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91–212 DTP 2003

S. HRG. 108–250

LEGISLATIVE AND REGULATORY RESPONSES TO

THE FTC STUDY ON BARRIERS TO ENTRY

IN THE PHARMACEUTICAL MARKETPLACE

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

JUNE 17, 2003

Serial No. J–108–16

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ORRIN G. HATCH, Utah, Chairman 

CHARLES E. GRASSLEY, Iowa 

ARLEN SPECTER, Pennsylvania 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

LARRY E. CRAIG, Idaho 

SAXBY CHAMBLISS, Georgia 

JOHN CORNYN, Texas 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

JOHN EDWARDS, North Carolina 

BRUCE ARTIM, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 1

Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa, prepared 

statement .............................................................................................................. 50

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 77

Schumer, Hon. Charles E., a U.S. Senator from the State of New York ............ 17

prepared statement .......................................................................................... 85

WITNESSES 

Bradshaw, Sheldon T., Deputy Assistant Attorney General, Office of Legal 

Counsel, U.S. Department of Justice, Washington, D.C. .................................. 10

Jaeger, Kathleen D., President and Chief Executive Officer, Generic Pharmaceutical Association, Washington, D.C.; accompanied by John Yoo, Professor 

of Law, University of California at Berkeley, Berkeley, California ................. 23

Kuhlik, Bruce N., Senior Vice President and General Counsel, Pharmaceutical 

Research and Manufacturers of America, Washington, D.C. ........................... 24

Metzenbaum, Howard M., Former U.S. Senator, and Chairman, Consumer 

Federation of America, Washington, D.C. .......................................................... 20

Muris, Timothy J., Chairman, Federal Trade Commission, Washington, D.C. .. 3

Troy, Daniel E., Chief Counsel, Food and Drug Administration, Rockville, 

Maryland ............................................................................................................... 5

SUBMISSIONS FOR THE RECORD 

Federal Trade Commission, Washington, D.C., prepared statement .................. 27

Jaegar, Kathleen D., R.Ph., J.D., President and CEO, Generic Pharmaceutical 

Association, Arlington, Virginia, prepared statement ....................................... 51

Kuhlik, Bruce N., Senior Vice President and General Counsel, Pharmaceutical 

Research and Manufacturers of America, prepared statement ........................ 66

Metzenbaum, Hon. Howard M., Chairman, Consumer Federation of America, 

prepared statement .............................................................................................. 79

Troy, Daniel E., Chief Counsel, Food and Drug Administration, Department 

of Health and Human Services, Rockville, Maryland, prepared statement .... 94

(1)

LEGISLATIVE AND REGULATORY RESPONSES 

TO THE FTC STUDY ON BARRIERS TO 

ENTRY IN THE PHARMACEUTICAL MARKETPLACE 

TUESDAY, JUNE 17, 2003 

UNITED STATES SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Committee met, pursuant to notice, at 10:05 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Orrin G. Hatch, 

Chairman of the Committee, presiding. 

Present: Senators Hatch and Schumer. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM THE STATE OF UTAH 

Chairman HATCH. Today, the Committee will hold a hearing in 

an area of great importance to the American public—competition in 

the pharmaceutical marketplace. This Congress has witnessed a 

growing spirit of bipartisan cooperation on pharmaceutical issues. 

After so many years of searching for consensus, we are all encouraged that the Finance Committee has now approved by a bipartisan majority the medicare reform and prescription drug benefit 

bill that we are now considering on the Senate floor. 

President Bush deserves credit for encouraging the Congress to 

act in the best interests of the public on these matters. We owe a 

debt of gratitude, as well, to Senators Grassley and Baucus, Chairman and Ranking Member on the Finance Committee, for the work 

that they did over the last number of years which culminated last 

week in a passage of the bill out of committee. 

I will give them my wholehearted support as the Senate debates 

the bill over the next two weeks. Having been a member of the socalled tripartisan group which developed and advanced the basic 

structure of this Medicare reform bill over a number of years, I am 

excited at the prospect of finally getting the job done for our seniors and those who are disabled in our society. But there is another 

set of issues relating to pharmaceuticals that promises to benefit 

the American public through increased competition in the pharmaceutical marketplace, and that is the subject of our hearing today. 

This Committee held a hearing in May of 2001 on the issue of 

competition in the pharmaceutical marketplace. At that time, we 

discussed the anticompetitive behaviors made possible in part by 

the sometimes complex and admittedly confusing text of a law I coVerDate 0ct 09 2002 09:34 Jan 14, 2004 Jkt 091212 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91212.TXT SJUD4 PsN: CMORC
2

authored, the Drug Price Competition and Patent Term Restoration 

Act of 1984, sometimes called the Hatch-Waxman bill. 

Since our last hearing on this issue, much has happened. Indeed, 

the HELP Committee has recently approved S. 1225, legislation 

which builds on that Committee’s earlier McCain-Schumer initiative to address the cost of prescription drugs. 

I must also single out both the Federal Trade Commission and 

the Food and Drug Administration for playing a constructive role 

in attempting to end several mechanisms by which some researchbased and generic drug firms were attempting to game the system 

to avoid competition in the marketplace. Senator Leahy is to be 

commended, as well, for his legislative initiative, the Drug Competition Act, which I have cosponsored. 

The agency has succeeded in winning several consent decrees 

with a variety of offending firms under the existing antitrust statutes. In addition, the FTC conducted an exhaustive survey and 

study of how certain provisions of the 1984 Waxman–Hatch Act affected competition in the pharmaceutical industry. 

The FTC study contained two major recommendations, both of 

which we will examine today. The first addressed the use of the 

statutory 30-month stay granted by the 1984 law in situations 

where patents are challenged by generic competitors. The second 

responds to those situations in which R and D and generic firms 

were entering into agreements not to impede generic competition. 

Our hearing will also examine how well the Bush administration’s final rule effectuates a fair and thoughtful one, and only one, 

30-month stay policy. Since the rule was finalized just last Thursday, none of us can understand all of its nuances. However, it does 

appear to be a good-faith attempt to implement the first FTC recommendation. But in an area this complex, no one should be surprised if we find that the agency inadvertently created new loopholes or unintentionally imposed unfair hardships that may need 

to be refined. 

We will also examine today the patent provisions of the HELP 

Committee legislation, a bill I find much improved over last year’s 

initiative, due in large part to the considerable influence of Chairman Gregg and, of course, Senator Schumer’s work as well. 

While I do have some concerns over this legislation which we will 

pursue in some detail this morning, I need to commend the sponsors of S. 1812 for moving in the right direction. I recognize that 

the language is something of a moving target, since there is under 

development a package of technical corrections that selected governmental and industry experts have commented upon. We will ask 

our witnesses today to comment on the legislation and the possible 

need for amendment. 

It is unfortunate that the PTO was unable to present a witness 

today, albeit on short notice, and I will continue to press the agency for comments on how the bill and the final rule affect patent 

rights. It would have been preferable for the Committee to have the 

benefit of an agency official who could sit with his sister agencies 

and advise us on the patent provisions of S. 1225. 

In closing, I have said many times that I prefer a comprehensive 

approach to Hatch-Waxman reform that includes a discussion of 

augmenting the existing intellectual property incentives and conVerDate 0ct 09 2002 09:34 Jan 14, 2004 Jkt 091212 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91212.TXT SJUD4 PsN: CMORC
3

sideration of whether and how to create a fast-track approval process for off-patent biologics. Nevertheless, I stand prepared, and the 

Judiciary Committee stands prepared to participate in any effort to 

revise the Drug Price Competition and Patent Term Restoration 

Act of 1984. 

So I look forward to today’s hearing, and we will look forward to 

our panels of witnesses and hope we can arrive at some good, effective work here today. On our first panel, we are pleased to have 

a number of witnesses from the administration. 

First, we will hear from our friend, Tim Muris, Chairman of the 

Federal Trade Commission. The FTC allocates a significant share 

of its resources toward overseeing the health care sector, including 

the pharmaceutical industry. The July 2002 FTC study on generic 

drug entry prior to patent expiration is a key document for policymakers. 

So we welcome you, Chairman Muris, and look forward to hearing your testimony here today. 

Our second witness is Dan Troy, Chief Counsel for the Food and 

Drug Administration. The FDA just issued a final rule last Thursday that is intended, in part, to implement one of the major recommendations of the FTC report. Dan will help us to understand 

what the FDA rule does and how the rule would work with legislation under development that appears in large part an attempt to 

codify key elements of the FDA rule. It is my understanding that 

staff from both FTC and FDA have provided a considerable amount 

of so-called technical assistance toward the end of protecting the 

language that came out of the HELP Committee last week. 

Our third witness on the panel, Sheldon Bradshaw, Deputy Assistant Attorney General, Office of Legal Counsel, will not submit 

prepared testimony. We are pleased that Mr. Bradshaw could appear here on relatively short notice. 

