OLUME 1 • NUMBER 10

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Advisory Board ReI Ambrozy

McKenna Long & Aldridge LLP Washington, DC

Jeffrey A. Berkowitz

Finnegan Henderson Farabow Garrett & Dunner Washington, D.C.

[ean-Francois Bloch Proteus S.A. Nimes, France

Thierry Caen Rinuy, Santarelli Paris, France

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The Patent and Licensing Exchange Pasadena, CA

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Robert Schulman

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What A Difference A Day Makes:

The Dilemma for Generic Drug Companies After Mylan

Daniel F. Coughlin and Richard H. Newman

In a scene reminisce. nt of the bootlegging days of Prohibition, the bottles were filled and the boxes were packed. The trucks were loaded and waiting to roll as soon as the clock struck midnight. The midnight shipments were to be the first of many that were expected to be worth more than $30 million over the next year. At last, a process that had begun formally two years before and, in fact, a number of years before that, was about to come to economic fruition. However, mere hours before the first trucks were scheduled to leave the loading docks, the federal government stepped in and brought the shipments to a halt before they even started.

In this tale of the new millennium, the federal government was represented not by the "revenooers" of the Roaring '20s or the "Untouchables" of Elliot Ness but by an administrative agency that has a decidedly staid image-the US Patent and Trademark Office (USPTO). The weapon that kept the trucks from rolling was not a tommy gun or even a federal warrant. It was a patent, specifically US Patent No. 6,150,365,1 owned by Bristol-Meyers Squibb (BMS) of Princeton, NJ. When the USPTO issued the '365 patent at 12 p.m. on Tuesday, November 21, 2000, a sequence of events began to unfold under a complex statutory scheme that has led to multiple lawsuits, involving numerous parties (including a cabinet-level department of the federal government) and the expenditure of millions of dollars in legal fees. The USPTO's action also has unleashed what will undoubtedly become a storm of rhetoric over the drug approval process administered by the Food and Drug Administration (FDA), if not the entire prescription drug policy in this country.

Mylan Pharmaceuticals, Inc., owned the trucks, and the bottles loaded into the trucks contained not bootleg whiskey or bathtub gin but a generic version of BMS's successful anti-anxiety drug, BUSp~.2 Issuance of the '365 patent spawned a number of lawsuits that ultimately led to the appellate opinion in Mylan v. Thompson? Because of the timely issuance of the '365 patent and the legislative scheme triggered as a result under the Federal Food, Drug,

Dr. Daniel F. Coughlin is a principal and Richard H. Newman is an associate with Cummings & Lockwood, LLC.

and Cosmetic Act (FFDCA),4 Mylan faced an automatic two and on-half year delay in bringing its product to market. The irony of the situation is that, if the '365 patent had issued even a day later;' an entirely different statutory scheme would have come into effect. Under that scheme, BMS would have had to prove in court according to established equitable principles that there was a compelling reason based on BMS's patent rights to prevent marketing of Mylans generic buspirone product. Thus, the trucks would have been free to begin their deliveries at midnight, and the parties would have been left to slug out their differences in court under an entirely different set of legal parameters far more favorable to Mylan.

Statutory and Procedural Background

Although, but for the issuance of the '365 patent, the trucks would have rolled at midnight on November 22,2000, the USPTO was not immediately responsible for keeping the trucks at the loading docks. The direct agent was the FDA, acting according to a complex legislative scheme under the provisions of both the FFDCA and the patent statutes, 35 U.S.C. §§ 1, et seq. In particular, the controlling statutory sections that impacted the issues surrounding Mylan v. Thompson arise from the Drug Price Competition and Patent Term Restoration Act of 1984,6 otherwise known as the Hatch-Waxman Amendments.

As universally recognized, the Hatch-Waxman Amendments represent a compromise that was the result of sometimes fierce negotiations between two distinct pharmaceutical industry segments (and their legislative proponents on Capitol Hill) that are fundamentally opposed in the marketplace-the "pioneer" drug companies, which are responsible for the bulk of the research and development that leads to new drug products, and the drug companiesthat produce the generic drug copies that represent a lower-cost alternative to the pioneer drugs.'

According to this legislative scheme," BMS, as part of the process by which an applicant obtains approval from the FDA for a pioneer drug," bears the responsibility of informing the FDA of any patents that claim the pioneer drug product or a method of using that

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product'? for which FDA approval has been sought. Once so informed, the FDA tends to its ministerial task of publishing the pertinent patent information in Approved Drug Products with Therapeutic Equivalence Evaluations, otherwise known as the Orange Book for the distinctive orange color of the cover of the original print version. 11 The Orange Book plays a significant role in the saga of Mylan v. Thompson in that the FDA, by listing patent information for a product in the Orange Book, triggers specific procedural requirements in the approval process for generic drug products. These requirements are directly responsible for the operation of the statutory scheme that can lead to what is, in effect, an automatic 30-month preliminary injunction against the FDA's approval of the generic drug company's application for its generic drug product.

Most significant from a legal perspective is that the operative statutes impose a de facto preliminary injunction against approval of the generic drug product without consideration of the typical equitable factors that courts must weigh in deciding whether to provide injunctive relief." If the '365 patent had issued after November 21,2000, the automatic stay provisions would not have been triggered. BMS's only legal course of action would then have been to bring suit under the patent statutes," in which BMS would have borne the burden of establishing entitlement to preliminary injunctive relief on the basis of factors, among others, such as the likelihood of success in proving that Mylan's generic product actually infringes the '365 patent."

