vibrant brand-name pharmaceutical industry, there would be no

generic drugs. And I’d like to commend our colleague, Mr. Waxman, for his work as co-author of the Hatch-Waxman Act, or as we

like to call on this side, the Waxman-Hatch Act, which increased

consumer access to generic drugs, while strengthening patent protections for new chemical entities. The Act has proven quite successful for the past 17 years. Both the brand name pharmaceutical

and generic industries have thrived, and consumers have benefited

greatly by access to both new therapies and to cheaper copies of old

therapies.

That being said, concerns have been raised about provisions of

the Waxman-Hatch Act which may lead to anti-competitive behavior. The Federal Trade Commission is presently conducting a yearlong review to consider this matter. Our witnesses today will shed

light on the continued utility of the automatic 30-month stay on

FDA approval during patent challenges, as well as how the 180-day

generic exclusivity provision is working.

While I know that some of my colleagues may wish to consider

additional generic issues, we simply do not have the time today to

consider all of these matters. Thus, I hope we can focus on the role

of generic pharmaceuticals and not delve into other areas today.

The subcommittee will also consider the authority of the FDA to

force a drug to be switched from prescription to over-the-counter

status despite the objection of the drug’s manufacturer. We are not

looking at whether FDA should switch specific drugs, and I want

to make that clear. We’re not intending to look at whether the FDA

should switch specific drugs, which have been in the news recently,

but rather whether FDA can under the law make the switch. And

if they can, what are the policy impacts of such action?

Last, we’ll hear from witnesses who will discuss the impact of direct-to-consumer broadcast advertising on consumers. In 1997, the

FDA changed the guidelines for broadcast drug ads, and since then

this advertising has increased, as we know, dramatically. While the

advertising has mostly focused on the top selling drugs, it has also

served to better inform consumers. Today, this subcommittee will

consider the full impact of broadcast drug advertising on consumers.

And I now yield with pleasure to Mr. Brown for an opening statement.

[The prepared statement of Hon. Michael Bilirakis follows:]

PREPARED STATEMENT OF HON. MICHAEL BILIRAKIS, CHAIRMAN, SUBCOMMITTEE ON

HEALTH

This hearing will now come to order. Today the Subcommittee will consider three

matters within the jurisdiction of the Food and Drug Administration which impact

the demand for, and the price of, pharmaceuticals.

Congress is actively seeking to improve access to affordable prescription drugs for

all Americans, and particularly our seniors. As we debate various proposals, we canVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
3

not ignore the impact of federal food and drug laws on the availability and affordability of drugs. Today, we will focus on three specific areas which have received

a lot of attention recently: access to generic drugs; the authority of the FDA to

switch drugs from prescription to over-the-counter status despite a manufacturer’s

objections; and direct-to-consumer broadcast advertising.

At our recent Food and Drug Administration Modernization Act hearing I mentioned my intent to examine issues related to generic drugs. That is the purpose

of today’s hearing. Generic drugs account for nearly half of all prescriptions filled,

yet they amount to less than 20% of pharmaceutical costs. Generics obviously save

consumers billions of dollars per year, and we should carefully consider their role

as we work to develop a Medicare prescription drug benefit.

I am particularly interested in learning more about the science of generics. For

instance, how closely must a generic scientifically resemble the innovator drug for

it to receive FDA approval? I understand that the scientific standard for generic approval is bioequivalence, but what exactly does that mean?

Also, do consumers understand, and feel comfortable with, generic drugs and their

role in the modern marketplace? In addition, I am interested to learn why, on average, it takes the FDA longer to approve generic drugs than it does for new drug

applications.

Of course, we cannot lose sight of the fact that without a healthy, vibrant brandname pharmaceutical industry, there would be no generic drugs. I’d like to commend

our colleague, Mr. Waxman, for his work as co-author of the Hatch-Waxman Act,

which increased consumer access to generic drugs, while strengthening patent protections for new chemical entities. The Act has proven quite successful for the past

17 years. Both the brand name pharmaceutical and generic industries have thrived,

and consumers have benefitted greatly by access to both new therapies and to

cheaper copies of old therapies.

That being said, concerns have been raised about provisions of the Hatch-Waxman

Act which may lead to anti-competitive behavior. The Federal Trade Commission is

presently conducting a year-long review to consider this matter. Our witnesses

today will shed light on the continued utility of the automatic 30-month stay on

FDA approval during patent challenges, as well as how the 180-day generic exclusivity provision is working.

While I know that some of my colleagues may wish to consider additional generic

issues, we simply do not have the time today to consider all of these matters. Thus,

I hope we can focus on the role of generic pharmaceuticals and not delve into other

areas today.

The Subcommittee will also consider the authority of the FDA to force a drug to

be switched from prescription to over-the-counter status despite the objection of

drug’s manufacturer. We are not looking at whether FDA should switch specific

drugs which have been in the news recently, but rather, whether FDA can, under

the law, make the switch. And if they can, what are the policy impacts of such action?

Last, we’ll hear from witnesses who will discuss the impact of direct-to-consumer

broadcast advertising on consumers. In 1997, the FDA changed the guidelines for

broadcast drug ads, and since then, this advertising has increased dramatically.

While the advertising has mostly focused on the top selling drugs, it has also served

to better inform consumers. Today, this Subcommittee will consider the full impact

of broadcast drug advertising on consumers.

I will now yield to Mr. Brown for an opening statement.

Mr. BROWN. Thank you, Mr. Chairman, very much for holding today’s hearings. I want to thank Janet Woodcock and also Bruce

Downey and other witnesses for joining us this morning.

We’re looking, as the chairman said, at three prescription drug

issues that are in some ways very different but which derive their

significance in part from the same basic concern; they have a significant impact on prescription drug costs in the United States.

Our objective in looking at these issues is not to dismantle legitimate incentives and rewards for innovative new drugs and biologics. This subcommittee, this committee, this Congress have a

pressing responsibility to understand the factors driving the dramatic increase in prescription drug spending and explore what

steps w should take to minimize wasted spending.

4

Inflated drug prices rob seniors of dollars they need for basic necessities; they fuel double digit increases in health insurance premiums; they drive up the cost of public programs; they accelerate

the erosion of employer sponsored coverage. Responsibility for establishing a prescription drug benefit under Medicare rests squarely on our shoulders and we simply can’t afford to waste a single

tax dollar on artificially inflated drug prices.

I want to start with generic drugs and focus on access. I want

to commend my colleague Mr. Pallone for introducing the Generic

Drugs Access Act which tackles bio-equivalency disputes at the

local and State levels. And I want to take this opportunity to discuss the Greater Access to Affordable Pharmaceuticals or GAAP

Act legislation which I introduced with Republican Jo Ann Emerson. This is the House version of the Mc-Cain Shumer Bill.

The explicit goal of the Brown-Emerson, Shumer-McCain Bill is

to restore the original intent of the 1984 Waxman-Hatch Act, the

goal of which was to promote generic competition while continuing

to encourage drug research and development. At friends at PhRMA

are going to make other claims about this bill. I understand they’ve

already visited some of my subcommittee colleagues.

PhRMA claims that the GAAP Bill undercuts the incentives Bill

into Waxman-Hatch to reward research and development. In fact,

the bill doesn’t touch the provision of Waxman-Hatch that were intended to reward innovation.

PhRMA claims it would reduce the patent life of brand name

drugs. This bill would have no effect on the statutory patent life

of brand name drugs.

You’ll hear it lowers the bio-equivalency standards used to ensure that a generic drug is identical to and therefore is safe and

as effective as it’s brand name counterpart. In fact, the bill codifies

three standards that the FDA already uses to determine bioequivalency. Putting the force of law behind these firmly established standards is one way to fend off endless and inevitably frivolous lawsuits intended to delay generic drug approvals.

With all due respect to PhRMA, it makes as little sense to defer

to them on bio-equivalency standards as it does to defer to the generic drug industry on bio-equivalency standards. Both parties

have a vested interest in the outcome of bio-equivalence analysis.

It’s kind of like trusting two oil men to come up with a balanced

global warming policy. Never mind on that.

So what would the GAAP Bill do?

Mr. Burr’s not here, but I didn’t want to disappoint him so he

could say that this hearing is partisan, Mr. Chairman.

So what would the GAAP Bill do? It would keep brand name

drug companies from misusing Waxman-Hatch to block legitimate

generic competition. Brand name companies cut deals with the first

generic challenger to keep it off the market because they know that

as Waxman-Hatch is currently written, no generic can enter the

market if the first one doesn’t.

Brand name companies file last minute patents on their drugs

because they know that by suing a generic for patent infringement

they can automatically delay FDA approval by 30 months. And

brand name companies cut deals with generics to keep them off the

market.

5

They claim we should protect their right to ‘‘settle court cases.’

What they need to remember, Mr. Chairman, is that they’re settling their case with one generic competitor, not with every potential generic competitor and every American consumer. We should

not all have to pay to reduce their time in court.

I look forward to discussing other provisions of the bill and other

generic drug issues, including the chronic under funding of the Office of Generic Drugs when we hear from our witnesses later.

I want to briefly touch on DTC advertising and over-the-counter

drugs. In the terms of direct-to-consumer advertising there clearly

are First Amendment implications. But on behalf of consumers,

FDA requires DTC advertising to strike a balance between promoting and explaining the limitations and risks associated with

prescription drugs. They’re also fairly explicit truth in advertising

laws.

Tuesday’s article you may have seen in the Washington Post regarding once-a-week Prozac. There are questions about whether

DTC ads fairly represent their products. It’s certain they don’t

highlight the relative price of their product and how that relates

to its efficacy. My guess is that if consumers had the full picture,

DTC ads would be much less inflationary than they are today.

Two thousand increases in sales of just 23 drugs promoted directly to consumers accounted for half of the $21 billion increase

in pharmaceuticals at retail spending.

In terms of over-the-counter drugs because Congress had the authority to modify the relevant law, it’s important to assess whether

FDA has legal authority to consider the safety of an over-thecounter determination based on an outside petition. But the reason

the WellPoint case is so important is because it’s promoted us to

ask the critical question how should these determinations be initiated. Is it a conflict of interest when an insurer initiates this

change? Is it a conflict of interest when a drug company initiates

this change, which coincidentally they do not do until their patent

is expired?

It’s in the public’s best interest to reevaluate the current process

and answer these questions. Prescription drugs save lives, they

prevent illness, they reduce the hardship of disabilities; that’s why

it’s important to maintain incentives for prescription drug research

and development. That’s what this committee needs to do. But it’s

also why it’s important to eliminate any kinks in the current system that artificially inflate prescriptions drug prices. Too much is

at stake, Mr. Chairman, to look the other way.

Thank you.

Mr. BILIRAKIS. The Chair yields to Dr. Norwood for an opening

statement and would request that we try to stay within the 5

minute rule, if we possibly could.

Dr. Norwood.

Mr. NORWOOD. Thank you very much, Mr. Chairman. And I am

grateful to you for this very important, interesting and hopefully

bipartisan hearing.

I don’t really think that I can add much to your opening statement. It said it all pretty well, other than to thank the witnesses,

Dr. Woodcock and others, for being here.

6

In a sense of timing, I’ll yield back my time so we can hear from

the witnesses.

Mr. BILIRAKIS. The Chair thanks the gentleman.

Mr. Pallone for an opening statement?

Mr. PALLONE. Thank you, Mr. Chairman. I want to thank you

and Mr. Brown for holding this hearing on these issues, particularly the generic drug issue which is very important to me.

As you know, the high cost of prescription drugs is one of the

most pressing health care issues confronting our country’s senior

citizens, employers, managed care plans, State and Federal drug

programs. Although controlling drug costs is not an easy task, generic competition can have a dramatic impact on reducing pharmaceutical costs, and I strongly support necessary changes to Waxman-Hatch that would allow timely access and availability of generic drugs once the patent on brand name drugs expires.

The inclusion of generic alternatives in the marketplace is great

for consumers, employers and government purchasers because generic competition provides access to less expensive, therapeutically

equivalent generic versions of brand name drugs. Brand name companies have been proficient in manipulating the Waxman-Hatch

law and launching aggressive campaigns to block or delay generic

alternatives from reaching the market.

The intent of Waxman-Hatch was to provide a balance between

brand name drugs and generic drugs in the marketplace. But currently the scales are tipped heavily in favor of the brand name

companies. This is clear from the number of pieces of legislation

that have successfully extend the patents on blockbuster drugs and

reaped extraordinary profits for these brand name companies.

The balance in the marketplace needs to be restored for the benefit of the consumer and an examination of Waxman-Hatch can be

done, I think, best through the GAAP Bill which Mr. Brown has

sponsored and which he mentioned, the Greater Access to Affordable Pharmaceuticals Act. I call it GAAP.

I would like to talk a little bit about how the big name drug companies have several frequently used methods to delay generic competition. One of their favorite tactics is to make insignificant

changes to their products and secure new patents just as the patent on the original product is set to expire. New patents are granted by the Patent Office for frivolous and invalid reasons, such as

changing the color of the bottle, however you know the problem is

that once the new patent is presented, the current law protects

these brand name companies by prohibiting a generic from going

on the market for 30 months.

Another favorite method used by the brand name industry to manipulate the intent of Hatch-Waxman—oh, did I say Hatch-Waxman, I’m sorry. Waxman-Hatch. Is inserting patent extensions into

legislative vehicles. In the interest of keeping pharmaceutical drug

costs down, Congress should reject attempts by the brand name industry to extend patents on profitable drugs by finding sponsors to

inconspicuously insert these patent extensions into various legislative vehicles.

And last, the misuse of citizen petitions by brand companies is

widely used to delay the approval of generic drugs. Often times,

brand name companies file a citizen petition with the FDA as a

7

method of blocking the regulatory process, and as a result brand

name companies are afforded months or even years of monopoly.

Agency officials reviewing these petitions are administratively challenged, and this leaves the review and approval of generic drugs

on the back burner. Just another example of where legislative

changes could prevent a citizen petition from delaying the approval

of a generic drug that would ensure patient safety and improve access, and of course the GAAP Bill seeks to accomplish that.

I don’t want to keep talking about all these tactics, but the bottom line is that the brand name industry does delay generic drugs

from entering the marketplace. It’s widespread, it’s well known and

I think we have to open up Waxman-Hatch to find avenues that

would stop these delays.

Thank you, Mr. Chairman.

Mr. BILIRAKIS. I thank the gentleman.

Mr. Waxman, for an opening statement.

Mr. WAXMAN. Thank you very much, Mr. Chairman.

By any definition, pharmaceuticals are important to Americans.

Some people place hope in research toward cures, some people are

struggling to afford the treatments that are already known. This

is the balance, progress and access. Neither make sense without

the other. It is unfair and wasteful to develop new products that

sick people can’t afford. It is pointless to get easy access to products

that don’t help.

This is a balancing act that I know well. I’ve been working on

it for almost 20 years now. I’m pleased and proud that the legislation that bears my name has been so uniformly regarded as successful in its twin goals.

I’m also always reluctant to open it up to amendment, whether

it be for ad hoc patent extensions or response to individual court

ruling, or for fine tuning to address market changes. The road to

imbalance is paved with good intentions.

But while I’m cautious about opening it up, I will not stand by

as a system is abused. Over the past year I’ve been very troubled

by reports of collusive arrangements between brand name and generic companies of near frivolous patent infringement and of late

additions of patents unrelated to the basic functioning of the drug.

I only wish that the manufacturers who benefit from the system

were as cautious about throwing it into imbalance as I am.

Such clear abuses invite legislative response, and while I’m cautious about amending the law, I will not let my caution be abused.

I look forward to the testimony and questioning today of those

witnesses that are before us, and I hope I’ll have other opportunities to explore these very complicated but truly vital issues further.

Mr. Chairman, just on a diplomatic note of clarification, both

Waxman-Hatch and Hatch-Waxman are acceptable usages. In fact,

if you did a quick computer search it would show that both are

widely used.

It’s been the tradition that I refer to this law as the Hatch-Waxman Act and Senator Hatch call it the Waxman-Hatch Act just out

of courtesy to each other and to the other party.

Again, this is another one of those balancing acts. But I want to

point out that it is not acceptable to call it the ‘‘Wax-Hatchman’ or

8

the ‘‘Hatchman-Wax Act.’ Any other use of our names in any order

is quite acceptable.

Mr. BILIRAKIS. I would say, Mr. Chairman, if I might still refer

to you as such, that we are not—we personally are not bound by

that tradition. You may be bound and Mr. Hatch may be bound,

but not us. So it’s still the Waxman-Hatch Act on this side of the

Capitol.

Mr. Stupak for an opening statement.

Mr. STUPAK. Well, thank you, Mr. Chairman. And thanks for

holding this very important hearing on recent developments in prescription industry. I believe it’s the duty of this subcommittee to

monitor and take necessary action to approve our Nation’s

healthcare system, of which prescriptions drugs play an increasingly large role.

Here are the indisputable facts. Prescription drug spending has increased by $20.8 billion or 18.8 percent just last year. Seniors,

one-third of whom lack prescription drug coverage, received a 2.4

cost of living increase in their Social Security benefit last year.

Less than half of the prescription drug cost inflation is linked to

the increased use of prescription drugs. The rest is attributable to

higher prices, annual price increases and shifts from lower costs to

higher cost drugs.

The hearing today focuses on three major issues facing the American in today’s health market: direct-to-consumer advertising, overthe-counter drugs, and generic drug issues. Each of these three

issues are substantial in their own right.

The speed of generic drugs into the marketplace is one area in

which I am particularly interested. In 1994 the Waxman-Hatch Act

was passed during a time when the drug approval process was

slow. Now, 17 years later, it’s the norm rather than the exception

to have a drug approved in 12 months. This change in the FDA approval process should also necessitate a change in the speed in

which the FDA is able to approve generic drugs. Pharmaceutical

companies, while indisputably delivering some excellent products,

are using the loopholes in the Waxman-Hatch Act to extend their

strong hold on their products and, thus, increase their profits.

Another area of particular concern to me is the direct-to-consumer advertising. While this is seen by many as a necessary way

to gain greater knowledge about drugs and healthcare in general,

I’m alarmed at the incredible amounts of money being spent on direct-to-consumer advertising, as well as the fact that the drug companies are responsible for outlining the risk of their drugs with little oversight from the FDA. Many drug companies are failing to

outline the risk to consumers.

The goal of this hearing is to find the best way to lower drug

prices for consumer while at the same time ensuring consumer

safety, and it’s a goal everyone can support.

The three issues we will discuss are seen as possible areas we

can improve upon to lower drug prices, better drugs and improve

healthcare systems.

Mr. Chairman, I sincerely hope this hearing resolves questions

I and others have on these issues. And thank you again for holding

this hearing.

Mr. BILIRAKIS. And I thank the gentleman.

9

Mr. Green for an opening.

Mr. GREEN. Thank you, Mr. Chairman, for holding this hearing

on consumer access to and demands for pharmaceuticals. It’s the

interest of all Americans, but especially relevant to our committee,

as we consider ways to provide an affordable Medicare prescription

drug benefit for seniors. According to the National Institute of

Health Management, costs of prescription drugs has risen dramatically over the last 15 years.

Last year alone, we saw a 19 percent increase in spending on

outpatient pharmaceuticals. Increases in sales of just 23 drugs

were responsible for half of this increase, including Vioxx, Lipitor,

Prevacid and Celebrex. It shouldn’t be a surprise to anyone that

these drugs are among the most popular, consumers are

bombarded with advertisements for these medications every time

they open a magazine, turn on the television or surf the Internet.

The proliferation of direct-to-consumer advertising has a strong effect on the consumer utilization of pharmaceuticals.

Consumers are taking a more activist role in their treatment. For

the first time they’re asking their physicians to prescribe a course

of treatment including the pharmaceuticals that they see advertised.

Mr. Chairman, I believe it’s important for consumers to be informed about their healthcare options and they should work their

doctors for treatment. But it does concern me when we see marketing costs for pharmaceuticals almost equaling the research and

development costs for pharmaceuticals.

The FDA’s recent recommendation to make certain allergy medications available over-the-counter has sparked fierce debate on the

FDA’s right to make such a change absent the consent of the sponsor. There are questions about how such a move would impact consumer’s access to such drugs, who would bear the economic burden

of the shift and whether such a move would create a disincentive

for the innovation.

Finally, consumer’s access for affordable pharmaceuticals is

greatly enhanced by the availability of generic alternatives. The

Drug Price Competition and Patent Term Restoration Act of 1984,

also know as the Waxman-Hatch Act, was a compromise bill which

successfully increased the availability of generic alternatives and at

the same time protecting their patents for innovation or innovator

companies. At the time it passed, this legislation represented a

compromise approach to meet the needs of both the innovator drug

companies and generic companies. The balance, though, has shifted

in recent years as loopholes in the law have created the opportunity for abuse in the system.

For example, innovator companies often file a number of patents,

staggering patent applications to extend their patent protections

and, thus, their exclusivity. They’re gaming the system and I don’t

think Congress should continue them to allow to do that. By staggering the patents, this loophole creates the possibility for innovator companies to receive multiple and unlimited stays for a single drug. This patent stacking results in lengthy delays and excessive litigation before the problems are resolved and alternatives

can reach the market.

10

Additionally, these new patents are often for peripheral issues,

such as the pharmaceutical’s color, its labeling, or even are indication. These include minor changes, and that’s why Congress should

update the Waxman-Hatch Act.

I know my good friend from Ohio, Sherrod Brown has introduced

legislation which would stem some of these abuses and level the

playing field for the generic pharmaceuticals. While I’ve not cosponsored my colleague’s bill, I grow more and more concerned that

Congress must take action to close the loopholes that we’ve seen

develop since 1984.

As we in Congress struggle to provide an affordable prescription

benefit for seniors, we must look at all these issues.

I look forward to the testimony today. And I yield back my time,

Mr. Chairman.

Mr. BILIRAKIS. I thank the gentleman.

Ms. Capps for an opening statement.

Ms. CAPPS. Thank you, Chairman Bilirakis. I’m pleased we could

be here today to address this issue.

The news just this week of the cost of living compared with the

exorbitant increases in medications, prescription medications, I

think is further testimony to the fact that something’s out of control. The prices have skyrocketed, and so it is high time that Congress take a long hard look at some of the factors influence the

price of prescription drugs.

Today prescription medications are often the preferred, and

sometimes the only method of treatment for many illnesses and

diseases, but the cost in so many cases is a deterrent so that patients are not getting this often life saving treatment that they

need. Therefore, we on this committee need to address this issue.

There are certainly no simple solutions. We will need to closely

examine the various factors that effect drug pricing, such as competition and cost of development and distribution. Seventeen years

ago Congress took a tremendous step in improving competition

with the Waxman-Hatch Act. It has had a dramatic effect quadrupling the percentage of the market represented by the generic

drugs while continuing to protect the right of patent holders and

encouraging new drug development. But I’m concerned about reports of abuses by pharmaceutical companies of the protections and

incentives that this law provides. These reported abuses could impede the access the generic drugs have to the market and to my

constituents.

Claims have been made that brand name companies are using

loopholes in the 30 month day and the 180 day market exclusivity

provisions to indefinitely delay the production of generic drug competition. In light of these charges, it is time for us to look at improving the Act. As we take this up, we certainly must not discourage innovation and new ideas. There must continue to be strong incentives for companies to spend on research and development, but

we cannot follow these incentives—we cannot allow these incentives to prevent our constituents from being able to afford the

medications that they need.

The increased competition that generic drugs bring to the marketplace has saved purchasers $8 billion to $10 billion according to

a 1998 CBO study. Clearly, this is important because if we are to

11

implement a real prescription drug benefit for our seniors, we are

going to have to find ways to contain costs.

So I’m looking forward to hearing the panel’s perspective on how

we can do this, eager to hear their thoughts on direct-to-consumer

advertising or DTC. DTC may have the potential to improve the

public’s understanding of their health needs and options, but I am

concerned about the resources being spent here, resources that add

to the cost of drugs and ultimately come from the consumer’s pocket.

We cannot permit companies looking for a way to increase their

profits to exploit their consumers, our constituents. And I also

think we must make sure that any such advertising meets the

strictest guidelines to protect American safety.

I want to thank Mr. Waxman for his years of leadership on this

issue and recognize the leadership of Representatives Brown,

Pallone, Eshoo and Dingell on these matters. They’ve worked hard

to find ways for the public to have more access.

And I look forward to working with you, Mr. Chairman, to continue this work and improve our health system.

I yield back the balance of my time.

Mr. BILIRAKIS. The gentlelady’s time has expired.

I’d like to very much to be able to get through the opening statements before we run over to vote.

Mr. Deal for an opening statement.

Mr. DEAL. I’ll assist you, Mr. Chairman, by passing.

Mr. BILIRAKIS. I thought you might do that. Thank you.

Mr. Deutsch.

Mr. DEUTSCH. Thank you, Mr. Chairman. I thank the chairman

and ranking members for calling this hearing.

Mr. Chairman, while all the issues we will hear about today are

serious and deserving of attention, there’s one aspect of this hearing that I think is particularly important to focus on today: Patent

issues under Waxman-Hatch Act.

While direct-to-consumer advertising and over-the-counter

switches may have some impact on the high cost of drugs, nothing

contributes to the prices our constituents pay at the pharmacy like

delaying generic entry into the market.

I hear everyday from constituents who are struggling with paying the high cost of drugs. I also frequently hear from the pharmaceutical industry giving me reasons why drugs are so expensive

and why I should help to maintain these extraordinary prices. And

while I agree that research into life saving therapies is a cost and

necessary venture, we should address how brand name companies

game the patent and Orange Book Listing, thereby inflating drug

prices even further and delaying entry of low cost generics into the

market.

We should also address the FDA’s role in this system and failure

to adequately ensure the validity of many patents.

I have seen and heard of numerous examples during my years

in Congress of a generic drug set to go to market only to be delayed

because a brand name company has filed an Orange Book Listing

with the FDA stating that they deserve additional market exclusivity on an active ingredient because they’ve changed some part

of the pill, it’s shape, color or size.

12

And then another generic company is forced to delay entry of its

product into the market until the new patent expires or they can

successfully challenge the patent. Amazingly, FDA is a full partner

in this process, simply listing patents in the Orange Book without

regard to the value of the patent. That makes no sense to me since

the FDA deals with patents on drugs, devices, cosmetics and other

products every single day.

Recently Biovail, a brand drug company listed a patent in the

Orange Book that they said applied to their drug Tiazac, which

was about to lose its original patent coverage. During litigation

FDA testified that it believed the new patent actually did not and

could not apply to Tiazac. Additionally, the FDA testified that it

was unilaterally prepared to delist the patent from the Orange

Book. Nevertheless, after all this testimony the FDA turned around

and sent a letter to Biovail telling the company that they would

continue to list the patent as applying to Tiazac as long as Biovail

sent a letter to them confirming the same.

Essentially the FDA said to Biovail help us help you lie to us.

If that is what Congress intended in Waxman-Hatch Act 17 years

ago, I doubt it.

The question we have before us is what do we do now? Frankly,

I don’t blame the brand companies for exploiting these loopholes.

That’s just plain business sense. It’s now up to us in Congress to

prevent this kind of abuse of the patent and Orange Book systems.

I fully support Ranking Member Brown’s legislation, part of

which requires brand name manufacturers to list all the drugs relevant to that and certify with the FDA that the list is complete and

accurate. This bill also expedites the legal process for challenging

late listed patents.

We may also want to look at limiting patents that can be listed

in the Orange Book to the active ingredient and the first mode of

use. Whatever we do, we need to ensure that FDA becomes a more

willing partner in this process.

I’m interested to hear from the witnesses and what they have to

say.

And I yield back the balance of my time.

Mr. BILIRAKIS. The Chair thanks the gentleman.

We will break now. The opening statements are hereby ended.

The written opening statement of all members of the subcommittee

are hereby made a part of the record without objection.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MICHIGAN

Mr. Chairman, thank you for holding today’s timely hearing on recent developments which may have an impact on consumers’ access to and demand for prescription drugs. These are complex issues, and we need to have a good grasp of them

as we work together to craft a Medicare prescription drug benefit.

It was my pleasure to serve with you on the House Leadership’s Prescription

Drug Task Force in the last Congress and to see the plan we crafted win bipartisan

approval by the House. I sought to serve on this task force because I strongly believe that no senior citizen should be forced to forego needed medication, take less

than the prescribed dose, or go without other necessities in order to afford life-saving medications. Our nation leads the world in the development of new drugs that

enable us to effectively treat diseases and conditions. But if people cannot afford to

buy these drugs, their benefits are lost to many in our population.

13

Mr. Chairman, I am looking forward to working with you and my colleagues on

both sides of the aisle and with the new Administration to craft a plan that can

win the bipartisan support necessary to move quickly through Congress and be

signed into law by President Bush. We cannot allow another Congress go by without

providing relief to the millions of seniors without prescription drug coverage.

PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WYOMING

Pharmaceutical products have come a long way over the course of the past two

decades, reaching new heights in innovation and research and development.

Because of that, many lives have been saved. Heaven forbid we should do anything to jeopardize that continued success in the future.

Since passage of the Hatch-Waxman Act in 1984, we have seen more generic

drugs make their way into the market and into the hands of consumers.

In 1980, before Hatch-Waxman, CBO estimated that 13 % of prescriptions filled

were generic; by 1998, generics comprised 58 % of total prescriptions. Those numbers tell us that Hatch-Waxman has played a pivotal role in making generic drugs

more accessible to patients.

At the same time, Hatch-Waxman has helped foster research and development.

Pharmaceutical companies have increased their R&D spending from $3.6 billion in

1984 to over $30 billion in 2001.

That is very encouraging, especially for those of us, presumably most, who depend

on drugs everyday for quality of life.

Hatch-Waxman is not, however, without its controversies—namely when it comes

to pharmaceutical patents. To the extent Hatch-Waxman has caused some

grumblings in this area, we will soon discover through the course of this hearing

today.

I look forward to hearing the testimony of our witnesses, and yield back the balance of my time.

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN, CHAIRMAN, COMMITTEE ON

ENERGY AND COMMERCE

Mr. Chairman: I’d like to begin by commending you for calling this very important, and timely, hearing today.

Our purpose today is to consider three important matters: Access to generic drugs,

direct-to-consumer broadcast advertising, and the government’s authority to switch

prescription drugs to over-the-counter status over the objection of drug sponsors.

These three issues directly impact our constituents who want the best quality pharmaceuticals at the lowest possible prices.

In 1984 the Congress passed the Hatch-Waxman, or as my friends on the other

side of the aisle call it, the Waxman-Hatch Act. This Act did two primary things:

it restored patent terms to innovators which had to navigate the lengthy FDA drug

approval process prior to marketing, and it provided an expedited drug approval

process for generic drugs. In my view, the 1984 Act has proven to be a resounding

success. In 1984, the market share for generic drugs was less than 20%, and today

that figure stands at nearly 50%. So consumers now have greater access to lowerpriced therapies. At the same time, we’ve seen an explosion in innovator investment

in research and development. Research-based pharmaceutical companies have increased their R&D spending from $3.6 billion in 1984 to over $30 billion today.

Knowing that innovator drugs will face competition immediately upon patent expiration forces the innovators to do what they do best: innovate.

That being said, there are some who urge that the 1984 Act needs some fine-tuning; that certain loopholes have been abused, thus delaying consumer access to

lower-cost generics. The primary focus of these comments concern the automatic 30

month stay on generic approval at FDA when the generic challenges an innovator

patent as invalid or not infringed, and the 180 day generic exclusivity provision of

the Act.

There have been a few recent, high profile examples of abuse of the 30 month stay

provision. And while these few examples have led some to call for major revisions

of Hatch-Waxman, I say let us keep things in perspective. While some reforms may

be necessary, we cannot lose sight of the fact that between 1984 and January, 2001,

8,259 generic applications were filed with FDA, and only 478 generic applications,

or 5.8% of the total, raised any patent issues. In essence, the 30 month stay is rarely a barrier to generic access to the market. That is not to say, however, that the

14

Congress must turn a blind eye if the stay acts as an artificial barrier to generic

competition. These are issues we must consider today.

Further, we must explore how the 180 day generic exclusivity provision is working. I believe there should be incentives for generics to challenge weak patents. In

1984 it was thought that 180 days of generic exclusivity would ensure this. But the

market place has changed dramatically since then. Now we see three, four, some

times five generics lining up to challenge patents on blockbuster drugs, even though

only the first generic to challenge is eligible for the exclusivity. Further, the courts

have determined that to be eligible for the exclusivity all the generic has to do is

file the challenge first, not successfully defend a patent infringement case. These developments raise many issues we need to explore: For example, should the exclusivity roll to subsequent challengers when the first challenger settles its case? Or,

is the statutory incentive even necessary now, given the market incentives which

lead to multiple generic applicants with no chance of exclusivity challenging patents?

Regarding direct-to-consumer, or DTC, broadcast advertising, I am especially interested in learning whether these ads lead to increased utilization of inappropriate

therapies, educate consumers to seek therapies which lead to healthier lives, or

maybe a bit of both. There has been a lot of anecdotal information on this subject,

and I know that FDA is presently conducting a review of DTC’s impact.

While increases in DTC broadcast advertising spending have coincided with increases in overall expenditures on pharmaceuticals, I think it is premature to draw

a causal connection between the two, though the existence of a connection must be

studied. There is information pointing to DTC broadcast ads having an overall positive impact. For instance, a 1999 FDA survey found that 27% of those who sought

information from their doctors after seeing a DTC ad asked their physicians about

a condition they had not discussed before. Further, a recent Prevention Magazine

survey found that 76% of Americans believe DTC ads help them become more involved in their own health care. At the same time, there is no denying that the advertising is concentrated on a relatively short list of drugs. The most recent statistics show that about 12 drugs accounted for nearly half of all DTC broadcast spending. And it probably comes as no surprise that these drugs are some of the biggest

sellers.

Last, the Subcommittee will focus on whether the FDA has the authority to

switch a drug from prescription status to over-the-counter, or OTC, status over the

objection of drug sponsors. This issue just recently came to the fore when one of our

witnesses before us today, WellPoint, filed a citizens petition urging such a switch.

The issue to me isn’t whether the drugs at issue in the WellPoint petition are safe

enough to be switched, but rather whether the FDA has the authority to make the

switch without the consent of the sponsor.

For past decades, it was widely understood that the only way to sell an OTC drug

was to either comply with a monograph, or to petition the FDA for a switch of your

prescription drug through a new drug application. However, there is no denying

that Section 503(b)(3) of the Code states that the ‘‘Secretary may by regulation remove drugs [from prescription status] when such requirements are not necessary for

the protection of the public health.’’ While this provision in the Code is a half-century old, it’s plain meaning seems evident. I need to hear from our witnesses why

my understanding of this provision may be misinformed, or whether I understand

it correctly.

And if it turns out that the Secretary does have the authority under the Code to

make the switch, we must explore what kind of process must be afforded to drug

sponsors who object to the switch. Are they entitled to evidentiary hearings? Will

they be forced to conduct label comprehension studies? Will the switch amount to

a Constitutional taking? We should consider all of these issues at our hearing today.

Thanks again, Chairman Bilirakis, for considering these very important issues

today. I look forward to the testimony of our witnesses.

PREPARED STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA

Thank you, Mr. Chairman. I share your interest in these issues which strike at

the core of consumer access to prescription medicines. I’m concerned, however, that

by dealing with all three in one hearing, we are giving them short shrift. Each of

these issues raises numerous questions. So I hope this will be the first hearing for

each.

That said, I’m looking forward to the testimony from today’s witnesses. As the

representative of California’s 14th Congressional District, home to the largest conVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
15

centration of biotech companies in the world, I have a keen interest in each of these

issues.

I’m particularly interested in hearing from FDA on their recent decision to move

three antihistamines from prescription status to over-the-counter. This has received

quite a bit of attention recently and it raises numerous legal questions, not the least

of which is whether FDA has the statutory and constitutional authority to take this

kind of action over the objections of the drug manufacturer.

But even more important is the impact on consumers. Will safety be compromised

and will the risk of this kind of unauthorized ‘‘switch’’ negatively impact future development of breakthrough medicines? These are just some of the questions this

Committee and FDA must consider as we forge new ground on this issue.

I’m also keenly interested in the direct-to-consumer advertising issue. When FDA

finalized its guidance in 1999, it opened the door and allowed drug companies to

advertise their products—on TV, in magazines, even in newspapers. For the first

time, doctors weren’t the only ones holding the knowledge. Consumers were coming

to their doctors armed with information and demanding a higher level of care.

Prior to these ads, prescription medicines were a mystery with names we couldn’t

pronounce and side effects we didn’t even try to understand. Today, consumers

know the drugs they’re taking, any potential side effects, even how they interact

with other drugs. Gone are the days when we simply accepted what our family doctor told us. We read, we surf the web and, yes, we listen to advertisements.

One of the issues before this Committee is whether the current system for directto-consumer advertising is providing consumers with enough information.

Finally, we cannot go home today without acknowledging that all these issues are

tied to a larger policy debate which has plagued this Congress and the nation—the

need for prescription drug coverage in Medicare. We’re so wrapped up in trying to

get at the pricing issue that we’re failing to do the one thing that will provide relief—a Medicare drug benefit. We’re missing the forest for the trees. Rather than

spending time trying to shorten patent lives and switching drugs from prescription

to over-the-counter—which may actually increase the prices for many beneficiaries—

let’s put our heads together and come up with a meaningful prescription drug benefit for every senior. The American people want it, they need it, and they deserve

it. It’s time we paid attention.

PREPARED STATEMENT OF HONO. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Chairman, thank you for scheduling this hearing. All three topics of this

hearing, Over-the-Counter drugs (OTC) switching, Direct-to-Consumer (DTC) advertising, and the Waxman-Hatch Act are matters in which I have a long-standing interest. The pharmaceutical marketplace is of ever-increasing importance to citizens,

and Committee attention to these matters has been lax for the past several years.

We know that millions of Americans cannot afford, and therefore do not take, the

drugs that they need. As a general matter, I will be curious to learn what our panel

knows about the competitive nature of the pharmaceuticals market.

With respect to DTC advertising, I have long-standing concerns about commercialization of the doctor-patient relationship as it applies to prescription drugs. I

agree that well done advertisements on public health issues can provide a substantial public health benefit. Ads on tobacco, sexually transmitted diseases, vaccines,

domestic violence, drug abuse, and other causes of premature death and disease

have worked. That is an entirely different matter than the case of a prescription

drug product sponsor running an advertisement for its product. The latter case

moves from the general message of urging people to take some action of benefit to

their health to a related, yet distinct, effort to urge persons to consume a particular

product. Are DTC ads improving the health of this country and, if so, how and to

what extent?

There is no doubt in my mind that the Waxman-Hatch Act has saved consumers

billions of dollars in prescription drug costs and, in doing so, has improved the

health of millions of persons. That said, I wonder if this law any longer can realize

its full potential as tens of billions of dollars of prescription drugs are scheduled to

go off patent in the next several years. My point is that a very good law has acquired some tattered edges due to judicial decisions, administrative actions, and

clever lawyering by brand name drug manufacturers. This law was enacted in 1984

and has not been revised since then. That is a long time in the life of any public

policy, especially one that affects the disposition of many billions of dollars. I understand that our witnesses today will not discuss ideas for fundamental reform, but

16

will limit their remarks to proposals aimed at restoring the original balance of the

Waxman-Hatch Act between product innovation and price competition.

Finally, we will hear two very different opinions on the issue of who can initiate

the switch of a prescription drug to over-the-counter status. The arguments pro and

con are intriguing and I look forward to the testimony.

Mr. Chairman, I hope this hearing is only the beginning of a substantial Subcommittee effort to address pharmaceutical market issues. Thank you.

Mr. BILIRAKIS. And we will break now and show our appreciation

to Dr. Woodcock for her patience. I’m sure you understand what we

go through here. Thank you.

[Brief recess.]

Mr. BILIRAKIS. The committee is pleased to welcome as our first

panelist Dr. Janet Woodcock, who is a Director for the Center for

Drug Evaluation and Research with the FDA.

Dr. Woodcock, of course, your written statement is a part of the

record. I will set the clock at 10 minutes, please do the best that

you can in that regard. We certainly won’t cut you off if you should

go over. Please proceed.

STATEMENT OF JANET WOODCOCK, DIRECTOR, CENTER FOR

DRUG EVALUATION AND RESEARCH, FOOD AND DRUG ADMINISTRATION

Ms. WOODCOCK. Thank you.

