Once again, a plethora of interesting events has occurred since the last time we stopped by. What was the biggest headline? That decision may be up for grabs, but certainly, the $500 million penalty paid by Ranbaxy Laboratories is high on the list. The generic drug maker ponied up to settle criminal and civil charges stemming from a long-running manufacturing failure and cover-up scheme.

The US Justice Department called this the largest “financial” penalty paid by a generic drugmaker for violating the Food, Drug & Cosmetic Act. Ranbaxy pleaded guilty to seven felony counts, including three for making false statements to the FDA; paid a $120 million criminal fine and forfeited $20 million. Another $350 million was paid for causing federal healthcare programs to overpay for various drugs.

For those who may not recall, Ranbaxy used raw chemicals from unapproved sources, fabricated in-house test data to meet FDA standards and concealed these activities from FDA inspectors by falsifying records. These infractions went on for several years, mostly at two plants in India, but also involved senior management there and in the US.

Since my last article here on IPWatchdog.com, the pharmaceutical industry has been simply overflowing with interesting developments, including the US Supreme Court hearing arguments concerning three significant cases.

The first case argued at the Supreme Court will determine whether generic drugmakers can be sued for alleged flaws in the design of their medications. At issue is whether federal law preempts such claims from proceeding in state court and if drugmakers can be held liable if they decline to withdraw their medicines from the marketplace.

Of course, the same concept could be applied to brand-name drugmakers, which is why the entire pharmaceutical industry is on edge. In fact, the Obama administration filed a brief in support of drugmakers over concerns the FDA regulatory review process could be undermine if medicines deemd safe and effective could later by considered ‘unreasonably dangerous.’

The court reviewed an appeal by Mutual Pharmaceutical to overturn a $21 million jury award to a New Hampshire woman who in 2004 had taken a generic painkiller called sulindac, but developed Stevens-Johnson Syndrome and toxic epidermal necrolysis. She’s nearly permnanetly blind and suffered burn-like lesions over most of her body, underwent numerous surgeries, and is now unable to read, drive or work, and must use a feeding tube, her lawsuit says.

In my first installment on Paragraph IV Certifications under Hatch-Waxman, I explored the basics of this “beast.”  See A Primer on Paragraph IV Certifications: Into the Belly of the Hatch-Waxman Beast Part 1  .  And as promised, in this second installment, I’ll now focus on one of the more litigated “trouble spots” for Paragraph IV Certifications, namely the “carve out” cases.  (In my third and final installment, I’ll talk about the other “trouble spot,” namely Hatch-Waxman “reverse payment” cases, which is now before the Supreme Court in the 11^th Circuit case of FTC v. Watson Pharmaceuticals, renamed as FTC v. Actavis, and for which oral argument was recently heard.)  So strap on your safety belts again, and let’s dive back into the “belly” of Hatch-Waxman Paragraph IV Certification “beast” to look at “carve outs.”

“Carve outs” essentially involve a situation where there is an FDA approved drug for which the generic drug maker seeks to market that drug, again through an Abbreviated New Drug Application (ANDA), but instead for an FDA approved use, where also that FDA approved use is unpatented.  While these “carve outs” also involve the filing of a Paragraph IV Certification, there is a slight but important twist in that Certification:  inclusion of what is called a “section viii statement”[1] that the generic drug maker “is not seeking approval for a method of use that is claimed in the patent.”[2]  When submitting the “section viii statement,” the generic drug maker must also provide a proposed label that removes or “carves out” the claimed method of use.[3]  The FDA will then approve this “carve out” statement only if:  (1) there is no overlap between the proposed label submitted by the generic drug maker and a use described in the Orange Book; and (2) removing the information about the claimed method of use from the label doesn’t render the drug less safe or effective.[4]

In a moment of extreme weakness, I agreed to Gene’s request to doing a primer on Paragraph IV Certifications under the Drug Price Competition and Patent Term Restoration Act, commonly referred to as Hatch-Waxman.  I don’t know if you would call me an expert, but I’ve studied many, many cases involving Paragraph IV Certifications under Hatch-Waxman.  The courts have found Hatch-Waxman to be a hydra-like monster with a labyrinth of sections that are frequently confusing (or worse yet, conflicting).  Paragraph IV Certifications are a particular trouble spot in Hatch-Waxman.  So if you’re up to diving into the “belly of this beast,” let’s examine the characteristics of this most infamous of the Hatch-Waxman monsters.

