Patent Baristas

On April 30, 2006 Judge Richard W. Roberts of U.S. District Court for the District of Columbia, in his memorandum opinion, has ruled in the favor of Ranbaxy & Ivax (acquired by Teva) by granting them summary judgment and contending that the FDA has acted contrary to the clear intent of Congress in its decision to deny Ranbaxy and Ivax’s citizen petitions. This ruling means that Ranbaxy and Ivax are likely to be the sole generic competitors to sell generic version of Merck’s Zocor after the basic patent (U.S. Patent No. 4,444,784) covering simvastatin get expired on June 23, 2006.

Delisting Orange Book Patents

Earlier, at the time when Ranbaxy and Ivax submitted their abbreviated new drug applications (ANDAs) with US FDA, Merck had three listed patents for simvastatin in the Orange Book — U.S. Patent No. 4,444,784 (‘784 patent’), U.S. Patent No. RE36481 (‘481 patent’), and U.S. Patent No. RE36520 (‘520 patent’). However, Ranbaxy and Ivax filed Para III certifications with respect to ‘784 patent but both filed Para IV certifications in respect of other two listed patents contending that the ‘481 and ‘520 patents were invalid or unenforceable, or that their drugs would not infringe those patents. Following the submission of Para IV certifications by Ranbaxy & Ivax, Merck, instead of suing them within 45 days, submitted a letter to the FDA requesting that the ‘481 and ‘520 patents to be delisted from the Orange Book. Learning that FDA has delisted the ‘481 and ‘520 patents from the Orange Book, both Ranbaxy and Ivax submitted citizen petitions, requesting FDA to confirm that it would not approve subsequent ANDAs until after the 180-day period and to relist the patents in the Orange Book.

On October 24, 2005 FDA denied both the petitions deciding that it would not relist the disputed patents, that no applicant will be entitled for 180-day exclusivity for delisted patents, and that it will approve all subsequent ANDAs for simvastatin. As a result, Ranbaxy and Ivax separately sued the FDA under 5 USC § 706 claiming that the FDA improperly nullified Ranbaxy and Ivax’s rights to a 180-day period of exclusive marketing of generic Zocor. These civil actions were consolidated and all three parties moved for summary judgment, contending that there are no genuine issues of material fact and that each is entitled to judgment as a matter of law.

The Last Laugh

The District Court Judge in his opinion ruled that the FDA should have granted the petition by Ranbaxy & Ivax and also that the FDA’s decision “contravened the plain and undisputed intent of Congress.” The issue is now sent back to the FDA by the District Court for a decision, giving Ranbaxy & Teva the last laugh. However, FDA may file an appeal against the ruling in the U.S. Court of Appeals for the District Court of Columbia Circuit, which may delay the sale of a generic Zocor beyond June 23, 2006.

Today’s post comes from Varun Chhonkar, Senior Officer – Patents with J.B. Chemicals & Pharmaceuticals Ltd., Mumbai, India (varun.chhonkar[at]jbcpl.com). © Varun Chhonkar.

In Eli Lilly & Co. v. Emisphere Technologies, Inc., a district court judge has decided that Eli Lilly doesn’t have any rights to a patent it applied for based on its partner’s technology after ruling that Lilly breached its contract with Emisphere by setting up a secret research team to study its partner’s technology.

Under a Research Collaboration and Option Agreement, Lilly and Emisphere agreed to collaborate on a research and development program to study the use of Emisphere Technology for oral delivery of PTH and related compounds, as well as some non-oral methods of delivery. The parties agreed that Emisphere would grant Lilly an option for an exclusive worldwide license to make and use the Emisphere carrier technology to develop oral PTH products. Lilly could exercise that option by giving notice to Emisphere and by paying Emisphere a sum of money. They also agreed on the terms of the separate license agreement that would take effect if and when Lilly exercised the option.

The parties defined Emisphere Technology broadly as: proprietary synthetic chemical compounds that enable the delivery of therapeutic macromolecules and other compounds that are not currently deliverable by oral means or by certain non-oral means (including all related patents, patent applications and Know-How presently owned by Emisphere and all patents, patent applications, and Know-How relating to inventions developed by Emisphere pursuant to the Program . . . ).

