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1
No Parking Here: A Review of Generic Drug 180-Day
Exclusivity and Recent Reform Proposals
Victor L. Van de Wiele, LL.B., LL.M.*
Jonathan J. Darrow, S.J.D., LL.M., J.D., M.B.A.^
Aaron S. Kesselheim, M.D., J.D., M.P.H.'†
Abstract:
In 1984, Congress enacted the Drug Price Competition and Patent Term
Restoration Act (Hatch-Waxman Act) to facilitate the market entry of generic
drugs after brand-name drugs’ patent exclusivity ended. To incentivize generic
manufacturers to challenge brand-name manufacturers’ patents, a 180-day
exclusivity accrued to the first manufacturer to successfully litigate the validity
or scope of a brand-name drug patent. However, brand-name and generic
manufacturers have found ways to strategically “park” the 180-day exclusivity to
delay generic entry and competitive drug markets. Congress revised the statute in
2003, but concerns continued. In 2019, three Congressional bills were introduced
to further revise the 180-day exclusivity framework. This Article reviews the
history of the 180-day provision, evaluates what types of strategic behavior
remained after 2003, and considers whether the recent legislative proposals are
likely to offer improvement.
* Affiliated researcher at the Program On Regulation, Therapeutics, And Law (PORTAL) in
the Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine,
Brigham and Women’s Hospital. His work is supported by Arnold Ventures.
^ Associate Professor of Law at Bentley University, an Assistant Professor of Medicine at
Harvard Medical School, and an Associate Scientist at PORTAL in the Division of
Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham and Women’s
Hospital. LL.M. waived. His work is supported by ACCISS, Arnold Ventures, the Commonwealth
Fund, the Greenwall Foundation, the Kaiser Permanente Institute for Health Policy, West Health,
and under a Novo Nordisk Foundation grant for a scientifically independent Collaborative Research
Programme (grant NNF17SA0027784).
'† Professor of Medicine at Harvard Medical School and the Director of PORTAL in the
Division of Pharmacoepidemiology and Pharmacoeconomics, Department of Medicine, Brigham
and Women’s Hospital. His work is supported by Arnold Ventures and by a Novo Nordisk
Foundation grant for a scientifically independent Collaborative Research Programme (grant
NNF17SA0027784).
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
2
TABLE OF CONTENTS
INTRODUCTION ..................................................................................................... 3
I. THE 180-DAY EXCLUSIVITY FRAMEWORK ..................................................... 5
A. EARLY PROBLEMS WITH 180-DAY EXCLUSIVITY ......................................... 6
B. REFORMS OF THE 2003 MEDICARE MODERNIZATION ACT ........................... 8
C. POST-2003 IMPLEMENTATION OF 180-DAY EXCLUSIVITY .......................... 10
II. THE PROSPECT OF ADDITIONAL 180-DAY EXCLUSIVITY REFORM ........... 12
CONCLUSION ....................................................................................................... 14
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
3
INTRODUCTION
In 1984, Congress enacted the Drug Price Competition and Patent Term
Restoration Act (Hatch-Waxman Act) to rebalance the interests of patent holders
and generic drug companies in the wake of the 1962 Kefauver-Harris Drug
Amendments. One of the law’s major innovations was a new framework
designed to facilitate the market entry of generic drugs by incentivizing generic
manufacturers to challenge brand-name manufacturers’ patents.
1
To this end, the
law required brand-name manufacturers to disclose to the Food and Drug
Administration (FDA) those patents that were claimed to cover their drugs. The
agency would then list those patents in a publication entitled “Approved Drug
Products with Therapeutic Equivalence Evaluations” (informally known as the
“Orange Book”). Because it can be difficult to determine which of the
approximately 350,000 patents issued each year are relevant to a given drug,
2
this
new system promoted transparency and helped generic drug manufacturers assess
the risk and feasibility of entering the market. The Act also provided that filing a
generic drug application with the FDA could be an act of patent infringement,
allowing any patents listed by the brand-name manufacturers to be reviewed in
court and potentially invalidated.
3
Traditional patent infringement rules generally
require patent owners to wait to sue until a potentially infringing product is made,
used, sold, offered for sale, or imported into the United States. Through the Act’s
process, the intellectual property landscape could potentially be resolved sooner
than was previously possible.
Patent litigation, however, is expensive, time-consuming, and, if successful,
could in some cases immediately open the market to all competitors and not just
the patent challenger.
4
To incentivize a generic drug manufacturer to engage in
patent challenges, the Act offered as a prize a period of generic drug exclusivity
to the first manufacturer that asserted the invalidity or non-infringement of the
brand-name patents. Exclusivity would be granted even if the patent holder did
not bring suit or if the case settled rather than leading to patent invalidation or a
finding of non-infringement.
5
Then, for 180 days after the FDA received notice
1
Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98
Stat. 1585; 21 U.S.C. § 355(j)(5)(B)(iv) (2018).
