FTC Warns Pharma Companies It Means Business with Its Orange Book Listing Policy | McDonnell Boehnen Hulbert & Berghoff LLP
Policy differences are endemic in politics, and the phrase “causing more heat than light” regarding federal drug policy comes readily to mind listening to the rhetoric coming from the Federal Trade Commission in this regard. The FTC is infamous for its uncontrolled venom towards industries they believe with religious fervor to be charging consumers prices higher that the FTC thinks they should be. This tendency was evident in the fight over reverse payment settlements in ANDA litigation, leading to a Supreme Court decision imposing a “rule of reason” standard rather than the draconian per se standard the Commission espoused in determining whether an antitrust violation had occurred (see FTC v. Actavis). And it is with similar rhetorical excesses that the Commission has begun its latest crusade involving listing on the Food and Drug Administration’s Orange Book for patents claiming medical devices relating to administering FDA-approved drugs.
It will be recalled that the FTC spent the better part of a decade attacking the practice of innovator drug companies settling ANDA litigation by providing payments to generic applicants challenging the validity of Orange Book-listed patents (see “The FTC’s Thinking Does Not Make It So Regarding Reverse Payment Agreements”; “Federal Trade Commission Issues Report on Reverse Settlement Agreements in FY2010”; “FTC Releases Another Report on Reverse Payment Settlement Agreements in ANDA Litigation”; “The FTC Is at It Again”). These agreements were termed “reverse payment” settlements because unlike in most patent suits, the defendant secured a payment from the patentee (as part of its campaign, the FTC termed these “pay-for-delay” agreements). The Commission persisted in its efforts despite most Federal Courts of Appeal deciding that, rather than being anticompetitive, the agreements frequently resulted in generic drugs coming to market much earlier than would be expected (see “Valley Drug Co. v. Geneva Pharmaceuticals, Inc.”; “Schering-Plough Corp. v. Federal Trade Commission”; “In re Tamoxifen Citrate Antitrust Litigation”; “In re Ciprofloxacin Hydrochloride Antitrust Litigation”; “Arkansas Carpenters Health & Welfare Fund v. Bayer AG”; and “Federal Trade Commission v. Watson Pharmaceuticals, Inc.”). One basis for the FTC’s persistence was the belief that branded drug companies settled because they were aware that their patents were invalid and thus improperly tried to extend their “monopoly”; of course this position supposed not only that innovator drug companies were willing to contravene the antitrust laws but perhaps more importantly that the Commission’s bureaucrats had a better understanding of the pharmaceutical industry than the executives making the decisions. Persistence being what it is, the FTC finally prevailed in finding a Circuit Court (the Third) to accept its arguments (see “The Federal Trade Commission Finally Wins One”), leading to the Supreme Court deciding the issue in FTC v. Actavis.
The FTC’s latest foray into policing pharmaceutical companies and their patent behavior was set forth in a policy statement promulgated last fall, entitled “Statement Concerning Brand Drug Manufacturers’ Improper Listing of Patents in the Orange Book,” in a classic example of begging the question and one viewed through the Commission’s prism of purported patent malfeasance by branded drug companies.
As it did with the reverse settlement issue, the FTC’s attitude seems to be that something might be happening and then to proceed as if it is. This is evident from the first sentence of the policy statement, which asserts that “[b]rand drug manufacturers may be harming generic competition through the improper listing of patents in the Food and Drug Administration’s (‘FDA’) Approved Drug Products with Therapeutic Equivalence Evaluations, known as the ‘Orange Book'” (emphasis added). The statement then extols the benefits of generic competition (which is fine as far as it goes, but of course there needs to be something to copy in the first place for the generics regime to be effective). There is a general allegation in the midst of this rhetoric — the statement asserts that “certain manufacturers have submitted patents for listing in the Orange Book that claim neither the reference listed drug nor a method of using it,” and if so, of course the Commission is empowered to and intends to pursue such manufacturers who are purportedly “abus[ing] the regulatory processes set up by Congress to promote generic drug competition” under the power to investigate unfair trade practices under 15 U.S.C. §§ 45(a), (n).
