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Drug Patents in the Spotlight
D
rug costs are drawing renewed
attention from the public and each
branch of the government, perhaps
more than any other healthcare issue today.
One major strategy to address drug costs is
to increase generic drug availability while
preserving incentives to develop pioneer
drugs. The main legislation in this regard has
been the Drug Price Competition and Patent
Term Restoration Act of 1984, popularly
known as the Hatch-Waxman Act (the “Act”).1
This article summarizes the Act and explains
why it is currently in the spotlight.
The Act was drafted as compromise
legislation among competing interests. To
obtain approval of a pioneer drug, a company
must perform clinical testing and navigate
through the FDA’s New Drug Application
(NDA) review. Because it often takes much
longer than obtaining a patent, this process
can effectively prevent the drug from entering
the market for years after a patent is granted,
substantially eroding the patentee’s term of
exclusivity. The Act amended the patent laws
to restore some of that patent term, thereby
encouraging continued vigorous investment in
drug development.2
Generic drug producers, on the other
hand, suffered from their own delays. They
could not enter the market immediately
after patents expired because no expedited
approval process existed for bioequivalent
drugs, and significant pre-approval activities
within the patent term were considered
infringement.3
The ANDA Process
The Act addressed such delays by
providing an Abbreviated New Drug
Application (ANDA) process for drugs
bioequivalent to approved drugs.4
In
addition, under the Act it is no longer
infringement for generic companies to
conduct activity directed solely toward
developing and submitting information for
FDA approval.5
The Act includes additional requirements
for the pioneer and generic companies.
A pioneer must
identify in its NDA the
number and expiration
date of any patent which
covers the drug or its
use. That information is
added to the FDA’s list
entitled “Approved Drug
Products with Therapeutic
Equivalence Evaluations,”
commonly known as the
“Orange Book.”6
A generic applicant, on the other hand,
must certify in its ANDA either that: (I) no
patent information has been filed; (II) the
patent has expired; (III) the patent will expire
on a specific date; or (IV) the patent is invalid
or will not be infringed. In the latter instance,
the applicant must notify the NDA and patent
holder and include a detailed statement
explaining the basis for the “paragraph IV”
certification.
Stay of 30 Months
Filing the ANDA is itself a technical act of
infringement. If the patentee sues the ANDA
applicant within forty-five days, the FDA
is prohibited from making ANDA approval
effective pending resolution of the suit, up
to a total stay of thirty months. This period
may be adjusted by court order addressing the
parties’ cooperation in expediting the action.
The stay provision seeks to give patentees
ample time to obtain injunctions when
appropriate, while preventing them from
protracting the litigation to effectively block
approval of their adversaries’ ANDAs.
To encourage generic companies to
be the first to design around or challenge
pioneer patents, the Act rewards the first
ANDA applicant by prohibiting the FDA from
making any other ANDA effective for 180
days. During this exclusivity period, a generic
drug can be priced just slightly lower than the
brand-name product, generating large profits
because the generic company avoids the
research, development and regulatory costs
borne by the pioneer producer.
For example, as the first ANDA applicant
for a generic version of Prozac, Barr
Laboratories generated $311 million in sales
during the exclusivity period, and reported
earnings of $4.63 per share for fiscal year
2002, compared to $1.66 for fiscal 2001.7
Heightened Attention
The Act is currently drawing heightened
attention. President Bush’s budget proposal
to Congress includes a $13 million increase for
the FDA to speed up generic drug reviews by
about two months.8
Substantial attention is
also focused on the concern that some brand-
name drug producers may be submitting
“improper” listings for the Orange Book,
sometimes to obtain multiple 30-month stays,
thereby delaying generic drug introduction
into the marketplace. The FTC released a
study on July 30, 2002,9
which presented
data and observations regarding allegedly
improper listings and multiple stays. The
financial motivation for such listings is
illustrated by the FTC’s data from eight cases
indicating that net sales in the year the second
stay issued ranged from $100 million to over
$1 billion. The study also expressed concerns
about settlement agreements wherein a
brand-name drug company pays the first
generic applicant to stay off the market,
thereby tolling the 180-day exclusivity period
to preclude the FDA from approving ANDAs
for subsequent generic applicants. The FTC
recommended legislative action to require
reporting of certain settlements to the FTC,
and to permit only one 30-month stay
per ANDA.
