How safe is the safe harbor provision of the Hatch-Waxman Act,35 U.S.C. §271(e)(1)?

Compiled and written by Greenblum & Bernstein PLC

How safe is the safe harbor provision of the Hatch-Waxman Act, 35 U.S.C. §271(e)(1)?

Barry I Hollander

is Of Counsel at Greenblum & Bernstein P.L.C.

A generic drug manufacturer can make, use, or sell a patented invention when a patent expires without infringement of the patent, but must first obtain regulatory approval from the Food and Drug Administration (FDA) for a drug to enter the market and compete with the patent owner of the expired patent. However, it can take a prolonged amount of time for testing and data gathering and evaluation regarding the generic drug, as well as for the submission of the data and obtaining the FDA approval. So, even though the patent has expired, the generic manufacturer cannot market the drug whereas the patent owner can continue to do so without competition from the generic manufacturer, as if the patent were still in force.

The safe harbor provision, at 35 U.S.C. §271(e)(1), of the Hatch-Waxman Act permits the generic drug manufacturer to start the FDA regulatory approval process by conducting non-sales activities before the patent expires without being liable for infringement so that FDA approval can be obtained before or by the time the patent expires or is invalidated. With the FDA approval in hand or in the works, the generic manufacturer can begin sales of the generic product when the patent does expire or is invalidated, or soon thereafter.

However, what non-sale activities by the generic drug manufacturer are related to obtaining FDA approval so as to fall within the safe harbor of non-infringement under the Hatch-Waxman Act? Also, if FDA approval is obtained before the patent expires or is invalidated, can the generic drug manufacturer safely continue any of those activities or other non-sales activities relating to the generic drug without infringing the patent under the safe harbor provision of the Hatch Waxman act? These issues were before the Court of Appeals for the Federal Circuit in two cases. In the first case, ¹ activities after market approval were held to be infringing and not within the safe harbor provision. However, in the second case, ² activities after market approval were held to be non-infringing under the safe harbor provision. The Supreme Court denied review of the first case but has been asked to review the second case on the grounds that the two decisions are in conflict and irreconcilable. It is noted that the dissenting appellate Judge in the first case (Judge Moore) wrote the opinion for the majority in the second case.

As illustrated in Figure 1, while otherwise infringing activities by a generic manufacturer are protected by the safe harbor provision before FDA approval, are the activities protected after FDA approval but before the patent expires or is invalidated?

OPEN IN VIEWER

Figure 1.

Relationship of Generic's activities and safe harbor infringement protection.

In the first case, the Court of Appeals for the Federal Circuit held that the safe harbor provision of 35 U.S.C. §271(e)(1) does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained. The court stated that the activities of Biogen and GlaxoSmithKline in providing vaccines, in advising on immunization schedules, and in reporting any adverse vaccine effects to the FDA after obtaining marketing approval, but before the patent expired, does not fall within the safe harbor of §271(e)(1), and vacated the lower court’s judgment of non-infringement. ³

In the second case, the Court of Appeals for the Federal Circuit held that post-approval studies that are reasonably related to the development and submission of information under a Federal law that regulates the manufacture, use, or sale of drugs fall within the scope of the §271(e) (1) safe harbor, and there was no limitation of the safe harbor to the drug approval process. According to the court, the safe harbor includes all materials the FDA requires to be submitted in the regulatory process, such as the testing of each batch of the generic drug that is sold commercially after FDA approval according to a patented test method, to satisfy the FDA requirement that the generic drug is actually the same as the brand name drug, or is unadulterated. Furthermore, the safe harbor applies to activities for which the FDA requires a record to be maintained even if the record is never submitted to the FDA. ⁴

The safe harbor provision of 35 U.S.C. §271(e) (1) provides:

