June 2012
CIPA Journal
Authored by Li Feng, Ph.D. and Bryan C. Diner
The recent U.S. Supreme Court case, Caraco Pharmaceutical Labs., Ltd. v. Novo Nordisk A/S, delivers a significant victory for the generic pharmaceutical industry.1 The Supreme Court held that a generic manufacturer, if sued for patent infringement, can counterclaim to force a brand manufacturer to correct an inaccurate "use code" listed in the Orange Book.2 After this case, the use codes for brand drugs may receive increased scrutiny, and the brand manufacturers will likely more carefully craft their patent claims, drug label languages, and use codes. This article reviews the legal framework of generic drug litigations in the U.S., analyzes the facts and holdings of the Caraco case, and explores the implications of this case for brand and generic companies alike.
The Hatch-Waxman Act ("the Act") enacted in 1984 and its further amendments in 2003 set forth the competitive framework between brand and generic pharmaceutical manufacturers in the United States.3 Before the enactment of the Act, the hurdle for bringing a generic drug to the market was quite high, requiring generic drug manufacturers to independently develop safety and efficacy data for a proposed generic drug and to do so only after patent protection for the brand drug expired. Because of the patent barrier and a high expense associated with developing this data, many brand drugs lacked significant generic competition. To lower the barriers and speed low-cost generic drugs to the market, the Act provided an abbreviated mechanism for generic drug manufacturers that allows them to rely on the brand company's safety and efficacy data and exempts them from infringement for generating data, pre-patent expiry, showing bioequivalency between the proposed generic and the brand drug.4 ,5 The mechanism, known as an Abbreviated New Drug Application (ANDA), dramatically reduced the threshold requirement for bringing generic drugs to the market and catalyzed the development of the modern generic drug industry.6
The Act also provides various protective mechanisms for the brand manufacturers to incentivize them to continue to develop new and useful therapeutics. A brand manufacturer has a certain period of exclusivity for its safety and efficacy data, depending on the nature of the approved product,7 during which time the FDA cannot approve an ANDA. For example, the data exclusivity period is five years for a drug product containing a new chemical entity, and three years for a drug product that does not contain a new chemical entity but has a new strength, dosage form, route of administration, or conditions of use.
If a brand drug is covered by a patent, the brand manufacturer must inform the FDA of the patent number and expiration date of any patent believed to cover the brand drug.8 If it is a method of use patent, the FDA regulations also require that the brand manufacturer provide a use code, which describes the approved use covered by the patent.9 The FDA lists the information regarding data exclusivity, the patent number and expiration date of the patents, and use codes in the Orange Book. The FDA, however, does not police the accuracy of the Orange Book listing. Nor does it substantively determine whether a generic's ANDA would infringe a listed patent. Instead, it relies on the patent information provided by the brand manufacturers and any certifications by the generic manufacturers. If a generic manufacturer wants to introduce a generic drug to the market before a listed patent expires, it must certify in one of two ways: (1) the listed patent is invalid, unenforceable, or not infringed (the so-called paragraph IV certification),10 or (2) the use sought for ANDA approval is not covered by the listed patent (the so-called section viii statement).11
A paragraph IV certification usually involves a prolonged process for challenging a listed patent. If the brand manufacturer, after receiving a paragraph IV certification, sues the generic company, the law prevents the FDA from approving the ANDA for 30 months from receipt of the paragraph IV notice ("the 30-month stay"),12 unless the court rules in favor of the generic company before the end of the 30-month stay. The 30-month stay, coupled with the data exclusivity, provides a significant advantage for a brand manufacturer, even if the brand manufacturer may eventually lose the patent infringement action.
The section viii statement, on the other hand, serves as an immediate pathway for generic entry, even if there is a patent listed in the Orange Book for the brand drug.13 If a brand drug is approved for multiple uses and the brand manufacturer only has patents that cover a subset of those uses, a generic manufacturer can seek market approval of a generic drug for a use not covered by the listed patents, effectively "carving out" the patented uses. Rather than copying the brand company's full drug label, as done when certifying under paragraph IV, a generic company proceeding under section viii copies only the portion of the brand label that corresponds to the non-patented uses.14 This practice is often called "skinny" labeling. The FDA relies on the use code provided by the brand manufacturer to determine whether to approve a skinny label. If the proposed skinny label overlaps with the use code listed for the brand drug, the FDA will not approve the generic drug with a skinny label.15 Importantly, however, if no overlap exists, the generic manufacturer does not need to notify the brand manufacturer of its skinny label and no 30-month stay can be triggered.16 Skinny labeling, therefore, can be a secret passageway for immediate generic entry of certain unpatented uses.
