Kamakhya Srivastava

The Indian generic pharmaceutical industry is witnessing rapid growth resulting in immense opportunities for firms. Generics worth over USD 40 billion (close to 15% of the total prescription market of the US) are going off patent in the near future. This is certainly going to give an impetus to an industry which always seems to have strategies of innovation in place.

The industry ranks fourth globally in terms of volume and in terms of value, it is ranked thirteenth. The quality of the products is reflected in the fact that the number of Indian manufacturing plants approved by the FDA is next only to those from the US. Indian companies have replaced multinationals in the marketplace with local players dominating a number of key therapeutic segments. Since the acceptance of the TRIPS Agreement, Indian companies have oriented themselves for investment in complex research and development activities like novel drug delivery system and new drug discovery. The industry also shows signs of moving towards greater consolidation through mergers and acquisitions. This is a welcome step in a very fragmented market - about 30,000 entities, but only 300 in the organized sector.

The US pharma market and the patent challenge strategy

The generics sector is set to play a considerable role in the pharmaceutical industry of the future. With major therapeutics coming off patent and increased demand for low cost medication, it is no longer just a peripheral provider of low cost basic medicines. The US market is illustrative. It is the worlds largest for generics and the US FDA operates one of the worlds most authoritative and respected systems of drug regulation. A large section of the US population remains without medical health insurance cover. The need for cheaper medicines could not have been more apparent. Developing and launching patented and innovative drugs quickly is difficult given the uncertainties of drug development, the length of development time and the FDA approval process. Therefore, more and more pharmaceutical and biotech companies are being forced to incorporate a generic strategy into their commercialization plans.

One of the strategies that has been believed to dominate thinking in the pharmaceutical industry is that in order to grow fast, companies have to aggressively pursue investment in both new chemical entities and new products, which could successfully challenge existing patented drugs. This is a high risk-high reward business model. Another strategy that has been found very useful is to file for a patent challenge under Para IV of the Hatch Waxman Act, 1984.[1] Paragraph IV is an important aspect of the Hatch-Waxman Act. Under this system, generic drug firms challenge pioneers drug patents in court. The claim is that that the generic version proposed to be launched by the manufacturer/claimant does not infringe the patent holders version. If successful, the prevailing generic firm obtains a 180-day marketing exclusivity period as the economic reward for its litigation efforts, and consumers benefit from earlier access to low-cost generic alternatives to the brand-name drug.

However, this strategy is not without its opponents. It is argued that resource scare domestic companies should follow a long-term strategy of developing new chemical entities rather than taking a short cut route of patent challenges. Growth, it is said, will come through partnering with multinationals and bagging exclusive contracts for co-developing and manufacturing. Such a strategy is geared to raise resources and close the R&D gap. However, most Indian pharma companies do not consider patent challenge a high risk high reward strategy. The majority of the Para IV filings go without any challenge and the earnings are substantial.

The Hatch Waxman Act - Necessary implication of the Para IV filing with US Food & Drugs Authority

The Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, strikes a balance between the interests of pioneer pharmaceutical companies, competing generic manufacturers and consumers. It creates several modifications to conventional patent law.

1. There are provisions that allow for the extension of the normal term of a patent for up to five years to compensate a patent owner for the marketing time allegedly lost in satisfying government (FDA) regulations requiring proof that a drug is safe and effective before it can be marketed.
2. Special procedures for challenging the validity or infringement of drug patents which, in effect, guarantees the patent owner a statutory preliminary injunction for a period of thirty months unless the adjudication completes in a shorter time.
3. A bounty for challenging patent validity, infringement or enforceability in the form of 180 days of market exclusivity to the first generic applicant to file a patent challenge against any approved drug.
4. A novel statutory exemption from claims of patent infringement for those acts of making, using, or selling a patented invention which are reasonably related to seeking FDA approval to market a drug, provided that no commercial use of a patented invention occurs before the patent expires. [Experimental Use Exemption]

Hatch-Waxman employs a unique procedural framework to manage the interplay between pioneer New Drug Application (NDA) and their generic Abbreviated New Drug Application counterparts (ANDA). Upon filing an NDA, a pioneer firm must provide a list of relevant patents, which are then listed in an FDA publication known as the Orange Book.[2] Subsequent ANDAs must reference these Orange Book listings and make one of four certifications for each patent:

1. The required patent information has not been filed;

2. The patent has already expired;

3. The patent has not yet expired, but will do so prior to FDA approval of the ANDA; or

4. The patent is invalid or will not be infringed by the ANDA.

The most significant and contentious of these is the Paragraph IV certification, because a generic firm is seeking market entry prior to patent expiration. Generic applicants making Paragraph IV certifications must notify the pioneer firm, which then has forty-five days to initiate a patent infringement lawsuit.

Pioneers typically pursue litigation, automatically triggering a thirty-month stay that prevents FDA approval of the ANDA until the earliest of the following dates: patent expiration, a final resolution of the patent litigation, or expiration of the thirty-month period.

If the generic drug manufacturer prevails in the Paragraph IV patent litigation, it is rewarded with a 180-day marketing exclusivity period, during which the FDA cannot approve subsequent generic versions of that drug. This 180-day monopoly can be immensely profitable, and it thus rewards the first Paragraph IV filer for bearing the risks and expenses of patent litigation. Once the exclusivity period has been triggered and expires, the FDA may approve subsequent generics to enter the market.

Generic drug firms now frequently race to file the first Paragraph IV certification in hopes of successfully challenging drug patent(s) in litigation and obtaining the profits of 180-day exclusivity. This process serves as an important patent quality-oversight mechanism that exposes invalid patents and accelerates consumer access to generic drugs.

Jurimetrics on Para IV filing under Hatch Waxman Act

Hatch-Waxman created a regulatory system by specifically authorizing Abbreviated New Drug Application (ANDA) and adopting bioequivalence as the new standard for generic drug approval. Thus a generic drug manufacturer is only required to demonstrate that its product contains the same active ingredient and basic pharmacokinetics as the brand-name drug.[3] The requirement with respect to safety and efficacy would be determined by relying on the pioneers clinical trial data. This step was taken to assist and facilitate FDA review.

This authorization was on the assumption that the duplicates of the pioneer drugs would be equivalent to the innovators drugs plus or minus twenty percent of the blood serum bioavailability of the active ingredient. This margin becomes critical in cases of drugs having narrow therapeutic band in the sense that there would be a fifty percent swing between the higher and lower end of the bioavailability of the drug according to the position of the active ingredient at the highest and lowest ends of the plus and minus twenty percent band. This has a direct bearing on the safety and efficacy of the generic, thus bringing inconsistency in the assumption that the bioequivalence data is surrogate to safety and efficacy regarding similarity of the generic with the pioneers drug. [4]

The reliance placed by FDA on the blood serum bioavailability of the active ingredient is an additional opportunity to point out oversights in the patented drug. Pharma Analysts with international Investment Bank also view this strategy as justifiable for large companies and advice in the process of earmarking a corpus in the annual budget for expenses related to such activities.

(Kamakhya Srivastava is an associate at LEX ORBIS, an Intellectual Property practice in New Delhi.)

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[1]Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (codified in scattered sections of 21 U.S.C., 35 U.S.C., and 42 U.S.C.).

[2] See U.S. Dept of Health & Human Servs. et al., Electronic Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations,

[3] An active ingredient is the chemical compound that produces the drugs intended therapeutic effect.

[4] See Overview of the Hatch Waxman Act and its impact on the drug development process, Gerald J. Mossinghoff,