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Mylan Pharmaceuticals, Inc. v. Kathleen Sebelius

April 23, 2012

MYLAN PHARMACEUTICALS, INC. PLAINTIFF,
v.
KATHLEEN SEBELIUS, IN HER OFFICIAL CAPACITY AS SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL., DEFENDANT, AND TEVA PHARMACEUTICALS USA, INC., DEFENDANT-INTERVENOR, AND CEPHALON, INC., DEFENDANT-INTERVENOR.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION

On April 4, 2012, two days before Mylan Pharmaceuticals Inc.'s ("Mylan") anticipated launch, the Food and Drug Administration ("FDA") decided that Teva Pharmaceuticals U.S.A. Inc. ("Teva USA") was entitled to a 180-day period of exclusivity to market modafinil, the generic version of Provigil. The FDA rejected Mylan's request for final approval to sell modafinil and indicated that it would consider Mylan's request at the conclusion of Teva USA's period of exclusivity. Mylan brings this action pursuant to the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq., claiming that the FDA's decision conflicts with the Drug Price Competition and Patent Term Restoration Act of 1984 (known as the "Hatch-Waxman Act" or the "Act"), Pub. L. No. 98-417, 98 Stat. 1585 (1984), and that it is entitled to a preliminary injunction requiring the FDA to revoke Teva USA's exclusivity and to issue a final approval of Mylan's ANDA.

BACKGROUND

I. STATUTORY FRAMEWORK

At issue in this case are a complex set of amendments to the Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301 et seq., added by the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act amendments.*fn1 These amendments were designed to simplify and expedite the process by which generic drugs are brought to market. Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1316 (D.C. Cir. 1998).

Under the Act, a company seeking FDA approval to market a particular drug must file a lengthy document called a New Drug Application ("NDA"), which, among other things, includes detailed data establishing the drug's safety and effectiveness. 21 U.S.C. § 355(b)(1). The NDA must also contain information on each patent that claims the drug or a method of using the drug that is the subject of the application and with respect to which a patent infringement claim could reasonably be asserted against an unauthorized party. Id. The FDA lists such patent information in a publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations, known in the industry as the "Orange Book." See Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1079 (D.C. Cir. 2001); Terry G. Mahn, Patenting Drug Products: Anticipating Hatch-Waxman Issues During the Claims Drafting Process, 54 Food Drug L.J. 245, 249-50 (1999).

Once an NDA has been filed, manufacturers seeking to market generic versions of the drug may file an Abbreviated New Drug Application ("ANDA"). Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1063 (D.C. Cir. 1998); 21 U.S.C. § 355(j). The ANDA is not required to include new safety and effectiveness data, but instead may rely on the safety and effectiveness data in the original NDA. Id. In this way, the Hatch-Waxman amendments were intended both to encourage the development of innovative new drugs and to permit the speedy marketing of lower cost generic drugs. Tri-Bio Labs., Inc. v. FDA, 836 F.2d 135, 139 (3d Cir. 1987).

An ANDA applicant must certify whether the generic drug would infringe any existing patents relied on and listed by the inventor of the pioneer drug and specify:

(I) that such patent information has not been filed,

(II) that such patent has expired,

(III) [] the date on which such patent will expire, or

(IV) that the patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted.

21 U.S.C. § 355(j)(2)(A)(vii).

By filing a paragraph IV certification (the only certification at issue in this case), the ANDA applicant challenges the validity of the patent or claims that the patent would not be infringed by the generic drug proposed in the ANDA. An applicant must provide notice of a paragraph IV certification to the patent holder. Id. § 355(j)(2)(B). The filing of a paragraph IV certification is deemed by statute to constitute an act of infringement under patent law, 35 U.S.C. § 271(e)(2)(A),*fn2 and the patent holder has 45 days to bring suit against the ANDA applicant. 21 U.S.C. § 355(j)(5)(B)(iii). If the patent holder brings such a suit, the FDA must delay approving the ANDA for 30 months. Id. This provision, known as the 30-month stay, allows the patent holder to assert its patent rights before the generic competitor is permitted to enter the market. Mova Pharm. Corp., 140 F.3d at 1064. If no suit is filed within 45 days, the FDA may approve a paragraph IV ANDA, and the approval may be effective immediately even though the patent has not expired, provided that other conditions have been met. Id.*fn3

As an incentive to generic manufacturers who take the risk of "sparking costly [patent infringement] litigation" and "to compensate [generic] manufacturers for research and development costs," the statute awards a 180-day period of market exclusivity to the first ANDA applicant to gain final FDA approval of its paragraph IV certification. Teva Pharms. USA, Inc. v. Sebelius, 595 F.3d 1303, 1305 (D.C. Cir. 2010) (quotation marks and citation omitted) (second alternation in original); see 21 U.S.C. § 355(j)(5)(B)(iv). During this "Edenic moment of freedom from the pressures of the marketplace," Mova Pharm. Corp., 140 F.3d at 1064, the FDA may not allow any subsequent ANDAs for the drug in question to become effective, thus allowing the first mover to sell its generic drug without competition from other generic manufacturers. Teva Pharms. USA, Inc., 595 F.3d at 1305.The statute is thus designed so that the promise of initial marketing exclusivity will lead to increased competition with brand manufacturers by incentivizing the filing of paragraph IV certifications, thereby expediting the availability of generic equivalents. Id.

Under pre-MMA law, the 180-day period of marketing exclusivity is triggered on the earlier of (1) the date on which the first applicant first begins to sell its approved ANDA product (the "commercial marketing trigger"), or (2) the date of a court decision holding that the NDA's patent is invalid or not infringed ("the court decision trigger"). 21 U.S.C. § 355(j)(5)(B)(iv). At the conclusion of the 180-day period, full competition among generics can commence.

