Will the Supreme Court save lower-cost medications from inducement by skinny labels?
Zachary Silbersher
In 2024, the Federal Circuit held—for the second time—that a generic pharmaceutical company could, under certain circumstances, be liable for inducing infringement of a method of use patent for a carved out indication. Hikma, the aggrieved generic, has petitioned to the Supreme Court. On June 23, the Supreme Court took an interest by soliciting the views of the United States. If left to stand, the growing precedent over inducement for section viii indications may stifle investment into generic drugs. Will the Supreme Court save lower-cost medications from inducement by skinny labels?
Amarin fails to keep out generics for the hypertriglyceridemia indication.
Amarin sells Vascepa®, which is an ethyl ester of an omega-3 fatty acid commonly found in fish oils. The drug was initially approved for severe hypertriglyceridemia. Yet, in 2019, Amarin surprised the market with positive clinical trial results for treating cardiovascular risk, including myocardial infarction, stroke, coronary revascularization, and unstable angina requiring hospitalization. The FDA approved Vascepa for a second cardiovascular indication. The patient population for the cardiovascular indication was expected to be sizeably larger than the hypertriglyceridemia indication. Amarin’s stock looked ready to pop.
The problem was that Amarin already faced generic competition for the hypertriglyceridemia indication. The worry was that if Amarin did not beat back the generics with its patents, then generic entry would eat into Amarin’s market share for the cardiovascular indication through off-label sales. This risk existed even though the generics, including Hikma and Dr. Reddy’s, expressly carved out the cardiovascular indication from the labels. The Hatch-Waxman lawsuits against Hikma and Dr. Reddy’s attracted considerable investor interest.
Unfortunately for Amarin, it lost its patent case against the generics. Amarin’s loss against Hikma and Dr. Reddy’s was a blow to the company. Amarin’s share price was poised to explode following positive clinical trial results for the CV indication, but the patent loss crushed the stock.
The Hatch-Waxman Act expressly allows generics to carve out indications covered by method-of-use patents generics do not wish to challenge. These are known as “section viii” carveouts, (§ 505(j)(2)(a)(viii)) and they are informally known as “skinny” labels. The policy behind permitting skinny labels is to facilitate lower-cost generic availability of drugs for indications not protected by patents. Otherwise, if a drug is approved for multiple indications, but only one of them is covered by a patent, that could preclude generic entry for all indications. Consumers would suffer, and brands might be incentivized to pursue potentially unprofitable indications for negligible patient populations as a tactic to preclude generic entry.
Amarin sues Hikma for inducement of carved out indication.
Given the state of the law, there did not appear to be much that Amarin could do to prevent generics from selling off label for the cardiovascular indication. Strong Federal Circuit precedent held that a generic cannot be liable for inducing infringement of method-of-use patents for off-label sales. That precedent appeared generally immune from challenge given the policy behind section viii carveouts.
Then a legal decision fell to earth, seemingly out of nowhere. It promised the hope of a changed landscape. In GSK v. Teva, the Federal Circuit affirmed a lower-court decision holding that Teva was liable for inducing infringement of a method-of-use patent covering an indication that Teva had expressly carved out from its label. The decision was contentious, to say the least, and clearly drew a split of opinions among the Justices at the Federal Circuit. Despite a veritable intra-Circuit split, the Court could not find its way to order en banc review, and the decision is now law.
The GSK decision has several unique facts, and to the extent it is precedent, it is arguably limited to its facts. And yet, it provided Amarin a foothold to sue Hikma, and allege that it was liable for infringing Amarin’s CV patents despite carving out the CV indication from Hikma’s label.
Amarin’s case against Hikma has also split the opinions among multiple judges. First, the Magistrate Judge denied Hikma’s motion to dismiss on the ground that, under GSK, under the right circumstances, a generic can be liable for off-label sales on a carved out indication. The District Court Judge refused to adopt the Magistrate’s report and recommendations, and held that Amarin could not state a claim for induced infringement based on Hikma’s off-label sales. Then the Federal Circuit reversed the District Court Judge, and held Amarin had, in fact, stated a claim for induced infringement based on Hikma’s off-label sales.
Unsurprisingly, Hikma filed a petition for certiorari to the Supreme Court. Perhaps more surprisingly, the Supreme Court has taken an interest. On June 23, the Court invited the Solicitor General to file a brief expressing the views of the United States.
There is the possibility this all goes nowhere. The Federal Circuit drafted its precedential decision in a manner that appeared mindful of the potential bomb it was slowly exploding within the generic pharmaceutical industry. The Court’s opinion starts its analysis with the following sentence, “We begin by noting what this case is not.” (Slip Op. at 12).
