Generic Success In Patent Cases May Slow Momentum For Waxman/Hatch Fix

A string of recent patent victories for the generic industry may take some momentum away from the drive for Waxman/Hatch reform.

Over the past month, generic companies have been successful in challenging patents belonging to GlaxoSmithKline's Augmentin , Abbott's Tricor and Elan's Naprelan .

Teva's victory in the Eastern Virginia federal court invalidating three Augmentin patents in March is the most high profile of the three. Augmentin ranks among the 10 top-selling products in the pharmaceutical industry according to a study by the National Institute for Healthcare Management Foundation (¹ , p. 15).

The Virginia federal court held that three of GSK's patents for the amoxicillin/clavulanate combination (Nos. 6,031,093; 6,048,977 and 6,051,703) are invalid. The patents were set to expire in 2017.

The court previously upheld Teva's invalidity challenge on the 6,218,380 patent, which was set to expire in December 2018.

Other issues are pending on the '380 patent that could be part of a mid-year trial in the same court, Teva said. Two other patents that are set to expire in 2002 (Nos. 4,525,352 and 4,529,720) are expected to go to trial mid-year. The '352 patent expires in June and the '720 patent expires in July, Teva said. GSK has other patents for Augmentin that are not in litigation.

Geneva is also part of the litigation against the Augmentin patents. The company filed its ANDA in January 2000. Ranbaxy also is understood to have filed an ANDA for generic Augmentin.

Glaxo said it would appeal the district court's decision. In February, GSK CEO J.P. Garnier downplayed the December verdict against the '380 patent (² (Also see "GSK Augmentin ES Conversion Rate Reaches 31%; XR Filing Imminent" - Pink Sheet, 25 Feb, 2002.), p. 15). "The fact that we lost on the first round is not that meaningful," Garnier said. "The logic of the appeal judge will be on the letter of the law, not on the social aspect of whether or not it's fair for us to get more patent life."

Garnier noted that the Patent & Trademark Office re-examined the patents, and reaffirmed their validity. "Those patents are clean. They were not violated," Garnier declared. "They were filed a long time ago. The fact that they were issued late had nothing to do with GlaxoSmithKline. It had to do with the PTO."

The Augmentin patent challenge presents an interesting twist to more traditional Waxman/Hatch patent litigation: because Augmentin was approved under pre-1997 laws for antibiotics, generics do not have to make Paragraph IV certifications and therefore are not eligible for generic exclusivity.

Teva received another favorable decision during its patent challenge to Abbott's Tricor (fenofibrate). Tricor recorded sales of $264 mil. in 2001.

On March 19, Chicago federal court granted Teva a summary judgment of non-infringement with respect to its ANDA for fenofibrate. Teva plans to market fenofibrate tablets that are AB-rated to Tricor capsules.

The court ruled that the claims made in Abbott's patent for Tricor (No. 4,895,726), licensed from French company Fournier, describe a different process of making fenofibrate than that used by Teva. Abbott's patent claims, among other things, a "composition containing a co-micronized mixture of particles of fenofibrate and a solid surfractant." The patent expires Jan. 19, 2009.

Teva's product does not infringe the Tricor patent because Teva's fenofibrate is micronized "by itself" while Tricor is composed of co-micronized particles of fenofibrate and a solid surfactant, the court said.

Under Teva's ANDA, pre-micronized fenofibrate is added to a granulating solution, after which other excipients are added.

Abbott's case against Impax, which is seeking to market generic Tricor capsules, has yet to go to trial in Chicago federal court, Impax indicated in its 10-K filing with the Securities & Exchange Commission. Impax' ANDA for 67 mg, 134 mg and 200 mg fenofibrate capsules was tentatively approved Feb. 20.

Abbott's complaint against Impax is "essentially the same lawsuit" as the one against Teva, Impax said in its 10-K.