Some have raised constitutional objections on the aspects of S. 

1225, as reported. As the Department is still reviewing this issue 

and the language may be in flux, we do not expect Mr. Bradshaw 

to give any final administration views on this issue. He may be 

able to answer questions on what type of interagency review process may be underway to help answer this question and give us an 

idea when the Committee can expect a response. 

Although I extended an invitation, absent from this panel is the 

representative from the Patent and Trademark Office. This is unfortunate but understandable, given that it may take some time for 

the experts at PTO to assess how the developments of last week, 

the FDA final rule, and the reporting of S. 1225 will affect patent 

law and policy. Even if we can’t hear from them today, I expect 

them to present their views on these matters in a reasonable period of time. 

Now, let’s start with Chairman Muris. I would like you to summarize your remarks in seven minutes, if you can, and we will go 

from you to Dan Troy. 

STATEMENT OF HON. TIMOTHY J. MURIS, CHAIRMAN, 

FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 

Mr. MURIS. Well, thank you very much, Mr. Chairman. I am not 

even sure I will take seven minutes, but let me just very briefly 

4

address three points. First is the context of Hatch-Waxman, second 

is our enforcement agenda, and finally, briefly, a few evidentiary 

points from our study. 

In terms of the Hatch-Waxman context, as I think we all know, 

advances in pharmaceuticals bring enormous benefits to Americans. Because of innovation, many medical conditions often can 

now be better treated with drug therapy than with alternative 

means such as surgery. We must maintain appropriate incentives 

for the development of such drugs. 

In 1984, Congress enacted Hatch-Waxman. The amendment 

sought to balance incentives for continued innovation by researchbased pharmaceutical companies, on the one hand, and opportunities for market entry by generic drugs on the other. Without question, Hatch-Waxman has increased generic entry. By purchasing 

generics, consumers have saved billions. Even greater savings are 

possible in the future. 

Moving to the FTC’s enforcement agenda, we have challenged 

conduct by firms allegedly gaming Hatch-Waxman to deter or delay 

generic competition. Our first generation of such matters involved 

agreements through which a brand name manufacturer allegedly 

paid a generic firm not to enter and compete, and to use the 

generic’s rights under Hatch-Waxman to impede entry by others. 

Our second generation of enforcement activities involves allegations that brand name manufacturers have delayed generic competition through a particular Hatch-Waxman provision that prohibits the FDA from approving a generic applicant for 30 months. 

Brand name drug manufacturers sometimes act strategically to 

obtain more than one 30-month stay of FDA approval of a particular generic by listing patents in FDA’s Orange Book after a generic company has submitted its application. The Commission recently obtained strong, and in some cases unprecedented relief 

against Bristol-Myers for this type of activity for its cancer drugs 

Taxol and Platinol, and its anti-anxiety drug BuSpar. 

Finally, let me briefly discuss our study. It examined 104 brand 

name drugs between 1992 and 2000. We asked whether and how 

generic drug companies competed against brand name drug manufacturers before the patents expired. 

Under Hatch-Waxman, brand name companies must list patents 

that claim each brand name drug in the Orange Book. A generic 

applicant then may certify that its product does not infringe the 

relevant patents or that those patents are invalid. If the brand 

name manufacturer sues the generic applicant for patent infringement, then the FDA may not approve the generic’s application 

until a court determination of patent invalidity or non-infringement, or 30 months after receipt of the certification. 

Our study found that 30 months has approximated the time necessary for FDA review and approval of a generic’s application, as 

well as the time necessary for a district court to resolve the patent 

litigation. Nevertheless, for eight brand name drug products, the 

manufacturers have obtained more than one 30-month stay. This 

has caused considerable delay of FDA approval of the generic’s application, ranging from 4 to 40 months of additional delay. 

Our study recommends a limit of one automatic 30-month stay 

per drug product, per generic application, to resolve infringement 

5

disputes over patents that were listed in the Orange Book prior to 

the filing of the generic’s application. And we are certainly pleased 

that the FDA has adopted substantially that approach and that it 

is also in the new bill that you mentioned. 

Our study also examined the Hatch-Waxman provision that 

awards 180 days of marketing exclusivity to the first generic to 

apply to enter the market before patent expiration. During this 

time, the FDA may not approve a subsequent generic. This provision provides an incentive for companies to challenge patent validity and to design around patents. 

The data in our study found that generic applicants prevailed in 

about 75 percent of the patent litigation resolved by a court decision. Sometimes, however, the case is not litigated to a decision 

and there is a settlement. We found 14 settlement agreements 

that, when executed, had the potential to park the first generic applicant’s 180-day exclusivity for some time, and thus prevent subsequent generic entry. 

Because they can raise antitrust issues, the Commission supports the Drug Competition Act of 2001, introduced by Senator 

Leahy and passed by the Senate during the last Congress, that 

would require the filing of these types of agreements with the FTC 

and the Department of Justice. 

Our study also made three minor recommendations to clarify the 

regulations governing the triggers for the 180-day marketing exclusivity. These recommendations should reduce any potential for the 

180-day exclusivity provision to be a bottleneck to subsequent generic entry. 

The Commission will continue to protect consumers from anticompetitive practices that inflate drug prices. We will continue to 

work closely with the Committee. I want to thank you, Mr. Chairman, on behalf of the Commission for your support of our work. I 

welcome your questions. 

[The prepared statement of Mr. Muris appears as a submission 

for the record.] 

Chairman HATCH. Thank you, Chairman Muris. We appreciate 

it, and we have appreciated the work you have done on this and 

the FTC has done. 

We will go to Mr. Troy. 

STATEMENT OF DANIEL E. TROY, CHIEF COUNSEL, U.S. FOOD 

AND DRUG ADMINISTRATION, ROCKVILLE, MARYLAND 

Mr. TROY. Thank you, Mr. Chairman. It is characteristic of your 

modesty that you referred to the law we are discussing today as 

Waxman–Hatch. Let me assure you, though, that everyone at the 

FDA talks about it as Hatch-Waxman. 

Chairman HATCH. I am sure that is going to make Henry really 

happy, I will tell you. 

Mr. TROY. That is not my goal. 

I also want to say what an honor it is to sit next to Chairman 

Muris, whose leadership in this area has really been very useful for 

the FDA. We have tried to work closely together with the FTC, and 

I think it is fair to say that at least from where we sit the relationship between the FDA and the FTC on a wide variety of counts has 

never been stronger. 

6

I want to begin by stressing that Dr. McClellan’s main goal for 

the FDA in this area is to promote innovation, while also promoting rapid access to low-cost, safe and effective generic drugs. 

Our recent improvements to the implementation of Hatch-Waxman 

are really just part of a set of FDA initiatives that will reduce drug 

costs, while again encouraging innovation by speeding up the drug 

development and approval process without compromising FDA’s 

high standards for safety and effectiveness. 

We are taking a lot of steps to reduce the time and cost of new 

drugs so people have wider access to safe and effective new drugs. 

You need the new drugs in order to ultimately have the generic 

drugs. And with respect to generics, we believe our recent rule 

changes will help. But far more important, other reforms in the generic approval process that were announced at the same time will 

shave months off the time to availability of generic drugs across 

the board. 

Similarly, under Dr. McClellan’s leadership, we have charted 

new pathways for improving inhaled and topical drugs that will potentially affect many products. These broad improvements in drug 

availability, both new drugs and generic drugs, will have a major 

impact on all patients, not just those affected by imperfections in 

the current law. With all due respect, we truly believe that the additional $13 million to the Office of Generic Drugs will make the 

biggest difference in the area of generic drug reform. 

That said, since its enactment in 1984, Hatch-Waxman has become an extremely valuable tool in making medications more affordable to American citizens. Of course, you know this, Mr. Chairman. To date, FDA has approved more than 10,000 generic drug 

products, providing high-quality, lower-cost prescription drugs to 

millions of consumers. 

Of course, there are two provisions that have been associated 

with some anticompetitive behavior—the submission of brand 

name drug patents for listing by FDA, and the role of those patents 

in generating 30-month stays in the approval of generic drugs 

while patent infringement issues are litigated. 

I am not going to go over what Chairman Muris said, but essentially the way I conceptualize Hatch-Waxman is as a complex signaling mechanism between generics and innovators, where the 

innovators declare their set of relevant patents. And the generics, 

when they submit their abbreviated new drug applications, have to 

declare the status of their product vis-a-vis those patents. And 

then, of course, there is the 45-day provision and 30-month stay to 

allow time for the patent issues to be worked out. 

Some have suggested that FDA should take a much more active 

role in policing the patents that go into the Orange Book. I want 

to make clear that we do not undertake an independent review of 

the patents submitted by the NDA sponsor. We have tried in our 

new rule to make it clear which patents must and must not be listed, and to have a beefed-up declaration. 

