II 

110TH CONGRESS 

1ST SESSION S. 316 

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 17, 2007 

Mr. KOHL (for himself, Mr. GRASSLEY, Mr. LEAHY, Mr. SCHUMER, and Mr. 

FEINGOLD) introduced the following bill; which was read twice and referred to the Committee on the Judiciary 

A BILL 

To prohibit brand name drug companies from compensating 

generic drug companies to delay the entry of a generic 

drug into the market. 

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

3 SECTION 1. SHORT TITLE. 

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

6 SEC. 2. CONGRESSIONAL FINDINGS AND DECLARATION OF 

7 PURPOSES. 

8 (a) FINDINGS.—The Congress finds that— 


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1 (1) prescription drugs make up 11 percent of 

2 the national health care spending but are 1 of the 

3 largest and fastest growing health care expenditures; 

4 (2) 56 percent of all prescriptions dispensed in 

5 the United States are generic drugs, yet they ac6 count for only 13percent of all expenditures; 

7 (3) generic drugs, on average, cost 63 percent 

8 less than their brand-name counterparts; 

9 (4) consumers and the health care system 

10 would benefit from free and open competition in the 

11 pharmaceutical market and the removal of obstacles 

12 to the introduction of generic drugs; 

13 (5) full and free competition in the pharma14 ceutical industry, and the full enforcement of anti15 trust law to prevent anticompetitive practices in this 

16 industry, will lead to lower prices, greater innova17 tion, and inure to the general benefit of consumers. 

18 (6) the Federal Trade Commission has deter19 mined that some brand name pharmaceutical manu20 facturers collude with generic drug manufacturers to 

21 delay the marketing of competing, low-cost, generic 

22 drugs; 

23 (7) collusion by the brand name pharmaceutical 

24 manufacturers is contrary to free competition, to the 


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1 interests of consumers, and to the principles under2 lying antitrust law; 

3 (8) in 2005, 2 appellate court decisions reversed 

4 the Federal Trade Commission’s long-standing posi5 tion, and upheld settlements that include pay-offs by 

6 brand name pharmaceutical manufacturers to ge7 neric manufacturers designed to keep generic com8 petition off the market; 

9 (9) in the 6 months following the March 2005 

10 court decisions, the Federal Trade Commission 

11 found there were three settlement agreements in 

12 which the generic received compensation and agreed 

13 to a restriction on its ability to market the product; 

(10) the FTC found that more than 2 14 ⁄3 of the 

15 approximately ten settlement agreements made in 

16 2006 include a pay-off from the brand in exchange 

17 for a promise by the generic company to delay entry 

18 into the market; and 

19 (11) settlements which include a payment from 

20 a brand name manufacturer to a generic manufac21 turer to delay entry by generic drugs are anti-com22 petitive and contrary to the interests of consumers. 

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

24 (1) to enhance competition in the pharma25 ceutical market by prohibiting anticompetitive agreeVerDate Aug 31 2005 18:31 Jan 18, 2007 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S316.IS S316

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1 ments and collusion between brand name and ge2 neric drug manufacturers intended to keep generic 

3 drugs off the market; 

4 (2) to support the purpose and intent of anti5 trust law by prohibiting anticompetitive agreements 

6 and collusion in the pharmaceutical industry; and 

7 (3) to clarify the law to prohibit payments from 

8 brand name to generic drug manufacturers with the 

9 purpose to prevent or delay the entry of competition 

10 from generic drugs. 

11 SEC. 3. UNLAWFUL COMPENSATION FOR DELAY. 

12 The Clayton Act (15 U.S.C. 12 et seq.) is amended— 

13 (1) by redesignating section 25 as section 29; 

14 and 

15 (2) by inserting after section 27 the following: 

16 ‘‘SEC. 28. UNLAWFUL INTERFERENCE WITH GENERIC MAR17 KETING. 

