Eli Lilly 2012 Annual Report Download - page 22

10
Absent a patent challenge, the FDA cannot approve an ANDA until after the innovator’s patents expire.
However, after the innovator has marketed its product for four years, a generic manufacturer may file an
ANDA alleging that one or more of the patents listed in the innovator’s NDA are invalid or not infringed. This
allegation is commonly known as a “Paragraph IV certification.” The innovator must then file suit against the
generic manufacturer to protect its patents. The FDA is then prohibited from approving the generic company’s
application for a 30- to 42-month period (which can be shortened or extended by the trial court judge hearing
the patent challenge). If one or more of the NDA-listed patents are challenged, the first filer(s) of a Paragraph
IV certification may be entitled to a 180-day period of market exclusivity over all other generic manufacturers.
Generic manufacturers use Paragraph IV certifications extensively to challenge patents on a wide array of
innovative human pharmaceuticals. In addition, generic companies have shown an increasing willingness to
launch “at risk,” i.e., after receiving ANDA approval but before final resolution of their patent challenge. We
are currently in litigation with numerous generic manufacturers arising from their Paragraph IV certifications
on Alimta. For more information on this litigation, see Item 8, “Financial Statements and Supplementary Data
—Note 15, Contingencies.”
Outside the United States, the legal doctrines and processes by which pharmaceutical patents can be
challenged vary widely. In recent years, we have experienced an increase in patent challenges from generic
manufacturers in many countries outside the U.S., and we expect this trend to continue. For more information
on challenges to our Alimta patent protection in Europe, see Item 8, “Financial Statements and
Supplementary Data—Note 15, Contingencies.”
Government Regulation
Regulation of Our Operations
Our operations are regulated extensively by numerous national, state, and local agencies. The lengthy process
of laboratory and clinical testing, data analysis, manufacturing development, and regulatory review necessary
for governmental approvals is extremely costly and can significantly delay product introductions. Promotion,
marketing, manufacturing, and distribution of human pharmaceutical and animal health products are
extensively regulated in all major world markets. We are required to conduct extensive post-marketing
surveillance of the safety of the products we sell. In addition, our operations are subject to complex federal,
state, local, and foreign laws and regulations concerning the environment, occupational health and safety, and
privacy. Animal health product regulations address the administration of the product in or on the animal, and
in the case of food animal products, the impact on humans who consume the food as well as the impact on the
environment at the production site. The laws and regulations affecting the manufacture and sale of current
products and the discovery, development, and introduction of new products will continue to require
substantial effort, expense, and capital investment.
Of particular importance is the FDA in the United States. Pursuant to the Federal Food, Drug, and Cosmetic
Act, the FDA has jurisdiction over all of our human pharmaceutical products and certain animal health
products in the U.S. and administers requirements covering the testing, safety, effectiveness, manufacturing,
quality control, distribution, labeling, marketing, advertising, dissemination of information, and post-
marketing surveillance of those products. The U.S. Department of Agriculture (USDA) and the U.S.
Environmental Protection Agency also regulate some animal health products.
The FDA extensively regulates all aspects of manufacturing quality for human pharmaceuticals under its
current Good Manufacturing Practices (cGMP) regulations. We make substantial investments of capital and
operating expenses to implement comprehensive, company-wide quality systems in our manufacturing,
product development, and process development operations to ensure sustained cGMP compliance. However,
in the event we fail to adhere to cGMP requirements in the future, we could be subject to interruptions in
production, fines and penalties, and delays in new product approvals.
Outside the U.S., our products and operations are subject to similar regulatory requirements, notably by the
European Medicines Agency (EMA) in the EU and the Ministry of Health, Labor and Welfare (MHLW) in Japan.
Specific regulatory requirements vary from country to country.
The marketing, promotional, and pricing practices of pharmaceutical manufacturers, as well as the manner in
which manufacturers interact with purchasers and prescribers, are subject to various other U.S. federal and
state laws, including the federal anti-kickback statute and the False Claims Act and state laws governing