But as we understand the statute, it requires us to publish patent information on approval of the NDA, thus making the agency’s 

role ministerial, and courts have so held. I think that one of the 

signal features of Hatch-Waxman is that generic and innovator 

firms are supposed to resolve their disputes about patent listings 

7

and about patents in general in private litigation in the courts, 

where the expertise really resides with respect to patent questions. 

We therefore strongly believe that FDA should not be asked to, 

or expected to review drug patents because we do not have the expertise to make these assessments. And we believe, for reasons 

that my written testimony goes into greater detail, that it would 

actually fail to speed the availability of generic drugs. We would 

end up in litigation, rather than litigation being worked out between the generics and the innovators. 

As I mentioned, we really commend the FTC for their comprehensive study on these issues. It has been enormously useful to 

us. The factual information in the report was very valuable in our 

own discussions on the generic drug approval process. 

Of course, the FTC recommended only one 30-month stay be allowed for infringement disputes over patents listed in the Orange 

Book before the filing of the ANDA. We agree that there should be 

one 30-month stay. We recognize, as our new rule says, that recently more ANDAs have been the subject of 30-month stays than 

in years past, and that more patents on average are now being litigated per generic drug application than in the past. 

But we would note that the FTC report, number one, did not say 

how the single 30-month stay should be implemented. We tried to 

do it through dealing with the statute as it currently is, and we 

think we did so successfully, but we are happy to talk about that. 

We note that the FTC report recognized that we do not have the 

capacity to review the appropriateness of patent listings. 

As you know and as you said, on June 12 we announced our final 

regulations that will streamline the process for making safe, effective generic drugs available to consumers. We expect that rule to 

save patients over $35 billion in drug costs over 10 years. We also 

think it will avoid unnecessary litigation and protect the process of 

developing new breakthrough drugs. 

Brand name drug manufacturers will be limited, as you have 

said, to only one 30-month stay to resolve allegations that a generic 

drug maker is infringing a listed drug patent. Multiple 30-month 

stays will not be permitted. As I mentioned, we have tightened the 

requirements and increased the information required for drug patent submission and listings, and brand name drug manufacturers 

will not be allowed to delay access to generic drugs by submitting 

additional patents for listing in the Orange Book for drug packaging or other minor matters not really related to effectiveness. 

The required submissions include patent information on active 

ingredients, drug formulations and composition, and approved uses 

of the drug. There is a much more detailed signed attestation accompanying the patent submission that is required, and we say on 

the declaration that false statements in the attestation can lead to 

criminal charges. We think these actions will significantly reduce 

opportunities to list inappropriate patents just to prevent access to 

low-cost generic alternatives. 

We are pleased to note again, as you mentioned, that last week 

the Senate Committee on Health, Education, Labor, and Pensions 

unanimously reported legislation on accelerating access to generic 

drugs. We recognize and appreciate Chairman Gregg’s leadership 

8

in achieving the bipartisan agreement with the original sponsors of 

the bill. 

We are pleased that this proposed legislation has key ideas embodies in FDA’s regulation to improve access to generic drugs, and 

that it doesn’t include some of the most problematic provisions of 

S. 812, which passed the Senate last year. 

Not surprisingly, in this complex, very technical area of the law, 

we have concerns with the workability of that draft that we believe 

must be resolved for the legislation to achieve its intended effect. 

I know of no more of the law in which the law of unintended consequences operates with more force than this one. 

We are working with the sponsors and other members to address 

various technical and policy issues. We are actively addressing the 

issues that have been raised by brand name and generic companies 

about the operation of the statute. We continue to work very, very 

hard to implement the Hatch-Waxman amendments as best we 

can, given the statutory text, the history of the legislation, as well 

as the numerous court challenges. 

You know, it is sometimes liberating to know that no matter 

what you do, you are going to get sued. It frees you to try and do 

the right thing. In doing so, FDA has tried to maintain a balance 

between protecting innovation in drug development and in expediting the approval of lower-cost generic drugs. 

I appreciate the opportunity to discuss these issues with you and 

I am happy to answer your questions. 

[The prepared statement of Mr. Troy appears as a submission for 

the record.] 

Chairman HATCH. Well, thank you. 

Let me begin with Chairman Muris. It has been my experience 

that Government reports usually just simply gather dust. So let me 

start by congratulating you and your agency for producing a report 

that appears to be gaining more and more traction with policymakers. 

In addition to the two major recommendations we have already 

talked about, your report also contains three minor recommendations. Could you please briefly describe for the Committee or provide for the record, if you wish, what these three minor recommendations are, what their status is with respect to acceptance 

within the administration and implementation, and how our Committee might best assist you with them if we decide they have 

merit? 

Mr. MURIS. Yes, and thank you again, Mr. Chairman, for your 

kind words about the FTC. We made three minor recommendations 

about the 180-day exclusivity triggers. The first one was that commercial marketing, which is one of the triggers, includes generic 

marketing of a branded product. That is in the Gregg-Schumer bill. 

The second is that the court decision trigger be a decision of the 

district court, which is the current rule. That is not in the GreggSchumer bill; it identifies they have the circuit court. Although 

there are clearly countervailing arguments on both sides of that 

issue, we think from the standpoint of consumers the district court 

rule is better. It provides the appropriate incentives, although we 

recognize that in some cases it could work a hardship on generics. 

It is a question of looking across the total of the circumstances and 

9

balancing what we think is in consumers’ best interest, which is 

the fundamental lodestone of FTC action. 

Finally, the study’s third recommendation was that dismissal of 

a declaratory judgment action be a decision of the court to trigger 

the 180 days. The D.C. Circuit in Teva held that a dismissal for 

lack of case or controversy would trigger the generic’s exclusivity 

period. That is not in Gregg-Schumer. We would recommend that 

this provision be added to Gregg-Schumer. 

Chairman HATCH. Okay, thank you. 

Mr. Troy, what is your opinion of whether we should view the 

30-month stay provisions of S. 1225, if enacted, as superseding, 

complementing, or having some other relationship with the recently finalized FDA rule? 

Mr. TROY. Well, we believe that our rule has addressed the issue 

of single 30-month stays. Our rule does not address at all some of 

the other things that are addressed in S. 1225, in particular the 

180-day exclusivity. I think a lot of the fixes that are talked about 

with respect to S. 1225 with respect to the 180 days are things that 

we might not—we haven’t taken a hard look at this, but we might 

not be able to do by rule, as we felt we were able to change the 

prior interpretation because we thought the language was ambiguous and change the prior interpretation from multiple 30-month 

stays to single 30-month stays. 

That said, again, without conceding that legislation is necessary 

because we don’t believe legislation is necessary, if Congress were 

to codify a workable single 30-month stay provision, it is obviously 

easier to defend legislation than it is to defend a change in interpretation in the rule. But it has got to be workable, and our main 

concern—and we have been making very good progress working on 

a bipartisan basis with the staff—our main concern is to make sure 

that it is workable because this is a very complex area of law. It 

is very technical. 

Again, I will go back a number of times to the law of unintended 

consequences. In part, because of our experience in trying to administer Hatch-Waxman, we see things that others might not because of our immense experience with—and it is not mine; it is the 

people on my staff, many of whom you know. There is no end to 

the originality of the arguments that are made in this area. The 

dollars are very large, the issues are extremely well-lawyered. 

So we see pitfalls and traps in many different places, and so we 

have been trying to work with the staff, again we think in a way 

that has been making progress, to try and address those concerns. 

Chairman HATCH. You may have referred to this briefly, but 

what, if any, of the patent listing and the 30-month stay provisions 

of the rule would need to be revisited if legislation is patterned 

after the outlines of S. 1225? 

I will give you an example. For example, does the final rule limit 

the 30-month stay to those patents listed prior to the submission 

of the abbreviated new drug application, the ANDA? 

Mr. TROY. Not in all cases, no. What the rule says is that there 

is one 30-month stay per ANDA. But if there is no paragraph IV 

certification with respect to the initial NDA, if you will, when the 

ANDA is filed, if there is a later listed patent and it is the first 

four, then you could have a 30-month stay. Let me suggest that 

10

that is likely to be a relatively—in fact, extremely infrequent occurrence. 

But let me say that the other two parts of our rule, tightening 

up on the patent declaration and making clear which patents must 

and must not be listed in the Orange Book, we think have already, 

to be immodest, made the world better by addressing the concerns 

that the FTC has raised and by providing clarity in this area and 

by limiting the opportunities for gaming. 

If S. 1225 were to pass in this or any of the forms that are being 

discussed, those two parts of the rule would continue to operate, 

and again would continue to make the world better. Legislation 

codifying a single 30-month stay would clearly supersede, if you 

will, that part of the rule that says single 30-month stay because 

Congress will have directly spoken to the precise question at issue. 

Again, that aspect of the rule would presumably be, if the legislation were passed, superseded. 

Chairman HATCH. Mr. Bradshaw, I have some questions and 

comments for you on one of the important matters in this. 

