By Alan M. Kirschenbaum –

After conducting a regulatory exercise mandated by court order, the Department of Defense (“DoD”) on Friday issued a regulation that is virtually identical to a regulation issued in March 2009 to implement its TRICARE retail drug refund program.  As we previously reported, section 703 of the National Defense Authorization Act of 2008 provides that prescriptions filled on or after January 28, 2008 (the enactment date) and paid for under the TRICARE retail pharmacy program are subject to Federal Ceiling Prices (“FCPs”) under 38 U.S.C. § 8126.  In a November 2009 ruling on an Administrative Procedure Act challenge from a coalition of pharmaceutical manufacturers, the Federal District Court for the District of Columbia remanded the original rule back to DoD to decide whether to maintain the current rebate/refund program in effect since May 26, 2009, or implement some other mechanism for obtaining FCPs.  Not surprisingly, after soliciting public comment on the issue in February 2010, DoD has concluded that the existing refund program is the alternative that is most in harmony with the statute, consistent with best business practice, and practical to administer.

The Department rejected industry comments that refunds should be prospective only and that it would be unfair to apply FCPs retrospectively to all prescriptions filled under the TRICARE retail pharmacy benefit since January 28, 2008.  DoD explained that it has no discretion to change this statutorily mandated effective date, but even if it did, retroactive application is not unfair because the statute itself, as well as a DoD Dear Manufacturer letter issued three days after its enactment, advised drug manufacturers of the law and DoD’s interpretation of its effective date.  DoD also rejected industry comments that refunds may be required only if and when a manufacturer enters into a prospective procurement contract with DoD, concluding that this interpretation is contrary to the statute and the legislative history.

DoD did make one significant change from the previous rule.  32 CFR § 199.21(q)(4) now provides that DoD may impose available remedies for the failure of a manufacturer to honor a requirement of the regulation or of a refund agreement, rather than for a failure to “make” an agreement as before.  This change is based on DoD’s view that the refund agreement is voluntary, because a manufacturer may opt out of the program on a drug-by-drug basis under section 199.21(q)(3)(iii)(C) of the rule.  However, if a drug is opted out, the drug will be excluded from TRICARE coverage through not only the retail pharmacy benefit, but also the mail order service and military treatment facility pharmacies.  More importantly, such an opt out may arguably cause the manufacturer to breach its Master Agreement with the Department of Veterans Affairs (VA), which obligates the manufacturer to offer its products to federal agencies (including DoD) on the Federal Supply Schedule.  DoD recognizes this possibility (though calling the issue “outside DoD’s authority”), but offers only cold comfort:  if a manufacturer thinks an opt-out will put it in breach of its Master Agreement, the manufacturer can always voluntarily decide to terminate its Master Agreement.  Of course, the result of these “voluntary” actions would be that the manufacturer would be prohibited from selling its drugs to the federal government, and could not have any of its outpatient drugs reimbursed by the federal government under Medicaid or Medicare Part B.

By Douglas B. Farquhar – 

At a trade industry conference this week, a cadre of government officials unanimously predicted a dramatic increase in the number of criminal prosecutions of individuals for violations of laws governing FDA-regulated industries.  They also discussed how the types of prosecutions may be shifting away from charges based on off-label promotion of drugs and medical devices to charges based on threats to the safety and efficacy of FDA-regulated products, which include food, tobacco, medical devices, and drugs.

I was a co-chair of the conference, which was sponsored by the Food and Drug Law Institute (“FDLI”) in Washington, D.C., along with Jennifer Bragg of the law firm Skadden, Arps, Slate, Meager & Flom.  The Annual FDLI Enforcement Conference gathers together as speakers the decision-makers on enforcement and compliance from all of the major Centers at FDA (Food, Medical Devices, Advertising and Promotion, Drugs, Veterinary Drugs, and Biologics), the top enforcement officer for the agency (Eric Blumberg, FDA Deputy Chief Counsel for Litigation) and the head of the Office of Consumer Litigation, the litigating arm for FDA at the federal Department of Justice (Eugene Thirolf).

In what was probably the most concentrated collection of enforcement speakers gathered at an industry event, nearly all of the speakers predicted an increase in the number of prosecutions of individuals for violations of the Federal Food, Drug, and Cosmetic Act, the statute that governs manufacture and distribution of FDA-regulated products.  The Conference focused on strict-liability prosecutions under the so-called Park doctrine (also covered in an HPM-sponsored webinar last week), and the officials predicted an increase of prosecutions of responsible corporate officials, even if there is no proof that they participated in, encouraged, or even had knowledge of the violations.  Speakers from the government, industry, and private law firms (that would include yours truly) discussed how it is imperative that top corporate officials implement policies and procedures that effectively prevent violations from occurring, with a special emphasis on ensuring that no unapproved claims are made in promotional materials for drugs and devices, that reports of safety problems are filed with FDA promptly and accurately, that officials do not ignore problems discovered in testing of manufactured products, and that drugs and devices are manufactured in accordance with regulations setting current Good Manufacturing Practice.

The trade press has already reported that the government may especially be looking at prosecuting officials for off-label promotion because they feel that the huge monetary settlements with drug and device companies (reportedly more than $9 billion in the last ten years) are not getting the job done.

