When generic drugs seek FDA approval, the pharmaceutical company files an Abbreviated New Drug Application (ANDA), in which the generic company establishes bioequivalence to its usually patented counterpart. The ANDA filer must also certify that, to the best of the filer's knowledge, the generic will not infringe on a current patent-holder's rights. This can be done by showing (1) no patent on the product exists, (2) the patent is expired, (3) the patent will expire by the time the generic is marketed, or (4) the ANDA filer believes the patent is invalid - called a Paragraph IV certification. A Paragraph IV certification usually results in a patent challenge. Recently, these challenges have been settled when the large, patent-holding company pays a large sum to the ANDA filer, and in many cases lets the ANDA filer enter the market prior to patent expiration. The result is delayed generic market entry and higher drug prices for everyone. The proposed Preserve Access to Affordable Generics Act, currently pending in Congress, will attempt to make these "reverse payments" illegal.
Laura J. Grebe,
Generic Entry in a Rough Economy - Proposed Legislation May Ease Health Care Costs,
14 Marq. Intellectual Property L. Rev. 167
Available at: http://scholarship.law.marquette.edu/iplr/vol14/iss1/10