18 ‘‘(a) It shall be unlawful under this Act for any per19 son, in connection with the sale of a drug product, to di20 rectly or indirectly be a party to any agreement resolving 

21 or settling a patent infringement claim which— 

22 ‘‘(1) an ANDA filer receives anything of value; 

23 and 


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1 ‘‘(2) the ANDA filer agrees not to research, de2 velop, manufacture, market, or sell the ANDA prod3 uct for any period of time. 

4 ‘‘(b) Nothing in this section shall prohibit a resolu5 tion or settlement of patent infringement claim in which 

6 the value paid by the NDA holder to the ANDA filer as 

7 a part of the resolution or settlement of the patent in8 fringement claim includes no more than the right to mar9 ket the ANDA product prior to the expiration of the pat10 ent that is the basis for the patent infringement claim. 

11 ‘‘(c) In this section: 

12 ‘‘(1) The term ‘agreement’ means anything that 

13 would constitute an agreement under section 1 of 

14 the Sherman Act (15 U.S.C. 1) or section 5 of the 

15 Federal Trade Commission Act (15 U.S.C. 45). 

16 ‘‘(2) The term ‘agreement resolving or settling 

17 a patent infringement claim’ includes, any agree18 ment that is contingent upon, provides a contingent 

19 condition for, or is otherwise related to the resolu20 tion or settlement of the claim. 

21 ‘‘(3) The term ‘ANDA’ means an abbreviated 

22 new drug application, as defined under section 

23 505(j) of the Federal Food, Drug, and Cosmetic Act 

24 (21 U.S.C. 355(j)). 


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1 ‘‘(4) The term ‘ANDA filer’ means a party who 

2 has filed an ANDA with the Federal Drug Adminis3 tration. 

4 ‘‘(5) The term ‘ANDA product’ means the 

5 product to be manufactured under the ANDA that 

6 is the subject of the patent infringement claim. 

7 ‘‘(6) The term ‘drug product’ means a finished 

8 dosage form (e.g., tablet, capsule, or solution) that 

9 contains a drug substance, generally, but not nec10 essarily, in association with 1 or more other ingredi11 ents, as defined in section 314.3(b) of title 21, Code 

12 of Federal Regulations. 

13 ‘‘(7) The term ‘NDA’ means a new drug appli14 cation, as defined under section 505(b) of the Fed15 eral Food, Drug, and Cosmetic Act (21 U.S.C. 

16 355(b)). 

17 ‘‘(8) The term ‘NDA holder’ means— 

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

19 to market a drug product pursuant to an NDA; 

20 ‘‘(B) a party owning or controlling enforce21 ment of the patent listed in the Approved Drug 

22 Products With Therapeutic Equivalence Eval23 uations (commonly known as the ‘FDA Orange 

24 Book’) in connection with the NDA; or 


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1 ‘‘(C) the predecessors, subsidiaries, divi2 sions, groups, and affiliates controlled by, con3 trolling, or under common control with any of 

4 the entities described in subclauses (i) and (ii) 

5 (such control to be presumed by direct or indi6 rect share ownership of 50 percent or greater), 

7 as well as the licensees, licensors, successors, 

8 and assigns of each of the entities. 

9 ‘‘(9) The term ‘patent infringement’ means in10 fringement of any patent or of any filed patent ap11 plication, extension, reissue, renewal, division, con12 tinuation, continuation in part, reexamination, pat13 ent term restoration, patents of addition and exten14 sions thereof. 

15 ‘‘(10) The term ‘patent infringement claim’ 

16 means any allegation made to an ANDA filer, 

17 whether or not included in a complaint filed with a 

18 court of law, that its ANDA or ANDA product may 

19 infringe any patent held by, or exclusively licensed 

20 to, the NDA holder of the drug product.’’. 

21 SEC. 4. NOTICE AND CERTIFICATION OF AGREEMENTS. 

22 (a) NOTICE OF ALL AGREEMENTS.—Section 

23 1112(c)(2) of the Medicare Prescription Drug, Improve24 ment, and Modernization Act of 2003 (21 U.S.C. 3155 

25 note) is amended by— 


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1 (1) striking ‘‘the Commission the’’ and insert2 ing ‘‘the Commission (1) the’’; and 

3 (2) inserting before the period at the end the 

4 following: ‘‘; and (2) a description of the subject 

5 matter of any other agreement the parties enter into 

6 within 30 days of an entering into an agreement 

7 covered by subsection (a) or (b)’’. 