In addition:

• Blumberg indicated that he expects that criminal investigations will focus on distribution of unapproved new drugs, failure to report unexpected adverse events caused by medical products, and “flagrant” off-label promotion (that is, advertising, company-sponsored programs, pitches by sales reps, and other promotional material which encourages the use of the products for conditions or treatments other than those approved in the labeling).
• Each of the FDA Center compliance directors reported that they are cooperating much more closely with FDA’s Office of Criminal Investigations.
• Howard Sklamberg, Director of FDA’s Office of Enforcement, noted that Class I recalls (the most serious category of recalls) will generally lead to increased FDA inspections and scrutiny of an FDA-regulated company.
• Thirolf mentioned that he anticipates seeing more criminal investigations and prosecutions focused on safety issues, rather than just off-label promotions.  He confirmed, in response to a particularly astute question (that would be from me) that safety issues include distribution of defective products, failure to report adverse events, and fraudulent reporting of testing data or false documentation of manufacturing processes and procedures.

One of the speakers also said that there were 70 whistleblower cases that were filed last year against device and drug companies that are currently being investigated by the federal government.

For more information about the conference, or to get a copy of a CD audio recording of the proceedings, visit www.fdli.org.

By Ricardo Carvajal –

Last October, we noted that FDA and FTC issued a joint warning letter to an internet marketer of a dietary supplement promoted as helpful in preventing swine flu, seasonal flu, and colds. That letter was one of several that targeted similar products as part of FDA’s Flu Task Force.  Now the two agencies appear to be extending the strategy to target supplements marketed for other diseases.  A recent warning letter challenges the marketing of supplements for the treatment of herpes, epilepsy, diabetes, and venereal diseases. 

Of interest to those who have been following recent developments on the subject of what constitutes adequate substantiation, the letter includes the following carefully worded statement: “[I]t is unlawful under the FTC Act. . . to advertise that a product can prevent, treat, or cure human disease unless you possess competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made” (emphasis added).

By Carmelina G. Allis –

We previously reported on FDA’s August 2010 publication of a report recommending changes to the 510(k) program.  We briefly discussed the proposed changes, and raised concerns with some of the agency’s recommendations because of their potential negative effect on the medical device industry and the 510(k) program.  Lawmakers from the U.S. House of Representatives also have concerns with some of the recommended changes.

On October 12, 2010, House lawmakers sent a letter to FDA’s Commissioner Dr. Hamburg asking to delay the implementation of certain changes that the agency is considering for the 510(k) program.  In particular, the lawmakers have raised concerns with the agency’s recommendations regarding rescission authority, split and multiple predicates, intended use and indications for use, mandatory pre-market inspections and clinical data for a subset of Class II devices, and proprietary information.  Those recommendations are “considered controversial” by lawmakers, raising concerns that their implementation could “prevent companies from using important evidence in product applications,” “delay the introduction of innovative new therapies,” and “potentially upset the delicate balance that exists between providing information to the public and protecting intellectual property.”

Although the Representatives do not oppose the recommendations, they request “more transparency from FDA” on those issues.  The letter asks the agency to provide more details about those recommended changes before they are implemented, such as a detailed work schedule for implementing the recommendations, which changes will be implemented pursuant to guidance documents, rulemaking, or statutory amendments, and an analysis of the economic impact of the recommendations on the domestic medical device industry.

The lawmakers also request that the agency “ensure that proper and appropriate public comment is solicited before moving forward.”  Emphasizing the need for more transparency, the Representatives commended the agency on its efforts for keeping “the public[] and the medical technology community informed and engaged” in this process.

By Kurt R. Karst –      

2011 is shaping up to be an interesting year in the Hatch-Waxman world, and all eyes seem to be focusing on what will happen with Ranbaxy’s purported (sole) 180-day exclusivity for a generic version of the mega-blockbuster drug LIPITOR (atorvastatin calcium) Tablets.  Will Ranbaxy launch in November 2011 (pusuant to a patent settlement agreement) and trigger its pre-Medicare Modernization Act (“MMA”) 180-day exclusivity?  Will the exclusivity remain “parked”?  Or will the company be stripped of its exclusivity or otherwise work out a deal to relinquish it?  A recent BernsteinResearch analyst report tries to address these questions and more. 

As we previously reported, Ranbaxy has had good manufacturing practice problems with FDA that could stall Agency approval of the company’s ANDA for atorvastatin.  In February 2009, FDA announced that the Agency was taking the unusual step of invoking its Application Integrity Policy (“AIP”) against Ranbaxy’s Paonta Sahib, India manufacturing facility.  FDA takes such regulatory action under the Agency’s AIP procedures when FDA believes that a company’s actions raise significant questions about the integrity of data in marketing applications.  Importantly, FDA notes in the AIP letter with respect to pending ANDAs that:

In accordance with FDA policy, the Agency will assess the validity of the data and information in all of Ranbaxy’s affected applications which contain data developed at the Paonta Sahib site. . . .  This means that the Agency does not intend ordinarily to conduct or to continue its normal substantive scientific review (including review of data and labeling) of any such pending application or supplement, or of any new application or supplemental applications filed after the date of this letter, that contain data developed at the Paonta Sahib site, during a validity assessment of that application.

Ranbaxy’s atorvastatin ANDA is widely believed to be out of the Paonta Sahib facility; however, Ranbaxy has never confirmed this.  If it is, as many believe, then the application could be blocked from approval and generic competition (other than an authorized generic) stalled. 

According to BernsteinResearch, there appear to be three possible outcomes in this case:

The highest likelihood is that Ranbaxy will be able to launch generic Lipitor (fully or partially) on time.  This would require some sort of resolution of a very challenging regulatory situation (Ranbaxy violated an honor system). However, (i) Ranbaxy will do all it can to resolve the issue (we see the recent departure of Ranbaxy CEO as related), (ii) a solution is best for the public wallet and (iii) may also be organizationally better for FDA (avoids lawsuits and negative attention). We can see a compromise solution like transferring the application to a new manufacturing site as possible.

