District Court Decision Acts to Preserve 180-Day Exclusivity Eligibility; An Interesting Solution Around a Forfeiture Catch-22

By Kurt R. Karst –      

A recent decision from the U.S. District Court for the Northern District of Illinois (Eastern Division) presents an interesting solution to a concern about the forfeiture of 180-day exclusivity when a company submits an ANDA containing both a Paragraph IV Certification to one patent and a Paragraph III Certification to another Orange Book-listed patent that does not expire until well into the future.  Such a scenario creates the risk of a court decision trigger under the “failure-to-market” forfeiture provisions that would occur well before the Paragraph III Certification patent expires.  Some companies have been willing to take that risk, however, by submitting their ANDAs early in the race to qualify for 180-day exclusivity. 

Section 505(j) of the Federal Food, Drug, and Cosmetic Act (“FDC Act”), as amended by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, provides that 180-day exclusivity eligibility is forfeited for a failure-to-market if there is a “later of” date that is calculated based on two events.  Specifically, the failure-to-market forfeiture event (at FDC Act § 505(j)(5)(D)(i)(I)) provides as follows:

(I)  FAILURE TO MARKET. – The first applicant fails to market the drug by the later of –

(aa)  the earlier of the date that is –

(AA)  75 days after the date on which the approval of the application of the first applicant is made effective under subparagraph (B)(iii); or

(BB)  30 months after the date of submission of the application of the first applicant; or

(bb)  with respect to the first applicant or any other applicant (which other applicant has received tentative approval), the date that is 75 days after the date as of which, as to each of the patents with respect to which the first applicant submitted and lawfully maintained a certification qualifying the first applicant for the 180-day exclusivity period under subparagraph (B)(iv), at least 1 of the following has occurred:

(AA)  In an infringement action brought against that applicant with respect to the patent or in a declaratory judgment action brought by that applicant with respect to the patent, a court enters a final decision from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that the patent is invalid or not infringed.

(BB)  In an infringement action or a declaratory judgment action described in subitem (AA), a court signs a settlement order or consent decree that enters a final judgment that includes a finding that the patent is invalid or not infringed.

(CC)  The patent information submitted under subsection (b) or (c) is withdrawn by the holder of the application approved under subsection (b).

Where there is a later-expiring patent subject to a Paragraph III Certification, a subitem (aa) event will likely occur well before the patent expires.  And because of the early submission of the ANDA containing a Paragraph IV Certification, one of the court decision triggers under subitem (bb) might also occur well before the patent subject to the Paragraph III Certification expires, thereby creating the two dates necessary to calculate a “later of” event under FDC Act § 505(j)(5)(D)(i)(I).  

The Illinois District Court’s decision stems from a Complaint filed by Abbott Laboratories after Abbott received notice of a Paragraph IV Certification from Matrix Laboratories (“Matrix”) involving KALETRA (lopinavir; ritonavir) Tablets.  KALETRA is listed in the Orange Book with 11 patents, that, with pediatric exclusivity, expire between January 2014 and May 2021.  Matrix’s ANDA No. 91-202, which was submitted to FDA on December 23, 2008, contains Paragraph IV Certifications to U.S. Patent Nos. 7,148,359 and 7,364,752, which expire (with pediatric exclusivity) in January 2020 and May 2021, respectively, and Paragraph III Certifications to the remaining 9 patents, the latest of which expires on December 26, 2016 (with pediatric exclusivity).  (As a side note, FDA tentatively approved another Matrix ANDA containing only Paragraph III Certifications for a generic version of KALETRA under the President’s Emergency Plan for AIDS Relief.)  According to FDA’s Paragraph IV Certification List Matrix is a first applicant eligible for 180-day exclusivity. Abbott timely sued Matrix, thereby triggering a 30-month stay of ANDA approval. 

