This episode is audio from the Protecting the Hatch-Waxman Act from Anticompetitive Gaming panel from the Engelberg Center's Hatch-Waxman at 40 and Beyond Symposium. It was recorded on September 26, 2024.
Anisha Dasgupta, Federal Trade Commission
Henry Hadad, Bristol-Myers Squibb
Steve Shadowen, Hilliard Shadowen LLP
Eric Stock, Gibson, Dunn & Crutcher LLP
Scott Hemphill, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)
Announcer 0:00
Welcome to engelberg center live a collection of audio from events held by the engelberg center on innovation Law and Policy at NYU Law. This episode is audio from the protecting the hatch Waxman act, from anti competitive gaming panel from the engelberg Center's hatch Waxman at 40 and beyond symposium. It was recorded on September 26 2024
Scott Hemphill 0:31
Welcome back to our panel on what we've described as pharmaceutical gaming. We've heard a little bit about this already in the lunch chat, the set of strategies that can be brought to bear to extend the exclusivity of a branded pharmaceutical, potentially encompassing a pretty wide range of conduct, conduct that we've already heard something about In some of our earlier discussions today, everything kind of leaks into everything else to some degree, maybe just to roll through a couple of them, we had these settlements of patent litigation, sometimes called reverse payment settlements, or payments for delay, which you heard about in Professor Francis' discussion with Commissioner slaughter, a variety of unilateral conduct, some of which is familiar from patent antitrust, generally, like fraud on the patent office or sham litigation, others of which are kind of exotic and bring us closer to the world of pharma, Orange Book listings that should not have occurred, citizen petitions to the FDA that are Shams the denial of access to samples. So if you're a generic and you need to offer a bioequivalent product and prove it to the FDA, you need the actual stuff, you know, dozens of pills or hundreds of pills to is probably not quite right, physically smoosh it up and prove that yours is the same as theirs. If you can't get the samples, you can't get your generic. And you might think that, how could that possibly actually work? Isn't it easy to get the generic samples to the samples to the generic? Sometimes yes, sometimes no. And product hopping, which you've heard at least alluded to, a bunch of times, wherein a branded drug maker manages to move its customers over to a new product, maybe under a different new drug application, maybe under the same one with longer lived or better patents or exclusivity, and accomplish that before the generic gets approval and snatches away a lot of the product. And then finally, we have a variety of contractual strategies. Ok, reverse payment settlements are maybe a contractual strategy, but again, some familiar moves, like locking up inputs, and then other more exotic ones, which could include, for example, the payments to PBMs that we heard about in the previous session. So in the next 90 minutes or so, I'm hoping we'll unpack some of these strategies try to decide what we mean by gaming. And when do we think gaming is a bad thing, and if we think it's a bad thing, is it an antitrust bad thing, or is it some other creature the best handled under the FTC Act Section five, or let the FDA worry about it, or wait for Congress to do something. Fortunately, we have an all star panel to help tackle these questions. I'm just gonna be brief in introductions, Anisha das Gupta to my left, spent the last two plus years as general counsel of the FTC, I got to know her as a star Deputy Solicitor General for the state of New York, where she you spent about eight years something like that. And I had the pleasure of hearing her argue the nameda product hopping case with my class. We brought the whole class. I think people were a little discombobulated at the Second Circuit to have because, I mean, there were line sitters and stuff. We were there on the early side, and they did not everyone got in and wanted to get in, I think. But we all got to, got to see this. I'll go alphabetically next. Steve Haddad, Senior VP and Deputy GC at Bristol. Myers, leading a team that, among other things, identifies and secures patent protection for new innovations, past president of the Intellectual Property Owners Association and continued involvement at least as of the last place I was able to check on the on the board there to his left, I think fair to say, Steve Shadowing is a leading plaintiff's counsel in pharma antitrust cases litigated, among other things, the Nexium product hopping case and the recent Gilead prep drug matter, among lots of others. And finally, Eric stock down on the end, brought that Namenda case. That I just mentioned the product hopping case as my, I guess, successor in the New York AGs office where he served as bureau chief for antitrust. He's now at Gibson Dunn, where he represents both defendants and plaintiffs in pharma and other antitrust cases. Before we jump in one brief disclosure, I do economic expert witness work in pharmaceutical antitrust cases, including that FTC versus Shkreli case that was mentioned a little while ago about toxoplasmosis drugs, and also a case in which Steve shadow and his counsel about Orange Book patent listings. All right, so gaming. Discuss. When we say gaming, we start with you. Anisha, what are we? What are we really worried about? What I mean? What is gaming properly understood? Is it just stuff we don't like? How do can we? Can we put some meat on the bones here?
Anisha Dasgupta 6:00
Sure. Well, I was going to say you stole a lot of my thunder in the list. It's ok in your list of the different strategies that we see, because when I think about gaming, what I think about is so hatch Waxman has a number of special features that go above and beyond what the regular patent framework is, because it's an attempt by Congress to strike a particular balance between facilitating generic competition on the one hand and not disincentivizing innovation on the other. And so it's a blend of features. Some of these provisions benefit brand manufacturers. Some benefit generics. But when these features are not used in the ways that Congress intended, and they negatively affect competition in that use that can create an antitrust problem. And so I think my colleague, Commissioner slaughter alluded to in her fireside chat the fact that, of course, hatch Waxman has certain protective mechanisms for patent holders, and here I am speaking in this whole panel, only on my only for myself, not on behalf of the FTC or giving the views of the agency. But I would say that when I approach things, I understand Congress wrote a statute, and there are certain special features it intended to provide. But when people go beyond the four corners of that, as they often do, that's where we have the problem. And so as Scott You were ticking those, ticking down all of those different kinds of problems we see, and I tend to think about these as they relate to particular features of hatch Waxman. So we have, for example, regulatory exclusivities, and those create the opening for product topping strategies, and we have a variety of features that are aimed at providing an abbreviated pathway for generic drug approval and permitting the resolution of patent disputes, pre approval or pre launch, which can be very valuable for generics to avoid at risk entry. I think we heard a little bit about this during the biologics patents, where set panel where some of the panelists were discussing that maybe some of what we see in the delay a generic entry in the biologic space has to do with the point in time when patent litigation can be brought and resolved. But these but these streamlined litigation features then create openings for Sham litigation to take advantage of the regulatory stay, there are orange book listings, which serve a really valuable purpose of providing notice of relevant patents and kind of triggering some of these streamlined pathways. But when there are listings of patents that Congress didn't intend to be listed in the orange book, you can have the automatic delay in generic entry under circumstances where, if a patent holder wanted to defend that right. Under the ordinary patent system, the patent holder could bring a preliminary injunction. Action could show the patent was infringed. Would have to show the patent was valid. But under that special system Congress set up, you don't have to make that showing, you know, you get that as an automatic which creates some incentive for abuse of the system, or at least for companies to try and test the boundaries. There the 180 day exclusivity for endo filers first and of filers, right? That creates the Pay for delay incentives, skinny label carve out pathways, but then brand manufacturers can use over broad codes potentially which can disincentivize or block generics from using that pathway and delay entry. And then there was the sample issue that you talked about, where in the past, there's been interaction between the REMS, rems protections and access to samples, but also the need for an and applicant to get the samples can sometimes create product topping incentives. So when I think about gaming, I think about it very much as for me, an exercise in understanding what the ways that hatch Waxman was intended to function by Congress and then making sure that that space for generic competition that benefits consumers is being respected in the in the practice, in the in the effects,
Scott Hemphill 10:46
so kind of breaking of the balance by some mechanism that's engaging with these, like, funny shaped Gears of that. Yeah,
Speaker 1 10:52
yeah, it's not, it's not that every time a brand manufacturer sees a genetic, a generic, that's that somehow amounts to gaming. You have to look at this. You have to look at the circumstances of the litigation and the context, and sort of understand from an antitrust perspective, you're talking about a competition problem, what the effects on competition would be, and
Scott Hemphill 11:15
so patent tickets, or watering that down for a minute, multiple patents per drug, as we've been talking about in different contexts, is not on your, albeit extensive list.
