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[Senate Report 111-123]
[From the U.S. Government Publishing Office]

                                                       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 generic 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\
---------------------------------------------------------------------------
    \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 /www.ftc.gov/speeches/leibowitz/
090623payfordelayspeech.pdf>.
    \2\Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \3\Drug 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. Sec. 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, non-infringing 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.
    \5\Generic Pharmaceutical Association, Facts at a Glance, available 
at /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 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).
---------------------------------------------------------------------------
    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\
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    \6\The 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 /www.cbo.gov/ftpdocs/
6xx/doc655/pharm.pdf>; see generally David Reiffen & Michael R. Ward, 
Generic Drug Industry Dynamics (Feb. 2002), available at /
www.ftc.gov/be/workpapers/industrydynamicsreiffenwp.pdf>.
    \7\21 U.S.C. Sec. 355(j)(5)(B)(iv).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \8\Pub. L. No. 108-173, Tit. XI, Subtit. B, 117 Stat. 2066, 2461.
    \9\S. Rep. No. 107-167, at 4 (2002), available at /
frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=107_cong_reports&docid=f:sr167.pdf>.
---------------------------------------------------------------------------
    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 mere presence 
of a patent entitles the patent holder to purchase protection 
from competition until patent expiration.\14\
---------------------------------------------------------------------------
    \10\Schering-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 /www.ftc.gov/os/testimony/P859910%20 
Protecting_Consume_%20Access_testimony.pdf>.
    \11\402 F.3d at 1065.
    \12\Tamoxifen, 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).
    \14\Ciprofloxacin, 544 F.3d at 1336.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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 /www.ftc.gov/os/2008/05/mmaact.pdf>.
---------------------------------------------------------------------------
    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. Sec. 355. 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.
---------------------------------------------------------------------------
    \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 /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 /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 /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.
    \18\While 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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
    \20\The 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.
---------------------------------------------------------------------------
    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 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.
---------------------------------------------------------------------------
    \21\Such 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. Sec. 45(b)) or in an action in Federal district court under 
section 13(b) of the FTC Act (15 U.S.C. Sec. 53(b)).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \22\The 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.
---------------------------------------------------------------------------
    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 reported favorably, without amendment, by voice 
vote on February 27, 2007. No further action was taken on S. 
316 in the 110th Congress.
---------------------------------------------------------------------------
    \23\That bill, S. 316 in the 110th Congress, was substantially 
identical to S. 369 as introduced in the 111th 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.

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. Sec. 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 senior 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.
           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 lower-priced 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 lower administrative expenses for the agency 
under the bill of $7 million over the 2010-2019 period.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             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 Deficit1
    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.

    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 compensate 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 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 
revenues 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, 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 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.

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

          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.

    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.

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 decision-making 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 
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 Hatch-Waxman 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.

                   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 anti-
competitive 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 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.
      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. Sec. Sec. 41 et seq.)

           *       *       *       *       *       *       *

SEC. 16 (15 U.S.C. Sec. 58). COMMENCEMENT, DEFENSE, INTERVENTION, AND 
                    SUPERVISION OF LITIGATION AND APPEAL BY COMMISSION 
                    OR ATTORNEY GENERAL

    (a) Procedure for Exercise of Authority To Litigate or 
Appeal.--
          (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 fourth paragraph of such 
                section (relating to compliance with section 46 
                of this title); [or]
                  (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 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. Sec. 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.
    (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 
        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 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 
        infringement 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.
          (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

           *       *       *       *       *       *       *

                    SUBCHAPTER V--DRUGS AND DEVICES

Part A--DRUGS AND DEVICES

           *       *       *       *       *       *       *

Sec. 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 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 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 
                action.--
                          (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
                                  (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 
                        application.--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.
                  (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.
                                          (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 listed 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.
                  (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 thirty-month 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.
          (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 safety 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--
                          (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 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 [the 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 an agreement 
                that is required in subsection (a) or (b) [of 
                this note] to be filed in accordance with this 
                subsection[.]; 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.''

                                  
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