CHAPTER § 3.02 An Overview of Patent Enforcement Actions Under the Hatch-Waxman Act and Biologics Price Competition and Innovation Act

• Jurisdiction: United States

§ 3.02 An Overview of Patent Enforcement Actions Under the Hatch-Waxman Act and Biologics Price Competition and Innovation Act

While there is no universal agreement on how the costs of drug development should be properly calculated, there is little dispute that the process for research and development of new drug products is expensive.⁹⁸ For manufacturers of innovative drug products, patent protection provides the opportunity for market exclusivity and commercial exploitation that is critical to recoup this investment. Market share of branded drug products, however, can drop as much as 80 percent within 6 months of a generic equivalent entering the market.⁹⁹ Because drug products can be so profitable, there are significant incentives for generic manufacturers to challenge the patents protecting the exclusivity of branded drug products. Political attention to increasing health care costs also generates interest in lowering prescription drug prices through additional legislation involving patents and the statutory frameworks for patent litigation under the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act ("BPCIA").

Within this framework, a significant amount of pharmaceutical patent litigation involves disputes between manufacturers of innovator products and the generic companies that seek to market competing products. Although the ultimate patent issues in these disputes are similar to the issues that arise in conventional patent lawsuits involving non-drug technologies, innovator/generic pharmaceutical patent cases have certain unique characteristics. These cases arise from a specific statutory framework under the Hatch-Waxman Act, which provides for an "artificial" act of patent infringement based on the generic manufacturer's submission of an "Abbreviated New Drug Application" ("ANDA") seeking approval for an infringing generic product, rather than the actual or imminent launch of an infringing product. Accordingly, the infringement inquiry relies almost entirely on the contents of the generic manufacturer's ANDA, rather than on testing an actual commercial product.

Unlike typical patent litigation involving products that have already been commercialized, adjudication of disputes between innovator and generic pharmaceutical companies before launch of the generic product generally are not triable to a jury. In typical patent cases, a patentee can recover damages, including lost profits or a reasonable royalty. In cases involving pre-generic launch disputes between innovator and generic pharmaceutical companies, however, these patent damages are generally not available. In these brand/generic patent disputes, statutory provisions also give the alleged infringer a greater incentive to seek prompt resolution of the litigation, although the same statutory scheme may make early settlement efforts more chal-lenging.¹⁰⁰

[1] The Hatch-Waxman Statutory Scheme

Over the past 35 years, Congress has repeatedly revisited the question of how to balance the profit incentives for branded manufacturers to incur the extensive costs of new drug innovation against allowing for the entry of generic drug products that compete on price and can be available at lower cost. The Hatch-Waxman Act was the first significant effort in this regard.

Innovator manufacturers typically submit a New Drug Application ("NDA") to obtain regulatory approval from the FDA to market a new pharmaceutical product. The NDA is a substantial submission reflecting pre-clinical data as well as data gathered during human clinical trials. Hatch-Waxman allows generic manufacturers to employ ANDAs that rely on much of the data already in existing NDA submissions.¹⁰¹ The ANDA applicant need only provide documentation that its generic formulation exhibits "therapeutic equivalence"¹⁰² to the previously approved innovator product, thereby circumventing much of the cost and delay associated with innovator drug development. An application under Section 505(b)(2) is another abbreviated approval pathway that lies somewhere between an NDA and an ANDA. A Section 505(b)(2) application may rely on some data already in existing NDA submissions, including in some cases clinical efficacy studies that do not need to be repeated by the Section 505(b)(2) NDA applicant, but must also include additional data showing that any differences between the proposed product and the reference listed drug are "scientifically justified."¹⁰³ Regulatory applications for generic drugs, which had taken two to 3 years before Hatch-Waxman, were dramatically streamlined after the legislation was enacted.