Speaker 1 11:25
It's not on it's not on this list. I think, yeah, I think we might talk a little bit later about terminal disclaimers, because I think you know, the ways that patent victims are interesting. You don't want to discourage people from innovating. And at the same time, though, there are features of hatch Waxman, like the orange book system that we sometimes refer to as giving the holder of an orange book listing superpowers. And so how do you how do you strike that balance. So you know, the idea that someone could incrementally improve a product is not troubling to me. What would be troubling to me is when patents are pegged to changes that may not represent real improvements, but then they may be used in a in a very aggressive fashion to prevent generic competition. Great. It
Scott Hemphill 12:28
seems like a not place to bring you in, Henry, you you've got a perspective. I'm sure. What do we mean when we're talking about gaming? Sure points of agreement, disagreement. Sure.
Henry Hadad 12:37
Scott. So as Scott mentioned, my name is Henry Haddad. I am Chief IP counsel for some Meyer Squibb in private practice. I represented both generics and innovators, and in addition, I'm appointed to the PPAC, the public patent Advisory Committee. Nothing I say here is representative anything from USPTO or VMs. It's just me. So that's where I'll start. And I'm also, actually, I'm pleased to be a on the board of advisors to this engelberg center of innovation, law and policy. So maybe I'll start with just innovation, because that was where you you ended up taking a look at hatch Waxman at 40. I say hey, for what you are, you're looking pretty good, you know. I mean, you're not perfect, but we all have to take a look at ourselves as we enter midlife and say, Are there things I can improve? And I'm sure there are, right. There is and but let's talk about some of the core things, and some of that goes to the data you presented earlier, right? So at the very earliest stages of hatch wax, when there was at least a view, at least for patent term extension and restoration, that there was a 14 year cap from from approval. We look at the data now, and we see data earlier on, from Tufts, I know more recently. I don't know if any of you got to read the USPTO FDA report that was issued this June, but there, there, there was a range of exclusivity of 25 products they looked at from three to 16 years. And if you did, the average is about 11 and a half. And then then Scott, the data you and Bob and talked about earlier, I was very consistent with that. So the fact that we're at roughly that number in terms of effective exclusivity 40 years later is pretty incredible, right? And it does another thing too, which it gets us focusing on, I think the right things. I think too often, we're getting distracted by the red herrings about pending applications or this or not and the other thing as a proxy for actual patent protection. And it's not particularly when you actually know a product is generic, right? If it's already generic, the fact that there's some downstream patents on different aspects of the innovation shouldn't really matter. So I think focusing on that as a, as an industry, as a, as people who are interested, because there's a huge public policy component, is really, really important. Okay, and moving that number is what really is going to dictate the pace of innovation. Right now we have a good pace of innovation. We don't know how things get impacted. By changing things around. But we just have to keep that in mind as we think of think about different changes to that system. Now, having said that hatch Waxman At 40, there are always things we can improve, right? And there are inefficiencies in the system, and I think Bob and Al actually spoke about some of them really eloquently this morning. I am someone who'd be very comfortable with the One and Done system, the way Bob mentioned earlier, because I think the enemy of innovation is unpredictability, because what it does is it prevents innovators. I think I know you guys all know this, but I feel obligated to say that it's part of my card of being in the innovative industry. It's really expensive and really risky to come up with the new drug, right? It's over a dozen years, often a couple of billion dollars, countless failures along the way. We need predictability to ensure that we're going to invest in the very expensive clinical trials, right? So that's an important thing to keep in mind. And when you have a system which is based on litigation, or this patent, or that patent or the other thing, it does add a degree of instability that I think everybody, the the public, the generics and the biosimilars and the innovators have to navigate. So I think we have to keep that in mind as we look at sort of different tweaks to the system, whether and we're going to go over each one of these. So I know I'm not going to address them, but we'll go over each one, and I'll give you my point of view as we go forward, so I'll turn it back to you.
Scott Hemphill 16:25
Great. I'm at a crossroads. Expositionally, I can either get reactions from our remaining panelists about this big picture question of gaming, or we can jump straight into reverse payments, which I'm going to start with. You guys, do you? I'm gonna do the ladder then, unless there's a strong resistance. So let's talk, let's, let's talk about reverse payments. We've, we've already heard it introduced a few times. I'd like to start with Steve. A lot of experience here. You know, we heard in the earlier panel, these things have changed over time. Used to be a bag of cash. Now it's complicated stuff. How can you walk us through that a little bit, and your perspective on whether these have we didn't really care one way or the other, whether they've dried up entirely. I suspect maybe they haven't entirely, but I'm curious what you think.
Steve Shadowen 17:14
Thanks, Scott. I am in private practice, and some of the things we'll be talking about are inactive litigation by me and my firm. So nothing I say represents the views of my law firm, my clients, or maybe even me, take it all with a grain of salt, but I do think in terms of where we are today is best understood both in terms of the magnitude of the problem and the shape of the problem. To the extent it is a problem with reverse payments is best seen by looking at the evolution of reverse payments over time. So the Actavis decision by the Supreme Court was in 2013 in the immediately preceding year 2012 the FTC reported that there were 33 reverse payment agreements reported under the MMA in the most recent data that's available, which is for agreements reach in 2017 there were only a total of six that might be Reverse payments. So you have to say that's a remarkably effective result of litigation that that culminated in the Supreme Court decision in Octavius. On the other hand, one reverse payment agreement on a $2 billion a year drug represents a loss to consumers of about a billion and a half dollars a year. So if you have just one, that's one too many. So why don't we talk about what shape these agreements are taken today? Many of you may remember the Cipro litigation that went on and on. That agreement was reached in 1997 and that was what I would think of as a very crude agreement, a check written by the brand manufacturer to the generic manufacturer for 390, $8 million the brand manufacturers don't do that anymore. In the wake of Actavis, the form of the agreement of the reverse payments moved on to what we call side deals. That is the brand manufacturer says, Okay, you Generica agreed to a later entry date, and I'll let you distribute this other drug I have over here. And instead of the going royalty rate of 90% of the profits. I'll only charge you a royalty of 50% so you get the delta of 40% a side business deal. Those have gone out of favor, because whether or not it's a legal presumption, it's a practical presumption. That a side deal is going to represent a payment, because otherwise, if it's such a great business deal between the two of you, why did you do it at the same time that you settled this litigation, if that makes sense as a business deal, why wasn't it done three years ago? Why didn't you wait six months till after the settlement agreement and then do it, no, it's tied up in the same deal. So the presumption, whether or not a legal presumption, the practical presumption, is that's a payment. And plus, there are, in fact, market rates for these side deals. The market rate for distributing an authorized generic product is 90% of the royalties period. And the plaintiffs and the FTC can prove that with expert testimony. So anything a royalty less than that as a payment. So those have gone by by the board, then we the manufacturers turn to no ag deals, no authorized generic, so that when the first filing generic gets a period of 180 day exclusivity under the statute, that's exclusivity only with respect to other a n, d, a products, that exclusivity does not prevent the brand manufacturer, during that 180 days from launching its own authorized generic and since he's going to lose all those generic sales anyway, absent some nefarious reason purpose to compensate the generic manufacturer. Brand manufacturers almost always launch on big products $100 million a year or more, will launch an authorized generic during that 180 day period. So the next evolution of payments was the brand manufacturer would say, Hey, you delay entering into the market, and during your 180 day period of exclusivity, I won't launch an authorized generic Well, the courts pretty rapidly struck that down, saying, No, that's a payment. So you can't do that. So now we're into where the FTC is reporting in its annual reports. These are this next iteration. Are possible payments. And why do they say possible payments? Because you've got to do the economics. And that is what we in the plaintiffs bar call economic no AGS. That is that the brand manufacturer and the generic manufacturer agree that, for example, during an 80 day period, the generic manufacturer can market a product under the brand manufacturers NDA, so that the generic manufacture, manufacture itself will be distributing and authorized generic and now, what are the terms of the royalty or the quantity, and what we call economic no AGS, they set the royalty rate at a level that will dissuade the brand manufacturer economically, that its incentive will be not to launch an authorized generic, where it would rather get a royalty on the generic, the generic sales rather than launch its own generic, because if there's only one generic in the market during that 180 days, is typically sold at a 15% discount off of the brand, if you take that monopoly in the generic sector and instead turn it into a duopoly where the brand manufacturer markets its own product. Now the discount price off of the brand is 40 to 50% rather than 15% so they've got a lot of room. There to set a royalty rate that is high enough to dissuade the brand manufacturer for launching the generic low enough that it's the generic manufacturer prefers it to launching into a duopoly market, so we call the Goldilocks rate. It's high enough for the brand, low enough that for the generic, and you end up with only a single generic in the market during that 180 day period. Steve,
Scott Hemphill 24:40
can I bring, bring Eric in here a little bit like as you as you hear, as our elevation increases, the air maybe gets a little thinner, and, you know, it's less even in the simplest of times. This isn't the easiest jury trial, I think. But as we get more and more complex, how do you look at the. From the standpoint of counseling a client, let's say, you know, is the idea, you know what I think, sub strategy, six, seven and eight, they're they're fine, because the underlying analytics are different. There's actually not a problem. Or is it more? Look, as you get to six, seven and eight, it's just above the where a jury's ever going to go. You don't really need to worry or they're never going to find it or like, how should, how should we think about these more complex strategies relative to the simpler ones?