The PTH License Agreement also included detailed provisions for confidentiality, including limits on Lilly’s internal distribution and use of information relating to the PTH and carrier research. Emisphere contends that Lilly violated confidentiality clauses by having the employees who worked on the PTH program provide confidential Emisphere information to the Lilly team working on the secret projects researching Emisphere’s carriers with proteins other than PTH.

A second research collaboration on oral delivery of PTH and hGH provided that Emisphere would own all patents, patent applications and Know-How relating to the Emisphere Technology to the extent that Lilly and/or Emisphere invents and/or develops same during the course of and as part of the Programs, including, but not limited to, any Lilly Improvements.

It didn’t help any that Lilly apparently set up a secret Oral Protein Delivery Team to study the mechanism of action of the Emisphere carriers, but with protein molecules other than PTH. The Secret Team had access to detailed information about results of unpublished research, experience with methods for synthesizing the carrier molecules, and methods for testing the carriers.

After getting promising results from its secret research on Emisphere carriers, Lilly began negotiating with Emisphere for a license to commercialize products containing Emisphere’s carriers and GLP. While those negotiations were going on, Lilly filed a PCT application for combinations of GLP with 56 different delivery agents, including Emisphere’s proprietary carriers that had been used in the collaborative research on PTH.

The court held that Lilly’s refusal to assign the GLP patent application to Emisphere violated Section 1.5(c) of the research agreement, which stated:

It will not be Lilly’s responsibility or intent to develop new synthetic chemical compounds that enable the delivery of therapeutic macromolecules and other compounds that are not currently deliverable by oral means or by certain non-oral means (the Carriers) as part of the Programs. Any new Carriers or inventions which are closely related to the Emisphere Technology (as it exists as of the Effective Date) that arise, in whole or in part, out of suggestions, recommendations or discussions held between Emisphere and Lilly scientists shall be Emisphere Technology.

Despite Lilly’s contention that the OPD/GLP team relied only on published data and that none of the information from the Emisphere collaboration was useful in selecting carriers for GLP, two of the carriers in the Lilly GLP patent application were carriers in Emisphere’s database of unpublished carriers. The court felt that any work Kahn did on carriers must have arisen at least in part from discussions, recommendations, and suggestions between Lilly and Emisphere scientists in the PTH project.

The court held that:

… Emisphere has shown that the Oral GLP team did not rely solely on published information, but had already received a running start on carrier research because of the help they received from [Lilly researchers], who got their start with the Emisphere-Lilly collaboration on PTH. In other words, Lilly’s Oral GLP team already knew a lot about what had worked with the PTH research. The effort to develop a sanitized paper trail relying on only published information did not accurately reflect the reality of what had occurred, yet it reflects an awareness of the benefits of making the project appear to be based on only public information.

…

The research efforts for any one therapy could easily require Emisphere to disclose to its research partner a vast amount of valuable information about the Emisphere carriers, as in the PTH project with Lilly. Much of that information was not public, such as the best procedures for synthesizing and manufacturing particular carriers, how to deal with impurities in the carriers, which excipients were likely to work well or not so well with carriers, toxicology data, dose response data from animal experiments, and whether solid or liquid doses produced better absorption, among many others. If a partner with vast scientific, intellectual, and commercial resources like Lilly could take the information gleaned in one project and use it in an independent project with other therapeutic proteins, Emisphere would have effectively sold its entire business for the relatively cheap price of a license for only one application of its technology. In addition, Emisphere’s existing licenses to its other research partners working on other proteins would weaken and lose value, and Emisphere’s ability to enter into new exclusive licensing agreements would also be diminished.

While Lilly contends that under Emisphere’s case, Lilly would be prohibited from carrying out research that any other company in the world may carry out, the court put weight to the fact that no other company in the world had the kind of access to Emisphere’s technology that Lilly had. In the court’s view, Lilly deliberately chose a course that was too aggressive, which resulted in the termination of the contracts and the loss of much of Lilly’s investment in the oral PTH program.

