[This post is co-authored by SpicyIP Intern Pranav Aggarwal and Swaraj Paul Barooah. Pranav is a second-year student pursuing B.A.LL.B.(Hons) at Rajiv Gandhi National University of Law, Punjab. He has a keen interest in commercial laws, especially in IP and allied fields. His previous posts can be accessed here.]
On 7th November 2023, the Federal Trade Commission (“FTC”) issued a press release announcing its challenge to more than 100 patents listed in the ‘Orange Book’. These patents which belong to ten pharmaceutical giants, including AstraZeneca, GlaxoSmithKline, and others, have been challenged on the ground that they were ‘improperly or inaccurately listed’.
Notably, the Orange Book lists the drugs approved on the basis of safety and effectiveness by the Food and Drug Administration (“FDA”) under the US Federal Food, Drug and Cosmetic Act. The Applicants have to also enlist the patents “which claim the listed drug or which claim a use for such listed drug”. As explained in the following parts, the inaccurate listing of the patents in the orange book leads to a delay in the entrance of generic competitors, prolonging the ability of listed drugs to maintain monopoly pricing strategies.
FTC Chair Lina M. Khan tweeted that inflated prices of essential asthma drugs, ranging from inhalers to EpiPens, could potentially be attributed to wrongfully listed patents in the Orange Book. Although the FTC had warned about such scrutiny in its recent policy statement, as seen here, the actual action may not have been anticipated. This move, however, highlights the firm intent of the FTC against such unfair trade practices that have continued by exploiting the statutory provisions. What are these statutory provisions and how are these anti-trade practices being carried out? This post aims to reflect on these questions. (Note: It’s unlikely that this will have any direct carry-over to India. However, the usefulness of more strict scrutiny of officially filed claims of pharmaceutical companies, especially if violations are found, would be useful to keep in mind even in the Indian context, especially where self-regulation or self-certification may be involved.)
Orange Book & The Red Flags
In 1984, the Hatch-Waxman Act was introduced for majorly twofold reasons; secure incentives for innovation and promote affordability through generic competition in the medical industry. Indeed, the Act was successful in creating a substantially better space for generic industry in almost four decades.
Before the Act, the Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book (because the cover page of the first edition was Orange) listed the FDA approved drugs and their therapeutic equivalences to provide a standard list of approved drugs all across the US. The Act introduced a stipulation that the details of the patents on the drug shall be added in the book and the generic competitors will have to either wait for the patent to expire or give a certification (Para IV certification) that the patent is invalid, unenforceable, or that the generic product doesn’t infringe the patent. The first generic company to successfully file an Abbreviated New Drug Application (ANDA) that contains a Para IV certification receives 180 days of market exclusivity for its generic product. However, if within 45 days of the filing of the ANDA, the patent holder files an infringement claim, it receives a 30 month stay on FDA approval of generic competitors (see here).
However, here comes the (current) problem. Relevant patent details are directly published in Orange Book and notverified by the FDA. Therefore, as explained by the FTC’s policy statement, companies have provided inaccurate patent details in the book which have been misused to maintain an unfair monopoly over their drugs ‘regardless of the validity or scope of the patent and regardless of whether the patent meets the statutory listing criterion’. As per a 2023 study by Feldman et al , from 2000-2021, such loopholes have been abused by the inhaler manufacturers for extending monopoly over essentials drugs even after the primary patents on such products had expired. They write, “…. long periods of market exclusivity by obtaining patents not just on the active ingredients (primary patents) but also on peripheral aspects of these products, such as the propellants and delivery devices (secondary patents), and by shifting active ingredients to different devices (device hops), thereby adding new secondary patents”. Ultimately, patients were being charged exorbitantly on the essential inhalers with Active Pharmaceutical Ingredients (“API”) developed decades ago.
Against such instances of ‘unfair trade practices’, Section 5 of the FTC Act declares unfair or deceptive acts or practices as unlawful and empowers the FTC to take actions against the same. The notices had been sent to the ten companies to either delist their products from the Orange Book or certify under penalty of perjury that the listings comply with applicable statutory and regulatory requirements within 30 days. However, these notices did not mention or explain the irregularity or inaccuracy in the listing which probably would have been conveyed privately to the companies.
The Way Forward
After the expiry of the 30 days period, few companies have withdrawn some of their disputed patents from the Orange Book already. For instance, the British giant, GSK, withdrew four of its patents which include products like Advair, Arnuity, Flovent and Ventolin, although GSK denies any misuse of these disputed patents.
Generally speaking, this specific move may prove to be a new hope for the millions of Americans who are suffering from Asthma and Chronic obstructive pulmonary disease (“COPD”). Although not immediately, affordability and thereby, accessibility of the inhalers will eventually get improved as soon as generic competition is allowed.
The FTC’s intent seems quite clear. As mentioned in the tweet thread of the FTC Chair, “[The FTC] will continue to hold dominant pharma companies accountable for illegally inflating medical prices for Americans, unlawfully extending patent listings, or otherwise side-stepping the antitrust and consumer protection laws on the books.”
However, this intent requires some clarity in the law itself. The Orange Book Transparency Act or any other legislation/guideline does not offer any clarity as to whether a patent that only claims a device constituent of a combination product can be approved because the patents that have been mostly removed from the Orange Book fall under this category. Additionally, there lies a question on the meaning of ‘improperly or inaccurately listed’ which requires a clear clarification from the FTC for further compliance or redressal. However, if we were to expect such actions in India, probably, we will end up being disappointed. The Division Bench of the Delhi High Court (as discussed here) denied jurisdiction of the Competition Commission of India (“CCI”) in cases pertaining to patent abuse. (To be clear, India does not have a similar Hatch Waxman type of generic/patent incentive framework as described above, so this is more of a generic comment and not specific to a directly parallel situation). The Section 4 of the Competition Act provides that no enterprise or group shall abuse its dominant position directly or indirectly in ‘condition of sale or price of goods’. If Section 4 were to apply, actions could have been taken against any enterprise or company that abused its dominant position acquired through patents by unnecessarily delaying generic competitors or inflating drug prices. However, after the DB order, CCI’s role in this regard is now restricted. With this position in place, it can be only wished now that the CCI, Controller (as per the above-mentioned DB order) or any other relevant body could be well empowered to take similar actions as the FTC in the foreseeable future.
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- Source: https://spicyip.com/2024/02/orange-book-inaccurate-patents-us-federal-trade-commission-in-action.html
