GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc.
SARA W. KOBLITZ*
Why This Case Made the List
Congress drafted the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Amendments”) in an effort to remove barriers to generic drug market entry—and to do so without discouraging pharmaceutical innovation. To that end, the statutory scheme implemented by the Hatch-Waxman Amendments includes a complex patent listing and certification process—informally called “the patent dance”—that seeks to both acknowledge and protect patent rights and also to encourage challenges to those patents to expedite generic approval and market entry. As part of that balance, Congress included in the Hatch-Waxman Amendments a mechanism by which a generic sponsor may omit—or “carveout”—patent-protected methods of use from generic labeling. Widely used, the provision results in a “skinny label” or “carveout” and allows the generic sponsor to avoid infringement of the relevant method-of-use patent.
In October 2020, in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc., the Federal Circuit put this statutory carveout in jeopardy, effectively writing it out of the statute, by holding that a skinny-labeled generic carvedilol drug product induced infringement of the relevant patent covering the carved-out method-of-use. In a controversial 2-1 decision, the court explained that a generic sponsor can be liable for induced infringement even if neither the product labeling nor the product marketing includes direct reference to the carved-out patent-protected method-of-use. Read broadly, the court’s decision leaves every carveout vulnerable to induced infringement claims and thereby threatens to nullify the carveout. This single patent case—without even acknowledging the potential ramifications to the FDA regulatory scheme—threatens to upset the long-established balance between intellectual property rights and generic drug access that Congress set forth in the Hatch-Waxman Amendments.
The Federal Food, Drug, and Cosmetic Act (FDCA), initially enacted in 1938, provides statutory authority for FDA to oversee the safety of food, drugs, medical devices, and cosmetics. Pursuant to 1962 amendments, the FDCA requires FDA to review and approve all new drugs for safety and efficacy prior to introduction into interstate commerce. To that end, FDA requires New Drug Applications (NDAs) to include, among other things, data from adequate and well-controlled human clinical trials that are sufficient to establish that the proposed drug is safe and effective for its intended use. Until 1984, this requirement applied to both innovator (or “brand”) drugs and generic drugs, which generally made it cost-prohibitive for generic drugs to obtain FDA approval to come to market.
In order to remove barriers to entry and facilitate patient access to affordable medicines, Congress implemented the Hatch-Waxman Amendments in 1984 and modified the FDCA. The Hatch-Waxman Amendments introduced an abbreviated pathway to market for generic drugs permitting FDA to rely on its determination of safety and effectiveness for an approved product—called the Reference Listed Drug (RLD)—for approval of a drug product with the same active ingredient, route of administration, and strength or concentration. Such an application, called an Abbreviated New Drug Application (ANDA), need not include full clinical trials, but it must demonstrate that the proposed generic drug is the same as and bioequivalent to its RLD. The generic drug product labeling also must be identical to that of the approved RLD, other than certain permissible differences, including the “omission of an indication or other aspect of labeling protected by patent or accorded exclusivity under section 505(j)(5)(F) of the [FDCA].”
In enacting the ANDA pathway to generic approval, Congress recognized that it needed to maintain incentives to encourage further innovation. Thus, NDAs containing full clinical trials became eligible for five or three year periods of exclusivity during which FDA could not receive or approve ANDAs (respectively) and set up a patent listing and certification procedure so that generic sponsors are aware of—and cannot simply ignore—patents covering the RLD. That patent listing process requires NDA holders to submit to FDA a list of all patents that claim the drug or the method of using that drug. In turn, FDA publishes the drug and its patents in its list of Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”). Patents eligible for listing in the Orange Book are limited to drug substance (active ingredient), drug product (formulation and composition), method-of-use, and product-by-process patents. When a method-of-use patent is listed, the sponsor must include a narrative description, called a “use code,” that describes “the specific approved method of use claimed by the patent for which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner of the patent engaged in the manufacture, use, or sale of the drug product . . . .”
