Sen. Orrin Hatch has introduced a bill that would augment the Hatch-Waxman Act, limiting challengers ability to proceed with patent challenges both in court and at the PTAB. Following is the introduction of the “Hatch-Waxman Integrity Act of 2018.” The full text of the bill is available here, with section-by-section analysis accessible here.
Hatch-Waxman Integrity Act of 2018
In 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act (the “Hatch-Waxman Act”), which carefully balanced incentives for both pharmaceutical innovation and drug affordability. To incentivize innovation by branded drug manufacturers, the Hatch-Waxman Act included various protections for patent terms and data exclusivity. But to incentivize market entry of low-cost generic drugs, the Hatch-Waxman Act also amended the Food, Drug, & Cosmetic Act (“FD&C Act”) by creating two abbreviated drug approval pathways—Sections 505(b)(2) and 505(j)—and by clearly delineating a pathway for challenging drug patents.
Congress has also enacted rules comparable to the Hatch-Waxman Act for biologic products. In 2009, Congress enacted the Biologics Price Competition and Innovation Act (“BPCIA”) to both provide incentives for biologic innovation and create an abbreviated pathway—Section 351(k) of the Public Health Service Act (“PHS Act”)—for market entry of lower-cost biosimilar products.
In 2012, Congress enacted the America Invents Act to fix a problem unrelated to drug/biologic innovation and drug/biologic affordability; it created the inter partes review (“IPR”) and post-grant review (“PGR”) processes to combat the growing problem of patent trolls.
Even though Congress did not intend to upset its drug/biologic-specific Hatch-Waxman and BPCIA procedures with the enactment of the IPR and PGR processes, generic drug and biosimiliars manufacturers have increasingly used the IPR process to circumvent the Hatch-Waxman Act and BPCIA patent challenge processes while nonetheless taking advantage of their abbreviated processes for drug entry. Moreover, hedge funds with no interest in manufacturing or marketing drugs have filed IPR challenges against drug patents with the goal of profiting from stock market declines triggered by the IPR filings—a type of market manipulation.
The Hatch-Waxman Integrity Act of 2018 would close the loophole unintentionally created by the America Invents Act. To restore the careful balance of the Hatch-Waxman Act and the BPCIA, and to prevent the IPR or PGR processes from undercutting them, the FD&C Act and the PHS Act would be amended to prevent using IPR (or PGR) challenges to circumvent the specific patent-challenge processes for drugs and biologics painstakingly created by Congress. In addition, the federal securities rules would be clarified to indicate that filing IPR patent challenges and profiting from resulting stock price changes is a form of prohibited market manipulation.