Mr. Chairman and members of the subcommittee, I’m Janet

Woodcock, Director of the Center for Drug Evaluation and Research at the Food and Drug Administration. I’m pleased to be here

and be able to provide information on FDA programs that may effect consumer’s demand for, and access to pharmaceuticals.

As you’re aware, the FDA is not involved in drug pricing. However many of our programs can impact directly or indirectly on

health care costs related to drugs. Our generic drug review program is the best example. The availability of lower cost generic

versions of innovator drugs has a substantial impact on lower cost

to consumers in the healthcare system.

Today I will discuss issues related to three FDA programs: Generic review, the agency’s regulation of direct-to-consumer advertising, and the process of switching drugs available under prescription to over-the-counter status.

The generic drug program has the most straight forward impact

on drug costs. In fiscal year 2000 alone, FDA approved 232 generic

drugs. Some of these were first time approvals, while others represented additional competitive entries into the marketplace. It has

been well documented that when generic competition is introduced,

drug prices drop. Because FDA review provides assurance that generic products are fully substitutable for the innovator drug, patients can save money on their medicines without fear of getting

a lower quality product.

FDA’s generic drug review program implements that Drug Price

Competition and Patent Term Restoration Act of 1984, also known

as the Waxman-Hatch Amendments. These amendments were intended to balance two important public policy goals. First, to provide meaningful market protection incentives to encourage the development of valuable new drugs. And second, to provide for the

rapid availability of generic versions once the statutory patent protection and marketing exclusivity of the innovator drug expired.

17

And overall, as we’ve already heard, the program has, and is currently achieving these goals. However, as might be expected when

so much is at stake financially, certain provisions have proved challenging to implement. In particular, the 180 day generic exclusivity

procedure has been marked by litigation, court decisions, and

course directions for FDA. These problems are too complex to discuss in my brief statement, but they’re fully covered in my written

testimony, and I’ll be glad to answer any questions you might have.

The bottom line is that the generic drug program is functioning

well, but there are difficulties in implementation of certain parts

of the statute. And I would like to also add that these difficulties

have increased in recent years, and we may project that the trajectory of problems may be increasing.

Now I’d like to turn to the issue of direct-to-consumer advertising. First, I’d like to point out that direct-to-consumer advertising has always been legal in the United States. Neither the

Food, Drug and Cosmetic Act nor the implementing regulations,

which were first issued in the 1960’s, prohibit promotion to consumers or patients.

People often ask us when FDA lifted its ban on direct-to-consumer advertising. In fact, this activity was never banned. Product

sponsors back in the 1960’s just didn’t advertise to consumers. In

the early 1980’s, however, a few firms started advertising their prescription products directly to patients. As a result of the ensuing

concerns, FDA requested in 1983 that sponsors voluntarily suspend

these ads to give FDA time to conduct research and hold public

meetings, which was done and the industry complied with this request.

In 1985 FDA withdrew the voluntary moratorium stating that

the regulations provided sufficient safeguards to protect consumers.

After that there was a steady growth of print direct-to-consumer

ads for prescription drugs.

By the late 1990’s increasing numbers of reminder ads began to

appear on television. These ads can mention the name of the drug,

but don’t mention its use, which is very confusing to the public, although not to health professionals who are familiar with drug

names.

In 1997, in response to the changed information environment in

the country, as well as the confusing broadcast situation and the

demand from patients and consumers for understandable prescription drug information, FDA issued a draft guidance explaining how

sponsors could meet the regulatory requirements for consumer access to complete label information. Sponsors followed this guidance

and used it to run broadcast ads.

In 1999 FDA issued the guidance in final form and stated our

intention to assess the impact of the guidance and of DTC promotion in general on the public health, and we will do this.

From the public health perspective direct-to-consumer advertising is a double edged sword. On one side we know that many

conditions with preventable, serious consequences are severely

undertreated in the U.S. population. Examples include hypertension, high cholesterol and mental illnesses. Many people are suffering, or will die prematurely, because they have not utilized

available treatments for these conditions. This is such a severe

18

problem that some public health advocates have suggested to the

FDA that certain medicines for cardiovascular problems be

switched to over-the-counter status so more people would have access.

Advertising and promotion can strongly influence behavior, that’s

why firms pay for it. Ads could reach out to untreated individuals

and motivate them to seek care. And, in fact, when we’ve looked

at broadcast ads, a significant number of them target these serious

and undertreated disorders.

The sword’s other edge, though, is that patients and consumers

could be motivated by advertising to seek medication that was not

right for them and even to pressure prescribers into inappropriate

choices. We certainly have heard stories from some health care professionals of patients coming to the office waving such an ad for an

inappropriate drug for them.

Again, I cannot cover all issues raised by DTC advertising in a

brief statement. When discussing DTC ads and drug costs it’s important to stress that not all drug cost increases are negative from

a public health standpoint. If more citizens take drugs to prevent

heart attacks, strokes, or weakened bones as a result of direct-toconsumer advertising, that is for the public good. If cost increases

reflect inappropriate prescriptions or preferential prescribing of

more expensive choices, then that’s a poor bargain indeed for the

public.

Finally, I’d like to say a word about switching drugs from prescription to over-the-counter status. Usually when such switches

are considered, the benefits that we think of at FDA involve consumer access and convenience. We do not think about drug costs.

In the vast majority of cases historically the drug manufacturer

proposes and supports such a switch.

Recently FDA was petitioned by a health care payer group to

switch certain prescription antihistamines to over-the-counter status. While FDA does not consider costs in making OTC switch decisions, it is likely that both the petitioner’s desire for the switch and

the manufacturer’s reluctance about the switch is at least in part

related to economic factors.

In summary, FDA operates a number of programs that impact

people’s access to, and knowledge about, available drug treatment.

We strive to do this in a way that produces the maximum public

health benefit within the current statutory framework that’s available to us.

Thank you.

[The prepared statement of Janet Woodcock follows:]

PREPARED STATEMENT OF JANET WOODCOCK, DIRECTOR, CENTER FOR DRUG EVALUATION AND RESEARCH, FOOD AND DRUG ADMINISTRATION, DEPARTMENT OF HEALTH

AND HUMAN SERVICES

INTRODUCTION

Mr. Chairman and Members of the Subcommittee, I am Dr. Janet Woodcock, Director of the Center for Drug Evaluation and Research (CDER), Food and Drug Administration (FDA or the Agency). I am here today to update you on three important

areas that CDER is continuing to work on:

(1) FDA’s implementation of provisions of the Drug Price Competition and Patent

Term Restoration Act of 1984 (Hatch-Waxman Amendments) that govern the

generic drug approval process.

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(2) The promotion that manufacturers of prescription drugs (product sponsors) direct

toward consumers and patients. This is referred to as ‘‘direct-to-consumer’’ promotion or DTC.

(3) The mechanism for reclassification of drugs from prescription to over-the-counter

(OTC) status, namely, the request for the OTC switch by a third party, a novel

situation FDA is presently facing.

I. GENERIC DRUGS

FDA’s implementation of provisions of the Drug Price Competition and Patent

Term Restoration Act of 1984 (Hatch-Waxman Amendments) govern the generic

drug approval process. These provisions give 180 days of marketing exclusivity to

certain generic drug applicants. The 180-day generic drug exclusivity provision is

one component of the complex patent listing and certification process, which also

provides for a 30-month stay on generic drug approvals while certain patent infringement issues are litigated.

The Hatch-Waxman Amendments are intended to balance two important public

policy goals. First, drug manufacturers need meaningful market protection incentives to encourage the development of valuable new drugs. Second, once the statutory patent protection and marketing exclusivity for these new drugs has expired,

the public benefits from the rapid availability of lower priced generic versions of the

innovator drug.

Statutory Provisions

The Hatch-Waxman Amendments amended the Federal Food, Drug, and Cosmetic

(FD&C) Act and created section 505(j). Section 505(j) established the abbreviated

new drug application (ANDA) approval process, which permits generic versions of

previously approved innovator drugs to be approved without submission of a full

new drug application (NDA). An ANDA refers to a previously approved NDA (the

‘‘listed drug’’) and relies upon the Agency’s finding of safety and effectiveness for

that drug product.

The timing of an ANDA approval depends in part on patent protections for the

innovator drug. Innovator drug applicants must include in an NDA information

about patents for the drug product that is the subject of the NDA. FDA publishes

patent information on approved drug products in the Agency’s publication ‘‘Approved Drug Products with Therapeutic Equivalence Evaluations’’ (the Orange

Book) (described in more detail below). The FD&C Act requires that an ANDA contain a certification for each patent listed in the Orange Book for the innovator drug.

This certification must state one of the following:

(I) that the required patent information relating to such patent has not been filed;

(II) that such patent has expired;

(III) that the patent will expire on a particular date; or

(IV) that such patent is invalid or will not be infringed by the drug, for which approval is being sought.

A certification under paragraph I or II permits the ANDA to be approved immediately, if it is otherwise eligible. A certification under paragraph III indicates that

the ANDA may be approved on the patent expiration date.

A paragraph IV certification begins a process, in which the question of whether

the listed patent is valid or will be infringed by the proposed generic product may

be answered by the courts prior to the expiration of the patent. The ANDA applicant

who files a paragraph IV certification to a listed patent must notify the patent

owner and the NDA holder for the listed drug that it has filed an ANDA containing

a patent challenge. The notice must include a detailed statement of the factual and

legal basis for the ANDA applicant’s opinion that the patent is not valid or will not

be infringed. The submission of an ANDA for a drug product claimed in a patent

is an infringing act if the generic product is intended to be marketed before expiration of the patent, and therefore, the ANDA applicant who submits an application

containing a paragraph IV certification may be sued for patent infringement. If the

NDA sponsor or patent owner files a patent infringement suit against the ANDA

applicant within 45 days of the receipt of notice, FDA may not give final approval

to the ANDA for at least 30 months from the date of the notice. This 30-month stay

will apply unless the court reaches a decision earlier in the patent infringement case

or otherwise orders a longer or shorter period for the stay.

The statute provides an incentive of 180 days of market exclusivity to the ‘‘first’’

generic applicant who challenges a listed patent by filing a paragraph IV certification and running the risk of having to defend a patent infringement suit. The

statute provides that the first applicant to file a substantially complete ANDA containing a paragraph IV certification to a listed patent will be eligible for a 180-day

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1Mova Pharmaceutical Corp. v. Shalala, 140 F.3d 1060, 1065 (D.C. Cir. 1998).

period of exclusivity beginning either from the date it begins commercial marketing

of the generic drug product, or from the date of a court decision finding the patent

invalid, unenforceable or not infringed, whichever is first. These two events—first

commercial marketing and a court decision favorable to the generic—are often called ‘‘triggering’’ events, because under the statute they can trigger the beginning of the

180-day exclusivity period.

In some circumstances, an applicant who obtains 180-day exclusivity may be the

sole marketer of a generic competitor to the innovator product for 180 days. But

180-day exclusivity can begin to run—with a court decision—even before an applicant has received approval for its ANDA. In that case, some, or all, of the 180-day

period could expire without the ANDA applicant marketing its generic drug. Conversely, if there is no court decision and the first applicant does not begin commercial marketing of the generic drug, there may be prolonged or indefinite delays in

the beginning of the first applicant’s 180-day exclusivity period. Approval of an

ANDA has no effect on exclusivity, except if the sponsor begins to market the approved generic drug. Until an eligible ANDA applicant’s 180-day exclusivity period

has expired, FDA cannot approve subsequently submitted ANDAs for the same

drug, even if the later ANDAs are otherwise ready for approval and the sponsors

are willing to immediately begin marketing. Therefore, an ANDA applicant who is

eligible for exclusivity is often in the position to delay all generic competition for

the innovator product.

Only an application containing a paragraph IV certification may be eligible for exclusivity. If an applicant changes from a paragraph IV certification to a paragraph

III certification, for example upon losing its patent infringement litigation, the

ANDA will no longer be eligible for exclusivity.

Court Decisions and FDA Actions

This 180-day exclusivity provision has been the subject of considerable litigation

and administrative review in recent years, as the courts, industry, and FDA have

sought to interpret it in a way that is consistent both with the statutory text and

with the legislative goals underlying the Hatch-Waxman Amendments. A series of

Federal court decisions beginning with the 1998 Mova 1 case describe acceptable interpretations of the 180-day exclusivity provision, identify potential problems in implementing the statute, and establish certain principles to be used by the Agency

in interpreting the statute.

In light of the court decisions finding certain FDA regulations inconsistent with

the statute, the Agency proposed new regulations in August 1999 to implement the

180-day exclusivity. Since then many comments have been submitted and there

have been additional court decisions further interpreting the 180-day exclusivity

provision and complicating the regulatory landscape. The Agency has not yet published a final rule on 180-day exclusivity. As described in a June 1998 guidance for

industry, until new regulations are in place, FDA is addressing on a case-by-case

basis those 180-day exclusivity issues not addressed by the existing regulations.

One of the most fundamental changes to the 180-day exclusivity program that has

resulted from the legal challenges to FDA’s regulations is the determination by the

courts of the meaning of the phrase ‘‘court decision.’’ The courts have determined

that the ‘‘court decision’’ that can begin the running of the 180-day exclusivity period may be the decision of the district court, if it finds that the patent at issue is

invalid, unenforceable, or will not be infringed by the generic drug product. FDA

had interpreted the ‘‘court decision’’ that could begin the running of 180-day exclusivity (and the approval of the ANDA) as the final decision of a court from which

no appeal can be or has been taken—generally a decision of the Federal Circuit.

FDA’s interpretation had meant that an ANDA applicant could wait until the appeals court had finally resolved the patent infringement or validity question before

beginning the marketing of the generic drug. FDA had taken this position so that

the generic manufacturer would not have to run the risk of being subject to potential treble damages for marketing the drug, if the appeals court ruled in favor of

the patent holder. The current interpretation means that if the 180-day exclusivity

is triggered by a decision favorable to the ANDA applicant in the district court, the

ANDA sponsor who wishes to market during that exclusivity period now may run

the risk of treble damages if the district court decision is reversed on appeal to the

Federal Circuit. As a practical matter, it means that many generic applicants may

choose not to market the generic and thus the 180-day exclusivity period could run

during the pendency of an appeal.

In one of the cases rejecting FDA’s interpretation of the ‘‘court decision’’ language

in the statute, the court determined that the applicant who relied in good faith on

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FDA’s interpretation of the 180-day exclusivity provision should not be punished by

losing its exclusivity. The court, therefore, refused to order FDA to begin the running of 180-day exclusivity upon the decision of the district court in the patent litigation at issue. FDA has taken a similar approach in implementing the courts’ decisions: the new ‘‘court decision’’ definition will apply only for those drugs for which

the first ANDA was submitted subsequent to March 30, 2000. In adopting this

course, a primary concern for the Agency was to identify an approach that would

minimize further disruption and provide regulated industry with reasonable guidance for making future business decisions.

To advise the public and industry of this position, FDA published a Guidance for

Industry in March 2000. FDA intends to incorporate the courts’ interpretation of the

‘‘court decision’’ trigger for 180-day exclusivity into the final rule implementing the

changes in 180day exclusivity.

Orange Book Listings

There have been concerns expressed over FDA’s role in the listing of patents in

the Orange Book, which can have an impact on generic drug approvals by delaying

approval and 180-day exclusivity. Under the FD&C Act, pharmaceutical companies

seeking to market innovator drugs must submit, as part of an NDA or supplement,

information on any patent that 1) claims the pending or approved drug or a method

of using the approved drug, and 2) for which a claim of patent infringement could

reasonably be asserted against an unauthorized party. Patents that may be submitted are drug substance (active ingredient) patents, drug product (formulation

and composition) patents, and method of use patents. Process (or manufacturing)

patents may not be submitted to FDA.

When an NDA applicant submits a patent covering the formulation, composition,

or method of using an approved drug, the applicant must also submit a signed declaration stating that the patent covers the formulation, composition, or use of the

approved product. The required text of the declaration is described in FDA’s regulations. FDA publishes patent information on approved drug products in the Orange

Book.

The process of patent certification, notice to the NDA holder and patent owner,

a 45-day waiting period, possible patent infringement litigation and the statutory

30-month stay mean there is the possibility of a considerable delay in the approval

of ANDAs as a result of new patent listings. Therefore, these listings are often closely scrutinized by ANDA applicants. FDA regulations provide that, in the event of

a dispute as to the accuracy or relevance of patent information submitted to and

subsequently listed by FDA, an ANDA applicant must provide written notification

of the grounds for dispute to the Agency. FDA then requests the NDA holder to confirm the correctness of the patent information and listing. Unless the patent information is withdrawn or amended by the NDA holder, FDA will not change the patent information listed in the Orange Book. If a patent is listed in the Orange Book,

an applicant seeking approval for an ANDA must submit a certification to the patent. Even an applicant whose ANDA is pending when additional patents are submitted by the sponsor must certify to the new patents, unless the additional patents

are submitted by the patent holder more than 30 days after issuance by the U.S.

Patent and Trademark Office.

FDA does not undertake an independent review of the patents submitted by the

NDA sponsor. FDA does not assess whether a submitted patent claims an approved

drug and whether a claim of patent infringement could reasonably be made against

an unauthorized use of the patented drug. FDA has implemented the statutory patent listing provisions by informing interested parties what patent information is to

be submitted, who must submit the information, and when and where to submit the

information. As the Agency has stated, since the implementation of the 1984 HatchWaxman Amendments began, FDA has no expertise or resources with which to resolve complex questions of patent coverage, and thus the Agency’s role in the patent-listing process is ministerial. The statute requires FDA to publish patent information upon approval of the NDA. The Agency relies on the NDA holder or patent

owner’s signed declaration stating that the patent covers an approved drug product’s

formulation, composition or use. Generic and innovator firms may resolve any disputes concerning patents in private litigation. As noted above, if the generic applicant files a paragraph IV certification and is sued for patent infringement within

45 days, there is an automatic stay of 30 months, substantially delaying the approval of the generic drug and, thus, the availability of lower cost generic drug products.

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CONCLUSION

FDA continues to implement the Hatch-Waxman Amendments exclusivity provisions in the best manner possible given the text of the legislation, the history of the

legislation and the numerous court challenges. Again, as previously noted, FDA has

tried to balance innovation in drug development and expediting the approval of

lower-cost generic drugs.

II. DIRECT TO CONSUMER ADVERTISING

Statutory and Regulatory Authority

The promotion that manufacturers of prescription drugs (product sponsors) direct

toward consumers and patients is referred to as ‘‘direct-to-consumer’’ promotion or

DTC. Such promotion uses multiple avenues for reaching lay audiences, including,

but not limited to: television and radio advertisements, print advertisements, telephone advertisements, direct mail, videotapes and brochures. It is important to understand the scope of FDA’s authority in this area. It is also important to understand the different types of advertisements that are directed toward consumer audiences.

The FD&C Act and regulations do not distinguish between professional and consumer audiences. Section 502(n) of the FD&C Act specifies that prescription drug

advertisements must contain ‘‘a true statement of... information in brief summary

relating to side effects, contraindications, and effectiveness’’ of the advertised product. The implementing regulations (Title 21, Code of Federal Regulations [CFR] Section 202.1), originally issued in the 1960s, specify, among other things, that prescription drug advertisements cannot be false or misleading, cannot omit material

facts, and must present a fair balance between effectiveness and risk information.

Further, for print advertisements, the regulations specify that every risk addressed

in the product’s approved labeling must also be disclosed in the advertisements.

For broadcast advertisements, however, the regulations require ads to disclose the

most significant risks that appear in the labeling. The regulations further require

that the advertisement either contain a summary of ‘‘all necessary information related to side effects and contraindications’’ or convenient access must be provided

to the product’s FDA- approved labeling and the risk information it contains.

Finally, the FD&C Act specifically prohibits FDA from requiring prior approval

of prescription drug advertisements, except under extraordinary circumstances.

Also, the advertising provisions of the FD&C Act do not address the issue of drug

product cost.

Types of Advertisements

There are three different types of ads that product sponsors use to communicate

with consumers: ‘‘product-claim’’ advertisements, ‘‘help-seeking’’ advertisements, and

‘‘reminder’’ advertisements. Advertisements that include both a product’s name and

its use, or that make any claims or representations about a prescription drug, are

known as ‘‘product-claim’’ advertisements. These ads must include a ‘‘fair balance’’

of risks and benefits. In addition, they must provide all risk information included

in the product’s FDA-approved labeling or, for broadcast advertisements, provide

convenient access to this information. In our regulations, the phrase ‘‘adequate provision’’ is used to identify the convenient access option. Unlike the ‘‘product claim’’

ads, ‘‘help-seeking’’ advertisements and ‘‘reminder’’ ads need not include any risk information.

A ‘‘help-seeking’’ advertisement discusses a disease or condition and advises the

audience to ‘‘see your doctor’’ for possible treatments. Because no drug product is

mentioned or implied, this type of ad is not considered to be a drug ad and FDA

does not regulate it.

The second type of advertisement that does not need to include risk information

is called a ‘‘reminder’’ advertisement. The regulations specifically exempt this type

of ad from the risk disclosure requirements. Like ‘‘help-seeking’’ ads, the ‘‘reminder’’

ad is limited, although in a different way from ‘‘help-seeking’’ ads. ‘‘Reminder’’ ads

are allowed to disclose the name of the product and certain specific descriptive (e.g.,

dosage form) or cost information, but they are not allowed to give the product’s indication or dosage recommendations, or to make any claims or representations about

the product. The exemption for ‘‘reminder’’ ads was included in FDA’s regulations

for promotions directed toward health care professionals, who presumably knew

both the name of a product and its use. ‘‘Reminder’’ ads serve to remind health care

professionals of a product’s availability. They specifically are not allowed for products with serious warnings (called ‘‘black box’’ warnings) in their labeling.

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Evolution of DTC Promotion

Prior to the early 1980s, prescription products were not promoted directly to consumers and patients. Instead, product sponsors often produced materials that were

given to health care professionals to pass on to patients if they thought this would

be appropriate for particular patients. In the early 1980s, a few companies started

advertising products directly to patient audiences (specifically, older people concerned about pneumonia and people taking prescription ibuprofen to treat arthritis

pain). As a result of questions and concerns about promotion directed toward nonhealth care professionals, in 1983 FDA requested that sponsors suspend DTC ads

to give the Agency time to study the issue.

The industry complied with this request, and during the ensuing moratorium FDA

conducted research and sponsored a series of public meetings. In 1984, the University of Illinois and Stanford Research Institute jointly sponsored a symposium to

discuss consumer-directed prescription drug advertising from a broad research and

policy perspective. On September 9, 1985, FDA withdrew the moratorium in a Federal Register (FR) Notice (50 FR 36677), which stated that the ‘‘current regulations

governing prescription drug advertising provide sufficient safeguards to protect consumers.’’

During the early 1990’s, product sponsors increasingly used consumer magazines

to advertise their products. These ads typically included a promotional message together with the ‘‘brief summary’’ of adverse effects, similar to that used in physician

directed ads. The ‘‘brief summary’’ statement, which frequently appears in small

print, is not very consumer friendly. In the 1990s, product sponsors also started

using television advertisements in a limited fashion. Television advertisements were

limited because FDA and industry did not believe that it was feasible to disseminate

the product’s approved labeling in connection with the ad. The extensive disclosure

needed to fulfill this requirement essentially precluded the airing of such ads. For

example, one way to satisfy this requirement would be to scroll the ‘‘brief summary,’’

which would take a minute or more even at a barely readable scrolling rate. The

industry, therefore, resorted to television ads that did not require risk disclosure.

By the mid-1990s, product sponsors started placing ‘‘reminder’’ ads on television.

Because these ads only mentioned the name of the drug, however, they were extremely confusing to consumers, who, unlike health care professionals, were not

knowledgeable about the name and the use for these products.

In response to increasing consumer demand for information, FDA began to consider whether broadcast advertisements could be constructed to ensure access to

product labeling, the only alternative to including all of an advertised product’s risk

information. FDA considered suggestions about providing access to multiple sources

of product labeling as a means of satisfying the requirement that consumers have

convenient access to FDA-approved labeling when manufacturers broadcast a ‘‘product-claim’’ advertisement.

In August 1997, FDA issued a draft guidance entitled: ‘‘Guidance for Industry:

Consumer-Directed Broadcast Advertisements’’ that clarified the Agency’s interpretation of the existing regulations. The Guidance described an approach for ensuring

that audiences exposed to prescription drug advertisements on television and radio

have convenient access to the advertised product’s approved labeling. The proposed

mechanism consisted of reference in the broadcast advertisement to four sources of

labeling information: a toll-free telephone number, a website address, a concurrently

running print advertisement, and health care professionals. Following a comment

period, and detailed review and consideration of the comments, FDA made only

minor changes to the draft guidance, and issued it in final form in August 1999 (64

FR 43197, also found at http://www.fda.gov/cder/guidance/1804fnl.htm). In announcing the final guidance, FDA advised that the Agency intended to evaluate the impact of the guidance, and of DTC promotion in general, on the public health, within

two years of finalizing the guidance.

Stakeholder Perspectives

A number of stakeholder groups have expressed strong interest in DTC promotion. Those that are positive about DTC promotion assert that this practice will:

• Improve consumers’ knowledge of drugs and drug availability.

• Encourage consumers to talk with their health care providers about their health

problems.

• Allow consumers and patients to have a greater role in decisions about their own

health care that they say they desire.

• Improve communication between patients and their physicians.

• Improve appropriate prescribing by allowing physicians to get more information

about their patients from their patients.

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• Lower the cost of prescription drugs. Not all stakeholders are positive about DTC

promotion. Opponents assert that DTC advertising will:

• Confuse consumers about drugs. • Make it appear that prescription drugs are safer than they are. • Interfere with the patient-physician relationship because patients will insist

that their physicians prescribe the advertised products. • Increase inappropriate prescribing. • Raise the cost of prescription drugs.

Finally, there is a group of stakeholders with a less polarized view of DTC promotion. They believe that such promotion has both benefits and risks, but that it

should be strictly regulated, and that, preferably, all DTC materials should be ‘‘preapproved’’ by FDA. They often assert that there are potential public health benefits

associated with patients visiting health care providers about untreated diseases or

conditions, particularly those that appear to be under treated in the population and

that are responsible for long-term harm (for example, high cholesterol, high blood

pressure, diabetes and osteoporosis).

Current Situation

FDA recognizes that drug promotion raises certain issues for health care professionals and different issues for consumers, in light of differences in medical and

pharmaceutical expertise. For this reason, FDA has monitored DTC promotion, and

especially broadcast promotion, very closely to help ensure that adequate contextual

and risk information, presented in understandable language, is included to fulfill

the requirement for fair balance and to help the consumer accurately assess promotional claims and presentations.

Product sponsors of prescription advertisements are required to submit their promotional materials to FDA around the time these materials are initially put into

public use. FDA receives approximately 32,000 of these submissions per year, for

all types of promotion, including promotion to health care professionals. Product

Sponsors also can submit draft materials to FDA for review and comment prior to

using them. Division of Drug Marketing, Advertising and Communications

(DDMAC) has made it a high priority to provide comments to product sponsors on

voluntarily submitted draft broadcast advertisements within a reasonable time. In

fact, although it is not required, a majority of product sponsors voluntarily submit

their broadcast advertisements to DDMAC for prior review and comment at some

point as advertising materials are being produced. Product sponsors may ask for review and comment at the very initial stages of production (by supplying the words

they intend to use along with rough drawings of their proposed graphics), or at the

later stages of final videotape production. DDMAC only gives final comments on

final videotapes because inappropriate presentations can turn an otherwise acceptable advertisement into an unacceptable one (for example, by pacing the risk disclosure too rapidly, including multiple distracting visual images during the risk disclosure, or including images that overstate the efficacy of the product beyond what is

supported by substantial clinical evidence).

Since January 1997, sponsors of about 65 prescription drugs have aired ‘‘productclaim’’ advertisements on television or radio. A small number of prescription biological products also have been advertised. Nine products fall into the allergy category

(nasal and ocular anti-histamines, and nasally administered corticosteroids), while

another eight products treat skin or hair-related problems (acne, cold sores, rosacea,

baldness, unwanted facial hair, nail fungus). More importantly, ten products are designed to treat diseases that are believed to be under treated, including high cholesterol and heart disease, and mental health problems like depression. Five products

to treat or prevent osteoporosis or menopausal symptoms have been advertised.

Other advertised products are approved to treat such conditions or diseases as asthma, Alzheimer’s Disease, arthritis, chronic obstructive pulmonary disease, diabetes,

insomnia, migraine, obesity, overactive bladder, serious heartburn, smoking cessation, and sexually transmitted diseases. Most of these are serious problems where

patients are in the best position to recognize symptoms.

It is important to note that DDMAC does not know how many different advertisements have aired in broadcast media for these 65 drugs. There have been multiple

campaigns for a number of the products, including the allergy and high cholesterol

products. In addition, many campaigns include different length ‘‘product-claim’’ commercials, as well as multiple short ‘‘reminder’’ commercials. DDMAC does not track

the number of different broadcast advertisements that are submitted. Further, because ‘‘help-seeking’’ advertisements, if done properly, are not considered to be drug

ads, most product sponsors do not send them to DDMAC under the submission requirements for prescription drug promotional materials. Therefore, we have no

measure of how many of these have been in the public domain.

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Enforcement Related to DTC Promotion

Since August 1997, FDA has issued:

• 26 ‘‘untitled’’ (or ‘‘Notice of Violation’’) letters on ‘‘product-claim’’ broadcast advertisements. Such letters request that the violative promotion be stopped immediately. Product sponsors virtually always comply immediately with this request.

• 3 ‘‘warning letters’’ on broadcast advertisements. This is a higher-level enforcement action, and requests that a remedial campaign be conducted by the company to correct the impressions left by the ad.

• 13 ‘‘untitled’’ letters on purported ‘‘reminder’’ broadcast advertisements.

• 3 ‘‘untitled’’ letters on purported ‘‘help-seeking’’ broadcast advertisements.

Most of the violations cited were because the ad overstated or guaranteed the

product’s efficacy, expanded the indication or the patient population approved for

treatment, or minimized the risks of the product, through either inadequate presentation or omission of information.

Since January 1997, the Agency has issued:

• 43 ‘‘untitled’’ letters that addressed DTC print advertisements or other promotional materials, including purported ‘‘reminder’’ and ‘‘help-seeking’’ materials.

• 1 ‘‘warning letter’’ that included a DTC print advertisement as part of an overall

misleading campaign.

Generally, the violations involving print ads making ‘‘product-claim’’ ads were

similar to those cited above. Nearly all ‘‘reminder’’ ad violations were the result of

representations about the product that triggered the need for full disclosure of benefits and risks. ‘‘Help-seeking’’ ad violations were due to a particular product being

implied in the message. As noted above, however, FDA cannot determine how many

specific advertisements serve as the denominator for assessing how many have resulted in enforcement action compared with those that have not.

Research on DTC Promotion

A number of groups have been conducting research on DTC promotion. Much publicly available research consists of surveys utilizing samples of consumers or patients to examine attitudes about DTC promotion and self-reported behaviors related to DTC promotion in the context of patient-physician visits and use of prescription drugs. The groups sponsoring this research include: Prevention magazine,

TIME Inc., the National Consumers League, and American Association of Retirement People. A few surveys of physicians have been made partially publicly available. FDA remains concerned, however, about the representation of the physician

surveys. In 1999, FDA sponsored a telephone survey that focused on a national

probability sample of patients who had seen a physician for a problem on their own

within the three months prior to the survey. The results of this patient survey suggested that patients are seeking additional information as a result of DTC promotions that they have seen. This information was sought primarily from health

care professionals, and secondarily from reference texts and family. Generally, between 10 and 20 percent of respondents said that they sought additional information from the sources referenced in broadcast advertisements—toll-free telephone

numbers, web sites, print advertisements. A major result, and one that is consistent

with results of Prevention’s national surveys, is that a significant minority of respondents said that a DTC ad has caused them to ask a doctor about a medical condition or illness they had not previously discussed. This could represent a significant

and positive public health benefit, particularly if these patients are talking about

undiagnosed heart disease or other serious disorders.

The survey results also suggest that DTC advertisements are not significantly increasing visits to a physician’s office. For the most part, patients said that they had

recently visited their doctors for the traditional reasons: because it was time for a

check-up (53 percent), because they were feeling ill (42 percent), or because they had

had a sudden symptom or illness (41 percent). Only two percent said that they had

visited their doctor because of something they had seen or heard. Of those patients

who had a conversation with their doctor about a prescription drug: 81 percent said

that their doctor had welcomed the question, 79 percent said that their doctor discussed the drug with them, and 71 percent said that their doctor had reacted as

though the conversation was an ordinary part of the visit. Only four percent said

that their doctor seemed upset or angry when the patient asked about a prescription

drug. According to the patients, therefore, physicians seem to be reacting well to

questions about prescription drugs. Finally, only 50 percent of these patients said

that their doctor gave them the medication discussed. Thirty-two percent said that

the doctor recommended a different drug. Twenty-nine percent of the respondents

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indicated that behavioral or lifestyle changes were suggested by the doctor. It therefore appears, from FDA’s data, that physicians are comfortable denying prescriptions when the prescription would not be right for the patient.

A small number of patients who were denied prescriptions said that their doctors

told them why. Reasons included: the drug wasn’t right for the patient; the doctor

wanted the patient to take a different drug; the drug had side effects of which the

patient was unaware; the patient did not have the condition treated by the drug;

the patient did not need a prescription drug; the patient could use a non-prescription drug; and, there was a less expensive drug available.

Patients also were asked about their attitudes about prescription drug advertisements. Their answers indicated somewhat mixed feelings. Eighty-six percent agreed

that these ads help make them aware of new drugs, 70 percent agreed that the ads

give enough information to help the patient decide if they should discuss the product with a doctor, and 62 percent agreed that ads help the patients have better discussions with their doctors about their health. Only 24 percent agreed that DTC ads

make it seem like a doctor is not needed to decide whether a drug is right for someone. In contrast, 58 percent agreed that DTC ads make drugs seem better than they

really are, 59 percent agreed that ads do not give enough information about the advertised product’s risks and negative effects, and 49 percent agreed that these ads

do not give enough information about the benefits and positive effects of the advertised product.

Next Steps

In issuing both the draft and the final broadcast advertisement guidance, FDA

stated its intent to assess the impact of the guidance, and of DTC promotion in general, on the public health. FDA is also aware that privately funded research is being

planned to examine the effects of DTC promotion. At present, FDA is not aware of

any evidence that the risks of DTC promotion outweigh its benefits. FDA intends

to carefully examine all available data, to determine whether the public health is

adequately protected.

III. PRESCRIPTION DRUG SWITCH TO OVER-THE-COUNTER STATUS

The FDA is responsible for the reclassification of many drugs from prescription

to OTC status. These are often referred to as ‘‘switch drugs,’’ and the reclassification

process is referred to as ‘‘switching from prescription to OTC.’’ Nearly forty ingredients incorporated into drug products have been reclassified since 1972 when the

OTC drug review began.

Under the FDA’s Office of OTC Drug Evaluation, a process was established for

producing a final regulation to set standards for each drug product-treatment category. Nearly forty ingredients has been reclassified using this process since 1972

using this process.

Switches are covered by the prescription exemption procedures, found in 21 CFR

310.200. Switches can be initiated by FDA, the sponsor of a new drug application,

or by any interested party. The OTC drug product can be marketed under a NDA

or under the process established by regulation. The switch may be:

1. A complete switch whereby all of the indications and dosage forms are switched

from prescription to OTC status;

2. A partial switch whereby some of the prescription indications and dose regimens

are switched to OTC status and the others remain prescription.

Historically, the majority of drugs that have been switched from prescription-only

to OTC marketing were at the initiated by the sponsor. The FD&C Act restricts

drugs to prescription only status if a learned intermediary is required for the proper

use of the drug. As written, the default assumption of the Act is for drugs to be

marketed OTC without a prescription unless a decision is made that consumers are

not able to appropriately diagnose their condition nor able to correctly choose the

remedy and safely use it based on OTC labeling.

Anyone may submit a citizen petition. Individuals sometimes submit petitions,

but most come from the regulated industry or consumer groups. For the first time,

a third party has asked the FDA to reclassify a drug through the citizen petition

process. Because the petition is still under review, we cannot comment on it at this

time. FDA may use a wide range of public procedures (e.g., conferences, meetings,

correspondence, hearings) during the process of evaluating the petition and to assist

in the formulation of a final response.

In the process of responding to a petition, the Agency creates an administrative

record, a comprehensive documentary foundation for the agency’s final decision. The

Agency’s grant or denial of a petition, which usually is in the form of a letter to

the petitioner, constitutes a final agency action. The Agency may also issue a tenVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
27

tative response explaining that the Agency has not yet reached a final decision on

whether to grant or deny the petition. When FDA issues a final decision, however,

it may be appealed through the court system.

As with any petition, FDA is studying the scientific and legal issues it raises in

an effort to make the best science-based decision under the law.

We look forward to the Committee’s continued interest in this area and would be

happy to answer any questions.

Mr. BILIRAKIS. Thank you, Dr. Woodcock.

I’ll start the questioning and depending on how the day goes and

calls for votes, we might go into a second round of questioning of

Dr. Woodcock. I’ve already discussed this with Mr. Brown.

In this first round at least, Dr. Woodcock you used the term, if

I heard you correctly, directly substitutable referring to the approval of generics. Do you believe that the public recognizes the

fact—well, maybe I should ask you. Do you believe that generics

are bio-equivalent directly substitutable to innovator drugs when

they’ve been approved by the FDA?

Ms. WOODCOCK. Yes. We have scientific basis for our decisions on

bio-equivalence and substitutability. And we would not approve a

generic drug that was not fully substitutable for the innovator

drugs.

Mr. BILIRAKIS. Do you believe that the public recognizes the fact

that they are in fact directly substitutable and use the term bioequivalent to those drugs?

Ms. WOODCOCK. I know that members of the public, the pharmacy community and the medical community, some of them have

serious doubts about substitutability perhaps for certain drug

classes or perhaps overall. There’s a lot of misunderstanding about

the program.

Mr. BILIRAKIS. We’ve heard physicians on both sides of the aisles.

We had Dr. Coburn who served on this panel who used to make

comments, at least to me personally, that he didn’t think that all

the drugs that were approved as being bio-equivalent actually fell

into that category.

What does it mean when we say the drug is bio-equivalent to another drug?

Ms. WOODCOCK. What we mean is that the active ingredient in

the drug is available in the same concentration in the pill or injection, or whatever it might be, it’s exactly the same as the innovator

product and that we know that the rate and extent of absorption

into the body of that active ingredient is equivalent. That’s what

we mean by bio-equivalence; that when you take that pill, for example, you get the same drug level within the body as you would

by taking the innovator product.

Mr. BILIRAKIS. Is there any room for error? Is there a safety factor in there somewhere?

Ms. WOODCOCK. All of these measurements have variability to

them, particularly bio-equivalence. If you took a drug and I took a

drug, it would be very likely we would wind up with slightly different blood levels for a variety of reasons. We have to take that

into account when we test generic drugs for bioavailability. But a

recent survey that was done showed that innovator products and

generic products on absorption into the body, looking at the actual

data there was less than 3 percent difference in the tests.

28

Now, if you tested an innovator product from day-to-day or lotto-lot, you may well see the same amount of variability, and that’s

what people don’t understand.

Mr. BILIRAKIS. If a patient were on a drug therapy using an innovator drug, could they in the middle of the stream, so to speak,

switch into a generic drug that is considered to be bio-equivalent

and no problems develop from that essentially?

Ms. WOODCOCK. That is correct.

Mr. BILIRAKIS. That is correct?

Ms. WOODCOCK. And there’s no need for additional tests or titration or changes of the dose if they switch to an equivalent generic

product.

Mr. BILIRAKIS. In my opening statements, Doctor, thank you for

that statement, there’s a concern out there I think among many

members of the public and still among the medical profession, as

we both already said, that they are not bio-equivalent.

Ms. WOODCOCK. That’s right.

Mr. BILIRAKIS. I think that’s one of the things that I wanted to

do in this hearing. I know the subject matter is varied in this hearing, but I wanted to be sure that we were able to project to the

American people a feeling of confidence.

In my opening statement I made the comment that FDA seems

to take longer to approve generic drugs. Is that true?

Ms. WOODCOCK. The mean time for generic drug approval right

now is about 18 months, whereas for a new drug it’s around 12

months. That’s correct.

Mr. BILIRAKIS. Is there a reason why it takes longer?

Ms. WOODCOCK. Well, significant resources were placed into the

new drug review process. FDA added over a 1,000 scientists and

reviewers as a result of the Prescription Drug User Fee Act and

subsequent changes to that.

