Federal Circuit Issues Important Decision Construing the Hatch-Waxman Counterclaim and Section viii Carve-Outs

April 16, 2010

On April 14, 2010, the U.S. Court of Appeals for the Federal Circuit issued its decision in Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories, Ltd., No. 2010-1001.  This decision offers the first extensive construction of the counterclaim that was added to the Hatch-Waxman Act in 2003.  See 21 U.S.C. § 355(j)(5)(C)(ii)(I).  The counterclaim provision authorizes a generic drug maker to challenge the "patent information" submitted by an innovative pharmaceutical company if the patent does not claim an approved drug or method of using the drug product.

Relying on the plain meaning of the relevant statutory text, the Federal Circuit held that, with respect to method claims, this counterclaim is available only in a narrow set of circumstances where the patent-in-suit does not claim any approved method of using the Orange Book-listed drug for which the generic applicant seeks approval.  Moreover, the court held, the counterclaim only authorizes the correction or deletion of the patent number or expiration date, and not any other information listed in the Orange Book in connection with the patent, such as a use code.

Background.  Section 505 of the Hatch-Waxman Act, codified as amended at 21 U.S.C. § 355, regulates the process by which drug makers can secure FDA approval of new drugs, as well as the avenues of judicial relief available to patent holders and their generic competitors.  Section 505(b) requires innovators who file New Drug Applications (NDAs) to provide specified "patent information" to the Food and Drug Administration (FDA): "The applicant shall file with the application the patent number and the expiration date of any patent which claims the drug … or which claims a method of using such drug."  21 U.S.C. § 355(b)(1) (emphases added). 

Separate and apart from the "patent information" specifically required of NDA filers by subsections (b) and (c), the FDA has promulgated regulations that require NDA applicants to provide substantial additional information not mandated by statute.  See 68 Fed. Reg. 36,671, 36,677 (June 18, 2003) (codified at 21 C.F.R. pt. 314).  This information is provided to FDA on Form 3542, and must include "the description of the approved indication or method of use" for a drug.  See 21 C.F.R. § 314.53(c)(ii)(P).  This description is popularly known as the "use code narrative."  The FDA publishes a list of patents claiming approved drugs, along with their associated use codes, in the "Orange Book."

Section 505(j) requires generic companies making Abbreviated New Drug Application (ANDA) filings to include a certification that (I) no patent covering the listed drug has been listed in the Orange Book; (II) the patent has expired; (III) the patent will expire on a particular date and approval of the ANDA should be deferred until expiration; or (IV) the patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug.  21 U.S.C. § 355(j)(2)(A)(vii).

The Hatch-Waxman Act provides that the filing of a Paragraph IV certification by an ANDA applicant is an act of patent infringement.  35 U.S.C. § 271(e)(2)(A); Eli Lilly & Co. v. Medtronic, Inc., 496 U.S 661, 678 (1990).  If the pioneer company brings suit within 45 days of receiving notice of the Paragraph IV certification, the FDA may not approve the ANDA for 30 months.  21 U.S.C. § 355(j)(5)(B)(iii).

In 2003, the Hatch-Waxman Act was amended to authorize a limited counterclaim for ANDA filers sued for infringement: 

If an owner of the patent or the holder of the approved application under subsection (b) of this section for the drug that is claimed by the patent or a use of which is claimed by the patent brings a patent infringement action against the [ANDA] applicant, the applicant may assert a counterclaim seeking an order requiring the holder to correct or delete the patent information submitted by the holder under subsection (b) or (c) of this section on the ground that the patent does not claim either–
(aa) the drug for which the application was approved; or
(bb) an approved method of using the drug.

21 U.S.C. § 355(j)(5)(C)(ii)(I) (added by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. 108-173, 117 Stat. 2066).

