25 Biotechnology Law Report 525
Number 5 (October 2006)
© Mary Ann Liebert, Inc.
Papers
Hatch-Waxman Game-Playing from a Generic Manufacturer
Perspective: From Ticlid® to Pravachol®, Apotex Has
Difficulty Telling Who’s on First
DANIEL F. COUGHLIN, Ph.D.,* and ROCHELLE A. DEDE†
S INCE THE INCEPTION of the Hatch-Waxman Act
more than two decades ago, branded pharmaceuti-
cal companies and their generic competitors have bat-
tled each other constantly with a variety of legal game-
playing strategies, seeking to wrest advantages from
the complex and conflicting wording of the legislation.
A more recent phenomenon is generic rivals using cre-
ative legal strategies to fight among themselves in
court skirmishes over the highly valuable exclusive
marketing period normally granted to the first com-
pany to file for approval to market a generic version
of a branded drug. A recent decision by the Circuit
Court of Appeals for the District of Columbia has lim-
ited the scope for some of these inter-generic skir-
mishes and so restored some certainty to the process,
but other attempts by generics to “game” the system
through new legal strategies are surely inevitable.
On June 6, 2006, in Apotex, Inc. v. FDA,1 the Cir-
cuit Court of Appeals for the District of Columbia is-
sued its latest decision in a long string of court battles
addressing the question of what qualifies as a “deci-
sion of a court” under the Hatch-Waxman Act suffi-
cient to trigger commencement of a marketing exclu-
sivity period for the first applicant to file an
Abbreviated New Drug Application (ANDA) with a
section challenging one or more patents listed as cov-
ering the approved drug product.2 In this most recent
battle, Apotex, Inc., to further a strategy for clearing
the way for its own generic product at the expense of
a rival’s potential profits, used the court system to at-
tempt to short-circuit Teva Pharmaceuticals USA’s po-
tential 180-day marketing exclusivity period for a ge-
neric version of Pravachol® (pravastatin sodium), a
blockbuster cholesterol-lowering medication.
Under the statutory scheme controlling the process
at the time Apotex first filed suit, Teva was in line to
receive a marketing exclusivity period from the Food
and Drug Administration on approval of its ANDA,
the first filed for a generic version of Pravachol. Bris-
tol-Myers Squibb (BMS), the owner of Pravachol, had
525
already elected not to sue either Teva or Apotex3 for
attempting to obtain FDA approval for generic ver-
sions of the drug product. Apotex instead sued BMS
in District Court seeking a declaratory judgment of
non-infringement, with the expectation—based on its
painful experience at the hands of Teva in earlier
cases—that its suit could trigger the start of the ex-
clusivity period for the generic product by obtaining a
“court decision” dealing with the validity, infringe-
ment, or enforceability of the patents listed as cover-
ing the approved Pravachol product.
One of the ironies here, and indeed, the primary goal
of Apotex’s strategy, was that if triggered, the 180-day
exclusivity period would have begun and ended before
Teva obtained approval from the FDA to begin mar-
keting its generic product. This, of course, would have
rendered Teva’s exclusivity period—the prime moti-
vating factor under the Hatch-Waxman scheme for a
generic drug manufacturer to get its product to market
before patents on the branded drug expire—effectively
meaningless. As Pravachol generates $2 billion in an-
nual U.S. sales for BMS, the 180-day exclusivity pe-
riod is valuable to Teva, as it would be to any other
generic contender seeking a significant share of the first
fruits from generic market entry. According to Teva,
the 180-day exclusivity for its generic version of Prava-
chol would result in two- to three-fold higher sales in
its first 12 months of marketing their generic product,
resulting in hundreds of millions of dollars of increased
net revenue. In general, most generic drug companies
estimate that 60% to 80% of their potential profit for
Daniel F. Coughlin, Ph.D.,* is a partner and Rochelle A. Dede†
is an associate in the Intellectual Property and Litigation prac-
tices at Dreier LLP in New York.
1 449 F.3d 1249 (D.C. Cir. 2006).
2 21 USC §355(j)(5)(B)(iv) (2002).
3 A total of eight generic companies, including Teva (the first
filer) and Apotex, had filed ANDA’s referencing Pravachol, and
BMS did not bring suit against any of these ANDA filers.
526
any one product is made during this exclusivity period.
Therefore, loss of a meaningful marketing exclusivity
period would have cost Teva hundreds of millions of
dollars in sales and profits.
If Apotex were successful in triggering Teva’s ex-
clusivity period, no generic product would, in fact, re-
ceive marketing exclusivity, and Teva would have
been just one of several generics manufacturers look-
ing to carve up the Pravachol market. Any generic con-
tender could then obtain an effective date for its
ANDA and FDA approval to market its product on the
expiration of the triggered 180-day period without hav-
ing to wait for Teva to receive final FDA approval and
for Teva to then market for 180 days.4 The first to ob-
tain FDA approval to market would have the valuable
initial opportunity to obtain and establish relationships
and generic accounts with healthcare management sys-
tems, pharmacies, and customers.
What is not immediately apparent on the face of the
Apotex decision is that this was not the first time that
Apotex and Teva locked horns over the subtle legal
question of what constitutes a “court decision” under
the Hatch-Waxman Act. In fact, there are at least four
separate underlying district court actions involving
Apotex and Teva (along with other necessary parties
such as the FDA) over this same question. Looking at
this battle from a broader perspective, it is possible to
characterize it as another example of the game-play-
ing that has run rampant within the pharmaceutical in-
dustry since enactment of the Hatch-Waxman Act
more than 20 years ago.5 Although it is possible to
look on this legal maneuvering as inevitable, given its
financial implications, the Apotex/Teva struggle is
worthy of note as an example of game-playing solely
within the generic side of the pharma industry equa-
tion. As the discussion below will touch on, the leg-
islative history of the Hatch-Waxman Act, as well as
the evolutionary line of court decisions interpreting
and implementing its provisions, is complex and fully
reflective of an intense struggle between two power-
ful and well-financed industry segments: the branded,
or “innovator,” drug companies that spend vast sums
for research into novel therapeutic molecules, and the
generic companies responsible for bringing low-cost
alternative products to market.
