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Supreme Court Unanimously Reverses Hatch-Waxman Counterclaim Ruling

WASHINGTON, D.C. - (Mealey's) Generic drug manufacturers may employ the Hatch-Waxman Act's counterclaim provision - known as a Section viii - to force correction of an inaccurate label when the brand-name drug's description overstates a particular method of use, the U.S. Supreme Court held April 17 (Caraco Pharmaceutical Laboratories Ltd. and Sun Pharmaceutical Industries Ltd. v. Novo Nordisk A/S/ and Novo Nordisk Inc., No. 10-844, U.S. Sup.). 

(Decision available. Document #16-120507-004Z.) 

The unanimous court reversed and remanded to the Federal Circuit U.S. Court of Appeals in the dispute between respondents Novo Nordisk A/S and Novo Nordisk Inc. (collectively, Novo) and petitioners Caraco Pharmaceutical Laboratories Ltd. and Sun Pharmaceutical Industries Ltd. (collectively, Caraco).   

'Context Matters' 

Central to the ruling was an interpretation of the counterclaim provision itself, which states that filers of an abbreviated new drug application (ANDA) may bring a counterclaim on grounds "that the patent does not claim . . . an approved method of using the drug." 

"When it comes to the meaning of 'not an,' context matters," Justice Elena Kagan wrote for the court. 

"The statutory context here supports Caraco's posi­tion.  . . .  The Hatch-Waxman Amendments authorize the FDA [Food and Drug Administration] to approve the marketing of a generic drug for par­ticular unpatented uses; and section viii provides the mechanism for a generic company to identify those uses, so that a product with a label matching them can quickly come to market.  The statutory scheme, in other words, contemplates that one patented use will not foreclose marketing a generic drug for other unpatented ones.  Within that framework, the counterclaim naturally func­tions to challenge the brand's assertion of rights over whichever discrete use (or uses) the generic company wishes to pursue," she added. 

Serious Misrepresentation 

Novo sells the drug repaglinide as Prandin for the treatment of diabetes.  One Novo patent, RE 37,035, related to use of repaglinide alone, expired in 2009, while another, No. 6,677,358, related only to the combination of repaglinide with metformin, does not expire until 2018.  In anticipation of the expiration of the '035 patent, Caraco sought to market a generic version of repaglinide.  Because Caraco's proposed drug label listed all FDA-approved uses of repaglinide, Novo sued Caraco for patent infringement in the U.S. District Court for the Eastern District of Michigan.

Novo alleged that any generic label that referenced the repaglinide-metformin combination would induce infringement.  Caraco invoked Section viii of the Hatch-Waxman Act, declaring that it was not seeking approval for the repaglinide-metformin combination therapy and asking the FDA to carve out of the label any reference to that drug.  Based on Novo's use code of repaglinide-metformin in the FDA's "Orange Book:  Approved Products with Therapeutic Equivalence Evaluations," the FDA ruled that Caraco's carve-out label would be proper.  In response to the Section viii ruling, Novo amended the '358 patent's use code in the Orange Book to cover use of repaglinide in general, not specifying use alone or in a combination.  Based on Novo's new use code, the FDA reversed itself and rejected Caraco's proposed labeling carve-out, requiring Caraco to include the patented repaglinide-metformin combination on its label.
Caraco filed a counterclaim, seeking partial summary judgment and an injunction, and the District Court ruled in Caraco's favor, enjoining Novo to restore its original use code.  The court found that the amended code "seriously misrepresents the approved method of use covered by" the '358 patent.  Novo appealed to the Federal Circuit, which in a divided April 2010 ruling reversed and vacated the injunction.  

According to the appellate panel, which read the phrase "an approved method of use" to mean "any approved method of use," the counterclaim provision of the Hatch-Waxman Act is available only if the listed patent does not claim any approved methods of using the listed drug.  Furthermore, the term "patent information" is limited to an "erroneous patent number or expiration date" and does not extend to the "use code narrative," the Federal Circuit held.  A petition for rehearing en banc was denied in July 2010, leading Caraco to appeal to the Supreme Court, which granted certiorari in June 2010 and heard oral arguments in December 2011. 

