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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 27 Reported in Senate (RS)]

                                                       Calendar No. 110
112th CONGRESS
  1st Session
                                 S. 27

 To prohibit brand name drug companies from compensating generic drug 
    companies to delay the entry of a generic drug into the market.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

             January 25 (legislative day, January 5), 2011

   Mr. Kohl (for himself, Mr. Grassley, Mr. Durbin, Ms. Collins, Ms. 
Klobuchar, Mr. Franken, Mr. Brown of Ohio, Mr. Sanders, and Mr. Johnson 
 of South Dakota) introduced the following bill; which was read twice 
             and referred to the Committee on the Judiciary

                             July 22, 2011

                Reported by Mr. Leahy, without amendment

_______________________________________________________________________

                                 A BILL

 
 To prohibit brand name drug companies from compensating generic drug 
    companies to delay the entry of a generic drug into the market.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Preserve Access to Affordable 
Generics Act''.

SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSES.

    (a) Findings.--Congress finds the following:
            (1) In 1984, the Drug Price Competition and Patent Term 
        Restoration Act (Public Law 98-417) (referred to in this Act as 
        the ``1984 Act''), was enacted with the intent of facilitating 
        the early entry of generic drugs while preserving incentives 
        for innovation.
            (2) Prescription drugs make up 10 percent of the national 
        health care spending but for the past decade have been one of 
        the fastest growing segments of health care expenditures.
            (3) Until recently, the 1984 Act was successful in 
        facilitating generic competition to the benefit of consumers 
        and health care payers--although 67 percent of all 
        prescriptions dispensed in the United States are generic drugs, 
        they account for only 20 percent of all expenditures.
            (4) Generic drugs cost substantially less than brand name 
        drugs, with discounts off the brand price sometimes exceeding 
        90 percent.
            (5) Federal dollars currently account for an estimated 30 
        percent of the $235,000,000,000 spent on prescription drugs in 
        2008, and this share is expected to rise to 40 percent by 2018.
            (6)(A) In recent years, the intent of the 1984 Act has been 
        subverted by certain settlement agreements between brand 
        companies and their potential generic competitors that make 
        ``reverse payments'' which are payments by the brand company to 
        the generic company.
            (B) These settlement agreements have unduly delayed the 
        marketing of low-cost generic drugs contrary to free 
        competition, the interests of consumers, and the principles 
        underlying antitrust law.
            (C) Because of the price disparity between brand name and 
        generic drugs, such agreements are more profitable for both the 
        brand and generic manufacturers than competition, and will 
        become increasingly common unless prohibited.
            (D) These agreements result in consumers losing the 
        benefits that the 1984 Act was intended to provide.
    (b) Purposes.--The purposes of this Act are--
            (1) to enhance competition in the pharmaceutical market by 
        stopping anticompetitive agreements between brand name and 
        generic drug manufacturers that limit, delay, or otherwise 
        prevent competition from generic drugs; and
            (2) to support the purpose and intent of antitrust law by 
        prohibiting anticompetitive practices in the pharmaceutical 
        industry that harm consumers.

SEC. 3. UNLAWFUL COMPENSATION FOR DELAY.

    (a) In General.--The Federal Trade Commission Act (15 U.S.C. 44 et 
seq.) is amended by--
            (1) redesignating section 28 as section 29; and
            (2) inserting before section 29, as redesignated, the 
        following:

``SEC. 28. 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 
                procompetitive 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 claim; 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 CFR 
        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 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. 4. NOTICE AND CERTIFICATION OF AGREEMENTS.

    (a) Notice of All Agreements.--Section 1112(c)(2) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (21 
U.S.C. 355 note) is amended by--
            (1) striking ``the Commission the'' and inserting the 
        following: ``the Commission--
            ``(1) the'';
            (2) striking the period and inserting ``; and''; and
            (3) inserting at the end the following:
            ``(2) any other agreement the parties enter into within 30 
        days of entering into an agreement covered by subsection (a) or 
        (b).''.
    (b) Certification of Agreements.--Section 1112 of such Act is 
amended by adding at the end the following:
    ``(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.'.''.

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

    Section 505(j)(5)(D)(i)(V) of the Federal Food, Drug and Cosmetic 
Act (21 U.S.C. 355(j)(5)(D)(i)(V)) is amended by inserting ``section 28 
of the Federal Trade Commission Act or'' after ``that the agreement has 
violated''.

SEC. 6. COMMISSION LITIGATION AUTHORITY.

    Section 16(a)(2) of the Federal Trade Commission Act (15 U.S.C. 
56(a)(2)) is amended--
            (1) in subparagraph (D), by striking ``or'' after the 
        semicolon;
            (2) in subparagraph (E), by inserting ``or'' after the 
        semicolon; and
            (3) inserting after subparagraph (E) the following:
                    ``(F) under section 28;''.

SEC. 7. STATUTE OF LIMITATIONS.

    The Commission shall commence any enforcement proceeding described 
in section 28 of the Federal Trade Commission Act, as added by section 
3, except for an action described in section 28(g)(2) of the Federal 
Trade Commission Act, not later than 3 years after the date on which 
the parties to the agreement file the Notice of Agreement as provided 
by sections 1112(c)(2) and (d) of the Medicare Prescription Drug 
Improvement and Modernization Act of 2003 (21 U.S.C. 355 note).

SEC. 8. SEVERABILITY.

    If any provision of this Act, an amendment made by this Act, or the 
application of such provision or amendment to any person or 
circumstance is held to be unconstitutional, the remainder of this Act, 
the amendments made by this Act, and the application of the provisions 
of such Act or amendments to any person or circumstance shall not be 
affected thereby.
                                                       Calendar No. 110

112th CONGRESS

  1st Session

                                 S. 27

_______________________________________________________________________

                                 A BILL

 To prohibit brand name drug companies from compensating generic drug 
    companies to delay the entry of a generic drug into the market.

_______________________________________________________________________

                             July 22, 2011

                       Reported without amendment
```