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Friday, March 23, 2012

The Hatch-Waxman Act: A Quarter Century Later


Wendy H. Schacht
Specialist in Science and Technology Policy

John R. Thomas
Visiting Scholar


Congressional interest in health-related issues has refocused attention on legislative efforts to provide both new as well as lower-cost pharmaceuticals for the marketplace. P.L. 98-417, the Drug Price Competition and Patent Term Restoration Act of 1984 (commonly known as the Hatch-Waxman Act), made significant changes to the patent laws as they apply to pharmaceutical products in an attempt to balance the need for innovative new drugs and the availability of less expensive generic products. The Act created several practices intended to facilitate the marketing of generic drugs while permitting brand name companies to recover a portion of their intellectual property rights lost during the pharmaceutical approval process. Twenty-five years later, the impact of the Act on the pharmaceutical industry may have implications for current congressional efforts to facilitate the development of new, inventive products while reducing costs to consumers.

Prior to the implementation of the Hatch-Waxman Act, 35% of top-selling drugs had generic competitors after patent expiration; now almost all do. The Generic Pharmaceutical Association points out that of 12,751 drugs listed in the Orange Book, 10,072 have generic substitutes available to consumers. Concurrently, the time to market for these generic products has decreased substantially. According to the Congressional Budget Office, in 1984 the average time between the expiration of a patent on a brand name drug and the availability of a generic was three years. Today, upon FDA approval a generic may be introduced immediately after patents on the innovator drug expire as companies are permitted to undertake clinical testing during the time period associated patents are in force. In cases where the generic manufacturer is the patent holder, a substitute drug may be brought to market before the patent expires.

Industry support for pharmaceutical research and development has grown since the passage of the legislation although some recent figures indicate reduced R&D spending by several companies. In the absence of the research, development, and testing performed by the brand name pharmaceutical companies, generic drugs would not exist. The provisions of the Hatch-Waxman Act permit the generic industry to rely on information generated and financed by the brand name companies to obtain approval for their product by the FDA. However, the pharmaceutical industry today differs significantly from what it was in the early 1980s when the legislation was enacted. The cost of developing a drug has doubled, as has the number of clinical trials necessary to file a new drug application. The number of participants required for these trials has tripled. As the rate of return on investments in a new drug declined 12%, manufacturers often spend R&D dollars on developing improved versions of, or new delivery methods for an existing product.

Many experts agree that the Drug Price Competition and Patent Term Restoration Act has had a significant effect on the availability of generic substitutes for brand name drugs. Yet, congressional concerns remain whether or not the balance inherent in the Act remains appropriate twenty-five years later.



Date of Report: March
13, 2012
Number of Pages:
20
Order Number: R
41114
Price: $29.95

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Broadband Loan and Grant Programs in the USDA’s Rural Utilities Service


Lennard G. Kruger
Specialist in Science and Technology Policy

Given the large potential impact broadband access may have on the economic development of rural America, concern has been raised over a “digital divide” between rural and urban or suburban areas with respect to broadband deployment. While there are many examples of rural communities with state of the art telecommunications facilities, recent surveys and studies have indicated that, in general, rural areas tend to lag behind urban and suburban areas in broadband deployment.

Citing the lagging deployment of broadband in many rural areas, Congress and the Administration acted in 2001 and 2002 to initiate pilot broadband loan and grant programs within the Rural Utilities Service (RUS) at the U.S. Department of Agriculture (USDA). Subsequently, Section 6103 of the Farm Security and Rural Investment Act of 2002 (P.L. 107-171) amended the Rural Electrification Act of 1936 to authorize a loan and loan guarantee program to provide funds for the costs of the construction, improvement, and acquisition of facilities and equipment for broadband service in eligible rural communities. The RUS/USDA houses two assistance programs exclusively dedicated to financing broadband deployment: the Rural Broadband Access Loan and Loan Guarantee Program and the Community Connect Grant Program.

