Patent Disputes
Does the system help or hurt innovation?
By Kenneth Jost

The U.S. patent system is designed to encourage technological innovation by granting inventors an exclusive right to profit from their discoveries. In recent years, however, many critics have complained that the system is actually impeding innovation. Critics say a hugely overburdened Patent and Trademark Office approves many dubious patents, some of which are used by so-called patent “trolls”. . . .

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Should Congress significantly overhaul patent law?

Chuck Fish Vice President, Chief Patent Counsel, Time Warner Inc.. Written for CQ Researcher, December 2006	James C. Greenwood President and CEO, Biotechnology Industry Organization (BIO). Written for CQ Researcher, December 2006

When Drug Patents Expire, Fighting Begins

The makers of brand-name and generic drugs frequently wrangle over patents before the U.S. Patent and Trademark Office (PTO) and in federal courts. But they are also waging significant side battles in Congress and at other federal agencies over procedures that generic drug makers say allow the major pharmaceutical companies to thwart competition with patent-protected medications.

The Generic Pharmaceutical Association (GPhA) wants Congress or the Food and Drug Administration (FDA) to rein in industry-backed “citizen petitions” at the agency that can delay or prevent the introduction of a non-brand-name medication after a patent has expired.

GPhA also wants Congress to pass a law to block brand-name drug companies from introducing so-called “authorized generics” during a protected 180-day period for a generic company to market the product.

The Pharmaceutical Research and Manufacturers of America (PhRMA) defends the regulatory filings as a legitimate device to keep unsafe drugs off the market. It says allowing brand-name companies to join in selling authorized generics lowers consumer prices.

Democratic lawmakers sponsored bills to deal with both issues in 2006, but they did not advance. Ranking FDA officials voiced concern about the industry-backed citizen petitions and instituted some internal changes in 2006 to try to control the practice.

Pharmaceuticals provide the most visible example of the costs consumers pay for the patent system in the form of higher prices for products protected by a government-granted legal monopoly. Generic drug makers can provide lower-cost substitutes only if a patent expires or is ruled invalid by a court or the PTO. Major drug companies say patent protection is needed to enable them to invest millions of dollars over long periods to discover and win regulatory approval for new medicines.

Congress has passed several laws aimed at easing the way for generic drug companies to compete with brand-name medications, including a 1984 law that balanced pro-generic provisions with some additional protections for drug company patent holders.

The Hatch-Waxman Act — named after its chief sponsors, Sen. Orrin G. Hatch, R-Utah, and Rep. Henry A. Waxman, D-Calif. — gives the first company to seek FDA approval for a generic drug the exclusive right to market the non-branded medication for 180 days. The six-month exclusivity is seen as giving the generic company needed financial incentives to bring the drug to market.

The FDA ruled in 2004 that the company that owns patent rights to a drug can also sell an unbranded version during the 180-day period. Generic drug makers say such “authorized generics” either reduce or kill the market for the generic firm. The big drug companies say the procedure lowers prices.

Big drug companies' use of petitions to block new generics began to emerge as an issue in the late 1990s. The Clinton administration proposed a rule to revise procedures on citizen petitions in 1999, but the Bush administration withdrew it in 2003. FDA officials say nearly one-third of the 170 citizen petitions currently before the agency involve industry challenges to generic applications.

In another fight, generic drug makers backed efforts by the Federal Trade Commission (FTC) to block brand-name companies from agreeing to pay cash settlements with individual generic firms in exchange for dropping patent challenges. The FTC claimed the settlements violated federal antitrust laws.

The federal appeals court in Atlanta rejected the argument in March 2005, and the Supreme Court declined to hear the case in late June 2006. A bipartisan group of senators critical of the drug industry in the past introduced a bill to curb the practice, but it expired with the end of the current Congress.

[1] See Marc Kauffman, “Petitions to FDA Sometimes Delay Generic Drugs,” The Washington Post, July 3, 2006, p. A1.

Footnote: 1. See Marc Kauffman, “Petitions to FDA Sometimes Delay Generic Drugs,” The Washington Post, July 3, 2006, p. A1.

[2] The act is formally titled the Drug Price Competition and Patent Term Restoration Act of 1984.

Footnote: 2. The act is formally titled the Drug Price Competition and Patent Term Restoration Act of 1984.

[3] For background, see Peter Benesh, “Feds Look Into Battle Over Authorized Generics,” Investor's Business Daily, Aug. 14, 2006, p. A7.

Footnote: 3. For background, see Peter Benesh, “Feds Look Into Battle Over Authorized Generics,” Investor's Business Daily, Aug. 14, 2006, p. A7.

[4] Quoted in Kauffman, op. cit.

Footnote: 4. Quoted in Kauffman, op. cit.

[5] The decision is Schering-Plough Corporation v. Federal Trade Commission, 402 F.3d 1056 (CA11 2005). For background, see Jeffrey Young, “Drug industry deals attracting attention,” The Hill, June 28, 2006, p. 22.

Footnote: 5. The decision is Schering-Plough Corporation v. Federal Trade Commission, 402 F.3d 1056 (CA11 2005). For background, see Jeffrey Young, “Drug industry deals attracting attention,” The Hill, June 28, 2006, p. 22.