The Abuse of Orange Book Listings by Branded Pharmaceutical Companies

In my last post, I highlighted an example of the kind of drug patent representing obvious and trivial modifications of the prior art that sometimes has led to the unjustified extension of patent term to block generic and biosimilar competition in the market for medicines.  In this post, I would like to focus on a particularly potent form of drug-patent abuse that uniquely can afflict those drug patents covering medicines that are subject to the Drug Price Competition and Patent Term Restoration Act of 1984, better known as the “Hatch-Waxman Act”: The tablets and capsules, oral suspensions, sprays, creams, ointments, and gels that typically come to mind when most people think about drugs of the so-called “small-molecule” variety.

The modern pharmaceutical industry has its roots in small-molecule drugs; and they were the original subject of that great compromise between branded and generic drug companies, which is embodied in the Hatch-Waxman Act’s provisions. At the core of these provisions lies what may well-be the most direct link between drug patents and drug prices in the history of American drug-patent legislation: the listing of drug patents in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, better known in the trade as the “Orange Book.”  This is because the patents listed in the Orange Book for a particular drug have the power, by their mere assertion in litigation against a generic drug maker, to automatically block the FDA’s ability to approve a generic version of the drug for a period of 30 months—i.e., 2.5 years.

Some historical background is in order. The Hatch-Waxman Act came about in reaction to the famous decision in 1984 by the Federal Circuit in the case of Roche v. Bolar.  Roche sued Bolar for patent infringement under 35 U.S.C. 271(a), for using its patented sleeping pill, Dalmane, to conduct experimental testing for submission to the FDA for approval to market a generic version of Dalmane after expiration of Roche’s patent.  Bolar pleaded experimental use as a defense.  Notwithstanding that preventing such testing in effect gave Roche an extended period of market exclusivity beyond the existing patent term, the Federal Circuit took a hard line on infringement, and relied upon the decision by the Court of Claims in Pitcairn v. United States, for the proposition that experimental use is not a defense against infringement when consisting of “[t]ests, demonstrations, and experiments . . . [which] are in keeping with the legitimate business of the . . . [alleged infringer].”

Comes along Congress, with a sweeping reaction to the fledgling patent-appeals court’s ruling: The Hatch-Waxman Act, which reversed Roche v. Bolar, and instituted the cottage-industry we know today as ANDA litigation. The Hatch-Waxman Act legislates a specific experimental use exception for generic drug makers to allow for testing of generic versions of a drug for submission of testing results to the FDA, prior to expiration of patents covering the drug (35 U.S.C. § 271(e)(1)).  In return, drug-patent owners received a 30-month period upon submission of a generic drug application to the FDA, in which to vet the patents listed by the drug-patent owner in the Orange Book, before the generic drug application could be approved.

The compromise represented by the Hatch-Waxman Act depends on the good-faith listing of patents by a drug-patent owner in the Orange Book, and a good-faith basis on which to assert such patents against a generic drug maker.  Drug-patent owners are given wide latitude in their ability to list patents in the Orange Book.

Unfortunately, drug-patent owners have not always exercised such good faith in practice.  A particularly egregious case in point is U.S. Patent No. 6,503,894 (“the ‘894 patent”), another AbbVie patent, this one drawn to a testosterone gel formulation, marketed by AbbVie as AndroGel, for the treatment of male testosterone deficiency.

The alleged innovation in the claimed formulation is the inclusion of a specific compound, called isopropyl myristate.  Isopropyl myristate is one of many compounds listed in the ‘894 patent specification (and known in the prior art) as examples of a so-called “penetration enhancer,” but it is the only one claimed.

As originally filed, moreover, claim 1 was drawn to any “penetration enhancer.”  But the patent examiner rejected the broad claim over prior art.  In response, AbbVie limited the claim to the specific compound, isopropyl myristate, as recited in the issued patent; whereupon, the examiner allowed the ‘894 patent to issue.

AbbVie included the ‘894 patent in the Orange Book listing for AndroGel.  Two generic drug companies filed Abbreviated New Drug Applications seeking to make generic versions of AndroGel.  In accordance with the requirements of the Hatch-Waxman Act, both companies filed so-called “paragraph IV” certifications with Notice to AbbVie, providing detailed reasons why their drug products did not infringe the ‘894 patent.

To any member of the patent bar worth their salt, the noninfringement position should have appeared straightforward, and air-tight:  The generic formulations used a different “penetration enhancer,” not isopropyl myristate.  Therefore, they did not literally infringe the patent. And claim 1 was limited explicitly to isopropyl myristate during prosecution, for reasons of patentability, in response to prior-art rejections.  Accordingly, pursuant to the Supreme Court’s decision in the Festo case, there could be no infringement under the doctrine of equivalents, due to the countervailing doctrine of prosecution history estoppel.

The facts of the case appear, indeed, to make-out a textbook example of how this patent-law classic of judicial gloss on 35 U.S.C. § 271 infringement, operates.

Nonetheless, pursuant to the Hatch-Waxman Act, AbbVie sued both generic drug companies, asserting constructive patent infringement under the doctrine of equivalents.  Because the ‘894 patent was listed in the Orange Book, the act of filing suit, itself, automatically invoked a 30-month stay period, during which time the FDA was prohibited by statute from approving the generic drugs for sale to the public—nominally to allow the parties to vet AbbVie’s patent rights under the ‘894 patent, in court.

AbbVie’s maneuver worked like clockwork to induce regulatory gridlock, which prevented generic competition and kept the company’s profits high at public expense, for years.

Fortunately, the FTC would have none of it.  The agency filed suit against AbbVie in the Eastern District of Pennsylvania in 2014, accusing the company of illegal monopolization under the antitrust laws.  The gravamen of the FTC’s complaint was that AbbVie wrongfully filed objectively-baseless sham litigations, to block generic competition.

The FTC moved the court for partial summary judgment on the “objective baselessness” prong of its antitrust claim.  The court granted the agency’s motion in September 2017, agreeing with the FTC that the lawsuits against the generic defendants “were without question objectively baseless,” as it was abundantly clear from the record that prosecution history estoppel precluded assertion of the doctrine of equivalents against either of the generic drug products.

The remainder of the dispute is now at trial to resolve whether AbbVie had the “subjective intent” to illegally monopolize, to warrant injunctive relief and $1.23 billion to compensate consumers.

The FTC v. AbbVie case is the first time in 15 years that the FTC has marshalled its muscle to reign-in abuse of Orange Book listings by branded pharmaceutical companies.  As drug prices continue to skyrocket, the FTC may be signaling that it intends to keep a hawkish focus on abusive Orange Book listings into the future.

In the next installment, I will turn to an example of over-zealous advocacy by drug-patent owners in their representation of alleged inventions before the PTO, as represented by Allergan’s Restasis patents that were invalidated by Judge Bryson last October in the Eastern District of Texas, and which have also been the subject of controversy over the issue of Tribal Immunity before the PTAB.