When Is Skinny Not Skinny Enough?

Perhaps when you’re carving out a patented method of use?  Well, at least that’s what GSK is arguing.  As the now-infamous GSK v. Teva case makes its way through the Federal Circuit once again to address what many have called the death-knell to skinny-labeling (also called a “section viii statement” or a “carve-out”), Teva is poising for a fight to save the practice.  Framing the issue in the Petition for Rehearing briefing, Teva, like much of the generic industry, argues (with support from former Rep. Waxman) that the Federal Circuit decision upends the statutorily-enacted Hatch-Waxman carve-out.  GSK, on the other hand, characterizes the issue as a fact-specific inquiry into whether Teva’s generic carvedilol adequately carved out enough of a patented method-of-use included in GSK’s Reference Listed Drug (“RLD”) Coreg’s labeling.  The Federal Circuit reheard arguments on this case in February 2021.  And, as we wait for a new opinion that could have huge implications for generic drugs, we bring this (belated) update.

To jog your memory: In October 2020, the Federal Circuit issued a big blow to the generic drug industry when it reinstated a jury verdict awarding GSK $235 million in damages from Teva resulting from the generic company’s alleged “induced infringement” of a GSK patent through skinny-labeling.  As we explained back in October, the Hatch-Waxman Amendments permit generic drug companies to “carve-out” a patent-protected method-of-use included in the labeling of the RLD so long as such a carve-out does not compromise the safety or effectiveness of the product for the conditions of use remaining in the labeling.  The resulting “skinny-labeled” generic can still be listed in the Orange Book with an “A” therapeutic equivalence code because such ratings look only to the drug product itself rather than the approved indications.  As a result, a skinny-labeled “A”-rated generic drug can be, and indeed automatically will be, substituted for the brand drug regardless of the reason the product is prescribed.  Effectively, GSK argues, even though the statute provides for such a carve-out, even though FDA’s Orange Book states that the generic is therapeutically equivalent to GSK’s product, and even though the pharmacy is legally required to substitute an AB-rated generic for brands in most states (absent doctor’s orders otherwise), the mere truthful promotion of Teva’s skinny-labeled version of GSK’s Coreg (carvedilol) as AB-rated constitutes induce infringement.  And, for all intents and purposes, both the jury and the Federal Circuit agreed, making sweeping statements indicating to industry that even the carved-out label may be enough to induce infringement (“[p]recedent has recognized that the content of the product label is evidence of inducement to infringe”).

Understandably, the Federal Circuit decision led to a panic in the generic industry.  Skinny-labeling has been around for decades—countless generic drugs have marketed their skinny-labeled drugs as therapeutically equivalent to their Reference Listed Drug.  Now, even though some of those patents have expired and carved-out language added into the generic labeling, there’s no telling how many cases for induced infringement may be in the wings.  Given this uncertainty in the industry, many have expressed concern about whether generic drug sponsors will proceed with patent carve-outs and whether any resulting hesitancy will result in increased drug prices.

It is no surprise then that Teva promptly petitioned the Federal Circuit for a rehearing en banc.  Framing the issue as “whether induced infringement can be used to nullify a provision of the Hatch-Waxman Amendments,” Teva argued (as many in the press have) that if describing a skinny-labeled product as the generic equivalent of the RLD “can be inducement, as the majority held, every skinny-labeled generic is at risk, and the carve-out statute is a dead letter.”  GSK, on the other hand, opens its Response to Teva’s Petition with a strong statement: “This case does not implicate the fate of section viii carve-outs.”  Instead, GSK explains, that the case is much narrower than Teva portends as it “merely reaffirmed that section viii is not a get-out-of-jail-free card for generics who do not fully carve out the patented use from their labels.”  GSK explains that Teva did not thoroughly carve out all of GSK’s patented use, and it’s the label’s claims that induced infringement, not the AB-rating promotion.  GSK concedes that the Federal Circuit opinion never actually noted that the “partial label instructed the patented method,” but argues that “that finding is implicit in, and necessary to, its decision.”   

On February 9, 2021, the Federal Circuit vacated the October 2, 2020 judgment and withdrew the controversial opinion.  The Federal Circuit granted a panel rehearing (rather than en banc), which occurred on February 23, 2021.  But rather than address the overarching issue of induced infringement by way of skinny labeling, the Court limited the appeal—or at least the rehearing—to evidence to support the jury verdict of induced infringement.  In other words, the Court declined to address whether skinny-labeling itself is induced infringement and theoretically will look only to the specific promotion used to allegedly induce infringement.  This limitation could provide for a much narrower decision than the October 2, 2020 decision, but the Court did leave room for itself to make a broader decision, stating that “[w]e find all other issues to be sufficiently briefed.”

While FDA did not submit an Amicus Brief, Henry Waxman—the namesake of the legendary Hatch-Waxman Amendments that created the skinny-label practice—did.  Others joined Rep. Waxman in submitting Amicus Briefs, including Apotex, Novartis, Mylan, a consortium of professors, Knowledge Economy International, the Association for Accessible Medicines, and the R Street Institute in support of Teva.  These briefs focused on the policy aspects—health, economic, and patent policy.  No Amicus Briefs were filed in support of GSK or the Federal Circuit’s decision.

The Federal Circuit reheard the case on February 23, 2021.  From all accounts, the panel listened to the narrowed questions about the facts at issue here (i.e., whether Teva’s skinny-labeled carvedilol carved out enough language) rather than the overarching concerns about the death of the carve-out.  This makes sense given the parties and the venue: a patent case should be specific to the patents-at-issue, not a validation of a statutory provision.  However, we can’t help but think about the arguments that might arise if this case were strictly about statutory interpretation.  How would the Court reconcile the implicated conflict between the patent statutory scheme (induced infringement) and the Hatch-Waxman Act (carve-outs)?  Obviously, patent and FDA cases overlap often: innovation is critical to the drug industry and patents are critical to innovation, thus ANDA litigation, 30-month stays, etc.  But, effectively, this case would force the Courts to determine whether to protect innovation or whether to protect accessibility—the very balance that Congress sought to achieve in adopting the Hatch-Waxman Amendments.  Given the limited oral argument, it’s unlikely that the Federal Circuit will go that far in this case, as it will probably issue a very narrow decision that allows the skinny-label to live another day, but the Federal Circuit did leave room to address the entire issue.  But all we can do now is wait to see if the Federal Circuit believes that Teva’s carvedilol labeling was skinny enough or whether the Federal Circuit’s initial decision applies more broadly.