The Hatch-Waxman Amendments are a classic example of legislative compromise and a shining example of how not to draft legislation. IS On the one hand, the amendments provide an incentive to pioneer drug companies to expend millions of dollars in research and in clinical testing to bring new therapeutic drug products to market. Although the drug companies obviously realize considerable revenues and profits from the sales of their approved pioneer drugs, society as a whole benefits from the availability of safe and effective medications to treat a wide range of disease conditions. These novel drug products save lives, improve the quality of lives, and increase life expectancies.

. The mechanism by which the pioneer drug companies protect their considerable financial investment in the development of these drug products is the patent system. A patent claiming a drug product or a method of making or using a drug product allows the pioneer drug companies to prevent others from making, using, selling, or offering to sell products embodying the patented invention." As currently measured, the exclusive rights bestowed by the patent grant remain in effect for a period of 20 years from the date of filing the earliest application leading to the patent. However, as justifiably argued by the pioneer drug industry, the lengthy process of

. securing approval from the FDA to market a new drug product consumes a significant portion of the effective term of a patent. In recognition of this, the Hatch-Waxman Amendments created a procedure by which a pioneer drug company can obtain an extension of a patent's term to partially compensate the patent owner for the patent term consumed by the FDA approval process. 17

In light of the competing interests of the generic drug industry and in recognition of the benefit to the public of having a supply of low-cost alternatives to patented drug products," the Hatch-Waxman Amendments also created a new procedure for the approval of generic products, called an Abbreviated New Drug Application (ANDA). Prior to the amendments, a new generic product was subject to the same costly and time-consuming approval process before the FDA as pioneer drugs, whereby the safety and effectiveness of the product must be established through extensive clinical testing. This was true even though the generic product, by definition," uses the same active drug ingredient as a pioneer drug. Under the new ANDA scheme, a generic drug company does not have to re-create the safety and efficacy data already submitted by the pioneer drug company. Instead, the generic drug company must show that its product is "bioequivalent" to the already approved pioneer drug product." Thus, the ANDA provides a mechanism that saves the generic drug companies considerable time and money and is designed to insure a source of lower-cost alternatives to pioneer drugs."

The Mylan Facts

Mylan filed ANDA No. 75-252 on September 28, 1998, seeking FDA approval to market a generic buspirone hydrochloride product for treatment of anxiety. At the time of filing of Mylan's ANDA, the Orange Book listed US Patent No. 4,182,763 as covering the pioneer drug product BirSpar". 22 According to the Orange Book, the period of market exclusivity for BtrSpar", primarily provided by its rights under the '763 patent, was scheduled to expire at midnight on November 21, 2000. Thus, Mylan's ANDA sought approval from the FDA to market its generic buspirone product after the expiration of exclusivity for BuSp~.23 The FDA approved Mylan's ANDA on August 23, 2000, conditioned on expiration of BuSpar's exclusivity on November 21,2000. In anticipation of this final approval, Mylan prepared to ship the generic product at midnight on that day,"

Due to the confidentiality of pending applications in the USPTO, Mylan was unaware that another patent, arguably related to the BtrSpar" product, was close to issuance. The '365 patent issued at 12 p.m. on Tuesday November 21, 2000.2S By 1 p.m., BMS had delivered the patent to the FDA for listing in the Orange Book with the necessary certification that the

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patent claimed BUSp~.26 On this basis, the FDA withdrew its conditional approval of Mylan's ANDA, effectively grounding the trucks. On November 22, 2000, Mylan filed a paragraph viii certification with the FDA to the effect that the '365 patent did not claim a use for which Mylan sought FDA approval." Consequently, on November 30,2000, the FDA wrote to BMS requesting that it certify that the '365 patent covers a method of use of the BirSpar" product. On December 4, 2000, BMS responded to the FDA with a certification that the '365 patent claimed a method of use of buspirone, as well as of the buspirone metabolite specifically recited in the patent. Because of this additional certification by BMS, the FDA, on December 6,2000, responded that BMS had met the FDA's concerns over the '365 patent and that the FDA would list the '365 patent in the Orange Book as covering BtrSpar". 28

The Litigation History

In response to the listing of the '365 patent and in anticipation of a 30-month delay in FDA approval of its generic buspirone product, Mylan filed suit in the US District Court for the District of Columbia against the FDA, as represented by the Secretary of the Department of Health and Human Services, Tommy Thompson, and against BMS seeking preliminary injunctive relief that would prevent the listing of the '365 patent and order the FDA that would immediately approve the generic Mylan product for marketing. In addition, Mylan filed a declaratory judgment action against BMS in the US District Court for the District of West VIrginia seeking a declaration that the '365 patent is invalid and not infringed by Mylan's generic buspirone product. Finally, BMS filed suit against Mylan in the US District Court' for the Southern District of New York for infringement of the '365 patent.

The District Court Opinion

In an opinion dated March 13, 2001, the District Court for the District of Columbia granted Mylans request for preliminary injunctions against BMS that directed it to take the steps necessary to delist the '365 patent with the FDA and against the FDA that directed the agency to immediately approve Mylan's ANDA for the generic buspirone product." In reaching this conclusion, the court first addressed jurisdictional issues raised by BMS in response to Mylan's suit. Mylans suit was brought under the Declaratory Judgement Act, 28 U.S.C. § 2201. According to the act, the declaratory judgment plaintiff must establish that Ita case or actual controversy exists" and that there is a separate jurisdictional basis for the suit under applicable federal statutes. The court found that BMS's listing of the '365 patent with the FDA for inclusion in the Orange Book was sufficient to create a reasonable apprehension of suit in Mylan" and that the instant case arose out of the patent statutes, thus

conferring a separate basis for federal jurisdiction aside from the Declaratory Judgment Act." This specific ruling was in response to BMS's argument that Mylans suit had failed to raise a cognizable cause of action in that the suit was actually an attempt to force agency action in delisting the '365 patent and thus was not a patent action. The court disagreed with BMS and, in support of its finding on jurisdiction, concluded that Mylan had raised a defense to a possible patent infringement action by alleging improper listing of the '365 patent with the FDA as claiming BUSp~.32