As can be seen, a brand manufacturer can reap significant benefit by listing as many appropriate patents as possible in the Orange Book to stave off generic entry. To curb any abuse from over-listing in the Orange Book, the Act as amended in 2003 provides a counterclaim provision that permits a generic manufacturer to force the brand company to correct or delete any patent information improperly listed in the Orange Book:
"[The ANDA] applicant may assert a counterclaim seeking an order requiring the holder to correct or delete the patentinformation . . . on the ground that the patent does not claim . . . an approved method of using the drug."17
This provision and its meaning was the focus of the dispute in the Caraco case. The Supreme Court framed the issues with the following two questions:
(1) In a counterclaim, can a generic manufacturer seek to correct a use code that covers an unpatented use?
(2) Does the patent information include use codes?
In addressing these questions, the Supreme Court had to interpret two terms—"patent information" and "an [approved method]"—and would ultimately answer both questions in the affirmative.
In the Caraco case, generic manufacturer, Caraco, sought to market a generic version of Novo Nordisk's diabetes drug Prandin®, the active ingredient of which is repaglinide.18 Repaglinide was approved for three uses: alone, in combination with metformin, and in combination with thiazolidinediones (TZDs).19 Novo Nordisk had a patent (the '358 patent) listed in the Orange Book for its product Prandin®.20 The '358 patent claims cover only one of the three approved uses, i.e., a "method for treating [diabetes by] administering ... repaglinide in combination with metformin."21 Tracking the patent claims, Novo Nordisk's original use code stated: "[u]se of repaglinide in combination with metformin to lower blood glucose," which covered the use of repaglinide in combination with metformin, but not the other two approved uses.22
Caraco initially filed a paragraph IV certification, and Novo Nordisk responded by suing Caraco for patent infringement.23 During the litigation, Caraco changed its course and filed a section viii statement, proposing a skinny label to market the two uses not covered by the '358 patent.24 In response, Novo Nordisk broadened its use code to "[a] method for improving glycemic control in adults with type 2 diabetes."25 As a result, Caraco's proposed skinny label overlapped with Novo Nordisk's broadened use code and the FDA did not approve Caraco's skinny label.26 Caraco then counterclaimed in the ongoing infringement suit, seeking a court order requiring Novo Nordisk to correct its newly listed use code that covered the two unpatented uses.27
The District Court granted summary judgment to Caraco, ordering Novo Nordisk to correct its inaccurate description of the new use code.28 The Federal Circuit reversed, holding that Caraco lacked "a statutory basis to assert a counterclaim."29 From the disputed provision, the court read the phrase "an approved method" to mean "any approved method," and read "the patent information" to consist of only the patent number and expiration date of any listed patent, but not the use code.30 In the Federal Circuit's view, as long as the '358 patent claims one approved method of using the drug, the counterclaim is not available to Caraco.31
In a unanimous decision, the Supreme Court rejected the Federal Circuit's decision on both issues. The Court held that a generic manufacturer can use the counterclaim provision to "force correction of a use code that inaccurately describes the brand's patent as covering a particular method of using the drug in question."32 The court acknowledges that the term "an [approved method]" is vague in itself.33 But the broader statutory context does not dictate that the term be interpreted to mean "any."34 The court said that the Congress understood that a single drug may be approved for multiple uses, though only some may be covered by patents.35 Section viii provides the mechanism for a generic manufacturer to identify those unpatented uses so that a product with a label matching the unpatented use can quickly come to market.36 Thus, the court concluded that the statutory scheme contemplates that one patented use will not exclude marketing a generic drug for other unpatented uses, and that the counterclaim provision naturally functions to challenge an overbroad use code that covers more uses than the patent claims.37
Regarding the interpretation of "patent information," the Court again looked at the broader statutory context. The court considered use codes as "pivotal" to the FDA's implementation of the Hatch-Waxman Amendments.38 To fulfill the congressional mandate under section viii, "the FDA must determine whether any patent covers a particular method of use; and to do that, the agency . . . relies on the use codes submitted in the regulatory process."39 "An overbroad use code therefore throws a wrench into the FDA's ability to approve generic drugs as the statute contemplates."40 Accordingly, the Court held that use codes should be part of the "patent information" submitted under the statute, and it does not matter that use codes are required by FDA regulation, not expressly by the statute.41
The Caraco case is significant because it provides a mechanism for the generic manufacturers to challenge an inaccurate use code, and clear the way for a potential ANDA with a section viii statement. As such, use codes may receive increased scrutiny and some of them may have to be modified or even deleted.
