Eli Lilly 2013 Annual Report Download - page 23

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complete safety and efficacy studies, i.e., a complete New Drug Application (NDA). The Hatch-Waxman Act
authorizes the FDA to approve generic versions of innovative human pharmaceuticals (other than biologics)
without such information by filing an Abbreviated New Drug Application (ANDA). In an ANDA, the generic
manufacturer must demonstrate only “bioequivalence” between the generic version and the NDA-approved
drug—not safety and efficacy.
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 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 challenging the
vitamin dosage regimen patent for Alimta. For more information on this litigation, see “Financial Statements
and Supplementary Data—Note 16, 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 administrative challenges and litigation involving our Alimta vitamin dosage regimen patents in Europe, see
“Financial Statements and Supplementary Data—Note 16, 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. 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. 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 compliance with cGMP and similar regulations. However, in the