2020 was supposed to be a year remembered for the 40th anniversary of the publication of the Orange Book—a celebration of one aspect of the Hatch-Waxman Amendments—but it could turn out that 2020 is remembered as the year in which the Hatch-Waxman Amendments took a significant blow to the face. Specifically, when ANDA (and 505(b)(2)) “skinny labeling” (i.e., labeling carve-outs) was struck down and the generic drug industry faltered.
Carve-outs (or skinny-labeling), in which a generic sponsor uses a “section viii” statement to remove from proposed product labeling any indications or other language covered by a method-of-use patent listed in the Orange Book for a given Reference Listed Drug (RLD), have been pretty routine since the Hatch-Waxman Amendments were enacted in 1984. Permitted by Congress under Section 505(j)(2)(A)(viii), a section viii statement inherently acknowledges that a given patent is listed in the Orange Book but declares that the patent does not cover a condition of use for which an ANDA applicant is seeking approval. Although the RLD and generic drug are listed in the Orange Book as A-rated, they are only rated as substitutable insofar as they are labeled the same. As FDA once stated in the Orange Book Preface: “Therapeutic equivalence determinations are not made for unapproved, off-label uses.”
RLD sponsors, understandably, tend to dislike so-called carve-outs, as they allow generic competitors to access the market without addressing listed patents. As a result, RLD sponsors often petition to preclude carve-outs on the grounds that a carve out would affect the safety and efficacy of the product for the remaining indications in the labeling. Typically, FDA rejects these petitions, and the practice is now a staple to facilitate generic competition. But, even though Congress and FDA accept the practice as commonplace, the Federal Circuit just threw a major wrench in the system.
In a 2-1 decision, the Federal Circuit recently held in GSK v. Teva that skinny-labeling can constitute induced infringement, rendering any generic sponsors who relied on a section viii statement for a method of use patent vulnerable to patent litigation. As the RLD holder, GSK had listed several patents in the Orange Book for carvedilol (Coreg), initially approved for use in the treatment of hypertension, and subsequently for the treatment of congestive heart failure and left ventricular dysfunction following a myocardial infarction. GSK listed the ‘069 method of use patent, which was reissued and relisted as the ‘000 patent in November 2003, covering the combination of carvedilol and an angiotensin-converting enzyme (“ACE”) inhibitor, diuretic, and/or digoxin with the use code “decreasing mortality caused by congestive heart failure.” Teva submitted its ANDA in 2002 with a Paragraph IV certification for the ‘069 patent, and, at some point after the ‘069 patent was reissued as the ‘000 patent, submitted a section viii statement for it, effectively converting its ‘069 Paragraph IV certification to a carve-out. Teva received tentative approval in June 2003, and launched upon expiration of a different patent in 2007 with an AB rating. Teva subsequently revised its labeling to include the indication for treatment of heart failure, as required by FDA to ensure that its label was identical to the GSK RLD.
In 2014, GSK sued for induced infringement of the reissued ‘000 patent. At trial, Teva argued that it had carved-out the treatment of congestive heart failure with a section viii statement, and therefore could not have infringed the ‘000 patent. The jury sided with GSK, finding that Teva caused physicians to prescribe generic carvedilol for the carved-out indication and therefore willfully induced infringement. In a rare move, the district court granted Teva’s motion for Judgement as a Matter of Law (“JMOL”) and overturned the jury verdict because GSK did not prove that Teva’s actions caused physicians to infringe. GSK appealed.
The Federal Circuit reviewed the JMOL de novo, evaluating whether “the record is critically deficient of the minimum quantum of evidence to sustain the verdict” (citations omitted). Looking at the JMOL standard, the Federal Circuit assessed whether the jury’s findings are supported by substantial evidence and whether the jury’s verdict can be supported by its findings. In no uncertain terms, the Federal Circuit held that the “criteria of induced infringement are met” based on the “ample record evidence of promotional materials, press releases, product catalogs, the FDA labels, and testimony of witnesses from both sides.” Mainly, the evidence consisted of materials in which Teva had noted that its product was a “generic of Coreg” and “AB rated” without any reference to specific indications. Notably, the Court implied that the labeling alone may have been enough, as “[p]recedent has recognized that the content of the product label is evidence of inducement to infringe.” Given that there was substantial evidence to support the jury’s verdict of inducement to infringe the ‘000 patent, the Federal Circuit overturned the JMOL, reinstated the $235 million damages award, and remanded the matter to back to the district court. The opinion was sure to stress that its decision was not based on policy but purely on applicable patent law.
Federal Circuit Chief Judge Prost vehemently dissented. Focusing on the “critical balance” of patent rights with public access to innovation, she noted that the Majority decision “undermines this balance,” particularly since Congress specifically provided for the skinny label pathway. The dissent astutely points out that the Federal Circuit’s holding “nullifies Congress’s statutory provision for skinny labels,” slowing the introduction of low-cost generics. The dissent stresses that Teva did everything right here, following all statutory and regulatory requirements, never expressly marketing for the carved-out indication, and omitting the indication from its labeling until the method of use patent expired. With no legally sufficient evidence to support inducement or to support that doctors prescribed generic carvedilol based on any action taken by Teva, the dissent would uphold the JMOL. To do otherwise, the dissent writes, “undermines Congress’s design for efficient generic drug approval.”
This case highlights the delicate balance that Congress tried to walk between intellectual property rights and facilitating generic drug access when passing the Hatch-Waxman Amendments, and how that balance can be upset by a single court decision. The evergreening/patent thicket problem just became even bigger for the generic drug industry, as innovators of a product with multiple indications, like cancer drugs that are approved for individual types of cancers, can now—absent a reversal of the panel decision—use a successive method-of-use patent to legally keep all competition off the market indefinitely.
There are also questions of fairness here, as well as reliance interests for generic drug companies. As Chief Judge Prost pointed out in her dissent, Teva followed the law to a T but is nonetheless on the hook for $235 million. And generic companies have been doing this for years; are they now all liable for induced infringement? For industry, the uncertainty leaves a wide open question of whether taking advantage of the skinny label process is advisable.
Given the huge implications here for the generic industry, Teva is sure to appeal this case, either en banc or to the Supreme Court. But it may be years before we have any certainty. Neither FDA nor Congress has said anything about this decision yet, but we would be surprised if FDA did not chime in on the issue in some form. After all, it significantly upsets the Hatch-Waxman balance FDA has strived to achieve and mischaracterizes FDA’s long held position on therapeutic equivalence determinations.