Recent Developments in Hatch-Waxman Law

Recent Developments In Hatch-Waxman Law

Areas of Significant Legal Developments

I. Settlement – Monday’s 3rd Cir. K-Dur Decision

II. Induced Infringement – Method of Use Claims

III. New Bite of “Effective” Claim Terms In
Obviousness

IV. You Can Be Enjoined Even If You Win

© 2012 Knobbe, Martens, Olson & Bear, LLP all rights reserved. 2

I. Developments In Settlement:
Monday’s K-Dur Decision
By The Third Circuit

©2012 Knobbe, Martens, Olson & LLP all rights reserved.
©2012 Knobbe Martens, Olson & Bear, Bear, LLP all rights reserved. 3

I. Settlement: K-Dur Decision

In re: K-Dur Antitrust Litigation
No. 10-2079 (3rd Cir. July 16, 2012)

Issue: What is the proper legal test for whether a Hatch
Waxman litigation settlement including a payment to the
generic is an unreasonable restraint of trade under the
Sherman Act ?

Holding: Such payment is prima facie evidence of an unreasonable
restraint, which it is up to the settling parties to rebut “by
showing that the payment (1) was for a purpose other than
delayed entry or (2) offers some pro-competitive benefit.”



Why is This a Big Deal ?
• It isn’t . . . if your business model depends on date-only
settlements without no-authorized generic provisions (which the
FTC views as a form of reverse payment).
• Because the “scope of the patent” test adopted by the 2nd, 11th
and Federal Circuits allowed for summary judgment or dismissal
on the pleadings.
• The K-Dur “quick look” reasonableness analysis is likely to lead
to issues of fact, precluding summary judgment and requiring
trial.
– The FTC and Private Plaintiffs
– Expense of Antitrust Litigation
– Potential Antitrust Damages


Scope of the Patent Test – 2nd, 11th and Federal Circuits

Reverse payments are permitted so long as:

(1) the exclusion does not exceed the scope of the patent;
(2) the infringement claim was not objectively baseless;
and
(2) the patent was not procured by fraud.

No antitrust claim subject to this test has ever been permitted to
proceed to trial.

Per Se Test in 6th and DC Circuits?

In re Cardizem CD Antitrust Litig. (6th Cir. 2003)


K-Dur Quick Look Test – Law of the 3rd Circuit

• Reverse payment settlements are unreasonable restraints,
unless the settling parties can prove:
- Payment for purpose other than delay; or
- Pro-competitive benefit of payment.

• How and how likely to meet burden of rebuttal?
- Merits of underlying patent case irrelevant
- Can attempt to prove payment for something else
- Can attempt to prove benefit, such as allowing cash-
starved generic to avoid bankruptcy and compete


Short Term:
• Petition for rehearing en banc.
• Settling cases pending in New Jersey and Delaware courts gets
harder right away; likely slows down for a little while.
• Check your files, especially for no-AG agreements.
Medium Term:
• Brand companies may think twice before filing in those districts -- at
least their tough cases. “Our hands are tied.”
• Increased attention to settlement provisions regarding who does and
pays what in the event of FTC investigation or private antitrust
litigation.
• More FTC enforcement actions in 3rd Circuit.


Long Term:

• Supreme Court review and resolution of conflict.

• Industry adjusts to building rebuttal or accepting date-only
settlements.

Open Issue:

• Will K-Dur test be applied to no-AG provisions?

• August 2011 FTC Report: “Authorized Generic Drugs:
Short-Term Effects and Long-Term Effects.”


II. Developments in Induced
Infringement


II. Induced Infringement: Use Codes
Why Use Codes Matter

• FDA does not check accuracy of brand-specified use codes for
Orange Book listed method of use patents.
• FDA will not allow Section viii statement if the use code
describes an indication for which the generic challenger seeks
approval – i.e., if the label overlaps with the use code.
• It does not matter to the FDA whether the patent itself actually
does encompass the indication for which approval is sought.
• Brand can force Paragraph IV litigation by insisting on
misleading use codes.


What the Parties and FDA Did in the Caraco Case
• Brand initially provided use code indicating patent covered one
of three approved indications: use of API in combination with
second API to treat diabetes.
• Generic sought to carve out that combination indication from its
label, with Section viii statement. Brand challenged carve-out at
FDA as rendering drug unsafe.
• Brand changed use code to indicate patent covered treatment of
diabetes generally, without limiting to combination use of API.
• FDA refused carve-out; forced Paragraph IV certification.
Generic forced to propose label with combination use, which it
stipulated induced infringement of the patent.
• Generic brought counterclaim to correct erroneous inclusion of
the other two indications in the use code, pursuant to the Act.


