By Abby Lauer – Edited by Alissa Del Riego
Siracusano v. Matrixx Initiatives, Inc., No. 06-15677 (9th Cir. Oct. 28, 2009)
Opinion

The Ninth Circuit has unanimously reversed the U.S. District Court for the District of Arizona’s holding, which had dismissed a class action claim against Zicam manufacturer Matrixx for the complaint’s failure to adequately allege a violation of the Private Securities Litigation Reform Act of 1995 (“PSLRA”).

In an opinion written by Tashima, J., the Ninth Circuit held that the District Court improperly relied on a statistical significance standard to determine that the plaintiffs’ complaint did not allege “a material misrepresentation or omission of fact.” Siracusano v. Matrixx Initiative, Inc., No. 06-15677 at 18 (9th Cir. Oct. 28, 2009). Instead of determining materiality as a matter of law, the district court should have allowed the jury to conduct a “fact-specific inquiry.” Siracusano v. Matrixx Initiative, Inc., No. 06-15677 at 20 (9th Cir. Oct. 28, 2009). In addition, the Ninth Circuit held that the lower court erred in dismissing plaintiffs’ complaint for failure to allege scienter on the part of Matrixx executives. The court reasoned that the inference that Matrixx executives knew about the possible link between Zicam and anosmia (loss of smell) before issuing allegedly misleading statements is at least as likely as any plausible opposing inference.

Phoenix’s East Valley Tribune provides an overview of the case. For further discussion of the opinion and pleading standard precedents, see The D & O Diary. For more information about homeopathic remedies, including Zicam, see this recent Washington Post article.

Plaintiffs brought the original action in April 2004, alleging that Matrixx had information of a possible causal connection between Zicam use and anosmia but failed to disclose this risk and instead issued false and misleading statements to consumers.

The Ninth Circuit held that plaintiffs’ complaint satisfied the heightened pleading standards of past Supreme Court cases Twombly and Tellabs and thus should have survived a motion to dismiss. In its holding on the materiality issue, the court examined allegations in the complaint to consider whether information regarding a possible link between Zicam and anosmia was information a reasonable investor might consider significant. The court found that the allegations were sufficient to satisfy the pleading requirement under the PSLRA and held that the issue of whether Matrixx’s misrepresentations were material should be left for a jury to decide. On the issue of scienter, the court emphasized that Matrixx was aware of at least 14 complaints linking Zicam to anosmia at the time it stated that a causal connection between the two was “completely unfounded and misleading.” The court also found a strong indication that high-level Matrixx executives knew that the company was being sued in a product liability action on the issue of anosmia when they released the allegedly misleading statements. Viewing the complaint as a whole, the court held that the inferences of scienter drawn by the plaintiffs’ complaint were sufficiently strong for it to survive a motion to dismiss.

The decision is the latest in a series of setbacks for Matrixx. Following a warning from the FDA last June that Zicam products could cause anosmia, the company voluntarily withdrew two forms of the drug. Matrixx continues to maintain that anosmia is caused by the cold virus, which Zicam is designed to treat, and not by the drug itself.

The case will now return to the District Court for further proceedings. Whether or not the plaintiffs eventually prevail at trial may have substantial implications for Matrixx, which relied on Zicam Cold Remedy products for about 70 percent of its total sales at the time the action was initially filed.

Bayer Schering Pharma v. Barr Labs

By Aaron Dulles – Edited by Evelyn Breithaupt
Bayer Schering Pharma AG and Bayer Healthcare Pharm., Inc. v. Barr Labs., Inc., No. 2008-1282 (Fed. Cir. Aug. 5, 2009)
Slip Opinion

On August 5, 2009, a Federal Circuit panel affirmed the decision of the District of New Jersey, which had found Bayer’s U.S. Patent No. 6,787,531 (”‘531 Patent”) invalid because of obviousness. The ‘531 Patent concerns a formulation of the well-known contraceptive drug drospirenone. The patent previously protected Bayer’s formulation of a daily oral contraceptive product, marketed as the drug Yasmin. When Barr Labs sought approval from the FDA to market a generic version of Yasmin, Bayer filed a patent infringement suit. The district court found that under KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007), the formulation of drospirenone in the Yasmin product was obvious. The sole issue of appeal was obviousness, and by a 2-1 vote the Federal Circuit affirmed the district court’s decision.

