Teva Patent Case Redo Spotlights Use of Generic ‘Skinny Labels’

Feb. 11, 2021, 10:30 AM

A Federal Circuit rehearing in a patent case against Teva Pharmaceutical Industries Ltd. could offer clarity over the extent to which generic drugmakers can rely on a once surefire practice for quick market entry.

At the center of the debate is the use of “skinny labels,” which generic companies depend on to sell copycat versions of a branded medicine, but only for limited uses. The initial appeals court ruling threw into question the viability of that practice, which has provided a gateway for many drugmakers to enter the market without infringing a brand owner’s patent for a particular indication.

The U.S. Court of Appeals for the Federal Circuit on Tuesday agreed to reconsider a controversial decision that revived a $235 million verdict against Teva for selling a generic version of GlaxoSmithKline PLC’s heart drug Coreg. A jury had found that Teva induced doctors to prescribe its generic for congestive heart failure, even though the label excluded that use. The trial court threw out the verdict.

The appeals court panel’s decision to reinstitute the jury’s findings was “a surprise to a lot of the industry,” said Chad Landmon, chair of Axinn, Veltrop & Harkrider LLP’s IP and FDA practice groups.

“Having skinny labels, where you remove one of the brand company indications, is something people have been doing since Hatch Waxman was passed in 1984,” Landmon said. Now, “all eyes will be watching” for the rehearing results.

Oral argument in the case is scheduled for Feb. 23.

Skinny Labels in Danger

The Federal Circuit’s initial ruling endangered the use of skinny labels because it found that Teva induced others to infringe Glaxo’s product “without giving sufficient attention to the fact that Teva was specifically entering on an unpatented indication,” Rutgers law professor Michael Carrier said.

Now, generics’ ease of entering the market may be at risk, Carrier said. “Generic companies are very worried.”

Induced infringement could put a generic company on the hook for paying a name brand to recover lost profits. The “worst case scenario” in the Federal Circuit rehearing is an opinion similar to the original, Carrier said.

“That gives no solace to a generic company that is planning to use a skinny label, because that company, just like Teva, can be held liable for inducing patent infringement,” he said.

The initial decision was bad for drug pricing and raised “a lot of red flags” from health-care industry officials, said Matthew Lane, executive director of the Coalition Against Patent Abuse. A new Federal Circuit decision along the same lines may prove problematic as well.

Such a decision could make it harder for generics to get around “patent thicketing,” or overlapping intellectual property rights on a product and its uses—a practice that can be applied for blocking generics from entering the market.

Patent thicketing is “manipulating the patent system for anticompetitive ends,” but there are also legitimate reasons to build a patent portfolio, Lane said. That’s why Congress “struck a balance with the skinny label,” he said.

“In the post decision world, the financial consequences for being liable for induced infringement are too high” Lane said. He noted that the ruling turned Glaxo’s use patent into a “blocking patent” that prevents generics from wanting to participate.

The damages for Teva were several times more than “what they made selling the drug,” Lane said.

Broader Reading

The Federal Circuit considered mentions of drug use in Teva’s marketing materials in finding the company induced infringement.

This marketing of off-label use was “unusual,” creating “more exposure with a skinny label that other companies don’t do,” said Dmitry Karshtedt, associate professor of law at George Washington University.

Now the Federal Circuit has another shot to “clarify what’s permissible” and “sharpen the analysis” for what generics should do to avoid inducing infringement, Karshtedt said. He noted that the Federal Circuit in its original opinion didn’t distinguish prior case law on the boundaries for infringement with skinny labels.

“‘For a risk-averse generic where there is a fear of massive financial exposure, I think it can create a chilling effect,” Karshtedt said of the original decision. While the decision was fact specific, a ”reasonable generic business would be concerned about a broader reading.”

A broader reading of the decision may already be having an impact.

Lane said a lawsuit has already been filed on the “theory” relied on by the Federal Circuit in the Teva case.

Amarin Pharma Inc. is suing Hikma Pharmaceuticals USA Inc. to get a generic version of its Vascepa heart medication pulled off the shelves. Amarin alleged that Hikma’s skinny labels induce doctors to prescribe its generic for an indication recently approved by the FDA.

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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