Medicare and the New Generic Drug Legislation: THE GREGG-SCHUMER AMENDMENT OF 2003 (S. 1225)

Generic Drug LegislationThe latest generic drug legislation, the Gregg-Schumer amendment (also known as GAAP) would achieve savings comparable to those of the original Schumer-McCain legislation of 2002 but would use a different approach to modify the patent laws. The key elements of the Gregg-Schumer proposal are described next.

A Single 30-Month Stay

In contrast to the law under Hatch-Waxman, the name-brand company under GAAP would get a single 30-month stay. The stay would be initiated if a name-brand company sued a generic company for any application that it claimed to be infringing on a patent on a blockbuster drug that was filed before a generic application was submitted to the FDA.
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After a generic application is filed, the name-brand company would have 45 days to challenge the generic application in court. If the name-brand company does not challenge the generic company’s application within 45 days, the generic company would be able to seek a declaratory judgment stating that it has not violated the name-brand drug’s patents.

The single 30-month stay would run concurrent with the FDA’s consideration of the generic company’s application. As such, the 30-month stay would probably not cause a significant delay in the generic drug’s introduction to the marketplace. (It usually takes the FDA 18 to 25 months to approve a generic drug.) In contrast, the FDA’s proposed rule would allow the stay to be triggered up until the eve of the generic drug’s coming to market.


The Gregg-Schumer plan does not specify which patents can be listed in the FDA’s Orange Book, which identifies FDA-approved drug products on the basis of safety and effectiveness under the Federal Food, Drug, and Cosmetics Act. To ensure that the name-brand companies do not use frivolous patents to keep generic drugs from the market, the proposal would create a new mechanism of enforcement.

This legislation would allow generic companies to file counterclaims if a name-brand company sued them for violating a patent. For example, if a name-brand company filed a frivolous patent and sued a generic applicant for violating that patent in order to trigger the 30-month stay, the generic company could countersue the name-brand company and argue that the patent should never have been listed in the Orange Book in the first place.
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180-Day Exclusivity

Currently, the first generic drug company that is able to come to market with a competitive product wins 180 days (six months) of exclusivity. The Gregg-Schumer proposal sets up forfeiture provisions, similar to those in earlier generic drug legislation, that prevent generic companies from abusing this incentive. Under the law, a generic drug company would forfeit its rights to this exclusivity if it were found to have made an anticompetitive deal with a name-brand company or had otherwise failed to come to market in a timely manner. If one of the forfeiture provisions outlined in the bill occurred, the exclusivity would be forfeited and the marketplace would open itself up to any generic company ready to come to market.


Under the current statute, the primary method by which the FDA determines whether a generic drug is equivalent to a name-brand product (bioequivalence) is by measuring the rate and absorption of the drug into the bloodstream. For certain drugs that are not absorbed into the bloodstream (e.g., topical agents and inhalers), the FDA uses different tests to determine bioequivalence, as defined in its regulations.

Name-brand companies have challenged the FDA’s use of these regulations, which has led to delays in the approval of the generic versions of these drugs. The Gregg-Schumer legislation would clarify that the FDA does have the authority to establish separate tests for determining the bioequivalence of drugs that are not absorbed into the bloodstream—as long as those tests are scientifically valid and meet rigorous standards.


On January 6, 2004, The New York Times reported that a federal judge ruled that Purdue Pharma, the maker of the highly profitable painkiller OxyContin®, deliberately misled federal officials in order to win patents protecting its drug and improperly delayed a generic competitor, Endo Pharmaceuticals Holdings, from introducing its generic version. In its countersuit, Purdue claimed that the agency should not approve generic versions of OxyContin® until its makers came up with plans to restrict abuse of the drug. Purdue added to its label a reference to its abuse-management program just before the expiration of its patent, eight years after the company first introduced the drug, and about two years after its abuse became widely known. Pur due contends that other generic companies must develop their own plans to restrict abuse.


The Hatch-Waxman Act started the ball rolling for the introduction of generic drugs to the market, but because of the many loopholes associated with it, name-brand companies were able to stall legally (and sometimes illegally) the placement of these generic drugs on the market. Because of the awareness among consumers and their sensitivity to drug prices and the differences between name brands and generics, political pressure was exerted and Congress subsequently responded. Although the response was slow, changes to the law finally appeared in 2003. It is hoped that there will be less confusion regarding product placements for name-brand and generic companies.

The Gregg-Schumer legislation clarifies that the FDA has the authority to allow generic drugs to enter the market for the original use, with modified labeling that ensures that products are safe and effective for use but does not include any information that is protected by patent or market exclusivity. For example, if a name-brand company is marketing a drug approved to treat hypertension and conducts studies revealing that the drug can also be used, a generic company is entitled to market the product for hypertension but not for cancer.

This legislation would also allow generic companies to countersue and possibly avoid delay in getting their products to market. It also would block other tactics, including using payoffs to generic companies to keep cheaper products out of the market.

Because generics often grab 80% of a branded drug’s sales within just a few months after introduction, however, consumers, especially senior citizens, will continue to experience problems related to the high R&D costs of prescription drugs.

For more information about the MMA, see the article by Dr. Stefanacci on page 95.

Category: Drugs

Tags: Generic Drug, Medicare

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