A less likely possibility is that Ranbaxy is delayed holding other generics off. This is the most likely result if Ranbaxy can’t launch. . . . 

The least likely scenario is that [the] Ranbaxy ANDA file is disqualified being of insufficient quality (as the result of potential fraud). . . .  If [the] Ranbaxy ANDA is invalidated, the exclusivity is lost . . . .

Although BernsteinResearch favors on an on-time launch scenario in November 2011, the report hedges and notes that “all paths depend on FDA willingness to work with Ranbaxy to approve Lipitor out of its facilities and we are uncertain FDA will do so.”  As an aside, BernsteinResearch notes that Ranbaxy could relinquish its 180-day exclusivity, but that the company “does not have commercial interest to do.”  (A selective waiver is not possible unless 180-day exclusivity is triggered by a relevant court decision or after ANDA approval and commercial marketing.)  Given the headaches atorvastatin 180-day exclusivity could cause FDA – think lawsuits and citizen petitions – one has to believe that the Agency would rather see the whole mess go away with a relinquishment. 

An early view on generic LIPITOR could have come earlier this year in the context of generic FLOMAX (tamsulosin HCl) Capsules; however, 180-day exclusivity was forfeited.  In that case, Ranbaxy was reported to be a first applicant eligible for post-MMA 180-day exclusivity with respect to the only Orange Book-listed patent – U.S. Patent No. 4,703,063, which expired on October 27, 2009, and the pediatric exclusivity for which expired on April 27, 2010.  FDA tentatively approved Ranbaxy’s ANDA No. 77-451 in June 2007 – and it remains the only tentatively approved ANDA for generic FLOMAX (8 other ANDAs have been approved).  It is unclear whether Ranbaxy’s inability to obtain final approval for ANDA No. 77-451 is due to FDA’s AIP and whether information supporting the ANDA file was generated from the company’s Paonta Sahib facility.  This is reportedly the case, but the basis for this report is not known. 

The BernsteinResearch report identifies another “early view” case that could shed some light on “the Lipitor situation” – namely generic ARICEPT (donepezil HCl) Tablets.  As we recently reported, Ranbaxy’s ANDA No. 76-786, which is tentatively approved, could be up for final approval on November 25, 2010 after the expiration of U.S. Patent No. 4,895,841, to which Ranbaxy submitted a Paragraph III certification.  Ranbaxy holds pre-MMA 180-day exclusivity based on Paragraph IV certifications to later-expiring patents.  Like atorvastatin (and tamsulosin), Ranbaxy’s donepezil is believed to be out of the Paonta Sahib facility.  “A solution to the Aricept situation if found, may serve as a model for Lipitor,” according to the BernsteinResearch report.

And what about the “nuclear option” – rejecting Ranbaxy’s ANDA and stripping the company of its 180-day exclusivity?  Then FDA “will almost certainly be sued by Ranbaxy” or Pfizer or an authorized generic distributor, according to the BernsteinResearch report.  But it could be a “damned if you do, damned if you don’t” situation for FDA, because “if FDA does not invalidate the application, it may be sued anyways by other generic filers seeking rejection of the filing.”

By Kurt R. Karst –      

Earlier this year we posted on the effects of the U.S. Court of Appeals for the Federal Circuit’s December 2009 “false marking” decision in Forest Group, Inc. v. Bon Tool Co.  False marking is the act of placing an item in commerce that is intentionally marked with a patent number that has expired or that does not protect the item.  In Forest Group, the Federal Circuit ruled that the $500 maximum penalty for a “false marking” in violation of 35 U.S.C. § 292 attaches to each individual article that is falsely marked, potentially resulting in astronomical monetary damages.  The false marking statute includes a bounty hunter (i.e., qui tam) provision providing that “[a]ny person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.”  Scores of lawsuits ensued, as identified on the Gray On Claims Blog.

Since our last post, many more complaints have been filed alleging false marking by various parties in the FDA-regulated industry, including Ranbaxy, Roche Diagnostics Corporation, Walgreens, Bristol-Myers Squibb, Eisai, Takeda, Watson, and many, many  others.  Even Pop Rocks® Crackling Candy has not been safe from the vagaries of the false marking bounty hunters! 

Although the Federal Circuit once again addressed 35 U.S.C. § 292 in Pequignot v. Solo Cup Co. in a June 2010 decision in which the Court held that that a rebuttable presumption of intent to deceive under 35 U.S.C. § 292 is created when a manufacturer prints expired patent numbers on its products with knowledge that the patents are expired, that decision does not appear to have put a damper on false-marking claims.  Indeed, qui tam relators likely took heart from the Federal Circuit’s August 2010 decision in Stauffer v. Brooks Brothers, Inc. in which the Court addressed standing under 35 U.S.C. § 292.  In that case, the Court ruled that “even though a relator may suffer no injury himself, a qui tam provision operates as a statutory assignment of the United States’ rights, and the assignee of a claim has standing to assert the injury in fact suffered by the assignor” (internal quotation omitted).

