In Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, the Supreme Court has unanimously held that generic drug manufacturers may invoke the counterclaim provision of the Hatch-Waxman Act, 21 U.S.C. § 355(j)(5)(C)(ii)(I), to force branded drug manufacturers to correct overbroad descriptions of their method-of-use patents in the Food and Drug Administration's "Orange Book."  The Court’s decision closes a loophole whereby uncorrected, overbroad "use codes" could effectively prevent generic drug manufacturers from “carving out” patented uses from their applications to sell generic drugs.

Statutory and Regulatory Background

Generic drug manufacturers often submit Abbreviated New Drug Applications (“ANDAs”) to the Food and Drug Administration (“FDA”) seeking authorization to sell a drug for certain uses.  FDA, however, cannot grant that authorization if the sale would infringe a branded drug manufacturer’s patent.  The Hatch-Waxman Act requires branded manufacturers to submit to FDA information about their patents, including patent numbers, expiration dates, and “use codes” describing particular methods of use covered by their patents.  FDA publishes this information in its “Orange Book” but does not try to verify its accuracy. 

In many cases, the branded drug manufacturer’s patent on the drug itself has expired, but the branded manufacturer still holds a patent on certain methods of using the drug.  In that case, generic manufacturers can avoid infringement by “carving out” the patented use through a so-called “section viii” filing under 21 U.S.C. § 355(j)(2)(A)(viii) certifying that they will market the drug only for unpatented uses.  But that approach will not work if the use code in the Orange Book overstates the breadth of the method patent and covers both patented and unpatented uses:  FDA assumes the patent information is accurate and will not approve an ANDA if the generic’s proposed label overlaps at all with the use code in the Orange Book.

In 2003, Congress adopted amendments to the Hatch-Waxman Act authorizing generic manufacturers to counterclaim to “correct or delete” erroneous Orange Book information if a branded drug manufacturer sues for patent infringement based on submission of an ANDA.  In particular, ANDA applicants may counterclaim to “correct or delete the patent information submitted by the holder … on the ground that the patent does not claim … an approved method of using the drug.”  21 U.S.C. § 355(j)(5)(C)(ii)(I).  In this case, the Federal Circuit held that the counterclaim provision is limited to cases where the generic seeks complete delisting of a patent from the Orange Book and is not available in cases where the Orange Book listing covers both patented and unpatented FDA-approved uses.  The Federal Circuit also held that the “patent information” that may be corrected by counterclaim is limited to patent numbers and expiration dates and does not include use codes.  As a practical matter, the Federal Circuit’s decision greatly reduced the usefulness of section viii carve-out filings because a brand manufacturer could submit overly broad use codes, yet FDA would not review them substantively and the generic had no judicial remedy to narrow them.  To gain FDA approval, the generic would be forced to file a “paragraph IV” certification and show that the patent was invalid.

Factual and Procedural History

Novo Nordisk (“Novo”) obtained patents involving the diabetes drug repaglinide, which Novo markets under the brand name Prandin®.  FDA has approved three ways of using the drug:  (1) use of repaglinide by itself; (2) use of repaglinide in combination with metformin, and (3) use of repaglinide in combination with another class of drugs.  The compound patent for repaglinide itself expired in 2009, but U.S. Patent No. 6,677,358 (“the ’358 patent”), a method-of-use patent which covers the use of repaglinide in combination with metformin, does not expire until 2018.

Caraco Pharmaceutical Laboratories (“Caraco”), a generic drug manufacturer, filed an ANDA with a section viii carve-out statement seeking FDA approval to market repaglinide without metformin.  In May 2009, however, Novo changed its use code for the ’358 patent from “use of repaglinide in combination with metformin to lower blood glucose” to “a method for improving glycemic control in adults with type 2 diabetes mellitus.”  This change effectively prevented Caraco from carving out the patented use and seeking approval for use of repaglinide alone.  In its ongoing litigation with Novo, Caraco also amended its answer to assert a counterclaim seeking an injunction requiring Novo to correct its use code.  In September 2009, the district court issued an injunction requiring Novo to change its use code back to its former code.  Novo appealed.

