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Executive Summary

ORPHAN AMENDMENTS PROPOSAL WOULD NOT RESULT IN "UNCONSTITUTIONAL TAKING" of property in the form of market exclusivity under the Orphan Drug Act, according to a legal memorandum prepared by Washington, D.C. law firms Fox Bennet & Turner and Laxalt Washington Perito & Dubuc. Although amendments (HR 4638) proposed by Rep. Waxman (D-Calif.) would open to competition exclusive markets granted to human growth hormone, erythropoietin and aerosolized pentamidine, the memorandum argues that market exclusively under the Orphan Drug Act is not a property right. The memo was prepared on behalf of Serono and Novo-Nordisk to counter a legal opinion previously circulated to members of Waxman's House Health Subcommittee. The first review was prepared for Genentech by Gibson Dunn & Crutcher and states that HR 4638 would result in an unconstitutional taking of property rights. A similar opinion was prepared for Lyphomed by Arnold & Porter ("The Pink Sheet" June 11, T&G-9). Genentech "incorrectly equates [orphan] exclusivity with patent protection in an attempt to categorize it as a property interest," the memo states. "The same argument" was "rejected" by FDA, which has said "there is no property right to be free from competition." The reference is to Genentech's unsuccessful court complaint against FDA and Lilly to block the approval of Humatrope as a separate orphan product. Both FDA and Lilly "rejected the [the argument] summarily," the memo contends. "Congress should do the same." The memo also points out that "Genentech's exclusively is not at stake," because "no one qualifies as a simultaneous developer of Genentech's hGH" under HR 4638. Therefore, the legislation would have "no effect whatsoever on Genentech's exclusivity for its product, Protropin I." Serono presumably hopes to market a copy of Lilly's methionyl-free biosynthetic hormone, Humatrope. Furthermore, "Genentech and its trade association, the [Industrial Biotechnology Association], both" supported a simultaneous development amendment in the past, the document notes. In 1987, IBA developed a "fallback" position behind its opposition to legislation proposed at the time by Rep. Waxman to open exclusive markets to any subsequent manufacturer willing to submit a full NDA. IBA's compromise, which it abandoned, would have required subsequent orphan sponsors to have filed an NDA before approval of the first marketed product.

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