In this latest battle with Teva, Apotex relied on ar-
guments from a line of prior cases with similar sets of
facts and issues, referred to as Teva I, Teva II, and
Teva III. Of interest here is that, in the first two of
these cases, the relative positions of Apotex and Teva
were opposite: Teva initiated court proceedings in an
attempt to trigger the start of the 180-day exclusivity
period that a division of Apotex qualified for as the
first ANDA filer to challenge the patents protecting
the approved drug Ticlid® (ticlopidine hydrochloride),
a stroke-prevention medication marketed by Roche un-
der patents owned by Syntex. In this first instance,
Biotechnology Law Report • Volume 25, Number 5
Teva’s game was successful in that a court ruling dis-
missing a declaratory judgment action against Syntex
was ultimately held to be a “court decision” sufficient
to trigger the marketing exclusivity period under
Hatch-Waxman to which Apotex would have been en-
titled as an ANDA first filer. Put simply, Teva won
and Apotex lost, not only the game, but its exclusiv-
ity period. In the latest case, even though Teva was in
the opposite position and defending its exclusivity pe-
riod for a generic version of Pravachol against Apo-
tex, Teva once again ultimately triumphed. What was
held to be a triggering “court decision” in Teva I and
II did not so qualify in either Teva III or the instant
Apotex case over generic Pravachol. Thus, Teva suc-
ceeded in retaining its 180-day exclusivity period.
HATCH-WAXMAN AND THE 180-DAY
EXCLUSIVITY PERIOD
This highly coveted 180-day exclusivity period pro-
vides the primary financial incentive for the develop-
ment of generic alternatives to approved products and
serves as a reward for the first generic drug manufac-
turer that files an ANDA with a Paragraph IV certifi-
cation under the Hatch-Waxman Act. The Hatch-Wax-
man Act6 was enacted in 1984 as an amendment to the
Food, Drug and Cosmetic Act,7 governing the FDA ap-
proval process for new drug products, and to the patent
statutes.8 The statutory scheme that emerged represents
a balance between the competing policy interests of in-
ducing pioneer research by innovator drug companies
while also enabling generic competitors to bring lower-
cost versions of name-brand prescription drug products
to market. The value to society of the former is re-
flected in the availability of potentially life-saving and
life-improving medications; the value of the latter is re-
flected in lower costs for prescription drugs.9
The legislation that emerged as the Hatch-Waxman
Act started its path toward existence as a measure
solely to the advantage of the branded drug industry
4 See 21 USC §355(j)(5)(B)(iv) (2002).
5 See, for example, Mova Pharm. Corp. v. Shalala, 140 F.3d
1060 (D.C. Cir. 1998); Mylan Pharms., Inc. v. Thompson, 268
F.3d 1323 (Fed. Cir. 2001).
6 Drug Price Competition & Patent Term Restoration Act of
1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984); see Andrx
Pharms., Inc. v. Biovail Corp., 276 F.3d 1368, 1372 (Fed. Cir.
2002).
7 21 USC §§301 et seq.
8 35 USC §§101 et seq.
9 A recent survey conducted by the American Association of
Retired Persons (AARP) indicated that the average cost of
bringing a new prescription medication to market was in ex-
cess of $800 million; the same study indicated that the average
costs for prescription drug products in the U.S. last year rose
at a rate significantly in excess of that for inflation.
Biotechnology Law Report • Volume 25, Number 5
in that it provided a mechanism by which a patent cov-
ering an approved drug product could be extended in
effective term beyond 17 years. This extended patent
term is intended as partial compensation to the drug
company for the often-lengthy period during the
patent’s enforceable life that is consumed in the FDA
approval process. The Act’s origin is reflected in the
title of the legislation.10 However, before the bill was
enacted and signed into law in 1984, a process that ex-
tended over multiple Congressional sessions, the ge-
neric drug industry won the inclusion of provisions re-
flecting its interests. Indeed, the provisions of the
Hatch-Waxman Act reflect a virtual see-saw of the
competing interests of these opposing pharmaceutical
industry sectors. For seemingly each provision favor-
ing one side, a separate provision favors the opposite
side, in either partial compensation, compensation, or
over-compensation. It’s hardly surprising that legisla-
tion reflecting such widely opposite interests emerged
as a less-than-sterling example of legislative drafts-
manship.11
One example of the Hatch-Waxman Act’s unique
give-and-take balancing between competing market
segments is illustrated by the patent term extension
provisions that favor the branded companies, and the
safe harbor provision needed to fully implement the
ANDA process, which obviously favors the generic
manufacturers. The Act grants a patent term extension
to compensate for the portion of the term that passed
by while the patent holder waited for New Drug Ap-
plication (NDA) review and approval by the FDA. At
least partially offsetting that benefit, Hatch-Waxman
provides generic companies a safe harbor from in-
fringement claims arising from generic product devel-
opment and clinical testing during the brand’s patent
term. It also gives generic companies the right to rely
on the safety and efficacy data provided in the NDA
for the approved, branded drug if they can show bioe-
quivalence of the generic product to the branded one.