The justification for the Commission’s concerns stems apparently from the results of a 2002 study (FED. TRADE COMM’N., GENERIC DRUG ENTRY PRIOR TO PATENT EXPIRATION: AN FTC STUDY 39-52 (2022), that supposedly involved improper listing, further citing an enforcement action in that year against Biovail (In re Biovail Corp., FTC Dkt. No. C-4060 (Oct. 2, 2002)). Also cited are a total of four instances where the Commission filed amicus briefs in cases where there may have been improper listing, such as patents for a system to implement a REMS (not a medical device). The consequence of such listings, the statement asserts, is to invoke the 30-month stay in approval attendant upon the NDA holder (or her licensee) filing suit against an ANDA applicant, because “even small delays in generic competition can generate substantial additional profits for brand companies at the expense of patients.” Patients would be harmed because they would be “deprived of the ability to choose between competing products and may be forced to pay inflated prices.” Of course the 30-month stay while statutory is not mandatory; should the infringement action be dismissed (for example, on motion that the patent asserted were improperly listed in the Orange Book), the FDA would be able to expeditiously approve the ANDA and the generic company enter the marketplace (with its own 180-day exclusivity if a first filer; under these circumstances the extent to which patients would pay deflated prices would be itself delayed).
Having established at least to its own satisfaction the basis for the Commission’s attention to this issue, the statement then announced the FTC’s intention to “enforce the law against those companies and individuals who continue to improperly list patents in the Orange Book” using “its full legal authority to protect patient and payors . . . from business practices that tend to negatively affect competitive conditions.” This threatened exercise of the Commission’s legal authority finds its basis in “the FTC’s historical use of Section 5 [of the Clayton Act]” based on improperly listing a patent in the Orange Book being an unfair method of competition. The statement goes on to speculate that improperly listing a patent in the Orange Book “may . . . constitute illegal monopolization,” perhaps evincing a recognition that agency overreach was not greeted warmly by the Supreme Court in Actavis with regard to the FTC’s position that reverse settlement agreements were a per se antitrust violation. Treading cautiously, the statement further warns that “improperly listing patents in the Orange Book may also be worthy of enforcement scrutiny from government and private enforcers under a monopolization theory” and calls out the possibility (or likelihood) that it “may also scrutinize a firm’s history of improperly listing patents during merger review” (emphasis added). Finally, the statement suggested that “individuals” (presumably corporate officers) who “submit or cause the submission” of patents improperly to the Orange Book may be held liable individually, and that a finding of a false certification under 21 C.F.R. § 314.53(c)(2)(ii)(R) could be sent to the Department of Justice for investigation of criminal liability. Should all else fail, the Commission also states that it “may” dispute individual Orange Book listings through the FDA process set forth in 21 C.F.R. § 314.53(f)(1) that permits “any interested person” to request patent information in the Orange Book be corrected.
Mostly in footnotes, the statement identified no more than 10 cases in support of the statement (and one of those, Fed. Trade Comm’n v. Shkreli, 581 F. Supp. 3d 579, 637 (S.D.N.Y. 2022), involved the infamous “Pharma Bro” whose shenanigans can hardly be held up as a standard under which ethical branded drug companies conduct their businesses). In view of the powers the Commission can wield, the assertions, allegations, and promises of future activities set forth in the statement cannot be ignored, but it also cannot help but raise the question of whether this tempest should not have remained in the teapot from whence it sprung, at least without further evidence that improper listing occurs frequently enough to significantly impact drug prices paid by the patients and payors the FTC is attempting to serve and protect from (in the Commission’s view, apparently) predatory branded drug companies.
Most recently, the FTC sent letters almost identical in substantive import to ten major drug companies (Amphaster Pharma, AstraZeneca, Boehringer Ingelheim, Covis Pharma, GlaxoSmithKline, Glaxo Group Ltd., Norton (Waterford) Ltd., Novartis, Novo Nordisk, and Teva Pharmaceuticals); the identical language of these letters indicates that presumption of wrongdoing rather than any individual, identified malfeasance prompted the campaign. The letters were accompanied with the FTC’s announcement and accompanying statements by Commission Chairwoman Lina Khan that:
“By filing bogus patent listings, pharma companies block competition and inflate the cost of prescription drugs, forcing Americans to pay sky-high prices for medicines they rely on.”
“By challenging junk patent filings, the FTC is fighting these illegal tactics and making sure that Americans can get timely access to innovative and affordable versions of the medicines they need”
(appropriate in tone for the former enfant terrible author of “Amazon’s Antitrust Paradox” (Khan, Lina M. (January 2017), Yale Law Journal, 126 (3): 710–805).
