89–010 

Calendar No. 183 

111TH CONGRESS REPORT " ! SENATE 2d Session 111–123 

PRESERVE ACCESS TO AFFORDABLE GENERICS ACT 

FEBRUARY 2, 2010.—Ordered to be printed 

Mr. LEAHY, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany S. 369] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to which was referred the bill 

(S. 369), to prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug 

into the market, having considered the same, reports favorably 

thereon, with amendments, and recommends that the bill, as 

amended, do pass. 

CONTENTS 

Page 

I. Background and Purpose of the Preserve Access to Affordable Generics 

Act ............................................................................................................... 1 

II. History of the Bill and Committee Consideration ....................................... 6 

III. Section-by-Section Summary of the Bill ...................................................... 7 

IV. Congressional Budget Office Cost Estimate ................................................ 9 

V. Regulatory Impact Evaluation ...................................................................... 17 

VI. Conclusion ...................................................................................................... 17 

VII. Minority Views ............................................................................................... 18 

VIII. Changes to Existing Law Made by the Bill, as Reported ........................... 25 

I. BACKGROUND AND PURPOSE OF THE PRESERVE ACCESS TO

AFFORDABLE GENERICS ACT

This legislation is intended to prevent anticompetitive agreements in the pharmaceutical industry between brand name and geVerDate Nov 24 2008 20:56 Feb 12, 2010 Jkt 089010 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\SR123.XXX SR123

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1 Jon Leibowitz, ‘‘Pay-for-Delay’’ Settlements in the Pharmaceutical Industry: How Congress 

Can Stop Anticompetitive Conduct, Protect Consumers Wallets, and Help Pay for Health Care 

Reform (The $35 Billion Solution), Speech to the Center for American Progress, Appendix at 13, 

available at <http://www.ftc.gov/speeches/leibowitz/090623payfordelayspeech.pdf>. 2 Id. 

3Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98–417, 98 

Stat. 1585. In 2003, this Act was amended. See Medicare Prescription Drug Improvement, and 

Modernization Act of 2003, Pub. L. No. 108–173, tit. XI, subtits. A–B, 117 Stat. 2066, 2448– 

64. 4 21 U.S.C. § 355(j)(5)(B)(iv). This exclusivity provision was intended to provide an economic 

incentive for generic drug companies to challenge patent validity and to find alternative, noninfringing forms of patented drugs. While the promise of marketing exclusivity has encouraged 

generic companies to challenge weak patents, it has also increased the incentive for the brand 

name firm to enter into a pay-for-delay settlement with the first generic challenger. 5Generic Pharmaceutical Association, Facts at a Glance, available at <http:// 

www.gphaonline.org/about-gpha/about-generics/facts>. A recent study by Professor C. Scott 

Hemphill of Columbia Law School, analyzing a subset of brand-generic settlements, estimated 

that if generic entry on those products were delayed just one year, it would have cost consumers 

neric drug manufacturers that may limit, delay, or otherwise prevent competition from generic drugs. These agreements (commonly 

known as ‘‘reverse payment’’ settlements or ‘‘pay-for-delay’’ agreements) occur as part of the settlement of a patent infringement 

lawsuit, in which the suit is brought by a brand name drug firm 

against a generic firm that is seeking to market a generic version 

of the brand name’s drug. 

In a reverse payment agreement, the pharmaceutical patent litigation is settled by the brand name drug manufacturer paying the 

generic drug maker cash or other valuable consideration in exchange for the generic drug maker agreeing to stay off the market 

for some period of time. In essence, the brand name drug maker 

pays its competitor not to compete. The agreement may benefit 

both parties to the settlement, but by preventing competition, competition which otherwise could cause drug prices to fall dramatically, consumers are harmed. In June 2009, the Federal Trade 

Commission (FTC) estimated that these reverse payment agreements would cost consumers $35 billion and the Federal Government $12 billion over the next decade.1 Additionally, FTC economists, based on a review of the entire universe of brand-generic 

settlements, calculate that, on average, settlements with payments 

delay generic entry 17 months more than settlements without such 

payments.2

The Committee bill, as reported, will provide the FTC with the 

tools it needs to prevent these agreements. The legislation is necessary because The Drug Price Competition and Patent Restoration 

Act (‘‘the Hatch-Waxman Act’’),3 enacted in 1984, does not adequately deter reverse payment settlements. The Hatch-Waxman 

Act was enacted with the intent of encouraging competition from 

generic drug manufacturers, while protecting legitimate patents. 

Under the Hatch-Waxman Act, generic drug manufacturers receive 

accelerated FDA approval of a generic drug upon showing that the 

generic drug is the bioequivalent to an approved drug. This approval can be sought prior to the expiration of the brand name 

drug’s patent. Generic firms are further incentivized to challenge 

weak brand name drug patents—those that are likely invalid or 

not infringed—because the first generic applicant is awarded a 180- 

day period of marketing exclusivity.4 A successful patent challenge 

brings the generic drug to market sooner, and provides a lower cost 

drug alternative to consumers. Generic drugs are estimated to save 

consumers between $8 billion and $10 billion each year.5


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billions. C. Scott Hemphill, An Aggregate Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition, 109 COL. L. REV. 629 (May 2009). 6The economic incentives behind these deals are related to the market dynamics of the industry. The introduction of a generic drug provides substantial benefits to consumers, but also 

unique and dramatic economic consequences for brand name firms. Studies of pharmaceutical 

markets indicate that the first generic competitor typically enters the market at a price that 

is 20 to 30 percent lower than that of the brand name counterpart. Subsequent generic entrants 

may enter at even lower prices—discounted as much as 80 percent or more off the price of the 

brand name drug—and prompt the earlier generic entrants to reduce their prices. Because of 

the policies of public and private health plans and state generic substitution laws, the generic 

drug gains substantial market share from the brand name product in a short period of time, 

anywhere from 44 to 80 percent of brand name sales within the first full year after the generic 

launch. See Congressional Budget Office, How Increased Competition from Generic Drugs Has 

Affected Prices and Returns in the Pharmaceutical Industry (July 1998) (‘‘CBO Study’’), available at <http://www.cbo.gov/ftpdocs/6xx/doc655/pharm.pdf>; see generally David Reiffen & 

Michael R. Ward, Generic Drug Industry Dynamics (Feb. 2002), available at <http:// 

www.ftc.gov/be/workpapers/industrydynamicsreiffenwp.pdf>. 7 21 U.S.C. § 355(j)(5)(B)(iv). 

8Pub. L. No. 108–173, Tit. XI, Subtit. B, 117 Stat. 2066, 2461. 

9S. REP. No. 107–167, at 4 (2002), available at <http://frwebgate.access.gpo.gov/cgi-bin/ 

getdoc.cgi?dbname=107lconglreports&docid=f:sr167.pdf>. 10Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005), cert. denied, 548 U.S. 919 

(2006); In re Tamoxifen Citrate Antitrust Litig., 429 F.3d 370 (2d Cir. 2005), amended, 466 F.3d 

187 (2d Cir. 2006), cert. denied, 127 S. Ct. 3001 (2007). For a detailed discussion of the Schering 

and Tamoxifen cases see the FTC’s May 2, 2007 testimony before the U.S. House of Representatives Energy and Commerce Committee’s Subcommittee on Commerce, Trade and Consumer Protection, at 15–19, available at <http://www.ftc.gov/os/testimony/P859910%20 

ProtectinglConsumel%20Accessltestimony.pdf>. 11 402 F.3d at 1065. 12Tamoxifen, 429 F.3d at 370 (2d Cir. 2005), amended, 466 F.3d 187 (2d Cir. 2006). 13 In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323 (Fed. Cir. 2008), cert. denied sub nom Ark. Carpenters Health & Welfare Fund vs. Bayer AG, 129 S. Ct. 2828 (2009). 

The Hatch-Waxman Act’s success in promoting generic competition is undermined by the emergence of reverse payment settlements. Reverse payment settlements can enrich the brand name 

and generic drug firms at the expense of consumers who are denied 

the benefits of competition from lower-cost generic drugs.6 Paying 

the first generic applicant to delay its entry effectively blocks other 

generic challengers from coming to market as well, since the FDA 

may not approve a subsequent generic application for the same 

drug product until the first applicant’s 180-day exclusivity expires.7

The threat reverse payment agreements pose to competition in 

the pharmaceutical industry has been recognized for some time. In 

2003, the Hatch-Waxman Act was amended to require brand name 

companies and generic applicants to file patent settlement agreements with the FTC and the Department of Justice.8 As the Committee on the Judiciary’s report explained, those amendments 

sought to stamp out the ‘‘abuse’’ of Hatch-Waxman law resulting 

from ‘‘pacts between big pharmaceutical firms and makers of generic versions of brand name drugs, that are intended to keep 

lower cost drugs off the market.’’ 9

Recent court decisions have made it more difficult for the FTC 

or private litigants to challenge reverse payment settlements under 

the antitrust laws. In 2005, two appellate courts adopted an extremely permissive position on reverse payment settlements.10 The 

Eleventh Circuit reversed the FTC’s decision in Schering-Plough 

Corp. v. FTC, applying neither the traditional per se or rule of reason analysis to the agreement.11 The Second Circuit in In re 

Tamoxifen Citrate Antitrust Litigation likewise upheld the legality 

of a reverse payment settlement.12 In 2008, a third appellate court 

adopted a similarly lenient view of reverse payment settlements.13

In that case, In re Ciprofloxacin Hydrochloride Antitrust Litigation, 

the Federal Circuit held that in the ‘‘absence of evidence of fraud 

before the [Patent and Trademark Office] or sham litigation,’’ the 


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14 Ciprofloxacin, 544 F.3d at 1336. 15 Bureau of Competition Report, Federal Trade Commission, Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization 

Act of 2003: Summary of Agreements Filed in FY 2007: A Report by the Bureau of Competition 

(May 2008), available at <http://www.ftc.gov/os/2008/05/mmaact.pdf>. 16 In recent years, the FTC attempted to take legal action under section 5 of the FTC Act to 

invalidate these agreements. However, as described above, several recent decisions have made 

it very difficult for the FTC and the drug purchasers who pay higher prices for prescription drug 

products as a result of these reverse payment settlements to challenge successfully their legality. The Schering, Tamoxifen, and Ciprofloxacin decisions have essentially nullified antitrust 

law in this area and adopted legal rules that permit these agreements. In the wake of these 

decisions, reverse payment settlements have become prevalent. See Bureau of Competition Report, Federal Trade Commission, Agreements Filed with the Federal Trade Commission under 

the Medicare Prescription Drug, Improvement, and Modernization Act of 2003: Summary of 

Agreements Filed in FY 2007: A Report by the Bureau of Competition (May 2008), available at 

<http://www.ftc.gov/os/2008/05/mmaact.pdf;> Bureau of Competition Report, Federal Trade 

Commission, Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003: Summary of Agreements Filed in FY 

2006: A Report by the Bureau of Competition (Apr. 2007), available at <http://www.ftc.gov/reports/mmact/MMAreport2006.pdf>; Bureau of Competition Report, Federal Trade Commission, 

Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003: Summary of Agreements Filed in FY 2005: A Report 

by the Bureau of Competition (Apr. 2006), available at <http://www.ftc.gov/os/2006/04/ 

fy2005drugsettlementsrpt.pdf>. 17 ‘‘Anything of value’’ is intended to include a cash payment or any other consideration of 

value. 18While only the FTC can bring an action to enforce the new section 28 of the FTC Act, the 

legislation also specifically provides that it should not be construed to modify, impair or supersede the applicability of the antitrust laws. See Section 3(a) of S. 369. Therefore, while there 

are no private rights of action created by this legislation, the ability of private parties to bring 

actions under the antitrust laws challenging these agreements is similarly not affected by this 

legislation. 

mere presence of a patent entitles the patent holder to purchase 

protection from competition until patent expiration.14

The Schering, Tamoxifen, and Ciprofloxacin rulings have prompted a resurgence in brand-generic settlements in which the parties 

settle with a payment to the generic company and an agreement 

by the generic company to delay marketing its product. An FTC 

staff report of settlements filed under the Medicare Prescription 

Drug, Improvement, and Modernization Act of 2003 during the fiscal year ending in September 2007 found that almost half of all of 

the final patent settlements (14 of 33) involved compensation to the 

generic patent challenger and an agreement by the generic firm to 

refrain from launching its product for some period of time.15

The Committee bill will provide the FTC with an additional avenue to challenge and prevent anticompetitive agreements. The 

Committee bill creates a new section 28 of the Federal Trade Commission Act. This new section allows the FTC to initiate a proceeding under the Federal Trade Commission Act to block a reverse 

payment settlement and to impose civil penalties if the agreement 

violates the Act.16 In this proceeding, an agreement settling a patent infringement claim is presumed to be illegal if the company 

seeking to market a generic drug receives anything of value 17 from 

a brand name drug manufacturer, and the generic drug company 

agrees to limit or forego research, development, manufacturing, 

marketing, or sales of the generic drug for any period of time. The 

settling parties are given the opportunity to rebut this presumption 

by demonstrating by clear and convincing evidence that the procompetitive benefits of the settlement agreement outweigh the 

anticompetitive effects of the agreement. If the parties do not make 

such a showing, the presumption of illegality has not been overcome, and the agreement is illegal.18 A proceeding under this Act 

must be initiated within three years of the date that the parties 

notify the FTC of their agreement, as required by 21 U.S.C. § 355. 