II. FACTUAL BACKGROUND

The instant case centers on modafinil, a prescription drug used to treat sleep disorders, including narcolepsy and sleep apnea.

Modafinil has been marketed by Cephalon Inc. ("Cephalon") under the brand name Provigil since 1998. (Teva USA's Opp'n, Ex. J. (Apr. 4, 2012 Letter from FDA to Teva USA [hereinafter "Modafinil Letter Decision"], at 2).) The FDA approved sale of this drug based on Cephalon's submission of NDA No. 020717 on December 24, 1998. (Id.) Currently, Cephalon has two patents in connection with Provigil: U.S. patents RE37,516 ("'516 patent") and 7,297,346 ("'346 patent"). (Id.) The '516 patent for Provigil was listed in the Orange Book in 2001*fn4 and the '346 patent, which covers a narrower class of modafinil products, was listed in 2007. (Id.) Unchallenged, the '516 patent would have blocked the sale of modafinil generics until October 6, 2014, and the '346 patent would have blocked the sale of generics until November 29, 2023. (Mylan's Mot. for Preliminary Injunction ("Mylan's Mot."), Ex. 2 ("Apr. 4, 2012 Letter from FDA to Mylan"), at 1.) Both patents for this profitable drug*fn5 were, however, challenged by generic manufacturers and these competing challenges have spawned the current litigation.

A. ANDAs Referencing the '516 Patent

The first date on which any ANDAs referencing the '516 patent could be filed was December 24, 2002. (Modafinil Letter Decision at 2.) On that date, four generic drug manufacturers-Mylan, Teva USA, Ranbaxy Laboratories, Inc. ("Ranbaxy"), and Barr Pharmaceuticals, Inc. ("Barr")-submitted ANDAs under paragraph IV declaring that the '516 patent was invalid, unenforceable, or not infringed by their generic versions of modafinil. (Id. at 3) The FDA tentatively approved all four ANDAs between 2004 and 2005 (id.); Mylan's was approved on February 9, 2005 (Apr. 4, 2012 Letter from FDA to Mylan at 1), and Teva USA's was approved on December 16, 2005. (Modafinil Letter Decision at 3.)

The filing of these paragraph IV certifications prompted Cephalon to file suit in New Jersey against all four generic manufacturers for patent infringement in February 2003. (Id; see Cephalon, Inc. v. Mylan Pharms. Inc., No. 03-cv-1394 (D.N.J. Feb. 28. 2003).) This in turn triggered the automatic 30-month stay of final FDA approval of the tentatively approved ANDAs.

From late 2005 to early 2006, Cephalon settled with Mylan, along with Barr, Ranbaxy, and Teva. (See Modafinil Letter Decision at 3; Derkacz Decl. ¶ 13; Tr. 96-97.) As part of these settlements, Cephalon paid the generic companies a significant amount of money-hundreds of millions of dollars, according to the Federal Trade Commission ("FTC")- to refrain from selling generic modafinil until April 6, 2012. (See Preliminary Injunction Hr'g Tr. 96, Apr. 18, 2012 ("Tr.").) In these agreements, the companies agreed not to sue each other in relation to the '516 patent or any other patents that referenced Provigil in the Orange Book. (Tr. 16, 23-24.)

Without these agreements, generic modafinil could have hit the market on June 24, 2005. However, by paying the ANDA applicants to delay, Cephalon bought itself almost seven years of market exclusivity during which time it sold, without any competition, Provigil at brand prices.*fn6

B. ANDAs Referencing the '346 Patent

On November 20, 2007, Cephalon obtained the second patent related to Provigil, patent '346, which covers a specific and narrower formulation of the drug. (Derkacz Decl. ¶ 11) On the first day that the '346 patent could be challenged, December 14, 2007, two companies-Teva USA and Watson*fn7 - filed ANDAs with paragraph IV certifications. (Modafinil Letter Decision at 3; Derkacz Decl. ¶ 12.) Inexplicably, Mylan did not file a paragraph IV certification until over three years later, on February 2, 2011.*fn8 (Mylan's Mot., Ex. 6.) Cephalon did not file a patent infringement suit against any of these companies based on the paragraph IV certifications regarding patent '346. *fn9 Indeed, it had relinquished any right to do so in the settlement agreements signed with Teva USA and Mylan (and presumably Ranbaxy and Barr as well).

In the intervening years, Teva USA's parent company, Israel-based Teva Pharmaceuticals Industries Ltd. (Teva Ltd.), purchased Barr in 2008 and Cephalon in 2011. Teva Ltd.'s announcement that it planned to acquire Cephalon, which would mean that the two U.S. drug companies subsidiaries would become indirectly owned by the same parent (Teva Ltd.), sparked significant scrutiny from the Federal Trade Commission ("FTC") regarding the merger's impact on competition in the drug industry and, in particular, with regard to modafinil and two other drugs. (See FTC Corr. Br. as Amicus Curiae ("FTC Amicus") at 5-8; Derkacz Decl. ¶ 15.) The FTC's investigation culminated in a draft consent order imposing competition-preserving requirements on the acquisition. (Id. ¶¶ 15, 16.)*fn10 Specifically, Teva Ltd. was required to provide Par Pharmaceuticals ("Par"), a separate drug company, with supplies to market an authorized generic version of modafinil for up to two years commencing on April 6, 2012. (Id. at 34-36.)

III. LAUNCH OF GENERIC MODAFINIL

As April 6, 2012 (the earliest launch date permitted by the modafinil settlement agreements) approached, there was growing confusion about which, if any, ANDA applicant ...


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