In April 2010, a divided Federal Circuit panel reversed.  Novo Nordisk A/S v. Caraco Pharm. Labs., Ltd., 601 F.3d 1359 (Fed. Cir. 2010).  The majority held that the counterclaim provision’s reference to “an approved method of use” meant “any approved method of use” and accordingly, a counterclaim was available only if the listed patent did not claim any approved methods of using the listed drug.  That was not the case here because the patent did claim one of the approved methods (repaglinide combined with metformin).  The panel further concluded that the “patent information” that may be deleted or corrected under the counterclaim provision was limited to the patent number and the expiration date and did not include the use code information.  A petition for rehearing en banc failed 7–2.  Novo Nordisk A/S v. Caraco Pharm. Labs., Ltd., 615 F.3d 1374 (Fed. Cir. 2010).

Caraco sought review by the Supreme Court, which granted certiorari in June 2011 to decide whether the counterclaim provision “applies where (1) there is ‘an approved method of using the drug’ that ‘the patent does not claim,’ and (2) the brand submits ‘patent information’ to the FDA that misstates the patent’s scope, requiring ‘correct[ion].’” 

The Supreme Court’s Decision

Today, a unanimous Supreme Court has reversed the Federal Circuit’s decision and held that a generic manufacturer may invoke the counterclaim provision to force correction of a use code that inaccurately claims that a patent covers a particular method of using a drug.  Justice Kagan wrote for all nine Justices, focusing primarily on the text and context of the statutory provisions at issue but also addressing the legislative history when refuting Novo’s arguments.  Justice Sotomayor wrote a concurrence notable for its pointed comments toward FDA.

Justice Kagan began by focusing on the statutory language allowing an ANDA applicant sued for patent infringement to bring a counterclaim “on the ground that the patent does not claim … an approved method of using the drug.”  Novo contended that “not … an” meant “not … any,” such that counterclaims would be available only if the listed patent claimed no approved method of using the drug at all.  Caraco, in contrast, argued that “not … an” meant “not a particular one,” such that counterclaims are available whenever a patent does not claim a particular method of use for which the generic applicant seeks to market the drug.  The Court recognized that both constructions were plausible in isolation but concluded that the context of the statute supported Caraco’s construction.  The Court recognized that the Hatch-Waxman Act authorizes approval of a generic drug for unpatented uses and that section viii statements enable generic manufacturers to carve out the patented uses from their drug labels.  The Court thus held that the statute “contemplates that one patented use will not foreclose marketing a generic drug for other unpatented ones” and that “[w]ithin 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.”  Slip op. 13.  According to the Court, “[t]he availability of the counterclaim thus matches the availability of FDA approval under the statute.”  Id.  The Court was unconvinced by Novo’s various counterarguments, stating that “‘[i]t would take strong evidence to persuade us that [Novo’s preferred meaning] is what Congress wrought.’”  Id. at 14 (quoting Eli Lilly & Co. v. Medtronic, Inc., 496 U. S. 661, 673 (1990)).

The Court also agreed with Caraco that the scope of correctable “patent information” includes use codes.  Justice Kagan acknowledged that the statute refers to “‘patent information submitted by the [brand] under subsection (b) or (c)’ of §355.”  Id. at 15 (emphasis added).  Consistent with precedent, however, the Court broadly construed “submitted … under” to mean “‘in furtherance of or compliance with a comprehensive scheme of regulation.’”  Id. at 17 (quoting Eli Lilly, 496 U.S. at 667).  The Court also compared the “submitted … under” language to other phrases in the same statute where Congress presumably used narrower language (“described in” and “prescribed by”) to express a narrower meaning.  Id.  The Court further recognized that a broad reading of “submitted … under” would enable FDA to fulfill its statutory mandate:  FDA must review use codes, and those codes must be accurate if FDA is to approve carve-out applications as Congress intended.  Id. at 17–18.

