Congress continues to focus attention upon both medical innovation and the growing cost of health care. The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, addresses each of these concerns. Through amendments to both the patent law and the food and drug law, the Hatch-Waxman Act established several practices intended to facilitate the marketing of generic pharmaceuticals while providing brand-name firms with incentives to i nnovate. Although Congress has since modified the basic framework of the Hatch-Waxman Act, both through direct amendments and the enactment of related legislation, potential legislative issues remain for congressional consideration. This report provides an overview of the Hatch-Waxman Act and identifies potential legislative issues. It begins by explaining the fundamentals of the patent acquisition process at the U.S. Patent and Trademark Office (USPTO) and patent litigation in the federal courts. The drug approval process at the Food and Drug Administration (FDA) is described next. The report then describes the 1984 judicial ruling in Roche Products, Inc. v. Bolar Pharmaceutical Co ., a case that called attention to the relationship between pharmaceutical innovation and competition. The report then describes the principal features of the Hatch-Waxman Act. These features include an expedited generic regulatory approval procedure; a patent term extension to compensate for regulatory approval delays; and a statutory exemption from patent infringement for firms seeking regulatory approval. The Hatch-Waxman Act also established specialized infringement litigation procedures with respect to certain pharmaceutical patents. The statute further created periods of "regulatory exclusivity" that protect an approved drug from competing applications for marketing approval under specified conditions. The report then reviews significant legislative amendments impacting the Hatch-Waxman Act. It closes with an identification of proposed amendments and other issues that may potentially be of legislative interest. Under the nation's patent laws, inventors may obtain patents on processes, machines, manufactures, and compositions of matter that are useful, novel, and nonobvious. An invention is judged as useful if it is minimally operable toward some practical purpose. To be considered novel within the patent law, an invention must differ from existing references that disclose the state of the art, such as publications and other patents. The nonobviousness requirement is met if the invention is beyond the ordinary abilities of a skilled artisan knowledgeable in the appropriate field. In order to be awarded a patent, an inventor must file a patent application with the USPTO. A patent application must include a specification that so completely describes the invention that skilled artisans are enabled to practice it without undue experimentation. The patent application must also contain distinct, definite claims that set out the proprietary interest asserted by the inventor. Trained personnel at the USPTO, known as "examiners," review all applications to ensure that the invention satisfies the pertinent requirements of the patent law. If the USPTO believes that the application meets the statutory standards, it will allow the application to issue as a granted patent. At that time, the USPTO will assemble and publish the corresponding patent instrument, which includes the complete specification, claims, and prior art references considered during prosecution. Each patent ordinarily enjoys a term of 20 years commencing from the date the patent application was filed. Granted patents give the patentee the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. Parties who engage in those acts without the permission of the patentee during the term of the patent can be held liable for infringement. The patentee may file a civil suit in federal court in order to enjoin infringers and obtain monetary remedies. Although issued patents enjoy a presumption of validity, accused infringers may assert that the patent is invalid or unenforceable on a number of grounds. Patents have the attributes of personal property and may be assigned or licensed to others. Since the 1962 Kefauver-Harris Drug Amendments, the Federal Food, Drug, and Cosmetic Act has prohibited the marketing of a "new drug" unless that drug meets certain safety and efficacy standards. A showing that a new drug is sufficiently safe and effective to allow it to be marketed ordinarily requires manufacturers to conduct clinical investigations of drugs. Such investigations generally occur over several stages, commencing with preclinical evaluation. The testing process begins in the company's laboratory, where scientists perform preliminary tests to determine whether the drug has any effect on a disease or its symptoms. For those compounds that merit further consideration following preclinical evaluation, the next step is the filing of an Investigational New Drug application (IND), at the FDA. The FDA evaluates the pre-clinical data and the proposed clinical trial design to determine whether to allow the IND and testing in humans. Clinical trials are ordinarily carried out in three phases that gather further evidence of the drug's safety and effectiveness. Once a new drug's