Mr. BILIRAKIS. Should it be 18 months versus 12 months? Why?

Is there a greater emphasis on safety there, just the fact that we

are saying that this non-innovator drug is bio-equivalent and thereof it takes us longer to do it?

Ms. WOODCOCK. The reason the generic drug takes longer, usually, is that the application goes through several cycles. We are responsible for reviewing a generic drug within 180 days and getting

an answer back. We only do that right now—we do that about 55

percent of time. We get them reviewed within 180 days. But that’s

much shorter than 18 months.

The problem is the answer is frequently no, that the generic drug

applicant does not meet all the standards and there are remaining

questions. Therefore, it must go back to the sponsor. The application must be resubmitted and then another review cycle occurs,

and sometimes even a third review cycle occurs that’s causing the

actual time to getting on the market to be up to 18 months.

Mr. BILIRAKIS. Thank you.

I think we’re having problems with the clock. But my time, I believe, has expired.

Mr. Brown to inquire?

Mr. BROWN. Thank you, Mr. Chairman.

I’m not sure I understood that. I understand that it’s 12

months—typically an NDA is 12 months and ANDA amended for

29

the generic is 18 months. Part of the reason for that is Congress

passing—I understand part of the reason is Congress passing

PDUFA 2 or whatever we ended up calling it under the New Prescription Drug User Fee Act. There are no generic user fees, correct?

Ms. WOODCOCK. That’s correct.

Mr. BROWN. But explain why beyond resources, and understanding resources are a big part of it, why is the generic company

not able when submitting its application to, in a sense, do it right

the first time? Is that a product of inadequate resources in the

agency?

Ms. WOODCOCK. I believe there are several factors, and that if

the agency were able to provide more assistance to generic firms,

then we would have better applications and we would have lower

cycles. That’s actually what happened under the Prescription Drug

User Fee Act. Much of the resources that we have under the User

Fee Act go to providing advice and explaining the standards to the

sponsors so that the applications are of good quality when they are

first submitted.

So, of course, there are other factors that are involved. Some generic firms are smaller, they may be inexperienced, it may be the

first time they put a product forward and they have to go through

many cycles.

Mr. BROWN. If you assume that name brands have—the name

brand approval process, the NDA approval process is adequately

resourced, funded, staffed, whatever from the FDA’s vantage point

and if you would make that same assumption for ANDA if we could

in fact fund it however it might be done at an equally adequately,

what would the time be—the 18 months would be able to be

knocked down to what time period?

Ms. WOODCOCK. It’s probably unlikely that we could get to 6

months or something like that.

Mr. BROWN. But certainly less than 12, correct?

Ms. WOODCOCK. Probably that’s correct.

Mr. BROWN. I mean it shouldn’t—let me interrupt. Sorry.

It should be easier—we should be able to accomplish it more

quickly the ANDA than the NDA, right?

Ms. WOODCOCK. I was just going to say that. Exactly, it is a simpler application.

One of the issues is to what extent can we get the generic drug

sponsors to submit an approvable application on the first cycle so

that it could be reviewed and approved on the first cycle. If that

doesn’t happen, then the clock will run twice, at least, and it’s

going to be 1 year.

Mr. BROWN. It seems, Mr. Chairman, that one of the goals of this

subcommittee and this full committee should be to bring that period down, that should be something we can agree on across the

board in both parties. If it takes 12 months for the new application,

that we can’t get it to 12 or fewer months for the ANDA. And I

know we’ve talked about it, and your interest is that for sure, too,

that it’s something we ought to be able to do.

Ms. WOODCOCK. Could I say one more thing about this? There

are several factors that are related.

30

Many of the drug manufacturers for generic drugs are located

overseas, particularly the bulk drug applications. And to try and— bulk drug manufacturers. To get to those overseas firms in a timely

manner is a challenge, because they’re all over the world.

Also, right now we have queues, waiting time, within the Office

of Generic Drugs before picking up an application. They have to

wait in a queue until the ones in front. We have very strict timeframes. So that’s another factor that impacts on our ability to get

these out quickly.

Mr. STUPAK. We’ll run this point on the drugs. The generic drugs

when they do an application do they pay a fee under the User Fee

Act?

Ms. WOODCOCK. No.

Mr. STUPAK. But a regular drug, a new drug applications pays about $309,000 I think is the average for a fee?

Ms. WOODCOCK. That’s correct.

Mr. STUPAK. So what you’re really saying, the process is really

driven by whose paying the fee at the time of the application?

Ms. WOODCOCK. The process is driven by the statutory structure

that’s set up. The fees for prescription drugs—the prescription drug

user fees are only allowed to be used for the process of review of

new human drugs.

Mr. STUPAK. Well, what you’re telling this committee is if you’re

a generic when you make your application, your chance of being

approved in 180 days is 55 percent. But now the new drug companies when they put down a $309,000 fee, the last 2 years you’ve

approved all those within a 100 percent of the time isn’t that correct?

Ms. WOODCOCK. This is a continual source of confusion. The review time, time to answer for a generic would be 180 days. It might

often be no. That’s—— Mr. STUPAK. What’s the time to answer on a regular drug, a new

drug application?

Ms. WOODCOCK. Twelve months.

Mr. STUPAK. Twelve months.

Ms. WOODCOCK. Yes.

Mr. STUPAK. But you do those 100—— Ms. WOODCOCK. Ten to 12 months.

Mr. STUPAK. [continuing] percent of the time for the last 2 years,

right?

Ms. WOODCOCK. We make those deadlines, right. We don’t approve them all in that time, but we get an answer back 100 percent

of the time, that is correct.

Mr. STUPAK. Thank the gentleman for yielding.

Mr. BILIRAKIS. The gentleman’s time has expired.

Mr. Deal to inquire.

Mr. DEAL. Thank you, Mr. Chairman.

And thank you, Dr. Woodcock, for being here today.

I’d like to explore with you briefly the issue of switching a drug

from a prescription drug status to an over-the-counter status. And

in order to understand that, let me first of all ask you are there

some drug applications that FDA approves that are initially nonprescription and over-the-counter? And if so, what percentage

would you estimate that might be of applications?

31

Ms. WOODCOCK. The answer is yes, there are some drugs that

are approved directly for the first time as an over-the-counter drug

under a new drug application. And it’s a very small percentage,

perhaps 1 percent. I can’t—I don’t have the data.

Mr. DEAL. Are those usually at the request of the manufacturer

that they be over-the-counter or is that a decision that FDA makes

initially in those cases?

Ms. WOODCOCK. We might discuss it. Frequently it is the aim of

the manufacturer from the start, but we have discussed it with

some manufacturers as to whether—what market their product is

most appropriate for.

Mr. DEAL. So in 99 percent of the cases or roughly thereabouts

they are asking for a protected prescription type status?

Ms. WOODCOCK. That’s correct.

Mr. DEAL. And is the determination in most cases to switch it

from prescription to over-the-counter status made during the timeframe of their initial patent protection exclusivity period or is it

normally made after that exclusivity has expired?

Ms. WOODCOCK. It’s normally made afterward, and there are several factors that go into that.

Mr. DEAL. But normally they have had their initial protected period in which they are allowed to be by prescription only in most

cases?

Ms. WOODCOCK. Yes, these things are not exactly linked, all

right, and they may be linked economically. But the prescription

status has to do with safety and effectiveness concerns about the

drug, prescription versus nonprescription status. But you’re right.

Mr. DEAL. But in that regard your statement was that the determination by FDA to switch it was not based on a cost factor?

Ms. WOODCOCK. That’s correct.

Mr. DEAL. So therefore I assume it is based on a determination

that it is now safe to be in a nonprescription status. Does that

mean then that FDA conducts ongoing investigations and research

to make that determination?

Ms. WOODCOCK. No, we usually do not. I think I ought to stress

that most drugs never switch to over-the-counter. The vast majority of drugs remain prescription, and this has to do with what we

call OTC-ness, if you’ll excuse the term. And that has to do with,

can the consumer diagnose this condition themselves, all right, No.

1. And then No. 2, is the drug safe enough to be used in the consumer’s hands as far as side effects and so forth.

So we go through a series of factors. Most drugs never switch off

prescription status, either because the doctor is needed to diagnose

the condition or monitor the condition or because the drug has safety or other issues around it that would not permit it to be used by

a consumer. But in cases where there is a possibility for a switch,

typically the manufacturer will pursue the additional studies required to demonstrate that OTC-ness.

Mr. DEAL. But I gathered from your initial testimony that in

most cases the switches are without the consent and sometimes

over the objection of the manufacturer. If that is the case and FDA

does not conduct ongoing research to make the determination about

whether or not the individual is able to prescribe his own medication, in effect, then how is that determination made? If the manuVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 E:\HEARINGS\73735 pfrm04 PsN: 73735
32

facturer is in effect saying they don’t think it is ready to be overthe-counter, but you’re saying that it is but you’ve conducted no research, how do you arrive at that conclusion?

Ms. WOODCOCK. I’m afraid I was unclear. The vast majority of

manufacturers want to switch their products, but in this current

situation that we’re facing, in fact, FDA had to do—had to assume

some of the burden of evaluating the safety of these products in response to citizen petition, and also the petitioner submitted data to

us as well.

Mr. DEAL. One final question, Mr. Chairman.

Does FDA take the position that it has the authority to switch

from prescription to over-the-counter status without the request

being made by the manufacturer?

Ms. WOODCOCK. Yes, we have that authority.

Mr. DEAL. And what is the basis, in your opinion, of that authority, which statute?

Ms. WOODCOCK. The Food, Drug and Cosmetic Act, DurhamHumphrey Amendments. We feel there is a presumption of nonprescription marketing of drugs unless there is a need for the

learned intermediary to be interposed for safety or effectiveness

reasons.

Mr. DEAL. Would that be the authority of Section 503(d)(3)?

That’s all right to ask, I was given that number myself.

Ms. WOODCOCK. We can get back to you.

Mr. DEAL. All right.

Ms. WOODCOCK. Sorry.

Mr. DEAL. Thank you, Mr. Chairman.

Mr. BILIRAKIS. Mr. Pallone to inquire.

Mr. PALLONE. Thank you, Mr. Chairman.

Dr. Woodcock, in your testimony you went through some detail

about this Orange Book Listing, and I have to say it’s a little confusing to me. But it’s my understanding that with the patent listing process that the FDA is required to list all patents in this Orange Book and you’re not in the business of determining the validity of the patents coming out of the Patent Office, you state that,

you just list the submitted patents. And then further on you said

if the generic applicant files a paragraph IV certification and is

sued for patent infringement within 45 days, there’s an automatic

stay of 30 months substantially delaying the approval of the generic drug and the availability of lower cost generic drug products.

Now, I guess what I wanted to ask is that it seems like this is

an open invitation to submit frivolous patents, you know, just to

trigger the 30 month hold on approval for a generic. And in our—

Mr. Brown’s bill in the GAAP Bill we eliminate this automatic 30

day delay, you know, when the brand name sues a generic. And,

you know, I think that is a good thing because, you know, the public has a lot to gain from eliminating these frivolous suits. And, as

you say, trying to bring the generics on the market so we can low

cost affordable drugs.

I just wanted you—if you would comment on that? I mean, would

you be in favor of this provision in the bill, in the GAAP Bill?

Ms. WOODCOCK. The Administration has not finalized its position

on that, so I really can’t comment.

33

I will say that, as I indicated in my oral testimony, that in recent

years we have seen an increase in paragraph IV certifications and

all the ramifications around that, it’s been a fairly remarkable increase. And this may reflect the impact of court cases in the last

decade and those decisions. And I am concerned about the implications of this for our continuing to operate the generic drug review

program.

Mr. PALLONE. Do you have any kind of analysis of that that we

could have that you could send us?

Ms. WOODCOCK. We can provide that, yes.

Mr. PALLONE. All right. I’d certainly appreciate it.

Ms. WOODCOCK. We’d be glad to do that.

Mr. PALLONE. But the problem is, it’s not so much the law

doesn’t allow you to look at this, but you just don’t have the resources, is that what you’re saying?

Ms. WOODCOCK. The statute, if I understand correctly, says FDA

shall list—is that correct? Shall publish patent submitted by the

innovator—— Mr. PALLONE. So you don’t think you legally have the right to

look into it?

Ms. WOODCOCK. No, I’m not a lawyer, but that is what our legal

interpretation—— Mr. PALLONE. It’s more resources, the law’s not clear.

Ms. WOODCOCK. Well, I can’t interpret the law. I’m sorry.

But if we were asked to do such a thing, I would have to say it

would significantly divert resources from the scientific review of generic drugs that we are currently undertaking.

Mr. PALLONE. Okay. Well, I appreciate it if you could send us

some information of what you’ve seen develop in that regard. That

would be helpful, I think.

I also wanted to ask you a question about generic biologics. Senator Hatch in a recent speech pointed out that unless a way is

found for the FDA to approve generic biologics with the same efficiency that it currently approves other generic drug products, neither the government nor I guess the private sector would be able

to afford to pay for the drugs of the future. Do you agree with that?

Does the FDA have the authority to approve generic biologics?

Ms. WOODCOCK. Products that are approved under the Public

Health Service Act are often considered biologics. It depends on

what you mean by biologics. But that statute does not have the

provision for generics. So, there’s actually no statutory framework.

There are also major scientific issues that relate to the approval

of recombinant protein products.

Mr. PALLONE. So, again, it’s partially you think that the statute

impartially, you know, resources or ability to do it?

Ms. WOODCOCK. That’s correct. There are some recombinant

products that are approved as drugs and regulated by the Center

for Drugs under Section—under the Food, Drug and Cosmetic Act

and we are certainly evaluating what path we could follow, because

those are subject to Waxman-Hatch Act.

Mr. PALLONE. Okay. Thank you.

Thank you, Mr. Chairman.

Mr. BILIRAKIS. Mr. Bryant to inquire.

Mr. BRYANT. Thank you, Mr. Chairman.

34

And let me add my welcome to Dr. Woodcock.

Also, in just following up, I have a couple of quick questions

about the advertising issue and understanding that your testimony

I think reenforces to some extent an appropriateness of advertising

insofar as it reaches under treated conditions and diseases. Could

you elaborate on that just a little bit more? Very quickly. I know

you referenced it earlier.

Ms. WOODCOCK. Certainly. We looked at, for example, the top

causes of death, the diseases that are top causes of death in the

United States now, and we looked at the direct-to-consumer advertising that is currently occurring, and many of the conditions leading to death, premature death in the United States are subject to

direct-to-consumer ads that have been aired in the last few years.

Now, we recognize that the ads being driven by commercial considerations may not advertise all drugs that are available, only the

ones probably that are on patent, for example. But they may have

the potential to increase awareness among consumers and patients

of these conditions and the availability of effective treatments.

Mr. BRYANT. And ultimately a down side, of course, is that the

patient goes to the doctor’s office and demands this drug whether

it’s necessary or not? Of course, the ultimate in that case, too, as

the gatekeeper in this situation the doctor has clearly, you know,

a duty to say you don’t need that drug, you don’t have that condition or whatever. So that should work itself out in most every case,

I would hope, if the doctor’s a competent physician he certainly

wouldn’t prescribe a drug for a patient that he believed did not

need it?

Ms. WOODCOCK. One would hope so. I think we have done some

surveys of patients, and that’s detailed in my written testimony,

and from the patient’s point of view this advertising has provided

an opportunity for them to go and talk to their doctor and mention

their condition and ask is the drug right for me. In many of those

cases their physician has said the drug is not right for you, and

there have been a variety of reasons; you don’t have the condition,

this drug is too expensive you should use another drug, or these

are side effects you may not wish to face.

Mr. BRYANT. Good. On the over-the-counter issue I understand

your testimony that the bulk of FDA’s decisions to move it over

from a prescribed status over to OTC status, by far and away the

majority of these decisions are with the manufacturer’s agreement

and consent. And, in fact, I assume these are all initiated by the

manufacturer. But now—— Mr. BILIRAKIS. Is that right, are they all initiated——

Ms. WOODCOCK. Generally, a vast majority. That’s correct.

Mr. BRYANT. Who else would initiate it if not the manufacturer?

Ms. WOODCOCK. Well, sometimes the FDA in past cases have

said ‘‘Look, this drug looks a lot more like an over-the-counter drug

than a prescription drug, maybe you ought to reassess your target

or your market.’’ Mr. BRYANT. Based on what types of studies to show that it was

safe to do so?

Ms. WOODCOCK. Right, and based on the—— Mr. BRYANT. Well, who would make the those studies when the

FDA initiates it?

35

Ms. WOODCOCK. The sponsor has agreed with that and gone

ahead and targeted the product toward the OTC world.

Mr. BRYANT. Do you have other entities or groups that have initiated these types of requests before?

Ms. WOODCOCK. Not historically, but we can’t foresee what the

future may hold. It may become more common.

Mr. BRYANT. Can you give me any example of where there’s been

another party, particularly a third party payer or an insurance

company that’s done this before?

Ms. WOODCOCK. We tried to search our memory banks for this,

and we could not come up with an example where this exact scenario has occurred before.

Mr. BRYANT. The reason I asked this is that I take one of the

drugs that’s in play here, and I was back in my District over the

weekend and I had a constituent come up to me unsolicited not

knowing we were going to have this hearing and ask about this,

and they take that same drug. And they’re not really happy, as I’m

not really happy about this being perhaps transferred over to an

OTC category simply based on economic reasons. And I know an

awful lot of the physicians out there that originally were in this

business also are concerned with this. And I would hope that the

FDA would take all this into consideration.

I think we’re breaking new ground here, if I’m not wrong, and

perhaps setting some bad precedent and perhaps too much interference in allowing economic driven reasons to have too much of a

play in terms of medical treatment.

So, again, I would hope that if indeed—and I stress the word if

the FDA has that authority to make this switch even over the objection of the manufacturer, I would hope the FDA would look

down the road also and say ‘‘Well, whose going to do the safety

testing’’ if you’ve got a manufacturer who opposes this transfer

and, again, to look at those types of considerations, too.

Do you have an opinion? This would be my last question in this

round. You know, over the objection of manufacturer, who would

perform the safety tests that are necessary before the FDA would—

to allow the FDA in effect to make this switch in categories?

Ms. WOODCOCK. These are very product line specific. In the case

of the antihistamines, as you know, all sorts of allergy medicines

and antihistamines are over-the-counter already. In addition,

there’s been a marketing history of these products in question.

That would be quite different for some other product at some other

stage of its marketing, for example.

So I can’t give a specific question, but obviously we need the safety data base, FDA, to make these kind of evaluations. And I can

assure you that economics will not play a role in our decisionmaking. I understand, and we all understand there are economic

factors on both sides of this particular issue. And that’s not the

basis for FDA’s evaluation of these issues.

Mr. BILIRAKIS. Should the FDA have that authority, the unilateral authority that you insist they have? Should they have it?

Ms. WOODCOCK. To switch a product over-the-counter? Yes,

we——

Mr. BILIRAKIS. You think you should have or you shouldn’t have

that authority?

36

Ms. WOODCOCK. Yes, I think that is appropriate. We think that’s

appropriate. We have that authority now.

Mr. BILIRAKIS. And you think it’s appropriate.

Mr. BRYANT. Mr. Chairman, again, could I just follow up, and I’m

not sure I had the answer on who will do the safety testing under

those—— Mr. BILIRAKIS. We’re going to have a second round, Ed.

Mr. BRYANT. Thank you, Mr. Chairman.

Mr. BILIRAKIS. Mr. Stupak?

Mr. STUPAK. Thank you, Mr. Chairman.

Doctor, in the direct-to-consumer advertising in your testimony

you said in August 1999 that you did a final regulation on it and

then you go on to say that in announcing the final guidance, the

FDA advised the agency intended to evaluate the impact of the

guidance and of direct-to-consumer promotion in general on the

public health within 2 years of finalizing the guidance.

Ms. WOODCOCK. Yes.

Mr. STUPAK. So it’ll be August of this year? Two years from

1999?

Ms. WOODCOCK. Yes.

Mr. STUPAK. So are you going to wait until August of 2001 or

have you been reviewing the impact?

Ms. WOODCOCK. We have been reviewing the impact. We have

some addition—as I said, we’ve done consumer survey, which of

course doesn’t totally evaluate public health impact. It gives one

side of the picture. We’re trying to work with private parties in

academia and do further surveys.

Mr. STUPAK. So in response to I think it was Mr. Bryant’s question, you said something about deaths related to—you were concerned about that. Explain that again to me.

Ms. WOODCOCK. Death?

Mr. STUPAK. Yes, I thought you said deaths, maybe I misheard

you.

Ms. WOODCOCK. No. I’m sorry. I don’t know what part of——

Mr. STUPAK. All right. Okay. So thus far in your 2 year review

that’s been going on how is direct-to-consumer advertising working? You mentioned about patients coming in saying I want this.

Has it increased the risks of improper drugs being supplied and

have all the risk with direct-to-consumer advertising then been

given to the consumer before they go into that doctor waving this

advertisement to them?

Ms. WOODCOCK. Right. As I said, we have done a consumer survey. We have—the Consumer’s Report about their encounters with

physicians, and that is detailed in my testimony. And what they

have said is that this has spurred their conversations with their

doctors, but in not all cases have they received the drug that they

went to ask about or the condition.

Mr. STUPAK. You know, consumers tell us that they spend less

time with their doctors. Are you saying direct-to-consumer advertising actually have patients spending more time with their doctors

discussing?

Ms. WOODCOCK. Well, what we hope that one of the benefits is

that it will focus on the discussion between the physician and the

patient on what is appropriate therapy, if any, for that condition.

37

Mr. STUPAK. And the final decision for the therapy, though, is

left to the physician, correct?

Ms. WOODCOCK. Always for prescription drugs.

Mr. STUPAK. Let’s get back to the application fee submitted by

new drug applications and generic drugs. In PDUFA, it was, wasn’t

it? Prescription Drug User Fee Act, when that came about did it

distinguish that the money as generated from these new applications would only be used for new drug applications or did it distinguish that—did it say that generics could not be used?

Ms. WOODCOCK. Yes. It restricted the use of the funds to new

drug applications or the process of review of new human drugs. We

also use it for IND investigational drug review.

Mr. STUPAK. But would it exclude generics?

Ms. WOODCOCK. Yes. We have to keep very careful books and we

cannot expend any funds from user fees on generic review.

Mr. STUPAK. Well, if the generics put forth the user fee, would

that get them processed quicker?

Ms. WOODCOCK. Well, I guess that would be up to the Congress.

Mr. STUPAK. Well, you tell me that, you know, you have 180 days

to make a decision on generic.

Ms. WOODCOCK. That’s correct.

Mr. STUPAK. But on a new drug, it’s 1 year?

Ms. WOODCOCK. Yes.

Mr. STUPAK. And generics have to go through two or three cycles,

but it seems like new drug applications only have to go through

one cycle, which is a 12 months deal and they get approved.

Ms. WOODCOCK. Many of them. By no means all of them.

Mr. STUPAK. But in the last 2 years according to the L.A. Times

article they would have been approved 100 percent. So for the last

2 years those new drug applications been a 100 percent approval

within the cycle?

Ms. WOODCOCK. No. People mix up approval and making our review times. We’ve 100 percent met our review times, many of those

are a turn down.

Mr. STUPAK. Okay. What about review time with generic drugs,

do you meet all of those?

Ms. WOODCOCK. No, only 55 percent.

Mr. STUPAK. 55 percent?

Ms. WOODCOCK. Right now.

Mr. STUPAK. So if you meet a 100 percent review time but only

55 with generics, would that number improve if there was money

attached to the application?

Ms. WOODCOCK. I think we could always do more with more.

Mr. STUPAK. Sure. So it really comes down to whether or not

you’re dedicating the resources to generic drugs is really the issue?

Ms. WOODCOCK. It’s certainly one of the factors that goes into the

current approval times, which are 18 months.

Mr. STUPAK. Okay. So it’s really not poor application by generic

drug applications, it’s just you don’t have the resources available

at the FDA to process them in a timely manner?

Ms. WOODCOCK. Well, for example, in the Prescription Drug User

Fee program back in the 1990’s when this was started, one of the

factors that was identified in the 3 year time to approval was that

a poor quality of applications.

38

Mr. STUPAK. Okay.

Ms. WOODCOCK. And part of that program was to work to develop very clear standards and guidance and assistance in meeting

the standards.

Mr. STUPAK. Okay.

Ms. WOODCOCK. And having high quality applications. That is

something that could—we could ramp up our effort in the generic

drug program.

Mr. STUPAK. You haven’t done that with the generics saying

here’s how you improve your applications, the standards and here’s

what you’ve got to meet?

Ms. WOODCOCK. We’ve done it within—we’ve done a lot within

our limits of our ability and we have brought the times down.

Mr. STUPAK. Thank you, Mr. Chairman.

Mr. BILIRAKIS. Mr. Burr to inquire.

Mr. BURR. Thank you, Mr. Chairman.

Welcome, Dr. Woodcock.

Ms. WOODCOCK. Thank you.

Mr. BURR. It’s been a while. We’re glad to have you back.

Ms. WOODCOCK. Thank you.

Mr. BURR. Let me ask you a few questions, if I could. I’ve tried

to do catch up and reading your testimony that the FDA fully feels

they have the authority to make a switch. Let me ask you about

the process of that. Is that a written procedure of what the FDA

goes through when petitioned either by a company for a switch to

over-the-counter status, an outside group or in this most recent

case, a third party?

Ms. WOODCOCK. Yes. The OTC office established procedures that

we go through.

Mr. BURR. And how much interaction would they have with the

line folks who actually go through the new drug applications on

prescription drugs? How much are they involved in the process?

Ms. WOODCOCK. They’re very deeply involved in the process.

Mr. BURR. Well, we would hope that they are.

If the FDA can make a switch over the objection of a drug manufacturer, which I think we conclude you believe you can, can it do

so without disclosing information which is otherwise protected by

the Food, Drug Act and the Trade Secrets Act?

Ms. WOODCOCK. I don’t think so. I’d like to ask our lawyers. I

have Kim Dettelbach here. Would you like to comment on that?

You’ll have to come up to the table. Or would you prefer not to

comment?

Mr. BURR. Would one interrupt that all the information is available post approval or is there information that is protected?

Ms. WOODCOCK. I think the answer, perhaps, to your question is

that we obviously can’t disclose trade secret information and that

is an issue that we would have to deal with.

Mr. BURR. And is there a written process as to how you deal with

that?

Ms. WOODCOCK. As I said in my testimony, we really haven’t

faced this particular set of issues previously.

Mr. BURR. If a manufacturer objects to a forced switch to overthe-counter status and refuses to remove the Rx from its label, the

prescription from its label, what recourse would the FDA have and

39

would this be misbranding in violation of Food, Drug and Cosmetic

Act?

Ms. WOODCOCK. I’d prefer not to answer that question right now,

because it’s a legal question. But I believe we would have legal recourse that we could take.

Mr. BURR. Okay. That’s sufficient.

Ms. WOODCOCK. All right.

Mr. BURR. Upon the submission of a new drug application can

the FDA force a drug to be sold over-the-counter though the manufacturer may wish to sell the drug by prescription only? In other

words, can you make the determination of an over-the-counter direction at the beginning of the application based upon your authority today?

Ms. WOODCOCK. Yes, I believe that would be the same as our authority to force a switch. It would be much less likely because of

the lack of data available on that particular drug at the beginning

of the process.

Mr. BURR. So it is unlikely that the FDA would use their authority to make that determination at the beginning of the filing process of an application?

Ms. WOODCOCK. Only if adequate data were available to satisfy

all the criteria for OTC-ness.

Mr. BURR. Are there any other classification of drugs that you

can think of that would be considered today for over-the-counter

status?

Ms. WOODCOCK. The FDA had a meeting, a public meeting in

June of this year, last year. I’m sorry. Of last year to discuss the

whole OTC program, and at that time a wide variety of medicines,

classes of medicines were brought up and discussed as far as being

candidates for OTC switching. In the vast majority of cases, in all

the other cases I think except the one we’re talking about here

today, the antihistamines, the manufacturers were supportive of

such switches.

Mr. BURR. So there’s no other classification that the FDA can

perceive today where one would consider it a forced switch where

a manufacturer was not in agreement?

Ms. WOODCOCK. Not to my knowledge.

Mr. BURR. Okay. One last question if I could. How much money

is spent today on direct-to-consumer advertising by pharmaceutical

companies?

Ms. WOODCOCK. I think $2.5 billion.

Mr. BURR. $2.5 billion. Is the FDA fairly confident of that number, because I think Members of Congress have heard—per year,

yes.

Ms. WOODCOCK. Per year.

Mr. BURR. But I think the trade journals have had it as high as

$11 billion at some point, and I’d love to have an accurate number

of direct-to-consumer advertising?

Ms. WOODCOCK. Yes. Well, we’re not an economic agency. We

don’t go out and directly survey these things. We rely on commercially published information. The information that we have is that

the vast majority of pharmaceutical advertising is still directed toward the physicians or other prescribers, and that’s about $13-14

billion a year total advertising, of which——

40

Mr. BILIRAKIS. Does the FDA keep track of dollars that are spent

for that type of advertising?

Ms. WOODCOCK. That’s not required to be submitted to us. We

do not have jurisdiction over that, over those type of economics.

Mr. BILIRAKIS. So where did we get this? That’s from the broadcasters?

Ms. WOODCOCK. This is from published information on firms that

commercially keep track of these matters. And we can provide you

our sources.

Mr. BURR. Dr. Woodcock, I’m told that $2.5 billion is inclusive of

samples and other marketing efforts, not—11 is inclusive?

Ms. WOODCOCK. Yes.

Mr. BURR. $2.5 is broadcast?

Ms. WOODCOCK. That’s correct.

Mr. BURR. Okay.

Ms. WOODCOCK. No, not broadcast. Direct-to-consumer.

Mr. BURR. Direct-to-consumer advertising.

Mr. BILIRAKIS. The gentleman’s time has expired.

Mr. BURR. I thank Dr. Woodcock. I hope she won’t be a stranger

to this committee.

And, Mr. Chairman, let me say that I’m disappointed that I

wasn’t here for Mr. Brown’s opening statement. He told me it was

elegant, and I believe every word of it.

Mr. BILIRAKIS. It was directed to the gentlemen.

Mr. Green to inquire.

Mr. GREEN. Thank you, Mr. Chairman.

And to follow up my colleague from North Carolina, I appreciate

the chairman calling this hearing today so we can talk about Mr.

Brown’s legislation.

Dr. Woodcock, I appreciate your being here, and I know the issue

is the over-the-counter versus prescription, and I know the FDA’s

interest is only the consumer safety. It’s interesting that for the

protagonists in this case, whether they are WellPoint or the pharmaceutical industry, obviously their interest is cost. And our concern overall is the cost to our constituents, whether it’s cheaper

over-the-counter because they have insurance coverage, or if it’s

cheaper on prescription.

In knowing that it didn’t—the FDA didn’t move into this area

very quickly. This was actually filed in 1998, so it’s taken 3 years.

The FDA didn’t move very lightly in making this decision.

But also, you did not look at all into the cost factors, it was only

in the consumer safety?

Ms. WOODCOCK. Right. We have not made a decision. We have

completed an advisory committee that has advised us on safety.

And we’re still evaluating what we’re going to do. But, no, we did

not move quickly, very quickly. We had to gather a lot of data, as

was already alluded to, and we did not take cost into account.

Mr. GREEN. The committee didn’t take cost? Will the FDA take

the cost into consideration?

Ms. WOODCOCK. No. We’ve certainly heard a lot about it on both

sides from many parties, but that’s not part of our role.

Mr. GREEN. Okay. Let me go on and ask some questions about

a lot of our concern on the generics.

41

Out of the approximately 500 cases where a generic has filed for

a paragraph IV certification, how many of these cases were settled

out of court, do you know, just a rough percentage? I understand

it’s about 90 percent. Is that correct?

Ms. WOODCOCK. All right. Well, I don’t know. I don’t have that

data right now. I can provide it to you to the extent we know that.

Mr. GREEN. So 90 percent, use that as an example and that’s

what I understood that 90 percent. And does the FDA have any jurisdiction over these settlement agreements?

Ms. WOODCOCK. No.

Mr. GREEN. And so the Waxman-Hatch statute requires that settlement agreements contain provisions to ensure that generics market their products immediately, and yet the FDA doesn’t have any

authority under Waxman-Hatch Act to be able to overlook or oversee those settlement agreements that extend the patent?

Ms. WOODCOCK. Right, that’s correct. That’s correct.

Mr. GREEN. But the FTC, Federal Trade Commission, has authority or jurisdiction over anti-competitive behavior?

Ms. WOODCOCK. That’s correct.

Mr. GREEN. Is there ever any correlation or work between the

FDA and the FTC?

Ms. WOODCOCK. Certainly. We talked to them when these issues

first arose, in fact.

Mr. GREEN. Okay. And it seems like if the percentages are 500

cases are filed and there’s 90 percent settlement, and yet our regulatory agency the FDA is taken out of it, it seems like that would

impact the cost to the consumers in generics versus the patent

drugs.

If a brand company could file a new patent at the end of the

original patent expiration and receive an automatic 30 month stay

and then negotiate for additional time because of the 180 day exclusivity this could result really in years of patent extension?

Ms. WOODCOCK. Yes.

Mr. GREEN. And that’s a concern I know, and like I said, I

haven’t really focused on my colleague Mr. Brown’s bill until today

and this hearing has caused me to do that and realize that, and

even Mr. Waxman agrees that we need to fix it.

The other concern we hear from the next panel the talk about

the patent stacking. And I understood I think in one of your answers you were interested or the FDA was going to look at the

issue of patent stacking?

Ms. WOODCOCK. Yes.

Mr. GREEN. So where a brand company introduces a new patent

toward the end of the patent’s original expiration date to give it

even longer time of market exclusivity. Is there anything in the

statute that would prevent these brand companies from doing this

now?

Ms. WOODCOCK. Not to my knowledge.

Mr. GREEN. There’s no regulatory authority FDA would have?

Ms. WOODCOCK. No.

Mr. GREEN. In fact, again, these companies receive an automatic

30 month stay if their patents are challenged.

Ms. WOODCOCK. That’s correct.

Mr. GREEN. So another 21⁄2 years?

42

Ms. WOODCOCK. That’s right.

Mr. GREEN. And again, my colleague who used to sit here, but

Peter Deutsch and I, we actually in our opening statements didn’t

collaborate but both of us were concerned about it, and I don’t fault

someone who is a lawyer in an earlier life for using the system but,

obviously, they’re gaming the system to the detriment of our consumers.

So, thank you, Mr. Chairman.

Mr. BILIRAKIS. Mr. Ehrlich.

Mr. EHRLICH. Doctor, thanks first of all.

Your testimony is very illuminating and it’s not only educational

for us but it helps us educate our constituents with regard to—in

fact, I’m meeting a number of my constituents in an hour. I’m

going to relay some of your observations, but particularly over

weekends when we go home we get a lot of these questions.

I think your observation with regard to truth in advertising is

well taken. It certainly can be consumer friendly with regard to

education, but it also obviously drives demand, which is one of the

issues we’re trying to deal with here.

Just a couple observations with regard to what you said. Clearly

an application fee with regard to generics and the additional income that would bring into the agency would shorten the review

time. That’s your testimony today, is that fair?

Ms. WOODCOCK. Well, as I said, we can do more with more. I

think we are performing well in getting generic drugs out, but

clearly there are limitations now.

Mr. EHRLICH. With regard to clearly a lot of questions on the

OTC process, and that’s really the purpose of this hearing today,

your testimony in that regard has been educational as well. You’ve

cited individual criteria, and that’s one of the most important

pieces of your testimony that we’re going to take away today as we

go back and talk to our constituents are those individual elements

that really make up the process. And what I’ve heard you talk

about, you’ve been very clear that money, cost is irrelevant and

you’ve talked about convenience, clearly.

Ms. WOODCOCK. Yes.

Mr. EHRLICH. And safety, obviously. And this more subjective, I

guess, test with regard to self diagnoses. I’d like to hear a little

more about that. And then with regard to a number of questions

from colleagues, in that you’ve talked about available data not generated in house, but generated by manufacturers?

Ms. WOODCOCK. Yes.

Mr. EHRLICH. Any other individual criterion that you would cite

today with regard to the entire process and then a further—if you

can, further objective description with regard to the self-analysis?

Also, a personal note as a sufferer at this time of the year I appreciate what you all have been doing with regard to bringing this

stuff out quicker, including antihistamines and the like. So, that’s

a personal note.

But if you can just give me your comments with regard to the

process?

Ms. WOODCOCK. Well, certainly. For all OTC drugs, if I understand your question, you’re asking what kind of criteria are there

for a drug to be OTC versus prescription, is that right?

43

Mr. EHRLICH. Correct. Correct. The list?

Ms. WOODCOCK. The list? All right.

One of the major criteria would be that the condition that the patient is able to figure out that they have the condition. And there

has been an evolution over the last 20 years on what we as a society feel, think that patients can diagnose and manage. And we’ve

already basically decided that patients can diagnose what we all allergic rhinitis. In other words, hay fever. They can tell when they

have hay fever and select choices, because there are many choices

out in the OTC market. So that’s very important.

For many of the other drugs that there’s a lot of debate about

right now about OTC switching, there are still significant questions

that remain about self-diagnoses, and those are drugs—we’re requests for drugs for cholesterol lowering, for example, to go overthe-counter. And the question is can the consumer adequately diagnose the fact they have high cholesterol and that this would be appropriate intervention for them. And that story is still evolving.

So, that’s the major criterion. If the consumer cannot appropriately select for themselves, diagnose their condition, then OTC

is off the table.

Then for any particular drug to treat that condition would have

to have certain characteristics. It would have to have an adequate

safety profile. It wouldn’t have to need medical monitoring to maintain its safety or its effectiveness.

As you know, when you go to the doctor sometimes they will take

tests of your blood or whatever while you’re taking a drug or an

EKG, or they’ll do different things to make sure that drug is still

right for you; it’s working or it’s safe. Those kind of interventions

can’t be used in the OTC setting.

We also frequently have what’s called label comprehension studies. And that sounds complex, but what it means is can you write

directions for use for that product that the average consumer who

has that condition can read and understand and then will go ahead

and use the product appropriately? Because people do all sorts of

things, as we all know. Sol that’s another piece that we look at.

Can a label be written that’s comprehensible to a consumer.

So those are the kind of criteria. Effectiveness also would need

to be something that the consumer in some way could tell whether

the drug was working or not. And traditional OTC drugs have been

for symptomatic conditions where you know you have a problem.

Mr. BILIRAKIS. The gentleman’s time has expired. And we do

have a second record.

Mr. EHRLICH. Thank you for the specificity. I appreciate that.

Ms. WOODCOCK. Certainly.

Mr. BILIRAKIS. Mr. Towns inquire.

Mr. TOWNS. Thank you very much, Mr. Chairman.

Dr. Woodcock, given the explosion in the use of the Internet,

even if the FDA modified its guidance on advertising, aren’t we

still likely to have product promotion occur? Only this time it won’t

be from the manufacturer, but from users of the Internet?

Ms. WOODCOCK. That’s true, and that’s been going on for a long

time in the print and other media. And the Internet is no different,

except that the information can get around a lot faster to a lot

more people. But FDA only regulates promotion by sponsors or

44

manufacturers, distributors, repackers and so forth. We don’t regulate statements by other citizens about drug use.

Mr. TOWNS. Well, I think the problem here is how likely is that

Internet generated promotional information to be accurate and contain the necessary safety warnings for the consumers? I mean, you

have to be concerned about that.

Ms. WOODCOCK. We certainly have been monitoring that, and

there’s a wide variety of quality of information on the Internet.

Some of it is very high quickly and some of it is highly inaccurate,

and that is a general safety problem.

Mr. TOWNS. And that’s going to get—I mean continue.

Ms. WOODCOCK. Right. Well, that’s part of the importance of the

prescriber in making sure that when people get prescription drugs

that they’re appropriate for them.

Mr. TOWNS. Right. I think you might have answered this question before. I think when I came in I thought I heard part of it.

In your experience do generic manufacturers have the expertise

to produce the kind of information that the FDA would require to

move a prescription to over-the-counter status?

Ms. WOODCOCK. Could you repeat the question?

Mr. TOWNS. Yes. I asked do generic manufacturers have the expertise to produce the kind of information that the FDA would require to move a prescription to over-the-counter status?

Ms. WOODCOCK. Absolutely not. We have generic copies of innovator over-the-counter drugs available.