The court held that Lilly should hand over the international patent application to Emisphere Technologies by May 5.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires drug companies to file certain agreements with the Federal Trade Commission and the U.S. Department of Justice. The FTC’s Bureau of Competition has now issued a summary of agreements filed with the Commission in fiscal year 2005 by generic and branded drug manufacturers. The summary provides information regarding the 20 agreements that were filed with the FTC in FY 2005, involving 16 different products.

For the first time since 1999, brand and generic companies are entering settlements in which the generic receives compensation from the branded manufacturer and there is a restriction on the generic’s ability to market its product. Based on the information reported in the Commission’s 2002 study and on settlements reported between 1999 and 2004, no patent settlements included both compensation to the generic and a restriction on the generic’s ability to market its product. In contrast, three settlements submitted in FY 2005 included those terms.

The summary also concluded that 1) 11 of the 20 agreements filed in FY 2005 were final settlements of patent litigation between a branded and generic company; 2) five were interim agreements that occurred during patent litigation between a brand and a generic company, but did not resolve the litigation; 3) the remaining agreements were between a first-filer generic company and a subsequent generic filer.

Drug companies began entering into these agreements in the 1990s, but the FTC concluded they were unfair to consumers and anti-competitive and the agency successfully challenged them.

However, the U.S. Court of Appeals for the 11th Circuit concluded that the FTC had overstepped its authority when it blocked an agreement between Schering-Plough Corp. and Upsher-Smith Laboratories Inc. The FTC has appealed to the Supreme Court.

The Washington Post reported that in a speech on Monday to the In-House Counsel’s Forum on Pharmaceutical Antitrust, FTC Commissioner Jon Leibowitz said that if the appeals court decision remains in effect, drug makers will have “carte blanche to avoid competition and share resulting profits.” Leibowitz said the agreements mutually benefit the brand-name and generic drug makers because the brand-name company gets to maintain its patent exclusivity, while the generic competitor receives a payment. In addition, the “generic companies … often enter into agreements to produce lower-priced version of the brand-name company’s drug at a predetermined date — far in the future,” the Post reports.

For example, Cephalon earlier this year made agreements with four generic companies over the drug Provigil, a sleep disorder treatment. Under the agreements, the generic companies pledged to stay out of the market until 2011, and Cephalon agreed to pay them licensing payments of $136 million. Leibowitz said, “Until recently, payments by brand-name companies to generics were the exception, but now they’re the rule.” (Washington Post, 4/24).

Copies of the Bureau’s summary of agreements filed in FY 2005 are available on the FTC’s Web site.

For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws.”

A federal District Court ruled that a terminal disclaimer does not negate Patent Term Extension. King Pharma v. Teva Pharma, 78 USPQ2d 1237 (D.N.J. 2006). In a patent dispute, Teva argued that Wyeth’s patent on zaleplon drug products had expired because of a terminal disclaimer. Wyeth, and its exclusive licensee King Pharma, argued that patent’s term was ongoing because of a Patent Term Extension due to FDA regulatory review delay.

King Pharma sued Teva Pharma for patent infringement alleging that Teva has infringed one or more claims of U.S. Patent No. 4,626,538, owned by Wyeth, under which King has exclusive license to sell drug products containing zaleplon under the trademark Sonata®, which is used to treat insomnia. Teva has moved to dismiss arguing that the ‘538 Patent expired on June 23, 2003 as a matter of law and therefore no valid and enforceable patent is being asserted. The District Court disagreed.

An FDA publication entitled “Approved Drug Products with Therapeutic Equivalence Evaluation” (the Orange Book) lists the ‘538 Patent as being applicable to King’s Sonata® drug products. The application for what ultimately became the ‘538 Patent was initially rejected on the ground that it claimed the same invention that was claimed in an earlier patent, U.S. Patent No. 4,521,422, and the ‘538 Patent was granted only after the applicant filed a terminal disclaimer under 35 U.S.C. § 253.

