Should Stockpiling Be Protected By The Hatch-Waxman Safe Harbor?

This somewhat arcane question took on significant, real-world consequences when Judge Andrews of the Delaware District Court denied Hospira's JMOL to overturn a jury's $70 million award to Amgen for Hospira's manufacture and stockpiling of 14 batches of an infringing pharmaceutical.[1] The jury had found that only 7 of the 21 batches were protected by the safe harbor.[2]

In reaching his conclusion, Judge Andrews relied on the specific working of the statute, section 271(e)(1), that "otherwise infringing activities" are protected where they are "‘solely for uses reasonably related' to obtaining FDA approval." [3] In Amgen, there was no proof that the 14 batches met that criterion. Indeed, it is unclear how the jury parsed the 21 batches and found that 7 were protected and 14 were not. But that is not the issue addressed here.

Although it is applicable to all pharmaceuticals, the safe harbor was enacted to accelerate entry of generic drugs to the market. It was a direct response to the Federal Circuit's ruling in Roche Prods. Ins. v. Bolar Phar. Co.[4], which prohibited drug manufacturers from even preparing to introduce a drug until any blocking patents expired. Thus, while any pertinent patent was extent, generics (or any drug manufactured) could not even begin the necessary testing required for an FDA filing until such patents expired. As a result, some argued that the patentee's ‘monopoly' was unduly extended well beyond patent expiry. Congress remedied this impasse by creating the safe harbor, which exempts conduct "reasonably related to the development and submission of information" to obtain regulating approval.[5]

One could argue that the act's legislative history would appear to immunize stockpiling, even if this conduct does not satisfy the specific wording of § 271(e)(1). In particular, the legislative history shows that the overall purpose of the safe harbor was to expedite FDA approval of generic drugs and get those drugs to market immediately following patent expiration.[6] Therefore, all patent rights, including the right to exclude, would terminate with patent expiration. In this regard, the legislative history includes the following statements:

It is the Committee's view that experimental activity does not have any adverse economic impact on the patent owner's exclusivity during the life of a patent, but preventing of such activity would extend the patent owner's commercial exclusivity beyond the patent expiration date.[7]

*         *        *

[The Committee on Energy and Commerce] reasoned that without [§ 271(e)(1)] generic manufacturers would be required to engage in … bioequivalency tests after the expiration of the patent. This would result in delays of about two years after the expiration of the patent before a generic could go on the market.[8]

Admittedly, neither the quoted statements nor the legislative history specifically addresses stockpiling. But without stockpiling, a patentee's "commercial exclusivity" would extend "beyond the patent expiration date," thereby undermining the very purpose of § 271(e)(1). Moreover, stockpiling would not have any "adverse economic impact" on patentees because commercial marketing of competing products would begin only after patent expiration. Courts have agreed that "[t]he basic idea behind [§ 271(e)(1)] was to allow competitors to begin the regulatory approval process while the patent was still in force, followed by market entry immediately upon patent expiration."[9] Moreover, "[b]y permitting the testing and regulatory approval process to begin well before a controlling patent had run its course, Congress must have intended to allow competitors to be in a position to market their products as soon as it was legally permissible."[10] In Intermedics Inc. v. Ventritex Inc.[11], the court opined that by enacting § 271(e)(1) Congress made a choice between two directly competing interests: continuing full protection of patent rights versus assuring access to new pharmaceutical products immediately after the expiration of blocking patents. As the court stated:

We believe that in enacting this exemption Congress clearly decided that it wanted potential competitors to be able to ready themselves, fully, during the life of the patent, to enter the commercial marketplace in a large scale way as soon as the relevant patents expired. Only by permitting this preparation to enter the market meaningfully could Congress achieve its goal of assuring the public prompt access to new medical products at the lowest commercially feasible prices.[12]

In a similar vein, the FDA has also been active in getting competing products to market as soon as FDA approval is obtained. Under a pre-launch activities importation request, the FDA can permit importation and stockpiling of finished drug products while an application for FDA approval (i.e., a new drug application, biologics license application or abbreviated new drug application) is pending. The intent is to allow drug manufacturers to expedite commercial launches with an inventory of foreign-made products as soon as FDA approval is granted.[13]

Accordingly, the two governmental entities dealing with the introduction of pharmaceuticals have a similar goal of ensuring that such products can be marketed as soon as the respective hurdles —€” FDA approval or patent expiration — are overcome.

Even though the Amgen decision is faithful to the wording of § 271(e)(1), one could posit that the statute should be reexamined to allow stockpiling to fully implement the overall purpose of the Hatch-Waxman safe harbor.

[1] Amgen Inc. v. Hospira, Inc., 15-CV-839-RGA, 2018 WL 4080353, at *1 (D. Del. Aug. 27, 2018). Earlier, the District Court of Massachusetts had held that stockpiling was not protected by the safe harbor. See Biogen Inc. v. Schering AG, 954 F. Supp. 391 (D. Mass. 1996).

[2] Hospira also question the jury instructions and the amount of damages. Both motions were denied. These issues are not discussed in this article.

[3] Id. at *2.

[4] 733 F.2d 858 (Fed. Cir. 1994).

[5] 35 U.S.C. § 271(e)(1).

[6] See Allan M. Fox & Allan R. Bennett, The Legislative History of the Drug Price Competition and Patent Term Restoration Act of 1984, 187-200 (FDLL1 1987).

[7] H.R. Rep. No. 98-857, pt. 1, at 46 (1984), reprinted in 1984 U.S.C.C.A.N. 2647, 2679.

[8] H.R. Rep. No. 98-857, pt. 2, at 8-9 (1984), reprinted in 1984 U.S.C.C.A.N. 2686, 2692-93.

[9] Proveris Scientific Corp. v. Innovasystems, Inc., 536 F.3d 1256, 1261 (Fed. Cir. 2008).

[10] Telectronics Pacing Sys., Inc. v. Ventritex, Inc., 982 F.2d 1520, 1525 (Fed. Cir. 1992).

[11] 775 F. Supp. 1269, 1277 (N.D. Cal. 1991), aff'd sub nom, Intermedics, Inc. v. Ventritex Co., 991 F.2d 808 (Fed. Cir. 1993).

[12] Id. at 1277 (emphasis added). See also Glaxo, Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1568 (Fed. Cir. 1977) ("The Hatch-Waxman Act, inter alia, allows makers of generic drugs to market generic versions of patented drugs as soon as possible after expiration of the relevant patents.").

[13] See Food And Drug Administration, Draft Guidance for Industry on Pre-Launch Activities Importation Requests, at 1 (2012).