In deciding whether to grant Mylans request for preliminary injunctive relief, the district court addressed the traditional equitable factors, such as likelihood of success on the merits, irreparable harm, balance of hardships, and public interest in the grant or denial of the requested relief. Most significantly, the court's analysis of Mylans likelihood of success on the merits specifically addressed the issue of whether the '365 patent claims a method of using BUSp~.33 In so doing, the court undertook a full inquiry into the question of infringement of the '365 patent by Bu'Spar", including a proper construction of the claim, as shaped by the file history of the patent and any estoppel created therein." Mylan had argued that the '365 patent covered only the use of the claimed buspirone metabolite, not buspirone itself. BMS countered that the claim of the '365 patent covered systemic administration of the buspirone metabolite and that this could be achieved either by direct administration of the metabolite or by administering buspirone under conditions that favored its in vivo conversion to the metabolite."

After a full analysis of the relevant factors in an infringement inquiry, the court found that the '365 patent expressly disclaimed administration of buspirone in the FDA-approved manner described in the package insert and found further that BMS had surrendered such coverage during prosecution of the '365 patent." On this basis, the court concluded that the '365 patent did not claim BtrSpar" and, as a result, Mylan was likely to prove at trial that the '365 patent was improperly listed in the Orange Book as covering BuSpa~.37 As for the remaining equitable factors, the court found that Mylan would not suffer irreparable harm if the requested injunction was not granted; that the likely harm to BMS and the FDA does not weigh heavily against preliminary injunctive relief; and that the public interest favored granting of a preliminary injunction." On this basis, the court directed BMS to request that the FDA delist the '365 patent, and it directed the FDA to grant Immediate approval to Mylans ANDA, No. 75-272.39

The Federal Circuit Opinion

BMS appealed the district court's order granting Mylans request for a preliminary injunction to the US Court of Appeals for the Federal Circuit." The

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FDA did not appeal the district court's ruling and argued to the Federal Circuit that the ruling, as to the FDA, constituted harmless error. The FDA further stated that Mylan had a cognizable cause of action against BMS under the patent laws, which was not prohibited under the FFDCA.41

As presented by the issues on appeal, the Federal Circuit framed the question before it as whether an ANDA patent infringement defendant can assert improper listing of a patent in the Orange Book as a defense to infringement. The Federal Circuit recognized that this question presented "a matter of first impression for this court."?

BMS argued to the Federal Circuit that Mylans attempts to delist the '365 patent from the Orange Book amounted to an improper attempt to bring a private cause of action under the FFDCA, which action the statute expressly prohibits." In response to this, both Mylan and the FDA conceded that no separate cause of action to delist a patent existed and that, if a plaintiff attempted to bring such an action under the FFDCA, the statute would bar such a cause of action. However, it was Mylan's position, as accepted by the district court, that improper listing of patent information in the Orange Book constitutes a defense to an allegation of patent infringement.

To assess this issue, the Federal Circuit first looked to the Declaratory Judgment Act, characterizing it as "remedial only."44 Recognizing that it was necessary to identify the federal law under which Mylan brought its original cause of action," the Federal Circuit applied the well-pleaded complaint rule to look to the cause of action that the declaratory judgment defendant, in this case BMS, would have brought to enforce its rights. In this context, Mylan argued that the cause of action would have been for patent infringement under 35 U.S.C. § 271 (e)(2).46 BMS argued that, under the well-pleaded complaint rule, it would have had no cause of action against Mylan to "list" the '365 patent.

The Federal Circuit rejected Mylan's argument, finding that Mylan's assertion was "not a recognized defense to patent infringement.?" The court reviewed the available statutory and equitable defenses and concluded that Mylan had not tied its argument to any of these recognized defenses but instead had sought

to litigate whether [BMS] is barred from asserting the '365 patent against any ANDA applicant because Bristol did not properly comply with the listing requirements set forth in the FFDCA. Although the issue may be akin to an estoppel defense or an unenforceability defense for a patentee's inequitable conduct in prosecuting a patent in the Patent and Trademark Office, Mylan has not asserted any such link."

The Federal Circuit went on to analyze the Hatch-Waxman Amendments and determined that

those statutory sections did not provide a basis for the defense to infringement as asserted by Mylan. On this basis, the Federal Circuit concluded that Mylans underlying cause of action was, in effect, a private action under the FFDCA to delist the '365 patent and, as such, was expressly precluded by 21 U.S.C. § 355 (a). Consequently, the Federal Circuit reversed the judgment of the District Court and vacated the injunctive relief against both BMS and the FDA.49

Analysis

The Federal Circuit's opinion is notable as much for what it did not say as for its express holdings. Because the court found that the remedy Mylan sought was not available under any statutory scheme or recognized equitable principles, at least as Mylan had presented its case, the Federal Circuit did not address the underlying conclusions reached by the district court. Thus, the Federal Circuit declined to grapple with the issue most directly affecting Mylan-whether BMS had improperly listed the '365 patent with the FDA as claiming a method of use of BuSpar. Nowhere does the Federal Circuit even suggest that the district court had erred in its analysis of the claim coverage of the '365 patent. Tl~e Federal Circuit effectively concluded that, even If the analysis was correct, Mylan was still not entitled to the remedy it sought.

