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PHARMACEUTICAL
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Reproduced with permission from PharmaceuticalLaw & Industry Report, Vol. 2, No. 7, 02/13/2004.
Copyright ஽ 2004 by The Bureau of National Affairs,Inc. (800-372-1033) http://www.bna.com Market Exclusivity Options Under the FFDCA:Strategic Opportunities for Innovators of Pharmaceutical Products BY CAROLYNE R. HATHAWAY AND JOHN R. MANTHEI protections have resulted in much longer periods of ex- clusivity for brand name drugs. For example, currently, the average period of exclusivity is nearly twice as long as it was approximately 20 years ago, when the exclu- Marketing exclusivity and patent protection are sivity period was almost solely based on the existing crucial components necessary for the success of patent term.2 Legislative nonpatent exclusivity provi- U.S. pharmaceutical companies. Most pharma- sions have contributed significantly to this phenom- ceutical companies file for patent protection once a po- tential drug demonstrates promise—long before it is de- veloped into a drug form and tested and approved for Every day a brand name drug is on the market with- human use. Due to the prolonged development, testing, out generic competition brings a tremendous amount of and FDA-approval process for these drugs (often up to revenue to its manufacturer.3 The financial implications 12 years), little patent protection may remain once a to the manufacturer when its patent for an original new drug enters the market. The nonpatent exclusivity brand name drug expires and generics become readily provisions of the Federal Food, Drug, and Cosmetic Act available may be substantial.4 Data suggest that generic (FFDCA)1 extend for months, or even years, the period drugs currently bring in approximately $5 billion of all during which a pharmaceutical innovator enjoys the drug sales on an annual basis, a number which is rising right to market its product without competition. These 2 See Arnold S. Relman and Marcia Angell, ‘‘America’s 1 Federal, Food, Drug, and Cosmetic Act of 1938, ch. 675, Other Drug Problem,’’ The New Republic, Dec. 16, 2002. The 52 Stat. 1040 (codified as amended at 21 U.S.C. §§ 301-397).
length of patent protection was previously 17 years from the date of patent grant, but it often took up to nine years for clini- cal trials and FDA approval, so the real period of marketing ex- Ms. Hathaway and Mr. Manthei are members clusivity was closer to eight years. See id. Patents filed after of the FDA practice group in the Washington, June 8, 1995, now have a patent term of up to 20 years from D.C., office of Latham & Watkins LLP. Mr. the date of filing of the earliest related patent application. See www.uspto.gov/go/taf/patdesc.htm.
Manthei is a former majority counsel to the 3 See Heidi Grygiel, ‘‘Now They GATT Worry: The Impact House Energy and Commerce Committee. of the GATT on the American Generic Pharmaceutical Indus- Special thanks to Jeremy Lustman who con- try,’’ 6 U. Balt. Intell. Prop. L.J. 47,47 (1997). This figure is low tributed to this article as a Latham associate. COPYRIGHT ஽ 2004 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. 20037 annually and has some predicting that generic drug rev- 1. New Chemical Entity Exclusivity. NCE Exclusivity is enue could eventually amount to 75 percent of all drug granted to innovative drugs that contain an ‘‘active moi- sales.5 Further, by the end of 2002, approximately 40 ety’’ that has not been previously approved by FDA in pharmaceutical products with combined annual rev- any other new drug application (NDA) submitted under enues of more than $16 billion were expected to lose section 505(b) of the FFDCA.12 NCE Exclusivity is their exclusivity protection in the United States, via unique in that it prohibits FDA not only from approving, patent or otherwise.6 Some estimates show that rev- but even accepting an abbreviated new drug application enues related to certain individual drug products ex- (ANDA) for a period of five years (four for applications ceed $4 million per day.7 Therefore, extending exclusiv- that contain a certification of patent invalidity or nonin- ity by a few months, weeks, or even days, represents fringement) for a competitive product containing the significant revenue to the manufacturer. This can be same active moiety as the original innovative drug.13 All particularly