IPRs and Drug Litigation

Since Post Grant Review (PGR) is designed to challenge patents on 112 and 101 grounds not available in Inter Partes Review (IPR), it is often assumed that Bio/Pharma is somewhat unconcerned with the growing trend to challenge patents in IPR at the PTAB. Today, my partner Richard Kelly and I explain that ethical drug companies are in fact very concerned with IPR.

The generic drug industry enjoyed a run of almost 20 years of enormous profits from the 180 day exclusivity period granted to the first ANDA file under the Hatch-Waxman Act —  this all changed in 2003. In response to perceived abuses, The Medicare Prescription Drug Improvement and Modernization Act became law in 2003. One unintended consequence of the act was that most exclusivity periods became shared. That is more than one generic company received the right to sell during 180 day exclusivity period.

The impact on the generic industry’s profitability has been marked. First, if there is only one generic, it has been estimated that the generic company will receive about 94% of the ethical company’s wholesale price and will capture 80% or more of the ethical drug company’s market volume. In contrast, with a shared exclusivity between two competitors, only 52% of the ethical company’s price is captured, at 9 competitors only 20%, but still collectively capturing about 80% or more of the ethical company’s volume. In the recent Crestor litigation, 9 companies are eligible for the 180 day shared exclusivity. This changes the economics of drug patent litigation tremendously. No longer can generic companies afford to pay $10 million or more in legal fees to challenge a drug patent listed in the FDA Orange Book. Like many patent challengers the generics are looking to cut litigation costs — enter the PTAB.

Since IPRs became available, a few generic drug companies have begun using IPRs to challenge drug patents. Apotex and Ranbaxy were the first generics to utilize the IPR procedure. At the time of the IPR filings Apotex was involved in litigation while Ranbaxy was not although the patents had been asserted against others, see IPRs 2013-00012 (Apotex v Alcon), 00015 (Apotex v Alcon), and 00024 (Ranbaxy v Vertex). All of the IPRs ended in settlements with Ranbaxy’s avoiding costly litigation.

Ranbaxy’s settlement resolved not only the IPR but also any potential Hatch-Waxman litigation between Ranbaxy and the patent owner Vertex and its licensee ViiV Healthcare. In the meantime the ANDA litigation between Vertex and Myan, the first ANDA filer, filed in August 2012 continues and is in the expert discovery phase.

Apotex has continued to use IPRs as part of its ANDA strategy. Apotex filed an IPR against Pfizer on the drug Tygacil which, at the time of IPR filing, was involved in litigation between Wyeth and Sandoz, a litigation subsequently dismissed by the parties (Sandoz has not launched as of yet a generic equivalent). Subsequent to Apotex’s IPR filing Pfizer brought suit against Fresenius Kabi. In the IPR, Pfizer waived its patent owner statement on February 7, 2014, Paper No. 9. As of today, Pfizer has not initiated district court litigation against Apotex.

Apotex filed three more IPRS, 2014-00428, -00429, and -00430 against three Alcon patents on July 5, 2013, all relating to self-preserved ophthalmic solutions. The IPR petitions were granted on January 2, 2014, on all claims for which review was requested. Alcon has not initiated litigation against Apotex but did initiate litigation against Mylan and Micro Labs after Apotex filed its IPRs.

Thus far it appears that Apotex’s strategy of filing IPRs before the patent holder brought a district court action appears to be working. Since these cases are all ANDAs involving parenteral drugs, it is most likely that Apotex’s only defense is patent invalidity. By preemptively filing IPRs it has avoided costly district court litigation with its 30 month stay of FDA approval of its drug, in favor of much faster and less costly IPRs. In terms of cost, it is most probable that Apotex’s IPR costs will be between 10% and 20% of that of district litigation while at the same time being much faster, 18 months from IPR filing to decision by the PTAB versus 30 months or more before a district court decision. Indeed it’s conceivable that the IPR appeal process to the Federal Circuit could be completed before the district actions have reached decision.

Baxter Health Care (Baxter) has filed 4 IPRs, 2013-00582, -00583, 00590, and -00591 in connection with its dispute with Millenium Biologix (Millenium). Millenium began the dispute by filing suit against Baxter in Illinois involving two patents. It is these two patents which are the subject of the four Baxter IPRs. The IPRs were filed within about 5 months of Millenium filing suit (April 2013) giving Baxter the possibility of filing additional IPRs should the PTAB deny its request for review of any of the claims involved in the litigation within one year of filing the complaint assuming Baxter can present additional evidence to address the PTAB position in denying the petition. Baxter thus far has not requested a stay of the district court litigation presumably waiting for the PTAB decisions on its petitions.

From these IPRs several lessons can be learned:

  1. File the IPR early, before the litigation begins. This is possible because in most drug cases the litigation cannot begin until an ANDA is filed.  ANDAs by statute cannot be filed until four years after the drug has been approved, the New Drug Application (NDA) approval date.
  2. IPRs have resulted in successful settlements without the expense of litigation.

Since the NDA approval date of a drug is known and, thus, the first date to filed an ANDA, four years later, generic companies would be well advised to file any IPRs challenging the patentability of any patents listed in the FDA Orange Book, all patents covering the drug, its formulation, or uses must be listed, 6 months or more before filing the ANDA. First, by filing this early, the generic company will have the PTAB opinion of its invalidity position before filing and have an opportunity to address any criticisms in advance of filing the ANDA. Second, it will have the PTAB decision by the fifth anniversary of the NDA approval which is the first date the generic can launch its product. Third, it most likely will have any appeal from the PTAB decision well in advance of the expiration of the 30 month stay of the FDA approval of the ANDA, assuming the patentee files suit timely. This will allow the generic to launch without risk if it was successful in the IPR. Fourth, the generic may be able to obtain a stay of the district court litigation if its only defense is the invalidity of the patent for the reasons in the IPR.

Even though 101 and 112 grounds remain unavailable in IPR, this simply leaves a generic with estoppel-free invalidity defenses should the IPR fail. For patents where strong patents and printed publication prior art exists, IPRs are proving a very valuable tool for generics.