Supreme Court decision delivers clarity to generic drugmakers

Caraco v. Novo Nordisk clarifies Congress’ intention in Hatch-Waxman Act

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WASHINGTON, D.C.—The U.S. Supreme Court on April 17 handeddown a ruling that is expected to bring greater clarity to patent regulationsconcerning brand-name and generic drugmakers. The court's decision in Caraco Pharmaceutical Laboratories Ltd., et al.,v. Novo Nordisk A/S, et al. notably addressed—for the first time—the scopeof a statutory provision authorizing generic drugmakers to counterclaim inHatch-Waxman litigation against a branded counterpart, and to correct or deletepatent information submitted to the U.S. Food and Drug Administration (FDA) andlisted in the Orange Book. 
Thecase "make(s) it clear that the wording of the label indication of aproprietary drug can affect the analysis of whether a generic manufacturer willinfringe the patented indication," says Isabelle Blundell, a member of thelife-science practice group at Sunstein Kann Murphy & Timbers LLP.
Dr. Jerry Isaacson, head of GlobalData's healthcare industrydynamics division, however, says "it remains to be seen what effect thosedecisions will have on the pharmaceutical and in-vitro diagnostics business. The details of this case are veryparticular, but it has broad implications for the pharmaceutical industry. Thiscase boiled down to an understanding of the intention of Congress when draftingHatch-Waxman and related laws, and interpretation of the specific wording."
When a brand-name drugmaker submits a new drug application(NDA) to the FDA, the pharma also submits a statement of the drug's componentsand proposed labeling describing the uses for which the drug may be marketed.Once the FDA has approved the drug, another company may seek approval to marketa generic version of the drug by filing an abbreviated NDA, or ANDA.
In 1984, the U.S. Congress enacted the Drug PriceCompetition and Patent Term Restoration Act, known to most as the Hatch-WaxmanAct, creating a process by which generic drugmakers can file ANDAs to seek FDAapproval of generic drugs. Hatch-Waxman requires a brand manufacturer to submitits patent numbers and expiration dates, and FDA regulations require adescription of any method-of-use patent, known as a use code.
The FDA does not attempt to verify the accuracy of the usecodes that brand manufacturers supply. Instead, it publishes the codes, patentnumbers and expiration dates in a large volume known as the Orange Book. Afterconsulting the Orange Book, an ANDA applicant enters one of severalcertifications to assure the FDA that its generic drug will not infringe thebrand's patent. If the patent has not expired, an applicant may fulfill thisrequirement in one of two ways. First, it may submit a Section VIII statementasserting that it will market the drug for only those methods of use notcovered by the brand's patent, and proposing a label that "carves out" thestill-patented methods of use. The FDA will not approve an ANDA with a SectionVIII statement if the proposed label overlaps at all with the brand's use code.Second, the ANDA applicant may file a Paragraph IV certification stating thatthe brand patent "is invalid or will not be infringed by the [generic drug's]manufacture, use, or sale." This filing is treated as an act of infringement,giving the brand an immediate right to sue and resulting in a delay in thegeneric drug's approval.
In this case, the FDA approved three uses of Novo's diabetesdrug Prandin, which is usually used in combination with metformin, but is alsoused as a monotherapy and in combination with thiazolidinediones. Novo'smethod-of-use patent, however, claimed only one use. Seeking to market ageneric version of the drug for the other two approved methods of use, Caraco fileda Paragraph IV certification. Considering this an act of infringement, Novofiled suit.
Caraco then submitted a Section VIII statement and a proposedlabel carving out Novo's patented therapy, but before the FDA could approveCaraco's ANDA, Novo changed its use code to indicate that it held a patent onall three approved methods of using repaglinide. Because Caraco's proposedlabel now overlapped with Novo's use code, the FDA would not permit Caraco to toemploy Section VIII to bring its drug to market.
Caraco filed a statutory counterclaim seeking an orderrequiring Novo to "correct" its use code, because the patent did not claim twoof the three approved methods of using repaglinide. The District Court grantedCaraco summary judgment, but the Federal Circuit reversed it. It read thecounterclaim's phrase "the patent does not claim . . . an approved method ofusing the drug" as requiring Caraco to demonstrate that Novo Nordisk's patentdoes not claim any approved method of use, and because the patent covers oneapproved method, the counterclaim was unavailable. The court also ruled thatthe counterclaim provision does not reach use codes because the patentinformation consists only of the patent number and expiration date expresslyrequired by the statutory provisions.
Ultimately, the Supreme Court reversed the Court of Appealsdecision, holding that "Caraco may bring a counterclaim seeking to 'correct'Novo's use code 'on the ground that' the '358 patent 'does not claim . . . anapproved method of using the drug'—indeed, does not claim two."
The decision is significant, says William Gaede, a partnerin the law firm of McDermott Will & Emery LLP, "because it broadly confirmsthe statutory counterclaim right of a generic drug manufacturer to seek correctionof a branded company's patent information submitted as part of the Orange Booklisting process. Also, if a branded company were to submit an overbroad usecode, that potentially may trigger antitrust issues as well.  Nonetheless, the facts of the decision aresomewhat unique, and it is unclear whether this decision will triggersignificant counterclaim litigation over use codes. Certainly, it will be goodpractice for a branded company to carefully consider the use code language itsubmits as part of the patent information supplied to FDA."
"Caraco … confirms that the Supreme Court will interpretambiguities in Hatch-Waxman in favor of generic companies in their attempt toquickly launch generic versions of innovator pharmaceuticals," says Blundell's colleague,Nancy Chiu Wilker, who is also amember of the life-science practice group at Sunstein Kann Murphy &Timbers.
But Jennifer Fox, a pharma/biotech industry patent attorneyat Brinks Hofer Gilson & Lione, opines, "I don't think this decision will havea very big impact in terms of how the industry operates under Hatch-Waxman,because this was a very fact-specific situation. The issue is interesting, butwhat is more interesting is that this is the first Hatch-Waxman case that theSupreme Court has ever heard. I think it's interesting that the Supreme Courtgot involved."

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