II 

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. 

1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Preserve Access to Af3 fordable Generics Act’’. 

4 SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF 

5 PURPOSES. 

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

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

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

3 (referred to in this Act as the ‘‘1984 Act’’), was en4 acted with the intent of facilitating the early entry 

5 of generic drugs while preserving incentives for inno6 vation. 

7 (2) Prescription drugs make up 10 percent of 

8 the national health care spending but for the past 

9 decade have been one of the fastest growing seg10 ments of health care expenditures. 

11 (3) Until recently, the 1984 Act was successful 

12 in facilitating generic competition to the benefit of 

13 consumers and health care payers—although 67 per14 cent of all prescriptions dispensed in the United 

15 States are generic drugs, they account for only 20 

16 percent of all expenditures. 

17 (4) Generic drugs cost substantially less than 

18 brand name drugs, with discounts off the brand 

19 price sometimes exceeding 90 percent. 

20 (5) Federal dollars currently account for an es21 timated 30 percent of the $235,000,000,000 spent 

22 on prescription drugs in 2008, and this share is ex23 pected to rise to 40 percent by 2018. 

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

25 Act has been subverted by certain settlement agreemstockstill on DSK4VPTVN1PROD with BILLS

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1 ments between brand companies and their potential 

2 generic competitors that make ‘‘reverse payments’’ 

3 which are payments by the brand company to the 

4 generic company. 

5 (B) These settlement agreements have unduly 

6 delayed the marketing of low-cost generic drugs con7 trary to free competition, the interests of consumers, 

8 and the principles underlying antitrust law. 

9 (C) Because of the price disparity between 

10 brand name and generic drugs, such agreements are 

11 more profitable for both the brand and generic man12 ufacturers than competition, and will become in13 creasingly common unless prohibited. 

14 (D) These agreements result in consumers los15 ing the benefits that the 1984 Act was intended to 

16 provide. 

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

18 (1) to enhance competition in the pharma19 ceutical market by stopping anticompetitive agree20 ments between brand name and generic drug manu21 facturers that limit, delay, or otherwise prevent com22 petition from generic drugs; and 

23 (2) to support the purpose and intent of anti24 trust law by prohibiting anticompetitive practices in 

25 the pharmaceutical industry that harm consumers. 

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1 SEC. 3. UNLAWFUL COMPENSATION FOR DELAY. 

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

3 Act (15 U.S.C. 44 et seq.) is amended by— 

4 (1) redesignating section 28 as section 29; and 

5 (2) inserting before section 29, as redesignated, 

6 the following: 

7 ‘‘SEC. 28. PRESERVING ACCESS TO AFFORDABLE 

8 GENERICS. 

9 ‘‘(a) IN GENERAL.— 

10 ‘‘(1) ENFORCEMENT PROCEEDING.—The Fed11 eral Trade Commission may initiate a proceeding to 

12 enforce the provisions of this section against the 

13 parties to any agreement resolving or settling, on a 

14 final or interim basis, a patent infringement claim, 

15 in connection with the sale of a drug product. 

16 ‘‘(2) PRESUMPTION.— 

17 ‘‘(A) IN GENERAL.—Subject to subpara18 graph (B), in such a proceeding, an agreement 

19 shall be presumed to have anticompetitive ef20 fects and be unlawful if— 

21 ‘‘(i) an ANDA filer receives anything 

22 of value; and 

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

24 forego research, development, manufac25 turing, marketing, or sales of the ANDA 

26 product for any period of time. 

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1 ‘‘(B) EXCEPTION.—The presumption in 

2 subparagraph (A) shall not apply if the parties 

3 to such agreement demonstrate by clear and 

4 convincing evidence that the procompetitive 

5 benefits of the agreement outweigh the anti6 competitive effects of the agreement. 