To understand Paragraph IV Certifications, you must first address what an Abbreviated New Drug Application (ANDA) is.  ANDAs are how generic drug manufactures expedite the approval of their generic drugs.  To use the language of the Federal Circuit, “[g]eneric drug companies are not required to conduct their own independent clinical trials to prove safety and efficacy, but can instead rely on the research of the pioneer pharmaceutical companies.”  See the 2008 Federal Circuit case of Janssen Pharmaceutica, N.V. v. Apotex, Inc.[1] which provides an excellent explanation of what the ANDA and Paragraph IV certification process is all about.  Instead, in the ANDA process, the generic drug company may rely upon this clinical safety and efficacy of the “pioneer pharmaceutical company” if it can “show show bioequivalence of its generic drug to the NDA drug.”  “Bioequivalence” is defined by the FDA as “the absence of a significant difference in the rate and extent to which the active ingredient or active moiety in pharmaceutical equivalents or pharmaceutical alternatives becomes available at the site of drug action when administered at the same molar dose under similar conditions in an appropriately designed study.”[2]  I’ll get to where those “pioneer pharmaceutical companies” and “NDA drugs” enter the ANDA approval process next.

Yet another busy month has passed since our last stop here at IPWatchdog. So let’s recap some of the more interesting developments. The last few weeks, in fact, have been bookended by concern over a batch of diabetes drugs and links to pancreatitis, but also pre-cancerous cellular changes in the pancreas.

First, a study in JAMA Internal Medicine indicated the drugs can double the risk of developing pancreatitis, an issue that has plagued these meds for years. Insurance records for more than 2,500 diabetics between 2005 and 2008 were examined and found patients hospitalized with pancreatitis were twice as likely to have taken the drugs than a control group that did not have pancreatitis. The study did not examine other meds, such as Novo Nordisk’s Victoza, that were not available at that time.

The issue raised questions about whether the results might alter treatment practice by physicians. Of course, the drug makers issued statements standing by the safety of their medicines, while acknowledging the risks have been detected in the past. The American Association of Endocrinologists and the American Diabetes Association issued a joint statement noting the analysis was a retrospective study, not a prospective, randomized controlled clinical trial.

Since we last met, there was yet another development in one of the more fascinating stories to grip the pharmaceutical world. The FDA decided not to pursue a re-hearing before a federal appeals court that recently ruled the federal government could not prosecute a sales rep who promoted off-label uses of a medicine because his speech was not false and misleading. The agency let a January 16 deadline pass without filing a motion.

At issue was a decision by the US Court of Appeals for the Second Circuit to overturn the 2008 conviction of a former sales rep for allegedly encouraging doctors to prescribe a drug on an off-label basis. A panel ruled 2-to-1 that his conviction violated his First Amendment rights and that the federal government did not attempt to prove that his remarks were false and misleading.

Since then, the decision has raised questions about a fundamental premise long asserted by the FDA and the US Department of Justice that off-label promotion is prohibited by law, which has been the basis for numerous settlements with drug makers over the past decade. Consequently, the court ruling prompted speculation about the strategic approach the FDA would take in response.

Litigation always factors into the pharmaceutical world, but the US Supreme Court commanded a special place in recent days. The high court figured in no fewer than four contentious issues that, not surprisingly, play a vital role in how drug makers can and will operate.

Let’s start with a case that is not yet before the court, but many predict will be headed there thanks to one of its earlier rulings. Earlier this month, a three-judge panel of the US Court of Appeals for the Second Circuit overturned the conviction of a former sales representative, who argued that prosecuting him for remarks made about off-label use violated his free speech rights.

