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« Patent Reform Legislation Moves to Senate Floor | Main | Centocor Ortho Biotech, Inc. v. Abbott Laboratories (Fed. Cir. 2011) »

February 23, 2011


Kevin, this doesn't sound like a proposal to encourage generic drug development. Given the way in which it would restrict innovators in how they can price and market their products, it sounds more like a proposal to punish innovators for...innovating (gasp)!

The drug business is asymmetrical: the barrier to entry for a new drug is extremely high, to the point that without assurances of the opportunity to recoup the investment make a good profit, a candidate for a new drug won't be developed, period.

In contrast, as you noted, the barrier to generic drug entry is low, which means that sooner or later, generic competition will occur, it's just a question of timing. The 180-day exclusivity period for generic manufacturers - and the potential windfall associated therewith - was meant to provide them with an incentive to knock out invalid patents or to develop design-arounds. Without the promise of that exclusivity, the commencement of generic competition may occur at a later date, as it may not be worth it for a generic drug company to challenge a patent if success means it will be opening the floodgates for other generic drug companies. But inevitably, there will be generic competition. As it is, as you noted, in those cases where there *aren't* authorized generics, the price to the consumer doesn't really drop until after the 180-day exclusivity period.

Have any of these Senators conducted a cost-benefit analysis to see how their proposal stacks up against maintaining the status quo? Despite the "threat" of authorized generics and their potential to "eat into" generic drug companies' profits, I haven't heard about a slowdown in Paragraph IV litigation the last few years, so is the forbidding of authorized generics really necessary?

At the other extreme, have the Senators done a c/b analysis of getting rid of the 180-day exclusivity period altogether? Or forbidding authorized generics, but at the same time shortening the exclusivity period for the successful paragraph IV challenger to 60 days? If at present a successful P-IV challenge (which costs a few million dollars to mount, in addition to the few million dollars it takes to actually develop the generic copy of the original drug) to a blockbuster drug nets the challenger several hundred million dollars, you would think it should still be able to realize a pretty good ROI over a shorter exclusivity period, enough to maintain the incentive to challenge.

Even better, rather than fine-tuning a system that at its core is dysfunctional, the Senators might do well to seriously consider the proposal, advanced independently by Bob Armitage and Sherry Knowles (as you reported in earlier PatentDocs posts) that exclusivity for the innovator be set at 14 years from FDA approval, without ties to patents and patent challenges. That would create predictably for all parties, would guarantee a significant price drop at the end of 14 years, and enable drug companies on both sides of the divide to free up assets currently allocated for the ubiquitous paragraph IV litigation. Might not be so good for those of us who litigate P-IV, but I'm more concerned about new drugs reaching the market. Besides, we lawyers seem to be pretty adept at manufacturing reasons for people and companies to avail themselves of our services.

"it sounds more like a proposal to punish innovators for...innovating (gasp)!"

While I have to admit I'm all for that, I don't really understand why letting the big drug maker be a generic as well is a bad thing. Sure it discourages others from coming in, but that seems fine to me.

"advanced independently by Bob Armitage and Sherry Knowles (as you reported in earlier PatentDocs posts) that exclusivity for the innovator be set at 14 years from FDA approval, without ties to patents and patent challenges."

Despite that being uttered by Knowles the idea itself, if not the term, isn't so bad. Call it 10 or 12 and you've got a deal if I were in lawmaking.

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