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91–832 PDF 2004

S. HRG. 108–390

EXAMINING THE SENATE AND HOUSE VERSIONS

OF THE ‘‘GREATER ACCESS TO AFFORDABLE

PHARMACEUTICALS ACT’’

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

AUGUST 1, 2003

Serial No. J–108–34

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

prepared statement .......................................................................................... 93

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

statement .............................................................................................................. 110

Schumer, Hon. Charles E., a U.S. Senator from the State of New York ............ 13

prepared statement .......................................................................................... 118

WITNESSES

Armitage, Robert A., Vice President and General Counsel, Eli Lilly and Company, Washington, D.C. ....................................................................................... 27

Bradshaw, Sheldon, Deputy Assistant Attorney General, Office of Legal Counsel, Department of Justice, Washington, D.C. ................................................... 10

Dudas, Jon W., Deputy Under Secretary of Commerce for Intellectual Property, and Deputy Director, U.S. Patent and Trademark Office, Department 

of Commerce, Washington, D.C. ......................................................................... 5

Muris, Timothy J., Chairman, Federal Trade Commission; accompanied by 

Susan Creighton, Washington, D.C. ................................................................... 4

Troy, Daniel E., Chief Counsel, U.S. Food and Drug Administration; accompanied by Gary Buehler, Director, Office of Generic Drugs, Center for 

Drug Evaluation and Research, U.S. Food and Drug Administration, Rockville, Maryland ..................................................................................................... 7

QUESTIONS AND ANSWERS

Responses of Jon Dudas to questions submitted by Senator Schumer ............... 37

Responses of Timothy Muris to questions submitted by Senator Schumer ........ 44

SUBMISSIONS FOR THE RECORD

Armitage, Robert A., Vice President and General Counsel, Eli Lilly and Company, Washington, D.C., prepared statement and attachments ...................... 50

Bradshaw, Sheldon, Deputy Assistant Attorney General, Office of Legal Counsel, Department of Justice, Washington, D.C., prepared statement ................ 67

Dinger, Henry C., Goodwin Procter LLP, Counsellors at Law, on behalf of 

the Generic Pharmaceutical Association, Boston, Massachusetts, letter to 

Senator Gregg ....................................................................................................... 72

Dudas, Jon W., Deputy Under Secretary of Commerce for Intellectual Property, and Deputy Director, U.S. Patent and Trademark Office, Department 

of Commerce, Washington, D.C., prepared statement ...................................... 80

Gray, C. Boyden, Wilmer, Cutler and Pickering, Washington, D.C., letter 

and attachments ................................................................................................... 83

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

Douglas Hotz-Eakin ............................................................................................. 96

Jaeger, Kathleen, President and CEO, Generic Pharmaceutical Association, 

Arlington, Virginia, statement ............................................................................ 98

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

Research and Manufacturers of America, Washington, D.C., letter ................ 107

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

prepared statement .............................................................................................. 113

Page

IV

Troy, Daniel E., Chief Counsel, U.S. Food and Drug Administration, Rockville, Maryland, prepared statement .................................................................. 123

Yoo, John, Professor of Law, Boalt Hall School of Law, University of California at Berkeley, Berkeley, California: 

letter, June 19, 2003 ........................................................................................ 149

letter, August 1, 2003 ....................................................................................... 153

(1)

EXAMINING THE SENATE AND HOUSE 

VERSIONS OF THE ‘‘GREATER ACCESS TO 

AFFORDABLE PHARMACEUTICALS ACT’’ 

FRIDAY, AUGUST 1, 2003 

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:36 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. Good morning, everybody. Today, we will explore important features of the Senate and House versions of the 

Greater Access to Affordable Pharmaceuticals legislation. In the 

Senate, this was the Gregg-Schumer amendment to the Medicare 

bill, S. 1. I seem to recall that this measure was adopted by the 

Senate by an overwhelming 94 to 1 vote. There is always somebody 

who doesn’t get the message. Similar but not identical legislation 

was included in the House Medicare bill, H.R. 1. 

A chief purpose of this hearing today is to help the Medicare conferees and others evaluate the merits of the Senate and House provisions. I want to commend my colleagues, Senators Gregg, Schumer, McCain, and Kennedy for all of their hard work on this legislation. I believe that the legislation does present a major improvement over last year’s vehicle, which, if I recall correctly, was S. 

812. 

I am pleased that the sponsors of this legislation have adopted 

a version of the 30-month stay provision that I first suggested last 

May and argued for on the floor last July. The one-and-only-one 30-

month stay for all patents filed when the NDA is submitted was 

also a centerpiece of the Federal Trade Commission report released 

last summer. The proponents of this legislation were wise to reject 

all of the various previous legislative proposals in this area. 

I want to commend again Chairman Muris and the FTC for the 

agency’s constructive contributions to this important debate. In addition to a recommendation pertaining to the 30-month stay, the 

FTC report contained a second recommendation calling for the reporting of any potentially anti-competitive agreement between pioneer and generic drug firms to the FTC and the Department of 

Justice. 

2

My colleague, Senator Leahy, developed just such legislation, the 

Drug Competition Act, that was included in the Senate Medicare 

bill. I have worked with Senator Leahy in developing this bill and 

I, of course, support it. 

Today, I want to spend some time examining some key differences between the Senate and House versions of the bill. For example, here are some of the differences between the House and 

Senate versions of the Leahy language that must be ironed out, in 

my opinion. 

One of the most significant differences between the Senate and 

House bills centers on the manner in which the declaratory judgment provisions are drafted. These provisions were the subject of 

a spirited written debate between two esteemed lawyers, both of 

whom are friends of mine—Boyden Gray, former White House 

Counsel, and John Yoo, a former member of my staff. 

Today, we will hear testimony from the Department of Justice 

that the administration has concluded that the Senate declaratory 

judgment provision is constitutionally infirm. Moreover, the Patent 

and Trademark Office will tell us that the Senate language, quote, 

‘‘could result in unnecessary harassment of patent owners,’’ unquote. In addition, PTO believes that the manner in which the Senate bill treats the award of treble damages is unwise. 

On the other hand, we will hear from the FTC that it believes 

a key feature of the House declaratory judgment provision, the 

right to confidential access, may not be necessary and, as a matter 

of policy, the Senate declaratory judgment provision may have 

some advantages. 

Consistent with its 2002 report, the FTC takes exception with 

the manner in which both the Senate and House language eliminate the current district court decision triggering mechanism for 

180-day marketing exclusivity. 

We will also hear from the FDA about how the provisions of 

these bills would interact with the agency’s recently issued final 

rule on patent listing. The FDA disagrees with the FTC on the 

matter of the court trigger and supports an appellate court triggering scheme. 

It is my hope that after we have heard from our panel of governmental experts, the conferees and other interested parties will gain 

additional knowledge about the strengths and weaknesses of the 

House and Senate bills. Our goal should be to forge a conference 

report that preserves the best features of these measures or results 

in the crafting of better language. 

Finally, we will also hear today from a private sector expert who 

will talk about the ramifications of an identical section of both the 

Senate and House bills. These are the provisions related to the 

award of 180-day marketing exclusivity where pioneer patents are 

found to be invalid or not infringed by generic competitors. 

Both bills adopt a first-to-file regime. I am a proponent of what 

I call a successful challenger system. It seems to me that the first 

successful challenger, be it the first generic to be sued, the first to 

win in court, or the first to be granted a covenant not to be sued 

by the pioneer firm, is more deserving than a mere first filer. 

As I explained in my June 26 Congressional Record statement, 

it appears to me that the 180-day marketing exclusivity provisions 

3

in the pending legislation contain perverse incentives that may result in unfortunate, if unintended, consequences. 

I plan to ask the Congressional Budget Office to review the provisions of the 180-day marketing exclusivity provisions and consider whether these new rules may actually prove costly to consumers. It is possible that a consensus will emerge to revisit this 

issue, and frankly it seems to me that simply adding a new forfeiture event in cases where a challenger is not sued, succeeds in 

court, or obtains a covenant not to be sued, could materially improve this legislation. It is also possible that the Medicare conference will not be the best time or place to reconsider these issues. 

I can accept that, but I also believe that we have not heard the last 

word on these new 180-day rules. 

Let me close by stating that it is my hope that the Congress will 

enact a Medicare drug benefit this year. I plan to work in a constructive fashion toward the success of this legislation. In that spirit, I hope that today’s hearing will help inform the discussion of 

reconciling the House and Senate versions of the important provisions that address generic drug competition. 

So I am personally looking forward to hearing the witnesses 

today. We have a distinguished first panel. The Honorable Timothy 

J. Muris is our first panelist today. He is Chairman of the Federal 

Trade Commission. 

I appreciate you, Chairman Muris, returning to testify to the 

Committee on these important matters. 

The next panelist is Mr. Jon W. Dudas, the Deputy Under Secretary for Intellectual Property, and Deputy Director of the United 

States Patent and Trademark Office of the Department of Commerce. Previously, he has served as the Deputy General Counsel 

and Staff Director for the House Judiciary Committee and as Counsel to the Courts and Intellectual Property Subcommittee. Mr. 

Dudas will share the PTO’s observations regarding the House and 

Senate versions of the Greater Access to Affordable Pharmaceuticals Act. 

We welcome you here. 

Our third panelist is Mr. Daniel Troy, Chief Counsel for the 

United States Food and Drug Administration. Throughout Mr. 

Troy’s career in the public and private sectors, he has specialized 

in constitutional and appellate litigation. Mr. Troy also will discuss 

recent Congressional action on amendments to the 1984 law. 

We are really honored to have you here, Dan. 

Finally, Mr. Sheldon Bradshaw, no stranger to this Committee, 

holds the position of Deputy Assistant Attorney General in the Office of Legal Counsel at the Department of Justice. Earlier this 

summer, Mr. Bradshaw shared some tentative concerns of the Department of Justice regarding the constitutionality of the Greater 

Access to Affordable Pharmaceuticals Act. 

I appreciate you taking time to share the administration’s position on these important constitutional concerns. 

We are also happy to have you here, Mr. Buehler, and we look 

forward to any participation you care to offer. 

So we will turn to Mr. Muris first. 

4

STATEMENT OF TIMOTHY J. MURIS, CHAIRMAN, FEDERAL 

TRADE COMMISSION, WASHINGTON, D.C.; ACCOMPANIED BY 

SUSAN CREIGHTON 

Mr. MURIS. Thank you very much, Mr. Chairman. It is a pleasure to be here again to talk on behalf of the Federal Trade Commission regarding this important issue. 

As you mentioned, both the House and the Senate have passed 

versions of Hatch-Waxman reform. These reforms do incorporate 

most of the recommendations that the Commission made last year, 

and overall we are certainly supportive of the thrust of the bills. 

Both bills, as you mentioned, amend Hatch-Waxman to allow 

only one 30-month stay per drug product per ANDA for patents 

listed in the Orange Book prior to the generic filing its ANDA, a 

proposal, as you mentioned, that you made and that we support. 

This provision, if it does become law, would have eliminated all 

eight of the instances in our study in which a brand name company’s later listing of patents resulted in an additional 30-month 

stay. 

Both bills provide generic applicants a new tool to correct patent 

information listed in the Orange Book. Generic applicants would be 

able to assert a counter-claim that Orange Book information is improper and should be corrected or removed. We support this provision and suggest that Congress extend the bases on which such a 

claim could be brought to parallel the basis for which a brand may 

submit a patent for Orange Book listing. So we think that the same 

bases for listing that are available should be available for delisting. 

The Senate bill adds a provision clarifying that if a brand name 

company fails to bring an infringement action within 45 days of receiving notice of an ANDA containing a paragraph IV certification, 

the generic applicant can bring a declaratory judgment action that 

the patent is invalid or not infringed. Without commenting on its 

constitutionality, we support this provision because it allows any 

patent questions to be resolved simultaneously with FDA approval 

of the ANDA. 

