The GAIN Act Stacks 5-Years of Market Exclusivity for Antibiotics

Guest Post by Jacob S Sherkow. Sherkow is a fellow at Stanford Law School's Center for the Law and Biosciences. This post originally appeared on Sherkow's Stanford Site.

This week's New Yorker has an interesting article on the rise of antibiotic resistant gonorrhea (subscription required). What caught my attention was its discussion of something called the GAIN Act ("Generating Antibiotic Incentives Now")–a new law that apparently seeks to encourage pharmaceutical research of antibiotic resistance by giving pharmaceutical companies manufacturing a "qualified infectious disease products" (QIPDs) an additional five years of market exclusively–with or without a patent. The Act comes as title VIII to Senate Bill 3187, the Food and Drug Administration Safety and Innovation Act (the "FDASIA"). The FDASIA generally concerns the regulation of user-fees for FDA drug approval. (That is, allowing pharmaceutical companies to pay for part of the FDA approval process.) There are a few surprising things about the law: (1) Despite the high level of congressional partisanship, it was passed rather quickly. The bill went from being introduced in the House to receiving the President's signature in just over a month. (2) Although it seems like the additional protections afforded to manufacturers are significant–and concern a broad variety of public interests–there has been almost no discussion of the Act in the popular press. And (3), a number of companies–some of which were already conducting Phase III trials of qualifying drugs when the bill was passed–seem to have benefited. The GAIN Act is a relatively complex piece of legislation that requires detailed analysis, but for now, I'll briefly review the broad outlines.

"Non-IP" Market Exclusively

Prior to the GAIN Act, several classes of new drug applications (NDAs) received statutory market exclusivity, independent of whether the underlying drugs were protected by a patent. New drugs–that is, new active ingredients–received four to seven-and-a-half years of protection from the date of application. (21 U.S.C. § 355(c)(3)(E)(ii).) Old drugs with new uses received three years. (Id. § 355(c)(3)(E)(iii).) And drugs for a "rare disease or condition"–as designated by the Secretary of DHHS–received seven years. (Id. § 360bb(a)(1).) During these "exclusivity periods," FDA could not approve another version of the same drug, even if those drugs were not protected by a patent.

The GAIN Act

The GAIN Act adds a class of applications to that list–"qualified infectious disease products" or QIPDs. (Like drugs for "rare diseases and conditions," QIPDs are to be determined by the Secretary.) If the QIPD fits any of the three categories, above (i.e., a new drug, an old drug with a new use, or a drug for a rare disease), then its market exclusivity is automatically extended by five years. This means that new drug QIPDs will have a minimum statutory protection of nine years; old drug/new use QIPDs will have a total of eight years of protection; and rare disease, i.e., "orphan" QIPDs will have a whopping twelve years of "non-IP" market exclusivity.

As for what qualifies as a QIPD, it's up to the Secretary, although the statute lists several "superbugs" as suggestions. Interestingly, the GAIN Act provides that once an application has been classified as a QIPD, that designation–and its attendant exclusivity–cannot be taken away, even if the Secretary removes a "bug" on the statutory list of QIPDs. Because the exclusivity periods in the GAIN Act are as long, or longer, than any Secretary will have his or her job (because, presumably, a new President, after eight years, will replace the Secretary), previous Secretaries' QIPD designations will have significant "dead hand control" on future ones'.

GAIN vs. Patent Terms

There has long been concern that patents do not provide enough incentives to drug companies to develop new as opposed to follow-on drugs. (There are a number of proposed reasons for this: FDA approval uncertainty, the length of the approval process, increased patent litigation, patent thickets and licensing concerns, and others.) The current wisdom is that, on average, a pharmaceutical patent will have an "effective patent life"–the amount of patent protection lasting after the FDA approval process–of about fourteen and-a-half-years. The reality is likely shorter due to recent backlogs at the patent office and the increasingly aggressive challenges from generic manufactures. Regardless, the GAIN Act now appears to offer protection on par with patents, with the added advantages of being immune from challenges from competitors or "de-listing" by the Secretary. These seem like fairly significant protections and may even obviate the need for patents in some instances.

The core question, of course, is whether the GAIN Act, with its generous protections, will spur enough innovation in a critical public health area that it's worth the hit to other researchers and consumers. Only time will tell, but a more thorough vetting of the Act would be to everybody's gain.

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

11 thoughts on “The GAIN Act Stacks 5-Years of Market Exclusivity for Antibiotics

  1. Great column. Even though it is a year later, this is still timely. Forbes.com just linked to this explaining how emerging companies are benefitting from the advantages created by GAIN link to onforb.es

  2. To clarify: how would this stop the ‘free rider’ problem and incentivise R&D spending on clinical trials (in absence of patents)? E.g. Company 1 spends millions on clinical trials for superbug treatment. Company 2 uses that data and conducts its own clinical trials (perhaps amending treatment slightly). Company 2 files an NDA before company 1. What recourse does company 1 have? Fraud on government for company 2 to file in priority to company 1?

  3. Very interesting development. Presumably with “non-IP” market exclusivity the only question is who is first to file the NDA? Therefore, would this allow an unpatentable medical treatment (e.g. due to novelty/obviousness objections) get the funding it needs to conduct clinical trials to test safety and efficacy and get to market?

  4. Now, what was that Roberts said about Obama’s fine for not having health insurance?

    Roberts will go out of his way to sustain this legislation, IMHO. If Roberts were on the court, the Trademark cases would have gone the other way.

    But the point really is well take even regardless that the Supreme Court has no backbone.

  5. An interesting constitutional question, which no one seems to have addressed, is whether Congress has the authority to create new forms of “intellectual property”. Feist vs. Rural Telephone dealt with those limits in the copyright area – Congress cannot extend copyright to cover “sweat of the brow” work, as opposed to originality. Thus, the US does not have database copyrights, or copyrights on copies of public domain works.

    The GAIN act pushes those limits in the patent area. It comes close to being a monopoly as a gift of the state. This issue could also be raised more directly in the area of drug marketing exclusivity based on paying for clinical testing.

  6. I was thinking the same thing: but consider this:

    1) the first to apply gets the exclusivity;

    2) the second to apply may be for essentially the same drug, but the Secretary decides. The Secretaries decision is final and cannot be challenged.

    I suppose the only challenge would be the traditional fraud on the government challenge. That seems always available.

    This whole approach is consistent with the PTO Director’s decision being “final” on certain issues. Congress can statutorily limit the scope of challenges by law, and it has in 282.

  7. with the added advantages of being immune from challenges from competitors or “de-listing” by the Secretary.

    We all see where this is going, right? Exclusivity means you have to be the first (otherwise someone else has exclusivity), so there’s still at least a novelty issue. Possibly even an obviousness issue. And if there’s enough money at stake to make this an R&D-promoting measure, there’s enough money at stake for competitors to find all kinds of unexpected ways to challenge it.

    Besides, this doesn’t (and can’t) address the stated problems with patents that FDA approval is uncertain and takes long, patents get litigated (these will too), other people have their own competing market exclusivities (this adds more), and “licensing concerns” (which I thought meant “don’t license it” in the pharma industry).

    People will still be getting patents, because patents still last longer, and can be drafted to exclude non-identical competing products, and give you exclusivity at a much earlier stage without the risk that someone else will be first to market (first to FDA?) with something you’ve been spending all that incentivized R&D money on for years.

    Now, what happens if one company has a patent on a drug, but someone else qualifies for one of these on the same drug?

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