The case's impact, however, is limited in several aspects. First, a section viii statement can be made only when the listed patents are method of use patents. If there are still valid and enforceable listed patents covering the active ingredient or drug product, a generic manufacturer cannot circumvent those patents by certifying under section viii regarding any listed method of use patent. So the Caraco case has no impact in those situations.
Second, the challenge of the use codes is limited to a counterclaim only. That means, a generic manufacturer cannot proactively file a declaratory judgment action to correct an inaccurate use code. As long as a use code overlaps with a proposed skinny label, the FDA cannot approve the ANDA under section viii, even if a generic manufacturer believes that the use code is overbroad. As Justice Sotomayor pointed out in her concurring opinion, the generic manufacturer has to provoke a suit before it can counterclaim to force a correction of an overbroad use code.42 The generic manufacturer may have to file an ANDA with a paragraph IV certification, substantially copying the brand label, and "wait for the brand manufacturer to institute suit, file a counterclaim, litigate the counterclaim, and, if successful in securing the correction of the use code, return to the start of the process and do what it always wanted to do—file an ANDA with a section viii statement and a carve-out label."43
Also, it is not clear what would happen if the brand manufacturer does not file suit.44 If the brand manufacturer decides not to sue, the FDA may approve the generic manufacturer's ANDA application, and the generic manufacturer would have secured approval to market a drug with a label materially identical to the brand manufacturer's, "[which] would be inducement of infringement to sell a product with labeling that suggests that the product be used for a patented method of use."45
Third, while now it seems that generic manufacturers have a viable counterclaim to correct an inaccurate use code, the Caraco case will unlikely significantly change the dynamics of litigation from the brand manufacturer's perspective. If a generic manufacturer believes that the use code for a brand drug is overbroad and wishes to market an unpatented use under section viii, it still has to go through the paragraph IV process in order to open the possibility of the brand manufacturer filing an infringement action, which will elicit a 30-month stay at the FDA. Although the 30-month stay can be effectively terminated prematurely if the generic manufacturer secures an order to correct the use code, it remains to be seen how fast such an order can be secured. To determine whether a use code is overbroad, the court essentially has to do a claim construction and infringement analysis (comparing the claim language, use code language, and the label language). It may take quite a while before a generic manufacturer can secure an order to correct an overbroad use code. Thus, even if the generic manufacturer wins on correcting a use code, the generic entry via skinny labeling may not be that fast after all.
As such, the Caraco case may not disincentivize the brand manufacturers from including broad narratives in use codes. A broad use code would prevent a generic manufacturer from seeking a skinny label, or at least force the generic manufacturer to take the slower paragraph IV path rather than the more swift section viii path. As long as the patent or NDA holder lists a use code as broad as it believes proper, there is no apparent mechanism, short of litigating, to prevent such a broad use code that may be later adjudicated as overbroad. To the brand manufacturer's advantage in this regard, the FDA has no clear guidance as to use code description. The relevant regulation simply states that a brand manufacturer must provide "[t]he description of the patented method of use as required for publication."46 A more specific, yet not necessarily more clear, instruction in FDA's Orange Book listing form explains that "[e]ach approved use claimed by the patent should be separately identified ... and contain adequate information to assist ... [generic] applicants in determining whether a listed method of use patent claims a use for which the ... [generic] applicant is not seeking approval."47 There are also no specific instructions as to how to draft a use code when the claim language differs from that of the drug label. Additionally, the FDA limits the length of a use code to "240 total characters including spaces."48
Rather than tweaking use code descriptions, a better option for brand manufacturers is to secure broad patents. The most valuable patents are still those covering the active ingredient or the drug product, which would preclude a section viii statement even if the method of use patent may not cover all the approved uses. If patents claiming the active ingredient or the drug product are not available, perhaps because the basic patents covering them have expired, method of use patent claims should be drafted broadly to justify broadly worded use codes. A use code essentially represents the overlapping portions of the patent claims and the drug label. The ideal situation is to have claims that mirror the language of the drug label. While the label language is not easily predicted, it is a good practice to at least envision what kind of uses, down to the very details such as dosages, administration routes and regimens, indications, and combination therapies, will be sought for approval at the FDA, and draft the patent claims accordingly.