important for companies with a small num- other forms of exclusivity protection only prohibit FDA from approving other applications, but allow it to accept This article is intended to provide a brief summary of and review them during periods of another company’s the three nonpatent market exclusivity provisions of the FFDCA that are most applicable to innovators of pre- Significantly, NCE Exclusivity attaches broadly to the scription drugs. These are: (a) New Drug Product Ex- drug’s ‘‘active moiety’’—defined by FDA as ‘‘the mol- clusivity (comprised of New Chemical Entity Exclusiv- ecule or ion responsible for the physiological or phar- ity and Clinical Investigation Exclusivity); (b) Orphan macological action of the drug substance, irrespective Drug Exclusivity; and (c) Pediatric Exclusivity. These of its form or indication.’’15 A competitor is precluded statutory exclusivity provisions are implemented and from marketing that same chemical substance pursuant monitored by the Food and Drug Administration. They to an ANDA even for a completely different indication prevent competitive products from entering the market or in a different form.16 NCE Exclusivity does not, how- by prohibiting FDA’s approval or, in some circum- ever, block acceptance or approval of another NDA for stances, even its acceptance of, certain competing ap- a product containing the same active moiety, where the applicant has conducted full clinical trials to support its 2. Clinical Investigation Exclusivity. Clinical Investiga- In 1984, Congress passed the Drug Competition and tion Exclusivity applies to drugs for which a manufac- Patent Term Restoration Act, commonly known as the turer conducts additional clinical testing to develop new Hatch-Waxman Act.8 In addition to providing various dosage forms, new indications, or to switch from pre- exclusivity protections to generic drug companies in Ar- scription to over-the-counter (OTC) use.18 It is granted ticle I, Hatch-Waxman enacted important market incen- for a change in an approved drug product (pursuant to tives for pharmaceutical innovators in Article II, in re- either a new NDA or a supplemental NDA) that re- sponse to growing concerns about the disincentives and quires new clinical investigations for approval.19 It pro- costs associated with lengthy FDA approval processes.9 hibits FDA, for a period of three years, from approving In particular, Congress acted to restore some of the a competitor’s ANDA relating to a modification for time lost on patent life while companies created new or which the innovator conducted a new clinical investiga- improved products and were awaiting pre-market ap- tion.20 In order to support Clinical Investigation Exclu- proval by creating a significant new incentive to encour- age increased expenditures for research and develop- ment, and ultimately, the introduction of more innova- (b) new (i.e., not previously used to support approval of Among its many provisions, Hatch-Waxman added up to five years of market exclusivity for certain new (c) essential to approval (i.e., study cannot be merely drugs (‘‘New Chemical Entity Exclusivity’’ or ‘‘NCE Ex- clusivity’’) and provided up to three years of additional exclusivity for companies that introduce changes in drugs already on the market (‘‘Clinical Investigation Exclusivity’’). Manufacturers are not required to apply Clinical Investigation Exclusivity can be controver- for either of these two types of exclusivity; rather, the sial. It has been granted for slight changes in dosage Center for Drug Research and Evaluation (CDER) form, for changes in the excipient (i.e., an inactive in- within FDA makes exclusivity determinations on all rel- gredient), for new indications and for switches from evant applications, with or without a request from the prescription to OTC status that required a clinical inves- 12 See 21 U.S.C. §§ 505(c)(3)(D)(ii), 505(j)(5)(D)(ii); see 5 See id; see also Jane Everhaty, ‘‘Panelists Detail Barriers to Wider Use of Generics,’’ 216 Am. Druggist 16 (1999) 6 See ‘‘Buying Time: US Pharma Companies Can Continue to Benefit From an Extended Pediatric Exclusivity Provision,’’ Pharmaceutical Executive, July 1, 2002.
16 See 21 C.F.R. § 314.108(b).
8 See generally 21 U.S.C. §§ 355, 360cc and 35 U.S.C.
19 See 21 U.S.C. §§ 505(c)(3)(D)(iii) & (iv), and 9 H.R. Rep. No. 98-857, Part I at 15-18 (1984).
505(j)(D)(iii) & (iv); see also 21 C.F.R. § 314.108.