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19 In order to be within the carve-out, a settlement agreement must consist only of these three 

categories of agreements (or a combination of the three). Settlement agreements in which there 

is additional consideration of any form paid to the generic drug holder are not within the safe 

harbor and are fully subject to the presumption of illegality contained in the new section 28 

of the FTC Act. 20The generic drug companies argue that they might be discouraged from entering the market 

prior to a finding of non-infringement or invalidity if they believe that the law would prevent 

them from obtaining lawfully a full release of liability as part of a settlement. As a result, the 

sponsors of the legislation considered adding a carve-out for settlement agreements in which the 

brand name drug company grants a release of liability for patent infringement to the generic 

drug company in situations in which the generic drug company has entered the market ‘‘at 

risk’’—that is, before adjudication of the patent dispute. In many situations, this form of consideration may not harm consumers or competition. However, these settlements are a new phenomenon in the Hatch-Waxman context, and there may be scenarios in which such a patent settlement could possibly raise competition concerns. Therefore, rather than exempting all such 

settlements, the Committee expects that the FTC will use the rulemaking authority of new section 28(e) to consider exempting appropriate forms of these agreements after it receives comments from affected parties. 

Under the new section 28(g)(2)(A) of the FTC Act, however, the 

FTC will have a year from the date of a final administrative order 

in an action brought under section 28 to pursue an action for civil 

penalties. 

The Committee bill enumerates factors that the fact-finder is to 

consider in determining whether the parties have met their burden 

to establish that their agreement’s procompetitive effects outweigh 

its anticompetitive harms. The list is not intended to be exhaustive, 

and the fact-finder is permitted to consider any other factor it 

deems relevant to its determination of competitive effects of the 

agreement under challenge. 

The Committee bill also provides that, in evaluating whether the 

settling drug companies have met their burden to establish that 

their agreement is procompetitive, the fact-finder shall not presume that entry of the generic drug would not have occurred until 

expiration of the relevant patent or statutory period of exclusivity. 

Further, the fact-finder cannot presume that the agreement is procompetitive on the basis that it provided for entry of the generic 

drug prior to expiration of the patent or statutory exclusivity, although such evidence may be relevant to the fact-finder’s determination 

Certain forms of consideration are exempted from the presumption of illegality created by this new section. The legislation does 

not prohibit agreements that include only one or more of the following: (i) the right to market the generic drug prior to the expiration of patent or other statutory exclusivity for the drug (i.e., a settlement that allows the generic drug to enter the market before the 

patent has expired but does not involve any payment of money or 

other consideration to the generic drug manufacturer); (ii) a payment to the generic drug company for its reasonable litigation expenses, not to exceed $7,500,000; or (iii) a covenant not to sue on 

any claim that the generic drug infringes a U.S. patent. It was the 

judgment of the Committee that these types of settlements should 

be carved out from the bill as they would not likely pose competitive concerns.19 The legislation also empowers the FTC to conduct 

a rulemaking that will exempt certain categories of agreements 

that contain reverse payments, but which the FTC determines benefit consumers.20

The Committee bill contains strong civil penalties that may be 

levied against parties that enter into patent settlement agreements 

that violate the Act. A violator faces a civil penalty of up to three 


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21Such a cease and desist order could be sought as an administrative remedy before the FTC 

under section 5(b) of the FTC Act (15 U.S.C. § 45(b)) or in an action in Federal district court 

under section 13(b) of the FTC Act (15 U.S.C. § 53(b)). 22The minority views of Senators Sessions, Hatch, Kyl, Cornyn, and Coburn argue that the 

Committee bill ‘‘prevent[s] parties that disagree on the strength of the patent and other key factors from settling a suit. . . .’’ As noted above, not all settlements are brought within the ambit 

of the legislation; parties are free to settle cases based on the date of entry alone or pursuant 

to the expressly enumerated safe harbors. And the record shows that even a per se ban on reverse payment settlements does not prevent parties from settling cases. From 2000 to 2004 

(prior to the Court of Appeals decisions discussed above), there were 20 settlements of pharmaceutical patent litigation which, according to the FTC, did not include payments from the brand 

name drug manufacturer to the generic competitor. Further, from 2005 to 2007, 41 out of 74 

cases settled without a combination of payments and entry restrictions. Thus, it is simply incorrect to argue the Committee bill will destroy the ability of brand name and generic drug companies to settle pharmaceutical patent litigation. 23That bill, S. 316 in the 110th Congress, was substantially identical to S. 369 as introduced 

in the 111th Congress. 

times the value it received from the agreement that is reasonably 

attributable to a violation of the law. If the brand name company 

has not received any such value (as in a situation where the evidence shows that, even in the absence of the agreement, generic 

entry would not have occurred prior to the decision finding the 

agreement illegal), the penalty to the brand name drug company 

may be up to three times the value of the consideration it gave to 

the generic drug company under the patent settlement agreement 

at issue. The Committee bill lays out additional factors that should 

be considered in determining the civil penalty as well. The FTC 

also maintains the authority to issue a cease and desist order enjoining the patent settlement agreement from going into effect or 

continuing in force.21 A generic drug company entering into an illegal patent settlement agreement under this statute will also lose 

its statutory exclusivity with respect to that drug—that is, its exclusive right to market a generic version of the drug for 180 days 

for having been the first generic drug filer. 

The Committee bill does not prohibit settlement of Hatch-Waxman patent litigation. The legislation will only impact those settlement agreements that include both compensation to the generic 

drug company and delayed generic entry. Parties are free to settle 

cases based on date of entry alone, or to incorporate any of the legislation’s exempted safe harbors into their agreement. 

II. HISTORY OF THE BILL AND COMMITTEE CONSIDERATION

The Preserve Access to Affordable Generics was first introduced 

in the 109th Congress by Senator Kohl on June 27, 2006 (S. 

3582).22 The bill had five cosponsors (Senators Leahy, Grassley, 

Schumer, Johnson and Feingold). It was referred to the Committee 

on Commerce, Science and Transportation, where no further action 

was taken on it during the 109th Congress. 

On January 17, 2007, Senator Kohl introduced the Preserve Access to Affordable Generics Act in the 110th Congress (S. 316).23

The bill had 10 cosponsors (Senators Leahy, Grassley, Schumer, 

Feingold, Kennedy, Durbin, Johnson, Klobuchar, Obama, and 

Brown). It was referred to the Committee on the Judiciary. The 

Committee held a hearing titled ‘‘Paying Off Generics to Prevent 

Competition with Brand Name Drugs’’ on January 17, 2007. Testimony was received from Jon Leibowitz, Commissioner, FTC; Billy 

Tauzin, CEO, PhRMA; Merrill Hirsch, Partner, Ross, Dixon & Bell, 

LLP; Bruce Downey, Chairman and CEO, Barr Pharmaceuticals, 

Inc.; and Michael Wroblewski, Consumers Union. The bill was reVerDate Nov 24 2008 20:56 Feb 12, 2010 Jkt 089010 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\SR123.XXX SR123

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ported favorably, without amendment, by voice vote on February 

27, 2007. No further action was taken on S. 316 in the 110th Congress. 

On February 3, 2009, Senator Kohl introduced the Preserve Access to Affordable Generics Act in the 111th Congress (S. 369). The 

bill has eight cosponsors (Senators Grassley, Feingold, Durbin, 

Brown, Collins, Klobuchar, Bill Nelson and Franken). It was referred to the Committee on the Judiciary. 

On September 24, 2009, the Committee considered the legislation 

during its business meeting. Senator Kohl offered an amendment 

in the nature of a substitute, which was adopted. Among other 

things, under the substitute amendment, agreements between 

brand name drug manufacturers and generic drug makers in settlement of patent disputes in which the generic company agrees to 

delay marketing a generic drug and receives a payment of value 

are presumed to be illegal (rather than automatically illegal), but 

in order to be found illegal the FTC must bring a legal action 

under the FTC Act. During such a legal action, the parties to the 

agreements at issue can overcome the presumption of illegality if 

they can establish by clear and convincing evidence that the agreement is procompetitive. The substitute amendment also prescribes 

penalties for entering into illegal patent settlements, and establishes a three year statute of limitations for the FTC to bring an 

action under the Act. 

On October 15, 2009, the Committee concluded its consideration 

of the bill. Senator Kohl offered an amendment to (i) modify the 

penalty provisions in the bill; (ii) modify the effective date so that 

the Act would only apply to agreements entered into after November 15, 2009; (iii) change the language of the certification used by 

parties submitting agreements to the FTC; (iv) clarify that the FTC 

has one year after a final order to seek civil penalties; and (v) make 

other minor technical changes. The amendment was adopted by 

unanimous consent. No other amendments were offered to the bill. 

The Committee then voted to report the Preserve Access to Affordable Generics Act, as amended, favorably to the Senate. The 

Committee proceeded by roll call vote as follows: 

Tally: 12 Yeas, 7 Nays. 

Yeas (12): Leahy (D–VT), Kohl (D–WI), Feinstein (D–CA), Feingold (D–WI), Schumer (D–NY), Durbin (D–IL), Cardin (D–MD), 

Whitehouse (D–RI), Klobuchar (D–MN), Kaufman (D–DE), 

Franken (D–MN), and Grassley (R–IA). 

Nays (7): Specter, (D–PA), Sessions (R–AL), Hatch (R–UT), Kyl 

(R–AZ), Graham (R–SC), Cornyn (R–TX), Coburn (R–OK). 

III. SECTION-BY-SECTION SUMMARY OF THE BILL

Section 1. Short title 

This section provides that the legislation may be cited as the 

‘‘Preserve Access to Affordable Generics Act.’’ 

Section 2. Congressional findings and declarations of purposes 

This section contains congressional findings and declarations of 

purposes. 


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Section 3. Unlawful compensation for delay 

Subsection (a). This subsection creates a new section 28 of the 

FTC Act, as follows—Sec. 28(a) provides that the Federal Trade 

Commission may bring a legal action to enforce this section with 

regard to any agreement in settlement of a patent infringement 

lawsuit in which a generic drug manufacturer receives anything of 

value from a brand name drug manufacturer, and the generic drug 

manufacturer agrees to limit or forego research, development, marketing, manufacturing or sales of the generic drug. Under this section, such agreements are presumed to be unlawful. This presumption can be overcome if the parties to such an agreement demonstrate by clear and convincing evidence that the procompetitive 

benefits of the agreement outweigh the anticompetitive effects of 

the agreement. 

Sec. 28(b) lists factors the fact-finder must consider in making 

this determination. 

Sec. 28(c) directs the fact-finder to avoid making certain presumptions. 

Sec. 28(d) exempts certain categories of agreements from the presumption of illegality. 

Sec. 28(e) gives the FTC rulemaking authority to implement and 

interpret section 28 and to exempt certain types of agreements if 

the FTC determines that such agreements will promote competition 

and benefit consumers. Any such rulemakings may be appealed to 

the U.S. District Court for the District of Columbia. Further, it provides that a violation of this section shall be treated as a violation 

of section 5 of the FTC Act. The section also provides that any 

order of the FTC under this section may be appealed only to the 

U.S. Court of Appeals to the D.C. Circuit or the Circuit Court of 

Appeals where the ultimate parent entity of either the brand name 

or generic drug company is incorporated. 

Sec. 28(f) states that nothing in the section supersedes or modifies the antitrust laws relating to unfair methods of competition. 

Sec. 28(g) provides for civil penalties for violations of this section 

sufficient to deter violations, but in no event greater than 3 times 

the value received by the party that is reasonably attributable to 

violations of the Act. If no such value has been received by the 

brand name drug company, the civil penalty shall be not greater 

than three times the value given to the generic drug company reasonably attributable to violations of the Act. This subsection also 

lists factors the court is to consider in assessing the civil penalty 

under this section. 

Sec. 28(h) provides definitions. 

Subsection (b). This subsection provides that section 28 of the 

FTC Act applies to all agreements entered into after November 15, 

2009. However, the civil penalty provision Sec. 28(g) does not apply 

to agreements entered into before the date of enactment of this Act. 

Section 4. Notice and certification of agreements 

This section requires settling parties to supplement their filing 

to the FTC under the Medicare Prescription Drug Improvement 

and Modernization Act of 2003, 21 U.S.C. § 355 (note), with any 

other agreement they enter into within 30 days of entering into 

that agreement. It also requires the Chief Executive Officer or senVerDate Nov 24 2008 20:56 Feb 12, 2010 Jkt 089010 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\SR123.XXX SR123

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ior executive responsible for a patent settlement agreement to certify that the filing is true, complete, and accurate. 

Section 5. Forfeiture of 180-day exclusivity period 

Under this section, generic drug companies violating the new section 28 of the FTC Act forfeit their right to a 180-day period of exclusivity of marketing of their generic drug. 

Section 6. Commission litigation authority 

This section allows the FTC to litigate cases and appeals under 

the new section 28 of the FTC Act under its own name, without 

a requirement that it first give the Attorney General the right to 

prosecute such an action. 

Section 7. Statute of limitations 

This section requires the FTC to bring any action to enforce section 28 of the FTC Act within three years of being notified of the 

agreement under the Medicare Prescription Drug Improvement and 

Modernization Act of 2003. 

Section 8. Severability 

This section provides if any provision of this Act is found unconstitutional, the remainder of the Act will be unaffected. 