2
Reed F. Beall & Aaron S. Kesselheim, Tertiary Patenting on Drug-Device Combination
Products in the United States, 36 NATURE BIOTECHNOLOGY 142, 143 tbl.1 (2018) (indicating an
average of approximately three unique patents per new drug by 2016).
3
35 U.S.C. § 271 (2018).
4
Evan J. Wallach & Jonathan J. Darrow, Federal Circuit Review of USPTO Inter Partes
Review Decisions, by the Numbers: How the AIA Has Impacted the Caseload of the Federal
Circuit, 98 J. PAT. & TRADEMARK OFF. SOC’Y 105, 118 (2016).
5
Food & Drug Admin., Guidance for Industry: 180-Day Exclusivity: Questions and Answers,
U.S. DEP’T HEALTH & HUM. SERVS. 10 (Jan. 2017), https://www.fda.gov/regulatory-
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
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that the first generic was being marketed, the FDA could not approve other
competing generics. Free-riding by other generic manufacturers on the patent
challenger’s efforts would therefore be temporarily curtailed. For those 180 days,
only the first generic product and the brand-name product could be sold, creating
a potentially lucrative duopoly for the generic manufacturer that would allow it to
sell its product for a much higher price than it could if other generic competitors
were allowed to enter the market.
The Hatch-Waxman Act has been widely viewed as a success. In the years
following its enactment, annual generic drug approvals increased from a median
of 136 in the years 1970–1984, to 284 in 1985–2012, and to 588 in 2013–2018.
6
But the 180-day exclusivity incentive has remained controversial. Generic
manufacturers consider it to be a crucial feature supporting the growth of the
international generic drug industry.
7
But enterprising brand-name and generic
manufacturers have found ways to strategically use the 180-day exclusivity to
delay generic entry and competitive drug markets. For example, in the years
following 1984, some brand-name and generic manufacturers settled patent
litigation with payments made to the generic that prevented or delayed the start
of the 180-day period. Such “parking” also prevented entry of other generic
competitors that were required by law to wait until the 180-day period had
elapsed.
Congress substantially revised the statute in 2003 to address parking, yet
sixteen years later, legislators and commentators continue to worry about it.
8
In
2019, three congressional bills were introduced that sought to further revise the
180-day exclusivity framework. To understand whether such additional changes
to the 180-day exclusivity period are needed, we reviewed the history of the
provision and evaluated what types of strategic behavior remained after 2003.
Finally, we considered whether the recent legislative proposals are likely to
improve the current framework.
information/search-fda-guidance-documents/guidance-industry-180-day-exclusivity-questions-and-
answers.
6
Jonathan J. Darrow, Jerry Avorn & Aaron S. Kesselheim, FDA Regulation and Approval of
Pharmaceuticals, 1983-2018, 323 JAMA 164 (2020).
7
AAM Position Paper on the HHS 180-Day Exclusivity Proposal, ASS’N FOR ACCESSIBLE
MEDS. (Mar. 2018), https://accessiblemeds.org/resources/fact-sheets/aam-position-paper-hhs-180-
day-exclusivity-proposal.
8
House E&C Health Subcommittee Holds Hearing on Reducing Barriers to Market
Competition for Prescription Drugs, ERNST & YOUNG: TAX NEWS UPDATE (Mar. 13, 2019),
https://taxnews.ey.com/news/2019-0671-house-e-and-ampc-health-subcommittee-holds-hearing-
on-reducing-barriers-to-market-competition-for-prescription-drugs.
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
5
I. THE 180-DAY EXCLUSIVITY FRAMEWORK
Under the Hatch-Waxman Act, brand-name manufacturers were required to
list with the FDA information about key patents claiming their drugs. Generic
manufacturers later seeking FDA approval of copies of brand-name drugs were
required to make one of four certifications with respect to these patents: (1) that
no patents covering the drug had been listed by the FDA (Paragraph I
certification); (2) that any listed patents had expired (Paragraph II certification);
(3) that the drug would not be marketed until the patents expired (Paragraph III
certification); or (4) that listed patents were invalid or would not be infringed by
the generic product (Paragraph IV certification). A Paragraph IV challenge was
deemed an artificial act of infringement, which allowed brand-name
manufacturers to initiate litigation over the validity and scope of the patents years
earlier than under traditional patent law rules. The Act provided that the generic
drug could not be approved until that litigation ended or thirty months elapsed
from when the patent holder received notice of the Paragraph IV certification,
whichever came first. In facilitating litigation and adjudication of patents
protecting a brand-name drug, Paragraph IV challenges served a social utility
function: since a Paragraph IV challenge could lead to the invalidation of patents
that should not have been granted in the first place or could help demonstrate
how to manufacture a bioequivalent generic product without infringing the
patents, cheaper generics could be made available to patients sooner. To
incentivize Paragraph IV challenges, the Act offered the first generic filer of an
application containing a Paragraph IV certification the ability to earn 180 days of
generic exclusivity.