In light of the conclusions reached by the Federal Circuit, it is logical to ask what should ~ylan have done. As the district court opinion amply illustrates, there is a logical flaw to the position taken by Mylan. Although Mylan had argued that it based its position on a defense to a putative charge of patent infringement that could have been brought by BMS, Mylans

<, argument forced the district court to undertake an infringement analysis that focused not on Mylan's generic product but on BMS's BtrSpar", Taken from this perspective, Mylans position resulted i~ t?e somewhat incongruous outcome that the district court had based its holding on an analysis that never even addressed the "accused" product, Mylans generic buspirone. What, then, is a generic companyto do?

The Federal Circuit opinion raises one possible avenue for Mylan and other generic companies similarly situated. In defending the propriety of its conclusions, the Federal Circuit cited previous holdings in pharmaceutical cases, such as that in Abbott Labs v. Novopharm Ltd.,s° in which the Federal Circuit held, in the context of a patent infringement suit brought under 35 U.S.C. § 271(e)(2), that an order to delist a patent from the Orange Book was proper to give effect to the court's judgme~t in favor of ~e generic defendant. Although the Issue presented ill that case went to the effective expiration date of the listed patent and not to whether the listing itself was proper, the Federal Circuit upheld the propriety of

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an order directing the delisting of the patent at issue. The Federal Circuit seems to be suggesting that relief in the form of delisting a patent may be appropriate in the context of an infringement suit brought by the pioneer drug company. This also would be consistent with the position taken by the FDA that the appropriate remedy for Mylan was to seek adjustment in a § 271(e)(2) infringement action of the presumptive 30-month stay of approval under 21 U.S.C. § 355(j)(5)(B)(iii).51

Given the most likely motivation behind a pioneer drug company's certification of patent information to the FDA that, arguably, does not claim the approved drug product-a marketplace-driven desire to hold generic competition at bay for as long as possible'<e-it is easy to see how an argument that the very listing of incorrect patent information is a violation, at least, of the stated purpose of the Hatch-Waxman Amendments, if not of the specifics of 21 U.S.C. § 355(j)(5)(B)(iii). However, the result in a more recent Federal Circuit case, Andrx Pharm., Inc. v. Biovail Corp., 53 would seem to conclusively preclude this line of defense against improper Orange Book listings.

Andrx v. Biovail

Andrx, a generic drug company, had sought FDA approval through an ANDA to begin marketing a generic diltiazem hydrochloride product. Biovail markets Tiazac", a branded diltiazem hydrochloride product for hypertension and congestive heart failure under FDA approval obtained through an NDA. Andrx, as part of its ANDA, provided a paragraph IV certification that the patents listed in the Orange Book as claiming Tiazac" were invalid and not infringed. Biovail sued under 35 U.S.C. § 271(e)(2), invoking the provisions of the FFDCA that imposed a 30-month stay on the FDA's approval of Andrx's ANDA. Andrx ultimately prevailed in the litigation and received notice of conditional approval of its ANDA from the FDA.54

Before Andrx could begin marketing its generic diltiazem product, Biovail obtained an exclusive license to US Patent No. 6,162,463 directed to an extended release formulation of diltiazem hydrochloride. Within approximately a week of obtaining a license to the '463 patent, Biovail certified to the FDA that the patent claimed the approved drug product Tiazac", The FDA promptly informed Andrx that it was withdrawing approval of its ANDA, and Andrx protested to the FDA that the '463 patent did not cover the approved product. The FDA sought clarification from Biovail, which Biovail provided. 55 In light of Biovail's response, the FDA listed the '463 patent information in the Orange Book, thus opening Andrx to a second 30-month stay of approval of its ANDA, even though Andrx had already prevailed in an infringement suit. Andrx filed suit in district court against Biovail and the FDA seeking a declaratory judgment of non-infringe-

ment and invalidity, a delisting of the '463 patent, and other relief under antitrust and state statutes. Andrx also filed a paragraph IV certification to the '463 patent, and Biovail sued under 35 U.S.C. § 271(e)(2). The court, upon Biovail's motion, consolidated the two cases in the US District Court for the Southern District of Florida."

On motion by Andrx," the district court shortened the 30-month stay against FDA approval of Andrx's ANDA and ordered the FDA to immediately approve the ANDA, although declining to grant relief in the form of an injunction to order delisting of the '463 patent. 58

Biovail appealed to the Federal Circuit. Biovail claimed that its actions before filing suit under § 271 (e)(2) were not relevant to the issue of whether to shorten the stay, and that, in a similar manner, actions before the FDA (improper listing of a patent) were irrelevant to its conduct in the infringement litigation, which conduct should be \the only basis for an order to shorten the 30-month stay. The Federal Circuit agreed on both counts and vacated the district court's order shortening the automatic stay period."

The most obvious effect of the Federal Circuit's decision in Andrx is that the holding eliminates the approach suggested by the same court in the Mylan case as a possible response to arguably improper Orange Book listings. Thus, generic drug manufacturers, such as Mylan and Andrx, face the dilemma of how best to get out from under the onerous effect of the 30-month stay provisions of the FFDCA.60 The course of action followed by Mylan offers distinct advantages in that, by filing suit, the generic manufacturer effectively seizes control of the timing and possibly the pace of the court action so that, in theory, the court should address the fundamental factual issues that determine infringement much earlier in the 30-month period. However, Mylan v. Thompson effectively precludes that approach. What else is left?

