“The Sanofi decision behooves drug sponsor, generic manufacturers, and drug purchasers alike to examine the Orange Book listings for potentially improperly listed patents.”

The U.S. Court of Appeals for the First Circuit has made brand companies think twice about creating patent thickets in the Orange Book by resuscitating an antitrust suit against Sanofi by direct purchasers of insulin glargine. In re Lantus Direct Purchaser Antitrust Litigation (Feb. 2020).

The Sanofi decision provides a possible opportunity to seek antitrust liability against brand companies for abusing Food and Drug Administration (FDA) regulations. The decisions should make branded companies reconsider over-listing patents in the Orange Book, and potentially slowing down generic competition. While this decision sets the stage for further fights over what patents should not be listed as covering approved “drugs,” it also sets a clear test for courts to consider when evaluating other tactics that brands have used to create regulatory delays to stall approval of potential rival products.

The FDA Regulatory Requirements

By statute, drug sponsors list patents that cover either the “drug” or method of treatment using the drug in a U.S. Food and Drug Administration (FDA) document known as the Orange Book. The term “drug” has been given a very broad reading by the FDA to include finished dosage forms that are the physical manifestations—tablets, capsules or solutions—containing the drug itself. The FDA has also defined finished dosage forms quite broadly to include metered aerosols or sprays or prefilled drug delivery systems. When listing a method patent, drug sponsors are also required to provide related “use codes,” which explain how the listed method patent related to FDA-approved uses of the drug. The FDA publishes the patent information provided by drug manufacturers but does not review the patent listings for accuracy.

Listing a patent in the Orange Book in reference to an approved product directly affects generic competition for that product. By listing a patent in the Orange Book, the drug manufacturer puts competitors on notice that if they want to sell a generic or similar product before patent expiration, they must prove that the patent is invalid or that the new product will not infringe the patents. Competitors must send a notice to the owner of the listed patent and drug owner, which creates the jurisdictional hook needed to file a patent infringement suit. If the patentee files an infringement suit within 45 days of receiving the notice, it forces the FDA to delay approval of the generic application for 30 months.

The Sanofi Litigation

Sanofi sells insulin glargine in a disposable, adjustable-dose injector pen under the trade name Lantus SoloSTAR. In this case, the purchasers pled in their putative class action complaint that Sanofi had improperly listed a patent covering a component of the SoloSTAR injector in the Orange Book as covering the Lantus product. The listed patent was not specific to the SoloSTAR injector—it could be used with any injector—and was not specific to insulin glargine. By listing the patent, plaintiffs alleged it delayed the approval of multiple rival products, including products by Lilly, Merck, and Mylan. Additionally, plaintiffs alleged that Sanofi had filed sham litigations on products clearly not using the claimed component to trigger the 30-month stay on FDA approval and to create leverage for settlements and licenses despite the non-infringing products. The district court dismissed the purchasers’ complaint on Sanofi’s Rule 12(b)(6) motion to dismiss.

The First Circuit overturned the district court’s grant of Sanofi’s motion to dismiss. The panel found that the patent, which was generally directed to a drive mechanism of a pen injector, was not directed to the listed “drug” and was not therefore eligible to be listed in the Orange Book. While “drug” has been broadly construed, the panel found it does not include component patents that are not necessarily tied to the finished drug product.

Additionally, the First Circuit rejected the district court’s finding that Sanofi’s reasonable basis in listing was enough to prevent antitrust scrutiny. Instead, the First Circuit held that the patentee may only avoid liability by proving that its decision to list was both reasonable and in good faith. It also clarified that reasonableness and good faith are affirmative defenses that must be proven by the patentee, not a burden on the putative antitrust plaintiff. Finally, the panel held that the automatic 30-month stay was a sufficient antitrust harm to warrant further litigation.

The Impact of the Decision

The Sanofi decision behooves drug sponsor, generic manufacturers, and drug purchasers alike to examine the Orange Book listings for potentially improperly listed patents. By statute, only patents that claim a drug or the method using such a drug are properly listed in the Orange Book. The FDA regulations clarify that claims covering a drug substance (active ingredient), drug product (formulation and composition), and method of use are properly listed. A method of use patent should only be listed if the claimed method of use is for an application that has been approved by—or is currently pending with—the FDA.