For the broadband loan program, the Administration’s FY2013 budget proposal requested $8.915 million to subsidize a loan level of $94.139 million. The Administration requested $13.379 million for broadband grants in FY2013.

The 110th Congress considered reauthorization and modification of the loan and loan guarantee program as part of the 2008 Farm Bill. The Food, Conservation, and Energy Act of 2008 became law on June 18, 2008 (P.L. 110-246). Title VI (Rural Development) contains authorizing language for the broadband loan program.

During 2009 and 2010, the Rural Broadband Access Loan and Loan Guarantee Program (also referred to as the Farm Bill Broadband Loan Program) was on hiatus as RUS implemented the Broadband Initiatives Program (BIP) established under the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). At the same time, final regulations implementing the broadband loan program as reauthorized by the 2008 Farm Bill were refined to reflect, in part, RUS experience in implementing BIP. Subsequently, on March 14, 2011, an Interim Rule and Notice was published in the Federal Register setting forth the rules and regulations for the broadband loan program as reauthorized by P.L. 110-246.

As reauthorized by the 2008 Farm Bill, the Rural Broadband Access Loan and Loan Guarantee Program is currently authorized through FY2012. Therefore, it is expected that the 112th Congress may consider reauthorization of the broadband loan program in the 2012 Farm Bill. As part of this consideration, Congress may focus on how effectively and cost efficiently the RUS broadband programs are addressing the lack of adequate broadband service in underserved rural communities.



Date of Report: March 7, 2012
Number of Pages: 29
Order Number: RL33816
Price: $29.95

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U.S. National Science Foundation: An Overview


Christine M. Matthews
Specialist in Science and Technology Policy

The National Science Foundation (NSF) was created by the National Science Foundation Act of 1950, as amended (P.L.81-507). The NSF has the broad mission of supporting science and engineering in general and funding basic research across many disciplines. The agency provides support for investigator-initiated, merit-reviewed, competitively selected awards, state-of-the-art tools, and instrumentation and facilities. The majority of the research supported by the NSF is conducted at U.S. colleges and universities. Approximately 82.3% ($3,900.6 million) of NSF’s estimated FY2009 $4,742.0 million research and development (R&D) budget was awarded to U.S. colleges and universities.

The Administration’s FY2013 budget request for NSF is $7,373.1 million, 4.8% above the FY2012 estimated level of $7,033.1 million. The FY2013 request includes $5,983.3 million for Research and Related Activities, $875.6 million for Education and Human Resources, $196.2 million for MREFC, $299.4 million for Agency Operations and Award Management, $4.4 million for the National Science Board, and $14.2 million for the Office of Inspector General.



Date of Report: March 1
5, 2012
Number of Pages:
12
Order Number:
95-307
Price: $29.95

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Cybersecurity: Selected Legal Issues


Edward C. Liu
Legislative Attorney

Gina Stevens
Legislative Attorney

Kathleen Ann Ruane
Legislative Attorney

Alissa M. Dolan
Legislative Attorney

Richard M. Thompson II
Legislative Attorney


The federal government’s role in protecting U.S. citizens and critical infrastructure from cyber attacks has been the subject of recent congressional interest. Critical infrastructure commonly refers to those entities that are so vital that their incapacitation or destruction would have a debilitating impact on national security, economic security, or the public health and safety. This report discusses selected legal issues that frequently arise in the context of recent legislation to address vulnerabilities of critical infrastructure to cyber threats, efforts to protect government networks from cyber threats, and proposals to facilitate and encourage sharing of cyber threat information amongst private sector and government entities. This report also discusses the degree to which federal law may preempt state law.

It has been argued that, in order to ensure the continuity of critical infrastructure and the larger economy, a regulatory framework for selected critical infrastructure should be created to require a minimum level of security from cyber threats. On the other hand, others have argued that such regulatory schemes would not improve cybersecurity while increasing the costs to businesses, expose businesses to additional liability if they fail to meet the imposed cybersecurity standards, and increase the risk that proprietary or confidential business information may be inappropriately disclosed.