COPYRIGHT ஽ 2004 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C.
tigation. Clinical Investigation Exclusivity prohibits riod.32 FDA may review such applications even though FDA from approving an ANDA or other application for the ODE precludes final approval.33 Thus, FDA may is- the protected change for three years. FDA can, how- sue a tentative approval which does not become effec- ever, approve an ANDA for the original indication (on tive until the applicable patent or exclusivity expires.34 the expiration of patent protection or the NCE Exclusiv- FDA may also approve other applications for the same ity).22 Unlike NCE Exclusivity, FDA can accept and be- drug with different indications.35 In addition, a subse- gin its review of an application during this period, but quent applicant can circumvent the ODE granted to a cannot grant final approval until the existing Clinical previous company and obtain approval for the ‘‘same Investigation Exclusivity expires.23 In addition, as is the drug’’ for the same orphan indication if the sponsor can case with NCE Exclusivity, Clinical Investigation Exclu- demonstrate that, despite its similarities, the second sivity does not block approval of an NDA that relies on drug is safer, more effective, or significantly more con- its own clinical data to support the change.24 venient for patients (i.e. ‘‘clinically superior’’) than the first drug.36 This provides an incentive for companies to engage in more research and development for the treat- The Orphan Drug Act of 1983 (ODA), and its subse- ment of rare diseases, since it permits a new competitor quent amendments were enacted to encourage the de- to displace the incumbent (who has already been velopment of drugs to treat rare diseases and conditions granted ODE) through the introduction of a superior that affect 200,000 or fewer Americans, and for which sales of the drug in the United States are unlikely to ‘‘Same drug’’ determinations can be quite conten- cover the cost of research and development.25 The ODA tious between competing manufacturers. They may in- provides pharmaceutical manufacturers a seven-year volve assessments of both chemical (i.e., whether same period of market exclusivity for the orphan indication active moiety equals same drug; and the relevance of following an orphan drug’s FDA approval and offers other drug components) and clinical similarity (i.e., generous tax credits and research grants to these com- whether a drug is clinically superior). For example, in Baker Norton Pharmaceuticals Inc. v. FDA,38 the plain- Congress recognized that, although the federal gov- tiff alleged that the FDA improperly denied its request ernment and private pharmaceutical companies spend for orphan drug designation of its drug Paxene (which millions of dollars a year in biomedical research and contains paclitaxel and treats the orphan disease Kapo- drug development, there are many inherent disincen- si’s Sarcoma).39 The plaintiff argued that the FDA im- tives in orphan drug development that may impede in- properly equated the term ‘‘same drug’’ with the ‘‘same novation.27 These include the fact that orphan diseases active moiety’’ when it enforced the orphan drug exclu- may cause more adverse side effects for orphan drugs sivity that it previously granted to the plaintiff’s com- than is the case with drugs for common diseases, most petitor, BMS, for its drug Taxol, which also contains pa- orphan drugs are not patentable or profitable on their clitaxel and treats the same condition.40 The plaintiff ar- own (without exclusivity protection), and it is extremely gued that the two drugs were chemically different, difficult to establish and administer human clinical tri- because even though they contained the same active als since there are so few people who have a given or- moiety, they had different inactive ingredients and phan disease.28 Congress believed that private compa- manufacturing processes.41 Therefore, it maintained, nies would develop more drugs for rare diseases if they that the two drugs were not the ‘‘same’’ and could be were given additional incentives (that could outweigh marketed concurrently.42 The court did not agree and the disadvantages).29 Congress maintained, in the face granted summary judgment in favor of the defendant, of opposition from many patient advocacy groups and holding that the FDA’s definition of ‘‘same drug’’ was generic drug manufacturers, that giving orphan drug not ‘‘arbitrary and capricious.’’43 manufacturers the potential for huge rewards for a suc- cessful orphan drug was preferable to a system that dis- Before Congress passed the ODA in January 1983, couraged the broader development of these drugs at there were few new drugs designed to treat rare dis- eases. To illustrate, in the decade before the law was en- Orphan Drug Exclusivity (ODE) blocks approval not acted, less than a dozen drugs were developed to ad- only of generic products, but also of second innovator dress rare diseases.44 However, since the ODA became products that contain the same active ingredient law, many products have been developed and approved labeled for the same orphan indication.31 This exclusiv- ity blocks FDA’s approval, but not its acceptance of, an- other application for the same drug and indication (in- cluding another complete NDA) during the ODE pe- 37 See David Duffield Rohde, ‘‘The Orphan Drug Act: An Engine of Innovation? At What Cost?’’ 55 Food & Drug L.J. 125 25 See 21 U.S.C. §§ 525-528; see also 21 C.F.R. Part 316.