Both bills require drug companies to file certain patent settlement agreements with us, as you mentioned, within ten days of 

execution. The House bill also requires the filing of agreements between generic applicants, and we support these notice provisions. 

Let me turn to a point you mentioned, which is the bill’s reform 

of the 180-day exclusivity period. Both bills eliminate the current 

court decision trigger. Accordingly, only the first generic’s commercial marketing will trigger the 180-day exclusivity period. 

Consistent with our study, both bills clarify that the first 

generic’s marketing of the brand name product constitutes commercial marketing to trigger the period. Eliminating the court decision 

trigger could allow, however, the first generic applicant to park the 

exclusivity by delaying the start of its commercial marketing. 

The bill contains forfeiture provisions that attempt to safeguard 

against this possibility. Despite this safeguard—and I believe that 

your opening statement addressed this point as well—the Commission believes that the bills virtually ensure that the first generic 

applicant will receive the 180-day exclusivity. 

The 180-day exclusivity near-guarantee arises because the failure to market forfeiture provision is triggered when the first geVerDate 0ct 09 2002 15:04 Mar 24, 2004 Jkt 091832 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91832.TXT SJUD4 PsN: CMORC
5

neric applicant fails to market within 75 days of the latter of, A, 

receiving final approval of the ANDA, or, B, an appeals court decision on the patents that were subject to the first applicant’s paragraph IV certifications. 

We have two concerns about this provision. First, it may delay 

the first generic applicant’s commercial marketing by an additional 

ten months, as compared to the current regulatory structure. And 

ten months in this world, particularly with blockbuster drugs, is a 

lot of money for consumers. 

Under the current rule, the 180-day exclusivity is triggered by 

any district court decision, not an appellate court decision. This 

rule encourages the first generic applicant to market as soon as 

possible thereafter or risk losing its exclusivity. 

The FTC study found that appeals courts overturn only about 7 

percent of district court decisions of patent invalidity or non-infringement in the Hatch-Waxman context. If the 180-day period 

starts only after an appeals court decision, then consumers may 

wait longer for the price reductions that generic entry cause. 

Second, the district court decision trigger is important to encourage subsequent generic entry. Our study suggested that a district 

court decision in a case involving a subsequent generic applicant 

trigger the first applicant’s 180-day period. The first applicant’s exclusivity—and again this is a point that you raised—should not unreasonably block subsequent entry. 

To address these issues, we suggest that the failure to market 

provision reference a district court rather than an appeals court decision. We also suggest amending the language of the failure to 

market forfeiture provision to state that court decisions dismissing 

a declaratory judgment action for lack of subject matter jurisdiction 

would trigger the first applicant’s 180-day period. This change will 

ensure that the 180-day period does not unreasonably block a subsequent generic applicant’s market entry after allowing the first 

applicant a reasonable time to begin commercial marketing. 

I want to thank you again, Mr. Chairman, and we look forward 

to working closely with the Committee, as we have in the past, to 

ensure that competition in this critical sector of the economy remains vigorous. 

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

for the record.] 

Chairman HATCH. Thank you so much. 

Mr. Dudas. 

STATEMENT OF JON W. DUDAS, DEPUTY UNDER SECRETARY 

OF COMMERCE FOR INTELLECTUAL PROPERTY, AND DEPUTY DIRECTOR, U.S. PATENT AND TRADEMARK OFFICE, DEPARTMENT OF COMMERCE, ARLINGTON, VIRGINIA 

Mr. DUDAS. Mr. Chairman, before I begin testifying, I want to 

apologize. You mentioned that I was a former staffer on the House 

Judiciary Committee, and every time I come to testify before Congress—I had built up a reputation as a staffer of giving particularly 

aggressive questions to the Chairman—I realize how wrong I was 

in doing that and I like to acknowledge that publicly whenever I 

have the chance. 

6

Chairman HATCH. We Chairmen never ask aggressive questions. 

We appreciate that admission. 

Mr. DUDAS. Thank you for the opportunity to share the Administration’s views on the patent-related provisions of the Senate- and 

House-passed versions of H.R. 1, the Prescription Drug and Medicare Improvement Act of 2003. 

Mr. Chairman, as you know, the Administration has placed a 

high priority on ensuring that the American people have access to 

existing prescription drugs at prices they can afford. We have 

worked and will continue to work with Congress to promote access 

to affordable medication for all consumers. We all share that goal, 

and I presume that we all share an additional goal to ensure that 

the United States continues to encourage the development of new 

prescription drugs that can in turn be accessible to all consumers 

on an affordable basis. 

I have read of a 1988 study of 12 industries by the University 

of Pennsylvania that estimates that 65 percent of pharmaceutical 

patents would not have entered the market without adequate patent protection. Can you imagine the difference today if this hearing 

were focused not on making a multitude of prescription drugs more 

accessible and affordable to Americans, but on why America was 

failing to develop cures to this multitude of diseases? 

It is critical that our efforts to provide access do not inadvertently jeopardize the benefits of medical innovation by adversely impacting the intellectual property rights of those who have dedicated 

significant resources to researching, developing, and commercializing new drugs. Furthermore, the time-tested and systematic 

incentives afforded by our patent system must be respected for all 

innovations, regardless of whether they are pharmaceuticals, micro 

processors, or aircraft engines. 

Mr. Chairman, the Drug Price Competition and Patent Term 

Restoration Act of 1984, which you authored, is a landmark statute 

that has arguably done more than any law on the books to increase 

access to affordable prescription drugs. 

Through careful balancing of interests of consumers and drug 

innovators, the Hatch-Waxman Act has facilitated the entry into 

market of over 10,000 generic drugs, while still respecting the patent rights of brand name drug manufacturers. 

Given the success of Hatch-Waxman, it is paramount that any 

revisions to the statute be carefully considered and balanced to 

maintain the right level of incentives and deterrents. In that regard, we have concerns that some of the patent-related provisions 

in the Senate version of H.R. 1 could undermine the patent system, 

while doing nothing to make prescription drugs more affordable or 

accessible. 

The Senate version of H.R. 1 would amend Title 35 to establish 

an actual controversy between the generic and the patent owner if 

the patent owner failed to file an infringement action within the 

statutory window. This is problematic from a patent standpoint for 

several reasons. 

First, by lowering the threshold for challenging a patent, the patent owner would have to bear significant litigation costs which ultimately may be passed on to the consumer in the form of higher 

drug prices. 

7

Secondly, the presumption of validity that attaches to all patents 

would become clouded in this area. This would make it riskier for 

patent owners to market, commercialize, and license their pharmaceutical innovations. In the long run, this could reduce the access 

to valuable new medicines because the incentives of the patent system will itself be reduced. Finally, the amendment raises consistency issues with respect to our obligations under applicable international trade agreements. 

Our second area of concern relates to the circumstances for denying treble damages. The Senate version of H.R. 1 would permit a 

court to refuse to award treble damages to a patentee who failed 

to list certain patents in the FDA’s Orange Book. This proposal appears to be a relatively harsh and unjustified penalty. 

The purpose of treble damages is to deter a willful patent infringement by punishing the willful infringer. The law already provides appropriate consequences for failing to list certain patents, 

including a loss of the 30-month stay. However, the failure of the 

patent owner to perform a ministerial task administered by another agency has absolutely nothing to do with whether the accused infringer has acted in bad faith or in good faith. For these 

reasons, providing the court with discretion to deny treble damages 

for failure to list certain patents is problematic. 

In summary, Mr. Chairman, while the goals of the drug affordability provisions of H.R. 1 are indeed laudable and ones that the 

Administration shares, it appears that the patent-related amendments in the Senate version will alter aspects of the Hatch-Waxman Act which continue otherwise to work well, while doing nothing to expedite the approval of lower-cost generic drugs. 

As a result, the amendments actually threaten to reduce the protections in our patent system that will encourage the development 

of new drugs, the drugs of the future. Americans will certainly lose 

out if we reduce the incentives to find the next generation of medical cures and treatment for diseases such as Alzheimer’s, cancer, 

SARS, and West Nile virus. 

Given these potential pitfalls, we caution against the adoption of 

these patent-related provisions which not only fail to provide benefits to Americans who use prescription drugs, but risk that needed 

cures may not be discovered. 

Thank you. 

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

for the record.] 

Chairman HATCH. Thank you, Mr. Dudas. 

Mr. Troy. 

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

AND DRUG ADMINISTRATION, ROCKVILLE, MARYLAND; ACCOMPANIED BY GARY BUEHLER, DIRECTOR, OFFICE OF GENERIC DRUGS, CENTER FOR DRUG EVALUATION AND RESEARCH, U.S. FOOD AND DRUG ADMINISTRATION, ROCKVILLE, MARYLAND 

Mr. TROY. Thank you, Senator Hatch, Mr. Chairman. As you 

mentioned today, I am joined today by Gary Buehler, who directs 

our Office of Generic Drugs in the Center for Drug Evaluation and 

Research. I am very pleased and grateful to be with you today to 

8

discuss reform of the Drug Price Competition and Patent Term 

Restoration Act, which we will continue to call the Hatch-Waxman 

amendments. 

We are pleased to see that the proposed legislation, both bills, 

complements and builds on elements of our rule, as well as things 

that you have proposed in the past, and builds on the FTC’s recommendations. We are, of course, committed to help speed generic 

drugs to market without compromising needed protections for innovation. 

As I think you know, the Administration supports generally H.R. 

1 and S. 1, and we have been very grateful for the opportunity to 

provide technical assistance. We think that both bills have come a 

long way both from last year and from what was initially proposed, 

and we think that they are very much workable. What we have 

really focused on is something that we can administer and that we 

can work with. 

Let me start by talking a little bit about our rulemaking, which 

you mentioned before. Our reforms of the generic drug approval 

process are intended to help speed and reduce the cost of determining that a new generic drug is safe and effective. So on June 

12, we announced final regulations that will streamline that process. 

Our economic analysis shows that that rule is expected to save patients over $35 billion in drug costs over 10 years, while avoiding 

unnecessary litigation and protecting the process of approving and 

developing new breakthrough drugs. 

In the final rule, as in all things we do with respect to HatchWaxman, we tried to maintain a balance between the innovator 

company’s intellectual property rights and trying to get generic 

drugs to market in a timely manner. As I think you know, the final 

rule eliminates multiple 30-month stays, clarifies patent submission listing requirements, and requires a more detailed signed attestation accompanying a patent submission. We believe that these 

actions will significantly reduce opportunities to list inappropriate 

patents just to prevent access to low-cost generic drugs. 

Of course, both the Senate and House have added generic drug 

access provisions to their versions of Medicare. They have passed 

both chambers and are in conference, and we are pleased that both 

of them include, as I mentioned, these key ideas embodied in our 

regulations and are improvement over last year. We do look forward to continuing to provide technical assistance, if requested. 

To briefly list some of the key components of the Senate bill, it 

amends the existing statutory 30-month stay in the following three 

ways. 

First, it would require the ANDA applicant to provide notice to 

the patent owner and NDA-holder within 20 days after the applicant has been notified that FDA has filed the applicant’s ANDA if 

the applicant has submitted a certification that can trigger a lawsuit resulting in a 30-month stay, the so-called paragraph IV certification. 

Second, it would limit the patents eligible for the 30-month stay 

to those that are submitted to the agency before submission of the 

ANDA. So it limits the universe and the generic knows which patents it must certify against. 

9

The third is it would allow approval of an ANDA if, before any 

30-month stay expires, a district court were to find the patent invalid or not infringed. Or if the district court judgment that finds 

the patent infringed is overturned on appeal, then it is the judgment of the court of appeals. 

The Senate bill, as it was mentioned, also allows an ANDA applicant to file a declaratory judgment action against a patent owner 

or the NDA-holder if no patent infringement suit has been brought 

within 45 days after the ANDA applicant has provided notice of the 

certification challenging the patent. It seeks to make the failure to 

file such a challenge an actual controversy under the declaratory 

judgment statute. If a suit has been filed, the applicant may assert 

a counterclaim for an order to require deletion of patent information that the NDA-holder shouldn’t have submitted for listing in 

the Orange Book. 