Mr. TOWNS. In your opinion why have there been so few patent

issues raised in regard to the generic applications with the FDA

since the inception of the Waxman-Hatch Act in 1984?

Ms. WOODCOCK. I don’t know. That would require me to read

into the minds of the people who would file these, and I don’t

know.

Mr. TOWNS. No, in your opinion?

Ms. WOODCOCK. Well, I think there have been quite a few in recent years, and they were fewer in the past and the prominence of

different court decisions and the impact of those court decisions has

changed the landscape, that’s what I believe.

Mr. TOWNS. Well, let me ask this then: In your opinion if there

was one element of the Waxman-Hatch Act that should be changed

to promote the production of more generics, what would it be?

Ms. WOODCOCK. Well, as I said, the Administration hasn’t finalized its evaluation of that and I don’t have an opinion at this point.

Mr. TOWNS. All right. Let me try it another way. I’m not going

to give up.

If there was one element that should be changed to protect the

interests of brand name products, in your opinion what would it

be?

Ms. WOODCOCK. The interests of brand name products?

Mr. TOWNS. Yes. Then I’ll try it another way. No, go ahead.

Ms. WOODCOCK. Well, it hasn’t really been posed to me that way.

Much of this hearing has been about protecting the interests of

brand name products yet providing for prompt availability of generic products once the patents expire. I think that is the central

issue that we’re discussing here.

45

Mr. TOWNS. I agree, but I mean in your opinion—I mean, could

you—you wouldn’t want to make a comment on it?

Ms. WOODCOCK. Well, I believe that the subjects that have been

discussed here today, the 180 day exclusivity, the 30 month stay

are central issues that we’re going to have to deal with.

Mr. TOWNS. All right. Thank you.

I yield back, Mr. Chairman.

Mr. BILIRAKIS. Are you suggesting that we should take another

look at the 180 day exclusivity and the 30 month stay?

Ms. WOODCOCK. Well, I believe FDA has really been struggling

with these issues, with the court decisions and the changing landscape. It’s been difficult for us.

Mr. BILIRAKIS. Let me ask you on the OTC situation, does FDA

have set up any sort of a remedy, if you will, or an appeal process

or whatever on the part of—since you feel that you have the unilateral authority to make that decision, do you have any sort of a

process for the manufacturer to take or even the public? Because

as long as it’s prescription, there would, depending on the insurance policy and that sort of thing, there would be coverage to a

large degree. But once it goes over-the-counter generally there

won’t be any coverage.

Ms. WOODCOCK. Well, there’s administrative—we have a formal

appeals process with the center for appealing decisions. And there’s

also the administrative process, formal administrative process in

hearings and so forth that could be pursued by anyone who disagrees with an FDA decision.

Mr. BILIRAKIS. You haven’t experienced that yet insofar as this

particular issue is concerned?

Ms. WOODCOCK. No. No, but this is a new issue.

Mr. BILIRAKIS. Yes. And you’re expecting to experience it on this

issue?

Ms. WOODCOCK. I don’t know.

Mr. BILIRAKIS. You don’t know? All right.

Just very quickly, Doctor. You’re an M.D., have you practiced

medicine?

Ms. WOODCOCK. Yes.

Mr. BILIRAKIS. You have? Okay. So as a medical doctor because

you’re concerned and care about patients, would say without any

hesitation that if a generic drug is approved by the FDA, that it

is directly substitutable and bio-equivalent to the innovative drug?

Ms. WOODCOCK. That’s correct. I use generics when they’re available. I use generics for my family. Prescribe generics for patients.

I believe there’s a lot of ignorance and misunderstanding out there

about the generic program.

Mr. BILIRAKIS. Good. Thank you for that.

Mr. Brown, we’re in the second round now, and we’re going to

have to break right after Mr. Brown inquires. We will break until

we have the vote, and then unfortunately we’ll have to ask you to

wait.

Mr. BROWN. Thank you for that very direct answer to the chairman, too, and putting people’s mind at rest I think in large part.

And the chairman and I have talked about that from time-to-time.

Thank you for that.

46

The PhRMA witness in the next panel wrote that ‘‘generic applications have not raised or encountered any patent issues that have

delayed their approval.’’ Is that statement essentially correct in

your experience?

Ms. WOODCOCK. I’ve not encountered any patent issues—— Mr. BROWN. I mean generic applications according to the former

witness in the next panel, ‘‘have not raised or encountered any patent issues that have delayed their approval.’’ Ms. WOODCOCK. No, they have not. Okay. I’d like to ask Gary

Buehler, who is the head of the Office of Generic Drugs to answer

that question, if I may.

Mr. BROWN. Mr. Chairman?

Mr. BILIRAKIS. It’s all right with me if he’ll speak up.

Mr. BUEHLER. We presently have nine active litigation cases

going in the Office of Generic Drugs. Five of them involve patents.

And each of these cases involves basically a challenge that is holding up generic drug work or could possibly.

Mr. BROWN. And that’s another word, phrase for delay their approval, correct?

Mr. BUEHLER. Correct.

Mr. BROWN. Okay.

Mr. BUEHLER. It may not actually right now be delaying the approval, but it could if it continues.

Ms. WOODCOCK. For any of them?

Mr. BUEHLER. Yes.

Ms. WOODCOCK. There are some that are actually delaying approval is your comment.

Mr. BROWN. So I wonder why PhRMA would make that statement? I guess is that a good reason for all of you to stick around

and find out in the next panel.

Most of the blockbuster drugs coming off their initial patents in

recent years, Prozac and Prilosec and others, have been involved in

paragraph IV certifications that challenge in many cases successfully essentially invalid patents designed to perpetuate the monopoly of the innovator firm well after their original patent has expired, right? I mean, it’s done through these paragraph IV applications, correct?

Ms. WOODCOCK. Yes.

Mr. BROWN. Okay. Well, Mr. Chairman, one thing I would like

to also ask and ask consent if you could to keep the record open

for written questions for other panelists?

Mr. BILIRAKIS. Yes. That is routine. By all means that will be the

case and I’m sure you don’t mind responding to those as soon as

you can?

Ms. WOODCOCK. Not a bit.

Mr. BILIRAKIS. We should really break now unless Mr. Pallone

wants to limit his inquiry to maybe about a minute or so.

Mr. PALLONE. You don’t want her to wait until we come back?

Mr. BILIRAKIS. Well, I’d rather excuse her if we can. But on the

other hand, I don’t want to cut you off.

Mr. PALLONE. There could be others, too, that want to ask. Why

don’t we wait.

Mr. BILIRAKIS. All right. I guess we’ll have to wait.

Ms. WOODCOCK. That’s fine.

47

Mr. BILIRAKIS. All right. We’re going to recess for a few minutes

until we cast this vote.

[Brief recess.]

Chairman TAUZIN. The committee will please come back to order.

Mr. Bilirakis has had to be excused for a while. I apologize for that.

I understand we’re on the second round of questions right now,

and the clerk will advise me as to whose up next. Mr. Pallone is

recognized for a round of questions.

Mr. PALLONE. I just wanted to yield to Mr. Brown briefly.

Mr. BROWN. Thank you. And, Mr. Chairman, welcome, good to

have you here.

Chairman TAUZIN. Good to be here.

Mr. BROWN. I wanted to correct a statement of so that it’s not

that I do not misconstrue PhRMA’s testimony. I’d said that there

were no patent delays—PhRMA’s actual words was that there are

an overwhelming number of cases there are no delays. And I would

content, while I apologize for the slight misquoting that I did, I

think that they’re still as, Dr. Woodcock said, there are several

very significant very costly issues involved there where there are

delays. And it’s not just a significant problem, it’s a growing problem. So for the slight misquote, I apologize, but I think the issue

is still very much in front of us.

And I thank the gentleman.

Mr. PALLONE. Thank you.

I wanted to ask Dr. Woodcock, following up on your statement

you made to Mr. Brown about the bio-equivalency of generics and

your use of generics, I have a bill the Generic Drug Access Act that

prohibits states from passing laws keeping generic drugs off the

market once the FDA has determined that a generic drug is therapeutically equivalent to a brand name product. And I guess I wanted to ask you two things.

First of all, if you can express an opinion on that whether you

think that’s a good idea, which you probably won’t. But second, you

know, to what extent you have seen states act in this to go beyond

that in ways that you think are really not effective or really don’t

make sense and if you have any reports or anything on that?

Ms. WOODCOCK. Yes, I can’t comment specifically on the bill, proposed bill. But I can say that I think there is a lot of misunderstanding about the generic program. I think sometimes it is promulgated by innovator companies either in a sincere belief that

their product is different than the generic product, or through other

motives. And that believe is widespread in the community and

some of the pharmacy and medical community that some generics

are not equivalent to the innovator product. And these misconceptions are really a problem because we’ve never—we always follow

up on reports we get of therapeutic in equivalence. We get many

reports; we switched our patient and the drug didn’t work. We’ve

never found a problem with these products when we followed up.

Mr. PALLONE. Have you any—I mean I believe strongly that a lot

of times these efforts are made in the State legislature by, you

know, brand names just to basically create more problems for

generics to come to the market. I mean, is there evidence of that

or would you comment on that?

48

Ms. WOODCOCK. Well, we certainly have seen efforts by innovator

firms to state that their product is different than the generics and

that there are problems with the generics. We certainly have seen

that. We feel—we’ve had to tell firms they can’t make these statements because it’s kind of comparative claim that they can’t make.

We don’t feel these warrant. But you recognize human behavior,

you get a pill that’s a different color or it looks different or something, and then you think well this is different and I’m really worried it’s going to have a different effect.

Mr. PALLONE. Okay. Let me ask you a second question. You

know, again, I have difficulty following these things. You commented extensively on the 180 day exclusivity period and the court

decisions, and your having to come up with new guidelines, I guess

some of which are still outstanding. And, you know, it seems to me

again going back to our GAAP Bill, under the GAAP Bill the 180

day exclusivity period granted to the first to file generic applicant

would become available to the next filed applicant if the first to file

generic company reaches a financial settlement with the brand

name to stay out of the market or fails to go to market within reasonable period. It seems to me that that’s a way of preventing, you

know, some of the problems that you’ve identified with the 180 day

market exclusivity, and I just wanted to know if you would comment on that? I mean, it seems that if we could change the law,

then when we don’t have you constantly having to deal with all

these court decisions and coming up with new guidelines. If you’d

comment on that?

Ms. WOODCOCK. I can’t comment specifically on the bill, however

I think whatever legislation is approached would have to be approached very carefully because of the law of unintended consequences.

I’m sure when the Waxman-Hatch Amendments were put into

place some of these outcomes were not necessarily foreseen at the

time. And now our regiment or statutory and regulatory regiment

is extremely complicated and——

Mr. PALLONE. Do you have any other suggestions maybe in lieu

of that to deal with the problem, in lieu of what GAAP proposed?

Ms. WOODCOCK. No, I can’t comment. I can’t make suggestions.

Sorry.

Mr. PALLONE. Okay. Thank you.

Thank you, Mr. Chairman.

Chairman TAUZIN. I thank the gentleman.

The Chair is going to going to ask a round of questions.

And, Dr. Woodcock, I want to ask you to give your own opinion

on this. I understand you cannot—are not prepared to give FDA’s

position on this, but I want to ask you with reference to the 180

day generic exclusivity provision of Waxman-Hatch Act, and basically I want to know whether you think it’s still necessary?

The fact is that some people, including the original folks who negotiated the bill for the generic industry, Mr. Engleberg and I understand Liz Dickinson of the FDA’s general counsel’s office speaking for herself have both commented that there’s so much of a financial incentive to challenge patents, that challenges will occur irrespective of exclusivity. What’s your personal opinion on that?

49

Ms. WOODCOCK. I’m not qualified, you know, I’m a physician. I’m

not really qualified to comment on the financial incentives for companies. I would defer to those trade associations and other people

who really—— Chairman TAUZIN. But you’re aware of the fact that people are

lining up to challenge, isn’t that correct?

Ms. WOODCOCK. Yes, that’s correct.

Chairman TAUZIN. And isn’t that quite evident now in the history of Waxman-Hatch Act that challengers do in fact line up because the financial incentives are so great?

Ms. WOODCOCK. No, they’re lining up—— Chairman TAUZIN. I suppose it must be because financial incentives are great.

Ms. WOODCOCK. They’re lining up to challenge, but also at this

point there’s a 180 day exclusivity is provided.

Chairman TAUZIN. Yes, but again only through the first challenge?

Ms. WOODCOCK. Right.

Chairman TAUZIN. So there’s still a lot of other people challenging?

Ms. WOODCOCK. Sure.

Chairman TAUZIN. And, you know, the comments of the folks

who negotiated this are basically questioning whether you still

need the 180 day exclusivity provision if in fact challengers are lining up without the benefit of it. And without asking you again to

comment on the financial incentives, you will concede that that is

in fact the case that there is a growing list of challenges now,

right?

Ms. WOODCOCK. That’s correct.

Chairman TAUZIN. Okay. Second, has the FDA perceived any recent trends wherein manufacturers of larger selling drugs are listing patents in the Orange Book shortly before the previous patents

are set to expire?

Ms. WOODCOCK. Yes, we feel that we have observed this trend.

Chairman TAUZIN. It’s a clear trend, is it not?

Ms. WOODCOCK. That we believe, yes.

Chairman TAUZIN. If so, does that concern you at all?

Ms. WOODCOCK. As I said earlier, we are concerned with the recent court cases, with the other problems that we’re encountering

in implementing this provision it’s going to become even more complicated and difficult to promptly approve generic drugs.

Chairman TAUZIN. Okay. And finally, does the FDA believe that

the rolling exclusivity provision contained within the Brown-Emerson legislation would be an impedient to generic competition in

that the exclusivity would continue to bounce from the first to the

second to the third challenger if the previous challenge is lost in

court?

Ms. WOODCOCK. I’m sorry, but again I’m not able to comment on

that. I feel, based on my experience in trying to administer some

of——

Chairman TAUZIN. We understand there was testimony on the

Senate side indicating that on a personal level again, that the FDA

representative there believed that that was of great concern. You’re

not ready to share that concern?

50

Ms. WOODCOCK. Not as—no. No. What I was going to say,

though, is that with many of these provisions simplicity is a virtue.

Chairman TAUZIN. All right. Thank you very much.

Mr. Greenwood is next, right. Mr. Deal in the Chair.

Mr. Greenwood is recognized for 5 minutes.

You want to Chair?

Mr. DEAL. No, no, you go ahead. Play musical chairs.

Mr. Greenwood.

Mr. GREENWOOD. Mr. Chairman, I’m going to pass for the moment. I just arrived and I need to get a little organized. So, if Mr.

Brown——

Mr. BROWN. I don’t have any second round questions.

Mr. GREENWOOD. Well then neither do I. I’ll just pass and wait

for the next ones.

Mr. DEAL. Dr. Woodcock, we want to thank you very much for

being here today. We apologize for the fact for the fact that some

of us had to come in and out, the votes and other things conflicted,

but we do appreciate your appearance today. And I do recall that

there were several issues that you indicated you would get back to

us in writing, and we would appreciate a follow up response.

Ms. WOODCOCK. That’s correct. I will do that. And thank you.

Mr. DEAL. Thank you.

We’ll call the second panel today, would they please to come to

the table.

Lady and gentlemen, we wish to thank you for appearing here

today, and I’ll introduce the panel very briefly.

First of all, Dr. Gregory Glover who is partner with a Washington firm and is appearing on behalf of the Pharmaceutical Research and Manufacturers of America.

Mr. Bruce Downey, who is the Chairman and CEO of Barr Laboratories and also, I understand, is appearing on behalf of the Generic Pharmaceutical Association.

And Dr. Jane Delgado, who is President and CEO of the National

Alliance for Hispanic Health.

And Mr. John Golenski, who is the Executive Director of

RxHealthValue here in Washington.

Mr. Thomas Geiser, who is General Counsel for WellPoint Health

Networks. And I believe Dr. Seidman is accompany you as well and

Vice President of Pharmacy.

And Mr. Richard Kingham, who is a partner in Covington &

Burling here in Washington.

Lady and gentlemen, we appreciate your patience in waiting for

your appearance here on this panel.

And, Dr. Glover, we will begin with you.

51

STATEMENTS OF GREGORY J. GLOVER, ROPES & GRAY ON BEHALF OF PHARMACEUTICAL RESEARCHERS AND MANUFACTURERS OF AMERICA; BRUCE L. DOWNEY, CHAIRMAN AND

CEO, BARR LABORATORIES, ON BEHALF OF THE GENERIC

PHARMACEUTICAL ASSOCIATION; JANE L. DELGADO, PRESIDENT AND CEO, NATIONAL ALLIANCE FOR HISPANIC

HEALTH; JOHN D. GOLENSKI, EXECUTIVE DIRECTOR, RX

HEALTH VALUE; THOMAS GEISER, GENERAL COUNSEL,

WELLPOINT HEALTH NETWORKS ACCOMPANIED BY ROBERT

SEIDMAN, VICE PRESIDENT, PHARMACY; AND RICHARD F.

KINGHAM, COVINGTON AND BURLING

Mr. GLOVER. Thank you. Mr. Chairman and members of the subcommittee, on behalf of the Pharmaceutical Research and Manufacturers of America I thank you for inviting me here today to testify

on the Waxman-Hatch Act. I am a licensed physician and a practicing attorney with the law firm of Ropes & Gray, and I specialize

in intellectual property law and FDA regulatory issues.

PhRMA companies are the source of virtually all new drugs in

the United States and the evidence confirms that our innovation in

our industry benefits consumers. The research based pharmaceutical industries investment in R&D has jumped more than $30

billion this year. During the last decade the industry has developed

more than 370 new life saving cost effective medicines and the pace

of innovation is increasing. Our industry now has more than 1,000

medicines in development.

We strongly believe the U.S. pharmaceutical market is robust,

competitive and working to the benefit of consumers and patients.

It is working, in fact, as Congress intended when it passed the

Waxman-Hatch Act.

We believe that advocates of change have a burden to show that

change is necessary and would not upset the balance between innovation and generic competition achieved by Congress. But advocates for change have not met that burden. Today almost all innovative medicines face generic competition after their patents expire. The generic industry’s share of the prescription drug market

is almost 50 percent today compared to less than 20 percent in

1984. And today generic copies often come to market as soon as the

patent in an innovative produce expires, whereas before in 1984 it

took 3 to 5 years for a generic drug to enter the market.

Contrary to the assertions of the generic industry, this system is

working well. Of the more than 8,000 generic applications that

have been filed since 1984, fewer than 500 have raised any patent

issues, meaning 94 percent have raised no patent issues whatsoever.

Despite the success of the Waxman-Hatch Act generic manufacturers are advocating major change in the legislation that would

jeopardize future innovation. I would like to respond specifically to

four of the issues that have been raised.

The first issue is patent dispute settlements between pioneers

and generics. The actions of the Federal Trade Commission in challenging some recent settlements demonstrate that the anti-trust

authorities are actively and adequately monitoring settlements between partner companies and generic manufacturers. Accordingly,

52

there is no need to amend the Waxman-Hatch Act to deal with this

issue.

The second issue is Orange Book Listings. FDA’s Orange Book

serves two purposes. First, it provides notice to a generic applicant

of the patents that cover a pioneer product, and second it provides

a mechanism by which innovator companies can initiate litigation

of patent disputes prior to FDA approval of a potentially infringing

product.

The generic industry proposes to restrict the ability of pioneers

to litigate patent disputes prior to FDA approval by limiting the

types of patents that can be listed. Restricting Orange Book Listings will hurt both the pioneer and the generic companies. It is in

the interest of both parties to have complete and full listings of

patents.

The third issue is the 30 month stay of approval. The generic industry contends that it is unfair for FDA to be barred from approving a generic application for up to 30 months while the pioneer attempts to resolve any patent disputes. The generics cannot have it

both ways. If it were not for the Waxman-Hatch compromise, an

innovator could sue an infringing generic manufacturer when it begins product development. The generic industry cannot reasonably

claim the right to engage in development activity that normally

would be considered patent infringement and at the same time assert there should no opportunity to resolve these patent disputes

prior to product approval. The research based industry should not

be condemned for defending patents that are presumed to be valid

under U.S. law.

The fourth issue is the so called late listed patents. The purpose

of the preapproval litigation procedure is to protect innovator companies from the injury that would occur if generic manufacturers

sell infringing products and are unable to pay the potentially large

amounts that would be due at the conclusion of the litigation. This

rationale applies to all patents regardless of when the patent is

issued. Innovator companies should not be deprived of one of the

most important rights conferred by the Waxman-Hatch Act simply

because a patent is issued by the Patent and Trademark Office

after NDA approval and is timely listed in the Orange Book.

None of the proposed changes have merit, none can be made

without jeopardizing future innovation and, accordingly, none of

these changes should be considered in isolation from the needs of

those patients awaiting cures.

I’ll be pleased to answer any questions that members of the committee may have.

Thank you.

[The prepared statement of Gregory J. Glover follows:]

PREPARED STATEMENT OF GREGORY J. GLOVER, FOR THE PHARMACEUTICAL

RESEARCH AND MANUFACTURERS OF AMERICA

Mr. Chairman and Members of the Subcommittee: On behalf of the Pharmaceutical Research and Manufacturers of America, I am pleased to appear at this

hearing today on the Hatch-Waxman Act, direct-to-consumer advertising of prescription drugs, and the switching of drugs from prescription to over-the-counter status.

I am a physician and an attorney with the law firm of Ropes & Gray, specializing

in intellectual-property and FDA regulatory issues. PhRMA represents the country’s

major research-based pharmaceutical and biotechnology companies, which are leadVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00056 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
53

ing the way in the search for new cures and treatments that will enable patients

to live longer, healthier, and more productive lives.

HATCH-WAXMAN

Turning first to Hatch-Waxman, PhRMA strongly believes that the U.S. pharmaceutical market is robust, competitive, and working to the benefit of consumers and

patients—is working, in fact, as Congress intended when it passed the delicatelybalanced Drug Price Competition and Patent Term Restoration Act of 1984 (commonly known as the Hatch-Waxman Act after its principal sponsors). We believe

that advocates of change have a heavy burden to clearly show that change is needed

and would not upset the careful balance achieved by Congress, as discussed immediately below. They have not met that burden.

Generics Flourish

On the one hand, the generic industry has flourished since the passage of the

1984 compromise law eliminated the barriers to entry and made it much easier, far

less costly, and quicker for low-cost generic drug manufacturers to get their copies

of innovator medicines to market following patent expiration.

• Since 1984, the generic industry’s share of the prescription-drug market has

jumped from less than 20 percent to almost 50 percent. • Before 1984, it took three to five years for a generic copy to enter the market after

the expiration of an innovator’s patent. Today, generic copies often come to market as soon as the patent on an innovator product expires. And in most cases,

sales of pioneer medicines drop as much as 75 percent within weeks after a generic copy enters the market. • Prior to 1984, only 35 percent of top-selling innovator medicines had generic competition after their patents expired. Today, almost all innovator medicines face

such competition.

Research Incentives Preserved

On the other hand, the research-based pharmaceutical industry—the source of

virtually all new drugs in the U.S.—was provided limited incentives for innovation

under the 1984 law, which restores part of the patent life lost by pioneer medicines

as a result of regulatory review by the Food and Drug Administration (FDA). The

industry, spurred by accelerating scientific and technological advances, continues to

increase its investment in R&D and to develop new, more advanced, and more effective medicines.

• The industry’s investment in pharmaceutical R&D has jumped from $3.6 billion

in 1984 to more than $30 billion this year.

• During the 1990s, the industry developed 370 new life-saving, cost-effective medicines—up from 239 in the previous decade.

• The research-based pharmaceutical industry now has more than 1,000 new medicines in development—either in human clinical trials or at FDA awaiting approval. These include more than 400 for cancer; more than 200 to meet the special needs of children; more than 100 each for heart disease and stroke, AIDS,

and mental illness; 26 for Alzheimer’s disease; 25 for diabetes; 19 for arthritis;

16 for Parkinson’s disease, and 14 for osteoporosis.

The Public Benefits

What these data show is that the Hatch-Waxman compromise is both promoting

competition—by making it easier, cheaper, and quicker for low-cost generic copies

of pioneer medicines to enter the market—and providing limited incentives for innovation—by restoring part of the patent life lost by pioneer products due to FDA regulatory review. As a result, consumers are receiving the benefits of early access to

low-cost generic copies and of an expanding stream of new, more precise, and more

sophisticated medicines.

The Hatch-Waxman Compromise

How has the Hatch-Waxman compromise both promoted competition and preserved incentives for innovation? A little history helps to explain.

Prior to 1984, there were few generic copies of pioneer drugs that had been approved after 1962. The safety and effectiveness data supporting the approval of a

post-1962 drug was considered to be trade-secret information that could not be used

to approve generic copies. Apart from repeating the long, costly clinical studies performed by an innovator company, a generic applicant could obtain approval of a

post-1962 drug only by using a literature-based (so-called ‘‘paper’’) New Drug Application (NDA), which was possible only when published scientific literature demonstrated a drug’s safety and effectiveness.

54

To permit the approval of generic copies of all post-1962 drugs, the Hatch-Waxman compromise in effect revoked the trade-secret status of innovators’ safety and

effectiveness information. Instead of proving safety and effectiveness, a generic

manufacturer was allowed to show only that its copy is ‘‘bioequivalent’’ to a pioneer

product and FDA could rely on the pioneer’s safety and efficacy data to approve the

copy.

Bioequivalence means that a copy’s active ingredient is absorbed at the same rate

and to the same extent as that of the pioneer medicine. As a result of the 1984 law,

generic manufacturers are able to avoid the huge cost (estimated at $500 million

on average) of discovering and developing a new drug. It costs only a very small

fraction of that amount for generic manufacturers to demonstrate bioequivalence—

which is why they can market their copies at reduced prices.

The Hatch-Waxman compromise also helped generic manufacturers by overruling

a 1984 Court of Appeals decision in the Bolar case. The Court had held that it constituted patent infringement for a generic company to manufacture and test a medicine before its patent expired even if its only purpose was to prepare a marketing

application. In a unique exception to patent law, the Hatch-Waxman compromise allows generic manufacturers to use innovator medicines still under patent to obtain

bioequivalency data for their FDA applications (a use that ordinarily would be a

patent infringement) so they can be ready to market their copies as soon as the pioneer patents expire.

The 1984 law also sought to increase the number of generic copies by providing

an incentive for generic manufacturers to challenge pioneer patents. The first generic manufacturer to certify to FDA that a patent on an innovator medicine is invalid or is not infringed by its product obtains 180 days of exclusive marketing

rights if the copy is approved before the patent expires. During that 180-day period,

FDA cannot approve any other copies.

To attempt to balance the generic provisions, the Hatch-Waxman compromise provided limited incentives to pioneer companies to help spur innovation. The law restores part of the patent life—but not all—lost by innovator products as a result of

FDA review:

• A pioneer drug receives a half-day in restored patent life for every day the product

is in clinical trials prior to FDA review.

• A pioneer drug receives day-for-day restoration of patent life for the time it is

under review by FDA. However, the effective patent life of a drug cannot exceed

14 years, regardless of how much time is lost in clinical testing and review. And

the total time restored is limited to no more than five years (even if more than

five years is lost during drug development and review).

Innovator drugs introduced in the 1990s that obtained patent restoration enjoyed

an average effective patent life of less than 11.5 years—substantially less than the

18.5 years enjoyed by inventors of other products. (The full patent term in the U.S.,

as with all member nations of the World Trade Organization, is 20 years from the

date a patent application is filed with the Patent and Trademark Office.)

In addition to partial patent restoration, the Hatch-Waxman law provides that

FDA is prohibited from approving generic copies of a pioneer drug for five years

after approval of an innovator product in the case of new chemical entities and for

three years in the case of other drugs and innovations in existing drugs. These exclusivity periods are to protect an innovator’s data when there is no patent protection. The law also creates a procedure for litigating patent disputes before FDA approves an allegedly infringing generic copy.

Few Patent Disputes

Despite the generic industry’s arguments to the contrary, data compiled by FDA

conclusively show that, in the overwhelming majority of cases, generic applications

have not raised or encountered any patent issues that have delayed their approval.

The facts speak for themselves:

• From 1984 through January 2001, 8,259 generic applications were filed with FDA.

• Of these applications, 7,781—94 percent—raised no patent issues.

• Only 478 generic applications—5.8 percent—asserted a patent issue, either challenging a patent’s validity or claiming non-infringement of a patent.

Further research shows that:

• Only 58 court decisions involving just 47 patents have been rendered resolving generic challenges to innovator patents—a tiny fraction of the number of generic

applications.

• Only 3 of the patent disputes settled between innovator and generic companies

have reportedly been challenged by the FTC—an infinitesimal percentage of the

applications.

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A Heavy Burden to Justify Change

Even though the Hatch-Waxman compromise stimulates competition and provides

limited research incentives, generic manufacturers are advocating major changes in

the legislation. We believe that, in view of the balanced nature of the law, any proponent of change has a heavy burden to clearly demonstrate that change is necessary and would not upset the delicate compromise achieved in 1984. We do not

believe this burden has been met with regard to any of the changes that have been

proposed. Therefore, we strongly oppose such changes that would, we believe, unfairly skew the law in favor of generic manufacturers and impede the ability of the

research-based industry to realize in a timely way the promises that the accelerating biomedical advances hold for patients in all parts of the world.

The generic industry has raised concerns in four areas in particular, which are

addressed to various extents and in various ways in the Brown-Emerson bill, H.R.

1862. (See also the Schumer-McCain bill, S. 812.) The research-based industry is

convinced that the changes sought by the generic industry would overturn some of

the main trade-offs of the Hatch-Waxman compromise, as briefly described below.

We would be pleased to discuss these and other such issues in more detail with any

Member of the Committee or staff member who so desires.

Patent-Dispute Settlements: The generic industry has proposed to place limits on

settling patent litigation between innovators and generic manufacturers that are

different from the rules that apply to the settlement of other types of patent litigation. There is no need to amend the Hatch-Waxman compromise to deal with this

issue. Settling cases is encouraged by the courts, it avoids the expenses of litigation,

and it can create results that accommodate the interests of both parties.

Any settlements that are anti-competitive are subject to regulatory challenge

under existing law. The actions of the Federal Trade Commission (FTC) in challenging some recent settlements demonstrate that the antitrust authorities are actively and adequately monitoring settlements between pioneer companies and generic manufacturers.

Orange-Book Listings: The generic industry would change the procedure by which

innovator companies can litigate patent disputes prior to FDA approval of an allegedly infringing product. This would upset a major feature of the Hatch-Waxman

compromise. The provision was intended to offset the loss by pioneer companies of

trade-secret status for their safety and effectiveness data and the loss of patent

rights that had been recognized in the Bolar case that was overruled by the 1984

law.

Prior to 1984, FDA approved a marketing application for a generic product even

if the patent holder contended that the product would infringe its patent. Although

patent holders could sue infringers, recovery of damages was questionable, particularly when the infringer was a small generic manufacturer that was potentially responsible for treble damages that accumulate during the patent litigation.

Under Hatch-Waxman, innovators are required to have their patents listed in the

FDA Orange Book, and a generic applicant must file a ‘‘Paragraph IV certification’’ if it wants the agency to approve its application before the listed patent expires. A

generic applicant may file such a certification only if it contends that the unexpired

patent is invalid or would not be infringed by its product. The generic applicant

must send a copy of the certification to the patent holder and the manufacturer of

the innovator drug. If the patent holder sues for infringement within 45 days, FDA

is automatically barred from approving the generic application for up to 30 months

while the case is litigated.

The generic industry has complained that this process has been abused and has

argued that the law should be changed to limit the patents that can be listed, such

as only listing patents on active ingredients. The data presented earlier conclusively

show that the process has not been abused as the overwhelming majority of generic

applications—94 percent—have not raised or encountered any patent issues.

There is no sound rationale why a generic manufacturer should be able to avoid

pre-approval patent litigation by making small changes from the marketed product,

such as by changing the crystalline form, when the changed product still infringes

an innovator’s patent. Pre-approval patent litigation should be linked to a generic

applicant’s reliance on an innovator’s safety and effectiveness data—that was one

of the trade-offs in the Hatch-Waxman compromise.

If a generic product would both rely on an innovator’s data and infringe one of

the innovator’s patents, pre-approval patent litigation should be allowed. Thus, any

patent that covers a product that could be approved based on an innovator’s data

should be listed in the Orange Book to permit pre-approval litigation.

Thirty-Month Bar: The generic industry contends that, once the patent-dispute

procedure is triggered as described above, FDA should not be automatically barred

from approving a generic application for up to 30 months. The industry also conVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00059 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
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tends that innovator companies should be required to post a bond that a generic

manufacturer could collect if it prevails in patent litigation.

Patent disputes involving generic drugs are a special case under the law because

the Hatch-Waxman compromise overruled the Bolar case and permits generic manufacturers to develop and test a competitive product before its patent expires, thus

barring patent holders from asserting their rights during this period. Such otherwise-infringing testing is not permitted in any other U.S. industry.

Since the 1984 compromise gave generic manufacturers a multi-year head start

on getting to market by authorizing product-development that would otherwise constitute patent infringement, innovator companies were given the offsetting benefit

of being allowed to litigate a patent before FDA approves the product.

If it were not for the Hatch-Waxman compromise, an innovator could sue a generic manufacturer when it begins product development and the litigation might

well be concluded by the time a product is ready for FDA approval. The generic industry cannot reasonably claim the right to engage in development activity that normally would be considered patent infringement and at the same time assert that

there should be no special rules governing the related patent litigation.

‘‘Late-Listed’’ Patents: The Hatch-Waxman compromise requires that, if a patent

has been issued at the time an NDA is submitted to FDA, the patent information

must be included in the NDA. If a patent is issued after FDA approves an NDA,

the patent information must be submitted to FDA within 30 days after the issuance

of the patent for listing in the Orange Book.

If a patent is listed in the Orange Book within 30 days of issuance, it is treated

the same as all other listed patents. The generic industry has argued that the preapproval litigation process should not apply to patents issued when generic drugs

are close to being approved. The generic industry refers to these as ‘‘late-listed’’ patents even though they are listed promptly after they are issued in accordance with

the Hatch-Waxman compromise.

The purpose of the pre-approval litigation procedure is to protect innovator companies from the injury that would occur if generic manufacturers sell infringing

products and are unable to pay the potentially large amounts that would be due at

the conclusion of litigation. This rationale applies to all patents, regardless of when

issued. Innovator companies should not be deprived of one of the important rights

conferred by the Hatch-Waxman compromise simply because a patent was issued

after a drug was approved or because the Patent and Trademark Office (PTO) was

slow in processing a patent application.

There are sufficient protections in existing law against abuse of the pre-approval

litigation procedure. For example, patents are issued only if the PTO determines

that they meet the statutory standards; innovator companies are subject to criminal

penalties if they knowingly make a false statement to FDA to obtain listing of a

patent in the Orange Book, and the Federal Rules of Civil Procedure provide sanctions if an innovator files a frivolous or improper patent suit. Further, if a patent

is truly late-listed—i.e., listed more than 30 days after it is issued—FDA’s rules exempt generic applicants with pending applications from filing a certification regarding the patent.

DTC ADVERTISING

On DTC advertising, PhRMA strongly supports direct-to-consumer advertising of

prescription medicines as currently regulated by FDA and opposes any further restrictions on this pro-patient, pro-health activity. Left sitting on pharmacy shelves,

medicines don’t do anyone any good. Unless they are prescribed for patients, prescription medicines cannot prolong life, ease pain, reduce disability or improve the

quality of life. And unless medicines are prescribed and used, they will not generate

the funds needed for private industry to continue to research and develop new and

more effective medicines.

In 1997, FDA under the Clinton Administration issued guidelines that clarified

the agency’s broadcast requirements. FDA no longer required radio and television

ads to contain voluminous information about a drug’s side effects. Under the draft

guidance, ads still have to list major health risks as well as side effects and must

set forth four ways for consumers to receive additional information.

FDA’s 1997 decision was in reaction to a policy that had generated ineffective and

confusing advertisements. Prior to the guidance, FDA required that a brief summary of the prescribing information for a drug had to be included in all advertisements—including broadcast advertisements—that both named a prescription drug

and stated its purpose. The brief summary is an FDA-approved document that advises physicians, in very technical language, how to appropriately use a drug. BeVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00060 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
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cause of its technical, scientific wording, this summary is very difficult for ordinary

patients and consumers to understand.

In announcing the clarifying guidance in August 1997, then FDA Lead Deputy

Commissioner Michael Friedman, M.D., said: ‘‘Today’s action can help promote

greater consumer awareness of prescription drugs.’’ Robert Temple, M.D., Associate

Director for Medical Policy at FDA’s drug division, added that, under the new guidance, ads could inform consumers about new products they might not learn about

through other means. As an example, he cited a new generation of antihistamines

that do not cause drowsiness. ‘‘You need to be told by someone that those products

are out there or you’ll never know,’’ he said.

Patients are now more actively involved in their own health care than ever before.

The consumer movement and the information explosion have empowered patients

to participate in these decisions. Armed with information, patients have become active partners with health-care professionals in managing their own health care and

they are savvy consumers. Rather than remaining uninformed and relying entirely

on an increasingly complex health-care system, patients are asking questions, evaluating information, and making choices.

Direct-to-consumer advertising provides a valuable resource for patients to obtain

information about specific diseases and conditions, particularly in rural areas of the

country where access to providers and health-care information may be difficult. Too

often, many common yet serious conditions go untreated even though effective treatments are available. Affected individuals may not realize they have a health condition. Others are aware of their symptoms, but may not know that treatment is

available. Patients suffering from chronic conditions may be dissatisfied with current treatment, but are unaware that different options are available with fewer side

effects or easier dosing regimens.

Pharmaceutical advertisements raise awareness of conditions and diseases that

often go undiagnosed and untreated. For example, the American Diabetes Association estimates that of the 16 million Americans who have diabetes, 5.4 million don’t

know it. One third of the people with major depression do not seek treatment and

millions of Americans are unaware that they have high blood pressure. By informing people about the symptoms of such diseases and the availability of effective,

non-invasive treatments, direct-to-consumer advertising can improve public health.

There are encouraging signs that this is happening:

• A survey by Prevention magazine found that, as a result of DTC advertising, an

estimated 24.7 million Americans talked to their physicians about a medical

condition they had never previously discussed with a doctor. In other words,

millions of people who had suffered in silence were encouraged to seek help. • A 1999 survey by FDA found that 27 percent of respondents asked their doctors

about a condition they had not discussed before. These conditions ranged from

diabetes and heart disease to arthritis and depression. • In the two years that ads for a medicine for erectile dysfunction have appeared,

millions of men have visited their doctors to request a prescription for the drug.

For every million men who asked for the medicine, it was discovered that an

estimated 30,000 had untreated diabetes; 140,000 had untreated high blood

pressure, and 50,000 had untreated heart disease. These numbers are striking—and this is just one drug. • A study by IMS Health, a health-information company, found that, in the one

year after an advertising campaign for an osteoporosis drug began, physician

visits by women concerned about the disease doubled.

A growing body of evidence suggests that consumers like DTC advertising. A 1999

survey by FDA found that those who liked these ads outnumbered those who did

not by nearly two to one. Eighty-six percent said the ads ‘‘help make me aware of

new drugs,’’ while 62 percent said the ads helped them to have better discussions

with their physician about their health. A survey by Prevention magazine found that

76 percent of respondents thought the DTC ads ‘‘help people be more involved in

their health care’’ and 72 percent felt the ads ‘‘educate people about the risks and

benefits of prescription medicines.’’ Advertising is only one source of user-friendly information available to consumers.

Some 50 consumer magazines that deal with health care are published every month.

The Physicians’ Desk Reference, or PDR, once confined to doctors’ offices, is now

available in a consumer edition at pharmacies. Internet users can surf tens of thousands of sites dedicated to health-care topics. In fact, according to health-care consultant Lyn Siegel, about 25 percent of online information is health-related, and

more than half of the adults who go on the web use it for health-care information.

So, while DTC advertising is an important source of information for consumers, it

is clearly not their sole source of information—even though it is the most accurate

because it is regulated by FDA.

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Critics contend that increasing expenditures on DTC advertising are driving up

the price of drugs, but the amount spent by pharmaceutical companies on advertising has remained fairly constant and price increases have been relatively modest.

As health care shifts from a physician-directed to a patient-directed system, companies are shifting the allocation of expenditures within their marketing budgets away

from doctors to patients, although the distribution of free samples by pharmaceutical companies (provided to physicians for trial use by patients) continues to

grow and remains by far the largest part of their advertising budgets.