7 ‘‘(b) COMPETITIVE FACTORS.—In determining 

8 whether the settling parties have met their burden under 

9 subsection (a)(2)(B), the fact finder shall consider— 

10 ‘‘(1) the length of time remaining until the end 

11 of the life of the relevant patent, compared with the 

12 agreed upon entry date for the ANDA product; 

13 ‘‘(2) the value to consumers of the competition 

14 from the ANDA product allowed under the agree15 ment; 

16 ‘‘(3) the form and amount of consideration re17 ceived by the ANDA filer in the agreement resolving 

18 or settling the patent infringement claim; 

19 ‘‘(4) the revenue the ANDA filer would have re20 ceived by winning the patent litigation; 

21 ‘‘(5) the reduction in the NDA holder’s reve22 nues if it had lost the patent litigation; 

23 ‘‘(6) the time period between the date of the 

24 agreement conveying value to the ANDA filer and 

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1 the date of the settlement of the patent infringement 

2 claim; and 

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

4 discretion, deems relevant to its determination of 

5 competitive effects under this subsection. 

6 ‘‘(c) LIMITATIONS.—In determining whether the set7 tling parties have met their burden under subsection 

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

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

10 the expiration of the relevant patent or statutory ex11 clusivity; or 

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

13 the ANDA product prior to the expiration of the rel14 evant patent or statutory exclusivity means that the 

15 agreement is pro-competitive, although such evidence 

16 may be relevant to the fact finder’s determination 

17 under this section. 

18 ‘‘(d) EXCLUSIONS.—Nothing in this section shall pro19 hibit a resolution or settlement of a patent infringement 

20 claim in which the consideration granted by the NDA 

21 holder to the ANDA filer as part of the resolution or set22 tlement includes only one or more of the following: 

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

24 the United States prior to the expiration of— 

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

2 patent infringement claim; or 

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

4 exclusivity that would prevent the marketing of 

5 such drug. 

6 ‘‘(2) A payment for reasonable litigation ex7 penses not to exceed $7,500,000. 

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

9 the ANDA product infringes a United States patent. 

10 ‘‘(e) REGULATIONS AND ENFORCEMENT.— 

11 ‘‘(1) REGULATIONS.—The Federal Trade Com12 mission may issue, in accordance with section 553 of 

13 title 5, United States Code, regulations imple14 menting and interpreting this section. These regula15 tions may exempt certain types of agreements de16 scribed in subsection (a) if the Commission deter17 mines such agreements will further market competi18 tion and benefit consumers. Judicial review of any 

19 such regulation shall be in the United States Dis20 trict Court for the District of Columbia pursuant to 

21 section 706 of title 5, United States Code. 

22 ‘‘(2) ENFORCEMENT.—A violation of this sec23 tion shall be treated as a violation of section 5. 

24 ‘‘(3) JUDICIAL REVIEW.—Any person, partner25 ship or corporation that is subject to a final order 

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1 of the Commission, issued in an administrative adju2 dicative proceeding under the authority of subsection 

3 (a)(1), may, within 30 days of the issuance of such 

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

5 States Court of Appeals for the District of Columbia 

6 Circuit or the United States Court of Appeals for 

7 the circuit in which the ultimate parent entity, as 

8 defined at 16 CFR 801.1(a)(3), of the NDA holder 

9 is incorporated as of the date that the NDA is filed 

10 with the Secretary of the Food and Drug Adminis11 tration, or the United States Court of Appeals for 

12 the circuit in which the ultimate parent entity of the 

13 ANDA filer is incorporated as of the date that the 

14 ANDA is filed with the Secretary of the Food and 

15 Drug Administration. In such a review proceeding, 

16 the findings of the Commission as to the facts, if 

17 supported by evidence, shall be conclusive. 

18 ‘‘(f) ANTITRUST LAWS.—Nothing in this section shall 

19 be construed to modify, impair or supersede the applica20 bility of the antitrust laws as defined in subsection (a) 

21 of the 1st section of the Clayton Act (15 U.S.C. 12(a)) 

22 and of section 5 of this Act to the extent that section 5 

23 applies to unfair methods of competition. Nothing in this 

24 section shall modify, impair, limit or supersede the right 

25 of an ANDA filer to assert claims or counterclaims against 

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1 any person, under the antitrust laws or other laws relating 

2 to unfair competition. 