Of course, Chairman Muris and Mr. Troy, you can comment, if 

you wish, on any of these questions. 

As you know, some, including Boyden Gray, former White House 

Counsel under Bush I, have questioned the constitutionality of proposed Section 271(e)(5) of Title 35 as created by S. 1225. This section provides that the failure to bring a patent infringement action 

establishes a case or controversy sufficient to confer subject matter 

jurisdiction for a declaratory judgment action in Federal court. I 

understand that equally respected attorneys take a different view 

than Mr. Gray, and I know that the Department has not completed 

its analysis of this language. 

Now, given that the so-called technical amendments package 

may affect this provision, it is possible that we may have to ask 

you to review different language at some point. I wonder if your research to date has turned up any other similar provision in the 

U.S. Code. 

STATEMENT OF SHELDON T. BRADSHAW, DEPUTY ASSISTANT 

ATTORNEY GENERAL, OFFICE OF LEGAL COUNSEL, DEPARTMENT OF JUSTICE, WASHINGTON, D.C. 

Mr. BRADSHAW. Thank you, Mr. Chairman. I am pleased to be 

with you today to discuss constitutional concerns surrounding S. 

1225, the Greater Access to Affordable Pharmaceuticals Act. 

On the specific language regarding the declaratory judgments in 

Section 271, we do not yet have a definitive position on whether 

cases brought pursuant to it would satisfy the Article III case or 

controversy requirement. I do have several general observations 

that I would make. 

The requirement of an actual case or controversy, as set forth in 

the Declaratory Judgment Act, is constitutionally compelled rather 

than statutorily required. As such, like other Article III requirements—for example, standing—it cannot simply be granted by 

Congress, but must be satisfied by the plaintiffs. 

I have not had an opportunity to fully examine this legislation 

or compare it with existing legislation. More importantly, we would 

like to see the package that contains the technical fixes which we 

11

have not yet seen before we opined on that subject. But I would 

lead with those general observations that the actual case or controversy requirement is constitutionally compelled rather than 

statutorily required. And as a result, Congress can’t simply create 

a case or controversy by statute, but the plaintiffs must establish 

the constitutional requirements for bringing the case. 

Chairman HATCH. I would also note that the FDA final rule contains an informative discussion of how adoption of the one, and 

only one 30-month stay policy might affect declaratory judgment 

actions. If I read this discussion correctly, I think the FDA concluded that it was not a barrier even without the case or controversy provision contained in S. 1225. 

Am I correct on that, Mr. Troy? 

Mr. TROY. I am not an expert in this area, in part because it 

really has more to do with patent law. But we believe that in most 

cases—I think in virtually every case, a declaratory judgment suit 

for invalidity would lie. Whether a suit for infringement, or declaratory judgment with respect to infringement would lie if the innovator hasn’t taken any action is an issue. 

The courts haven’t articulated a standard with respect to that. 

I am certainly not going to opine. I haven’t really thought seriously 

about the constitutional issue. I would defer to the Justice Department on that. But what we have tried to say is that we believe that 

there can be mechanisms for the generic to get the kind of certainty that it may want before it goes to market. 

Let’s be clear that in many areas of industry people go to market 

and they run the risk of a lawsuit for patent infringement. That 

happens all the time. I could go into the pen-making business and 

if I am infringing on somebody’s patent, I could be sued for patent 

infringement. 

Generics, for good reasons, want more certainty than that before 

they launch, and so the question is can they get it. And we believe 

that, again, so long as they make sure that they do not run afoul 

of the FTC’s concerns about competition, there may well be ways 

that we again articulated in the final rule for the generic to write 

to the innovator and say—this is outside the context of a 30-month 

stay where the notice is not a requirement—to write to the innovator and say, here is what we are doing, we invite you to sue us. 

So the point is there may be ways for the generic to induce the 

kind of lawsuit and the kind of certainty. If the innovator is written and takes no action, then query whether or not there is a reasonable apprehension of suit. 

Chairman HATCH. I would highlight, Mr. Bradshaw, the fact that 

the FDA pointed out in the 1999 Teva case that the D.C. Circuit 

found that no case or controversy existed when a patent-holder 

drug company disavowed an intent to sue. Now, absent this intent, 

the court could not find the requisite reasonable apprehension of 

suit. 

I wonder if you have any preliminary thoughts on the case or 

controversy language of S. 1225, including what factors you need 

to analyze, and so forth. I also hope that the Department might be 

able to suggest ways to avoid any constitutional problematical language as work on the legislation continues. 

12

Mr. BRADSHAW. Sure, and I understand again that one of the 

technical fixes under consideration may, I have been told, do that, 

in fact. But you are right in citing the D.C. Circuit case that the 

general test that courts have emphasized is whether there is a reasonable apprehension of an infringement suit as sort of the touchstone of justiciability in a case under the Declaratory Judgment 

Act. 

As a result, the applicant in this case would need to have a reasonable apprehension that the patent-holder might bring an infringement suit in order to have an actual case or controversy for 

purposes of the declaratory judgment action. And if there was a 

case like the facts in the D.C. Circuit where the patent-holder expressly stated that, in fact, they would not bring an infringement 

action, it may be difficult for an applicant under those facts to establish an actual case or controversy. 

Chairman HATCH. I hope you will get us your opinion as soon as 

possible. 

Mr. BRADSHAW. We are in the process of working with the administration in formulating the administration’s views on the constitutional questions, and just as soon as we receive a copy of the 

different technical fixes, we will go about reviewing them. 

Chairman HATCH. Now, as the Department looks more closely at 

how S. 1225 reforms civil justice proceedings, you may very well 

have further comments on the bill. And if that is the case, I would 

like you to communicate your concerns to the Committee as soon 

as possible, okay? 

Mr. BRADSHAW. Yes. 

Chairman HATCH. Let me just ask you, is the Department currently looking at any other aspects of S. 1225, and if so, what are 

you examining? 

Mr. BRADSHAW. Well, as you are aware, Mr. Chairman, the Office 

of Legal Counsel advises the administration on the constitutionality of all legislation that is introduced in Congress. So as a 

matter of course, our office is reviewing S. 1225 for constitutionality and we are in the process of advising the administration 

on our views. 

Without going into any details on what we have advised people 

within the administration, because that process is still ongoing, I 

would note that others have raised questions related to whether or 

not portions of the bill are impermissibly retroactive. Again, like 

the Article III question, we have not yet taken a definitive position 

on that. 

Chairman HATCH. All right. 

For Mr. Muris and Mr. Troy, in its statement of administration 

policy opposing the McCain-Schumer bill of last year, the White 

House cited its fear that S. 812 might encourage excessive litigation. I am concerned that the unique and, in my view, not fully justified advantage granted to first filers with respect to the 180-day 

marketing exclusivity incentive may already be encouraging earlier 

lawsuits of dubious merit. 

FDA’’s shared exclusivity policy also, it seems to me, plays a role 

in this dynamic. I have seen the June 2 issue of the Pink Sheet 

that came out which contains an article detailing that the incredible pressure to be the first to file a paragraph IV challenge might 

13

result in a marked increase in willful infringement cases. The article described a case in which a Federal court ruled against a generic firm which filed an ANDA application before obtaining outside counsel opinion on either non-infringement or invalidity. 

To me, one of the most perplexing features of both S. 812 from 

last year and the new bill, S. 1225, is the almost unbelievable advantage given first filers of generic drug applications. As you know, 

prior to the D.C. Circuit’s Mova decision in 1997, FDA had required 

a generic challenger to successfully defend against the patent claim 

of an innovator company. 

Now, from a policy perspective, why should a mere first filer be 

treated better than a party who actually wins a lawsuit? And if we 

are to legislate in this area, why don’t we consider overriding Mova 

and reinstate the old successful defense requirement? 

We will start with you, Mr. Muris, or either one. 

Mr. MURIS. The Commission in its report doesn’t view the 180 

days as a reward for successfully defending a patent suit. We view 

it as an incentive to file the ANDA in the first instance. 

Now, I know there are some proposals to actually avoid the shanty town problem of people in line to file, and I am sure Mr. Troy 

will address those. But we think that it does create an incentive 

to go ahead and be clever and innovative. And if you are so clever 

and innovative that the branded decides it can’t even sue you, then 

we think so much the better. 

In fact, of the 104 brand-name drugs that we looked at, in 75 the 

brand did go ahead and sue the generic for infringement, but in 29 

it didn’t. From the standpoint of an incentive, we believe the generic, which develops a product and avoids litigation, such as in 

those 29 cases, should benefit from the exclusivity. 

Mr. TROY. We certainly agree with you about S. 812 and we 

thought that it would unduly induce too much litigation, and the 

administration opposed S. 812. 