The latest attempt to legislatively quash false marking qui tam lawsuits came from Representative Bob Latta (R-OH), who recently introduced the Patent Lawsuit Reform Act of 2010 (H.R. 6352) to amend 35 U.S.C. § 292.  (Previous attempts to amend the law as part of the Patent Reform Act have thus far failed as the reform bill has been stalled.)  According to Rep. Latta, the bill “would strengthen the vague language [of 35 U.S.C. § 292] to revert back to the pre-Forest Group decision and assess one $500 fine if found guilty of deceiving the public under Section 292 and not allow for the interpretation of being fined for each product on the market.”  Moreover,  H.R. 6352, which has been referred to the House Judiciary Committee would “also require the individual bringing the lawsuit to have suffered a competitive injury as a result of the violation.”  A one-two punch for Forest Group and Stauffer!

By John A. Gilbert & Peter M. Jaensch –

On October 6, 2010, the Drug Enforcement Administration (“DEA”) announced a Statement of Policy concerning the procedure by which a registrant-prescriber may use an agent, including a nurse in a long term care facility (“LTCF”), to communicate controlled substances prescriptions to a pharmacy.

DEA notes on background that “[w]hile the core responsibilities [of] prescribing controlled substances may not be delegated…an individual practitioner may authorize an agent to…communicat[e] such prescriptions to a pharmacy in order to make the prescription process more efficient.”

The Policy provides a discrete summary of “acts that an agent may take in connection with controlled substance prescriptions.” It enumerates that:

1. An agent may “prepare a written prescription for the signature of the practitioner,” provided the practitioner has “in the usual course of professional practice” made the necessary determinations regarding the legitimate medical need, and has specified the “required elements” of the prescription to the agent.

2. An agent may telephone a pharmacy concerning a prescription for a controlled substance in schedules III through V and convey the practitioner’s otherwise valid oral prescription provided the prescriber has specified all required prescription information.

3. Where otherwise permissible to fax a controlled substance prescription to a pharmacy, the agent may do the actual faxing.

The Notice further states that “[d]ue to the legal responsibilities of practitioners and pharmacists under the CSA and the potential harm to the public from inappropriate and unlawful prescribing and dispensing of controlled substances,” DEA advises practitioners and their agents to commit their agency authorization to writing.

Importantly, DEA states that a nurse in a LTCF may act as practitioner’s agent.  The Notice closes with a sample of a written authorization that DEA would consider adequate.   This is an area that industry has been seeking clarification on for a long time.  DEA’s  Notice moves this issue in the right direction.   

Notably, the Notice advises that although “not required by DEA,” the agency authorization original should be kept by the practitioner during the life of the agency, and for the two years following. The DEA further notes that a pharmacist’s corresponding duty applies, and even where the pharmacists has a copy of the agency authorization, depending on circumstances, further inquiry may still be necessary to fulfill that duty in connection with a prescription communicated via agent.

The Federal Register Notice advises parties seeking further information to contact Mark W. Caverly, Chief of the Liaison and Policy Section, Office of Diversion Control, DEA, 8701 Morrissette Drive, Springfield, VA 22152, (202) 307-7297. 

Hundreds of you have already signed up for Hyman, Phelps & McNamara, P.C.’s free webinar – The Evolution and Resurgence of Strict Liability Criminal Prosecutions Under the Park Doctrine – scheduled for Friday, October 8, 12:00 p.m. – 1:30 p.m.  For those last minute stragglers, there’s still time to register at the event website.  (Registration will close 3 hours before the webinar.)  If you have a burning question about the Park Doctrine you want answered during the webinar, then submit your question ahead of time by emailing it to rcs@hpm.com.

UPDATE:

• FDA and the Park Doctrine Slide Presentation   

By Carrie S. Martin –

Yesterday, the Federal Trade Commission (“FTC”) announced the issuance of proposed revisions to its “Green Guides,” last revised in 1998.  The proposed revisions would update industry guidance on how to avoid making misleading environmental claims.  In addition, Julie Brill, Commissioner of the FTC, spoke at the annual conference of the National Advertising Division (“NAD”) on October 4, 2010, outlining what she felt were the most important proposed revisions.

Ms. Brill explained that the proposed revisions would update some of the current guidance from the 1998 version and also add new provisions to address claims that were not in use in 1998, such as “renewable energy.”  FTC based the revisions on information collected from several public workshops that included 450 people from the government and industry, among others, over 200 public comments, and a study of how consumers interpret specific environmental claims such as “green” and “biodegradable.”

Among the proposed revisions to the current Guides, FTC cautions marketers against using general claims, such as “environmentally friendly” without qualification.  FTC’s consumer study confirmed that people interpret such claims in different ways and often expect the product to be much more “environmentally friendly” than is actually true or intended by the marketers.  Ms. Brill added that these claims must be properly substantiated.  In addition, the proposed revisions caution against claiming that a product has a certain “certification” or “seal of approval” without revealing the basis for that claim.  Notably, Ms. Brill stated that FTC now considers certifications and seals of approval to be endorsements, and industry should follow FTC’s recently revised Guides Concerning the Use of Endorsements and Testimonials in Advertising in making such claims.  That guidance can be found here.   Also see our prior blog posting on that guidance.

If revised, the Green Guides would also state that “new” environmentally-friendly claims such as “renewable materials” or “renewable energy” require qualification and proper context.   Again, this reflects the consumer studies results showing that people interpret these claims differently than intended by marketers.  The Guides would state, for example, that one cannot claim that a product is made with “renewable energy” if the power used to make that product derived from fossil fuels.  Finally, if one makes a claim about “carbon off-sets,” it must be supported by competent and reliable scientific evidence.  In addition, such claims are not appropriate if such off-set is already required by law.

Comments on the proposed revisions must be submitted by December 10, 2010, either electronically or in paper form.  Ms. Brill noted that the FTC is particularly interested in comments that include supportive data.  Electronic comments should be submitted here, while paper comments, while paper comments should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-135 (Annex J), 600 Pennsylvania Avenue, NW, Washington, DC 20580. 