Matrix, perhaps not expecting a patent infringement lawsuit, promptly filed a Motion to Stay requesting the entry of an order: “(i) staying this action until July 1, 2014, (ii) providing that any party may move to lift the stay at an earlier date upon a showing of good cause, and (iii) during the pendency of the Court’s stay, tolling the balance of the thirty-month period [under FDC Act § 505(j)(5)(B)(iii)] with respect to . . .  ANDA No. 91-202.”

Relying on previous decisions in Novartis v. Dr. Reddy’s Labs, Ltd., 2004 WL 2368007 (S.D.N.Y., Oct. 21, 2004) and Amgen, Inc. v. Hoechst Marion Roussel, Inc., 3 F. Supp.2d 104, 109 (D. Mass. 1998), Matrix argued that:

[A]bsent a stay, Defendants are in a Catch-22 situation in view of the forfeiture provision.  If Defendants litigate now and win, their exclusivity will almost inevitably be forfeited because a final court decision would almost certainly occur more than 75 days prior to December 26, 2016.  In that event, Defendants would have undertaken the expense of a successful challenge to the patent obstacle to generic entry, but would then compete with generic competitors who (especially if Defendants prevail on the basis that patent claims are invalid) would not have borne the competitive burden of the litigation expense.  This is contrary to the Congressional purpose for granting the 180-day period of exclusivity, which is to encourage early challenges to patents by preventing free-riding by later generic applicants.  If Defendants lose, then they would presumably be enjoined under 35 U.S.C. §271(e)(4)(A) and unable to compete with later generic applicants until expiration of the patent(s) they would be found to infringe.  In sum, if Defendants win soon, they lose in the marketplace, and if Defendants lose soon they lose in the marketplace.  The only way to avoid the Catch-22 is to stay the action.

The court, after considering Abbott’s Response and Matrix’s Reply, agreed with Matrix and granted the Motion to Stay, but on the grounds of judicial economy:

Defendants . . . raise an argument about the purposes of Hatch-Waxman. Specifically, they argue that the Act’s purpose of spurring generics through a 180-day exclusivity period could be frustrated without a stay.  The Court’s decision to grant a stay rests on traditional factors such as docket control and the efficient use of the Court’s and the parties’ resources.  Legislation serves many purposes, particularly when as here the legislation was part of a carefully crafted, comprehensive scheme. . . .  The Court is not prepared, on the record and briefing before it, to conclude that one among many purposes furnishes the authority to avoid an implication that arises as a result of the language that Congress chose to enact.  Nor is it self-evident that such an outcome would frustrate Congress’s intent.

Although the court’s decision was based on judicial economy, it could lead to greater concerns at FDA over administrative economy.  Indeed, FDA noted the following in the Agency’s Determination of Granisetron Exclusivity:

[A] comment raises a point that has been a source of some concern to the Agency irrespective of the forfeiture provisions, and that is that the “race” to earn 180-day exclusivity by submitting the first ANDA to challenge a patent may result in the submission of ANDAs that may also contain one or more paragraph III certifications to patents that do not expire until well into the future and that will preclude approval of the application for many years.  We have received ANDAs for which, based on the patent expiration dates and corresponding certifications, the sponsor has no intention to obtain approval and market the generic drug for 12 years or more.  [The commenter] is correct when it notes that this practice may result in agency resources being committed to unnecessary reviews.  There is the very real possibility that events will occur in the years between initial review and patent expiration such that the sponsor ultimately will decide not to obtain approval of and market the generic drug product. . . .  Furthermore, should the sponsor seek final approval after the lapse of many years from initial review and tentative approval, the ANDA would almost certainly have to be reviewed a second time before a final approval could issue.

Notwithstanding this concern, it is possible that implementation of FDA’s Document Archiving, Reporting and Regulatory Tracking System (“DARRTS”) in the Office of Generic Drugs (“OGD”) might alleviate the problem.  As we previously reported, DARRTS implementation in OGD is intended to make more efficient use of the Office’s resources so that those applications that can or should be approved sooner than others will be prioritized over applications that might not be approved for several years; for example, because an ANDA contains a Paragraph III Certification to a patent that will not expire for several years. 

Thanks to Shashank Upadhye for alerting us to the decision.