October 21, 2002 8:33 A.M. EDT

THE PRESIDENT: Good morning. For more than a year, the Federal Trade Commission has investigated delays and abuses in the process of bringing generic drugs to the market. I have reviewed the FTC findings and I am taking immediate action to ensure that lower cost, effective generic drugs become available to Americans without any improper delays.

By this action, we will reduce the cost of prescription drugs in America by billions of dollars and ease a financial burden for many citizens, especially our seniors.

I appreciate so very much the Secretary of the Department of Health and Human Services, Tommy Thompson, for his good, steady and hard work on this issue.

SECRETARY THOMPSON: Thank you, Mr. President.

THE PRESIDENT: I want to thank Les Crawford, who is the Deputy Commissioner of the FDA, who so ably led this agency for the last year. I appreciate your hard work, Les. And I'm proud also, that Mark McClellan is with us, who is the newly confirmed FDA Commissioner. Mark has been on my staff with the Council of Economic Advisors and he will soon take over the FDA to work with Les to make sure the policy I'm announcing is fully implemented.

We live in an age of miracle drugs. Millions of Americans -- and citizens from many other lands, for that matter -- have found healing and hope from medicines discovered and created in this country. New drugs allow children with rheumatoid arthritis to walk and to go to school. New drugs shrink cancerous tumors and they control the advance of HIV, slow the progression of multiple sclerosis. In the treatment of many diseases, major surgery has been replaced by a single pill.

And this has been a special blessing to many Americans, particularly our seniors, who are living longer and better lives. As a nation, we are committed to encouraging the promise of new miracle drugs in two different ways.

First, we recognize innovators must be able to be financially rewarded for their creativity and hard work so they will continue investing and researching, putting new resources and talents in the creation of new drugs. Every time we hope for a cure or a breakthrough, we're counting on the success of a researcher and the success of a drug company.

Second, we want these breakthroughs to become affordable and widely available. Both of these goals -- innovation and accessibility -- are essential, both are possible. In America, one of the ways we reward innovation is by granting a patent. If you take a risk and you make an investment and succeed, you have the exclusive right to sell what you invent, and you have the right to profit if you can.

A new drug can cost as much as $800 million to develop and bring to the market. Without patent protection, few would take such a risk, few would be willing to invest. With patent protection America's brand name drug companies have become the greatest in the world, and health care systems around the world depend on American innovations they could not possibly duplicate.

Patents, of course, expire after a number of years, and this is one of the ways we are able to make drugs more accessible. After the patent expires, other companies are free to offer the drug in generic form at far lower prices. Last year, the average brand name drug cost more than $72 per prescription. The average price for generic drugs, which are just as safe and effective as the brand name drugs, was less than $17 per prescription. Generic drugs make America health care far more affordable.

Current federal law and regulations attempt to carefully balance the goals of innovation and accessibility. New drugs, on average, are sold for 11 years under patent protection, then generic versions become available. Unfortunately, the careful balance of the law is being undermined.

The FTC investigation discovered that some brand name drug manufacturers may have manipulated the law to delay the approval of competing generic drugs. When a drug patent is about to expire, one method some companies use is to file a brand new patent based on a minor feature, such as the color of the pill bottle or a specific combination of ingredients unrelated to the drug's effectiveness. In this way, the brand name company buys time through repeated delays, called automatic stays, that freeze the status quo as the legal complexities are sorted out.

In the meantime, the lower-cost generic drug is shut out of the market. These delays have gone on, in some cases, for 37 months or 53 months or 65 months. This is not how Congress intended the law to work. Today, I'm taking action to close the loopholes, to promote fair competition and to reduce the cost of prescription drugs in America.

The Food and Drug Administration is issuing a proposed rule that will permit only one automatic stay per generic drug application. A move that in many cases will reduce the public's wait for generic drugs by years. Some patents will no longer be entitled to protections like the 30 month stay, including patents on packaging and others that have little or nothing to do with valuable innovation and drug therapy.

These steps we take today will not undermine patent protection. Instead, we are enforcing the original intent of a good law. Our message to brand name manufacturers is clear: you deserve the fair rewards of your research and development; you do not have the right to keep generic drugs off the market for frivolous reasons.

Over the next three years, about 200 drug patents are set to expire. By cutting out delays and maneuvering, our reforms will yield cost savings of more than $3 billion a year. Those savings will come to employer health plans, to state Medicaid programs and to seniors when they buy medicines on their own.