The 180-day duopoly could be very lucrative for generic manufacturers.
Unlike in many countries around the world, drug manufacturers in the United
States are treated like manufacturers of nearly all other products in that they can
freely set the prices of their offerings. When the existing patent system
(established in 1790) and this traditional free-market pricing philosophy were
joined by expanding drug insurance coverage beginning with the federal
Medicare and Medicaid programs in the 1960s, U.S. drug prices were free to rise
to unprecedented levels, at least until patents expired.
9
Following patent expiration, drug prices can drop dramatically. Generic
manufacturers have much lower research, development, and marketing
expenditures than brand-name manufacturers and can sell their products at a
profit for a price much closer to the marginal cost of production. For large
9
Jonathan J. Darrow & Donald W. Light, Beyond the High Prices of Prescription Drugs: A
Framework to Assess Costs, Resource Allocation, and Public Funding, 40 HEALTH AFFS. 281
(2021).
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
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markets that can attract ten or more generic manufacturers, prices have
eventually dropped 79% or more compared to the brand-name price
10
(though
most generic drug markets have four or fewer competitors
11
). Even in markets
that will eventually attract many competitors, the duopoly facilitated by the 180-
day exclusivity period means that the sole generic manufacturer is not pressured
by other generics to sell its product for such low prices and may introduce its
product at only a 10–15% discount compared to the brand-name product.
12
Generic manufacturers could therefore make substantial profits during the six-
month period when prices would be close to the brand-name drug price.
A. Early Problems with 180-Day Exclusivity
With massive revenues sometimes at stake, manufacturers figured out how
to strategically deploy the Hatch-Waxman Act process in ways that did not result
in a timely court resolution facilitating widespread generic entry. These tactics
were motivated by the manufacturers’ goal of disincentivizing generic entry and
preserving market exclusivity which, in turn, would safeguard profits. In some
cases, generic and brand-name drug manufacturers entered into settlement
agreements arising from the patent litigation, leaving the patents intact. When
these settlements involved an agreement to delay generic entry (and thereby the
start of the 180-day exclusivity period) in return for cash payments from the
brand-name manufacturer to the alleged generic infringer, they became known as
“reverse payment” (or “pay-for-delay”) agreements. These agreements caught the
attention of the Federal Trade Commission (FTC) for potentially violating
antitrust laws.
In a 2002 report, the FTC observed that from 1992 through 2000 there were
82 brand-name drug products associated with a Paragraph IV certification
(excluding 22 products for which patent litigation was pending court
resolution).
13
Of these, the patent holder did not sue the first filer in 29 instances
(35%). Of the remaining 53 brand-name products with resolutions, 14 ended with
settlement agreements, including 9 (11% of 82) that involved cash payments of
between $1.75 million and $132.5 million by the brand-name manufacturer to the
10
Chintan V. Dave, Abraham Hartzema & Aaron S. Kesselheim, Prices of Generic Drugs
Associated with Numbers of Manufacturers, 377 NEW ENG. J. MED. 2597, 2598 fig.1 (2017).
11
Chintan V. Dave, Aaron S. Kesselheim, Erin R. Fox, Peihua Qiu & Abraham Hartzema,
High Generic Drug Prices and Market Competition: A Retrospective Cohort Study, 167 ANNALS
INTERNAL MED. 145, 146 tbl.1 (2017).
12
Id.
13
Generic Drug Entry Prior to Patent Expiration: An FTC Study, FED. TRADE COMM’N 15
(July 2002), https://www.ftc.gov/sites/default/files/documents/reports/generic-drug-entry-prior-
patent-expiration-ftc-study/genericdrugstudy_0.pdf. A total of 130 brand-name drug products were
subject to at least one Paragraph IV certification from 1984 to January 2001, but the FTC study
included only the most recent 104 of these. Id. at 10.
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
7
first generic applicant.
14
Although reverse-payment settlements were therefore
small in number compared to the 8,019 generic drug applications filed between
1984 and 2000,
15
the incentive to enter into such settlements would be greatest in
markets with the largest profit potential, and could thus exert a significant impact
on public expenditures.
Brand-name manufacturers used other tactics to undermine the 180-day
exclusivity incentive. For example, brand-name manufacturers could sell their
already-approved product in the form of an “authorized generic.” Although the
authorized generics are exactly the same drug products as those packaged and
sold under the corresponding brand name, they simulate a three-manufacturer
oligopoly that increases price competition and thereby reduces the value of the
180-day exclusivity to the first generic entrant. Another tactic involved brand-
name manufacturers listing with the FDA new patents covering their drugs that
were issued after the filing of the generic drug application, which in turn meant
that the first-filer had to provide a new Paragraph IV certification as to those
patents. Because the FDA considered each Paragraph IV certification to trigger a
30-month stay during which time no other generics could be approved, brand-
name manufacturers could obtain additional exclusivity when such patents were
issued.