This terminal disclaimer disclaimed any term of the ‘538 Patent that would otherwise have extended beyond the ‘422 Patent, which expired on June 23, 2003. The original termination date of the ‘422 Patent was June 3, 2002 (seventeen years from its issue date); however, pursuant to 35 U.S.C. § 154, this date was reset to June 23, 2003 (twenty years from its filing date). The USPTO agreed that the ‘538 Patent’s expiration date should be reset at June 23, 2003 as well since the term of the ‘538 Patent was linked to the term of the ‘422 Patent. Thus, based on the terminal disclaimer, the ‘538 Patent had been scheduled to expire on June 23, 2003.

On June 4, 2003, pursuant to 35 U.S.C. § 156, the PTO extended the term of the ‘538 Patent for a period of 1810 days, running from June 23, 2003, based on the regulatory review of the product Sonata® (zalephon) by the FDA. Based on the Patent Term Extension, the expiration date of the ‘538 Patent became June 6, 2008. The crux of Teva’s argument is that the term of a terminally disclaimed patent may not be extended under 35 U.S.C. § 156 and, therefore, the ‘538 Patent expired on June 23, 2003.

Section 156 provides that:

a) The term of a patent which claims a product, a method of using a product, or a method of manufacturing a product shall be extended in accordance with this section from the original expiration date of the patent, which shall include any patent term adjustment granted under section 154(b), if– (1) the term of the patent has not expired before an application is submitted under subsection (d)(1) for its extension; (2) the term of the patent has never been extended under subsection (e)(1) of this section; (3) an application for extension is submitted by the owner of record of the patent . . . ; (4) the product has been subject to a regulatory review period before its commercial marketing or use; (5)(A) except as provided in subparagraph (B) or (C), the permission for the commercial marketing or use of the product after such regulatory review period is the first permitted commercial marketing or use of the product under the provision of law under which such regulatory review period occurred; . . . .

The District Court held that

Teva has not alleged that the enumerated conditions were not satisfied. Instead, Teva argues that a § 156 patent term extension is not available to a patent subject to a § 253 terminal disclaimer. However, § 156 is plain and unambiguous: a terminally disclaimed patent is not barred from receiving a § 156 extension.

…

Further, § 156 makes no reference whatsoever to terminal disclaimers. Section 156’s direction that a patent term extension “shall” be granted if the conditions are met contains no exception for patents subject to a § 253 terminal disclaimer. This Court may not read language in or graft meaning on to § 156, and hence may not create an exception for terminally disclaimed patents where Congress did not see fit to do so.

Whereas § 156 provides for a patent term extension for FDA delays in approving a drug for sale, § 154(b) provides for a patent term extension, or adjustment, where a delay has occurred during prosecution of a patent before the PTO. 35 U.S.C. §§ 156, 154(b) (2005). Unlike § 156, § 154(b) expressly refers to terminally disclaimed patents: No patent the term of which has been disclaimed beyond a specified date may be adjusted under this section beyond the expiration date specified in the disclaimer.

The Court held that it must follow the presumption that Congress acted intentionally and purposely when it included an exception for terminally disclaimed patents in § 154 and omitted any exception for terminally disclaimed patents in § 156. The Court concluded that a terminally disclaimed patent is eligible for extension under 35 U.S.C. § 156.

Note that before June 8, 1995, the terminal disclaimer date was printed on the face of the patent; the date was determined from the expected expiration date of the earlier issued patent based on a seventeen year term measured from grant. When 35 U.S.C. 154 was amended such that all patents (other than design patents) that were in force on June 8, 1995, or that issued on an application that was filed before June 8, 1995, have a term that is the greater of the “twenty year term” or seventeen years from the patent grant, the terminal disclaimer date as printed on many patents became incorrect. If the terminal disclaimer of record in the patent file disclaims the terminal portion of the patent subsequent to the full statutory term of a referenced patent (without identifying a specific date), then the date printed on the face of the patent is incorrect when the full statutory term of the referenced patent is changed as a result of 35 U.S.C. 154(c).

The European Commission has given Sandoz, the generic division of Novartis, approval for the sale of a generic version of a human growth hormone, making it the first generic of a biotechnology drug authorized for sale in Europe.