Eric Stock 25:27
That's a great question. And I'll add the disclaimer that I am only speaking for myself and not for any any of our clients or the firm. I think when branded pharmaceutical companies mostly are looking for the rules they want to for the most part, they want to comply with the rules. They want rules that are clear and that can be implemented when the rules are unclear. It creates problems for them, because they do have the fiduciary duty to maximize the return for shareholders in compliance with the rules. So I think what they want are clear rules. So a lot of a lot of the difficulty here comes from the complication of the case law and what someone might interpret as a relatively clear rule and that someone else might not. So let me give you an example, so you and I and others here lived through this massive battle that the FTC eventually won over case law that had held that these reverse payments were lawful as long as the patent was not a sham right? And that was because of the challenge of thinking through what these agreements mean when there is a patent that, on its face, protects this whole market. And I think one of the reasons that the FTC and the courts got comfortable with this rule is with an idea that, okay, we're not going to be forcing brands and generics to do something that's impossible, because what can be done is a compromise entry date that simply reflects the merits of the patent case. And if there's a four year patent horizon and it's a 5050, shot of winning, they can settle in year two. And so people got comfortable that that was kind of a benchmark that allowed this case law to go forward. And but if you think about it, that let's say compromise entry date halfway through the patent period. It is a payment. It is the generic is agreeing to forego their path their patent challenge, and in return, they are getting two years of entry, you know, two years of entry prior to the patent expiration. And so what the Supreme Court said in FDC versus activists is that doesn't count. That doesn't count as a reverse payment, letting them in early that's great for competition, and that's the only way to have a reasonable or that's at least one way to have a reasonable compromise. So a lot of Brea manufacturers took that to mean, okay, early entry. That's not a reverse payment. But then when you apply that to some of the agreements that now we've seen come out in the litigation. Okay, early entry. Does that mean that I can license I the branded manufacturer can, as part of an agreement with a generic license them to come in early, at a royal, certain royalty rate, or even at no royalty rate, in a limited amount, let's say that looks to a branded manufacturer like that's just giving them early entry. Those those cases have been challenged mostly by the private bar. But there's all here's another fact pattern that has come up. A branded manufacturer and a generic manufacturer are in very, very hotly contested litigation. The generic manufacturer decides, I'm going to launch at risk, I'm going to sell, you know, all my products before the litigation is even over, and then they do it, and then they do it, and they earn, let's say, 100 million from all their generic sales. There's still this patent litigation pending. The only way to settle that case is to settle both the underlying claim for the patent litigation as well as the claim that the brand has for damages against the generic for its at risk launch. Now what? And then, let's say there is a settlement. We'll settle for this compromise entry date, and then we'll settle. You'll give us X amount of damages, not, not all the damage is something in the middle, right? That also looks, I think, to a branded manufacturer, like, what app, FTC versus activists intended? But that's been challenged too. That's, well, I think you didn't ask them for enough when you you. Got your damages for you know, your compromise damages for outreach entry. So what you end up having is a lot of challenges in reality to because maybe what the brand thinks are clear rules are not as clear as they seem, or other other types of provision. Provisions that maybe aren't clearly addressed by activists, and so it is complicated, and it's hard to counsel in this area, because a lot of you know, a lot of a lot of the cases are settled. A lot of the cases are brought by the block bar, and they're settled and there's no there's no decision. I also want to add another point on the no AGS. I think the courts have been clear that they can be a reverse payment. But I also want to point out that under the hatch Waxman act, it's very unclear that it was even contemplated that the brands would be allowed to launch these AGS during what's supposed to be the generics 180 day exclusivity. So back back in the day, when people were contemplating these, you know, I agree not to launch an authorized generic. At that same time, the generics were complaining to the FTC that these authorized generics themselves, the brand launching a generic during the 180 day period, that's that's improper, that's unethical. And so at that time, you could imagine the branded manufacturer saying, well, actually, there's not anything anti competitive about agreeing not to launch something that is highly questionable to begin with. That's just make
Scott Hemphill 31:36
sure I understand this. So the suggestion is that what we might otherwise think of as being anti competitive from a consumer welfare standpoint is arguably exonerated by the fact that, because this wasn't contemplated initially, we should sort of thank the brand for bringing us back to the original hash Waxman conference. I
Eric Stock 31:56
don't think I'm saying that, but I think what I'm saying is, if you want to get into the heads of the people that were doing these agreements. This is back in some of these agreements, back in 2010 2011 and there were letters from Congress to the FTC and the FDA, or maybe just to the FDA, Democratic Congressman writing saying the these authorized generics need to be prohibited. They are disincentivizing the first generic manufacturer. And that
Scott Hemphill 32:25
was that study that we we've heard about a lot of FTC studies. We have an FTC study that was trying to get at that a little bit. Yeah, can I take this up a level of abstraction just for a minute? And this is really for anybody you know. Eric's comment raises this question about how to think about the hatch Waxman act vis a vis antitrust, right? We've always had to think about how antitrust and patent are kind of duels of one another or one of the other with like Monopoly. Yay, monopoly, you know. And then we had hatchman. Hatch Waxman, which creates these sort of complex incentives, and antitrust, I think, has always struggled in different ways with how to think about enforcement, where we have this kind of complicated jungle gym, all these funny shaped objects that you were talking about, and we've heard about earlier, like the 180 days and the 30 months, which provides an opportunity, or a terrible temptation, to like blame, blame hatch and Waxman, I guess, or blame the act, or attribute outcomes to the act, rather than to antitrust, or to think of this intervening regulatory system as intervening in a way that cuts off the antitrust inquiry. And I'm just wondering, you know, to the extent I know all of you all have thought about this in different contexts, like, how do we, you know, how do we make headway on this? We have this old case 20 now, 20 years now. Trinco talks about how antitrust modulates in different regulated industries, but that's a case that ultimately finds against liability, which might grant some support to defendants avoiding antitrust in the in this context, I'm not claiming that's the right read. I think it's the wrong read, but just any reactions to how to think about this complicated hatch Waxman structure in the context of trying to do antitrust enforcement.
