Generic Skinny Labeling – A Different Kind of Off-Label Promotion – Part I

Let me start by apologizing for the long hiatus since my last posting in July.  While the demands of law firm practice often interfere with a legal blogger’s desire to publish on a frequent and consistent basis, work commitments this past Summer were particularly unforgiving for this blogger.  When I finally sat at my keyboard, I double-checked to make sure there had been no major events in the cases that I have been following for this blog, particularly the Caronia and Par cases.  Regretably, we are quickly reaching the second anniversary of oral argument before the Second Circuit in Caronia and we still don’t have a decision.  In the Par case, negotiations between the Government and Par Pharmaceuticals are continuing into their ninth month and I am still predicting a settlement with no discussion of Par’s First Amendment challenge.   So, before moving away from the topic of off-label promotion entirely, and keeping with this blog’s commitment to deal with other “risks” facing the pharma/med device/bio-tech industries, I’d like to discuss a topic that is mostly of interest to patent lawyers, but which is instructive on the Government’s thinking on what really is and isn’t “off-label” use: generic “skinny labeling” of innovator drugs.

Under the Drug Price Competition and Patent Term Restoration Act of 1984, more commonly known as the “Hatch-Waxman Act,” Congress established the modern combat rules between the branded-innovator or “pioneer” drug companies and generic drug companies.  To make a long story short, any generic drug company that files an Abbreviated New Drug Application (ANDA) must certify to FDA that the patent on the pioneer drug has not been filed (Par. I), has expired (Par. II), will expire on a certain date (Par. III), or that the patent is invalid, or will not be infringed by the generic drug (Par. IV).  See 21 U.S.C. § 355(j)(2)(A)(vii)(I)-(IV).  If the generic manufacturer files a Paragraph IV certification, in order to assure itself of “first mover” status and the lucrative six-month period of exclusivity against competing generics, it notifies the pioneer manufacturer, which then has 45 days to file a patent infringement suit in federal district court.  The filing of the suit stays FDA approval of the generic company’s ANDA for 30 months, pending resolution of the litigation.  If the suit is not resolved within 30 months and the pioneer company fails to get an injunction from the court effectively extending the stay, the FDA may approve the ANDA and the generic company has the choice of “launching at risk” with the possibility of a later adverse infringement ruling, or losing its six month exclusivity.  (As in any Hatch-Waxman litigation, the risks, stakes and millions ($) are high for both companies.  Accordingly, the pioneer and generic companies have the option of entering into settlement agreements that may include provisions whereby the pioneer company “pays” the generic company to delay the generic drug’s entry into the market.  The Government has charged that these “reverse payments”  violate the antitrust laws and the Supreme Court may decide to settle the matter in its next term.  A good topic for a later blog post.)

A different set of issues arise under Hatch-Waxman when the patent(s) at issue don’t involve just the patent on the drug compound, but on the drug’s “method of use,” which can include the indication for which the drug was approved by FDA.  To make matters interesting, a number of drugs have multiple indications, each of which may have a its own method of use patent that is listed in the Approved Drug Products With Therapeutic Equivalence Evaluations — a.k.a., the “Orange Book.”  Indeed, in deciding what to certify to FDA, the generic ANDA filer must consult the Orange Book and determine whether its drug will infringe the pioneer company’s listed patents.  Finally, to make matters even more interesting, while the drug’s compound and first approved use may have proximate patent expiration dates, drugs with multiple indications often have method of use patents with very different expiration dates.  Indeed, FDA has encouraged manufacturers to invest in clinical research and development in order to get additional indications approved for their products and the manufacturers that do so are rewarded with patent exclusivity for those additional indications.  Thus, for companies like Allergan, which forked over $600 million to the Feds in 2010 for promoting Botox for uses that were before, but not yet approved by, FDA, there is supposed to be a reward or “return” for investing millions of dollars in clinical research and getting additional indications approved by FDA, and for not promoting off-label.  But does that really happen?

The truth is that companies that make the financial investment in clinical research to get additional FDA-approved indications usually don’t get much of any return on their investment once the original compound and method of use patents expire, even where they obtain additional years of patent exclusivity for those additional indications.  And that’s because under Hatch-Waxman, the generic manufacturer can file what’s known as a “viii statement”(also known as a “little viii carve-out” statement).  In short, if the generic manufacturer tells FDA that it is only seeking ANDA approval for a drug with a FDA approved use that is not covered by any valid, unexpired patent, FDA will approve the ANDA, provided all other bioequivalency requirements have been met and all patent-protected uses and accompanying information are carved out of the generic drug’s label.  See 21 U.S.C. § 355(j)(2)(A)(viii).  This practice, known as “skinny labeling” (because it leads to a generic drug label that is “skinnier”than the pioneer drug label)  has been utilized by generic manufacturers over the past several years to rob pioneer manufacturers of their investments in clinical reserch to get additional FDA-approved indications.  More importantly, generic skinny labeling robs pioneer manufacturers of millions, if not billions, of dollars in lost sales from those additional, patent-protected, FDA -approved indications.

How does this happen?  Since mandatory and permissive “substitution” rules require/allow the substitution of any “AB-rated” generic drug for the more expensive pioneer drug, once a generic version of a pioneer drug hits the market, the generic drug is subtituted for the pioneer drug at the pharmacy level for all uses, regardless of the narrower use(s) for which FDA has approved the AB-rated generic drug. (AB-rated drugs are those generic drugs that meet FDA’s necessary bioequivalence standards — i.e., same active ingredient and no significant difference in formulation, quality and effectiveness between the generic and pioneer drug).  In essence, the generic manufacturer gets a free ride on patent-protected uses that are “off” (the generic drug’s) label.  Thus, pioneer companies are left with a choice: continue losing billions of dollars investing and obtaining FDA approval for current off-label uses of a drug (knowing that as soon as the patents on the drug’s compounds and original indication(s) expire, the drug will get skinny labeled), or forego the investment and risk prosecution for off-label promotion of those uses.

In my next blog post (whch I promise will be in a week or two), I’ll discuss the case law that has developed in the skinny label context and what options exist for the pioneer manufacturer caught in the horns of the skinny label dilemma.


About José P Sierra

José Sierra is a partner at Laredo & Smith, LLP, in Boston, which provides respected advice and creative representation in business litigation, white collar criminal defense, government investigations, corporate compliance, and business and employment law. Prior to joining the Firm, Mr. Sierra was a principal at Fish & Richardson. Previously, Mr. Sierra was senior vice president, chief compliance and ethics officer for Sepracor Inc., and Kos Pharmaceuticals, and was legal director at Schering-Plough Corporation, and an assistant U.S. attorney in the Newark, NJ U.S. Attorney's Office.

Mr. Sierra's practice focuses on white collar criminal defense, government investigations and corporate compliance. Contact him at 617-443-1100 or via email.

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