This short paper is a summary of my presentation at the Michigan State Law Review 2014 Fall Symposium on “Public Domain(s): Law, Generating Knowledge, and Furthering Innovation in the Information Economy” held on October 3, 2014. The paper reviews the current role played by regulatory competitive shelters (RCSs; a.k.a. regulatory exclusivities) in the area of agrobiotech. The article also suggests that the Food and Drug Administration\u27s move to treat genetically modified animals as  animal drugs  under the Generic Animal Drug and Patent Term Restoration Act (GADPTRA) may result in the application of GADPTRA\u27s RCS regime to genetically modified animals and in a  Hatch-Waxmanizing  of the regulation of that agrobiotechnology

Heled, Yaniv, J.S.D.

English

Heled, Yaniv

bepress Legal Repository

Regulatory Competitive Shelters as Incentives for Innovation in Agro-biotech

Georgia State University College of Law: Reading Room

Michigan State University College of Law: Digital Commons

REGULATORY COMPETITIVE SHELTERS AS 
INCENTIVES FOR INNOVATION IN 
AGROBIOTECH 
Yaniv Heled, J.S.D.*  
2015 MICH. ST. L. REV. 553 
Regulatory competitive shelters1 (RCSs; a.k.a. regulatory 
exclusivities) are well known in the pharmaceutical industry as an 
effective way to incentivize technological innovation while creating 
passageways for follow-on (generic) entry into the market in the 
regulated products.2 RCSs, however, have played a less significant 
role in the innovation economy of other areas of technology, 
including agricultural biotechnologies (agrobiotech).3  
                                                 
 * Assistant Professor, Georgia State University College of Law; J.S.D. 
2011 Columbia Law School; LL.M. 2004 Columbia Law School; LL.B. 2000 Tel 
Aviv University; Undergraduate Diploma in Biology 2000 Tel Aviv University. 
This Article is a short summary of my presentation at the Michigan State Law 
Review 2014 Fall Symposium on “Public Domain(s): Law, Generating Knowledge, 
and Furthering Innovation in the Information Economy” on October 3, 2014. I wish 
to thank my co-panelists, Jennifer Carter-Johnson, Daryl Lim, and Janewa Osei-
Tutu, as well as Andrew Torrance for their comments. Special thanks to Elizabeth-
Ann Weeks and Walter Freitag for their excellent research assistance.  
 1. RCSs “are competitive advantages resulting from statutory bars on 
regulatory action where such action is otherwise mandated [in legislation] and 
would have taken place but for the triggering of the bar.” See Yaniv Heled, 
Regulatory Competitive Shelters, 76 OHIO ST. L.J. (forthcoming 2015) (manuscript 
at 10) (on file with author). In other words, the “agency’s non-action,” which is 
dictated by the statutory bar, “creates an impediment to competition in [the] market” 
or in a product or activity that is regulated by that agency, “thereby effectively 
sheltering the beneficiary of the earlier regulatory action from potential competition” 
and resulting in exclusivity in the regulated market or product. Id. (manuscript at 10-
11). 
 2. See id. (manuscript at 10-14, 92 n.222).  
 3. The term “agrobiotech” as used in this Article pertains to and includes 
the following classes of technologies: (a) genetically engineered (GE) and bred 
varietals of food and animal-feed crops (including algae), e.g., soybeans and hybrid 
corn; (b) GE and bred varietals of food animals, e.g., GE salmon and black angus 
cattle; (c) cells bred in cultures and meant for consumption as food, e.g., yeast and in 
vitro meat; (d) GE and bred varietals of non-food crops, e.g., cotton; (e) GE and 
bred varietals of non-food animals, e.g., horses, donkeys, and sheep (when grown 
for wool); (f) pesticides of all sorts, including plant-incorporated protectants (PIPs); 
(g) food products that are produced from and are a byproduct of GE and bred 
varietals of any organisms (animals, plants, and microorganisms) where the 
organism itself is not consumed, e.g., milk, honey, eggs of all sorts (including 
554 Michigan State Law Review  2015:553 
Currently in the United States, there are eight statutory regimes 
that create fourteen specific RCSs (there used to be fifteen, but one 
of the regimes is no longer applicable since 1984).4 Most of these 
RCS frameworks are in the context of food and drug law and are 
administered by the Food and Drug Administration (FDA), where 
they work in conjunction with patents. However, interestingly, the 
first RCS regime ever created was established in 1978 under the 
Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) in the 
technological context of agrobiotech.5 Administered by the 
Environmental Protection Agency (EPA),6 the FIFRA RCS regime is 
probably one of the most thoughtfully crafted RCS regimes to date.  
Under the FIFRA RCS regime, pesticide products approved by 
the EPA stand to benefit from a ten-year data-exclusivity period.7 In 
other words, under FIFRA, upon determination by the EPA that a 
pesticide product is sufficiently safe, based on data submitted by the 
applicant, any party seeking EPA approval for its own follow-on, 
generic version of the same pesticide product would be unable to rely 
on the safety data submitted by the original applicant for a period of 
ten years. This creates what is known as “‘data exclusivity,’” a 
period during which the submitter of the data is able to exclusively 
benefit from the data submitted to the agency, wherein the data is 
withheld from and cannot be relied upon (not even by reference8) by 
third parties.9 Uniquely, RCSs created under FIFRA can be waived at 
will by their beneficiaries,10 which effectively creates the ability to 
                                                                                                       