The amendments to the existing statutory 180-day exclusivity 

provisions are essentially as follows. 

One, it applies exclusivity on a product basis rather than a patent-by-patent basis, something that we strongly believe is preferable. 

Second, it would allow exclusivity for all ANDA applicants that 

challenge patents on the first day that ANDAs challenging patents 

can be submitted for the particular listed drug, which incidentally 

is a topic we have addressed in a guidance that we released today. 

Third, it would trigger the 180-day exclusivity with commercial 

marketing only as Chairman Muris mentioned before. 

Fourth, it would provide for forfeiture of an applicant’s eligibility 

for exclusivity under the following circumstances: first, if the drug 

isn’t marketed within a particular period of time or after the court 

resolves the status of the challenged patents; two, if the applicant 

withdraws its ANDA; three, if the patent challenges are withdraw; 

four, if the applicant fails to obtain tentative approval within 30 

months; five, if the applicant enters into an anti-competitive agreement; or, six, if all qualifying patents expire. We have provided 

technical assistance with respect to this last provision suggesting 

deletion. 

The bill defines bioavailability and bioequivalence for non-systemic drugs. And, of course, the bill states that a court can refuse 

to award treble damages under certain circumstances. 

I want to conclude just by going through at least what are the 

key differences from our perspective between the House and Senate 

generic drug bills. 

First, approval of a different listed drug. The House bill prohibits 

ANDA applicants from amending or supplementing an application 

to seek approval of a generic drug referencing a listed drug that is 

different from the listed drug identified in the original application. 

This prohibition does not apply to different strengths and the Senate bill does not have such language. 

The second difference is the civil action for patent uncertainty. 

The Senate bill allows the ANDA applicant to bring a civil action 

for declaratory judgment that the patent is invalid or will not be 

infringed if the patent owner or NDA-holder has not brought suit 

within 45 days after notice has been received. Of course, the House 

bill is somewhat different. 

10

Third, access to confidential ANDA information. The House bill 

allows a DJ action to be brought if the 45 days expires and the notice was accompanied by a document providing a right of confidential access to the ANDA applicant’s application in order to determine if a lawsuit could be brought. 

This provision sets forth the contents of the document, including 

restrictions on access to the application and the uses that the information can be put to through the process. The Senate bill doesn’t 

have such a confidential access provision. Failure to bring a patent 

infringement action in the Senate bill makes a failure to bring such 

an action within 45 days of notice an actual case or controversy, 

as I mentioned. There is the treble damages provision which is in 

the Senate bill, but not in the House bill. 

Finally, with respect to filing of certain agreements with the 

FTC, they both have requirements that certain agreements between generic manufacturers and innovators about the marketing 

of generic drugs should be filed with the FTC. But the House bill 

requires that certain agreements between generic manufacturers 

also be filed with the FTC, while the Senate bill does not. 

The legislation does not address all of the provisions of the final 

rule. If the legislation were to pass, based on our review we believe 

that only the 30-month stay provision of the final rule would be impacted. We continue to address the issues that have been raised regarding the statute and we continue to try and implement the 

Hatch-Waxman amendments as best we can, given the statutory 

text, the history of the legislation, and the many court challenges. 

We have tried to maintain a balance, as we mentioned, between 

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

I am grateful for the opportunity to talk with you. I am grateful 

for the opportunity that the FDA has had to provide technical assistance and to work with staffs on both sides of the aisle with respect to this important legislation and this important issue, and I 

will be happy to answer any questions. 

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

the record.] 

Chairman HATCH. Well, thank you. We are grateful to have you 

here and we are grateful for the work you are doing out there. 

Mr. Bradshaw, we will turn to you. 

STATEMENT OF SHELDON BRADSHAW, DEPUTY ASSISTANT 

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

Mr. BRADSHAW. Thank you, Mr. Chairman, for inviting me here 

today to provide the Administration’s views on H.R. 1, the Medicare Prescription Drug and Modernization Act of 2003. 

My testimony today will focus on a single provision in the Senate 

version of the bill, Section 702(c), which declares that the Federal 

court shall have subject matter jurisdiction over certain declaratory 

judgment actions. Specifically, the provision in question provides 

that the failure of a patent owner to bring an action for patent infringement against a company that files a new drug application or 

the FDA that is based on one of its patents within 45 days of receipt of notice of the application shall establish an actual conVerDate 0ct 09 2002 15:04 Mar 24, 2004 Jkt 091832 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91832.TXT SJUD4 PsN: CMORC
11

troversy between the applicant and the patent owner sufficient confer subject matter jurisdiction in the courts of the United States to 

hear an action brought by the applicant under the Declaratory 

Judgement Act. 

As you noted, Senator Hatch, on June 17, 2003, I provided this 

Committee with the Administration’s tentative views on a similar 

provision contained in S. 1225, the Greater Access to Affordable 

Pharmaceuticals Act. At the time, the Administration had not yet 

formulated a view on whether cases brought pursuant to such a 

provision would satisfy the Article III case or controversy requirement. 

I did, however, make several general observations about the matter. I noted that, among other things, the case or controversy requirement set forth in the Declaratory Judgment Act was constitutionally compelled, and that like other Article III requirements, it 

could not be waived by Congress. 

Having now had an opportunity to examine the provision in 

greater detail—and I also note that I have reviewed the materials 

submitted by both Professor Yoo, who, as the Chairman is aware, 

was in the Office of Legal Counsel for the last several years and 

who I had the opportunity to serve with as a deputy, along with 

the materials submitted by Boyden Gray. 

Having had a chance to review those materials, along with the 

relevant law, the Administration is of the view that in its present 

form, Section 702(c) is inconsistent with Article III of the Constitution. This provision, which again does not appear in the House 

version of the bill, attempts to vest the lower Federal courts with 

jurisdiction over disputes that, because of Article III’s case or controversy requirement, the Constitution does not empower these 

courts to hear. Accordingly, it is the view of the Administration 

that this provision should either be deleted from the bill or rewritten. 

As you are aware, both the Senate and the House versions of 

H.R. 1 make amendments to the process by which n new drug applications are approved. As amended, the process would require 

certain applicants to give notice to existing owners of a patent or 

to holders of an approved application. The notice must provide a 

detailed factual and legal basis for why the application does not infringe the recipient’s patent or why the recipient’s patent is invalid. 

If the recipient of the notice sues for infringement within 45 days 

following receipt, it receives a significant benefit. Among other benefits, the application may not be approved until the resolution of 

the infringement suit, the expiration of the relevant patents, or the 

passage of 30 months from the date of the notice. 

Both the Senate and the House versions of the bill provide that 

if a patent holder does not bring suit within the 45-day period, the 

applicant may then bring a declaratory judgment action for non-infringement or patent invalidity. The Senate, again, but not the 

House, goes further and provides that the failure of the owner of 

the patent to bring an action for infringement of a patent within 

this 45-day period shall establish an actual controversy between 

the applicant and the patent owner sufficient to confer subject matter jurisdiction in the courts of the United States. 

12

Herein lies the Constitutional infirmity. The Declaratory Judgment Act requires that a dispute be an actual controversy before 

the Federal courts have subject matter jurisdiction over actions to 

declare the right of the parties. The Senate version of H.R. 1 purports to declare this requirement satisfied in every case by the failure of the patent holder to bring an action within 45 days and thus 

vest the Federal courts with subject matter jurisdiction in all of 

these cases. Congress, however, cannot so declare. 

The limitation on the Federal courts jurisdiction emanate from 

the Constitution, not merely from the actual controversy requirement of the Declaratory Judgment Act. Under the Constitution, 

Federal courts have jurisdiction over a dispute only if it is a case 

or controversy within the meaning of Article III. The restriction on 

the court’s authority is fundamental to the separation of powers established by the Constitution and enjoins the Federal courts from 

issuing advisory opinions. This requirement, consequently, operates 

as a limitation on Congress’ power to grant the courts jurisdiction. 

Put simply, Congress cannot expand the court’s power to hear 

cases beyond what the Constitution itself provides. In fact, that 

was the holding of the Court’s decision in Marbury v. Madison. 

Courts have read the Declaratory Judgment Act’s actual controversy language to track the Constitution’s case or controversy 

requirement. The Supreme Court has adjudged the Act constitutional only by interpreting it to confine the declaratory judgment 

remedy within conventional case or controversy limits. 

If the Declaratory Judgment Act were effectively amended with 

respect to these patent cases, satisfaction of the statutory actual 

controversy requirement would no longer be sufficient to grant the 

courts jurisdiction. The courts would still have to satisfy themselves that the dispute was an actual case or controversy under the 

Constitution. 

Although Congress made it clear that a certain set of facts fulfills 

the statutory requirement, it cannot declare Article III’s limitation 

satisfied. If it did so, it would be improperly intruding on the 

courts’ province to interpret the Constitution. 

Just as Congress may not declare the Article III standing requirement satisfied, so may it not declare Article III’s case or controversy limitation satisfied. Congress simply cannot expand the 

Federal courts’s jurisdiction beyond the bounds established by the 

Constitution. 

Section 701(c) of the Senate version of H.R. 1 thus can have no 

effect. In many cases, the actions brought following the 45-day period will meet the constitutional case or controversy requirement 

independently of Section 701(c)’s declaration, and as applied to 

those cases, the provision is constitutional, but without any purpose. 

Currently, to determine whether Article III and the Declaratory 

Judgment Act are satisfied in patent disputes, Federal courts have 

asked whether the applicant has a reasonable apprehension that 

the patent owner will sue for infringement. Applying this standard, 

courts look to a variety of factors, including communications between the patent holder and the applicant and the actions of the 

patent holder with respect to other possible infringers. 

13

Indeed, in light of the statutory benefit conferred on the patent 

holder if he sues within the 45-day period, it is likely that a court 

would consider the applicant’s reasonable apprehension to be diminished if the patent holder does not sue for infringement within 

that time. 

Over disputes the courts determine are insufficiently definite and 

concrete to rise to a case or controversy, the Constitution prohibits 

Congress from granting the courts jurisdiction. Accordingly, the 

courts would decline to hear such cases and Section 701(c) would 

again be rendered ineffectual. 

For these reasons, it is the view of the Administration that the 

Senate version should be amended to delete the language purporting to confer the Federal courts with subject matter jurisdiction 

whenever a recipient of the required notice has not sued within the 

45-day waiting period. 

I look forward to addressing or answering any questions that you 

or Senator Schumer might have. 

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

Chairman HATCH. Well, thank you so much. I appreciate all the 

witnesses here today. You have really done an excellent job. 

I am going to turn to Senator Schumer because he has to head 

back to New York, and I want to compliment him for being willing 

to listen not only to me but to others to try and get this bill as perfect as we can, because it is a very, very important bill and we all 

know that. I take a personal interest in it, as you know, but I want 

to personally compliment my friend for being open and willing to 

effectuate some of these changes that have already been effectuated, but I think there are a few more that we need to work on. 

So I will turn to you, Senator Schumer, for your statement and 

any questions you might want to ask. 

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

FROM THE STATE OF NEW YORK 

Senator SCHUMER. Thank you, and again I want to thank you, 

Mr. Chairman, for your leadership in holding this hearing today, 

but more importantly for your leadership on the issue. 

As I have said throughout the course of working on this issue, 

I think that Hatch-Waxman was one of the greatest pro-consumer 

pieces of legislation in the last 25 years. It has saved Americans 

billions of dollars and made very important drugs more available 

to many people who wouldn’t get them. Your leadership in authoring the bill back in 1984 was truly ground-breaking. 

But as we know—and we both know this—the law has been 

abused in recent years, and I especially want to thank you for recognizing that and calling the multiple hearings you have had over 

the last few years to bring the issue to light and to move the ball 

forward as we go where we are going today. 

I also want to thank Senator Leahy, and, Mr. Chairman, I would 

ask unanimous consent that Senator Leahy’s full statement and 

my full statement be put in the record. 

