Supreme Court: Generic Pharma Manufacturer Has Standing to Pursue FDA Mis-Label Claim against Patentee

By Dennis Crouch

Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, (Supreme Court 2012)

This decision only slightly shifts balance of power in the pharmaceutical industry away from patentees toward generic manufacturers. The case may serve as a good example a complex issue that the Supreme Court appears to understand and deal with in a nuanced fashion.

The FDA maintains a listing of approved drug treatments and any patents that cover the treatment. The listing – known as the Orange Book – is essentially managed by the individual patentee-manufacturers who regularly provide the FDA with updated information of new listings and de-listings. Patentees receive a number of benefits from listing patents in the Orange Book, including constructive standing to sue based upon a generic company's filing of an abbreviated new drug agreement (ANDA) as well as an up-to-30-month stay of FDA approval of any generic versions.

Although the diabetes drug repaglinide has three FDA approved uses, Novo's listed patent covers only one of those methods of use. Relying upon that limitation of coverage, Caraco filed an ANDA application requesting permission to sell the drug for the other two uses but carving out the patented use from its application. Novo then changed its Orange Book listing to indicate that its patent actually covered all three approved uses.

In the ensuing litigation, Caraco filed a counterclaim seeking an order to force Novo to amend its use-code listings. The Federal Circuit, however refused to allow the counterclaim.

In a unanimous decision penned by Justice Kagen, the Supreme Court has reversed, holding that a generic drug manufacturer may employ the counterclaim provision of the Hatch-Waxman Act to force correction of a use code that inaccurately describes the brand's patent as covering a particular method of using a drug.

The Federal Circuit had given the statute a highly technical reading – noting that such a counterclaim for correction was only available if "the patent does not claim … an approved method of using the drug." 21 U. S. C. §355(j)(5)(C)(ii)(I). Since the patent did cover one approved method, the appellate panel majority reasoned that there was no standing to correct the two incorrect listings.

The Supreme Court rejected that analysis as counter to the context surrounding the provision in the law.

The statutory counterclaim we have considered enables courts to resolve patent disputes so that the FDA canfulfill its statutory duty to approve generic drugs that do not infringe patent rights. The text and context of the provision demonstrate that a generic company can employthe counterclaim to challenge a brand's overbroad use code. We accordingly hold that Caraco may bring a counterclaim seeking to "correct" Novo's use code "on the ground that" the '358 patent "does not claim . . . an approved method of using the drug"—indeed, does not claim two.

Reversed.

Justice Sotomayor penned a short concurring opinion calling for further reform to the statute and within the FDA to better ensure that generic drugs can become quickly available for uses that are not covered by any valid patent. The concurring opinion calls the agency to task for failing to exercise its authority in regulating listings in the Orange Book.

34 thoughts on “Supreme Court: Generic Pharma Manufacturer Has Standing to Pursue FDA Mis-Label Claim against Patentee

  1. Gosh, it’s been busy around here. Between work initiatives, holiday parties, shopping, wrapping, and being a mom, there wasn’t much time left over. I’m going to try and do some catch up within the next few days. We had a lovely Christmas holiday, and especially enjoyed starting new traditions with our kids. (first year with kid(s) in the plural!) As always, I enjoyed decorating and wrapping, and let E get in and help a little.

  2. Couldn’t they patent those other uses? Sure the effective term of those claims would expire as soon any other use was publicly available, but it would be one more selling point for the duration.

  3. The infringer would be the pharmacist who prescribed it. The seller of the drug is in no way contributory.

    As pointed out, the pharmacist prescribing the drug would be the infringer.

    If the patentee does not have a patent on the composition generally, then he is generally screwed if (1) the generic seller does not market the drug for a patented use or instructs the buyer (pharmacist) that it can be used for such purposes, or (2) the patentee does not want to sue the buyer.

  4. See my post at Apr 18, 2012 at 01:50 PM above and tell me how Novo’s actions were borderline fraudulent.

  5. In 2009, as explained in Judge Dyk’s concurring opinion of the Fed Circuit case, the FDA requested (Not NOVO) a change to the approved indications for Prandin®. (from three to the one you placed in ALL CAPS.) Thus, this change in indication forced Novo to change its packaging/labeling for the product. Since the indication changed, Novo was also forced to change the use code to match the new Prandin® indication. Why was Novo “forced” to change the use code? Well, Novo’s actions were consistent with the FDA’s own forms and guidance. See link to fda.gov Section 4.2 expressly states that the patent owner: “Submit the indication or method of use information as identified specifically in the approved labeling.” Nowhere in these instructions does it say the patented method. It instructs the patent owner to submit the indication. Thus, the FDA’s procedures forced Novo to change the use code to comport with the new indication.

