Supreme Court Allows Generics To Challenge Orange Book Use Codes In Hatch-Waxman Litigation

Introduction

Today, the United States Supreme Court held that a generic drug manufacturer who is sued for infringement of a method-of-use patent pursuant to the Hatch-Waxman Act may assert a counterclaim alleging that the use code listed in the Orange Book inaccurately characterizes the uses claimed in the listed patent and requesting that the branded drug manufacturer correct the use code characterization accordingly. See Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, No. 10-884 (U.S. 2012) (Slip Op.). This expanded counterclaim is likely to become a recurring issue in Hatch-Waxman litigation regarding branded drugs with multiple approved methods of use.

Background and Litigation Below

Under the Hatch-Waxman Act, a generic manufacturer seeking FDA approval for a generic version of a branded drug must certify for each unexpired patent listed in the Orange Book for the branded drug that the generic will not seek approval prior to the expiration of the patent ("Paragraph III certification") or that the patent is invalid or will not be infringed by the manufacture, use or sale of the generic product ("Paragraph IV Certification").¹ Additionally, when the branded drug is indicated for several different uses, a generic can "carve out" uses from its proposed labeling that are covered by method patents,² and may file a "section viii statement" alleging that it does not seek approval for the uses that are covered by the Orange Book patents.³ While FDA may approve an ANDA containing a section viii statement to a listed method of use patent, it will refuse to do so if indications within the generic's proposed labeling overlap with the "use code" listed in the Orange Book.⁴

Novo Nordisk's branded product Prandin® (repaglinide) was approved by FDA for the treatment of diabetes as a monotherapy, as well as in combination with metformin, and in a separate combination with thiazolidinediones. See Slip Op. at 7. Novo brought a patent infringement suit against Caraco based upon its ANDA submission for a generic version of Prandin® prior to the expiration of Novo's patents, including a patent covering the use of repaglinide in combination with metformin to treat diabetes. See id. at 7-8. Caraco filed a Paragraph IV certification on the metformin combination use patent, but later submitted a "section viii" statement to carve out the metformin combination indication from its proposed labeling. See id. Novo, however, subsequently changed the use code for its metformin combination patent to a use code that recited only treatment of diabetes (and not the metformin combination), causing Caraco's proposed labeling to overlap with the use code, thus rendering its ANDA unapprovable. See id. at 8-9.

In response to Novo's use code revision, Caraco brought a counterclaim alleging that the amended use code did not accurately reflect what was claimed by the listed patent covering the use of repaglinide in combination with metformin. In bringing its counterclaim, Caraco sought an order that Novo correct its use code with FDA. See id. at 9. Caraco cited 21 U.S.C. § 355(j)(5)(C)(ii)(I) as the statutory basis for its use code counterclaim.⁵ See id. The district court granted Caraco's request and ordered Novo to change its use code. The Federal Circuit, however, reversed the district court in a 2-1 decision, holding that § 355(j)(5)(C)(ii)(I) does not provide a statutory basis for Caraco's asserted counterclaim. See id. at 9-10. Writing for the majority, Chief Judge Rader held that by its plain language, § 355(j)(5)(C)(ii)(I) does not apply where the listed patent covers any "approved method" of using the branded product, and that use codes are not "patent information" subject to correction under that provision.⁶

The Supreme Court's Unanimous Decision

The Supreme Court unanimously reversed the Federal Circuit's decision, holding that a generic defendant to a Hatch-Waxman suit may bring a counterclaim under 21 U.S.C. § 355(j)(5)(C)(ii)(I) to require a branded manufacturer to change an improper use code. See Slip Op. at 1-2. Justice Kagan, writing for the Court, found that the statutory language of that provision is ambiguous, and relied largely on the policies of the Hatch-Waxman scheme, i.e., its "contemplat[ion] that one patented use will not foreclose marketing a generic drug for other unpatented ones." See id. at 11-15. The Court further found that the term "patented information" necessarily includes use codes, and that use codes are "submitted under" 21 U.S.C. § 355(b) and (c), despite the fact that they are technically submitted in accordance with FDA regulations, and not statutory provisions per se. See id. at 15-18. The Court also rejected Novo's arguments relating to the legislative history of § 355(j)(5)(C)(ii)(I), including the argument that this provision was created to deal exclusively with the problem of Orange Book listed patents that did not cover the branded drug product. See id. at 20-24. According to the Court, the use code counterclaim is necessary to preclude a scenario in which generics can neither avoid a method of use patent with a section viii statement (in view of a broad use code) nor successfully challenge such a patent on noninfringement grounds (in view of labeling that, in the absence of section viii, includes the claimed method of use). See id. at 24.

