FTC can play a critical role in making health care more affordable

This month, the Federal Trade Commission (FTC) started facing off against drug maker AbbVie pharmaceuticals, in its antitrust trial before the Pennsylvania Eastern District court. The case concerns a patent directed to AbbVie’s testosterone formulation, AndroGel, which us used to treat males with low testosterone levels.

Of all the actions the FTC has taken against pharmaceutical companies over the years, this one arguably wields the most muscle. It may well be the most important, for lowering drug prices — by far — in at least 15 years.

{mosads}The case brought by the FTC against AbbVie involves some of the most arcane legal details ever drafted at the interface of patent law and FDA regulations.

Lawmakers would be wise to study them carefully, however, if they want to really understand how drug-patent owners at certain branded pharmaceutical companies increasingly have employed legal shenanigans to delay generic competition for years.

Such delay results from exploiting loopholes in the system for policing drug patents. Notably in this case, is the ability to induce regulatory gridlock with a key component of FDA drug-market oversight: The Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known at the Orange Book which, “identifies drug products approved on the basis of safety and effectiveness by the Food and Drug Administration (FDA).”

To get to the heart of this matter and why the Orange Book is so important, requires understanding how one of the most famous pieces of federal drug legislation in American history connects policing of drug patents to FDA approval of generic drugs. That legislation is called the Drug Price Competition and Patent Term Restoration Act of 1984 — better known as the Hatch-Waxman Act.

The Hatch-Waxman Act directly connects the policing of drug patents to the approval of generic drug competition, and the consequent lowering of drug prices — typically by up to 85 percent. In effect, the Hatch-Waxman Act tasks generic drug makers with spearheading the policing function.

Whenever a generic drug company files an Abbreviated New Drug Application with the FDA, the law requires the generic company to certify its good-faith belief that the generic version of the subject branded drug either does not infringe any patent listed in the Orange Book for that drug, or that the listed patents are invalid (or unenforceable), or both.

This certification must be accompanied by detailed reasons for the good-faith belief, and the generic drug company must provide Notice of its filing and a copy of the certification with detailed reasons to the branded drug company.

As soon as the branded company receives the notice and certification, the clock starts ticking on the time a branded company can sue the generic drug company for infringement. The branded company has 45 days to decide whether to file suit.

If it does, then, as soon as it does, a 30-month “stay” period ensues automatically, during which time the FDA is not allowed to approve the generic drug for marketing. The entire process typically requires teams of lawyers and science Ph.D.’s at branded and generic companies and in government, to make all the gears in this complex policy machine, hum.

The FTC action against AbbVie is a case in point. The agency filed its complaint back in 2014, alleging, in relevant part, that AbbVie had wrongfully brought sham patent infringement litigation against two generic competitors under the Hatch-Waxman Act, using a patent it knew could not be infringed by the accused products.

The generic drug companies told AbbVie in their detailed notice and certification papers submitted along with their Abbreviated Applications to the FDA. But because AbbVie had listed the patent in the Orange Book,” instituting the sham litigation against those generic competitors automatically invoked a 30-month stay to vet that patent in court, which automatically blocked the FDA from approving the generic drugs for a period of 2.5 years.

That, is some powerful clockwork, and has the color orange painted all over it. At trial, the FTC is seeking injunctive relief and $1.23 billion to compensate consumers.

To prove its case, the FTC did some nerd-heavy lifting. By carefully analyzing the arguments made by the patent owner to the PTO during the patent application process (a collection of papers called the “prosecution history”), the FTC moved the district court ahead of trial for partial summary judgment on its illegal monopolization claim. In particular, the FTC urged the court to find the “objective baselessness” of AbbVie’s sham litigation in the details of the patent prosecution history.

The court granted the FTC’s motion in September 2017, finding that the prosecution history plainly showed that AbbVie had relinquished to the public the compounds used by the generic drug makers as a “penetration enhancer” in their formulations. Therefore, the court concluded, an infringement case against the defendants was impossible, and AbbVie’s justification for filing suit was baseless.

That means that the fact of the “objective baselessness” of the sham litigation brought by AbbVie has already been established. The trial currently in progress is to vet whether AbbVie had the required “subjective intent” for illegal monopolization. AbbVie has in its court papers essentially blamed this on its predecessor companies in interest.

The case already has produced tangible evidence of the FTC’s ability to challenge the legal shenanigans branded drug companies have used to exploit the arcane details of the Hatch-Waxman Act, and thereby delay generic competition. The agency deserves kudos for its efforts to plug an unfortunate loophole in the act’s procedures for policing drug patents.

As lawmakers close-in on confirming the president’s antitrust-enforcement nominees this week, both the confirmation-committee members and the upcoming, antitrust enforcers-in-chief should be encouraged to keep in mind just how vital antitrust enforcement can be, and is, at advancing federal efforts to combat high drug prices.

And the new enforcers, being highly-competent antitrust-gurus, all of them, should be encouraged to put their skills to good use in prosecuting patent abuse to the fullest extent of the law, for the health and well-being of all Americans. 

Arie M. Michelsohn, Ph.D., J.D., has litigated drug patents in Hatch-Waxman and biotechnology cases for nearly  20 years. He is a former patent examiner in biotechnology, and a former law clerk to the Hon. Raymond C. Clevenger III, of the U.S. Court of Appeals for the Federal Circuit. Dr. Michelsohn holds a Ph.D. in biology from Caltech.