In their decision, the 2-to-1 majority cited a US Supreme Court ruling early last year that struck down a highly controversial Vermont law, which restricted the sale of prescription drug data identifying prescribers and patients for commercial marketing purposes. Specifically, the court ruled that “speech in aid of pharmaceutical marketing… is a form of expression protected by… the First Amendment.”

The Federal Trade Commission recently filed an amicus brief in a case in the U.S. District Court for the Eastern District of Pennsylvania.  The brief is notable because the FTC explains in the brief that it is their learned opinion that minor, non-therapeutic changes to a branded pharmaceutical product harm generic competition and can constitute exclusionary conduct that violates U.S. antitrust laws.

Wow! I almost don’t know where to start to unpack such nonsense, but I will give it the old college try! Before proceeding, however, I can’t help but notice that with the notable exception of the United States Patent and Trademark Office, the Obama Administration has recently started to sound quite anti-patent.

Not only is the FTC arguing that product changes to patented drugs violate U.S. antitrust laws, but the FTC and Department of Justice (DOJ) are going to look into whether patent enforcement activities that seek redress for infringement violate U.S. antitrust laws.  See FTC, DOJ to Hold Workshop on Patent Assertion Entities. This does not bode well for a second Obama term, and I have to wonder whether those in the patent community that decided to vote for President Obama due to his perceived friendliness to patents and smooth running of the Patent Office are going to start to have regrets, particularly now that David Kappos is leaving the USPTO.

A key provision of the Hatch-Waxman Act resides in 35 U.S.C. § 271(e)(1) which provides immunity from a patent infringement suit where the testing of the patented invention is for the purpose of securing regulatory approval from the FDA.  Or to use the specific language of 35 U.S.C. § 271(e)(1), there is no patent infringement if the use of the patented invention is “solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs.”

This Hatch-Waxman provision, commonly known as the “safe harbor,” has been construed twice by the Supreme Court, and in an expansive manner to immunize alleged infringing activity.  First, in the 1990 case of Eli Lilly & Co. v. Medtronic, Inc., the Supreme Court ruled that this “safe harbor” applied to medical devices, not just drugs as was originally believed (including by the respective House and Senate floor managers for the Hatch-Waxman Act).  In fact, the basis for the holding in the Medtronic case makes this “safe harbor” essentially applicable to the testing of any patented invention that is for the purpose of securing regulatory approval from the FDA (e.g., food additives, cosmetics, etc.).  See Guttag, “The Ever Expanding ‘Safe Harbor’ of Hatch-Waxman:  The Merck v. Integra Lifesciences Case,” Cincinnati Bar Association Report, page 16 (August 2005).

On Friday, July 20, 2012, the National Association of Boards of Pharmacy® issued a report about the continued escalation of online counterfeit drug supply and the urgent need for international collaboration among regulators and private sector entities. As described in the Internet Drug Outlet Identification Program Progress Report for State and Federal Regulators: July 2012, counterfeit drugs sold online often make their way to unwary consumers through a complex chain of international transactions by multiple parties, and international, public-private collaborative efforts are needed to combat this illegal activity.

According to NABP, of more than 10,000 Web sites analyzed, 97% operate out of compliance with pharmacy laws and practice standards established in the United States. Such sites provide an outlet for counterfeit medicines to enter the US drug supply, endangering the health and safety of Americans. It is about time for the U.S. government to get serious and produce a comprehensive approach to protecting Americans preyed upon because they desperately need to find cheaper alternatives to the prescription drugs sold in the United States.

Washington, D.C. (June 21, 2012) – BIO commends the House of Representatives for its unanimous approval of S. 3187, the Food and Drug Administration Safety and Innovation Act (FDASIA), which includes a reauthorization of the Prescription Drug User Fee Act (PDUFA).

