Hatch-Waxman Allows Generic Drug Maker To Force Use Code Change, High Court Rules

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Case Summary:High court gives a victory to generic drug makers when only method-of-use patents cover a brand name drug.


Key Takeaway:Hatch-Waxman counterclaim provision allows a generic drug manufacturer to force FDA changes that will let it market the generic for unpatented uses.

By Tony Dutra  

The counterclaim provision of the Hatch-Waxman Act allows a generic drug maker to force the Food and Drug Administration to change the use code and description of the brand name manufacturer's drug, a unanimous U.S. Supreme Court ruled April 17 (Caraco Pharmaceutical Laboratories Ltd. v. Novo Nordisk A/S, U.S., No. 10-844, 4/17/12).

The situation at issue in the case occurs when the patent on the drug covers some but not all of the FDA-approved uses. The FDA allows the brand name drug maker to create a use description that covers all uses, and the agency had previously denied the generic maker's demand to fix the description so as to be aligned with the patented uses only.

The high court overturned an interpretation of the counterclaim provision by the U.S. Court of Appeals for the Federal Circuit that barred challenges to the use description in court.

Justice Sonia M. Sotomayor filed a concurring opinion criticizing the FDA's “opaque” regulations on use codes and descriptions, and identifying the difficulty for a generic drug maker following the Hatch-Waxman process even under the court's interpretation.

Caraco Fights Orange Book Use Description.

Novo Nordisk A/S owns patents (RE 37,035 and 6,677,358) underlying the drug repaglinide, which the company markets under the brand name Prandin. The '035 patent covers the drug itself, but it expired in 2009. The '358 patent is on uses of the drug and does not expire until 2018.

The FDA approved three uses of Prandin--by itself, in combination with metformin, and in combination with thiazolidinediones.

Only Claim 4 of the '358 patent is at issue in the case. It claims a method for using repaglinide in combination with metformin to treat type 2 diabetes. The FDA, in fact, initially limited the Orange Book use code solely to “Use of repaglinide in combination with metformin to lower blood glucose.”

Caraco Pharmaceutical Laboratories Ltd. sought to offer generic repaglinide and filed an abbreviated new drug application (ANDA), accordingly, with a Paragraph IV certification--that is, under 21 U.S.C. §355(j)(2)(A)(vii)(IV)--as to the '358 patent.

Acting on advice from the FDA, Caraco subsequently filed a “Section viii statement,” per Section 355(j)(2)(A)(viii), declaring that it was not seeking approval for the combination with metformin. Soon thereafter, though, responding to a new FDA requirement, Novo requested and the FDA approved a change broadening the use code description: “A method for improving glycemic control in adults with type 2 diabetes mellitus.”

In addition, the FDA required Caraco to label its product without disclaiming use with metformin, leaving it in the position of infringing the patent given that label. Responding to Novo's patent infringement lawsuit, the generic drug maker counterclaimed under Section 355(j)(5)(C)(ii)(I), requesting that the use code and description be changed back to the original.

Federal Circuit Reverses Lower Court.

The U.S. District Court for the Eastern District of Michigan granted Caraco's motion for summary judgment on the counterclaim, which would have forced the use code revision, but the Federal Circuit reversed. Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories Ltd., 601 F.3d 1359, 95 USPQ2d 1031 (Fed. Cir. 2010).

In a 2-1 decision, the appeals court determined that the counterclaim provision is available only when the branded drug maker lists patents that are not related at all to the listed drug.

Two terms in the counterclaim provision were key to the court's view:

• The challenger may invoke the provision “on the ground that the patent does not claim … an approved method of using the drug.” The appeals court held, “When an indefinite article is preceded and qualified by a negative, standard grammar generally provides that 'a' means 'any,' ” and it was thus sufficient that the '358 patent claims any one of the three methods of use.

