Report Predicts Tough Road Ahead for Some Generics After Federal Circuit Patent Use Code Decisions

By Kurt R. Karst –      

A recent report issued by Morgan Stanley, titled Pharmaceuticals – Potential Selective Upside for Industry post Prandin Ruling, predicts “increasing probability for the innovative pharmaceutical industry to successfully delay US generic approval of select innovative drugs” following a pair of rulings (here and here) in Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories, Ltd. handed down earlier this year by the U.S. Court of Appeals for the Federal Circuit concerning Patent Use Codes (“PUCs”) and the drug product PRANDIN (repaglinide) Tablets. 

As we previously reported (here and here), in those decisions the Federal Circuit ruled that a generic applicant “does not have a statutory basis to assert a counterclaim requesting” a court to enter an order to change an Orange Book-listed PUC because a PUC, among other things, is not “patent information.”  PUCs, as the Morgan Stanley report shows (using the table we put together for a previous post), have doubled in recent years, while at the same time “the number of approved patents has remained largely unchanged.”    According to Morgan Stanley: 

We anticipate that several companies will extract significant [earnings per share] and [net present value] upside from utilization of PUC (Patent Use Code) narrative strategies.  In the absence of listed Orange Book patents, it is challenging to identify discrete opportunities.  However, we believe those companies facing near term generic competition have the strongest motivation to consider this strategy in order to capture residual intellectual property value.

The report tempers its positive outlook, however, noting that:

While this is an important positive development for the industry . . . only select drugs will benefit from any upside a PUC based legal strategy brings. The innovative drug must have robust “use” patents listed in the FDA Orange Book.  In addition, one must believe that Congress will not amend the current FDA law to limit the use or abuse of this strategy.  Regardless, we anticipate increasing listing of “use” patents in the Orange Book as the innovative industry seeks to maximize any commercial gains.

Interestingly, the Morgan Stanley report fingers AstraZeneca’s (“AZN’s”) CRESTOR (rosuvastatin calcium) Tablets as one drug product for which a PUC strategy may be beneficial.  Assuming there is a “section viii” statement to carve out out certain information covered by two Orange Book-listed patents – U.S. Patent Nos. 7,030,152 and 6,858,618 – “AZN will likely respond with (i) filing a Citizens Petition (ii) Argue that its PUC code prevents a carve out approval.”  Morgan Stanley anticipates “a 90% probability that the FDA is unable to carve out an indication for the ANDA,” and that “assuming Congress does not enact a change in FDA regulatory law, we estimate a 64% probability that AZN can delay US generic introduction until 3Q 2018.”  U.S. Patent No. 7,030,152 is listed in the Orange Book with a “U-1032” PUC, which is defined as “USE OF ROSUVASTATIN CALCIUM FOR THE PRIMARY PREVENTION OF CARDIOVASCULAR DISEASE IN INDIVIDUALS WITHOUT CLINICALLY EVIDENT CORONARY HEART DISEASE BUT WITH INCREASED RISK FACTORS,” and U.S. Patent No. 6,858,618 is listed with a “U-618” PUC, which is defined as “USE OF ROSUVASTATIN CALCIUM TO REDUCE ELEVATED TOTAL-C, LDL-C, APOB, NONHDL-C OR TG LEVELS; TO INCREASE HDL-C IN ADULT PATIENTS WITH PRIMARY HYPERLIPIDEMIA OR MIXED DYSLIPIDEMIA; AND TO SLOW THE PROGRESSION OF ATHEROSCLEROSIS.”

So it is possible there could be another PUC battle on the horizon – or perhaps in the halls of Congress.  We will certainly keep you posted.