The current spate of threatening letters is similarly devoid of evidence and long on supposition, quoting from the earlier Policy Statement that:
“. . . patents improperly listed in the Orange Book may delay lower-cost generic drug competition” [and]
“In addition to delays resulting from such a stay of approval, the costs associated with litigating improperly listed patents may disincentivize investments in developing generic drugs, which risks delaying or thwarting competitive entry.”
The letters further warn that the FTC has chosen to use the statutory pathway under 21 C.F.R. § 314.53(f)(1)(i)(A) for disputing “the accuracy or relevance of patent information submitted” to FDA for Orange Book listing but that the Commission “retain[s] the right to take any further action the public interest may require, which may include investigating this conduct as an unfair method of competition under Section 5 of the FTC Act, 15 U.S.C. § 45.” These stratagems enable imposition of civil (monetary) penalties, but the earlier warning in the Policy Statement that “if the FTC encounters false certifications filed under 21 C.F.R. § 314.53(c)(2)(ii)(R) that may constitute a potential criminal violation for the submission of false statements, the Commission may refer such cases to the U.S. Department of Justice for further investigation” has not been abjured.
This latest action raises the question of why these companies and what behavior prompted the Commission to act now? Each letter contains a table of the patents whose listing the Commission calls into question, summarized as follows herein:
A closer look shows that what these patents protect are, by and large, medical devices that provide either greater accuracy in administered dose or increased patient convenience and accompanying greater patient compliance; for example:
U.S. Patent No. 7,654,986 (expiration expected July 12, 2024) (Novo Nordisk)
Claim 1: A needle mounting system for mounting and dismounting a needle assembly onto a needle mount of an injection device, comprising . . .
Specification:
Injection devices, also referred to as dosers, have greatly improved the lives of patients who must self-administer drugs and biological agents. Dosers may take many forms, including simple disposable devices that are little more than an ampoule with an injection means or they may be highly sophisticated instruments with numerous functions. Regardless of their form, they have proven to be great aids in assisting patients to self-administer injectable drugs and biological agents. They also greatly assist care givers in administering injectable medicines to those incapable of performing self-injections.
U.S. Patent No. 8,161,968 (expiration expected February 5, 2028) (GSK)
Claim 1: A medicament dispenser for containing plural elongate form medicament carriers, each medicament carrier having multiple distinct medicament dose portions carried thereby, . . .
Specification:
The Applicant has now found that in providing a medicament dispenser of this type a number of practical problems and design challenges are encountered.
One problem is that of providing a dispenser device that is able to accommodate the plural medicament carriers, but is of sufficiently small overall size that it is conveniently portable (e.g. in the pocket or bag of a patient) and amenable to discrete use, by the patient.
Another problem is that of providing a dispenser device, in which the distinct medicament dose portions of each of the plural medicament carriers may be indexed or accessed without the need for the user to apply undue indexing or accessing force. Particular challenges are faced when the plural medicament carriers are required to be moved through the dispenser device for indexing/accessing thereof, and where the indexing/accessing action is coupled (e.g. moving peelable blister strips through the dispenser device to both index a particular blister on each strip and peelably access that blister).
U.S. Patent No. 8,182,838 (expiration expected October 20, 2028) (Novartis)
Claim 19: A pharmaceutical composition comprising composite active particles prepared in accordance with the method as claimed in claim 1, blended with carrier particles.
Claim 36: A dry powder inhaler containing a composition as claimed in claim 19.
Specification:
WO 00/74754 and many other publications over a period of more than twenty years have described how, particularly in powder inhalers, there is a considerable problem with moisture. Not only can moisture have a disadvantageous effect on the pharmaceutically active composition of the medicament, it can also impair in particular the interplay of physical and chemical parameters of the combination of active substance and auxiliaries. As a result, lumps may form, for example, or the breakdown of the inhaled powder into particles which can access the lungs may be impaired. All these circumstances can lead to problems affecting the metering and the efficacy of the administration of a powdered medicament.
To minimize these disadvantages, various attempts have already been made in the past to reduce the penetration of moisture into a powder inhaler by using seals. Attempts have also been made to reduce the disadvantageous effects of penetrated moisture by providing desiccants to absorb the moisture, in particular to keep the air moisture in storage chambers to a minimum.
