Ding Dong is the Skinny Label (Effectively) Dead?

September 7, 2021By Sara W. Koblitz

Innovators rejoice while generic sponsors mourn: In the wake of the latest in GSK v. Teva decision, the skinny label may be dead.

The “skinny label,” also known as a “carve-out” or a “section viii statement,” is a widely-used statutory provision adopted in the Hatch Waxman Amendments that allows generic sponsors to come to market notwithstanding a method-of-use patent covering an aspect of the reference listed drug (RLD) labeling by removing that patent-protected use from the generic labeling.  Typically, generic sponsors carve out a patent-protected indication or patient population, but technically, any method of use can be carved out as long as FDA determines that the product can still be used safely and effectively without the patent-protected information.  Though the carve-out seems at odds with FDA’s regulations requiring generic drugs to have the “same labeling” as their RLDs, such regulations specifically provide for differences arising from carved-out, patent-protected method of use.  The catch is, as we have learned from the GSK v. Teva case, that the statutory provisions governing patent infringement, specifically induced infringement, do not address carve-outs.  So while Congress provided a pathway for approval of a skinny-label drug, it did not provide a safe harbor to protect generic sponsors from allegations of induced infringement based on marketing a skinny-labeled generic as therapeutically equivalent to its RLD.  Until recently, there hasn’t been a need for such a safe harbor, as Courts have not found inducement to infringe in this context, but the GSK v. Teva decision changed everything.

Briefly (more detail is available here), GSK sued Teva back in 2014 alleging that Teva induced infringement of a method-of-use patent when Teva marketed a skinny-labeled generic version of GSK’s Coreg (carvedilol) as AB-rated.  GSK had listed several patents for Coreg, including a method-of-use patent listed with the use code “decreasing mortality caused by congestive heart failure.”  Teva submitted an ANDA in 2002, and after some complicated regulatory history, ultimately carved-out the congestive heart failure indication by way of a section viii statement.  Teva received tentative approval in June 2003 and launched in 2007 after a blocking patent expired.  Like all generics, FDA assigned Teva’s carvedilol an AB-rating, meaning that the products are therapeutically equivalent as labeled.  At trial, Teva argued that it had carved-out the treatment of congestive heart failure with a section viii statement and therefore could not have infringed the ‘000 patent, but the jury disagreed.  The jury found that Teva caused physicians to prescribe generic carvedilol for the carved-out indication and therefore willfully induced infringement and awarded GSK $235 million in damages.  The District Court, however, granted Teva’s Motion for Judgment as a Matter of Law (JMOL), and overturned the jury verdict, explaining that GSK did not prove that Teva’s promotion caused physicians to appeal.

Unsurprisingly, GSK appealed the JMOL in the Federal Circuit.  in a 2-1 decision, which included a vehement dissent by Chief Justice Prost, the Federal Circuit reversed the JMOL and reinstated the jury verdict.  The Federal Circuit held that the “criteria of induced infringement are met” based on the “ample record evidence of promotional materials, press releases, product catalogs, the FDA labels”—almost all of which touted the generic’s AB-rating—”and testimony of witnesses from both sides.”  This decision was widely praised by innovators and derided by generic sponsors.

Teva moved for a rehearing en banc with the support of the generic industry.  Teva argued that the October 2020 decision, due in part to a lack of clarity, essentially imposed liability on any ANDA filer relying on a carve-out.  However, rather than grant the en banc rehearing, the Federal Circuit had the same panel rehear the case, and ultimately, the panel—voting in the same way as it did in October 2020—made the same decision.  In the reissued decision, the Court explained that it “agreed to rehear this case to make clear how the facts of this case place it clearly outside the boundaries of the concerns” raised by industry.  This time, focusing on the specifics of Teva’s promotion, the Court determined that the record reflects “substantial evidence . . . that Teva actively induced by marketing a drug with a label encouraging a patented therapeutic use.”  The Court posited that, despite GSK’s listing of the patent with a use code covering only Congestive Heart Failure (CHF), the patent also covered the use of the product in patients suffering from left ventricular dysfunction following a myocardial infarction myocardial infarction (post-MI), and because Teva’s labeling did not carve out all references to myocardial infarction, Teva induced infringement—even though its skinny label complied with FDA requirements.

In brief, the Court stated that whether Teva carved out enough information from its skinny-label was a question for the jury rather than for the District Court to decide in a JMOL.  And, that GSK did not mention the post-MI information in the use code does not mean that Teva had no duty to carve that information out.  Instead, noting FDA is not the arbiter of patent infringement issues, the Court explained that use codes are not substitutes for the ANDA applicant’s review of the patent.  It was therefore Teva’s responsibility, according to the Court, to review the patent and make sure both CHF and any post-MI information was carved-out, regardless of the use code.

Ultimately, the Court hung its decision on Teva’s implied intent to induce physicians to use generic carvedilol in an infringing manner.  Though Teva argued that physicians do not read generic labeling, the Court held that GSK’s evidence refutes that claim, particularly because Teva’s promotional materials referred health care providers to its labeling and advised them to prescribe accordingly.  “In other words, the literature Teva provided to doctors told them to read labels and to prescribe according to them,” and thus caused physicians to infringe.  The Court further found that Teva’s marketing efforts demonstrated that Teva encouraged generic carvedilol sales for CHF despite the carve-out by marketing the product as an AB rated therapeutic to Coreg, which Teva described as approved as a cardiovascular treatment.  The decision did include a footnote stating: “We do not hold that an AB rating in a true section viii carve-out (one in which a label was produced that had no infringing indications) would be evidence of inducement.”  But it’s not clear what would suffice as a “true carve-out” and it may not be clear until a court opines on the scope of the relevant carved-out patent.