    My answer to your second paragraph questions becomes obvious in light of the above.

  6. “The case may serve as a good example a complex issue that the Supreme Court appears to understand and deal with in a nuanced fashion.”

    Why, oh why, couldn’t they have done that with Mayo v. Prometheus?! That decision showed neither understanding nor nuance.

  7. That’s a decision the pharma company has to make knowing that the most it can get is a method patent, not a composition patent. Yes, one is inferior to the other. That’s simply a fact of life — a method patent is less valuable than a composition patent, precisely because you cannot monopolize other uses of the drug. Is it worth it to invest in research knowing that at most you will get a second rate monopoly? That’s an economic calculation.

    Meanwhile, telling the government you have a patent on three uses when you only have one strikes one as bordering on fraud, and certainly is an abuse. Amazing that the CAFC thought there was no remedy.

  8. Novo’s original use code stated “[u]se of repaglinide in combination with metformin to lower bloodglucose.” That is one of the approved uses, and the only one subject to an in force patent. After the ANDA was filed, Novo changed its use code to “A METHOD FOR IMPROVING GLYCEMIC CONTROL IN ADULTS WITH TYPE 2 DIABETES MELLITUS.” Now, explain to me why exactly they made that change. The FDA didn’t force them to do it. No, the only reason they did it was to try to keep the generic out.

    And in your hypothetical, of only two approved uses yet a broader patent scope, who cares? If the use code is as broad as the patent claims, what possible harm is there to the generics? And if the use code is limited to the approved uses, what is the harm to the NDA holder? It’s not like a generic is going to try to file and ANDA for the unapproved uses.

  9. However what happens when the claim/ use code does not match all the indications.

    What difference does that make? A patent claim doesn’t have to line up exactly with every commercial embodiment, and you don’t need FDA approval to have 112 support. All that matters is whether the indication is within the claim. Seems like any type of irritable vowel syndrome would be, in this case.

  10. Well at least this shows, despite their recent track record, that the Sups can actually pen an intelligent opinion in the field of patent law.

  11. Will it make sense for companies to invest in trials for a second indication of the drug if there is not sufficient patent term on the composition of matter patent to warrant the investment?

    You mean additional to the patent term?

    What you really are talking about is extra time, isn’t it?

  12. Finally, the abuse perpetrated by the big pharma in the name of advancing medicine through the overreaching on every patent they get (however bogus the claims are), and facilitated by the FDA in the guise of “we do not do patents” will end — at least temporarily!!!

  13. They will get other indications because it’s illegal to market the drug for off-label uses and the Feds are actually enforcing that now and going after them. So if they find a promising indication other than the first one, they’ll do the work to market it. They could do that during the patent period just as easily now as before, it’s just they’d rather get more years of exclusivity than higher revenues during a normal period of exclusivity.

  14. It has everything to do with the 3 years regulatory exclusivity. The reward the Hatch-Waxman act provided to drug companies for investing in new uses of existing drugs is that the FDA is not, within three years, permitted to approve a generic version of that drug for that use. However, if a generic drug that is not seeking approval for the new indication is nonetheless substituted for the brand regardless of the indication, the substitution scheme defeats the purpose of the three year exclusivity.

  15. Novo didn’t overreach. Their use statement is the approved indication as it appears on the package insert for the product. In fact, the form one files with the FDA when asking for use codes suggests that either the use or the indication be supplied. Kagen mentioned that in the decision, but wholly ignored the fact that Novo’s “broad use claim” was in fact it’s approved use of the drug.

    That’s what this argument is about. Caraco wants the brand to list its patented method claim (singular) as the use code. If the generic isn’t applying for that use, then no litigation. However what happens when the claim/ use code does not match all the indications. E.g your method claim says “drug x to treat a disease of vowels.” The approved indications are to treat disease of vowel A and disease of vowel E only. (disease I, O, U, and sometimes Y were not studied). What should the use codes be, the patented broad method of treating all vowel diseases or just the two approved vowel disease treatments?