This short-cut saves considerable expense to the
ANDA filer, as well as considerable clinical and ap-
plication review time. As a result of this shortcut and
the safe harbor, the generic manufacturer will likely
have tentative approval of its ANDA by the time the
brand’s first patents are set to expire. Without these
provisions of the law, the generic company would not
be able to file its ANDA, or even begin product de-
velopment and evaluation, until the patent listed as
covering the approved product had expired.
PATENT CHALLENGES UNDER HATCH-
WAXMAN AND THE MARKETING
EXCLUSIVITY PERIOD
In its ANDA, the applicant must make one of four
certifications under 21 USC §355(j)(2)(A)(vii) re-
527
lating to each patent that claims the drug or use of
the drug for which the applicant is seeking ap-
proval.12 The patents the applicant must certify
against are listed in an FDA resource referred to as
the Orange Book.13 Information on the listed patents
is provided by the branded NDA applicant, who is
required to provide patent numbers and expiration
dates for “any patent which claims the drug for
which the applicant submitted the application or
which claims a method of using such drug and with
respect to which a claim of patent infringement could
reasonably be asserted if a person not licensed by
the owner engaged in the manufacture, use, or sale
of the drug.”14
When an ANDA applicant makes a Paragraph IV
certification, it must give notice to the NDA holder
and patent owner (if they are different entities) stat-
ing that it filed an ANDA and explaining why the
patents are either invalid or will not be infringed.15
On receipt of such notice, the NDA holder has 45
days to bring suit against the applicant for infringe-
ment under 35 USC §271(e)(2)(A), which functions
effectively only as a jurisdictional provision in that
no commercial sales of the proposed product have
yet occurred, and any prior manufacturing or use of
the product is sheltered from patent infringement li-
ability under the “safe haven” provisions of 35 USC
§271(e)(1). If the NDA holder opts to sue, the FDA
must stay ANDA approval for 30 months or some
shorter or longer period dictated by the court,
whether by motion from one of the parties or by fi-
10 See supra note 8.
11 “[The Hatch-Waxman Act] is far from a model of legislative
draftsmanship. The district court in this case called the provi-
sion [Section 355(j)(5)(B)(iv)] ‘cumbersome’; another district
court described it as ‘very confusing and ambiguous.’ ” Mova
Pharm. Corp. v. Shalala, 140 F.3d 1060, 1069 (D.C. Cir. 1998)
(quoting Mylan Pharms., Inc. v. Sullivan, No. 89-36-C(K), slip
op. at 6 (N.D.W.V. Mar 5, 1989)).
12 The four certifications that an ANDA applicant may make
with respect to the patents listed in the Orange Book are: (i)
patent information has not been filed; (ii) patent has expired;
(iii) applicant will not market until the date the patent will ex-
pire; and (iv) patent is invalid or will not be infringed by the
manufacture, use, or sale of the new drug for which the appli-
cation is submitted. 21 USC §355(j)(2)(A)(vii).
13 The formal title for the listing is “Approved Drug Products
with Therapeutic Equivalents,” the popular name arising from
the traditional color of the initial hard-copy editions.
14 21 USC §355(b)(1) (2003).
15 21 USC §355(j)(2)(B). Although not specifically recited in
the statute, FDA also recognizes a challenge based on unen-
forceability as triggering eligibility for 180-day marketing ex-
clusivity for a first-filer with such a certification. 21 CFR
§314.107(b)(1)(iv) (2000).
528
nal decision of the court.16 This stay is an admitted
benefit to the NDA holder and can be viewed as at
least partial compensation to the branded drug seg-
ment of the industry for the challenges brought un-
der the Hatch-Waxman scheme through Paragraph
IV certifications. Consistent with the see-saw bal-
ancing of the statute, the 180-day marketing exclu-
sivity that comes with a Paragraph IV certification
by a first filer is at least partial compensation for the
delay in marketing approval from the automatic stay
provisions of the Hatch-Waxman scheme.
The provision governing the 180-day exclusivity
period, 21 USC §355(j)(5)(B)(iv), was amended on
December 8, 2003 by the Medicare Modernization Act
of 2003 (MMA).17 However, the pre-Amendment ver-
sion of the statute applies to Teva’s ANDA in the Apo-
tex case because Teva filed it prior to enactment of the
MMA.18 The pre-Amendment language is as follows:
(iv) If the application contains a certification
described in subclause (IV) of paragraph
(2)(A)(vii) and is for a drug for which a previ-
ous application has been submitted under this
subsection continuing such a certification, the
application shall be made effective not earlier
than one hundred and eighty days after—
(I) the date the Secretary receives notice from
the applicant under the previous application of
the first commercial marketing of the drug un-
der the previous application, or
(II) the date of a decision of a court in an ac-
tion described in clause (iii) [a case where in-
fringement liability arises under 35 USC §271
(e)(2)(A)] holding the patent which is the sub-
ject of the certification to be invalid or not in-
fringed,
whichever is earlier.
As stated in this provision, either initiation of com-
mercial marketing of the approved generic product or
a “court decision” can trigger commencement of the
180-day exclusivity period.19 With the “court deci-
sion” trigger, a competing generic feasibly can short-
circuit the marketing exclusivity for the first-to-file ge-
neric manufacturer by obtaining a “court decision” that
would trigger, and even run out, the period before the
first-to-file company has approval to market. Unique
to this statutory provision is that the “court decision”
trigger can be invoked without any regard to the fac-
tual issues of infringement by the very product enti-
tled to market exclusivity. The game-playing by gener-
ics manufacturers, such as reflected in the series of
cases resulting in the latest Apotex decision, revolves
around a set of fact-intensive judicial inquiries into
Biotechnology Law Report • Volume 25, Number 5
which the first filer has no input and over which the
applicant has absolutely no control.20 That was the
goal that Teva achieved against Apotex/TorPharm in
the Ticlid cases (Teva I and II), and was Apotex’s un-
attained goal in the Pravachol cases.