16
Yet another brand-name manufacturer strategy involved delisting
patents that were the subject of Paragraph IV challenges if it appeared the patents
would be invalidated in court. The FDA initially took the position that the
practice of patent delisting canceled the 180-day exclusivity, but the FDA’s
interpretation was later overturned in court, removing the incentive to delist.
17
Gaming related to the 180-day exclusivity period also arose on the generic
side. For example, in their zeal to win the race to be first-filers, some generic
manufacturers submitted their Paragraph IV certifications even before their
testing, applications, and manufacturing facilities were ready. With the right to
180-day exclusivity in hand, the generic manufacturer might then take an
extended period of time to cure application deficiencies and obtain FDA
approval, preventing other generic drug companies from marketing their products
in the meantime.
18
For example, in 2002, Ranbaxy submitted its application for
14
Id. at 32 tbl.3-3; In re Nexium Antitrust Litigation, PUB. CITIZEN,
https://www.citizen.org//re-nexium-antitrust-litigation (discussing In re Nexium Antitrust Litig.,
777 F.3d 9 (1st Cir. 2015)); Generic Drug Entry Prior to Patent Expiration: An FTC Study, supra
note 13, at 31.
15
Generic Drug Entry Prior to Patent Expiration: An FTC Study, supra note 13, at 10; ANDA
(Generic) Drug Approvals in 2002, U.S. FOOD & DRUG ADMIN., https://www.fda.gov/drugs/first-
generic-drug-approvals/anda-generic-drug-approvals-previous-years
16
Apotex, Inc. v. Thompson, 347 F.3d 1335, 1340 (Fed. Cir. 2003).
17
Ranbaxy Lab’ys Ltd. v. Leavitt, 469 F.3d 120 (D.C. Cir. 2006).
18
Shashank Upadhye, There’s a Hole in My Bucket Dear Liza, Dear Liza: The 30-Year
Anniversary of the Hatch-Waxman Act: Resolved and Unresolved Gaps and Court-Driven Policy
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
8
generic atorvastatin (Lipitor), a blockbuster treatment for high cholesterol, which
the FDA did not approve until 2011, following 14 amendments.
19
Another
example of delaying the 180-day exclusivity trigger entailed a manufacturer that
sought approval of a generic version of carbamazepine (Tegretol), a treatment for
seizures.
20
Its Abbreviated New Drug Application (ANDA) had been submitted
in 2003 and was amended over 20 times before it was finally approved in 2011.
21
B. Reforms of the 2003 Medicare Modernization Act
Recognizing that the Hatch-Waxman Act created opportunities for strategic
behavior that undermined the goals of the 180-day exclusivity incentive,
legislators included corrective provisions in the 2003 Medicare Prescription
Drug, Improvement, and Modernization Act (MMA).
22
The MMA included
provisions to reduce the problem of brand-name manufacturers listing later-
issued patents necessitating additional challenges and leading to multiple 30-
month stays. Only one 30-month stay could be obtained per ANDA, regardless of
the number of patents listed with the FDA, and these stays would be triggered
based only on patents listed at the time of ANDA filing.
23
Legislators addressed
patent delisting by providing that delisting would generally not result in
canceling the 180-day exclusivity.
24
The MMA also provided that 180-day exclusivity could be triggered only by
commercial launch, rather than by either commercial launch or a final court
Gap Filling, 40 WM. MITCHELL L. REV. 1307, 1326 (2014).
19
Letter from Food & Drug Admin. to Ranbaxy Inc. (2011),
https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2011/076477Orig1s000ltr.pdf (regarding
ANDA 076477).
20
Nostrum Pharms., LLC v. U.S. FDA, 2011 No. 11-3111 (JAP), 2011 WL 2652147 (D.N.J.
July 6, 2011).
21
Approval Package for: Application Number: ANDA 76-697, FOOD & DRUG ADMIN. 225
(May 20, 2011), https://www.accessdata.fda.gov/drugsatfda_docs/anda/2011/076697Orig1s000.pdf
Using the search tool at Drugs@FDA: FDA-Approved Drugs, U.S. FOOD & DRUG ADMIN.,
https://www.accessdata.fda.gov////.cfm, one can count the number of amendment dates listed by the
FDA for an ANDA; this application shows twenty amendments.
22
Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, Pub.
L. No. 108-173, 117 Stat. 2066; Federal Food, Drug, and Cosmetic Act (FFDCA), Pub. L. No. 75-
717, § 505(j)(5)(D)(i), 52 Stat. 1040 (1938).
23
21 U.S.C. § 355 (j)(5)(D)(iii) (2018); see also 149 Cong. Rec. 31,783 (2003) (statement of
Sen. Kennedy) (“The Hatch-Waxman provisions in this bill also make the exclusivity available
only with respect to the patent or patents challenged on the first day generic applicants challenge
brand drug patents, which makes the exclusivity a product-by-product exclusivity rather than a
patent-by-patent exclusivity.”).
