Patent Reform, Piracy, Generic Drug Issues Likely For US Congress This Year

Although attempts to repeal last year’s healthcare reform bill and efforts to get the deficit under control may take up much of the United States Congress’ time this year, lawmakers are expected to tackle a number of intellectual property-related priorities lawmakers, including patent reform, internet neutrality, and enforcement during the new 112th session.

New dynamics will arise in this Congress as Republicans now have a majority in the House of Representatives while the Senate and the presidency remain in Democrats’ hands.

Even if the Republicans’ bill to get rid of last year’s healthcare reform overhaul passes the House, it is unlikely to pass the Senate, which is dominated by Democrats. Still, the Republicans likely will attempt to chip away at the law.

The Biologics Prices Competition and Innovation Act, however, likely will stay intact. The BCPI Act calls on the US Food and Drug Administration to create a regulatory pathway to bring cheaper, similar versions of complicated biologic drugs to market. The FDA has been holding hearings and accepting comments from stakeholders on the most effective way to create such a pathway. Many Republicans have joined Democrats in favour of the biologics provisions.

On 7 January, a bipartisan group of lawmakers sent a letter to FDA Commissioner Margaret Hamburg clarifying the difference between data exclusivity and market exclusivity, stressing that the law does not provide innovator companies with the latter.

Instead, they wrote, the act “prohibits FDA from allowing another manufacturer of a highly similar biologic to rely on the Agency’s prior finding of safety, purity and potency for the innovator product, for a limited period of time.” Generic firms can use their own data to develop their drugs before the legislated 12-year data exclusivity window elapses.

Also on the drug front, some lawmakers will continue pushing for passage of legislation that will prevent what is referred to as “pay-for-delay” (also called “reverse payments”) of generic drugs. This practice consists of brand-name companies paying generic firms to delay bringing their cheaper drugs to market.

Previously, Sen. Herb Kohl, a Wisconsin Democrat, helped sponsor the Preserve Access to Affordable Generics Act, which would make it illegal for generic drug makers to limit or forego research, development, manufacturing, marketing, or sale of a drug product in exchange for payment. The bill passed the Senate Judiciary Committee last year but was not addressed in the full Senate.

“Pay-for-delay is in no way dead,” Kohl said in a statement. “We are continuing to gain support – the latest in the form of an endorsement from Walmart Corporation – and the need to lower drug costs and save taxpayer money is not going to end with this Congress.”

“Passage of our bipartisan bill would bring generic drugs to the market faster, increase drug competition, and drive down prices for consumers,” added Sen. Charles Grassley, an Iowa Republican and bill cosponsor.

“Pay-for-delay” deals arose as part of patent litigation settlement agreements between brand and generic drug companies. It can be a win-win: brand-name firms get to maintain higher prices and maintain more market share, while generic firms get part of the brand’s profits. Noting that brand-name drugs can cost up to 10 times more per month, the US Federal Trade Commission (FTC) says such deals delay entry of generic drugs by nearly 17 months and protect at least $20 billion in sales of brand-name pharmaceuticals, costing American consumers $3.5 billion per year. Link to 2010 FTC report here [pdf].

A report [pdf] issued 1 December 2010 by the US Health and Human Services Department says getting rid of pay-for-delay deals and allowing an increased number of cheaper drugs to come to market could increase government savings.

The Generic Pharmaceutical Association said the report “erroneously” concluded that a ban on such settlements will result in savings and called the FTC’s findings “flawed.”

“Settling patent litigation has proven to be the one sure way of getting affordable generics to consumers before patents expire on the counterpart brand drug,” GPhA said in a release. “Settlements have never resulted in delaying generic market entry past patent expiration.”

A group of 32 state attorneys general have also filed a brief with the US Supreme Court seeking to end the “pay-for-delay” agreements. In the matter before the court, Bayer Corp. of Germany is accused of paying competitors $400 million to not market generic versions of the antibiotic Cipro, used to treat bacterial infections.

Net Neutrality, Patent Reform, Other Issues

Separately, the 21 December decision by the US Federal Communications Commission (FCC) regarding network neutrality (“net neutrality) also will receive some congressional backlash. Among other things, the agency approved rules banning broadband providers from blocking access to legal content via wired lines, but does not provide the same protection for mobile broadband users. The rules have a rash of critics who say the rules do not provide “real” neutrality and still allow discrimination.