GAME 1 OF THE SERIES: TEVA VS.
APOTEX’S MARKETING EXCLUSIVITY
FOR TICLID (TEVA I)
On June 20, 1997, Teva filed an ANDA to market
a generic version of the drug Ticlid, the branded ver-
sion of ticlopidine that is marketed by Hoffmann
LaRoche under patents owned by Syntex. Teva, how-
ever, was not the first to file. Teva’s generic competi-
tor, Torpharm, a U.S. marketing division of the Cana-
dian firm Apotex, was the first ANDA applicant to file
with a Paragraph IV certification against the Syntex
16 The statutory scheme under the Hatch-Waxman Act effec-
tively relieves the pioneer drug companies from the constraints
normally imposed under Rule 11 of the Federal Rules of Civil
Procedure that require an independent inquiry into the factual
bases of any pleading filed in federal court. Thus, this “artifi-
cial” act of infringement, see Eli Lilly & Co. v. Medtronic Inc.,
496 U.S. 661, 676 (1990), sustains an infringement suit with-
out the need for the patent owner to plead the fact of infringe-
ment of patent rights by the generic product. Perhaps more im-
portantly, the automatic stay provisions also relieve the patent
owner from having to seek injunctive relief from the court and
the typical equitable balancing required to justify imposition of
such relief.
17 In the MMA, Congress eliminated the “court decision” trig-
ger and added various 180-day exclusivity forfeiture provisions.
Congress also clarified that “court decision” (in the pre-Amend-
ment version and the new forfeiture provision) means “a final
decision of a court from which no appeal (other than a petition
to the Supreme Court for a writ of certiorari) has been or can
be taken.”
18 Effective and Applicability Provisions, Pub. L. No. 108-173,
§ 1102(6), 117 Stat. 2460 (Dec. 8, 2003).
19 If no court decision is reached, the exclusivity period cannot
begin to run until the approved generic product reaches the mar-
ket. If the product is never marketed, then the period never be-
gins, and never ends, blocking entry of any generic products.
It is this possible outcome, and the potentially collusive agree-
ments between branded and generic companies arising from
Hatch-Waxman litigation, that have elicited considerable FTC
and Justice Department interest in their anti-competitive effects.
20 The irony here is that it is possible to envision a set of cir-
cumstances where the first-filer’s product would not infringe
the Orange Book-listed patents (particularly where those patents
claim the formulation or method of use only and not the active
ingredient), yet the later-filer generic company could pursue
court action triggering the exclusivity period with a product that
actually infringes one or more of the listed patents.
Biotechnology Law Report • Volume 25, Number 5
patents and was awarded 180-day exclusivity.21 De-
spite the Paragraph IV certification, Roche and Syn-
tex elected not to sue Teva or Torpharm.
With an apparent motive of triggering Apotex’s ex-
clusivity period through a “court decision” and gain-
ing an unimpeded share of the market, Teva’s first
pitch involved suing Syntex in the Central District of
California seeking a declaratory judgment of nonin-
fringement of Roche’s formulation patent for ticlopi-
dine tablets.22 In response, Syntex sent Teva a letter
stating that Teva would not infringe the patent in ques-
tion and that Syntex would not file an infringement
claim based on the sale of Teva’s disclosed formula-
tion. Despite participation in discussions with Teva re-
garding a joint stipulation of dismissal, Roche also
moved to dismiss the complaint for lack of subject-
matter jurisdiction, arguing that Teva could have had
no reasonable apprehension of suit, given Roche’s ex-
press assurance that it would not bring suit against
Teva on the patent in question. Without such reason-
able apprehension, no actual case or controversy could
exist with sufficient immediacy or reality on which to
base jurisdiction over Teva’s declaratory judgment
claim. On that basis, and in effect looking outside the
pleadings to Syntex’s letter to Teva concerning non-
infringement, the California District Court granted
Roche’s motion to dismiss for lack of subject-matter
jurisdiction (Teva–Roche dismissal).
When the FDA tentatively approved Teva’s ANDA
to market a generic version of Ticlid, Teva’s next move
was to attempt to persuade the FDA that the
Teva–Roche dismissal satisfied the “court decision”
requirement and therefore that the FDA did not need
to wait for expiration of a 180-day exclusivity period
to finally approve Teva’s ANDA. When the FDA did
not respond, Teva filed suit seeking (1) a declaratory
judgment that Teva was entitled to ANDA approval
on February 10, 1999 (180 days after the Teva–Roche
dismissal); (2) an injunction making Teva’s ANDA ef-
fective on that date; and (3) a temporary restraining
order to prevent the FDA from approving the first
ANDA if such approval would give the first applicant
any exclusive marketing beyond February 10, 1999.
The FDA took the position that the Teva–Roche dis-
missal was not a “court decision” under the statute as
the California District Court, in entering the Teva–
Roche dismissal order, never reached a decision on the
merits concerning the underlying question of patent
infringement.
The D.C. District Court ended Teva’s first inning
when it declined to award injunctive relief, reasoning
that Teva could not demonstrate a likelihood of suc-
cess on the merits.23 The D.C. District Court ruled that
the Teva–Roche dismissal did not fall within the plain
language of §355(j)(5)(B)(iv)(II), and even if the
statute was ambiguous, Teva was unlikely to succeed
529
in showing that the FDA’s interpretation was imper-
missible. The D.C. District Court reasoned that the
triggering “court decision” provision required nothing
less than a substantive decision on the merits. In so
doing, the D.C. District Court adopted a “textual” ap-
proach as to whether a “court decision” could trigger
the 180-day exclusivity period, relying solely on the
four corners of the court decision. According to this
logic, an order dismissing the action for lack of sub-
ject matter jurisdiction could never reach the merits
and never act as the triggering decision.
