Labeling carve-out does not shield generic drug makers from induced infringement claims, CAFC rules

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The U.S. Court of Appeals for the Federal Circuit (CAFC) recently decided (2-1) in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc. that a labeling carve-out by a generic drug sponsor did not preclude a finding of “induced infringement,” placing the sponsor at risk of substantial damages for relying on a section viii statement and labeling carve-out to address the innovator's Orange Book patent. A key factor was the court’s determination that promotion by the generic drug sponsor of the Food and Drug Administration's (FDA) therapeutic equivalence (TE) rating was evidence that the company induced physicians to prescribe the generic for the same indications as the Reference Listed Drug (RLD), including the indication that had been carved-out of the generic’s labeling. This decision raises significant issues with FDA's longstanding practice of allowing generics to omit patent protected uses from their labeling, while still advising through the Orange Book that the generic should be considered therapeutically equivalent to the branded RLD.

The Federal Circuit's decision in Teva potentially leaves generics that use labeling carve-outs, sometimes referred to as "skinny labeling," at risk of infringement primarily because of FDA’s practice of granting TE ratings without regard to approved indications. FDA’s approach has often been said to elevate form over substance by giving legal weight to the carve-out under the Hatch-Waxman patent system while largely overriding the practical effect of the carve-out by representing to the public that the generic should be considered the equivalent of the branded RLD.

This practice has had the effect of allowing generic drugs to be dispensed for patent-protected methods of use, even though the generic has represented to FDA – through a section viii statement – that it is not seeking approval of this use. This dissonance between carve-outs to support section viii statements, and the Orange Book system of rating the generic as equivalent to the RLD, without regard to omitted indications and uses, may now be ripe for re-examination based on the Federal Circuit's recent decision.

This is not the first time that a section viii carve-out has been found wanting in subsequent litigation for induced infringement. In AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042 (Fed. Cir. 2010), FDA allowed the generic to carve out a once-daily dosing option from the labeling, to avoid a patent, while also allowing the generic to retain labeling that instructed patients to titrate to the lowest effective dose. The court reasoned that the only way to titrate down from taking two doses per day was to take one dose a day. Thus, there was induced infringement – despite the FDA-authorized carve out of the patent – based on what was arguably a “partial” carve out. But now the industry, FDA, and the courts are faced with a precedent finding that even labeling with a full carve-out of the patented use can lead to induced infringement.

Background

Although a generic drug product is generally required to have the same labeling as the RLD, there is an exception for indications that are protected by a patent or regulatory exclusivity. The statute (21 U.S.C. § 355(j)(2)(A)(viii)) allows the generic sponsor to remove or “carve out” the protected indication or other protected condition of use from the product labeling, and submit a “section viii” statement explaining that the applicant does not seek approval for the protected use. The regulations (21 CFR 314.94(a)(8)(iv)) similarly authorize omission of both patented and exclusivity-protected uses. There is a similar provision for 505(b)(2) applications (21 U.S.C. § 355(b)(2)(B)) and this case also could have implications for those 505(b)(2) products that have a TE rating but omit protected uses from their labeling.

In this case, the patent holder (GSK) sued the generic drug manufacturer (Teva) for “induced infringement,” arguing that Teva induced physicians to prescribe its generic carvedilol for the carved-out indication of congestive heart failure (CHF), for which GSK’s branded carvedilol product Coreg® was patented. GSK argued that circumstantial evidence supported a showing of inducement, including Teva’s product labeling, advertisements, and user manuals directed to a class of direct infringers. This evidence included Teva’s product catalogs that referred to Teva’s carvedilol as the “AB rated generic equivalent of GlaxoSmithKline’s Coreg® tablets.”

At trial, the jury sided with GSK, awarding $235 million in damages, but the district court overturned the jury verdict, finding there was insufficient proof that physicians relied on Teva’s label in making their prescribing decisions. GSK appealed to the Federal Circuit.

CAFC: Skinny labeling may constitute induced infringement

Writing for the CAFC panel majority, Judge Pauline Newman found “substantial evidence” of induced infringement in Teva’s promotional materials, press releases, product catalogs – communicating the product’s “A” rating – and evidence that physicians and providers took these sources as signaling that the generic could be substituted without regard to the limits of its labeling. The majority concluded that the “precedent makes clear that when the provider of an identical product knows of and markets the same product for intended direct infringing activity, the criteria of induced infringement are met.”

In her dissent, Chief Judge Sharon Prost said the verdict subverts the desire of Congress, reflected in the statute, for efficient procedures to encourage room for low-cost generics in the marketplace. “The majority’s holding undermines this purpose,” she wrote, “by creating infringement liability for any generic entering the market with a skinny label, and by permitting infringement liability for a broader label that itself did not actually cause any direct infringement.”

The dissent points to what may be the most important takeaway from this opinion: the majority decided that, in and of itself, a skinny label does not preclude a finding of induced infringement. Branded drug makers may demonstrate inducement with evidence beyond the package insert, including external communications that announce equivalence between the generic and brand drugs; testimony that physicians know of and rely on such communications; and the generic's knowledge of possible revenue from off-label infringing uses.

Possible FDA response: TE rating changes?

In the Orange Book, FDA applies therapeutic equivalence (TE) evaluation codes to indicate whether generic drugs should be considered substitutable for the RLD. An “A” rating indicates that products are therapeutically equivalent and signals to pharmacists and others that FDA considers the products to be substitutable for one another.

FDA’s system of “A” rating generics was front and center in this case. Teva referred to FDA’s “A” rating in a product catalog, and the court’s decision suggests that that alone may be enough to induce infringement. “A” ratings are not limited to indication and are widely taken to signal substitutability irrespective of the labeling of the generic. FDA offers a disclaimer of sorts in the preface to the Orange Book, stating that TE determinations are not made for unapproved, off-label uses. But the body of the Orange Book, and the listings themselves, do not distinguish between the different indications for which the generic and the RLD are approved. One possible solution therefore is to make the Orange Book indication-specific and only rate generics as “A” for the specific uses on their labeling. Alternately, FDA could adopt additional TE codes to better communicate the limits of the generics approved uses.

FDA had already announced in January 2019 it was considering changes to the Orange Book, which we analyzed here.

We will continue to monitor this case, including the possibility of en banc review by the full Federal Circuit.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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