And, while total pharmaceutical expenditures are rising, price increases have

been in line with inflation in recent years. According to IMS Health, a health-information company, total drug expenditures rose 14.7 percent in 2000. Of that figure,

only 3.9 percent of the increase resulted from price increases. Most of the increase

in drug expenditures came from the increased use of prescription medicines, including the use of newer, more expensive, and more effective therapies. The increased

use of prescription drugs is a healthy trend. Drugs not only save lives—they save

money in many cases by reducing the need for alternative, more expensive care.

They keep patients out of hospitals, out of nursing homes, out of surgery, out of doctors’ offices—and on the job. Still, only 8.2 percent of every health-care dollar is

spent on prescription medicines, compared to 32 percent on hospital care and 22

percent on physician and clinical services.

In summary, direct-to-consumer advertising helps to meet the increased demands

of consumers for information about diseases and treatments. It fosters competition

among products, which can improve the quality of care for consumers. Most important, DTC advertising can improve public health. It is intended to start a dialogue

between patients and doctors. Often, the dialogue will not result in a physician prescribing the drug mentioned by a patient. But it will prompt a discussion that may

lead to better understanding and treatment of a patient’s condition. And, whatever

happens, it is important to remember that it is a physician who ultimately decides

whether a drug should be prescribed and, if so, which medicine is most appropriate

for a particular patient.

RX/OTC SWITCHES

The issue has recently arisen as to whether a party other than a sponsor of a New

Drug Application (NDA) can request that FDA switch a prescription medicine to

over-the-counter (OTC) status. It has been a long-term policy of FDA that such a

request can be made only by an NDA sponsor, or by another with its approval,

through the submission of an NDA supplement with extensive data to support safe

and effective OTC use with appropriate OTC labeling. PhRMA strongly supports

this practice that has long been followed for good reasons.

There are compelling legal reasons against forced switches of prescription drugs.

These reasons have been spelled out in submissions to FDA. Without elaboration

in this testimony, such switches would violate the confidentiality provisions of the

Federal Food, Drug, and Cosmetic Act, the Trade Secrets Act, and the Fifth Amendment to the U.S. Constitution.

The process of discovering and developing new medicines, and new uses for existing medicines, is risky, expensive, and time-consuming. It is undertaken principally

by private companies at their own initiative through the investment of huge sums

in research and development ($500 million on average for one drug). This process

has led to enormous progress in preventing and treating disease and in improving

public health.

The sponsor of an NDA has the most comprehensive and detailed knowledge of

its drug and is in the best position to design, finance, and conduct additional studies

necessary to evaluate the safety and effectiveness of the drug for OTC use and to

prepare the appropriate OTC labeling. Every recent switch has been based on the

development and submission of substantial amounts of data demonstrating that a

prescription drug would be safe, effective, and properly labeled for OTC use.

Such data have been almost universally submitted through NDA supplements,

which give manufacturers the opportunity to earn exclusivity rights established by

Congress as an incentive to invest in the necessary research. The NDA holder is

in the best position to take all of the relevant information into account and to decide

whether and when to initiate a switch. Forced switches are being proposed by insurers seeking to shift costs to patients. These third parties lack the necessary data

to determine whether a switch is appropriate and are not themselves proposing to

conduct the extensive studies needed to support a switch. Rather, they are seeking

switches on the basis of assertions, anecdotal evidence, and other flawed and incomplete data.

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FDA would be acting arbitrarily and capriciously if it applied a lower standard

to switches initiated by the agency itself or by third parties than it applies when

an NDA sponsor seeks such action. Forced switches also would alter revenue

streams and expose manufacturers to different product-liability risks than anticipated when they planned their research investments.

There are good reasons to retain the process that has been of great benefit to

FDA, industry, and the public for many years. It is the process most likely to generate the needed data and to ensure that only drugs that are actually safe for overthe-counter use can be obtained without a prescription. Switches based on insufficient data could put the public at risk. In fact, the one time FDA initiated a switch

without the active support of the NDA holder—for a bronchodilator almost 20 years

ago—the agency quickly rescinded its decision after receiving numerous adverse

comments.

If third parties were allowed to initiate switches, moreover, there likely would be

an outpouring of such requests—and it would be difficult, if not impossible, for FDA

to control the process and decide who should and should not be permitted to seek

these changes.

FDA certainly plays a critical role in the drug-development process in general and

in switching drugs in particular. If the agency believes that a drug is an appropriate

candidate to be switched, it can consult with the NDA holder to determine whether

there is an interest in such a change and in developing a study program to support

an application for a switch. Industry has long cooperated with FDA on issues of mutual interest and is ready to do the same on this important issue. But forced switches would be unprecedented, would violate the rights of NDA holders, and could be

detrimental to public health.

This concludes my written testimony. I would be pleased to answer any questions

or to supply any additional materials requested by Members or Committee staff on

these or any other issues.

Mr. DEAL. Thank you, Dr. Glover.

Mr. Downey.

STATEMENT OF BRUCE L. DOWNEY

Mr. DOWNEY. Thank you, Mr. Chairman.

At the outset I’d like to thank the committee for holding this

hearing. I think it addresses some very important subjects and I

hope to contribute to that dialog.

As the chairman noted, I’ll be testifying not only on behalf of myself, but also on behalf of the Generic Pharmaceutical Association

and its 150 members that provide virtually all the generic drugs

in this country.

I have submitted a written statement. I would ask that that

statement be made a part of the record before I expand on those

remarks.

Mr. DEAL. Without objection.

Mr. DOWNEY. Thank you. I’d also like to thank Congressman

Brown and Congressmen Emerson for introducing their legislation.

I think that legislation has many very positive features that would

help speed generic products to market and add considerable savings to American consumers and to Congressman Pallone for his

legislation which, if enacted, would eliminate some of the artificial

barriers that we confront state-to-state as we try to market our

products.

It really is a privilege to be here today because this legislation

that we’re addressing, the Waxman-Hatch legislation, was transforming. It created an entire industry. It’s saved consumers tens of

billions of dollars over the last 15 years. It’s increased the amount

of investment in R&D from the pharmaceutical companies, the

branded companies. And it’s done all of this in the context of free

markets where there is really little State or Federal participation

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in that. It’s all been done in the marketplace, which I think is a

tremendous accomplishment.

On a personal level, it’s also given me a very good job in an exciting industry, and I’m very pleased for that.

I would like to really respond to some of the questions that have

been asked today and try to put or thoughts together to respond

on several issues. First the patent process.

As we have discussion about the 180 days of exclusivity and patent settlements and the 30 month stay, it really glosses over what

I think is the underlying problem. And the underlying problem I

think is twofold. One, the process in which you obtain a patent is

loaded in favor of patent issuance and many patents that are not

patent worthy get issued. And second, we have a broad definition

of what’s patentable in the United States, such that ideas that I

don’t believe necessarily merit patents earn them.

I want first to talk about the process. As you go to the Patent

Office to make an application, you make a submission, there’s an

examiner, there’s no opponent. So there’s no one saying to the examiner or the judge this patent should not be issued because or

this idea is not patent worthy because. All of the disclosure is made

by the proponent. And in that context, it shouldn’t be surprising

when billions of dollars, literally, are at stake. Many proponents

push the envelop to the bursting point in advocating in favor of

patentability in the absence of opponent advocating to restrict the

patent. Unpatentworthy ideas obtain patent protection. So I think

that basic system leads to some of the problems that we’ve tried

to overcome.

Also, I think some of the ideas that we consider patent worthy

in this country really shouldn’t be. Things like formulation patents

on how to use an active ingredient in combination with other compounds to deliver a dose to a patient. How to score the tablets so

they can be broken in a certain way to titrate the dose. All of these

ideas are patentable under current law, but in my view add very

little to the intellectual capital of the country.

Given this situation it seems to me the 180 days of exclusivity

is our only line of defense. It’s that exclusivity which gives us in

the generic industry the incentive to go out after the patents

issued, attack that patent in a way to get our products to market

earlier than the patent law would otherwise provide.

Those who would say the 180 days of exclusivity is not important

aren’t responsible to shareholders and to the public for the profitability of our firms. We invest literally millions of dollars in these

patent challenges and we do so, as Dr. Glover pointed out, in the

face of a presumption of validity of the patent and in face of a situation where if we launch the product in the market that’s subject

to the patent, we could be subject to treble damages. In a company

of our size, even one of the largest generic companies, we would be

bankrupt if we were to launch, say, a Prozac into the market, market it for a year or so, and ultimately lose the patent case.

And Prozac is a very good example, because recently we did challenge the patents on Prozac, and there were two; one that expired

in February 2001 and one scheduled to expire in December 2003.

The 30 months passed before we got to trial. We could have theoVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 E:\HEARINGS\73735 pfrm04 PsN: 73735
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retically launched that product to market and subjected ourselves

to treble damages prior to the final decision of the case.

We lost the first patent, the one that expires in 2001, and we

would have been out of business. But we won the second patent,

and as a consequence of winning that second patent we’ll bring generic Prozac to market 30 months in advance of that patent expiry

at a savings of literally $4 or $5 billion to the healthcare system.

We invested 5 or 6 years in that case. We invested with our partner in excess of $8 or $10 million. And we did it all in the face of

a presumption of validity that we had to overcome to bring the

product to market. Without the exclusivity, without the return on

that investment, we would simply not have undertaken that process.

We at Barr have undertaken six and completed six patent cases.

We’ve won two, we’ve lost two and we’ve settled two. And I want

to take up the question of settlements, because it’s not the settlement that keeps you out of the market, it’s the patent. If the patent’s valid, you can’t launch the product in defiance of that patent

without subjecting yourself to unacceptable risks.

In our settlements, for example, in both cases we’ll be launching

a product under license from the innovator into the market prior

to the patent expiry. In one case, 10 years prior to patent expiry.

So that settlement brought economic benefits to us, less than we

would have earned if we had taken the case to trial and won but

more than we’d have earned if we had gone to trial and lost. And

I think it’s very significant because both cases we settled the subsequent challengers lost. And I think in retrospect that shows the

wisdom of the settlement and I think an essential part of the patent process to be able to settle cases in order to keep—or actually

to bring products to market faster to provide the incentive for the

cases and bring generic products to the consumer.

I have lots of other remarks that I’d like to make, but I think

the stop sign is on, and I’ll pass the mike and answer questions

when everyone’s finished.

[The prepared statement of Bruce L. Downey follows:]

PREPARED STATEMENT OF BRUCE L. DOWNEY, CHAIRMAN, BARR LABORATORIES, INC.

Mr. Chairman, members of the Sub-committee, thank you for the opportunity to

testify. My name is Bruce L. Downey, and I am Chairman of Barr Laboratories,

Inc., which has facilities in New York, New Jersey and Virginia and manufactures

and distributes a wide range of prescription medicines for the treatment of diseases

ranging from breast cancer to heart disease to depression. Barr Laboratories is a

member of the Generic Pharmaceutical Association.

Today, I am speaking on behalf of the GPHA and its more than 140 member companies, which manufacture nearly all generic pharmaceuticals distributed in the

United States today. No other industry has made, nor continues to make, the contribution to affordable health care that is made by a robust generic pharmaceutical

industry.

I want to thank Chairman Bilirakis, Chairman Tauzin, Congressman Dingell and

Congressman Brown for focusing on an issue that has such significance for our industry and for the American consumer. This is the first House-sponsored hearing

in some time that has looked specifically at the value and contribution of generic

pharmaceuticals to consumers, and how our industry makes a significant contribution to affordable healthcare.

Often, when industries come to Congress, they bring an agenda that would impose

significant costs on American taxpayers. The generic industry comes before you

today to discuss ways to create a direct and immediate benefit for consumers by reducing health care costs by billions of dollars. A strong generic industry will allow

62

the government to do much more for all Americans—particularly the elderly, underinsured and uninsured—for much less. The opportunity to create immediate consumer benefits, at no additional cost, deserves serious consideration.

As I intend to demonstrate in my testimony, the generic pharmaceutical industry

has saved, and continues to save, consumers billions of dollars a year in prescription

costs. The problem is, however, that the legislative balance that created significant

annual savings for consumers has gradually been eroded.

In just the past week, the value of America’s pharmaceutical industry has been

in the spotlight, as articles in newspapers and magazines across the nation focused

on the 20th anniversary of the AIDS crisis. Universally, these stories addressed two

issues: the extraordinary power of pharmaceutical research and development; and

the extraordinary financial burden that has been created by these life-saving pharmaceutical therapies.

I want to stress that the generic pharmaceutical industry recognizes the risks in

the investment made by the brand pharmaceutical industry in new pharmaceutical

therapies. We also recognize that the brand industry deserves to receive incentives

for its innovation. In addition, the health of the generic industry is tied substantially to the health of the brand industry and our future is directly linked to the

ability of the brand industry to innovate and to bring new therapies to market.

As always, however, in the nearly 20-year history of the generic pharmaceutical

industry, the challenge continues to be rewarding innovation but assuring competition at the end of brand exclusivity. Both the House and Senate, through recently

introduced legislation, have taken the first steps in an effort to restore that balance.

We welcome these initial first steps, but we respectfully call upon Congress to do

much more to preserve the consumer savings that result from a healthy brand and

generic pharmaceutical industry.

Since its inception in 1984, with the implementation of the Drug Price Competition and Patent Term Restoration Act, (commonly called the Hatch-Waxman Act),

the generic pharmaceutical industry has been responsible for saving consumers and

taxpayers billions of dollars each year.

According to the Congressional Budget Office Report of 1998, generic pharma- ceutical competition returns a minimum of $8-10 billion a year in savings into the

pockets of American consumers. With pharmaceutical sales in the United States in

excess of $138 billion in the past year, sales of generic medicines accounted for less

than 10% of the total dollars, but accounted for nearly one out of every two prescriptions filled. In fact, when you rank the top five pharmaceutical companies on the

basis of prescriptions dispensed, three of the top five are generic pharmaceutical

companies: Watson, Mylan and Teva, all members of our association.

Interestingly, this savings has not come at the expense of innovation. According

to the same CBO Report, ‘‘Between 1983 and 1995, investment in R&D as a percentage of pharmaceutical sales by brand name drug companies increased 14.7 percent

to 19.4 percent. Over the same period, U.S. pharmaceutical sales by those companies rose from $17 billion to $57 billion.’’

The evidence is compelling. The underlying premise of the Hatch-Waxman Act

works—consumers benefit if a proper balance is maintained between rewarding innovation and guaranteeing competition.

Unfortunately, the delicate balance struck by Congress in 1984 has gradually

grown lopsided in favor of the brand pharmaceutical industry, hostile to the generic

industry, and as a direct result, become a threat to the expansion of consumer savings. The reason is simple: the brand industry discovered years ago that competition

is good for consumers but bad for their bottom line.

When Hatch-Waxman was implemented, the assumption was that the brand products would lose about 30% of their market, but would recover this loss through price

increases. However, the introduction of a generic product often results in such a significant market share loss—as much as 80-90%—that the brand company is not able

to recover its loss. After starting their own generic businesses, and implementing

other strategies, it became clear to brand companies that the only way to succeed

was to delay competition for as long as possible.

Additionally, laboring under the burden of significant expectations from the financial markets to maintain strong profits, brand companies have increasingly found

that they are unable to generate a consistent pipeline of new products to meet profit

and growth expectations. The investment in new product innovation continues, but

the value of extending the market exclusivity of existing products is increasingly

viewed as a prudent financial investment.

The results of this investment in delaying competition have been significant.

Delays in the introduction of generic competition, combined with the nearly $3 billion spent annually on direct-to-consumer marketing for new products that often

displace generic sales, have resulted in a stagnation of the growth of generic substiVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00066 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
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tution. Nearly two decades after Hatch-Waxman, generic substitution rates hover in

the low 40% area, rather than the 50-65% that was predicted by many experts just

a few years ago.

Since 1984, no less than a half dozen different acts of Congress have delayed the

introduction of generic competition for specific products. According to a National Institute for Health Care Management (NIHCM) Foundation study issued earlier this

year, the slow erosion of Hatch-Waxman through legislation, and the increasing exploitation of legal and regulatory loopholes in the Act, has extended anticipated

market exclusivity from approximately 12 years to more than 18 years for some

drug products.

The cumulative effect of these actions has resulted in extending product monopolies by almost 50%. With national prescription drug spending continuing to increase

at an alarming rate, it is incumbent upon Congress to re-set the 1984 balance. In

other words, its time to put the health of Americans first, with the challenge of reachieving the optimal balance of rewarding innovation and assuring public access

of affordable medicines immediately at the end of brand exclusivity.

Over the past decade, as it has become clear to the brand industry that delaying

competition is one sure bet to ensuring a healthy profit stream, the number of other

gimmicks applied to extend the life-cycle of products nearing the end of their patent

life has increased dramatically.

Certainly, the stakes in this game are high. Products representing annual sales

of more than $37 billion are due to lose patent protection in the next five years.

Many of these are the blockbuster names that we all know. To preserve their monopolies, brand companies have turned to such tactics as patent evergreening, citizen petitions, application of the automatic 30-month stay in patent litigation, application for pediatric exclusivity, and other techniques that delay generic approval or

prevent timely introduction of generic competitors.

I would like to cite two recent examples of the techniques used to ‘‘game the system.’’

The cancer agent Taxol enjoyed nearly 8 years of market exclusivity. But tactics

employed by the brand manufacturer, Bristol-Myers Squibb, resulted in a two-andone-half year delay in generic approval.

Taxol, an anti-cancer agent, was originally discovered and developed by federal

researchers over a thirty-year period. Although BMS testified before Congress in

1991 that the compound was neither patented nor patentable and, therefore, BMS

would not have any intellectual property rights, BMS received several patents on

certain methods of administration and stabilizing the compound following FDA

product approval. Another egregious fact is that prior to the expiration of five years

of product exclusivity granted under Hatch-Waxman, BMS unsuccessfully appealed

to Congress for additional market protection.

In a complex series of legal maneuvers involving patent listings in the Orange

Book, that followed, BMS was able to delay generic approval. Part of these delays

resulted from the 30-month stay provision of Hatch-Waxman that automatically prevents approval of a generic product for this period, while patent litigation is underway. These tactics, assuming a modest generic penetration of only 50%, at a 50%

price reduction, cost consumers more than $500 million.

Another recent example is the anti-anxiety drug, Buspar, which had annual sales

of $700 million. The product was in its 14th year of market exclusivity, when the

brand company, again Bristol-Myers Squibb, filed a surprise last-minute new patent

on Buspar one day ahead of generic competition.

The last-minute patent sought to protect a metabolite created by digestion of the

drug in the human body. Again, because of the patent filing, the company was able

to invoke the 30-month stay of approval of a generic competitor. Although this listing was ultimately overturned, these tactics, assuming a modest generic penetration

of only 50%, at a 50% price reduction, cost consumers more than $57 million.

Both of these examples highlight two issues that Congress must address. First,

patent law allows the listing of any number of patents on drug products, making

it impossible for generic competition to begin on a date certain, as long as the brand

company can find some aspect of the product that can be patented. This issue is

an area where Congress could make significant and immediate changes, simply by

conforming U.S. patent law to that practiced throughout the world.

The second issue is that of the 30-month stay. Delay equates to profit preservation, so the brand company has much to gain by initiating patent litigation against

the generic competitor. They face no financial or other penalty if the case is ultimately found to be groundless. But they do get an automatic extension of their exclusivity while the case is in review. The burden rests entirely on the generic competitor. Congress could address this deficiency in Hatch-Waxman by requiring the

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brand holder to post a bond as part of any patent litigation. This would place them

at risk for taking actions that have no other purpose than to delay competition.

These are only two examples of a systematic process of investing in legal and regulatory innovation to prevent generic competition. These types of abuses need to be

curbed.

How can we work together to fix this problem, and increase both access and cost

savings? I believe that the answer rests in the combination of encouraging the increased usage of generic medicines today and strengthening Hatch-Waxman to restore the balance first established in 1984. Each of these steps can generate billions

of dollars in savings for America’s health care system, while increasing access to

medicines that can improve and prolong life.

I would like to briefly address both points.

First, I would like to address the potential and immediate savings that can result

from increasing the utilization of generic medicines. The price difference between an

equivalent generic product and its brand equivalent can be as much as 70-80%. A

decade ago, the price differential between a brand product and an equivalent generic

product was approximately $17. Last year, that price differential had grown to approximately $46.

According to a study published last September by Tim R. Covington, Executive

Director of The Managed Care Institute at Samford University, ‘‘An increase of only

1% in the nation’s generic prescription utilization rate (approximately 27 million scripts) would generate a payer savings of $1.3 billion each year.’’ Action by Congress to encourage the maximum utilization of generic medicines in federal and

state prescription drug programs, and to develop national educational programs that

communicate the sameness, safety and savings of generic medicines would be an investment that could return significant and immediate value to taxpayers.

Estimates suggests that total pharmaceutical spending in the next decade will tri- ple to more than $330 billion by 2010. Clearly, increased utilization of generic drugs

represents the only immediate, significant opportunity to put the brakes on this

runaway escalation of America’s pharmaceutical bill.

Second, I am encouraged that Congress has begun the process of considering ways

to restore the intended balance of Hatch-Waxman. While it is too early in the legislative process for the generic industry to unconditionally endorse any current proposal, we strongly support Congressional initiatives that represent meaningful and

substantive reforms of Hatch-Waxman, and that restore the balance necessary to remove the barriers that delay the introduction of more affordable generic pharmaceuticals.

Proposals that have been introduced on the Hill have been criticized for being too

pro-generic. If that is the case, then they must also be criticized for being too proconsumer. The facts are simple: investment by brand industry innovation in the

legal and regulatory arenas can carry less risk and more reward than new product

development.

Working together, I am confident that our industry and members of the House

of Representatives and the Senate can find ways to increase consumer savings by

restoring balance to the competitive landscape.

The membership of GPHA has identified a number of areas where Hatch-Waxman

reform would accelerate the introduction of more affordable generic medicines.

These proposals include eliminating the 30-month stay component of patent challenges, and requiring brand manufacturers to post a bond if they challenge generic

product applications.

We believe that these and other proposals would dramatically encourage the competition that saves consumers more than $10 billion a year in prescription drug

costs. GPHA is committed to working with the Senate and the Congress to ensure

that any legislative initiatives: preserve the intent of Hatch-Waxman; result in a

balance between the interests of the brand and generic industries; and, create a vibrant competitive environment in which substantial pharmaceutical savings reach

American consumers.

In summary, the brand and generic industry agree that affordable medicines are

the key to longer, healthier and more productive lives. We also agree that innovation must be rewarded. But the generic pharmaceutical industry is unwavering in

its belief that after the expiration of a fair and equitable period of patent protection

and market exclusivity, consumers should be allowed to enjoy the benefits that competition creates in lower costs and increased access.

Let us work together with you to resolve the problems of dispensing medicines

to all Americans, including the under-insured and uninsured, by promoting the increased usage of generic medicines and working to ensure the timely introduction

of generic competition.

I am happy to answer any questions you might have.

65

Mr. DEAL. Thank you, Mr. Downey.

Dr. Delgado.

STATEMENT OF JANE L. DELGADO

Ms. DELGADO. Good afternoon. My name is Dr. Jane Delgado. I’m

President, CEO of the National Alliance for Hispanic Health,

known as the Alliance.

It’s been very interesting for me to sit here, read my testimony

and think I have so much more to say, but I only have 5 minutes.

I should let you know I was also the consumer member of the

Edwards Commission, which worked to restructure the FDA in the

late 1980’s, early 1990’s. So I’m very familiar with some of the

issues that were raised. I’m also familiar with the saying ‘‘to tell

the truth, the whole truth and nothing but the truth.’’ And two out

of three is not enough, so I will do all three and my daughter is

here, and I’m here in front of you.

So let me tell you what our concerns are. One of the major concerns we have, and it’s not in my testimony, is this whole discussion about generic and brand. And I raise it because of the issue

that what we know about physical science is changing.

For example, in our community, Hispanics, many people know

things about us. They know that we’re overweight, they know that

we’re diabetic, but they didn’t know that we have less heart disease

than non-Hispanic whites. They didn’t know that what we also do

is we live longer than non-Hispanic whites. They didn’t know we

have less breast cancer. They also didn’t know how the differences

are in how we metabolize our drugs.

So when people say generics, I say generic for whom? The FDA

will also be able to tell you that if you look at who participates in

these clinical trials, there are very few people who represent the

diversity in this Nation. And there are differences.

As Dr. Woodcock says ‘‘Well, you know, you can take one medicine and you can take another one and it’s okay, and it’s a little

different for you and it’s a little different for them.’’ Well, that little

difference can mean a big difference for a patient. And I think in

terms of your constituents, they can tell you what has happened

with them when they use drugs.

Constituents don’t take drugs or medicines because one is cheaper, one is expensive. That may help. They take them because it

works. If it’s cheaper and it doesn’t work for them, they’re not

going to take it. So please go back to the idea that we want things

that work for the patient.

I want to move on to one of the important facts that we also

think is important is the idea of information to consumers. Someone said well, you know, these consumers are coming in and they’re

asking the doctor ‘‘I’m diabetic, I want some Zoloft.’’ And it’s the

wrong thing they’re asking for. Well, we have changed our

healthcare system from a physician hospital based system to one

which is more patient driven and one which is more at home. And

that patient should be congratulated for having the nerve to come

in and ask for something, even if it’s the wrong thing. And if the

communication is incorrect, well great. What a great way to start

a discussion. If we only talk to people who knew everything, we’d

be very bored. We need new viewpoints, even mistakes to correct

66

them; that’s why we’re here because obviously some people are saying one thing, other people saying another thing, and we’re trying

to make more sense of it. But this idea of correcting or talking to

a patient is something which is not part of our healthcare system,

is driven too often by factors of cost.

I got this publication yesterday from the American Academy of

Family Physicians, and it said ‘‘life balance from doctor-to-doctor.

Tip One: Don’t try to be too efficient. Take time to really listen to

a couple of patient’s stories a day. We need to be fed by our patients.’’ That is where medicine is today, and that’s why direct to

consumer advertising is important.

If more people are getting more medicines, good, they’re getting

treatment. If we have generic and we have brand, let the decision

be made by the healthcare provider and the patient, not by anyone

else. Those are the challenges we face, because our system is

changing.

And if you look at the way is science is ongoing, they will look

back upon us and say ‘‘Can you believe those people thought that

if you gave 100 people the same medicine, they were supposed to

respond the same. Ha, ha, ha.’’ They will laugh because in the future medicine’s going to be tailored to the individual.

And as medicines change, what becomes law or the policies we

develop have to be able to incorporate those changes. Medicine is

not of the past, it is of the future. And those are the things that

we as Hispanics are very concerned about.

We know that we are now 12 percent of the population of the

United States, that’s even though the Census didn’t include the 3.5

million people in Puerto Rico. But we’re there, 12 to 13 percent.

For us there are differences.

We also know for people who are over 75 only 2 years ago the

FDA started to record what was going on with them.

If you add all the groups for which we really don’t have the specificity of data on drugs and their impact, you have most of your constituents, gentlemen.

So, thank you very much. I’ll be open for questions later.

[The prepared statement of Jane L. Delgado follows:]

PREPARED STATEMENT OF JANE L. DELGADO, PRESIDENT AND CEO, NATIONAL

ALLIANCE FOR HISPANIC HEALTH

Good morning. My name is Dr. Jane L. Delgado and I am President and CEO of

the National Alliance for Hispanic Health (the Alliance). I am pleased to be here

today to present the Alliance’s perspective on pharmaceutical access and direct to

consumer advertising. Before presenting these views, however, I’d like to provide

you with a short background on who the Alliance is so that you may better understand our perspective and our reasons for being here today.

The Alliance is the oldest and largest network of Hispanic health and human

service providers. Alliance members serve over 10 million (one in four) Hispanic

health consumers annually. Our members are community-based organizations, provider organizations, government, national organizations, universities, for-profit corporations, and individuals. We have a bi-partisan board and three things make the

Alliance unique: (1) belief in community-based solutions, (2) representation of all

Hispanic groups, and (3) refusal of funding from alcohol or tobacco companies. We

are a principled and strong organization.

To meet the needs of our communities, the Alliance operates state-of-the-art services in four program centers: Consumers, Providers, Technology, and Science. We

develop national model community-based initiatives for service delivery in areas

currently covering: cancer, environmental health, HIV/AIDS, prenatal care, substance abuse, tobacco control, and women’s health. In addition, we directly reach

67

1The Kaiser Commission on Medicaid and the Uninsured. Uninsured in America: A Chart

Book. May 2000. 2 Ibid.

Hispanic health consumers nationwide by connecting them to local services and information (using zip code) through our

—National Hispanic Family Health Helpline (1-866-SU-FAMILIA),

—National Hispanic Prenatal Helpline (1-800-504-7081), and

—National Hispanic Indoor Air Quality Helpline (1-800-SALUD-12)which have bilingual (Spanish and English) information specialists.

As one of the organizations that established the field of cultural proficiency for

health providers, the Alliance operates a significant support network for health professionals including training and education programs for cultural proficiency. We

maintain and update a national database of 16,000 community health providers,

representing the largest network of health providers serving Hispanic communities.

As the organization that established the first Hispanic on-line presence in 1991,

the Alliance continues to foster cutting edge initiatives in science and technology.

We operate hispanichealth.org and this year will unveil a redesign of the site that

will include community health chats, training resources, and a portal to accurate

health information that will continue the Alliance’s role as the Hispanic community’s trusted source for the best in health information.

An innovator in health science, the Alliance operates a national network of university-based researchers working with community-based organizations. Alliance research was the first to show over eight years ago that the Hispanic community was

growing at a faster rate than Census predictions and would be the largest racial

or ethnic minority group by the year 2000. Our research has challenged long held

notions of health and well-being by showing that while Hispanics are more likely

to be uninsured and in poverty, we also live longer than non-Hispanic whites. We

have demonstrated the positive role of community, culture, family, and faith in a

healthy life and the negative impact of some U.S. cultural norms on health and

well-being.

Alliance research has also shown, that while Hispanics live longer than non-Hispanic whites, it is a life often marked by chronic illness and disease. Hispanics are

more likely to suffer from diabetes, depression, asthma, and other chronic illnesses

and diseases yet we live longer than non-Hispanic whites. Our chronic conditions

benefit from early identification and a treatment plan that includes the appropriate

pharmaceutical regimen. For this reason, full access to available pharmaceuticals

and information made available through direct-to-consumer (DTC) advertising is a

critical issue for the Hispanic community.

ACCESS TO PHARMACEUTICALS.

Hispanics are the group least likely to have regular access to health care services.

More than one third (37%) of Hispanics are uninsured compared to 14% of non-Hispanic whites.1 The impact is that about one-third of the uninsured reported no usual

source of health care (38%), skipping a recommended medical test or treatment

(39%), or not filling a prescription (30%).2 This lack of access to health care, including pharmaceuticals, is a significant barrier for Hispanic communities. The picture

for pharmaceutical access is further complicated by formularies and other administrative strategies that limit access to the full range of pharmaceutical products. This

is of particular concern to Hispanic consumers as research has shown that a number

of pharmaceutical products have a different metabolic pathway for Hispanics. Finding the right product with the least side effects requires access to the full range of

pharmaceutical products in a given class. However, many Hispanic consumers find

that while a pharmaceutical product that works well for a majority of the population

is on their formulary, other products which work better for them may not be accessible. The goal of a responsible pharmaceutical policy should be to make the full

range of approved pharmaceuticals available to all so that a medical rather than

cost-limiting decision can be made between a doctor and patient. It is disturbing

that the discussion on pharmaceutical policy has focused on pharmaceutical spending as a negative for the health care system. Quite the opposite, pharmaceutical

products are the most cost effective sector of health care. Increased spending on

pharmaceuticals is a sign of our evolving health system, which has less of a focus

on hospitalization. With improved products coming to market and a healthy research base there are new alternatives for those currently without adequate treatment options.

68

3 IMS Health Reports. A 14.9% Growth in U.S. Prescription Sales to $145 billion in 2000. May

31, 2001. 4 ‘‘Providing Antiretroviral Therapy for HIV Infection,’’ The New England Journal of Medicine,

Vol. 344, No. 11, March 15, 2001. 5 Health Care Financing Administration, Office of the Actuary, National Health Statistics

Group, 2001. 6 Ron Winslow, ‘‘GlaxoSmithKline’s Coreg Benefits Heart Patients in Two Big Studies,’’ The

Wall Street Journal, March 21, 2001. 7The SOLVD Investigators, The New England Journal of Medicine, Vol.325, No.5, pp.293-302,

1991; Walsh/America/PDS. 8Scott-Levin, Integrated Share of Voice Services IMSHEALTH/CMR, 2001.

The facts of increased pharmaceutical spending argue for a responsible and patient-based policy that will expand rather than limit access to pharmaceutical products.

More than two-thirds (71%) of increased spending on pharmaceuticals is a result

of increased utilization. According to IMS Health, in 2000, total prescription drug

spending increased 14.7 percent. Of that amount, only 3.9 percent represented price

increases, the remaining 10.8 percent reflects the fact that more patients are getting

new and better medicines. Also according to IMS Health, the rate of increase in

drug spending in 2000 (14.7%) was substantially lower than the rate in both 1999

(18.8%) and 1998 (16%).3

Value of new prescription drugs explains increased utilization. Utilization of pharmaceuticals is increasing because untreated patients are coming in for treatment

and patients have access to new and better medicines. In the 1990’s, according to

the industry trade association PhRMA, over 300 new medicines were made available

to patients. These mean new and better options for patients. For example, in a

study published in The New England Journal of Medicine, it was reported that in

the 16 months following the introduction of antiretroviral therapy for HIV, there

was a 43 percent decrease in hospital inpatient care. According to Samuel A.

Bozzette, a physician with the Veterans Affairs San Diego Healthcare System, who

headed the study, ‘‘The drugs are almost a perfect substitute for hospital care. We

can afford them because, in fact, we were already spending the money on HIV care’’

in the form of hospitalization.4

Increased utilization is good news—decreases spending on more expensive treatments and means improved health care for consumers. Since the 1960s, spending on

prescription drugs as a percent of total national heath expenditures has remained

below 10%; with nearly four times as much spent on hospital care.5 Pharmaceuticals

remain the most cost effective segment of the health care industry. The real story

of increased pharmaceutical spending is that patients are getting treated with improved regimens or untreated patients are getting treated before a more costly acute

episode arises, leading to reduced spending on other more expensive health care

treatments and improved patient satisfaction. For example, a recent study of patients with severely weakened hearts due to heart failure found that use of a new

beta blocker, not only reduced deaths by 35 percent compared with patients given

a placebo, it also sharply reduced hospital admissions, hospital stays and the use

of tests and procedures in the hospital.6 Another study published in The New England Journal of Medicine found that the use of ACE inhibitors for patients with congestive heart failure reduced mortality by 16%, avoiding $9,000 in hospital costs per

patient over a three-year period. Considering the number of people with congestive

heart failure, additional use of ACE inhibitors could potentially save $2 billion annually.7

Pharmaceutical innovation is critical to improved health care. The aging of the

population means that chronic illness and disease in this country will increase. The

most cost effective to this evolving health challenge is access to the full range of

pharmaceutical products and development of new and improved products to avoid

hospitalization and costly (in human and economic terms) impact of not treating

chronic illness and disease early. For example, about 70% of seniors (28 million) now

suffer from cardiovascular disease. If this trend continues, over 50 million elderly

could face this disease by 2050.8

Access to Information. New research is showing that health care disparities

among black, Hispanic, and white Americans cannot be explained wholly by disparities in income and health insurance coverage among these groups, but that other

factors such as lack of information play a critical role. Indeed, a new study sponsored by the federal Agency for Healthcare Research and Quality (AHRQ) has found

that one-half to three-fourths of the disparities observed in 1996 would have

remained even if racial and ethnic disparities in income and health insurance were

69

9Weinick, Robin, et. al. ‘‘Racial and ethnic differences in access to and use of health care services, 1977 to 1996,’’ Medical Care Research and Review, November 2000, No. 57 (Suppl. 1), pp.

36-54. 10FDA 1999 Survey, question 7. 11Prevention Magazine. International Survey on Wellness and Consumer Reaction to DTC Advertising of Prescription Drugs: 2001. 12Prevention Magazine. International Wellness and DTC Study. 2001. 13FDA 1999 Survey, question 7. 14FDA 1999 Survey, question 7. 15Prevention Magazine. International Wellness and DTC Study. 2001.

eliminated.9 Access to information is a critical piece in the access picture for Hispanic and other underserved communities.

DTC pharmaceutical advertising is a responsible approach of discussing benefits

and risks. DTC pharmaceutical advertising is more in the model of public health

patient education rather than the Madison Avenue tradition of advertising. Indeed,

a survey by the U.S. Food and Drug Administration (FDA) found that as many consumers recalled seeing DTC ads that contained information about ‘‘benefits of the

drug’’ (87%) as did seeing ‘‘risk or side effects’’ (82%).10 The FDA plays a vital and

appropriate role in ensuring the patient’s concerns are primary in DTC advertising.

Unlike other sectors of the health care market (e.g. dietary supplements, over-thecounter drugs), DTC pharmaceutical advertising is required to use a ‘‘fair balance’’

of potential risks and benefits in consumer-friendly language. In addition, print advertising must include a brief summary of product information and broadcast advertising must make reference to label information sources (toll-free number, print ad,

web site) and encourage discussion with a health care professional. Furthermore, all

advertising is submitted to the FDA at first use. This responsible approach to advertising is one that should be used as a model for other sectors of the industry whose

advertising by focusing on benefits without adequate discussion of risks does little

to empower and inform consumers.

DTC advertising helps health consumers recognize untreated disease. The $2.5 billion spent by the pharmaceutical industry of DTC advertising in 2000 is less than

10% of the $26 billion spent in 2000 by the industry on research on development.

Furthermore, this spending has dramatically increased patients’ awareness of and

ability to recognize untreated disease. A survey by Prevention Magazine found that

since 1997, DTC advertising has prompted an estimated 54.2 million health consumers in the U.S. to talk to their doctors about a medical condition or illness they

had never discussed with their physician before. This is critical to the 50% (6-8 million) people with diabetes who are not being treated as well as individuals with a

range of other untreated conditions for which treatments are available. Furthermore, the Prevention Magazine survey of DTC advertising and consumers found that

one-third (33%) of patients using a prescription medication were reminded to take

their medication by a DTC ad.11 This compliance benefit is significant for many

chronic illnesses and conditions that require long-term compliance with a treatment

regimen.

DTC advertising encourages discussion between patients and health providers. Patient-provider communication is being improved with DTC advertising. A study conducted by Harris Interactive found that 64% of doctors thought DTC ads help educate and inform the public.12 Furthermore, a 1999 FDA survey of DTC advertising

found that 81% of patient’s reported that their doctor welcomed their question about

a drug as a result of DTC advertising.13 In addition, the FDA study also found that

27% of people who spoke to their physician as a result of DTC advertising, talked

to them about a previously undisclosed medical condition.14 Also, of consumers who

spoke to their physician as a result of DTC advertising, a majority (53%) of physicians discussed non-drug therapy with their patient.15

Health care is in transition from a physician-directed, hospital-based system to a

patient driven, at-home system. Responsible DTC advertising is another tool that

empowers consumers with information that includes both benefits and risks so that

the consumer can make an informed choice. Unfortunately, much information for

consumers available through the internet and other venues is not subject to FDA

standards nor does it benefit from a balance or benefit and risk information found

in responsible DTC advertising.

Our challenge is to maintain the information, rather than image, base of DTC advertising and carry-over the high standards employed in pharmaceutical DTC advertising to other health care product advertising.

Mr. DEAL. Thank you.

Mr. Golenski.

70

STATEMENT OF JOHN D. GOLENSKI

Mr. GOLENSKI. Thank you, Mr. Chairman. My name is John

Golenski. I’m the Executive Director of RxHealthValue, a national

coalition of consumer groups, labor unions, provider groups, business groups and employers, insurers and health plans, pharmacy

benefit management organizations and academic researchers committed to improving American’s access to health improving prescription drugs.

As you can understand, a deliberative body comprised of nearly

40 organizations will rarely arrive at a full consensus regarding

any issue. Remarkably, our membership has achieved consensus

regarding the recommendations that I’m offering about direct-toconsumer advertising of pharmaceutical drugs to consumers and

patients. I believe the fact of these consensus recommendations indicates the fundamental importance of this issue for the members

of RxHealthValue. It is our belief that this form of advertising affects the health and safety of American patients and consumers.