The approved drug, Omnitrope®, is based on Pfizer’s Genotropin, a treatment for abnormal growth and growth hormone deficiency in children and adults. The active substance of Omnitrope is somatropin, a growth hormone produced by recombinant DNA technology. Somatropin is a hormone of importance for growth and for the metabolism of lipids, carbohydrates and proteins.

Earlier, the European Medicines Agency recommended approval of Omnitrope. In addition to the European Union, Australia approved Omnitrope sales last year.

Sandoz has asked the FDA to approve Omnitrope in the U.S., “acknowledging the sound science that supports this product.” So far, the FDA has not been keen on biogenerics and has not approved Sandoz’ 1994 application to make and sell Omnitrope in the U.S. even though regulators in Australia and the European Medicines Agency found Omnitrope showed comparable quality, safety and efficacy to Pfizer’s Genotropin.

Sandoz sued the FDA last year and a judge in the U.S. District Court for the District of Columbia ordered the FDA to make a decision after FDA Acting Commissioner Andrew von Eschenbach disclosed the agency wouldn’t release long-awaited guidelines on how to best test generic versions of insulin and human growth hormones, the compounds generic companies most want to copy.

[Today’s post is a guest commentary on the NewStandard article about drug companies getting taxpayer supported government grants and then extracting large profits on drug sales.]

If I may comment on the [previous post: Do Drug Companies ‘Gouge’ Consumers With Taxpayer Handouts? ], what is the fair price for any product? When people purchase high-priced drugs, every person who pays the price is indicating that they agree that the drug is worth the dollars paid. It is hard to say, for such individuals, that the drugs are “overpriced”. After all, they are willing to fork-over their hard earned money to complete the purchase. What better definition is there for a “proper price” for a product.

The described scenario overlooks two considerations. One is that millions of poorer people may be unable to pay the cost of purchasing a high-priced product. Or more precisely, they will choose not to purchase such a product. The other scenario is that the vendor may be making a substantial profit, a profit well in excess of the amount of profit needed to encourage them to stay in business. This might be called “surplus” profit.

Patents are designed to produce “surplus” profit. Such increased profits arise in the absence of competition. Free competition sets a market price were producers settle for the minimum profit that they can tolerate. This produces a “competitive price”. Typically, a competitive price allows many more persons to have access to a product. And it allows rich people to acquire a product at a much lower price than they would be willing to pay otherwise. Economists sometimes call the advantage enjoyed by rich persons in such a situation as “consumer surplus”.

Why do governments sponsor a system wherein patents produce surplus profit? Patent systems are maintained because of the belief that they bring into existence products that would not otherwise come into existence if it weren’t for the incentive of surplus profit. But how much profit is enough? Is 20 years too long for some inventions? And do some inventions command such market power that people will pay anything in order to obtain access to the product? These are concerns that arise when a government endeavors to operate under a one-size-fits-all patent law.

On the one hand, we have those who say “Keep it simple”. On the other hand, there are those who say “Make sure the law is just”. These are competing interests that cannot be easily reconciled.

So we have proponents of the patent system who advance a defense based on demonstrated examples wherein the patent system has worked. And we have opponents of the patent system who advance an attack on the basis of perceived injustice.

The pharmaceutical industry is subject to such attacks because:

1) their product commands such market power that they can charge especially high prices;

2) the high prices charged for pharmaceuticals limits access for many persons of limited means, and

3) there is a deep suspicion that the profits earned by the pharmaceutical industry are not needed in order to provide a reasonable incentive for the production of new pharmaceutical products.

Today’s commentary comes from David J. French, an attorney with Milton, Geller LLP in Ottawa, Canada.

A federal judge has ordered the U.S. Food and Drug Administration to decide after a long delay whether Novartis AG can market a version of human growth hormone as a bioequivalent to the one already sold by Pfizer Inc.

The order by Judge Ricardo Urbina of the U.S. District Court for the District of Columbia could put pressure on the FDA to come up with guidelines for approving generic copies of biotechnology drugs. The agency has said it was close to issuing such guidelines for years now. In January 2006, the European Medicines Agency (EMEA) announced draft guidelines for the first four biogeneric products – recombinant human insulin, somatropin, erythropoietin (EPO), and recombinant granulocyte colony-stimulating factor (rG-CSF). In December 2005, the EMEA reported that it had provided scientific advice to companies on the development of 15 other biosimilars. In contrast, the FDA has over the past year done almost nothing to move toward clearer biogeneric regulations.

