Thus, the Supreme Court's broad holding and restoration of the full scope of the counterclaim provision in this case is consistent with the intention behind the counterclaim provision and restores a key defense for generic manufacturers.

The U.S. Supreme Court's unanimous ruling on April 17, 2012, in Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S was a resounding win for both Caraco and the generic pharmaceutical industry as a whole. Specifically, the Court held that a generic manufacturer may employ the counterclaim provision of 21 U.S.C. § 355(j)(5)(C)(ii)(I)—part of the Medicare Modernization Act of 2003 amendments to the Hatch-Waxman Act—to force correction of an Orange Book use code that inaccurately describes the brand's patent as covering a particular method of using the drug. Allowing generic manufacturers to counter-claim for correction of overly broad use codes provides a faster, more efficient means for bringing non-infringing generic products to market, while hopefully curtailing abuses of use codes by brand pharmaceutical companies seeking to delay generic competition.

The drug at issue in this case is PRANDIN® (repaglinide), which is used for the treatment of type 2 diabetes (non-insulin dependent diabetes mellitus). There are three FDA-approved indications for PRANDIN®: (1) treatment with repaglinide alone; (2) treatment with repaglinide in combination with metformin and (3) treatment with repaglinide in combination with thiazolidinediones (TZDs). When Caraco filed its abbreviated new drug application (ANDA) in 2005 seeking approval to market generic repaglinide, the Orange Book listing for PRANDIN® included two patents: U.S. Patent No. RE37,035 ("the '035 patent") and U.S. Patent No. 6,677,358 ("the '358 patent"). The '035 patent, which claimed the compound repaglinide, expired in 2009, leaving only the '358 patent, which claims only the second FDA-approved use: repaglinide-metformin combination therapy. At the time Caraco filed its ANDA, Novo's included a use code for the '358 patent stating "[u]se of repaglinide in combination with metformin to lower blood glucose.” Novo holds no unexpired patents claiming the use of repaglinide alone or in combination with TZDs.

Caraco's ANDA contained a paragraph III certification for the '035 patent and a paragraph IV certification for the '358 method-of-use patent, asserting that it was invalid, unenforceable and/or not infringed. In response to the paragraph IV certification, Novo filed suit against Caraco in the U.S. District Court for the Eastern District of Michigan. Upon review of Caraco's ANDA, the FDA advised Caraco that if it was not seeking to market repaglinide with metformin, it could submit a section viii statement seeking approval for only the two unpatented approved uses. Caraco took the FDA's cue and submitted an amended ANDA with a section viii statement, with proposed labeling carving out (omitting) Novo's patented metformin-repaglinide combination therapy, which would have cleared the way for approval of Caraco's product upon expiration of the '035 compound patent.

Novo responsed to Caraco's section viii filing by revising the use code for the '358 patent to broadly state that the '358 patent claims "[a] method for improving glycemic control in adults with type 2 diabetes," which was sufficiently broad to encompass all three FDA-approved uses. Because the FDA does not attempt to confirm the accuracy of use codes, it accepted Novo’s revised use code for the '358 patent. Based on the fact that the revised use code overlapped with all three approved indications, the FDA then rejected Caraco's section viii statement and corresponding label carve-out. Caraco responded by counter-claiming under 21 U.S.C.§ 355(j)(5(C)(ii)(I), requesting that Novo change the '358 patent use code back to the original narrow description, which would allow the FDA to accept the section viii statement and theoretically proceed to approval of Caraco's generic product.

The district court, on summary judgment, ordered Novo to restore the old use code within 20 days, sparking Novo to seek an immediate stay of the injunction and expedited appellate review of the district court's ruling. The main issue on appeal before the Federal Circuit was interpretation of the counterclaim statute. Specifically, Novo argued that because the Medicare Modernization Act of 2003 authorizes the generic manufacturer to assert a counterclaim "on the ground that the patent does not claim . . . an approved method of using the drug," a counterclaim is available only if the '358 patent does not claim any approved methods. 21 U.S.C. § 355(j)(5)(C)(ii)(I) (emphases added). Caraco, in turn, argued that it is entitled to a counterclaim because the '358 patent does not claim two of the approved methods of PRANDIN® use. In other words, Novo read "an approved method" in the counterclaim statute as "any approved method" while Caraco read it as "all approved methods."