38 See Baker Norton Pharmaceuticals Inc. v. FDA, 132 26 See Frank Lichtenberg, The Effect of New Drugs on Mor- tality from Rare Diseases and HIV, NBER Working Paper No.
27 See H.R. Rep. No. 97-840, Part I at 6-7.
44 See ‘‘The Price of Success: Orphan Drug Act Has 31 See generally U.S.C. § 525-528; see also 21 C.F.R. Part Spurred Advances—And Disputes,’’ The Boston Globe, July 25, PHARMACEUTICAL LAW & INDUSTR Y REPOR T to treat such rare diseases and conditions as cystic fi- formation about the effects of drugs and biological brosis, complications of HIV-infection, Gaucher’s dis- products in children.56 It believed that these incentives eases, hemophilia, and rare forms of cancer. In particu- would entice drug manufacturers to conduct pediatric lar, over one thousand products have received orphan clinical studies that would generate useful and neces- drug status, with over 200 of them approved for market- sary information about drug effectiveness in children.57 Pediatric exclusivity grants brand name pharmaceu- ODE has allowed some pharmaceutical manufactur- tical manufacturers who conduct pediatric clinical stud- ers to reap tremendous revenue from their respective ies an additional six months of market exclusivity, after orphan drugs. According to one source, approximately patent protection and/or all other forms of market ex- 1 percent of the 10,000 products that made up the U.S.
clusivity for the drug have expired.58 Pediatric exclusiv- prescription drug market in 2000 were orphan drugs; ity is available only to extend other forms of already- yet, the sales of these orphan drugs amounted to ap- existing exclusivity or patent protection for a particular proximately 4 percent of the U.S. prescription drug product, and is not a separate, independent basis of ex- market total.46 For example, in between 2000 and 2001, clusivity.59 Therefore, if a sponsor obtains pediatric ex- Amgen’s Epogen had sales of $2 billion, Neopogen’s Fil- clusivity, any patent, NCE, Clinical Investigation Exclu- gastrim had sales of $1.2 billion, Biogen’s Avonex had sivity, or Orphan Drug Exclusivity applicable to the sales of $761 million, Schering AG’s Betaseron had product will be extended by six months. During this pe- sales of $634 million and Serono’s Gonal-F had esti- riod, FDA cannot approve a generic version of the drug mated 2001 sales of $400 million to 420 million.47 In ad- containing the same active ingredient.60 If, however, no dition, the ODA has been a major step in bringing more other exclusivity period or patent applies to the prod- pediatric trials to fruition. Enbrel, Immunex’s drug uct, pediatric exclusivity is generally unavailable.61 (marketed jointly by Amgen and Wyeth) for juvenile rheumatoid arthritis, a condition that affects between Pediatric exclusivity is granted once an applicant, 70,000 to 100,000 children in the United States, was who possesses an approved NDA for a particular drug, among the first orphan drugs to be studied and ap- conducts studies in response to a ‘‘written request’’ proved in children.48 Immunex maintains exclusive from FDA for a pediatric study to determine the pediat- rights to manufacture Enbrel, sales of which were $367 ric effectiveness and safety of that specific drug.62 Un- million in 1999 (its first year on the market) and $652 der the BPCA, if FDA issues a ‘‘written request’’ for pe- million in 2000, a large windfall over and above Immu- diatric studies on a product that has market exclusivity, nex’s original