The Court next turned to the statute’s description of the available remedies:  both deletion and correction of erroneous “patent information.”  Justice Kagan noted that the Court’s construction gave content to both remedies:  “[i]t deletes a listing from the Orange Book when the brand holds no relevant patent and corrects the listing when the brand has misdescribed the patent’s scope.”  Id. at 18.  In contrast, she wrote, “Novo’s two arguments would all but read the term ‘correct’ out of the statute” because the appropriate remedy where no use is actually patented would be to delete the listing entirely.  Id.  Moreover, the Court posited, Novo’s narrow reading of correctable “patent information” would render counterclaims nearly useless because patent numbers and expiration dates rarely require correction, as the brand has every incentive to submit the right numbers in the first place and promptly rectify any error discovered.  Id. at 19.

The Court then rejected Novo’s arguments based on the legislative history of the 2003 amendments.  Novo argued that a proposed statute had expressly allowed correction of use codes but did not pass.  The Court responded that legislation fails for many reasons, and there was no way of knowing that this particular issue was responsible.  The Court then disposed of Novo’s argument that Congress merely intended the counterclaim provision to overturn Mylan Pharmaceuticals Inc. v. Thompson, 268 F.3d 1323 (Fed. Cir. 2001), a case where the generic manufacturer sought a complete delisting from the Orange Book.  The Court thought this interpretation too simplistic because “[b]y the time Congress acted, it also had at hand an FTC study broadly criticizing brands’ patent listings and an FDA rule designed to address the very same issue.”  Id. at 22.  Instead, Mylan alerted Congress to the broader problem that generic manufacturers lacked a way to challenge the accuracy of brands’ Orange Book listings, and that FDA therefore could not approve proper ANDAs.  The statute specifically allowed counterclaimants to seek correction as well as deletion of misinformation as in Mylan.  Indeed, the Court observed, counterclaim relief is even more necessary here than in Mylan because it offers the only route to bring a generic drug to market for noninfringing uses.  Id. at 23–24.

The Court concluded that its reading of the statutory counterclaim provision “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,” and that “[t]he text and context of the [counterclaim] provision demonstrate that a generic company can employ the counterclaim to challenge a brand’s overbroad use code.”  Id. at 24.  The Court therefore reversed the Federal Circuit’s judgment and remanded for further proceedings.  Id.

Justice Sotomayor’s Concurrence

Justice Sotomayor concurred in the Court’s opinion but wrote separately to emphasize two issues.  First, she observed that the counterclaim provision “can only lessen the difficulties created by an overly broad use code; it cannot fix them.”  Concurrence at 1.  She noted that the statutory scheme is designed to speed up the introduction of low-cost generics to the market, but an overly broad use code “‘throws a wrench’ into that scheme.”  Id. at 2 (citing Justice Kagan’s opinion for the Court).  If the use code overlaps with the generic manufacturer’s proposed carve-out label, FDA will not approve an ANDA with a section viii statement.  Although the majority’s opinion now allows a generic manufacturer to respond by submitting an ANDA with a certification of no infringement and then seeking correction of the use code via a counterclaim, Justice Sotomayor observed that this process results in delay and expense and will not necessarily work.  In her view, a real fix will have to come from Congress or FDA.  Justice Sotomayor also emphasized that FDA’s current guidance regarding use codes is “remarkably opaque” and that undue litigation is likely to continue unless FDA provides greater clarity about what it requires from branded drug manufacturers.  Id. at 3.


The Federal Circuit’s decision would have allowed brand name drug manufacturers to abuse use codes, effectively allowing them to block generic competition as long as they maintained patent protection on any use of the drug.  The Supreme Court’s decision has closed that loophole and re-opened the door for section viii statements and counterclaims by generic manufacturers seeking to correct inaccurate use codes.  As Justice Sotomayor points out, the decision is not a perfect fix to the problem of overly broad use codes, but it at least provides generic manufacturers a remedy.

© 2012 Perkins Coie LLP


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