Key points
- The FTC is stepping up its effort to challenge what it considers improper patent listings in the Orange Book, putting pressure on brand-name pharmaceutical companies.
- While most companies whose patents have been challenged have not removed them from their lists, believing they are properly included, some have complied with the FTC’s requests.
- In response to the FTC’s campaign, the FDA has promised to provide updated guidance on Orange Book compliance, something it has not done for four years.
- FTC officials hope that removing allegedly incorrect listings will make it easier for generic competitors to enter the market.
The Federal Trade Commission (FTC) has drawn attention over the past year to its perception of the influence brand-name pharmaceutical companies have over the price of beneficial drugs. More recently, the agency has claimed that drugmakers may be using a patent tactic to delay generic competition.
By challenging patents that the FTC says are unnecessarily listed, the agency hopes to disrupt a practice it says keeps drug prices artificially high.
In light of this additional pressure from the FTC, companies should be mindful of how they list their patents in the Food and Drug Administration (FDA) Orange Book and consider delisting unenforceable patents before they are challenged.
Pharmaceutical Market Regulation
The online Orange Book, colloquially named for the color of its cover when it was first completed as a paper publication on Halloween in 1980, is a central component of the FDA-regulated generic drug development and approval process. The publication functions as a database of pharmaceutical products approved on the basis of safety and effectiveness (i.e., brand-name drugs) and includes lists of patents identified as covering those drugs.
Much of the information contained in the Orange Book is provided by the holders of new drug authorization applications (NDAs). However, the FDA has not offered any updated guidance on how and which patents should be included in the Orange Book since 2020. This lack of guidance has caught the attention of the FTC.
In 2022, the FTC filed an amicus brief in the U.S. District Court for the District of Delaware in the case of Jazz Pharmaceuticals v. Avadel CNS Pharmaceuticals, arguing that the 30-month suspension of generic approval under the Food, Drug, and Cosmetic Act serves as an incentive for brand-name companies to list patents in the Orange Book. As examples, the FTC asserted that companies sometimes list patents for devices such as inhalers and other methods of delivering a drug that do not apply to the drug itself and therefore should not be listed.
Branded pharmaceutical companies, beware
Following its amicus brief in the Jazz Pharmaceuticals case, the FTC notified the market of its concerns in a September 2023 policy statement, jointly announced with the FDA. The policy statement said the FTC “intends to examine the improper listings in the Orange Book to determine whether they constitute methods of unfair competition in violation of Section 5 of the Federal Trade Commission Act.”
The notice further explained that the FTC believes listing unlistable patents blocks consumers’ access to competitive products that could lower prices, improve quality, or both.
“By submitting false patent listings, pharmaceutical companies block competition and inflate the cost of prescription drugs, forcing Americans to pay sky-high prices for the medicines they rely on,” said FTC Chairwoman Lina Khan. said in April 2024.
In response to pressure from the FTC, the FDA promised to issue updated guidance to companies on which patents to include in the Orange Book.
The FTC goes on the offensive
In November 2023, the FTC complied with the policy statement of Challenging over 100 patent listingsUsing the FDA’s regulatory dispute process, the FTC claimed that the patents listed by the brand-name companies were inappropriate.
Most companies that received a challenge have not removed their patents from the list, largely stating that they believe they are acting legally and that federal authorities have not notified them that their actions are improper. For example, in a Jan. 15, 2024, letter to lawmakers, drugmaker Teva stated that “at no time did Teva use these patent lists to stifle competition, prolong a monopoly, or defraud patients.” It said it believes strong patent lists are pro-competitive.
But some companies have been receptive to the FTC’s challenge and have taken steps to remove their patents from the FDA’s list.
In March 2024, the FTC also filed an amicus brief in Teva v. Amneal in the U.S. District Court for the District of New Jersey, taking the position that the Hatch-Waxman Act limits drug products to “a finished dosage form, e.g., tablets, capsules, or solutions, containing a drug substance, generally, but not necessarily in association with one or more additional ingredients.” According to the FTC, patents claiming devices or device components are therefore not enumerable.
In April 2024, The FTC challenged more than 300 patent listings in the Orange Book as incorrect or inaccurate. According to the FTC, these challenges were aimed, in part, at trying to facilitate the development of affordable alternatives to brand-name drugs such as Ozempic and Victoza.
The FDA has found that having at least one generic competitor to a brand-name drug reduces prices by nearly 40%. The FTC hopes that its efforts will lead to more companies removing patents from their lists and, in turn, to generic manufacturers developing more generic (presumably cheaper) versions of a brand-name drug in the coming years.
Stimulate price competition
The FTC’s recent effort to challenge the inclusion of allegedly improper patents in the Orange Book is just one of many initiatives taken under Chairman Khan’s leadership with the purported purpose of attempting to stimulate price competition in the pharmaceutical market. These initiatives come amid, and perhaps because of, the slow progress of several patent reform proposals pending in Congress.
In addition to challenging the patent lists, the FTC has:
- He questioned two major pharmaceutical mergers.
- Investigations have been launched into pharmacy benefit managers (PBMs), which serve as “middlemen” between drug manufacturers and insurers, focusing on the perceived impact of PBMs on pricing and competition in the pharmaceutical market.
Despite the FTC’s apparent commitment to the cause, questions remain about when and how the FTC will follow through on its threats to crack down on allegedly improper patent listings in the Orange Book.
As a preliminary matter, the lack of FDA guidance on Orange Book practices creates uncertainty as to which patents may be properly included on the list. Moreover, there is little precedent to demonstrate whether improper Orange Book listings actually stifle competition in a manner that supports claims of unfair competition or violation of antitrust laws.
The FDA could ease some of these hurdles with guidance it has promised to provide. Congress also appears poised to act, as senators raised concerns about device patent listings at a May 2024 hearing, and a Congressional Research Service report from the same month singled out Orange Book patent listings and the 30-month suspension as issues of interest.
With momentum building on all these fronts, the question seems to be when, not if, further enforcement action will occur.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended to be legal advice nor should it be construed as such. This memorandum is considered advertising under applicable state laws.
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