The Senate Judiciary Committee’s Ranking Republican, Sen. Orrin Hatch of Utah, vowed legislative action to overturn the FCC rules to “protect internet freedom.”

“The American people don’t want unelected bureaucrats in the Obama administration to decide what goes on the internet,” Hatch said last month. “These new FCC rules give the federal government unprecedented power and can’t be allowed to stand.”

Free Press, one of the many groups unhappy with the FCC rules they call a “carve-out for AT&T and other wireless providers to make their own rules,” said they would support legislation if it helps fill the gaps left by the regulations and further protect consumers.

“If members of Congress propose legislation to protect consumers from mobile broadband providers seeking to exploit the loopholes in the net neutrality rule, we’ll be happy to support it,” Free Press Research Director S. Derek Turner told Intellectual Property Watch. “But until then, we’ll continue pushing the FCC to do its job and stand up for the public.”

Senate Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat, today said in prepared remarks that patent reform is a top priority. Saying that House Judiciary Committee Chairman Lamar Smith, a Texas Republican, also wants to see patent reform pass, Leahy said patent reform is “in the interest of protecting American jobs and economic leadership.”

Brian Pomper, director of the Innovation Alliance, said the top priority should be to reduce patent application backlog at the USPTO. He restated concerns about damages and post-grant review in patent reform legislation.

Last fall, Hatch and Leahy introduced the Combating Online Infringement and Counterfeits Act, which, among other things, will give the US Justice Department more tools to shut down websites that provide access to unauthorised downloads, streaming or sale of copyrighted content and counterfeit goods such as movies or drugs. The Senate Judiciary Committee passed the bill but it died with the end of Congress. Groups such as the US Chamber of Commerce Global Intellectual Property Center (GIPC) are calling for it to be reintroduced; Leahy said efforts will be renewed.

“Online infringement costs our national economy billions of dollars every year,” Leahy said. “Our intellectual property-based businesses are among the most productive in our economy and among its best employers. We cannot stand by and see them ravaged, and American consumers subjected to counterfeits. “

Gina Vetere, senior director for intellectual property promotion at the Chamber GIPC said Congress most likely will also address rogue sites, performance rights, fashion piracy, and potential legislative proposals recommended by Victoria Espinel, the US intellectual property enforcement coordinator, in her forthcoming report.

In June, Espinel released a national plan [pdf] to improve and better coordinate efforts across the government to enforce and protect IP rights.

“It is critical that this plan is successfully implemented in 2011, beginning with congressional action to ensure the IPEC has sufficient resources to achieve her mission,” Vetere told Intellectual Property Watch.

Republicans Bring IP Focus Back to House

Meanwhile, Smith has vowed to make intellectual property a priority of the House Judiciary Committee. He has reassembled a new intellectual property panel; Democrats disbanded that subcommittee in 2006, moving IP issues to the full committee.

The new Subcommittee on Intellectual Property, Competition and the Internet will deal with copyright, patent, trademark law, information technology and antitrust matters.

Smith named Virginia Republican Bob Goodlatte chairman of the IP subcommittee and Howard Coble, a North Carolina Republican, as vice-chair.

Coble, who previously chaired the House Subcommittee on the Courts, Internet, and Intellectual Property, plans to work to ensure fees from patent applications and other activities conducted by the US Patent and Trademark Office support that office instead of being diverted into the general Treasury, a spokesman told a local North Carolina publication.

“The protection of America’s intellectual property is critical to our economic growth, job creation and ability to compete in the global marketplace,” Smith said in a statement. “A separate IP subcommittee will ensure that the committee remains focused on all aspects of intellectual property, including patent reform and copyright protections.”

Smith also said his committee will “support industries that employ millions of Americans by protecting their patents and copyrights.”

Obama has also made passage of a free-trade agreement with South Korea a priority; he may send a bill to Congress as early as this month.

Vetere said the Office of the US Trade Representative will continue negotiations with parties to the Trans-Pacific Partnership Agreement, with the goal of completing the agreement by November.

“These negotiations provide an opportune time to build upon modern IP standards found in recently concluded US FTAs, particularly the US-Korea Free Trade Agreement,” Vetere said.