24
MMA § 1102(a), 117 Stat. at 2457-60. The MMA was not retroactive, and the D.C. Circuit
later interpreted the pre-MMA statute in a similar manner. See supra note 17 and accompanying
text.
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
9
decision on patent infringement, as was the case under the Hatch-Waxman Act.
25
In situations in which a generic firm challenged a secondary patent while waiting
for the underlying active ingredient patent to expire, eliminating the court-
decision trigger helped to ensure that the 180-day period would not begin to run
before the generic manufacturer was lawfully able to enter the market. By
providing assurance to generic manufacturers that they would enjoy the entire
exclusivity period, the MMA maximized the incentive to bring a Paragraph IV
challenge. The change also encouraged earlier challenges of secondary patents.
26
Even before the MMA, if the FDA concluded that a first generic applicant
was not “actively pursuing” FDA approval, the FDA could immediately approve
subsequent generic applicants that were otherwise eligible.
27
Strengthening the
law to ensure against intentional delays by generic manufacturers (either for their
own gain or as part of an agreement with a brand-name manufacturer), the MMA
specified six events that would trigger first-filer generics to forfeit their 180-day
exclusivity. Forfeiture would occur under the MMA if all patents as to which
Paragraph IV certifications were filed had expired, preventing the 180-day period
from extending the total exclusivity period beyond that otherwise permitted
under the patent laws (Event #1). To prevent delays caused by agreements by
which the first-filer refrained from or delayed market entry, forfeiture would
occur if the first-filer withdrew its application (Event #2), amended its
certification from a Paragraph IV to, for example, a Paragraph III (i.e., indicating
it would wait until patent expiration to market its product) (Event #3), or failed to
market its drug within 75 days after FDA approval (Event #4).
28
To minimize the
delays caused by premature filing of generic drug applications that were not
25
21 U.S.C. § 355 (j)(5)(B)(iv) (2018) (amended in 2003 by the MMA); FFDCA
§ 505(j)(5)(B)(iv)(I); see also 21 C.F.R. § 314.3(b) (2020) (“Commercial marketing is the
introduction or delivery for introduction into interstate commerce of a drug product described in an
ANDA, outside the control of the ANDA applicant, except that the term does not include transfer
of the drug product for investigational use under part 312 of this chapter or transfer of the drug
product to parties identified in the ANDA for reasons other than sale. Commercial marketing
includes the introduction or delivery for introduction into interstate commerce of the reference
listed drug by the ANDA applicant.”).
26
Examining the Senate and House Versions of the “Greater Access to Affordable
Pharmaceuticals Act”: Hearing before the S. Comm. on the Judiciary, 108th Cong. 96-97 (2003).
27
See Abbreviated New Drug Application Regulations, 54 Fed. Reg. 28872, 28895 (proposed
July 10, 1989) (to be codified at 21 C.F.R. pt. 314). This regulation was implemented in 1994. See
Abbreviated New Drug Application Regulations; Patent and Exclusivity Provisions, 59 Fed. Reg.
50338, 50354 (Oct. 3, 1994) (to be codified at 21 C.F.R. pt. 314); 21 C.F.R. § 314.107(c)(3)
(2020).
28
Complaint for Declaratory Judgment at 8, Cobalt Pharms. Inc. v. Bayer AG, No. 1:07-cv-
05875 (N.D. Ill. Oct. 17, 2007); Kurt R. Karst, FDA Determines that Cobalt Forfeited 180-Day
Exclusivity for Generic PRECOSE; Agency Is Sued Yet Another Time, FDA L. BLOG (May 11,
2008), https://www.thefdalawblog.com/2008/05/fda-determines/.
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
10
ready for FDA review and approval, or by failure to diligently shepherd
applications through approval, the MMA provided that forfeiture would occur if
the first-filer failed to obtain FDA approval of its ANDA within 30 months of the
filing date (unless caused by a change in FDA approval requirements) (Event
#5).
29
Finally, forfeiture would occur if the first-filer entered into an
anticompetitive settlement agreement with the patent holder, a provision that
directly discouraged such settlements (Event #6).
30
C. Post-2003 Implementation of 180-Day Exclusivity
After the MMA, Paragraph IV challenges continued to increase in frequency
and occur ever sooner after approval of the brand-name product. The share of
new drugs experiencing such a challenge increased from 9% of those first facing
generic competition in 1995 to 76% in 2014.
31
The number of years from brand-
name approval to first Paragraph IV challenge decreased from 18.7 years for
drugs experiencing first generic competition in 1995 to 5.9 years in 2014.