Passino PLLC suggests that the majority’s application of the In re O’Farrell, 853 F.2d 894 (Fed. Cir. 1988) standards was too rigid, and thus appeared to go against warnings in KSR concerning rigid application of tests. Patent Docs agreed, asserting that the judges both at the trial and appellate levels disregarded important evidence and emphasizing that the “common sense” of obviousness is that of the practitioner, not the judge. AboutLawSuits.com noted the ruling, but focused on known potential negative side effects of the drospirenone-based contraceptives such as Yasmin.

Drospirenone had been a well-known contraceptive. In formulating the drug as a daily oral pill, however, Bayer ran into two problems: it is hydrophobic, resisting dissolution in water; and it is acid-sensitive, isomerizing (changing shape but not composition) in acids such as those found in the stomach, thereby losing certain important qualities. While the usual solution of “micronization” for hydrophobic chemicals ordinarily may have seemed to be a clear solution, that process was known to worsen acid sensitivities. Bayer scientists considered certain protective coatings for a time, but during experimentation they found that drospirenone’s bioavailability – its crucial ability to be absorbed into the bloodstream to work – could be assured by micronization and without any protective coatings. Yasmin was formulated as such, and in prosecuting the ‘531 Patent, Bayer relied on the fact that prior art had pointed against micronization due to the isomerization problem.

Writing for the majority, Mayer, J., applied the KSR standard to the micronization, first examining whether a person of ordinary skill would have attempted the formulation. Citing In re O’Farrell, the Court considered two identifiers of non-obviousness: first, a solution may be non-obvious where there is not a limited and relatively small set of solutions that may be investigated; and second, a solution may be non-obvious where prior art is vague and does not give clues about future courses of study.

In considering the obviousness of micronization, the Court relied in large part on the text of a pharmacology textbook that gave clues as to why a formulator would nevertheless consider micronization. The Court further cited prior art that pointed towards micronization, as well as the testimony of a Bayer expert who stated that micronization would generally be a first-choice solution.

Bayer argued foregoing the coating was non-obvious because certain prior art points towards using the coating, while Barr argued that other prior art points against using the coating. The Court noted that the parties’ disagreement neatly proved that a drug formulator would have been presented with options to investigate, thus avoiding the first indicator of non-obviousness in O’Farrell. Moreover, the inconclusive prior art on coating of drospirenone would clearly have indicated a topic for exploration.

Dissenting, Newman, J., emphasized that ex post bias may have caused the Bayer formulation to appear obvious to the majority. Citing the same textbook, the dissent showed that it also advised against micronization of acid-sensitive drugs. Moreover, the prevailing knowledge available showed that drospirenone was sensitive to acids, and so a formulator would not ordinarily contemplate direct exposure to stomach acids without a protective coating. Interestingly, the dissent characterized the district court’s finding on micronization – that it was viable but uncertain – as insufficient to find obviousness, stating that predictability was a more important factor than such fortuitous experimentation.

Senators Urge FCC to Carefully Examine Exclusive Cell Phone Deals

On June 16, Ars Technica reported that senators wrote a letter to the FCC voicing concern over exclusivity agreements between service providers and phone manufacturers. The four senators who signed the letter – Senators John Kerry (D-MA), Roger Wicker (R-MS), Byron Dorgan (D-ND), and Amy Klobuchar (D-MN) – expressed particular concern as to whether the deals restrict consumer choice regarding handsets and geographic regions. They also noted that the agreements may disadvantage competing smaller carriers and discourage new innovation. According to the letter, the “Senate Committee on Commerce, Science and Transportation will convene a hearing this week to examine issues confronting wireless consumers” and decide if legislative action is necessary. Although the iPhone’s exclusivity agreements have garnered the most attention, the letter considers all cell phone carriers.

Microsoft Files Suit After Finding Evidence of Click Fraud

On June 16, the New York Times reported that Microsoft sued three individuals and several corporations for $750,000 in damages for click fraud – manipulating clicks on online advertisements. After noticing suspicious spikes in traffic from auto insurance and World of Warcraft web advertisements, Microsoft began an investigation that eventually uncovered an alleged click fraud manipulation scheme. Microsoft’s complaint alleges that the defendant directed traffic to his competitors’ Web sites so they would pay for the clicks and exhaust their advertising budgets. Jeremy Fain, a vice president of Interactive Advertising Bureau, said that although there is much precedent for mail and wire fraud, there is little regarding internet fraud. He went on to say that this case may “create more of a legal precedent, and more of a legal library of cases to draw from in the future.”