projection that the drug would bring in a the company must inform FDA, within 180 days after maximum of $500 million annually after three years in receiving the request, whether it will conduct the stud- ies.63 To the extent the study requested is not initially More recently, in April 2003, the FDA announced the acceptable to the manufacturer, the statute provides approval of Fabrazyme, the first treatment of Fabry dis- that the parties may negotiate and ultimately change ease.50 Fabry is a rare genetic disorder (afflicting only the parameters of the request.64 If the company does 5,000 people worldwide) in which an enzyme deficiency not ultimately agree to conduct the pediatric studies leads to the buildup of fat in body organs and a short- specified in the ‘‘written request,’’ the FDA may ask the ened average lifespan.51 Genzyme, the manufacturer of Foundation for the National Institutes of Health to Fabryzyme, beat out Transkaryotic Therapies Inc.’s Re- award a grant to conduct the studies, even though the plagal for orphan drug protection.52 drug has remaining market exclusivity.65 If FDA does not issue a ‘‘written request’’ on its own volition, a com- pany wishing to conduct pediatric studies and receive Pediatric exclusivity protections, which were estab- an additional exclusivity period can submit a request to lished originally by the Food and Drug Administration FDA for a ‘‘written request.’’66 As of Aug. 31, 2003, the Modernization Act of 199753 (FDAMA), originally sun- set on December 31, 2001.54 They were extended until U.S.C. §§ 355a and 505(A); see also 21 C.F.R. Parts 201, 312, October 2007 by the enactment of The Best Pharmaceu- 314, and 601. In addition to issues concerning ‘‘written re- ticals for Children Act (BPCA) on Jan. 4, 2002.55 Con- quests’’ discussed in this section, the BPCA also included pro- gress enacted this protection to address the lack of in- visions concerning labeling for generic products and compa- nies and restored generic exclusivity to the pediatric exclusiv- ity program so that these two types of exclusivity run 45 See ‘‘Finding Homes for Orphan Drugs,’’ Chemical Busi- consecutively, even if they initially overlap.
56 See S. Rep. No. 105-43 at 151-53 (1997); see also Lauren Hammer Breslow, ‘‘The Best Pharmaceuticals for Children Act of 2002: The Rise of the Voluntary Incentive Structure and 48 See ‘‘Strength in Numbers,’’ The Houston Chronicle, July Congressional Refusal to Require Pediatric Testing,’’ 40 Harv.
50 See ‘‘The FDA’s New Math,’’ The Wall Street Journal, 58 See BPCA generally at 21 U.S.C. § 355a.
52 See Associated Press, ‘‘Genzyme Gets FDA Nod for Fab- ry’s Disease Drug,’’ The Wall Street Journal, April 25, 2003.
62 See BPCA at 21 U.S.C. § 355a(a).
53 Food and Drug Administration Modernization Act of 63 See BPCA at 21 U.S.C. § 355a(a).
1997, Pub. L. No. 105-115 § 111, 111 Stat. 2296, 2305-09 (codi- 64 See BPCA at 21 U.S.C. § 355a(d)(1).
fied as amended in scattered sections of 21 U.S.C.).
65 See BPCA at 21 U.S.C. § 355a(d)(4)(B).
66 See Thomas J. Parker and Amy S. Manning, ‘‘Buying 55 Best Pharmaceuticals for Children Act of 2002 (BPCA), Time: US Pharma Companies Can Continue to Benefit From Pub. L. No. 107-109, 115 Stat. 1408 (codified as amended in an Extended Pediatric Exclusivity Provision; Business Strate- scattered sections of 21 U.S.C. and 42 U.S.C.; see also 21 gies,’’ Pharmaceutical Executive, July 1, 2002.
COPYRIGHT ஽ 2004 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C.