• Second, the remedy sought by asserting the provision would be “to correct or delete the patent information submitted by the holder under subsection (b) or (c) of this section.” The Federal Circuit held that “patent information” is expressly limited by the two subsections identified--only “the patent number and the expiration date of any patent”--and does not include the use code.

A subsequent petition for en banc rehearing failed 7-2. The Supreme Court granted Caraco's petition for a writ of certiorari June 27.

Statutory Context Supports Use Correction.

Justice Elena Kagan wrote the opinion of the court.

“We cannot say that the counterclaim clause is altogether free of ambiguity,” the court said. “But when we consider statutory text and context together, we conclude that a generic manufacturer in Caraco's position can use the counterclaim.”

The court disagreed with the Federal Circuit on both instances of statutory interpretation.

The first point the court addressed was whether “not an” meant “not any”--as the appeals court held--or “not a particular one.” It determined that the meaning depends on the context and that the context in this case supported the latter view.

After reviewing the events that gave rise to Congress's approval in 2003 of amendments to Hatch-Waxman that added the counterclaim provision, the court said:  

The Hatch-Waxman Amendments authorize the FDA to approve the marketing of a generic drug for particular unpatented uses; and section viii provides the mechanism for a generic company to identify those uses, so that a product with a label matching them can quickly come to market. The statutory scheme, in other words, contemplates that one patented use will not foreclose marketing a generic drug for other unpatented ones. Within that framework, the counterclaim naturally functions to challenge the brand's assertion of rights over whichever discrete use (or uses) the generic company wishes to pursue.  



'Submitted Under' Includes Regulations.

The court next turned to the appeals court's interpretation that the statute's authorization for changes does not extend to the use code and description.

“The statute does not define 'patent information,' but a use code must qualify,” the court said. The difficult issue, the court said, lies in the “submitted under” phrase.

While the court acknowledged that subsections (b) and (c) specify only “the patent number and the expiration date of any patent,” it reasoned that the subsections “as well govern the regulatory process by which brands provide additional patent information to the FDA.”

The court cited FDA regulations, at 21 C.F.R. §314.53, that are based on the subsections and require brands to submit use codes. According to the court, “use codes fall within the counterclaim's ambit if the phrase 'submitted under' reaches filings that not only subsections (b) and (c) themselves, but also their implementing regulations require.”

The court concluded that “submitted under” in the counterclaim provision's reference to patent information “most naturally refers to patent information provided as part of the 'comprehensive scheme of regulation' premised on those subsections,” quoting from Eli Lilly and Co. v. Medtronic Inc., 496 U.S. 661, 667, 15 USPQ2d 1121 (1990).

Again, the statutory scheme supports that interpretation, the court said. It noted that use codes are essential to the FDA's approval of ANDAs under the Hatch-Waxman Amendments, “no less so because a regulation, rather than the statute itself, requires their submission.”

The court further referred to the counterclaim provision text allowing actions to “correct or delete” the patent information. It concluded that limiting the information to patent numbers and expiration dates would effectively read “correct” out of the statute.

More Than Mylan Behind Congress's Action.

Finally, the court rejected Novo's interpretation of Congress's impetus for the 2003 amendments.

Novo contended that Congress added the counterclaim provision as a reaction to the Federal Circuit's ruling in Mylan Pharmaceuticals Inc. v. Thompson, 268 F.3d 1323, 60 USPQ2d 1576 (Fed. Cir. 2001).

The Mylan court held that nothing in Hatch-Waxman at the time created a cause of action for a generic drug maker “to create a private action for delisting a patent from the Orange Book for a patentee's failure to comply with section 355.” Novo argued that Congress's intent, therefore, was to address similarly situated generic drug makers only.

The court disagreed:  

Maybe Mylan triggered the legislative effort to enact a counterclaim, or maybe it didn't: By the time Congress acted, it also had at hand [a Federal Trade Commission] study broadly criticizing brands' patent listings and an FDA rule designed to address the very same issue. … Here, we think Mylan alerted Congress to a broader problem--that generic companies generally had no avenue to challenge the accuracy of brands' patent listings, and that the FDA therefore could not approve proper applications to bring inexpensive drugs to market.  