The Court then explained that this was not a Hatch-Waxman suit, but rather a garden variety patent litigation. In other words, inducement allegations were being vetted not before a potential generic launch, but after Hikma’s product and marketing has already been launched. It was also not a typical section viii carveout case where the allegation is that the generic has not carved out enough. Rather, it was a post-launch case where Hikma’s marketing materials, and what the company actually told doctors, was part of Amarin’s allegations. It was also not a decision following a summary judgment or bench trial decision that had the benefit of discovery. Rather, it was a decision on a motion to dismiss where the allegations must be construed most favorably for the plaintiff, namely, Amarin.
After this litany of qualifications and throat-clearing, the Federal Circuit then held that Amarin had, in fact, stated a claim for induced infringement of Amarin’s cardiovascular patents even though Hikma had carved out that indication from its label. Induced infringement typically requires “active” inducement—i.e., actively encouraging, recommending, promoting infringement. Indeed, because Hikma carved out the cardiovascular indication from its label, the Court acknowledged that Hikma’s label itself cannot be said to be “actively” inducing infringement. But it was the label in combination with Hikma’s marketing statements that warranted denial of Hikma’s motion to dismiss.
Like the court in GSK, the Federal Circuit also relied upon Hikma’s activies outside of its label, including its press releases and other promotion of its drug. Those marketing materials appeared to repeatedly suggest that Hikma’s drug was a “generic equivalent to Vascepa®” without clarifying that it was only approved for the hypertriglyceridemia indication, and not for the cardiovascular indication. Hikma’s marketing also touted sales figures for Vascepa that included both indications. Hikma’s website apparently had a small-print disclaimer that said as much. The Court, however, credited Amarin’s allegation that this was insufficient to overcome Hikma’s attempt to pass off its drug as equivalent to Vascepa for all indications.
Will the Fed Cir’s decision quell generic investment?
Hikma’s appeal to the Supreme Court has attracted amicus briefs arguing that the Federal Circuit’s decision is a policy blunder. The main thrust of their critique of the Federal Circuit’s decision is that it will quell investment in and availability of lower-cost generic formulations. They are not wrong.
The Federal Circuit attempted to preempt these policy concerns in its opinion. It rejected Hikma’s suggestion that its decision will “effectively eviscerate section viii carveouts.” (Slip. Op. at 20). The Court emphasized that it was reviewing a decision at the pleading stage, not after full discovery, and it was guided by the plausibility standard enunciated in Twombly.
The Federal Circuit may, however, be overlooking the damage done. The Association For Accessible Medicines filed an amicus brief arguing that the Federal Circuit has allowed a case past the pleading stage based on “threadbare” allegations, i.e., calling a drug a “generic” version of a brand drug and touting the brand’s total sales. By doing so, and creating uncertainty where there previously was none, generics will now have to consider potentially ruinous lost profits damages from launching a generic label with a carved out indiciation. That will curb investment into generics.
In addition, by opening the door to discovery on a generic’s marketing materials, that will necessarily extend the litigation time period for generics to get to market. More cases will be sent off to discovery, more litigation will take more time. Fewer generic companies will make the investment, fewer drugs will receive ANDA applications, fewer lower-cost alternatives will reach the market. This is all a boon to brand pharmaceutical companies because, in their fight against generics, months and years of litigation delay is money in their pocket, even if the litigation ultimately fails.
The damage is not limited only to generics. It will extend to consumers and purchasers of pharmaceutical drugs as well. These consumers do not have a seat at the table when patents are litigated and settled that ultimately effect the prices they will have to pay. Moreover, if generics decide to forgo investment in certain drugs because they cannot make an economic case for the carve out risks, then consumers are deprived the benefit of lower-cost medications, and must continue to pay monopoly prices for pharmaceutical drugs that they often cannot live without.
The one potential salvo to generics and consumers may be that the Federal Circuit’s decision provided guidance on how to avoid Hikma’s fate. The Court hinted that generics could likely skirt Hikma’s fate with clearer “communications regarding a drug marketed under a skinny label.” (Slip. Op. at 20). Generics have little leeway in how their labels are drafted, but when it comes to marketing materials, prudence would now dictate the generics bend over backwards to avoid suggesting their formulation is available for carved out indications.
Yet, again, there is now a cloud of uncertainty where there previously was none. It’s not clear that there existed a problem here that needed fixing by the Federal Circuit. And the people who are forced to pay for their prescriptions will now just be forced to pay more.