EU Seizure of Indian Drugs Hinders Medicine Dispersal

According to a recent report by Intellectual Property Watch, an increase in European seizures of Indian medicines believed to infringe intellectual property rights has triggered concerns that there is a strategic pattern in enforcement. On June 16, Spicy IP reported that India has recently protested to the TRIPS Council, expressing strong disapproval of EU’s controversial regulations and demanding more transparency of the various seizures. In May, German officials held about 3 million pounds of Amoxicillin on suspicion of a trademark infringement, delaying shipment to the Pacific by 4 weeks. “These random seizures seriously impact our ability to service the healthcare needs of people living in developing countries in a timely manner,” according to a drug supplier spokesperson. The EU claims that it is merely trying to reduce the “fast growing and dangerous” problem of counterfeits in developing countries.

By Sharona Hakimi – Edited by Stephanie Weiner
Abbott Laboratories v. Sandoz, Inc., May 18, 2009, No. 07-1400, -1406
Opinion (hosted by Patently-O)

On May 18th the Court of Appeals for the Federal Circuit, sitting en banc, reconciled a long-standing conflict between two lines of cases determining the scope of product-by-process claims. The Federal Circuit affirmed the Atlantic Thermoplastics Co. v. Faytex Corp. rule that infringement of a product-by-process claim requires actually using those claimed process steps to make the product, and overruled the more inclusive Scripps Clinic & Research Foundation v. Genentech, Inc. rule, which defined product-by-process claims as limited solely by the end product.

Peter Zura of the 271 Patent Blog summarizes the opinion and provides excerpts that outline past relevant Supreme Court decisions. Kevin E. Noonan of Patent Docs provides an overview of the case and particularly emphasizes Judge Newman’s dissenting opinion. The Patent Prospector provides an in-depth summary and long excerpts from the decision.

On appeal were two cases from the Eastern District of Virginia and the Northern District of Illinois between Abbott Labs and two generic drug makers over United States Patent 4,935,507, which claims a chemical composition by process for the creation of an antibacterial drug. Abbott argued that the District Court erred in construing infringement of the process claim to require performing the process steps from the claims, and instead wanted the court to follow the more inclusive Scripps test.  Writing for the majority, Judge Rader disagreed, affirming the District Court’s finding of no infringement and overruling the Scripps test in favor of the Atlantic Thermoplastics test, which limits product-by-process claims to the actual process and not the product itself.  The majority argued that even when a product’s structure process is not known or is too complex to categorize, the inventor can use the process steps to define the product. However, in doing so, the inventor is limiting the bounds of his or her patent. 

Only the issue of how to interpret the scope of a product-by-process claim was considered en banc. Generally, the Federal Circuit will only take cases en banc when it wants to focus on important or extremely complex questions of patent law. Remarkably, the judges took this issue of the case en banc even though the court received no briefing and held no oral argument on the issue. Because there was no public notice and no opportunity for amicus briefs, there was little input from patent holders and practitioners, thereby allowing for what Brian Galvin terms “guerilla judging” in his patent blog.

Judge Newman (who wrote the Scripps opinion) dissented, joined by Judges Mayer and Lourie. Judge Newman accused the court of “overturn[ing] a century of precedent and practice” in its decision. Dissenting both on procedural and substantive grounds, she warned that this decision will place new restraints on patent holders of new products, “particularly today’s complex chemical and biological products whose structure may be difficult to analyze with precision.” In a separate dissent, Judge Lourie argued that the Supreme Court precedents on which the majority relied were based on mechanical processes of more than a century ago, and this bright line rule can be detrimental for chemical-biological products today.

Following this decision many patents can be presented for reissue to bring claims into better conformance with the law. Though the repercussions of the bright line rule set down in Abbott Laboratories are certainly debatable, this decision resolves a long-standing split within the Federal Circuit and clarifies the rules for future and current patent holders.  

By Tyler Lacey – Edited by Evan Kubota
Takeda Pharmaceutical Co. v. Doll, April 10, 2009, No. 2008-1131
Opinion

On April 10th, the United States Court of Appeals for the Federal Circuit vacated and remanded the decision of the United States District Court for the District of Columbia, holding that manufacturing processes developed after a product is patented may be “patentably distinct” from their related products.

