White House Targets Generic Exclusivity to Lower Drug Prices

On February 13, 2018, Fish Principal and Regulatory and Government Affairs Practice Group Leader, Terry Mahn, was quoted in the Bloomberg BNA article reproduced in full below.

By Bronwyn Mixter

The Trump administration is targeting generic drug exclusivity as a way to increase competition and lower drug prices.

In the 2019 budget request released Feb. 12, the administration said ending the foot-dragging practices of some generic makers would save Medicare an estimated $1.8 billion over a decade by speeding up access to lower-cost drugs. Legislation would be needed to achieve this change, and some attorneys contacted by Bloomberg Law were skeptical about whether the change would help lower costs and spur competition.

At issue is how the first generic company to file an application for a particular drug at the Food and Drug Administration behaves at the front of the approval queue. The first company to file a generic application at the FDA gets 180 days of exclusivity for their product, meaning that in general no other generic can be sold for a lucrative half-year period once the branded drug loses patent protection. But sometimes a generic maker will essentially park its exclusivity and not sell the drug, meaning the second and subsequent companies cannot reach the market and help lower a drug’s cost.

Henry Waxman, a former Democratic congressman from California and a sponsor of the 1980s law that created the generics approval process, said the problem with parked exclusivity comes from patent litigation settlements between generic and branded companies.

Waxman said in a Feb. 13 online posting that some drug manufacturers "misuse the exclusivity by entering into agreements with other manufacturers to suppress competition through pay-for-delay or reverse-payment" agreements. In such agreements, branded drugmakers pay a potential generic competitor to stay off the market. The article by Waxman, who now runs the public affairs firm Waxman Strategies, was coauthored by former HHS officials Bill Corr and Kristi Martin and published by the Commonwealth Fund, a New York-based foundation that advocates for better health care coverage and quality.

Eroding an Important Incentive

The Trump administration proposal would essentially start the exclusivity period’s clock running even if a first-filing generic hasn’t started selling its drug yet. But profit margins for the generic industry are very low and the proposal would cut into one incentive that companies rely on, Kurt Karst an attorney at Hyman, Phelps & McNamara in Washington who advises drugmakers, told Bloomberg Law Feb. 13.

A generic trade group said the real problem with drug costs involves what branded companies are doing, not generic makers. The 180-day exclusivity "has fostered generic drug competition for the benefit of patients," Jeff Francer, senior vice president and general counsel for the Association for Accessible Medicines (AAM), the trade group for industry, said in a Feb. 12 statement. "We do not see how the proposal in question would help address the gaming of the patent or exclusivity system by brand name drug companies who drive drug costs for patients."

Members of the AAM include Baxter Healthcare Corp., Teva Pharmaceuticals USA, and Mylan N.V.

Start the Clock

The proposal supported by the administration would make the tentative approval of a second generic drug, if it’s blocked by the first filer’s behavior, a trigger of the first applicant’s 180-day exclusivity. This means the clock would start ticking on the 180 days for the first filer once a second filer receives tentative approval, even if the first filer’s product isn’t on the market due to patent litigation or other issues.

While there could be short-term savings to Medicare, over the long term the proposal would decrease patent challenges by generic companies and could even decrease the number of generics on the market, attorney Chad A. Landmon told Bloomberg Law Feb. 12. "Ultimately you may end up with less generic competition" because of the proposal, Landmon said. Landmon, an intellectual property and food and drug law attorney, is with Axinn, Veltrop & Harkrider LLP in Hartford, Conn., and Washington.

Attorney Terry Mahn also told Bloomberg Law Feb. 12 the proposal would actually eliminate exclusivity because if the exclusivity period is triggered by the second generic getting tentative approval, the first generic could get no benefit from the exclusivity because they could be tied up in litigation and unable to get their product on the market. Mahn is a principal with Fish & Richardson PC and head of the firm’s regulatory and government affairs practice group. He also is a Bloomberg Law advisory board member.

Solution to a Nonexistent Problem

It’s hard to "park" generic exclusivity and the proposal comes "up with a solution to a problem that really isn’t a big problem," Mahn said.

The Medicare Modernization Act (MMA) of 2003 (Pub. L. No. 108-173) took care of most of the issues with generic companies parking exclusivity, Mahn and Landmon told Bloomberg Law. That law requires the FDA to forfeit the first applicant’s 180-day exclusivity period if the applicant fails to attain certain milestones within certain deadlines.

Mahn said before the MMA was enacted, parking generic exclusivity was "easy and it was happening a lot," but now it doesn’t happen as much.

To contact the reporter on this story: Bronwyn Mixter,[email protected]

Reproduced with permission from Pharmaceutical Law & Industry Report, 16 PLIR 211 (Feb. 16, 2018). Copyright 2018 by The Bureau of National Affairs, Inc. (800-372-1033)