With respect to the 180-day exclusivity, what Chairman Muris 

was referring to is right now there are sometimes limousines, 

sometimes vans, sometimes cars, sometimes tents in the Metro 

North parking lots that come days, weeks, and in some cases even 

months in advance of a particular date. Why we should reward 

someone because they camp out longer in the parking lot is a good 

question as a matter of policy. It is a good question. 

That said, we are working, we think, very productively with the 

staff on S. 1225 to embody more of a, shall we say, use it or lose 

it approach so that someone can’t park their exclusivity. The FTC 

has done a great job in ensuring that people can’t park their exclusivity. 

We don’t have an official administration policy or position on 

whether or not you should or shouldn’t have 180 days of exclusivity. We certainly think that the question of whether or not you 

should get this reward for being the first and simply the one to 

stand on line the longest is a worthy policy question and is worth 

talking about and thinking about. 

But as I understand all of the discussions that have been going 

on, I think that there is a recognition that that is an issue, and 

there have been some very good solutions that have been talked 

about and thought about in order to try and solve that problem. 

14

Chairman HATCH. With respect to completing the rulemaking in 

less than 1 year from proposed to final rule, it is quite an accomplishment, and you and your staff, I think, need to be commended 

for that. 

Mr. TROY. Thank you, Mr. Chairman. 

Chairman HATCH. That is great. Frankly, I am somewhat envious, to be honest with you, because it has been almost 10 years 

since the Dietary Supplement Health and Education Act passed 

Congress and there are still no final rules specifying good manufacturing practices for those products. 

Mr. TROY. We got out the proposal. 

Chairman HATCH. I don’t want any excuses. That is fine. 

I am pleased that you adopted a one, and only one 30-month stay 

principle, but I wonder how you respond to those in the R and D 

industry, whose shenanigans with multiple stays started the trouble in the first place, who say the way you drafted the final rule 

allows the system to be gamed by ANDA applicants. 

Here is the type of example some have raised with me with respect to the new FDA rule. Suppose there were two patents prior 

to the filing of an ANDA, one compound patent and one formulation patent. A generic applicant may intend to challenge both, but 

initially files a paragraph III certification on the compound patent 

and a paragraph IV certification on the formulation patent. 

Determining that the generic firm has invented around the formulation patent, the generic decides not to pursue the paragraph 

IV litigation. Instead, the ANDA applicant decides to allege invalidity and converts the paragraph III certification on the compound 

to a full-blown paragraph IV challenge. 

The question is this: Under the rule, is the 30-month stay already used up, and if so, doesn’t this open the door to such tactics? 

Mr. TROY. I think, in part, it depends on whether or not it is 

within the first 45 days and whether litigation was commenced. 

But let me say that there is no way, through rulemaking or 

through legislation, to avoid all opportunities for gaming. We tried 

within the limits of the law to plug as many of the loopholes as we 

could. 

I have never participated in a process like this, but we would 

have 10 or 15 staffers in a room with the text of the rule up on 

a screen and we would go through it, all of us, word by word in 

order to look for opportunities that might be seized upon to be 

gamed in an effort to try and say this argument might be made 

here, this argument might be made here. 

We tried as best we could to cut down on all opportunities for 

gaming. We did not succeed in cutting down all opportunities for 

gaming because no legislation is so good, no rule could be so good 

as to cut down all opportunities for gaming because there are unforeseen circumstances and unintended consequences. 

We think we have addressed 80, 85, maybe 90 percent of the 

loopholes that are obvious and that we have seen in the past within the limits of the law. This hypothetical that you have mentioned 

was raised to us. We again tried to address it within the context 

of what happens in the first 45 days. If there is all sorts of switching, FDA, like all administrative agencies, retains authority with 

15

respect to shams. If people are really playing games, we think we 

have authority to deal with that. 

But I am not smart enough, and the 20 people sitting around the 

room aren’t smart enough and far-sighted enough, despite all of our 

expertise and experience, to see every single situation that could be 

gamed. And that said, there were obviously limits to what we could 

do because we are an administrative agency trying to implement 

the statute. 

But, again, we are having much the same discussions and the 

same experience with respect to the legislation because either way 

you tilt it, you can’t write it so clearly that there are no opportunities for gaming. And there is going to be tilting one way or the 

other, and some of the issues that come up are on which side of 

the table do you want to run the risk of gaming. 

I think the best way to approach this, frankly, is to say, well, on 

this side with respect to this issue, we are going to run a little 

more risk of gaming on this side, and on this side for this issue we 

are going to run a little bit more risk of gaming on this side. Hopefully, you end up with something that has some degree of balance. 

Chairman HATCH. Mr. Muris, let me ask you one last question. 

Section III–C of your testimony discusses some of your enforcement 

activities with respect to settlements between generic manufacturers. 

Do you think it is advisable to work with Senator Leahy to consider amending the text of the Drug Competition Act to require the 

reporting to FTC and DOJ of certain potentially troublesome generic-generic or brand name-to-brand name agreements, in addition to the generic-brand name agreements that the bill currently 

addresses? 

Mr. MURIS. We had 20 brand-generic agreements. We only had 

six generic-generic agreements, but some of those did raise potential anticompetitive problems. In fact, we did bring one case involving that. It is certainly not something to which I would object. 

Based on the evidence, it was not as big a problem as the brandgeneric. 

Chairman HATCH. For the two of you, I have one last question 

that has come up, and that is I want to bring out in this question 

some of the complex policy tradeoffs at play in this area. 

First, would one of you be so kind as to give the Committee a 

short explanation of what a polymorph is? And please make it a 

discussion at the level of polymorphs for dummies, okay? 

Mr. TROY. The most simple example of what a polymorph is is 

water, ice, and steam; same molecule, different form. It is all H20. 

Chairman HATCH. Second, I note from comments that the FTC 

submitted to FDA in December that the FTC’s view of the proper 

treatment of polymorph patents is somewhat different from the 

FDA’s. 

Could each of you briefly describe your agency’s views on the 

legal and policy arguments regarding the appropriateness of listing 

polymorph patents in the FDA Orange Book? 

Mr. MURIS. Let me put this in context. With the single 30-month 

stay, if it is upheld by courts or put in the legislation, this problem 

becomes much less important. The problem with these later listed 

patents, however would be eliminated by a single 30-month stay. 

16

We found questionable patenting practices in six of the eight later 

listed patents in which there is a court decision or FTC action. 

Those listings have been found to be questionable. 

Second, the FDA did address to some extent our concern—and 

we appreciate that—in changes they made from the proposed rule 

to the final rule, and I am sure Mr. Troy will explain those, and 

I will defer to him on the empirical evidence. But I think they believe it would have taken care of most of the problems that we saw. 

There was a difference of opinion in how to read the statute and 

that was the source of our disagreement. Obviously, under our system and under the Chevron decision, they have the final say in 

reading their statute, subject to court review, and that court review 

gives fairly significant deference. 

Chairman HATCH. Thank you. 

Mr. Troy? 

Mr. TROY. I just want to reiterate what Chairman Muris said. 

We think that the single 30-month stay and the tightened-up patent declaration and making clear which patents must and must not 

be listed will substantially alleviate this issue because the incentive to come in with later listed patents, if you have a single 30-

month stay, largely falls away. So that is the first point. 

This was, at least for me, the most vexing issue as a policy matter and as a legal matter in the rule because, on the one hand, the 

FTC articulated an interpretation that said the inquiry for listing 

is different than the inquiry for bioequivalence. The other argument was made, well, that is trying to have it both ways. You can’t 

say it is not the same when it comes to listing, but it is the same 

when it comes to approval. You are trying to have it both ways. 

There is a bias here. 

And so we really struggled with the issue and ultimately we felt 

that because the courts have, in fact, given us so much flexibility 

with respect to interpreting what is the same, we thought that we 

diminished our legal risk by going in that direction. I am not going 

to suggest that it was an easy decision. It was probably the most 

hotly debated issue internally with respect to the rule. 

But we think that particularly with the change from the proposal 

to the final which says that—it sort of squares the circle, if you 

will, and says if you are maintaining that it is the same, innovator, 

then you have to have done the work internally to prove that it is 

indeed the same; i.e., to have satisfied at least yourself and to be 

willing to certify that there is a degree of bioequivalence there. 

We think that that is going to dramatically limit any opportunity 

for the indiscriminate listing of polymorph patents and gaming of 

the system even on its own, separate and apart from the fact that 

the single 30-month stay is going to reduce the incentives for the 

gaming with these later listed patents. 

So it is a hard issue. I am not pretending it is not a difficult 

issue. We found the input of the FTC very helpful and very useful 

and we think we have come up with a solution that works. 

Chairman HATCH. Well, thank you. 

We will turn to Senator Schumer. 

17

STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR 

FROM THE STATE OF NEW YORK 

Senator SCHUMER. Well, thank you, Mr. Chairman, and I first 

want to thank you not only for holding this hearing, but for your 

leadership on this issue. I said this a while back that I think 

Hatch-Waxman was one of the great pro-consumer pieces of legislation of the last 25 years. Your authorship of it is a very important 

feather in your cap that I hope you wear proudly, and I am glad 

to see that you are still involved and interested in this issue, which 

I know you are from the last few years that we have been involved. 