An interesting aspect of the Federal Circuit opinion in Andrx is the suggestion that an appropriate course of action would be for the generic manufacturer to bring a cause. of action under the Administrative Procedure Act (APA) 61 for judicial review of the FDA's action in listing information for a given patent in the Orange Book. On appeal, Andrx attempted to argue before the Federal Circuit that one of the counts of its complaint was actually a cause of action under the APA. In response, the Federal Circuit stated that "[ajthough we agree that claims might properly be brought under the APA in this case to challenge the FDXs failure to issue the ANDA, we do not agree that Andrx has filed such a claim under the APA."62 Although this is a promising indication, the Federal Circuit qualified its position:

"We, of course, express no opinion here as to whether the FDXs action in refusing to inquire into

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the correctness of the listing, which then caused the FDA to stay approval of an ANDA, might represent action that is arbitrary, capricious or not in accordance with law,'?'

The Federal Circuit's cautionary footnote is telling. In a case related to Mylan v. Thompson, a second company with an ANDA on file for a buspirone product generic to BtrSpar" brought suit in the US District Court for the District of Maryland against the FDA under the APA.64 Unlike Mylan or Andrx, Watson brought suit specifically against the FDA. However, a plaintiff in such an action faces a high burden to overturn agency action.

Under the APA, an agency's decision is entitled to deference, amounting to a presumption of validity, and can only be set aside on a showing that it is arbitrary, capricious, not in accordance with the law, or unsupported in fact. See, generally, Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). The judicial deference owed the agency in the interpretation of its own governing statutes and regulations is especially great. See Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844-45, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).65

As the FDA argued in Mylan, its role in listing patent information in the Orange Book is largely ministerial, serving merely as a conduit for information from the NDA holder. As such, the agency has little discretionary power and no technical expertise or . resources to perform an independent analysis of whether the proffered patent information is correct. In both the Mylan and Andrx cases, the FDA followed all of the procedures that the FFDCA provides in a situation in which a party calls into question patent information in an Orange Book listing. However, this amounts merely to a request for clarification to the NDA holder. Once the FDA receives the requested clarification, there is virtually nothing it can do but proceed with listing of the proffered patent information in the Orange Book. Recognizing this, the district court in Watson stated:

So long as the FDA is acting within the scope of law and regulation which it did here when it accepts the patentee's declaration,· the Court has no warrant to second-guess it. The FDXs action here under attack was not unreasonable, arbitrary, or capricious, but was, rather, a reasonable exercise of its statutory and regulatory powers."

Thus, given the constraints imposed on the FDA by the FFDCA, it is unlikely as the Watson court explained, that an action under the APA will provide any source of relief for a generic company facing a mandatory 30- month stay against the approval of its ANDA.

. Possible Strategies

In light of the Andrx and Watson decisions, it appears that a generic drug manufacturer has few, if any, weapons at its disposal to address improper Orange Book listings, which can literally cost the company tens of millions of dollars. Arguably, this situation strikes even the most jaundiced industry observer as not only unfair but also as somewhat incongruous under the law. After all, Congress enacted the Hatch-Waxman Amendments ostensibly as a measure to spur drug price competition and to bring a source of cost savings to a public that is increasingly restive over the high cost of pharmaceuticals in this country. Once again, the question is: What is a generic manufacturer to do?

Turning to the Federal Circuit opinion in Mylan, there is a suggestion that may ultimately provide an effective strategy. In discussing Mylans argument that, by challenging the Orange Book listing of the '365 patent, it was merely asserting an available defense to patent infringement, the court stated that lithe issue may be akin to an estoppel defense or an unenforceability defense for a patentee's inequitable conduct in prosecuting a patent.'?" Thus, the court is suggesting that it is possible to attack an improper Orange Book listing, as a defense to patent infringement in a suit under § 271(e)(2), in the context of what is perhaps best characterized as an equitable defense. Specifically, the best line of attack may be to assert a charge of patent misuse arising from a pioneer drug company's certification that a patent claims the approved drug when, in fact, it does not. The logic here is compelling. The pioneer drug company's actions are analogous to the type of activity that courts have long recognized as constituting patent misuse, such as illegal tying. In illegal tying, a patent owner seeks to improperly broaden the scope of rights under its patents by forcing competitors to take licenses to unwanted patents in order to obtain licenses for desired patents." In providing the FDA with information for patents that do not in fact claim the approved drug product, a pioneer drug company is seeking to extend the rights under the listed patent to subject matter that is outside of the patent's scope. The end result is an improper broadening of patent rights beyond the grant conveyed by the government in issuing the patent. This is classic patent misuse.

In at least one reported case, Astra Aktiebolag v.

Kremers Urban Devel. Co., 69 a generic manufacturer defendant asserted defenses based on patent misuse for improper Orange Book listings. In deciding a motion to dismiss defenses of patent misuse, the district court observed:

Patent misuse is a defense to patent infringement, which if proven, renders the patent unenforceable until purged. The elements of an allegation of patent misuse include a patentee's impermissible use of its patent to

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broaden the physical or temporal scope of its patent with an anticompetitive effect. Patent misuse, therefore, requires bad faith and some improper purpose (citations omitted, emphasis added)."

The defendants specifically alleged that the plaintiffs had committed patent misuse by listing a patent in the Orange Book and falsely certifying that the patents covered the product sold as Prilosec", forcing the defendants to file a paragraph IV certification leading to § 271(e)(2) litigation. The court held that such an allegation was sufficient to assert patent misuse as a defense and denied plaintiffs motion with respect to that patent. The court granted the plaintiffs motion with respect to two other patents involved in the litigation on the basis that the asserted defense stated only that the plaintiff had listed the patents in the Orange Book and had asserted them against the defendant. Lacking specific allegations going to bad faith and an improper purpose necessary to support patent misuse, the court dismissed the defenses with respect to these patents."