Steve Shadowen 34:13
Well, to come back to the question of these to answer in the context of these economic no AGS, for example, they are complicated. They are sophisticated. You got to spend a million and a half bucks on an economic expert to come in and figure it all out. But what's the alternative? Because I talked about the evolution of these agreements. One of the issues with evolution is it doesn't stop that is if enforcers, for example, don't go after these type of deals, either in the government agencies or the or the private bar, that's going to be the next way that the agreements are done. And we'll go from six. Back to 33 agreements a year, either if they're not challenged, or heaven forfend, the courts were to say, No, that's perfectly okay, because these are very sophisticated companies. They're as enormous amounts of money at stake. And obviously it's a shock to the system of the brand manufacturers that go from making $2 billion a year on this drug to making 200 million overnight. So there's a lot at stake. A lot of smart lawyers are put on the case, and from our perspective, we have no choice but to ferret this out whatever form it takes.
Henry Hadad 35:44
Yeah, thank you. As I said in my introductory remarks, predictability is really important for everyone involved in the system. The clearer the lines are, the better we can function, both from a public policy standpoint, innovator, generic standpoint as well. I think act Davis provides a good framework. I think when you talk about the diminishment in some of the reverse payment reviews by the agency, I think that is an indicator of some good guidance that was put out there early on, which has instructed behaviors. There's always going to be sort of, oh, this is a novel thing. This is a different thing. Sometimes it's probably okay, you know, but it's going to be explored, for example, by the private bar. Sometimes it may not be, either way, it's good to get those clear guidances out there as soon as possible.
Speaker 1 36:38
Turn to you. Anisha, yeah, sure. I mean, I think Eric's all of the hard questions that Eric has thrown out are really interesting ones, because I think you see this in all sorts of areas of law, right? So courts will set forward a rule, and then people will try and figure out how to supply to particular sets of facts that weren't before the court at that time, and people go about trying to address that in a variety of different ways, you know. So Eric and Henry were giving the sort of client counseling perspective, and Steve was talking about the importance of, nonetheless, trying to get to the bottom of arrangements. And obviously the FTC as a regulator is very much in that mold of antitrust enforcement is necessarily a predictive exercise. And so especially when you're talking about these hard questions, you're faced with scenarios where you may see that a particular kind of arrangement really does seem to be aimed at avoiding a risk of competition, and it's concerning because of the amount of money at stake, and therefore the impact on the Consumers who make use of that product, and then all the innovators who may be chilled from coming into the space to try and come up with a product that is similar but not infringing, or a different, different approach to the problem, Right? And so, I think Pay for delay is very or reverse payments are very instructive, because the FTC had cases along those lines that it brought and didn't succeed on until activists and then activists happened, and people woke up to the issue and said, Oh yes, we see this is a problem. And so now Eric is talking about these hard cases, which are very fact intensive, as these situations present themselves, there are these questions about there's a recent case in the second circuit involving allegations of side deals that the Second Circuit determined could be dismissed at the pleading stage because the Second Circuit concluded that the private plaintiffs there hadn't adequately alleged and shown that the payments were unjustified. And the FTC was pointing out that at that we came in as an amicus to argue that at that stage, you have to credit the allegations. But I think the framework that the Second Circuit identified, and there was a recent DC Circuit case that the FTC brought involving a licensing scenario, where the FTCs allegation was that the companies had engaged in a licensing arrangement that overlapped a licensing arrangement they already had, so there really wasn't any new value being provided beyond a cloaking of a reverse payment. But these are, these are hard cases, and courts wrestle with these factual scenarios. I think. And regulators have some advantages in being able to bring these cases, because, as the courts in both of those instances identified, they were sort of stuck on these pleading questions. But then regulators have some ability when it comes to pre complaint discovery and compulsory process, where we might actually be able to when we bring a case, flesh out the allegations and the showing. So I think this is a particularly the hard cases that Eric is talking about. It's particularly important for regulators to look at these and think about leading the way, because we have tools at our disposal that private plaintiffs may not have, but it may require those showings to get courts what they need, to be able to analyze the questions, and then again, to be able to provide certainty to private companies on where those lines are, whether they are legal or not legal.
Scott Hemphill 40:53
So So let's shift gears. You know, reverse payments, really tough topic. Let's pick something easy, like product hopping. So for those who've already heard us right, our basic idea, as I mentioned, the brand, is moving customers over from, you know, the iphone four to the iPhone five. Sorry, I know this isn't this is farm. It's totally different, moving folks from one drug to another drug before the generic comes in. Recall that in pharma, there's this special feature. There's state laws that encourage substitution, or even require it. There's private payer and government payer incentives to make the switch from the brand to the generic. So there's a lot of private infrastructure and government infrastructure devoted to making that transformative shift that drains away the profits from the brand and brings prices way down upon the arrival of the generic but the the idea is that the brand has already moved customers from the old thing to the to the new thing. And we've already heard here and there in the discussion this question of like, okay, but if the generic comes in, if the new generic, the generic comes in on the old drug, with a product that's assertively just as good or nearly as good, because the improvement wasn't a real improvement and is way cheaper, then isn't that going to it's not going to work itself out. Which shouldn't an enlightened payer be rejiggering formularies so that this brand move turns out to be a bust? Let's put, let's put to one side these extreme versions, where a product is like fully withdrawn, and there's something extremely disruptive. But in the mind, run of cases, Henry, I know this is this comment has been, is on sort of fertile ground here, but can you lay that out a little bit? I mean, I think there's, there's on the defense side, a kind of feeling of like, kind of, what, what am I? So,
Henry Hadad 42:51
you know, you have three, I have three co panelists, or much more eloquent, on sort of the ins and outs of enforcement and litigation. Hopefully I can add some value on drug development and drug discovery. The problem I see, and this is a very this is a room full of really smart people who kind of know this stuff, but too often people who are involved in policy making positions have this. There's these words thrown out, like product hopping or thickets or evergreening, and I don't know if people really know what they mean, and which of those behaviors are ones we want to discourage, and frankly, which are the ones that we want to encourage because they're actually leading to patient benefit. And I think that's where the rubber hits the road, and that's why I think it's important. Like Commissioner slaughter said, every fact is different. Every case is different. You got to really dig into it, right? So, for example, if you have a drug that treats a autoimmune disease, right? And it is a drug which is given intravenously at a hospital, but you can create a auto injector device and a new formulation, which you can do at home, I think everyone would agree that's a good thing, okay, well, what if you can extend the indication from rheumatoid arthritis to lupus or psoriatic arthritis, and those are actually inventive contributions. They actually are novel and not obvious. And do we want to encourage that? I think the answer is yes. What if you combine it with another novel active ingredient, and it provides a patient benefit, or you identify a biomarker which actually is going to be most fertile in terms of treating this disease condition. So I've just described to you what many people would call a patent that get, but what I would call, wow, this is great innovation at the same time. And I think we have to really, be really careful about and we talked about, I asked the question for a reason earlier, is that, you know, sometimes that type of activity is confused with, well, you're getting a patent late in the game, which covers the original product. If the original product or the original indication is going off, patent should be no harm, no foul, right? It should be great. Keep on innovating. If there's a question of, well. How does this later file patent impact the original product? I think that's a least worth looking at, right? You could look at that and say, Okay, why is what? Why is that happening? Is it a new process, a new manufacturing process that you came up with? Is it something different, or is it inherent in the old product? I think that's something that bears a little more scrutiny, but new innovation something we should encourage. And there was a comment earlier which really struck me that there are issues with the system overall, which don't involve the patent system, which may discourage the uptake of a generic on the old version of the product, but it's there. It's out there for the taking. And we know that with biosimilars, because there's actually not that frequent interchangeability. The companies are out there detailing it anyway. They can detail the older version of the product just as well as we could, right? So
Speaker 2 45:46
you're suggesting the generic could build a business to detail on the Yes,
Henry Hadad 45:50
and I realize that their current business model doesn't really anticipate that. So could we, rather than disincentivize innovation, which I know some potential legislation talks about, could we encourage them to go out there and give them a financial incentive to, say, use the old drug? I mean, I also think to your point, insurers are out there other payers. They're they're going to hold your feet to the fire on if there's not a meaningful difference. What about the FDA saying this is a meaningful difference in certain contexts? You know, I think these are things we should look at rather than sort of disrupt the innovation ecosystem. I'll stop there.