Chairman HATCH. Without objection, and we will keep the record 

open for any other statements by members of the Committee. 

14

Senator SCHUMER. Senator Leahy, along with you, Mr. Chairman, drafted the Drug Competition Act, another piece of legislation 

key to ending the anti-competitive behavior in the pharmaceutical 

industry. I have always supported this legislation. I did when I was 

in the House, and I am very happy to see that it has been included 

in both the Senate and House versions of the Medicare bill as well. 

It is this bill, along with the Gregg-Schumer bill which we are 

here to discuss today, that will ensure that as the Federal Government implements a Medicare drug benefit, precious taxpayer 

money will not be wasted due to anti-competitive gaming. 

I would also want 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 for the past few years 

to craft a strong bipartisan compromise which is now part of the 

Medicare bill in conference that passed the Senate 94 to 1. I am 

not going to mention who the 1 was. 

In drafting the bill this year, we have made modifications to address the concerns that kept the bill’s critics from supporting it last 

year, including many of those of the Chairman. And he is certainly 

correct, he has given great advice in this area. 

I was also, of course, pleased to see similar provisions in the 

House bill, though I do have very serious concerns about the areas 

in which there are significant differences in this approach, and I 

will touch on those in a minute. 

The Senate bill, passing nearly unanimously, is an effective, efficient approach to achieving the goals of the original SchumerMcCain bill, making sure that after a pharmaceutical company has 

gotten a return on their investment, generic drugs are available 

quickly. 

Specifically, the Gregg-Schumer bill in S. 1 will remove barriers 

to access and increase competition in the pharmaceutical marketplace. Simply put, it will get lower-cost generics into the pharmacies and into the hands of consumers as quickly as possible. I 

do not believe the House bill will effectively achieve these goals. 

But before I get into the details on the differences of the bills, 

I just want to say that we have come a long way in the past few 

years on this issue. With these bills in conference, we are on the 

verge of making some real progress for consumers. We are all familiar with the abuses, and over the past year or two support for 

this legislation has only continued to swell. 

In past hearings, we have heard from the FDA, the FTC, and 

witnesses representing consumers and States, all of whom shared 

their concern about the ways in which the pharmaceutical industry 

was taking advantage of loopholes in the law at the expense of the 

consumer. 

For years, the carefully crafted balance of Hatch-Waxman 

worked as it was intended, to bring low-cost generic drugs to the 

market quicker, while continuing to provide ample rewards for innovation. But as profits spiraled higher and as blockbuster drugs 

no longer came on with the frequency that they did in the past, the 

pharmaceutical industry began to see their multi-billion-dollar monopolies coming to an end. 

Without new blockbusters ready to replace the old, they changed 

their approach to innovation. In too many instances, instead of inVerDate 0ct 09 2002 15:04 Mar 24, 2004 Jkt 091832 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91832.TXT SJUD4 PsN: CMORC
15

novating new drugs, they have been innovating new patents. Find 

a good lawyer, he will find a good loophole. But as we attempt to 

close the loopholes, as they say, the devil is in the details, and I 

am sure my friend, Chairman Hatch, would agree there is perhaps 

no other statute for which this phrasing is more true. Change an 

‘‘and’’ to a ‘‘the’’ and you go from huge savings to huge costs. 

I want to reiterate that the bill that Senators Gregg, McCain, 

Kennedy and I put together is extremely carefully crafted. It is fair 

and balanced, and I will not watch and stand by as it is watered 

down in conference. Though there are only a few areas of difference 

between the bills, the differences could mean seriously different 

outcomes for consumers, and that causes me serious concern. 

First and foremost is the difference between the declaratory judgment provisions, which were just spoken about by Justice. First, I 

understand that some have raised questions about the constitutionality of the Senate approach, and I understand, and I have just 

heard DOJ testify to that effect. 

Mr. Chairman, quite frankly, I am floored. Last fall, the President went to the Rose Garden and made it his mission to, quote, 

‘‘close the loopholes and promote fair competition.’’ This is precisely 

what the declaratory judgment provision will achieve. 

We have heard from Chairman Muris of the FTC and he said, 

again, the importance of timely resolution of patent disputes to ensuring robust competition, the importance of which was also clearly 

communicated in the FTC report released last summer. To hear the 

Department of Justice sitting here today suggesting we delete a 

provision which is at the very heart of promoting timely, robust 

competition—well, I am sorry to say this to our President, but you 

can’t have it both ways. You can’t say you are for the consumer and 

you want to bring generics onto the market quickly and then have 

your Administration testify to rip out the heart of this bill without 

even proposing an additional solution. 

We originally had litigation. Many on the other side said litigation is not the way to go. I understand the bias, so we came up 

with this provision, and now they say get rid of it. Well, I have to 

tell you this is becoming—and I am sorry to get excited here, but 

this is becoming a trend of this Administration. 

The President goes and pats the head of a kid on Head Start and 

then cuts money from Head Start. The President talks about AIDS 

in Africa and lets Congress cut money in Africa. The President says 

he is for renewal of the assault weapons ban and then whispers to 

the House you can kill it. Well, it is not going to happen on this 

bill, at least not if there is anything I can do about it. 

If there was good faith and they proposed something else, another quick way for timely resolution, that is fine. But we spent 

months and months and months coming up with a solution for 

timely resolution and this is it, and it flies in the face—PhRMA, 

of course, says this is not constitutional. I don’t think you should 

be a voice piece for PhRMA if you believe in the consumer, because 

most every expert says it is not unconstitutional. And if you believe 

it is, let the courts decide. 

Let me just say a few more things about this. I have letters from 

two well-respected constitutional experts. One is Henry Dinger—he 

is with Goodwin, Procter—who has decades of experience with conVerDate 0ct 09 2002 15:04 Mar 24, 2004 Jkt 091832 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91832.TXT SJUD4 PsN: CMORC
16

stitutional questions such as this. The other is from John Yoo, who 

worked for the Administration. He is formerly from the Office of 

Legal Counsel and now he is fellow at the American Enterprise Institute and a very well-respected scholar, perhaps the most respected in the field. Clearly, he doesn’t agree with me on politics 

if he is at AEI. He is a professor at Berkeley. 

Both of them make it perfectly clear there is no constitutional 

issue with this provision, and I would ask unanimous consent that 

they be put in the record. 

Chairman HATCH. Without objection, we will put them in the 

record. 

Senator SCHUMER. I want to stress the importance of the declaratory judgment provision in this bill. It is key to making the system 

work. There is not currently a clear pathway for a generic drug 

company to get a declaratory judgment to show that they do not 

infringe a patent. 

We saw yet another example of this just three weeks ago when 

the District Court for the District of New Jersey dismissed Dr. 

Reddy’s case for declaratory judgment that their generic does not 

infringe on a patent to Pfizer’s blockbuster drug Zoloft. Basically, 

Dr. Reddy challenged the patent. Pfizer did not choose to sue within 45 days and Reddy wanted assurances from the court that they 

were clear to go to market without the risk of Pfizer suing later. 

The court dismissed the case for lack of subject matter jurisdiction, and now Dr. Reddy has to go back to the drawing board and 

generic competition on a significant drug will be delayed for a long 

time. On a drug with sales of $2.4 billion per year, this decision 

could cost consumers hundreds of millions of dollars, and that is 

just one drug and one decision. 

At the very heart of Hatch-Waxman is the goal of ensuring that 

patent disputes are resolved before generics come to the market. 

Without a clear right for the generics to bring a suit for declaratory 

judgment, the brand companies are in a position to leave the 

generics in the dark. The brand company can list a new patent, sit 

back and wait and wait and wait and wait. 

Sure, the generic could go ahead and go to market at risk, and 

then the brand company could pounce. And if they win the suit, 

they could collect triple their lost profits. I ask the audience, I ask 

anybody, what generic company in its right mind, with its shareholders watching closely, would be willing to take that risk? 

We must ensure that if there are issues of potential patent dispute which the brand company decides to take its sweet time in addressing that at least the generic will be able to go to court and 

say, look, I want to go to the market, get this product to consumers, will you give me clearance to go? 

Without a strong declaratory judgment provision to amend Title 

35, we are not reducing delays. We are simply changing the nature 

of those delays and leaving wide open the potential for gaming and 

abuse. The approach taken in the Senate bill is fair and workable, 

and in Title 35 it parallels the creation of the artificial act of infringement that was created by Hatch-Waxman in 1984. As I said, 

I will not sit idly by and watch this provision and watch our whole 

compromise gutted. I am not here for a hollow victory. I believe in 

this issue. 

17

The House bill, instead of enhancing the ability of the generic to 

seek declaratory judgment, takes a step backward. It makes the 

right of the generic to bring an action for declaratory judgment contingent on the generic handing over sensitive proprietary information about its product, all without any kind of protective order from 

a court and with no enforcement of any kind to prevent the brand 

company from using this information inappropriately. I don’t know 

of any precedent for this type of disclosure, nor do I know any company that would simply turn over highly sensitive proprietary information with no assurance that the information will be protected. 

Now, the second major difference in the bills is that the House 

version is devoid of a mechanism to enforce the brand companies 

to list patents appropriately. The Gregg-Schumer bill includes a 

provision to ensure that brand companies comply with the new 

rules by saying that if a brand company doesn’t list a patent which 

should have been listed, the court may decide not to award treble 

damages if the generic chooses to go to market. 

Without such a provision, who will enforce that the brand companies comply with the new rules? After all, Mr. Chairman, the FDA 

has never taken enforcement action with regard to patent listing 

and we have every reason to believe they won’t start. In fact, Mr. 

Troy has repeatedly testified that this is not their job. So an independent enforcement action is key to making these rules work. 

Finally, there is a provision in the House bill which is commonly 

referred to as the anti-bundling provision. Quite frankly, I can’t figure out why it is in there. What I hear is that it is intended to codify existing FDA guidance on what can and can’t be included in a 

generic application. 

Well, it is my understanding that the FDA’s guidance is very 

clear on this point and its system has been working just fine. I 

don’t know of a single example of how these procedures have been 

problematic in the drug approval process. 

As I mentioned earlier, Mr. Chairman—and I am coming to a 

conclusion here because I know we are trying to catch planes and 

things—as I mentioned earlier, the statute is extremely complex. 

And as we have plainly seen, any change we make to the statute 

runs the risk of being interpreted overly broadly or of opening new 

loopholes. 

Why we would want to take the risk of opening up new loopholes 

that could cost consumers billions when there is no evidence that 

this is an area in need of clarification is beyond me. I strongly feel 

we should leave this one to the FDA. 

Before I close, Mr. Chairman, I would like to make a plea to the 

brand pharmaceutical companies. You make a great product. Me, 

my family, everyone I know has benefitted, but you are losing your 

goodwill day by day. Don’t become like the tobacco industry. They 

made a product that hurt people. You make a product that helps 

people. 

I understand the desire of CEOs to have high profits, to maximize profits. That is their job. But, you know, they shouldn’t just 

think of the next quarter because very time the pharmaceutical industry goes against a reasonable provision like this, they increase 

the chances that provisions they like even less, such as reimportation, will become law. 

18

Everyone knows this is fair. Everyone knows Hatch-Waxman is 

right, and everyone knows there are abuses. Instead of fighting it 

head-on, you go to the House and get these provisions slipped in 

that you know will decimate the bill. 

Well, this generic drug provision is like the escape valve on the 

pressure cooker, the pressure cooker of high drug costs, and if we 

close this escape valve in compliance with your wishes, we are just 

going to create more pressure and sooner or later the lid on the 

whole pressure cooker is going to blow off. 

So I would ask you to work with us on this bill. I would ask you 

to make sure that we get a strong bill, but I will tell you this: I 

am not going to sit by with a compromise that decimates this proposal, into which went a lot of hard work. 

I am sorry for my lengthiness, Mr. Chairman, and I will apologize to the panel. I did have questions which I would like to submit 

in writing. 

Chairman HATCH. Without objection. 

