180-Day Exclusivity: The Key Ingredient in Hatch-Waxman

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The AAM’s Chip Davis looks back on 35 years of healthcare system savings from generic pharmaceuticals in the US, and the peril the generics industry faces from the Lower Health Care Costs Act.

 

A key provision of our generic pharmaceutical architecture is in jeopardy. The “180-day exclusivity” is the sugar in the Hatch-Waxman cupcake, if you will. It is the reason that generic manufacturers take on large—and ever-expanding—brand-name drug patent monopolies

To celebrate the 35th anniversary of the Hatch-Waxman Act, which launched the generic pharmaceutical industry in the United States, my colleagues at the Association for Accessible Medicines gave out free cupcakes on Capitol Hill.

 

It was a sweet reminder of Hatch-Waxman, which unleashed dramatic savings for patients and taxpayers—USD 2 trillion in the last decade, according to IQVIA. The legislation also triggered investment in research and development that has resulted in better cures and treatments for a range of conditions—“the best medicine that pharmaceutical science can provide,” as President Ronald Reagan proclaimed when he signed the law.

 

Today, however, a key provision of our generic pharmaceutical architecture is in jeopardy. The “180-day exclusivity” is the sugar in the Hatch-Waxman cupcake, if you will. It is the reason that generic manufacturers take on large—and ever-expanding—brand-name drug patent monopolies. And it is the reason that patients have expedited access to more affordable versions of life-saving medicines. Without this critical ingredient, the generic cupcake crumbles.

 

The so-called Lower Health Care Costs Act (S. 1895) contains some worthy ideas for eliminating surprise medical bills, but it also includes ideas that will result in less competition and higher prices. In particular, Section 205 of the Lower Health Care Costs Act targets 180-day exclusivity in a manner that could have grievous consequences for the industry and for patients.

 

Under current law, 180-day exclusivity rewards generic companies that take on the expense and risk of challenging patents that protect expensive brand-name drugs. Specifically, the first generic company that files a substantially complete abbreviated new drug application (ANDA) with at least one patent challenge is rewarded with a short 180-day window during which that company is the only generic on the market. That incentive structure has paid major dividends: Generic companies vigorously compete with one another to quickly develop more affordable versions of brand-name drugs, and more Americans than ever have access to treatments that previously were unaffordable.

 

As drafted, Section 205 would significantly change the terms of exclusivity so that a first generic applicant’s 180-day exclusivity is triggered—and lost—for reasons outside the first applicant’s control. Under the bill, exclusivity is lost if:

  • a subsequent generic applicant has tentative approval;
  • no first applicant has final approval;
  • thirty three months have passed since the first applicant submitted its application; and
  • The thirty-month stay has been lifted as to one first applicant.

 

That first applicant’s exclusivity is thus triggered even if it is actively and diligently pursuing final approval. In other words, a first applicant can do everything right and still lose its exclusivity. It might be dealing with a citizen petition filed by a brand-name drug company or a last-minute labeling change by the brand-name company. Or it could be patiently waiting for FDA to inspect its facilities. Under all of these circumstances, that first applicant could lose its exclusivity.

 

Unsurprisingly, Section 205 would actually inflict major harm upon an industry that already operates on paper-thin margins. Economists have been warning for years that further attenuation these margins could lead to companies exiting the market for some drugs—driving prices up and potentially resulting in shortages. Making exclusivity less certain and more unpredictable decreases its value. That means that fewer generic companies will take on the effort and risk—sometimes as much as $1 million per patent—of challenging expensive brand-name drug patents. And ultimately patients will suffer. They will have to pay higher brand-name prices for longer.

 

Fundamentally upending 180-day exclusivity is not the answer here. Former US FDA Deputy Commissioner William B. Schultz and Former US FDA Associate Commissioner Margaret M. Dotzel note in an editorial that existing legislation has already solved alleged generic “parking”— the purported problem that Section 205 seeks to solve. Indeed, the Medicare Modernization Act “ensure[s] that a generic company cannot block subsequent generics by sitting on this exclusivity — if they do, they forfeit the 180 days. Thus, FDA already has the tools it needs to ensure that additional generics are not blocked from coming on the market.”

 

As Kurt R. Karst observes in a blog , “Enactment of the proposed language would almost certainly lead to costly and time-consuming litigation…. Moreover, the [legislation] could allow for myriad other circumstances outside of alleged ANDA ‘deficiencies’ to trigger 180-day exclusivity.” And in another blog, Karst argues that Section 205 “would punish ANDA applicants eligible for 180-day who are diligently pursuing final application approval and would further dilute and cheapen the 180-day exclusivity incentive Congress created in the 1984 Hatch-Waxman Amendments.”

 

Rather than cheapening medicines, Karst points out, the proposal would cheapen exclusivity—the very incentive that drives the industry. And, by cheapening exclusivity, Section 205 will ultimately lead to higher drug prices for patients. And this will ultimately be antithetical to the entire purpose of the Lower Health Care Costs Act.

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