By Kurt R. Karst –      

Earlier this week, the Institute of Medicine (“IOM”) issued a 350-page report, titled “Rare Diseases and Orphan Products: Accelerating Research and Development,” which is intended to help refocus attention on accelerating rare diseases research and product development.  The report is the culmination of a series of meetings held between August 2009 and May 2010.

The IOM report calls for implementing an integrated national strategy to promote rare diseases research and product development that would include seven key elements:

• Active involvement and collaboration by a wide range of public and private interests, including government agencies, commercial companies, academic institutions and investigators, and advocacy groups.
• Timely application of advances in science and technology that can make rare diseases research and product development faster, easier, and less expensive.
• Appropriate use and further development of trial design and analytic methods tailored to the special challenges of conducting research on small populations.
• Creative strategies for sharing research resources and infrastructure to make good and efficient use of scarce funding, expertise, data, biological specimens, and participation in research by people with rare conditions.
• Reasonable rewards and incentives for private-sector innovation and prudent use of public resources for product development when the latter appears to be a faster or less costly way to respond to important unmet needs.
• Adequate organization and resources, including staff with expertise on rare diseases research and product development, for the public agencies that fund biomedical 2research on rare diseases and regulate drugs and medical devices.
• Mechanisms for weighing priorities for rare diseases research and product development, establishing collaborative as well as organization-specific goals, and assessing progress toward these goals.

Although “[c]omponents of each of these elements already exist, some more robust than others,” according to a report summary, “it is difficult to achieve coherence, given the array of participants with differing perspectives and priorities, the number and diversity of rare diseases, and the limited and even undocumented resources devoted to them individually and collectively.”   The IOM report goes on to recommend a number of specific steps to aid in developing a more integrated approach to rare diseases research and product development.

Interest in rare disease/orphan product issues has been running high as of late.  As we previously reported (here and here), Congress is considering legislation to streamline the development and regulation of products for rare and neglected diseases and to increase incentives for the development and approval of such products. 

By Kurt R. Karst –      

The U.S. Court of Appeals for the Federal Circuit answered “Yes” to this question in an October 6th decision in Teva v. Eisai (2009-1593) that could pave the way for generic versions of Eisai, Inc.s’ ARICEPT (donepezil HCl) Tablets sooner than expected if the first-filer in this pre-Medicare Modernization Act case, Ranbaxy, does not otherwise trigger its 180-day exclusivity (which might not happen through commercial marketing because of the company’s manufacturing problems), and for which Ranbaxy qualified as a result of the company’s Paragraph IV certification to four Orange Book-listed patents covering ARICEPT – U.S. Patent Nos. 5,985,864 (“the ’864 patent”); 6,140,321 (“the ’321 patent”); 6,245,911 (“the ’911 patent”), and 6,372,760 (“the ’760 patent”) (collectively the “DJ Patents”).  The Federal Circuit’s decision reverses a September 9, 2009 decision from the U.S. District Court for the District of New Jersey in which the court granted Eisai’s Motion to Dismiss for Lack of Subject Matter Jurisdiction Teva’s declaratory judgment action on the DJ Patents.  Eisai argued, and the district court agreed, relying in part on a preliminary injunction entered against Teva and the company’s Gate Pharmaceuticals subsidiary in a separate and ongoing patent infringement action regarding a fifth Orange Book-listed patent on ARICEPT – U.S. Patent No. 4,895,841 (“the ’841 patent”) expiring on November 25, 2010 – that Teva failed to establish the existence of an Article III controversy for declaratory judgment jurisdiction.  Teva appealed the decision arguing that the case should proceed, and the Federal Circuit agreed applying a 2008 decision in Caraco Pharmaceutical Laboratories, Ltd. v. Forest Laboratories, Inc., 527 F.3d 1278 (Fed. Cir. 2008).

In the last couple of years, the Federal Circuit has addressed the proper jurisdictional scope of the “case or controversy” requirement under Article III of the U.S. Constitution for a court to have jurisdiction in ANDA Hatch-Waxman declaratory judgment actions where a patent covering the Reference Listed Drug is listed in the Orange Book; specifically, in Caraco and another 2008 decision in Janssen Pharmaceutica, N.V. v. Apotex, Inc., 540 F.3d 1353 (Fed. Cir. 2008).  These decisions came in the wake of the U.S. Supreme Court’s January 2007 decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), in which the Court ruled that a dispute must be “definite and concrete” and “real and substantial” to support the exercise of a district court’s subject matter jurisdiction, and the Federal Circuit’s March 2007 decision in Teva Pharms. USA v. Novartis Pharms. Corp., 482 F.3d 1330 (Fed. Cir. 2007), in which the Court, consistent with the Supreme Court’s MedImmune decision, rejected the “reasonable apprehension of imminent suit” test the Federal Circuit had followed for several years, and instead adopted an “all the circumstances” standard for determining when a justiciable controversy for declaratory judgment actions exists. 