8 (b) CERTIFICATION OF AGREEMENTS.—Section 1112 

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

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

11 or the company official responsible for negotiating any 

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

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

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

15 declare under penalty of perjury that the following is true 

16 and correct: The materials filed with the Federal Trade 

17 Commission and the Department of Justice under section 

18 1112 of subtitle B of title XI of the Medicare Prescription 

19 Drug, Improvement, and Modernization Act of 2003, with 

20 respect to the agreement referenced in this certification: 

21 (1) represent the complete, final, and exclusive agreement 

22 between the parties; (2) include any ancillary agreements 

23 that are contingent upon, provide a contingent condition 

24 for, or are otherwise related to, the referenced agreement; 

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1 ments, representations, commitments, or promises be2 tween the parties that are responsive to subsection (a) or 

3 (b) of such section 1112 and have not been reduced to 

4 writing.’.’’. 

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

6 Section 505 of the Federal Food, Drug and Cosmetic 

7 Act (21 U.S.C. 355(j)(5)(D)(i)(V)) is amended by insert8 ing ‘‘section 28 of the Clayton Act or’’ after ‘‘that the 

9 agreement has violated’’. 

10 SEC. 6. STUDY BY THE FEDERAL TRADE COMMISSION. 

11 (a) REQUIREMENT FOR A STUDY.—Not later than 

12 180 days after the date of enactment of this Act and pur13 suant to its authority under section 6(a) of the Federal 

14 Trade Commission Act (15 U.S.C. 46(a)) and its jurisdic15 tion to prevent unfair methods of competition, the Federal 

16 Trade Commission shall conduct a study regarding— 

17 (1) the prevalence of agreements in patent in18 fringement suits of the type described in section 28 

19 of the Clayton Act, as added by this Act, during the 

20 last 5 years; 

21 (2) the impact of such agreements on competi22 tion in the pharmaceutical market; and 

23 (3) the prevalence in the pharmaceutical indus24 try of other anticompetitive agreements among com25 petitors or other practices that are contrary to the 


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1 antitrust laws, and the impact of such agreements or 

2 practices on competition in the pharmaceutical mar3 ket during the last 5 years. 

4 (b) CONSULTATION.—In conducting the study re5 quired under this section, the Federal Trade Commission 

6 shall consult with the Antitrust Division of the Depart7 ment of Justice regarding the Justice Department’s find8 ings and investigations regarding anticompetitive practices 

9 in the pharmaceutical market, including criminal antitrust 

10 investigations completed by the Justice Department with 

11 respect to practices or conduct in the pharmaceutical mar12 ket. 

13 (c) REQUIREMENT FOR A REPORT.—Not later than 

14 1 year after the date of enactment of this Act, the Federal 

15 Trade Commission shall submit a report to the Judiciary 

16 Committees of Senate and House of Representatives, and 

17 to the Department of Justice regarding the findings of the 

18 study conducted under subsection (a). This report shall 

19 contain the Federal Trade Commission’s recommendation 

20 as to whether any amendment to the antitrust laws should 

21 be enacted to correct any substantial lessening of competi22 tion found during the study. 

23 (d) FEDERAL AGENCY CONSIDERATION.—Upon re24 ceipt of the report required by subsection (c), the Attorney 

25 General or the Chairman of the Federal Trade CommisVerDate Aug 31 2005 18:31 Jan 18, 2007 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S316.IS S316

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1 sion, as appropriate, shall consider whether any additional 

2 enforcement action is required to restore competition or 

3 prevent a substantial lessening of competition occurring 

4 as a result of the conduct or practices that were the sub5 ject of the study conducted under subsection (b). 

6 SEC. 7. AUTHORIZATION OF APPROPRIATIONS. 

7 There are authorized to be appropriated to the Fed8 eral Trade Commission such sums as may be necessary 

9 to carry out the provisions of this Act. 

Æ 


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