The Political Economy of the Hatch-Waxman Amendments
Reform of the Hatch–Waxman generic drug framework is in the air. Scholars, consumer advocacy groups, regulated industry, and policymakers are engaged in heated debate about perceived shortcomings in the scheme, flaws, and unexpected loopholes. Changes in how the U.S. Food and Drug Administration (FDA) implements the law, as well as changes to the law itself, are under serious consideration. These policymaking discussions take place against a backdrop of shared assumptions about the origins and nature of the original Hatch–Waxman legislation — assumptions that this Article claims are wrong. Convention wisdom holds that the Hatch–Waxman legislation was a delicate compromise privately negotiated and endorsed by the affected industries — and one that benefitted both sides. When the law is viewed through the lens of public choice theory, however, the truth is more nuanced, and the balance of benefits and costs different. By design the benefits would largely flow to one group, the generic companies, while the costs would be borne by the other group, the innovating companies. The public stood to both gain (earlier access to cheaper drugs) and lose (reduced flow of innovative drugs, if economic models were accurate). Its interests were championed by a legislative entrepreneur (Henry Waxman) as well as Public Citizen, however, which focused on the gain rather than the loss. The economic interests of the generic companies, which invested heavily in passage of the legislation, aligned with the interests of Public Citizen, and the combination of their forces made passage inevitable. Curiously, there have been few published histories of the Hatch–Waxman Amendments since the accounts written contemporaneously by participants in the policymaking process. Scholars, third–party opinion–shapers, and policymakers considering reform proposals need a clearer understanding of the history and the constraints under which the Hatch–Waxman Amendments were in fact brokered. This Article steps into the gap by offering a contextualized history of the statute and describing its political economy.