  16. Or maybe they shouldn’t have done the studies to advance medicine in the first place. One indication per drug is enough. We wouldn’t want a drug that eases pain and thins the blood to prevent heart attacks. Is this the (il)logical conclusion: drugs will only have one approved indication? Will it make sense for companies to invest in trials for a second indication of the drug if there is not sufficient patent term on the composition of matter patent to warrant the investment?

    One of the ideas that I have heard is that given this scenario, the govt should invest in alternative indications for off-patent drugs through the NIH. Much is known about these drugs already and no Pharma company will invest-and you can forget about generics.

  17. The above comments are interesting in understanding why, in the real world, the patentee cannot effectively enforce a patent on a specific use of a drug [not a patent on the drug itself] once generics can sell that drug for any other use.
    Presumably contributory infringement is of no help to the patent owner, since that statute requires: “..knowing the same to be especially made or especially adapted for use in an infringement of such patent, AND NOT a staple article or commodity of commerce suitable for substantial NONinfringing use.” ?

  18. One other thing…when Sotomayor says that the generic has no choice but to exactly copy the branded labeling, see is referring to the situation in this case where the name brand company overreached on its use statement. Because they allegedly claimed their patent protection extended to uses beyond what they in fact did, the generic company could not carve out the patented use for labeling purposes (section viii statement). This case absolutely does not give generics carte blanche as you suggested.

    Also, this case has absolutely nothing to do with 3 year data exclusivity. Apples and oranges.

  19. Thus, this case allows generic substitution of branded drugs for all uses, not just the unpatented ones. Again, the 3 year data exclusivity for new uses of old drugs is vitiated.

    Your logic completely escapes me. If there are unpatented, yet FDA-approved, uses, then the generic can request FDA approval of labeling which carves-out any patented use. Now, that system is clearly not perfect. But I hardly see how a generic company which does not at least attempt to avail itself of that process can claim they are not liable for contributory/inducement because they had no choice but to label the product in a way they really did not want to. In fact, if anything, this case cuts against the argument you are trying to make, as it opens up another way for a generic to force name brands to use more precise Orange Book listings.

  20. Thus, this case allows generic substitution of branded drugs for all uses, not just the unpatented ones. Again, the 3 year data exclusivity for new uses of old drugs is vitiated

    Good.

  21. Ned – pharmacy substitution is common practice, and most state laws require it for Medicare/Medicaid see here for example link to professionals.epilepsy.com.

    It has nothing to do with a pharmacist character. Actually, they have no knowledge and should not be charged with knowing which methods of treatments for which drugs are on or off patent. And they don’t have the means to decide that either. For example, a patient’s script typically doesn’t tell why the patient is taking the medication, it simply tells the pharmacist what to dispense for the patient and how to take it.

    So here’s the scenario, a patient in the doc’s examining room was diagnosed with X disease. The doc prescribed Drug A for X disease, which is a patent method of using Drug A. Drug A is also good for curing disease y, which is not a patented use of Drug A.

    The script is sent (electronically, usually) to the pharmacy of choice (e.g., Walgreens) and drug A is dispensed. Unless the pharmacist asks the patient or the doc’s write the purpose of taking Drug A on the prescription, the pharmacist would have no way of knowing why the patient is taking drug A – is it for patent treatment of disease X or unpatented treatment for disease Y? Because of this, the generic substitution occurs and is, in fact, common practice.

    The consequence is that there is no way for a patent holder to prevent generic substitution of the brand even if the patient was prescribed the brand for its patented use.

    To address your second point, because the SCOTUS has decided that a generic drug’s label must (exactly) match brand’s label and that generics do not have sales forces promoting their drugs (see substitution scheme explained above), the generics have a (admittedly) strong argument that they do not have the requisite mental state to be held liable for contributory or inducement of infringement.

    Thus, this case allows generic substitution of branded drugs for all uses, not just the unpatented ones. Again, the 3 year data exclusivity for new uses of old drugs is vitiated.

  22. “If you were a rubber manufacturer, would you want or expect to be sued on your unpatented rubber composition every time someone patented a new tire tread pattern?”