35 U.S.C. §271(e) (1) It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products. (emphasis added.)

On appeal, Classen argued that the district court erred in its application of §271(e)(1) because this statute, as enacted and intended, and as judicially interpreted, is limited to activities conducted to obtain pre-marketing approval of generic counterparts of patented inventions, before patent expiration. GlaxoSmithKline and Biogen argued that their reporting of vaccine relationships, or recommendations in view of the relevant literature, or other activity in conformity with FDA regulations, are within the infringement safe-harbor of §271(e)(1). However, the appeals court agreed with the patent owner, Classen, that the district court extended §271(e)(1) beyond its statutory and legislative purpose, because there is no issue in this case of submissions for regulatory approval of generic products, or like policy considerations. The appeals court stated that:

Classen is correct, for §271(e)(1) provides an exception to the law of infringement in order to expedite development of information for regulatory approval of generic counterparts of patented products. The statute does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained. (emphasis added) 659 F.3d at 1070.

Several decisions were also cited in support of the appeals court’s position that the safe harbor provision is directed to premarketing approval of generic counterparts before patent expiration, including:

Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 671, 110 S. Ct. 2683, 110 L. Ed. 2d 605 (1990), (the safe harbor provision allows competitors, prior to the expiration of a patent, to engage in otherwise infringing activities necessary to obtain regulatory approval, and activities could not constitute infringement if they had been undertaken to develop information reasonably related to the development and submission of information necessary to obtain regulatory approval under the Food, Drug, and Cosmetic Act (FDCA)).

In a dissent by Judge Moore, it was argued that “Nowhere does the statute limit the safe harbor to pre-approval uses.” ⁶ According to Judge Moore, the majority's construction is contrary to the plain language of the statute and Supreme Court precedent because the statute broadly recites that “[i]t shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention … solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs … ” 35 U.S.C. §271(e)(1). According to Judge Moore, the Supreme Court explored the boundaries of this safe harbor in Merck, ⁷ when it reversed the appeals court's narrow interpretation of §271(e)(1). The dissent quoted the Supreme Court as stating that:

According to the dissent by Judge Moore, the Supreme Court continued, “[t]here is simply no room in the statute for excluding certain information from the exemption on the basis of the phase of research in which it is developed or the particular submission in which it could be included.” ⁸ To eliminate any lingering doubts, the Supreme Court emphasized yet a third time that “[Congress] exempted from infringement all uses of patented compounds ‘reasonably related' to the process of developing information for submission under any federal law regulating the manufacture, use, or distribution of drugs.” ⁹

The dissent agreed that §271(e)(1) covers pre-approval studies, as the legislative history indicates, but argued that none of the legislative history cited by the majority, nor the cases it references, speak to the question at issue here – whether the statute as enacted also covers post-approval activities. According to the dissent, the question is not whether Congress intended to protect pre-approval activity but whether the enacted legislation covers more than just pre-approval activity. The answer to that question, according to the dissent, is that the plain language on its face does not contain a “pre-approval” limitation, and “Any activity solely for uses reasonably related to the development and submission of information under a Federal law is included in §271(e)(1). ¹⁰

In his dissent, Judge Moore agreed with the district court's plain language construction of the statute, and agreed that the alleged participation by GSK and Biogen in studies evaluating risks associated with different vaccination schedules is reasonably related to their requirement to review and report adverse information to the FDA. The dissent referred to 21 C.F.R. §601.70 (requiring annual progress reports of post-approval studies); and 21 C.F.R. §600.80 (requiring the reporting of post-approval adverse reactions). However, the dissent indicated that he did not believe that GSK’s and Biogen’s vaccination of patients according to the patented methods did not come within the statutory safe harbor. Classen accused GSK of: (1) screening schedules and then immunizing subjects in accordance with a lower risk schedule and (2) determining the risk of an immunization schedule by immunizing subjects and then comparing the incidence of a disorder (i.e., an adverse event) to that in a control group. Biogen was similarly accused of administering the vaccines according to a risk-reducing protocol. The dissent concluded that these activities are not reasonably related to the development and submission of data to the FDA and therefore do not fall within §271(e)(1)'s safe harbor exception because “Although GSK and Biogen might be required to report adverse events that occur as a result of their vaccines, they are not required by law or regulation to perform such post-approval vaccinations in order to generate data.” ¹¹