Consistent with the Federal Circuit's observations in Mylan, this case demonstrates that patent misuse is available and may prove to be effective as a defense when pioneer drug manufacturers have provided improper patent information to the FDA for listing in the Orange Book. However, this approach does little to address the generic defendant's pressing need for quick resolution of the threshold issue of whether the listed patent claims the approved product. What should be a much more effective approach, as tried unsuccessfully by Mylan and Andrx, would be to affirmatively bring a cause of action to delist a patent from the Orange Book rather than to wait to defend an infringement suit under § 271(e)(2). It is clear from the opinions discussed above that such a cause of action is not currently available. However, legislation is currently pending before Congress thai may, at least partially, address the kinds of concerns discussed here. Senators Schumer and McCain have introduced the Greater Access to Affordable Pharmaceuticals Act of 2001,72 and the bill has been referred to the Senate Committee on Health, Education, Labor and Pensions.

According to current provisions of the bill, when an applicant includes a paragraph IV certification with an ANDA, the FDA will approve the pending application at the expiration of the 45-day notice period, unless the pioneer drug company brings suit within that period and the court grants a preliminary injunction against manufacture and marketing of the generic product. The bill also provides that an ANDA filer may bring a civil action against the NDA holder for a declaratory judgment to determine whether the patent that claims the listed drug is invalid or not infringed. In addition, the bill provides that, if patent information for an approved drug has

been listed in the Orange Book for one year after the filing of an ANDA, either the ANDA filer or the NDA holder may bring a civil action "to determine the legal status of the patent for the listed drug." Although not providing an unfettered right to address whether Orange Book patent information is proper, the proposed legislation at least recognizes the dilemma under discussion. Of course, given the demonstrated strength of the congressional lobby for the pioneer drug industry, there is no way of knowing the final form in which the legislation will issue, if at all.

One of the more telling aspects of this proposed legislation is found in the Purposes section of the bill, which states:

The purposes of this Act are-

to ensure fair marketplace practices and deter pharmaceutical companies (including generic companies) from engaging in anticompetitive action or actions that tend to unfairly restrain trade.

This language suggests that the actions of pioneer drug manufacturers in providing incorrect patent information to the FDA for listing in the Orange Book are anticompetitive in effect and, to the extent that they are intended to reduce competition from generic drugs, are in violation of antitrust statutes, both federal and state." Thus, an appropriate response to an action under § 271(e)(2) may be to file counterclaims asserting antitrust violations under both federal and state statutes." As is the case with the patent misuse defense, it is reasonable to conclude that the success of such counterclaims may ultimately depend on whether evidence can be presented that demonstrates the pioneer drug company's improper intent and knowing submission of incorrect patent information to the FDA.

Summary

In the almost 20 years since passage of the HatchWaxman Amendments, it is undisputed that the legislation has generated considerable litigation. What is subject to more question is whether the amendments have succeeded in fulfilling one of the stated goals of the legislation-to make lower cost drug products available to the public. Working within the statutory framework created by the Hatch-Waxman Amendments, pioneer drug companies have exercised considerable creativity in their efforts to reduce competition from generic companies. When, as suggested by the results in Mylan and Andrx, the pioneer drug companies are reaching outside the bounds of the statute to achieve their business goals, it is time to consider a change to those amendments, perhaps along the lines of S. 812. Given the futility encountered by generic companies in addressing the tactics of the pioneer drug companies, there is considerable urgency in addressing these issues. Looking to the bottom line, both literally and

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figuratively, there should be enough profit within the pharmaceutical industry to sustain both pioneer and generic companies. Finally, it is important for the industry to consider the effect of its strategies on the public as a whole. As headlines increasingly illustrate, a vast segment of the population seems to feel that the system doesn't work and that drug costs are just too high.

Notes

1. The '365 patent, entitled "Anxiety Method," issued from an application filed June 6, 2000, which was the subject of a petition to make special, claiming a need to secure issuance of the patent by November 22, 2000, "in order to maintain its product position in what has become a highly competitive market."

2. The active ingredient in both BtrSpar" and Mylan's generic equivalent is buspirone hydrochloride. BMS's sales of BtrSpar" in 1999 were in excess of $600 million.

3. Mylan v. Thompson, 268 F.3d 1576 (Fed. Cir. 2001).

4. 21 U.S.C. §§ 355, et seq. (2001).

5. As indicated in the Manual of Patent Examining Procedure § 1703, patents issue every Tuesday. Thus, the next available issue date for the '365 patent would have been November 28, 2000, after expiration of the '763 patent.

6. Pub. L. No. 98-417, 98 Stat. 1.585 (1984), codified at 21 U.S.C. §§ 355, 360 cc, 35 U.S.C. §§ 156, 271, 282.

7. "[T]he Hatch-Waxman Amendments were the product of compromise.

The Act emerged from Congress' efforts to balance two conflicting policy objectives: to induce name-brand pharmaceutical firms to make t?e investments necessary to research and develop new drug products, while simultaneously enabling competitors to bring cheaper, generic copies of those drugs to market." See Mead Johnson Pharmaceutical Group v. Bowen, 838 F.2d 1332, 1333 (D.C. Cir. 1988); H.R.Rep. No. 857, 98th Cong., 2d Sess., pt. 1, at 14-15, reprinted in 1984 U.S.Code Cong. & Admin. News 2647, 2647-2648. Abbott Laboratories, Inc. v. Young, 920 F.2d 984, 991 (Edwards, J., dissenting) (Fed. Cir. 1990).