caviar), and swallow nests (in Chinese cuisine); and (h) fertilizers and nitrogen-
fixing bacteria (for use with legumes).  
 4. See Heled, supra note 1 (manuscript at 49-53 tbl.3).  
 5. See Act of Sept. 30, 1978, Pub. L. No. 95-396, 92 Stat. 819; Heled, 
supra note 1 (manuscript at 61).  
 6. See Heled, supra note 1 (manuscript at 50, 54, 57-58). 
 7. See 7 U.S.C. § 136a(c)(1)(F)(i) (2012). 
 8. Notably, it has been argued that, at least in some cases, the proprietary 
nature of such data submitted to administrative agencies cannot be divulged to third 
parties. This, however, does not preclude the agency from indirectly relying on the 
data “by reference” in evaluating applications for marketing approval of follow-on 
products without actually disclosing it to the follow-on applicant. See Heled, supra 
note 1 (manuscript at 18-23) (discussing property interests in data submitted to 
administrative agencies in connection with and as part of RCS regimes).  
 9. See id. (manuscript 31-32) (quoting Donna M. Gitter, Innovators and 
Imitators: An Analysis of Proposed Legislation Implementing an Abbreviated 
Approval Pathway for Follow-On Biologics in the United States, 35 FLA. ST. U. L. 
REV. 555, 572 n.108 (2008)).  
 10. See 7 U.S.C. § 136a(c)(1)(F)(iii). 
 Regulatory Competitive Shelters 555 
monetize on such data exclusivities or “trade” in them with potential 
competitors seeking to enter the market.  
The ten years of data exclusivity under the FIFRA regime are 
then followed by a five-year mandatory-compensation period, during 
which the generic applicant must make an offer to compensate the 
original submitter of the data.11 If they disagree on the amount of 
compensation, FIFRA further establishes a mechanism to resolve the 
dispute.12 The ten-year period is also extendable by up to three 
periods of one year each for adding three “minor uses” to the 
pesticide’s label.13 According to the EPA’s Pesticide Product 
Information System (PPIS), to date, the EPA has registered over 
95,000 pesticide products under FIFRA.14  
The other RCSs relevant to agrobiotech all apply to genetically 
engineered (GE) animals15 and are the result of an interesting and 
broad construction by the FDA of the term “animal drug” under the 
Generic Animal Drug and Patent Term Restoration Act 
(GADPTRA).16 Under that construction, the FDA views genetic 
modifications entered into animals as a “new animal drug,”17 
requiring approval for safety and efficacy.18 By requiring such 
approval, the FDA, essentially, restricts the use of the resulting 
genetically modified animals and, if the genetic trait is inheritable, its 
                                                 