clinical testing is complete, the sponsor prepares a New Drug Application (NDA) and submits it to the FDA for evaluation. An NDA includes the clinical trial results along with a description of the drug's manufacturing process and facilities. The agency considers three broad questions when reviewing an NDA: Whether the drug is safe and effective in its proposed use(s), and whether the benefits of the drug outweigh the risks. Whether the drug's proposed labeling (package insert) is appropriate, and what it should contain. Whether the methods used in manufacturing the drug and the controls used to maintain the drug's quality are adequate to preserve the drug's identity, strength, quality, and purity. As the agency has explained, an NDA "is supposed to tell the drug's whole story, including what happened during the clinical tests, what the ingredients of the drug are, the results of the animal studies, how the drug behaves in the body, and how it is manufactured, processed and packaged." FDA approval of an NDA allows the drug to be marketed to the public. The award of marketing approval by the FDA and the grant of a patent by the USPTO are formally distinct events that depend upon different criteria. For example, the USPTO could issue a patent on a drug that the FDA ultimately decides not to approve for marketing due to deleterious side effects. As well, the FDA could grant marketing approval to a safe and effective drug that was already described in the published literature and therefore not patentable. However, because brand-name firms ordinarily seek both marketing approval and patent protection, the practical relationship between these procedures was the subject of policy debate for many years. Many observers believe that the 1984 judicial decision in Roche Products, Inc. v. Bolar Pharmaceutical Co . hastened the pace of discussion in Congress. As noted previously, patent proprietors possess the right to exclude others from practicing the patented invention. Accused infringers may offer several defenses to avoid liability for patent infringement. One potential patent infringement defense consists of the so-called experimental use privilege. One nineteenth century court explained that it was "well-settled that an experiment with a patented article for the sole purpose of gratifying a philosophical taste, or curiosity, or for mere amusement is not an infringement of the rights of the patentee." Most patent attorneys observe that few infringers have successfully pled an experimental use defense, however. As a practical matter, infringement charges are only rarely brought against philosophers or amusement seekers. The venerable experimental use defense suggested an interesting possibility with the advent of marketing approval procedures before the FDA. When a competitor grew interested in marketing the generic equivalent of a drug patented by another, it might have wished to commence clinical trials and other procedures needed to obtain commercial marketing approval during the term of the other's patent. This procedure would allow the generic firm to market the drug as soon as possible—and ideally upon the date the patent expired. Whether the regulatory compliance activities of a generic drug manufacturer amounted to patent infringement or were exempted by the experimental use defense was an open legal question for many years. The 1984 decision of the Court of Appeals for the Federal Circuit in Roche v. Bolar resolved this question conclusively in favor of a finding of patent infringement. In that case, Roche Products, Inc. (Roche) marketed a prescription sleeping pill and owned a patent covering its active ingredient. During the term of Roche's patent, Bolar Pharmaceutical Co. (Bolar) began using the active ingredient to obtain data needed to file an NDA with the FDA. When Roche brought a patent infringement suit, the federal courts agreed that Bolar should be enjoined from using the active ingredient until Roche's patent expired. The courts explained that: Bolar's intended "experimental" use is solely for business reasons and not for amusement, to satisfy idle curiosity, or for strictly philosophical inquiry. Bolar's intended use ... to derive FDA required test data is thus an infringement of the [Roche] patent. Bolar may intend to perform "experiments," but unlicensed experiments conducted with a view to the adaptation of the patented invention to the experimentor's business is a violation of the rights of the patentee to exclude others from using his patented invention. It is obvious here that it is a misnomer to call the intended use de minimis . It is no trifle in its economic effect on the parties even if the quantity used is small. It is no dilettante affair.... We cannot construe the experimental use rule so broadly as to allow a violation of the patent laws in the guise of "scientific inquiry," when that inquiry has definite, cognizable, and not insubstantial commercial purposes. The ruling in Roche v. Bolar , in combination with the requirement of marketing approval for new drugs under the Food, Drug, and Cosmetic Act, was perceived as leading to two distortions of the statutory patent term. First, patent term would continue to run whether or not the FDA had approved the claimed pharmaceutical for marketing.