3 ‘‘(g) PENALTIES.— 

4 ‘‘(1) FORFEITURE.—Each person, partnership 

5 or corporation that violates or assists in the violation 

6 of this section shall forfeit and pay to the United 

7 States a civil penalty sufficient to deter violations of 

8 this section, but in no event greater than 3 times the 

9 value received by the party that is reasonably attrib10 utable to a violation of this section. If no such value 

11 has been received by the NDA holder, the penalty to 

12 the NDA holder shall be shall be sufficient to deter 

13 violations, but in no event greater than 3 times the 

14 value given to the ANDA filer reasonably attrib15 utable to the violation of this section. Such penalty 

16 shall accrue to the United States and may be recov17 ered in a civil action brought by the Federal Trade 

18 Commission, in its own name by any of its attorneys 

19 designated by it for such purpose, in a district court 

20 of the United States against any person, partnership 

21 or corporation that violates this section. In such ac22 tions, the United States district courts are empow23 ered to grant mandatory injunctions and such other 

24 and further equitable relief as they deem appro25 priate. 

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1 ‘‘(2) CEASE AND DESIST.— 

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

3 issued a cease and desist order with respect to 

4 a person, partnership or corporation in an ad5 ministrative adjudicative proceeding under the 

6 authority of subsection (a)(1), an action 

7 brought pursuant to paragraph (1) may be 

8 commenced against such person, partnership or 

9 corporation at any time before the expiration of 

10 one year after such order becomes final pursu11 ant to section 5(g). 

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

13 subparagraph (A), the findings of the Commis14 sion as to the material facts in the administra15 tive adjudicative proceeding with respect to 

16 such person’s, partnership’s or corporation’s 

17 violation of this section shall be conclusive un18 less— 

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

22 or 

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

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1 ing shall be conclusive if supported by evi2 dence. 

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

4 amount of the civil penalty described in this section, 

5 the court shall take into account— 

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

7 and gravity of the violation; 

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

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

12 NDA holder, compensation received by the 

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

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

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

18 in lieu of, any other remedy provided by Federal 

19 law. Nothing in this paragraph shall be construed to 

20 affect any authority of the Commission under any 

21 other provision of law. 

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

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

24 means anything that would constitute an agreement 

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

2 or section 5 of this Act. 

3 ‘‘(2) AGREEMENT RESOLVING OR SETTLING A

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

6 claim’ includes any agreement that is entered into 

7 within 30 days of the resolution or the settlement of 

8 the claim, or any other agreement that is contingent 

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

11 claim. 

12 ‘‘(3) ANDA.—The term ‘ANDA’ means an ab13 breviated new drug application, as defined under 

14 section 505(j) of the Federal Food, Drug, and Cos15 metic Act (21 U.S.C. 355(j)). 

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

17 means a party who has filed an ANDA with the 

18 Food and Drug Administration. 

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

20 product’ means the product to be manufactured 

21 under the ANDA that is the subject of the patent 

22 infringement claim. 

23 ‘‘(6) DRUG PRODUCT.—The term ‘drug prod24 uct’ means a finished dosage form (e.g., tablet, cap25 sule, or solution) that contains a drug substance, 

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1 generally, but not necessarily, in association with 1 

2 or more other ingredients, as defined in section 

3 314.3(b) of title 21, Code of Federal Regulations. 

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

5 drug application, as defined under section 505(b) of 

6 the Federal Food, Drug, and Cosmetic Act (21 

7 U.S.C. 355(b)). 

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

9 means— 

10 ‘‘(A) the party that received FDA approval 

11 to market a drug product pursuant to an NDA; 

12 ‘‘(B) a party owning or controlling enforce13 ment of the patent listed in the Approved Drug 

14 Products With Therapeutic Equivalence Eval15 uations (commonly known as the ‘FDA Orange 

16 Book’) in connection with the NDA; or 

17 ‘‘(C) the predecessors, subsidiaries, divi18 sions, groups, and affiliates controlled by, con19 trolling, or under common control with any of 

20 the entities described in subparagraphs (A) and 

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

22 indirect share ownership of 50 percent or great23 er), as well as the licensees, licensors, succes24 sors, and assigns of each of the entities. 

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1 ‘‘(9) PATENT INFRINGEMENT.—The term ‘pat2 ent infringement’ means infringement of any patent 

3 or of any filed patent application, extension, reissue, 

4 renewal, division, continuation, continuation in part, 

5 reexamination, patent term restoration, patents of 

6 addition and extensions thereof. 