In a non-unanimous opinion written by Circuit Judge Rader, the Federal Circuit held that “the relevant time frame for determining whether a product and process are ‘patentably distinct’ should be at the filing date of the [process] application.”  If there exists only one process to manufacture a product, the process cannot be patented separately from the product because the two are substantially co-extensive.  However, if multiple, materially different processes for making a product existed at the time of the product’s invention, then those processes are distinct from the product and can therefore be patented separately. See Manual of Patent Examining Procedure §806.05.  This decision now allows for processes discovered after the product’s invention to be considered “patentably distinct,” defeating any patent invalidity claim based on the double patent doctrine.  The double patent doctrine prevents a patentee from obtaining extra exclusivity time for a single invention by obtaining two patents for it. 

Peter Zura of the 271 Patent Blog summarizes the opinion. The Patent Prospector criticizes the decision arguing that the double patent issue was “resolved badly” and asserting that the court did not “[think] through the implications of its ruling.”  Patently-O provides a summary of the original district court opinion.

Although the court acknowledged that it was deciding a novel legal issue for the first time, it mentioned that its decision was consistent with the district court’s holding in Phillips Petroleum Co. v. U.S. Steel Corp., 604 F. Supp. 555 (D. Del. 1985), which allowed the patenting of an alternative manufacturing process that was invented one year after the related product was patented.  While in the present case the district court had held that evidence from any time period could be used in a “patentably distinct” analysis, the Federal Circuit stressed that only development in the relevant art taking place before the filing of the process patent application should be used in such an analysis.  According to the court, its holding “gives the applicant the benefit of future developments in the art.  At the same time, however, it prevents the inequitable situation that arises when an applicant attempts to rely on developments occurring decades after the filing date of the [process patent] application.”  The court believes that its “approach should encourage the swift development of materially distinct, alternative processes,” thus improving the state of the art.

Circuit Judge Schall dissented in part, disagreeing with the majority that developments occurring after the filing of a product’s patent can be used when considering if a process is “patentably distinct” from its related product.  The dissent would have held that only evidence from before the invention of the original product should be relevant to “patentably distinct” analysis.  The dissent argued that “tying the inquiry to the invention date is most commensurate with patent law as a whole and the policy goals relating to obviousness-type double patenting.”  Judge Schall agreed that the “fundamental reason for the rule [of obviousness-type double patenting] is to prevent unjustified timewise extension of the right to exclude granted by a patent no matter how the extension is brought about,” but argued that the majority’s holding allows for exactly the type of extension that the court was trying to avoid.

This decision is significant because it is the first time that the Federal Circuit has addressed the question of whether “later-developed alternative processes are relevant in the product-process ‘patentably distinct’ inquiry.”  In holding that these later-developed processes are relevant, the Federal Circuit may have opened the door to more process patents.  This has the potential to encourage innovation in manufacturing processes, but could also limit the methods by which the public may manufacture even products potentially within the public domain.

Tafas v. Doll
Federal Circuit, March 20, 2009, No. 2008-1352
Opinion

On March 20th, the Federal Circuit affirmed in part and vacated in part a decision by the United States District Court for the Eastern District of Virginia in a suit that challenged rules proposed by the U.S. Patent and Trademarks Office (USPTO). Tafas, the plaintiff, contested the USPTO’s proposed rules that limited the number of continuation applications petitioners may file and the number of claims they can include within each application. Judge Prost, writing on behalf of the Federal Circuit, held that the new rules were procedural and thus “within the scope of the USPTO’s rulemaking authority.” However, the case was remanded to determine if the rules should be invalidated on other grounds. The court’s decision confirmed that USPTO does have the power to change its rules and restrict the way patent applications may be filed.

Patent Docs summarizes the case and outlines the Federal Circuit decision. Patently-O highlights and explains the proposed changes to USPTO rules 78 (Continuations), 114 (Requests for Continued Examinations), and 75 and 265 (Claims). Bnet Pharma discusses the potential effect of the decision on drug companies who rely heavily on their ability to patent chemicals.

The conflict arose in 2007 when, in an effort to decrease the backlog of patent applications, the USPTO proposed rules that would limit patent applications to 5 unique claims and 25 total claims per invention. The proposed rules would also limit the number of requests to reconsider patent applications as well as requests for continuations, thereby curbing the number of chances to amend a patent application.  In a summary judgment hearing in May 2007, the District Court for the Eastern District of Virginia blocked implementation of the new rules, finding the changes to be substantive and beyond the scope of the USPTO’s authority.