 11. Id.  
 12. See id.  
 13. Id. § 136a(c)(1)(F)(ii). Such extensions make it possible for the original 
developer to further receive three years in total for nine additional “minor uses.” Id. 
 14. Pesticide Product Information System (PPIS), U.S. ENVTL. PROTECTION 
AGENCY, http://www.epa.gov/opp00001/PPISdata/ (last visited Mar. 17, 2015). 
 15. According to the FDA, “GE animal can refer to both animals with 
heritable r[ecombinant]DNA constructs and animals with non-heritable rDNA 
constructs (e.g., those modifications intended to be used as gene therapy).” FOOD & 
DRUG ADMIN., GUIDANCE FOR INDUSTRY: REGULATION OF GENETICALLY 
ENGINEERED ANIMALS CONTAINING HERITABLE RECOMBINANT DNA CONSTRUCTS 3 
(2011), available at http://www.fda.gov/downloads/AnimalVeterinary/Guidance 
ComplianceEnforcement/GuidanceforIndustry/ucm113903.pdf. 
 16. See Generic Animal Drug and Patent Term Restoration Act, Pub. L. No. 
100-670, 102 Stat. 3971 (1988) (codified as amended in scattered sections of 21 
U.S.C.).  
 17. 21 U.S.C. § 321(v) (2012) (internal quotation marks omitted). 
 18. See FOOD & DRUG ADMIN., supra note 15, at 6 (“The 
r[ecombinant]DNA construct in a GE animal that is intended to affect the structure 
or function of the body of the GE animal, regardless of the intended use of products 
that may be produced by the GE animal, meets the [Federal Food, Drug and 
Cosmetic Act] drug definition. A non-heritable r[ecombinant]DNA construct that is 
intended to affect the structure or function of a GE animal or to cure, mitigate, or 
treat a disease in the animal also meets the drug definition.”).  
556 Michigan State Law Review  2015:553 
progeny.19 From an RCS perspective, this means that a genetic 
modification of an animal approved as an “animal drug” is subject to 
the GADPTRA RCS regime, which, in a nutshell, entails a five-year 
market and data exclusivity for new animal drugs, three-year market 
and data exclusivity for new uses of existing products, and a 180-day 
exclusivity for a first generic applicant to challenge patents covering 
an animal drug.20  
The FDA’s policy that views genetic modifications made to an 
animal as an “animal drug” is relatively new—only since 201121—
and so we are still not at the point where we may see how it plays out 
with relation to potential generic applicants trying to enter the market 
with their own versions of previously approved genetically modified 
animals. It would be interesting to see, however, to what extent, if 
any, the GADPTRA RCSs would provide meaningful protection to 
varietals of GE animals. 
Another interesting question raised by the FDA’s policy 
treating the genetic modification of animals as “animal drugs” under 
GADPTRA is why stop at animals? Namely, why does the FDA 
view only animals (and not even all animals) as a necessary subject 
of its regulation, rather than any organism?! Is there anything special 
in animals as such over plants and bacteria in this context? And if so, 
what is it?22 Could it be that the FDA’s decision to regulate 
genetically modified organisms (and, again, only just some of them) 
is rooted in public pressure and anxiety over genetically modified 
                                                 
 19. See id.  
 20. Notably, these patents are listed in an FDA-run listing known as the 
Green Book. See Approved Animal Drug Products (Green Book), U.S. FOOD & 
DRUG ADMIN., http://www.fda.gov/AnimalVeterinary/Products/ApprovedAnimal 
DrugProducts/UCM2006464 (last visited Mar. 17, 2015).  
 21. See FOOD & DRUG ADMIN., supra note 15, at 1. 
 22. The FDA divides GE animals into six classes based on the purpose of 
the genetic modification:  
(1) to enhance production or food quality traits (e.g., pigs with less 
environmentally deleterious wastes, faster growing fish); (2) to improve 
animal health (e.g., disease resistance); (3) to produce products intended 
for human therapeutic use (e.g., pharmaceutical products or tissues for 
transplantation; these GE animals are sometimes referred to as “biopharm” 
animals); (4) to enrich or enhance the animals’ interactions with humans 
(e.g., hypo-allergenic pets); (5) to develop animal models for human 
diseases (e.g., pigs as models for cardiovascular diseases); and (6) to 
produce industrial or consumer products (e.g., fibers for multiple uses).  
See FOOD & DRUG ADMIN., supra note 15, at 4. At least five of these six purpose 
classes (1, 2, 3, 4, and 6) are, arguably, also applicable to non-animal organisms 
such as plants and bacteria.  
 Regulatory Competitive Shelters 557 
organisms rather than science? Regardless of the answers to these 
questions, the FDA’s move toward application of GADPTRA to 
genetically modified animals may provide additional incentives for 
technological innovation in the area of genetically modified animals, 
which may be a first step in the “Hatch–Waxmanizing“23 of the area 
of agrobiotech. 
                                                 