IV. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

The Committee sets forth, with respect to the bill, S. 369, the following estimate and comparison prepared by the Director of the 

Congressional Budget Office under section 402 of the Congressional 

Budget Act of 1974: 

JANUARY 28, 2010. 

Hon. PATRICK J. LEAHY, Chairman, Committee on the Judiciary, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 369, the Preserve Access to 

Affordable Generics Act. If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact 

is Julia Christensen. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 369—Preserve Access to Affordable Generics Act 

Summary: S. 369 would impose significant restrictions on certain 

agreements to settle a claim of patent infringement between manufacturers of brand-name and generic drugs relating to the sale of 

a drug product. CBO anticipates that enacting S. 369 would accelerate, on average, the availability of lower-priced generic drugs affected by such agreements and generate savings to public and private purchasers of prescription drugs. 

CBO estimates that implementing S. 369 would: 

• Reduce direct spending by $0.7 billion over the 2010–2014 

period and by $1.8 billion over the 2010–2019 period. 


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• Increase federal revenues by $0.1 billion over the 2010– 

2014 period and by $0.2 billion over the 2010–2019 period. (Social Security payroll taxes, which are off-budget, would account 

for almost 30 percent of those totals.) 

• Reduce spending subject to appropriation by $0.1 billion 

over the 2010–2014 period and by $0.2 billion over the 2010– 

2019 period, assuming that appropriation action reflects the estimated reductions in costs. 

Considering both the direct spending and revenue effects, CBO 

estimates that enacting S. 369 would reduce unified budget deficits 

by approximately $0.8 billion over the 2010–2014 period and by 

roughly $2.0 billion over the 2010–2019 period. 

Pursuant to section 311 of S. Con. Res. 70 (110th Congress), CBO 

estimates that S. 369 would not cause a net increase in deficits in 

excess of $5 billion in any of the four 10-year periods beginning 

after fiscal year 2019. 

S. 369 contains no intergovernmental mandates as defined in the 

Unfunded Mandates Reform Act (UMRA). 

S. 369 would impose a mandate on the private sector by limiting 

agreements between brand-name and generic drug manufacturers 

to settle a claim of patent infringement. CBO estimates that the 

aggregate direct cost of complying with this mandate would exceed 

the threshold established by UMRA for private-sector mandates 

($141 million in 2010, adjusted annually for inflation) in each year, 

beginning with 2010. 

Estimated cost to the Federal Government: The estimated budgetary impact of S. 369 is shown in the following table. The costs 

of this legislation fall primarily within budget functions 370 (commerce and housing credit), 550 (health), and 570 (Medicare). 

CBO expects that enacting S. 369 would accelerate, on average, 

the availability of generic drugs that are the subject of specific 

types of agreements to settle a claim of patent infringement between manufacturers of brand-name and generic drugs. The legislation would affect settlement agreements entered into after November 15, 2009, that involve certain kinds of compensation flowing from the manufacturer of a brand-name drug to the manufacturer of the generic version of the drug. Earlier entry of lowerpriced generic drugs would reduce the average price of prescription 

drugs over the next 10 years. CBO expects that lower drug prices 

would reduce the costs of federal programs that purchase prescription drugs or provide health insurance that covers prescription 

drugs. CBO estimates that savings to mandatory health programs—such as Medicare and Medicaid and for health insurance 

provided to certain retirees by the Federal Employees Health Benefits (FEHB) program and TRICARE for Life program operated by 

the Department of Defense—would total $0.7 billion over the 2010– 

2014 period and $1.8 billion over the 2010–2019 period. 

Lower prices would also generate savings to federal health programs subject to appropriation—such as health insurance provided 

to federal employees through the FEHB program, and the health 

programs of the Departments of Veterans Affairs and Defense—totaling $0.1 billion over the 2010–2014 period and $0.2 billion over 

the 2010–2019 period. CBO estimates that the Federal Trade Commission (FTC) would also realize discretionary savings because of 


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lower administrative expenses for the agency under the bill of $7 

million over the 2010–2019 period. 


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By fiscal year, in millions of dollars— 

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010–2014 2010–2019 

CHANGES IN DIRECT SPENDING 

Estimated Budget Authority ................................................................................................................................ ¥30 ¥170 ¥160 ¥170 ¥140 ¥120 ¥110 ¥220 ¥290 ¥340 ¥670 ¥1,750 

Estimated Outlays ............................................................................................................................................... ¥30 ¥170 ¥160 ¥170 ¥140 ¥120 ¥110 ¥220 ¥290 ¥340 ¥670 ¥1,750 

CHANGES IN REVENUES 

Effect from Health Insurance Premiums: 

On-budget ................................................................................................................................................... 5 10 10 10 10 10 10 15 20 20 45 120 Off-budget .................................................................................................................................................. 3 5 5 5 5 5 5 5 10 10 23 58 

Subtotal ............................................................................................................................................. 8 15 15 15 15 15 15 20 30 30 68 178 

Collection of Civil Penalties ................................................................................................................................ 0 0 2 5 5 5 5 5 4 4 12 35 Total Changes in Revenues: 

On-budget ................................................................................................................................................... 5 10 12 15 15 15 15 20 24 24 57 155 Off-budget .................................................................................................................................................. 3 5 5 5 5 5 5 5 10 10 23 58 

Total Changes ................................................................................................................................... 8 15 17 20 20 20 20 25 34 34 80 213 

NET IMPACT ON THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES 

Net Change in the Deficit 1

On-budget ................................................................................................................................................... ¥35 ¥180 ¥172 ¥185 ¥155 ¥135 ¥125 ¥240 ¥314 ¥364 ¥727 ¥1,905 

Off-budget .................................................................................................................................................. ¥3 ¥5 ¥5 ¥5 ¥5 ¥5 ¥5 ¥5 ¥10 ¥10 ¥23 ¥58 

Total Changes ................................................................................................................................... ¥38 ¥185 ¥177 ¥190 ¥160 ¥140 ¥130 ¥245 ¥324 ¥374 ¥750 ¥1,963 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

Federal Health Programs: 

Estimated Authorization Level .................................................................................................................... ¥5 ¥20 ¥25 ¥20 ¥20 ¥15 ¥10 ¥25 ¥35 ¥35 ¥90 ¥210 

Estimated Outlays ...................................................................................................................................... ¥5 ¥20 ¥25 ¥20 ¥20 ¥15 ¥10 ¥25 ¥35 ¥35 ¥90 ¥210 

Federal Trade Commission: 

Estimated Authorization Level .................................................................................................................... * * * ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥2 ¥7 

Estimated Outlays ...................................................................................................................................... * * * ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥1 ¥2 ¥7 

Total Changes: 

Estimated Authorization Level .................................................................................................................... ¥5 ¥20 ¥25 ¥21 ¥21 ¥16 ¥11 ¥26 ¥36 ¥36 ¥92 ¥217 

Estimated Outlays ...................................................................................................................................... ¥5 ¥20 ¥25 ¥21 ¥21 ¥16 ¥11 ¥26 ¥36 ¥36 ¥92 ¥217 

1 Negative numbers indicate a reduction in budget deficits. 

* = between 0 and ¥$500,000. 


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S. 369 would affect revenues in two ways. First, the bill would 

increase governmental receipts (i.e., revenues) because it would create new civil penalties for parties that violate the bill’s requirements. Secondly, the bill would also affect revenues because CBO 

expects that lower prices for prescription drugs would reduce premiums for private health insurance and we assume that part of the 

savings from lower health insurance costs would be passed on to 

workers as increases in taxable compensation. Taken together, 

CBO estimates that the bill would increase federal revenues by 

$0.1 billion over the 2010–2014 period and by $0.2 billion over the 

2010–2019 period. 

Basis of estimate: S. 369 would impose significant restrictions on 

settlement agreements to resolve patent litigation between manufacturers of brand-name and generic drugs relating to the sale of 

a drug product. Under current law, such settlement agreements 

must be reported to the FTC. The FTC may challenge those agreements in court by alleging that they constitute an illegal restraint 

of trade. 

S. 369 would limit agreements to settle a claim of patent infringement where the manufacturer of the generic version of the 

drug receives anything of value from the manufacturer of the 

brand name drug and the generic drug manufacturer agrees to 

limit or forego research, development, manufacturing, marketing, 

or sale of the generic drug for any period of time. The bill would 

allow the FTC to initiate an enforcement proceeding where such 

settlement agreements between drug companies would be presumed anti-competitive and unlawful; they would only be allowed 

if the parties can demonstrate by clear and convincing evidence 

that the competitive benefits of the agreement outweigh the anticompetitive effects of the agreement. 

The bill, however, would permit a brand manufacturer to grant 

certain types of consideration to the manufacturer of the generic 

version of the drug under settlement agreements. Such exemptions 

include the right to market the generic drug before the expiration 

of patents or statutory exclusivities that aim to prevent such marketing. The legislation also would allow the FTC to establish additional exemptions through rulemaking procedures. 

S. 369 also would establish significant penalties to deter parties 

from entering into certain settlement agreements. Such penalties 

include the assessment of civil penalties and the forfeiture by a violator of any rights to the award of 180 days of market exclusivity 

to the generic drug company granted such exclusivity by the Food 

and Drug Administration (FDA) for meeting certain statutory requirements. The new restrictions under S. 369 would apply to all 

agreements entered into after November 15, 2009. (Provisions relating to civil penalties, however, only apply to agreements entered 

into after the date of enactment.) For the estimate, CBO assumes 

that S. 369 will be enacted in early 2010. 

Based on discussions with drug industry experts, CBO expects 

that limiting the compensation of manufacturers of generic drugs 

within settlement agreements between drug companies in the manner specified by S. 369 would lead to the earlier entry of some generic drugs. Since profits of manufacturers of brand-name drugs 

are so high relative to those of generic drug manufacturers, CBO 

believes that there is an incentive for brand manufacturers to comVerDate Nov 24 2008 20:56 Feb 12, 2010 Jkt 089010 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\SR123.XXX SR123

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pensate generic manufacturers for delaying the availability of the 

generic drug within such agreements. If the generic company that 

is party to such an agreement is eligible for 180 days of marketing 

exclusivity, plans to enter the market by competing generic manufacturers could also be delayed. 

Under the restricted terms of compensation allowed under S. 

369, we anticipate that the expected date of market entry for generic drugs affected by such agreements, on average, would be earlier regardless of whether that date is ultimately determined by a 

court ruling (because the parties decide to litigate instead of settling with an agreement subject to those new terms) or by a different settlement agreement negotiated between the parties. 

Direct Spending 

Through imposing significant restrictions on certain types of 

compensation in agreements to settle a claim of patent infringement between manufacturers of brand-name and generic drugs, enactment of S. 369 would accelerate the availability of lower-priced 

generic drugs. CBO estimates that change would reduce federal direct spending for mandatory health programs such as Medicare, 

Medicaid, payments for annuitant premiums under the FEHB program, and the Defense Department’s TRICARE for Life program by 

$0.7 billion over the 2010–2014 period and by $1.8 billion over the 

2010–2019 period. 

To estimate the savings from earlier entry of generics, CBO focused on the share of national spending for prescription drugs that 

might both face competition by generic products over the next 10 

years and involve settlement agreements of patent litigation with 

terms of compensation limited by the bill. We assumed that those 

products make up roughly one-quarter of the current market that 

may face competition by generic drugs. (CBO estimates that the 

value of the total drug market in the United States that may experience generic competition through 2019 is greater than $100 billion.) Based on information from FTC, CBO assumes that S. 369 

would accelerate the entry of generic drugs affected by the bill by 

roughly 17 months, on average. During that period, CBO expects 

that the availability of lower-priced generic drugs would reduce 

total spending for the drug by roughly one-half. After accounting 

for the fact that S. 369 would only restrict settlement agreements 

entered into after November 15, 2009, CBO estimates that earlier 

entry of generic drugs affected by the bill would reduce total drug 

expenditures in the United States by roughly $8 billion over the 

2010–2019 period. 

A settlement agreement with compensation flowing from the 

brand manufacturer to the generic manufacturer is just one of several possible outcomes to patent litigation. Limiting such settlement agreements would cause the expected rewards from challenging a patent to decline, on average. CBO expects that such a 

decline in expected returns would lead to fewer challenges of patents. In some instances, fewer generic challengers would lead to a 

higher average price following generic entry. CBO estimates that 

such price increases would increase total drug spending in the 

United States by roughly $2 billion over the 2010–2019 period. On 

net, CBO estimates that S. 369 would reduce total expenditures on 


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prescription drugs in the United States by about $6 billion over the 

10-year period. 

To estimate the net effect of the bill on federal spending by 

health programs that pay for prescription drugs, CBO applied the 

expected rate of savings generated nationally to each program. (We 

also took into account that prices paid by federal programs are generally lower than prices paid by private payers for brand-name prescription drugs.) CBO estimates that enacting S. 369 would reduce 

direct spending for federal health programs by $0.7 billion over the 

2010–2014 period and by $1.8 billion over the 2010–2019 period. 

Revenues 

CBO estimates that enacting S. 369 would increase federal reve- nues by $0.1 billion over the 2010–2014 period and by $0.2 billion 

over the 2010–2019 period. That estimate reflects two effects: • Higher federal tax revenues resulting from employers 

passing lower costs for employer-sponsored health insurance to 

workers as increases in taxable compensation; and • Collection of civil penalties associated with violations of 

new requirements imposed by the bill that would be recorded 

as federal revenues. 

