What is at the heart of the GSK skinny-label standoff at the CAFC?
Zachary Silbersher
I previously blogged about the surprising case, GlaxoKlineSmith v. Teva (GSK), where the Federal Circuit held that a generic pharmaceutical company can, under the right circumstances, be liable for inducing infringement of a method-of-use pharmaceutical patent despite carving out the patented indication from its label. The decision at first spooked the generic pharmaceutical industry, but was then followed by two additional opinions—one related to a panel rehearing, followed by another one, which issued on February 11, 2022, denying a hearing en banc, which included a fiery dissent. These decisions show clear disagreements among the Judges at the Federal Circuit. What is at the heart of this dispute?
The Federal Circuit’s original GSK decision.
The original Federal Circuit decision in GSK appeared to cut against the prevailing understanding that generics cannot induce infringement for off-label sales. That understanding was principally based upon Takeda Pharmaceuticals U.S.A. v. West-Ward Pharmceutical Corp., 785 F.3d 625 (Fed. Cir. 2015) and Warner-Lambert Co. v. Apotex Corp., 316 F.3d 1348 (Fed. Cir. 2003).
That decision rightly spooked some within the generic side of the pharmaceutical industry. One commentatorsuggested, “[t]he decision raises questions about whether a generic drug maker can ever avoid inducing infringement of a method-of-treatment patent by carving out indications on its label.” Another commentator suggested, “there is a hint that the majority was concerned with generic drug companies improperly relying on the skinny label strategy to profit from "off-label use" by physicians for the very indication excluded by the skinny label carveout.”
The Federal Circuit’s rehearing of the GSK decision.
The Federal Circuit subsequently agreed to rehear the GSK decision before same panel—in other words, the same three-Judge panel who issued the first GSK decision agreed to hear it again. The decision issued in August 2021. Not surprisingly, the panel upheld the holding of their original decision. What was a bit more surprising was that they nevertheless also took some of the bite out of the original decision. In particular, the Court upheld the jury’s finding that Teva induced infringement of a patent covering a carved-out indication (CHF) because the indications in the label that were not carved out, by themselves, infringed the asserted CHF patent.
To put this more plainly, GSK’s Coreg® drug was approved for three indications: hypotension, congestive heart failure (CHF) and to reduce to reduce cardiovascular mortality in patients suffering from left ventricular dysfunction following a myocardial infarction, i.e., the "post-MI LVD" indication. Teva initially carved out the CHF indication from its label. In the underlying lawsuit, GSK asserted a patent against Teva that purported to cover the CHF indication. Teva argued that it cannot be liable for inducing infringement of a patent covering a carved out indication. Yet, the rehearing panel at the Federal Circuit held that GSK convinced the jury that the contents of the label directed to the post-MI LVD indication, which Teva did not carve out from its label, by themselves satisfied infringement of GSK’s patent directed to the CHF indication.
In other words, the label’s instructions for treating one condition (post MI LVD) ended up infringing a patent purporting to cover a different indication (CHF). That is another way of saying that, despite attempting to carve out the CHF indication from its label, Teva’s generic label failed to do so. That result is a potentially circumstantial one that turned on the similarities between the two indications (CHF and post MI LVD), and just as importantly, on the wording of the asserted patented claims. Given all of this, the rehearing decision in GSK is arguably one limited to its facts. In fact, the rehearing Court expressly concluded: “Teva’s partial label did not successfully carve out the patented use.”
The Amarin district court decision.
Accordingly, the rehearing decision in GSK, despite agreeing with the holding of the Federal Circuit’s prior decision, arguably took much of the bite out of that decision. A recent district court decision in Amarin Pharmaceutical’s suit against Hikma bears this out.
In that case, Amarin sued Hikma for inducing infringement of its patents covering a cardiovascular indication for its drug Vascepa® even though Hikma’s generic had carved out the cardiovascular indication. Hikma moved to dismiss, and the Magistrate Judge initially recommended denying the motion to dismiss. Yet, after that report and recommendation by the Magistrate, the Federal Circuit issued its en banc decision in GSK. In light of the en banc decision in GSK, the district court granted Hikma’s motion to dismiss, and therefore, refused to follow the Magistrate’s original recommendation.
The facts in Amarin’s case were different from those GSK’s case. The district court quoted the rehearing Court in GSK, which described the decision as a “narrow, case-specific review” and that it is still the law that “generics could not be held liable for merely marketing and selling under a 'skinny' label omitting all patented indications, or for merely noting (without mentioning any infringing uses) that FDA had rated a product as therapeutically equivalent to a brand-name drug.”
The district court also found that, unlike in the GSK case, Amarin had failed to plausibly plead that Hikma’s label—which carved out the cardiovascular indication—nevertheless infringed the carviovascular patent. The district court also examined Hikma’s public statements, including a statement that Hikma’s generic is a “generic equivalent to Vascepa®.” Yet the district court pointed out that the rehearing GSK Court stated, “[w]e do not hold that an AB rating in a true section viii carve-out (one in which a label was produced that had no infringing indications) would be evidence of inducement.”
The Federal Circuit’s en banc denial opinions.