Following the issuance of a patent for PRANDIN®, Novo Nordisk’s patented repaglinide-metformin combination drug, in 2004, Novo Nordisk submitted a proposed use code narrative to the FDA that read, "Use of repaglinide in combination with metformin to lower blood glucose."  The FDA assigned use code U-546.  In 2005, Caraco filed an ANDA for generic repaglinide that included a Paragraph IV certification that Novo Nordisk’s patent was invalid or would not be infringed by the sale of generic repaglinide.  Novo Nordisk sued for infringement under the provisions of the Hatch-Waxman Act.  Caraco then amended its ANDA, splitting its certification and submitting a section viii statement carving out repaglinide-metformin combination therapy from its label for Claim 4 of the patent.  The FDA indicated that it would permit such a carve-out, and Novo Nordisk moved for reconsideration.

In December 2008, Novo revised its PRANDIN® label pursuant to an FDA directive "requesting changes to the professional labeling of all oral anti-diabetic drugs."  In May 2009, Novo submitted an amended FDA Form 3542, which included an updated use code narrative to reflect precisely the new FDA-mandated indication for PRANDIN®.  The new use code read, "A method for improving glycemic control in adults with type 2 diabetes mellitus," and was assigned use code U-968.  Based on the new use code, the FDA determined that Novo’s request for reconsideration of the section viii carve-out was now "moot," because the "factual predicate" on which FDA’s permissive carve-out decision had rested no longer applied.  Despite repeated entreaties from Caraco, FDA declined to allow its section viii statement.  Caraco then counterclaimed against Novo Nordisk under 21 U.S.C. § 355(j)(5)(C)(ii)–the special counterclaim added by the 2003 amendments to Hatch-Waxman–for "an order requiring [Novo] to correct the use code information submitted by [Novo]" to the FDA by filing an amended Form 3542 that would have asked the FDA to revert to the previous U-546 use code.

The district court issued an injunction, requiring Novo Nordisk to change the use code narrative for PRANDIN®.  Novo Nordisk brought an interlocutory appeal to challenge that injunction.

Federal Circuit Opinion.  The Federal Circuit, in an opinion authored by Judge Rader, reversed and vacated the injunction that had directed Novo Nordisk to change its use code. In holding that Caraco "does not have a statutory basis to assert a counterclaim requesting such injunctive relief," Op. at 1, the court adopted each of Novo Nordisk’s statutory interpretation arguments, and emphasized that "Caraco’s real complaint should lie with the FDA, not Novo." Id. at 12. Judge Clevenger joined Judge Rader’s analysis of the relevant statutory provisions in full, and wrote a separate concurrence emphasizing that "there is nothing illegal, or even incorrect, about Novo’s current use code" and that the denial of Caraco’s request for a section viii carve-out was the result of FDA policies, and not anything that Novo Nordisk had done wrong.  Concurring Op. at 3. Judge Dyk issued a dissenting opinion.

In the majority opinion, the court made clear that, as Novo Nordisk had argued, the Hatch-Waxman Act provides only "a limited counterclaim to a generic manufacturer in a Paragraph IV infringement action," and that such a limited claim "strike[s the proper] balance of the pioneering and generic manufacturers’ interests."  Op. at 9, 12.  In its detailed analysis of the statute and the legislative history, the court adopted each prong of Novo Nordisk’s argument, providing multiple bases for its decision:  

  • First, the court ruled that there is "no ambiguity in the statutory language."  Novo Nordisk had read the counterclaim statute to be limited to cases in which the listed drug does not claim any approved method of using the drug, while Caraco had read the statute far more broadly to permit a counterclaim whenever a drug does not claim all approved methods.  The court adopted Novo Nordisk’s plain meaning argument because, "[w]hen an indefinite article is preceded and qualified by a negative, standard grammar generally provides that ‘a’ means ‘any.’"  The court also agreed with Novo Nordisk that "[t]he rest of the counterclaim provision also does not support Caraco’s interpretation."  Op. at 10.
  • Second, the court explained that the historical background–in particular, the fact that Congress added the use code counterclaim to "correct the specific issues raised in [the Federal Circuit’s 2002 decision in] Mylan [Pharms. v. Thomson], i.e., to deter pioneering manufacturers from listing patents  that were not related at all to the patented product or method"–supported the court’s interpretation of the statute that "on its face presents no ambiguities."  Op. at 10-11 (emphasis supplied).  The court thereby rejected Caraco’s far broader reading of the relationship between Mylan and the use code counterclaim. 
  • Third, the court held that the counterclaim provision does not authorize an order compelling the patent holder to change its use code narrative because "the [Hatch-Waxman] Act defined the term ‘patent information’ as ‘the patent number and expiration date,’" and the counterclaim provision therefore "only authorizes suits to correct or delete an erroneous patent number and expiration date[, and t]he authorization does not extend to the use code narrative."  Op. at 12-13.  
  • Fourth, the court decided that FDA interpretations or congressional floor statements invoked by Caraco were either at odds with the plain language of the statute or helplessly ambiguous.  Op. at 13-14.

