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The Obama administration’s proposal to reduce U.S. deficits contains two provisions dealing with intellectual property and healthcare.

The proposal would reduce data exclusivity for biologic medicines to 7 years (from the current period of 12 years), and would “prohibit additional periods of exclusivity for brand biologics due minor changes in product formulations, a practice often referred to as ‘evergreening’.”  The administration predicts that the shorter periods of data exclusivity will “encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products.”

This proposal for shorter periods of data exclusivity for biologics would run afoul of the requirement for 12 years of data exclusivity that is rumored to be in the secret TPP negotiating text tabled by USTR in Chicago last week.

It would also prohibit pay-for-delay settlements of patent litigation between branded and generic manufacturers. These are payments in which the branded firm pays its potential competitor to stay off the market.  The Hatch-Waxman Act (which governs “linkage” between the USPTO and the FDA)  is structured in a way in which the first generic firm to challenge a patent receives a period of time in which it is the only competitor, but additional generic competitors cannot enter the market if the first one has not done so.  The Federal Trade Commission has identified pay-for-delay settlements as an abuse of the Hatch Waxman framework and has supported legislation to address it in the past.

Full Proposal:  Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction. Office of Management and Budget. September 2011.