32
The growth of the generic drug industry and the continued popularity of
Paragraph IV challenges after 2003 show that the MMA’s anti-parking
provisions did not undermine the incentive effects of the 180-day exclusivity
provision. However, while parking of the 180-day exclusivity period became
more difficult after the MMA, some concerns remained. One of these concerns
was that, although the MMA provided for forfeiture of 180-day exclusivity in the
case of settlement agreements, it did so only if a final FTC or court decision
determined the settlement agreement violated antitrust laws. It was unclear,
however, when settlements would meet this criterion. In 2013, the U.S. Supreme
Court in FTC v. Actavis affirmed that settlements were subject to FTC scrutiny
and the potential for liability even if the settlement agreement stayed within the
exclusionary scope of the patent.
33
While settlements have continued since
Actavis, few have involved reverse payments that might violate antitrust laws. By
2016, of the 232 Paragraph IV litigation settlements reported to the FTC, only 16
(7%) involved transfers of cash from the brand-name to the generic
manufacturer, all of which involved payment only for litigation costs.
34
The FTC
29
FFDCA § 505(j)(5)(D)(i)(IV).
30
MMA § 1102(a)(2), 117 Stat. at 2458-60.
31
Henry Grabowski, Genia Long, Richard Mortimer & Ani Boyo, Updated Trends in US
Brand-Name and Generic Drug Competition, 19 J. MED. ECON. 836 (2016) [hereinafter Grabowski
et al., Updated Trends]; Henry G. Grabowski, Margaret Kyle, Richard Mortimer, Genia Long &
Noam Kirson, Evolving Brand-Name and Generic Drug Competition May Warrant a Revision of
the Hatch-Waxman Act, 30 HEALTH AFFS. 2162 (2011).
32
Grabowski et al., Updated Trends, supra note 31.
33
FTC v. Actavis, Inc., 570 U.S. 136 (2013).
34
Pharmaceutical Agreement Filings, FED. TRADE COMM’N, https://www.ftc.gov/advice
/guidance/guidance/care/agreement-filings; Brad Albert, Armine Black & Jamie Towey, MMA
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
11
has nevertheless emphasized the need to monitor settlements for less transparent
forms of compensation that might constitute illegal reverse payments, such as
agreements by which patent holders refrain from selling authorized generics in
the United States
35
or that allow generic manufacturers to enter foreign markets
before patents in those markets expire.
One other source of delay was observed after the MMA but was both
uncommon and not clearly attributable to strategic manufacturer behavior. This
type of delay occurs when a first-filer fails to obtain FDA approval within thirty
months due to a change in FDA-approval requirements rather than the fault of the
applicant,
36
in which case forfeiture of 180-day exclusivity will not result.
37
Between 2007 and 2012, changes to FDA review standards were estimated to
have led to delays in approximately 20 cases among the more than 3,500 generic
drug applications approved in those years (0.006%).
38
For example, a generic
version of clobetasol propionate shampoo (Clobex) used to treat eczema and
psoriasis was submitted in 2007 but was not approved until 2011,
39
thereby not
triggering its 180-day exclusivity for more than fifty months due to changes by
the FDA in standards related to vasoconstrictor bioassays that the generic
manufacturer needed to conduct to demonstrate bioequivalence and receive FDA
approval.
40
A generic version of levocetirizine (Xyzal) allergy tablets retained
180-day exclusivity after a delay of five months beyond the thirty-month limit
due to a change in the indication of the brand-name drug from children of “6
months to 5 years of age” to “children 2 years of age and older,” among other
labeling changes.
41
Specifically, during its bioequivalence review, the agency
asked the drug sponsor, Actavis, to perform comparative vasoconstrictor
bioassay studies; the agency later told Actavis the agency was reviewing the
Reports: No Tricks or Treats—Just Facts, FED. TRADE COMM’N: COMPETITION MATTERS (Oct. 27,
2020, 5:15 PM), https://www.ftc.gov/news-events/blogs/competition-matters/2020/10/mma-
reports-no-tricks-or-treats-just-facts.
35
Albert et al., supra note 34.
36
FFDCA § 505(j)(5)(D)(i)(IV).
37
Id.
38
Kurt R. Karst, Excuses, Excuses! A Round-Up of Exceptions Under the Failure to Obtain
Timely Tentative Approval 180-Day Exclusivity Forfeiture Provision, FDA L. BLOG (Nov. 1, 2012),
http://www.fdalawblog.net//11/excuses-a-round-up-of-exceptions-under-the-failure-to-obtain-
timely-tentative-approval-180-d.
39
Letter from Food & Drug Admin. to Actavis Mid Atlantic LLC (2011),
https://www.accessdata.fda.gov/_docs///ltr.pdf (regarding ANDA 078854). The shampoo contains
vasoconstrictive properties in its chemical structure. Id. at 2.
40
Id.
41
Letter from Food & Drug Admin. to Synthon Pharms., Inc. (2010),
https://www.accessdata.fda.gov/_docs///ltr.pdf (regarding ANDA 090229); Highlights of
Prescribing Information: Xyzal, FOOD & DRUG ADMIN. (2009),
https://www.accessdata.fda.gov/_docs///,022157s003lbl.pdf.