Scott Hemphill 46:25
I mean, I mean listening, just my own two cents, the insurer aspect version of that is a bigger puzzle to me than the generic detailer version. Because if you have multiple generics, like, Hi, I'm Teva, I'm detailing. I hope you choose Teva rather than have, you know, simpler, some other generic automatically gets substituted. Because that would be a bummer, because I can't stop that unless the doctor prescribes as dispensed the generic to have a right. But the insurer version of that is, I mean, I think every plaintiff in the room that's thought about these cases faces that question, I think to some degree, Eric, you've thought about this, probably from both sides at this point, reflections. Yeah, I
Eric Stock 47:09
think, I mean, one of the things that always amazes me is how we always think the pharmaceutical industry is so unique, but we actually can do a pretty good job of applying general antitrust principles in the pharmaceutical industry, and I think product topping is one of those areas you talked about trinco, this kind of trinco Aspen skiing reconciliation that the courts have done. Okay. Refusals to deal are not unlawful, but they might be if there's a voluntary course of dealing that is then terminated and that principle can be potentially expanded to your voluntarily selling your product, and then you, then you terminate that decision to sell your product by pulling it off the market. And I think we've got Trinko and Aspen. We also have this. Really, it's not a new concept, that there's a challenge to a new innovation, a new improvement. We have the Berkey photo case, where even back in I think it was the 70s or the early 80s, the allegation is that Kodak is changing the design of its camera to interfere with people who wanted to make film for its camera. So these are well established antitrust principles, and I think that they do work on this product topping area. And really there's kind of, there's two elements of the conduct when you're talking about switching patients. There's first the decision to introduce the new product, maybe it's better, maybe it's not. And then there's a second decision, which is what to do with the old product, and I think courts have shown that they're a lot more comfortable addressing the second point than the first. They're not that comfortable because of the type one, type two error that Commissioner slaughter was talking about. They're not that comfortable sitting in judgment as to whether a new product is an improvement or not they, especially if they could be convinced that the market is out there and will address that question. But what we found when we were putting together the nameda case is there's a lot of precedent for the idea that pulling a product off the market, discontinuing a product can be analogized to terminating a course of dealing and well, let's ask what the pro competitive justification is for that decision. And that turned out to be, I think, a place that courts were very comfortable in assessing. And so now what the courts have done since Namenda, and I think that the kind of distinction in Namenda between a hard switch where there's a lot of that latter course of conduct, impeding access to the old product, either pulling it off the market or impeding it. Courts are pretty comfortable kind of judging pharmaceutical manufacturers that have done that, and in case after case, they are comfortable saying, I think this decision. To pull this drug off the market either was or was not justified by a business rationale. And so we've had success in attacking, I think, what has been considered kind of the worst type of product topping where you don't allow the market to make a decision between the old product and the new product, you kind of force the market to the new product. And so it seems like that's where the courts have been most comfortable. Now I don't know if there will be ever a successful case that where the brand didn't engage in any of the second type of conduct. It only introduced a new product, I think that will be very tough case for plaintiffs, because courts are going to be very reluctant. If the two drugs are out there and physicians have the choice, courts are going to be very reluctant to sit in judgment of whether that is an improvement or not. But I think that, you know, a lot of people thought when we brought, when the New York Attorney General brought an amend a lot of people thought that there really couldn't be any enforcement in this area. And I think that's that's proven to be untrue. There's been case after case brought a lot by the private bar, some some public comments by the FTC, showing that at least these hard switches can can result in enforcement. Steve, let
Scott Hemphill 51:20
me bring you in here and help me think about, help us all think about the intermediate case where it's not, you know, I'm going to withdraw the old product and set it on fire just to cackle and show you that the old product is no longer available. Nor am I merely introducing a new product, like, you know, in Cupertino every year with some new offer, we're not, nobody's going to win that case, let's agree. But the stuff in between where, you know, we rebalance the incentives, we we don't take it off the market, but we do raise the price, or we lower the price on the new one. These aren't the exact same thing, but there's some similarities. This is there's this whole world of soft switches that sit in between the really extreme, set it on fire stuff, and the merely introducing a product. Do these have these? You know, when you when you see facts, you know, coming down the transom trying to decide whether to, you know, start up a new fight in this area. Which of these have a prayer of success? Which of these are doomed? Or, you know, take any part of that
Steve Shadowen 52:20
you want. The court seemed to fast fastened on this idea of there must be, for there be antitrust liability with respect to a product top, there's got to be, quote, coercion. That's
Unknown Speaker 52:32
from the Second Circuit. Yeah. That's, yeah,
Speaker 1 52:35
the direct question of, What the What should the test be? And the answer was coercion, and they wrote it with the opinion. And
Steve Shadowen 52:43
most courts and a lot of commentators have understood that to mean only a hard switch constitutes coercion. And the suboxone case recently in the Eastern District of Pennsylvania, the court gave a more expansive reading to what would constitute coercion. And I think the reason that that judge and others are going to want to go beyond have liability, beyond just the hard switch, pulling your product off the market, is because having that be the test is bad policy. It's bad law and it's bad economics. The reason that it's bad economics is that there's the thing that causes the harm is doing the switch before the generics enter the market, because there's all kinds of economic literature that that's the key marker. And when you look at the defendant's internal documents, and European Commission did a study on this, got their those generics internal documents. They said, Whatever you do, you have to pull off this product off. You've got to beat the generic onto the market. And that's because doctors having been encouraged to switch from Product A to product B. Don't want to face that patient two months later and say, Oh, by the way, I'm switching it back to product A. Because, you know, in economic terms, there are switching costs there, and these are experienced goods. Once you pay much, once a product works for a patient, you don't want to switch the patient. So given that that's the key economic marker, beating the generic onto the market, it doesn't make any sense to say, well, but we're only going to have liability if they pull the old product off the market. What's that had to do with anything? Either you switch the market by whatever means before the generic entered the market or you didn't. And now let's look at that conduct that you use, whatever it is, wherever it falls on the spectrum. Was that legitimate conduct, as you mentioned, Scott, maybe creating an artificial price difference between the old product? New product. The brand says, Hey, this, this new product is great. Well, then how come you're having this price, different differential where the old product costs more now? Now what we think we may be seeing is payments to PBMs, don't advantage the generic product, or don't advantage it for the next two years as I make the switch. So that kind of conduct making false or at least false statements or misrepresentations about the efficacy or the safety of the old product that you've been selling for 15 years. Suddenly, the brand manufacturer says, oh my god, don't take that thing that that'll kill you. So there's a whole range of conduct there that should be subject to scrutiny under the rule of reason, with courts and economists understanding that the key point is, did they do this? Were they successful in getting the market switched to the new product before the old before the generic of the old product hits the market? I'm
Scott Hemphill 56:14
going to give you a choice. You can reflect on that, or we can move to one of the other two topics, and you can choose. So do you want to do you want to do? Want to respond to that? Or do you want to
Speaker 1 56:24
go ahead and do orange book? I just had one, one small thing, which is, I think Steve and I are not so far apart on the idea. I mean, certainly and Eric would agree with this. Everything that you're describing definitely fell under the umbrella of what we thought of as coercion when we were formulating the theory in the nameda case, because the idea is that, yes, the hardest kinds of cases are when you just, you introduce the new product, like an extended release version or something, and then you have the new products coexisting with the old product. And there's a generic I mean, what? What is that? That the problematic aspect is when somehow you try and tilt the playing field in a way that affects competition. And maybe I see it through this lens, because I'm, I think of it, you know, as a competition problem, that if you have a variety of different kinds of versions of a drug coexisting on the market, and some things are better for some people, you know, some somebody wants a longer lasting version. Somebody is willing to take it twice a day, but that's because they want the cost savings. You know, from from the standpoint of consumers, that choice that might reflect what is better for them is good. It's just when you through, when companies through behavior may manifest that they don't think that the new product actually is better or preferable or could out compete, and then they do things like they play around with the timing in a context that shows they're trying to thwart generic competition, because they know that effectively, If the new product can't compete with the old product, it can't really, it's not going to compete with the generic version of the old product, right? Or the rebating practices that we're that we're talking about. So I think, yeah, like, tremendously interesting. But I just, I just wanted to throw that out there to say that, Steve, I think of the idea of coercion as being something that's a broad concept, because what it takes into account is the idea of trying to through whatever mechanism push people towards something they may not really want so much that isn't better for them, because your product couldn't compete on a level playing field.
