Federal Circuit Affirms District Court’s Extension of 30-Month FDA Stay

Eli Lilly v. Teva Pharmaceuticals (Fed. Cir. 2009)

Teva is hoping to make a generic version of Lilly's Evista brand raloxifene tablets that are used to help prevent postmenopausal osteoporosis. In May 2006, Teva filed an abbreviated new drug agreement (ANDA) and Lilly subsequently sued for patent infringement and to block the generic release. Under the law, after the patentee files suit, the FDA cannot then approve the generic for thirty months "unless the court has extended or reduced the period because of a failure of either [party] to cooperate reasonably in expediting the action." This is commonly known as the "thirty month stay."

In this case, the court originally set a trial date four months after the end of the thirty month period. In the months leading up to trial Teva altered its proposed generic formulation, which changed Lilly's litigation strategy. As a result, the district court ordered that the FDA thirty month stay be extended for four extra months – until May 2009. Teva filed an emergency appeal to lift the stay.

On appeal, a split Federal Circuit panel affirmed – finding that the district court acted within its discretion in extending the stay based on Teva's activity. "Trial courts, thus, may shorten or extend the thirty-month statutory period based on the parties' uncooperative discovery practices before the court." In its decision, the court distinguished the 2002 Andrx v. Bioval case. In Andrx, the Federal Circuit found that the district court had abused its discretion in shortening a thirty-month stay based on a party's "positions before the FDA." Rather, changes to the thirty-month period must be based on failure to cooperate court.

In dissent, Judge Prost argued that the majority misinterpreted the statute to grant too much deference to the district court in extending the stay. Rather, the statute requires that the stay should only be extended when a party fails "to cooperate reasonably in expediting the action." Here, Judge Prost argues, the lower court did not find that Teva failed to cooperate, but only that Lilly could use more time to respond. The statute is limited in a way that does not allow extension of the stay in that situation.

Notes:

• Judge Rader wrote the majority opinion and was joined by Chief Judge Michel.
• On the expedited schedule, Appellant filed its principle brief November 24, 2008; briefing was complete on December 30, 2008; Oral arguments were heard on January 14, 2009; and a decision rendered on February 24, 2009.

Comments

[Lionel Hutz]

Can someone explain to me the 30-month stay? Pharmaceuticals is not my field. Am I missing something or does this give any patent holder of a successful drug the ability to shut off a competitor for 30 months for any claim of infringement that rises above Rule 11 liability?

[Dan Feigelson]

Lionel, long answer coming: when a generic manufacturer files an abbreviated new drug application (ANDA), it has to look at the FDA's "Orange Book" and see if any patents are listed there that cover the drug the generic manufacturer wants to copy. If there are patents that are still in force, the ANDA has to either certify that (a) the generic won't sell before the patent expires (a so-called paragraph III certification) or that the patent is either invalid or non-infringed (a "paragraph IV" certification). The patentee has to be notified of a par. IV certification, and then the patentee has 45 days to file suit againt the ANDA filer for infringement under 271(e)(2). If the patentee files such a suit, then the FDA is enjoined for 30 months from approving the ANDA. However, if the patent is determined to be invalid or not infringed by the ANDA filer's product, then the ANDA filer gets 180 days exclusivity as the only generic manufacturer allowed to sell (assuming it was the first ANDA filer). So generic have strong incentive to challenge or work around patents and to do it early in the lifetime of the patent. Once upon a time a patentee could get multiple 30-month stays, but now they only get one bite at the apple.

Note that 271(e)(2) litigation occurs before any product is on the market, so there aren't usually damages involved. In the past, if a patentee chose not to sue under 271(e)(2) and the ANDA was approved, the generic had to decide whether or not to launch its drug "at risk", in which case it could be sued under 271(a) and subject to damages; but in the wake of Medimmune, an ANDA filer who's not sued under 271(e)(2) can probably get DJ jurisdiction.

Does that answer your question?

[Just sayin']

the defendant altering its proposed generic formulation in the middle of discovery seems like a bit of chikanery to me, not just that Lilly could use more time to respond.

Another sensible opinion from Judge Rader.