8. See Mylan v. Thompson, 139 F. Supp. 2d 1, 4-7 (D. D.C. 2001) for a more detailed description of the statutory scheme regulating the approval of both pioneer and generic drugs.

9. The FFDCA requires a pioneer drug company to file a New Drug Application (NDA) establishing the safety and efficacy of the drug product through extensive clinical testing in order to obtain approval to market the new drug product.

10. "The applicant shall file with the application the patent number and the expiration date of any patent which claims the drug for which ~e applicant submitted the application or which claims a method of usmg such drug and with respect to which a claim of patent infringement co~d reasonably be asserted if a person not licensed by the owner engaged m the manufacture, use, or sale of the drug." 21 U.S.C. § 355(B)(1) (2001).

11. Orange Book listings can also be accessed online at http://www. [da.gov/cder/ob/defaulthtm.

12. The only requirement necessary to trigger the automatic 30-month stay of FDA approval is filing of a paragraph IV certification and subsequent suit by the NDA holder/patent owner under 35 U.S.C. § 271(e)(2(A).

13. 35 U.S.C. § 271(a).

14. A further irony is that the statutory scheme under the HatchWaxman Amendments effectively relieves the pioneer drug company from the constraints normally imposed under Rule 11 of the Federal Rules of Civil Procedure that require an independent inquiry into the factual basis for any pleading filed in federal court. Under 35 U.S.C. § 271(e)(2)(A), it is an act of infringement, without more, to file an ANDA with a paragraph IV certification. See Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 676 (1990). Thus, this "artificial" act of infringement sustains an infringement suit arguably without the need for the patent owner to plead the fact of infringement of patent rights by the generic product.

15. "[The Hatch-Waxman Act] is far from a model of legislative draftsmanship. The district court in this case called the provision [Section 355(j)(5)(B)(iv)] 'cumbersome'; another district court described it as 'very confusing and ambiguous.' Mylan Pharmaceuticals, Inc. v. Sullivan, No. 89_36-C(K), slip op. at 6 (N.D. W.v. May 5, 1989)." Mova Pharm. Corp. v. Shalala, 140 F.3d 1060,1069 (D.C. Cir. 1998).

16. 35 U.S.C. § 271(a).

17. BMS took advantage of this procedure to obtain a two-year extension of the patent term of the patent originally listed as claiming BuSpar"', us Patent No. 4,182,763. BMS also obtained an additional six-month period of market exclusivity for BuSpar'" arising from its clinical testing of the

drug product for pediatric applications. The exclusivity BMS enjoyed for its product was set to expire at midnight on November 21,2000 ..

18. TItle I of the act was intended to "make available more low cost generic drugs by establishing a generic drug approval procedure for pioneer drugs first approved after 1962." H. R Rep. No 98-857, pt. 1 at 14 (1984) reprinted in U.S.C.C.A.N. 2647.

19. A drug product is generic to a product approved under an NDA if it contains the same active ingredient; at the same strength; is administered by the same route of administration; in the same dosage form, and is bioequivalent to the approved drug product. ''Bioequivalence r:efe:s to ~te at which and the extent to which, the body absorbs the active mgredients in the 'drug." Mylan, 139 F. Supp. 2d at 1. 3. See 21 U.S.C. § 355(j)(8)(A); 21 C.F.R. § 320.l(e).

20. The inactive ingredients in a drug product's formulation, which comprise the bulk of most formulations, do not have to be the same as the pioneer drug.

21. Market studies indicate that for most drug products, within two years of the start of marketing of generic equivalents, prices for the drug product fall to approximately 50 percent of the price before the pioneer drug product lost exclusivity.

22. The FDA first approved BirSpar" for marketing in 1986.

23. As part of an ANDA, the FFDCA requires the applicant to certify with respect to the patent information provided in the Orange Book that one of the following four situations exist: (1) there are no patents listed as claiming the approved pioneer drug; (2) the patents listed as claiming the pioneer drug product have all expired; (3) the patents listed as claiming the pioneer drug product will expire on a certain date and that the applicant will wait until that expiration date to market their product, if approved; and (4) that there are one or more patents listed as claiming the pioneer product, but approval is sought to market the generic product before expiration of the listed patents because the patents are either not infringed or invalid. 21 U.S.C. § 355(j)(2)(A)(vii)(I-IV); 21 C.F.R § 314.107(b)(1)(iv). These are commonly referred to as paragraph I to IV certifications.

24. Mylan estimated that its total revenues for generic buspirone would amount to $31,250,000 over the next 12 months.

25. The application leading to the '365 patent claimed priority as a continuation-in-part of an earlier application filed January 18, 2000, which in turn was a division of an application originally filed August 5, 1999. Both previous applications were abandoned.

26. 37 C.F.R. § 314.53(d).

27. 21 U.S.C. § 355(j)(2)(A)(viii).

28. As will be discussed in more detail below, this was virtually the only

action available to the FDA under the FFDCA.

29. Myian, 139 F. Supp. 2d at 29.

30. ld. at 15.

31. ld. at 17. 32.ld.

33. In addressing this issue, the court used the logical framework of whether the '365 patent would be infringed by use of BuSpar'" as approved by the FDA, in accord with the Federal Circuit's holding in Hoechst-Roussel Phann., Inc. v. Lehman, 109 F.3d 756,758 (Fed. Cir. 1997).

34. The sole claim of the '365 patent reads as follows:

A process for ameliorating an undesirable anxiety state in a mammal comprising systemic administration to the mammal of an effective but non-toxic anxiolytic dose of 6-hydroxy-8-[ 4-[ 4-(2-pirimidinyl)piperazinyl]-butyll-8-azaspiro[ 4,5]-7,9-di.one fa buspirone metabolite] or a pharmaceutically acceptable addition salt or hydrate thereof.