To ensure recognition of those listed patents, each ANDA must include one of four certifications with respect to each patent listed in the Orange Book for the RLD: a Paragraph I certification affirming that no patent information was filed for the RLD; a Paragraph II certification affirming that the listed patent has already expired; a Paragraph III certification affirming that the proposed generic drug will not be marketed prior to the relevant patent’s expiration date; or a Paragraph IV certification affirming that the relevant patent is invalid or will not be infringed by the manufacture, use, or sale of the proposed generic drug. A Paragraph IV certification also requires the ANDA sponsor to provide notice to the RLD holder within forty-five days so that the RLD holder has the opportunity to bring patent litigation prior to the approval of the ANDA, which effectively stays approval of that ANDA for thirty-months as the patent litigation is resolved.
The Hatch-Waxman Amendments also provide an alternative to the patent certification; instead of a patent certification, an ANDA might include a “section viii statement” informing FDA that the proposed ANDA does not seek approval for the use covered by a listed method-of-use patent (and only a method-of-use patent). In that situation, the ANDA applicant “carves-out” from its product labeling the language that the NDA sponsor lists in the “use code” for that patent. Because FDA’s role in administering patents is “ministerial,” FDA relies on the use code to assess the parameters of the patent claim that must be omitted from the “skinny-labeled” generic labeling to avoid infringement. Though FDA regulations require a generic to have the same labeling as its RLD, the regulations specifically provide for differences arising from carved-out, patent-protected methods of use.
FDA permits carveouts only when the method-of-use information—typically indications, concomitant uses, or patient populations—can be omitted from product labeling without affecting the safety or efficacy of the product for the remaining indications. FDA often allows such carveouts, as they allow immediate ANDA approval rather than tentative approval until all patents expire or patent litigation is complete (as is required with the submission of a Paragraph III or Paragraph IV certification). Further, RLD sponsors receive no notice of the submission of an ANDA with a section viii statement and thereby no opportunity to bring patent litigation prior to ANDA approval and stay such approval for thirty months to litigate the relevant patent. Because section viii statements often accelerate the approval process, carveouts, when possible, are an attractive option for generic sponsors.
Unsurprisingly, RLD sponsors tend to dislike labeling carveouts (and reliance on section viii statements), as they allow generic competitors to access the market without addressing listed patents. It is not uncommon for RLD sponsors to petition FDA to preclude such carveouts on the grounds that a labeling omission would affect the safety and efficacy of the product for the remaining indications in the labeling. Typically, FDA rejects these petitions and, barring any deficiency in the ANDA, will approve an ANDA with a section viii statement before the expiration of the relevant method-of-use patent.
Once an ANDA is approved, FDA lists it in the Orange Book alongside its RLD. Such listing assists state health agencies, prescribers, and pharmacists to facilitate drug product selection pursuant to state generic drug substitution laws. FDA identifies multi-source drug products that are expected to have the same clinical effect and safety profile as the RLD when administered to patients under the conditions specified in the labeling—therapeutically equivalent and therefore substitutable products—by assigning and listing therapeutic equivalence codes in the Orange Book. FDA assigns ANDAs that are therapeutically equivalent an “A” rating, while products that have not been shown to be therapeutically equivalent are assigned “B” ratings. Each “A” and “B” rated product is assigned a second letter reflecting the dosage form and the basis of FDA’s therapeutic equivalence determination. AB-rated products are those that meet necessary bioequivalence requirements for substitution. Therapeutic equivalence codes are based solely on the composition of the drug. Thus, a skinny-labeled generic could be “A” rated against the RLD—and therefore substitutable—even if it is not approved for all of the same indications.
In 1995, FDA approved GSK’s Coreg (carvedilol), 6.25, 12.5, and 25 mg tablets, under NDA 20297 for the treatment of hypertension. FDA subsequently approved Coreg for the treatment of congestive heart failure (CHF) and left ventricular dysfunction following a myocardial infarction, and GSK added these indications to its labeling. After approval of each indication, GSK listed a number of patents in the Orange Book, eventually listing a method-of-use patent, U.S. Patent No. 5,760,069 (the “‘069 patent”) with the use code U-233, “decreasing mortality caused by congestive heart failure.” The ‘069 patent, however, contained errors; by 2008, GSK corrected these errors, the patent reissued as the RE40000 (the “‘000”) patent, and GSK listed the reissued in the Orange Book with the same use code.