In one “bookend” Hatch-Waxman declaratory judgment decision – Caraco, concerning LEXAPRO (escitalopram oxalate) – the Federal Circuit held that an ANDA applicant’s declaratory judgment action for non-infringement met the Article III “case or controversy” requirement notwithstanding that the patentee had granted the generic applicant a covenant not to sue.  In that case, the Federal Circuit determined that “Forest’s covenant not to sue did not eliminate the controversy between the parties.”  In the other “bookend” decision – Janssen, concerning RISPERDAL (risperidone) Oral Solution – the Federal Circuit dismissed a declaratory judgment action for non-infringement notwithstanding a covenant not to sue, because the “alleged harm of indefinite delay of [ANDA] approval was too speculative to create an actual controversy to warrant the issuance of a declaratory judgment,” and therefore, did not meet the Article III requirement.  Although the factual scenarios presented to the Federal Circuit in Caraco and Janssen were very similar, the point of difference that led the Federal Circuit to rule against declaratory judgment jurisdiction in Janssen was that the ANDA applicant, Apotex, stipulated to the validity, infringement, and enforceability of one Orange Book-listed patent covering RISPERDAL (that was not the subject of the declaratory judgment action).  As a result, according to the Federal Circuit, the potential harm to Apotex changed, in that Apotex eliminated any possibility of going to market until the expiration of that patent even if the company could claim victory in its declaratory judgment action concerning two other Orange Book-listed patents.  In an “intermediate” case – Dey L.P. and Dey Inc. v. Sepracor Inc., concerning Dey’s ANDAs for generic versions of Sepracor’s XOPENEX (levalbuterol HCl) – the U.S. District Court for the District of Delaware ruled in January 2009 that Dey’s declaratory judgment action presented a justiciable Article III controversy.

In the instant case, both Teva and Gate amended previously-submitted ANDAs with Paragraph IV certifications to each of the five Orange Book-listed patents on ARICEPT.  Ranbaxy’s ANDA contains Paragraph IV certifications to the DJ Patents, but a Paragraph III certification to the ’841 patent.  This set up the possibility for shared 180-day exclusivity in a non-mutually-blocking Paragraph IV certification circumstance, whereby Teva would qualify for exclusivity with respect to the ’841 patent and Ranbaxy would qualify for exclusivity with respect to the DJ Patents.  And, indeed, FDA approved Teva’s ANDA No. 77-344 in April 2008 after expiration of a 30-month stay, presumably recognizing shared 180-day exclusivity.  In September 2010, however, FDA converted Teva’s final ANDA approval to a tentative approval because, among other things discussed in a September 17, 2010 Letter Decision publicly disclosed in the Federal Circuit’s docket (and that effectively responds to a recent Eisai citizen petition), the Agency decided not to apply its shared exclusivity policy in this case.

Although Eisai filed a patent infringement suit against Teva with respect to the ’841 patent, Eisai did not sue on the DJ Patents.  In May 2008, Teva filed an action for declaratory judgment on the DJ Patents – two of which (the ’864 and ’321 patents) were subject to statutory disclaimers, and the other two of which (the ’911 and ’760 patents) are the subject of a covenant-not-to-sue between Eisai and Teva.  Nevertheless, the DJ Patents remain listed in the Orange Book.  This is an important fact for the Federal Circuit’s decision, because although the “facts were slightly different, Janssen reaffirms Caraco’s holding that the injury-in-fact must stem from the actions of the company that listed the patents in the Orange Book, not the inherent framework of the Hatch-Waxman Act.”

In applying the Caraco–Janssen decisions, the Federal Circuit ruled that Teva v. Eisai is more akin to Caraco:

As we explained in Caraco, the generic drug company’s injury (i.e., exclusion from the market) is fairly traceable to the defendant’s actions because “but-for” the defendant’s decision to list a patent in the Orange Book, FDA approval of the generic drug company’s ANDA would not have been independently delayed by that patent.  527 F.3d at 1292; see 21 U.S.C. § 355(j)(5)(B)(iv).  When an Orange Book listing creates an “independent barrier” to entering the marketplace that cannot be overcome with-out a court judgment that the listed patent is invalid or not infringed – as for Paragraph IV filers – the company manufacturing the generic drug has been deprived of an economic opportunity to compete.  Id. at 1293; see also 21 U.S.C. § 355(j)(5)(B)(4).  A declaratory judgment redresses this alleged injury because it eliminates the potential for the corresponding listed patent to exclude the generic drug from the market. . . .

Here, as in Caraco, a favorable judgment “would eliminate the potential for the [DJ patents] to exclude [Teva] from the drug market.”  527 F.3d at 1293.  Unlike the generic drug company in Janssen, Teva has not stipulated to the validity, infringement, or enforceability of any other patent listed in the Orange Book for donepezil.  540 F.3d at 1360.  Nor is Teva subject to any final judgment regarding an Orange Book patent for donepezil that would prevent Teva from selling products covered by the Gate ANDA. Given the absence of such factors, Caraco controls. 

The Hatch-Waxman world is already buzzing about the decision, with questions posted in the Linked-In Hatch-Waxman ANDA Litigation Forum, such as “So what’s the takeaway here?  There’s DJ jurisdiction if a later-filer is blocked, not by the first-filer’s 180-day exclusivity, but instead by the listing of the patents in the Orange Book?”

Interestingly, in another declaratory judgment action concerning generic ARICEPT filed in the U.S. District Court for the Middle District of North Carolina by a subsequent ANDA filer, Apotex, in an effort to “unpark” 180-day exclusivity, the court applied Janssen and recently  ruled (see our previous post here) that “Apotex has not presented a justiciable Article III controversy in the present case, and that even if it had, the Court within its discretion would decline to exercise jurisdiction over this claim.”  Apotex has appealed that decision to the Federal Circuit – Apotex v. Eisai (2010-1559).

