Will “method-of-use thickets” grow from SCOTUS denial of the GSK v. Teva skinny label case?
Zachary Silbersher
Bad facts make bad law. The case of GlaxoSmithKline’s lawsuit over Teva’s generic Coreg® drug is a case-in-point. I previously blogged about the case here and here. Given that the Supreme Court declined to grant certiorari, we’re now stuck with Federal Circuit precedent holding that a generic can still face liability for induced infringement of a method-of-use patent covering a section viii carved-out indication. What will be the consequences of this?
As a brief summary, Teva pursued a generic for Coreg®. The drug included three separate indications. Teva filed a section viii carveout for one of the indications. Under existing precedent, including Takeda Pharmaceuticals U.S.A. v. West-Ward Pharmaceutical Corp., 785 F.3d 625 (Fed. Cir. 2015) and Warner-Lambert Co. v. Apotex Corp., 316 F.3d 1348(Fed. Cir. 2003), it was understood that by carving out an indication, Teva could avoid liability for inducing infringement of that indication. Yet, despite that precedent, after an initial decision and then a rehearing decision, explained in more detail here, the Federal Circuit ultimately held that Teva was, in fact, liable for induced infringement for the carved out indication.
There were very vocal and loud dissents at the Federal Circuits. For instance, the Honorable Sharon Prost summed up what was most troubling about the Court’s decision: Induced infringement requires a showing of intent, namely, the generic intended to instruct or encourage doctors to infringe a patented method. Yet, if the law permits a generic to carve out a specific indication from a label, and Teva expressly carved out that indication, then how could Teva nevertheless be found to have intentionally instructed anyone to prescribe Coreg® for that indication?
Under the Hatch-Waxman Act, a generic can seek approval to distribute a generic version of a brand pharmaceutical drug for less than all indications of that drug. Under 21 U.S.C. § 355(j)(2)(A)(viii), a generic may essentially “carve out” patented indications in a label, thereby transforming it into a “skinny” label. As a result of carving out certain patented indications, a generic can avoid potentially infringing any patents covering that indication. Doing so permits a faster launch, without the necessity of recourse to litigation. Consumers benefit by having earlier access to lower-cost medications. Brands are prevented from perpetually delaying generic entry by repeatedly procuring new method-of-use patents covering the drug.
Yet, for the carve-out scheme to work, everyone needs to know which method-of-use patents cover the drug. Brand pharmaceutical companies are therefore required to identify method-of-use patents for each particular drug in the Orange Book.
Everyone also needs to know which portions of the label cover which indications. This is because a generic is required by the FDA to copy the brand’s label. Therefore, to carve out a particular indication, the generic must know which portions of the label must be carved out. To accomplish this, brand pharmaceutical companies are required to provide sworn declarations identifying which patents cover certain indications as well as which portions of the label cover those indications. (Brands are also required to identify use codes for shorter-hand reference.) The FDA does not itself investigate or confirm which portions of a particular label cover specific indications. Rather, they rely upon the brand’s declaration alone.
That last point is exactly what is so confounding about the GSK decision. The Hatch-Waxman statute expressly allows generics to avoid infringement of certain method-of-use patents for a particular drug by carving out indications covered by those patents from their label. To determine which portions of the label cover a carved-out indication, both the FDA and the generic rely upon sworn declarations from the brand. The FDA does not confirm those declarations are correct, and the generic does not have unilateral discretion to edit the label. Yet, under the GSK decision, even if a generic does everything right, and carves out the sections of the label actually identified by the brand as covering the carved out indication, courts can still find that the generic intentionally infringed a patent covering that indication.
There are likely to be multiple consequences from having this decision stand. For one thing, the GSK decision has suddenly inserted significant uncertainty into an area where there was previously none. Uncertainty means more litigation. More litigation means more time before generics can enter. More time means more delay. More delay means that consumers must wait longer to pay for available lower-cost medications. Consumers—i.e., those that actually pay for medications—have no seat at the table while these mechanics play out.
In the en banc decision, some of the Federal Circuit judges suggested that generics can file counterclaims of equitable estoppel to foreclose lawsuits filed by brand pharmaceutical companies for induced infringement of indications that were expressly carved out. But that alone is tantamount to a give-away of months or even years of monopoly pricing to brand pharmaceutical companies. Equitable estoppel is a highly-factual inquiry that can take months or years to litigate. Relying on equitable estoppel will only serve to increase the brand’s settlement leverage during negotiations for an entry date for generics.
Anyone who follows drug-pricing and patents is aware of how “patent-thickets” can delay generic entry just by virtue of existing. The GSK decision is likely to incentivize “method-of-use thickets.” Brand pharmaceutical companies are now incentivized to surround a drug with as many method-of-use patents as possible. Alvotech’s amicus brief argues that the problem of patent-thickets “only stands to be exacerbated by the [GSK] decision, which encourages brand companies to expand the patent thickets with multiple method-of-use patents claiming off-label uses in the hopes that they can find some language in the labeling to justify an inducement claim.” (at 19).
Yet, the uncertainty spawned by the GSK decision doesn’t just mean more delay. It is also likely to inhibit generic investment in certain medications. Before the GSK decision, whether a section viii carve out was successful was left up to the FDA. Now, the success of a section viii carve out is left up to juries or judges.
A jury’s decision or a bench trial decision often comes years after research and development and even more years of litigation. A jury’s decision is also the result of an adversarial process. Brands are incentivized to scour the label looking for any fact issues that can push the case past summary judgment for the purpose gaining settlement leverage in negotiating a generic’s entry date. Generics are likely to decide that pursuing a particular section viii carveout for a given is not worth the risk today, even though it was worth the risk before the GSK decision.
Mylan’s amicus brief summed it up: “whether brands win or lose, the risk of unwarranted litigation itself will keep section viii products off the market.” (at 12).