The dissent indicates that the general administration of drugs or vaccines is not reasonably related to post-approval reporting requirements. According to Judge Moore, while the FDA requires the reporting of post-approval adverse reactions, this does not mean that all commercial uses of the vaccine are “solely for uses reasonably related to the development and submission of information under a Federal law.” Judge Moore stated that “The fact that GSK or Biogen would have to report to the FDA any adverse reaction after administering a vaccine does not mean the administration itself is noninfringing.” So, according to the dissent, some of the post approval activities of GSK and Biogen fell within the safe harbor, and some did not fall within the safe harbor, depending on whether the post-approval activities were according to the safe harbor provision “reasonably related to the development and submission of information under a Federal law.” ¹²

In response to the dissent by Judge Moore, the majority of the Court stated that:

Our colleague in dissent strays from statute and precedent, in arguing that any activity by any entity concerning any adversely patented product or method is exempted from infringement by §271(e)(1), provided only that the information obtained is “reasonably related to submitting any information under the FDCA,” Diss. Op. at 17 (emphasis in dissent), “including information regarding post-approval uses.” Id. Such a massive enlargement of the statutory exemption is incorrect. See, Classen, 659 F.3d at 1072.

According to the court in Momenta, this molecular diversity raises a potential problem in light of the Food and Drug Administration's (FDA's) abbreviated new drug application (ANDA) approval process. ANDAs are typically used by generic companies to obtain approval to market a generic version of an existing drug. Unlike a new drug application (NDA), an ANDA applicant is not required to submit the same extensive clinical studies typically needed to prove the drug's safety and efficacy. Instead, the ANDA applicant must submit studies to establish that its drug is bioequivalent to the reference drug with sufficient information to establish that the generic drug has the same active ingredients as the reference drug. According to the FDA, the FDA has broad discretion with respect to the information it may consider in making a finding on the ‘sameness' of an active ingredient.

Amphastar was the first company to file an ANDA for a generic version of enoxaparin, however Momenta Pharmaceuticals, Inc. and Sandoz (collectively Momenta) received approval first and were the first to market a generic enoxaparin product. The subsequent approval of Amphastar’s generic version threatened Momenta’s position of being the only generic version, which generated annual revenue of about one billion dollars. Momenta sued Amphastar for infringement of its U.S. Patent No. 7,575,886 after Amphastar received final FDA approval to market its generic enoxaparin. The Momenta patent related to methods for analyzing an enoxaparin sample. Momenta alleged that Amphastar infringed the patent by manufacturing generic enoxaparin for commercial sale using the claimed methods. The district court granted Momenta a preliminary injunction based on its belief that Amphastar's quality control batch testing infringed the ‘886 patent. The appeals court stayed the preliminary injunction and then vacated the preliminary injunction because the district court incorrectly concluded that Momenta was likely to succeed on the merits of its infringement claim.

In its opposition to the preliminary injunction, Amphastar argued, among other things, that its testing falls within the scope of the Hatch-Waxman safe harbor, 35 U.S.C. §271(e)(1). The district court found that the alleged infringing activity involves the use of Momenta’s patented quality control testing methods on each commercial batch of enoxaparin that will be sold after FDA approval, because the “FDA requires” the testing. While acknowledging that Amphastar's use of the patented method was for the purpose of developing information to submit to the FDA, the district court nevertheless concluded that the safe harbor does not apply to Amphastar's testing. According to the district court, although the safe harbor provision permits otherwise infringing activity that is conducted to obtain regulatory approval of a product, it does not permit a generic manufacturer to continue in that otherwise infringing activity after obtaining such approval. In reaching this conclusion, the district court focused primarily on the legislative history of the safe harbor, as quoted in Classen. ¹³