 23. The idea of “Hatch-Waxmanizing” the area of agrobiotech is discussed 
in Jennifer Carter-Johnson’s article in this volume. See generally Jennifer Carter-
Johnson, Defining Limited to the Application of the Statutory Experimental Use 
Exception Within the Agricultural Biotechnology Industry, 2015 MICH. ST. L. REV. 
509. 



Regulatory Competitive Shelters as Incentives for Innovation in Agrobiotech

Article published in the Michigan State Law Review

Yaniv Heled

Humanities Commons

REGULATORY COMPETITIVE SHELTERS AS INCENTIVES FOR INNOVATION IN AGROBIOTECH Yaniv Heled, J.S.D.*  2015 MICH. ST. L. REV. 553 Regulatory competitive shelters1 (RCSs; a.k.a. regulatory exclusivities) are well known in the pharmaceutical industry as an effective way to incentivize technological innovation while creating passageways for follow-on (generic) entry into the market in the regulated products.2 RCSs, however, have played a less significant role in the innovation economy of other areas of technology, including agricultural biotechnologies (agrobiotech).3                                                    * Assistant Professor, Georgia State University College of Law; J.S.D. 2011 Columbia Law School; LL.M. 2004 Columbia Law School; LL.B. 2000 Tel Aviv University; Undergraduate Diploma in Biology 2000 Tel Aviv University. This Article is a short summary of my presentation at the Michigan State Law Review 2014 Fall Symposium on “Public Domain(s): Law, Generating Knowledge, and Furthering Innovation in the Information Economy” on October 3, 2014. I wish to thank my co-panelists, Jennifer Carter-Johnson, Daryl Lim, and Janewa Osei-Tutu, as well as Andrew Torrance for their comments. Special thanks to Elizabeth-Ann Weeks and Walter Freitag for their excellent research assistance.   1. RCSs “are competitive advantages resulting from statutory bars on regulatory action where such action is otherwise mandated [in legislation] and would have taken place but for the triggering of the bar.” See Yaniv Heled, Regulatory Competitive Shelters, 76 OHIO ST. L.J. (forthcoming 2015) (manuscript at 10) (on file with author). In other words, the “agency’s non-action,” which is dictated by the statutory bar, “creates an impediment to competition in [the] market” or in a product or activity that is regulated by that agency, “thereby effectively sheltering the beneficiary of the earlier regulatory action from potential competition” and resulting in exclusivity in the regulated market or product. Id. (manuscript at 10-11).  2. See id. (manuscript at 10-14, 92 n.222).   3. The term “agrobiotech” as used in this Article pertains to and includes the following classes of technologies: (a) genetically engineered (GE) and bred varietals of food and animal-feed crops (including algae), e.g., soybeans and hybrid corn; (b) GE and bred varietals of food animals, e.g., GE salmon and black angus cattle; (c) cells bred in cultures and meant for consumption as food, e.g., yeast and in vitro meat; (d) GE and bred varietals of non-food crops, e.g., cotton; (e) GE and bred varietals of non-food animals, e.g., horses, donkeys, and sheep (when grown for wool); (f) pesticides of all sorts, including plant-incorporated protectants (PIPs); (g) food products that are produced from and are a byproduct of GE and bred varietals of any organisms (animals, plants, and microorganisms) where the organism itself is not consumed, e.g., milk, honey, eggs of all sorts (including 554 Michigan State Law Review  2015:553 Currently in the United States, there are eight statutory regimes that create fourteen specific RCSs (there used to be fifteen, but one of the regimes is no longer applicable since 1984).4 Most of these RCS frameworks are in the context of food and drug law and are administered by the Food and Drug Administration (FDA), where they work in conjunction with patents. However, interestingly, the first RCS regime ever created was established in 1978 under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) in the technological context of agrobiotech.5 Administered by the Environmental Protection Agency (EPA),6 the FIFRA RCS regime is probably one of the most thoughtfully crafted RCS regimes to date.  