A divided Federal Circuit panel reversed the district court's holding. The majority opinion (Chief Judge Rader with Judge Clevenger concurring) held that the statutory language was clear on its face, and that "an approved method of using the drug" is equivalent to "any approved method," as opposed to "all approved uses." Furthermore, the counterclaim provision of the 2003 Medicare and Modernization Act was meant to deter brand manufacturers from listing patents that were not related at all to the patented product or method, and not to create a tool to compel "the patent holder to change its use code narrative."

In a unanimous decision for Caraco, the Supreme Court wholly disagreed with the Federal Circuit and Novo, holding that the statutory context favors Caraco's construction. In its opinion, the Court found that the text, context and legislative history of the statute also supported an interpretation that allowed for correction of more than just patent number and expiration dates in the Orange Book. With regard to the linguistic dispute surrounding the phrase "an approved method," the Court ruled that Novo's approach failed to elucidate a single meaning of the phrase, requiring a closer inspection of the broader statutory text and context. The Court also noted that Congress could have simply used the word "any" in the statute, if such a narrow meaning was intended. Regarding the broader context of the statute, the fact that the statutory scheme contemplates that one patented use will not foreclose marketing a generic drug for other unpatented ones rendered Novo's arguments inconsistent with the underlying goals and proper functioning of the Hatch-Waxman Act (and subsequent amendments).

The Court also rejected Novo's contention that patent use codes are not "patent information submitted by the [brand] under subsection (b) or (c)" of § 355. Simply put, the Court found that the only logical reading of the statute includes use codes within the scope of "patent information," particularly given the fact that subsections (b) and (c) govern the regulatory process by which brands provide additional patent information to the FDA, both before and after a new drug application (NDA) is approved. The Court traced the legal authority back to section 505 of the Federal Food, Drug, and Cosmetic Act, and acknowledged that subsections (b) and (c) of 21 U.S.C. § 355 provide the basis for the regulation requiring brands to submit use codes to the FDA.

The Court also dismissed Novo's assertions regarding the available remedies provided for in the counterclaim provision. The Court stated that Novo's interpretation allowed only for deletion of patent information, despite the fact that the statute plainly provides for a successful claimant to obtain an order requiring the brand to "correct or delete" its patent information § 355(j)(5)(C)(ii)(I). Novo argued that a counterclaim could succeed only if the patent challenged does not claim either the drug or any approved method of using it, leaving deletion of a patent as the only possible remedy aside from correction a typographical error in a patent number itself. The Court found Novo's arguments strained at best, and ruled that the statute gives content to both remedies: "It 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." Novo's two arguments relating to the counterclaim's drafting history were also insufficient to overcome the clear statutory text and context, with the Court instead finding that "the statute's evolution indicates that Congress determined to enforce the FDA's new listing provisions, including its use-code requirement, through the new counterclaim."

Finally, the Court considered whether the counterclaim statute was established solely to solve the problem raised by the Federal Circuit's decision in Mylan Pharmaceuticals, Inc. v. Thompson, which was that generics had no cause of action to delist a patent from the Orange Book. 268 F.3d 1323. The Court's rejection of this argument highlights the broader concerns addressed by the counterclaim statute, as well as the positive bearing that the Caraco decision will likely have on the ability of the Hatch-Waxman scheme to function properly in the future. The Mylan case was limited to the issue of delisting a patent, which (as discussed above) is only one of the concerns addressed by the counterclaim statute. A brand's improper listing and characterization of patents in the Orange Book ultimately prevents approvable, non-infringing generic products from obtaining FDA approval.

Since the Federal Circuit's decision in Novo, creative drafting of Orange Book use codes had become a strategy for brand pharmaceutical manufacturers to delay generic approvals. For example, in this case, the revision to the use code was in response to Caraco's section viii statement and proposed label amendment—presumably because Novo knew that the label carve-out would allow for a possibly shorter litigation and faster FDA approval of Caraco's product. The Court here reasoned that part of Congress' intent in passing the counterclaim provision was to prevent exploitation of FDA's determination that it cannot police accurate submission of patent information to the FDA for listing in the Orange Book. Thus, the Court's broad holding and restoration of the full scope of the counterclaim provision in this case is consistent with the intention behind the counterclaim provision and restores a key defense for generic manufacturers.

For Further Information

If you have any questions or would like more information, please contact Laura A. Vogel, Christopher S. Kroon, any other member of the Intellectual Property: Generic Pharmaceuticals Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.