Health Insurance Premiums. As explained above, CBO expects 

that enacting S. 369 would reduce the average cost for prescription 

drugs. That change would lower costs for private health insurance 

plans. CBO anticipates that the reduction in costs for private 

health insurance plans would result in lower insurance premiums, 

thus reducing the amount spent by employers for tax-favored 

health insurance and increasing the amount spent on taxable 

wages. That wage effect would increase federal revenues from income taxes and payroll taxes by an estimated $0.1 billion over the 

2010–2014 period and $0.2 billion over the 2010–2019 period. Social Security payroll taxes, which are off-budget, would account for 

about 30 percent of those totals. 

Collection of Civil Penalties. Under the bill, the FTC would have 

the authority to assess civil penalties on entities that enter into a 

settlement agreement that is subsequently ruled anti-competitive. 

The magnitude of those penalties would be tied to the value received by the parties to the agreement. CBO assumes that cases for 

which penalties would be assessed would take 2 or more years to 

resolve, thus we anticipate that the collection of penalties would 

start in 2012. CBO assumes that some firms would initially test 

the evidentiary standards for lawful agreements, and as those 

standards become clearer, fewer agreements would trigger penalties. Based on our estimates of profits garnered by firms who 

enter such agreements, CBO estimates that the bill would increase 

collections of civil penalties by about $35 million over the 2012– 

2019 period. 

SPENDING SUBJECT TO APPROPRIATION

CBO estimates that implementing S. 369 would reduce spending 

subject to appropriation by $0.1 billion over the 2010–2014 period 

and by $0.2 billion over the 2010–2019 period. 

Spending by Federal Health Programs for Prescription Drugs. 

Accelerating the entry of the lower-priced generic drugs would reduce the costs to administer certain discretionary health programs, 


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including those of the Veterans Health Administration, the Indian 

Health Service, and the Department of Defense. It also would lower 

payments by federal agencies for health insurance premiums for 

employees enrolled in the FEHB program. CBO estimates that implementing S. 369 would reduce discretionary spending by those 

programs by about $0.1 billion over the 2010–2014 period and by 

$0.2 billion over the 2010–2019 period, assuming that appropriation actions reflect the estimated reductions in costs. 

Administrative Costs of the Federal Trade Commission. Based on 

information from the FTC, CBO expects that the agency’s rulemaking and enforcement activities relating to settlement agreements between drug companies would decrease over time as the 

number of settlements requiring enforcement activities declines. 

CBO estimates that any resulting cost reductions would be insignificant for the first three years after enactment of S. 369; thereafter, CBO estimates the agency’s costs would be reduced by about 

$1 million per year. Assuming that appropriation actions reflect 

these reductions, CBO estimates that discretionary spending would 

fall by about $2 million over the 2010–2014 period and by $7 million over the 2010–2019 period. 

Estimated impact on State, local, and tribal governments: S. 369 

contains no intergovernmental mandates as defined in UMRA. 

CBO estimates that enactment of this bill would result in a decline 

in State Medicaid spending of less than $50 million over the 2010– 

2014 period. 

Estimated impact on the private sector: S. 369 would impose a 

mandate on brand-name and generic drug manufacturers by limiting agreements to settle a claim of patent infringement if, in 

those agreements, the generic manufacturer receives anything of 

value and agrees to limit or forgo research, development, manufacturing, marketing, or sale of the generic drug for any period of 

time. Such agreements would be presumed illegal unless drug manufacturers present clear and convincing evidence that the competitive benefits of the agreement outweigh the anticompetitive effects. 

CBO anticipates that limiting such agreements would result in 

earlier generic entry into the market and, as a result of lower drug 

prices, decreased profits for drug manufacturers. Under UMRA, the 

cost of this mandate to drug manufacturers would be the forgone 

profit, which CBO estimates to be about $350 million in 2010 and 

$2.4 billion over the 2010–2014 period. Thus, the costs of the mandate would significantly exceed the threshold established by UMRA 

for private-sector mandates ($141 million in 2010, adjusted annually for inflation). 

Previous CBO estimate: On November 20, 2009, CBO transmitted a cost estimate for H.R. 3962, the Affordable Health Care 

for America Act, as passed by the House of Representatives on November 7, 2009. H.R. 3962 also contains a provision that would impose restrictions on certain settlement agreements between manufacturers of brand-name and generic drugs. (That provision can be 

found in section 2573 of the bill.) 

Differences in the estimated costs of the provision in H.R. 3962 

and S. 369 reflect differences in the legislation. A key difference in 

the proposals is that the provision in H.R. 3962 would not allow 

the parties the opportunity to demonstrate that the competitive 

benefits of the settlement agreement outweigh the anticompetitive 


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effects. CBO’s estimate for the provision in H.R. 3962 also reflects 

interactions with other policies in the bill (such as the expansion 

of health insurance coverage and other drug policies.) 

Estimate prepared by: Federal Spending: Federal Health Programs—Julia Christensen and Anna Cook, Federal Trade Commission—Susan Willie; Federal Revenues: Zachary Epstein; Impact on 

State, Local, and Tribal Governments: Lisa Ramirez-Branum; Impact on the Private Sector: Patrick Bernhardt and Anna Cook 

Estimate approved by: Holly Harvey, Deputy Assistant Director 

for Budget Analysis. 

V. REGULATORY IMPACT EVALUATION

In compliance with rule XXVI of the Standing Rules of the Senate, the Committee finds that no significant regulatory impact will 

result from the enactment of S. 369. 

VI. CONCLUSION

The Preserve Access to Affordable Generics Act, S. 369, will prevent anticompetitive pharmaceutical patent settlement agreements 

between brand name and generic drug companies. This legislation 

will provide the FTC with a strong remedy to block anticompetitive 

patent settlements that harm consumers, and also provide a strong 

deterrent against drug companies entering into these agreements 

in the first place. 


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(18) 

VII. MINORITY VIEWS 

MINORITY VIEWS OF SENATORS SESSIONS, HATCH, KYL, 

CORNYN, AND COBURN 

Although this bill has been substantially improved since it was 

first introduced, we cannot support it in its current form. The original bill would have created a per se violation of the antitrust laws 

where the parties to a drug patent infringement suit settle the suit 

in a way that gives something of value to the generic company 

other than the right to go to market earlier. The reported bill replaces an express per se ban with a presumption that such agreements are anticompetitive and invalid. Because of the way that the 

bill enforces that presumption, however, we believe that the bill 

would amount to a de facto per se ban on covered settlements—and 

would entail all of the evils attendant to a per se ban. 

To be clear, we would support creating a legal presumption 

against drug patent settlements—in effect, requiring the parties to 

such settlements to show why the terms of the settlement are reasonable and will not harm consumers. Such a test would require 

the parties to explain what consideration is being transferred between them under the agreement, to estimate the value of that 

consideration, and to give a neutral and legitimate reason for the 

exchange. We think that such a test would ferret out settlements 

that are anticompetitive and designed simply to delay generic market entry, while still allowing the parties to enter into settlements 

that are reasonable. 

For a legal-presumption rule to work, however, the parties must 

be afforded a forum in which they can quickly and fairly test 

whether they have overcome the presumption and whether the 

agreement is valid. Unfortunately, under the reported bill, settlements would be made presumptively unlawful, but the bill does not 

create a process for quickly resolving whether the agreement is unlawful. The issue would not be resolved until the FTC brings an 

action to challenge the settlement, which could be years after the 

settlement was entered into. Moreover, the current bill requires the 

brand and generic companies to rebut the presumption that the 

agreement is unlawful by clear and convincing evidence. This is a 

heavy burden that is not appropriate for commercial litigation and 

that tilts the scales in a lawsuit sharply in the government’s favor. 

As a practical matter, few companies will ever agree to subject 

their settlements to the reported bill’s procedures. Generic and 

brand companies simply are not going to take the risk that, years 

after they have entered into a settlement, they will be sued by the 

FTC, will be unable to overcome the presumption of invalidity by 

clear and convincing evidence, and will have their agreement declared invalid and will be subjected to treble damages. Parties 


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1 A copy of this letter is included as an attachment to these views. 

enter into settlement agreements so that they can have legal certainty. There is no certainty—and no reason to enter into the settlement—if the agreement will be presumed unlawful, with no way 

to promptly determine whether the presumption of invalidity has 

been overcome. 

Parties also settle cases so that they can avoid the burden and 

expense of litigation. The reported bill invites the parties to end 

their litigation against each other, only to begin years of discovery 

and litigation against the FTC. 

In its practical effect, the bill reported by this committee still 

amounts to a per se ban on settlements of patent-infringement 

suits between brand and generic companies. 

We are opposed to a per se ban. There are many valid reasons 

for a generic drug company to settle a patent infringement suit for 

things of value other than the right to go to market earlier. In the 

course of discovery and litigation, the generic company may conclude that the patent that it is challenging is fairly strong, and 

that it only has a 10% chance of winning. It thus makes sense for 

the generic company to settle for a modest amount of money (an 

amount that reflects the 10% chance of winning) rather than litigating to conclusion. And in this situation, the brand company who 

owns the patent may be unwilling to let the generic company go 

to market earlier—if that company thinks that it will win the infringement suit, it will be better off litigating the case rather than 

giving the generic company part of its valuable monopoly. This 

puts the generic company in a terrible position, where it can either 

continue what is very likely pointless litigation, or walk away with 

nothing. 

By effectively preventing the parties from settling, it is likely 

that this bill will discourage generic drug companies from bringing 

challenges to brand companies’ patents in the first place—and as 

a result, the bill will ultimately reduce competition and raise prices 

for drugs that are currently subject to invalid or low-quality patents. 

This point is brought into relief in a letter that Senator Sessions 

recently received from Wockhardt USA, a smaller generic drug 

company that is based in New Jersey.1 The letter describes the considerable expense borne by a generic drug company in challenging 

a brand company’s patent: ‘‘Patent challenges already cost approximately $4 to $7 million to pursue, and with upwards of 5 challenges occurring at any one time (at least for Wockhardt), the costs 

can get out of control quite quickly.’’ As a result, generic companies 

must think carefully about whether to bring suit—and they rely on 

the possibility of settlement when making their decision: 

Since Wockhardt and other similarly situated companies 

must marshal limited resources, a thorough cost versus 

risk analysis must be conducted before committing to 

bringing suit against a well-funded branded company. Integral to that analysis is consideration of the possibility of 

settlement. 


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This particular generic drug company takes a dim view of the impact that this bill will have on its ability to challenge brand patents and bring generic drugs to market. First it notes that it is 

often difficult if not impossible for parties to settle if they only are 

allowed to do so by allowing the generic to go to market earlier: 

the overly simplistic view adopted by this legislation fails 

to take into account the different positions of the parties 

on a number of critical issues to any settlement discussion: 

risk aversion, financial resources, underlying knowledge of 

the strength of a patent and other variables, such as 

knowledge of the market. The differences in perception on 

these and other issues and their effect on parties coming 

to an agreement on an appropriate entry date will most 

certainly make it very difficult, and perhaps impossible, to 

reach a settlement. 

The letter contends that as a result, the committee-reported bill 

will effectively deter generic drug companies—particularly small 

ones—from bringing challenges to branded drugs in the first place: 

effective removal of settlement as an option, as contemplated by S. 369, significantly complicates the risk 

analysis currently undertaken and leaves small manufacturers with insufficient incentive to pursue challenges except in the clearest (and rarest) of cases where the cost 

would almost certainly be rewarded. 

This particular company has concluded that ‘‘S. 369, in its current form, would chill competition, discourage generic challenges 

and subsequently drive up the cost of affordable medicines.’’ 

Obviously, this result is the exact opposite of that which this bill 

is intended to achieve. It nevertheless seems that there is a high 

risk, if not outright likelihood, that the bill in its current form will 

achieve exactly this result. By preventing parties that disagree on 

the strength of a patent and other key factors from settling a suit, 

the bill will deter generic companies from embarking on the expensive path of challenging a brand patent in the first place, and will 

ultimately result in fewer generic drugs entering the market. 

Again, there is much with regard to this bill that the sponsors 

and we agree on: brand-generic patent settlements should be subject to careful scrutiny, and it is appropriate to create a presumption against such settlements and force the parties to provide a legitimate justification for all of the consideration being exchanged. 

But by failing to provide for prompt resolution of whether a settlement is invalid, and by stacking the deck against the settling parties, this bill amounts to an effective per se ban on settlements. 

Such a ban would benefit neither the companies nor consumers. It 

would ultimately reduce generic market entry and raise prices for 

consumers—a result that we think all would agree is to be avoided. 

JEFF SESSIONS. 

ORRIN HATCH. 

JON KYL. 

JOHN CORNYN. 

TOM COBURN. 


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ATTACHMENT TO MINORITY VIEWS OF SENATORS SESSIONS, HATCH, KYL, CORNYN, AND COBURN

WOCKHARDT, 

PARSIPPANY, NJ, 

November 2, 2009. 

Re The Preserve Access to Affordable Generic Drugs Act (S. 369). 

Hon. PATRICK LEAHY, 

Chairman, Senate Judiciary Committee, 

Washington, DC. 

DEAR MR. CHAIRMAN: I am the Senior Vice President and Head of Global Legal 

Affairs for Wockhardt, a global pharmaceutical and biotechnology company. 

