Prescription
Drug Pricing Pathfinder
Statutory Protection
Patent law is crucial to the pharmaceutical industry. A patent is generally
the exclusive right to one's own invention. Products or processes can be patented,
but ideas cannot be patented unless they are applied. Patents are granted by
the U.S. Patent
and Trademark Office.
It is generally agreed that without patent protection there would be insufficient
incentive to undertake the extensive, time-consuming research and development
necessary to bring a drug to market. Patent law has been beefed up to protect
the pharmaceutical industry beyond the normal term to compensate for time "lost"
during the FDA approval process. Additionally, Congress occasionally grants
special patent extensions for certain drugs.
While patents are thought essential to the drug industry,
they also inevitably contribute to higher prices for prescription drugs. Generic
drugs or other reduced-price drugs cannot be produced until the patent expires.
For a helpful, though slightly technical discussion of the role of patents in the pharmaceutical industry, see Viscusi, W. Kip et al., Economics of Regulation and Antitrust, MIT Press (2nd Edition, 1995), Chapter 24.
The following laws provide the basic statutory protection to
drug manufactuers:
1. 20 Year Patent Terms
35 U.S.C. Sec. 154
Currently, patents last for 20 years. The 20-year term is codified at 35 U.S.C.
Sec. 154. (If you look this up in a hard copy, be sure to check the pocket part
in the back of the volume, which updates the statutes--the copy that I looked
at still showed the term as 17 years, but was listed correctly in the pocket
part.)
The 20 year term begins on the date of the patent application. This is
very important for drug manufacturers, because drugs are generally patented
before beginning the FDA approval process. Because the approval process can
take so long, the "effective life" of the patent, that is, the number
of years left on a patent by the time the drug is actually marketed, is often
less than half the original life. For this reason, Congress has enacted a patent
extension provision for pharmaceuticals.
2. Patent Extension Provisions
The Drug Price Competition and Patent Restoration Act (a.k.a. the "Hatch-Waxman
Act")
In 1984, Congress enacted a compromise measure solve two problems in the
pharmaceutical industry. One problem was the delay in approval of generic drugs,
resulting in a delay in the availability of low-cost prescription drugs. The
second was the fact that drug manufacturers "lost" many years of patent
life during the FDA approval process.
To rectify both problems, the Act provided for an accelerated approval process for generic drugs when the drug was identical to one that had already completed the FDA approval process (although the generic drug provision was inadvertently altered by the GATT treaty to require a longer time-lag) and also provided for an extension of a drug's post-FDA approval patent life by up to five years. The two provisions seem to cancel each other out in a way--the patent extension provision allows drug companies to keep exclusive marketing rights for an extra five years, but once the patent expires, generic drugs can enter the market more quickly.
The Act was P.L. 98-417, 98 Stat. 1585. Note that insiders in the pharmaceutical industry tend to refer to this as the "Hatch-Waxman Act," but the U.S. Code and indexes to laws do not call it that--they call it the Drug Price Competition and Patent Restoration Act. If you just use the public law (P.L.) number, you'll be fine. The extension provisions are codified at 35 U.S.C. Sec. 155-156.
2a. Special Patent Extension Bills
Interestingly, Congress occasionally toys with legislation designed to extend the patent protection of certain drugs. In 1996, a measure covering Daypro, an anti-inflammatory drug made by Monsanto (then a unit of G.D. Searle--now part of Pharmacia) was attached to emergency legislation to avert a Government shutdown.
In April of 1999, Congressman Ed Bryant, R-TN, introduced H.R. 1598, designed to effectively extend the patent life on the popular allergy medicine Claritin, as well as six other drugs. The bill garnered 78 co-sponsors before being stalled in Committee; expect additional, similar bills in the next few years. The patents on many high-priced, high-profile drugs will expire over the next few years.
Additional Sources:
- For an interesting, brief article on special patent extension legislation,
see Teresa Riordan, "Patents: Claritin and Six Other Drugs Hope to Geta
Little Congressional Help on Further Patent Protection," The
New York Times, May 10, 1999, Section C, Page 13, Column 4.
- To search for special patent extension bills in Congress, visit the free,
ever-improving legislative web site Thomas.
Thomas allows you to search for current and past bills (bill summaries back
to 1975; full text of bills only back to 1989). Searching can be a bit frustrating
because of the enormous volume of legislation--a search may return an unmanageable
number of hits. Make your search as specific as possible by filling in the sponsor's
name, dates, topics, etc. where prompted.
3. Reimportation
Ban
The Prescription Drug Marketing Act of 1987
This law bans the re-importation of American-made drugs as well as the sale
or trade of drug samples distributed to doctors and pharmacies or hospitals.
The importation ban means that once an American-made drug has been sent out
of the country--to Canada, for instance--it cannot be brought back by anyone
except the original manufacturer. This probably means that technically, the
seniors on the bus trips up in New England are violating the law.
The Prescription Drug Marketing Act was PL 100-293, 102 Stat. 95.
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