Meanwhile, courtroom ANDA battles
continue to draw attention. Two major
battles relate to metabolized forms of drugs,
or “metabolites.” In one case, Bristol-Myers
listed a patent for a metabolite of the anti-
anxiety drug, BuSpar, the day before the
drug’s original patent expired.10
Bristol
then sued ANDA filers Mylan and Watson
Pharmaceuticals within forty-five days,
triggering a second 30-month stay blocking
them from entering the marketplace. Mylan,
FRIDAY, FEBRUARY 28, 2003
SERV
INGTHE BE
NCH
AND
BAR SINCE 1
888
LAWRENCET. KASS is a partner at Milbank, Tweed,
Hadley & McCloy LLP.
By LawrenceT. Kass
The Hatch-Waxman Act amended the
patent laws to restore some of the patent
term, thereby encouraging continued
vigorous investment in
drug development.

2. Watson, and others in turn sued Bristol for
antitrust violations, claiming it illegally listed
the metabolite to squelch competition. The
cases were consolidated in In re Buspirone
Patent Litigation11
before New York district
Judge John Koeltl, who held that the patent
claims required a synthetic form of the
metabolite and would not be infringed by the
natural form created upon metabolization of
the BuSpar equivalent. He further held that
if the claims were alternatively construed to
cover the natural metabolite, they would be
invalid in view of the prior art. In a separate
decision, he denied Bristol’s motion to dismiss
the antitrust claims, holding that when listing
patents in the Orange Book, pioneer drug
makers are not entitled to Noerr-Pennington
antitrust immunity because the FDA’s listing
is only ministerial.12
On January 7, 2003,
the parties reached an antitrust settlement,
with Bristol agreeing to pay more than $670
million to resolve issues relating to BuSpar
and Taxol, Bristol’s cancer drug.13
The other important metabolite case
is In re Omeprazole Patent Litigation,14
before New York district Judge Barbara
Jones, relating to Astra’s highly profitable
Prilosec for gastric acid inhibition. Astra’s
pioneer patent for omeprazole and its oral
administration was expiring, but Astra had
obtained and listed another ten patents,
including one for an omeprazole metabolite.
On the ANDA applicants’ motion for summary
judgment, the court held that the natural
metabolite produced in vivo by the generic
drug would not infringe because the claims
could only be construed to cover the synthetic
metabolite. Moreover, if construed otherwise,
the claims would be invalid as anticipated by
the original patent, which inherently disclosed
the natural metabolite produced upon
ingesting omeprazole.
In later proceedings, the court held six of
Astra’s ten patents invalid. Some plaintiffs
then went on to assert antitrust claims based
on Astra’s allegedly improper listing of invalid
patents. However, the court dismissed the
claims, distinguishing In re Buspirone by
noting that Astra had listed all ten patents
well before its original patent expired, and
therefore had not actually extended its patent
monopoly.
Most recently, the U.S. Court of Appeals
for the Federal Circuit decided Warner-
Lambert Co. v. Apotex Corp.,15
which is
quite timely in addressing controversial
listings for “off-label” drug uses. “Off-label”
uses are those which are not identified as
FDA-approved on the drug’s label. Warner-
Lambert’s patent on its pioneer seizure
medication, Neurontin, was set to expire
on January 16, 2000. However, it also
possessed a patent for the off-label use of
the active ingredient, gabapentin, to treat
neurodegenerative diseases. When Apotex
filed an ANDA on April 17, 1998, for the
approved use of gabapentin to treat seizures,
Warner-Lambert sued for infringement. The
district court granted Apotex’s motion for
summary judgment, and Warner-Lambert
appealed.
Matters Of First Impression
On appeal, Warner-Lambert argued that
submitting an ANDA for an approved use
constitutes infringement if any other use for
the drug is covered by a listed patent. The
Federal Circuit disagreed on this matter
of first impression, convinced instead by
Apotex’s argument that because an ANDA
can only seek approval for a previously NDA
approved use, the infringement provision does
not apply to off-label use patents. The court
further explained that the Act refers to in-
fringement of “the” patented use, meaning the
one patented and approved use, and Congress
made it clear in the Act’s legislative history
that an ANDA applicant need not certify with
respect to every other use patent. Moreover,
the court observed that if construed to cover
any off-label use patent, an NDA holder could
perpetually maintain exclusivity through
successive 30-month stays merely by regu-
larly obtaining and listing narrow patents for
unapproved uses. The court concluded that
Apotex’s ANDA filing did not infringe Warner-
Lambert’s off-label use patent and therefore
Apotex’s paragraph IV certification had been
unnecessary.