As GSK amended its Coreg NDA, Teva submitted ANDA 76373 in March 2002 seeking approval to market a generic carvedilol with Coreg as its RLD. Teva initially submitted a Paragraph IV certification for the ‘069 patent (now ‘000), but in March 2007 withdrew the Paragraph IV certification and instead submitted a section viii statement to carve out all labeling information related to the CHF indication. Teva received FDA approval in September 2007 and launched a skinny-labeled generic carvedilol with no reference to the CHF indication. At all times, Teva’s carvedilol product was listed in the Orange Book with an AB-rating.
GSK sued Teva in the District Court of Delaware in July 2014 for patent infringement, alleging Inducement of Infringement and Contributory Infringement under Title 35 of the U.S. Code. Relevant here, the patent infringement statute provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Active inducement requires a demonstration that the party’s actions caused the infringement. Courts have found such causation through affirmative intent that the product be used to infringe, as well as mere knowledge that labeling may lead to infringement.
After a trial in 2017—in which GSK presented evidence that Teva’s promotional materials referred to Teva’s generic carvedilol as “AB-rated generic equivalents” and as generic versions of Coreg—a jury found Teva liable for induced infringement. Teva moved for a Judgment as Matter of Law of no inducement or lost profits, which the court granted in March 2018 stating that “substantial evidence does not support the jury’s findings on inducement in either the skinny or full label period.” Because Teva’s carvedilol labeling did not instruct doctors to prescribe its product for CHF and marketing materials stated only that the product had an “AB rating” to Coreg, the court found that GSK failed to show causation. Further, Teva showed alternative factors—i.e., factors other than the labeling or AB rating—caused physicians to prescribe carvedilol. Without causation, the court held, a finding of inducement cannot stand. Therefore, the court granted Teva’s Motion for Judgment as a Matter of Law and overturned the jury verdict.
GSK appealed, and as a patent case, it went to the Federal Circuit. The Federal Circuit reviewed the Judgement as a Matter of Law de novo, evaluating whether “‘the record is critically deficient of the minimum quantum of evidence’ to sustain the verdict.” To that end, the Federal Circuit assessed whether the jury’s findings were supported by substantial evidence and whether the jury’s verdict can be supported by its findings. In no uncertain terms, the Federal Circuit held that while the district court applied the correct standard, the “criteria of induced infringement are met” based on the “ample record evidence of promotional materials, press releases, product catalogs, the FDA labels, and testimony of witnesses from both sides.” The majority took this position even though the evidence presented consisted of materials in which Teva had noted that its product was a “generic equivalent of Coreg” and “AB rated” without any reference to specific indications. Notably, the court implied that the labeling alone may have been enough, as “[p]recedent has recognized that the content of the product label is evidence of inducement to infringe.” Given that the court found substantial evidence to support the jury’s verdict of inducement to infringe the ‘000 patent, the Federal Circuit overturned the Judgment as a Matter of Law, reinstated the $235 million damages award, and remanded the matter to back to the district court. The court explained that its decision was not based on policy but purely on applicable patent law.
Federal Circuit Chief Judge Prost vehemently dissented. Focusing on the “critical balance” of patent rights with public access to innovation, she noted that the majority decision “undermines this balance,” particularly since Congress specifically provided for the skinny label pathway to market. The dissent explained that the crux of the case is “whether Teva induced infringement of GSK’s reissue patent, RE40,000, by marketing its generic carvedilol for unpatented uses through a ‘skinny label.’ The clear answer: Teva did not.”
The dissent criticized the Federal Circuit’s holding because it “nullifies Congress’s statutory provision for skinny labels,” slowing the introduction of low-cost generics. In the dissent’s view, Teva “did everything right—proceeding precisely as Congress contemplated.” Indeed, Teva followed all statutory and regulatory requirements: Teva never expressly marketed for the carved-out indication, and properly omitted the indication from its labeling until the method of use patent expired. Teva “never stated that it was approved, or could be used, to treat CHF.” With no legally sufficient evidence to support inducement or to support that doctors prescribed generic carvedilol based on any action taken by Teva, the dissent would uphold the judgement as a matter of law. To do otherwise, the dissent writes, “undermines Congress’s design for efficient generic drug approval.”