Senator SCHUMER. I have to get on my way. I am sorry. 

Chairman HATCH. Well, thank you, Senator. 

Senator SCHUMER. Thank you. 

Chairman HATCH. You have taken a great interest in this, and 

even though you are wrong, you have been very persuasiveness, 

though, I have to admit. 

[Laughter.] 

Senator SCHUMER. Persuasive. 

Chairman HATCH. But not quite there. 

Senator SCHUMER. Thank you, Mr. Chairman. 

Chairman HATCH. I am personally happy that you have taken an 

interest in this. You have a good break, too. 

Let’s turn to you, Mr. Bradshaw. 

Mr. BRADSHAW. Well, sure. I— 

Chairman HATCH. Well, let me ask a question first. 

[Laughter.] 

Mr. BRADSHAW. I was anxious to respond to some of Senator 

Schumer’s comments. 

Chairman HATCH. I will give you every opportunity. I am really 

happy to have you here and it is good to see you back here again. 

We appreciate you coming back to your Committee with your determination on the constitutionality of the declaratory judgment provision in the Senate bill. 

I read with great interest the correspondence from Boyden Gray, 

former White House Counsel; John Yoo, a former staffer of mine, 

a brilliant man, no question about that. I understand that Mr. Yoo 

has submitted additional comments just this morning, and I look 

forward to reviewing those. I didn’t have a chance to do that yet. 

I have no doubt that Mr. Gray and his colleagues will probably 

choose to submit additional views themselves about your testimony 

and Mr. Yoo’s supplemental comments. 

Your testimony comes down squarely on the side of Mr. Gray and 

concludes that this is a bald attempt to legislate around the case 

or controversy constitutional requirement. Now, I can’t speak for 

any of the other 94 Senators who voted for this bill, but this Senator thinks that the better view is that the Senate-passed language 

has major problems. I don’t think anybody looking at it who has 

19

studied case and controversy litigation and law can just dismiss 

this question. 

Now that you have diagnosed the Senate bill as being broken because of this, please help us fix it. Your testimony suggests that 

the offensive language simply should be deleted. Now, if I understand your testimony at page 3, you believe that even without the 

offending actual controversy language, there is good reason to believe that the courts would confer jurisdiction in a bona fide patent 

challenge situation. 

Am I correct on that? 

Mr. BRADSHAW. Well, yes, several things. There certainly is a 

way to fix this to make this constitutional. On the latter point, 

also, just as certain, if Congress were to pass the Senate version 

as it currently stands, a court would nevertheless not entertain an 

action if it felt the case or controversy requirement were not satisfied. 

It is a constitutional requirement embedded in Article III of the 

Constitution. Notwithstanding the fact that Congress asserts that 

a case or controversy has, in fact, been established by the failure 

of a patent-holder to bring a lawsuit during the 45-day period, the 

court would still independently require there be a case or controversy. So, yes, a court would find this provision to be without 

effect. 

Chairman HATCH. Well, constitutional considerations aside, from 

a civil justice reform perspective, do you have any thoughts on the 

House declaratory judgment language with its right to confidential 

access provision, versus the Senate language absent the offending 

actual controversy language? 

Mr. BRADSHAW. I don’t have any specific comments on the House 

language other than to say that a bill could just simply allow an 

individual who has not been sued, an applicant who has not been 

sued during that 45-day period to bring a case under the Declaratory Judgment Act. The Declaratory Judgment Act itself then 

would require that there be an actual case or controversy. 

Chairman HATCH. Besides deleting the language, which you have 

suggested here, do you have any other suggestion as to how we 

might fix the language? 

Mr. BRADSHAW. Well, I think you could do several things. The 

suggestion I would have is to leave in the language allowing an applicant to bring a declaratory judgment action and just simply 

striking the language that asserts that by doing so, the district 

court shall have subject matter jurisdiction and there shall be an 

actual controversy. That language simply isn’t necessary. 

If the goal of the sponsors is simply to allow individuals to have 

access or to be able to bring an action under the Declaratory Judgment Act, that can simply be asserted in the legislation that they 

have such a right. Then they would have to satisfy the statutory 

requirements of the Declaratory Judgment Act, along with the constitutional ones. 

Chairman HATCH. Thank you. 

Mr. Muris, welcome back to the Committee. We are delighted to 

have you here again. Now, before DOJ came down on the constitutionality question, you appeared to state a preference for the SenVerDate 0ct 09 2002 15:04 Mar 24, 2004 Jkt 091832 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91832.TXT SJUD4 PsN: CMORC
20

ate language, and let me just work on your thoughts for a minute 

or tease them out on the House bill. 

Your testimony states that the right of confidential access to the 

ANDA application may be unnecessary. My question is this: Are 

you saying that the right to access language is superfluous or 

somehow counterproductive? 

Mr. MURIS. I think what we are saying is that the generics have 

every incentive not to get entangled in complex litigation with the 

branded companies, with the innovators. Therefore, they have incentives to provide sufficient information about whether their 

ANDA infringes. In that sense, we think it is superfluous. 

Chairman HATCH. Do you have any preference between the 

House declaratory judgment language and the Senate language, 

with the troublesome, quote, ‘‘actual controversy,’’ unquote, language stricken? 

Mr. MURIS. We have not opined on the constitutionality. That is 

beyond our expertise, my personal expertise. I have a lot of respect 

for both lawyers on the opposite side. In fact, I worked for Boyden 

Gray in the Reagan Administration. That doesn’t mean I always 

agreed with Boyden, but he is obviously a very powerful mind. 

Chairman HATCH. Well, no one always agrees with Boyden, I 

have to say, and Boyden doesn’t always agree with everybody. 

Mr. MURIS. Right, but we all remain very fond of Boyden. 

Chairman HATCH. That is true. 

Mr. MURIS. The reason we have the preference for the provision 

of the Senate is there is a real concern on the part of generics that 

the brandeds will opt out of the system, the Hatch-Waxman system, and just sit back and wait. And so instead of having the FDA 

review of the generics ANDA and the court review occurring more 

or less on the same time frame, you will have them run consecutively and you will have greater delay. 

It is true that the generics have—depending on the circumstances, but our report revealed that the generics were very 

cautious—entered before a district court decision, not with some of 

these more bogus claims that we challenged, but with some more 

basic patent disputes. 

Therefore, I understand their concern. I think it is a legitimate 

concern. We are talking about a world that hasn’t existed in the 

past that may exist in the future. For that reason, because we 

think it is a legitimate concern is why we have expressed a preference, leaving the constitutionality aside, for the Senate language. 

Chairman HATCH. Well, thank you so much. 

Mr. Troy, we are happy to have you here again. I think you are 

doing a great job out there. But the same question to you: what are 

your thoughts on the declaratory judgment matter, now that the 

Department of Justice has found the Senate language is constitutionally problematic? And how should the conferees fix this problem in a way that will achieve the goal of giving generic challengers the appropriate opportunity to litigate the patents? 

Mr. TROY. Well, let me say that we entirely defer to the Department of Justice on the constitutional issue. The declaratory judgment action sort of takes place, if you will, of outside the context 

or outside the rubric of FDA. So we don’t have strong views one 

way or the other with respect to the DJ provisions. 

21

I guess I will have a few observations. Of course, the Senate bill 

allows the ANDA applicant to bring a civil action for declaratory 

judgment that the patent is invalid or won’t be infringed if the suit 

isn’t brought within 45 days. That essentially makes express what 

we think is implied already, so it is not necessarily necessary for 

the bill to do that. But it certainly does no harm and it does not 

really affect us. 

With respect to the House with respect to the confidential access, 

we don’t have, again, strong views on that one way or the other. 

We do think that it would be helpful if it made clear that there was 

no obligation on FDA at all to do the redactions or anything like 

that. 

I don’t think the intention is for FDA to play a role in that process. It is, of course, helpful for us for it to be made clear that we 

have no obligation in that process because, in general, when there 

is patent litigation ongoing, we don’t get involved and we seek not 

to get involved, and we don’t want there to be any suggestion that 

we really should get involved. 

So, again, deferring entirely to the Department of Justice on the 

constitutionality, I think we think that there are salutary features 

of this bill that would make the world better—of both these bills 

that would make the world better, the DJ action issue aside. We 

think that building on your suggestion and on the FTC suggestion 

and our rule to make clear that there is one 30-month stay is a 

good thing. We think the way that the 180-day exclusivity would 

operate would be improved under both bills. 

Chairman HATCH. Thanks. I know Mr. Muris has to go in about 

5 minutes, so let me approach both of you. Both of you can answer 

this if you would like. 

Mr. Muris, on our next panel we are going to hear from Bob 

Armitage, of Eli Lilly, who will argue that this new 180-day marketing exclusivity system will routinely result in 180 days of marketing exclusivity being awarded to generic drug firms who don’t 

defeat the basic composition of matter or method of use patents, 

but merely find a way of inventing around the formula of the drug. 

Now, I understand that Mr. Armitage has met with both of your 

staffs. My friend, Senator Schumer, criticizes the R and D firms for 

inventing new patents, not inventing new drugs. But might it be 

the case that the legislation contains a system whereby potentially 

billion-dollar rewards will be granted to generic firms who have not 

invented around or defeated the basic patent rights, but really invented around what may be considered relatively unimportant formulation patents and, let me put it this way, parked the exclusivity? 

And a follow-on question on that: why should multi-drug generic 

competition be delayed for 180 days, at great cost to consumers, 

merely because some non-infringing challengers of drug formulation patents filed papers with the FDA earlier than others? 

Mr. MURIS. Mr. Chairman, there are at least three points there. 

One point which you were mentioning at the end is this question 

of whether we should give 180-day exclusivity at all. Our approach 

has been to respect the original balance in Hatch-Waxman, and we 

see no compelling reason in the facts of our study that the 180-day 

provision by itself caused particular problems. 

22

However, a second point, and your mention of the word ‘‘park,’’ 

raises this serious issue and we think there is the real possibility 

of delays in generic entry. You mentioned in your opening statement, and you had, I think, an intriguing idea of another trigger 

where there is a second generic ready to go. The way the bills are 

currently written, that first generic would have a right to block the 

second generic. 

We are also particularly concerned about the additional delay 

that we think would be caused by the circuit court trigger. If you 

look at our data, the district court rule is a new rule. It has only 

been in effect since the Mylan decision in 2000. Before that, when 

generics had the option, they often entered, but they probably just 

as often—probably a little more than just as often—did not. This 

provision is meant, I think, to give the generics some more flexibility. The innovators like it in the sense that it may delay generic 

competition, but I think the consumer is left out of that. 

The third and final point is in terms of basic patents, I think if 

those patents are valid that the generics are most often not entering, and that is not what the dispute is about. The dispute is often 

about the sort of patents that you are talking about. But, again, 

I think in the original Hatch-Waxman balance, that is a valid reason for generic competition. 

One of the very important things you did and what, quite frankly, I am concerned about from a competition and consumer perspective is the tendency to pile on the pharmaceutical industry. There 

is an overwhelming incentive for government to act as a 

monopsonist, a power buyer, and thereby lower the price that it 

pays for prescription drugs, which is penny-wise and pound-foolish 

in the long run. 

So I understand that point and I don’t think that is a problem 

with Hatch-Waxman as proposed because you, in fact, extended 

patent life. That was a very important part of the compromise. 

And, in fact, I don’t think that is a problem here. I think that is 

a problem with other possible legislation. 

But I do think, to sum up, that for the generics, the 180 days 

does provide them an incentive to innovate and that is a useful incentive. Unfortunately, as we have talked about before, I have several hundred physicians waiting to hear me and if you would like, 

I have Susan Creighton, who will be the Director of the Bureau of 

Competition, and she could sit here and address any other questions. 

Chairman HATCH. Well, thank you. We will sure release you and 

we will be happy to have Susan sit there. 

Mr. MURIS. Thank you. I appreciate it, Mr. Chairman. 

Chairman HATCH. Well, thank you so much. 