Indeed, the court concluded that the need for the counterclaim option is greater under the situation Caraco faced. In the situation presented in Mylan, the court noted, the challenger could have made a Paragraph IV challenge based on noninfringement of a patent that should be delisted.

Conversely, in the current case, with the FDA's refusal to allow Caraco to carve out noninfringing uses, the generic maker “cannot use paragraph IV litigation to that end.”

Therefore, the court said of Caraco, “the counterclaim offers the only route to bring the generic drug to market for non-infringing uses.”

The court thus reversed the Federal Circuit's decision and remanded the case for further proceedings consistent with the opinion.

Sotomayor Concurrence.

Sotomayor filed a concurrence to add two “observations.” First, she played out the likely challenge by a generic maker even under the court's ruling, when the use code is overly broad:

• The generic manufacturer submits an ANDA with a Paragraph IV certification, because the label will require infringement.

• The brand name manufacturer files an infringement lawsuit.

• The generic can then file and litigate the counterclaim.

• If successful, the generic will then be able to file an ANDA with a Section viii statement and a carve-out label.

Sotomayor noted the delay and expense required, but was most concerned with what happens if the brand drug maker does not file an infringement lawsuit. She determined that, in fact, “it is not obvious the brand will have any incentive to do so,” as the generic will be forced to decide whether to introduce a possibly infringing product without the benefit of a court decision.

“A fix is in order,” she said, “but it must come from Congress or FDA.”

The FDA took more criticism in Sotomayor's second observation. “Indeed, in some respects we are here today because of FDA's opacity in describing what is required of brand manufacturers [in providing use codes and descriptions],” she said.

She charged the FDA with being unclear on the distinction between a use and an “indication.” She looked at the FDA's guidance and excused Novo for believing that either a method of use or an indication--which may not be patented--could suffice as a use code.

Sotomayor noted that, in 2003, Congress rejected a provision that would have distinctly required a use “covered by the [patent] claim,” based on the idea that it would encourage excess litigation. “Absent greater clarity from FDA concerning what is required of brand manufacturers in use codes,” she said in conclusion, “Congress' fears of undue litigation may be realized.”

Act's Sponsor Applauds Court.

Hatch-Waxman's original sponsor, Rep. Henry A. Waxman (D-Calif.), had filed an amicus brief supporting Caraco's arguments in the case.

In a statement after the opinion was published, Waxman wrote that he was pleased with the decision. “While the issues in the case may seem arcane, the fact of the matter is that allowing brand companies to exaggerate the breadth of their patent protections in their listings with FDA served as a real block to generics,” he said. “This decision is in the interest of American consumers who should have the benefit of competition and lower prices.”

Richard A. Samp, chief counsel of the Washington, D.C.-based Washington Legal Foundation, disagreed. “The Supreme Court's expansive interpretation of the right of action at issue here will no doubt lead to increased numbers of patent challenges being asserted,” he told BNA. “That may be a good thing from the standpoint of those who seek earlier generic entry as a means of bringing about short-term price decreases.”

Samp was concerned about the “serious danger” that the court's opinion would undermine the value of pharmaceutical patents. “We are discouraging research and development,” he said, “and thereby decreasingly the development of new, life-saving medications.”

The two associations most concerned with the outcome of the case--the Pharmaceutical Research and Manufacturers of America and the Generic Pharmaceutical Association--did not immediately respond to BNA's requests for comment.

James F. Hurst of Winston & Strawn, Washington, D.C., represented Caraco. Mark A. Perry of Gibson Dunn & Crutcher, Washington, D.C., represented Novo.

By Tony Dutra  

Opinion at http://pub.bna.com/ptcj/100844Apr17.pdf

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