Sandoz, the generics arm of Novartis, sued the FDA last September for leaving its copycat product in limbo, a move designed to break a logjam over so-called biogenerics. The FDA in November sought a dismissal of the suit, saying the charges were unfounded since its experts had not finished their review of the drug, Omnitrope.

Under both the Federal Food Drug and Cosmetic Act and the Food Prescription Drug User Fee Act, the FDA is required to either approve or reject new drug applications.

Sandoz filed its application for Omnitrope in July 2003. On Sept 2 2004, Sandoz announced that FDA had notified the company that the agency was unable to reach a decision on whether to approve the company’s application for Omnitrope. According to the FDA letter issued to Sandoz, the agency has completed its review of Omnitrope and did not identify any deficiencies in the application. However, the agency stated it had been unable to reach a final decision on the application due to uncertainty regarding scientific and legal issues. No action on the application has been taken since then.

No biogenerics (or follow-on proteins) have yet been approved in the US pharmaceutical market. It is argued that the 505(b)(2) provision of the Hatch-Waxman Act (the Hatch-Waxman amendments of the Federal Food, Drug and Cosmetic Act) lays out an abbreviated approval pathway (ANDA) for generic versions of small molecule drugs) provides a route for the FDA to approve a biological therapy that is different from the originator product, yet relies on data filed by the innovator as part of the original NDA.

The reason for the lack of a regulatory pathway for approval of biogenerics lies in the complexity of biological products. Biologics are large, complex, heterogeneous molecules, for which the manufacturing process can be a determinant of the end product. Demonstrating that its product was as safe and effective as the originator’s would be a difficult task, since establishing that immunogenicity had not been altered, and that any undetected differences in the product would not impact safety and efficacy, would be problematic without conducting clinical trials.

Biogeneric companies need an abbreviated approval pathway to avoid undertaking the same large scale clinical development process as the originator companies, and thus allow them to market their product at a discount to the brand while maintaining a healthy profit margin.

But, even if biogenerics are approved, don’t go spending all your projected savings just yet. The high barriers to market entry will necessitate a smaller price differential between brand and generic products than that seen in regular generics, and initial physician and patient reluctance to take up biogenerics may limit the impact of competition on originator companies.

Prof. James Edward Maule, at MauledAgain, plays host to a special Tax Day Edition of Blawg Review #53.

But, as Prof. Maule points out, every day is Tax Day given the plethora of ways in which governmental agencies extract their pound of flesh. Sales taxes. Real estate transfer taxes. Use taxes. Telephone taxes. Tire excise taxes. Occupation taxes. Emergency services taxes. Inheritance taxes. Gift taxes. Estate taxes. Income taxes.

For those keeping track, Tax Freedom Day for 2006 is April 26th, the 116th day of the year, three days later than in 2005 and 10 days later than it was in 2004.

After that bit of depressing news, Maule gives us a good round-up of blawg news. We especially enjoyed the interview with Prof. Stephen Bainbridge at AutoMuse about his obsession with fast. We always like to keep up on all things automobile.

If only AutoMuse could help me find that perfect vehicle that could stow a bicycle, get good mileage and still seat three kids across the back. I like the new SUV hybrids but have been disillusioned by their prices (and lackluster gas mileage). The sticker price of a Toyota Highlander SUV hybrid is $6,590 more than the six-cylinder gas-only model. That, for an SUV that just screams AARP. (No offense to Instapundit!) But it probably explains why they’re still sitting on the lots.

I love the way the FX45 drives but I don’t want to single-handedly melt the polar caps, not that I want to go metrospiritual on you. We’re looking forward to getting our leather wrapped hands on the 2007 Acura MD-X Concept. We can’t wait to try out the cupholders on this sport ute. Now, if we can only get it in a hybrid version. Preferably, a plug-in.