Mr. Troy, do you have anything to add to that, or do you agree 

or disagree with what was said? 

Mr. TROY. Thank you, Mr. Chairman. Let me say that Eli Lilly 

and Mr. Armitage raised new issues that were really not addressed 

or discussed during our discussions on either side. We certainly are 

happy to have a lot of smart people thinking about this and trying 

to avoid unintended consequences because I think as everyone 

agrees, there are few areas of legislation that I know about where 

the law of unintended consequences operates with the same force. 

23

That said, let me offer just a few initial thoughts, and they are, 

let me just say, tentative initial thoughts on the Lilly piece. 

We think that some of the 180-day provisions could create unintended difficulties. The testimony doesn’t really provide specific 

language. When we gave technical assistance to the staff, we did 

raise the need to change particular language and I want to clarify 

what I may have misstated or may have been misunderstood during my opening statement. 

In particular, we think the (CC) provision under failure to market, where it says when the patents expire—we think that should 

be deleted. We made that technical suggestion. There wasn’t time 

during the many changes that were happening in the last few days 

for that to be made. We were not told there was any objection to 

it, and so we are interested in continuing to have a dialogue on 

that. I think that if that technical suggestion is made, it would at 

least address some of the concerns that are raised in the Lilly testimony. 

There are some other deficiencies that are posed in the testimony 

that we are not quite sure are as problematic as that testimony 

may suggest. In particular, our regulations and court decisions interpreting pretty similar language preclude the possibility that a 

generic would still be eligible for exclusivity if they lose a patent 

infringement suit. At least we interpret these provisions with the 

intent that our regulations and court decisions on that point would 

apply. 

So in other words, the ANDA applicant files a IV. If they lose, 

we don’t think they can still under the rubric of that same paragraph IV certification commence entirely new litigation. That is the 

way we interpret it. Would it be helpful to clarify this interpretation? Perhaps. Is that necessary? We don’t really think so. 

We do think that this concept of basic patents is somewhat troublesome and we haven’t seen a good definition of it. But to get to 

your, I think, philosophical question on 180-day exclusivity, I do 

entirely agree with Chairman Muris. We have approached the 180-

day exclusivity provision with the end of giving effect to the original compromise. 

The logical conclusion of some of the arguments raised in the 

Lilly testimony is that perhaps there shouldn’t be 180-day exclusivity. Obviously, the existence to a certain extent delays full generic competition, which is when you really see the price drop. 

On the other hand, the argument is that 180-day exclusivity does 

create a powerful incentive for people to come in and challenge 

these patents and to bring generic drugs to market in the first 

place. So we have, again, as the FTC has, tried to administer the 

statute making the 180-day provision as workable as possible. 

Again, we were very grateful for the openness of the Senate staff 

on both sides of the aisle to talking with us about ways to make 

it more workable. We do think that the provisions in both bills with 

respect to 180-day exclusivity, which are identical, would make the 

scheme more workable. 

Chairman HATCH. Thank you. 

Mr. Dudas, we don’t want to leave you out here today. We welcome you back to the Committee and appreciate the work you have 

done up here on Capitol Hill, as well as your work at the PTO. 

24

I take it from your testimony that the PTO is not enamored of 

the Senate amendment to the patent code. Is it your view that PTO 

prefers the House language which does not alter the patent code? 

But before you answer that question, I want to recognize Mary 

Critharis, who is with PTO and was on loan to the Judiciary Committee a few years ago. So we are grateful to have her here. 

If you would take a crack at that, I would appreciate it. 

Mr. DUDAS. Absolutely, and thank you for acknowledging Mary. 

We were very happy to take her back, and I know it was kicking 

and screaming. 

The answer is yes. As we look at the patent provisions, in particular, there are concerns we have raised with patent provisions 

that are in the Senate bill that don’t exist in the House bill. Our 

main concern, again, is maintaining the balance that is in HatchWaxman, the balance of making sure you have affordable medicines, but also making sure that new prescription drugs will come 

about. 

What we have found in the patent provisions as we look at them 

is that we are creating a different system. We fail to see how it provides more accessible medicines, but we recognize that it could undermine the patent system and the balance that is in Hatch-Waxman today. 

Chairman HATCH. One of your positions, and your testimony, I 

think, stated that any amendment to Title 35 must be consistent 

with your obligations under the applicable international trade 

agreements. 

Mr. DUDAS. Absolutely. Any time there is a change in patent law, 

it is important to analyze the effects on existing international trade 

agreements and potentially new trade agreements, especially if the 

change in patent law will affect a particular industry or particular 

technology. 

The United States is by far the leading innovator of new prescriptions drugs, and as we negotiate agreements throughout the 

world, we often point out to other nations their need to have a systematic approach to intellectual property and patent law, in particular. So as we do that, we need to analyze and evaluate the effects of our own changes to patent law. 

Chairman HATCH. Our lead may very well end if we continue 

these schemes of drug importation, which would impose price controls on our industries here. That is why Canada doesn’t have any 

real innovator pharmaceutical industry. So there is a lot going on 

here. 

Let me just say this: could you comment upon today or provide 

for the record—in fact, I wish you would provide for the written 

record after consulting with USTR your opinion on whether the 

Senate language is consistent with the TRIPS provisions and the 

Paris Convention. Could you do that for us? 

Mr. DUDAS. Absolutely. We will talk to our colleagues at USTR 

and communicate that. 

Chairman HATCH. In short, I guess what I am saying is, does the 

Senate language run afoul of the international IP restrictions 

against singling out a class of patents from discriminatory treatment? Perhaps Utah’s favorite son, Sheldon Bradshaw, will help 

you with this analysis. We would appreciate having that, okay? 

25

We are very proud of you and the position you have and the work 

that you are doing. So, if you folks would do that for us? 

Mr. DUDAS. Absolutely. 

Chairman HATCH. Now, let me just ask the whole panel this 

question. 

Susan, we are happy to have you join in on this. 

Generally speaking, a patent is a negative right and comes down 

to a power to exclude. I think that is a fair statement. Patent-holders generally have a wide latitude in determining when, where, 

and against whom to exercise this right of exclusion. I understand 

and sympathize with the generic industry’s desire to force resolution of patent challenges right up front. 

But what evidence is there, if any, to support the fear that pioneer firms will not vigorously defend their patents against a paragraph IV patent infringement challenge? Is there any evidence of 

that? 

Ms. CREIGHTON. There is none in the FTC’s drug study that focused on that issue. 

Chairman HATCH. All right. Does anybody else care to comment? 

A lot of blank stares there. Not so blank, but at least—okay. 

Let me ask the panel about the dramatically new 180-day marketing exclusivity provisions. I am mindful of the fact that we are 

facing identical 180-day provisions in the House and the Senate 

language. It is known that I am no friend of the first-to-file system. 

I prefer to stimulate and reward successful challengers. 

Frankly, I don’t understand a system where a successful patent 

invalidity challenger could be forced to share exclusivity with other 

first, but unsuccessful, challenging filers. Or, worse, why should a 

subsequent-filing but successful non-infringing challenger have to 

wait 180 days to enter the market, during which time infringing 

first filers were not able to get to market? Why not simply add a 

new forfeiture event whereby the first challenger not sued, succeeding in court or obtaining a covenant not to be sued, gets the 

180 days? 

Who would like to take a crack at that? 

Mr. Troy? 

Mr. TROY. Well, I can say that FDA initially interpreted the 180-

day provisions as embodying a successful defense requirement, and 

the courts told us that that was not the right way to read the statute. Since that time, we have been trying to administer the statute 

as best we can, in light of the court decisions. 

What you raise is a policy question that we have taken no position on. There are pros and cons to the whole question of 180-day 

exclusivity and setting forth the conditions on it, and those are just 

fundamental policy choices that Congress needs to decide. 

Our primary concern, again, given the experience and expertise 

that we have, is trying to ensure that whatever system is designed 

is one that we can administer with a minimum degree of ambiguity, cost, inefficiency, because one of the things that is very important, as I think you know, is that people understand what the 

rules are. Everybody wants to know what the rules are. People can 

deal with the rules once they know what they are, but they want 

to know what they are. So we have tried to, again, work closely 

with everybody to try and make sure that there is clarity. 

26

Chairman HATCH. Well, thank you. 

Now, Mr. Troy, before you leave I want to mention one other 

thing. Senator Harkin and I have written to the FDA twice. This 

is off the subject, but I want to take advantage of you while you 

are here. 

We have written twice and talked to the Commissioner and you 

about the andro situation, and we are farther than ever from having it resolved. I take this very, very seriously, and I think you do, 

too. 

In July, my staff and I had a staff meeting with the DEA and 

FDA in my office. Now, it appears that FDA is not taking action 

against andro products because you can’t decide whether it is a 

supplement or a drug. At least, that is what it appears to me. You 

could go after it under either theory, as a non-grandfathered supplement or an unapproved drug. I don’t care which way you go, but 

I think you have to act. It is a dangerous situation, and while you 

are not acting, people, and especially kids, are getting hurt. 

Now, when we come back in September, we may have to have 

a hearing, or perhaps we may have to do a bill. I would prefer not 

to do that. You folks are good guys. You are doing a good job. You 

are trying to do the best you can. You have inherited a myriad of 

problems out there and I think you are straightening them out. 

We are moving ahead on our unitary, state-of-the-art campus 

that really will augment FDA like never before under our FDA Revitalization Act. But I think inaction can give us all a bad name 

if we don’t do something about this. There are some who believe 

that there are those out at FDA who would like nothing better 

than to have a tragedy in what is called the, quote, ‘‘dietary supplement,’’ unquote, industry. I hope that is not true, but there are 

some who believe that. 

Now, I am counting on FDA moving forward on this to protect 

the public health because I think this inaction has been going on 

far too long. Will you take that message back? 

Mr. TROY. I will. 

Chairman HATCH. And tell Dr. McClellan I would like this resolved before I get back in September, and I don’t see any reason 

why it can’t be resolved. So help us here, Dan, okay? 

Mr. TROY. I will take that back, Mr. Chairman. Nobody has any 

intention of waiting around for a tragedy. That is not our modus 

operandi. We do try and act proactively to try and protect the public health. That is why we are there, and I will certainly talk to 

Dr. McClellan about this issue. 

Chairman HATCH. I don’t want it to go beyond the next few 

weeks. 

Mr. TROY. I will take that back. 

Chairman HATCH. And if it does, I am going to be really upset. 

Mr. TROY. I will take that back. 

Chairman HATCH. And I have been known to kill. 

[Laughter.] 

Chairman HATCH. But it takes a lot to get me there; it takes a 

lot to get me there. 

Mr. TROY. I have had some chats with Brent about this. I don’t 

want to see you mad. 

Chairman HATCH. That is great. 

27

I want to compliment all of you for your excellent testimony. We 

have discussed some very difficult technical issues, but this bill is 

that important. Everybody admits it is one of the great consumer 

bills, and it was so hard to put together at the outset. I mean, it 

was just awful, but when we finally got it together, it worked magnificently well, except some have gamed the system and we have 

got to solve that. 

These bills are good-faith intentions to do that, but I want to 

make sure that when we get them done, they are constitutionally 

sound and that they really work and that they don’t upset the balance between the need to have new, innovative drugs created at a 

cost of $800 million to $1 billion, where you have got to get that 

money back or you can’t keep investing in it—the need to do that 

and the need to get them into generic form as quickly as possible. 

That is the balance of Hatch-Waxman that we worked hard to create and really has worked remarkably well, in spite of even some 

of these conflicts and problems that we have had. 

So your testimony here today is very, very important, and I believe that the conferees will pay attention to it, as they should. And 

if you will get me the written materials that I have asked you to 

do as quickly as possible, that will mean a lot to us, too. And then 

if you will work on the andro thing, I would be very grateful. 

Thanks so much. I want to thank each of you. You are great people, you are great public servants, and I appreciate the efforts that 

you have made to be with us today and the intelligent testimony 

that you have given. 

