40 Years of Hatch-Waxman: What is the Hatch-Waxman Act?

Today, 90% of the medicines patients get in the United States are generics and biosimilars, which are more affordable for patients and save the U.S. health care system hundreds of billions of dollars every year. But it wasn’t always this way. Forty years ago, the generic drug industry, which produces low-cost copies of brand drugs following the end of their exclusivity period, was only producing a fraction of what it does today. At that time, there was no clear legal pathway for the FDA approval of generics, which delayed generic competition for years, even when the capacity to produce them existed.  At the same time, increasing regulatory approval requirements were lengthening the time for brand drugs to reach the market, decreasing effective patent life for brand drugs.

Recognizing these concerns, in 1984, Congress passed Senator Orrin Hatch (R-UT) and Representative Henry Waxman’s (D-CA) bipartisan Drug Price Competition and Patent Term Restoration Act, better known today as the Hatch-Waxman Act. In doing so, they created a comprehensive legal framework that stimulated rapid growth in the generic drug industry and incentivized new biopharmaceutical innovation – leading to new treatments and cures for patients.

America’s unique IP system promotes innovation and affordability, giving U.S. patients more medicine choices than anywhere else in the world while ensuring medicine costs remain a small and stable share of health care spending even as new medicines reach patients year after year. By many measures, America’s strong and reliable IP system has proven a resounding success in fueling innovation and driving treatment advances. In fact, since 2000, biopharmaceutical companies have brought more than 750 new medicines to patients, resulting in cures against some of the most challenging and costly diseases, declining death rates and dramatically improving quality of life. Yet, even with this progress medicines have remained and are projected to continue to remain just 14% of overall health care spending, on par with other countries.

The success of the balanced framework that Hatch-Waxman created leverages the prescription medicine lifecycle which has built in cost containment to make room for these treatment advances. Generic medicines are a key part of this balance. The Hatch-Waxman Act was able to facilitate the rapid growth in generic uptake and maintain incentives for innovation by:

• Creating a clear patent litigation framework with a predictable timetable to enable generic manufacturers to more easily challenge a brand manufacturer’s patents in court and offering a 180-day market exclusivity period for the first marketed generic to incentivize faster access to low-cost generics for patients.
  
  
• Allowing generic manufacturers to rely on brand manufacturers’ clinical trial data in FDA approval applications to expedite the approval timeline and dramatically reduce costs.
  
  
• Establishing a “safe harbor” provision to exempt generic manufacturers from patent infringement liability for developing a low-cost alternative and seeking FDA approval before a brand drug’s patents expire.
  
  
• Restoring parts of the patent term lost to innovators due to the length of the regulatory review process.
  
  
• Recognizing the importance of the data generated by brand manufacturers when they take on the significant risks and costs of drug development through a 5-year exclusivity period from generic applications.
  
  
• Establishing a 3-year exclusivity period for improved versions of brand pharmaceuticals that required additional clinical studies for FDA approval.

These provisions were immensely successful in growing the generics market, helping skyrocket generic uptake in the U.S., and lowering patient costs nationwide without sacrificing the vital incentives needed to motivate our country’s world-leading innovators.

As we look back on four decades of success of Hatch-Waxman, we’ll be exploring its impact for patients and how we can build upon its legacy to continue to bolster life-saving innovation and lower costs in the years to come.