7 ‘‘(10) PATENT INFRINGEMENT CLAIM.—The 

8 term ‘patent infringement claim’ means any allega9 tion made to an ANDA filer, whether or not in10 cluded in a complaint filed with a court of law, that 

11 its ANDA or ANDA product may infringe any pat12 ent held by, or exclusively licensed to, the NDA 

13 holder of the drug product. 

14 ‘‘(11) STATUTORY EXCLUSIVITY.—The term 

15 ‘statutory exclusivity’ means those prohibitions on 

16 the approval of drug applications under clauses (ii) 

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

18 data exclusivity), section 527 (orphan drug exclu19 sivity), or section 505A (pediatric exclusivity) of the 

20 Federal Food, Drug, and Cosmetic Act.’’. 

21 (b) EFFECTIVE DATE.—Section 28 of the Federal 

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

23 apply to all agreements described in section 28(a)(1) of 

24 that Act entered into after November 15, 2009. Section 

25 28(g) of the Federal Trade Commission Act, as added by 

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1 this section, shall not apply to agreements entered into 

2 before the date of enactment of this Act. 

3 SEC. 4. NOTICE AND CERTIFICATION OF AGREEMENTS. 

4 (a) NOTICE OF ALL AGREEMENTS.—Section 

5 1112(c)(2) of the Medicare Prescription Drug, Improve6 ment, and Modernization Act of 2003 (21 U.S.C. 355 

7 note) is amended by— 

8 (1) striking ‘‘the Commission the’’ and insert9 ing the following: ‘‘the Commission— 

10 ‘‘(1) the’’; 

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

12 and 

13 (3) inserting at the end the following: 

14 ‘‘(2) any other agreement the parties enter into 

15 within 30 days of entering into an agreement cov16 ered by subsection (a) or (b).’’. 

17 (b) CERTIFICATION OF AGREEMENTS.—Section 1112 

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

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

20 or the company official responsible for negotiating any 

21 agreement required to be filed under subsection (a), (b), 

22 or (c) shall execute and file with the Assistant Attorney 

23 General and the Commission a certification as follows: ‘I 

24 declare that the following is true, correct, and complete 

25 to the best of my knowledge: The materials filed with the 

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1 Federal Trade Commission and the Department of Justice 

2 under section 1112 of subtitle B of title XI of the Medi3 care Prescription Drug, Improvement, and Modernization 

4 Act of 2003, with respect to the agreement referenced in 

5 this certification: (1) represent the complete, final, and ex6 clusive agreement between the parties; (2) include any an7 cillary agreements that are contingent upon, provide a 

8 contingent condition for, or are otherwise related to, the 

9 referenced agreement; and (3) include written descriptions 

10 of any oral agreements, representations, commitments, or 

11 promises between the parties that are responsive to sub12 section (a) or (b) of such section 1112 and have not been 

13 reduced to writing.’.’’. 

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

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

16 and Cosmetic Act (21 U.S.C. 355(j)(5)(D)(i)(V)) is 

17 amended by inserting ‘‘section 28 of the Federal Trade 

18 Commission Act or’’ after ‘‘that the agreement has vio19 lated’’. 

20 SEC. 6. COMMISSION LITIGATION AUTHORITY. 

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

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

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

24 the semicolon; 

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

2 after the semicolon; and 

3 (3) inserting after subparagraph (E) the fol4 lowing: 

5 ‘‘(F) under section 28;’’. 

6 SEC. 7. STATUTE OF LIMITATIONS. 

7 The Commission shall commence any enforcement 

8 proceeding described in section 28 of the Federal Trade 

9 Commission Act, as added by section 3, except for an ac10 tion described in section 28(g)(2) of the Federal Trade 

11 Commission Act, not later than 3 years after the date on 

12 which the parties to the agreement file the Notice of 

13 Agreement as provided by sections 1112(c)(2) and (d) of 

14 the Medicare Prescription Drug Improvement and Mod15 ernization Act of 2003 (21 U.S.C. 355 note). 

16 SEC. 8. SEVERABILITY. 

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

18 this Act, or the application of such provision or amend19 ment to any person or circumstance is held to be unconsti20 tutional, the remainder of this Act, the amendments made 

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

22 Act or amendments to any person or circumstance shall 

23 not be affected thereby. 

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Calendar No. 110 

112TH CONGRESS 

1ST SESSION S. 27 

A BILL 

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

JULY 22, 2011 

Reported without amendment 

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