Hearing on Affordable Pharmaceuticals

May 8, 2002 Issues: Health

Hearing on Affordable Pharmaceuticals
May 8, 2002

By Henry A. Waxman

The Hatch-Waxman Amendments are about balance: progress and access. Neither makes sense without the other. It is unfair and wasteful to develop new products that sick people can't afford. On the other hand, it is pointless to encourage generic competition if the price is a pharmaceutical industry without sufficient incentives to develop effective new medicines.

The Hatch-Waxman Amendments therefore represented a careful balance between the need to encourage low-cost generic drugs and the need to reward brand name drug companies for the costly process of developing new drugs.

In 1984, generics had about 19% of the market. By last year, they had close to 50% of the market. I am very pleased by the success of the Hatch-Waxman Amendments in making affordable generic drugs available. Generics save consumers one-half to two-thirds the cost of brand-name drugs. Now more than ever, access to low-cost generics is essential as the cost of prescription drugs has skyrocketed.

But the growth of the generic market has stagnated. This is due in part to abuses of the Hatch-Waxman Amendments by brand name companies. Over the past year and a half, I have been very troubled by reports of collusive arrangements between brand-name and generic companies, of near-frivolous patent infringement lawsuits, and of late additions of patents unrelated to the basic functioning of the drug. The brand-name companies have not honored the careful balance struck by those Amendments. Instead, they have used creative lawyering to keep generic products off the market long past the time intended by Congress when the Amendments were enacted. At a time when the brand-name companies have few new innovative products in their pipelines, they have chosen to keep profits high by extending their monopolies on existing products. The price of this behavior to our nation's health care bill and to the health of Americans is shockingly high.

Over the years, I have been reluctant to open up Hatch-Waxman to amendment--whether it be for ad hoc patent extensions, for a response to individual court rulings, or for fine-tuning to address market changes. But while I am cautious about opening it up, I will not stand by as the system is abused. I only wish that the manufacturers who benefit from the system were as cautious about throwing it into imbalance as I am. Such clear abuses invite a legislative response.

Some will argue that if Congress amends Hatch-Waxman to end what it views as abuses, the original balance struck in the bill will be upset, giving a greater advantage to generics than was originally intended. I disagree. The legal maneuvering we have begun to see that keeps generics off the market past the expiration of legitimate patents, exploits loopholes in the statute that we neither foresaw nor intended. It is this maneuvering that has undermined the original balance. Elimination of these loopholes would merely restore the balance that was intended by Congress.

I have also heard arguments that if we amend or eliminate a particular provision of the original statute, we must at the same time amend a counterpart provision that was intended as a specific trade for the first provision. This is a misrepresentation of the negotiations that culminated in the Hatch-Waxman Amendments. There was no one-for-one trading of provisions. Instead, we weighed all of the provisions to encourage innovation, taken as a whole, against all of the provisions to encourage generic competition, as a whole, and concluded that an appropriate balance had been struck. This careful balance has now been undone by the actions of the brand-name companies, and it is Congress' responsibility to determine how to restore that balance.