And a close look at the frequency with which these patents have been asserted in an abbreviated new drug application (ANDA) litigation shows that most of them have not been so asserted. Of the 61 patents identified in the FTC’s letters (presumably indicating some level of differentiation to select somewhat- to particularly egregious-examples of bad behavior), 34 have never been asserted and eight others have been asserted in only five ANDA cases. The anomaly are 19 patents asserted in 209 cases, with the majority of these being directed to Ozembic, Saxenda, and Victoza. Whether this exemplifies over-exuberance, bad acting, or justifiable protection of devices providing patient-specific advantages remains to be determined.
In at least one case, the FTC’s crusade has proven to be persuasive to a district court, Teva Branded Pharmaceutical Products R&D, Inc. v. Amneal Pharmaceuticals of New York, LLC (Civil Action No. 23-20964 (SRC), U.S. District Court of New Jersey) (Opinion & Order). The decision arose in ANDA litigation over Teva’s ProAir® HFA (albuterol sulfate) Inhalation Aerosol product, wherein Teva asserted U.S. Patent Nos. 8,132,712; 9,463,289; 9,808,587; 10,561,808; and 11,395,889. These patents claimed devices for administering the drug product, and Amneal moved (and the District Court held) that these patents should be delisted from the Orange Book. The basis for the court’s decision was that these patents did not claim the drug product and thus were improperly listed under the requirements of 21 U.S.C. § 355(b)(1)(A)(viii)(I). (The FTC garners credit, or blame, for the decision by its filing of an amicus brief heavily relied upon and cited in the opinion, for which Commission Chair Kahn was quick to publicly claim responsibility. In rendering its decision, the Court relied on the First Circuit’s decision in Cesar Castillo, Inc. v. Sanofi-Aventis U.S., LLC (In re Lantus Direct Purchaser Antitrust Litig.), 950 F.3d 1, 3 (1st Cir. 2020), that a listed patent must be directed to the drug product and the Second Circuit’s decision in United Food & Commer. Workers Local 1776 v. Takeda Pharm. Co., 11 F.4th 118, 134 (2d Cir. 2021), that the question of proper listing was based on what the patent claimed and not what would infringe those claims (to the extent, unexplicated in the District Court’s decision, that these would be different). It must be recognized that the District Court’s decision was based, inter alia, on Teva’s assertion that these patents were listed as reciting the drug rather than reciting methods for administering the drug.
(Perhaps more troubling is that the District Court denied Teva’s motion to strike Amneal’s counterclaim that improper listing can amount to an antitrust violation under 21 U.S.C. § 355(j)(5)(c)(ii)(II) and particularly rejected Teva’s claim that such listing does not raise antitrust liability under the Supreme Court’s decision in Verizon Communs., Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 398-99 (2004)).
The circumstances surrounding this most recent FTC endeavor bring back to mind the circumstances in the reverse settlement situation, where the first case involved what apparently was in fact an abuse of the statute and could have been an antitrust violation (and in which private parties and “[t]he attorneys general of all 50 States, Puerto Rico and the District of Columbia (the ‘attorneys general) eventually joined the litigation on behalf of their States and as parens patriae on behalf of the residents of their respective jurisdictions”; see “In re Cardizem CD Antitrust Litigation, 332 F.3d 896 (6th Cir. 2003)”). Thereafter, every such settlement was not just suspect but evidence of anticompetitive behavior merely by its existence, with the only motivation contemplated by FTC’s philosophy being that patentees were aware of the invalidity of the patents at issue and were attempting to “buy off” challengers. The counter-narrative (understood and explicated by the Chief Justice in his dissent in FTC v. Actavis), that the investment by innovative pharmaceutical companies and vagaries of any litigation mitigated against taking unnecessary business risks, was lost on the FTC and undoubtedly will be so again here. How these ten pharmaceutical companies respond to the FTC’s mandate will vary, no doubt (and asserting these patents in ANDA litigation is likely imprudent when routine avenues of recourse may suffice). But these alternatives may involve a higher degree of disruption of markets and patient-availability of the medicines under NDA and also reduce investment into new and better ways of administering drugs known to be more difficult to administer than conventional drugs or that would provide real-world benefit for patients. The Policy Statement and the FTC’s actions in enforcing it being in their early stages it is impossible to predict the outcome. But if earlier FTC ideology-based efforts are a guide it is likely to be a protracted struggle.
[View source.]