1 132 S.Ct. 1670 (2012).
2 Id. at 1675. The Orange Book contains the patent and data exclusivity information regarding all approved drug products in the United States. The Orange Book is no longer published in a book with an orange-colored cover, but instead maintained by the Food and Drug Administration (FDA) at http://www.accessdata.fda.gov/scripts/cder/ob/default.cfm.
3 21 U.S.C. § 355.
4 21 U.S.C. §§ 355(j)(2)(A)(ii), (iv).
5 Id.
6 Matthew Avery, Continuing Abuse of the Hatch- Waxman Act by Pharmaceutical Patent Holders and the Failure of the 2003 Amendments, 60 HASTINGS L.J. 171, 175 (2008).
7 21 U.S.C. §§355(c)(3)(E).
8 21 U.S.C. § 355(b)(1).
9 21 CFR § 314.53(c)(2)(ii)(P).
10 21 U.S.C. § 355(j)(2)(A)(vii)(IV).
11 21 U.S.C. § 355(j)(2)(A)(viii).
12 21 U.S.C. § 355(c)(3)(C).
13 21 U.S.C. § 355(j)(2)(A)(viii). The section viii statement applies when only method of use patents are listed for a brand drug and there are no other valid and enforceable listed patents covering either the active ingredient or drug product.
14 21 C.F.R. § 314.94(a)(8)(iv).
15 68 Fed. Reg. 36,676, 36,682-36,683 (June 18, 2003). The FDA will not permit skinny labeling if the carve-out would render the proposed generic drug product less safe or effective than the name brand. The name brand company may use a citizen petition to point that out to the FDA and prevent the approval of the skinny label.
16 Fed. Reg. 36,676, 36,682 (June 18, 2003) ("A section viii statement does not carry the requirement for notice to the NDA holder and patent owner, and the related opportunity for a 30-month stay.")
17 21 USC § 355(j)(5)(C)(ii)(I).
18 Caraco, 132 S.Ct. at 1678.
19 Id.
20 Id. at 1679.
21 Id. at 1678-79.
22 Id. at 1679.
23 Id.
24 Id.
25 Id.
26 Id.
27 Id.
28 Id.
29 Id. at 1679.
30 Id. at 1679-80.
31 Id. at 1680.
32 Id. at 1675.
33 Id. at 1681.
34 Id. at 1681-83.
35 Id. at 1681-82.
36 Id.
37 Id.
38 Id. at 1684.
39 Id.
40 Id.
41 Id.
42 Id. at 1688-89.
43 Id. at 1688.
44 Id. at 1689.
45 Id.
46 21 CFR § 314.53(c)(2)(ii)(P)(3): "The following information and verification statement is required:… (P) Information on each method-of-use patent including the following: (1) Whether the patent claims one or more approved methods of using the approved drug product and a description of each approved method of use or indication and related patent claim of the patent being submitted; (2) Identification of the specific section of the approved labeling for the drug product that corresponds to the method of use claimed by the patent submitted; and (3) The description of the patented method of use as required for publication . . . ."
47 Form FDA 3542 (Form approved OMB No. 0910-0513, Expiration Date: 10/31/2013).
48 Id.; see also, 68 Fed. Reg. 36,676, 36,683 (June 18, 2003).
Originally printed in CIPA Journal. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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