The FDA’s guidance on properly listed claimed subject matter is not always so straightforward. For example, as the Sanofi decision points out, the FDA has indicated that an injector pen—by dint of being deemed a “drug product”—is listable subject matter. The patent at issue in the Sanofi case claimed only a component of an injector device, did not mention the drug itself and was found to be not properly listable. There are numerous other types of patent claims that can cover a drug product—but are not necessarily properly listed: drug delivery systems, packaging, metabolites, intermediates, or method of manufacture claims, to name a few. There is nuance here that could be a rich vein for Hatch-Waxman litigants and drug purchasers to mine for potentially improperly listed patents. Similarly, drug sponsors would be well advised to review their patent listings with such possible attacks in mind.

There are two other mechanisms available to generic drug manufacturers that could be combined with and perhaps strengthen a claim under Section 2 of the Sherman Act. The first is an administrative procedure in which a challenger can dispute the accuracy or relevance of patent information included in the Orange Book. The challenger may dispute both patents covering the drug itself as well as patents covering methods of using drugs and the related use codes. The proceeding is initiated by notifying the FDA in writing of a patent listing dispute. The FDA will then request that the NDA holder confirm and verify the correctness of the patent information or withdraw or amend the patent information. For challenges regarding whether the listed method patent covers an FDA-approved use, the NDA holder must provide a short narrative of why the method patent and related use code covers only the approved use. The FDA will only make a change to the Orange Book if the NDA holder withdraws or amends its patent information.

The second mechanism is available if a generic manufacturer—upon filing its ANDA and serving its notice to letter to the NDA holder—has been sued by the NDA holder for patent infringement. The generic manufacturer may assert a counterclaim seeking an order requiring the NDA holder to correct or delete patent information included in the Orange Book. This includes both a claim that the listed patent does not cover the drug or that a listed method of use patent does not cover an FDA-approved method of use for the drug.

Limited Remedies

Both the administrative proceeding and counterclaim described above are limited remedies. Perhaps because of the FDA’s purely ministerial role in the administrative listing dispute, this type of administrative challenge has not been widely used. According to the FDA website, there have been 34 patent listing disputes between 2017—when this dispute process was implemented—and mid-February, 2020. Sixteen of these disputes resulted in an “updated” patent list. Similarly, the counterclaim available to the generic defendant is somewhat limited, because the statute does not create an independent cause of action, but only a counterclaim. In addition, the statute does not entitle the counterclaimant to damages, but only injunctive relief.

However, these listing challenge mechanisms could strengthen an antitrust counterclaim under Section 2 of the Sherman Act. A Section 2 violation requires (1) monopoly power in the relevant market and (2) improper action to acquire or maintain that power. In the context of Hatch-Waxman litigation, monopoly power on the part of the drug sponsor is often not reasonably in dispute; the drug sponsor’s listed patents create monopoly.

The issue, then, is likely to be whether the disputed patent listing or related use code was an improper action to maintain monopoly power. The Sanofi court decided that once there has been an adequate allegation of improper listing, the inquiry turns to the drug sponsor’s conduct. Specifically, the drug sponsor must show that it acted reasonably and in good faith to comply with the patent listing regulation. It is possible that a drug sponsor’s affirmative verification of the correctness of its patent listing—in response to an administrative challenge—or vigorous defense of an improper listing counterclaim—following initiation of patent litigation pursuant to the Hatch-Waxman framework—would be relevant evidence to the antitrust inquiry. For example, if a drug sponsor verified an improper patent listing or use code during an administrative challenge, the drug sponsor’s ability to argue the listing or overly broad use code was a reasonable mistake would be limited. In any event, the drug sponsor would be put in the position of having to prove a defense that its conduct was reasonable and in compliance with the regulations. Of course, a Section 2 violation provides for treble damages, adding considerable power to the feeble listing challenges on their own.

A generic manufacturer may wish to consider taking advantage of the available listing challenges so they can be coupled with—and perhaps strengthen—an antitrust counterclaim. Similarly, the strategy of combining listing challenges with an antitrust counterclaim should provide more motivation for drug sponsors to carefully police their patent listings.

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