A Welfare Analysis of Prohibitions on Reverse Payments in Pharmaceutical Patent Disputes, with and without the Hatch-Waxman Entry Injunction
![handle is hein.journals/gmlr12 and id is 849 raw text is: 2004]
A WELFARE ANALYSIS OF PROHIBITIONS ON
REVERSE PAYMENTS IN PHARMACEUTICAL PATENT
DISPUTES, WITH AND WITHOUT THE HATCH-
WAXMAN ENTRY INJUNCTION
Sencer Ecer and Richard S. Higgins*
INTRODUCTION
The Hatch-Waxman Act (HWA) is a 1984 law that governs the ap-
proval process for generic drugs and the potential competition between
generic and branded drugs prior to the patent expiration date. One impor-
tant aspect of the HWA is to provide the brand name drug patent holder an
automatic thirty month stay of approval by the Food and Drug Administra-
tion (FDA) of the Abbreviated New Drug Application (ANDA) for the
generic product. The HWA also provides a 180 day period of marketing
exclusivity to the first generic drug manufacturer to file for an ANDA.
These two aspects of the HWA aim to both expedite the approval and prof-
itability of investing in generic drugs and provide a counterbalancing incen-
tive for brand-name drug manufacturers to innovate.'
Both the thirty month stay and 180 day exclusivity aspects of the law
have led to some controversy in practice. In particular, the brand-name
companies used repeated thirty month stays to keep a generic product off
the shelves by listing additional patents to the FDA's Orange Book after
an applicant filed an ANDA. On the other hand, some generic firms, after
obtaining FDA approval, agreed to license and market the brand-name
product instead of their own ANDA products, thereby preventing later ap-
plicants from gaining FDA approval, since the first applicant would never
trigger its exclusivity period. These controversial aspects of the HWA are
widely referred to as loopholes.
On December 8, 2003, Congress enacted the Medicare Prescription
Drug, Improvement, and Modernization Act (MMA), which implemented
significant changes to the Hatch-Waxman Act. Most relevant to the issues
* Corresponding author: Richard S. Higgins, Director, LECG, LLC, 1725 Eye Street, NW, Suite
800, Washington, DC 20006). Phone: (202) 973 6659, Fax: (202) 466-4487. Email address: rhig-
gins@lecg.com; Sencer Ecer is a Senior Economist at LECG, Washington, DC. We thank Yee Wah
Chin, Amy Hebert, and Jack Staines for comments. All errors are solely ours. The views expressed here
are ours and should not be construed as representing the positions of other experts at LECG.
1 The ANDA procedure allows the generic manufacturer to bypass various safety and effective-
ness requirements as long as it can demonstrate a bioequivalency between its drug and the pioneer's
approved drug.](ViewImageLocal?handle=hein.journals/gmlr12&div=37&collection=&method=preview&ext=.png&size=3)
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