The tremendous increase in the extent of DTC advertising of prescription drugs since the FDA removed the requirement for the

brief summary of risk information in 1997 is well documented. It

is almost impossible to open a general news magazine or view a

prime time television program or listen to the radio and not see or

hear advertising for prescription drugs. Given that the prescribing

physician is the decisionmaker regarding the use of these medications, it is all the more startling that so many resources are expended by drug manufacturers to affect the attitudes of consumers

and patients.

Although there is little evidence currently available regarding

whether consumer and patient attitudes affect physician choice in

prescribing, no stakeholder in the health system and health economy has suggested that the impact of such advertising is insubstantial. Given the FDA’s expressed interest in assessing the effects of DTC advertising, we expect more direct evidence of impact

will be available in the near term future.

While we await the results of planned and pending studies on

the effects of DTC advertising on attitudes, behaviors and medical

outcomes of the consumers and patients, RxHealthValue members

are concerned that risk information in particular is not adequately

reflectively conveyed in DTC advertising.

One of our member organizations, AARP, recently conducted a

survey of members to assess the impact of DTC advertising finding

that nearly a third of those surveyed could not recall ever seeing

risk information in the ads. Two-thirds of the survey population

felt that the information presented in such advertising was not particularly helpful in assessing recommendations about whether to

take prescription medications. This poses a serious safety risk to

consumers and patients.

In our first recommendation to the FDA presented publicly 1

year ago at the National Press Club RxHealthValue emphasized

the fundamental importance of protecting the safety of patients

and consumers who are confronted with DTC advertising. Thus,

RxHealthValue recommends that the Congress direct the FDA first

to convene a task force of key stakeholders, including the pharmaceutical manufacturers who advertise prescription drugs, as well as

71

1Draft Guidance for Industry: Consumer Directed Broadcast Advertisements: Availability.

Federal Register 1997; 62:43171. 2Findlay, Stephen. Prescription Drugs and Mass Media Advertising. NIHCM, Sept. 2000.

3 Bero, Lisa A. & Lipton, Shira. Methods for Studying the Effects of Direct-to-Consumer Pharmaceutical Advertising on Health Outcomes and Health Services Utilization. (Paper to be presented at ASPE Conference on Methods to Assess Effects of DTC Advertising, May 30, 2001).

consumer groups, patient organizations, provider groups, payers

and relevant experts to develop and test standards for information

disclosure on DTC advertising.

Second, to more carefully define the concrete meaning of ‘‘fair

balance’’ in disclosing benefits and risks of advertised medications

to include disclosure of other appropriate therapies in addition to

alternative medications.

And third, to further define ‘‘fair balance’’ to mean that full disclosure of risks and side effects be given equal print and air time

as the description of benefits in the same communication.

RxHealthValue recommends that the Congress direct that the

appropriate agencies of the Federal Government conduct on-going

research to evaluate the effects of DTC advertising on the health

of American consumers and patients. It is a given that many Americans appreciate the increased awareness of diseases and conditions

and potential therapies which DTC advertising makes possible. It

is also true that such advertising can obscure potential hazards of

the pharmaceutical advertised and neglect the relative value of

other forms of therapy. Only thorough, independent research can

demonstrate the differential impact of such advertising upon the

health choices of American patients and physicians.

In conclusion, the members of RxHealthValue applaud the committee for engaging this dialog about the effects of this increasingly

pervasive influence on the therapeutic choices of American consumers and patients. We pledge our assistance in implementing

any of the recommendations we have offered and thank the committee for this opportunity to comment. And we will be glad to answer questions.

[The prepared statement of John D. Golenski follows:]

PREPARED STATEMENT OF JOHN D. GOLENSKI, RXHEALTHVALUE

Mr. Chairman, Members of the Committee, I am John D. Golenski, Executive Director of RxHealthValue, a national coalition of consumer groups, labor unions, provider groups, business groups and employers, insurers and health plans, pharmacy

benefits management organizations, and academic researchers committed to improving Americans’ access to health-improving prescription drugs. (Our membership list

is appended below.) As you can understand, a deliberative body comprised of nearly

30 organizations will rarely arrive at full consensus regarding any issue. Remarkably, our membership has achieved consensus regarding the recommendations I am

offering regarding Direct-to- Consumer (DTC) advertising of prescription drugs to

consumers and patients. I believe the fact of these consensus recommendations indicates the fundamental importance of this issue for the members of RxHealthValue.

It is our belief that this form of advertising affects the health and safety of American patients and consumers.

The tremendous increase in the extent of DTC advertising of prescription drugs

since the FDA removed the requirement for the ‘‘brief summary’’ of risk information

in 1997 1 is well documented.2 It is almost impossible to open a general news magazine, view a prime time television program or listen to the radio and not see or hear

advertising for prescription drugs. Given that the prescribing physician is the decision-maker regarding the use of these medications, it is all the more startling that

so many resources are expended by drug manufacturers to affect the attitudes of

consumers and patients. Although there is little evidence 3 currently available regarding whether consumer and patient attitudes affect physician choice in preVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00075 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
72

4Foley, Lisa A. & Gross, David J. Are Consumers Well Informed About Prescription Drugs?

The Impact of Printed Direct-to-Consumer Advertising. AARO: Public Policy Institute, April

2000. 5Policy Recommendations. RxHealthValue May 10, 2000.

scribing, no stakeholders in the health system and health economy have suggested

that the impact of such advertising is insubstantial. Given the FDA’s expressed interest in assessing the effects of DTC advertising, we expect more direct evidence

of impact will be available in the near term future.

While we await the results of planned and pending studies on the effects of DTC

advertising on the attitudes, behaviors and medical outcomes of consumers and patients, RxHealthValue members are concerned that risk information in particular is

not adequately or effectively conveyed in DTC advertising. One of our member organizations, AARP, recently conducted a survey of members to assess the impact of

DTC advertising 4 finding that nearly a third of those surveyed could not recall ever

seeing risk information in the ads. Two thirds of the survey population felt the information presented in such advertising was not particularly helpful in assessing

recommendations about whether to take prescription medications. This poses a serious safety risk to consumers and patients. In our first recommendations to the FDA,

presented publically one year ago at the National Press Club, RxHealthValue emphasized the fundamental importance of protecting the safety of patients and consumers who are confronted by DTC advertising.5

Thus, RxHealthValue recommends that the Congress direct the FDA:

• To convene a task force of key stakeholders, including the pharmaceutical manufacturers who advertise prescription drugs, as well as consumer groups, patient

organizations, provider groups, payers and relevant experts, to develop and test

standards for information disclosure in DTC advertising. • To more carefully define the concrete meaning of ‘‘fair balance’’ in disclosing benefits and risks of advertised medications to include disclosure of other appropriate therapies in addition to alternative medications. • To further define ‘‘fair balance’’ to mean that full disclosure of risks and side effects be given equal print and air time as the description of benefits in the same

communication.

RxHealthValue recommends that the Congress direct that the appropriate agencies of the Federal Government conduct on-going research to evaluate the effects of

DTC advertising on the health of American consumers and patients. It is a given

that many Americans appreciate the increased awareness of diseases and conditions

and potential therapies which DTC advertising makes possible. It is also true that

such advertising can obscure potential hazards of the pharmaceutical advertised

and neglect the relative value of other forms of therapy. Only thorough, independent

research can demonstrate the differential impact of such advertising upon the

health choices of American patients and physicians.

In conclusion, the members of RxHealthValue applaud the Committee for engaging this dialogue about the effects of this increasingly pervasive influence on the

therapeutic choices of American consumers and patients. We pledge our assistance

in implementing any of the recommendations we have offered and thank the Committee for this opportunity to comment.

Mr. DEAL. Thank you, sir.

Mr. Geiser.

STATEMENT OF THOMAS GEISER

Mr. GEISER. Mr. Chairman and members of the committee, I’m

Thomas Geiser, General Counsel of WellPoint Health Networks.

I’m here with Dr. Robert Seidman, our chief pharmacy officer who

is also available to answer your questions today.

Three years ago Dr. Seidman wrote a letter to the Food and Drug

Administration pointing out that the safety profiles of the prescription allergy drugs Claritin, Zyrtec and Allegra may have been candidates for a switch to over-the-counter status. He asked that the

FDA consider his letter a citizen’s petition for FDA to undertake

the switch. On May 11, 2001 the FDA convened an expert advisory

committee to determine whether Claritin, Allegra and Zyrtec were

safe for OTC use. The FDA noted that the other conditions for OTC

73

use that laypeople could self diagnose allergies, that appropriate labeling could be prepared and that the products were effective to relieve the symptoms of allergic rhinitis, that is runny nose, itchy

watery eyes had already been settled. What remained for the expert advisory committee to determine was that the drugs were safe

for use by laypeople OTC.

After hearing testimony from two of the three drug manufacturers from WellPoint and from other interested parties for a full day,

the expert committee voted overwhelming that each of the drugs

was, indeed, safe for OTC use.

Most importantly, these products surpassed the safety profiles of

drugs already available OTC for use in connection with allergies.

More than 1000 combinations of antihistamine products that were

once Rx are now available OTC. These first-generation products

have more significant side-effects, including drowsiness, dizziness,

blurred vision, and dry mouth than any of the second-generation

prescription antihistamines. The FDA’s expert advisory committee

noted their superior safety profiles throughout the discussion at the

hearing.

We were asked by this committee today to address the legal authority of the FDA to switch prescription drugs to OTC use as a

result of a citizen’s petition such as that provided by WellPoint. A

number of comments submitted to the FDA in connection with the

May 11 hearing questioned the FDA’s authority to make such a

switch, and therefore WellPoint has submitted to the FDA a supplement to our citizen’s petition to address those comments. The

text of the supplement’s contained in my written statement, which

I’d like to summarize for you.

The Food, Drug and Cosmetic Act and the FDA’s implementing

regulations make it clear that Congress gave FDA the expressed

legal authority to compel a switch from Rx to OTC status. Under

the statute drugs are to be marked OTC with adequate directions

for use by the lay public, unless they’re exempted from this requirement. Section 502(f) of the Act states that a drug is misbranded unless it bears adequate directions for use.

Section 503(b) in turn grants the FDA the authority to exempt

prescription drugs from the adequate directions for use requirement when a drug is safe for use only under the supervision of a

medical practitioner.

Viewed in combination, these sections show that Congress intended that all drugs, unless exempted, bear directions for use that

permit the lay public to use the drug safely OTC.

Now within the framework where all drugs must be available

OTC unless exempted, the Act also grants FDA the authority to

switch a product to OTC use where the product no longer fits the

prescription labeling exemption. Again, the statutory grant of this

authority is very, very clear. Section 503(b)(3) provides that the

Secretary may by regulation remove drugs subject to Section 505—

that’s the new drug application section—when the requirements of

paragraph 1 of this subsection—that is the prescription labeling exemption—when such requirements are not necessary for the protection of the public health.

Based on the plain meaning of the statute, it’s difficult for me

to come to any conclusion other than that Congress intended to

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grant the FDA the authority to perform the type of action we have

requested. In addition, under its regulations, the FDA is actually

required to make a switch when the agency finds that the exemption is no longer necessary to protect the public health. The regulation, like the statute, I believe is very clear and unambiguous. It

reads ‘‘Any drug limited to prescription use shall be exempted from

prescription dispensing requirements when the Commissioner finds

such requirements are not necessary for the protection of the public

health.’’ Furthermore, the regulation states that the proposal to switch

may be initiated by the Commissioner or by any interested party.

We believe the plain meaning of both the statute and the regulations could not be more clear.

In conclusion, the Food, Drug and Cosmetic Act, under that Act

the FDA clearly poses statutory authority to initiate a switch. And,

in fact, under its own regulations the FDA is actually required to

initiate the switch when the Rx only requirement is not necessary

for the protection of the public health.

Mr. Chairman, Dr. Seidman and I would be happy to answer any

questions the members of the committee may have.

[The prepared statement of Thomas Geiser follows:]

PREPARED STATEMENT OF THOMAS GEISER, GENERAL COUNSEL, WELLPOINT HEALTH

NETWORKS, INC.

Mr. Chairman and members of the Committee. My name is Thomas Geiser and

I am the General Counsel for WellPoint Health Networks, Inc. WellPoint Health

Networks (‘‘WellPoint’’) serves the health care needs of nearly 9.8 million medical

and more than 40 million specialty members nationally through Blue Cross of California, Blue Cross and Blue Shield of Georgia, and UNICARE. I am pleased to have

the opportunity to testify before you today regarding WellPoint’s Citizen Petition to

the Food and Drug Administration (‘‘FDA’’).

Let me introduce to you Rob Seidman, PharmD, MPH, our Chief Pharmacy Officer. Three years ago, in 1998, as Vice President of Pharmacy for Blue Cross of California, Dr. Seidman wrote a letter to the FDA pointing out that the safety profiles

of the prescription (‘‘Rx’’) allergy drugs Allegra, Claritin, and Zyrtec made them candidates for a switch to over-the-counter (‘‘OTC’’) status. He asked that the FDA consider his letter, which is appended to our testimony, a Citizen Petition for FDA to

undertake the switch. Six months later, Dr. Seidman received a reply from the FDA,

which said that it was studying the issue. Eighteen more months passed, and last

June (2000) the FDA held a two-day hearing, at which Dr. Seidman testified, on

the process of switching a variety of types of drugs from Rx to OTC status.

In May this year, the FDA convened a joint meeting of two expert advisory committees to determine whether Allegra, Claritin and Zyrtec were safe for OTC use.

The FDA noted that the two additional conditions for OTC use—that lay people

could self-diagnose allergies and use appropriately labeled OTC antihistamines safely without supervision of a licensed professional—had already been settled. What remained for the advisory committees to determine was that the drugs were safe for

use by lay people OTC. After reviewing volumes of medical data collected over many

years and hearing testimony from two of the three drug manufacturers, WellPoint,

and other interested parties for a full day, the two committees voted overwhelmingly

that each of the three drugs was, indeed, safe for OTC use. We have attached

WellPoint’s May 11 presentation to today’s testimony for your reference.

In fact, these products surpass the safety profiles of drugs already available for

use in the treatment of allergies OTC. More than 100 combinations of antihistamine

products that were once Rx are now available OTC. These first-generation products

have more significant side effects, including drowsiness, dizziness, blurred vision,

and dry mouth, than any of the three leading second-generation prescription antihistamines. The FDA’s advisory panels noted their superior safety profiles throughout discussion at the hearing.

We were asked by the Committee today to address the legal authority of the FDA

to effectuate the conversion of prescription drugs to OTC use as a result of a Citizen

Petition. A number of comments submitted to the FDA contested the FDA’s authorVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00078 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
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1The advisory committee’s votes were 19-4 for Claritin and Zyrtec and 18-5 for Allegra.

ity to make such a switch, and so WellPoint has submitted to the FDA a supplement

to our Citizen Petition to address those comments. The text of that supplement is

restated below and will constitute the bulk of my testimony.

Whether a switch is initiated by a manufacturer, the FDA, or a third party

through a Citizen Petition, it is WellPoint’s position that the FDA has express legal

authority to compel a switch to OTC status from Rx if the FDA finds that a given

drug or drugs meet the requirements NOT to be exempted from the labeling requirements for OTC drugs. Indeed, we would argue that the Food, Drug, and Cosmetics Act (‘‘FDCA’’ or the ‘‘Act’’), as amended, requires the FDA to make the

switch. These arguments are outlined below.

SUMMARY

On July 22, 1998, WellPoint (through its subsidiary Blue Cross of California) submitted a Citizen Petition requesting that the FDA remove the prescription exemption for three second-generation antihistamines: Allegra and Allegra-D

(fexofenadine), Claritin and Claritin-D (loratidine), and Zyrtec (cetirizine). On

May 11, 2001, the FDA convened the Non-Prescription Drugs Advisory Committee

and the Pulmonary-Allergy Drug Advisory Committee for a joint meeting and vote

on whether the above three allergy drugs were safe and effective for OTC status.

See 66 Fed. Reg. 17,431 (March 20, 2001). The two committees voted overwhelmingly that the data presented demonstrated that the 2nd generation antihistamine

products were safe and that adequate directions for use by the lay public can be

developed for OTC use.1

Despite the overwhelming votes by the scientific expert advisory committees that

the safety data fully support an OTC switch for these products, there have been

comments suggesting that either the FDA does not have the legal authority to initiate a switch of its own accord, or that for reasons not related to safety and effectiveness, the agency should choose not to initiate such a switch. However, an analysis of both the FDCA and FDA’s implementing regulations demonstrate that not

only does the FDA possess the statutory authority to initiate a switch, but under

the FDA’s regulations the Agency is required to initiate a switch when it finds that ‘‘such requirements are not necessary for the protection of the public health by reason of the drug’s toxicity or other potentiality for harmful effect, or the method of

its use, or the collateral measures necessary to its use, and [the Commissioner] finds

that the drug is safe and effective for use in self-medication as directed in proposed

labeling.’’ See 21 CFR § 310.200. The FDA acknowledged as much in its April 5,

2001, Memorandum on the Advisory Committee Meeting to Discuss OTC Antihistamines when it stated that it interprets the FDCA to mean, ‘‘any drug that can

be used safely over the counter should be.’’ For the reasons explained below, because: (1) the safety and effectiveness of these

2nd generation antihistamine drug products have been examined by a committee of

scientific experts and by overwhelming majority were found to be safe and effective

for OTC drug use; (2) the FDA clearly possesses the statutory and regulatory authority; and (3) there has been ample opportunity for substantive public input and

comment, the agency should, without due delay, initiate a switch from Rx to OTC

status for these 2nd generation antihistamine drug products since the Rx exemption

from adequate directions for use is no longer necessary for the protection of public

health.

I. THE FEDERAL FOOD, DRUG, AND COSMETIC ACT ESTABLISHES A CLEAR MANDATE THAT

ALL DRUG PRODUCTS MUST BE SOLD OTC UNLESS THEY MEET THE EXEMPTION CRI- TERIA FOR PRESCRIPTION CLASSIFICATION

Section 502(f) of the FDCA states that a drug is misbranded unless its labeling

bears:

(1) adequate directions for use; and

(2) such adequate warnings against use in those pathological conditions or by

children where its use may be dangerous to health, or against unsafe dosage

or methods or duration of administration or application, in such manner and

form, as are necessary for the protection of users...

Provided, that where any requirement of clause (1) is not necessary...[FDA]

shall promulgate regulations exempting [the product].

21 U.S.C. § 352(f). This section was passed in the original 1938 Act in order to protect the public from drugs that did not clearly explain their usage or potential dangers and required all such drugs to bear labeling that the lay public could understand. Although the Act has undergone significant changes since its passage in

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2 Comments from the statement of Sen. Copeland shed light on what Congress was attempting

to do, ‘‘There is no more common or mistaken criticism of this bill than that it denies the right

to self-medication, or as the objector usually fit it, ‘‘You can’t take an aspirin tablet with a doctor’s prescription.’’ Nothing could be further from the truth. The proposed law simply contributes

to the safety of self-medication by preventing medicines from being sold as ‘‘cures’’ unless they

are really cures...There must be plain and explicit directions for use, as well as warnings that

in certain pathological conditions the use of drugs would not be safe...When public health cannot be protected otherwise, the bill authorizes control through licensing.’’ 79 Cong. Rec. 4567

(1934) (reprinted in, CHARLES WESLEY DUNN, FEDERAL FOOD, DRUG, AND COSMETIC ACT: A

STATEMENT OF ITS LEGISLATIVE RECORD 90 (FDLI 1987)). Sen. Copeland further stated, ‘‘It requires that all drugs bear explicit directions for use and appropriate warnings against their consumption by children or in certain disease conditions where the use is contra indicated and may

be dangerous to health.’’ Id. at 162.

Comments of Mr. Walter G. Campbell, Chief of the Food and Drug Administration of the Department of Agriculture, ‘‘But what is desired by this particular paragraph [requiring that the

product bear the common name of the drug and the ingredients] and by others which impose

restrictions on statements made about the remedial properties of the drugs is to make self-medication safe.’’ Id.

1938, this provision has never been removed. FDA regulations have documented this

interpretation by defining ‘‘adequate directions for use’’ as ‘‘directions under which

the layman can use a drug safely and for the purposes under which it is intended.’’

See 21 CFR § 201.5. Thus, under this provision of the Act, all drug products, unless

exempt, are to be labeled OTC with adequate directions for use for the average consumer.

Section 503(b) of the Act provides a definition of an Rx drug and then authorizes

the exemption from the OTC labeling requirement for Rx drugs. This section reads:

A drug intended for use by man which—

(A) because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, is not safe for use

except under the supervision of a practitioner licensed by law to administer

such drug; or

(B) is limited by an approved application under section 355 of this title to use

under the professional supervision of a practitioner licensed by law to administer such drug;

hall be dispensed only upon a written prescription of a practitioner licensed

by law to administer such drug...

***

Any drug dispensed by filling or refilling a written or oral prescription of a

practitioner licensed by law to administer such drug shall be exempt from the

[adequate directions for use], if the drug bears a label containing the name and

address of the dispenser, the serial number and date of the prescription or of

its filling, the name of the prescriber, and, if stated in the prescription, the

name of the patient, and the directions for use and cautionary statements, if

any, contained in such prescription.

21 U.S.C. § 353(b). This section provides a classification structure for Rx drugs,

grants an exemption from OTC labeling requirements, and authorizes separate Rx

labeling for products dispensed upon the prescription of a licensed practitioner.

Viewed in combination, these two sections unequivocally demonstrate that Congress intended that all drugs, unless exempted, bear directions for use that permit

the lay consumer to use the drug safely OTC. An analysis of the legislative history

of the Act further supports this analysis.2

Although today most new drugs that are approved under section 505 of the FDCA

are exempted from the adequate directions for use provision because they are found

unsafe for use except under the supervision of a medical practitioner and thus have

the ‘‘Rx Only’’ designation, this longstanding statutory scheme and classification

system has (1) served as the foundation for development of product labeling, (2) despite many changes to the FDCA, has never been removed or questioned by Congress; and (3) is only being questioned by certain factions of the pharmaceutical industry in the effort to prevent wide access to the 2nd generation antihistamines.

II. THE FDCA IS CLEAR IN ITS GRANTING OF THIS AUTHORITY TO THE FDA

A. The FDCA Clearly and Unambiguously Grants the FDA the Authority to Remove

Drugs Subject to Section 505 From the Prescription Labeling Requirements

Section 503(b)(3) of the FDCA grants the agency the clear authority to remove

drugs that have been approved by the new drug application (‘‘NDA’’) process from

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3The 1938 Act had set up a new drug application process whereby manufacturers would submit an NDA and unless FDA objected to the application, it would be deemed approved. Thus,

the DH Amendment was passed during a period where many new drug applications had become

effective by the NDA process. In addition to these drug ‘‘approvals,’’ large numbers of products

came onto the market as ‘‘me-too’’ versions of drugs already marketed, where manufacturers

concluded on their own that their products were ‘‘generally recognized as safe.’’ As a result of

this system, at the time of the DH Amendment, it was not unusual for numerous drug products,

each with the same active ingredient, each bearing different labeling. In fact, it was not unusual

for some products to be labeled as prescription while others with the same active ingredient

were marketed as OTC.

the prescription labeling requirement where it is no longer necessary to protect the

public health. It states:

[FDA] may by regulation remove drugs subject to section 505 [i.e., NDAs]

from the requirements of paragraph (1) of this subsection [the prescription labeling exemption] when such requirements are not necessary for the protection

of the public health.

21 U.S.C. § 503(b)(3).

This section of the Act was added in 1951 by the Durham-Humphrey Amendment

(‘‘DH Amendment’’). See ch. 578 § 1, 65 Stat. 648 (Oct. 26, 1951).3 Congress passed

the DH Amendment to give the FDA greater authority over the labeling of products

which due to the circumstances of the time had created inconsistencies among similar or even identical products. Its stated dual purposes were to (1) protect the public

from abuses in the sale of potent prescription drugs and (2) to relieve pharmacists

and the public from unnecessary restrictions on the dispensing of drugs that are

safe for use without the supervision of a physician. See Sen. R. No. 946 at 1, reprinted in 1951 U.S.C.C.A.N. 2454. The clear language of this statutory provision

and its underlying purpose is applicable to the situation presented in the WellPoint

petition, as it was to the situation that existed when the provision was promulgated

in 1951. In the instant situation, pharmacists and the public should be and would

greatly benefit from being relieved from unnecessary restrictions on the dispensing

of drugs, i.e., the 2nd generation antihistamines that are safe for use without the

supervision of a physician.

B. When the Statute’s Plain Meaning is Clear and Unambiguous the Analysis Stops

Under the well-established laws of statutory interpretation, when the statute is

clear and unambiguous in its granting of authority, there is no need to conduct any

further analysis. That is the case in the instant situation. The FDCA clearly grants

the agency the authority to remove the exemption from adequate directions for use.

When the plain meaning of the statute is clear and unambiguous, the inquiry must

end.

Chevron Step I—Under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), courts employ a two-step test in determining whether

an agency has presented a permissible interpretation of a statute it administers. See

id. at 842-43. First, courts consider the plain meaning of the statute. The plain

meaning of a statute is derived from both the statutory language itself ‘‘as well as

the language and design of the statute as a whole.’’ See K Mart Corp. v. Carter, Inc.,

486 U.S. 281, 291 (1988); Bethesda Hospital Ass’n. v. Bowen, 485 U.S. 399, 403-405

(1988). If the court determines that Congress has spoken to the precise question presented by the parties, the court must give effect to the unambiguously expressed

intent of Congress. See Chevron, 467 U.S. at 842.

Congress clearly and unambiguously granted FDA the authority to remove the

prescription exemption when it said ‘‘[FDA] may by regulation remove drugs subject

to section 505...’’ It is difficult to imagine a more clear, concise, and unambiguous

statement than section 503(b)(3) of the Act. The plain meaning of the statute makes

it wholly unnecessary and inappropriate to look any further beyond the language

of the statute.

C. Assuming Arguendo that the Statute is Ambiguous, the FDA’s Interpretation is

Followed as long as it is Reasonable

Chevron Step II—Although the statute is clear on its face, assuming for the

sake of argument that section 503(b)(3) is ambiguous in its granting of authority,

the FDA’s regulations at § 310.200 are a reasonable and permissible interpretation

of the statute.

If a court determines that Congress has not spoken to the precise issue because

‘‘the statute is silent or ambiguous with respect to the specific issue,’’ the court advances to the second step of Chevron. See Chevron, 467 U.S. at 843. Under Chevron

step two, the court determines whether the agency’s answer is based on a permisVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00081 Fmt 6633 Sfmt 6621 E:\HEARINGS\73735 pfrm04 PsN: 73735
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sible construction of the statute. Id. Chevron step two is not invoked when the court

first encounters a potential ambiguity:

[G]iven that the judiciary remains the ‘‘final authority on issues of statutory

construction,’’ abdication of that authority and deference to an administrative

construction is legitimate only where the court confronts a gap in the statute

that cannot be bridged by traditional tools of statutory construction and which

can properly be characterized as an express or implied delegation of authority

by Congress to an agency.

See Abbott Lab. v. Young, 920 F.2d 984, 995 (D.C. Cir. 1990) (Edwards, C. J., dissenting o.g.) (citing Chevron, 467 U.S. at 843 n. 9).

If, however, the court advances to Chevron step two, the court must defer to the

agency’s reasonable interpretation so long as it does not conflict with the statute’s

plain meaning. See K Mart, 486 U.S. at 281. With respect to section 503(b)(3), although it is difficult to discern any ambiguity, to the extent there may be an ambiguity in the statute, the agency’s regulatory interpretation in 21 CFR § 310.200 is

clearly reasonable.

Given that statute is so clear and unambiguous on this issue it is not surprising

that other comments have argued not that the statute does not grant FDA the authority, but rather that the statute does not really mean what it clearly says. Such

arguments should be dismissed. Attempts have also been made to argue that the

section is obsolete, or has been superseded. Such arguments are also without merit

however, since Congress has several times made major alterations to the statute (including 1962, 1984, and 1997) which did not include or even contemplate removing

this section. Further, whether an agency has used its power in the past has no bearing on whether it possesses that power in the first instance. See Jones Et Ex. v. Alfred H. Mayer Co., 392 U.S. 409, 437 (1968); Sanders v. Dobbs Houses, Inc, 431 F.2d

1097 (5th Cir. 1970).

III. FDA’S IMPLEMENTING REGULATIONS GIVE IT CLEAR AUTHORITY TO REMOVE THE LA- BELING EXEMPTION FOR PRODUCTS THAT ARE SAFE FOR USE WITHOUT MEDICAL SUPERVISION AND IN FACT REQUIRE IT TO DO SO WHEN THE EXEMPTION IS NO LONGER

NECESSARY

A. The FDA’s Regulations Require the Agency to Switch a Product to OTC Status

When Prescription Labeling Is No Longer Necessary for the Protection of Public

Health and Authorize the Agency to Do So On Its Own Initiative

With a classification system where drugs are presumptively OTC, it is not surprising that the statute and FDA regulations permit the agency to switch a product

from Rx to OTC status where Rx labeling is no longer necessary to protect the public health. In spite of several comments challenging this authority, not only does the

statute permit FDA to make such an Rx to OTC switch, but the FDA’s implementing regulations require that the FDA remove the prescription drug dispensing

requirements when it finds the requirements are no longer necessary for the protection of public health. 21 CFR § 310.200 reads:

[a]ny drug limited to prescription use [under the FDCA] shall be exempted from

prescription-dispensing requirements when the Commissioner finds such requirements are not necessary for the protection of the public health by reason

of the drug’s toxicity or other potentiality for harmful effect, or the method of

its use, or the collateral measures necessary to its use, and he finds that the

drug is safe and effective for use in self-medication as directed in proposed labeling. A proposal to exempt a drug from the prescription-dispensing requirements of section 503(b)(1)(C) of the act may be initiated by the Commissioner

or by any interested person. Any interested person may file a petition seeking

such exemption, which petition may be pursuant to part 10 of this chapter, or

in the form of a supplement to an approved new drug application

21 CFR § 310.200 (emphasis added).

This regulation is consistent with the FDCA’s granting of this authority in section

503(b)(3) and the Act’s presumption that drug products should be available to consumers OTC if medical supervision is not required.

Certain comments have stated that the Kefauver-Harris Drug Amendments (‘‘KH

Amendments’’) in 1962 fundamentally altered the FDCA so that section 503(b)(3)

and its implementing regulations were rendered ineffective. This argument is belied

by an examination of the history and timing of 21 CFR § 310.200. In fact, the regulation stating FDA shall switch products OTC when the agency finds the restrictions

are no longer necessary was proposed in 1963, shortly after the passage of the KH

Amendments. See 28 Fed. Reg. 1449 (February 14, 1963). This disputes any argument that the KH Amendments so altered section 503(b)(3) as to render them inoperative. Based on the final and proposed rule it is clear that FDA considered the

79

4 21 CFR § 130.101 was re-codified by the agency in 1974 and is now § 310.200. See 39 Fed.

Reg. 11,680 (March 29, 1974).

KH Amendments consistent with their authority to mandate an Rx to OTC switch.

The final rule published on June 20, 1963 is substantially similar to that which remains today.

The provisions of the final rule published on June 20, 1963 are set forth below:

Any drug limited to prescription use under section 503(b)(1)(c) of the act shall

be exempted from prescription-dispensing requirements when the Commissioner

finds such requirements are not necessary for the protection of the public health

by reason of the drug’s toxicity or other potentiality for harmful effect, or the

method of its use, or the collateral measure necessary to its use, and he finds

that the drug is safe and effective for use in self-medication as directed from

proposed labeling. A proposal to exempt a drug from the prescription-dispensing

requirements of section 503(b)(1)(c) of the Act may be initiated by the Commissioner or by any interested person. Any interested person may file a petition

seeking such exemption, stating reasonable grounds therefor, which petition

may be in the form of a supplement to an approved new-drug application. Upon

receipt of such a petition, or on his own initiative at any time, the Commissioner

will publish a notice of proposed rule making and invite written comments.

After consideration of all available data, including any comments submitted, the

Commissioner may issue a regulation granting or refusing the exemption, effective on a date specified therein’’.

21 CFR § 130.101 (published at 28 Fed. Reg. at 6385 (June 20, 1963), (emphasis

added).4

Thirteen years later, the FDA again opined on this regulation. In 1976, the agency published a final rule on the OTC review procedure found at Part 330. See 41

Fed. Reg. 32,580 (August 4, 1976). In the proposed rule the FDA outlined the two

procedures ‘‘by which a prescription drug ingredient may lawfully be marketed for

OTC use.’’ See 40 Fed. Reg. 56,675 (December 4, 1975). In the preamble the agency

explains:

Prior to the OTC drug review, the procedures for obtaining approval to market

a prescription ingredient as an OTC ingredient were by petition to the [FDA]

following procedures set forth under § 310.200 . . . This procedure may be initiated by the Commissioner or by a petition from any interested person...

Id. Section 310.200 clearly grants the FDA the authority for the type of switch requested by WellPoint and arguments that it is an obsolete provision are not supported by the FDA’s actions and preambles to its regulations. Moreover, the FDA’s

regulations were promulgated through notice and comment rulemaking. The final

regulations were adopted without any substantive comments from the industry or

public. The only comments have come forth recently, after the expert advisory panel

voted that the 2nd generation antihistamines are safe and can be adequately labeled for OTC use.

B. The Regulations Do Not Require that A Manufacturer Consent to a Switch in a

Product’s Status from Rx to OTC

The regulations require a medical, scientific and factual based inquiry to determine whether Rx labeling is required for the protection of public health. Once these

protections are no longer medically/scientifically justified, the regulations specify

they should be removed. For this reason, the regulations do not require that a

switch be initiated by the drug manufacturer or that the manufacturer agrees to

the proposal. Although for obvious reasons in such a situation it is preferable that

the manufacturer concurs with the switch, there is no basis in either the regulations

or the statute for a manufacturer to be permitted to ignore a determination that

Rx labeling is no longer necessary for the product. Clearly, the manufacturers of

Allegra, Claritin and Zyrtec have a right to be heard and submit data on the issue,

but it is the FDA and not the drug manufacturers who have the final say on whether a product is safe and effective or in this case whether is a product is safe and

effective for self-medication. Both Schering and Aventis were unable to specifically

identify any safety concern or study, whether contemplated or underway, to address

a safety concern with respect to the OTC marketing of the products. Two expert scientific advisory committees have reviewed the data, evaluated the issues presented

by Pfizer, Schering, Aventis and the FDA, and voted overwhelmingly that Allegra,

Claritin and Zyrtec are safe for OTC use.

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5 At the May 11, 2001 Advisory Committee meeting, Agency staff clearly stated that no additional information would be essential for approval of the switch. Thus, the companies would not

be eligible for three years of market exclusivity under Section 505(j)(5)(D)(iv).

IV. THE COMMENTS ARE INCORRECT WHEN THEY CLAIM THAT REMOVAL OF THE

EXEMPTION IS A DEPRIVATION OF PROPERTY

A. Companies May Possess a ‘‘Property Right’’ in Their Approval and Proprietary

Data

Several comments have argued that drug companies possess a ‘‘property right’’ in

the ownership of a drug’s approval and the data contained in the NDA. This fact

is not disputed. The issue is whether the switch in labeling from Rx to OTC would

be considered a regulatory ‘‘taking.’’ It is clear that no court has ever found a government ‘‘taking’’ in a regulatory switch of a product’s marketing status from Rx to

OTC. This seems logical since in most cases such a switch is desired by the drug

manufacturer because such a switch may lead to further exclusivity 5 and/or increased sales.

The Supreme Court has treated the issue of whether a taking has occurred as ‘‘es- sentially an ‘ad hoc, factual,’ inquiry...[but] has identified several factors that

should be taken into account when determining whether a governmental action has

gone beyond ‘regulation’ and effects a ‘taking’.’’ Ruckelshaus v. Monsanto Co., 467

U.S. 986, 1005 (1984). This examination entails inquiry into such factors as the

‘‘character of the governmental action, its economic impact, and its interference with

reasonable investment-backed expectations.’’ Id. A taking has been held to not only

include an actually physical invasion of property but also an action the effect of

which is to deprive the owner of all or most of his or her interest in the subject

matter. See United States v. General Motors Corp., 323 U.S. 373 (1945). The claim

that a switch in regulatory status of a drug from Rx to OTC is a ‘‘taking’’ is a novel

legal argument, but ultimately meritless.

B. The Comments are Mistaken in Their Belief that the Removal of the Prescription

Drug Exemption Would Constitute a ‘‘Deprivation of Property’’

As noted above, a ‘‘takings’’ claim here would be predicated on the belief that a

change in marketing status from Rx to OTC would constitute a ‘‘deprivation of property.’’ It may be helpful here to note initially what changes the agency could require

in order to effectuate a change, and conversely what types of changes the agency

cannot compel under a switch.

Changes that would be required:

• removal of Rx designation; • proposed labeling for OTC use

The status quo (i.e., things that would not be changed):

• FDA’s decision would have no effect on the validity of the patents or any other

exclusivity on the product (i.e., generic competition would not be introduced); • FDA’s decision would have no effect on the price at which the product may be

sold; • FDA’s decision would not require FDA to disclose trade secret or privileged information;

Although no court has ruled on this specific issue, an examination of other takings

clause cases that are similar demonstrates that a takings claim in this case has no

merit. In the Ruckelshaus case cited above, the Monsanto Company objected to the

Environmental Protection Agency (‘‘EPA’’) using its safety data to evaluate another

application for registration. Ruckelshaus is easily distinguished from an Rx-to-OTC

switch because in such a switch, the agency action does not involve using a company’s ‘‘property right’’ for the benefit of another party. It is simply a change in the

marketing status of the drug to be available without a prescription. Further still,

in Ruckelshaus the Supreme Court determined that Monsanto, while possessing a

property right in its data, did not have a takings claim where Monsanto was ‘‘aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by

an applicant in exchange for the economic advantages of a registration can hardly

be called a taking’’ Ruckelshaus, 467 U.S. at 1007. These ‘‘conditions’’ included the

fact that the data could be used with out Monsanto’s permission.

Similarly, a drug is marketed as an Rx drug only under certain conditions. If a

drug no longer meets the conditions upon which an exemption from adequate directions for use was granted, it must be regulated as an OTC drug. As with Monsanto,

this regulatory condition is well known by drug companies and often utilized to

their benefit. Therefore, as in Ruckelshaus, it is no ‘‘taking’’ to change the regulatory

status of a drug product, even if the drug company objects to the switch. To further

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6See United States v. Nova Scotia Food Products Corp. 568 F.2d 240, 251 (2d Cir. 1977) (the

general rule is that an agency disclose scientific material that is the basis of a rule making,

but there is ‘‘an exception for trade secrets or national security’’). 7See 21 CFR § 20.61 for FDA’s definition of ‘‘trade secret’’ and ‘‘commercial or financial information which is privileged or confidential.’’

support this position, it is also clear that the regulatory action has no effect on the

companies’ ability to market or sell the product. For these reasons it is clear that

neither the character of the act, nor the economic impact, fit into the category of

actions that would constitute a regulatory taking.

V. WHEN PROMULGATING REGULATIONS SPECIFICALLY RELATED TO THE REQUESTED RE- MOVAL OF THE PRESCRIPTION STATUS EXEMPTION, FDA IS NOT REQUIRED TO DIS- CLOSE INFORMATION THAT IS SUBJECT TO TRADE SECRET PROTECTION.

Comments have argued that under the APA, FDA must publicly disclose the data

upon which any proposed rule is based. However, no trade secret data must be disclosed by FDA in order to promulgate a regulation removing the exemption from

adequate directions for use. Of course, the general disclosure rules exempts the disclose of trade secret information.6 It is well known that certain data and information

in an NDA is trade secret protected.7 However, these comments fail to note that

much of the information contained in an NDA is not protected as trade secret information and in fact is disclosable under the Freedom of Information Act. See 5 U.S.C.

§ 552 et seq. Under 21 CFR § 314.430, the following information contained in an

NDA is already made available to the public:

• the summary basis of approval; • study protocols; • adverse event reports; • lists of inactive ingredients; • assay methods; and • correspondence and summaries of verbal communications with FDA.

Only information that qualifies as trade secret or commercial and financial information that is confidential is not able to be disclosed. This information would not

be relevant in an Rx to OTC switch. What is most relevant here is primarily the

adverse events reports concerning the three products. These reports demonstrate a

low incidence of significant adverse reactions associated with the three drug products. FDA has reviewed the data and presented a summary of the data at the public

advisory committee meeting held on May 11, 2001. This information is not trade secret protected.