Chairman HATCH. Thank you so much. I appreciate that. 

Senator SCHUMER. I also want to thank Senator Leahy, who has 

been involved, and together with you, Mr. Chairman, worked on 

the Drug Competition Act which the Senate passed last year. 

Senator Leahy wanted to be here today, but couldn’t, and I would 

just ask unanimous consent that his opening statement be put in 

the record. 

Chairman HATCH. Without objection, and we will put any statements in the record. 

Senator SCHUMER. Thank you, Mr. Chairman. 

I would also like to thank Senator Gregg for his leadership in approaching me and bringing together Senators McCain and Kennedy, with whom I have worked on this issue in the past few years. 

Together, Judd and I, along with the others, have crafted a strong 

bipartisan bill which is now poised to pass the Senate, and I think 

has a real chance of making it through the House as well. 

The bill which passed out of Committee unanimously last week 

achieves the goals of the original Schumer–McCain bill of closing 

loopholes in the law which I know we are hearing about from our 

witnesses today. But it does so my modifying certain provisions to 

address the concerns that kept its critics from supporting it last 

year, including my friend Senator Hatch, who is always giving me 

some good advice on how to deal with these kinds of issues. 

Before I get into the discussion of the bill, I would like to talk 

about the issue and how far we have come in bringing these abuses 

to light over the last few years. Two years ago, Chairman Hatch 

called a hearing on this very same issue. At the time, we heard 

from the FDA, the FTC, and witnesses representing consumers and 

States who all shared their concern about ways in which the pharmaceutical industry was taking advantage of one of the most proconsumer laws passed in decades, Hatch-Waxman. 

The compromise that Senator Hatch and Congressman Waxman 

crafted was carefully done, intended to strike a balance and help 

save consumers billions of dollars, while rewarding brand name 

companies for their innovations. For years, the law worked to do 

exactly that, but as the profits became higher, and frankly it 

seemed to me as the pharmaceutical industry, the brand name industry, had a large number of blockbuster drugs that were about 

to expire, and with their worry that they couldn’t replace them 

with other drugs that were just as profitable, they began to find 

ways around this law, instead of innovating new drugs, innovating 

new patents. 

This is how America works; find a good lawyer and they will find 

a good loophole, and that is what happened. Companies began to 

18

do that, and even, to boot, some of the generic companies were 

hardly blameless. They would make deals with the brand name 

company and say, give us some money and we will keep this drug 

off the market. 

Congress began to look at all of these abuses 2 years ago with 

Chairman’s Hatch. What has happened since then? First, the evidence mounted. In three additional hearings last year, Congress—

this Committee, the Commerce Committee, the HELP Committee, 

the House Energy and Commerce Committee—heard how doubledigit growth in drug costs and anticompetitive activity in the pharmaceutical industry has thrown not only citizens, but corporations, 

State Medicaid programs, and insurers into a tailspin as they 

struggle to pay for the drugs. 

Then the FTC issued a report which documented abuse of several 

key loopholes in the law, creating barriers to generic entry. Most 

significantly, the report identified eight blockbuster drugs, representing billions of dollars in sales for which the brand companies 

listed patents late in the process and triggered the successive 30-

month stays of generic competition. 

The pharmaceutical companies have argued before Congress that 

these patents and the delays have been legitimate. Well, we have 

heard from the courts on five of these products, and so far in every 

single instance the courts have decided that these patents have 

been invalid or not infringed by the generic challenger. That 

doesn’t sound too legitimate to me; zero for five is not a great batting record. 

Let me illustrate with an example. The example is Paxil. This is a $2.1 billion drug used to treat obsessive-compulsive disorder. It 

has been in litigation since 1998. After the lawsuit began and the 

first 30-month stay was triggered, the brand company, Glaxo 

SmithKline, listed nine additional patents on the drug, which 

ended up triggering five additional 30-month stays. 

Well, over the last year there have been court decisions on four 

of those patents. The patent which began this litigation was not 

found to be infringed upon by the generic, and the other three were 

found to be flat-out invalid. But the 30-month stays are still preventing the competition, costing consumers $3 billion. 

So this is a problem; it is a real problem. We have now the State 

attorneys general banding together to bring multiple suits against 

pharmaceutical companies. They have secured hundreds of millions 

of dollars in damages. The administration, under the FDA, has 

issued new regulations. 

Before I get into the substance of what we are talking about 

here—and I appreciate the opportunity to speak at some length, 

Mr. Chairman—I would make a plea to the pharmaceutical industry. You make a great product, you save people’s lives. This is a 

good thing. You deserve a rate of return that is a fine rate of return. I don’t dispute that. There are some who do. I don’t. But the 

bottom line is, by overdoing it on these patents, you are ruining 

your goodwill. 

This is not an area where we are talking about price controls. It 

is not even an area we are talking about where American consumers pay for the research for the whole world. You have gotten 

what you are supposed to get on these patents, a large amount of 

19

profitability. God bless you. You have come out with a good product. 

But then to come up with some of these changes and say they 

are perfectly legitimate and say you are really just searching for 

better ways to serve the consumer—everyone in America knows 

that is bunk. This is one area where the pharmaceutical industry 

should say, hey, we want to work with you to keep a legitimate 

rate of return for wonderful drugs that save people’s lives, but not 

abuse it, and because we have made so much money and we have 

to make more money. That is truly a heartfelt plea. 

We have some good companies in New York that employ thousands of people and they do good things. But the bottom line is 

don’t kill the goose that laid the golden egg, because that is what 

happening here. Instead of the pharmaceutical industry being held 

in high esteem, which it was a decade ago, you are beginning to 

lose it, and some of it is just because the prices are high and people 

don’t like that. But some of it is because you are abusing certain 

privileges, and you are not doing it in any area more so than generic drugs. So join with us. Don’t fight us. 

I do want to say, Mr. Chairman, I think the proposal that Senator Gregg and I have put together is fair and balanced, and again 

saying to the pharmaceutical industry, I know you are not fighting 

us head-on, but I am going to fight weakening this bill. I am not 

going to allow loopholes, not going to allow lack of enforcement. I 

am not going to let someone say, because you can pluck out some 

lawyer somewhere who says something might be unconstitutional, 

leave this bill denuded. I feel very strongly about this. 

So where are we now? The proposal we have put together makes 

it easier for less expensive generic drugs to be sold in pharmacies. 

It will significantly reduce overall drug spending in the U.S. by billions. And yet, as Senator Gregg is always mindful, it will continue 

to allow innovation. It will continue to say to the industry, create 

something good and new and you are going to get an excellent rate 

of return on it. 

I think you have gone over what the bill does, but basically the 

bottom line—I used to call it Mitch Daniels’ dream. Now, maybe we 

will have to call it Josh Bolton’s dream. It is free-market, it is proconsumer, and it doesn’t cost the Government a penny. In fact, it 

will save the Government money. 

The bill provides a critical complement to the work the FDA has 

done in clarifying its regulations on patent listing, but it goes much 

further. The FDA, to its credit, has said we can’t do it all; lots of 

this needs statute, when they came out with their proposed regulations which are now in effect, I guess. 

Chairman HATCH. Senator, your time is up. My problem is I have 

to be out of here at twenty-five after eleven. 

Senator SCHUMER. Let me just say quickly, on this chart, the 

FDA regulations get you up to here. We take you all the way 

through, and there are many other things that need to be done and 

the FDA regulations are not sufficient. 

I am going to ask that the rest of my statement be placed in the 

record, Mr. Chairman, because I know you are busy. 

Chairman HATCH. Without objection. 

20

[The prepared statement of Senator Schumer appears as a submission for the record.] 

Senator SCHUMER. I have a question or two, but I will defer. 

Chairman HATCH. We will keep the record open for written questions for any Senator on the Committee, and I will have some, I 

think. 

Senator SCHUMER. I will submit written questions to speed this 

along, Mr. Chairman. 

Chairman HATCH. Would you do that, because I am pressured 

and I have to be out of here? 

Senator SCHUMER. Yes, no problem. 

Chairman HATCH. I want to thank the three of you for being 

here. I think this has been an excellent time, and I want to personally tell all three of you how much I respect you and the work that 

you do. I think you are just terrific and you are doing great work. 

Mr. Troy, you have brought a breath of fresh air out there at 

FDA, in my opinion, and I just want to compliment you for it. 

You know how highly I think of you, Mr. Muris. 

Justice Department, get us that information as soon as you can, 

will you? 

Mr. BRADSHAW. Yes. 

Chairman HATCH. Well, thank you so much. We appreciate you 

being here. 

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

Mr. TROY. Thank you. 