In addition to the detailed statutory analysis, the court made clear that its decision comported with central policy aim of the Hatch-Waxman Act, which is to strike a balance between the interests of generic and innovator manufacturers.  Thus, it was proper, according to the court, to limit the use code counterclaim so that generic manufacturers would need to go through the Paragraph IV lawsuit process to "provide proof that the[] use [of a generic drug] will not cause infringement of the patented use"; doing so "ensure[s] that a generic drug for non-patented purposes will not be used for patented purposes via a simple section viii certification" and ensures that such uses will instead be evaluated at trial "in a proceeding that fully tests for infringement and its implications, including potential health and safety risks."  Op. at 11-12.

In his concurring opinion, Judge Clevenger stated that he "agree[d] with Judge Rader’s analysis of the relevant statutory provisions . . . and therefore join[e]d the opinion he wr[o]te[] for the court."  Concurrence at 1.  He wrote separately to address the dissent and emphasize that it was the FDA that requested a change in the approved indications for PRANDIN®, which "required Novo to use FDA’s new approved labeling . . . [and] permitted Novo to revise its use code."  Id.  He made clear that "[n]othing in the record suggests that Novo is responsible for the labeling change, which, given the statutory and regulatory framework, happens to benefit Novo at Caraco’s expense."  Id. at 2.  Indeed, he emphasized and reiterated numerous times that "there is nothing illegal, or even incorrect, about Novo’s current use code," that "[l]aying blame on Novo is wrong," and that "[i]f a fix is in order under the circumstances of this case, it lies with the FDA and Congress . . . to remedy the situation," and not with Novo Nordisk.  Id. at 3.

Judge Dyk dissented, arguing that the Hatch-Waxman counterclaim authorized the injunction issued by the district court.

Conclusion.  In this groundbreaking case, the Federal Circuit made clear that the Hatch-Waxman counterclaim for correction or deletion of patent information submitted by innovator drug manufacturers to the FDA is quite narrow: The counterclaim is available, for method of use patents, only where both of the following conditions are met:

(1) the listed patent does not claim any approved method of using the drug that the ANDA applicant seeks approval for; and

(2) the only patent information that the counterclaimant seeks to have corrected or deleted is the patent number or expiration date. 

In light of these limitations, the court held, the Hatch-Waxman Act does not authorize a counterclaim for correction or deletion of other information listed in the Orange Book, such as the use code.  This decision should benefit innovator drug companies facing Hatch-Waxman counterclaims; this is especially so in the method of use context, where the FDA looks to use codes provided by NDA-holders for listing in the Orange Book in evaluating requests by ANDA applicants for section viii carve-outs.

Gibson, Dunn & Crutcher LLP 

This Alert was prepared by Mark A. Perry, who represented Novo Nordisk on appeal and argued the case to the Federal Circuit on Novo Nordisk’s behalf, and Josh Krevitt, Michael A. Sitzman, and Wayne Barsky, who represented Novo Nordisk at the district court and on appeal.  Any questions about Novo Nordisk or other litigation involving the Hatch-Waxman Act may be directed to the Gibson Dunn lawyer with whom you work or any of the following:

Mark A. Perry – Washington, D.C. (202-887-3667; mperry@gibsondunn.com)
Josh Krevitt – New York (212-351-2490, jkrevitt@gibsondunn.com)
Michael A. Sitzman – San Francisco (415-393-8221, msitzman@gibsondunn.com)
Wayne Barsky – Los Angeles (310-557-8183, wbarsky@gibsondunn.com)

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