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
12
appropriateness of vasoconstrictor bioassay studies for topical corticosteroid drug
products that are applied to the hirsute scalp, which caused the five-month delay.
II. THE PROSPECT OF ADDITIONAL 180-DAY EXCLUSIVITY REFORM
In 2019, three legislative proposals were introduced in Congress to address
remaining opportunities for parking: the BLOCKING Act, the Expanding Access
to Lower Cost Generic Drugs Act, and the Lower Health Care Costs Act.
42
The
BLOCKING Act
43
would have allowed later-filed generic applications to be
approved if over 30 months passed since submission of the first-filer’s
application,
44
even if the first-filer’s lack of marketing within 30 months was
caused by changes to FDA review standards. But because it can be difficult to
predict when or how review standards will change, the BLOCKING Act may
disincentivize bringing patent challenges by placing the risk on the first-filer that
changes to the regulatory review process—which are generally beyond its
control—will delay an application’s approval.
45
The BLOCKING Act thus seeks to address a parking problem that has arisen
in an extremely small fraction of generic drug approvals and that may not be the
fault of generic drug applicants, at the potential cost of reducing incentives
intended to motivate all generic manufacturers to engage in the Paragraph IV
certification process in the first place. If reintroduced, the BLOCKING Act could
be amended to allow first-filers to justify delays, but this would increase
administrative costs and fail to completely eliminate uncertainty. Alternatively, a
second, longer time limit (e.g., 40 months) could be added to the bill to apply
when review standards change. Yet, this too would increase complexity without
eliminating the uncertainty that could chill generic manufacturer incentives for
bringing Paragraph IV challenges were the BLOCKING Act to pass.
46
Despite
the potential to dampen first-filer enthusiasm, the BLOCKING Act received a
Congressional Budget Office score report in 2019 estimating that the bill would
42
Blocking Act of 2019, H.R. 938, 116th Cong. (2019); Expanding Access to Lower-cost
Generics Act of 2019, S.3092, 116th Cong. (2019); Lower Health Care Costs Act of 2019, S.1895,
116th Cong. (2019).
43
Michael A. Carrier, Opinion, Solving the ‘Parking’ Problem in the Drug Monopoly Game,
HILL (Dec. 27, 2019, 9:30 AM EST), https://thehill.com///solving-the-parking-problem-in-the-drug-
monopoly-game.
44
This assumes the ANDA contains deficiencies if still not approved after 30 months.
45
Scott Gottlieb, The HELP Committee’s Fix for 180-Day Generic Marketing Exclusivity:
Does It Solve the Problem?, HEALTH AFFS. BLOG (May 30, 2019),
https://www.healthaffairs.org/do/10.1377/hblog20190529.223594/full/.
46
Kurt R. Karst, The BLOCKING Act: “Oh You Know, Strikes and Gutters, Ups and
Downs,” FDA L. BLOG (June 3, 2019), https://www.thefdalawblog.com/2019/06/the-blocking-act-
oh-you-know-strikes-and-gutters-ups-and-downs/ (proposing a 42-month alternative period to
apply when review standards change).
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
13
save an average of $44.2 million per year on federal drug spending over the next
ten years.
47
By comparison, the U.S. prescription drug market is nearly $500
billion per year, with generic drugs accounting for about 20% of that spending.
Although a Congressional Budget Office score showing even small amounts of
savings can impact a bill’s chance of enactment, the estimate of the BLOCKING
Act’s economic impact may not accurately account for the extent to which first-
filers will experience reduced incentives to submit applications.
48
A second bill, the Expanding Access to Lower Cost Generic Drugs Act, is
intended to address two parking-related problems. “First applicants” are defined
more broadly than under current law to include later applicants filing Paragraph
IV certifications for each of the patents addressed by a previous Paragraph IV
certification of an earlier applicant. The bill would cause first applicants to lose
their first-filer status if they enter into “disqualifying agreements,” defined as
those in which a generic applicant agrees with the manufacturer of the brand-
name reference product to delay marketing until after the expiration of the 180-
day exclusivity period of another applicant. This section of the bill is intended to
combat reverse payment settlement agreements, although such agreements are
both increasingly rare and already subject to challenge under antitrust laws. The
bill also seeks to reduce parking by allowing subsequent filers that challenge
patents through a Paragraph IV certification to share the 180-day exclusivity
period with first-filers.
49
The threat of having to share the exclusivity could
potentially motivate first-filers to trigger the exclusivity as early as possible to
avoid overlap with the commercial time frame of a subsequent filer reaching
FDA approval and resolving litigation. This would increase the number of
competitors during the 180-day window if subsequent filers are able to quickly
resolve litigation, but it is unclear how frequently this occurs, and invalidation of
previously-challenged patents by subsequent filers is believed to be rare.