In its next at-bat, Teva appealed the D.C. District
Court’s refusal to grant injunctive relief. On appeal,
the D.C. Circuit Court of Appeals, in its de novo re-
view of the D.C. District Court’s decision, answered
in the affirmative the question of whether Teva was
likely to prevail in its challenge of the FDA’s refusal
to treat the Teva–Roche dismissal.24 In reviewing
whether the FDA’s decision was arbitrary and capri-
cious or an abuse of discretion, and on the basis of an
unreasonable and impermissible interpretation of the
statute,25 the Appellate Court questioned the FDA on
three issues. First, the Appellate Court noted that a
court’s “decision” or “holding” could be significant
under the statue in view of its preclusive effect, re-
gardless of its wording or “text,” and asked the FDA
on remand why a dismissal based on the assurance that
the patent holder would not sue the generic for in-
fringement did not satisfy such a preclusiveness re-
quirement. Second, the Appellate Court asked the FDA
to explain why a decision holding a patent unenforce-
able was a triggering “court decision” but a dismissal
based on an enforceable assurance that a party will not
enforce a patent against a party was not. The Appel-
late Court reasoned that the effect (preclusiveness) was
21
Teva Pharms. USA, Inc. v. FDA, No. Civ. A. 99-67, 1999
WL 1042743, at *3 (D.D.C. Aug. 19, 1999) (Teva II Distr. Ct.).
22 See Teva Pharms., USA, Inc. v. FDA, 182 F.3d 1003, 1003
(D.C. Cir. 1999) (Teva I).
23 Teva Pharms., USA, Inc. v. FDA, No. 99cv00067 (D.D.C.);
see Teva I, 182 F.3d at 1005–06.
24 Teva I, 182 F.3d at 1003.
25 Pursuant to the Administrative Procedures Act (APA)
§ 706(2)(A), a court may vacate an agency decision if it is “ar-
bitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law.” Agency decisions and interpretations
are entitled to much deference. Under Chevron, U.S.A., Inc. v.
Natural Res. Def. Council, Inc., 467 U.S. 837 (1984), the court
first determines whether the statute clearly speaks precisely to
the question at issue in the agency’s decision. If the statute is
silent or ambiguous with respect to the specific issue, then the
court must uphold the agency’s interpretation if the interpreta-
tion is supported by a permissible and reasonable construction
of the statute, regardless of whether alternative interpretations
exist, including those that the court would find more support-
able.
530
the same and required the FDA to state its position
fully and to provide justification for that position.
Third, the Appellate Court directed the FDA to ex-
plain the apparent conflict between its decision in this
case and an agency guidance document. Specifically,
the FDA had not reconciled its reasoning for finding
that a grant of partial summary judgment based on the
patent holder’s admission of noninfringement is a
“court decision” in Granutec, Inc. v. Shalala26 with its
finding that the Teva–Roche dismissal for lack of sub-
ject-matter jurisdiction based on the patent holder’s ad-
mission of noninfringement is not a “court decision.”
In conclusion, the Appellate Court in Teva I found that
the FDA’s refusal to consider the Teva–Roche dis-
missal as a “court decision” was arbitrary and capri-
cious. Therefore, Teva was likely to succeed on the
merits. Accordingly, the Appellate Court reversed the
D.C. District Court’s denial of injunctive relief and re-
manded the case. Nothing in the Appellate Court’s de-
cision, however, could be interpreted as taking the po-
sition that the FDA’s approach to the “court decision”
question could never pass scrutiny under the appro-
priate tenets of administrative law. In essence, the Ap-
pellate Court took the position with the FDA that, if
the FDA could state its position and provide a suffi-
cient, rational basis, then the Agency’s position could
conceivably stand.
GAME 2 OF THE SERIES: APOTEX
AND FDA APPEAL (TEVA II)
On remand, the D.C. District Court granted Teva’s
request for a permanent injunction and required the
FDA to make Teva’s ANDA effective immediately.27
In defense of its exclusivity period, Apotex/TorPharm,
along with the FDA, appealed. On appeal, the D.C.
Circuit Court of Appeals stated that the FDA had not
meaningfully addressed the Court’s specific questions
on remand.28 The FDA argued that the burden of sub-
stantively reviewing the estoppel effect (preclusive-
ness) of rulings was insupportable in view of the lim-
ited agency resources. The agency also repeated its
position that the dismissal did not state on its face that
the underlying patent was not infringed, and that it
would not look beyond the face of the order.29 In sup-
port of this position, the FDA provided a brief Affi-
davit from an agency official stating that the FDA
lacked the staff resources to address fully the estoppel
effects of any ruling arising from a patent challenge.
The Appellate Court concluded that the “judgment of
the agency fails for want of reasoned decision-mak-
ing” and ruled that the judgment of the District Court
must, therefore, be affirmed. Presciently, in light of
the outcome of Apotex v. FDA, Judge Edwards, in his
concurring-in-part and dissenting-in-part opinion in
Biotechnology Law Report • Volume 25, Number 5
Teva II, stated that the FDA could be justified in its
proposed interpretation but that the interpretation
needed to be stated better and supported more fully.
Thus, Teva came out on top in the first two games of
this series—the injunction went into effect, and Teva
was free to start marketing its approved generic prod-
uct, effectively short-circuiting whatever theoretical
exclusivity Apotex had been entitled to. No basis re-
mained for Apotex to seek further redress, and the
FDA never had an opportunity to address the ques-
tions from Teva I that the D.C. Circuit ruled were still
not answered in Teva II.