[Pacific Reporter]

Teva wants the 30-month stay to expire so it can threaten to launch "at-risk" (i.e. while litigation is still pending). That way it will have more leverage when negotiating a pay-for-delay settlement with Lilly. I expect Lilly will settle with Teva in a few months, and that Teva will get a big payout to go away.

[Humorless Democrat]

Could be chicanery, or it could be that during the course of litigation they found a way to improve their formulation. The innovators have changed their formulation during FDA review on numerous occasions; why should a generic company be precluded from doing the same just b/c at the time the FDA is considering their ANDA (or should be considering their ANDA if the 30-month stay weren't imposed), they're being sued for an act that isn't really infringement (remember, at the time of the trial they've only asked the FDA to approve their generic version, they haven't yet sold or offered to sell anything)? Also keep in mind that b/c of the 180-exclusivity period, generic companies want to get their foot in the door fast, so the possibility that they find an improved version later isn't unrealistic. I think Rader is one of the best judges on the CAFC, but I wonder if Prost may have gotten it right this time. A tough call, especially in a field in which there are no angels.

[John Roethel]

I think Congress should apply this same scheme to golf balls. Why is Big Pharma more important than Big Golf?

Thanks to Mr. Feigelson for the explanation.

[Lionel Hutz]

Dan,

Thanks.

[Dan Feigelson]

John, pharma is different from golf balls because for pharma we've imposed a regulatory scheme - the FDA approval process - that raises the cost to market entry for new drugs sky-high, in the hundreds of millions of dollars. If we were worried about golf balls killing people like we're worried about bad drugs killing people, then we could impose a similar regulatory scheme for golf balls, including the whole Orange Book listing - paragraph IV challenge - 30 month stay of FDA approval thing.

The regulatory scheme for pharma isn't in place to help big pharma companies, it's to ensure that (a) the public continually has access to new, *safe* and *effective* medicines and (b) the cost of old medicines drops as soon as they go off-patent (an event which can be hastened by the generic companies themselves in the way of paragraph IV challenges). This scheme works pretty well - I don't have the exact figures in front of me, but since the Waxman-Hatch amendment came into force in 1984, the generic drug industry has boomed. The USA remains the leader in new drug development (due both to a strong patent system and the lack of government price controls on drugs like some countries have), and the difference in prices between pre- and post-generic market entry in the USA is the highest in the world - US generics are the cheapest around.

But hey, if you want to pay thousands of dollars for your new golf balls, go lobby your congressman to enact Orange Book legislation for the golf industry.

[bsn]

" ... and the difference in prices between pre- and post-generic market entry in the USA is the highest in the world - US generics are the cheapest around."
No. US pre-generics are the most expensive around.

This is off-topic, but there's an interesting morality discussion to be had around the twin effects of the strong patent system / lack of price controls. We end up with better drugs, but fewer people can afford them. Is that a net benefit to society?

[Humorless Democrat]

BSN, I live overseas, and the generics here are more expensive than the generics in the USA. I think the question you really want to ask is, should the citizens of the USA be subsidizing drug development for the rest of world? Because that's in effect what's happening - the high prices paid for new drugs in the USA is what funds the development of the next generation of drugs, while price controls in other countries ensure that they foot disproportionately less of the bill for drug development.

[Archer]

BSN, Agreed that it would be an interesting morality discussion, but only in the larger context of peoples' general spending habits (e.g., spending on medicine vs. entertainment).
Also, even if it is assumed that there is a significant disparity with respect to access to a new medication due to its high initial cost, the near certaintly that it will eventually go generic (or at the very least face non-generic competition) leaves little doubt that society is better off in the long run. Drug discovery & development today is still an unpredictable, resource-intensive endeavor. As long as there is a societal need for new and better medications these costs will need to be borne.

[John Roethel]

Dan et al. Thanks for the extended discussion of Waxman-Hatch. Much food for thought. Another example of how hard it is sometimes to anticipate the consequences of legislation. And we can add the coming convolutions of universal health care to the mix.

[Millard Crowther]

I'm afraid I would prefer to see the generic drugs get through without a problem, since my insurance doesn't cover "name-brand" drugs. If you want to print or download any patent in PDF format, you can get it at WikiPatents.com. Even if you aren't needing to research any patents, you can see how other people feel about any specific invention.

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