On appeal, Amphastar argued that the district court took an unduly restrictive view of the safe harbor in holding that it does not apply after approval. Momenta argued that the lower court correctly held that the safe harbor does not apply to Amphastar's testing for two reasons: (1) the safe harbor does not apply to post-approval activity, and Amphastar's batch testing is carried out as a condition for the post-FDA approval sale of enoxaparin and (2) the FDA does not require the use of the particular procedure that is claimed in the ‘886 patent because the availability of other acceptable testing methods means that Amphastar's alleged use of the patented method is not required by the FDA, and is therefore outside of the safe harbor provision.

The appeals court then proceeded to ascertain the scope of the Hatch-Waxman safe harbor provision 35 U.S.C. §271(e)(1) to resolve the parties’ conflicting views about the scope of the safe harbor. According to the court, Congress could not have been clearer in its choice of words for the provision that as long as the use of the patented invention is solely for uses “reasonably related” to developing and submitting information pursuant to “a Federal law” regulating the manufacture, use, or sale of drugs, it is not “an act of infringement.” The court explained that although the Hatch-Waxman safe harbor provision was enacted in the context of the then-novel ANDA approval process, 35 U.S.C. §271(e)(1) does not reference the portion of the Federal Food, Drug, and Cosmetic Act describing the ANDA requirements, e.g., 21 U.S.C. §355(j). Instead, the court explained, Congress used more flexible and expansive language to define the scope of §271(e)(1), referring generally to “the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs.” The court stated that:

This broad language unambiguously applies to submissions under any federal law, providing that the law “regulates the manufacture, use, or sale of drugs.” Limiting the scope of 35 U.S.C. §271(e)(1) to just the submission of information pursuant to the Federal Food, Drug, and Cosmetic Act generally, or to the ANDA provision of the Federal Food, Drug, and Cosmetic Act in specific, would read words into the statute in violation of the express language chosen by Congress. 686 F.3d at 1354.

The court disagreed with the contention that the information in question was not “submitted” to the FDA but rather was retained by the ANDA holder. According to the court, Amphastar, as a generic drug manufacturer under an ANDA, cannot sell a batch of enoxaparin unless it has established that its strength and quality is consistent with the standards set forth in the relevant official compendium, pursuant to 21 U.S.C. §§331(a), 351(b). The court further indicated that FDA regulations require that all records associated with a produced batch of drugs, including these batch records, “be retained for at least 1 year after the expiration date of the batch” pursuant to 21 C.F.R. §211.180(a), and that these records “shall be readily available for authorized inspection” by the FDA at any time, pursuant to 21 C.F.R. §211.180(c). The court stated that “the requirement to maintain records for FDA inspection satisfies the requirement that the uses be reasonably related to the development and submission of information to the FDA.” ¹⁷ The court found that it is not disputed by the parties that these records are produced in order to develop and submit to the FDA proof that the Amphastar products comply with a Federal law. The court held that the fact that the FDA does not in most cases actually inspect the records does not change the fact that they are for the “development and submission of information under a Federal law” pursuant to 35 U.S.C. §271(e)(1); as supported by the Supreme Court decision in Merck. ¹⁸ Accordingly, the court considered this information “submitted” for purposes of the statute, and then addressed the question of whether the submissions are within the safe harbor.