Now, Mr. Robert Armitage is our sole panelist for the second 

panel. Mr. Armitage is Senior Vice President and General Counsel 

at Eli Lilly and Company. Prior to joining Lilly in 1999, Mr. 

Armitage was a partner in the law firm of Vinson and Elkins, one 

of the great law firms in this country, and headed the firm’s intellectual law practice in Washington, D.C. 

In addition, Mr. Armitage has served as an adjunct professor of 

law at George Washington University School of Law, and as president of both the American Intellectual Property Law Association 

and the Association of Corporate Patent Counsel. 

I am particularly interested in hearing your views, Bob, on how 

this legislation might affect generic drug entry and drug innovation 

for brand name companies. So we appreciate you making the effort 

to be here, the effort to testify, and the effort to educate us on some 

of these very important questions. 

So we will turn the time over to you. 

STATEMENT OF ROBERT ARMITAGE, VICE PRESIDENT AND 

GENERAL COUNSEL, ELI LILLY AND COMPANY, WASHINGTON, D.C. 

Mr. ARMITAGE. Senator, it is an honor to be here this morning. 

Let me say to begin with that I am not here to talk about reforming the Hatch-Waxman Act. The issue we have before us today is 

quite a narrow one. What should happen to S. 1, what should happen to H.R. 1 in the event a compromise would be reached on Medicare? 

Also, contrary to what might have been implied, there is nothing 

in my testimony today— 

28

Chairman HATCH. I think you might want to restate that. Maybe 

you had better start over. 

Mr. ARMITAGE. Let me just say, Mr. Chairman, that I may have 

to start over in just a second myself. Sorry. 

Chairman HATCH. I am going to make one other statement before you start. 

Mr. ARMITAGE. Sure. 

Chairman HATCH. Before we receive your testimony, I think it is 

important for me to say that we made a good-faith attempt to have 

a representative from the generic drug industry to be with us 

today, as well. We invited two witnesses, and also asked their trade 

association to recommend a witness. They apparently did eventually identify a witness, but the logistics just didn’t work out. 

We did ask both the GPhA and PhRMA to provide written statements explaining their views on the Senate and House language, 

and we will make these responses part of the record, in addition 

to the lively correspondence between Boyden Gray and John Yoo on 

the constitutionality issue. 

So we will certainly keep this record open for the generic companies to make whatever comments they would care to make. We feel 

badly that they couldn’t make it at this point. There was not an 

intention not to make it, I don’t believe. It is just that they were 

unable to. So we just wanted to make that clear. 

Mr. Armitage, we will take your testimony. 

Mr. ARMITAGE. Thank you. Also, it is refreshing experience for an 

executive in a pharmaceutical company to be on a panel and have 

no fellow panelists disagreeing with him. 

Chairman HATCH. That must be a first. 

Mr. ARMITAGE. For me, it would be a first, yes. 

As I think I indicated earlier, we don’t see our testimony here 

today to talk generally about Hatch-Waxman reform. We are really 

very narrowly focused on the provisions in S. 1 and H.R. 1, particularly those that would make what we believe would be a fundamental difference in the way we would look at patents to protect 

our innovation, and also the way the consumer would be impacted 

by the 180-day generic exclusivity provisions. 

Also, just to be very clear at the outset, we are not looking at 

a change in S. 1 that would produce a loophole that would allow 

gaming of the system that would in any way result in even a single 

extra day of exclusivity for an innovator. 

Also, there is nothing in anything that we have in our prepared 

testimony and there is nothing that I am going to say in the few 

minutes I will have for these remarks that will in any way suggest 

that we seek to repeal or eliminate the 180-day exclusivity. 

More to the point, what we are looking for, I believe, is what the 

Senator was looking for in 1984 when the Hatch-Waxman Act was 

first put into effect. If we are going to continue the 180-day exclusivity, if it is to be part of Hatch-Waxman and it is dealt with in 

S. 1, then it should serve its purpose. 

Its purpose was perhaps two-fold: one, to accelerate generic drug 

entry, which in situations it has done. The second potential use of 

the 180-day period is to cause patents to be challenged by generic 

drug companies that might not otherwise be challenged. 

29

It is in the context of these assumptions that we believe the provisions in S. 1 will not serve the intended purpose of their sponsors 

and will, in fact, have what we believe are profoundly counterproductive effects in not only delaying generic drug entry in a number of situations, but also delaying competition among generic companies, which is the real value that consumers receive from the 

180-day challenge when it achieves its intended function. 

Now, some of you may already be wondering why someone from 

a multinational research-based pharmaceutical company is coming 

here trying to explain to you why I might possibly want a law 

changed to facilitate not only earlier generic drug entry, but also 

to facilitate competition among generic companies. 

The answer is very simple. If, indeed, by changing the HatchWaxman law, you do as the FTC and Chairman Muris stated in 

his testimony, created an opportunity for each of our innovative 

products to receive a patent challenge at the earliest possible 

date—that is 4 years after the product is approved—and if a challenge can be made against all of our patents, including the basic 

patents that are the reason we are able to invest in a new molecule, and that patent challenge has no prospect of failing, failing 

in the sense that it may fail to clear the way for generic drug entry, 

it may fail to accelerate generic competition by 1 day; it may fail 

as an incentive for other generic companies to be able to get to the 

market. 

But it may nonetheless succeed in producing a 180-day monopoly 

period that might return $100 million, might return $500 million, 

for a true blockbuster drug might return $1 billion just for being 

first to come to the FDA with a paper that says I made a patent 

challenge, and whether the defense was there, whether the defense 

was successful, nonetheless have this guaranteed reward. That, in 

effect, is why we are so concerned about the provisions of S. 1 because they, in practice, then become highly anti-innovation, as well 

as being anti-consumer. 

Now, I would love to sit here and explain to you what is in my 

12-page, single-spaced typed testimony on exactly how it is that removing a court trigger has all of these impacts that I believe, 

frankly, are an unintended loophole in the law. As exciting as that 

would be to me, I can guarantee you that to everyone else in this 

room it would probably be a relatively boring exercise in drawing 

elaborate diagrams. 

Chairman HATCH. We will put all 12 pages into the record, and 

I assure you we are going to read them. 

Mr. ARMITAGE. I appreciate that. 

Let me also just talk for a second, because I think this is to me 

a very important part of understanding where we see a solution to 

this issue that we have raised. I was delighted to see that the FTC 

indeed has taken this issue seriously enough to have a set of possible solutions that they would like obviously be considered in conference. 

I think if I listened to Mr. Troy carefully, he believes that 

through a combination of perhaps some changes to the statute and 

a technical amendment suggested by the FDA during the process 

that led to S. 1, plus relying on FDA regs and interpretations, 

30

which I think based on the experience of the last 20 years would 

not be wise, perhaps we could accomplish a closing of this loophole. 

But let me say there is another way that meets Senator Schumer’s requirement, basically, that we not allow new gaming of 

Hatch-Waxman, that we not provide new prerogative or incentives 

that he might say innovators do not deserve, but nonetheless targets in precisely on some of the difficulties with the 180-day period 

with S. 1, and perhaps even without S. 1. 

So what is it that in our prepared remarks we have discussed at 

length? It is to say that if you get to the point where all of the 

basic patents have expired. Now, while the FDA may have difficulty defining this, the definition can be quite simple. They are 

patents that, if they are valid, can’t be gotten around because they 

are not infringed. They are the active ingredient, they are the approved uses. If you are decreed by a court not to infringe the patent, it is not a basic patent. Otherwise, obviously it may be. 

But when we look at the time that is perhaps 12 or 14 years 

after a new drug has been first approved by the FDA, and if no 

patent challenger has at that point been able to use the 180-day 

period because their challenge is not complete, their challenge was 

not successful in clearing the way or they wish to park a challenge, 

then we believe that competing generic companies who have gone 

through the entirety of the same patent challenge, faced the same 

obstacles, been required to design the same non-infringing generic 

drug products, been required to make the same patent certification 

statements and been required to demonstrate to the innovator 

whether through litigation or otherwise that they do not infringe, 

and have done so obviously without the incentive of the 180-day period—then we have reached a point where there ought to be a forfeiture event. 

Mr. Chairman, it is much like your notion that he who succeeds 

in demonstrating that he is completely and totally free from patent 

issues by using the Hatch-Waxman patent challenge process ought 

to at that point at least be entitled to get to the market even if that 

challenger cannot get the 180-day exclusivity period. 

Again, what we are talking about with the prolonged ability of 

someone to make a successful challenge and use the 180 days, with 

then the ability of the first applicant to still use and still maintain, 

and perhaps even still park the 180-day period if another competitor has not completely gone through the challenge process and 

been demonstrated to be totally free from patent issues and ready 

to market, we see no possible reason or no possible way why that 

does not both allow full, extended opportunities for 180-day exclusivity that will and can be used when they—and I will use the term 

‘‘earned’’ in this sense, in quotes, and yet prevent this new ability 

that is noted by both the FDA and the FTC to indefinitely park 

that exclusivity, particularly park it until all the basic patents have 

expired, and then take it out and have it have its direct anti-consumer effects by delaying generic competition and its obvious antiinnovator effects of being a no-risk, guaranteed reward way of financing early and entirely speculative patent challenges. 

Now, I assume my time is up. I would be happy to talk a little 

bit about some of the provisions that the first panel talked about 

in perhaps a minute or less if that would be of any interest. 

31

Chairman HATCH. Go right ahead, Mr. Armitage. 

Mr. ARMITAGE. First of all, let me say that while I am speaking 

today only on behalf of Eli Lilly and Company, PhRMA has submitted a paper which I think accurately captures some of the difficulties that I think the pharmaceutical industry, including Lilly, 

share. 

Let me just say on the constitutional issue, having been through 

patent challenges where declaratory judgment actions were 

brought and resolved, I cannot for the life of me, not being a constitutional scholar, figure out how a provision of law that is either 

redundant or a court would ignore because there is no case or controversy as required by the Constitution could be the proper solution to the concerns that Senator Schumer raises, much less the 

concerns that the Department of Justice has raised. 

As we look at the House bill and consider perhaps the comment 

of the FTC about whether or not providing access to generic drug 

applications on a confidential basis, in a way equivalent to a protective order in a court, would be superfluous, let me say from my 

real-life experience that is not a superfluous issue. 

We know that the gaming of the Hatch-Waxman system has included generic companies refusing to provide any information during a 45-day period, sometimes providing just so little information 

that an innovator company who genuinely wants the issues of patent infringement resolved faces a Rule 11 issue under the Federal 

Rules of Civil Procedure. There may be a patent for which, without 

knowing what the drug substance is that the generic is using, you 

do not have a basis for concluding you have a possible case of infringement. 

So before one would cast aside the House language on providing 

confidential access as being totally superfluous, I look at it as a 

major step to prevent an aspect of gaming that I have experienced 

in terms of the generic drug industries. 

I have never seen a sit-back-and-wait situation where an innovator who had a basis for keeping a generic drug off the market 

because the innovator believed there was a genuine issue of patent 

litigation that ought to result in the innovator winning would 

somehow not bring the lawsuit and allow the generic competition 

to begin. I would like to find that patent attorney, if indeed such 

an attorney works at Eli Lilly and Company, so I could have a brief 

discussion with him. 

The last issue that I will just comment on for a second deals with 

our TRIPS obligation to provide non-discriminatory protection for 

all fields of technology. It may be that we can find a way to discriminate against pharmaceutical patents that doesn’t violate the 

TRIPS agreement. 

I would submit that denying a normal patent remedy in a field 

of technology for the failure to undertake a ministerial act gives a 

road map around the world to companies who would like to do very 

similar things that will differ only in degree. 

I would urge the Senate, even if it believed that this must only 

be a minor issue to deny treble damages, to perhaps consider that 

other countries with TRIPS obligations may decide to deny lost 

profit damages, or may decide to deny anything more than a nominal royalty as damages in a situation where some ministerial act 

32

relating to a pharmaceutical patent, particularly one that is at best 

ambiguous in its ultimate application, has not been fulfilled. 

