Teva Prevails in Generic COZAAR/HYZAAR 180-Day Exclusivity Forfeiture Litigation; the Decision is a Game-Changer (Our 800th Post!)

By Kurt R. Karst –      

Earlier today, the U.S. Court of Appeals for the District of Columbia Circuit handed Teva Pharmaceuticals USA, Inc. (“Teva”) a significant victory in the company’s lawsuit against FDA concerning the availability of 180-day exclusivity for generic versions of Merck & Co., Inc.’s (“Merck’s”) blockbuster angiotensin II receptor antagonist drugs COZAAR (losartan potassium) Tablets and HYZAAR (hydrochlorothiazide; losartan potassium) Tablets.  Although FDA has made no determination with respect to generic COZAAR and HYZAAR 180-day exclusivity, Teva believes that FDA’s interpretation of the statute, as previously applied in the Agency’s adjudications concerning generic PRECOSE (acarbose) Tablets and generic COSOPT (dorzolamide hydrochloride; timolol maleate), will result in a forfeiture of 180-day exclusivity for both products.  The D.C. Circuit's decision is the culmination of several years of debate concerning the proper interpretation of the “failure to market” 180-day exclusivity forfeiture provisions at FDC Act § 505(j)(5)(D)(i)(I), beginning with FDA's so-called "bookend approach" described in the Agency's generic KYTRIL (granisetron HCl) Injection 180-day exclusivity decision.

As we previously reported (here, here, and here), Teva’s lawsuit challenged FDA’s interpretation of the “failure to market” 180-day exclusivity forfeiture provisions at FDC Act § 505(j)(5)(D)(i)(I), which were added to the FDC Act in December 2003 by the Medicare Modernization Act (“MMA”), and in particular FDA’s interpretation of the patent information withdrawal provision at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC).  That provisions states that one of the dates for calculating a forfeiture is the date that is 75 days after which “[t]he patent information submitted under [FDC Act § 505(b) or (c)] is withdrawn by the holder of the application approved under [FDC Act § 505(b)].”  FDA has interpreted the provision such that a request to withdraw patent information from the Orange Book is a forfeiture event under FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC).  In discussing its interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC), FDA determined that the U.S. Court of Appeals for the District of Columbia Circuit’s 2006 decision in Ranbaxy Labs. Ltd. v. Leavitt (a pre-MMA case) holding that FDA may not condition the delisting of a patent on the existence of patent litigation and deprive an ANDA applicant eligible for 180-day exclusivity of such exclusivity does not apply to the version of the FDC Act amended by the MMA. 

Teva argued in the D.C. District Court that it should not forfeit 180-day exclusivity because FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) is unlawful.  Specifically, Teva argued that the mechanism added to the FDC Act by the MMA – i.e., FDC Act § 505(j)(5)(C)(ii)(I) – permitting a cause of action that allows a generic applicant to seek a court order compelling the brand manufacturer to delist a challenged patent must be read together with FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC):

Read together, as statutory provisions must be, it thus is clear that these twin Amendments – the delisting mechanism, on one hand, and the delisting trigger, on the other – were not remotely intended to open the proverbial floodgates to manipulative, exclusivity-divesting patent delistings by brand manufacturers, and thus sub silentio to abrogate the longstanding prohibition against such delistings that Ranbaxy recognized.

In July 2009, Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia ruled in a 27-page opinion that FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) is not ambiguous and that FDA’s interpretation of the statute is reasonable.  The court, analyzing the arguments under the familiar Chevron standard, concluded that, “[a]t Chevron step one this Court must give effect to the clear intent of Congress as reflected in the statute because subsection (bb)(CC) is not ambiguous on its face.”  The court went on to state that “Teva is correct that the statute does not address when an Innovator may withdraw a patent, but what is important is that the statute does not limit the Innovator’s right to withdraw patent information.  The Court cannot take on the role of the legislature by creating such limitations when they were omitted by Congress.”  The court also dismissed the utility of the Ranbaxy decision in interpreting the 180-day exclusivity forfeiture provisions added by the MMA, noting that “Ranbaxy was decided under the Hatch-Waxman Amendments as they existed prior to the enactment of the MMA . . . .  The MMA now provides that the first generic manufacturer is entitled to exclusivity if it has not forfeited that exclusivity.” (emphasis in original)  Ultimately Judge Collyer concluded that “FDA’s interpretation of the MMA is a reasonable interpretation of the balance Congress struck between these competing goals.” 

(The court also denied FDA’s Motion to Dismiss the case on several grounds – that Teva is not challenging final agency action, Teva’s claims are not ripe, Teva has not suffered sufficient injury for Article III standing, and Teva has failed to exhaust administrative remedies – but primarily on the basis that Teva failed to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), inasmuch as Teva was not challenging a final agency action.  FDA appealed only the ripeness and standing issues.)   

On appeal, Teva offered two primary arguments against FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) – which the D.C. Circuit dubbed the “linguistic argument” and the “structural argument.”  Teva’s “linguistic argument”:

. . . takes the form of linguistic analysis focused almost entirely on the text of the “failure to market” forfeiture event and a related provision.  The [MMA], Teva explains, introduced a new procedure, a counterclaim in the brand manufacturer’s patent infringement suit, through which generic companies can force brand companies to delist an improperly asserted patent.  See 21 U.S.C. § 355(j)(5)(C)(ii)(I).  This counterclaim provision is the only portion of the statute that explicitly provides for the delisting of a patent after it has been challenged in an ANDA.  In the company’s view, that singular reference requires the conclusion that the counterclaim provision describes the only scenario in which the FDA may delist a challenged patent.