Wockhardt, through its subsidiaries in Parsippany, New Jersey and Morton Grove, 

Illinois, is an active participant in the United States generic pharmaceuticals market. We take great pride in our role in saving American consumers and taxpayers 

billions of dollars each year in prescription drug costs, and it is in that spirit that 

I write to you today to express my deep reservations about 8.369, ‘‘The Preserve Access to Affordable Generic Drugs Act’’. 

Given that most of the pharmaceutical companies with a ‘‘presence’’ in Washington generate significantly more revenue than Wockhardt, we felt it critical to provide another perspective—that of a smaller generic whose strategy and decisionmaking process will most certainly and significantly be adversely affected by S. 369. 

In theory, and according to its proponents, S. 369 will reduce the anti-consumer 

practice of brand-name drug manufacturers using ‘‘pay-off’’ agreements to keep 

cheaper generic equivalents off the market by making such practices presumptively 

illegal. While this may look promising in theory, in practice, this overly broad and 

sweeping approach will cause a significant decline in patent challenges in the 

United States, resulting in strengthened market monopolies for branded companies 

and, unfortunately, limited competition. 

What is most surprising about the evolution of this particular legislation is the 

legal standard that has somehow found its way into the analysis. Looking back 

throughout history, with a particular focus on antitrust law, courts traditionally 

apply a per se rule only when considerable judicial experience identifies a category 

of conduct that almost invariably reduces output and raises price. In the present 

situation, however, the proponents of S. 369 do not seem to be advocating this legislation because they seek to codify an emerging judicial consensus about a harmful 

category of conduct. In fact, the situation is quite the opposite. A review of the legal 

landscape over the past several years reveals that there is a growing judicial consensus that many of these settlements are not categorically problematic. Many 

economists, jurists and legal scholars have studied, analyzed and evaluated these 

settlements and consistently concluded that there are obvious pro-consumer effects 

to these settlements. Even the Federal Trade Commission (‘‘FTC’’), at one time, has 

joined in this conclusion. Former FTC Chairman Deborah Platt Majoras acknowledged this in stating, ‘‘Undoubtedly, there can be significant pro-competitive benefits of settling patent litigation between brand and generic manufacturers. Further, 

we recognize the importance of settlements generally to the judicial system.’’ Neither these ‘‘significant procompetitive benefits’’ nor the understanding that the per 

se standard is inappropriate is reflected in the FTC’s current support of S. 369. I 

would submit that simply because a settlement between a brand and generic company has the potential to have an anti-competitive effect, does not warrant this type 

of shift, while seemingly completely ignoring the benefits these types of agreements 

have had on the cost of health care in this country to date. 

S. 369, for all practical purposes, enacts a per se standard by shifting the burden 

to companies entering into a settlement to prove, by clear and convincing evidence, 

that a settlement is pro-competitive, and it would remove from the trier of fact the 

ability to determine whether a patent is valid and a valuable intellectual property 

right. Together, these burdens would add layers of cost, time, and risk to the current process, substantially harming small generic manufacturers’ ability to aggressively pursue challenges. Since Wockhardt and other similarly situated companies 

must marshal limited resources, a thorough cost versus risk analysis must be conducted before commiting to bringing suit against a well-funded branded company. 

Integral to that analysis is consideration of the possibility of settlement. 

Determining whether to challenge a patent is often exacerbated by the complexity 

of the products and patents at issue, and the outcomes of even the best cases are 

uncertain. As such, effective removal of settlement as an option, as contemplated 

by S. 369, significantly complicates the risk analysis currently undertaken and 

leaves small manufacturers with insufficient incentive to pursue challenges except 


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22 

in the clearest (and rarest) of cases where the cost would almost certainly be rewarded. It simply cannot be assumed that brand and generic companies will even 

be able to reach agreements moving forward under this legislation. 

As various critics of this proposed legislation have pointed out, the overly simplistic view adopted by this legislation fails to take into account the different positions of the parties on a number of critical issues to any settlement discussion: risk 

aversion, financial resources, underlying knowledge of the strength of a patent and 

other variables, such as knowledge of the market. The differences in perception on 

these and other issues and their effect on parties coming to an agreement on an 

appropriate entry date will most certainly make it very difficult, and perhaps impossible, to reach a settlement. 

In fact, this sort of incentive re-alignment is out of sync with the balancing of 

rights originally sought under the Hatch-Waxman statute. Inherent and systemic 

conflicts will always exist between patent law and antitrust law, but the HatchWaxman statute was and continues to be successful in challenging monopolies in 

the interest of American consumers. However, if faced with the risks and costs associated with settlement under S. 369, generic companies will have to make an earlier 

and very complicated assessment as to whether to challenge a patent and how much 

it will cost to litigate that case all the way through appeal. With the shifting of the 

burden, there will be no result other than a substantial increase in expenses and 

litigation budgets (not to mention additional waste of judicial resources), which cannot be sustained by companies like Wockhardt. Patent challenges already cost approximately $4 to $7 million to pursue, and with upwards of 5 challenges occurring 

at any one time (at least for Wockhardt), the costs can get out of control quite quickly. We will have to evaluate very closely whether we can sustain our current program should this legislation be implemented. 

In fact, the costs noted above appear not to factor in costs associated with trying 

to prove to a trier of fact that a settlement is pro-competitive. It is not at all clear 

how the process is to work and how it will be implemented, but one thing is certain: 

these additional layers of significant time, cost and risk will cause Wockhardt and 

similarly situated generic companies to challenge fewer patents. Fewer patent challenges will result in fewer product offerings and will most certainly adversely impact the downward pressure on drug prices associated with multiple generic entrants. 

To provide some perspective, Wockhardt, despite our relatively small market 

share, received 23 Abbreviated New Drug Application (‘‘ANDA’’) approvals from the 

FDA in 2008 alone, placing us, we believe, among the top 5 companies in the world 

in that regard. Since 2005, we have filed 106 ANDAs with the FDA, 14 of which 

have resulted in litigation and several of which having been settled in the past 

eighteen months. Those settlements each will result in our launching of the generic 

product in advance of the expiration date associated with the relevant patents. However, should S. 369 be implemented, our number of challenges will most certainly 

shrink significantly due to the factors previously set forth above. For context, think 

about a market with only two or three participants, as opposed to four, five, six or 

greater. 

In conclusion, one observer noted that public policy must ‘‘take into account and 

balance all three relevant social policies—pro-competition, pro-patent and pro-settlement—and formulate rules leading to the lowest net social cost when all relevant 

costs are factored.’’ (Daniel A. Cranem Exit Payments in Settlement of Patent Infringement Lawsuits: Antitrust Rules and Economic Implications, 54 FLA. L. REV. 

747, 750 (2002)). While the current regulatory framework encourages patent challenges and rewards generic companies for engaging in the research and development 

and litigation necessary to bring products to market and lower the prices of medicines, S. 369, in its current form, would chill competition, discourage generic challenges and subsequently drive up the cost of affordable medicines. 

Thank you for considering our views. 

Sincerely, 

JEROME D. JABBOUR. 


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(23) 

MINORITY VIEWS FROM SENATOR HATCH 

For years, the Senate Judiciary Committee has been considering 

legislation that would curtail abuses that may exist in the way 

pharmaceutical companies enter into patent litigation settlements. 

Unfortunately, in an effort to curb anti-consumer practices, the 

proponents of the Preserve Access to Affordable Generics Act (S. 

369) fail to acknowledge that consumers benefit when generic and 

brand companies are able to set aside reasonable differences and 

reach agreements that allow generics to enter the marketplace earlier. 

When Representative Henry Waxman and I were drafting the 

Drug Price Competition and Patent Term Restoration Act of 1984, 

commonly referred to as the ‘‘Hatch-Waxman Act,’’ we created a 

system that allows generic manufacturers to challenge patents 

when they believe the patents should not prevent them from entering the market and we provided them incentives to make every effort to get to the market early. There is no doubt that consumer 

access to generic medicines is expedited any time these important 

products come to market prior to the patents expiring. 

What seems to have been forgotten during consideration of S. 

369 is the reality that patent litigation settlements between brand 

and generic drug companies give consumers the ability of using generic drugs earlier than can be anticipated. In other words, generic 

competition is infused into the market sooner rather than later— 

providing savings to the health care system. This was the purpose 

of the Hatch-Waxman Act, and it has worked. Consequently, it is 

important that before we change the law, we have a clear understanding of the proposed legislation and a complete appreciation of 

the consequences of its implementation. 

While it is true that S. 369 no longer has a bright-line rule that 

all settlements are per se illegal, the hurdles that would be imposed on settling parties could effectively discourage proconsumer 

settlements. Specifically, the legislation provides that certain patent settlement agreements are presumed to have anti-competitive 

effects and are unlawful. That presumption can only be overcome 

if the parties demonstrate by ‘‘clear and convincing’’ evidence that 

the precompetitive benefits of the agreement outweigh the anticompetitive effects. This high burden of proof creates a strong disincentive for parties to settle. Additionally, the ‘‘clear and convincing evidence’’ standard, as opposed to the traditional preponderance of the evidence standard, gives the Federal Trade Commission (FTC) an unprecedented and unfair amount of discretion. It 

unduly benefits the Commission by making it very difficult for companies to rebut the presumption even in cases that have merit. 

Adding to the power of the FTC is the fact that S. 369 requires 

violators to pay a civil penalty of up to three times the value of the 

consideration given to the generic manufacturer. Historically the 


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24 

FTC has used injunctions and disgorgement as enforcement tools. 

The authority under S. 369 to penalize drug manufacturers by 

making them pay potentially millions of dollars in fines is 

overbroad and unnecessary. 

If S. 396 is enacted in its current form, generic companies that 

might have brought actions in the past and ultimately settled for 

early entry may be deterred from doing so. Moreover, the bill could 

create uncertainty among industry participants, their investors, 

and the public. And that uncertainty—as to the duration of patent 

protection, ability to resolve good faith disputes, and investment in 

new applications for existing medicines—will have a significant adverse impact on innovation and the quality of health care in the 

United States. 

ORRIN G. HATCH. 


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25 

VIII. CHANGES TO EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, changes in existing law made by S. 369, as reported, are shown as follows (existing law proposed to be omitted 

is enclosed in black brackets, new matter is printed in italic, and 

existing law in which no change is proposed is shown in roman): 

UNITED STATES CODE 

TITLE 15—COMMERCE AND TRADE 

* * * * * * * 

CHAPTER 2—FEDERAL TRADE COMMISSION; PROMOTION OF EXPORT TRADE AND PREVENTION OF UNFAIR METHODS OF COMPETITION 

SUBCHAPTER I—FEDERAL TRADE COMMISSION 

FEDERAL TRADE COMMISSION ACT (15 U.S.C. §§ 41 et seq.) 

* * * * * * * 

SEC. 16 (15 U.S.C. § 58). COMMENCEMENT, DEFENSE, INTERVENTION, 

AND SUPERVISION OF LITIGATION AND APPEAL BY COMMISSION OR ATTORNEY GENERAL 

(a) PROCEDURE FOR EXERCISE OF AUTHORITY TO LITIGATE OR AP- PEAL.— 

(1) Except as otherwise provided in paragraph (2) or (3), if— 

(A) before commencing, defending, or intervening in, any 

civil action involving this subchapter (including an action 

to collect a civil penalty) which the Commission, or the Attorney General on behalf of the Commission, is authorized 

to commence, defend, or intervene in, the Commission 

gives written notification and undertakes to consult with 

the Attorney General with respect to such action; and 

(B) the Attorney General fails within 45 days after receipt of such notification to commence, defend, or intervene 

in, such action; 

the Commission may commence, defend, or intervene in, and 

supervise the litigation of, such action and any appeal of such 

action in its own name by any of its attorneys designated by 

it for such purpose. 

(2) Except as otherwise provided in paragraph (3), in any 

civil action— 

(A) under section 53 of this title (relating to injunctive 

relief); 

(B) under section 57b of this title (relating to consumer 

redress); 

(C) to obtain judicial review of a rule prescribed by the 

Commission, or a cease and desist order issued under section 45 of this title; 

(D) under the second paragraph of section 49 of this title 

(relating to enforcement of a subpena) and under the 


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26 

fourth paragraph of such section (relating to compliance 

with section 46 of this title); øor¿ 

(E) under section 57b–2a of this title; or 

(F) under section 28; 

the Commission shall have exclusive authority to commence or defend, and supervise the litigation of, such action and any appeal of such action in its own name by any 

of its attorneys designated by it for such purpose, unless 

the Commission authorizes the Attorney General to do so. 

The Commission shall inform the Attorney General of the 

exercise of such authority and such exercise shall not preclude the Attorney General from intervening on behalf of 

the United States in such action and any appeal of such 

action as may be otherwise provided by law. 

(3)(A) If the Commission makes a written request to the Attorney General, within the 10-day period which begins on the 

date of the entry of the judgment in any civil action in which 

the Commission represented itself pursuant to paragraph (1) or 

(2), to represent itself through any of its attorneys designated 

by it for such purpose before the Supreme Court in such action, 

it may do so, if— 

(i) the Attorney General concurs with such request; or 

(ii) the Attorney General, within the 60-day period 

which begins on the date of the entry of such judgment— 

(I) refuses to appeal or file a petition for writ of certiorari with respect to such civil action, in which case 

he shall give written notification to the Commission of 

the reasons for such refusal within such 60-day period; 

or 

(II) the Attorney General fails to take any action 

with respect to the Commission’s request. 