What the Courts Held in the Caraco Case

• The Act provides that a generic defendant may “assert a
counterclaim seeking an order requiring the [brand] to correct or
delete the patent information submitted by the [brand] under
subsection (b) or (c) [of i 355] on the ground that the patent
does not claim . . . an approved method of using the drug.”

• The Federal Circuit (Rader) said this means that so long as the
patent claims at least one of the approved methods, there can be
no counterclaim. And in any event, the Act does not authorize a
counterclaim in this case because use codes are not
“information submitted . . . Under subsection (b) or (c).”
• In April 2012, the Supreme Court rejected both conclusions and
affirmed that the counterclaim was available in that case.


II. Induced Infringement: The Right to Not Seek Approval

Why the Right to Not Seek Approval is Important

• Routine brand lifecycle management to sponsor studies to
support new indications or new patient populations for a given
drug, which can then be claimed in a method of use patent
extending years beyond the compound.

• The threat of litigation and liability for at-risk launch in the face of
an endless series of new method of use patents in effect shuts
down generic competition indefinitely.



The Federal Circuit in 2012 and the Right to Not Seek Approval

AstraZeneca v. Apotex -- Crestor: Motion to Dismiss

Bayer Schering Pharma v. Lupin -- Yasmin: Judgment on Pleadings



The Facts in AstraZeneca v. Apotex

• Brand asserted infringement of two method of use patents covering
new approved indications for Crestor.

• Generics had filed Section viii statements and carved out both
indications from their labeling.

• Brand did not allege that current proposed labeling included the
claimed uses in the “Indications and Usage” section.

• Brand did not allege that Section viii statements were not authorized
by law.



The Facts in AstraZeneca v. Apotex

• Brand alleged that FDA ultimately would force generics to include
the indications in their labels.
• Brand argued that whether other parts of the labeling induced
infringement was a factual issue that could not be resolved on the
pleadings without discovery.
• Brand argued that, as a matter of “market realities,” people will use
the generic products for the indications covered by the patents.



What the Federal Circuit Held in AstraZeneca

• Brand failed to state claim for inducement, because it was
uncontested that generics were not seeking approval for the
claimed indications.
• Did not expressly address factual issue of whether the labeling
other than “Indications and Usage” induced infringement.
• Found claims based on speculation as to what the FDA someday
would do to be unripe for resolution.
• Found that “market realities” argument would vitiate the Section viii
statute, and would lead to de facto infinite exclusivity.



What the Federal Circuit Held in AstraZeneca

“But AstraZeneca does not allege or argue that Appellees’ Section viii
statements were erroneous, nor would an unfounded Section viii
statement necessarily immunize an ANDA that actually seeks approval
for a patented treatment or necessarily leave the patentee without
recourse under i 271(e)(2). We do not opine on such a fact situation
not before us.”



The Facts in Bayer Schering Pharma

• Brand asserted infringement of patent claiming method of
“simultaneously achieving” (1) a contraceptive effect, (2) an anti
androgenic effect, and (3) an anti-aldosterone effect.

• That FDA approved use for contraceptive effect only.

• Generics sought approval for contraceptive effect only.

• Generics sought judgment on the pleadings.



The Facts in Bayer Schering Pharma

• Brand relied on experts to argue that “Clinical Pharmacology”
section of label reflected FDA approval of claimed uses, and
thus would induce their infringement.

• Brand argued that FDA approval of marketing materials
mentioning these other uses or effects constituted FDA approval
of the claimed uses.

• Brand argued that regulations governing listing in Orange Book
call not only for patents claiming “indications,” but also for “other
conditions of use.”



What the Federal Circuit Held in Bayer Schering Pharma

• Held for generics. Affirmed dismissal. Rejected all brand
arguments.

• Split panel. Judge Newman dissenting.

• Judge Newman opines that judgment on the pleadings is
inappropriate where there were factual issues based on the FDA-
approved promotional literature and the parts of the generics’ labels
other than “Indications and Usage.”



Okay. So what does this mean?