We appreciate the leadership of Senate Health, Education, Labor and Pensions Committee Chair Tom Harkin (D-IA) and Ranking Member Mike Enzi (R-WY) as well as of House Energy and Commerce Committee Chair Fred Upton (R-MI) and Ranking Member Henry Waxman (D-CA) in reconciling the differences between the user fee packages adopted by the two Chambers and for securing unanimous approval in the House.

Last week, on Friday, June 15, 2012, Merck (NYSE: MRK) announced the U.S. District Court for the District of New Jersey (Judge Peter G. Sheridan) ruled against the company on the issue of patent infringement in its suit against Apotex Inc. and Apotex Corp. See Non-Published, Redacted Opinion and Court Order. The patent at issue in the decision was U.S. Patent No. 6,127,353, which covers the active ingredient in Nasonex® and which provides exclusivity the expiration of the patent on April 3, 2018.  The District Court decision did, however, confirm the patentability of the claims in question, finding Apotex’s challenges for anticipation and obviousness unpersuasive.

The case at issue in the Merck announcement was styled Schering Corporation v. Apotex, Inc. 3:09-cv-06373.  So why was Merck announcing this adverse decision?  In November 2009, Merck completed a $41 billion acquisition of Schering-Plough. See Merck completes acquisition of Shering-Plough. This acquisition, making Schering a fully owned subsidiary, was reportedly part of an attempt to diversify as they seek to weather the recession and cope with the unpredictability of drug development. See Merck to buy rival for $41 billion.

In a complaint filed December 18, 2009, Schering claimed that the Abbreviated New Drug Application (ANDA) filed by Apotex constitutes patent infringement of the ’353 patent, which was issued to Schering on October 3, 2000 and claimed priority of an international patent application first filed pursuant to the Patent Cooperation Treaty (PCT) on September 6, 1991.

The mantra of the anti-patent community is nearly in unison on the issue of patented drugs.  Of course, everyone wants drugs to be developed, but no one wants to pay the exorbitant prices charged for blockbuster, patented drugs.  You can add me to that list of individuals who doesn’t like the prices, but at least there is a benefit.  Without appropriate financial incentives in place drugs would not be patented, but then again they wouldn’t be developed either.  But what is the justification for scarcity and exorbitant prices of old drugs that are off patent?

In a recent  survey of U.S. oncologists conducted by MDLinx reports that over 90% of oncologists are experiencing shortage of important cancer drugs in the United States.  The survey conducted of 200 U.S. oncologists in April 2012 finds that 90.5 percent reported experiencing shortages of key cancer drugs in their practices.

Washington, D.C. (May 24, 2012) – BIO commends the bipartisan Senate approval of FDASIA, which includes a reauthorization of the Prescription Drug User Fee Act (PDUFA).

In particular, we appreciate the leadership shown by Chairman Tom Harkin (D-IA) and Ranking Member Mike Enzi (R-WY) to craft a bipartisan measure which will continue to ensure patient safety, access to the newest cures and therapies, and job growth in America. FDASIA reflects the enhancements to PDUFA agreed upon by industry and the U.S. Food and Drug Administration (FDA). It will enhance the development and review of innovative new therapies through increased transparency and scientific dialogue, advancements in regulatory science and strengthened post-market review.

Erik Iverson is Associate General Counsel with the Bill & Melinda Gates Foundation, working exclusively with Foundation’s Global Health initiate. Mr. Iverson works with grantees in the development of intellectual property management plans, collaboration agreements and global access strategies with respect to the health solutions being funded by the Foundation. On Thursday, April 14, 2011, he will be the keynote speaker at the BIO IP Counsels Committee Conference, which will be held in Seattle, Washington from April 13-15, 2011. Mr. Iverson’s presentation at the BIO Conference is titled: “The Business Case for International Humanitarian Approaches to IP Management and Collaborations.” Several of my contacts at the Biotechnology Industry Organization (BIO) graciously put me in touch with Inverson and facilitated the coordination of an interview.  The transcript of part 1 of the interview appears below.