Under Teva's structural argument, Ranbaxy remains applicable post-MMA:

This brings us to Teva’s structural argument.  Ranbaxy, Teva notes, concerned an FDA policy with a virtually identical effect. See 469 F.3d at 125. This court condemned that rule, partly because it allowed a brand manufacturer,

by delisting its patent, to deprive the generic applicant of a period of marketing exclusivity. By thus reducing the certainty of receiving a period of marketing exclusivity, the FDA’s delisting policy diminishe[d] the incentive for a manufacturer of generic drugs to challenge a patent . . . in the hope of bringing to market a generic competitor for an approved drug without waiting for the patent to expire.  The FDA may not, however, change the incentive structure adopted by the Congress, for the agency is bound “not only by the ultimate purposes Congress has selected, but by the means it has deemed appropriate, and prescribed, for the pursuit of those purposes.”

Id. at 126 (emphasis added, citation omitted).  Nothing in the [MMA] altered that essential incentive structure, says Teva, so the preceding portion of Ranbaxy remains applicable even under the new regime.  Indeed, it is true that the 2003 amendments say nothing specific to undermine our prior understanding of the statute’s intended incentive structure.

The D.C. Circuit’s highly anticipated 31-page opinion, which also addressed the issues of ripeness and standing appealed by FDA, is a game-changer!   The Court ruled (Judges Williams and Griffith) that FDA’s interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) fails at Chevron step one.  Reviewing the district court’s decision de novo, the D.C. Circuit, although not convinced by Teva’s linguistic argument, found Teva’s structural argument to be persuasive: 

The real issue, then, is whether the FDA is right that the 2003 addition of the “failure to market” forfeiture provision, 21 U.S.C. § 355(j)(5)(D)(i)(I), altered the statute’s incentive structure to the point that Ranbaxy’s reasoning no longer controls the agency’s treatment of a delisting request in the wake of a paragraph-IV filing.

The terms of § 355(j)(5)(D)(i)(I) . . . create five possible dates on which a generic manufacturer otherwise entitled to exclusivity can forfeit it: (1) 75 days after the agency finally approves the relevant ANDA; (2) 30 months after the generic submits the relevant ANDA; (3) 75 days after a court judgment that the challenged patent is invalid or not infringed; (4) 75 days after a suit over the challenged patent is settled favorably to the ANDA filer; and (5) 75 days after the challenged patent is delisted. No forfeiture occurs, however, unless one of dates (1)-(2) and one of dates (3)-(5) have come to pass. . . .  Setting aside the subsection at issue in this case—listed as (5) above, and codified as (bb)(CC)—the “failure to market” forfeiture provision does not permit a brand manufacturer to vitiate a generic’s exclusivity without the generic manufacturer’s having had some say in the matter.  No forfeiture can take place unless the brand manufacturer brings an infringement suit against the generic and either loses on the merits or enters an unfavorable settlement agreement.  The latter necessarily entails some participation by the generic; the former invariably involves significant expense for the brand manufacturer, and affords the victorious generic the opportunity to ask the court to delay entering final judgment until a date that would not trigger forfeiture prematurely— before the agency grants final approval to the relevant ANDA.

The FDA’s view turns the last alternative among events (3)-(5) into a fundamentally different forfeiture trigger: it is satisfied when the patent targeted in a paragraph-IV filing “is withdrawn by the” brand manufacturer, full stop—meaning that Congress has now explicitly provided for a scenario in which the brand maker can unilaterally deprive the generic of its exclusivity.  The agency, however, offers not a single cogent reason why Congress might have permitted brand manufacturers to trigger subsection (CC) by withdrawing a challenged patent, outside the counterclaim scenario identified by Teva.

The argument that the plain language of the statute imposes no limit on the circumstances in which the agency may effectuate delisting requests fails. Precisely the same could have been said of the version of the statute that Ranbaxy addressed, and we nevertheless concluded that its structure precluded an FDA rule allowing the agency “to delist a patent upon the request of the [brand manufacturer]” when the delisting would rob the generic maker of earned exclusivity. . . .

As Congress deliberately created the 180-day exclusivity bonus, the FDA cannot justify its interpretation by proudly proclaiming that it has eviscerated that bonus.

We see nothing in the [MMA] that changes the structure of the statute such that brand companies should be newly able to delist challenged patents, thereby triggering a forfeiture event that deprives generic companies of the period of marketing exclusivity they otherwise deserve.  For that reason, the interpretation of the statute that the FDA has adopted in two recent adjudications, and that it regards itself as bound by law to apply to Teva’s ANDAs for losartan products, fails at Chevron step one. [(italics in original; bold emphasis added; citations omitted)]

So, under the D.C. Circuit's opinion, the patent delisting counterclaim provision at FDC Act § 505(j)(5)(C)(ii)(I) added by the MMA must be read together with the patent delisting forfeiture provision at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC).

Judge Henderson filed a dissenting opinion in the case on the basis that Teva’s lawsuit is not ripe until FDA issues an exclusivity decision.  The case was remanded to the district court for further proceedings “as the court has yet to address the appropriateness of each form of relief that Teva has sought. . . .”  Teva's Complaint requested declaratory and injunctive relief.  

There could very well be a flurry of activity in this case until April 2010, when FDA is expected to approve generic losartan products, as interested parties decide whether or not to seek to overturn the D.C. Circuit’s decision.