Scott Hemphill 58:38
I just want to inject one more note before we move on to I think, I think we'll move on to orange books, and I'll turn to you in just a minute. But just one more note on product hopping. I just want to make sure we don't pass too long before just noting. There is a certain weirdness to we are not going to let you discontinue this product, right? Imagine that you can't shut down the iPhone five. You got to sell it forever. And you might think, in amended, for example, like, what I mean, what's, what's the story here, whether, what do defendants have to say for themselves? And my recollection, you know, from the from the argument was like, not, not much of anything. There was a kind of belated argument introduced about opportunity cost, which seems like a mean, spiritually or analytically, it's kind of a reasonable move like, well, we got a production line running IR. We got one running er, and if we keep running IR, that's some other unspecified life saving cure that just may never occur. And they weren't able to really sell that idea that there was an opportunity cost, but in a world in which there was a sharp opportunity cost, and therefore there was a, I mean, maybe not a pro competitive justification, but at least a business justification that would explain the otherwise seeming strangeness of discontinuing for what looked like bad reasons. You know, if you have some alternative. Reason mightn't that not, mightn't that be a kind of get out of the jail free card in at least some context where the judge, you know, Fact Finder, wasn't entirely convinced of the whole story, where you say, Well, I mean, I can only make so many different things your honor. And like, we really just want to focus on the new thing and the old thing, you know, let someone else make it under the, you know, under bioequivalence. Okay. Look, you want to jump in briefly before I go real briefly.
Henry Hadad 1:00:27
I look, I think hard switches are relatively rare, right? I mean, they are relatively rare compared to what are, what are called soft switches, but which, most companies just think of innovation and things that hopefully will be helping the patient. And as I said at the outset of this discussion, aren't there better ways in competition law to fix this? Aren't there better carrots we can provide to make sure the old product gets out there and is competing actively with the newer product? And you know, there, as I think, Scott you point out, maybe there's something in the insurance space or there's but I think that's something that bears further review. I'll stop. Let's
Scott Hemphill 1:00:59
talk about orange book again, or come back to it, and I'm gonna start with you. So what? What's the problem here? I mean, you know, it engages these misshapen objects, you know, the 30 month stay, you know, patents supercharged by the system, walk us through this. And like, you know, we talked a little bit about it at lunch, but, you know, help get a handle. I mean, the FTC has come in big on this, right? Trying to get stuff delisted, really trying to comb. I mean, some of us would say, do what maybe the FDA. I think Bob and mentioned, you know, a stronger role for the FDA. And thinking through some of these questions, get us going on this, please,
Speaker 1 1:01:43
sure. So we've talked a little bit about the orange book in different contexts throughout the day, and just to take a step back, right, we've talked a little bit about the fact that it this. It's part of a process that kind of provides patent holders with what we might think of as superpowers in terms of the ability to get this automatic stay and that it's this is an issue the FTC has actually been engaged with for nearly 20 years now, and has been in a dialog with Congress about where the FTC, In addition to the enforcement actions we've brought, has done a lot of studies, a lot of joint listening sessions, and work with the PTO because it's a it's an issue that has a number of different dimensions to it, and some of the FTCs work then led To recommendations to Congress that Congress adopted in terms of providing now a delisting mechanism for improper Orange Book listings. And then the most recent move that Congress has made is the unanimously enacted Orange Book Transparency Act Amendments with the goal of clarifying the patents that are eligible for listing. And the House report that accompanied that noted that the reason why Congress did that was out of concern that some brand and companies were submitting patents, potentially for the purpose of blocking generic competition. So as the statute is before us now, it speaks in very clear terms about the kinds of patents that can be listed, and those are not every single type of patent. It's sort of very specifically a patent that could be infringed by a follow on drug and a patent that claims either the drug itself or an approved method of using the drug, and that's pretty simple and straightforward, and the orange book listing then enables you to benefit from this 30 month stay without showing that the underlying patent was valid or infringed. But as the FTC has sort of returned to this sort of orange book work that it has has been doing over the past 20 years. One of the things that FTC staff did was just sort of sat down and looked through the orange book and looked through some of the listings and to try and see, you know, do these do these listings actually match up with just the plain statutory text? And the staff started off by looking at really common, important products, especially older products, for which we might expect wider generic competition by now, like asthma inhalers and epinephrine injectors and other kinds of auto injector products. And the idea was just, well, are these, are these drug device patents that might appear in the orange book claiming the drugs active ingredient? And what they found was that quite a number. Of those patents were not and so they sent out letters to companies, and the goal really was to encourage companies to conduct a spring cleaning of their own listings. Right? Take a look at your listing and do these? Did anybody? Yes, quite a number of companies did delist patents that were improperly listed. And the idea is just, you know, it's, it's not a big mystery often, whether or not a patent should be listed. So I think that that's something that was kind of a an antitrust problem in plain sight, because, you know, the orange book is there, the statute is there. There was a mismatch, and it obviously had a competition dimension to it, because in addition to the 30 month stay that formally blocks generic entry, obviously the specter of the stay can deter companies from investing in generic products in the first place. It can distort incentives about what they choose to bring to market. And as with, as with everything you know we we now have some cases coming to the courts to kind of test, test the boundaries of what that statutory language means. And the Federal Circuit is currently considering these issues in one case in which generic has sued, and the district court there determined that the patent was wrongly listed and ordered delisting. And so as it comes to the Federal Circuit, it comes as the question of whether the delisting remedy should be affirmed, and that's that's a very interesting case, because the patents at issue in that case are drug agnostic. They're directed at mechanical devices. They don't claim any particular active ingredient or drug formulation or composition, and they are listed for numerous other drug and device products, many of which contain totally different active ingredients. And I think this case draws together some really interesting themes we've talked about through the day. The the NDA for the drug device combo product at issue was approved in 2004 but the patents at issue in the litigation were submitted and listed in the Orange Book long afterwards, one of them as recently as August 2022 and so the expiration dates of these Run to almost 28 years after the NDA was approved. So there, the parties are now in the Federal Circuit arguing about what the statutory language means. The FTC has weighed in as an amicus, with our view about how the statutory language applies in that particular case, but also just sort of as a general policy matter, to underscore that you know, hatch Waxman as a statute, yes, it intentionally provided certain features, but by allowing listings that go beyond what Congress intended, you're basically sustaining harms to competition that weren't part of that balance being struck.
Scott Hemphill 1:08:30
So in a minute, I want to open up to questions. So start thinking. I want to turn to Eric. I mean, there's a certain take on this, which is like, this is all very straightforward. You sometimes have drug makers listing on the orange book a patent that, in retrospect, turns out not to pertain to the drug. And so it shouldn't have been there, and it shouldn't have been lying around as a kind of weapon to trigger this 30 months. And it could be more than that, by the way, right? Because the 180 days also comes in any sort of fancy way to by forcing a paragraph four challenge that can, in turn create even further delays. So the 30 months Day is a thing, the 180 days, in a complicated, kind of subtle way, can also be additionally problematic in this context, because it blocks further generic entry and delays even the first entry do. Yeah, what's on the other side of this?
