Hatch-Waxman Act 30 years later: Landmark compromise still resonates

Thirty years ago, Democratic and Republican members of Congress hammered out a rare and prescient bipartisan compromise bill that transformed the pharmaceutical landscape forever and unleashed the modern generic drug industry. That law, the Drug Price Competition and Patent Term Restoration Act — also known as the Hatch-Waxman Act in honor of its two principle sponsors in the House and Senate — has proven to be one of the most far-reaching and impactful pieces of legislation ever to shape the American healthcare system.

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Enacted Sept. 24, 1984, Hatch-Waxman was a Nixon-goes-to-China event. In all probability, only the coming together and active leadership of two influential lawmakers, who in other respects were almost polar opposites on the political spectrum — deeply conservative Republican Sen. Orrin Hatch of Utah and California Rep. Henry Waxman, one of the most liberal members of Congress — could have made such a compromise possible.



“The Hatch-Waxman Act is more than the cornerstone of the modern generic pharmaceutical industry; it is nothing short of a remarkable bipartisan legislative triumph,” said Ralph Neas, president and CEO of the Generic Pharmaceutical Association. The law, he added, “demonstrates that good policy that embraces compromise can benefit all Americans. Brand drug makers have profited from a reasonable extension of patent protections, and generic manufacturers have benefited, as well, growing into a thriving industry that has produced approximately 12,000 safe, more affordable versions of brand drugs.”



Those cheaper me-too versions of pioneer drugs have saved Americans and their health plans $1.46 trillion in pharmaceutical costs over the past decade, according to IMS Health, including $239 billion last year alone. But by guaranteeing branded drug makers a reasonable period of patent protection and market exclusivity for their costly research and development efforts, the bill also spurred research-based medication breakthroughs and a thriving branded drug industry.



 Hatch-Waxman’s impact can hardly be overstated. “Generic medicines made up 86% of the drugs dispensed in 2013, up from only 18% in the pre-Hatch-Waxman era. At the same time, the brand industry has flourished, with more new drug breakthroughs over the last 30 years than ever before,” said Neas.



“Before its adoption, no streamlined Food and Drug Administration approval process existed for generic drugs,” noted a report from the Practical Law Co., a think tank and consulting group for attorneys. “Rather, generic drug companies were required to conduct the same kinds of expensive, time-consuming clinical trials that drug companies conducted for new brand-name drugs. In addition, the unlicensed investigation and testing of a patented drug by the generic drug company to obtain FDA approval ... could subject [that] ... company to patent infringement liability.”



The law’s far-reaching success stems from its remarkable ability to balance the interests of both sides of the pharmaceutical industry. It gave generic manufacturers an expedited FDA-approval process for copycat products via abbreviated new drug applications, or ANDAs, while granting patent exclusivity periods to both branded and generic manufacturers and patent-term extensions to pioneer drugs.



Waxman himself described the bill in a written summation: “The [Hatch-Waxman Act] struck a balance between ensuring access to safe, effective and affordable drugs and providing adequate incentives for innovation,” he noted. “Under the law, a generic equivalent cannot be approved until at least five years after approval of the brand innovator drug. The generic drug is required to demonstrate it is chemically the same as the innovator drug, but the generic is allowed to rely on the brand’s safety and effectiveness data rather than having to go through the time and expense of replicating that data.”



“The competition generated through the act not only results in lower priced drugs, but also fosters innovation by encouraging companies to bring new products to market to replace revenues from older products,” Waxman added.



Perhaps remarkably, both lawmakers are still going strong. Waxman, now 74, announced plans to retire at the end of the current Congressional term. Hatch, 80, said he plans to step down in 2018. But the impact of their signature compromise bill will remain a big part of their legislative legacy.