On appeal, the Federal Circuit first addressed the rulemaking authority of the USPTO.  35 U.S.C. § 2(b) provides USPTO with procedural and not “general substantive rulemaking power.” The court refused to grant Chevron deference to the USPTO with regard to substantive rulemaking. However the court did grant Chevron deference to the USPTO’s interpretation of “statutory provisions that relate to the exercise of delegated authority.”

The court then looked to the proposed rules offered by the USPTO, which it found to be procedural and thus within the scope of the USPTO’s rulemaking authority. However, it found that one of the proposed final rules, Rule 78, conflicts with 35 U.S.C. § 120 and is therefore invalid. Thus, the Federal Circuit affirmed the summary judgment with regard to invalidating Rule 78, but it vacated the ruling for Rules 75, 114, and 265.

Notably, the case was ultimately remanded back to the lower court to determine “whether any of the Final Rules, either on their face or as applied in any specific circumstances, are arbitrary and capricious; whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in this opinion; whether all USPTO rulemaking is subject to notice and comment rulemaking under 5 U.S.C. § 553; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive.”

The Federal Circuit acknowledged that these new rules assign a large amount of power to the USPTO to grant or reject petitions: “[W]e are mindful of the possibility that the USPTO may in some cases attempt to apply the rules in a way that makes compliance essentially impossible and substantively deprives applicants of their rights.” However, the court emphasized that judicial review will be available under 5 U.S.C. § 706, so petitioners may appeal to courts on a case-by-case basis to overturn results.

Judge Rader notably dissented, stating that he would affirm the decision of the district court, holding that the rules were substantive: “Because the Final Rules drastically change the existing law and alter an inventor’s rights and obligations under the Patent Act, they are substantive and the PTO exceeded its statutory rulemaking authority.”

This case was followed closely by multiple industries that rely heavily on patents such as the drug and tech industries. Some larger companies including IBM and Apple favored the new rules, claiming that they will increase efficiency and thereby improve patent quality and remove unnecessary paperwork for the USPTO. Critics of the rules largely include biotech and pharmaceutical companies, since they tend to accrue large numbers of patent claims and continually amend their applications as their research develops.

Text of H.R. 1427
Summary

Last week, Rep. Henry Waxman and several other representatives unveiled the latest version of a bill designed to lower the price of drugs by encouraging generic competition in biological products (”biologics”). Biologics are products derived from living processes and used to prevent, treat, or cure human illness. Most drugs, in contrast, are synthesized using chemical reactions.  Biologics include products such as vaccines, blood-derived products, antibodies, and recombinant proteins (e.g. proteins that modulate the immune system, or proteins that induce the proliferation of red blood cells). Over the past 30 years, a revolution in recombinant DNA technology has propelled the sub-field of biologics from the periphery into prominence in the biopharmaceutical industry. Three of the top 10 best-selling drugs in the U.S. in 2007 were biologics (Enbrel, Aransep, and Epogen), and biological products now represent some of the most expensive drugs on the market; annual per-patient treatment costs for one expensive drug topped $300,000 last year.

The new bill, H.R. 1427, dubbed the “Promoting Innovation and Access to Life-Saving Medicines Act,” is intended to introduce price competition in biologics by granting the FDA clear authority to approve generic, or “follow-on” biologics, which are comparable in safety and efficacy to biologics already on the market. The new legislation is modeled on the Hatch-Waxman Act of 1984, which allowed generic manufacturers to gain market approval by showing that their products were interchangeable, or bio-equivalent, with previously approved products, without the need to preform additional clinical trials. Until now, the FDA has been reluctant to allow for this type of abbreviated approval for biologics, which have historically been regulated under a different legal regime from other drugs. Although, as described in this testimony by an FDA official, the story is more complicated. Some proteins that were initially purified from human and animal tissues, such as insulin and human growth hormone, were categorized as drugs when they first obtained FDA market approval. Today these substances remain regulated as drugs, even though they are now synthesized using recombinant DNA technology, like many biologics.