The Hatch-Waxman Act's provisions for creating and resolving pharmaceutical patent disputes arise from the fact that, following FDA approval of their NDA, the innovator drug applicants must identify any patents that cover the innovator drug or its approved methods of use. These patents are then listed in an FDA publication entitled "Approved Drug Products with Therapeutic Equivalence Evaluations," commonly referred to as the "Orange Book." Generic manufacturers seeking approval of an ANDA or a Section 505(b)(2) application referencing an earlier approved NDA are required to make one of four alternative "certifications" to the FDA with respect to Orange Book-listed patents protecting the "Reference Listed Drug" on which the NDA or Section 505(b)(2) application relies on for approval. A "Paragraph IV Certification" with respect to an Orange Book-listed patent indicates that, in the opinion of the generic manufacturer, the patent is invalid, unenforceable, or would not be infringed by the product described in the ANDA or Section 505(b)(2) application. Notice of a Paragraph IV certification must be made to each owner of the patent that is the subject of the certification and to the holder of the NDA.¹⁰⁴ The notice must state that an application containing data from bioavailability or bioequivalence studies has been submitted to the FDA to obtain approval to engage in the commercial manufacture, use, or sale of the drug before the expiration of the challenged patents.¹⁰⁵ The notice must also include a detailed statement of the factual and legal basis of the opinion of the applicant that the patent is invalid or will not be infringed.¹⁰⁶

Generic manufacturers that are the first to file a substantially complete ANDA containing Paragraph IV Certification and successfully litigate the ensuing patent dispute are awarded 180 days of market exclusivity as to all subsequent ANDA applicants.¹⁰⁷ The 180-day exclusivity period, if not forfeited, commences with the commercial marketing of any first applicant entitled to 180-day exclusivity.¹⁰⁸ If another, later generic challenger files an ANDA for a drug for which an earlier first ANDA applicant made a Paragraph IV challenge entitling it to 180-day exclusivity, the later-filed ANDA cannot be approved by FDA until 180 days after the date of the first commercial marketing of the drug by the first applicant.¹⁰⁹

[a] Infringement Under 35 U.S.C. § 271(e)(2)

Under 35 U.S.C. § 271(e)(2)(A), the submission of an ANDA or Section 505(b)(2) application with a Paragraph IV certification is considered an act of patent infringement with respect to the challenged patents.¹¹⁰ An innovator manufacturer who responds to notice of a Paragraph IV certification by commencing a patent infringement suit against the generic manufacturer within 45 days of receiving notice benefits in two ways: (1) the innovator has the opportunity to select the forum for patent litigation (subject to limitations on personal jurisdiction and venue), and (2) the innovator obtains a 30-month stay of FDA approval of the ANDA or Section 505(b) (2) application, allowing for orderly patent litigation to proceed without the need for preliminary injunction proceedings. During this 30-month period, the FDA is barred from granting final approval of the generic manufacturer's ANDA unless the generic drug company wins the pending lawsuit or all of the applicable Orange Book patents on the innovator product expire.¹¹¹

In an ensuing patent infringement litigation, the ANDA or Section 505(b)(2) application will be found to infringe an Orange Book listed patent under Section 271(e) (2)(A) when the innovator can prove, by a preponderance of the evidence, that the application describes a drug product or a method of using the drug product that, if marketed, would infringe the listed patent. As the Federal Circuit has held, in a patent infringement inquiry under Section 271(e)(2)(A), the statements and specifications in a generic manufacturer's ANDA submitted for FDA approval take precedence over the generic manufacturer's representations to the court that it will only manufacture non-infringing products.¹¹²

Courts have also detailed how the concepts of induced¹¹³ and contributory¹¹⁴ infringement are applied in the context of Hatch-Waxman cases under Section 271(e) (2)(A), particularly with respect to patents directed to methods of treatment. "[F]or a court to find induced infringement, it must be established that the defendant pos-sessed specific intent to encourage another's infringement."¹¹⁵ As the Federal Circuit has held, "[w]hen proof of intent to encourage depends on the label accompanying the marketing of a drug, the label must encourage, recommend, or promote infringement."¹¹⁶ For example, in Sanofi v. Watson Laboratories Inc., the Federal Circuit found that "the inducing act will be the marketing by Watson and Sandoz of their generic dronedarone drugs with the label described above. And the induced act will be the administration of dronedarone by medical providers to patients meeting the criteria set forth in the [] patent claims."¹¹⁷ But "it [is] not an act of infringement for a competitor to submit an [ANDA] for approval to market a drug for use when neither the drug nor that use was covered by an existing patent, and the patent at issue was for a use not approved under the [NDA]."¹¹⁸

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