In determining whether the submissions are within the safe harbor, the court cited its previous case, Classen, ¹⁹ as holding that the safe harbor provision §271(e)(1) “does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained.” ²⁰ The court said that at issue in Classen were studies to evaluate the association between the timing of childhood vaccinations and the risk of developing certain immune-mediated disorders. Although the studies themselves were not mandated by the FDA, any vaccine license holder was required to report to the FDA “adverse experience information,” such as adverse side effects, it acquired as a result of vaccine studies, pursuant to 21 C.F.R. §600.80. The court stated that in Classen “We found that the studies conducted by the vaccine license holder according to patented methods were not insulated by the safe harbor because the studies did not facilitate marketing a generic drug by “expedit[ing] development of information for regulatory approval.” Classen, 659 F.3d at 1070.” ²¹ The court did not overrule the Classen decision and said that it was bound by it, stating:

We, of course, are bound by the Classen decision unless it is overruled en banc or by the Supreme Court. Accordingly, the scope of the safe harbor provision does not extend to “information that may be routinely reported to the FDA, long after marketing approval has been obtained.”

However, what is a “routine submission” and what is “long after” marketing approval. Also, if, according to Classen, the safe harbor does not apply after approval, why does it matter how long after approval the activities occurred, and why does it matter if the activities are routine or not? Where in the safe harbor provision does the statute state “routine” in referring to the submission, and where does it state “long after” or “marketing approval?” According to the court in Momenta:

This case, however, fits well within Classen because the information submitted is necessary both to the continued approval of the ANDA and to the ability to market the generic drug. Here, the submissions are not “routine submissions” to the FDA, but instead are submissions that are required to maintain FDA approval. Amphastar is required to conduct a laboratory determination of identity and strength of the active ingredient for each batch of enoxaparin. See 21 C.F.R. §211.165(a). This test must be done according to the patented methods described in an official compendium, in this case the United States Pharmacopeia (USP). See 21 U.S.C. §351(b) (Any “determination as to strength, quality, or purity shall be made in accordance with the tests or methods of assay set forth in such compendium.”). Moreover, as described above, FDA regulations require that all such batch records “be retained for at least 1 year after the expiration date of the batch,” 21 C.F.R. §211.180(a), and that such records “shall be readily available for authorized inspection” by the FDA at any time, 21 C.F.R. §211.180(c); see also 21 C.F.R. §§211.186, 211.188, 211.194 (requiring “master production and control records,” “batch production and control records,” and “laboratory records”). Failure to comply with these requirements could result in suspension or revocation of Amphastar's ANDA approval to market the drug. See 21 U.S.C. §§335a(g), 355(e). Furthermore, such testing is “a condition for [the drug's] approval and release” into commerce, 21 C.F.R. §211.165(d), thus acting as a predicate to the ability to market the ANDA-approved drug to the public. Momenta, 686 F.3d at 1358.

Momenta also argued that even if 35 U.S.C. §271(e)(1) extends to post-approval activities, Amphastar's testing is not protected because there are FDA-endorsed non-infringing alternatives available. However, according to the court, the safe harbor does not mandate the use of a non-infringing alternative when one exists. The only limitation in the safe harbor, according to the court, is that the use must be “reasonably related to the development and submission of information” pursuant to a federal law regulating the “manufacture, use, or sale of drugs or veterinary biological products.” 35 U.S.C. §271(e)(1). The court held that the safe harbor's protection is not limited to the dire situation where the patented invention is the only way to develop and submit the information. Instead, stated the court, the safe harbor expressly allows the submitter the freedom to use an otherwise patented means to develop the necessary information demanded by the “Federal law.” ²⁵

The court dismissed Momenta's interpretation as being predicated upon the incorrect assumption that “solely” in the context of 35 U.S.C. §271(e)(1) means that the patented invention must be the “sole” means of providing the information for the safe harbor to apply. According to the court, “solely” modifies the phrase “uses reasonably related to the development and submission of information,” but does not place any other restriction on when the patented invention may be used without infringing. The court held that as long as the use of the patented invention is done to generate information that will be submitted pursuant to a relevant federal law, that use falls within the safe harbor. ²⁶