Previous attempts to create an abbreviated approval pathway for generic, or “follow-on” biologics, have stalled based on concerns that the new pathway will fail to ensure patient safety and protect the profits of innovator firms. A major sticking-point has been the inclusion, in some versions of the legislation, of a “data-exclusivity” provision that would prevent generic firms from gaining approval based on comparisons to an innovator product for 12-14 years after the innovator gains approval. The data exclusivity term would run concurrent with the term of any patents covering the innovator product. Data exclusivity would protect innovator firms whose patents have expired or been interpreted too narrowly to effectively block competition. The new H.R. 1427 attempts to compromise with innovators by offering shorter, 3- and 5- year periods of data exclusivity, similar to the periods currently available to other drugs under the 1984 Hatch-Waxman regime (a model suggested by Boston University Scholar Laurence Kotlikoff).

While the debate rages on over how best to protect investment by innovators under the new regime, few have raised the question of whether or not the new legislation will actually be successful in promoting generic competition. Lawmakers and lobbyists pushing for the extended period of data exclusivity appear to assume that once the pathway is open, it will be a simple matter for generic firms to reverse engineer the originator product. The success of the Hatch-Waxman regime has relied on the fact that most drugs are easy to reverse engineer — the process of characterizing and reproducing a simple chemical entity can cost as little as $100 million and take as few as 6 months. Once Hatch-Waxman removed the barrier of submitting independent clinical data, generic competition was immediate and dramatic: the share of prescriptions filled by generic drugs rose from 19% to 40% in the first decade following the act (as described in this FTC Comment).

By contrast, the process of reverse-engineering a biologic is much more complicated. As the FDA notes, biologics tend to be more complex, heterogenous, and harder to characterize than their chemical counterparts.  Unlike most chemical drugs, the particulars of the production process for biologics can have major effects on the structure of the end product.  Use of different cell-lines or small changes to the manufacturing process can lead to dangerous variations in the product that can be difficult to detect without additional clinical studies. The importance of the manufacturing process and use of particular cell lines means that a product may remain difficult to reproduce, even where elements have been disclosed in a patent application. The innovator biologics industry has argued that it would be impossible — at least in some cases — to design a follow-on products that could be safely exchanged with the innovator product. This assertion has prompted criticism that many biologics patents are actually invalid because they fail to disclose enough information to enable a person skilled in the art to make and use the invention. See 35 U.S.C. § 112

Such barriers to reverse-engineering biologics will cut into the effectiveness of the new legislation by making it difficult for generic firms to prove that their drugs are similar enough to the innovator product to gain regulatory approval without preforming additional clinical trials. Even Henry Grabowski, a Duke University economist who has argued for a 12-16 year data exclusivity period to protect innovation, admits that the new legislation will not work as well as Hatch-Waxman at promoting competition for biologics. In a 2006 paper published in Health Affairs, Grabowski estimated that even with an abbreviated approval process in place, technological and manufacturing barriers to copying would result in fewer follow-on biologics. Less generic competition means that prices are not likely to drop as dramatically for biologics as they had for simpler drugs following Hatch-Waxman.

The troubling implication is that some biologics will be able to maintain their monopolies — and resulting high prices — even after the new legislation takes effect. Even more troubling is the fact that no attempt has been made to generate new solutions to the new challenges presented by biologics. Instead, the debates have focused on which elements of the Hatch-Waxman regime, such as data exclusivity, will be incorporated into the new legislation.

Solutions do exist. One potentially simple fix to the problem could be to borrow from patent law and require the innovator firm to meet an additional disclosure requirement in return for the allotted period of data exclusivity. If innovator firms insist on an 12-14 year period of monopoly protection, it is reasonable and fair to ensure that when the period expires, generic firms will be allowed to compete. A disclosure requirement could ensure competition by giving generic firms the information and materials necessary to replicate the innovator product with a minimum of additional expense. This would mean, in many cases, requiring the innovator firm to share cell lines and disclose manufacturing processes that would otherwise be protected by trade secrets. Such a requirement would also assist with public safety by ensuring that generic biologics were as similar as possible to the innovator — reducing the danger of unexpected side-effects. Publication of the disclosure could be timed to coincide with the expiration of patent and data exclusivity terms, as a way to prevent generics firms from manipulating the system by seeking early entry.

The paradigm for generic entry developed for chemical drugs fails to address existing barriers to production of follow-on biologics.  If lawmakers do not recognize these problems and incorporate new solutions to overcome them, the new legislation will not be effective at lowering the price of biologics.