GAME 3 OF THE SERIES: APOTEX VS.
TEVA’S MARKETING EXCLUSIVITY
FOR PRAVACHOL (TEVA III)
The next contest in this series presents the same is-
sues as Teva I and II, but with the parties now on op-
posite sides of the matter and with an opposite out-
come for the first filer.30 These cases arose from the
180-day exclusivity granted to Teva when it was the
first to file an ANDA with a Paragraph IV certifica-
tion as to three patents listed as covering Pravachol, a
Bristol-Myers Squibb product for the treatment of high
cholesterol. These listed patents were directed to the
product formulation and to methods of use and did not
depend for patentability on the active ingredient,
pravastatin sodium. Teva also filed a Paragraph III cer-
tification that it would not market its generic version
until after the expiration of the BMS product patent in
April 2006. Seven other generic drug manufacturers
(including Apotex) subsequently filed ANDAs con-
taining Paragraph IV certifications as to the same three
patents and a Paragraph III certification as to BMS’s
product patent.
BMS opted not to sue Teva or any of the seven other
generic manufacturers. Apotex, however, chose to
bring suit against BMS in October 2003, seeking a de-
claratory judgment of non-infringement. Obviously
having learned painful lessons from Teva in Teva I and
26 Nos. 97-1873, 97-1874, 1998 WL 153410 (4th Cir. Apr. 3,
1998).
27 Teva II Distr. Ct., 1999 WL 1042743, at *7 (D.D.C. Aug.
19, 1999).
28 Teva Pharms., USA, Inc. v. FDA, Nos. 99-5287, 99-5342,
2000 WL 1838303, at *1 (D.C. Cir. Nov. 15, 2000) (Teva II).
29 In litigation over the propriety of Orange Book listings for
patents covering BuSpar®, the FDA raised similar administra-
tive burden reasoning when it refused to critically review such
patent information submissions. See Mylan Pharms., Inc. v.
Thompson, 268 F.3d 1323 (Fed. Cir. 2001).
30 Teva Pharms. USA, Inc. v. FDA, 398 F. Supp. 2d 176
(D.D.C. 2005) (Teva III Distr. Ct.).
Biotechnology Law Report • Volume 25, Number 5
II, Apotex intended to return the favor and short-cir-
cuit Teva’s generic marketing exclusivity with its own
“court decision.” If Apotex were successful in trig-
gering Teva’s exclusivity 180-day exclusivity period
with a “court decision” entered 180 days or more be-
fore the April 20, 2006, patent expiration, Teva’s ex-
clusivity period would have expired even before it won
final approval to market its product. If Teva’s exclu-
sivity period expired, the FDA would finally approve
any tentatively approved ANDA’s (including Teva’s
and Apotex’s) upon patent expiration,31 and Teva
would lose out on substantial profits from having the
first and sole generic on the market for 6 months be-
cause all of the other conditionally approved generic
manufacturers, including Apotex, would have been
free to enter the market on patent expiration.
With that goal in mind, Apotex filed suit seeking a
declaration that the BMS patents covering Pravachol’s
formulation and the method of use were invalid or not
infringed by Apotex’s generic product.32 The legacy
company moved to dismiss the complaint for failure
to meet subject-matter jurisdiction requirements under
the Declaratory Judgment Act. The District Court
never faced an opportunity to rule on this motion, how-
ever, because Apotex agreed to a stipulation that its
complaint be dismissed for lack of subject-matter ju-
risdiction on the basis that BMS represented, and as-
sured Apotex, that it had no intention to sue.33 Ac-
cordingly, the District Court entered a Stipulation and
Order, proposed and signed by the parties, on July 23,
2004 (Apotex–BMS dismissal).
In its next at-bat, Apotex submitted a request to the
FDA to consider that the Apotex–BMS dismissal was
a “court decision” that triggered the Teva’s 180-day
exclusivity period. In a June 28, 2005, letter, the FDA
concluded that the Apotex–BMS dismissal did qualify
as a “court decision,” and that Teva’s 180-day exclu-
sivity period began on August 22, 2004, the date the
order became final and more than a year and a half be-
fore the expiration of the BMS patents. Neither the in-
ning nor the game was over, however.
Teva next stepped to the plate by filing a complaint
for declaratory relief, on July 26, 2005, that the FDA’s
decision was arbitrary and capricious and constituted
an abuse of discretion under the Administrative Pro-
cedures Act (APA) §706(2).34 Teva sought a prelimi-
nary and permanent injunction enjoining the FDA from
approving competing ANDAs until the expiration of
Teva’s exclusivity period. Apotex was added as an in-
tervenor-defendant, and the motion for injunctive re-
lief was consolidated with a hearing on the merits.
The District Court stated that it must decide the case
on the basis of the FDA’s action, the Hatch-Waxman
Act, and the governing authority, including Teva I and
II.35 The Court analyzed the FDA’s actions extensively
on the basis of Teva I and II and the meanings of “hold-
ing” and “decision” under Second Circuit law and de-
531
cided that the Apotex–BMS dismissal did not consti-
tute a “court decision” or “holding” under the Hatch-
Waxman Act. Accordingly, the District Court ruled
that Teva’s 180-day exclusivity period had never been
triggered and that the FDA’s determination was “ar-
bitrary, capricious . . . or otherwise not in accordance
with the law” under §706(2) of the APA As Judge
Bates stated in the Teva III opinion: “Teva II did not
develop in a vacuum,”36 apparently reflecting the fact
that the FDA had still not done its homework and had,
apparently, not yet fully considered the three questions
the Appellate Court had posed to it in Teva I.
