Hatch-waxman is why generics exist – we extend it

(Matt Sandgren, Capitol Hill Veteran specializing in Government Affairs, Public policy, and Strategic Consulting, from the George Washington University Law School, 02/21/2024, “For cheap generic drug prices, you can thank 40 years of Hatch-Waxman,” Washington Examiner, , DA: 06/30/2024) da-wh

Here’s another item for that list: generic drugs. Today, when you fill a prescription, odds are it’s with a generic. In 2021, the Food and Drug Administration reported that of all prescriptions filled in the United States were filled with generics. 

That’s a great thing for consumers. Generic drugs cost far less than name-brand alternatives, saving patients and taxpayers each year. There’s a reason generic drugs are so popular. They provide the same benefits as the name brand but at far less cost.

However, generics weren’t always so common. In the early 1980s, they constituted a meager of prescriptions. Development was difficult, and regulatory barriers were high.

So, what changed?

Congress recognized there was a problem and acted to solve it.

That solution was the Drug Price Competition and Patent Term Restoration Act, better known as Hatch-Waxman after its principal sponsors, Utah Sen. Orrin Hatch and California Rep. Henry Waxman.

Passed in 1984, Hatch-Waxman achieved that elusive goal that is often necessary for legislation to succeed but difficult to achieve: balance. The law recognized there are two competing interests when it comes to the development of generic drugs that have to be accommodated. 

First is the need for drug innovators to recoup the substantial research and clinical costs involved in bringing any new drug to market. Most new drug attempts fail. The research doesn’t pan out, the clinical trials don’t yield the hoped-for results, or the drug simply doesn’t work as expected. And even for those that do, getting the drug to market typically costs . That’s one reason drug prices are so high — the company has to recoup the cost of development while also making up for the costs of all the other drugs that didn’t work.

So, drug innovators need enough financial incentive to bear the risks and costs associated with bringing any drug successfully to market.

The other competing interest is the need for generic manufacturers to have regulatory and litigation certainty as they figure out how to manufacture the drug themselves and prove their generic’s equivalence to the name-brand drug. If the barriers to approval or risk of litigation from the name-brand manufacturer are too high, the generic manufacturer will not take the necessary steps to develop and make the lower-cost alternative available.

And so Hatch-Waxman struck a balance. Among other things, it gives drug innovators a period of exclusivity during which the FDA cannot approve a generic version of the drug. This period of exclusivity is separate from any patent rights the innovator has for the drug. The act also extends the life of patents for the drug for a portion of the time the drug was under review by the FDA, thereby helping to ensure that prolonged review does not defeat profitability.

On the generic side of the equation, Hatch-Waxman limits the regulatory burden generic manufacturers must satisfy to obtain approval for the drug and provides a safe harbor from patent infringement claims while the company is pursuing approval. It also provides a streamlined process for adjudicating infringement claims once the generic’s new drug application is filed.

So, on the one hand, Hatch-Waxman helps ensure drug innovators have a sufficient period of exclusivity to recoup their substantial investments in bringing the new drug to market. And on the other hand, it provides a pathway for generic manufacturers to seek approval with a lower risk of expensive, uncertain legislation.

And the results speak for themselves. Between 1984, when Hatch-Waxman was passed, and the late 1990s, the percentage of prescriptions that were filled by generics 13% to 50%. It rose again between the late 1990s and early 2010s to . Today, as noted above, the percentage stands at about 90%. At the local level, we’ve also seen the law’s influence in spurring creative to bring even more affordable, lifesaving generic medications to consumers.

Hatch-Waxman’s success cannot be denied. It gave birth to the modern generic drug industry and has saved consumers trillions of dollars since it was enacted.