Chairman HATCH. Now, we will go to our next panel. Our first 

witness on the second panel is my friend, Howard Metzenbaum, 

former Senator from Ohio, representing the Consumer Federation 

of America. 

We welcome you back, Howard. You used to be a member of this 

Committee and we look forward to hearing your testimony. 

The second panelist will be Ms. Kathleen Jaeger, President of the 

Generic Pharmaceutical Association. We are very happy to have 

you here, Ms. Jaeger. 

Finally, we will hear from Bruce Kuhlik, General Counsel to the 

Pharmaceutical Research and Manufacturers of America. 

It is possible that these three witnesses might not see eye to eye 

on all of these issues, so it will be interesting to hear what you 

have to say. We will put your full statements in the record. If you 

can summarize very quickly, I would appreciate it, in 5 minutes, 

because I have to leave here in about ten minutes. So if you can, 

I would appreciate it. 

Senator Metzenbaum, we will turn to you first. 

STATEMENT OF HOWARD M. METZENBAUM, FORMER UNITED 

STATES SENATOR, AND CHAIRMAN, CONSUMER FEDERATION OF AMERICA, WASHINGTON, D.C. 

Mr. METZENBAUM. As one who participated in so many filibusters 

with you, it would be difficult for me to summarize that briefly, but 

I will do the best I can, Mr. Chairman. 

Chairman HATCH. Listen, I recognize that well. 

[Laughter.] 

Mr. METZENBAUM. Mr. Chairman and Senator Schumer, it is 

good to be back at the Judiciary Committee. My name is Howard 

21

Metzenbaum. I serve as Chairman of the Consumer Federation of 

America. I appreciate your invitation to offer my comments, which 

I am presenting on behalf of the Consumer Federation and Consumers Union, which publishes Consumer Reports magazine. 

The FTC report detailed the many specious tactics used by drug 

companies to stall or thwart public access to less expensive generic 

drugs. It is actually outrageous that the same companies that 

charge Americans the highest drug prices in the industrialized 

world would use secret payoffs, flimsy legal maneuvers, and backroom deals to eliminate generic competition, line their pockets, and 

harm consumers. 

Every time a drug company blocks a safe generic drug from getting into the hands of the American people, they are not only placing a tax on the uninsured, the sick and the elderly, but are doing 

untold harm to millions of Americans. These outrageous attempts 

to keep drug prices high are particularly disgraceful because they 

undermine the effectiveness of one of your major achievements, Mr. 

Chairman, the Hatch-Waxman Act. You and Congressman Waxman provided great and wise leadership in drafting a law that 

carefully balances the need for drug innovation and affordability. 

Hatch-Waxman dramatically increased access to generic drugs, 

saved consumers billions of dollars, and ensured that the drug 

manufacturers have adequate patent protection to justify substantial investment in research and development. However, in recent 

years, as a number of top-selling blockbuster drugs were due to 

come off patent, brand drug manufacturers have used their political muscle and legal resources to block generic drugs from coming 

to market. 

When crass legislative efforts to pass unjustified patent extensions failed in Congress in the late 1990’s, the drug industry 

turned to their platoon of legal talent for help. They filed late patent claims just before a drug was to come off patent. Sometimes, 

those claims had nothing to do with the therapeutic equivalent of 

a generic drug, such as the shape or color of a pill. 

They filed numerous nuisance lawsuits on the same drugs for 

violation of those late patents. This triggered Hatch-Waxman’s 30-

month stay on the approval of a generic drug, and they made secret 

payments to some generic companies to keep generic alternatives 

off the market. To the drug industry, I say you should be ashamed 

of your conduct. You have abused the free market system. 

I will not discuss the additional $13 million that has been appropriated to the FDA for speedy approval of generic drugs. Let me 

assure you, however, that we strongly support that appropriation 

if it helps reduce the 20 months, on average, that it takes now for 

approval of a generic drug. 

I would like to comment briefly on two of the major responses to 

the FTC’s report that we have seen—the Senate bipartisan legislation that was reported out of the HELP Committee last week and 

the FDA’s new generic rule. These two responses are somewhat 

complementary, but the Senate legislation will be far more effective 

in protecting the public from the range of abuses I have detailed. 

First, it would limit the ability of brand name drug manufacturers to block generics through multiple 30-month stays. The bill 

would generally allow a drug company to receive only one stay per 

22

drug. The FDA rules on restrictions on multiple stays, by contrast, 

are far weaker and would allow brand drug companies to continue 

to game the system. 

Second, generic drug companies would have the right to assure 

that their drugs are not in violation of any patents before going to 

market by seeking a declaratory judgment. 

Third, the bill would take some moderate steps to reduce nuisance patent lawsuits. Unfortunately, however, this is one area 

where the bipartisan compromise will not be as effective as legislation passed overwhelmingly by the Senate last year. 

Unlike last year’s bill, the compromise does not provide as many 

disincentives to stop brand drug companies from filing unjustified 

late patents. I will give you an example. Last year’s bill gave generic companies a private right of action to de-list improper patents, and it didn’t allow the brand drug companies to file an infringement lawsuit unless the patent in question was listed at the 

time the drug was approved. 

Regarding the FDA’s generic rule which took effect last week, it 

has some strengths. For instance, it requires brand drug companies 

to provide more information about the patents they are listing. 

Overall, however, it is a disappointment. It is unlikely to reduce 

the many anticompetitive tactics that have been cited today. Even 

worse, it requires the listing of some new categories of patents. 

This may actually encourage brand drug companies to play patent 

hanky-panky once again. 

In closing, let me reiterate, Mr. Chairman and Senator Schumer, 

that the pharmaceutical industry has repeated used improper delaying tactics to thwart access to generic drugs. Their activities 

have been and continue to be shameful. This is not only a threat 

to the pocketbooks of many Americans, but to their health, and it 

is blight upon the free enterprise system. When faced with high 

drug costs, many people will go without needed medication or reduce the consumption of these drugs below the prescribed label. 

Senator Hatch and Senator Schumer, I urge you and members 

of the Committee to support actively the bipartisan compromise 

legislation that will soon reach the floor. Although the bill is not 

as strong as legislation that passed the Senate last year, I applaud 

the efforts of Senators Kennedy, Schumer, McCain, and Gregg to 

find a compromise that will decrease drug costs and increase the 

flow of cheaper generic drugs to Americans in need. 

I am very grateful to you, Mr. Chairman, for the opportunity to 

appear before your Committee. I think that we need action promptly and I am hopeful that we will see such action provided by your 

leadership, Senator Schumer, and other members of this Committee. 

[The prepared statement of Mr. Metzenbaum appears as a submission for the record.] 

Chairman HATCH. Thank you, Senator Metzenbaum. 

We will turn to you, Ms. Jaeger, and take your testimony at this 

time. 

23

STATEMENT OF KATHLEEN D. JAEGER, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, GENERIC PHARMACEUTICAL 

ASSOCIATION, WASHINGTON, D.C.; ACCOMPANIED BY JOHN 

YOO, PROFESSOR OF LAW, UNIVERSITY OF CALIFORNIA AT 

BERKELEY, BERKELEY, CALIFORNIA 

Ms. JAEGER. Thank you, Mr. Chairman, distinguished members 

of the Committee. My name is Kathleen Jaeger. I am the President 

and CEO of the Generic Pharmaceutical Association. On behalf of 

GPhA and its members, I especially want to thank you, Mr. Chairman, for your leadership on this issue as the original author of the 

landmark Hatch-Waxman Act, and for convening this hearing 

today. 

We applaud the Senate and the administration for their commitment to a package of administrative and legislative measures that, 

if taken together and not weakened, will make American health 

care more affordable. 

As you know, Senate bill 1225, the Greater Access to Affordable 

Pharmaceuticals Act, sponsored by Senators Gregg, Schumer, 

McCain, and Kennedy, was unanimously passed out of the Senate 

HELP Committee last week. We echo the President’s intention to 

work with both the House and the Senate on this legislation to 

make certain that prescription drugs are more affordable to the 

American public. 

We believe that Senate bill 1225 will remove some of the most 

serious market barriers to generic competition. We also believe that 

the administration’s regulatory initiatives, coupled with the compromise bill, will make American health care more affordable and 

provide consumers with timely access. 

But given that, instead of actually discussing the actual compromise that is on the table, you have raised some very important 

issues with respect to constitutionality with respect to the declaratory judgment provision, and out of respect for your time, Mr. 

Chairman, I ask that Mr. John Yoo, who is here today, actually 

speak to that issue. Mr. Yoo served as General Counsel to this 

Committee under your chairmanship from 1995 to 1996. In addition, Mr. Yoo has clerked for Supreme Court Justice Clarence 

Thomas, and currently is a visiting fellow at the American Enterprise Institute and a professor of law at Berkeley. 

With your permission, may I turn over the floor to Mr. John Yoo, 

please. 

Chairman HATCH. Sure. 

