Is the Listing of REMS Patents in the Orange Book Patently Anticompetitive?

FTC sure thinks so.  And the FTC said as much in a recent Amicus Brief (“Brief”) in paragraph IV litigation between Avadel CNS Pharmaceuticals (“Avadel”) and Jazz Pharmaceuticals Inc. (“Jazz”).  This type of statement from the FTC is unprecedented; not only is the FTC Brief unusual in that it comes in the context of patent litigation between two private entities but also because the FTC opines where the government entity responsible for maintaining the Orange Book (the FDA) has long refused to address the propriety of such patent listings.  Because FDA has been reluctant to address questions of whether certain patents like device Risk Evaluation and Mitigation Strategies (“REMS”) patents are appropriately listed in the Orange Book, courts—and now the FTC—have provided their own opinions on the issue.

To set the stage: In August 2022, Avadel sued FDA alleging that the Agency violated the Administrative Procedure Act (“APA”) by requiring certification to a patent Jazz listed in the Orange Book for the relevant Reference Listed Drug (“RLD”) that Avadel had tried to carve-out with a section viii statement.  That patent was a method-of-use patent that described the drug distribution REMS approved for use with the RLD.  While technically, Avadel challenged FDA’s compelled certification to that patent, it also implicitly challenged whether a REMS patent could be listed in the Orange Book at all.  The Court, however, never got anywhere near that question because of parallel patent litigation.

Before the APA litigation, Jazz had filed suit against Avadel after FDA compelled Avadel to certify to the method-of-use patent, triggering a 30-month stay.  In response, Avadel filed a counterclaim seeking to delist the patent.  As the patent litigation ensued, Avadel sued FDA under the APA.  But because the APA authorizes review only when the plaintiff lacks another adequate remedy in court, the District Court in the APA litigation determined that Avadel had another available and adequate remedy—the delisting process—and therefore granted FDA’s and intervenor Jazz’s Motion for Summary Judgment.

While the Court may have ended the APA litigation, the counterclaim litigation seeking to delist the method-of-use REMS patent lives on.  FDA, of course, has not gotten involved in the delisting litigation—not surprising considering the Agency’s approach to Orange Book listings.  But in a surprise move for seemingly run-of-the-mill paragraph IV litigation, the FTC filed its Amicus Brief on November 10, 2022.  In the Brief, the FTC does not have too much to say about the method-of-use patent at issue or the specifics of the litigation at hand but instead focuses on the practice of listing REMS patents in the Orange Book.  Stepping in where FDA has not, the FTC explains the Orange Book’s potential for abuse and gamesmanship, which ultimately deprives “consumers of potential competition from lower-cost alternatives and the ability to choose between products.”

The FTC Brief details the potential for abuse arising from improper Orange Book patent listings, compounded by FDA’s “purely ministerial” role in the listing process.  Even if FDA wanted to, the Brief notes, FDA does not “have any tools to remove improperly listed patents.”  Thus, the FTC explains, there is “no gatekeeper to prevent a company from inappropriately listing patents that do not meet the Orange Book criteria.”  Instead, a brand can list a patent in the Orange Book, bring an infringement suit, and obtain a 30-month stay of generic approval “regardless of the scope or validity of the patent and regardless of whether it meets the statutory listing criteria.”  That 30-month stay, the FTC continues, serves as an incentive to brand companies to list non-listable patents in the Orange Book, and in so doing, block consumer access to a competing product that might reduce prices, improve quality, or both.  And “the only available remedy for an improper Orange Book listing is the statutory delisting provision that Avadel has invoked in this case.”

The FTC Brief further provides a textual argument based on the statutory language. Because the statute states patents covering methods of using a drug, the FTC argues that distribution patents—or in this case, the REMS patent—should not be listed in the Orange Book because they are not technically a method of using the drug.  While the FTC Brief takes no position on Jazz’s specific patent, it argues that a patent only covering drug distribution should be delisted:

As a general matter, however, patents that claim a distribution system do not meet the Orange Book listing criteria; to the extent they claim a method at all, it is a method of distributing a drug rather than a method of using one. This is an important distinction.

In other words, FTC explains that the statutory language states that only patents covering a “drug” or “method of using” a drug can be listed, and patents claiming a method of distributing drug do not cover the drug itself or a method of using the drug.  Because the use code for Jazz’s method-of-use patent at issue in the Avadel case is “method of treating a patient with a prescription drug using a computer database in a computer system for distribution,” the FTC explains that the patent does not cover either the drug or a method of using that drug—only a method of distribution.  “To be sure, a REMS distribution system is a condition of FDA approval for certain drugs. But that does not make it a condition of the drug’s use.”  The FTC also argues that listing REMS patents not only contravenes the plain text of the Orange Book listing statute, but it also may violate the REMS statute by blocking or delaying follow-on approval.

Generally, we would expect that the FTC would be working with FDA to address potential anticompetitive behavior arising from a scheme that FDA is responsible for administering.  But there’s no indication here that FDA provided any input on the Amicus Brief or whether FDA agrees with this position.  It will be interesting to see how (or whether) the Court addresses this argument in the context of the delisting, how (or if) FDA will react, and whether there will be further litigation arising from any decision that addresses the FTC’s argument.  Without hearing FDA’s position though, the uncertainty lingers.