Can the AIA’s New IPR and PGR Post-Grant Proceedings Trigger a Forfeiture of 180-Day Exclusivity Under the Failure-to-Market Provisions?

February 17, 2015

By Kurt R. Karst –      

Last year we posted on the possible effect of Inter Partes Review (“IPR”) on the forfeiture of 180-day exclusivity eligibility under the so-called failure-to-market forfeiture provisions at FDC Act § 505(j)(5)(D)(i)(I) added by the 2003 Medicare Modernization Act.  With no decision yet from the U.S. Court of Appeals for the Federal Circuit on the matter (or from FDA), however, the interplay between IPR and 180-day exclusivity remains an open question.  But in an upcoming law review Note slated for publication this October in the Michigan Law Review, Brian Apel, a law student at Michigan, argues that under the current wording of the statute, IPR – as well as Post-Grant Review (“PGR”) – “will likely prove ineffective for later-filing generics at triggering the failure to market provision.”

By way of background, the Leahy-Smith America Invents Act (“AIA”) created two procedures to replace inter partes reexamination of a patent: IPR and PGR.  Both procedures allow for administrative patent challenge proceedings at the U.S. Patent and Trademark Office (“PTO”) before the Patent Trial and Appeal Board that serve as a parallel or alternative to district court litigation to adjudicate patentability of issued patents.  Whereas PGR is available immediately after patent issuance, IPR becomes available only after the period for PGR has passed. 

The FDC Act’s failure-to-market provisions are one of the six forfeiture provisions added to the statute by the MMA.  Together, the six forfeiture provisions, which borrow heavily from the pre-MMA law, were designed to make the 180-day market exclusivity incentive work more effectively within the Hatch-Waxman framework. 

Under the failure-to-market forfeiture provisions, there must be two events (i.e., “bookends”) to calculate a “later of” event.  The first bookend date (under FDC Act § 505(j)(5)(D)(i)(I)(aa)) is the earlier of the date that is 75 days after ANDA approval or 30 months after ANDA submission.  The other bookend date (under FDC Act § 505(j)(5)(D)(i)(I)(bb)) is “the date that is 75 days after the date as of which, as to each of the patents with respect to which the first applicant submitted and lawfully maintained a [Paragraph IV] certification qualifying the first applicant for the 180-day exclusivity period,” one of three events occurs – two of which are relevant here:

(AA) In an infringement action brought against that applicant with respect to the patent or in a declaratory judgment action brought by that applicant with respect to the patent, a court enters a final decision from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that the patent is invalid or not infringed.

(BB) In an infringement action or a declaratory judgment action described in [FDC Act § 505(j)(5)(D)(i)(I)(bb)(AA)], a court signs a settlement order or consent decree that enters a final judgment that includes a finding that the patent is invalid or not infringed.

The (AA) and (BB) court decision events under item (bb) can be triggered in patent infringement litigation by “the first applicant or any other applicant (which other applicant has received tentative approval).”

Another of the six forfeiture provisions – the so-called “collusive agreement” forfeiture provision at FDC Act § 505(j)(5)(D)(i)(V) – addresses the effect on 180-day exclusivity when a first applicant enters into a settlement agreement with the NDA holder and/or owner of the patents listed on the listed drug.  It provides that eligibility for 180-day exclusivity is forfeited if:

The first applicant enters into an agreement with another applicant under this subsection for the drug, the holder of the application for the listed drug, or an owner of the patent that is the subject of the [Paragraph IV certification], the Federal Trade Commission or the Attorney General files a complaint, and there is a final decision of the Federal Trade Commission or the court with regard to the complaint from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that the agreement has violated the antitrust laws (as defined in section 12 of Title 15, except that the term includes section 45 of Title 15 to the extent that that section applies to unfair methods of competition).

In his Note, Mr. Apel focuses primarily on the failure-to-market and collusive agreement forfeiture provisions, and argues that as a result of court and FDA decisions, both provisions have failed to live up to their potential as Congress originally intended.

In steps the AIA and the new IPR and PGR post-grant proceedings.  Can these proceedings be used to trigger a forfeiture of exclusivity eligibility?  Mr. Apel confronts the question head-on, looking at the statutory text, legislative history, judicial precedent, and practical application.  Ultimately, he concludes that if the question came to a court or to FDA, neither would be likely to construe the failure-to-market provisions to include IPRs or PGRs.  Why?  Because the failure-to-market provisions use the term “declaratory judgment action” and IPRs and PGRs are simply not a “declaratory judgment action.”  However, writes Mr. Apel, there is decent support for going the other way.  The strong estoppel effect of IPRs and PGRs gives them the effect of a district court action, and Congress intended to trigger the failure-to-market provisions upon resolution of the patent dispute.  Nevertheless, Mr. Apel predicts that those arguments cannot overcome the unambiguous text of the statute, especially in a highly regulated field, and that the statute would need to be amended:

Neither a court nor FDA is likely to adopt a broad enough construction of the failure to market statute to accommodate the new USPTO proceedings.  Thus, amending the failure to market provision to include administrative proceedings would remove the uncertainty in the field and help refocus the Hatch-Waxman Act towards its originally-intended balance.

The Federal Circuit has just started issuing decisions in the first IPRs to ever be filed, but none have concerned pharmaceutical patents that could otherwise be the subject of Hatch-Waxman litigation.  FDA’s recently-published proposed rules (see our previous post here) don’t shed any new light on the matter either, though 180-day exclusivity forfeiture is not the focus of FDA’s proposal.  In any case, practitioners will have to continue to wait as cases move through the system and issues are posed to FDA.