Furthermore, what is relevant in this instance has already been narrowed by the

agency. The agency has not raised any questions as to the effectiveness of the 2nd

generation antihistamines for the relief of symptoms of allergic rhinitis. The only

item at issue is whether the products are safe for OTC use. This is a much more

limited inquiry than a full NDA approval. The issue of whether trade secret information needs to be disclosed in order to evaluate this matter has already been answered. The advisory committee members have fully examined the safety information provided by the agency and voted on May 11, 2001, by a overwhelming majority, that these products are safe for OTC use. This determination did not require

the disclosure of trade secret information. There is no reason that FDA cannot promulgate its rulemaking without the disclosure of protected information. summary

basis of approval;

VI. THE COMMENTS’ CLAIM OF A LACK OF DUE PROCESS ARE INCORRECT IN THAT THE

DUE PROCESS REQUIREMENT IS MET BY THE CITIZEN PETITION AND NOTICE AND COM- MENT PROCEDURE

A. Section 505(e) of the FDCA Requires the FDA to Provide a Formal Hearing Only

When the FDA is Seeking to Withdraw an NDA

Several of the comments to the docket claim that any ‘‘modification’’ of an NDA

requires the agency to provide a formal hearing. However, the FDCA and the FDA’s implementing regulations do not provide for a hearing for a ‘‘modification’’ of an

NDA. In fact, both the statute and regulations provide for a hearing only when the

FDA proposes to withdraw an NDA. The statute at section 505(e) states in pertinent

part:

[FDA] shall, after due notice and opportunity for hearing to the applicant, withdraw approval of an application with respect to any drug under this section if

the Secretary finds...

21 U.S.C. § 355 (emphasis added). The statute then enumerates five different situations under which approval can be withdrawn. They are:

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8FDA’s regulations at 21 CFR § 314.150 provide a hearing only for situations where the agency has proposed to withdraw an application. 9 A ‘‘license’’ is defined as ‘‘a whole or a part of an agency permit, certificate, approval, registration, charter, membership, statutory exemption or other form of permission.’’ 5 U.S.C.

§ 551(8).

1. data shows that the drug is unsafe;

2. new evidence shows that the drug is not safe;

3. new information shows that the drug is not effective;

4. patent information was not timely filed; and,

5. the application contains an untrue statement of material fact.

Id.8 If the FDA proposes to withdraw an NDA based on one of the above reasons,

a formal evidentiary hearing is required. However, the statute does not require a

hearing for a proposal to modify an application, i.e., a change from Rx to OTC status

or for any other change to an application other than withdrawal. As the FDA is not

proposing to withdraw approval of any of these products, section 505(e) is inapplicable.

B. Arguments that the Administrative Procedure Act (‘‘APA’’) Requires a Formal

Hearing are Incorrect and Further, Any Due Process Concerns Are Adequately

Addressed In The Notice And Comment Procedure Utilized In This Process

Several comments have argued that the APA, 5 U.S.C. § 551 et seq., itself provides an independent source of authority for a hearing were the FDA to initiate a

switch of a product from Rx to OTC. However, a close examination of the provisions

of the APA and relevant case law demonstrate that this is not correct.

Assuming first that an NDA meets the requirements for a ‘‘license,’’ 9 section 558

of the APA provides that, ‘‘except in cases of willfulness or those in which public

health, interest, or safety requires otherwise, the withdrawal, suspension, revocation, or annulment of a license is lawful only if, before the institution of agency proceedings therefor, the licensee has been given notice... and opportunity to demonstrate or achieve compliance with all lawful requirements.’’ 5 U.S.C. § 558. Again

it is clear that the switch of a product from Rx to OTC does not constitute the ‘‘withdrawal, suspension, revocation, or annulment’’ of a license. Therefore this provision

of the APA is not applicable.

Under the APA an agency may act through either rulemaking or adjudicatory procedures. In adjudication, a formal hearing on the record is required. The adjudication procedures are defined in section 554 of the APA. The adjudication provisions

apply, ‘‘in every case of adjudication required by statute.’’ See 5 U.S.C. § 554(a) (emphasis added). However, the APA in itself ‘‘imposes no requirement of an adversary

hearing before an agency, but only specifies the procedure to be followed when a

hearing is required by some other statute.’’ See Conley Electronics Corp. v. FCC, 394

F.2d 620 (10th Cir. 1968); see also Democratic Nat’l Committee v. FCC, 460 F.2d,

891, 912 (D.C. Cir. 1972) (‘‘Since there is no requirement of a hearing under the

Communications Act this section of the APA is clearly inapplicable’’); Joseph E. Seagram & Sons, Inc. v. Dillion, 344 F.2d 497, 501 (D.C. Cir. 1965). Since the FDCA

does not provide for a hearing in this instance, and in fact specifies that the agency

may ‘‘by regulation,’’ remove the prescription exemption, no hearing is required in

this case.

In any event, issues of due process, and notice and comment are dubious since

the Citizen Petition requesting this action has been pending for three years and no

party can claim to not have had an opportunity for its voice to be heard. Moreover,

there has been ample opportunity to provide input and comment through the public

Advisory Committee meetings that have been held to hear discussion of the issues.

One can only surmise what type of information the drug companies would provide

at a hearing that has not already been provided to the agency. One wonders whether it is due process at issue or due delay. To the extent that due process is at issue,

the notice and comment procedure that FDA is required to perform is sufficient to

meet those demands.

In conclusion, under the Food, Drug, and Cosmetic Act and FDA’s implementing

regulations the FDA clearly possesses the statutory authority to initiate a switch

and under FDA’s regulations, the agency is required to initiate a switch when the

Rx only requirement is not necessary for the protection of the public health. The

statutory and regulatory scheme has been in effect for a very long time and has

served to protect the health and safety of the public. The Advisory Committees fully

evaluated the scientific evidence and overwhelmingly voted that Allegra, Claritin,

and Zyrtec are safe and can be adequately labeled for use by the lay public.

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Mr. BILIRAKIS. I am told that Mr. Kingham is the next witness.

I do want to apologize to all of you for not being here, but I really

couldn’t help it.

Please proceed, sir.

STATEMENT OF RICHARD F. KINGHAM

Mr. KINGHAM. Mr. Chairman and members of the subcommittee,

my name is Richard Kingham, I’m a partner in the law firm of

Covington & Burling in Washington, D.C. specializing in matters

of food and drug regulatory law. I’ve been practicing in that field

for nearly 30 years and have served in committees of the National

Academy of Sciences, the National Institutes of Health, the World

Health Organization and taught food and drug law in universities

in the United States and the United Kingdom. And perhaps most

relevant, I was counsel to one of the parties in what I believe remains the only judicial challenge to an Rx OTC switch in at least

my memory.

I appear today on my own behalf, but I do of course represent

pharmaceutical manufacturers in my day-to-day practice.

I thank you for the opportunity to appear and request that my

written statement be entered into the record.

I start with the premise that as a matter of public health policy

consumers should have access to safe and effective medicines that

can be appropriately used and labeled for self-care. At the same

time, it is absolutely critical that any switch of a product from prescription to OTC status be supported by adequate data demonstrating that the products can be used safely and effectively by

consumers without a physician’s supervision.

The manufacturer of the drug is in the best position to provide

this data and the manufacturer’s active involvement in a switch is

crucial. Recent proposals to impose a switch without the manufacturer’s support reflect, in my view, poor public policy and raise serious legal issues. I oppose those proposals which I believe would depart from 50 years of precedent concerning OTC switches since the

enactment of the Durham-Humphrey Amendments in 1951.

First, I believe that collaboration between the drug manufacturer

and the FDA is key to any switch. In evaluating a switch candidate, the FDA requires evidence to show that the drug is intended to treat a condition that can be self-diagnosed and self

treated, that the drug will be safe and effective as used in an OTC

setting, and that there is a safety margin based on prior prescription marketing experience. It is also critical to show that OTC labeling will be understood by consumers and provide adequate

warnings and instructions so that consumers will not diagnose and

self-medicate if they experience symptoms that should be evaluated

by a physician.

A manufacturer’s knowledge of all facets of a drug is indispensable to assessment of whether a drug meets the standards for a

switch. The manufacturer has undertaken and maintains the full

clinical development data concerning the drug and the manufacturer’s in the best position to perform the new studies that are ordinarily required to support switch from prescription to nonprescription status. There are significant issues that can arise when drugs

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are switched and testing is ordinarily required to look into those

issues. The manufacturer is the one that carries out those studies.

Simple comparisons of a switch candidate to existing OTC drugs

cannot substitute for genuine study of the drug’s safety and effectiveness under OTC conditions of use and they don’t meet the legal

standards for a switch. Current law clearly provides that drugs

must be evaluated on their individual merits and does not permit

comparative assessments of safety or effectiveness. This makes

good sense because attempts to rely on comparative evaluation of

different compounds are prone to error.

Next, switching a drug over the manufacturer’s suggestions

would in my view implicate the manufacturer’s established legal

rights under the Federal Food, Drug and Cosmetic Act, under mantel precepts of administrative law and the United States Constitution.

A forced OTC switch would fundamentally change the terms of

the manufacturer’s approved license for the prescription drug and

upset the settled expectations that the manufacturer had when it

invested in development of the drug. Any compelled switch would

also necessarily rely without the manufacturer’s consent on proprietary data developed by the manufacturer. These actions would

trigger core due process and property rights issues for the manufacturer and would, at a minimum, require that the manufacturer

be afforded a hearing and potentially just compensation.

Finally, mandated switches would constitute unprecedented governmental interference in the drug development and marketing decisions of private firms. Since the passage of the Durham-Humphrey Amendments in 1951 FDA has never switched a prescription

product to over-the-counter status over the active objection of the

manufacturer. In the one prominent instance in which the FDA effectuated a switch without fully consulting all interested parties including the manufacturer and gaining the support of the manufacturers, the agency ultimately had to rescind that decision and the

Commissioner of Food and Drug had to appear in a subcommittee

of this committee to explain the action that the agency had taken.

Departure from the agency’s otherwise settled precedent could

seriously disrupt the drug development process. Firms carefully establish research plans and development strategies for a product’s

life cycle. These plans would be jeopardized by unanticipated

switches triggered by a third party. To allow such a practice would

create uncertainty and unnecessarily complicate the already highly

risky business of drug development. New research and development could be chilled as a result.

I’ll be happy to answer any questions.

[The prepared statement of Richard F. Kingham follows:]

PREPARED STATEMENT OF RICHARD F. KINGHAM, COVINGTON & BURLING

Mr. Chairman and Members of the Subcommittee:

My name is Richard F. Kingham. I am a partner at the law firm of Covington

& Burling in Washington, D.C., specializing in matters of food and drug law and

regulation. I have been practicing in the field for nearly 30 years, and have served

on committees of the National Institutes of Health, the Institute of Medicine of the

National Academy of Sciences, and the World Health Organization. I have lectured

on pharmaceutical regulation at universities in the United States and the United

Kingdom. Although I represent both prescription and nonprescription drug researchers and manufacturers, I appear today on my own behalf. I thank the Subcommittee

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for the opportunity to present my views on the switching of drugs from prescription

to over-the-counter status.

I start with the premise that, as a matter of basic public health policy, consumers

should have access to safe and effective medicines that can be appropriately used

and labeled for self-care. At the same time, it is absolutely critical that any switch

of a product from prescription to OTC status be supported by adequate data demonstrating that the products can be used safely and effectively by consumers without a physician’s supervision. The manufacturer of a drug is in the best position to

provide those data, and the manufacturer’s active involvement in a switch is crucial.

Recent proposals to impose a switch without the manufacturer’s support reflect poor

public health policy and raise serious legal issues. I therefore strongly oppose these

proposals, which would depart from the 50 years of precedent governing OTC

switches since enactment of the 1951 Durham-Humphrey Amendments to the Federal Food, Drug, and Cosmetic Act.

Historical Development of FDA’s Approach to Rx-OTC Switches

Historically, FDA has used three mechanisms for switching drugs. First, following

enactment of the Durhman-Humphrey Amendments in 1951, FDA switched a number of drugs to OTC status using a rulemaking approach referred to as the ‘‘switch

regulation,’’ which was authorized under section 503(b)(3) of the Federal Food, Drug,

and Cosmetic Act. This rulemaking process made sense in the 1950s and 1960s as

a way for the agency to gain control over a variety of drugs that were marketed

by different companies under different conditions, some Rx and some OTC, some

with new drug applications (NDAs) and others without. The very same drug, with

identical dosage and indications, might have been sold Rx by one company and OTC

by another. Of course, that situation does not exist today, and FDA has not used

this process to switch a drug for some 30 years (the last time being in 1971).

Second, beginning in the early 1970s, FDA relied on the ‘‘OTC Drug Review’’ as

the principal vehicle for switching drugs to OTC status. This, too, made a great deal

of sense for its time, since it was part of the agency’s comprehensive review of the

safety, effectiveness, and labeling of OTC drugs following the landmark 1962

amendments to the Federal Food, Drug, and Cosmetic Act. FDA switched approximately 32 drugs through the OTC Drug Review in the 1970s and 1980s. However,

the OTC Drug Review has largely run its course, and it is not the focus of switch

activity today.

FDA entered the third, and current, switch era in the mid-1980s when it began

switching drugs through the NDA process. With very few exceptions, every switch

today is accomplished through approval of an NDA or NDA supplement. This is

suited to today’s environment. FDA comprehensively regulates new drugs, both Rx

and OTC, through the NDA process. The NDA process gives the agency the maximum degree of authority over all aspects of a drug, and provides the means by

which manufacturers may invest in the development of proprietary data for submission to FDA in support of approval.

Collaboration Between the Drug Manufacturer and the Food and Drug Administration is Key to a Switch.

In evaluating a switch candidate, FDA requires evidence to show that the drug

is intended to treat a condition that can be self-diagnosed and self-treated, that the

drug will be safe and effective as used in an OTC setting, and that there is a safety

margin based on prior prescription marketing experience. It is also critical to show

that OTC labeling will be understood by consumers and provide adequate warnings

and safety information, so that consumers do not self-diagnose and self-medicate if

they experience symptoms that should be evaluated by a physician. These standards

are vital to the continued integrity of the nonprescription market.

For the past decade, the switch of a prescription product to OTC status has in

nearly all cases been initiated by the holder of an approved NDA, or with its approval, through the submission of a new application or a supplement with extensive

data to support safe and effective OTC use and appropriate OTC labeling for the

specific drug. This makes public health sense. The company that developed the drug

in the first place and obtained the approval for the prescription drug knows the

most about the drug.

Evaluation of a switch is necessarily conducted product by product, based on the

specific data and merits of each product. Extensive prescription use is essential to

the full characterization of a drug’s clinical profile, and is thus is a prerequisite for

OTC consideration. New information is often learned through commercial use that

cannot be identified based on the limited number of patients involved in the clinical

trials conducted for initial product approval. Sponsors seeking OTC switches are

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ical trial and actual use, as well as updated scientific information developed since

the time of initial NDA approval providing an enhanced understanding of the underlying disease, current medical practice, and the pharmacology of the drug.

A manufacturer’s knowledge of all facets of a drug is indispensable to assessment

of whether a drug meets the standards for a switch. The manufacturer has undertaken and maintains the full clinical development of the prescription drug, and is

in the best position to understand the existing clinical and post-marketing surveillance data, evaluate a drug’s current safety profile, and determine if an appropriate

safety margin would support use without a physician’s care.

The manufacturer is also in the best position to perform the new studies that are

typically essential to ensuring that a drug will be safe as used in an OTC setting,

and that labeling can effectively communicate information to consumers about

warnings and precautions. Significant issues can arise under OTC use that do not

exist, or are of considerably less concern, when a drug is used in accordance with

a physician’s prescription and supervision. For example, use of a drug may cause

interactions with other drugs that a physician could identify and manage, if closely

monitoring a patient. These risks need to be carefully scrutinized, and data collected

to ensure that consumers will properly comprehend product labeling and will not

self-diagnose and self-medicate if they experience symptoms that should trigger a

physician consultation. Actual use and labeling comprehension studies can address

these questions. A switch should generally not be permitted unless considerable

data are developed in addition to the data already present in the NDA for prescription use. The drug manufacturer is best situated to design, fund, perform, analyze,

and submit the needed studies.

Simple Comparisons of a Switch Candidate to Existing OTC Drugs Cannot Substitute for Genuine Study of the Drug’s Safety and Effectiveness Under OTC

Conditions, and Do Not Meet the Legal Standards for a Switch.

Current law clearly provides that drugs must be evaluated on their individual

merits, and does not permit comparative assessments of safety or effectiveness. This

makes good sense, as attempts to rely on a comparative evaluation of different compounds are prone to error. Either data exist to support OTC use of a drug or they

do not, and considerations of relative safety or effectiveness are not germane.

No more permissive standard may be applied to allow third parties without adequate data to initiate a switch based on purported product comparisons. To do so

could put the public at risk. It would also constitute arbitrary and capricious action

for the FDA to apply one standard to a manufacturer-initiated switch and another

to a third-party switch. See, e.g., Independent Petroleum Ass’n v. Babbitt, 92 F.3d

1248, 1258 (D.C. Cir. 1996); Airmark Corp. v. FAA, 758 F.2d 685, 691-92 (D.C. Cir.

1985); United States v. Diapulse Corp., 748 F.2d 56 (2d Cir. 1984).

Switching a Drug Over the Manufacturer’s Objections Would Implicate the Manufacturer’s Established Legal Rights under the Federal Food, Drug, and Cosmetic

Act, Fundamental Precepts of Administrative Law, and the United States Constitution.

A forced OTC switch would fundamentally change the terms of the manufacturer’s

approved license for the prescription drug, and upset the settled expectations that

the manufacturer had when it invested in development of the drug. Any compelled

switch would also necessarily rely without the manufacturer’s consent on proprietary data developed the manufacturer. These actions would trigger core due process and property rights of the manufacturer, and would, at a minimum, require that

the manufacturer be afforded a hearing and potentially just compensation.

Section 505(e) of the Federal Food, Drug, and Cosmetic Act specifically requires

that FDA provide notice and a hearing in order to seek basic changes to an approved application. Section 505(e) provides important due process protections for the

holders of approved NDAs, and is a central part of the current regulatory scheme.

These statutory protections are directly reinforced by the due process clause of the

Constitution and longstanding principles of administrative law, which hold that an

administrative agency must provide an individualized hearing before taking specific

action to modify or withdraw an approved license. The due process rights of licenseholders are recognized in a long line of judicial decisions tracing back to the seminal

Supreme Court case of Bi-Metallic Inv. Co. v. State Bd. of Education, 239 U.S. 441

(1915), and its progeny. These due process protections are a fundamental safeguard

against arbitrary and unreasonable agency action, and must be preserved.

In addition to raising due process concerns, almost any switch would also have

to rely in part on data contained in the original NDA for the prescription drug to

support OTC use. The company has proprietary rights in its NDA data, which could

not be used without its consent, regardless of the regulatory procedures followed.

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1See 48 Fed. Reg. 24926 (June 3, 1983).

Companies make substantial investments to generate the data that are contained

in an NDA, and such non-public commercial information is protected from disclosure

by federal statutes such as the Freedom of Information Act and the Trade Secrets

Act. The unauthorized appropriation of proprietary data would also implicate the

Takings Clause of the Constitution. This is particularly true because a company

would be deprived of the benefits of a prior investment of millions of dollars in the

research and development of a new drug with no prior notice that it might be compelled to convert the product from prescription to nonprescription use.

Mandated Switches Would Constitute Unprecedented Governmental Interference in

the Drug Development and Marketing Decisions of Private Firms.

Since the passage of the Durham-Humphrey Amendments in 1951, FDA has

never switched a prescription product to over-the-counter status over the active objection of a manufacturer. In one prominent instance in which FDA effectuated a

switch without the manufacturer’s support (involving the bronchodilator

metaproterenol), the agency had to rescind its decision. 1 This episode provides a

cautionary tale for subsequent switches.

Further departures from the agency’s settled precedent could seriously disrupt the

drug development process. As indicated above, firms carefully establish research

plans and development strategies for a product’s life cycle. These plans would be

jeopardized by unanticipated switches triggered by a third party. To allow such a

practice would create uncertainty and unnecessarily complicate the already highly

risky business of drug development. As it is, the Pharmaceutical Research and Manufacturers of America reports that only one in 5,000-10,000 compounds synthesized

in the laboratory ever makes it to market, over 12-15 years at an average cost of

$500 million. Adding greater uncertainty to the drug development process could

chill new research and investment.

Once the Door is Open for Insurers and Other Third Parties to Initiate Switches, it

Will be Difficult to Establish Appropriate Limits.

Insurers have significant incentives to compel OTC switches, because a switch effectively shifts drug costs from the health plan to consumers. If current law and

practice are changed to permit insurers and other third parties to seek switches,

there could be an outpouring of requests. It would then be difficult, if not impossible, for FDA to control the process and decide who should and should not be permitted to seek a switch. I strongly caution against any changes in law or policy that

would produce such a result.

This concludes my written testimony. I would be pleased to answer any questions

or to supply any additional materials requested by Members or Subcommittee staff

on these or any other issues.

Mr. BILIRAKIS. Thank you very much, Mr. Kingham.

I think it’s of note that Dr. Woodcock has chosen to remain in

the hearing room to listen to all of this testimony. That is a very

positive thing, and I want you to know, Doctor, that we appreciate

it.

Mr. BROWN. Mr. Chairman, Dr. Woodcock, the chairman has

asked people to do this for 5 years and finally someone did it. So,

thank you. You made him so happy when you walked back into the

room.

Mr. BILIRAKIS. Ordinarily I have to sort of recommend that they

do it. Thank you very much, Doctor.

The Chair recognizes Mr. Greenwood for him to inquire.

Mr. GREENWOOD. Probably Ms. Woodcock was going to sit here

for another 5 or 10 minutes, and now she’s stuck for the rest of the

afternoon.

Mr. Downey, I believe you said that your company filed two patent challenges to Prozac, is that your testimony?

Mr. DOWNEY. It was a single patent challenge, but it challenged

two different patents.

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Mr. GREENWOOD. Could you specify—and you lost the first one

and won the second one, is that correct?

Mr. DOWNEY. Correct.

Mr. GREENWOOD. Could you specify exactly what was at issue in

this cases?

Mr. DOWNEY. Yes. In the patent that expired in 2001, in February of this past year, the principle issue is whether the best

mode for making the product and practicing invention was disclosed in the patent, which is one of the legal obligations of the patent applicant. The courts ultimately concluded that the best mode

was disclosed or the disclosure was adequate and the patent was

sustained.

The second patent was the one that expired, and it would expire

in 2003, and we challenged that patent on the grounds that it was

not sufficiently different from this patent expiring in 2001 to be

independently patentable. And that, generally, was the idea of one

invention/one patent. If you get a second invention—a second patent for the same invention, that runs afoul of the rule of double

patenting—against double patenting. And that was the grounds in

which the Court of Appeals for the Federal Circuit in an en banc

decision—well, in a panel decision directed by the en banc panel

struck down that patent just a week or so ago.

Mr. GREENWOOD. Now, in your testimony you also said that you

thought that at the time when a patent is asserted, you noted that

there was not an adversarial situation, that there was no one to

argue at that time against the patent. Are you actually arguing

that there ought to be and that that would be the case for all patents?

Mr. DOWNEY. No. I’m suggesting that that is—I’m not making

that suggestion. What I’m saying is the system we have is the

product of that process, and that process had led in my judgment

to a number of unpatentable ideas obtaining patents which once

they’re obtained, are entitled to presumption of validity. That is the

basic problem we confront in getting our products to market.

I’m not suggesting that it’s a—that the solution to that is to create the patent application as an adversarial process——

Mr. GREENWOOD. Well, are you suggesting that there is a solution to that?

Mr. DOWNEY. I think the best solution is one that’s in the current

law and one that’s carried over into the Brown-Emerson Bill, and

that is to ensure that there’s incentive once the patent has been

granted to challenge that patent if it’s weak or challengeable. In

the case of the Waxman-Hatch Act and the Brown-Emerson legislation that incentive is the 180 days of exclusivity for the successful

patent challenger.

I also think the Brown-Emerson Bill improves current law by

providing that if the first challenger settles the case, subsequently

the exclusivity for a successful challenger then rotates to the second in the line. So, I think that’s a significant improvement. I also

think that’s an improvement that will eliminate the 30 month stay,

which is another problem.

In the normal patent case if it’s a chemical compound or electronics patent and you’re challenging the patent, normally you’d be

going to market and the patent holder would have to obtain an inVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00123 Fmt 6633 Sfmt 6602 E:\HEARINGS\73735 pfrm04 PsN: 73735
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junction to stop you from marketing. If they get that injunction,

they have to post a bond. And if the patent challenger ultimately

wins the case, they recover their lost profits.

In the case of the automatic 30 month stay, there is no bond. In

essence, that gives the patent holder and the pharmaceutical industry a free preliminary injunction with no downside risk. And I

think that’s an area where the current law also needs to be

changed so if there is a challenge during the case of Prozac and

we’re kept off the market by a patent ultimately declared invalid,

we would recover our loss profits for that period that we’re kept off

the market. I think that’s an improvement that needs to be made

in the current legislation. But those are some of the problems that

I see.

Mr. GREENWOOD. Does the generic industry support user fees to

help speed products to market the way—— Mr. DOWNEY. As an industry we do not, and I think I can add

why. In the case of the Office of Generic Drugs has approximately

125 people. I think with as few 150 or 175 you could have products

actually approved in the 6 months. And I personally believe, and

I think our industry believes, that a user fee program for 50 full

time equivalents is not—is the wrong response to a fairly small

problem. I think that simply a line item appropriation that would

maintain the Office of Generic Drugs in an appropriate level to

process the applications in a timely basis is the right approach.

And I would say in response to some Dr. Woodcock’s testimony,

many firms have a much shorter than 18 month approval cycle. I

know that in our case it’s more like 12 or 15 months. I know your

constituent Teva would also have something in the neighborhood of

12 or 15 months. And usually the period over a year has to do with

characteristics of the product.

For example, the United States Pharmacopeia establishes standards for most products. And if a product is in the Pharmacopeia,

you get a much shorter approval time. But I can tell you if it’s not

and we submit an application, we get extensive chemistry comments because those specifications haven’t been worked out in advance. So there’s some other factors that figure into the approval

process and really a small increment—the Office of Generic Drugs

I believe could really bring the process down to 6 months.

Mr. GREENWOOD. Thank you.

Mr. BILIRAKIS. Mr. Brown to inquire.

Mr. BROWN. Thank you, Mr. Chairman.

I don’t know where to start. Dr. G;over on behalf of PhRMA says

we shouldn’t attempt to improve upon Waxman-Hatch Act because

any changes would jeopardize research and development. Yet,

PhRMA member companies enjoy—PhRMA member companies,

first of all, charge U.S. consumer often times two and three and

four times what consumer and other wealthy developed industrial

democracies are charged. PhRMA companies have been the most

profitable businesses industry in the U.S. for 20 years running,

whether it’s return on investment, return on equity, return on

sales. PhRMA companies have enjoyed the lowest tax rate of any

industry in America because of the research they do, something I

in fact support. PhRMA companies have spent more money in marketing than they have research and development. And also governVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00124 Fmt 6633 Sfmt 6602 E:\HEARINGS\73735 pfrm04 PsN: 73735
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ment and foundations taxpayers through NIH foundations, other

government agencies spend half—do half of the research and development in dollar terms have of the research and development in

this country on prescription drugs.

And then PhRMA tells Congress, Dr. Glover has told Congress

and told the American people in very expensive ad campaigns that

anything Congress does that might effect prices will curtail research and development.

Now, Dr. Glover in his testimony said ‘‘There’s no need to amend

Waxman-Hatch Act to deal with this issue, and settling cases, and

he is encouraged by the courts it avoids the expenses of litigation

and it can create results that accommodate the interests of both

parties.’’ While the corporate special interest flavor of this Congress

and this Administration might suggest otherwise, our job in this institution is in fact to protect the public interest. You’re a lawyer,

you do a good job I’m sure for your client, that’s why you’re here.

You’re impressive. You’ve lad out a good case today. But how does

it serve the public interest when, you know, one party, the generic

is happy. The PhRMA company is happy. Yet prices don’t come

down when generics in the marketplace would in fact bring prices

down. How does that compromise under Waxman-Hatch Act the

way it works now, how does that serve the public interest?

Mr. GLOVER. In the pharmaceutical industry there are two ways

in which the public interest can be served. The first is that we

make sure that we have a system in place that will allow for innovation for the current population as well as innovation that will

prevent future generations from suffering from the same diseases

that we currently suffer from.

The other, which we tend to focus on in these debates, is that

the generic industry by virtue of providing drugs at lower costs is

another way to provide protection to the public health.

Now, in a circumstance where there is a patent settlement, in

some cases it will result in the innovator’s patent being protected.

That, by itself, does not mean that the public interest is not being

served. It is in our interest and the interest of the system that

we’ve designed that the patents are sometimes protected. In other

cases, as Mr. Downey described in his testimony, the generic interest gets to the market prior to the expiration of the patent that

would have otherwise kept it off the market. And in one of the

cases that he described, the subsequent challenges to the patent

did not get on the market because they lost their patent infringement cases. So in those circumstances, both of them are circumstances in which the public was better off by having the parties

settle the case than it would have been to expend further sums and

more time in litigation to the end.

Mr. BROWN. But in case after case this settlement between two

parties, both of whom can profit immensely from those settlements,

keeps a less expensive identical drug from going to the market giving consumers choice and giving consumer lower prices?

Mr. GLOVER. It is not true that simply by having lower cost you

give consumers choice. You give consumers choice today, you take

away choice tomorrow.

And with respect to this being case after case, please bear in

mind that there are only three cases in which there have been supVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00125 Fmt 6633 Sfmt 6602 E:\HEARINGS\73735 pfrm04 PsN: 73735
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posedly any complaints by the FTC regarding settlements between

pioneers and generics. It is simply not the case that this is a common place occurrence that the FTC has deemed to be anti-competitive.

Mr. BROWN. Well, if it’s three cases, then it’s cases where as we

see this happening more and more, and it’s obviously going to happen more tomorrow than it did yesterday, that’s clearly the

trend——

Mr. GLOVER. I actually think that’s unlikely given that we now

see the FTC’s interest in these matters and we now have some

clarification with respect to the way the courts are going to interpret the 180 day exclusivity, I think it is unlikely that you’re going

to see more and more of the settlements between pioneers and

generics. In fact, that is a downside of the ambiguity of the scrutiny that is coming out of the FTC is that it will make the system

substantially less efficient because you cannot have efficient settlements where they’re appropriate.

Mr. BROWN. Well, I would argue it won’t be less likely or PhRMA

wouldn’t be putting the kind of resources into opposition of this

bill.

But let me make one other point with Dr. Delgado. It’s not really—it’s a simple question. My understanding there are 11 members

of the National Alliance for Hispanic Health and the corporate advisory council, six of those, if I could name them quickly, Karen

Katen whose with Pfizer, Karen Dawes whose with Bayer, David

Anstice is with Merek, Aldrage Cooper is with Johnson & Johnson,

Gino Santine with Eli Lilly, Kevin Reilly with Wyeth. Is that correct what I just said, those 6 out of the 11 and those people are

actually under——

Ms. DELGADO. Yes, they are on our corporate council. They contribute less than .25 percent of our budget, and we are a health organization that does not accept money from tobacco or alcohol companies. We work with people who try to save lives, yes.

Mr. BROWN. Thank you.

Mr. BILIRAKIS. I thank the gentleman.

Mr. Bryant to inquire.

Mr. BRYANT. I thank you, Dr. Delgado. Let me just ask you one

question I had intended to——

Mr. BILIRAKIS. You might lift that mike up closer to you.

Mr. BRYANT. Oh, okay. Let me slide closer here.

Based on your testimony and the statistics that I think have

been recited several times today by panelists, would you care to

characterize the direct to consumer advertising that is being done

in this area as successful in terms of reaching people who would

otherwise be untreated?

Ms. DELGADO. Yes. I think it gets people to think about their illness. And not just in the sense of having them go in for care, but

also thinking about maybe I should take my medicines or things

like that.

Mr. BRYANT. Let’s see, I wanted to ask Dr. Glover a question

also. I have a short period of time here, and I don’t find it right

now.

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But in essence my understand is that on average the drug com- panies spend something like $500 million in developing a drug. I

don’t know if that’s—is that ball park?

Mr. GLOVER. That’s correct. That’s an estimate, yes.

Mr. BRYANT. And do you know, and I know Mr. Downey next to

you may well know this perhaps better than you, what the cost

would be that would be associated with bringing a generic to market on average? A generic drug?

Mr. GLOVER. I will pass to Bruce, but our expectation is that it

is a fraction less than 1 percent of the cost to bring the pioneer to

market.

Mr. BRYANT. And what is your source representing the pharmacy

side of recovering those R&D costs?

Mr. GLOVER. We need to recover the R&D costs by virtue of marketing our drug and the income that we receive from marketing

our drugs. And as the economics will show that of the drugs that

are approved by FDA only a small fraction of those drugs generate

enough income to cover the average $500 million cost for those

drugs. And as a result, just virtue of the economics, it is necessary

that a certain percentage of all drugs approved must be drugs that

far exceed the $500 million cost in order to make up for the cost

of the other drugs.

The additional thing that we have to keep in mind that we’re

doing with the income from the drugs that are being sold, is that

we’re not merely recovering the R&D for drugs that have already

been developed, but we’re also trying to have enough money to

fund the R&D for the next generation of cures which are likely to

be more complex, more expensive and take a longer time to get to

approval.

Mr. BRYANT. In your R&D do you have drugs that strike out,

that fail, that don’t work?

Mr. GLOVER. Absolutely. In the drug development process, failure

occurs everywhere in the process. It occurs starting with animal

studies, starting with first generation, second generation animal

studies, first trials into humans. You may find toxicity in certain

populations that you didn’t find in other populations.

Mr. BRYANT. Let me ask you this, and again I want to jump

down to Mr. Kingham and then go back and let Mr. Downey talk.

To your knowledge do the generics have strike outs and failures?

They have a better batting average than you do, don’t they?

Mr. GLOVER. They have a substantially better batting average in

the sense that they are relying on us having found the magic bullet

amongst many that are not magic bullets. So they are simply faced

with the task of making a copy of what we have determined to be

the effective drug.

Mr. BRYANT. Okay. Mr. Kingham, let me ask you very quickly,

in terms of section 503(b)(3) of the FDA are you aware of any instance of this Act, are you aware of any instance where the FDA

itself moved a prescription drug, converted it over to a OTC drug

over the objection of the manufacturer of that drug?

Mr. KINGHAM. No, I’m not. I’d also point out that that provision

has not been used for 30 years. The last time it was invoked was

in 1971 for a drug called Tolnaftade. It’s essentially been superseded by other legislation.

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Mr. BRYANT. Well, would forcing a switch to this former Rx over

to an over-the-counter drug over the objection of a manufacturer,

would it result in the consumers being forced to pay more out of

pocket expenses for the drugs that they use? In my case, I use one

of those, would I have to start paying for it myself if my insurance

company didn’t pay for it?

Mr. KINGHAM. I would assume that for those people who have

drug benefits under their insurance policies that don’t cover OTCs,

that would presumably be the result.

Mr. BRYANT. And to be sold OTC a drug must be safe, a consumer must be able to self-diagnose what the problem is and the

label itself on the container must be comprehensible to the consumers. If the FDA is allowed to do these switches over the objection of manufacturers, who would perform these label comprehensive studies?

Mr. KINGHAM. Well, I don’t know of anybody but the manufacturers who do them, and usually in addition to label comprehension

studies, some actual clinical trials are required as well. And the

only people who do those in our system are the manufacturers.

Mr. BRYANT. Do you think this forced switch might impact on the

ability of pharmaceutical companies to innovate?

Mr. KINGHAM. It could affect, it’s one of a number of factors that

effect investment decisions that companies make, yes.

Mr. BRYANT. All right.

Mr. Chairman, if I might ask for a unanimous consent to have

perhaps an additional minute?

Mr. BILIRAKIS. Without objection. I hear no objection.

Mr. BRYANT. Mr. Downey, if we could go back to you now, I

wanted you to get the last word in in terms of responding to Dr.

Glover on those numbers and statistics I mentioned.

Mr. DOWNEY. Well, it’s highly variable the amount of investment

required to bring a generic product to market. In the least expensive case, $1 million, $2 million for a very simple product. In other

case we’ve spent at Barr $30 to $40 million to attempt to bring a

generic Premarin to market, and we still haven’t done it. And

that’s for a variety of reasons, mostly regulatory. So there’s no set

answer to that question.

I will point out, and I’d be happy to document this in

supplementing my testimony, R&D is a percentage of gross profit.

Our company spends more than Merck or Johnson & Johnson or

I believe any of the innovative companies. They always say the percentage of investment in R&D versus sales, well their margins are

almost 95 percent, so sales and gross profit are the same. In our

case gross margins are much lower percentage basis.

So if you look at the gross profit as disposable income for a company, Barr and many of our competitors in our generic industry

spends a higher percentage of our gross profit on R&D than the innovator company. So I think we really are a research-based firm,

and frankly we spend a much lower percentage of our gross profit

on sales and marketing costs. Much, much lower.

Mr. BRYANT. Thank you.

Mr. BILIRAKIS. Mr. Pallone to inquire.

Mr. PALLONE. Thank you, Mr. Chairman.

I wanted to ask Mr. Downey a couple of questions.

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If I listen Mr. Glover’s testimony where he talks about how there

are few patent disputes. You know, he says despite the generic industry’s arguments to the contrary, data show generic applications

have not raised or encountered any patent issues that have delayed

their approval, and he gave us some facts in that regard. But then

Mr. Downey, you go on to talk about the stagnation of the growth

of generic substitution. Nearly two decades after Waxman-Hatch

Act, generic substitution rates, however, in the low 40’s area. You

talk about how this National Institute for Health Care Management foundation study showed that they through legislation and

exploitation of legal and regulatory loopholes, the brand names

have extended the anticipated market exclusivity from 12 to 18

years. An accumulative effect has resulted in extending product

monopolies by almost 50 percent.

I mean, I know you’re mainly talking about price and you know

to the extent that price is an issue here. But how do you explain

the two? I mean, it’s almost like opposites?

Mr. DOWNEY. Well, I think in my testimony I indicated BusPar.

BusPar is a product recently where generics were kept off the market by a late listed patent.

I think a recent example of Nicorette gun which was kept off the

market by—sort of a nightmarish system of regulatory questions

about the labeling and the patient materials. I think there are a

number of instances where products have been kept off the market,

either through regulatory manipulation or through patent manipulation. And I think both are important and I think Congressman

Brown’s bill addresses both. You have questions about bio-equivalence, which would be modified in the new legislation. You’d have

questions about citizen’s petitions tightened up in the new legislation. You would eliminate the 30 month stay so if people really did

want to market at risk that had the ability to do it. So, I think

there are a number of things that can be done and are in the

Brown-Emerson Bill that would clear these pathways to bring our

products to market.

But I think the fundamental thing, the biggest single incentive

to work to bring these products to market is the 180 days of exclusivity to challenge patents. And without that, you’re going to have

a long, long delay in market entry.

Mr. PALLONE. We didn’t have much mention today about the citizen petition process.

Mr. DOWNEY. Yes.

Mr. PALLONE. You just mentioned that. Do you want to tell us

a little bit about that, because again that’s addressed in the Brown

bill, you know, the effort to—I guess under the GAAP you have to

require to certify that petitions are factually based, that they can’t

be used for any competitive purposes, otherwise they’d be investigated by the FTC. I mean, tell us how this process is used and

how we can improve it?

Mr. DOWNEY. I’ll give you a real life example. Our company

brought to market a generic version of Coumadin, warfarin sodium,

been off patent for 40 years. As our application neared approval

and was within, in my judgment, 30 days of approval the innovator

firm filed a citizen’s petition in which they recited almost comically

in the first page that they learned the previous day that a generic

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product was about to be approved and they were filing this 50 page

petition saying why approval of that product would be imprudent.

So if you read it literally, they prepared this document within—this

50 page document overnight to file with the FDA.

I believe that petition—as a practical matter, I believe the FDA

chooses for reasons they think are sufficient to not approve the

products until they can resolve the citizen’s petition issues. And if

you time your citizen’s petition correctly, as in the case that I just

described, working through the petition, preparing a response

takes months and results in months of delay.