FDA had received 334 proposed pediatric study re- FY 2002, Congress appropriated $200 million for this quests and they had formally issued 284 ‘‘written re- purpose).78 They contend that manufacturers should be quests,’’ some in response to proposed requests and expected and required on their own to ensure the safety others issued by FDA on its own, without proposed re- and effectiveness of drug products in pediatric patients before marketing them, as they must do with almost, if A pediatric study does not have to be successful in or- der for the drug to retain its exclusivity.68 Moreover, in- Estimates as to the cost of conducting a pediatric formation from a requested pediatric study does not study vary. The National Institute for Children’s Health have to be included on a product’s label in order for it and Development estimates that safety and effective- to still qualify for exclusivity.69 Rather, as long as the brand-name manufacturer submits a study that ‘‘fairly ness studies in children can cost from $1 million to $7 responds’’ to FDA’s requirements (as set forth in the million.80 The Pharmaceutical Research and Manufac- ‘‘written request’’), six months of pediatric exclusivity turers of America estimates the cost at anywhere from $5 million to $35 million.81 Yet, the financial benefit of a six-month pediatric exclusivity extension will often One of the most significant benefits of pediatric ex- far exceed these costs. According to one source, The clusivity is that it attaches not only to the product stud- ied in the pediatric population, but also to all of the ap- Wall Street Journal calculated the additional revenue plicant’s formulations, dosage forms, and indications for six drugs granted exclusivity, estimating their gains for products with existing market exclusivity or patent for the extra six month period of exclusivity (compared life that contain the same active ingredient.71 For ex- to the same amount of time in competition with generic ample, if a brand-name manufacturer had obtained drugs) to be as follows: (a) Claritin, $975 million; (b) FDA approval for oral, intravenous, and topical formu- Prozac, $831 million; (c) Glucophage, $648 million; (d) lations containing the same active ingredient, and then Pepcid, $290 million; (e) Vasotec, $318 million; and (f) conducted pediatric studies in accordance with FDA’s written request relating to the active ingredient just in The Pediatric Exclusivity program has been ex- the oral formulation, the additional six-month exclusiv- tremely controversial. For example, in Barr Laborato- ity period would also be applicable to the intravenous ries Inc. v. Thompson,83 Barr brought a claim against FDA for refusing to approve the company’s ANDA to Since the pediatric exclusivity provisions were en- market its generic version of AstraZeneca’s breast can- acted, many pediatricians, politicians, and children’s cer drug Tamoxifen Citrate until AstraZeneca’s pediat- health advocates have praised its effects and overall re- ric exclusivity for the drug expired.84 The FDA had sults.73 As of April 1999 (two years after the FDAMA granted tentative approval to the plaintiff’s ANDA in was enacted), the FDA had granted pediatric exclusiv- 1990, but did not request a pediatric study from Astra- ity to 28 products.74 Eighteen of those studies resulted Zeneca until 10 years later, in 2000.85 AstraZeneca’s ul- in new dosage, safety or adverse effect information for timate completion of this study led FDA to grant a six- already-approved drugs.75 This number is in direct con- month extension of its patent from August 2002 to Feb- trast to only 11 pediatric studies that were completed in ruary 2003.86 The court upheld the retroactive the seven-year period before the FDAMA was en- application of the pediatric extension to delay final ap- Others, however, have argued that the benefit of en- hanced pediatric studies has come at a significant cost.
For example, the six-month extensions that are granted through pediatric exclusivity cost consumers hundreds Schering-Plough’s Claritin is illustrative of some of of millions of dollars because of the delay in the avail- the mechanisms that have been used by innovators to ability of cheaper, generic drugs reaching the market.77 extend market exclusivity for their products. Claritin These critics also argue that taxpayers should not fund was patented by Schering-Plough in 1981, but was not the drug studies that manufacturers refuse to conduct, approved by FDA until 1993, amid much controversy as as these studies average about $3.87 million each (for to whether it was effective in preventing drowsiness when taken in low doses.88 In 2001, Claritin had sales 67 See www.fda.gov/cder/pediatric/wrstats.htm. The proce- dure for asking FDA to make a drug eligible for pediatric ex- clusivity is also provided on FDA’s Web site, www.fda.gov/ 80 See Breslow at 168 and FNs 100 and 298.