(B) In any case where the Attorney General represents the 

Commission before the Supreme Court in any civil action in 

which the Commission represented itself pursuant to paragraph (1) or (2), the Attorney General may not agree to any 

settlement, compromise, or dismissal of such action, or confess 

error in the Supreme Court with respect to such action, unless 

the Commission concurs. 

(C) For purposes of this paragraph (with respect to representation before the Supreme Court), the term ‘‘Attorney General’’ 

includes the Solicitor General. 

(4) If, prior to the expiration of the 45-day period specified 

in paragraph (1) of this section or a 60-day period specified in 

paragraph (3), any right of the Commission to commence, defend, or intervene in, any such action or appeal may be extinguished due to any procedural requirement of any court with 

respect to the time in which any pleadings, notice of appeal, or 

other acts pertaining to such action or appeal may be taken, 

the Attorney General shall have one-half of the time required 

to comply with any such procedural requirement of the court 

(including any extension of such time granted by the court) for 

the purpose of commencing, defending, or intervening in the 

civil action pursuant to paragraph (1) or for the purpose of refusing to appeal or file a petition for writ of certiorari and the 


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written notification or failing to take any action pursuant to 

paragraph 3(A)(ii). 

(5) The provisions of this subsection shall apply notwithstanding chapter 31 of Title 28, or any other provision of law. 

(b) CERTIFICATION BY COMMISSION TO ATTORNEY GENERAL FOR

CRIMINAL PROCEEDINGS.—Whenever the Commission has reason to 

believe that any person, partnership, or corporation is liable for a 

criminal penalty under this subchapter, the Commission shall certify the facts to the Attorney General, whose duty it shall be to 

cause appropriate criminal proceedings to be brought. 

(c) FOREIGN LITIGATION.— 

(1) COMMISSION ATTORNEYS.—With the concurrence of the 

Attorney General, the Commission may designate Commission 

attorneys to assist the Attorney General in connection with litigation in foreign courts on particular matters in which the 

Commission has an interest. 

(2) REIMBURSEMENT FOR FOREIGN COUNSEL.—The Commission is authorized to expend appropriated funds, upon agreement with the Attorney General, to reimburse the Attorney 

General for the retention of foreign counsel for litigation in foreign courts and for expenses related to litigation in foreign 

courts in which the Commission has an interest. 

(3) LIMITATION ON USE OF FUNDS.—Nothing in this subsection authorizes the payment of claims or judgments from 

any source other than the permanent and indefinite appropriation authorized by section 1304 of Title 31. 

(4) OTHER AUTHORITY.—The authority provided by this subsection is in addition to any other authority of the Commission 

or the Attorney General. 

* * * * * * * 

SEC. 28 (15 U.S.C. § 58). PRESERVING ACCESS TO AFFORDABLE 

GENERICS 

(a) IN GENERAL.— 

(1) ENFORCEMENT PROCEEDING.—The Federal Trade Commission may initiate a proceeding to enforce the provisions of this 

section against the parties to any agreement resolving or settling, on a final or interim basis, a patent infringement claim, 

in connection with the sale of a drug product. 

(2) PRESUMPTION.— 

(A) IN GENERAL.—Subject to subparagraph (B), in such a 

proceeding, an agreement shall be presumed to have anticompetitive effects and be unlawful if— 

(i) an ANDA filer receives anything of value; and 

(ii) the ANDA filer agrees to limit or forego research, 

development, manufacturing, marketing, or sales of the 

ANDA product for any period of time. 

(B) EXCEPTION.—The presumption in subparagraph (A) 

shall not apply if the parties to such agreement demonstrate by clear and convincing evidence that the pro-competitive benefits of the agreement outweigh the anticompetitive effects of the agreement. 


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(b) COMPETITIVE FACTORS.—In determining whether the settling 

parties have met their burden under subsection (a)(2)(B), the fact 

finder shall consider— 

(1) the length of time remaining until the end of the life of 

the relevant patent, compared with the agreed upon entry date 

for the ANDA product; 

‘(2) the value to consumers of the competition from the ANDA 

product allowed under the agreement; 

(3) the form and amount of consideration received by the 

ANDA filer in the agreement resolving or settling the patent infringement claim; 

(4) the revenue the ANDA filer would have received by winning the patent litigation; 

(5) the reduction in the NDA holder’s revenues if it had lost 

the patent litigation; 

(6) the time period between the date of the agreement conveying value to the ANDA filer and the date of the settlement 

of the patent infringement claim; and 

(7) any other factor that the fact finder, in its discretion, 

deems relevant to its determination of competitive effects under 

this subsection. 

(c) LIMITATIONS.—In determining whether the settling parties 

have met their burden under subsection (a)(2)(B), the fact finder 

shall not presume— 

(1) that entry would not have occurred until the expiration of 

the relevant patent or statutory exclusivity; or 

(2) that the agreement’s provision for entry of the ANDA product prior to the expiration of the relevant patent or statutory exclusivity means that the agreement is pro-competitive, although 

such evidence may be relevant to the fact finder’s determination 

under this section. 

(d) EXCLUSIONS.—Nothing in this section shall prohibit a resolution or settlement of a patent infringement claim in which the consideration granted by the NDA holder to the ANDA filer as part of 

the resolution or settlement includes only one or more of the following: 

(1) The right to market the ANDA product in the United 

States prior to the expiration of— 

(A) any patent that is the basis for the patent infringement; or 

(B) any patent right or other statutory exclusivity that 

would prevent the marketing of such drug. 

(2) A payment for reasonable litigation expenses not to exceed $7,500,000. 

(3) A covenant not to sue on any claim that the ANDA product infringes a United States patent. 

(e) REGULATIONS AND ENFORCEMENT.— 

(1) REGULATIONS.—The Federal Trade Commission may 

issue, in accordance with section 553 of title 5, United States 

Code, regulations implementing and interpreting this section. 

These regulations may exempt certain types of agreements described in subsection (a) if the Commission determines such 

agreements will further market competition and benefit consumers. Judicial review of any such regulation shall be in the 


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United States District Court for the District of Columbia pursuant to section 706 of title 5, United States Code. 

(2) ENFORCEMENT.—A violation of this section shall be treated as a violation of section 5. 

(3) JUDICIAL REVIEW.—Any person, partnership or corporation that is subject to a final order of the Commission, issued 

in an administrative adjudicative proceeding under the authority of subsection (a)(1), may, within 30 days of the issuance of 

such order, petition for review of such order in the United 

States Court of Appeals for the District of Columbia Circuit or 

the United States Court of Appeals for the circuit in which the 

ultimate parent entity, as defined at 16 C.F.R. 801.1(a)(3), of 

the NDA holder is incorporated as of the date that the NDA is 

filed with the Secretary of the Food and Drug Administration, 

or the United States Court of Appeals for the circuit in which 

the ultimate parent entity of the ANDA filer is incorporated as 

of the date that the ANDA is filed with the Secretary of the 

Food and Drug Administration. In such a review proceeding, 

the findings of the Commission as to the facts, if supported by 

evidence, shall be conclusive. 

(f) ANTITRUST LAWS.—Nothing in this section shall be construed 

to modify, impair or supersede the applicability of the antitrust 

laws as defined in subsection (a) of the 1st section of the Clayton 

Act (15 U.S.C. 12(a)) and of section 5 of this Act to the extent that 

section 5 applies to unfair methods of competition. Nothing in this 

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

ANDA filer to assert claims or counterclaims against any person, 

under the antitrust laws or other laws relating to unfair competition. 

(g) PENALTIES.— (1) FORFEITURE.—Each person, partnership or corporation 

that violates or assists in the violation of this section shall forfeit and pay to the United States a civil penalty sufficient to 

deter violations of this section, but in no event greater than 3 

times the value received by the party that is reasonably attributable to a violation of this section. If no such value has been 

received by the NDA holder, the penalty to the NDA holder 

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

than 3 times the value given to the ANDA filer reasonably attributable to the violation of this section. Such penalty shall accrue to the United States and may be recovered in a civil action 

brought by the Federal Trade Commission, in its own name by 

any of its attorneys designated by it for such purpose, in a district court of the United States against any person, partnership 

or corporation that violates this section. In such actions, the 

United States district courts are empowered to grant mandatory 

injunctions and such other and further equitable relief as they 

deem appropriate. 

(2) CEASE AND DESIST.— (A) IN GENERAL.—If the Commission has issued a cease 

and desist order with respect to a person, partnership or 

corporation in an administrative adjudicative proceeding 

under the authority of subsection (a)(1), an action brought 

pursuant to paragraph (1) may be commenced against such 


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person, partnership or corporation at any time before the 

expiration of one year after such order becomes final pursuant to section 5(g). 

(B) EXCEPTION.—In an action under subparagraph (A), 

the findings of the Commission as to the material facts in 

the administrative adjudicative proceeding with respect to 

such person’s, partnership’s or corporation’s violation of 

this section shall be conclusive unless— 

(i) the terms of such cease and desist order expressly 

provide that the Commission’s findings shall not be 

conclusive; or 

(ii) the order became final by reason of section 

5(g)(1), in which case such finding shall be conclusive 

if supported by evidence. 

(3) CIVIL PENALTY.—In determining the amount of the civil 

penalty described in this section, the court shall take into account— 

(A) the nature, circumstances, extent, and gravity of the 

violation; 

(B) with respect to the violator, the degree of culpability, 

any history of violations, the ability to pay, any effect on 

the ability to continue doing business, profits earned by the 

NDA holder, compensation received by the ANDA filer, and 

the amount of commerce affected; and 

(C) other matters that justice requires. 

(4) REMEDIES IN ADDITION.—Remedies provided in this subsection are in addition to, and not in lieu of, any other remedy 

provided by Federal law. Nothing in this paragraph shall be 

construed to affect any authority of the Commission under any 

other provision of law. 

(h) DEFINITIONS.—In this section: 

(1) AGREEMENT.—The term ‘‘agreement’’ means anything that 

would constitute an agreement under section 1 of the Sherman 

Act (15 U.S.C. 1) or section 5 of this Act. 

(2) AGREEMENT RESOLVING OR SETTLING A PATENT INFRINGE- MENT CLAIM.—The term ‘‘agreement resolving or settling a patent infringement claim’’ includes any agreement that is entered 

into within 30 days of the resolution or the settlement of the 

claim, or any other agreement that is contingent upon, provides 

a contingent condition for, or is otherwise related to the resolution or settlement of the claim. 

(3) ANDA.—The term ‘‘ANDA’’ means an abbreviated new 

drug application, as defined under section 505(j) of the Federal 

Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)). 

(4) ANDA FILER.—The term ‘‘ANDA filer’’ means a party who 

has filed an ANDA with the Food and Drug Administration. 

(5) ANDA PRODUCT.—The term ‘‘ANDA product’’ means the 

product to be manufactured under the ANDA that is the subject 

of the patent infringement claim. 

(6) DRUG PRODUCT.—The term ‘‘drug product’’ means a finished dosage form (e.g., tablet, capsule, or solution) that contains a drug substance, generally, but not necessarily, in association with 1 or more other ingredients, as defined in section 

314.3(b) of title 21, Code of Federal Regulations. 


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

as defined under section 505(b) of the Federal Food, Drug, and 

Cosmetic Act (21 U.S.C. 355(b)). 

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

(A) the party that received FDA approval to market a 

drug product pursuant to an NDA; 

(B) a party owning or controlling enforcement of the patent listed in the Approved Drug Products With Therapeutic 

Equivalence Evaluations (commonly known as the ‘‘FDA 

Orange Book’’) in connection with the NDA; or 

(C) the predecessors, subsidiaries, divisions, groups, and 

affiliates controlled by, controlling, or under common control with any of the entities described in subparagraphs (A) 

and (B) (such control to be presumed by direct or indirect 

share ownership of 50 percent or greater), as well as the licensees, licensors, successors, and assigns of each of the entities. 

(9) PATENT INFRINGEMENT.—The term ‘‘patent infringement’’ 

means infringement of any patent or of any filed patent application, extension, reissue, renewal, division, continuation, continuation in part, reexamination, patent term restoration, patents of 

addition and extensions thereof. 

(10) PATENT INFRINGEMENT CLAIM.—The term ‘‘patent infringement claim’’ means any allegation made to an ANDA 

filer, whether or not included in a complaint filed with a court 

of law, that its ANDA or ANDA product may infringe any patent held by, or exclusively licensed to, the NDA holder of the 

drug product. 

(11) STATUTORY EXCLUSIVITY.—The term ‘‘statutory exclusivity’’ means those prohibitions on the approval of drug applications under clauses (ii) through (iv) of section 505(c)(3)(E) (5- 

and 3-year data exclusivity), section 527 (orphan drug exclusivity), or section 505A (pediatric exclusivity) of the Federal 

Food, Drug, and Cosmetic Act . 

(b) EFFECTIVE DATE.—Section 28 of the Federal Trade Commission Act, as added by this section, shall apply to all agreements described in section 28(a)(1) of that Act entered into after November 

15, 2009. Section 28(g) of the Federal Trade Commission Act, as 

added by this section, shall not apply to agreements entered into before the date of enactment of this Act. 

SEC. 29. 

This subchapter may be cited as the ‘‘Federal Trade Commission 

Act’’. 

