Eli Lilly and Co. v. Teva Pharms. USA, Inc.

On February 24, 2009, a divided panel of the U.S. Court of Appeals for the Federal Circuit issued a decision that could impact patent litigation under the Hatch-Waxman Act—in particular, a court’s ability to alter the statutory 30-month stay of FDA approval of abbreviated new drug applications under 21 U.S.C. § 355(j)(5)(B)(iii).

The case, Eli Lilly and Co. v. Teva Pharms. USA, Inc., Slip Op. 2009-1071, involves Teva Phamaceuticals’ abbreviated new drug application (ANDA) for its generic version of Eli Lilly’s raloxifene hydrochloride (marketed by Lilly under the brand name Evista® for the treatment and prevention of postmenopausal osteoporosis). Lilly lists in the Orange Book 12 patents that it says cover Evista®.

Teva filed its ANDA and its Paragraph IV certifications in early 2006, and on May 16, 2006, notified Lilly of its Paragraph IV certifications. Lilly sued Teva in the Southern District of Indiana on June 29, 2006, alleging infringement of four method patents of its 12 listed Orange Book patents related to Evista®, triggering the FDA’s 30-month stay of approval of Teva’s ANDA until November 16, 2008. On September 25, 2006, the district court entered a scheduling order setting a trial date of March 9, 2009, four months after the expiration of the 30-month stay of approval of Teva’s ANDA.

During the litigation, Teva apparently developed new methodologies related to its generic version of Evista®, and on July 8, 2008, Teva amended its ANDA. Teva disclosed the amendment to Lilly on July 10, 2008 (approximately eight months before trial). The parties stipulated that Teva would produce samples and documents related to the new methods by August 18, 2008. Ultimately, however, Teva provided sample products to Lilly on July 28, August 19 and September 17, 2008, and completed its document production on September 5, 2008. As a result, Lilly asked the district court to extend the statutory 30-month stay of the FDA’s approval of Teva’s ANDA under 21 U.S.C. § 355(j)(5)(B)(iii), alleging that Teva “fail[ed] to ‘reasonably cooperate in expediting the action.’” Lilly alleged that Teva’s “last minute” alteration of its proposed drug product and delays in producing discovery “adversely affected Lilly’s infringement case and trial preparation.” The district court granted that motion, concluding that an extension of the stay was warranted “in order to provide Lilly with a reasonable amount of time to allow its expert to test and report” on the altered product, and “for Lilly to assess and utilize that information and analysis in preparation for trial” (which was scheduled to begin over four months later).

The Federal Circuit appears to have granted Teva’s motion for an expedited appeal and, in a split decision, the majority of the Federal Circuit panel (Michel, CJ and Rader, J) upheld the extension of the statutory stay.

The majority concluded that the decision on such a request to extend a stay was discovery-related and, relying on authority from the Federal and Seventh Circuits, that discovery determinations are reviewed for an abuse of discretion. In looking at the merits of the district court’s decision, the majority held that “21 U.S.C. § 355(j)(5)(B)(iii) grants district courts the discretion to adjust the statutory 30-month stay of ANDAs if “either party to the action failed to reasonably cooperate in expediting the action.” Particularly, the majority concluded that the district court’s decision was supported by “evidence in the record that Teva altered its proposed generic raloxifene hydrochloride tablets late in the litigation,” “changed the particle size manufacturing specification of its active pharmaceutical ingredient and the method of measuring the particle size,” and “then delivered its changed samples to Lilly past the court’s August 18, 2008, discovery deadline.” In sum, the majority held that the district court’s decision was supported by the record, its factual findings and proper application of the law.  

In dissent, Judge Prost quarreled with the majority’s conclusion that an abuse of discretion standard of review was proper. According to Judge Prost, while district courts generally have broad discretionary powers to issue stays in order to control their dockets, in this instance, the authority to extend or reduce the stay is tied directly to a statutory standard and thus warranted de novo review.  

Judge Prost also disagreed with the majority’s decision even assuming an abuse of discretion standard of review. According to her dissent, the district court based the extension of the stay on Lilly’s ability to digest the newly produced information, rather than on whether Teva had failed to reasonably cooperate in expediting the action, which is the statutory standard for modifying the 30-month stay. Indeed, Judge Prost noted, the district court did not make any finding that Teva had failed to reasonably cooperate in expediting the action, and at least implicitly agreed that Teva did act in an expeditious fashion in disclosing the information, albeit 18 days after the stipulated date for production.  

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District courts have in the past occasionally modified the 30-month stay of ANDA approval. See e.g., Dey L.P. v. Ivax Pharms., Inc., 233 F.R.D. 567 (C.D. Cal. 2005). However, as noted in Judge Prost’s dissent discussed above, such instances have been rare. It will be interesting to see if the Federal Circuit’s decision in Eli Lilly and Co. will be viewed by subsequent courts as lowering the standard for shortening or lengthening the statutory 30-month stay of ANDA approval. By placing the decision to modify a stay within a district court’s discretion to manage its docket, and by affirming a decision that focused on the ability of the party seeking modification to prepare for trial, rather than the expeditiousness of the opposing party, the Federal Circuit may have invited requests for modifications any time a litigant can show some discovery shortcoming of an opponent and assert that the shortcoming will impact the litigant’s ability to prepare for trial. Given the level of heated debate in Congress when instituting the 30-month stay and the single exception to the length of stay, it can be argued that Congress did not intend for the 30-month stay to be so easily modified.