In a dissent by Judge Radar, it was argued that the parties agreed that FDA-mandated quality control testing during manufacturing is not done “solely” for purposes of developing and submitting information to the FDA. Accordingly, argued the dissent, because Amphastar uses the patented method while manufacturing a product to sell in commerce, its infringing activity does not meet the “solely” limitation in the statute. ²⁷ However, the court countered that this is not a tenable reading of the statute and is contrary to precedent. In support of its position, the court stated that “Supreme Court cases interpreting the safe harbor make clear that the safe harbor is not limited to acts that only produce information for the FDA but protects all acts, even interim research steps and acts that might produce other useful data, “as long as there is a reasonable basis for believing that the [act] will produce the types of information that are relevant to [a submission to the FDA].” Merck, 545 U.S. at 208.” ²⁸ The appeals court in Momenta indicated that it has “interpreted this language of the safe harbor to allow alleged infringers to use “data from tests for more than FDA approval,” such as for fund raising and other business purposes. Abtox, Inc. v. Exitron Corp., 122 F.3d 1019, 1030 (Fed. Cir. 1997) (holding that the alleged infringer's “intent or alternate uses [of test data] are irrelevant to its qualification to invoke the section 271(e)(1) shield”).” ²⁹

According to the court, “even if Momenta's strained reading of the statute was supportable, Amphastar's allegedly infringing activities are clearly carried out according to the dictates of the Federal Food, Drug, and Cosmetic Act.” The court reasoned that under the Act, Amphastar is prohibited from selling a drug if it is adulterated pursuant to 21 U.S.C. §331(a), and a drug is adulterated if it purports to be a drug listed in an official compendium, but in actuality differs in composition, pursuant to 21 U.S.C. §351(b) and 21 U.S.C. §321(j) (defining “official compendium”). To demonstrate that a drug is not adulterated, testing must be carried out pursuant to the methods articulated in the compendium, in this case the United States Pharmacopeia (USP). ³⁰

The court held that under the correct interpretation of 35 U.S.C. §271(e)(1), Momenta's admission that Amphastar's testing is carried out to “satisfy the FDA's requirements” makes it unlikely that Momenta will succeed on the merits of its infringement claim, and so the preliminary injunction against Amphastar’s allegedly infringing activities was vacated. ³¹

Momenta and Sandoz, Inc. have petitioned the U.S. Supreme Court to review the Momenta decision as being irreconcilable with the Classen decision and as both being incorrect as to the scope of the safe harbor provision, thereby making its meaning uncertain. However, the Supreme Court had denied certiorari in the Classen decision during pendency of the Momenta case. Before denying to hear the case, the Supreme Court requested the U.S. Solicitor General to file an amicus brief urging the court to deny certiorari. In the amicus brief, it was argued that even though the Federal Circuit erred in Classen in stating that the safe harbor provision of section 271(e)(1) encompasses only activities undertaken to obtain the FDA’s premarketing approval of generic products, there is no longer any practical need for the Supreme Court’s intervention in light of the Federal Circuit’s subsequent decision in Momenta. The amicus brief also states that if post approval studies involve the use of patented inventions solely for uses reasonably related to the development and submission of information to the FDA, the plain language of Section 271(e)(1) precludes any claim for patent infringement. So, it appears that the Supreme Court may deny certiorari in the Momenta case because Momenta held that: (1) even though it could not overrule Classen, the cases were consistent and (2) as argued by the U.S. Solicitor General, the safe harbor is not limited to pre-approval activities but rather to the use of patented inventions solely for uses reasonably related to the development and submission of information to the FDA.

It looks like the patent owners and the generic manufacturers will need to do the “dog paddle” until the U.S. Supreme Court decides whether to hear the Momenta case and which activities float and which activities sink in the safe harbor. It would be helpful if the Supreme Court agreed to hear the Momenta case to: (1) clearly overrule Classen’s indication that the safe harbor only applies to pre-approval activities, (2) clarify the significance of the word “solely” in the safe harbor provision, and (3) clarify or overrule both Classen’s and Momenta’s indication that the statute does not apply to information that may be routinely reported to the FDA, long after marketing approval has been obtained. ³²