The D.C. Circuit Court of Appeals, in Teva III,37
found that FDA mistakenly thought it was bound by
the Court’s decision in Teva I and II, and thus, the
FDA’s error in that assumption rendered its decision
arbitrary and capricious. The Teva I and II opinions
never articulated or imposed a judicial rule on FDA
for evaluating the triggering effect of a “court deci-
sion.” For that reason, the Appellate Court vacated the
District Court’s judgment and remanded with instruc-
tion that the District Court vacate the FDA’s decision
and remand to the FDA. On remand this time, the FDA
was to formulate a rule and to provide sufficient ra-
tionale to support its position. The Appellate Court
stated that the FDA must “make a reasonable policy
choice” and prove that that choice was reasonable with
adequate support. The Appellate Court also noted that
the FDA had still not addressed all three questions put
to it on remand in Teva I.
On remand, the FDA finally acted in a manner
mindful of the Appellate Court’s previous guidance.
The agency submitted a 15-page, single-spaced letter
articulating its position on the “court decision” issue
and the basis for a “textual” approach for determining
the triggering effect of such “court decisions.” Under
the FDA’s “textual” approach, only a court decision
that holds on the merits that a patent is invalid, not in-
fringed, or unenforceable would trigger the 180-day
exclusivity period. On the basis of the textual ap-
proach, the FDA concluded that the Apotex–BMS dis-
missal did not qualify as a “court decision” because
the stipulated order did not contain any determination
on infringement, invalidity, or unenforceability by the
31 See 21 USC §355(j)(5)(B)(ii).
32 Teva III Distr. Ct., 398 F. Supp. 2d at 180–81.
33 On the same day that Apotex filed its declaratory judgment
suit, BMS mailed a letter to Apotex stating its position that there
was no infringement by Apotex’s proposed generic formulation
and that it had no intention to sue in the future. The two doc-
uments essentially crossed in the mail.
34 Id. at 181.
35 Id. at 184.
36 Id. at 187.
37 Teva Pharms. U.S.A., Inc. v. FDA, 441 F.3d 1, 5 (D.C. Cir.
2006) (Teva III).
532
court. Thus, the FDA would approve Teva’s ANDA,
and commence its 180-day exclusivity period, when
BMS’s product patent expired in April 2006.
GAME 4 OF THE SERIES: APOTEX V. FDA
Finding itself still batting zero, Apotex next filed
suit against the FDA, challenging the Agency’s deci-
sion and moving for a temporary restraining order and
preliminary injunction to prevent a grant of final ap-
proval to Teva. The District Court considered the
FDA’s position letter and denied Apotex’s motion on
the basis that Apotex did not demonstrate a likelihood
of success on the merits.38 The District Court noted
that although the FDA took the same position against
an estoppel-based approach as it took in Teva I, the
FDA had better articulated and more fully supported
its position. The FDA supported its position by stat-
ing that the estoppel-based approach would render the
statutory terms “decision,” “holding,” “invalid,” or
“not infringed” superfluous, while the “textual” ap-
proach gives meaning to those terms. The FDA also
explained that an estoppel-based approach would pose
a large administrative burden that would be arduous
and impractical and would lead to inconsistent results
that would spawn litigation and undermine the statu-
tory purpose behind the Hatch-Waxman Act of faster
approval of lower-cost generics. On the contrary, the
FDA reasoned, a “textual” approach would improve
industry certainty by looking only to the four corners
of a court decision. Admittedly, FDA’s “textual” ap-
proach could slow down the initial marketing of gener-
ics by resulting in a later triggering of the exclusivity
period. However, the FDA reasoned that the avoidance
of complex satellite litigation more than outweighs the
impact of later expiration of exclusivity periods.
THE FINAL GAME: TEVA SWEEPS!
After the District Court denied Apotex’s motion for
a preliminary injunction, Teva began marketing its
generic product, and Apotex appealed the District
Court’s denial of its motion. In its June 6, 2006 deci-
sion, the D.C. Circuit Court of Appeals affirmed the
District Court’s approval of the FDA’s latest position
and denial of Apotex’s motion for preliminary in-
junction.39 The District Court had explained that the
FDA’s letter “thoughtfully deconstruct[ed] the multi-
faceted implications of the estoppel and holding-on-
the-merits approaches [and] sufficiently addressed
each of the three concerns raised in Teva I and recalled
in Teva III.”40 The Appellate Court found that the
FDA’s “hard-and-fast” rule that it “will never look be-
yond the face of a court order to ascertain whether it
Biotechnology Law Report • Volume 25, Number 5
qualified as a triggering court decision” was based on
“reasoned decisionmaking.” Although the FDA again
relied on the administrative burden of a case-by-case
estoppel approach, it also articulated its concerns that
inherent uncertainty that would “lead to unpre-
dictability in the marketplace” and “interfere with
business planning and investment.” The Appellate
Court also pointed out that the estoppel-based standard
“would force FDA, an agency lacking patent law ex-
pertise, to resolve borderline questions about the estop-
pel effects of patent-holder declarations.”
The Appellate Court stated that the FDA further ex-
plained that a case-by-case estoppel approach would
“spawn litigation” in that “forcing it to parse court de-
cisions will invite fruitless litigation from generic drug
manufacturers seeking to trigger, or to avoid trigger-
ing, exclusivity periods.” The FDA stated that it be-
lieved that anything less objective and clear than the
“holding-on-the-merits” standard would increase the
opportunities for disputes on the meaning of “court de-
cision” and would encourage “highly-interested and
well-financed litigants to pursue ever-finer distinc-
tions, ever farther removed from the language of the
statute. . . . As the FDA stated, this does not advance
the public interest, as it offers no guarantee of more
rapid generic drug approvals and only increases the
likelihood of delay due to litigation. The Appellate
Court concluded, fulfilling Judge Edwards’ prophetic
position in Teva I, that “these perfectly reasonable
propositions adequately support FDA’s position that
an estoppel-based approach to the court decision trig-
ger is ill-advised.”
