On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“the Act”). By a vote of 54-44, the Senate approved the Medicare prescription drug plan on November 25, 2003, while the House of Representatives had approved the plan in the early morning hours of November 22, 2003, by a narrow 220-215 vote. Passage of this legislation is considered the most significant restructuring of Medicare since its creation in 1965.

While the focus of this law is on Medicare, one small section, Title XI, “Access to Affordable Pharmaceuticals” modifies certain provisions covering generic drugs that were set forth in the Hatch-Waxman Act. These changes will likely have a significant impact on both innovator pharmaceutical companies with patents listed in the FDA’s Orange Book and generic pharmaceutical companies that file “Paragraph IV” certifications along with their Abbreviated New Drug Applications (ANDAs).

The Act changes the Food, Drug, and Cosmetic Act (Section 505, or 21 U.S.C. 355) in a number of significant aspects:

Only One 30-Month Stay Allowed

The Act allows only one 30-month stay per product when litigation ensues over Orange Book listed patents and an applicant’s ANDA. Under the new provisions, FDA approval of an ANDA submitted with a Paragraph IV certification (which results in a lawsuit) is effective within 30 months, whether or not the innovator “late lists” any newer patents during the pending lawsuit. Previously, the innovator could receive successive 30-month stays for late listed patents. If, prior to 30 months, a federal district court decides that the subject patent is invalid or not infringed, the FDA’s approval is effective upon entry of the district court’s decision. This section of the Act clarifies that it is the district court’s decision, rather than the appeals court’s decision, which results in approval.

The 180-Day Exclusivity May Be “Shared” by Generic Companies

Under the Act, the “First Applicant” to submit a substantially complete ANDA with a Paragraph IV certification will be eligible to receive 180 days of marketing exclusivity. The Act specifies that the submission is measured as of the day (not the time of day) the ANDA is filed. This change may result in “shared exclusivity” when more than one applicant submits an ANDA for the same product on the same day. The Act also provides that the 180-Day exclusivity period is measured from first day of marketing the listed drug. The previous law started the 180-day exclusivity period from the date of a favorable district court decision. This change allows generic companies the opportunity to “gear up” for launch after the litigation has ended.

An ANDA Applicant May File a Declaratory Judgment Action Against the Patent Holder

The Act allows an ANDA applicant to bring a declaratory judgment action against an Orange-Book listed patent holder under certain, specific conditions:

1. when the 45-day notice period for filing of infringement by the innovator has expired, and
2. if the applicant’s Paragraph IV certification notice asserted non-infringement and the notice was accompanied by a redacted ANDA related to the assertion of non-infringement.

If these conditions are satisfied, an ANDA applicant may seek a declaratory judgment that the patent is invalid or will not be infringed by the drug for which the applicant seeks approval.

The Senate had originally proposed a stricter version of a declaratory judgment provision, stating that the “failure of the [NDA holder] to bring an action for infringement of a patent that is the subject of [a Paragraph IV certification within the 45 day period] shall establish an actual controversy between the [ANDA] applicant and the [NDA holder] sufficient to confer subject matter jurisdiction in the courts of the United States [for a declaratory judgment of invalidity or non-infringement]” (emphasis added). Yet in August 2003, the Bush administration questioned the constitutionality of the Senate provision, and recommended that ANDA applicants be required to satisfy the already-existing requirements of the Declaratory Judgment Act.

The new declaratory judgment provision in the Act brings about the question: What circumstances will cause a “case or controversy” to be found for purposes of the Declaratory Judgment Act? For example, a federal district court recently held that the listing of a patent in the Orange Book, without more, is not sufficient threat of a lawsuit. (Teva Pharmaceuticals USA Inc. v. Pfizer Inc., D. Mass., No. 03-CV-10167-RGS, 12/8/03). But could the lapse of the 45-day period after receipt of a Paragraph IV certification notice implicitly suggest there is no case or controversy? Answers to this and other questions remain for the courts to decide.

The ANDA Applicant May file a Counterclaim to “De-list” a Patent from the Orange Book

The Act also allows an ANDA applicant to assert a counterclaim seeking an order requiring the NDA holder to correct or delete patents listed in the Orange Book, when the ANDA applicant has been sued for patent infringement. The ANDA applicant may assert that either the listed patent does not claim the drug for which the application was approved, or does not claim an approved method of using the drug. This section of the Act does not provide an independent cause of action, and no damages are available under such a counterclaim.

Certain Conditions Result in Forfeiture of the 180-Day Exclusivity Period

Under the Act, a “first applicant” may forfeit its exclusivity period if it fails to market its product within 75 days after it receives FDA approval or 30 months after ANDA submission, whichever is earlier; or 75 days after a non-appealed favorable district court or favorable Federal Circuit decision has been rendered; or 75 days after a favorable settlement has been entered; or 75 days after the patent expires or is withdrawn, whichever is later. This provision is a significant change from the previous law, which did not have a forfeiture provision. Effectively, this provision extends the actual exclusivity period for any generic company that is not prepared to launch its new product upon receiving a favorable court decision.

Thus, while the Access to Affordable Pharmaceutical section of the Act received scant attention in the mainstream media, and was only obliquely referenced by the December 8, 2003, White House press release (“[a]ll seniors will save from steps to bring safe, lower cost generic drugs to market sooner”), the changes to the Hatch-Waxman Act will be felt by both ANDA applicants and holders of Orange Book-listed patents.