ADDITIONAL READING:

• Teva’s Opening Appeal Brief
• Eisai’s Opening Appeal Brief
• Teva’s Reply Brief

REMINDER: Register for HPM's free webinar “The Evolution and Resurgence of Strict Liability Criminal Prosecutions Under the Park Doctrine” on October 8th. (link to registration: http://hpmwebinar.eventbrite.com/)

By Kurt R. Karst –      

The voice of Michael Corleone – “Just when I thought I was out . . . they pull me back in” – played over and over again in our heads today when we learned that Apotex, Inc. filed a Petition for Writ of Certiorari with the U.S. Supreme Court asking for a review of the U.S. Court of Appeals for the District of Columbia Circuit’s decision concerning 180-day exclusivity for generic versions of Merck’s COZAAR and HYZAAR (i.e., losartan). 

As FDA Law Blog readers will recall, in April 2010 FDA approved (here and here) Teva’s ANDAs with 180-day exclusivity, which expired earlier this month.  In July 2010, a 3-judge panel of the D.C. Circuit issued a 2-page per curiam judgment affirming the U.S. District Court for the District of Columbia’s April 2, 2010 order denying motions for preliminary injunction filed by Roxane Laboratories, Inc. and Apotex.  The Roxane and Apotex motions challeged FDA’s March 26, 2010 letter decision in which the Agency reluctantly concluded  that Teva did not forfeit 180-day exclusivity eligibility under FDC Act § 505(j)(5)(D)(i)(VI), which states that 180-day exclusivity eligibility is forfeited if “[a]ll of the patents as to which the applicant submitted a certification qualifying it for the 180-day exclusivity period have expired.”  FDA issued its response after soliciting public comment on whether Teva forfeited 180-day exclusivity eligibility because the only exclusivity-qualifying patent – U.S. Patent No. 5,608,075 – “expired” last year after Merck ceased paying certain patent maintenance fees. 

The July 6th judgment came out after the D.C. Circuit issued two orders in May 2010, in which the Court denied FDA’s petition for panel rehearing and rehearing en banc of the D.C. Circuit’s March 2, 2010 decision in Teva Pharms USA, Inc. v. Sebelius.  In that case, a 3-judge panel of the D.C. Circuit ruled in a 2-1 decision concerning 180-day exclusivity for generic COZAAR (losartan potassium) Tablets and HYZAAR (hydrochlorothiazide; losartan potassium) Tablets that a mere patent delisting request is not enough to trigger a forfeiture event under the failure-to-market forfeiture provision at FDC Act § 505(j)(5)(D)(i)(I), and that there is “no reason to conclude that the 2003 addition of forfeiture provisions meant to give the brand manufacturer a right to unilaterally vitiate a generic’s exclusivity.”

Apotex presents a single question for the Supreme Court’s review – “Whether a generic drug manufacturer may forfeit marketing exclusivity under 21 U.S.C. § 355(j)(5)(D) based on ‘unilateral’ action by the holder of the challenged patent” – and gives several reasons why the Supreme Court’s review is warranted: 

This Court’s immediate review is necessary to remedy fundamental and costly errors inflicted by the decision below. . . .  In ignoring that clear congressional command, the decision below did serious damage to a federal statute of the highest importance.  In concrete terms, the decision below will confer massive anti-competitive advantages on drug companies (both generic and brand-name) that Congress did not authorize.  In just the next several years, numerous major generic drugs are set to enter the market.  If they do so under the erroneous decision below, consumers will bear billions of dollars in unnecessary and unintended costs.

Its practical importance aside, the D.C. Circuit’s decision is plainly wrong as a matter of statutory interpretation.  It does not seriously confront the statutory text, relying instead on the court’s understanding of the statute’s “intended incentive structure.”  It also errs in divining those “incentives,” relying on a pre-MMA decision and, in turn, on the deeply flawed premise that brand-name manufacturers will work to frustrate the availability of generic exclusivity.  The D.C. Circuit simply misunderstood that any manufacturer will prefer government-protected duopoly to wide-open competition.

Equally troubling, the D.C. Circuit did all of this under the guise of step one of Chevron, rejecting FDA’s view that the statute draws no distinction between “unilateral” action and other action resulting in removal of a challenged patent from the Orange Book.  This Court’s immediate review is necessary to remedy these fundamental errors and the resulting damage to a vital federal statutory scheme.

If the Supreme Court decides to take the case, it could result in a landmark Hatch-Waxman decision.  We’ll keep you posted.

REMINDER: Register for HPM's free webinar “The Evolution and Resurgence of Strict Liability Criminal Prosecutions Under the Park Doctrine” on October 8th. (link to registration: http://hpmwebinar.eventbrite.com/)

By Kurt R. Karst –      

In a short, but scathing opinion piece published in the October 5th Wall Street Journal (“WSJ”), the editors take on the Federal Trade Commission (“FTC”) and those Members of Congress who want to ban patent settlements between brand-name and generic drug companies (what opponents call “pay-for-delay” or “reverse payment” agreements) – or at least make them a very unattractive option – under the “Preserve Access to Affordable Generics Act.”  As we previously reported, the bill, which is currently included in the report accompanying the Fiscal Year 2011 Financial Services and General Government Appropriations Bill (S. 3677) that is under consideration in Congress, would make patent settlements presumptively anticompetitive and unlawful if challenged by the FTC unless it can be demonstrated “by clear and convincing evidence that the procompetitive benefits of the agreement outweigh the anticompetitive effects of the agreement.”  Some Senators have objected to the provisions, arguing that they would “do serious violence to the Hatch-Waxman process for the market entry of generic drugs,” and the Congressional Budget Office issued a cost estimate criticizing the estimated savings from the bill as “significantly overstated.”

