SEPTEMBER 01, 2006

Congress is considering new legislation to outlaw the marketing of "authorized generics" during the 180-day exclusivity period of generic pharmaceutical patent challenges. Generic drug industry leaders say that this move is necessary to restore the pharmaceutical market balance created by the Hatch-Waxman Act of 1984. That law created the 180-day exclusivity period as an incentive to encourage generic companies to challenge questionable or frivolous brand pharmaceutical patents as part of the complex, intellectual property-based US generic drug approval process.

When a drug patent holder repackages its own branded drug and markets it through a subsidiary or third party as an authorized generic during the 180-day period of exclusivity, the incentives designed to produce generic competition are reduced or eliminated, industry officials contend.

A bill to curb this practice was introduced in the House by Rep Jo Ann Emerson (R, Mo). It is a companion to similar Senate legislation sponsored by Sen John D. Rockefeller IV (D,WVa).

The House proposal drew immediate support from officials at the Generic Pharmaceutical Association (GPhA). They said that the restrictions on authorized generics would "eliminate a tactic that has been utilized extensively by the brand pharmaceutical industry over the past 3 years, to the detriment of consumers."

GPhA President and Chief Executive Officer Kathleen Jaeger said that "authorized generics have upset the balance of the Hatch-Waxman Act by discouraging investment in generic patent challenges that have previously delivered billions of dollars in savings to American consumers." At the same time, this strategy tends to "reward the brand companies for undermining the Hatch-Waxman system," she said.

A new independent analysis of authorized generics released by GPhA concludes that the practice of introducing authorized generics could "significantly reduce incentives for independent generic firms to challenge invalid brand name patents and to develop noninfringing processes." The study also found that the continued introduction of authorized generics "will lead generic firms to be less aggressive in competing against brand name firms, and the ultimate losers will be consumers."