Food and Drug Administration Safety and Innovation Act--Motion to Proceed--Continued

Floor Speech

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Mr. BINGAMAN. Madam President, I wanted to speak about an amendment which I intend to offer once we do get on this Food and Drug Administration Safety and Innovation Act. This is an important amendment. I want to advise my colleagues and all who are listening about it so they can, hopefully, look into it and wind up supporting it.

This is an amendment that Senator Vitter has worked with me on, as well as Senators Franken, Shaheen, Kohl, Tom Udall, Tim Johnson, Klobuchar, Merkley, Sanders, and Sherrod Brown. The amendment has the strong support of many organizations that are focused on the cost of prescription drugs.

Here is a list: AARP, AFL CIO, Walmart, Families USA, Consumer Federation of America, U.S. PIRG, Consumers Union, Center for Medicare Advocacy, AFSME, National Legislative Association on Prescription Drug Prices, the Alliance for Retired Americans, various other companies and organizations--the New Mexico Pharmacy Association strongly supports this legislation.

This amendment addresses the root cause of anticompetitive, anticonsumer settlements that are entered into between brand-name and generic pharmaceutical manufacturing companies. The effect of these settlements they enter into is to delay timely access that consumers would have to generic drugs. This practice is commonly referred to as pay for delay. It costs American consumers and it costs the Federal Government billions of dollars each year in higher drug costs.

According to the Federal Trade Commission, in 2010, pay-for-delay agreements, limiting access to affordable generic drugs, protected $20 billion in sales from brand-name pharmaceutical companies. That was at the expense of consumers who would have been able to pay much less for those same drugs.

Ensuring access to affordable medication is an essential aspect of addressing the growth in health care spending. Prices for brand-name prescription drugs have continued to outpace inflation, and overall spending on prescription drugs has also increased sharply. These statistics are amazing to me. The Kaiser Family Foundation found that in 2008, spending in the United States for prescription drugs was $234.1 billion. That is nearly six times what it was in 1990.

Since generic drugs are, on average, one-fourth of the price of their brand-name alternatives, they can be an important source of affordable prescription drugs for many Americans. But to actually achieve the savings for consumers, those generics have to reach market in a timely manner.

In 1984, Congress passed the bipartisan Hatch-Waxman Act to create market-based incentives for generic pharmaceutical companies to bring their drugs to market as quickly as possible. The express purpose of that law was to incentivize early generic drug competition while preserving incentives for pioneer companies to develop innovative new medicines. Instead, the pay-for-delay settlements that our amendment tries to address--these pay-for-delay settlements between brand-name and generic pharmaceutical manufacturers have become commonplace.

These settlements stifle competition. They delay access to generic drugs at significant costs to consumers and to the Federal Government. In these settlements, the first filer generic drug company agrees to delay market entry in exchange for monetary or other rewards. This has the effect of blocking all subsequent generic filers in coming to market.

This is a complicated issue. I would like to take a few minutes to explain how these agreements work under existing law and also how our amendment would solve this problem as we see it.

Under current law, first-to-file generic drug applicants are rewarded with 180 days of market exclusivity. Exclusivity is awarded only to generic companies that are the first to file. It is not available to subsequent filers even if they successfully invalidate a patent and are ready to come to market immediately. So subsequent generic filers can only enter the market after the first generic filer has enjoyed its 180 days of market exclusivity.

So under the pay-for-delay settlements, the first filer generic company essentially parks its exclusivity; that is, it blocks all other generic manufacturers from coming to market until 6 months after the market entry date. This is true regardless of the strength of the patent or the readiness of subsequent generic filers to come to market.

So this means under pay-for-delay settlements, first filer generic companies receive a reward from brand-name companies for delaying market entry, usually a cash reward, a very substantial amount. They also get a reward from the current statute, this 180-day exclusivity period, and brand-name companies get to extend their monopolies beyond what was originally intended under the Hatch-Waxman legislation.

Consumers are left footing the bill and left with no option but to buy the more expensive drugs and to keep buying it, even after the generic should have come to market.

``Pay for delay'' settlements also typically include an agreement that the first-filer generic company can accelerate its entry into the market in the event that a subsequent filer invalidates the patent in question. In such cases, the subsequent filer triggers the first filer's exclusivity. Put simply, there is no incentive for subsequent generic filers to fight to invalidate weak patents and come to market as soon as possible, even when they believe strongly that they would win their case in court. In other words, whereas the original intent of Hatch-Waxman was to reward companies that were the first to file and actually bring their drugs to market, currently the reward goes to the first company to submit the necessary paperwork. Bringing the generic drug to market immediately has become an option that can be negotiated away.

To fix the ``pay for delay'' problem, the law needs to be changed so that first filers who enter into ``pay for delay'' settlements can no longer block generic subsequent filers who successfully challenge patents from entering the market and bringing affordable drugs to consumers. The amendment we are offering provides this solution or this fix in the following three ways:

First of all, the amendment grants the right to share exclusivity to any
generic filer who wins a patent challenge in the district court. This means that if a subsequent filer successfully challenges a patent, even after a first filer has entered into a ``pay for delay'' settlement with a brand-name company, that subsequent filer has a right to share exclusivity with the first filer. This provision provides an incentive for subsequent filers to challenge patents and stimulates competition.

