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On November 7, 2023, the Federal Trade Commission (FTC) took unprecedented action by issuing notice letters to ten pharmaceutical companies challenging a total of more than 100 device-based patent listings as being improperly or inaccurately listed in the U.S. Food and Drug Administration’s (FDA) Approved Drug Products with Therapeutic Equivalence Evaluations (commonly known as the Orange Book). The FTC also opted to file patent listing dispute notifications with the FDA disputing the accuracy or relevance of the listed information for these patents.

Although scrutiny of Orange Book patent listings is not new, the FTC has never before independently challenged Orange Book patent listings. Its action has again fanned the flames of what began as a slow burn of criticism against alleged inappropriate patent listings in the Orange Book. In turn, recent actions — along with other efforts to increase drug competition and the increased coordination between the FTC, the FDA, and the United States Patent and Trademark Office (USPTO) — now have new significance.

Origins of Orange Book Scrutiny

Since the first edition was published in 1980, the Orange Book has served to identify approved drug products, list FDA-granted regulatory exclusivity, and notify companies of the drug substance, drug product, and method of use patents that purportedly covers the approved drug product and for which a claim of patent infringement could reasonably be asserted. The root of the recent scrutiny is how broadly to interpret “drug product,” which includes a finished dosage form. Patents claiming the finished dosage form may be listed, including those for approved products such as metered aerosols, gels, powders, solutions, and sprays, but patents claiming the drug’s container or packaging should not be listed.

The FDA’s historical role in listing patents and maintaining the accuracy of the Orange Book has been “purely ministerial.” In other words, the FDA relies upon the accuracy of the listings submitted, an approach that various courts have affirmed. Should a party wish to challenge the accuracy or relevance of patent information published in the Orange Book, FDA regulation allows a party to file a patent listing dispute. Patent holders then must either remove the listing or must amend/confirm the correctness of the listing and certify under penalty of perjury that the listing is true/correct and complies with applicable statutory and regulatory requirements. However, apart from contacting the patent holder regarding the patent listing dispute, the FDA does not take further action.

Concerns about Orange Book patent listings — perceived by the FTC and others as a potential barrier to inhibit generic competition — has resulted in recent legislative, judicial, and regulatory developments. For example, the Orange Book Transparency Act of 2020 (OBTA), enacted in January 2021, revised the requirements for submission of patent information, clarified the types of patents and exclusivity-related information to be listed in the Orange Book, and clarified when certain patent information must be removed.

Additionally, the OBTA resulted in an FDA Report to Congress in January 2022 and a Government Accountability Office (GAO) Report in March 2023 discussing how stakeholders believe the FDA’s information on patents could be improved. The GAO report also highlighted the potential for delayed market entry of generics caused by the proliferation of drug/device combination products and the ability for sponsors to list patents awarded for minor changes to a product.

Current State of Affairs

Although the FTC has previously expressed interest in the accuracy of Orange Book patent listings (e.g., filing amicus briefs in private litigations relating to the anticompetitive effects of improper Orange Book patent listings) its actions have become more urgent. Prior to issuing the November 7 notice letters, FTC intervened in a case involving the propriety of listing a patent covering a risk evaluation and mitigation strategy (REMS), arguing that REMS patents are not permitted to be listed in the Orange Book because they do not cover a drug substance, drug product, or method of use.

In October, the FTC issued a policy statement (supported by the FDA) in which it warned brand pharmaceutical companies that they could face legal action, including enforcement under Section 5 of the Federal Trade Commission Act (Section 5), for improperly listing patents in the Orange Book. That policy statement all but guaranteed notice letters were on the horizon: “The goal of this policy statement is to put market participants on notice that the FTC intends to scrutinize improper Orange Book listings to determine whether these constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act.”

While the FTC has opted to issue notice letters and file patent listing dispute notifications with the FDA, it has made clear that, based on its belief that certain patents were inaccurately or improperly listed, it “retains the right to take any further action as needed in the public interest.” This includes investigating the patent listings as an unfair method of competition in violation of antitrust laws, specifically Section 5.

Section 5 broadly prohibits “unfair methods of competition” and “unfair or deceptive acts or practices in or affecting commerce.” The FTC has wide authority to investigate what it considers an unfair method of competition but has limited remedies – it cannot pursue monetary relief at this stage because improper listing in the Orange Book has not yet been found to be “unfair” in an administrative hearing. The FTC can only pursue cease and desist orders. Even so, litigating a complaint even through an administrative hearing is time consuming and costly for all parties. This is perhaps why the FTC chose also to dispute the listings directly with the FDA. In addition, the FTC under Commissioner Khan has used its public pulpit to pressure companies to take action, or refrain from taking action, before the FTC even brings a complaint. Indeed, Rahul Rao, Deputy Director of the Bureau of Competition at the FTC, recently stated that the FTC would like the companies to delist patents and hopes enforcement will not be necessary. However, issuing the notice letters is the first step towards enforcement.

What Happens Next

The FTC’s November 7 notice letters and patent listing disputes raise a number of key issues. First, the FTC’s notice letters did not state the basis on which it believed that any of the challenged patents were improperly or inaccurately listed, thus arguably not giving the companies appropriate notice of their alleged inappropriate conduct. Although Deputy Director Rao has publicly stated that the FTC focused on device patents that do not deal with the active drug (i.e., for products such as asthma and inhaler devices, epinephrine autoinjectors, and Restasis® multidose bottles), the FTC provided no patent-by-patent analysis of the ones being challenged. Thus, the companies who received a notice letter must await information provided by the FDA pertaining to the patent listing dispute notifications.

Second, the FTC is attempting to regulate the Orange Book in a way that the FDA never has, and without any corresponding statutory or regulatory changes. The FDA has always asserted that its listing role is “purely ministerial” in part because it does not have the same patent expertise as the USPTO. Deputy Director Rao has pointed to the FTC’s recent actions involving patent listings as putting companies on notice of possible action against individual companies. However, it is difficult to believe that the FTC would have the requisite patent expertise if the FDA does not itself have such expertise.

Finally, while the pattern of products and patents targeted in the November 7 notice letters is clear, the companies were not informed about why these particular products and patents were chosen. As referenced above, Deputy Director Rao has stated that the FTC focused on device patents having “nothing to do with” an active ingredient for widely-used products that, given their length of time on the market, would be expected to have more competition. Nevertheless, notice letter recipients and those who have, at the moment, avoided receiving an FTC notice letter alike are left to question how the FTC made its decision.

In light of these uncertainties, companies with existing or to-be-listed Orange Book Patents — particularly those covering approved drug/device combination products with high use and a low level of generic competition — should ensure their decision-making for listing in the Orange Book is on solid legal ground. We expect that some companies will find creative legal arguments to challenge the FTC’s actions. We also expect that this will not be the last word by the FTC, the FDA, Congress, or the courts on the propriety of Orange Book patent listings.

Buchanan is poised to assist companies impacted by the FTC’s actions in this arena. If you need help determining the impact of these recent developments on your own product portfolio, Buchanan’s Life Sciences Industry Group is here to help.