Justice Sotomayor's Concurrence, and Potential Future Litigation Issues

Justice Sotomayor provided a concurring opinion, articulating the potential complexity that the new use code counterclaim may bring to the Hatch-Waxman scheme. As Justice Sotomayor acknowledged, a generic manufacturer seeking to file a section viii statement in view of what it considers to be an overly broad use code will have to take the steps of (1) filing a Paragraph IV certification, (2) waiting to be sued by the branded manufacturer, (3) filing and successfully litigating a use code counterclaim, and (4) amending its ANDA to have a section viii statement and carve-out label. See Slip Op. at 1-2 (Sotomayor, J., concurring). Justice Sotomayor further noted that some of these steps may never occur. For example, the branded manufacturer may choose not to bring suit against the generic manufacturer, and even if the generic manufacturer could obtain approval,⁷ it would potentially subject itself to a finding of infringement in a later action. See id. at 2-3. Finally, Justice Sotomayor noted that FDA's use code regulations lack clarity, and accordingly suggested that use code counterclaims will likely be litigated for years to come. See id. at 3-5.

As one Federal Circuit panel has recently held, an ANDA containing a section viii statement concerning a method of use patent and carving out the claimed method of use does not infringe that patent under 35 U.S.C. § 271(e)(2)(A).⁸ Obtaining a section viii statement may be valuable to generic manufacturers not only because it may allow a generic to avoid a definite finding of infringement for a patent that clearly reads on one of the branded indications, but potentially allows the generic to escape liability for infringement under § 271(e)(2)(A) entirely. Likewise, it will be crucial for branded manufacturers seeking to enforce method of use patents prior to generic launch to succeed in fending off any use code counterclaims directed to those patents. Potentially, generics may try to use Paragraph IV certifications offensively against method of use patents that are plainly infringed, with the intent of triggering use code counterclaim litigation. As Justice Sotomayor predicts, the newly confirmed § 355(j)(5)(C)(ii)(I) use code counterclaim will likely be a source of contentious litigation for years, absent a change in the underlying FDA statutes or regulations.

Footnotes

^{1 See 21 U.S.C. §§ 355(j)(2)(A)(vii), (5)(B).}

^{2 See 21 C.F.R. § 314.94(a)(8)(iv) (permitting submission of ANDAs with indications carved-out for the purpose of avoiding branded patents or exclusivities); id. § 314.127(a)(7) (permitting approval of ANDAs with carved-out indications, provided that such labeling changes "do not render the proposed [generic] product less safe or effective than the [branded] drug for all remaining, non-protected conditions of use").}

^{3 See id. § 355(j)(2)(A)(viii).}

^{4 See 68 Fed. Reg. 36676, 36682-83 (Jun. 18, 2003). The "use code" is a code in the Orange Book that reflects the branded manufacturer's description to FDA of the uses covered by its Orange Book listed method of use patents. See 21 C.F.R. §§ 314.53(c)(2)(ii)(P)(3), (e).}

^{5 Pursuant to 21 U.S.C. § 355(j)(5)(C)(ii)(I), an generic manufacturer who is sued for patent infringement by a branded manufacturer may assert a counterclaim in that action "seeking an order requiring the [branded manufacturer] to correct or delete the patent information submitted by the [branded manufacturer] on the ground that the patent does not claim either . . . the drug for which the application was approved; or . . . an approved method of using the drug."}

^{6 See Novo Nordisk A/S v. Caraco Pharm. Labs., Ltd., 601 F.3d 1359, 1360-67 (Fed. Cir. 2010).}

^{7 If the branded manufacturer does not sue the generic within 45 days of receiving its Paragraph IV certification notice, the ANDA can be approved immediately, despite the fact that it has a Paragraph IV certification. See 21 U.S.C. § 355(j)(5)(B)(iii).}

^{8 See AstraZeneca Pharms. LP v. Apotex Corp., 669 F.3d 1370, 1377-81 (Fed. Cir. 2012).}

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