As she did in the vacated decision, Chief Judge Prost vehemently dissented to the Majority Opinion stating frankly: “I write in this case because far from being a disagreement among reasonable minds about the individual facts, this case signals that our law on this issue has gone awry.”  Chief Judge Prost poignantly criticized the Majority Opinion for “weakening” and “eviscerating” the “intentional-encouragement prong of inducement” and “the causation prong of inducement.”  With respect to the carve-out itself, Chief Judge Prost writes that the “majority creates confusion for generics, leaving them in the dark about what might expose them to liability. These missteps throw a wrench into Congress’s design for enabling quick public access to generic versions of unpatented drugs with unpatented uses.”

Chief Judge Prost warns that this ruling could prevent a less-expensive generic product from coming to market even though the drug itself and other uses of it were unpatented.  Congress had intended the section viii statement, as well as the use code, to ensure that one patented use wouldn’t prevent public access to a generic version for an unpatented use, but the Majority essentially inferred intent based on Teva’s failure to carve-out language, which, again, was not addressed in the use code.  In contrast, that Teva carved out all of the language included in the use code, Chief Judge Prost explained, signifies a lack of intent, as Teva carved out exactly the language it was required to under the statute and the relevant FDA regulations—precisely to avoid infringement.  Instead, it was GSK who erred in omitting the post-MI language from the use code.  Intent cannot be inferred from following all the rules and claiming that its product is the equivalent of its RLD—because the regulatory scheme determined that Teva’s product is the equivalent of its RLD.   Further, Judge Prost found no evidence that doctors even read Teva’s labeling prior to making prescribing decisions, undermining any evidence of causation.

As many critics said of the initial, now-rescinded Opinion, Chief Judge Prost explained, this time, “[u]nder [the Majority’s] analysis, the difference is indiscernible between this case and one in which the generic is safe. Indeed, it’s unclear what Teva even did wrong—or, put another way, what another generic in its shoes should do differently.”  Instead, Judge Prost wrote that the Majority Opinion eliminates both the generic industry’s and FDA’s expectations that “they could rely on what brands said about what their patents covered.”  She continued: “is the takeaway, instead, that Congress meant to expose ANDA generics to liability for simply describing themselves as the ‘generic version’ or ‘generic equivalent’ of a brand drug?”

And Chief Judge Prost is correct as to the lack of clarity here: Though the Majority Opinion insists that “[t]his narrow, case-specific review of substantial evidence does not upset the careful balance struck by the Hatch-Waxman Act regarding section viii carve-outs,” it’s difficult to see how the new revised decision limits the effects.  Yes, the decision specifically focused on Teva’s conduct—including listing a litany of promotional materials stating that the product was “AB-rated” or a “generic version” of Coreg—and some of those statements may raise legitimate risk (as Teva mentioned “heart failure” in its press release) of induced infringement.  But the Court merely says that labeling of a “true carve-out” would not be sufficient evidence alone of inducement infringement.  But what is a “true carve-out?”  Especially now with the utility of the use code minimized.  And could AB-rating or equivalence claims be enough evidence for inducement?  As Chief Judge Prost stated “[t]he only clear thing now is that no generic can know until hit with the bill whether it’s staying within the confines of the law.”

This decision also raises questions about approval of generic drug labeling.  If use codes are now meaningless and generic sponsors must decide what labeling is covered by the patent, on what basis will FDA determine the scope of an appropriate carve-out?  How will labeling negotiations work?  Must FDA review the patent to ensure that the only information carved out (which is the only labeling that may differ substantively from the RLD) is covered by the patent?  Or is the interpretation of the patent claims subject only to a jury’s interpretation, which would delay generic entry for both patented and unpatented uses until after the completion of litigation?  Alternatively, FDA could continue to rely on use codes as it currently does, and RLD sponsors would be able to list narrow use codes—which would dictate the scope of the language that could be permissibly carved-out from the “identical labeling” requirements for generic drugs—to allege induced infringement.   In this circumstance, FDA would only approve a generic with the narrow use code carved out; any other potentially infringing information would need to remain in the labeling, leaving the generic vulnerable to induced infringement litigation.  The generic applicant therefore could either forego section viii approval, wait for a resolution of patent litigation, or risk treble damages.  And too broad use codes are already considered problematic for blocking approval of generics.

While the Majority Opinion may be limited to this case with respect to the specific way the Court found induced infringement, it nonetheless upends the industry.  This decision raises just as many questions as the last, which can be seen from the follow-on cases that already are in progress in the courts.  Amarin, for example, sued Hikma on the heels of the first GSK decision for induced infringement based on Hikma’s carve-out of the method-of-use patent covering hypertriglyceridemia from the labeling of its generic Vascepa product and the promotion of its product as AB-rated or a “generic.”  There, Amarin argues that Hikma’s carve-out of patent-protected language itself, absent a disclaimer, is evidence of an intent to induce.  Amarin even sued a health insurer alleging active encouragement to use Hikma’s generic version instead of Vascepa for the patented indication.  Par also has filed similar litigation.

GSK has opened the floodgates for induced infringement for years to come, impacting both approved and pending ANDAs.  As Judge Prost wrote “Initially, the majority suggests that this is not a skinny-label case. Nothing to see here, the majority reassures concerned amici: the Act remains intact. See Maj. 10–11. But it’s hard to see how.”

So, for now, the skinny label may effectively be dead for any risk-averse generic sponsor (given the potential for treble damages for a blockbuster product with no generic competition).  The generic industry anxiously awaits to see whether SCOTUS or Congress can revive it.  While we wait, the brand side continues to bring more induced infringement suits while singing the Munchkins’ song.