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February 2017: Life Sciences Litigation Update

Business Litigation Reports

Recently Amended FDA Rules Can Affect Settlements in Pharmaceutical Litigations. After more than thirteen years of bureaucratic analysis and rulemaking, the U.S. Food and Drug Administration recently implemented its new rules governing the submission and approval of generic drug products and related pharmaceutical patent litigations under Title XI of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”). (81 Fed. Reg. 69,580 (codified at 21 C.F.R. §§ 314, 320).) Effective December 5, 2016, the FDA’s final rule is designed to “reduce unnecessary litigation, reduce delays in the approval of 505(b)(2) applications and [Abbreviated New Drug Applications (“ANDAs”)] that are otherwise ready to be approved, and provide business certainty to both brand name and generic drug manufacturers.” (81 Fed. Reg. 69,580.) While some revisions codified longstanding FDA practices, others were created to capture developments in case law or to facilitate compliance with and enforcement of the Federal Food, Drug, and Cosmetic Act (“FD&C Act”). Of particular note are certain provisions of the final rule that touch upon: (i) generic exclusivity in light of settlement agreements between patent holders and generic pharmaceutical companies; and (ii) New Drug Application (“NDA”) holders’ requests to delist patents from the Approved Drug Products with Therapeutic Equivalence Evaluations, or the “Orange Book.”

With respect to settlement agreements, the final rule clarifies the impact that settlement agreements and consent decrees have on patent certifications in 505(b)(2) applications and ANDAs. The prior FDA rule only required 505(b)(2) applicants and ANDA holders to change Paragraph IV certifications (asserting non-infringement or invalidity of the relevant patents) to Paragraph III certifications (acquiescing in the validity of the patent and tacitly admitting that their proposed generic product would infringe if marketed without a license) when a court entered “final judgment” of patent infringement against the 505(b)(2) or ANDA applicants and the applicants had failed to obtain a judgment of patent invalidity. The previous rule, however, did not expressly specify whether ANDA and 505(b)(2) applicants were required to submit settlement agreements or consent decrees containing findings of infringement. The final rule eliminates this gap, requiring that ANDA and 505(b)(2) applicants amend their certifications from Paragraph IV to Paragraph III when a court signs and enters a settlement order or consent decree that includes a finding of patent infringement, absent a finding of invalidity. (See 21 C.F.R. §§ 314.50(i)(6)(i), 314.94(a)(12)(viii)(A).) That said, a tension exists within the final rule, such that ANDA and 505(b)(2) applicants who have settled and through the course of the settlement have obtained a license to particular patents may not be required to amend their certifications to those patents. This tension is further explored in the FDA’s January 2017 draft guidance entitled “180-Day Exclusivity: Questions and Answers,” which states that “[a]n [ANDA] applicant potentially may retain eligibility for 180-day exclusivity even . . . if sued, the case is resolved, for example, through settlement that allows the applicant to enter the market before the patent expires” and provides that “an ANDA applicant’s agreement that the [exclusivity bearing] patent is valid and would be infringed in the course of securing a license” does not require the applicant to change the Paragraph IV certification to a Paragraph III certification. “180-Day Exclusivity: Questions and Answers,” at pp. 10 (question 12), 19 (question 30), available at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM536725.pdf. Note that if a settlement order or consent decree is signed and entered without a finding of infringement, however, then it may be appropriate for the ANDA or 505(b)(2) applicant to continue to maintain its Paragraph IV certification(s).

Another update relevant to settlements relates to the 180-day period of generic market “exclusivity” that may be available to the first party submitting a substantially complete ANDA challenging the patent position of a branded drug, and what happens to that period of exclusivity in the event that the challenged patents are removed or “delisted” from the Orange Book either through expiration or invalidation. The final rule codifies the FDA’s current practice of not removing a patent or patent information from the Orange Book until any 180-day exclusivity based on the patent has been expired or extinguished. (See 21 C.F.R. §§ 314.50(i)(6)(ii), 314.94(a)(12)(viii)(B).) An NDA holder who determines that a patent or patent claim no longer meets the statutory requirements for listing (such as if there has been a judicial finding of invalidity for a listed patent, from which no appeal has been or can be taken) must promptly notify the FDA to amend the patent or patent information. The FDA is required to remove the patent or patent information from the Orange Book if there is no first-filer eligible for 180-day exclusivity based on the submission of a Paragraph IV certification. If the NDA holder’s request is for the delisting of an exclusivity-bearing patent, however, then the FDA must keep the patent or patent information listed in the Orange Book until the 180-day exclusivity period of a first‑filer based on that patent has expired or has been extinguished. Accordingly, under the final rule and consistent with current practices, a first-filer will not lose its first-filer status on account of an NDA holder’s request to delist an Orange Book listed patent where that patent is the basis of a first filer’s 180-day exclusivity.

The FDA’s new rulemaking does not expressly contain new rules directed to the 180-day exclusivity forfeiture provisions enumerated under section 505(j)(5)(D) of the FD&C Act. However, the FDA’s comments published during the course of public comment and rulemaking do indicate the FDA’s interpretation that an ANDA applicant’s commercial marketing of an “authorized generic” drug—most commonly defined as an approved, branded drug that is marketed as a generic product without the brand name on its label—will trigger the running of any period of 180-day generic exclusivity to which an ANDA applicant might otherwise have been entitled. (See 81 Fed. Reg. 69582, 69592-93.) As the FDA’s comments note, the FDA will determine whether additional rulemaking relating to 180-day exclusivity is necessary in the future. (See 81 Fed. Reg. 69584.) In the interim, the FDA has provided additional perspectives concerning 180-day exclusivity in its draft guidance, “180-Day Exclusivity: Questions and Answers.”