In a third victory for generics over the past month, a Miami federal court found in favor of Andrx on March 14, invalidating Elan's patent (No. 5,637,320) for Naprelan.

Andrx' strategy against Elan suggests a rather different approach to invalidating patents: the court invalidated the Elan patent based on the on-sale bar rule, which specifies that an inventor loses the right to a patented invention if it is placed on sale one year before the patent application is made.

Elan proposed a licensing agreement to Wyeth-Lederle in 1987 relating to Naprelan, three and a half years prior to applying for a patent for the drug, the court ruled. Elan applied for the '320 patent on Jan. 14, 1991.

"In view of the 'strong policy of preventing exploitation of the commercial value of an invention while deferring commencement of the statutory term,' I hereby declare Elan's '320 patent invalid," Miami federal court judge Adalberto Jordan said.

Elan argued that its agreements to license Naprelan amount to offers to license the patent itself, rather than offers to license or sell the invention.

Besides Elan's 1987 letter to Lederle, Andrx also provided documents relating to proposed licensing discussions between Elan and Schering in March 1988, Warner Lambert in May 1988 and Wyeth Laboratories in May 1988.

In its letter to Lederle, Elan said that the company is "actively seeking a partner" for its version of naproxen. "Lederle's marketing strengths make you ideal in this respect," the letter says.

The letter proposes a licensing fee of $2.75 mil. structured according to milestone payments. Elan offered Lederle "an initial gross margin of not less than 70% after taking into account our processing charge [of $60 per 1,000 tablets]...packaging and royalty."

Elan argued that the letter did not constitute an offer for sale because its product was not approved by FDA at the time of the letter.

"The letter was not an offer for sale because Elan could not have legally promoted or commercially distributed Naprelan or any other embodiment of the '320 patent in the United States...as there was no NDA, ANDA, or IND covering any such product."

The court, after examining the terms of the Lederle proposal, determined that Elan would receive its first milestone payment on signing of the contract, prior to filing the IND. "Elan therefore offered to sell an embodiment of the invention prior to any IND filing," the court said.

Andrx is awaiting an FDA decision on whether it would be able to launch its generic version of Naprelan with 180-day exclusivity. Andrx maintains that Schwarz Pharma subsidiary Brightstone, which was first to file an ANDA for Naprelan, lost its exclusivity after an unfavorable court decision. Andrx's generic was tentatively approved in July 2001.

The issue of 180-day exclusivity being triggered by a court decision in a case not involving a first filer is also being debated in the case of 3M's Tambocor (³ (Also see "Barr Generic Tambocor Launch Planned For Fall Following Win In Patent Case" - Pink Sheet, 14 May, 2001.), p. 15).

In May 2001, Minneapolis federal court dismissed 3M's patent infringement suit against Barr regarding Tambocor (flecainide). 3M's case against Par, which was first-to-file, is currently under trial. Barr argued that its victory triggered Par's 180-day exclusivity.

Par continues to maintain that it retains 180-day exclusivity. Par CEO Scott Tarriff told analysts at the Banc of America healthcare conference in Las Vegas April 3 that the company received a temporary restraining order from the Minnesota federal court while attempting to ship generic flecainide.

"That TRO has been lifted," Tarriff said. "We could get to the market today. From a legal standpoint, we are reviewing our options at this point....Hopefully that launch will occur shortly."

Tarriff highlighted Par's marketing of generic megestrol (Bristol's Megace ) as an example of "some tremendous paradigm shifts through the generic drug sector."

"In about six months we had, as the exclusive supplier of that drug, 75% market share," he said. Par launched generic megestrol in July 2001 following an appellate court decision (⁴ (Also see "Par Expects To Launch Megestrol Suspension In August After Appellate Win" - Pink Sheet, 23 Jul, 2001.), p. 11).

"As we speak here, about nine months into it, we have about 85% market share," Tarriff said. "These are new records we are breaking each day when you can get conversions like that, from the brand to generic....It speaks volumes."