68 See http://www.fda.gov/cder/pediatric/faqs.htm.
81 See Breslow at 168 and FN 299.
82 See Breslow at 168 and FNs 92 and 301.
70 See id. See also http://www.fda.gov/cder/pediatric/ 83 See Barr Laboratories Inc. v. Thompson, 238 F. Supp. 2d 71 An active moiety is the ‘‘molecule or ion . . . responsible for the physiological or pharmacological action of the drug substance,’’ 21 C.F.R. § 314.108.
72 See generally Food and Drug Admin., Dep’t of Health and Hum. Servs., The Pediatric Exclusivity Provision: January http://www.citizen.org/congress/reform/archives/ 2001 Status Report to Congress, iii, 37 tbl. 7 (2001).
claritin/articles.cfm?ID=1075. Claritin received an additional 22.5 months of exclusivity extension from the Uruguay Rounds Agreement Act (URAA) of 1994, the U.S. enabling legislation for the General Agreement on Trade and Tariffs (GATT). On average, the URAA extended pharmaceutical patents by only PHARMACEUTICAL LAW & INDUSTR Y REPOR T of about $2.7 billion and it brought in close to one-third years old.98 Its period of marketing exclusivity for this of Schering-Plough’s revenues that year.89 product does not currently expire until June 21, 2007.99 In addition, in 2002, Schering-Plough petitioned and The 17-year patent for Claritin would have expired in received approval from the FDA to change Claritin 1998, but the company received a Hatch-Waxman ex- from a prescription drug to an OTC medication. This clusivity extension for two years, a GATT-related exten- maneuver effectively prohibited generic companies sion for an additional 22 months, 90 and a pediatric ex- from entering the prescription market when the patent clusivity extension for an additional six months; a total expired in 2002, as the same drug at the same dose can- of almost four-and-a-half additional years of exclusivity not be sold both through prescription and OTC.101 Al- protection for the drug. During this time period, though the OTC price for Claritin has dropped dramati- cally since its exclusivity elapsed in December 2002 and Schering-Plough sued eight generic drug companies for contributed significantly to the loss in revenues and infringement of one or more of its patents listed in the margins for Schering-Plough (71 percent reduction in FDA’s Orange Book.92 The company’s costs were ap- margins in the first quarter of 2003), the company sig- proximately $5 million per case, but this amount paled nificantly limited the competition on its blockbuster in comparison to the amount of profits it earned related In 1987, Schering-Plough patented the active metabo- The numerous forms of market exclusivity discussed lite of Claritin—the molecule into which the body con- throughout this article are somewhat complicated to verts Claritin, which accounts for the action of the navigate, especially given their interrelationship. As the Claritin case illustrates, the current regulatory land- drug.94 Facing the loss, in 2002, of its exclusive pre- scape permits innovators to create variations of an ex- scription rights for Claritin, the company petitioned and isting product, prevent competition from generic drugs, received approval from the FDA to market this metabo- and attain a number of forms of exclusivity beyond lite as Clarinex.95 Schering-Plough was awarded NCE patent protection that could yield hundreds of millions for Clarinex following the drug’s approval in December of dollars in additional revenue. Aside from the obvious 2001.96 It immediately began an aggressive marketing financial benefits that are associated with market exclu- effort to switch Claritin users to this new drug before sivity, companies who comprehend and pursue the vari- the exclusivity for Claritin expired in December 2002.97 ous opportunities associated with such exclusivity, ulti- mately buy themselves additional time to develop the Schering-Plough received an additional six months of long-term strategies and new products that will eventu- pediatric exclusivity on Clarinex for conducting pediat- ally shield them from the impending onslaught of com- ric clinical trials on children aged six months to 11 98 See ‘‘Schering-Plough Gets Added Exclusivity for Clar- inex,’’ The Memphis Business Journal, Feb. 25, 2003.
See Relman and Angell at pp.16-17 (of 23).
See Matthew Harper, ‘‘Claritin Will Be Sold Without A Pre- scription,’’ Forbes, March 8, 2002.
102 See Peter Landers, ‘‘Schering-Plough’s Profit Plunges; U.S. Sales Slip by More Than Half,’’ The Wall Street Journal, COPYRIGHT ஽ 2004 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C.

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