II. Induced Infringement: The Brand’s Right to Sue Anyone

What Is Going On?

District Courts in Delaware and New Jersey are expanding
the universe of ANDA defendants to include API suppliers,
development partners and potentially anyone else who in
any way can be said to have contributed to the ANDA and may
be in some way affected by the contemplated commercial sale
of the proposed generic product.

Why does that matter?

Control and pace of the litigation; indemnification; surprise.


III. New Bite of “Effective” Claim
Language in Obviousness


III. “Effective” in Obviousness

Two Cases For Consideration

AstraZeneca v. Anchen (D.N.J. 2012) -- Seroquel XR

and

In re Cyclobenzaprine Hydrochloride ER Litigation
(Fed. Cir. 2012) -- Amrix


III. “Effective” in Obviousness: Seroquel XR

The Facts in Seroquel XR

• Formulation patent covering use of HPMC in gel matrix sustained
release formulation of quetiapine:
12 claims to specific formulations
2 claims to processes for making claimed formulations
1 claim to method of treatment using the claimed formulations

“A method of treating psychotic states or hyperactivity in a warm-
blooded animal which comprises administering to said warm-blooded
animal an effective amount of a formulation according to anyone of
claims 1-12.”



District Court Found All Claims Valid – Not Obvious

• Brand conceded that HPMC formulations well known in prior art,
and quetiapine compound likewise well known.

• Court found that because of the single claim to administering an
“effective amount,” the person of ordinary skill was not limited to
formulators, but included clinicians and clinical researchers in the
field of psychotic states.

• Court found credible brand’s expert testimony that clinicians and
researchers would not have been motivated to seek a sustained
release formulation of quetiapine to treat certain psychotic states.



District Court Found All Claims Valid – Not Obvious

• The Court discounted generics’ expert formulation testimony as not
giving due regard to the number of factors with HPMC gel matrix
formulations, which in turn made it less likely that a person of
ordinary skill in the art, even if motivated, would have had a
reasonable expectation of success.

• The Court also found that the “unique features” of quetiapine as an
API made it less likely that a motivated person of ordinary skill in the
art would have had a reasonable expectation of success.

• Tension with the Court’s finding of long felt need for formulation that
would titrate faster than the quetiapine IR.


III. “Effective” in Obviousness: Cyclobenzaprine ER

The Facts In Cyclobenzaprine ER

• Formulation patent covering use of beads to release specified
amounts of the API at specified rates:

“wherein said dosage form provides a therapeutically effective
plasma concentration over a period of 24 hours to treat muscle
spasm associated with painful musculoskeletal conditions when
administered to a patient in need thereof” and

“provides a maximum blood plasma concentration (Cmax) within
the range of about 80% to 125% of [X] and an AUC within the
range of about 80% to 125% of [Y] and a Tmax within the range
of 80% to 125% of about [Z] hours.”


The District Court Found The Claims Obvious

• Found that it would have been obvious to make an ER formula to
produce a pharmacokinetic (PK) profile bioequivalent to the PK profile
of the immediate release product.

• Concluded that the claimed “therapeutically effective concentration”
would necessarily follow from such bioequivalence.



The Federal Circuit Reversed

• “The district court [] was also required to consider the asserted claims’
limitation requiring therapeutic effectiveness, and whether it would
have been obvious to one of ordinary skill in the art at the time of the
invention that a bioequivalent PK value would satisfy that limitation.”

• “While it may have been obvious to experiment with the use of the
same PK profile when contemplating an extended release formulation,
there is nothing to indicate that a skilled artisan would have had a
reasonable expectation that such an experiment would succeed in
being therapeutically effective.”

• Key is absence of known PK to pharmacodynamic (PD) relationship.


III. “Effective” in Obviousness

What might this mean for the future?

Increased centrality of clinical experts

Non-obviousness of old formulation technology

Increased importance of Section 112 defenses


IV. You Can Be Enjoined Even If
You Win


IV. Enjoined Even If You Win

In re Cycobenzaprine ER Litigation

• Trial
• Sua Sponte TRO Against Generic at End of 30 Months
• Ruling Finding Patents Obvious
• Mylan Launch
• District Court Grants Injunction Pending Appeal
• Mylan Moves Federal Circuit for Stay of Injunction
• Federal Circuit Denies Stay, With Modification
• Federal Circuit Reverses Obviousness


Recent Developments in Hatch-Waxman Law

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