Eric Stock 1:09:26
Thanks for asking. I think, I think this is a very interesting issue. I think that there is clearly evidence that in the past, Sham litigation cases have been brought with using 180 day, using the 180 30 month stay Orange Book listing, and there has been enforcement in that area. I think I have a couple questions about what the FTC is doing now. The first question is, how much of a problem is this really? And the second question is, to the extent this. Is a problem. Do we already have? We already have the remedies we need for this. And on the first issue, how much of a problem is this really I think we have to take a step back and it's absolutely right that one effect of listing a patent is to potentially entitle that branded manufacturer to a 30 month stay. I say potentially because in many, many cases, those listings will not entitle the branded manufacturer to a 30 month stay, either because they've got a lot of other patents in there already, so this one's kind of irrelevant, or they've already gotten a 30 month stay in litigation so
Scott Hemphill 1:10:36
and but I should have said, if the FDA approval happens slower than the litigation, then the litigation, like, if the brand dies a five day death in the patent litigation, the stay stops. I'm not sure if we've ever today said that, but for those who don't really know the state, it's not 30 months come hell or high water. If the generic wins as to that patent, the state will stop. That's right, which puts a cap on some of these. But So
Eric Stock 1:11:00
let's, let's look at the other reason we have the orange book, which is that we lived in a world before the orange book, where generic manufacturers were put in a very difficult situation. They they they didn't have to figure out whether to bring their generic on board without knowing if they'd be found to be infringing. And if they were found to be infringing and they launched their product, they would be subject to treble damages for will for infringement of a patent. So one of the purpose of the Orange Book was not you can list, you must. You must list all of your patents in the orange book to give the generic an opportunity to challenge them before they launch. Because this, we view will increase the likelihood of generic entry, because instead of the generic having to put, you know, maybe $100 million at risk, because they're going to be subject to treble damages once they launch, the only thing they're putting at risk is seven or $8 million to litigate a case before they launch. Okay, so this is viewed as very pro competitive, and in that respect, Orange Book listings can be pro competitive because they allow the generic to challenge the patent prior to prior to launching. So from that perspective, there is another side here to really getting as many Orange Book listings in there as possible the generic, the generic then has the opportunity to challenge it and the brand manufacture. Manufacturer can, but need not bring a litigation. So I think that's one question as to whether it is a problem to have more orange book listings rather than less. And I'll also add that, let's say that one of these patents is a weak patent, even a sham patent, it's still better for the generic to be able to test that and prove that before it launches, rather than having to launch and then, and then take that risk. And then the other question I have is, let's say it's a it's a weak patent, and it is going to result in a 30 month stay. So it's exactly the concern that the FTC asked is worried about, and then that is, and that is a concern to be worried about. But right now, if the brand and manufacturer puts a listing in the orange book and it's challenged, they have to make a decision whether to, whether to sue on that weak patent, and if they do Sue and invoke the 30 month stay, they're subject to Sham litigation claims by the FTC, by the generic, by class action lawyers. So there we do already live in a world where there is a very powerful remedy for branded manufacturers that inappropriately list patents or inappropriately seek to sue on patents that are shams. So I it's not entirely clear to me that we don't, and number one, how big the problem is. And number two, to the extent there is a problem that we don't already have remedies that are well placed to correct those problems, can
Unknown Speaker 1:14:00
I just very
Speaker 1 1:14:02
quick thoughts? And then, of course, want to give others the chance to give their views. So on the first point, I agree with you entirely that there are very important benefits to the orange book listing, but what you were describing is a notice regime. And think the it's not the notice regime that is problematic from a competition standpoint. It's the notice regime tied to these other abilities and so, yes, absolutely, a system where people are listing patents to facilitate the search process by generic, that's great. Now presumably the reason why Congress added in some of these other provisions may have been to incentivize listing, because otherwise it might be in the interest of the brand company not to list. Right? So this is a little bit of a. Sweetener. So I think I agree with the first part of what you said. And if we could have a notice regime that's decoupled from the superpowers that Congress gave along with it, I think from the competition standpoint, that would be ideal. How would that play out in practice? Maybe you wouldn't pick up the listings that you now do, sort of on the second part with the weak patents, again, with the concern is not so much about the strength of the patent standing alone, because, as you pointed out, there are other remedies to address that. It's the problem of the mismatch of listing the patent that shouldn't that is not within the orange book framework in the first place, and sort of the sham patent litigation claims don't get to that quite as effectively. So Henry
Unknown Speaker 1:16:02
or Steve. Do you guys want to chime in here? And then I'll take questions.
Steve Shadowen 1:16:05
Just an interesting issue that pops up here is in civil litigation with respect to the wrongful Orange Book listings, what standard should apply? Is it a sham standard? It was a sham listing that seemed like not the right standard, because Sham is what applies when something is nor Pennington protected, and you're asking the government to take some action, that's not this. This is an unsupervised listing of a patent in the orange book that the FDA or nor anyone else is asked to approve in any way. So if sham's not the standard, what is, I'll disclaim I ever said this, but surely it's not well, you made a mistake. Now you owe me trouble damages in an antitrust case. So it's probably not just Well, you were wrong. It's got to be somewhere between sham and you're just essentially liable for making a mistake. There's got to be some standard in there. And I think that the courts are just now beginning to grapple with that
Henry Hadad 1:17:12
so real quick. So I do think the orange book does play an important notice provision. It is a bit ironic that the leaked taste of all Tepa right? I think a lot of generic companies do find comfort in knowing that these patents are listed, right? So let's put that to the side. To Anisha point. You know some of these patents, you know the statute requires you to list certain patents, and you do, you have to do that certain patents, I think Anisha, you'd be much more familiar than I am. Probably didn't fall within that and maybe have been taken out because of the clear guidance that the FDC issued. So again, back to predictable rules. They're the ones in the middle, right? They're the ones with the drug product in a device. And I think that opens up an interesting question that needs to be and then instead of looking at whole Oh, that is per se anti competitive, we look and say, Are there other patents which bear the weight of the 30 month stay, which? It's not this patent, but it's something else like I think, I think you have to take a close look at the details of the case before you say with a broad brush, every listing that potentially is on the cusp could be, it could be anti competitive
Speaker 2 1:18:16
questions. I'll start with Bob. Lots of questions. Great. I Well,
Unknown Speaker 1:18:26
at first I thought you said pass I was like, I don't think I heard that.
Bob Armitage 1:18:31
So this has been an extraordinarily stimulating panel, from my point of view. And so I have a couple of hypotheticals that I'd like your reaction to, actually one in one hypothetical in two parts. Let's suppose that hatch Waxman had been written slightly differently, and it was the F if it's not the FDA, but the patent office that had to receive the patent listings, the patent office that had to review the patent listings and only permit the patents to be listed where the patent office determined the listing was proper under the current standard. And that patent listing statute was also coupled with a patent extension statute so that patents that were listed were qualified for the extension, which, let's just say, hypothetically, would be 14 years the limit under the current hatch Waxman law, is
Unknown Speaker 1:19:25
there an article about that?