*For further discussion of biologics and data exclusivity, see the forthcoming Fall 2009 edition of the Journal of Law & Technology, featuring “A Longer Monopoly for Biologics?: Implications of Data Exclusivity as a Tool For Innovation,” a student Note by Sarah Sorscher.

Wyeth v. Levine
Supreme Court of the United States, March 4, 2009, No. 06-1249
Slip Opinion

On March 4th, the Supreme Court of the United States affirmed the judgment of the Vermont Supreme Court, holding that federal drug labeling regulations do not preempt state failure-to-warn lawsuits.  The Supreme Court held that compliance with FDA labeling requirements did not preempt Levine’s failure-to-warn claim based on what she alleged was defective labeling of Wyeth’s anti-nausea drug Phenergan. In so holding, the Court concluded that Congress did not intend to preempt state-law failure-to-warn actions.  It also rejected Wyeth’s claim that the Court should defer to an FDA statement, made in the preamble to a 2006 regulation, that state tort suits threatened the FDA’s statutory mandate.

Briefs and relevant court documents are available here at the SCOTUS wiki.  The SCOTUS Blog provides an overview of the case. Drug and  Device Law Blog suggests that the decision does not eliminate preemption alcims, but does make them far more difficult to win.  The Wall Street Journal Law Blog features an analysis of the decision.  The Volokh Conspiracy notes a decrease in deference to agencies.

The Court upheld a $6.7 million jury award to musician Diana Levine, who lost most of her right arm to gangrene after an IV-push injection of Wyeth’s anti-nausea medication Phenergan.  Levine settled her claims against the health center and clinician who administered the Phenergan.  She then sued Wyeth in state court, arguing that the pharmaceutical company should have revised its FDA-approved label to warn clinicians not to use the higher-risk IV-push method of injection for administering the drug. A jury ruled in Levine’s favor, determining that Wyeth was negligent and Phenergan was a defective product as a result of inadequate warnings and instructions.   On appeal, the Vermont Supreme Court affirmed, holding that the jury’s verdict was not preempted by federal labeling requirements because Wyeth could have warned against IV-push administration without prior FDA approval, and because federal labeling requirements create a floor, not a ceiling, for state regulation.

Justice Stevens wrote the majority opinion, joined by Justices Kennedy, Souter, Ginsburg and Breyer.  The majority reasoned that drug companies remain primarily responsible for keeping their warning labels up to date and complete despite federal labeling requirements.  It also concluded that Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness.

Based on a statement made in the preamble of a 2006 FDA regulation, Wyeth had argued that the FDA’s statutorily prescribed role as an expert federal agency responsible for evaluating and regulating drugs preempted conflicting state requirements.  The majority acknowledged that agency regulation with the force of law can preempt conflicting state requirements, but it maintained that in each case the Court would perform its own analysis of the substance of state and federal law and not rely on agency proclamations of preemption.  The majority concluded that the FDA’s statement that state law frustrated the agency’s implementation of its statutory mandate did not merit deference.  Based on its reading of the regulatory history and background, the majority concluded that there was a longstanding coexistence of state and federal law and the FDA’s traditional recognition of state-law remedies was in place each time the agency reviewed Wyeth’s Phenergan label.

Justice Breyer concurred, emphasizing the narrow reach of the holding and clarifying that the FDA may still promulgate lawful specific regulations with preemptive effect.  Justice Thomas wrote a separate concurrence supporting the majority’s conclusion but not its reasoning.  Thomas expressed his skepticism of the Court’s current preemption doctrine, arguing that it lead to expansion of federal statutes and unconstitutional results.  He would only preempt state law where Congress explicitly provided for such preemption.

Justice Alito dissented, joined by Justice Scalia and Chief Justice Roberts.  Alito argued that the FDA was ultimately responsible for regulating warning labels for prescription drugs.  He would not have disturbed the FDA’s judgment that the approved label was sufficient to render the use of Phenergan safe.  Arguing that the FDA is better suited than juries to consider the interests of all potential users of a drug over a long period, Scalia emphasized that state tort law could not be used to impose a different labeling requirement than that required under federal law. Because a jury’s cost-benefit analysis in a single case could differ from that of the FDA’s, Scalia expressed concern that juries in all fifty states could contradict the FDA’s expert determinations, reducing the incentives for medical manufacturers to develop new medical products.