Impact of the Decision
As Chief Judge Prost’s dissent explains, the Federal Circuit’s decision could mean the end of the carveout. While GSK would argue that the decision here should be read more narrowly—applicable only to Teva’s specific labeling, which GSK has since asserted did not fully carveout CHF, rather than to all skinny-labeled generics—the language the Federal Circuit uses implies that merely referencing FDA’s assigned therapeutic equivalence code is enough to induce infringement. Indeed, Teva followed the applicable FDA regulations and made no representations specific to CHF but was nevertheless liable for infringement. Consequently, the decision discourages the use of the carveout—a tool that Congress expressly provided to encourage timely generic approval without violating patent rights—in any situation. Further, any sponsor of skinny-labeled drugs currently on the market is vulnerable to similar litigation, potentially opening the flood gates for induced infringement litigation.
The Federal Circuit tried to side-step “policy” arguments, but its decision effectively determined that patent rights supersede Congress’s statutorily-enacted process for avoiding method-of-use patents, as set forth in the FDCA. It is clear that the FDA regulatory scheme received little consideration from the majority here. The majority even mischaracterizes the dissent’s concerns about the abrogation of the Hatch-Waxman Amendment’s intent—to “speed the introduction of low cost generics to the market”—as a policy debate “about whether GSK made enough money from carvedilol in past years . . . .” Suggesting that Congress should revisit the patent profit issue with legislation, the majority overlooks the fact that Congress did just that by enacting the carveout in the first place. Framing the issue here as a debate about windfall profits rather than access to medicine seems to intentionally obfuscate the balance between patent rights and market access that the Hatch-Waxman Amendments expressly addressed. It is illustrative of—and in fact heightens—the tension between innovation and affordability, which is pervasive in the drug industry. Effectively, the majority opinion’s complete disregard of the FDCA implications here suggests that the court made a clear choice to protect innovation over accessibility. With a single court decision, the Federal Circuit signaled the supremacy of the patent by undermining the balance that Congress sought to achieve in adopting the Hatch-Waxman Amendments. If this decision holds, at least on the grounds set forth in the October 2020 Federal Circuit decision, Teva may be correct that “the carve-out statute is a dead letter.”
At the time this paper was submitted for publication, the Federal Circuit vacated its October 2020 decision, but a decision on the rehearing by the same panel is forthcoming. Teva petitioned the Federal Circuit for a rehearing en banc, and the court granted a panel rehearing composed of the same judges as the October 2020 panel. In that rehearing briefing, Teva pleaded for the court to recognize the enormity of its initial decision, while GSK explained that that decision “merely reaffirmed that section viii is not a get-out-of-jail-free card for generics who do not fully carve out the patented use from their labels.” A Federal Circuit decision on the rehearing is forthcoming.
* Sara W. Koblitz is Counsel at Hyman, Phelps & McNamara, P.C., where she advises drug and device manufacturers on applicable regulatory requirements under the Federal Food, Drug, and Cosmetic Act and Public Health Service Act, with a specific focus on the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act.
 Drug Price Competition and Patent Term Restoration Act, Pub. L. 98-417, 98 Stat. 1585 (1984).
 21 U.S.C. § 355(j)(2)(A)(viii).
 976 F.3d 1347 (Fed. Cir. 2020).
 Kefauver Harris Amendments, Pub. L. No. 87-781, 76 Stat. 780 (1962); Federal Food, Drug, and Cosmetic Act, Pub. L. No. 75-717, 52 Stat. 1040 (1938).
 See 21 U.S.C. § 355.
 See PLIVA, Inc. v. Mensing, 564 U.S. 604, 612 (2011).
 Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1326 (D.C. Cir. 1998) (citing, inter alia, H.R. Rep. No. 98-857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N. 2647, 2647).
 21 U.S.C. § 355(j)(2)(A).
 21 C.F.R. § 314.94(a)(8)(iv).
 See 21 U.S.C. §§ 355(b)(1)(A)(viii), (j)(7)(A)(i); Purepac Pharmaceutical Co. v. Thompson, 354 F.3d 877, 880 (D.C. Cir. 2004) (“In order to determine what patents cover existing brand-name drugs and hence whether any paragraph IV certifications or section viii statements are needed, applicants look in the ‘Orange Book . . . .’”).