Under the FIFRA RCS regime, pesticide products approved by the EPA stand to benefit from a ten-year data-exclusivity period.7 In other words, under FIFRA, upon determination by the EPA that a pesticide product is sufficiently safe, based on data submitted by the applicant, any party seeking EPA approval for its own follow-on, generic version of the same pesticide product would be unable to rely on the safety data submitted by the original applicant for a period of ten years. This creates what is known as “‘data exclusivity,’” a period during which the submitter of the data is able to exclusively benefit from the data submitted to the agency, wherein the data is withheld from and cannot be relied upon (not even by reference8) by third parties.9 Uniquely, RCSs created under FIFRA can be waived at will by their beneficiaries,10 which effectively creates the ability to                                                                                                        caviar), and swallow nests (in Chinese cuisine); and (h) fertilizers and nitrogen-fixing bacteria (for use with legumes).   4. See Heled, supra note 1 (manuscript at 49-53 tbl.3).   5. See Act of Sept. 30, 1978, Pub. L. No. 95-396, 92 Stat. 819; Heled, supra note 1 (manuscript at 61).   6. See Heled, supra note 1 (manuscript at 50, 54, 57-58).  7. See 7 U.S.C. § 136a(c)(1)(F)(i) (2012).  8. Notably, it has been argued that, at least in some cases, the proprietary nature of such data submitted to administrative agencies cannot be divulged to third parties. This, however, does not preclude the agency from indirectly relying on the data “by reference” in evaluating applications for marketing approval of follow-on products without actually disclosing it to the follow-on applicant. See Heled, supra note 1 (manuscript at 18-23) (discussing property interests in data submitted to administrative agencies in connection with and as part of RCS regimes).   9. See id. (manuscript 31-32) (quoting Donna M. Gitter, Innovators and Imitators: An Analysis of Proposed Legislation Implementing an Abbreviated Approval Pathway for Follow-On Biologics in the United States, 35 FLA. ST. U. L. REV. 555, 572 n.108 (2008)).   10. See 7 U.S.C. § 136a(c)(1)(F)(iii).  Regulatory Competitive Shelters 555 monetize on such data exclusivities or “trade” in them with potential competitors seeking to enter the market.  The ten years of data exclusivity under the FIFRA regime are then followed by a five-year mandatory-compensation period, during which the generic applicant must make an offer to compensate the original submitter of the data.11 If they disagree on the amount of compensation, FIFRA further establishes a mechanism to resolve the dispute.12 The ten-year period is also extendable by up to three periods of one year each for adding three “minor uses” to the pesticide’s label.13 According to the EPA’s Pesticide Product Information System (PPIS), to date, the EPA has registered over 95,000 pesticide products under FIFRA.14  The other RCSs relevant to agrobiotech all apply to genetically engineered (GE) animals15 and are the result of an interesting and broad construction by the FDA of the term “animal drug” under the Generic Animal Drug and Patent Term Restoration Act (GADPTRA).16 Under that construction, the FDA views genetic modifications entered into animals as a “new animal drug,”17 requiring approval for safety and efficacy.18 By requiring such approval, the FDA, essentially, restricts the use of the resulting genetically modified animals and, if the genetic trait is inheritable, its                                                   11. Id.   12. See id.   13. Id. § 136a(c)(1)(F)(ii). Such extensions make it possible for the original developer to further receive three years in total for nine additional “minor uses.” Id.  14. Pesticide Product Information System (PPIS), U.S. ENVTL. PROTECTION AGENCY, http://www.epa.gov/opp00001/PPISdata/ (last visited Mar. 17, 2015).  15. According to the FDA, “GE animal can refer to both animals with heritable r[ecombinant]DNA constructs and animals with non-heritable rDNA constructs (e.g., those modifications intended to be used as gene therapy).” FOOD & DRUG ADMIN., GUIDANCE FOR INDUSTRY: REGULATION OF GENETICALLY ENGINEERED ANIMALS CONTAINING HERITABLE RECOMBINANT DNA CONSTRUCTS 3 (2011), available at http://www.fda.gov/downloads/AnimalVeterinary/Guidance ComplianceEnforcement/GuidanceforIndustry/ucm113903.pdf.  16. See Generic Animal Drug and Patent Term Restoration Act, Pub. L. No. 100-670, 102 Stat. 3971 (1988) (codified as amended in scattered sections of 21 U.S.C.).   17. 21 U.S.C. § 321(v) (2012) (internal quotation marks omitted).  