The Good, the Bad and the Ugly: New FDA Legislative Proposal on 180-Day Exclusivity (Both “the Bad” and “the Ugly”)

It was some time ago that we posted on what we though was “the Good” in an avalanche of FDA-related legislation that we sorted into three categories: the Good, the Bad, and the Ugly.  Our prior post took a look at a couple of bills that we thought fit Clint Eastwood’s role as “the Good” in the 1966 Italian epic spaghetti Western film, “The Good, the Bad and the Ugly”: the “Modernizing Therapeutic Equivalence Rating Determination Act” (S. 1463) and the “Simplifying the Generic Drug Application Process Act” (S. 1462).

We intended to quickly follow up that post with another post addressing a couple of bills that we thought fit the role of Lee Van Cleef as “the Bad,” and Eli Wallach as “the Ugly”: the “Prompt Approval of Safe Generic Drugs Act” (H.R. 2831) and the “Bringing Low-cost Options and Competition while Keeping Incentives for New Generics Act of 2021” (H.R. 2853), which is better known as the “BLOCKING Act of 2021.”  The BLOCKING Act in particular has drawn this blogger’s ire in prior blog posts (here, here, and here) and in Congressional testimony as antithetical to a primary goal of the Hatch-Waxman Amendments: getting high quality, low-cost generic drugs into the hands of consumers—fast.

Well, things got away from us due to other intervening priorities at the time and we never quite got to finishing up that post.  But Good things—and in this case Bad and Ugly (and we mean really Bad and really Ugly!) things too—come to those who wait!  But before we get back to “the Good” again, let’s take a look at “the Bad” and “the Ugly” . . . .

Earlier this week, FDA issued its Fiscal Year 2023 Budget Justification and related documents.  Among the various documents, a document titled “Executive Summary of FY 2023 Legislative Proposals” caught our attention.  It’s a list of 14 legislative proposals that FDA says would “better support Agency efforts to protect American consumers and patients, particularly during public health emergencies like the COVID-19 pandemic.”  The first of such legislative proposals targets 180-day generic drug exclusivity.  It says:

Amend the 180-Day Exclusivity Provisions to Encourage Timely Marketing of First Generics

In practice, 180-day patent challenge exclusivity is not operating as expected to encourage early generic entry, because this exclusivity is often “parked” by first applicants who either receive approval but do not begin marketing for extended periods of time following approval, or by first applicants who delay receiving final approval of their ANDAs for extended periods of time.  This proposal would substantially increase the likelihood that generic versions of patent-protected drugs will come into the market in a timely fashion, and that multiple versions of generic products will be approved quickly (leading to significant cost savings).  FDA is proposing to amend sections 505(j)(5)(B)(iv) and (D)(i)-(iii) of the FD&C Act, which govern the 180-day patent challenge exclusivity provisions, to specify that FDA can approve subsequent applications unless a first applicant begins commercial marketing of the drug, at which point approval of subsequent applications would be blocked by 180 days, ensuring that the exclusivity actually lasts 180 days (i.e., from the date of first commercial marketing by a first applicant until 180 days later) rather than for multiple years, as can occur under current law.

If the scent of this proposal smells vaguely familiar, it is.  It’s regime change!  It’s an effort to rework the current and longstanding ANDA Paragraph IV 180-day exclusivity incentive regime by replacing it with a new 180-day exclusivity regime modeled after the Competitive Generic Therapy (“CGT”) 180-day exclusivity regime created with the passage of the FDA Reauthorization Act of 2017 for drugs for which there is inadequate generic competition and for which there are no unexpired patents or exclusivities listed in the Orange Book at the time of original submission of an ANDA.

But before we delve into how a CGT-like exclusivity model would be misplaced and disastrous for a generic drug approval system based on patent challenges, it’s worth taking a quick look at the (false) premise of the proposal: “180-day patent challenge exclusivity is not operating as expected to encourage early generic entry, because this exclusivity is often ‘parked’ by first applicants who either receive approval but do not begin marketing for extended periods of time following approval, or by first applicants who delay receiving final approval of their ANDAs for extended periods of time.”  This sounds a bit dramatic . . . and it is.  It’s overly dramatic.

This blogger would expect FDA to point to the Agency’s findings in a November 2021 research report, titled “Marketing of First Generic Drugs Approved by U.S. FDA from January 2010 to June 2017” as evidence to support the premise above.  But that report—a not-too-thinly-veiled promotion piece for the BLOCKING Act and other legislation—is flawed.  In addition to stale data, data sets that may count the same product multiple times across different first applicants, and some selective data omissions, the report looks at the incorrect endpoint for its analysis: the time from ANDA approval to product launch.  However, the more accurate, reasonable, and meaningful endpoint for an analysis of the success of the current Paragraph IV 180-day exclusivity regime is the time between product launch and patent expiry.  That is, how much sooner does a generic drug come to market than it otherwise would without a patent challenge.  In other words, FDA’s analysis looks at the wrong end of the equation.  It’s not the time from ANDA approval to launch that is meaningful, but the time taken off of patent life allowing for an early launch that is meaningful.

