II 

115TH CONGRESS 

1ST SESSION S. 124 

To prohibit brand name drug companies from compensating generic drug 

companies to delay the entry of a generic drug into the market. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 12, 2017 

Ms. KLOBUCHAR (for herself and Mr. GRASSLEY) introduced the following bill; 

which was read twice and referred to the Committee on the Judiciary 

A BILL 

To prohibit brand name drug companies from compensating 

generic drug companies to delay the entry of a generic 

drug into the market. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Preserve Access to Af5 fordable Generics Act’’. 

6 SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF 

7 PURPOSES. 

8 (a) FINDINGS.—Congress finds the following: 

9 (1) In 1984, the Drug Price Competition and 

10 Patent Term Restoration Act (Public Law 98–417) 


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1 (referred to in this Act as the ‘‘1984 Act’’), was en2 acted with the intent of facilitating the early entry 

3 of generic drugs while preserving incentives for inno4 vation. 

5 (2) Prescription drugs make up approximately 

6 10 percent of the national health care spending. 

7 (3) Initially, the 1984 Act was successful in fa8 cilitating generic competition to the benefit of con9 sumers and health care payers, although 88 percent 

10 of all prescriptions dispensed in the United States 

11 are generic drugs, they account for only 28 percent 

12 of all expenditures. 

13 (4) Generic drugs cost substantially less than 

14 brand name drugs, with discounts off the brand 

15 price averaging 80 to 85 percent. 

16 (5) Federal dollars currently account for over 

17 40 percent of the $325,000,000,000 spent on retail 

18 prescription drugs, and this share is expected to rise 

19 to 47 percent by 2025. 

20 (6)(A) In recent years, the intent of the 1984 

21 Act has been subverted by certain settlement agree22 ments in which brand name companies transfer 

23 value to their potential generic competitors to settle 

24 claims that the generic company is infringing the 

25 branded company’s patents. 


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1 (B) These ‘‘reverse payment’’ settlement agree2 ments— 

3 (i) allow a branded company to share its 

4 monopoly profits with the generic company as a 

5 way to protect the branded company’s monop6 oly; and 

7 (ii) have unduly delayed the marketing of 

8 low-cost generic drugs contrary to free competi9 tion, the interests of consumers, and the prin10 ciples underlying antitrust law. 

11 (C) Because of the price disparity between 

12 brand name and generic drugs, such agreements are 

13 more profitable for both the brand and generic man14 ufacturers than competition and will become increas15 ingly common unless prohibited. 

16 (D) These agreements result in consumers los17 ing the benefits that the 1984 Act was intended to 

18 provide. 

19 (b) PURPOSES.—The purposes of this Act are— 

20 (1) to enhance competition in the pharma21 ceutical market by stopping anticompetitive agree22 ments between brand name and generic drug manu23 facturers that limit, delay, or otherwise prevent com24 petition from generic drugs; and 


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1 (2) to support the purpose and intent of anti2 trust law by prohibiting anticompetitive practices in 

3 the pharmaceutical industry that harm consumers. 

4 SEC. 3. UNLAWFUL COMPENSATION FOR DELAY. 

5 (a) IN GENERAL.—The Federal Trade Commission 

6 Act (15 U.S.C. 44 et seq.) is amended by inserting after 

7 section 26 (15 U.S.C. 57c–2) the following: 

8 ‘‘SEC. 27. PRESERVING ACCESS TO AFFORDABLE 

9 GENERICS. 

10 ‘‘(a) IN GENERAL.— 

11 ‘‘(1) ENFORCEMENT PROCEEDING.—The Com12 mission may initiate a proceeding to enforce the pro13 visions of this section against the parties to any 

14 agreement resolving or settling, on a final or interim 

15 basis, a patent infringement claim, in connection 

16 with the sale of a drug product. 

