resolving hatch-waxman issues

PATENTS, COMPETITION, ANTITRUST AND GENERIC DRUGS:

RESOLVING HATCH-WAXMAN ISSUES

BY:KIRBY DRAKE

Hatch-Waxman Act

• Drug Price Competition and Patent Term Restoration Act of 1984

• Easier for generic manufacturer to enter market by permitting it to file an Abbreviated New Drug Application (ANDA)• ANDA must show that generic version is

“bioequivalent” to approved drug

• May include Paragraph IV certification

Hatch-Waxman Act

• Incentive to generic manufacturer to be first to file ANDA with Paragraph IV certification: • 180-day period of marketing exclusivity with

respect to other generic manufacturers

• No provisions in original version of Act for review of settlements of Paragraph IV patent litigation

Bayer-Barr Cipro Litigation

• Bayer patent relates to active ingredient in Cipro - ciprofloxacin hydrochloride

• Bayer patent issued in 1987

• Bayer received approval from FDA to market Cipro in October 1987

Bayer-Barr Cipro Litigation

• 1991: Barr applied to FDA to bring generic to market claiming Bayer patent related to Cipro was invalid and unenforceable

• 1992: Bayer sued Barr for patent infringement

• 1997: Bayer started paying Barr in exchange for agreement not to manufacture generic Cipro

Bayer-Barr Cipro Settlement

• Bayer-Barr settlement terms• Bayer agreed to pay approximately $49.1M to

Barr (initial payment)

• Barr converted Paragraph IV certification to Paragraph III certification

• Barr agreed not to challenge validity or enforceability of Bayer patent

• Barr could sell a competing product beginning 6 months before the expiration of Bayer patent

Follow-On Cipro Patent Litigation

• Bayer filed for reexamination of its patent and validity of claims affirmed by PTO

• Bayer defended its patent against 4 other generic challengers

• Two on summary judgment (Schein, Mylan)

• One after trial (Carlsbad)

• One after generic company withdrew its Paragraph IV certification (Ranbaxy)

• Validity and enforceability of the Bayer patent upheld in lawsuits

Cipro Antitrust Litigation

• Lawsuits filed in 2000 and 2001 by private plaintiffs to challenge Bayer-Barr settlement

• Various lawsuits consolidated in federal court in New York


• Policy bases for antitrust lawsuit:• Prop-up drug price at expense of consumers

and health insurance companies

• Blocking access to adequate suppliers and cheaper, generic versions of Cipro

• Generic manufacturers forced to abandon efforts to bring generic Cipro to market

• Manipulation of price and supply of drug


• Argued violations of Sections 1 and 2 of the Sherman Act and violations of state antitrust and consumer protection laws

• Summary judgment granted – no antitrust violations• Relevant market is Cipro

• Bayer had the market power

• Settlement was in exclusionary zone of the Bayer patent


• NY court assessed rulings in Hytrin and Cardizem litigation where courts applied per se analysis and found settlement agreements illegal

Hytrin Litigation

• Abbott settled patent litigation with Geneva and Zenith Goldline

• Agreement was “interim” agreement and did not finally resolve patent issues

• Settlement agreement found per se unlawful

Cardizem Litigation

• “Interim” settlement of patent litigation between HMRI and Andrx

• Settlement agreement found to be per se unlawful - reduces competition in market


• Found Cipro settlement distinguishable from settlements in Hytrin and Cardizem litigation• Agreements did not finally dispose of litigation

• Agreements potentially blocked competition from non-infringing products

Cipro Antitrust Litigation – Federal Circuit

• Arguments on appeal to Federal Circuit• Agreement was per se unlawful

• Agreement did not fall within exclusionary zone of the Bayer patent

• Failure to consider law of the regional circuits

• Failure to appreciate effects of agreement on other generic manufacturers

• Failure to consider that agreements may preserve Barr’s claim to 180-day exclusivity period


• NY court properly applied rule of reason analysis• Determined relevant market

• Found that Bayer had market power within market

• No bottleneck on challenges to patent or restraint on competition outside “zone of exclusion” of patent

• Reverse payment within “zone of exclusion” is not illegal


• Patents are naturally anticompetitive

• Bayer-Barr agreement within rights of patent holder

“The essence of the agreements was to exclude the defendants from profiting from the patented invention. This is well within

Bayer’s right as the patentee.”

Judge Prost


• Not problematic that Barr agreed not to challenge patent• Typical provision in settlement of patent cases

• Settlement did not prevent others from challenging patent

• Settlements favored even when anticompetitive


• No antitrust violation by settlement if:• Patent holder makes payments to generic

manufacturer who filed ANDA with Paragraph IV certification

• Generic manufacturer agrees not to market its product until expiration of the patent

• Patent lawsuit dismissed and generic manufacturer agrees not to challenge the validity or enforceability of the patent


• Must prove that patent litigation was objectively and subjectively baseless

• Did not find Bayer enforced patent without reasonable basis

Changing Times Since Cipro

• Hatch-Waxman Act now includes “forfeiture” events that may eliminate the first filer’s 180-day period of exclusivity

• Settlement agreements must now be filed with the FTC and the DOJ for review

Congressional Action

• S.369 – Preserve Access to Affordable Generics Act• Adds new section to Clayton Act

• Generic manufacturer who violates would forfeit 180-day period of exclusivity

• Prohibit reverse payments

Congressional Action

• H.R. 1902 – Protecting Consumer Access to Generic Drugs Act of 2007• Includes same or similar prohibited conduct as

in recently proposed Senate act

• Did not specifically propose to amend Clayton Act

Resolving Hatch-Waxman Issues

• Conflict in the courts

• Conflict between courts and Congress and/or private consumers

• Conflict between importance of patents in the pharma sector and suggestion that pharma companies do not have right to protect their patents