Apotex argued that the FDA still had not addressed
the questions raised in Teva I, but the Appellate Court
disagreed. The Court found that FDA had provided
ample explanation for its position on “court decisions,”
and that the FDA’s position in this case was now con-
sistent with the decision in Granutec.41 The summary
judgment order in Granutec was clearly a holding on
the merits of patent infringement as a matter and law,
and the Apotex–BMS dismissal on its face made no
patent infringement or invalidity holding. For all of
these reasons, the Appellate Court found that Apotex
had little likelihood in succeeding on the merits of its
claims, and therefore affirmed the district court’s or-
der denying Apotex’s motion for preliminary injunc-
tion. On the basis of this outcome in Apotex’s appeal,
Teva apparently will have enjoyed its generic exclu-
sivity until October 2006. Once again, Teva wins and
Apotex loses.
38 Apotex, Inc. v. FDA, No. Civ.A. 06-0627, 2006 WL 1030151,
at * 1 (D.D.C. Apr. 19, 2006).
39 Apotex, 449 F.3d 1249, 1252 (D.C. Cir. 2006).
40 Id. at 1250–52.
41 See Granutec, supra note 29.
Biotechnology Law Report • Volume 25, Number 5
POST-GAME ANALYSIS
In sum, the FDA’s textual approach appears con-
sistent with the delicate balancing and the compromise
nature of the Hatch-Waxman scheme. Arguably, the
functional effectiveness of the Hatch-Waxman scheme
is dependent on maintaining the value of the 180-day
marketing exclusivity in that it provides generic com-
panies with incentives to challenge patents and be at
least partially compensated for undergoing the rigors
of litigation. Teva I through III provide ample evidence
of the way involved and time-consuming litigation can
arise over what appears to be a simple question of
whether a “court decision” triggered the start of a ge-
neric exclusivity period. This type of satellite litiga-
tion could easily slow down the introduction of ge-
neric products to the marketplace, even more than
later-expiring exclusivity periods, because of the re-
sources generics firms must invest in litigating rather
than developing new products. In addition, this kind
of litigation not only consumes court resources, but
also introduces market uncertainty.
Thus, at first glance, it seems that the FDA’s tex-
tual approach will facilitate the interpretation of “court
decisions,” limit court battles on the question, smooth
the calculation and administration of 180-day exclu-
sivity periods, and effectuate the recognized purpose
of Hatch-Waxman Act. But will it really? Or will
generics firms find another way to game over the 180-
day exclusivity period despite the textual approach and
the MMA amendments? That is almost certainly in-
evitable. Generic manufacturers, and legacy compa-
nies, have displayed no limits to the creativity they
bring to the process of operating within and pushing
the limits of the Hatch-Waxman Act. Indeed, there are
other ongoing litigations concerning the provision for
the 180-day exclusivity. For instance, another line of
generic-gaming cases,42 which addresses the question
of whether the pre-Amendment provision contem-
plates a patent-based or drug-product-based approach
to the 180-day exclusivity award, is now on appeal to
the D.C. Circuit Court of Appeals. A patent-based ap-
proach, which the FDA supports, would allow multi-
ple exclusivity periods for drugs covered by multiple
patents, whereas a drug-product based approach would
permit only one company to enjoy exclusive market-
ing rights.
533
None of this should be surprising, considering that
even a moderately successful drug product can gener-
ate bottom-line profits in excess of $1 million a day.
Despite the popular pastime of attorney bashing, it is
doubtful that any attorney or group of attorneys could
generate sufficient legal fees to neutralize such a cash
stream.
The Hatch-Waxman Act undeniably reflects a bal-
ancing of interests between two powerful industry seg-
ments, thus its somewhat awkward structure and com-
plexity. However, the rising costs of prescription
drugs, along with the increasingly expensive process
of bringing new drugs to market, illustrates starkly the
opposing market and economic factors at play within
the industry. This balancing is necessary and must con-
tinue. Without the marketplace rewards that devolve
from patent exclusivity, the incentive to innovate and
to dedicate substantial resources to new products is
significantly diminished. As a consequence, the pub-
lic could face the risk of fewer prescription medicines.
Recognizing the need for both new drugs and main-
taining some measure of constraint on the costs of ob-
taining them, Congress has reached the decision that
it is not in the public’s best interests to permit the
branded drug industry to control the marketplace
unchecked. The balancing between the interests of the
branded and generic drug industries performs an im-
portant societal function. In many ways, it is not un-
like the system of checks and balances integral to our
system of government. The Hatch-Waxman Act is the
mechanism now in place to effect that balancing. It
may be flawed; it is certainly complex and expensive,
but, in its own way, it works. Can it be improved? Al-
most certainly, but it is the framework under which
the industry must operate for now. If nothing else, de-
cisions such as that in Apotex provide real potential
value in increasing certainty and predictability in the
marketplace. It still is not possible to keep track of the
players without a scorecard, but perhaps now, the in-
dustry has taken a step toward more easily being able
to tell what inning they’re in.
• • •
42See Apotex Inc. v. FDA, 414 F. Supp. 2d 61 (D.D.C. 2006),
appeal docketed, No. 06-5060 (D.C. Cir. Feb. 24, 2006).