18. See FOOD & DRUG ADMIN., supra note 15, at 6 (“The r[ecombinant]DNA construct in a GE animal that is intended to affect the structure or function of the body of the GE animal, regardless of the intended use of products that may be produced by the GE animal, meets the [Federal Food, Drug and Cosmetic Act] drug definition. A non-heritable r[ecombinant]DNA construct that is intended to affect the structure or function of a GE animal or to cure, mitigate, or treat a disease in the animal also meets the drug definition.”).  556 Michigan State Law Review  2015:553 progeny.19 From an RCS perspective, this means that a genetic modification of an animal approved as an “animal drug” is subject to the GADPTRA RCS regime, which, in a nutshell, entails a five-year market and data exclusivity for new animal drugs, three-year market and data exclusivity for new uses of existing products, and a 180-day exclusivity for a first generic applicant to challenge patents covering an animal drug.20  The FDA’s policy that views genetic modifications made to an animal as an “animal drug” is relatively new—only since 201121—and so we are still not at the point where we may see how it plays out with relation to potential generic applicants trying to enter the market with their own versions of previously approved genetically modified animals. It would be interesting to see, however, to what extent, if any, the GADPTRA RCSs would provide meaningful protection to varietals of GE animals. Another interesting question raised by the FDA’s policy treating the genetic modification of animals as “animal drugs” under GADPTRA is why stop at animals? Namely, why does the FDA view only animals (and not even all animals) as a necessary subject of its regulation, rather than any organism?! Is there anything special in animals as such over plants and bacteria in this context? And if so, what is it?22 Could it be that the FDA’s decision to regulate genetically modified organisms (and, again, only just some of them) is rooted in public pressure and anxiety over genetically modified                                                   19. See id.   20. Notably, these patents are listed in an FDA-run listing known as the Green Book. See Approved Animal Drug Products (Green Book), U.S. FOOD & DRUG ADMIN., http://www.fda.gov/AnimalVeterinary/Products/ApprovedAnimal DrugProducts/UCM2006464 (last visited Mar. 17, 2015).   21. See FOOD & DRUG ADMIN., supra note 15, at 1.  22. The FDA divides GE animals into six classes based on the purpose of the genetic modification:  (1) to enhance production or food quality traits (e.g., pigs with less environmentally deleterious wastes, faster growing fish); (2) to improve animal health (e.g., disease resistance); (3) to produce products intended for human therapeutic use (e.g., pharmaceutical products or tissues for transplantation; these GE animals are sometimes referred to as “biopharm” animals); (4) to enrich or enhance the animals’ interactions with humans (e.g., hypo-allergenic pets); (5) to develop animal models for human diseases (e.g., pigs as models for cardiovascular diseases); and (6) to produce industrial or consumer products (e.g., fibers for multiple uses).  See FOOD & DRUG ADMIN., supra note 15, at 4. At least five of these six purpose classes (1, 2, 3, 4, and 6) are, arguably, also applicable to non-animal organisms such as plants and bacteria.   Regulatory Competitive Shelters 557 organisms rather than science? Regardless of the answers to these questions, the FDA’s move toward application of GADPTRA to genetically modified animals may provide additional incentives for technological innovation in the area of genetically modified animals, which may be a first step in the “Hatch–Waxmanizing“23 of the area of agrobiotech.                                                   23. The idea of “Hatch-Waxmanizing” the area of agrobiotech is discussed in Jennifer Carter-Johnson’s article in this volume. See generally Jennifer Carter-Johnson, Defining Limited to the Application of the Statutory Experimental Use Exception Within the Agricultural Biotechnology Industry, 2015 MICH. ST. L. REV. 509. 

https://hcommons.org/deposits/download/hc:35980/CONTENT/lrvol2015iss26fulltext.pdf/

Regulatory Competitive Shelters as Incentives for Innovation in Agrobiotech

Abstract

Similar works

Full text

Available Versions

bepress Legal Repository

Georgia State University College of Law: Reading Room

Michigan State University College of Law: Digital Commons

Humanities Commons