35. Mylan further argued, in response to BMS's position on claim interpretation, that the manner of administration of buspirone to favor in vivo conversion to the claimed metabolite was contrary to the FDA-approved use of BirSpar" as described in the package insert.

36. Mylan, 139 F. Supp. 2d at 24-26.

37. ld.

38. ld. at 29.

39. ld.

40. Mylan v. Thompson, 268 F.3d 1323 (Fed. Cir. 2001).

41. ld. at 1326.

42. fd. at 1330.

43. ld. See 21 U.S.C. § 355(a).

44. ld.

45. This was necessary because the Declaratory Judgment Act does not expand federal jurisdiction but only enlarges the available range of remedies. Thus, there must be a separate statutory basis for federal jurisdiction.

46. "It shall be an act of infringement to submit-

(A) an application under section 505(j) of the Federal Food, Drug, and Cosmetic Act or described in section 505(b)(2) of such Act [an ANDA] for a drug claimed in a patent or the use of which is claimed in a patent, ... "

47. Mylan, 268 F.3d, at 1331.

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48. ld.

49. ld. at 1333.

50. Abbott Labs v. Novophann ltd., 104 F.3d 1305, 1309 (Fed. Cil: 1997).

51. Under this section of the statute, the court may adjust the automatic 30- month stay of ANDA approval if either party to an action brought under 35 U.S.C. § 271(e)(2) fails "to reasonably cooperate in expediting the action."

52. The economics here are simple. BMS reported revenues from BuSpar" for 1999 of $600 million, a figure that averages to $50 million per month. By listing the '365 patent in the Orange Book, BMS delayed the onset of generic competition by as much as 30 months. This insures a continued flow of revenue from the sale of BuSpar" over that time period of $1.5 billion. Granted, even if Mylan had been able to begin marketing of its buspirone product in November 2000, BMS would have retained the lion's share of the market, at least temporarily. Within six months of Mylan's marketing, however, it is possible that the FDA would have approved other ANDA's for generic buspirone. The inevitable effect of this generic competition would be decreased market share and eroded price levels in response to the lower prices of the generic products. By the end of this 30-month period, BMS's revenues for BirSpar" could easily have been reduced by 50 percent or more.

53. Andrx Phann., Inc. v. Biovail Corp., 276 F.3d 1368 (Fed. Cir. 2002)

54. 234 F.3d 1297 (Fed. Cir; 2001).

55. Arguably, Biovail had to alter its manufacturing process for Tiazac" to bring the process within the claims of the '463 patent. In response to this, the FDA took the position that Biovail needed to file a supplement to its NDA to cover the altered process, a course of action that would require considerable expenditure of resources on Biovail's part to' address, and which could lead to a suspension of marketing of the revised TIazac® formulation pending FDA review of the supplement. Biovail opposed the FDA's request, but the FDA has maintained its position that the changes require a supplement to the NDA.

56. 175 F.Supp.2d 1362 (S. D. Fla 2001).

57. see 21 U.S.C. § 355G)(5)(B)(iii).

58. ld.

59. Andrx, 276 F.3d 1368.

60. In this context, generic drug manufacturers are faced with a potential double whammy. They could face the 30-month stay provisions solely under § 271(e)(2) even though there is no factual basis for infringement, assuming a proper Orange Book listing. In addition, as was the case for Mylan and Andrx, they could face the very real prospect of improper

Orange Book listings forcing a significant delay on the approval and marketing schedule for their generic products.

61. 5 U.S.C. § 702.

62. Andrx, 276 F.3d at 1379-1380.

63. u, at 1'379 n.8.

64. Watson Phann. v. Henney and Bristol-Myers Squib Co, No. 00 CV 3516,

District of Maryland.

65. ld. slip op at p.3.

66. Id: at p.4.

67. Mylan, 268 F.3d at 1331.

68. Under 35 U.S.C. § 271(d), a patent owner may tie a license to one patent to a license under another patent "unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned." Given the specific relationship between a product approved under an NDA and competitive generic products, there can be little doubt that a pioneer drug company cannot avail itself of the protection afforded by this section, even if the patent rightfully covered the approved product. Where, as discussed herein, the asserted patent does not cover the listed drug product, there should be no haven from patent misuse allegations.

69. 61 U.S.P.Q.2d 1767 (S.D.N.Y. 2001).

70. ld. at 1768.

71. ld.

n. S. Res. 812, 107th Congo (2001).

73. See, e.g., the Connecticut Unfair Trade Practices Act, C.G.S. § 42-110b, "No person shall engage in unfair methods of competition or unfair or deceptive acts or practices in the conduct of any trade or commerce." ~74. A recent article, "Drug Firms Settle Patent Dispute," Brubaker, B., The

. Washington Post, April 24, 2002, reports that the Federal Trade Commission (FTC) has initiated an investigation against Biovail for the "illegal" listing of patent information with the FDA for inclusion in the Orange Book as covering Tiazac". Reportedly, the FTC and Biovail have reached a settlement in which Biovail does not admit any wrongdoing. A spokesman for Biovail is quoted as saying that the settlement was solely for the purpose of avoiding litigation costs in a dispute with the FTC. However, the article does not state whether the FTC will require, as part of the settlement, a delisting of the patent information. If nothing else, the mere fact of the FTC investigation, regardless of the specific terms of the settlement with Biovail, is a clear indication of the anti-competitive nature of listing improper patent information in the Orange Book.

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