Turning back to the legislative proposal, it says that FDA is proposing to amend FDC Act §§ 505(j)(5)(B)(iv) and (D)(i)-(iii)—the statutory provisions currently governing the qualification for and forfeiture of 180-day patent challenge exclusivity eligibility—“to specify that FDA can approve subsequent applications unless a first applicant begins commercial marketing of the drug, at which point approval of subsequent applications would be blocked by 180 days, ensuring that the exclusivity actually lasts 180 days (i.e., from the date of first commercial marketing by a first applicant until 180 days later) rather than for multiple years, as can occur under current law.”

That’s exactly how CGT 180-day exclusivity operates.  Indeed, here’s how FDA explains that exclusivity in guidance:

The 180-day CGT exclusivity period described under section 505(j)(5)(B)(v) of the FD&C Act is triggered by the “first commercial marketing of the competitive generic therapy (including the commercial marketing of the listed drug) by any first approved applicant.”  After this exclusivity is triggered, the 180-day period runs without interruption.

The FD&C Act also specifies that only an ANDA “for a drug that is the same as a competitive generic therapy for which any first approved applicant has commenced commercial marketing” can have its approval blocked until the 180-day CGT exclusivity period has been extinguished.  As such, once the first approved applicant has commenced commercial marketing, FDA is restricted from approving ANDAs for a drug that is the same as a CGT approved in the first approved applicant’s ANDA.  Therefore, FDA would not be restricted from approving other ANDAs covering a drug that is the same as the CGT prior to or after the approval of a first approved applicant’s ANDA for the CGT unless and until the first approved applicant has commenced commercial marketing and triggered the exclusivity period.  Likewise, the triggering of the CGT exclusivity period by the first approved applicant would not restrict other ANDA applicants that were approved prior to the trigger of such exclusivity from commercially marketing their products.

While the CGT 180-day exclusivity regime has operated quite well for drugs with inadequate generic competition and for which there are no unexpired patents or exclusivities listed in the Orange Book (as evidenced by the 130 CGT approvals thus far), using it as a blueprint for the approval of generic versions of brand-name drugs with dense patent thickets makes no sense.  What generic drug companies would be willing to invest millions of dollars in generic drug development and patent challenges for the potential of a hollow exclusivity incentive?  That is, because patent challenges often result in patent settlements that allow for generic competition (i.e., launch) prior to patent expiration, a CGT-like exclusivity regime that triggers the exclusivity only upon launch—which may occur years after ANDA approval—means that by the time launch occurs and exclusivity is triggered there will be no further approvals to which the exclusivity would apply.

Perhaps this is FDA’s way of trying to limit patent settlements.  But if you limit a generic drug manufacturer’s ability to settle cases, that manufacturer does not settle fewer cases, it submits fewer Paragraph IV ANDAs.  And fewer ANDAs means less, not more, generic drug competition.

The problem here, as with FDA’s November 2021 research report, is that the Agency is focused on the wrong endpoint.  FDA focuses on ANDA approvals instead of launches.  But more approvals does not necessarily translate into more launches.  Indeed, over time, a CGT-like exclusivity regime for Paragraph IV ANDAs may mean fewer ANDA approvals and launches.  And that ultimately means fewer choices for consumers and higher costs to the U.S. healthcare system.

If FDA and Congress were to focus on addressing the launch issue and not approvals alone, then a simple proposal that addresses this issue may be something along the lines of the following, which we call the “First Applicant Prime” exclusivity approach:

• If a “first applicant,” as currently defined under the statute, receives final approval within 45 months of ANDA submission or commercially markets more than 5 years before the expiration of the latest exclusivity-qualifying Paragraph IV Orange Book-listed patent, then that applicant would be eligible for 270 days of exclusivity rather than the current 180 days of exclusivity.
• If there is a group of first applicants and only a single first applicant meets the 45-month/5-year criteria above, then that applicant would be eligible for the first 90 days of exclusivity alone and other first applicants would get approval on day 91 of the 270-day exclusivity period.

This “First Applicant Prime” approach has several advantages, and is Clint Eastwood’s “the Good” in this post.  It incentivizes the submission of high-quality applications, which is what FDA wants.  There would be a competition to see who the “true” first applicant would be, meaning the first applicant who can both submit first and get approved first.  It could also address FDA’s concern about companies submitting ANDAs with non-compliant manufacturing facilities identified.  Separately, such a proposal could address the “25-tied ANDA first applicant situation” that is a problem with all New Chemical Entities.  That is, it would restore true generic drug exclusivity (to a one ANDA applicant for 90 days).  This approach could also help play a role in patent settlement agreements by potentially allowing companies to negotiate better agreements that fit into the 5-year criterion above.