50
As
with the proposed BLOCKING Act, the bill could lead to reduced incentives to
challenge patents, since the potential to share exclusivity would increase
uncertainty and, when it occurs, reduce the profits of the first generic
manufacturer.
47
H.R. 938: BLOCKING Act of 2019, SPENDING TRACKER, https://spendingtracker.org
/bills/hr938-116.
48
EZEKIEL J. EMANUEL, REINVENTING AMERICAN HEALTH CARE: HOW THE AFFORDABLE CARE
ACT WILL IMPROVE OUR TERRIBLY COMPLEX, BLATANTLY UNJUST, OUTRAGEOUSLY EXPENSIVE,
GROSSLY INEFFICIENT, ERROR PRONE SYSTEM 75 (2014).
49
Expanding Access to Low Cost Generic Drugs Act, S. 2476, 115th Cong. (2018).
50
Kurt R. Karst, Reshaping 180-Day Exclusivity: The FAIR Generics Act Returns as the
Expanding Access to Low Cost Generic Drugs Act, FDA L. BLOG (MAR. 5, 2018),
https://www.thefdalawblog.com/2018/03/reshaping-180-day-exclusivity-the-fair-generics-act-
returns-as-the-expanding-access-to-low-cost-generic-drugs-act/.
YALE JOURNAL OF HEALTH POLICY, LAW, AND ETHICS 20:1 (2021)
14
A third bill, the Lower Health Care Costs Act would allow the FDA to
approve a subsequent generic application if a first-filer did not receive final
approval of its ANDA within 33 months of submitting its application. This grants
three additional months for the first-filer to seek FDA approval in comparison
with the time period offered by the BLOCKING Act (i.e., 30 months). Such a
provision may be intended to motivate first-filers not to delay seeking FDA
approval by setting a firm deadline on when its ability to claim first-filer
exclusivity benefits expires.
51
Notably, current law already provides that first-
filers forfeit their 180-day exclusivity if no tentative approval is obtained within
30 months of submitting the application.
52
The provision appears to be directed
toward those cases in which FDA-approval requirements are changed and the 30-
month forfeiture provision does not apply, but such cases are infrequent and
occur largely outside the control of the applicant. Thus, this bill, like the other
two, offered the possible benefit of fostering competitive markets in a very small
number of cases, along with the very real risk of further destabilizing the existing
180-day exclusivity system. None of the bills were taken up by Congress.
CONCLUSION
The 180-day generic exclusivity period was established in the Hatch-
Waxman Act to provide an incentive for generic manufacturers to invest the time
and resources needed to challenge brand-name manufacturers’ drug patents
without risk that other manufacturers would immediately free-ride on their
investments in patent litigation. Unforeseen loopholes in the 1984 legislation
created the opportunity for strategic behavior by manufacturers intending to
delay generic competition, which Congress addressed in the 2003 MMA,
including the addition of a provision for forfeiture of 180-day exclusivity in the
case of anticompetitive settlement agreements. In the 2013 Actavis decision, the
Supreme Court clarified that a broad range of reverse payments could potentially
violate antitrust laws, expanding the impact of the MMA. However, concerns
about misuse of the 180-day incentive remained, leading to proposals to further
reform the law.
Our review of available data suggests that remaining parking issues occur
infrequently and, when they do occur, tend to relate to changes in FDA review
standards over which generic manufacturers have little or no control. Recently
proposed changes to the Hatch-Waxman Act’s statutory framework are therefore
unlikely to substantially improve generic availability. In addition, such changes
risk upsetting existing incentives for generic manufacturers to bring Paragraph IV
51
Lower Health Care Costs Act, S. 1895, 116th Cong. § 205 (2019).
52
149 Cong. Rec. 32,290-93 (2003) (statement of Sen. Hatch); 21 U.S.C. § 355(j)(5)(iv).
NO PARKING HERE: A REVIEW OF GENERIC DRUG 180-DAY EXCLUSIVITY AND RECENT
REFORM PROPOSALS
15
challenges in the first place by increasing uncertainty with respect to the ability
to obtain or retain exclusivity and the extent to which the exclusivity period will
be shared. In cases in which exclusivity is in fact shared, profits of first-filers will
be reduced.
It is possible that strategic behavior has become less transparent, rather than
less frequent, and further research may uncover more examples of gaming the
180-day exclusivity incentive. Until additional evidence of the frequency, length,
and financial impact of strategic behavior emerges, Congress should refrain from
revising a system that has helped increase the share of generic drugs from 19% in
1984 to 90% in 2020, and that has led to generic drug prices in the United States
that are generally among the lowest in the world. As revisions to the law are
considered, legislators must recognize that any changes could inadvertently undo
gains, as well as close loopholes. Legislators should avoid statutory amendments
that undermine existing incentives to file generic applications containing
Paragraph IV certifications.
