Senator Orrin Hatch (R-Utah), the namesake and coauthor of the Hatch-Waxman Act, proposed (but has not yet introduced) an amendment titled the “Hatch-Waxman Integrity Act of 2018” during the Senate Judiciary Committee held on June 13, 2018. The purpose of the amendment, according to press release from the Senator’s Office, is to “ensure that Hatch-Waxman continues to operate as originally intended by protecting the ability of generic drug companies to develop low-cost drugs while at the same time ensuring brand-name companies have sufficient protections in place to recoup their investments.”
The eponymous Hatch-Waxman Act of 1984 (“HWA”) carefully balanced incentives for pharmaceutical innovation and drug affordability, by providing brand companies with various protection for patent terms and data exclusivity while creating pathways for generic makers to obtain abbreviated drug approval and to challenge drug patents. To strike similar balance between innovation and affordability for biologic drugs, Congress has enacted in 2009 the Biologics Price Competition and Innovation Act (BPCIA), which provided incentives for biologic innovators and created abbreviated pathway for biosimilar makers.
The delicate balance, states the detailed summary of the amendment, has been unexpectedly undercut by the inter partes review (IPR) and post grant review (PGR) proceedings in front of the Patent Trial and Appeal Board (PTAB), created in 2012 under the America Invents Act (AIA) primarily to combat the problem of patent trolling in the tech community. Generic drug and biosimilar manufacturers are increasingly utilizing the IPR/PGR proceedings to challenge drug/biologic patents while circumventing the HWA and BPCIA regimes, but are nonetheless taking advantage of the abbreviated drug/biologic approval processes provided therein. Such practice led to added litigation pressure on innovator companies and allowed generic makers who lost in Hatch Waxman litigation a second bite at the apple, i.e., follow-on challenge to a drug patent.
The Hatch-Waxman Integrity Act of 2018 aims to “close the loophole unintentionally created” by the AIA and “restore the careful balance” of the HWA and the BPCIA. Generic or biosimilar makers wishing to challenge a brand drug or biologics patent, and related entities (“any party in privity with the applicant”), will be required to (i) choose between the specific HWA or BPCIA patent procedures and the PTAB proceedings under the AIA, rather than taking advantage of both; and (ii) not rely “in whole or in part on any decision issued by” the PTAB as the evidence that the brand patent is invalid in the HWA or BPCIA procedures. Further, the Securities Exchange Act will be clarified to specify that filing PTAB patent challenges to profit from short sale of the patent owner stock, as practiced by certain hedge funds, is a form of the prohibited “manipulative or deceptive device.”
The HWA/BPCIA patent procedures afford generic/biosimilar makers substantial advantages including the ability to rely on the innovator’s safety and efficacy studies for FDA approval, whereas the PTAB proceedings, albeit presenting cheaper and faster forums for patent challenge than HWA/BPCIA, does not provide the advantages of a streamlined approval process. As such, a practical outcome of the bill, assuming it is introduced and enacted prior to Senator Orrin’s expected retirement in January 2019 in its current form, would be preservation of HWA or BPCIA regimes as the standard path as it has been for the past two decades while keeping IPR/PGR proceedings as alternate options where other interest come into play.