 21 U.S.C. §§ 355(b)(1)(A)(viii), (j)(7)(A)(i).
 21 U.S.C. § 355(j)(7)(A)(i).
 21 C.F.R. § 314.53(b); Applications for FDA Approval to Market a New Drug, 67 Fed. Reg. 65,448, 65,452 (Oct. 24, 2002).
 21 C.F.R. § 314.53(f)(1)(i)(B).
 21 U.S.C. § 355(j)(2)(A)(vii).
 21 U.S.C. § 355(j)(5)(B)(iii); 21 C.F.R. § 314.107(f)(2).
 21 U.S.C. § 355(j)(2)(A)(viii); 21 CFR § 314.94(a)(8)(iv).
 Listing of Patent Information in the Orange Book, 85 Fed. Reg. 33,169, 33,170 (June 1, 2020); see 21 C.F.R. § 314.53(f)(1)(i)(B).
 See 21 C.F.R. § 314.94(a)(8)(iv).
 21 C.F.R. § 314.127(a)(7); Citizen Petition from Hogan & Hartson, FDA Docket No. 2003P-0518 (Sept. 20, 2004).
 Purepac Pharmaceutical Co. v. Thompson, 354 F.3d 877, 880 (D.C. Cir. 2004).
 See, e.g., Citizen Petition from Fish & Richardson, P.C., Docket No. FDA-2016-P-0383 (Jan. 29, 2016) (requesting that FDA preclude carveouts of a protected use from Nucynta ER); Citizen Petition from Millennium Pharmaceuticals, Inc., Docket No. FDA-2017-P-3672 (June 8, 2017) (same from Velcade).
 See, e.g., FDA Letter Decision, Docket No. FDA-2016-P-0383 (Apr. 29, 2016) (rejecting a request to preclude carveouts of a protected use from Nucynta ER); FDA Letter Decision, Docket No. FDA-2017-P-3672 (Nov. 6, 2017) (same from Velcade).
 21 U.S.C. § 355(j)(7)(A).
 Orange Book Preface (41st ed. 2021).
 See Orange Book Preface § 1.6.
 See id. at § 1.7
 Coreg (carvedilol), Approval Letter, NDA 20297/S-007 (Oct. 1, 2001); Coreg (carvedilol), Approval Letter, NDA 20297/S-009 (Mar. 27, 2003).
 GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 313 F. Supp. 3d 582, 586 (D. Del. 2018).
 Id. at 586–87.
 Id. at 587.
 Id.; Not relevant here, Teva added CHF information back into its label at FDA’s direction in 2011 even though the ‘000 patent did not expire until June 2015.
 Carvedilol, in Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations, 3 – 71 (U.S. Dept. of Health & Human Servs., 28th ed. 2008).
 Complaint for Patent Infringement, GSK v. Teva, Docket No. 1:14-cv-00878 (D. Del., Jul. 3, 2014).
 21 U.S.C. § 271(b).
 GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 313 F. Supp. 3d 582, 586 (D. Del. 2018).
 GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 976 F.3d 1347, 1352–53, 1355 (Fed. Cir. 2020).
 GSK v. Teva, 313 F.Supp.3d.
 Id. at 590.
 Id. at 590–91.
 Id. at 599.
 GlaxoSmithKline LLC v. Teva Pharms. USA, Inc., 976 F.3d 1347, 1351 (Fed. Cir. 2020).
 Id. at 1355.
 Id. at 1356.
 Id. at 1357–58.
 Id. at 1357.
 Id. at 1358.
 Id. at 1361.
 Id. at 1362.
 Id. at 1365.
 Id. at 1374.
 See GSK’s Response Brief to Petition for Rehearing En Banc, GSK v. Teva, Docket No. 18-1976 (Fed. Cir., Jan. 29, 2021).
 GSK v. Teva, 976 F.3d at 1356; id. at 1373 (citing Caraco Pharm. Labs., Ltd. v. Novo Nordisk, 566 U.S. 399, 405 (2012)).
 Petition for Rehearing En Banc at 1, GSK v. Teva, Docket No. 18-1976 (Fed. Cir., Dec. 2, 2020).
 GSK’s Response Brief to Petition for Rehearing En Banc at 13, No. 18-1976 (Fed. Cir., Jan. 29, 2021).
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