In order to protect federal information networks, the Department of Homeland Security (DHS), in conjunction with the National Security Agency (NSA), uses a network intrusion system that monitors all federal agency networks for potential attacks. Known as EINSTEIN, this system raises significant privacy implications—a concern acknowledged by DHS, interest groups, academia, and the general public. DHS has developed a set of procedures to address these concerns such as minimization of information collection, training and accountability requirements, and retention rules. Notwithstanding these steps, there are concerns that the program may implicate privacy interests protected under the Fourth Amendment.

Although many have argued that there is a need for federal and state governments, and owners and operators of the nation’s critical infrastructures, to share information on cyber vulnerabilities and threats, obstacles to information sharing may exist in current laws protecting electronic communications or in antitrust law. Private entities that share information may also be concerned that sharing or receiving such information may lead to increased civil liability, or that shared information may contain proprietary or confidential business information that may be used by competitors or government regulators for unauthorized purposes.

Several bills in the 112th Congress would seek to improve the nation’s cybersecurity, and may raise some or all of the legal issues mentioned above. For example, H.R. 3523 (Rogers (Mich.)) addresses information sharing between the intelligence community and the private sector. H.R. 3674 (Lungren) includes provisions regarding the protection of critical infrastructure, as well as information sharing. S. 2102 (Feinstein) seeks to facilitate information sharing. S. 2105 (Lieberman) includes the information sharing provisions of S. 2102, as well as provisions relating to the protection of critical infrastructure and federal government networks. S. 2151 (McCain) also addresses information sharing among the private sector and between the private sector and the government. Many of these bills also include provisions specifically addressing the preemption of state laws.



Date of Report: March 14, 2012
Number of Pages: 44
Order Number: R42409
Price: $29.95

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Cybersecurity: Cyber Crime Protection Security Act (S. 2111)—A Legal Analysis


Charles Doyle
Senior Specialist in American Public Law

The Cyber Crime Protection Security Act (S. 2111) would enhance the criminal penalties for the cyber crimes outlawed in the Computer Fraud and Abuse Act (CFAA). Those offenses include espionage, hacking, fraud, destruction, password trafficking, and extortion committed against computers and computer networks. S. 2111 contains some of the enhancements approved by the Senate Judiciary Committee when it reported the Personal Data Privacy and Security Act (S. 1151), S.Rept. 112-91 (2011).

The bill would (1) establish a three-year mandatory minimum term of imprisonment for aggravated damage to a critical infrastructure computer; (2) streamline and increase the maximum penalties for the cyber crimes proscribed in CFAA; (3) authorize the confiscation of real property used to facilitate the commission of such cyber offenses and permit forfeiture of real and personal property generated by, or used to facilitate the commission of, such an offense, under either civil or criminal forfeiture procedures; (4) add such cyber crimes to the racketeering (RICO) predicate offense list, permitting some victims to sue for treble damages and attorneys’ fees; (5) increase the types of password equivalents covered by the trafficking offense and the scope of federal jurisdiction over the crime; (6) confirm that conspiracies to commit one of the CFAA offenses carry the same penalties as the underlying crimes; and (7) provide that a cyber crime prosecution under CFAA could not be grounded exclusively on the failure to comply with a term of service agreement or similar breach of contract or agreement, apparently in response to prosecution theory espoused in Drew. With the exception of this last limitation on prosecutions, the Justice Department has endorsed the proposals found in S. 2111.

The bill has been placed on the Senate calendar. As of this date, S. 2111 has no House counterpart.

Related CRS reports include CRS Report 97-1025, Cybercrime: An Overview of the Federal Computer Fraud and Abuse Statute and Related Federal Criminal Laws, available in abridged form as CRS Report RS20830, Cybercrime: A Sketch of 18 U.S.C. 1030 and Related Federal Criminal Laws.



Date of Report: March 12, 2012
Number of Pages:
17
Order Number: R
42403
Price: $29.95

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