Second, the amendment we are offering maximizes the incentive for all generic challengers to bring products to market at the earliest possible time by holding generic settlers to the deferred entry date agreed to in the settlements they have signed.

Third, our amendment creates more clarity regarding litigation risks by requiring brand-name companies to make a decision to litigate a patent challenge within the 45-day window provided for in the Hatch-Waxman Act. This ``use it or lose it'' provision enhances market certainty by eliminating the option for brand names to litigate patent challenges well after a generic has come to market.

Finally, I think it is important to point out that the amendment we are offering does not interfere with the rights of the parties to settle their patent litigation if they choose to do so.

There have been numerous antitrust experts and consumer groups that have identified the Hatch-Waxman Act's structural flaw--the one I have been describing here--as the source of the ``pay for delay'' problem and have called for a legislative solution. In addition, in 2003 Senator Hatch himself expressed concern that the flaw remained despite an attempt to fix it by including a ``use it or lose it'' provision in the Medicaid Modernization Act of 2003. Senator Hatch emphasized that the law should be changed to reward, and not penalize, generic companies that successfully invalidate a patent and are ready to come to market.

Let me further underscore the need for this amendment with some concrete examples.

I have a chart here that I think will make the point I am trying to make. This table shows three drugs included in ``pay for delay'' settlements. And this is just three; there are many of these settlements entered into each year. The delay to market in years for each of the three drugs--the three drugs are Altace, Lipitor, and Provigil--the delay period the settlements called for in one case is 2 years; in another case 1 1/2 years; and in the other 6 years. The estimated lost savings to consumers is here.

Let me describe each of these a little bit. The first drug is King Pharmaceutical's Altace. A generic version of Altace was delayed for 2 years at an estimated cost of $637 million to consumers under a ``pay for delay'' settlement. In 2007, Lupin invalidated a patent covering Altace. Lupin could not launch, or bring their generic to market, despite being the party responsible for invalidating the patent and opening the market early. Instead, the first filer, Cobalt, accelerated its entry into the market and benefited from 180 days of exclusivity. Lupin was left with no reward despite the fact that they had been the one that succeeded in the litigation to invalidate the patent.

The second is a cholesterol-lowering drug familiar to most of us. It is the best-selling pharmaceutical drug in the history of the world, Lipitor. According to a 2008 New York Times report, Pfizer and generic manufacturer Randbaxy Laboratories agreed to a settlement delaying generic entry into the market by 20 months. The same report stated that the generic version of the drug was estimated to sell for less than one-third of the cost of the brand-name Lipitor, which had earned $12.7 billion in sales the year before. A letter sent to FDA Director Hamburg last year by some of my colleagues in the Senate indicated that the Federal Government was spending $2.4 billion a year on Lipitor and that a generic version was expected to generate $3.97 billion to $6.7 billion in savings annually.

The final example on the chart here is Provigil, which is a sleep-disorder drug, a generic version of which could have come to market as early as December of 2006. However, due to ``pay for delay'' settlements, a generic version of Provigil just entered the market this year instead of in 2006.

In addition, in October 2011, a subsequent generic filer, Apotex, invalidated a patent covering Provigil. Because the first filers in this case settled their patent litigation with the brand company 6 years prior, Apotex could not begin selling generic Provigil despite its court victory. Even the CEO of Cephalon, which is the brand-name manufacturer of Provigil, is quoted as saying--this is the CEO of the brand-name company--this:

We were able to get six more years of patent protection. That's $4 billion in sales that no one expected.

In other words, the Provigil case represents 6 years and tens of millions of dollars in lost savings to consumers. One of the largest of those consumers is the U.S. military. As this chart illustrates, this is an estimate of the effect of this settlement--the so-called ``pay for delay'' settlement--related to Provigil on the Department of Defense. Assuming that a generic version of Provigil would have been released in 2006 with expiration of exclusivity, the DOD would have saved $159 million for this drug accessed by almost half a million soldiers between the years 2006 and 2011. Had our amendment, the Fair Generics Act, been the law--and we have introduced it as a stand-alone bill--had the Fair Generics Act been the law, generic versions of Provigil would very likely have been available 6 years ago. The first filers, knowing that the patent was weak and that subsequent filers could invalidate it and come to market themselves, would have fully prosecuted the patent fight instead of just settling it as they did.

As these examples illustrate, by granting shared exclusivity rights to any generic challenger that wins its patent case or is not sued by the brand company, our amendment will end the ``pay for delay'' problem and move us closer to the original intent of Hatch-Waxman. That original intent was more competition, greater access to affordable drugs, and substantial savings to the U.S. Government and American consumers.

I hope that when we get the opportunity to offer this amendment and consider it on the Senate floor and have a vote on it, my colleagues will support this amendment. It will be a substantial step forward for American consumers and will help us greatly in our effort to reduce the cost of prescription drugs for Americans.

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