* * * * * * * 

TITLE 21—FOOD AND DRUGS 

* * * * * * * 

CHAPTER 9—FEDERAL FOOD, DRUG AND COSMETICS 

ACT 

* * * * * * * 


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SUBCHAPTER V—DRUGS AND DEVICES 

PART A—DRUGS AND DEVICES 

* * * * * * * 

§ 355. New Drugs 

* * * * * * * 

(j) ABBREVIATED NEW DRUG APPLICATIONS.— 

* * * * * * * 

(5)(A) Within one hundred and eighty days of the initial receipt of an application under paragraph (2) or within such additional period as may be agreed upon by the Secretary and 

the applicant, the Secretary shall approve or disapprove the 

application. 

(B) The approval of an application submitted under paragraph (2) shall be made effective on the last applicable date determined by applying the following to each certification made 

under paragraph (2)(A)(vii): 

(i) If the applicant only made a certification described in 

subclause (I) or (II) of paragraph (2)(A)(vii) or in both such 

subclauses, the approval may be made effective immediately. 

(ii) If the applicant made a certification described in subclause (III) of paragraph (2)(A)(vii), the approval may be 

made effective on the date certified under subclause (III). 

(iii) If the applicant made a certification described in 

subclause (IV) of paragraph (2)(A)(vii), the approval shall 

be made effective immediately unless, before the expiration of 45 days after the date on which the notice described 

in paragraph (2)(B) is received, an action is brought for infringement of the patent that is the subject of the certification and for which information was submitted to the Secretary under subsection (b)(1) or (c)(2) of this section before the date on which the application (excluding an 

amendment or supplement to the application), which the 

Secretary later determines to be substantially complete, 

was submitted. If such an action is brought before the expiration of such days, the approval shall be made effective 

upon the expiration of the thirty-month period beginning 

on the date of the receipt of the notice provided under 

paragraph (2)(B)(i) or such shorter or longer period as the 

court may order because either party to the action failed 

to reasonably cooperate in expediting the action, except 

that— 

(I) if before the expiration of such period the district 

court decides that the patent is invalid or not infringed (including any substantive determination that 

there is no cause of action for patent infringement or 

invalidity), the approval shall be made effective on— 

(aa) the date on which the court enters judgment reflecting the decision; or 

(bb) the date of a settlement order or consent 

decree signed and entered by the court stating 


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that the patent that is the subject of the certification is invalid or not infringed; 

(II) if before the expiration of such period the district court decides that the patent has been infringed— 

(aa) if the judgment of the district court is appealed, the approval shall be made effective on— 

(AA) the date on which the court of appeals 

decides that the patent is invalid or not infringed (including any substantive determination that there is no cause of action for patent 

infringement or invalidity); or 

(BB) the date of a settlement order or consent decree signed and entered by the court of 

appeals stating that the patent that is the 

subject of the certification is invalid or not infringed; or 

(bb) if the judgment of the district court is not 

appealed or is affirmed, the approval shall be 

made effective on the date specified by the district 

court in a court order under section 271(e)(4)(A) of 

Title 35; 

(III) if before the expiration of such period the court 

grants a preliminary injunction prohibiting the applicant from engaging in the commercial manufacture or 

sale of the drug until the court decides the issues of 

patent validity and infringement and if the court decides that such patent is invalid or not infringed, the 

approval shall be made effective as provided in subclause (I); or 

(IV) if before the expiration of such period the court 

grants a preliminary injunction prohibiting the applicant from engaging in the commercial manufacture or 

sale of the drug until the court decides the issues of 

patent validity and infringement and if the court decides that such patent has been infringed, the approval shall be made effective as provided in subclause 

(II). 

In such an action, each of the parties shall reasonably cooperate in expediting the action. 

(iv) 180-DAY EXCLUSIVITY PERIOD.— 

(I) EFFECTIVENESS OF APPLICATION.—Subject to subparagraph (D), if the application contains a certification described in paragraph (2)(A)(vii)(IV) and is for 

a drug for which a first applicant has submitted an 

application containing such a certification, the application shall be made effective on the date that is 180 

days after the date of the first commercial marketing 

of the drug (including the commercial marketing of the 

listed drug) by any first applicant. 

(II) DEFINITIONS.—In this paragraph: 

(aa) 180-DAY EXCLUSIVITY PERIOD.—The term 

‘‘180-day exclusivity period’’ means the 180-day 

period ending on the day before the date on which 


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an application submitted by an applicant other 

than a first applicant could become effective under 

this clause. 

(bb) FIRST APPLICANT.—As used in this subsection, the term ‘‘first applicant’’ means an applicant that, on the first day on which a substantially complete application containing a certification described in paragraph (2)(A)(vii)(IV) is 

submitted for approval of a drug, submits a substantially complete application that contains and 

lawfully maintains a certification described in 

paragraph (2)(A)(vii)(IV) for the drug. 

(cc) SUBSTANTIALLY COMPLETE APPLICATION.—As 

used in this subsection, the term ‘‘substantially 

complete application’’ means an application under 

this subsection that on its face is sufficiently complete to permit a substantive review and contains 

all the information required by paragraph (2)(A). 

(dd) TENTATIVE APPROVAL.— (AA) IN GENERAL—The term ‘‘tentative approval’’ means notification to an applicant by 

the Secretary that an application under this 

subsection meets the requirements of paragraph (2)(A), but cannot receive effective approval because the application does not meet 

the requirements of this subparagraph, there 

is a period of exclusivity for the listed drug 

under subparagraph (F) or section 355a of this 

title, or there is a 7-year period of exclusivity 

for the listed drug under section 360cc of this 

title. 

(BB) LIMITATION.—A drug that is granted 

tentative approval by the Secretary is not an 

approved drug and shall not have an effective 

approval until the Secretary issues an approval after any necessary additional review 

of the application. 

(C) CIVIL ACTION TO OBTAIN PATENT CERTAINTY.— (i) DECLARATORY JUDGMENT ABSENT INFRINGEMENT AC- TION.— 

(I) IN GENERAL.—No action may be brought under 

section 2201 of Title 28, by an applicant under paragraph (2) for a declaratory judgment with respect to a 

patent which is the subject of the certification referred 

to in subparagraph (B)(iii) unless— 

(aa) the 45-day period referred to in such subparagraph has expired; 

(bb) neither the owner of such patent nor the 

holder of the approved application under subsection (b) of this section for the drug that is 

claimed by the patent or a use of which is claimed 

by the patent brought a civil action against the 

applicant for infringement of the patent before the 

expiration of such period; and 


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(cc) in any case in which the notice provided 

under paragraph (2)(B) relates to noninfringement, the notice was accompanied by a document 

described in subclause (III). 

(II) FILING OF CIVIL ACTION.—If the conditions described in items (aa), (bb), and as applicable, (cc) of 

subclause (I) have been met, the applicant referred to 

in such subclause may, in accordance with section 

2201 of Title 28, bring a civil action under such section 

against the owner or holder referred to in such subclause (but not against any owner or holder that has 

brought such a civil action against the applicant, unless that civil action was dismissed without prejudice) 

for a declaratory judgment that the patent is invalid 

or will not be infringed by the drug for which the applicant seeks approval, except that such civil action 

may be brought for a declaratory judgment that the 

patent will not be infringed only in a case in which the 

condition described in subclause (I)(cc) is applicable. A 

civil action referred to in this subclause shall be 

brought in the judicial district where the defendant 

has its principal place of business or a regular and established place of business. 

(III) OFFER OF CONFIDENTIAL ACCESS TO APPLICA- TION.—For purposes of subclause (I)(cc), the document 

described in this subclause is a document providing an 

offer of confidential access to the application that is in 

the custody of the applicant under paragraph (2) for 

the purpose of determining whether an action referred 

to in subparagraph (B)(iii) should be brought. The document providing the offer of confidential access shall 

contain such restrictions as to persons entitled to access, and on the use and disposition of any information 

accessed, as would apply had a protective order been 

entered for the purpose of protecting trade secrets and 

other confidential business information. A request for 

access to an application under an offer of confidential 

access shall be considered acceptance of the offer of 

confidential access with the restrictions as to persons 

entitled to access, and on the use and disposition of 

any information accessed, contained in the offer of confidential access, and those restrictions and other terms 

of the offer of confidential access shall be considered 

terms of an enforceable contract. Any person provided 

an offer of confidential access shall review the application for the sole and limited purpose of evaluating possible infringement of the patent that is the subject of 

the certification under paragraph (2)(A)(vii)(IV) and 

for no other purpose, and may not disclose information 

of no relevance to any issue of patent infringement to 

any person other than a person provided an offer of 

confidential access. Further, the application may be 

redacted by the applicant to remove any information 

of no relevance to any issue of patent infringement. 


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(ii) COUNTERCLAIM TO INFRINGEMENT ACTION.— 

(I) IN GENERAL.—If an owner of the patent or the 

holder of the approved application under subsection 

(b) of this section for the drug that is claimed by the 

patent or a use of which is claimed by the patent 

brings a patent infringement action against the applicant, the applicant may assert a counterclaim seeking 

an order requiring the holder to correct or delete the 

patent information submitted by the holder under subsection (b) or (c) of this section on the ground that the 

patent does not claim either— 

(aa) the drug for which the application was approved; or 

(bb) an approved method of using the drug. 

(II) No independent cause of action—Subclause (I) 

does not authorize the assertion of a claim described 

in subclause (I) in any civil action or proceeding other 

than a counterclaim described in subclause (I). 

(iii) NO DAMAGES.—An applicant shall not be entitled to 

damages in a civil action under clause (i) or a counterclaim 

under clause (ii). 

(D) FORFEITURE OF 180-DAY EXCLUSIVITY PERIOD.— 

(i) DEFINITION OF FORFEITURE EVENT.—In this subparagraph, the term ‘‘forfeiture event’’, with respect to an application under this subsection, means the occurrence of 

any of the following: 

(I) FAILURE TO MARKET.—The first applicant fails to 

market the drug by the later of— 

(aa) the earlier of the date that is— 

(AA) 75 days after the date on which the 

approval of the application of the first applicant is made effective under subparagraph 

(B)(iii); or 

(BB) 30 months after the date of submission 

of the application of the first applicant; or 

(bb) with respect to the first applicant or any 

other applicant (which other applicant has received tentative approval), the date that is 75 

days after the date as of which, as to each of the 

patents with respect to which the first applicant 

submitted and lawfully maintained a certification 

qualifying the first applicant for the 180-day exclusivity period under subparagraph (B)(iv), at 

least 1 of the following has occurred: 

(AA) In an infringement action brought 

against that applicant with respect to the patent or in a declaratory judgment action 

brought by that applicant with respect to the 

patent, a court enters a final decision from 

which no appeal (other than a petition to the 

Supreme Court for a writ of certiorari) has 

been or can be taken that the patent is invalid or not infringed. 


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(BB) In an infringement action or a declaratory judgment action described in subitem 

(AA), a court signs a settlement order or consent decree that enters a final judgment that 

includes a finding that the patent is invalid or 

not infringed. 

(CC) The patent information submitted 

under subsection (b) or (c) of this section is 

withdrawn by the holder of the application 

approved under subsection (b) of this section. 

(II) WITHDRAWAL OF APPLICATION.—The first applicant withdraws the application or the Secretary considers the application to have been withdrawn as a result of a determination by the Secretary that the application does not meet the requirements for approval 

under paragraph (4). 

(III) AMENDMENT OF CERTIFICATION.—The first applicant amends or withdraws the certification for all of 

the patents with respect to which that applicant submitted a certification qualifying the applicant for the 

180-day exclusivity period. 

(IV) FAILURE TO OBTAIN TENTATIVE APPROVAL.—The 

first applicant fails to obtain tentative approval of the 

application within 30 months after the date on which 

the application is filed, unless the failure is caused by 

a change in or a review of the requirements for approval of the application imposed after the date on 

which the application is filed. 

(V) AGREEMENT WITH ANOTHER APPLICANT, THE LIST- ED DRUG APPLICATION HOLDER, OR A PATENT OWNER.— The first applicant enters into an agreement with another applicant under this subsection for the drug, the 

holder of the application for the listed drug, or an 

owner of the patent that is the subject of the certification under paragraph (2)(A)(vii)(IV), the Federal 

Trade Commission or the Attorney General files a 

complaint, and there is a final decision of the Federal 

Trade Commission or the court with regard to the 

complaint from which no appeal (other than a petition 

to the Supreme Court for a writ of certiorari) has been 

or can be taken that the agreement has violated section 28 of the Federal Trade Commission Act or the 

antitrust laws (as defined in section 12 of Title 15, except that the term includes section 45 of Title 15 to the 

extent that that section applies to unfair methods of 

competition). 

(VI) EXPIRATION OF ALL PATENTS.—All of the patents 

as to which the applicant submitted a certification 

qualifying it for the 180-day exclusivity period have 

expired. 

(ii) FORFEITURE.—The 180-day exclusivity period described in subparagraph (B)(iv) shall be forfeited by a first 

applicant if a forfeiture event occurs with respect to that 

first applicant. 


hsrobinson on DSK69SOYB1PROD with HEARING
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(iii) SUBSEQUENT APPLICANT.—If all first applicants forfeit the 180-day exclusivity period under clause (ii)— 

(I) approval of any application containing a certification described in paragraph (2)(A)(vii)(IV) shall be 

made effective in accordance with subparagraph 

(B)(iii); and 

(II) no applicant shall be eligible for a 180-day exclusivity period. 