After the Federal Circuit’s rehearing decision, Teva petitioned for en banc review. Not surprisingly, the petition garnered considerable amici interest from across the pharmaceutical industry. Nevertheless, on February 11, the Court denied en banc review of this case. That did not, however, stop numerous Judges from weighing in with both concurring and dissenting opinions to the Court’s decision not to take this case up en banc.
Indeed, both the concurring and dissenting opinions appear to reflect a veritable split at the Federal Circuit over some fairly important patent-legal questions that continually impact the pharmaceutical industry—namely, what is really required to “induce” infringement of a method-of-use patent? And, how certain can generics be that carving out an indication from their label will immunize them from liability for patents covering that carved-out use?
A scathing dissent authored by the Honorable Sharon Prost embodies the Court’s wing that believes the GSK precedent has gone astray. Judge Prost laments that the Court’s decision to leave in place this holding will cause considerable damage to the generic pharmaceutical industry—and, ultimately, to consumers who will have to bear the brunt of higher cost medications.
Congress specifically enacted a regulatory framework that permitted generics to carve-out certain indications from their label expressly for the purpose of making it easier for generics to bring lower-cost drugs to market without infringing method-of-use-patents covering those carved-out indications. Despite Teva doing exactly that—namely, carving out the CHF indication from its label—the Court nevertheless cobbled together different, remaining portions of the Coreg® label, namely, the ones that had not been carved out, and presumably related to different indications, and found that that skinny label instructed doctors to infringe a patent covering that carved-out indication. And because Teva kept those remnants within its proposed generic, which it otherwise had choice not to do, the Court deemed that Teva intentionally instructed doctors to infringe GSK’s patent covering the carved out CHF-indication.
Judge Prost argues that all of this cannot add up. In other words, this cannot possibly be the law. The law on induced infringement expressly requires a finding of intent—namely, both the jury, and to a large extent, the court as well, must find that the generic pharmaceutical company intended to encourage doctors to practice the method-of-use recited in the brand’s patent.
Here, according to Judge Prost, there are two principle facts that marshal against a finding that intent. First, GSK had previously told the FDA, in a sworn statement, that the CHF indication for Coreg® was the only patented indication. Second, Teva expressly carved that indication out of its label. Given these facts—which do not arise infrequently when generics are seeking entry for drugs with multiple indications—it seems that Teva played by the rules to avoid any patent liability. How can there nevertheless be a finding that Teva intended to embrace that liability? As Judge Prost put it, “When a generic plays by the skinny-label rules, the FDA-required label can’t be evidence of intent.”
According to Judge Prost, this precedent will discourage investment in generic pharmaceutical drugs because it greatly exacerbates the risks of doing so. The decision opens the door to the possibility that a generic will be liable for infringing a method-of-use patent despite expressly carving out that indication from its label. That liability will be determined ultimately by jury verdicts, which often come years after a generic has invested considerable time, money and resources towards bringing a generic drug to market.
Judge Prost also warns that the risk of being on the wrong side of that jury verdict can be catastrophic. A generic drug’s profits are usually dwarfed by the potential liability of infringing a patent. In this case, Teva’s revenues (not profits) from generic Coreg® were around $74M, whereas its assessed liability to GSK because of this case is $234M.
To be fair, that type of monetary liability is unlikely to happen where the generic does not launch at-risk, namely, until after the Federal Circuit weighs in on a jury verdict. Yet, the GSK decision increases the possibility of that type of liability, and that itself has consequences. That will prolong Hatch-Waxman lawsuits, force more cases to go to trial on induced infringement of off-label indications, and further delay entry of lower-cost generic alternatives. Putting aside the increased costs imposed upon generic pharmaceuticals, it remains the consumers of pharmaceuticals—who have no seat at this table—who also suffer from this decision.
On the other side of the debate, the Honorable Kimberly H. Moore authored a concurrence that was joined by several other Judges on the Court. Judge Moore essentially argued that the rehearing GSK was limited to its particular facts, and it is hardly going to wreak the havoc proposed by the dissent. To some extent, that is true. The rehearing decision turned on the fact that the remaining portions of GSK’s label happened to arguably read upon the elements of GSK’s patent for CHF. That means Teva was caught in this jam based on essentially not one, but two highly-variable circumstances—first, the precise wording of GSK’s label for Coreg®, and two, the precise wording of GSK’s patent covering the CHF indication. Whether this highly circumstantial trap that Teva fell into is going to repeat in the future with any frequency appears to be, in part, at the heart of the disagreement over this case at the Federal Circuit.
There is another strange wrinkle to this case, which is also lamented by the dissents. The purpose of en banc review is for the Court to weigh on those cases where this palpable disagreement among the Court, veritable intra-Circuit splits. From the perspective of the public, en banc review is a service that provides clarity in the law, because the lack of clarity increases everyone’s costs. Hardly every denial of en banc review by the Federal Circuit is accompanied by strongly-worded dissents and concurrences marshaling considerable support on both sides of the Court. One would think that, when that happens, that is precisely the sort of case that would benefit from en banc review.
The Honorable Jimmie V. Reyna said as much in his dissent: “This court’s Internal Operating Procedure No. 13(2)(b) provides that en banc consideration is war- ranted for issues of exceptional importance. As evidenced by the briefs, the majority opinion, the dissent, and the number of amicus briefs filed to date, I believe this case involves an issue of exceptional importance.”