Single Letter Needed 

Reversing, the high court found that the availability of the counterclaim provision "matches the availability of FDA approval" under the Hatch-Waxman Act.  "A company may bring a counterclaim to show that a method of use is unpatented because establishing that fact allows the FDA to authorize a generic drug via section viii," Justice Kagan explained.

 Applying the rationale to the instant dispute, Justice Kagan rejected Novo's assertion that because Novo holds a valid patent on a different use than that claimed by Caraco, the petitioner's counterclaim "evaporates." 

"To put the matter simply, Novo thinks the counterclaim disappears because it has a patent for a method of use in which neither Caraco nor the FDA is interested at all.  'It would take strong evidence to per­suade us that this is what Congress wrought.'  That 'not an' sometimes (but some­times not) means 'not any' is not enough," Justice Kagan wrote, citing Eli Lilly & Co. v. Medtronic Inc. (496 U.S. 661, 676 [1990]). 

"Congress, after all, could have more clearly expressed Novo's proposed meaning in the easiest of ways - by adding a single letter to make clear that 'not an' really means 'not any.'  And indeed, Congress used a 'not any' construction in the very next subclause, enacted at the very same time.  . . .  So if we needed any proof that Congress knew how to say 'not any' when it meant 'not any,' here we find it.  We think that sees, raises, and bests Novo's argument," she added. 

Counterclaim Ambit 

Next, the high court rejected the Federal Circuit's finding that the counterclaim does not provide a way to correct use codes because use codes are not patent information submitted by the brand manufacturer under subsection (b) or (c) of the Hatch-Waxman Act.  The subsections require a new drug application (NDA) applicant to submit specified information - including the patent number and relevant expiration date - which claims the drug or a method of its use, Justice Kagan noted.  While Novo argued that only such specified information comes within the counterclaim provision, the high court disagreed, for the subsections also govern the regulatory process by which brands provide additional patent information to the FDA both before and after an NDA is approved.  

In affording the term "under" a "broad meaning," Justice Kagan - again citing Eli Lilly - found that patent information submitted under subsection (b) or (c) "most naturally refers to patent information provided as part of the 'comprehensive scheme of regulation' premised on those subsections."   

What's more, the breadth of the term "becomes particularly clear" when compared with phrases like "described in" and "prescribed by" appearing in neighboring provisions, according to the high court.  "Those phrases denote a patent number and expiration date and nothing more.  In contrast, the word 'under' naturally reaches beyond that most barebones information to other patent materials the FDA demands in the regulatory process," Justice Kagan explained. 

Pivotal To Implementation 

Deeming use codes "pivotal to the FDA's implementation of the Hatch-Waxman Amendments," the high court concluded that "an overbroad use code . . . throws a wrench into the FDA's ability to approve generic drugs as the statute contemplates."   

"The statutory counterclaim we have considered enables courts to resolve patent disputes so that the FDA can fulfill its statutory duty to approve generic drugs that do not infringe patent rights.  The text and context of the provision demonstrate that a generic company can employ the counterclaim to challenge a brand's overbroad use code.  We accordingly hold that Caraco may bring a coun­terclaim seeking to 'correct' Novo's use code 'on the ground that' the '358 patent 'does not claim . . . an ap­proved method of using the drug' - indeed, does not claim two.  The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion," the high court held. 

'Sensible Reading' 

In a concurrence, Justice Sonia Sotomayor indicated that although she, too, found the counterclaim provision "not free of ambiguity," she joined the unanimous ruling because it is "the most sensible reading in light of the existing regulatory scheme."

Caraco is represented by Charles B. Klein, Steffen N. Johnson and Andrew C. Nichols of Winston & Strawn in Washington,  James F. Hurst of Winston & Strawn in Chicago and David S. Bloch of the firm's San Francisco office.  Mark A. Perry and Scott P. Martin of Gibson, Dunn & Crutcher in Washington,  Michael A. Sitzman of the firm's San Francisco office, Josh A. Krevitt of the New York office and Wayne Barsky of the Los Angeles office represent Novo. 

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