    Well, mebbe so, but only if you’d have offered an analogy that was actually a bit more on point.

    This one may be a bit closer: There are patented tire treads that require a specified rubber which you do not yet make. Now you start making said rubber, and introduce it directly to those who are very likely to use it for the patented tire treads. Sure, there’s another tire tread type out there, too, that they COULD use it for. Now, in this case, is your new rubber product a regular ol’ gray good that’s fungible for lots of non-infringing uses? Or are you a contributor to / inducer of infringement?

  23. If the court decides the claimed use does not cover the ANDA use, I think the Orange Book should be amended to reflect the actual state of affairs. What is the problem?

    As IANAE states, the patent holder does not have a patent on the drug, only on a use. Anyone should be able to sell the drug for other uses. If pharmacists do in fact swap illegally as you contend, perhaps the NDA patent holder can sue the pharmacists. But you assume that pharmacists are dishonest.

    Further, if it can be shown that the ANDA holder urges the illegal substitution, they may be liable for inducement. Either way, the patentee is not without a remedy.

  24. MM with a Quinnbot comment and IANAE with an anti-software patent comment…

    The Trolls are bored.

  25. Second, Novo is not trying to prevent Caraco from substituting its generic version for the non-patented uses. What Novo is doing is trying to stop Caraco from getting its generic substituted for the patented uses – which is what will happen.

    I still don’t see how that’s Caraco’s problem. If you were a rubber manufacturer, would you want or expect to be sued on your unpatented rubber composition every time someone patented a new tire tread pattern?

    If Novo couldn’t or didn’t get a patent on the drug, Novo shouldn’t be able to stop people who are selling the drug without more.

  26. IANAE – First, because there is no statutory/regulatory provision to “take it up with the pharmacist.”

    Second, Novo is not trying to prevent Caraco from substituting its generic version for the non-patented uses. What Novo is doing is trying to stop Caraco from getting its generic substituted for the patented uses – which is what will happen.

    What this decision has now created is a pre-litigation infringement hearing. With this counterclaim, the court will have to determine whether the “use” in the use code falls within the scope of the patented method. To do this, the court will have to construe the claims and then decide is the “use code” falls within the claims.

    What is more disturbing is Kagen’s dismissal of the reason that Novo changed its use code. She addresses it in a footnote at page 8. She says Novo decided to change it. However, the citation to the Fed. Circuit clearly shows that while Novo did change it, Novo did so because the FDA told them to!

    In the end, here’s how I think its going to play out. A patient’s prescription is going to be switched out at the pharmacy level and the patient is taking the generic as per the patented method. Novo will sue Caraco for willful, contributory and/or inducement of infringement and we will have yet another litigation.

  27. Caraco simply will put its generic product into the pharmacies as an A/B rateable product that will automatically be switched for the brand at the pharmacy level regardless of the intended end use for the drug.

    If the patent doesn’t cover the drug itself, why should the patentee be able to stop the generic from selling the drug? Take it up with the pharmacist.

    It sounds like the same “problem” the software patentees have – they have an identifiable infringer, but they want all of patent law changed because they’d rather be able to sue someone else.

  28. Kagen seems naive – she kept referring to the generic as “wanting to market its drug for only the unpatented methods of use.” Last I checked, I didn’t think Caraco has sales reps. Caraco simply will put its generic product into the pharmacies as an A/B rateable product that will automatically be switched for the brand at the pharmacy level regardless of the intended end use for the drug.

    3 year data exclusivity for new uses is now completely meaningless. Say goodbye to multiple indication drugs.

  29. When precise reading and bright lines create extra obligations on the patentee, we’ll decide the case based on precise descriptions of the invention. Festo, Microsoft v AT&T, Caraco.

    All these inventions are “related to a human organism” so they are ineligible for patenting.

    /Quinnbot off

  30. Hmm.

    When precise reading of claims and bright line rules (you know, the kind of thing we usually like in commercial law) would help the patentee, we’ll add some hazy “enough more” requirement above the literal claim language, or allow the law to reach beyond the literal words. KSR, Quanta, Bilski, Mayo v Prometheus.

    When precise reading and bright lines create extra obligations on the patentee, we’ll decide the case based on precise descriptions of the invention. Festo, Microsoft v AT&T, Caraco.

    Am I drawing too big an inference from too few data points?

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