Warner-Lambert also argued that Apotex’s
marketing of gabapentin would induce
infringement by physicians because allegedly
up to 89% of Neurontin is prescribed for
off-label uses, and the practice of off-label
prescription is common knowledge. The court
again disagreed, reasoning that the patented
use represents only a fraction of all off-label
uses and, even if Apotex knew a portion of
its gabapentin would be prescribed for that
use, such knowledge could not amount to
inducement because specific intent and action
to induce infringement must be proven.
Various parties have sued Warner-
Lambert in multiple antitrust actions, which
have been consolidated in New Jersey district
court.16
It will be interesting to see if the
court follows In re Buspirone and rejects
antitrust immunity, because it appears that
Warner-Lambert effectively extended its
original patent’s monopoly by using the Act’s
30-month stay provisions.
The Act has also drawn the attention of
the legislature and executive. Last summer,
FRIDAY, FEBRUARY 28, 2003
the Senate passed the Schumer-McCain bill,
which proposes to: require that, after the
NDA approval, any later-obtained patent
be listed within 30 days of grant; allow only
one 30-month stay per ANDA; provide a
cause of action for patent delisting; require
more detailed support for paragraph IV
certifications; and require the first ANDA
applicant, if it delays or makes a deal to delay
market entry, to forfeit its 180-day market
exclusivity to the next applicant.
President Bush opposed the Schumer-
McCain bill, but based on the FTC’s study,
he later proposed to address the issues
through FDA rulemaking. The proposed
rules, issued on October 24, 2002,17
include
provisions similar to the Schumer-McCain
bill, but do not include a cause of action for
patent delisting, which Bush had opposed.
The FTC substantially agreed with the
rules, but suggested that the FDA provide
further clarification to prevent listing of
patents claiming packaging, metabolites, and
intermediates. The Schumer-McCain bill was
reintroduced as S.54 on January 7, 2003.
The proposed legislation and rules, combined
with continuing courtroom dramas, promise
to make 2003 a very interesting year for drug
patent law.
1
98 Stat. 1585.
2
35 U.S.C. § 156 (possible restoration generally
up to one-half the clinical trial period plus the
regulatory period, limited by restoration of five
years or total patent exclusivity of fourteen years).
3
Lourie, Patent Term Restoration: History,
Summary, and Appraisal, 40 Food, Drug and
Cosmetic L. J. 351, 354 (1985).
4
21 U.S.C. § 355.
5
35 U.S.C. § 271(e)(1).
6
See http://www.fda.gov/cder/ob/default.htm.
7
80 Chem. & Eng. News, at 53-59 (Sept. 23, 2002).
8
President to Improve Access to Generic Drugs,
U.S. Newswire (Jan. 24, 2003).
9
“Generic Drug Entry Prior to Patent Expiration:
An FTC Study,” see http://www.ftc.gov/
os/2002/07/genericdrugstudy.pdf.
10
Seidenberg, BuSpar--High Anxiety For Bristol-
Meyers, 7/29/2002 Conn. L. Trib. S10 (August
2002).
11
185 F. Supp. 2d 340 (S.D.N.Y. 2002).
12
185 F. Supp. 2d 363 (S.D.N.Y. 2002).
13
New York Times, at C9 (Jan. 7, 2002).
14
2001 WL 585534 (S.D.N.Y. 2002).
15
No. 02-1073 (Fed. Cir. Jan. 17, 2003).
16
In re Neurontin Antitrust Litigation, 217
F.Supp.2d 1380 (D.N.J. 2002).
17
67 Fed. Reg. 65447 (Oct. 24, 2002).
Reprinted with permission from the February 28,
2003 edition of the NEW YORK LAW JOURNAL ©
2016 ALM Media Properties, LLC. All rights reserved.
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# 070-01-16-42
It will be interesting to see if the court
follows ‘In re Buspirone’ and rejects
antitrust immunity, because it appears
that Warner-Lambert effectively
extended its original patent’s
monopoly by using the act’s
30-month stay provisions.