The WSJ echoes the sentiments of those Members of Congress opposed to the “Preserve Access to Affordable Generics Act:” 

Reverse settlements expand the options for rationally ending patent disputes.  A brand-name company might settle to protect a high-risk investment even if it is convinced that its patent is strong, because anything can happen in litigation. Or the two sides might be at loggerheads.  No one can know in advance which side will prevail at trial, and a cash payment might be the only way to reach an agreement. . . .  [E]liminating reverse settlements will reduce the incentive to challenge patents at all.  If the only choice is an expensive litigation death match that lasts for years, fewer generic companies will sue under the probability that they will themselves face patent infringement suits.

The WSJ cites a January 2010 RBC Capital Markets report to make its point that patent settlements are a good thing; that is, that the patent settlement “status quo seems to be working better than anything today's Congress might produce.”  The RBC report found, among other things, that in cases that went to trial over the last three years, settlements occur on average 47% of the time.  Although many of those settlements did not involve a “reverse payment,” in those that did, “presumably payment was the only way to bridge the settlement gap and may have thus sped up generic entry,” according to the WSJ.

The WSJ is also critical of the FTC’s efforts to broker patent settlement deals – and in particular the FTC’s conduct called into question in FTC v. Bisaro.  As discussed in a recent Washington Legal Foundation Legal Opinion Letter, in that case, the FTC attempted to broker a deal between competing generic drug companies by forcing one of them to selectively waive or relinquish its 180-day exclusivity for a generic version of PROVIGIL (modafinil).  “It’s one thing for the [FTC] to litigate pay-for-delay cases, even dodgy ones, but quite another to actively attempt to broker deals in the drug business,” according to the WSJ. 

Hyman, Phelps & McNamara, P.C.’s Kurt R. Karst will be speaking at the Center for Business Intelligence’s (“CBI’s”) 3rd Annual Life Sciences Congress on Paragraph IV Disputes, which is scheduled for October 18-19, 20109 at the Hilton Alexandria Old Town in Alexandria, Virginia.  This popular CBI conference brings together representatives from both the brand-name and generic drug industries to discuss litigation strategies, statutory guidelines, current cases, and their landmark decisions.  A copy of the conference brochure is available here.  In addition to presenting a session on the FDC Act’s 180-day exclusivity forfeiture provisions, Mr. Karst, along with Sean Ryder (Glenmark), and Joe Bonaccorsi (Akorn), will put on a “Paragraph IV Boot Camp” workshop on myriad Paragraph IV issues. 

Special FDA Law Blog Discount – CBI is offering FDA Law Blog readers a $300 discount off of the registration fee.  To register for the conference, go to the CBI website and enter the following promotion code: ZUE255

By Ricardo Carvajal –

No sooner did FDA hold its advisory committee meeting and public hearing on bioengineered AquAdvantage salmon than Congressional representatives made their displeasure known with the prospect of FDA approval.  In addition to signing on to letters of protest to the Commissioner (here and here), some have opted to sponsor legislation (here, here, and here) that would amend the FDC Act to require genetically engineered fish to be labeled as such or to ban them altogether.  As we noted in a prior posting, this is the first time FDA is considering a NADA for a genetically engineered animal intended for food use.  The level of controversy and opposition engendered thus far provides a strong disincentive to those developers waiting in line.

To appreciate just how protracted a battle the folks at AquAdvantage face, one need look no further than the dairy shelf, where the slugfest over labeling of milk derived from cows not treated with rbST continues more than 15 years after that drug’s approval (rbST stands for “recombinant bovine somatotropin,” a bioengineered hormone that increases milk production).  For years, marketers of milk derived from cows not treated with rbST have sought to advertise that fact so as to tap into the desire on the part of some consumers to avoid all things biotech.  Some labeling and advertising claims (e.g., “rbST free”) have provoked trade complaints from rbST advocates, who allege that the claims are false or misleading because they imply that milk derived from cows treated with rbST  contains rbST and is somehow inferior.  Having failed to get satisfaction from FDA and FTC in response to their trade complaints, rbST advocates turned to state legislatures to challenge the claims.  Ohio obliged by banning certain types of claims (including “rbST free”) on the ground that they were false or misleading.  A First Amendment challenge to Ohio’s ban was initially turned aside by a federal district court, which found the claims to be inherently misleading - but that victory was short lived.  The 6th Circuit Court of Appeals recently reversed and remanded the case for further proceedings, noting that milk derived from cows treated with rbST might yet be found to contain rbST, and that there is “evidence that [such milk] contains increased levels of IGF-1 and might be compositionally of a lesser quality.”  If so, then the claim “rbST free” in the labeling of milk derived from cows not treated with rbST would be truthful and not misleading.  These arguments are eerily similar to those raised against AquAdvantage – arguments that FDA presumed it had put to rest, at least in the case of rbST (a more in-depth article over the rbST controversy is available here).

The biotech headaches of late have not been FDA’s alone.  USDA/APHIS has been embroiled in litigation over its attempt to deregulate bioengineered alfalfa, and has now provoked the ire of a district court by issuing permits for the production of bioengineered Roundup Ready sugar beet seedlings – less than a month after being found in violation of the National Environmental Policy Act for deregulating the beets without preparing an Environmental Impact Statement.  The court has ordered APHIS to “state under penalty of perjury exactly when and where it made the information public that the permits had been granted.”  Ouch.

All in all, it would appear that a powerful alliance has emerged between consumer groups that generally oppose biotech and producers who have staked their livelihoods on the burgeoning consumer demand for “natural” and “organic” products.