17 ‘‘(2) PRESUMPTION AND VIOLATION.— 

18 ‘‘(A) IN GENERAL.—Subject to subpara19 graph (B), in such a proceeding, an agreement 

20 shall be presumed to have anticompetitive ef21 fects and shall be a violation of this section if— 

22 ‘‘(i) an ANDA filer receives anything 

23 of value, including an exclusive license; and 

24 ‘‘(ii) the ANDA filer agrees to limit or 

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1 turing, marketing, or sales of the ANDA 

2 product for any period of time. 

3 ‘‘(B) EXCEPTION.—Subparagraph (A) 

4 shall not apply if the parties to such agreement 

5 demonstrate by clear and convincing evidence 

6 that— 

7 ‘‘(i) the value described in subpara8 graph (A)(i) is compensation solely for 

9 other goods or services that the ANDA 

10 filer has promised to provide; or 

11 ‘‘(ii) the procompetitive benefits of the 

12 agreement outweigh the anticompetitive ef13 fects of the agreement. 

14 ‘‘(b) LIMITATIONS.—In determining whether the set15 tling parties have met their burden under subsection 

16 (a)(2)(B), the fact finder shall not presume— 

17 ‘‘(1) that entry would not have occurred until 

18 the expiration of the relevant patent or statutory ex19 clusivity; or 

20 ‘‘(2) that the agreement’s provision for entry of 

21 the ANDA product prior to the expiration of the rel22 evant patent or statutory exclusivity means that the 

23 agreement is procompetitive. 

24 ‘‘(c) EXCLUSIONS.—Nothing in this section shall pro25 hibit a resolution or settlement of a patent infringement 


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1 claim in which the consideration granted by the NDA 

2 holder to the ANDA filer as part of the resolution or set3 tlement includes only one or more of the following: 

4 ‘‘(1) The right to market the ANDA product in 

5 the United States prior to the expiration of— 

6 ‘‘(A) any patent that is the basis for the 

7 patent infringement claim; or 

8 ‘‘(B) any patent right or other statutory 

9 exclusivity that would prevent the marketing of 

10 such drug. 

11 ‘‘(2) A payment for reasonable litigation ex12 penses not to exceed $7,500,000. 

13 ‘‘(3) A covenant not to sue on any claim that 

14 the ANDA product infringes a United States patent. 

15 ‘‘(d) ENFORCEMENT.— 

16 ‘‘(1) ENFORCEMENT.—A violation of this sec17 tion shall be treated as a violation of section 5. 

18 ‘‘(2) JUDICIAL REVIEW.— 

19 ‘‘(A) IN GENERAL.—Any party that is sub20 ject to a final order of the Commission, issued 

21 in an administrative adjudicative proceeding 

22 under the authority of subsection (a)(1), may, 

23 within 30 days of the issuance of such order, 

24 petition for review of such order in— 


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1 ‘‘(i) the United States Court of Ap2 peals for the District of Columbia Circuit; 

3 ‘‘(ii) the United States Court of Ap4 peals for the circuit in which the ultimate 

5 parent entity, as defined in section 

6 801.1(a)(3) of title 16, Code of Federal 

7 Regulations, or any successor thereto, of 

8 the NDA holder is incorporated as of the 

9 date that the NDA is filed with the Com10 missioner of Food and Drugs; or 

11 ‘‘(iii) the United States Court of Ap12 peals for the circuit in which the ultimate 

13 parent entity of the ANDA filer is incor14 porated as of the date that the ANDA is 

15 filed with the Commissioner of Food and 

16 Drugs. 

17 ‘‘(B) TREATMENT OF FINDINGS.—In a 

18 proceeding for judicial review of a final order of 

19 the Commission, the findings of the Commis20 sion as to the facts, if supported by evidence, 

21 shall be conclusive. 