John, welcome back to the Committee. You are an old friend and 

a terrific law professor. 

Mr. YOO. Thank you, Mr. Chairman, and I will just very quickly 

provide some advice to the Committee. 

Chairman HATCH. Real quickly, though. 

Mr. YOO. I hope that unlike past time when I worked for you, 

you actually listen to my advice a little bit this time. 

[Laughter.] 

Chairman HATCH. Well, I think we have heard enough from you. 

[Laughter.] 

Chairman HATCH. Go ahead. 

Mr. YOO. Just on the two points of the Declaratory Judgment Act 

and the 30-month stay provision, it is my view that both provisions 

24

are constitutional. The Declaratory Judgment Act is a more difficult issue than the 30-month stay provision, but this is exactly 

the kind of circumstance that the Declaratory Judgment Act was 

passed to address, cases where potential patent infringers need to 

bring a suit to get some kind of declaration about their rights because the patent-holder might not bring suit. 

In fact, when Congress passed the bill in 1934, it specifically discussed this exact situation, and the Supreme Court, as you know, 

3 years later in the Aetna case upheld the Declaratory Judgment 

Act. 

The only potential issue is whether the case law of the Federal 

Circuit and this reasonable apprehension test raises any doubt 

about the constitutionality of this legislation. There are a number 

of reasons why I don’t think it does. One is that the reasonable apprehension test itself may not be an interpretation of the Article 

III case or controversy requirement, but might be an exercise of the 

Federal Circuit’s prudential discretion not to hear certain kinds of 

suits. 

Second, I think it is perfectly appropriate for Congress to articulate a standard that might be odds with a lower Federal court if 

it wants the Supreme Court to determine finally whether this is a 

proper interpretation of the Article III case or controversy requirement. 

On the 30-month stay, just very quickly, a 30-month stay provision is just a change in the procedures that are used to enforce a 

Federal property right. It doesn’t actually affect the Federal property right itself. As the Supreme Court has said most recently in 

the Plout case, Congress has full authority to make changes in 

cases that have not been finally decided by the Article III courts, 

and the procedures and even the substantive rights at issue, so 

long as, again, there has been no final determination of those 

rights and a final judgment by the Article III courts. 

Thank you, Mr. Chairman. 

Chairman HATCH. We would appreciate any further scholarship 

you can give us on this in writing. It would be helpful to us because 

it is a matter of concern. 

Ms. JAEGER. We would be happy to. 

Chairman HATCH. Thank you both for being here. 

[The prepared statement of Ms. Jaeger appears as a submission 

for the record.] 

Chairman HATCH. Mr. Kuhlik, you are the last one and if you 

could keep your remarks—I am in trouble here, but if you can keep 

your remarks within 5 minutes, I would appreciate it. 

STATEMENT OF BRUCE N. KUHLIK, SENIOR VICE PRESIDENT 

AND GENERAL COUNSEL, PHARMACEUTICAL RESEARCH 

AND MANUFACTURERS OF AMERICA, WASHINGTON, D.C. 

Mr. KUHLIK. I have been crossing out as you go along. Thank 

you, Mr. Chairman. 

I am Bruce Kuhlik, Senior Vice President and General Counsel 

of the Pharmaceutical Research and Manufacturers of America. We 

are pleased to have the opportunity to testify this morning. 

Landmark legislation passed by Congress in 1984, commonly 

known as the Hatch-Waxman Act, has fulfilled its twin goals of exVerDate 0ct 09 2002 09:34 Jan 14, 2004 Jkt 091212 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91212.TXT SJUD4 PsN: CMORC
25

pediting generic drug entry and encouraging pharmaceutical innovation. By any measure, the law has been an enormous boon to the 

generic industry, as Chairman Muris explained this morning. 

For 3 years, though, we have had a debate over the need for new 

legislation. Until the FTC issued its report last year, however, the 

debate lacked any shared understanding of the facts. We were 

therefore pleased when the FTC issued its report last July. The report confirmed that the Hatch-Waxman Act works. Out of approximately 6,000 generic drugs approved since 1984, the FTC identified 

only 8 instances in which innovator companies had received socalled multiple 30-month stays. Even accepting the view that there 

is something wrong with these stays, a law that works 5,992 times 

out of 6,000 is a law that works and, in our view, works well. 

The FTC called for two principal changes in the law: first, a limitation on 30-month stays to patents listed with FDA in the Orange 

Book before an ANDA is filed, and, second, a requirement that certain agreements between innovator and generic companies be reported to the FTC. 

A number of legislative and regulatory proposals have emerged 

since last July, none limited to the comparatively modest suggestions made by the FTC. First, the Senate passed a bill last year, 

Senate bill 812, that would have created a new cause of action for 

patent de-listing, cut off the right to a 30-month stay for a broad 

universe of patents, subjected innovator companies to a 45-day 

statute of limitations, and forfeited patent enforcement rights altogether in certain cases. 

Mr. Chairman, you testified last year that this bill, quote, ‘‘goes 

too far without a compelling demonstration of systemic abuse, and 

it upsets the carefully crafted balance,’’ unquote, in the law. 

Next, FDA proposed new Hatch-Waxman regulations last October which were issued in final form last week. The FDA rule attempts to address the multiple 30-month stay question within the 

confines of the current law, but we believe that it raises significant 

technical concerns regarding generics’ ability to avoid any 30-

month stay. In this regard, the agency said in the preamble, and 

Mr. Troy indicated as well this morning that it cannot completely 

prevent manipulation of the rule. 

Also, last week the HELP Committee marked up a bill, S. 1225, 

that attempts to address the 30-month stay issue precisely as the 

FTC suggested. This bill, we believe, is a significant improvement 

over previous legislative proposals and is close, Mr. Chairman, I 

think, to what you have suggested as appropriate. 

Senator Schumer, we congratulate you, Senator Gregg, and the 

other sponsors of this bill for your leadership in developing it. 

In its present form, however, as marked up by the committee, 

the bill does present significant technical and workability concerns 

regarding operation of the 30-month stay. Mr. Troy discussed some 

of those earlier this morning. It also goes beyond the FTC report 

by addressing other issues in a problematic fashion. We have heard 

discussion this morning of the constitutional issues raised by the 

declaratory judgment provision. 

As Mr. Boyden Gray said, former White House Counsel, quote, 

‘‘The bill takes the absence of a live case or controversy and defines 

it as a live case or controversy,’’ unquote. We look forward to hearVerDate 0ct 09 2002 09:34 Jan 14, 2004 Jkt 091212 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91212.TXT SJUD4 PsN: CMORC
26

ing what the Justice Department has to say about that constitutionality provision. 

The bill would also limit the availability of treble damages in certain cases involving willful infringement by generics. At a time 

when generic abuses of the statute are growing, it would make little sense to discriminate against pharmaceutical patent-holders by 

curtailing the remedies for this sort of behavior. 

Where does this leave us? We believe that the FTC report vindicates our longstanding view that legislation to amend the Act in a 

manner adverse to research and innovation is unnecessary. At the 

same time, the technical concerns presented by both the FDA rule 

and S. 1225 as marked up counsel in favor of addressing the complex 30-month stay issue correctly. We would be pleased to work 

on a bipartisan basis toward this goal, with the priority of seeing 

such a bill passed and signed into law as quickly as possible. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Kuhlik appears as a submission 

for the record.] 

Chairman HATCH. Thank you so much. 

I am going to turn to Senator Schumer for just a very short 

statement. 

Senator SCHUMER. I will submit written questions. 

Chairman HATCH. We will all submit written questions, and we 

have got a lot of questions. 

Senator SCHUMER. Thank you, Mr. Chairman. I just wanted to 

say Senator Gregg and I spent a lot of time working on this compromise and we consulted numerous constitutional experts on the 

declaratory judgment provision in the bill. They were virtually 

unanimous that there was no constitutional problem, so I am not 

worried about it. 

That is what I wanted to say for the record, Mr. Chairman. 

Chairman HATCH. Well, thank you. 

I want to thank each of you for being here. Mr. Yoo, please submit any scholarship you can on this, and I know you will, knowing 

you, and you also, Mr. Kuhlik. These are important issues. I think 

you, Ms. Jaeger, have represented the generic industry well. 

Senator Metzenbaum, the consumers of America are well represented by you. There is no question about that. I still remember 

you rushing onto the floor at the last minute trying to stop this effort, talking to Ralph Nader and trying to stop Hatch-Waxman. But 

I had slipped it through on you before you got in there, and you 

just immediately went back to work to stop some other things you 

thought were wrong. 

But I will tell you it is a privilege to have you here in the Judiciary Committee room again, and it is a privilege to have your testimony. So we appreciate you taking the time to do it. 

Thank you all for being here. 

With that, we will recess and I will get to my next meeting. 

[Whereupon, at 11:34 a.m., the Committee was adjourned.] 

[Submissions for the record follow.]

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