The marketing approval process for a new drug has undergone significant changes at United States Food and Drug Administration (USFDA) in the year 1962. Prior to the year 1962, a new drug used to get marketing approval by USFDA on the basis of safety profile alone. However, in 1962, Kefauver-Harris Amendments made to the Federal Food, Drug, and Cosmetics Act added a new and compulsory requirement of “proof-of-efficacy” for obtaining marketing approval for a new drug. As a result, all drug products approved before 1962 by the USFDA were reviewed again for efficacy through the Drug Efficacy Study Implementation (DESI) program. DESI was a program initiated by the USFDA following Kefauver-Harris Amendments to establish safety and efficacy requirements for approval of new drugs as well as for reconsidering the safety and efficacy of prior approved drugs. To prove that new drugs were safe and effective enough so as to get the USFDA approval, new drugs manufacturers were required to conduct clinical trials on a limited number of human individuals so as to determine the efficacy and safety of the new drugs and submit the results of the same to the USFDA along with their New Drug Application (NDA).

Also, innovator drug manufacturers usually secure patent rights over the drug molecules produced in their R&D labs at an early development stage itself. They do so to exclude others from making, using, or selling their molecules at a later stage and also to gain profits in case a drug molecule succeeds to become a blockbuster drug. Usually, the discovery and development of new drug incurs a lot of monetary expense, efforts and time and hence the effective patent term for which the manufacturer can recoup the investments and reap benefits gets reduced as time is lost in developing the drug into a dosage form. To add to this lost time, USFDA approval required to market the drug takes another couple of years. Thereby the effective term of many drug patents gets shortened further due to the time required for obtaining the safety and efficacy data. Sadly, however, there was no provision for patent term extension prior to enactment of the Hatch Waxman Act, to make up for the time lost out of the total patent term during the marketing approval process.

On the other hand, those companies seeking to market a generic version of an innovator drug (also called branded drug) were also required to carry out their own safety and efficacy studies i.e. clinical trials, much like the innovator drugs companies. Due to the high costs involved in conducting clinical trials, only a few generic companies showed interest in launching products in the US. As a result, by 1984, there were approximately 150 innovator drugs whose patents had expired, and for them there were no generic equivalents available in the market (according to the USFDA estimation). This indirectly maintained the monopoly of the patent holders of the innovator drugs as no other players were there in the market.

Another factor that complicated the approvals of generic drugs was the timing when the generic drug companies were allowed to perform their clinical trials. A generic drugs company was not allowed to begin the required USFDA approval process for a generic drug until the patents on the corresponding innovator drug had expired. Generally speaking, even if a generic drugs manufacturer gets access to the clinical data of the innovator drugs, making copies of a pharmaceutical product is not simple. Procuring active ingredients, performing bio-equivalence studies, assuring quality, putting together a dossier, establishing patient
information leaflets and going through the regulatory process can take two to three years. Manufacturing needs another three to six months. Consequently, patent protection for the innovator drugs used to unduly get extended by two to three years before the generics manufacturers could come up with the approved generic versions for those innovator drugs. This discouraged the entry of generic drugs in the market.

In order to address the above mentioned problems, a provision in the law was needed which would allow the generic manufacturers to use the clinical trial data of the innovator drug and also allow the experimental use of the patented innovator drug so as to come up with the generic version of the innovator drug well before the patent for the innovator drug expires. This was needed in order to get the marketing approval of generic version before the expiry of the patent for the innovator drug so that the generic version could enter the market as soon as the patent for the innovator drug expires. This was also necessary to avoid the undue extra patent protection enjoyed by the innovator drug company and thereby avoid monopoly. Further, there was a need for a provision of extending the life term of patents related to pharmaceutical drugs to compensate for the time lost in seeking USFDA approvals.

To overcome the above mentioned problems as well as to address the inadequacies in the pharmaceutical regulatory system, the Drug Price Competition and Patent Term Restoration Act was passed by the Congress in 1984. This act is informally called the Hatch-Waxman Act.

This is an attempt to understand the history and evolution of the Hatch-Waxman Act (hereinafter, referred to as HWA) of 1984, to study the impact of the HWA on U.S. Pharmaceutical Industry, to understand the need of Generic Drugs in U.S. and need to regulate it, to analyse the general provisions of HWA of 1984, to understand the process of Abbreviated New Drug Application(ANDA), to analyse provision relating to the Paragraph IV Litigation in detail and to analyse the latest case-law pertaining to the Paragraph IV litigation.