22 ‘‘(e) ANTITRUST LAWS.—Nothing in this section 

23 shall modify, impair, limit, or supersede the applicability 

24 of the antitrust laws as defined in subsection (a) of the 

25 first section of the Clayton Act (15 U.S.C. 12(a)), and 


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1 of section 5 of this Act to the extent that section 5 applies 

2 to unfair methods of competition. Nothing in this section 

3 shall modify, impair, limit, or supersede the right of an 

4 ANDA filer to assert claims or counterclaims against any 

5 person, under the antitrust laws or other laws relating to 

6 unfair competition. 

7 ‘‘(f) PENALTIES.— 

8 ‘‘(1) FORFEITURE.—Each party that violates or 

9 assists in the violation of this section shall forfeit 

10 and pay to the United States a civil penalty suffi11 cient to deter violations of this section, but in no 

12 event greater than 3 times the value received by the 

13 party that is reasonably attributable to the violation 

14 of this section. If no such value has been received by 

15 the NDA holder, the penalty to the NDA holder 

16 shall be sufficient to deter violations, but in no event 

17 greater than 3 times the value given to the ANDA 

18 filer reasonably attributable to the violation of this 

19 section. Such penalty shall accrue to the United 

20 States and may be recovered in a civil action 

21 brought by the Commission, in its own name by any 

22 of its attorneys designated by it for such purpose, in 

23 a district court of the United States against any 

24 party that violates this section. In such actions, the 

25 United States district courts are empowered to grant 


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1 mandatory injunctions and such other and further 

2 equitable relief as they deem appropriate. 

3 ‘‘(2) CEASE AND DESIST.— 

4 ‘‘(A) IN GENERAL.—If the Commission has 

5 issued a cease and desist order with respect to 

6 a party in an administrative adjudicative pro7 ceeding under the authority of subsection 

8 (a)(1), an action brought pursuant to para9 graph (1) may be commenced against such 

10 party at any time before the expiration of 1 

11 year after such order becomes final pursuant to 

12 section 5(g). 

13 ‘‘(B) EXCEPTION.—In an action under 

14 subparagraph (A), the findings of the Commis15 sion as to the material facts in the administra16 tive adjudicative proceeding with respect to the 

17 violation of this section by a party shall be con18 clusive unless— 

19 ‘‘(i) the terms of such cease and de20 sist order expressly provide that the Com21 mission’s findings shall not be conclusive; 

22 or 

23 ‘‘(ii) the order became final by reason 

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1 ing shall be conclusive if supported by evi2 dence. 

3 ‘‘(3) CIVIL PENALTY.—In determining the 

4 amount of the civil penalty described in this section, 

5 the court shall take into account— 

6 ‘‘(A) the nature, circumstances, extent, 

7 and gravity of the violation; 

8 ‘‘(B) with respect to the violator, the de9 gree of culpability, any history of violations, the 

10 ability to pay, any effect on the ability to con11 tinue doing business, profits earned by the 

12 NDA holder, compensation received by the 

13 ANDA filer, and the amount of commerce af14 fected; and 

15 ‘‘(C) other matters that justice requires. 

16 ‘‘(4) REMEDIES IN ADDITION.—Remedies pro17 vided in this subsection are in addition to, and not 

18 in lieu of, any other remedy provided by Federal 

19 law. Nothing in this paragraph shall be construed to 

20 affect any authority of the Commission under any 

21 other provision of law. 

22 ‘‘(g) DEFINITIONS.—In this section: 

23 ‘‘(1) AGREEMENT.—The term ‘agreement’ 

24 means anything that would constitute an agreement 


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1 under section 1 of the Sherman Act (15 U.S.C. 1) 

2 or section 5 of this Act. 

3 ‘‘(2) AGREEMENT RESOLVING OR SETTLING A

4 PATENT INFRINGEMENT CLAIM.—The term ‘agree5 ment resolving or settling a patent infringement 

6 claim’ includes any agreement that is entered into 

7 within 30 days of the resolution or the settlement of 

8 the claim, or any other agreement that is contingent 

9 upon, provides a contingent condition for, or is oth10 erwise related to the resolution or settlement of the 

11 claim. 

