FTC Issues Policy Statement on Patent Listing

On September 14, 2023, the Federal Trade Commission (“FTC”) and Food and Drug Administration (“FDA”) issued a “Statement Concerning Brand Drug Manufacturers’ Improper Listing of Patents in the Orange Book,” with the stated goal of putting pharmaceutical companies “on notice” that the FTC would be scrutinizing patent listing practices.¹  The Policy Statement reflects the FTC’s continued focus on patent enforcement in the pharmaceutical space.

Background

Under the Hatch-Waxman Act, drug manufacturers submitting a New Drug Application (“NDA”) must submit a list of patents that claim the drug or a method of using the drug to the FDA for inclusion in the “Orange Book,” the FDA’s catalog of “Approved Drug Products with Therapeutic Equivalence Evaluations.”  The Orange Book lists approved drugs along with the patent and exclusivity information associated with these drugs.²  The Orange Book informs manufacturers of generic drug products of patents which the brand manufacturer believes are likely to cover the generic products.³

If a generic company filing an Abbreviated New Drug Application (“ANDA”) seeks FDA approval prior to the expiration of an Orange Book-listed patent covering the branded drug product and contends that the patent is invalid, not infringed, or unenforceable, it must file a certification to that effect with the FDA (a so-called “PIV Certification”), and serve notice of that certification, along with a detailed description of the basis for the contention, on the NDA holder and patentee(s) (a “PIV Notice”).  The Hatch-Waxman Act provides a process under which a patent holder can file an infringement action upon receiving a PIV Notice.  If the patent holder files an infringement action within 45 days of receipt of the PIV Notice, the statute provides a presumptive 30-month stay on the approval of the ANDA.⁴

The Policy Statement

The Policy Statement purports to serve as “notice” that the FTC will be scrutinizing Orange Book patent listings under Section 5 of the FTC Act.⁵  The FTC Act generally prohibits “unfair or deceptive acts or practices in or affecting commerce.”⁶  The FTC has recently articulated an expanded interpretation of Section 5, targeting conduct broadly identified as “unfair” methods of competition.  

Here, the FTC claims that listing patents which do not meet the statutory listing criteria may be an unfair method of competition, negatively impacting competitive conditions and limiting consumer choice by a means that is not on the merits of drug quality or price.⁷  The FTC claims that improper listings may “block generic competition,” disincentivize investments in competing products, and delay generic drug and follow-on product entry.⁸

The FTC further claims that improper patent listing may also constitute illegal monopolization by way of seeking to acquire or maintain monopoly power by excluding competition.⁹

Notably, the Policy Statement suggests that the FTC may take action based on the listing itself, not waiting for enforcement of the relevant patents, even though the listing by itself will not give rise to any stay on ANDA approval.  The FTC commits to employing its “full legal authority” to take actions against companies and individuals who improperly list patents in the Orange Book.¹⁰

Recent Actions

This latest Policy Statement builds on recent FTC actions both on Section 5 and on drug patents more broadly.  In November 2022, the FTC released a Policy Statement clarifying that the FTC will interpret Section 5 to include actions beyond those prohibited by the Sherman and Clayton Acts.¹¹  In the 2022 Policy Statement, the FTC mentioned that “misuse of regulatory processes that can create or exploit impediments to competition (such as those related to licensing, patents, or standard setting)” can be an unfair method of competition.¹²

The FTC has recently expanded its activity pertaining to drug patents. For example, in 2022 the FTC sued drug company founder Martin Shkreli, alleging Sherman Act and state antitrust law violations based on patent-related conduct involving supply and distribution agreements; the FTC succeeded in banning Shkreli from the pharmaceutical industry altogether.¹³

Also, in November 2022, the FTC filed an Amicus Brief in Jazz Pharmaceuticals Inc., v. Avadel CNS Pharmaceuticals, LLC, arguing that the 30-month stay on approval can incentivize wrongful patent listings, noting that while Orange Book listings are strictly regulated by the Hatch-Waxman Act, the current method of challenging an improper listing, i.e., a delisting counterclaim filed by an accused infringer, may not be sufficient to remedy the potential anticompetitive delay.¹⁴

Why It Matters

As noted above, challenges to Orange Book listings are not new.  That said, investigation and litigation based on patent listing was typically triggered by lawsuits seeking to enforce the listed patents.  The new Policy Statement appears to be changing that trigger; the FTC cautions that failure to remove improperly listed patents may give rise to liability under the FTC Act or a legal dispute under the FDA process allowing for correction of patent information in the Orange Book, and nothing in the Policy Statement suggests that the FTC will wait for a branded company to file infringement litigation based on Orange Book-listed patents before initiating an investigation or enforcement action.  Companies should therefore consider engaging in a thorough review of existing patents listed in the Orange Book to confirm that they were properly listed and should carefully consider the statutory criteria before listing patents moving forward.