This is another important advance in the cause of bringing affordable prescription drugs to our seniors. Already, we have cleared the way for states to provide prescription drug coverage to more seniors with modest means through our Medicaid Pharmacy Plus Program. We're working to provide seniors on Medicare with drugs cards that provide discounts from drug manufacturers on brand name drugs, like the ones available in private health plans. And we will not rest until we've reformed and strengthened the Medicare program itself so that a prescription drug benefit is available to every senior in America.

The House of Representatives took strong action in passing legislation to improve Medicare. The Senate failed to act. The challenge of health care reform is to increase access to quality care, while we preserve the finest health care system in the world.

I thank the good people at the FTC and the FDA for helping in this effort and for working to make these critical drugs more affordable for every American.

Thank you for coming.

	President Bush announced a new rule to lower prescription drug costs for millions of Americans by improving access to generic drugs, which are safe and effective and can be much less costly alternatives to brand-name prescription drugs. The proposed rule is expected to lead to savings in drug costs of over $3 billion per year for Americas consumers.
	This regulatory action will close loopholes in the implementation of the Hatch-Waxman law, which governs how generic drugs can compete with brand-name drugs. As a result, patients will benefit from greater and more predictable access to safe, effective, low-cost generic alternatives to brand-name drugs.

	Implement Federal Trade Commission (FTC) recommendations for improving access to generic drugs by making significant changes in the use of automatic 30-month stays and in the drug patent listing process.
	Allow one 30-month automatic stay at most in patent infringement litigation involving a generic drug application: Drug manufacturers would be limited to only one 30-month stay per generic application, to resolve allegations that a generic drug maker is infringing a drug patent. According to the FTC, this is an appropriate time period for courts to resolve cases of patent infringement. Multiple 30-month stays, which have led to delays in generic entry of an additional 4 to 40 months, would not be permitted.
	Tighten requirements and increase disclosures for drug patent listings: Drug manufacturers would no longer be allowed to list patents in the FDA Orange Book for drug packaging, drug metabolites, and intermediate forms of a drug. Permitted listings include patents on active ingredients, drug formulations, and uses of a drug. In addition, a more detailed signed attestation accompanying a patent submission will be required, and false statements in the attestation can lead to criminal charges. This will significantly reduce opportunities to list inappropriate patents just to prevent fair competition from generic drugs.
	Provide billions of dollars in savings for public and private health insurance programs: The rule will not only provide savings for patients by giving them more safe and effective, low-cost prescription drug alternatives; it will reduce budgetary pressures on state Medicaid programs, and reduce the cost burdens facing employer-provided coverage.
	Lower the cost of improving Medicare with prescription drug coverage: The rule provides important relief for seniors, but it is only a first step. Seniors really need an improved and strengthened Medicare program like the President has proposed, with better and more secure coverage options. While the House of Representatives took an important first step this year by passing legislation to provide drug coverage, the Senate failed to act. The President is calling on the leadership of the Senate to put politics aside and pass a prescription drug benefit for Medicare. The proposed rule makes this job easier by reducing the cost of a Medicare prescription drug benefit.

	Under the Hatch-Waxman law passed in 1984, generic competition is allowed when a new drugs patent and market exclusivity protection expires, or when a 30-month stay terminates. The intent of the law is to provide incentives to develop valuable new drug treatments through patent protection, but also to facilitate access to generic versions of the drug after the innovators patent expires.
	FDA-approved generic drugs are safe and effective alternatives to many brand-name prescription drugs, at a cost that is often only one-third as great. Almost half of all prescriptions filled today are for generic drugs, and generic alternatives exist for many commonly-used brand name medications providing an equally safe and effective but much less expensive alternative for millions of Americans.
	In recent years, however, access to generic drugs has sometimes been delayed by litigation. Under FDAs past interpretations of the Hatch-Waxman law and the Orange Book patent listing process, drug manufacturers have been able to file additional patents on packaging, ingredient combinations, and other minor matters in order to get repeated 30-month automatic stays in court that significantly delay access to generic drugs.
	In response to bipartisan Congressional concern about this issue, the FTC conducted a detailed study of Generic Drug Entry Prior to Patent Expiration. The study was issued in July 2002. It identified cases involving seven major brand-name drugs between 1994-2000 where the repeated use of automatic stays on late-filed patents had delayed access to generic drugs. The FTC made the following recommendations:   Allow only one automatic stay per generic drug application; and Tighten the Orange Book patent listing process to help ensure that only appropriate patents are filed.