12 ‘‘(3) ANDA.—The term ‘ANDA’ means an ab13 breviated new drug application filed under section 

14 505(j) of the Federal Food, Drug, and Cosmetic Act 

15 (21 U.S.C. 355(j)) or a new drug application filed 

16 under section 505(b)(2) of the Federal Food, Drug, 

17 and Cosmetic Act (21 U.S.C. 355(b)(2)). 

18 ‘‘(4) ANDA FILER.—The term ‘ANDA filer’ 

19 means a party that owns or controls an ANDA filed 

20 with the Commission of Food and Drugs or has the 

21 exclusive rights under such ANDA to distribute the 

22 ANDA product. 

23 ‘‘(5) ANDA PRODUCT.—The term ‘ANDA 

24 product’ means the product to be manufactured 


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1 under the ANDA that is the subject of the patent 

2 infringement claim. 

3 ‘‘(6) DRUG PRODUCT.—The term ‘drug prod4 uct’ has the meaning given such term in section 

5 314.3(b) of title 21, Code of Federal Regulations (or 

6 any successor regulation). 

7 ‘‘(7) NDA.—The term ‘NDA’ means a new 

8 drug application filed under section 505(b) of the 

9 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

10 355(b)). 

11 ‘‘(8) NDA HOLDER.—The term ‘NDA holder’ 

12 means— 

13 ‘‘(A) the holder of an approved NDA appli14 cation for a drug product; 

15 ‘‘(B) a person owning or controlling en16 forcement of the patent listed in the Approved 

17 Drug Products With Therapeutic Equivalence 

18 Evaluations (commonly known as the ‘FDA Or19 ange Book’) in connection with the NDA; or 

20 ‘‘(C) the predecessors, subsidiaries, divi21 sions, groups, and affiliates controlled by, con22 trolling, or under common control with any of 

23 the entities described in subparagraphs (A) and 

24 (B) (such control to be presumed by direct or 

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1 er), as well as the licensees, licensors, succes2 sors, and assigns of each of the entities. 

3 ‘‘(9) PARTY.—The term ‘party’ means any per4 son, partnership, corporation, or other legal entity. 

5 ‘‘(10) PATENT INFRINGEMENT.—The term 

6 ‘patent infringement’ means infringement of any 

7 patent or of any filed patent application, extension, 

8 reissue, renewal, division, continuation, continuation 

9 in part, reexamination, patent term restoration, pat10 ents of addition, and extensions thereof. 

11 ‘‘(11) PATENT INFRINGEMENT CLAIM.—The 

12 term ‘patent infringement claim’ means any allega13 tion made to an ANDA filer, whether or not in14 cluded in a complaint filed with a court of law, that 

15 its ANDA or ANDA product may infringe any pat16 ent held by, or exclusively licensed to, the NDA 

17 holder of the drug product. 

18 ‘‘(12) STATUTORY EXCLUSIVITY.—The term 

19 ‘statutory exclusivity’ means those prohibitions on 

20 the approval of drug applications under clauses (ii) 

21 through (iv) of section 505(c)(3)(E) (5- and 3-year 

22 data exclusivity), section 527 (orphan drug exclu23 sivity), or section 505A (pediatric exclusivity) of the 

24 Federal Food, Drug, and Cosmetic Act (21 U.S.C. 

25 355(c)(3)(E), 360cc, 355a).’’. 


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1 (b) EFFECTIVE DATE.—Section 27 of the Federal 

2 Trade Commission Act, as added by this section, shall 

3 apply to all agreements described in section 27(a)(1) of 

4 that Act entered into after June 17, 2013. Section 27(f) 

5 of the Federal Trade Commission Act, as added by this 

6 section, shall apply to agreements entered into on or after 

7 the date of enactment of this Act. 