(E) If the Secretary decides to disapprove an application, the 

Secretary shall give the applicant notice of an opportunity for 

a hearing before the Secretary on the question of whether such 

application is approvable. If the applicant elects to accept the 

opportunity for hearing by written request within thirty days 

after such notice, such hearing shall commence not more than 

ninety days after the expiration of such thirty days unless the 

Secretary and the applicant otherwise agree. Any such hearing 

shall thereafter be conducted on an expedited basis and the 

Secretary’s order thereon shall be issued within ninety days 

after the date fixed by the Secretary for filing final briefs. 

(F)(i) If an application (other than an abbreviated new drug 

application) submitted under subsection (b) of this section for 

a drug, no active ingredient (including any ester or salt of the 

active ingredient) of which has been approved in any other application under subsection (b) of this section, was approved 

during the period beginning January 1, 1982, and ending on 

September 24, 1984, the Secretary may not make the approval 

of an application submitted under this subsection which refers 

to the drug for which the subsection (b) application was submitted effective before the expiration of ten years from the date 

of the approval of the application under subsection (b) of this 

section. 

(ii) If an application submitted under subsection (b) of this 

section for a drug, no active ingredient (including any ester or 

salt of the active ingredient) of which has been approved in 

any other application under subsection (b) of this section, is approved after September 24, 1984, no application may be submitted under this subsection which refers to the drug for which 

the subsection (b) application was submitted before the expiration of five years from the date of the approval of the application under subsection (b) of this section, except that such an 

application may be submitted under this subsection after the 

expiration of four years from the date of the approval of the 

subsection (b) application if it contains a certification of patent 

invalidity or noninfringement described in subclause (IV) of 

paragraph (2)(A)(vii). The approval of such an application shall 

be made effective in accordance with subparagraph (B) except 

that, if an action for patent infringement is commenced during 

the one-year period beginning forty-eight months after the date 

of the approval of the subsection (b) application, the thirtymonth period referred to in subparagraph (B)(iii) shall be extended by such amount of time (if any) which is required for 

seven and one-half years to have elapsed from the date of approval of the subsection (b) application. 


hsrobinson on DSK69SOYB1PROD with HEARING
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(iii) If an application submitted under subsection (b) of this 

section for a drug, which includes an active ingredient (including any ester or salt of the active ingredient) that has been approved in another application approved under subsection (b) of 

this section, is approved after September 24, 1984, and if such 

application contains reports of new clinical investigations 

(other than bioavailability studies) essential to the approval of 

the application and conducted or sponsored by the applicant, 

the Secretary may not make the approval of an application 

submitted under this subsection for the conditions of approval 

of such drug in the subsection (b) application effective before 

the expiration of three years from the date of the approval of 

the application under subsection (b) of this section for such 

drug. 

(iv) If a supplement to an application approved under subsection (b) of this section is approved after September 24, 1984, 

and the supplement contains reports of new clinical investigations (other than bioavailability studies) essential to the approval of the supplement and conducted or sponsored by the 

person submitting the supplement, the Secretary may not 

make the approval of an application submitted under this subsection for a change approved in the supplement effective before the expiration of three years from the date of the approval 

of the supplement under subsection (b) of this section. 

(v) If an application (or supplement to an application) submitted under subsection (b) of this section for a drug, which includes an active ingredient (including any ester or salt of the 

active ingredient) that has been approved in another application under subsection (b) of this section, was approved during 

the period beginning January 1, 1982, and ending on September 24, 1984, the Secretary may not make the approval of 

an application submitted under this subsection which refers to 

the drug for which the subsection (b) application was submitted or which refers to a change approved in a supplement 

to the subsection (b) application effective before the expiration 

of two years from September 24, 1984. 

(6) If a drug approved under this subsection refers in its approved application to a drug the approval of which was withdrawn or suspended for grounds described in the first sentence 

of subsection (e) of this section or was withdrawn or suspended 

under this paragraph or which, as determined by the Secretary, has been withdrawn from sale for safety or effectiveness reasons, the approval of the drug under this subsection 

shall be withdrawn or suspended— 

(A) for the same period as the withdrawal or suspension 

under subsection (e) of this section or this paragraph, or 

(B) if the listed drug has been withdrawn from sale, for 

the period of withdrawal from sale or, if earlier, the period 

ending on the date the Secretary determines that the withdrawal from sale is not for safety or effectiveness reasons. 

(7)(A)(i) Within sixty days of September 24, 1984, the Secretary shall publish and make available to the public— 

(I) a list in alphabetical order of the official and proprietary name of each drug which has been approved for safeVerDate Nov 24 2008 20:56 Feb 12, 2010 Jkt 089010 PO 00000 Frm 00039 Fmt 6602 Sfmt 6602 E:\HR\OC\SR123.XXX SR123

hsrobinson on DSK69SOYB1PROD with HEARING
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ty and effectiveness under subsection (c) of this section before September 24, 1984; 

(II) the date of approval if the drug is approved after 

1981 and the number of the application which was approved; and 

(III) whether in vitro or in vivo bioequivalence studies, 

or both such studies, are required for applications filed 

under this subsection which will refer to the drug published. 

(ii) Every thirty days after the publication of the first list 

under clause (i) the Secretary shall revise the list to include 

each drug which has been approved for safety and effectiveness 

under subsection (c) of this section or approved under this subsection during the thirty-day period. 

(iii) When patent information submitted under subsection (b) 

or (c) of this section respecting a drug included on the list is 

to be published by the Secretary, the Secretary shall, in revisions made under clause (ii), include such information for such 

drug. 

(B) A drug approved for safety and effectiveness under subsection (c) of this section or approved under this subsection 

shall, for purposes of this subsection, be considered to have 

been published under subparagraph (A) on the date of its approval or September 24, 1984, whichever is later. 

(C) If the approval of a drug was withdrawn or suspended 

for grounds described in the first sentence of subsection (e) of 

this section or was withdrawn or suspended under paragraph 

(6) or if the Secretary determines that a drug has been withdrawn from sale for safety or effectiveness reasons, it may not 

be published in the list under subparagraph (A) or, if the withdrawal or suspension occurred after its publication in such list, 

it shall be immediately removed from such list— 

(i) for the same period as the withdrawal or suspension 

under subsection (e) of this section or paragraph (6), or 

(ii) if the listed drug has been withdrawn from sale, for 

the period of withdrawal from sale or, if earlier, the period 

ending on the date the Secretary determines that the withdrawal from sale is not for safety or effectiveness reasons. 

A notice of the removal shall be published in the Federal Register. 

(8) For purposes of this subsection: 

(A)(i) The term ‘‘bioavailability’’ means the rate and extent to which the active ingredient or therapeutic ingredient is absorbed from a drug and becomes available at the 

site of drug action. 

(ii) For a drug that is not intended to be absorbed into 

the bloodstream, the Secretary may assess bioavailability 

by scientifically valid measurements intended to reflect the 

rate and extent to which the active ingredient or therapeutic ingredient becomes available at the site of drug action. 

(B) A drug shall be considered to be bioequivalent to a 

listed drug if— 


hsrobinson on DSK69SOYB1PROD with HEARING
41 

(i) the rate and extent of absorption of the drug do 

not show a significant difference from the rate and extent of absorption of the listed drug when administered at the same molar dose of the therapeutic ingredient under similar experimental conditions in either 

a single dose or multiple doses; or 

(ii) the extent of absorption of the drug does not 

show a significant difference from the extent of absorption of the listed drug when administered at the 

same molar dose of the therapeutic ingredient under 

similar experimental conditions in either a single dose 

or multiple doses and the difference from the listed 

drug in the rate of absorption of the drug is intentional, is reflected in its proposed labeling, is not essential to the attainment of effective body drug concentrations on chronic use, and is considered medically 

insignificant for the drug. 

(C) For a drug that is not intended to be absorbed into 

the bloodstream, the Secretary may establish alternative, 

scientifically valid methods to show bioequivalence if the 

alternative methods are expected to detect a significant 

difference between the drug and the listed drug in safety 

and therapeutic effect. 

(9) The Secretary shall, with respect to each application submitted under this subsection, maintain a record of— 

(A) the name of the applicant, 

(B) the name of the drug covered by the application, 

(C) the name of each person to whom the review of the 

chemistry of the application was assigned and the date of 

such assignment, and 

(D) the name of each person to whom the bioequivalence 

review for such application was assigned and the date of 

such assignment. 

The information the Secretary is required to maintain under this 

paragraph with respect to an application submitted under this subsection shall be made available to the public after the approval of 

such application. 

* * * * * * * 

Historical and Statutory Notes 

* * * * * * * 

Amendments 

* * * * * * * 

Federal Trade Commission Review 

Pub. L. 108–173, Title XI, 1111 to 1118, Dec. 8, 2003, 117 Stat. 

2461–64, provided that: 

SEC. 1112. NOTIFICATION OF AGREEMENTS. 

(a) AGREEMENT WITH BRAND NAME DRUG COMPANY.— (1) REQUIREMENT.—A generic drug applicant that has submitted an ANDA containing a certification under section 


hsrobinson on DSK69SOYB1PROD with HEARING
42 

505(j)(2)(A)(vii)(IV) of the Federal Food, Drug, and Cosmetic 

Act [subsec. (j)(2)(A)(vii)(IV) of this section] and a brand name 

drug company that enter into an agreement described in paragraph (2) shall each file the agreement in accordance with subsection (c) [of this note]. The agreement shall be filed prior to 

the date of the first commercial marketing of the generic drug 

that is the subject of the ANDA. 

(2) SUBJECT MATTER OF AGREEMENT.—An agreement described in this paragraph between a generic drug applicant 

and a brand name drug company is an agreement regarding— 

(A) the manufacture, marketing or sale of the brand 

name drug that is the listed drug in the ANDA involved; 

(B) the manufacture, marketing, or sale of the generic 

drug for which the ANDA was submitted; or 

(C) the 180-day period referred to in section 

505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic 

Act [subsec. (j)(5)(B)(iv) of this section] as it applies to such 

ANDA or to any other ANDA based on the same brand 

name drug. 

(b) AGREEMENT WITH ANOTHER GENERIC DRUG APPLICANT.— (1) REQUIREMENT.—A generic drug applicant that has submitted an ANDA containing a certification under section 

505(j)(2)(A)(vii)(IV) of the Federal Food, Drug, and Cosmetic 

Act [subsec. (j)(2)(A)(vii)(IV) of this section] with respect to a 

listed drug and another generic drug applicant that has submitted an ANDA containing such a certification for the same 

listed drug shall each file the agreement in accordance with 

subsection (c) [of this note]. The agreement shall be filed prior 

to the date of the first commercial marketing of either of the 

generic drugs for which such ANDAs were submitted. 

(2) SUBJECT MATTER OF AGREEMENT.—An agreement described in this paragraph between two generic drug applicants 

is an agreement regarding the 180-day period referred to in 

section 505(j)(5)(B)(iv) of the Federal Food, Drug, and Cosmetic 

Act [subsec. (j)(5)(B)(iv) of this section] as it applies to the 

ANDAs with which the agreement is concerned. 

(c) FILING.— (1) AGREEMENT.—The parties that are required in subsection 

(a) or (b) [of this note] to file an agreement in accordance with 

this subsection shall file with the Assistant Attorney General 

and the Commission the text of any such agreement, except 

that such parties are not required to file an agreement that 

solely concerns— 

(A) purchase orders for raw material supplies; 

(B) equipment and facility contracts; 

(C) employment or consulting contracts; or 

(D) packaging and labeling contracts. 

(2) OTHER AGREEMENTS.—The parties that are required in 

subsection (a) or (b) [of this note] to file an agreement in accordance with this subsection shall file with the Assistant Attorney General and øthe Commission the¿ the Commission— 

(A) the agreements between the parties that are not described in such subsections and are contingent upon, provide a contingent condition for, or are otherwise related to 


hsrobinson on DSK69SOYB1PROD with HEARING
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an agreement that is required in subsection (a) or (b) [of 

this note] to be filed in accordance with this subsectionø.¿; 

and 

(B) any other agreements the parties enter into within 30 

days of entering into an agreement covered by subsection 

(a) or (b). 

(3) DESCRIPTION.—In the event that any agreement required 

in subsection (a) or (b) [of this note] to be filed in accordance 

with this subsection has not been reduced to text, each of the 

parties involved shall file written descriptions of such agreement that are sufficient to disclose all the terms and conditions 

of the agreement. 

(d) CERTIFICATION.—The Chief Executive Officer or the company 

official responsible for negotiating any agreement required to be 

filed under subsection (a), (b), or (c) shall execute and file with the 

Assistant Attorney General and the Commission a certification as 

follows: I declare that the following is true, correct, and complete to 

the best of my knowledge: The materials filed with the Federal 

Trade Commission and the Department of Justice under section 

1112 of subtitle B of title XI of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, with respect to the 

agreement referenced in this certification: (1) represent the complete, 

final, and exclusive agreement between the parties; (2) include any 

ancillary agreements that are contingent upon, provide a contingent 

condition for, or are otherwise related to, the referenced agreement; 

and (3) include written descriptions of any oral agreements, representations, commitments, or promises between the parties that are 

responsive to subsection (a) or (b) of such section 1112 and have not 

been reduced to writing.’’ 

Æ 


hsrobinson on DSK69SOYB1PROD with HEARING