With that, I do appreciate, Senator, the opportunity to make 

these remarks. 

Chairman HATCH. Thank you. We are grateful to have you here, 

as well, and I thought your remarks were excellent, but I do have 

some questions. 

Let me see if I get the crux of your testimony. You believe, if I 

interpret it correctly, that the new system guarantees large rewards for relatively minor inventions around relatively unimportant patents, such as drug formulation patents. Did I get it right? 

Can you explain that? 

Mr. ARMITAGE. Sure, I would be happy to explain just that point. 

Obviously, when we develop a new pharmaceutical product, we will 

patent the active ingredient on the drug. That is the very simplest 

case. 

Also, as we are developing a new drug—and I will use an example that has been in the popular press and been in the FDA regulations—we may find a particular polymorph or a particular physical 

way in which the drug forms a crystal to be very advantageous in 

manufacturing and we may patent that. 

Then what a generic company needs to do, if those are the two 

patents in the Orange Book, is to say the active ingredient is invalid and we have decided not to use the polymorph the innovator 

uses. They may simply make no invention at all and pick some alternative physical form to use in their drug. 

The FDA merely requires that the active ingredients be identical. 

You can make a drug in any physical form that will turn out to 

be bioequivalent to the active ingredient. Doing just that and making a patent challenge at 4 years, even if you have no reason to 

believe that the active ingredient patent could ever be invalidated, 

will earn you under S. 1 180 days of exclusivity. 

You may have to wait 7 or 8 years, but because you can lose on 

the basic patent in court and park the exclusivity until the basic 

patent expires, then just when all the other competing generic companies who have done just what you did—they took off the shelf 

a polymorph that wasn’t patented, they went through the patent 

certification process, they demonstrated they don’t infringe—you 

will keep all your competitors off the market and you will get 180 

days of exclusivity. 

If the drug happens to be a drug like—we will take Zantac, 

which was a Glaxo drug that indeed had a patent both on the active ingredient and on the polymorph. You will be able, going forward, to keep a product like that off the market for an additional 

6 months, all your generic competitors off the market. 

A product like Zantac, which was a billion-dollar product—you 

may make $2 or $3 million in monopoly profits that under today’s 

law, that very same early patent challenge would have produced no 

monopoly. 

Chairman HATCH. I see. Can you please take me through some 

of the examples in your appendices where you describe the results 

if the proposed 180-day exclusivity provisions had been in effect? 

Now, you have kind of given some examples, but I wouldn’t mind 

having some more. 

33

Mr. ARMITAGE. Let me go to what I believe is Appendix B in my 

testimony, and it is a—actually, that is not where I want to go. It 

is Appendix A and it will be on page A–5. This is the example that 

I think clearly indicates the categorical need for a form of technical 

amendment to S. 1 or what Senator Schumer fears most. That 

there is a loophole in S. 1 that can game the system and delay generic competition is all too true. 

In the example on page A–5, we have a situation where there are 

only two patents left in the Orange Book. This is the most common 

situation that Chairman Muris talked about for most of the 180-

day periods that have arisen. They arise after the basic patents 

have expired or at the time the basic patents will expire. 

Here is a situation where, just to get to the details, the formulation patent—that is how the drug is actually put together, the way 

the innovator put together his drug—expires in 2013, and a polymorph patent or a patent on any physical form of the drug expires 

several years later. 

Now, the first applicant who is in a hurry to get there first manages to not succeed in designing around the formulation patent and 

simply is found to infringe that patent. It expires in 2014. In the 

example I have given you, the first applicant has completed the 

FDA review process and has tentative approval in 2007, 6 years before this first patent in the Orange Book will expire. 

Now, in this example I have listed below three competing generic 

drug companies who did exactly the same thing the first company 

did, tried to design a non-infringing formulation, tried to find a 

source of the bulk drug that was not patented. In this example, 

each of those three companies not only succeeded in doing that, but 

succeeded in making the patent challenge and succeeded in demonstrating to the innovator that they did not infringe the patents. 

In this case, the demonstration was so convincing they were never 

sued for patent infringement. 

Under current law, there is no possibility—I am sorry—under S. 

1, there is no possibility that the 180-day exclusivity can expire 

until 75 days after the formulation patent expires because of the 

new parking right. Indeed, competing generic companies stay off 

the market under this particular example until sometime in 2013, 

almost 2014. 

That, I submit, is a loophole that, while it perhaps would warm 

the heart of the innovator company who faced no generic competition for 6 1/2 years, is not the bargain consumers thought they 

were getting when Hatch-Waxman was enacted. 

Chairman HATCH. Any other examples you would care to give us, 

please feel free to do that. 

Mr. ARMITAGE. I am happy to do that. 

Chairman HATCH. You don’t need to do it right now. That was 

a very interesting, but difficult to understand— 

Mr. ARMITAGE. It is almost the true-life story, Senator, of the 

Prilosec patent challenge, which is another example. 

Chairman HATCH. Right, yes. You believe that the proposed legislation effectively eliminates the court decision trigger that allows 

exclusivity to be parked sometimes for years until the basic patents 

covering the molecule and the method of use expire. 

Can you walk us through how that works a little bit? 

34

Mr. ARMITAGE. Well, unfortunately, except for the court decision 

trigger, the only thing left that triggers the start of the 180 days 

is what necessarily must trigger it, the start of commercial marketing by the generic drug company. 

So the way S. 1 is written, but for the forfeiture provisions that 

the first panel talked about, the generic drug company would have 

total discretion as to when to bring the 180-day monopoly into force 

and could indeed tie up competing generic companies for an indefinite period of time. 

So it turns out that under the structure of Hatch-Waxman, taking out the court decision is equivalent to taking one of the wheels 

off a bicycle. It really makes it harder to get the bicycle to go anywhere, much less work the way it was intended. 

Unfortunately, when the forfeiture provisions were written, they 

did not put in place a forfeiture that stopped a generic company 

from parking indefinitely. In fact, what the forfeiture provisions 

did, I think, as the first panel indicated, is add an additional 75-

day period in which there could be no forfeiture after a court decision, then move the court decision from the district court trigger 

to the appellate court trigger, and then, I think as Mr. Troy’s testimony suggested, for all the patents that block your way to FDA approval, made the expiration of the patent the earliest possible date 

that the forfeiture could take place. 

In other words, not only was the court decision written out as a 

trigger for the start of the 180-day period, but the court decision 

was then delayed, then changed to a different court decision, and 

then utterly written out on all the patents, particularly the basic 

patents if they survived a patent challenge. 

So it ended up being the perfect creation of a loophole, moving 

something from one section of a statute to a brand new section of 

a statute, and then not have the new section of the statute do the 

most fundamental thing the old section did, and that is prevent 

this parking of the exclusivity until it will become anti-consumer 

and anti-competitive. 

Chairman HATCH. Well, let me just ask one other question, and 

we will be happy to have you submit anything else you would care 

to for the record. 

As you know, I am asking CBO to see if this new system would 

actually cost consumers money, the new system under S. 1. Do you 

have any estimates on how much this new system might cost consumers over time? 

Mr. ARMITAGE. It is like McDonald’s, billions and billions. 

Chairman HATCH. So, what is billed as a consumer bill could actually be costly to consumers? Is that what you are saying? 

Mr. ARMITAGE. Amazingly costly. Let me just give you an example of what—well, it is in my testimony. I won’t go into it in any 

detail. 

Chairman HATCH. I don’t want anything to take away from 

Hatch-Waxman’s pro-consumer stance while we try and resolve 

some of these loophole problems. 

Mr. ARMITAGE. Well, let me just say one thing, if I could. One 

of the most pro-consumer parts of Hatch-Waxman is that it is proinnovation. The greatest benefit, I believe, consumers have received 

over the last 20 years that Hatch-Waxman has been in effect is the 

35

two or three generations of some of the most amazing medicines 

known to mankind. 

As much as being a pro-consumer bill in terms of saving consumers money warms my heart as a taxpayer and someone responsible for medical bills, indeed I think the anti-innovation part of 

parking is a far greater consumer threat in this bill, although I believe that if you are talking about just the pocketbook effects and 

you just look at the Prilosec patent challenge, you would see there 

a potential delay of all generic competitor for an additional year, 

which I will submit would have been almost a certainty had S. 1 

become law. 

Chairman HATCH. Well, I wrote a letter as of August 1, today, 

to Mr. Douglas Holtz-Eakin, the Director of the CBO, the Congressional Budget Office. ‘‘This letter is to request your prompt evaluation of the potential effects of Section 703 of S. 1, the Prescription 

Drug and Medicare Improvement Act of 2003, that have recently 

come to my attention.’’ 

I think all too often, some of our people around here get all 

caught up in the politics of this thing and don’t really look at what 

they are doing to what is an otherwise very, very good bill. I was 

somewhat surprised that I was the only one to vote against S. 1; 

94 voted for it. 

But then I go on and talk about the various sections, and so 

forth, and I will make this letter a part of the record. I point out 

to CBO that the conference of S. 1 and H.R. 1 will be continuing 

throughout this month and I want these answers as quickly as possible so that we can at least have every possible help we can so we 

get the very best bill we can. 

I don’t have any axes to grind here. I recognize that both sides 

of this industry are very crucial to America. Without the 

innovators, we won’t have the drugs to go off patent into generic 

form. Without the generics, the innovators would be able to charge 

forever and make profits that would be unconscionable. 

If we turn and completely balance it in favor of the generics because it is the cheap, easy thing to do, in any event we will lose 

our capacity to do the R and D necessary to come up with the 

blockbuster drugs and the treatments and cures that our pharmaceutical industry, the greatest in the world, is capable of doing. So 

this has to be balanced. 

I have to say I think we did an amazingly good job back in 1984. 

Yes, there are some people, that have gamed the system, but they 

are relatively few and the system has worked very well. Now, I am 

not advocating that we should keep Hatch-Waxman exactly the 

way it was or we shouldn’t improve it, in light of the last 19 years 

of practice. But I don’t want to, quote, ‘‘improve it,’’ unquote, so 

that it doesn’t work, and that it works to the detriment of consumers, not to the benefit. 

I think your testimony here today is very important and I will 

look forward to having the generics’ response to this. But in all 

honesty, I am not sure they can show that what you have said here 

today is wrong. On the other hand, we are interested in what they 

can give us that will help to bridge the differences between these 

two bills and hopefully help us to, if we are going to reform HatchVerDate 0ct 09 2002 15:04 Mar 24, 2004 Jkt 091832 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\91832.TXT SJUD4 PsN: CMORC
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Waxman, have true reform, not just political reform, which never 

works, in my opinion. 

True reform, I think, can work, and to that extent we need both 

sides of this. There are many sides to this very complex pharmaceutical business, but basically, the PhRMA companies, the 

innovators, and the generic companies can come together and help 

us to do this right. 

I am doing my dead-level best to try and get it right and it has 

come largely my way from the original Schumer-McCain bill, which 

was just plain awful. But to their credit, they have been willing to 

work with us down the line to try and get it more correct. The purpose of this hearing is try and get it as perfect as we can. 

I want to compliment Senator Schumer, Senator McCain, and 

above all Senator Judd Gregg, who, along with Senator Schumer, 

has really worked hard to try and get this bill in the best form they 

possibly can. They deserve a lot of credit, but so do you people who 

have testified today. All of you deserve a lot of credit because with 

this kind of expert testimony, hopefully we can do a better job. 

The bill has come a long way. It is quite a good bill compared 

to what it was, but I still voted against it because there are, in my 

opinion, unconstitutional aspects to it and there are some other aspects which you and others have pointed out here today that might 

work against the interests of consumers, and in the end against the 

interests of the two basic sides of this equation that have to be effective if we are going to benefit consumers. 

So I just want to thank you for taking time out to be here with 

us today and to give the excellent testimony that you have. 

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

Chairman HATCH. With that, we are going to recess until further 

notice. 

[Whereupon, at 11:36 a.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.]

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