8 SEC. 4. NOTICE AND CERTIFICATION OF AGREEMENTS. 

9 (a) NOTICE OF ALL AGREEMENTS.—Section 

10 1112(c)(2) of the Medicare Prescription Drug, Improve11 ment, and Modernization Act of 2003 (21 U.S.C. 355 

12 note) is amended by— 

13 (1) striking ‘‘the Commission the’’ and insert14 ing the following: ‘‘the Commission— 

15 ‘‘(A) the’’; 

16 (2) striking the period and inserting ‘‘; and’’; 

17 and 

18 (3) inserting at the end the following: 

19 ‘‘(B) any other agreement the parties enter 

20 into within 30 days of entering into an agree21 ment covered by subsection (a) or (b).’’. 

22 (b) CERTIFICATION OF AGREEMENTS.—Section 1112 

23 of such Act is amended by adding at the end the following: 

24 ‘‘(d) CERTIFICATION.—The Chief Executive Officer 

25 or the company official responsible for negotiating any 


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1 agreement under subsection (a) or (b) that is required to 

2 be filed under subsection (c) shall execute and file with 

3 the Assistant Attorney General and the Commission a cer4 tification as follows: ‘I declare that the following is true, 

5 correct, and complete to the best of my knowledge: The 

6 materials filed with the Federal Trade Commission and 

7 the Department of Justice under section 1112 of subtitle 

8 B of title XI of the Medicare Prescription Drug, Improve9 ment, and Modernization Act of 2003, with respect to the 

10 agreement referenced in this certification— 

11 ‘‘ ‘(1) represent the complete, final, and exclu12 sive agreement between the parties; 

13 ‘‘ ‘(2) include any ancillary agreements that are 

14 contingent upon, provide a contingent condition for, 

15 or are otherwise related to, the referenced agree16 ment; and 

17 ‘‘ ‘(3) include written descriptions of any oral 

18 agreements, representations, commitments, or prom19 ises between the parties that are responsive to sub20 section (a) or (b) of such section 1112 and have not 

21 been reduced to writing.’.’’. 

22 SEC. 5. FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD. 

23 Section 505(j)(5)(D)(i)(V) of the Federal Food, 

24 Drug, and Cosmetic Act (21 U.S.C. 355(j)(5)(D)(i)(V)) 

25 is amended by inserting ‘‘section 27 of the Federal Trade 


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1 Commission Act or’’ after ‘‘that the agreement has vio2 lated’’. 

3 SEC. 6. COMMISSION LITIGATION AUTHORITY. 

4 Section 16(a)(2) of the Federal Trade Commission 

5 Act (15 U.S.C. 56(a)(2)) is amended— 

6 (1) in subparagraph (D), by striking ‘‘or’’ after 

7 the semicolon; 

8 (2) in subparagraph (E), by inserting ‘‘or’’ 

9 after the semicolon; and 

10 (3) inserting after subparagraph (E) the fol11 lowing: 

12 ‘‘(F) under section 27;’’. 

13 SEC. 7. STATUTE OF LIMITATIONS. 

14 The Federal Trade Commission shall commence any 

15 enforcement proceeding described in section 27 of the 

16 Federal Trade Commission Act, as added by section 3, ex17 cept for an action described in section 27(f)(2) of the Fed18 eral Trade Commission Act, not later than 6 years after 

19 the date on which the parties to the agreement file the 

20 Notice of Agreement as provided by section 1112(c)(2) 

21 and (d) of the Medicare Prescription Drug Improvement 

22 and Modernization Act of 2003 (21 U.S.C. 355 note). 

23 SEC. 8. SEVERABILITY. 

24 If any provision of this Act, an amendment made by 

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1 ment to any person or circumstance is held to be unconsti2 tutional, the remainder of this Act, the amendments made 

3 by this Act, and the application of the provisions of such 

4 Act or amendments to any person or circumstance shall 

5 not be affected. 

Æ 


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