Once generic drugs pass a Federal Food and Drug Administration (FDA) approval process they become lower cost equivalents of brand-name pharmaceuticals, often saving consumers one-third the purchase price of their brand-name counterparts. Part of this approval process includes requiring generic drug manufacturers to demonstrate to the FDA that their drugs are equivalent to the name-brand product. Also, the FDA helps to ensure that the innovator’s patent rights are protected – which can bog down the approval process, especially when brand-name companies manipulate the law in order to delay the generic drug’s release. Policymakers began examining the process when it was discovered that name-brand companies are using loopholes in patent protection laws in order to delay competition from the generic drug manufactures and delay the access consumers have to up-and-coming generic drugs. On October 24, 2002 President Bush proposed some new rules through the FDA in order to get the less expensive generic drugs on the market and to the consumer faster. White House officials estimate the president’s plan will save consumers $3.2 billion in the first year and $35 billion over 10 years (Pear, New York Times, 10/22/02).

On October 21, 2002 the president made an televised announcement stating "Our message to brand-name manufactures is clear. You deserve the fair awards of your research and development. You do not have the right to keep generic drugs off the market for frivolous reasons." Commenting on the president’s proposed changes in a PBS NewsHour discussion with Ray Suarez, commentator Susan Dentzer suggests that some brand name companies are improperly manipulating patent laws and slowing up the accessibility of generic products by "exploiting a loophole in the law (Dentzer, PBS, 10/21/02)." Using the loophole, some patent holding drug manufactures have applied for and filed new patents for the same drugs they already have patents for in order to delay the introduction of generic equivalents to the market. Brand-name manufactures can control patented drug prices longer because other manufactures are not allowed to market the same drug while it is still under patent protection.

Under the 1984 Hatch-Wexman Act the FDA gives brand-name companies a 30-month patent protection stay whenever a generic drug manufacturer challenges a brand-name patent (American Health Line, 10/21/02). This stay is in place to give the original drug manufacturer time to protect its patent rights in court. In some instances the brand-name manufactures use the 30-months to make an inessential change to their product and file a new patent in order to trigger yet another 30-month stay and further delay FDA approval and the generic competitor from making their product available to consumers. For example, brand-name patent holders are known for making a minor change to the packaging, the color or the shape of the product while leaving the drug fundamentally the same, and then obtaining a patent base on purely an aesthetic change. In one case a company the patented the brown bottle that a cancer drug comes in during the 30-month stay claiming the packaging preserves the drug’s potency. Another 30-month stay was stacked on top of the first stay, delaying competition and the generic company’s ability to market the drug by another 30-months, at the expense of consumers. In another case, Glaxo-Smith-Kline, the original manufacture of the anti-depressant Paxil, stacked eight patents on top of each other, delaying the generic equivalent for years, costing consumers an estimated two and half billion dollars during the additional patent period.

Bush’s proposal would use a new interpretation of the 1984 Hatch-Wexman Act. Pharmaceutical companies would no longer be able to obtain multiple 30-month delays related to newly obtained patents. This does not compromise patent rights since innovator companies would still retain the right to protect their patent rights though traditional patent infringement suits. In their October 21, 2002 the News Release the Health and Human Services states that the "FDA’s proposed rule change would eliminate a significant impediment to prompt approval of generic drugs while preserving the legitimate incentives necessary for innovative drug development" (HHS Release, 10/21/02).

The proposal also sets new requirements that pharmaceutical companies need to follow in order to list drug patents in the "Orange Book" (the FDA’s official drug product digest):

• Drug manufactures cannot submit patents to the FDA that are ‘unlikely to represent significant innovations" like the "product packaging, metabolites, and intermediates."
• Manufactures of new drugs will need to provide additional information in a detailed patent declaration when applying for patents disclosing whether or not the patent is permitted to be listed under the statute and regulations.
• Patent applicants who misrepresent the patent declaration will be subject to criminal prosecution (HHS Release, 10/21/02).

Kathleen Jaeger, president of the Generic Pharmaceutical Association, says that the president’s proposal is "a good first step administrative action to curb some of the abuses" (Carter, AP, 10/22/02).

The Senate passed a more comprehensive measure July 2002 but the House never acted, and when the bill died, the president intervened. Some critics say that in comparison to the Senate’s bill, Bush’s proposal does not do enough. Senator Edward Kennedy, who heads the Senate’s health committee said the presidents proposal ‘will do little to assure that these loopholes will be closed or the abuses that are preventing the generic drugs from getting swiftly to the market will end." Senate Majority leader Tom Dashchel says that Bush’s proposal "falls short of what the Senate has already passed."

In its proposal, the White House made the following omissions from the Senate’s July 2002 bill:

• Language that gives generic companies the right to sue if it believes that a brand-name company is filing a new patent solely to prevent competition is left out.
• Provisions that require a brand-name company to sue within a certain time period to stop a generic competitor form making their product available to the market.

An author of the July 2002 Senate Bill, Senator Charles Schumer said that the president’s proposal "closes on door to the pharmaceutical industry in their attempt to delay generics, but it opens up several others. I think that within three weeks, the pharmaceutical industry will find a way around it" (Carter, AP, 10/22/02).

The pharmaceutical industry, one of the most influential lobbyists in Washington, may be viewing the president’s proposal better than the Senate’s July version, and something they could work with considering the current political climate, rising healthcare costs and senior care. In Online NewsHour Susan Dentzer said that the pharmaceutical industry, specifically PhRMA, was privately "very concerned that the Senate did pass that legislation last summer [July 2002], which would have actually have gone much further than the FDA rule today [the 10/21/02 rule] would have gone in terms of baring the kinds of legal maneuvers that some companies are engaging in" (PBS, 10/22/02). Concerning the more comprehensive Senate bill (July 2002), patent lawyer Dr. Gregory Glover who works with pharmaceutical companies said that the Senate’s bill would make it difficult for innovators to "protect their discoveries," resulting in "fewer new drugs for American consumers" (Glover, Newstream, 07/02). Because of experimentation, testing and frequent failures it typically takes a drug company 12 to 15 years to develop a new drug before it can be released to the public. Strong patent protections help companies bear the research and development costs associated with new drugs. The Senate’s bill would decrease profits to the point where new drug development would be jeopardized. Generic drug companies only copy the most profitable drugs; Dr. Glover warns that the generic companies are not in the business of developing new drugs and cures. "The only companies that are investing in new drug discoveries are the brand-name pharmaceutical companies" (Glover, Newstream, 07/02). Dentzer went on to say that the president’s proposal, which is a compromise of the original Senate bill, is something that some of the pharmaceutical companies "could live with" (PBS, 10/22/02).