In 1984, the US Congress introduced a law called the Drug Price Competition and Patent Term Restoration Act, or the Hatch-Waxman Act after the two sponsors of the bill: Representative Henry Waxman and Senator Orrin Hatch. This legislation has been attributed with launching the generic industry in the US, as it established a regulatory system for these cheaper products to operate under.

To speed up market entry of generics of drugs for multiple indications, the Act allows generic drug companies to seek US Food and Drug Administration (FDA) approval for a generic product before patents for the relevant brand-name drug have expired, explains Holland & Hart partner Lee Gray.

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Generic companies do this by removing, or carving out, from their labelling any “specific uses that are covered by a brand company’s patents or regulatory exclusivity,” adds Chad Landmon, chair of Axinn’s intellectual property and FDA practice groups. The generic is then approved by the FDA for other non-patented indications; this mechanism is known as skinning labelling and has become commonplace in the decades since the Act was introduced.

However, in October a decision by a federal circuit court regarding a case between GlaxoSmithKline (GSK) and Teva Pharmaceuticals (GSK v Teva Nos 2018-1976, 2018-2023), which centres around GSK’s beta-blocker Coreg (carvedilol), concluded that Teva’s marketing of its version induced infringement of GSK’s patent. This is despite Teva using a skinny label, which was FDA-approved and did not mention the indication covered by GSK’s patent for Coreg.

Has this decision thrown a spanner in the works and challenged the validity of skinny labelling by the generics industry?

Pros and cons of skinny labelling

A major benefit of ‘skinny labelling’ is that it significantly “opens the market for these generics drugs years before it would otherwise be available”, according to Gray. In turn, this means that patients have access to lower-cost versions of drugs, as University of California Hastings College of Law Arthur J Goldberg distinguished professor Robin Feldman notes.

Landmon claims that earlier access to generic products has saved patients and payors millions, if not billions in drug costs, which was why Congress put this mechanism in place in the Hatch-Waxman Act.

Carving out indications from their labels, he continues, allows generic companies to combat attempts by brand companies to both strengthen and extend their market exclusivity for their pharma products through mechanisms like evergreening and thicketing. Feldman agrees, stating in her book, Drug Wars: How Big Pharma Raises Prices and Keeps Generics of the Market, this is common as drug nears the end of its patent.

Unsurprisingly, big name pharmaceutical companies are less keen on skinny labelling. Gray explains they argue that this technique “effectively ends their lucrative monopoly on the drug” necessary for them to “recoup the exorbitant cost of new drug development, clinical trials and the approval process”.

He explains that generic companies argue that by using carve-outs they are only marketing the generic drugs for non-patented uses, and as such they are “not affecting the brand manufacturers’ exclusivity” or patents.

Despite this, brand manufacturers argue that these generics are prescribed off-label to patented indications even if those are not listed on the skinny label, explains Feldman.

It is common for doctors to view them as equal and therefore prescribe the generic for patented uses in order to save their patient’s money, however, Feldman notes in Drug Wars that the FDA has refused to accept this rationale to refuse a skinny label.

Exploring the detail of the GSK v Teva case

In 1997, the FDA approved GSK’s branded drug Coreg for three indications: hypertension, mild-to-severe congestive heart failure (CHF) and left ventricular dysfunction (LVD) following a heart attack. However, GSK only patented Coreg for CHF. In 2007, after the expiration of GSK’s compound patent for Coreg, but before its patent in CHF expired, Teva received FDA approval to market a generic version of carvedilol for only the non-patented indications: LVD and hypertension. Teva’s approved skinny label did not list CHF.

However, in 2011, the FDA required Teva to amend its label to include CHF, meaning its generic carvedilol had an identical label to GSK’s branded Coreg. This was because GSK’s CHF patent for Coreg had expired and “skinny labels are only available when there is a brand product on the market to use as a reference’ drug,” explains Feldman.

The problem was that GSK had reissued its patent for Coreg in 2008 with a slight modification of the CHF indication. Gray notes that it is unclear why the FDA made this request of Teva given the newly issued 2008 CHF patent for GSK’s Coreg.

In 2014, GSK took Teva to district court in Delaware for patent infringement of Coreg. According to Gray, “GSK alleged that Teva had induced infringement during the period when Teva’s label included the CHF indication (full label period) [2011-2014], as well as the period when Teva’s label did not include the CHF indication (skinny label period) [2007-2011]”.

A jury for the Delaware district court found that Teva had wilfully induced infringement during both the skinny and full label periods. This was on the basis that Teva’s marketing materials led doctors to prescribe carvedilol for CHF even between 2007 and 2011 when it was not on the product’s label.

Teva filed a motion for Judgement as a Matter of Law (JMOL) as a result of this decision. The JMOL centred on whether Teva actually induced the doctors to prescribe carvedilol over Coreg for CHF, or whether other factors were at play. The court subsequently overturned the jury’s verdict because it concluded that GSK did not prove that Teva’s actions during the skinny label period directly caused doctors to infringe the CHF patent.

GSK then appealed the JMOL in a Federal Circuit court. In a 2-1 decision, the court reversed the district court’s JMOL and restored the jury’s findings of infringement and awarded GSK $235m in damages from Teva.

The majority judgement determined that Teva could be liable for induced infringement even though CHF indication was carved out from its label. This was because of press releases and marketing materials that implied Teva’s carvedilol’s equivalence with GSK’s Coreg and, therefore, encouraged off-label use for CHF, infringing GSK’s patent.

Implications of the GSK vs Teva case for skinny labelling

However, the federal circuit’s decision was not universal. In the words of Hyman, Phelps & McNamara counsel Sara W Koblitz in an FDA law blog, one of the judges, chief US circuit judge Sharon Prost “vehemently” dissented from the federal circuit’s majority judgement. Judge Prost argued that the judgement nullified the practice of skinny label launches, a practice that has Congressional approval. She added that Teva was being punished for following the regulatory pathway set out in the Hatch-Waxman Act.

Teva has already indicated it will be appealing the case. The company has now successfully won its appeal, so a new hearing with the same three judge panel has been set for the 23 February.

However, the federal circuit’s decision could create considerable risks for generics companies using skinny labels. The heightened risks include “expensive litigation that would include extensive discovery of internal documents”, including marketing materials, and “the potential for large damage awards”, according to Feldman.

The industry is now faced with a “precedent finding” that even a full carve out of the patented use can lead to induced infringement, argue Hogan Lovells attorneys in Lexology. In addition, this case gives brand manufacturers a “roadmap” to challenge generic drugs relying on skinny labelling, notes Gray.

Another concern is that, as Chief Judge Prost noted in her dissent, “contrary to Congress’s intent, the majority … allows one patented method to discourage generics from marketing skinny labels—thus, slowing, rather than speeding, the introduction of low-cost generics.” Landmon agreed that the decision could have “a significant impact on delaying generic drug products coming to market”.

This is particularly concerning as Gray notes that skinny labelling is the only way to market a generic drug within a branded drug’s exclusivity period without challenging the patent itself. Compared to skinny labelling, litigation is a costly and time-consuming exercise not at all in the spirit of the Hatch-Waxman Act and its aim to increase competition and lower drug prices.

“Without skinny labelling, brand drug companies can continue to extend their monopolies by seeking new indications covered by new patents”, concludes Landmon.