In today’s increasingly competitive generic drug market, the Court of Appeals for the D.C. Circuit has issued a ruling that makes it more difficult for generic drug manufacturers to use patent lawsuits as a vehicle to trigger, or avoid triggering, the 180-day exclusivity period for generic drugs. In Apotex, Inc. v. Food & Drug Administration, the D.C. Circuit upheld the Food & Drug Administration’s (“FDA”) rule that a court decision triggers the beginning of the 180-day exclusivity period only if it includes an actual holding on the merits as to the invalidity, non-infringement or unenforceability of a patent.

Before the Court was a long-running dispute between the FDA and generic drug manufacturers over what qualifies as a "decision of a court . . . holding [a challenged] patent . . . to be invalid or not infringed" under the Hatch-Waxman Act, 21 U.S.C. § 355(j)(5)(B)(iv) (2000)(amended 2003). Any qualifying court decision triggers the commencement of the 180-day exclusivity period during which the first generic drug manufacturer to file an Abbreviated New Drug Application ("ANDA") may market its goods without competition from other manufacturers. Given the importance to generic drug manufacturers of the exclusivity period, patent suits – and the triggering court decisions that may be rendered in such suits – have been used by some manufacturers as a way to trigger the running of the exclusivity period, thereby affecting their rights or those of their competitors in the marketplace.

Prior to its recent ruling, the D.C. Circuit had struck down the FDA rule, in effect requiring that the FDA parse each court decision in a patent suit to determine whether the decision invalidated the drug patent or held the patent unenforceable expressly or by implication. See Teva Pharms. USA., Inc. v. FDA, 182 F.3d 1003, 1012 (D.C. Cir. 1999) (Teva I); Teva Pharms. USA, Inc., v. FDA, No. 99-5287, 2000 WL 1838303, at *1 (D.C. Cir. Nov. 15, 2000) (Teva II). In the view of the FDA, such parsing of court decisions can lead to an "undermin[ing] of marketplace certainty and interfer[ence] with business planning and investment" and can "invite fruitless litigation from generic drug manufacturers seeking to trigger, or to avoid triggering, exclusivity periods."

The D.C. Circuit’s new ruling came in a case that implicated precisely these two concerns. Apotex filed a suit against Bristol-Myers Squibb Co. ("BMS") seeking a declaratory judgment that Apotex’s generic version of BMS’s Pravachol did not infringe on BMS’s patent. Apotex filed the suit in an effort to trigger the exclusivity period before its competitor Teva Pharmaceuticals could market its own generic version upon the expiration of BMS’s patent in 2006 and pursuant to Teva’s first-filed ANDA. In July 2004, almost two years before BMS’s patent was to expire, Apotex and BMS resolved the lawsuit between them by entering into a "stipulation and order" under which BMS agreed it would not sue Apotex and both parties agreed the complaint should be dismissed for lack of subject matter jurisdiction. Apotex then sought a decision by the FDA that the "stipulation and order" was a court decision that triggered the exclusivity period long before the 2006 expiration of BMS’s patent and before Teva could benefit from its first-filed ANDA.

By upholding the FDA rule that court decisions, such as dismissals for lack of subject matter jurisdiction or upon "stipulation and order," trigger exclusivity periods only when they include holdings on the merits, the D.C. Circuit has provided greater certainty to first filers of ANDAs that they will reap the benefits of being the first to file and has made it more difficult for generic drug manufacturers to engage in strategic gamesmanship through the use of patent lawsuits. Instead, generic drug manufacturers must be prepared to litigate such actions on the merits, or persuade a court to include a holding on the merits in its decision of dismissal, to gain benefits based upon the 180-day exclusivity period by filing suit.

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