Bob Armitage 1:19:28
Pardon, hang on for one second. And so you'd have all, you'd have all the patent lists and all the notice function, and then you would let members of the public, particularly generic companies, provide to the patent office for those patents that would last longer than that 14 year period, the ones that didn't get extended but had a longer patent life, the ability of a generic to say, hey, there's a substantial question of patentability here. So that for those. Patents that would last longer, the patent office would then be able to use patent reexamination similar to what they could do under supplemental examination, which would be any issue of patentability, so that at the end of the day, when the process was done, generics would have an idea that the patents that would last longer than the data period actually had gone through a second more rigorous review and probably would be found valid if challenged or would just disappear. Part two is if
Unknown Speaker 1:20:32
it's if it's if it's short. This is
Bob Armitage 1:20:35
really short. This is very shortly. This. This is probably the key part the problem is 180 day exclusivity which was designed originally to encourage the first filer to challenge the validity of the patent. So you change the 180 day exclusivity rule to simply say it only applies under the MMA rules to a patent that was challenged resulted in an infringement lawsuit and resulted in a judgment the patent was invalid. In other words, so the patent would then disappear, and all other generics would be free from that patent, or that patent comes out of the bucket. For paragraph four patents to determine whether or not you can have the 180 day exclusivity. The result of that would mean you could settle any litigation you want as a first filer, but as soon as you settled, your 180 days would be gone. Everybody could get on the market. There'd be no delay. There'd be no pay for delay, because there could be no delay. So if we did those two things, which I think are very consistent with what people thought would happen in 1984 would we end almost all the abuses you guys have talked about? Because I don't I'm not a believer in product hopping, so I'm going
Scott Hemphill 1:21:55
to respond to the second suggestion and jokingly offer my article with Mark Lindley, which offers a view of earning exclusivity as a condition for the 180 days, which I think would have very much the effect that you have in mind, and that it sounds like hatch Waxman had initially contemplated. Let me focus this on the first part of the suggestion the shifting of authority or role from FDA toward PTO, and FDA apparently doesn't want it anyway, as best I as best I can tell from what they say, would reactions to this? Would this? Would this help? Would it? I mean, would it make certain kinds of litigation harder, even because it would be at the PTO rather than at the FDA? Any reaction?
Eric Stock 1:22:41
I mean, my only reaction is, I think part of the reason we're here is that the PTO has a very hard job already, and they take an enormous amount of resources to review these patents. And it's not just Pharma. Take a look at the mobile phone area. There's hundreds of patents that may cover a single phone. So I think if this is an interesting idea, would solve a lot of problems, but we would need to accompany it with a large funding increase for the Patent and Trademark Office, so the brand and manufacturers fund it. Okay?
Scott Hemphill 1:23:19
I mean going up a level of abstraction, just for a minute, the idea of heightened review for some subset of patents under certain conditions, I see a lot of heads nodding, because a lot of work on this area written by a lot of the folks in the room. And that could be because it's in the orange book, and everything in the orange book gets it, or it could be because you put in more money, or because B is part of, you know, renewal, but like thinking that there's a subset of patents that we would focus more of our fire on, I think would give us some headway on the invalidity question. Doesn't help us with the non infringement piece very much, unless you expect that investigation to give some kind of real clear meets and bounds, you know, advice to generics, which seems kind of foreign to how we normally think about things, but on the invalidity piece, it might make a difference. Sarah,
Saurabh Vishnubhakat 1:24:10
thanks. I think I proposed at your point, Scott, about meet some bounds, clarity. I'm curious the everybody's opinion. But Anish, I'll direct this to you, because I'm curious what the FTCs view on the anti competitive potential, anti competitive effect of improper omission from the orange book might be vis a vis improper listing, right? Because you're required to list, and the law frequently tells you, okay, you must do this. You must not do this. And then the stuff in the middle is up to you. We've got a statute which somewhat uncommonly says, Here are the things you must do, and if you overdo them, that creates the specter of over deterrence and market harm. But is there an anti competitive setting aside which is more frequent or empirical data? Is there a reason to think that improper omission from the orange book would create anti competitive harm? And if so, what would the nature of that harm be? I.
Speaker 1 1:25:03
So you have the easy one clearly. Well, what I was going to say is, I got to provide the qualification that this is not, I'm not speaking on the FTCs view, and in fact, Commissioner slaughter would be better placed. But even she would say, We're just, we're just here speaking as people, thinking through the questions and the problems, and so the way I would go about thinking about that, just kind of as with any question in that space, goes back to, you know, an observation that Eric had made, which is that pharma doesn't stand apart. If you're talking about competition problems, it doesn't stand apart from antitrust law, right? I mean, there are basic principles that we apply and inquiries that we undertake and and so I at least having litigated a lot of really interesting and by interesting, I mean really hard questions, often at the boundaries of the law, and always loath to say that very firmly, well, you know, certainly this particular thing could never pose, you know, a problem or an issue. And especially, I think, what, what we've been discussing is how much of these questions, often, they break down to particularities of the facts and the context. And so would I? Would I say, you know, that there could never be a harm to competition there? No, I would, you know, if I heard that a practice like that was happening with the intention of making competition in that space more difficult, I would want to know more, and then I would want to analyze what I found under the case law and the Basic principles of antitrust law, which I have never found those to fall short when it comes to problems in the pharma space. I mean, there's a lot of technical complexity, but I think when Eric was earlier, going through the analogies, the thing that I always find really interesting when I'm when I am working on a case in this area is just how much lateral thinking it makes sense to do, because you really are borrowing from principles in all kinds of spaces like Commissioner slaughter had referred earlier to the Illumina Grail case, and the Commission sort of going forward with the idea of a market in research and development. But actually, when I was prepping for the oral argument there, there's all sorts of Supreme Court case law that comes at it from different context. You know, I think there was a case that involved the canned goods, I mean, but kind of speaks to that particular, that particular set of facts or issues. So I I'm intrigued, if anybody is aware of something like this going on the you know, definitely get in touch with the FTC, because we're always, we're always interested to know what's happening.
Scott Hemphill 1:28:16
And just to make sure I understand and clarify just briefly. So I think what you just make sure I understand the competitive theory. I think it's that normally the filing would be the filing by the generic could be a statutory infringement, that would then kick off some kind of clarity along the lines that Eric was talking about. But if it's not listed, then you file and you just have to wait around, force people
Speaker 1 1:28:38
to be at risk, and it's hard. It would deter. It would it would basically some companies, some some generics, yes, exactly, yeah, yes, exactly, increases search costs. But also some generics are more aggressive or risk tolerant than others. And so what you would really do is you would deter entry by companies that aren't well resourced or don't regard themselves to be well positioned to engage in at risk entry, yeah, that would be, that would be the theory, yeah. Is
Rebecca S. Eisenberg 1:29:08
this on? Yes, okay. It seems crazy to me to rely on the FTC to be trying to draw a boundary between, you know, anti competitive overlisting of patents and anti competitive under listing of patents. I think the involvement of all of these FBM trust agencies in all of these areas is a sure sign that the hatch Waxman act isn't looking so good at 40, but it's a helpful pointer maybe to areas of poor regulatory design that need to be addressed, maybe by through legislation by Congress. I'm not sure I'm on board with the idea of, well, I don't know. I consider it more Foley, but sending these, having the PTO oversee the orange book seems a little crazy to me. They may have some comparative advantage at assessing patent validity, but we. A lot of mechanisms available already for assessing patent validity, including patent examination ex ante and PTAB proceedings ex post and litigation challenges to patent validity. What we don't have, what only FDA can do is determine whether this patent was properly listed with respect to this product under standards that FDA is uniquely well positioned to do not reassess validity, but reassess whether you know that the you know these, these Anza litigation cases, are all they're not about. They're not like other infringement actions. They're about comparing a patent to an application for abbreviated new drug approval under the FDCA. These documents are written for FDA, and the question is whether this document infringes that document. It's not like they have to bring in witnesses to testify to the glycosylation of the protein or whatever. This is really something that belongs in FDA. Bailiwick, and I understand they don't want to do it, but the FDA is called upon by statute to do all sorts of things that they don't want to do, including disclose health and safety information about drugs, and that's a good subject. They respond to. What they respond to is user fees. They really like user fees. And you could put some sort of a fee on the submitter of a patent to the to the orange book that would help defray the cost of having somebody read the damn thing and compare it to the Anda, or to the to the, you know, the to the terms of approval. And that's something that FDA is only, the only one situated to do. And I think it the fact that there's all that there's all this antitrust involvement, is really regrettable, but it does shine a light on the poor regulatory design.