Mr. PALLONE. But how do we improve on that? I see what we’re

proposing in the Brown bill. How would it improve on it?

Mr. DOWNEY. Well, I think the Brown bill would have attached

some consequences if you filed a petition that was ultimately denied. I think, frankly, it’s a very difficult problem because people

do have First Amendment rights and you don’t want to stop people

from making legitimate safety petitions to the FDA.

I personally believe the best way to do it is decouple the two

processes. And that is if you have a product in the market and you

have established approval processes for the generic product, let it

go forward. And then if there’s a problem, that will manifest it

later.

If you as an innovator think there’s a problem with a generic

product being approved, you have years in advance of the application to make that known to the FDA. Only in an emergency, an unusual situation would something come up at the last minute that

should delay the approval.

So, it’s a difficult problem but I think the Brown-Emerson Bill

addresses it in a sensible way.

Mr. PALLONE. Thank you.

Thank you, Mr. Chairman.

Mr. BILIRAKIS. I thank the gentleman.

Ms. Delgado, I know your role here is to sort of support, if you

will, the direct-to-consumer TV advertising, is that correct?

Ms. DELGADO. Well, my role here is to represent our membership, which are Hispanic consumers.

Mr. BILIRAKIS. I’m glad you said that. That being the case, let

me shift over to you. You’ve sat in the audience, and I’m not sure

whether you know if it’s unfair of me to bring it up, please let me

know, the OTC situation where the prescription drug might be

shifted over to the over-the-counter.

Ms. DELGADO. I’m very familiar with that, yes.

Mr. BILIRAKIS. You are familiar with it. What is your organization’s, on behalf of your people, what is your opinion on that?

Ms. DELGADO. I think that the FDA has a very important role

that should not be pushed by people who are more concerned about

the cost to themselves rather than consumers. I am concerned that

the decision is driving more by pushing the costs off to consumers.

For example, we know some of the managed care companies encourage their members to take part in alternative health because

they don’t have to cover those costs. And I think that when you

have an OTC, your consumer already has limited funds will cover

more of those costs. So we’re concerned about that.

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We would like the FDA to proceed as they always did on good

science and not to feel pushed in way or another.

Mr. BILIRAKIS. Well, I’m not sure how to interpret all that.

Ms. DELGADO. That means that when the big boys fight, that

science should be the one who rules the day. And what’s good for

consumers, that—I mean medications need to be out for a while before we know that they’re really as good, as effective as they are

supposed to be. We in the United States are very different than in

other countries, and I’m very concerned when they compare us to

other place and say ‘‘Well, there we can get a drug out quicker and

it’s over-the-counter and you can get it.’’ Mr. BILIRAKIS. You heard me say, and nobody’s disputed it, the

insurance companies that cover drugs will cover prescription drugs.

Ms. DELGADO. Right.

Mr. BILIRAKIS. So if drugs shift to over-the-counter, I guess conceivably it probably would be less expensive to the consumer. But

I’d say, whether it is or whether it isn’t, the point of the matter

is that it will probably not be covered by the insurance policy. Is

that right?

Ms. DELGADO. Exactly. Exactly. And that we don’t see as good.

Mr. BILIRAKIS. All right. That being the case, how do you feel

about that?

Ms. DELGADO. Let me back up. I think one of the problems is

when we look at health coverage in America from that hospitalbased position system to more in-home and patient-driven, which

means that in fact somehow the patient’s going to have more medical home care costs. And our system doesn’t do that. So we do this

patchwork approach of solving it.

I don’t think it’s good to just making OTC and then make the

consumer pay for it. Because even though the costs are low, those

costs may still be higher than their co-pay, or whatever they may

have to pay for that medicine. It’s a very complicated issue and it’s

unfair that whenever the price of drugs go up, we oh, or there’s

more expenses on it. Because I’m happy people are spending less

time in hospitals.

We work very much on HIV/AIDS. We’re happy to see less time

in hospitals, more part with medicine.

Mr. BILIRAKIS. Let me ask you then about the direct-to-consumer

TV advertising. I don’t know whether it was mentioned while I was

gone, and Mr. Downey may have been alluding to it earlier, but in

one of our prior hearings just a few days ago, we had a witness

who put up a chart that indicated that direct-to-consumer TV advertising—at least that’s the way I interrupted it and I’ve checked

with some staff here and I think they kind of agree would amount

to about $300 billion over 10 years. I know it seems out of the ordinary. And I am relating it to the $300 billion that’s been allocated

in the budget to prescription drug coverage for seniors. So, regardless of whether this $300 billion is a correct figure or

something considerably less than that, still we’re talking about an

awful lot of money.

Ms. DELGADO. But the other side is what’s the cost of not getting

care.

Mr. BILIRAKIS. Yes. But whether it be $300 billion or whether it

be $2.5 billion times 10 years, or whatever the figure might be,

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that’s going to be a part of the price that your consumers will pay,

will it not?

Ms. DELGADO. Yes.

Mr. BILIRAKIS. All right. And you still feel that the advantages

of that advertising outweigh the advantages or the disadvantage of

additional costs?

Ms. DELGADO. The advantages of advertising is having people

going for care, and I want healthy people not people who are working that are ill or not able to work. So I think with——

Mr. BILIRAKIS. Are those same people paying more for their

drugs because of that advertising?

Ms. DELGADO. I would assume that they probably are paying

more, but they’re also going in for care.

Mr. BILIRAKIS. Yes.

Ms. DELGADO. So I think it’s a tradeoff. I mean, it’s very difficult

but people need to go in for care. And if it gets them in, that’s the

first step.

Mr. BILIRAKIS. Yes.

Mr. GEISER. Mr. Chairman?

Mr. BILIRAKIS. Yes, sir.

Mr. GEISER. We request permission to present two charts that

have a bearing on this discussion.

Mr. BILIRAKIS. You want to put them into the record, is that

what you’re saying, sir?

Mr. GEISER. Yes. And to have Dr. Seidman speak to them for a

moment?

Mr. BILIRAKIS. I don’t know about that. But we are very glad to

consider anything that you have to present for a matter of the

record.

Mr. GEISER. Well, the two charts demonstrate and speak to the

issue that was just discussed and present our best guess on what

the impact of the OTC switch would be and compare what we

project the price to be to——

Mr. BILIRAKIS. Mr. Geiser, your time was up, obviously, but if

there’s no objection and if there is objection—actually, at this point

in time I’m going to have to call on Mr. Burr to inquire, because

you haven’t had your opportunity to inquire Mr. BURR. The Chair

is correct.

Mr. BILIRAKIS. All right. We’ll do that.

After Mr. Burr testifies if you make that request, and if there’s

no objection, I will allow the charts. But I think I will just allow

you to explain them if you wanted to very, very briefly.

Mr. GEISER. Thank you.

Mr. BILIRAKIS. All right, Mr. Burr, please.

Mr. BURR. I thank the Chair and let me take this opportunity,

Mr. Chairman, to point out to those that are left, even though I’ve

been absent, Dr. Woodcock has stayed. This is probably one of the

first times, whether it’s the FDA or any other agency, that I’ve

seen somebody who testified actually take the time to stay and listen to the other panels. And I want to commend her for it,

because——

Mr. BILIRAKIS. I’ve already done that, Richard. I appreciate you

concerning that.

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Mr. BURR. I felt if I didn’t do it, she would think that I had

slacked off a little bit.

Let me also say to Dr. Delgado, it’s refreshing to find somebody

with the focus in the right place. Your answers are genuine and for

the right reason; it’s because your focus is on what’s best for patients. And I think, hopefully, most would agree with you that the

better educated consumers are in the market place, the easiest that

we can make it for patients to access care, care a big umbrella.

Hopefully the sooner they do it, the healthier they are. And I think

we’ve lost focus up here of the fact that one of the impacts that we

can have from a legislative standpoint is actually to prevent people

from visiting the hospital for extended periods of time. Some of

that is the pharmaceutical regiment, some of it’s the technology

that’s in devices that we can now do in doctor’s offices versus a hospital stay. And I think we lost track of that when we had a debate

not long ago as it relates to severe cuts in home care, which was

originally designed to keep people out of the hospital. And we’re

trying to make up for the mistakes that we make.

Let me ask each one of you: Is there anybody that disagrees that

the FDA currently has the authority to make a determination that

switches a drug from prescription to over-the-counter? Is there anybody that feels the authority does not exist at FDA today to make

that determination?

Mr. KINGHAM. Representative Burr, if you mean over the objection of the manufacturer through the procedure that has been suggested that’s I think one of the instigation for this issue to be discussed here today, yes, I think there are a couple of very serious

problems that are presented by that.

Mr. BURR. I understand that in your testimony, I’m sorry I

missed it but I have familiarized myself with it, that you don’t feel

that there should be a decision to move over-the-counter based

upon the pharmaceutical company’s objection. My question is technical though. Does the FDA have the authority to make that determination in your opinion?

Mr. KINGHAM. I think that in the procedure that is under discussion some very serious legal questions are raised by the proposed

procedure that’s intended to be used. The first has to do with

whether due process would be accorded through the rulemaking

procedure that is proposed in the context of the recent request. I

don’t think that it would be, and I don’t think that provisions of

the statute requiring a hearing would be satisfied as well.

Perhaps even more important because it’s fundamental to the

outcome is that the court decisions relating to FDA rulemakings

have held that the agency when it engages in a rulemaking process

that is based on science, must disclose the scientific basis, the full

scientific basis for the decisions that it’s making, otherwise its rulemaking can be set aside.

The problem here is that the key data or certainly some of the

key data relating to a switch are proprietary data that are trade

secret or confidential. They either belong to a drug manufacturer

and cannot be disclosed on the record without a violation of the

Trade Secrets Act, the Federal Food, Drug and Cosmetic Act and

the agency’s own regulation.

130

So it’s a very difficult question in the situation that has been represented here. It’s never arisen before. We’ve never had to deal

with it because there’s always been a collaborative process with the

manufacturers and the FDA.

Mr. BURR. I certainly raised that question earlier with Dr.

Woodcock, and I think she, with the advise of others from the FDA

felt that there was a protection that they had to adhere to on trade

secrets. I take from yours the protection of those trade secrets

would preclude them from living up to all of the hurdles that they

had to overcome?

Mr. KINGHAM. I believe that’s right.

Mr. BURR. I’m sure that we’ll get some additional legal interpretation from the FDA on their views, but I appreciate your personal

views.

Yes, sir?

Mr. GOLENSKI. Mr. Burr, if you meant asking all of us the question, RxHealthValue gave a statement to the FDA expert panel regarding the safety issue of OTC transfer of the antihistamines on

behalf of WellPoint, and we did that for two reasons. One was we

felt that the only way these kinds of questions that you’re essentially raising are going to be asked given the unprecedented nature

of the request would be to actually do it. And we supported

WellPoint’s right, and in fact supported them aggressively to bring

the question.

And second, a content issue and I think it’s a question that your

colleague Mr. Bryant asked earlier in the morning of Dr. Woodcock

but I don’t think was specifically addressed, and that is we were

concerned that much of the safety data that you would need to

have for an OTC switch in fact exhibits in the world and that unfortunately is not within the boundaries of the United States, but

these medications specifically have been over-the-counter for years

in Europe and we felt that the quality of the scientific work that

was done in that part of the world was adequate and we felt it

should be used, and we said that in our statement to the FDA

panel.

Mr. BILIRAKIS. Would the gentleman yield briefly?

Mr. BURR. Be happy to yield.

Mr. BILIRAKIS. Even though his time has expired.

Mr. BURR. I don’t think the Chair has started the clock.

Mr. BILIRAKIS. Mr. Kingham, what’s the remedy? I asked this

question of Dr. Woodcock. What is the remedy for the manufacturer in the case where a unilateral decision has been made to go

OTC without the approval of the manufacturer?

Mr. KINGHAM. Well, it’s very unclear because the system, despite

what’s been said, is not really set up with that in mind and it

hasn’t happened, so it isn’t clear what would play out if in fact the

FDA went forward and tried to compel a switch. It would be an unprecedented act.

There are a variety of possible ways in which the issue could be

raised. It could be raised in the context that the change could not

be made, except through a full evidentiary hearing process under

section 505 of the Federal Food, Drug and Cosmetic Act. Another

possibility is that a suit could be brought to challenge the regulation itself, either——

131

Mr. BILIRAKIS. Well, the suit is always available.

Mr. KINGHAM. That’s right.

Mr. BILIRAKIS. I mean within the FDA itself.

Mr. KINGHAM. Within the FDA, of course, there’s an administrative review process. There’s an appellate process within the Center

for Drugs which Dr. Woodcock mentioned in her testimony earlier,

and one can go above that up to the Commissioner and that sort

of thing.

But one question here is if there were simple notice and comment rulemaking of the type that some people are advocating,

there wouldn’t be a hearing in the usual sense of the word. There

would be an exchange of paper, but no hearing in which people

would be given an opportunity to confront the other side’s evidence

of witnesses in the way that we ordinarily understand.

Mr. BILIRAKIS. All right. I’m just going to take the purgative if

I may. I’m sure Mr. Brown won’t mind.

Dr. Glover, you’re an M.D. You’re also an attorney. J.D. and M.D.

Mr. GLOVER. Yes.

Mr. BILIRAKIS. You have heard the testimony of Dr. Woodcock

earlier on the direct substitution the bio-equivalency, etcetera, of

generic drugs. Do you agree?

Mr. GLOVER. There are——

Mr. BILIRAKIS. And I might add, Dr. Delgado made the comment

before I came in, but as I understand it for certain ethnic groups

they may not work. Maybe she was speculating? I don’t know

whether there’s any——

Ms. DELGADO. No, I’m not speculating.

Mr. BILIRAKIS. No speculation. It’s based on facts?

Ms. DELGADO. Yes.

Mr. BILIRAKIS. All right. Go ahead.

Mr. GLOVER. Mr. Chairman, I think that therefore there are two

issues here. The difference in ethnic groups is something that we’ve

known about for many, many years. We know, for example, that

certain populations have a different degree of activity, the enzymes

in their liver where many drugs are cleared, certain populations

are more susceptible to the effects of certain drugs that act on certain receptors or vice versa and things of that nature. And as a result for certain drugs you will want to test that drug, whether it’s

pioneer or generic, in a particular population where it might be

used and to make sure that it is effective or not toxic in each of

those various populations. And we also see this played out on the

international scene where in certain foreign countries, particularly

Japan comes to mind, where many drugs that might be on the market here need to be separately tested on the Japanese population

to make sure that there are no unusual metabolic properties of the

Japanese population that may have a difference in the drug.

You then take that to the next issue, which is what is the impact

of that or anything else on bio-equivalence for pharmaceutical products.

With respect to generics, Dr. Woodcock focused on the idea that

generics were to be directly substitutable. We started, I believe her

first comment was that they were identical and then got to a position with some questioning that there was indeed some variation

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that would exist between the generic and the pioneer. And indeed

as she testified, between pioneer products from batch-to-batch.

We believe, however, that the variation that FDA allows is substantially wide. That is, FDA permits a variation of as much as

plus or minus 20 percent of the bio availability of the pioneer

drugs——

Mr. BILIRAKIS. Is that enough of a safety factor to cover their

concerns?

Mr. GLOVER. The plus or minus 20 percent is a very large factor

in the view of the pioneer companies. Moreover, even to the extent

that we could get comfortable with a 20 percent variation with respect to a generic, with respect to the pioneer, that then allows for

a possible 40 percent differentiation between one generic versus another generic.

As you very well know if you have any experience in getting generic drug products filled at the pharmacy, you can go in 1 week

and get generic drug A and the next week generic drug B by a different manufacturer, both generic to the same pioneer product. But

with respect to each other they could be on either side of the variation. And so it’s that degree of variability I believe is substantially

troublesome and there are particular products in the marketplace

where that kind of variation may very well cause a difference in

a toxicity or certainly a difference in efficacy in the population.

Mr. BILIRAKIS. I didn’t expect all of that.

Mr. BROWN. Mr. Chairman, since we begun a new debate here,

I think it’s only fair that’s Mr. Downey——

Mr. BILIRAKIS. You’re reading my mind. I had planned to do that,

yes.

Mr. BROWN. Mr. Chairman, I’ve been——

Mr. BILIRAKIS. We don’t always agree——

Mr. BROWN. I’ve sat next to you so long I can read your mind.

Mr. BILIRAKIS. I guess that’s the case.

Mr. BROWN. I was just saving you the effort. Thank you.

Mr. DOWNEY. Well, we do agree with Dr. Woodcock and I would

strongly disagree with Dr. Glover on this point. The whole structure of the FDA approval process is to have pioneer products proven safe and efficacious. And then the generic product to be proved

same as the brand.

In the case of the approval process we have all sorts of requirements. We have to do the same chemical warranty, the same mode

of administration, we have to prove that the active ingredients absorb the same rate and at the same extent as the brand product.

And we do that in this context of the same standards that the

brand products use to take the products they use in their clinical

studies to the marketplace. They also do bio-equivalence studies to

show what they’re actually going to market is bio-equivalent to

what they actually use in their chemical studies. So it’s the same

set of standards applying both to the brand industry providing that

their products are the same as it is to us proving we’re the same

as the brand.

So, we agree 100 percent with Dr. Woodcock. And, in fact, I think

her testimony forms the basis that we ought to mandate generic

substitution in Federal programs and ought to support CongressVerDate 11-MAY-2000 10:50 Oct 10, 2001 Jkt 010199 PO 00000 Frm 00136 Fmt 6633 Sfmt 6602 E:\HEARINGS\73735 pfrm04 PsN: 73735
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man Pallone’s bill to preempt all the State requirements that don’t

recognize these very rigorous standards imposed by the FDA.

Mr. BILIRAKIS. I had hoped that this hearing would be sort of the

unanimity in terms of the efficacy of generics.

I’m going to have to cut it off somewhere. Mr. Geiser has a couple of charts he’s requesting we show.

Dr. Delgado very briefly and Mr. Golenski very briefly.

Mr. GOLENSKI. Okay.

Ms. DELGADO. All right. I’m a clinical psychologist also in private

practice licensed in the District. I work with an internist. My specialty is patients who have depression. And I can tell you that

when people talk about therapeutic substitution there’s a wide

range. And that those decisions need to be made.

I don’t make them. I work with someone who prescribes and sees

patients and does that. And he works with the patient to do that.

And I’m very concerned about creating a system where everyone

says cheaper is better. Cheaper is not better. Cheaper may be better, but let that be based on the individual patient and their provider.

And as for cost, just like we like to have seat belts and that was

an added cost for the consumer, it did save lives. I think we have

to be very careful about just focusing on cost.

Mr. BILIRAKIS. If the provider were to prescribe a generic, that’s

the provider doing it, right?

Ms. DELGADO. But it didn’t work. Then they should have the

ability to give the patient something else. What happens is when

Congress says this is how we’re going to do and this is what we’re

going to pay, all those other drugs get taken off the list and you

can’t give them to patients. And I can tell you, I treat people with

depression. Some of them do well with one, some with another and

you have to change until you find the right medicine for the person.

And it’s just inconceivable to me to put that decision away from

the specific patient and provider. That’s not the way—and

formularies. I mean——

Mr. BILIRAKIS. So what you’re saying is when we do the prescription drug for seniors among the Medicare Act, that we should take

all that into consideration?

Ms. DELGADO. Especially since we know since it was only 2 years

ago that FDA said companies had to start keeping records on people over 75 when they were doing their drug trials. Since most people—the fastest growing segment of the population is people over

80 we need to know.

Mr. BILIRAKIS. Isn’t what you’re saying and what Dr. Glover said

also applicable to brand name drugs?

Ms. DELGADO. Sure.

Mr. BILIRAKIS. So it’s not just generics, is it?

Ms. DELGADO. No, my thing is——

Mr. BILIRAKIS. It might react——

Ms. DELGADO. My thing is the decision is between the patient

and provider based on effectiveness. If you’ll notice in the language

when we talked about generics is we want the outcome to the patient to be the same. Not that it’s the same absorption rate, that’s

good. That’s not enough. If it’s absorbed the same, but the reaction

to the patient is not the same, that’s what I’m concerned about.

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Mr. BILIRAKIS. Mr. Golenski, very briefly do you have anything

you wanted to add?

Mr. GOLENSKI. Yes, quite specifically to that, Mr. Chairman.

RxHealthValue strongly endorsed the Schumer-McCain and BrownEmerson Bills. And the reason we did that is because we believe

that cheaper is not better; cheaper is the same. And we realized

that therapeutic and bio-equivalence is determined by the FDA. In

addition to that, we have memberships representing 75 health

plans in the United States. Some of them are nonprofit health

plans. We have two large pharmacy benefit management organizations. And they all have generic substitution programs aggressively

in place. We have no evidence of negative outcomes to the patients

in generic substitution.

Mr. BURR. Mr. Chairman——

Mr. GOLENSKI. But the reason we endorsed those bills is because

we believe cheaper isn’t——

Mr. BILIRAKIS. But if there were evidence, you would like to

know that a substitute would be available?

Mr. GOLENSKI. Well, we also aggressively support, of course, in

all of these organizations that the physician and the patient are

the people who make the determination of which medication the

patient should be taking. But we’d like to have the generic available to the patient.

Mr. BILIRAKIS. Mr. Burr?

Mr. BURR. Mr. Chairman, I want to break the tie that you Mr.

Brown had. Everybody here is right, but the reality is that we

asked the FDA to be the gold standard for the approval process of

pharmaceuticals, generics, medical devices in this country. And

what we have done is we have created an atmosphere where it’s

tough for them to do their job because there’s all sorts of legal attacks on different pieces. And it causes an agency like the FDA to

sit back and look for an arbitrator or for the courts to make determinations. Unfortunately, the patient’s the one that loses. Even

though we’re hearing different slices about where they can benefit

and where they lose, and the reality is that if you want to maintain

a gold standard—and I don’t think that there’s anybody here that’s

saying let’s lower the bar. That’s one of the reasons we can’t harmonize our standards with the European Union. We can’t do it

around the world. Because we won’t accept what they’re willing to

accept. We won’t.

Mr. Golenski, we’ve been trying to do it for 6 years now. And the

reality is that there’s not too many people in America that want

to adopt the standards that the Italians use, which is they use

model because all members.

If we’re going to maintain this gold standard, then the question

is how do we make this system function? We were briefly on Waxman-Hatch Act. From a policy standpoint it is not perfect. It was

not a policy document. It was political document. It’s where different components of the industry gave in the waning hours up

something, one got something, somebody gave up something, and

it was their recommendation stay away from this.

It works pretty good right now. But when you look at it from a

policy standpoint, it’s certainly not perfect.

135

And I would only suggest to all of us that where we’ve got something to contribute that we think maintains the gold standard and

presents a better option for patients across the country, present it.

If it doesn’t, then understand that we’re not necessarily here to

change the functions of the FDA. We had that opportunity in 1997.

It was the FDA Modernization Act. We choose to maintain the

standard, and I don’t think there’s willingness on the part of members to go back through and to change that standard.

I thank the chairman for the opportunity to editorialize. Let’s see

whether we can get a second set of questions.

Mr. BILIRAKIS. Mr. Geiser, I want to be fair. You can devote an

all day hearing to each one of these subjects. We’ve crammed three

in here. And we’ve got to try to limit, obviously, the gist of the

issues. What we wanted to do in the case of the OTC was to try

to determine whether in fact, as you heard, whether FDA has the

authority and if they do have the authority, should they retain the

authority to do it on a unilateral basis.

If you have charts toward that end, we would be glad to receive

them. I would hope that it doesn’t take much of an explanation.

Are they so difficult to be able to understand that you’d have to explain them, because I don’t want to delay this hearing much longer.

Mr. GEISER. I think it can be explained in very, very short order,

Mr. Chairman.

Mr. BILIRAKIS. Short order means what?

Mr. GEISER. In 1 minute.

Mr. BILIRAKIS. One minute. And you would explain those?

Mr. GEISER. Yes, I will do that.

Mr. BILIRAKIS. If there’s no objection, let’s do that.

Mr. GEISER. The two charts speak to this question of access to

care and to make it clear as the committee is considering this topic

to inform the committee’s consideration as to what we believe the

outcome of the OTC switch would be.

This chart demonstrates, basically, the monthly cost of OTC

products. Claritin OTC in the UK and Canada, and the current

monthly cost on a prescription basis here in the United States.

The second chart demonstrates that we believe, and we cannot

be certain of this, but if the OTC switch is granted and the drugs

are marketed over-the-counter that these second-generation antihistamines will be offered at substantially monthly cost than is

currently the case, that in fact that cost in addition to benefiting

the uninsured and seniors or the people that are not covered, will

in fact result in lower out-of-pocket cost for the insured.

We’ve shown here that our blended brand drug co-pay is about

$17, this is just a blended average of our health plans everywhere.

And for a physician office visit about $17 if you need a physician

office visit to secure the prescription. So we’re looking at even an

insured member incurring substantially more out-of-pocket cost in

comparison to what we anticipate a post-OTC switch price of these

drugs will be.

Mr. BILIRAKIS. Do you have those charts in the form that we can

put them into the record?

Mr. GEISER. They are attached to my statement.

Mr. BILIRAKIS. They are attached. Without objection, it will be

made a part of the record Mr. Brown.

136

Mr. BROWN. Well, without prolonging the debate, I will speak

even shorter than Mr. Geiser. And I just wanted to comment on

something Dr. Delgado said. She over and over from her written

testimony through several questions talked about quality and not

worrying so much about price. And I agree with that. I think we

all do. But, you know, this is a Congress unwilling to spend money

on prescription benefit. It’s a Congress unwilling to spend money

on universal coverage. It may, I hope not, but be a Congress unwilling to spend money on the speeding up the approval process for

ANDA. But a Congress that gives tax cuts to the richest people in

the country——

Mr. BURR. I take back those nice things I said about your earlier.

Mr. BROWN. But, you know, the fact is that overshadows, that’s

an umbrella on everything we do here; on universal coverage, on

prescription drug prices. on prescription drug coverage. And I

would hope that you would use the National Alliance for Hispanic

Health to push for that, because we can’t have the quality of

healthcare that you keep talking about if we’re unwilling to pay for

it.

Ms. DELGADO. I agree, but part of it is when you talk about costs

you have to talk about the cost saving of keeping somebody out of

the hospital.

Mr. BROWN. Of course you do.

Ms. DELGADO. That’s also the other side of it.

Mr. BROWN. We don’t think in those terms——

Ms. DELGADO. I’m with you. I’m here. Don’t worry.

Mr. BILIRAKIS. Dr. Delgado, all legislation we have up here is

costed by the Congressional Budget Office.

Ms. DELGADO. I understand.

Mr. BILIRAKIS. And you know what? They do not give us ever any

credit for preventative healthcare or the keeping them out of the

hospital unfortunately.

Ms. DELGADO. Right.

Mr. BILIRAKIS. And that makes our job so much more difficult.

Ms. DELGADO. But we’re with you.

Mr. BROWN. Wrap it up, Mr. Chairman.

Mr. BILIRAKIS. Yes. We customarily ask if you would be receptive

to, I haven’t heard anybody ever say no. If you said no, I’m not sure

what we could do about it. But we would like to furnish you with

written questions and ask you for your written response within a

matter of just a few days or so. We appreciate it.

Thanks so much for your patience. Thanks for sitting here

through a couple of votes. You’ve been an awful lot of help.

[Whereupon, at 2:15 p.m. the hearing was adjourned.]

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF ALLERGY & ASTHMA NETWORK MOTHERS OF ASTHMATICS

As a patient advocate and the founding president of Allergy & Asthma Network

Mothers of Asthmatics (AANMA), I am writing to oppose OTC status of nonsedating

antihistamines due to lack of tangible evidence that patients can use these medications safely without physician diagnosis or guidance. In the absence of such compelling data, the FDA should not grant OTC status for nonsedating antihistamines.

For the last four years and with support from more than 100 members of Congress, AANMA has conducted an annual Asthma Awareness Day on Capitol Hill.

We’ve worked to make members of Congress aware of the issues that affect patient

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1Data presentation given by IMS in April 2001.

lives and to promote patient access to improved medications, specialty care, school

nurses, and medications while on school property.

Allergies and asthma are increasing at epidemic rates in our country and no one

knows why. While NIH, EPA, HHS, CDC, AANMA, and others work tirelessly to

reach underserved populations suffering with these conditions, health insurers (companies we pay to insure our health) lobby Congress and the FDA to transfer their

financial burden for these medications to the backs of patients and families.

If health insurers want to save money, place patient outcomes first. Don’t whittle

away at our benefits. We want to be well at home, work, school, and play.

Take the case of the harried father at CVS whose tiny, glassy-eyed, frail daughter

coughed relentlessly at his side while he struggled to read the packaging of a combination cough and antihistamine medication. He looked at me and said, ‘‘You are

a mom. What do you give a little girl who can’t stop coughing?’’ I said, ‘‘A trip to

the doctor’s office.’’

The father snapped back, ‘‘I’m not going to give one more dollar to those moneygrubbing b----,’’ then took four different cough preparations to the checkout counter.

Is this father safely using OTC medications? No. Will more choices lining the

store shelves help? No.

If nonsedating antihistamines cannot be safely and strategically introduced in today’s market so that all people can make informed purchases, then patients and

parents of children with allergies and asthma are not ready for OTC nonsedating

antihistamines.

OTC medications have their place on store shelves across America, but not without the evidence that patients can safely use them. Drug safety and patient use

safety are one and the same on the OTC market.

PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF CHAIN DRUG STORES

The National Association of Chain Drug Stores (NACDS) appreciates the opportunity to submit a statement for the record on Federal and state policies affecting

the availability of generic pharmaceuticals. NACDS membership consists of nearly

180 retail chain community pharmacy companies that operate over 33,000 retail

community pharmacies with annual sales totaling over $400 billion. Chain operated

community retail pharmacies fill over 60 percent of the 3 billion prescriptions dispensed annually in the United States.

GENERIC DRUGS SAVE PATIENTS MONEY

Generic pharmaceuticals are a cost-effective way of providing prescription drug

therapy. Pharmacists in community-based practice settings work with patients and

physicians to maximize the use of lower-cost generics when they are available on

the market. The savings from using generics are unmistakable. If a generic substitute is not available, a pharmacist works with the physician to determine if the

patient can take a generic version of another drug.

With billions of dollars in brand name drugs coming off patent over the next few

years, we believe that it is critical that any new Medicare drug benefit have both

patient and pharmacy incentives to encourage greater generic use. We are concerned, however, about some of the tactics being used by brand name companies

that may delay the availability of many of these lower cost generics, and thus raise

costs for all prescription drug users.

According to IMS Health, the average brand-name prescription drug price was

about $65.29 in 2000, while the average generic prescription drug price was about

$19.33, less than a third of the brand price.1 Because the average cost of a brand

name prescription has escalated so rapidly over the last 10 years, the gap between

the average brand name and generic prescription price has significantly widened.

In 1990, the average gap was about $16.87. In 2000, that gap had almost tripled,

increasing to about $46.

Although more generic drugs are on the market today, the percent of all prescriptions being dispensed with low-cost generic drugs has remained relatively flat over

the last few years, about 42 percent of all prescriptions. However, despite this relatively stable trend in the dispensing of generic drugs, the share of all generic prescription dollars as a percent of total prescription dollars has decreased significantly. For example, in 1995, generic drugs accounted for 12.2 percent of all prescription sales; today, they represent only 7.1 percent.

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2 NACDS Analysis of 1996, 1997 MEDS data and NAMCS data. In addition, according to

Brenda Motheral, Senior Director of Research for Express Scripts, generic fill rates are noticeably higher for retail than mail, as reported in ‘‘Pharmacy Benefit Design: What We Have

Learned,’’ April 6, 2000.

GENERIC DRUGS ARE SAFE AND EFFECTIVE

In almost all states, a pharmacist can dispense a generic drug, unless the physician has specifically stated in his or her own handwriting that the brand name

pharmaceutical is ‘‘medically necessary.’’ We encourage and support laws that leave

the substitution of generic drugs to the professional discretion of the pharmacist.

However, in some states, generic substitution is prohibited for certain drugs, unless the pharmacist expressly obtains the permission of the physician, regardless of

what the prescription states. Some states have passed these laws in response to

misrepresentations by brand name drug companies regarding the safety of generic

versions of their drugs. These are so-called ‘‘narrow therapeutic index’’ drugs, such

as Coumadin or Theophylline, where the brand name manufacturer argues that the

potential for problems for the patient from switching from the brand to a generic

are so great that only a physician should authorize the switch. This obviously reduces the generic substitution rate of the drug.

Policymakers should be aware, however, that the Food and Drug Administration

(FDA) has compiled a list of every prescription drug produced by every manufacturer including all information about safety and effectiveness for patients. The FDA

exhaustively compared all generics to all brands and developed a directory, commonly called the ‘‘Orange Book,’’ available to every pharmacy that lists which drug

products are truly equivalent. In fact, the FDA Commissioner has said, ‘‘... be assured that if the FDA declares a generic drug to be therapeutically equivalent to an

innovator drug, the two products will provide the same intended clinical effect’’.

The importance of assuring maximum access to generic drugs is important for a

very simple reason. Savings from generic substitution should significantly increase

when several high-volume brand name drugs come off patent in the next twelve

months. According to IMS America, brand-name drugs with $8 billion in sales are

scheduled to come off patent next year, and drugs with about $25 billion in retail

sales are scheduled to come off patent between the years 2002-2005. Importantly,

some brand name drugs within the anti-depressant and cholesterol-lowering therapeutic classes come off patent in the next year.

The potential for savings from the use of generics in these categories is significant, since public and private payors spent billions of dollars on anti-depressants

and on cholesterol-lowering drugs last year.

COMMUNITY PHARMACIES DISPENSE MORE GENERICS THAN PBMS, MAIL ORDER

The use of generic drugs varies significantly by the source of prescription coverage. For example, generic drugs are used in about 55 percent of all prescriptions

provided by community pharmacies to cash-paying customers. However, the percentage of generic pharmaceuticals used in private third-party plans and PBM coverage

programs is much lower. In fact, the generic substitution rate for all mail order prescriptions is only 32.5 percent, while it is only 44 percent for all prescriptions paid

by PBM or third-party prescription coverage plans.2 Both patients and providers

should be given incentives to use and dispense generic drugs in any new senior

Medicare pharmacy benefit. These would include lower generic copays, as well as

reimbursement incentives to the pharmacy to dispense generic drugs.

There are many factors that affect the ability of pharmacists to dispense generic

drugs. These include state pharmacy practice laws; incentives used by third party

plans to encourage generic use, such as lower copays and pharmacy generic dispensing fees; and the rebates paid by brand name manufacturers to third party

payors, including mail order, to dispense brand name drugs rather than lower-cost

generics.

Unfortunately, brand name manufacturer rebates have created perverse incentives for third party payors to switch from one expensive brand name drug, for

which the plan does not receive a rebate, to a brand name drug for which they receive a rebate. The plan should be switching to a lower-cost generic. However, because generic manufacturers do not pay rebates and these payors make much of

their money from these rebates, there is significant over-utilization of brand name

drugs and under-utilization of generic drugs.

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3Wall Street Journal, November 1998.

BRAND NAME MANUFACTURERS’ TACTICS LIMIT GENERIC DRUG AVAILABILITY

Ultimately, a generic cannot be used unless it is available on the market. We are

very concerned that some brand name manufacturers are employing multiple

schemes to delay the availability of generic versions of their drugs, contributing unnecessarily to health care costs, increased spending for Medicaid, private prescription drug programs, and millions of seniors and uninsured individuals.

NACDS believes that brand name manufacturers should have appropriate incentives to research and develop new pharmaceuticals, and have sufficient marketing

exclusivity time to allow them to recoup their investment with an appropriate profit.

We do not believe, however, that many of these schemes are defensible, and we believe appropriate action should be taken by policymakers to correct these abuses.

For example, we are concerned with the abuses that have developed surrounding

the awarding of the 180-day exclusivity provision for the generic company that successfully challenges a brand name patent; the practice of some brand name companies to ‘‘late list’’ patents in the Orange Book, resulting in a 30-month stay of the

generic drug approval; and the filing of frivolous ‘‘citizens petitions’’ with the FDA,

which slows down generic drug approval. These citizen petitions can delay generic

availability for six to eight months, and the overwhelming majority of them are rejected by the FDA.3

For these reasons, we support H.R. 1862, and its companion bill S.812, the ‘‘Greater Access to Affordable Pharmaceuticals Act,’’ also known as the Emerson/Brown and

McCain/Schumer bills. We look forward to working toward its enactment.

We also support the FTC’s investigation into the extent to which brand manufacturers have paid generic manufacturers not to market competing generic drug products. The FTC also plans to investigate brand manufacturers’ abusive patent listings and patent litigation, which stall generic competition, whether or not the listed

patents are valid.

After the FTC completes its study, we recommend implementation of a four-stage

strategy with the goal of preventing such anticompetitive practices in the future.

• First, the FTC should immediately halt all anticompetitive practices it discovers.

• Second, the FTC should issue new rules or guidances preventing such anticompetitive arrangements in the future.

• Third, the FTC should work closely with the Food and Drug Administration to

revise the FDA’s policies regarding citizens’ petitions, the 180-day exclusivity

rule and the 30-month stay rule.

• Fourth, the FTC should recommend revisions to the relevant provisions of the

Hatch-Waxman Act to permanently eliminate the ability of brand and generic

drug manufacturers to conspire to restrain competition.

We are also concerned with certain brand-name manufacturer ‘‘evergreening’’

strategies, which, when combined with the explosion in direct-to-consumer (DTC)

advertising, are further minimizing the cost savings impact of generics, even if they

are successful at reaching the marketplace.

For example, before a patent expires on a brand name drug, a manufacturer will

seek to switch the patient to a slightly-different ‘‘next generation’’ of the brand

name drug, or seek to move the patient over to a long-acting or single-day dosage

of the drug, making it difficult for the generic to penetrate the market. This process

has been made easier by DTC advertising, which encourages patients to ask their

physicians about new drug therapies. While we believe that some patients would

logically benefit from the new generation drug, or the new daily dosage form, it is

highly likely that the patient could use the generic version of the brand name drug

and experience the same medical results at a much lower cost.

We are also concerned about a new ‘‘evergreening’’ tactic in which a brand name

company seeks a different ‘‘use patent’’ for a drug whose original patent is about

to expire, and sells the drug under a different name and for a different indication.

Even though the original product may be off patent, the pharmacist cannot substitute the generic version of the off patent brand for the identical new patented

drug because of the new use patent that the manufacturer was successful in obtaining. Take, for example, Sarafem, which contains the same active ingredient as the

popular anti-depressant Prozac, but which was approved for the new use indication

of premenstrual dysphoric disorder (PMDD).

Finally, we understand that the Congress will be reauthorizing the pediatric exclusivity provisions of the FDAMA this year. NACDS fully supports the testing of

drugs in children, and believes that it is important that many older, off patent

drugs, which are commonly used in children today, should be among those tested.

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However, we question whether the six-month additional exclusivity afforded to

some block buster drugs is an appropriate public policy incentive to encourage brand

name companies to do these studies. Pharmaceutical companies should be rewarded

for doing these studies, but it may be the case that the hundreds of millions of dollars in additional revenue generated for these manufacturers in brand name drug

sales are skewed in favor of drug manufacturers rather than consumers. The value

of this exclusivity should be directly tied to the value and usefulness of the pediatric

studies. Moreover, this additional six months gives manufacturers additional time

to execute their various ‘‘evergreening’’ strategies, which further delays generic

entry and erodes generic penetration.

CONCLUSION

NACDS strongly urges Congress to examine current laws and regulations that determine the market availability of generic pharmaceuticals. It is critical for life and

health that brand name manufacturers are given appropriate incentives to research

and develop new drugs and to study the effects of drugs in children. On the other

hand, it is also necessary to assure that generic pharmaceuticals know the ‘‘rules

of the road’’ without being hit with every detour and delay that a brand name manufacturer can use to limit the availability of generic drugs. We think that the current market is out of balance, and generic availability and the savings to consumers

is the primary casualty of this brand name drug bias.

We believe that Congress should act soon to rectify this situation. Undoubtedly,

increasing the availability of generic drugs will help make a new Medicare senior

pharmacy benefit more affordable, as well as help struggling state Medicaid programs control their drug spending. We also believe that this will help uninsured

Americans better obtain their medications and slow the rate of growth in private

sector drug programs, which have also been experiencing double-digit rates of

growth in their pharmaceutical budgets. We appreciate the opportunity to submit

this statement for the record. Thank you.

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