Generic Drug Patent Infringement Litigation & Trial under the Hatch-Waxman Act
Updated: Apr 15, 2021
... the artificial act of infringement and timing of the lawsuit create unique challenges for proving patent infringement. The challenges arise from the fact that at the time the paper NDA or ANDA is submitted to FDA, there is no commercial product for the parties and the court to analyze....
While providing a safe harbor for generic companies to use patented inventions in order prepare their FDA submissions, the protections of the safe harbor mostly end when the application for approval to market the generic copy is submitted to FDA. In order to promote early resolution of patent issues before the generic company makes substantial investments in actually bringing the product to market, the Hatch Waxman Act created an artificial act of infringement as an early starting point for generic drug patent litigation.
Under the statute, the act of submitting a paper NDA or ANDA to FDA for approval is deemed an act of infringement if the applicant has made a paragraph IV certification, informing FDA that it can immediately approve the application because in the applicant’s view, the patents covering the drug and its therapeutic uses are invalid, unenforceable, or not infringed by the production and sale of the generic drug. See 35 U.S.C. § 271(e)(2).
This artificial act of infringement allows the patent litigation to commence before the generic manufacturer has made or sold any commercial generic drug product. By accelerating the patent litigation in this way, the Hatch Waxman Act allows the patent issues to be resolved before (1) the generic manufacturer makes undue investment in commercial production and marketing, (2) disruption is created in the market by the sale and subsequent recall of generic drugs due to a finding of patent infringement, and (3) damage is done to the innovator’s exclusive market due to the unwarranted, temporary entry of a generic competitor.
Although the procedural and substantive aspects of litigating drug patent validity and enforceability do not deviate much from non-drug patent litigation, the artificial act of infringement and timing of the lawsuit create unique challenges for proving patent infringement. The challenges arise from the fact that at the time the paper NDA or ANDA is submitted to FDA, there is no commercial product for the parties and the court to analyze—only drug substance samples and product samples from small-scale “demonstration” batches and a collection of documents comprising an ANDA or paper NDA that seek approval to market the proposed commercial product. The question then becomes, what is the appropriate object of the patent infringement analysis?
The U.S. Patent Act defines infringement as making, using, selling, offering to sell, or importing into the United States a patented article. See 35 U.S.C. § 271(a). A person who commits any one of these acts is said to have directly infringed the patent. In addition, the U.S. Patent Act imposes patent infringement liability on a person who indirectly induces or contributes to the direct infringement of a patent by another person. See id. at §§ 271(b) & (c).
In Hatch-Waxman litigation, the focus of the infringement inquiry often depends on whether the generic drug manufacturer is accused of direct infringement or indirect infringement. When the generic drug manufacturer is accused of directly infringing patent claims to either the drug substance or the finished drug product, then the infringement inquiry usually focuses upon the application’s drug or finished product specifications. When the generic drug manufacturer is accused of indirectly infringing method-of-use patent claims by inducing the direct infringement of the patent claims by doctors or patients, then the infringement inquiry usually focuses upon the drug product label and its indicated uses for the drug.
Direct Patent Infringement
U.S. patent law recognizes two types of direct infringement. The first type of patent infringement is literal infringement where all patent claim elements as defined in the patent are found in the infringing product. For example, a patent claim to the base molecule of the drug substance will define each constituent part of the molecule and its structure. A generic drug will literally infringe the patent claim if it contains the same base molecule as defined in the patent claim.
Patents directed to the base molecule of the drug substance are often referred to as “pioneer” patents, because they are the first in a family of patents that includes later-issued patents directed to new formulations and new uses of the drug substance. Because the scope of pioneer patent claims is narrowly confined to describing the base molecule, there are few opportunities for generic drug manufacturers to “design around” or avoid infringing the patent claims--ordinarily a generic drug must copy the active ingredient. As a result, generic drug manufacturers often admit that their drug product will infringe the pioneer patent claims thereby simplifying and narrowing the lawsuit to issues of patent validity or patent enforceability.
The second type of patent infringement is infringement by equivalence where although one or more of the patent claim elements as defined in the patent are not found in the infringing product, an equivalent to the patent claim element is instead found in the infringing product. For example, a patent claim to the sodium salt of the base molecule may be infringed by a generic drug that contains the potassium salt of the base molecule if the court determines that the potassium salt of the drug is insubstantially different from sodium salt of the drug.
Infringement by equivalence is most common where the Orange Book listed patent is a later-issued patent directed to a new formulation or new use of the drug substance. Later-issued patents provide generic manufacturers more opportunities to attempt to design around or avoid the literal scope of the patent claims. For example, where the patent claims a specific salt form or specific crystalline polymorphic form of the drug substance, then the generic manufacturer may attempt to avoid the patent claims by developing an FDA-acceptable alternative salt form or crystalline polymorphic form of the drug substance. As a result, litigations involving these later-issued patents are often complicated by not only questions about patent validity and patent enforceability but also questions about infringement and the equivalency of the generic drug product to the literal scope of the patent claims.
As discussed elsewhere, the timing of Hatch-Waxman litigation substantially complicates the infringement inquiry because the final approved commercial drug product does not yet exist. In the decade following the enactment of the Hatch-Waxman Act in 1984, the courts struggled with how to conduct the infringement analysis of a hypothetical drug product. Finally, in a 1997 decision, the Federal Circuit explained that the inquiry is a standard infringement test and “[t]he only difference … is that the allegedly infringing drug has not yet been marketed and therefore the question of infringement must focus on what the ANDA applicant will likely market if its application is approved.” Glaxo, Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1569 (Fed. Cir. 1997); see also Bayer AG v. Elan Pharm. Res. Corp., 212 F.3d 1241, 1248-49 (Fed. Cir. 2000) (“The focus under § 271(e)(2)(A), is on ‘what the ANDA applicant will likely market if its application is approved, an act that has not yet occurred”); Glaxo Group Ltd. v. Ranbaxy Pharm., Inc., 262 F.3d 1333, 1337-38 (Fed. Cir 2001) (same).
In offering guidance to parties and the courts on how to apply the “likely-to-be-approved product” analysis, the Federal Circuit further explained that “this hypothetical inquiry is properly grounded in the ANDA application and the extensive materials typically submitted in its support.” Glaxo, 110 F.3d at 1569. “Therefore, it is proper for the court to consider the ANDA itself, materials submitted by the ANDA applicant in support of the ANDA, and any other relevant evidence submitted by the applicant or patent holder.” Id. at 1570. In summary, the question asked during the infringement analysis is whether the drug product specified and described in the ANDA or paper NDA will infringe the patent if approved and then sold?
As a consequence of litigating a hypothetical future product described by an application that is, itself, subject to amendment during the approval processes, the infringement analysis is often a far-ranging and somewhat complex matter. It typically involves not only questions about what the paper NDA or ANDA says the product will be but also question about what kind of product FDA will ultimately approve.
In Sunovion Pharm., Inc. v. Teva Pharm. USA, Inc. et al., 731 F.3d 1271 (Fed. Cir. 2013), Dr. Reddy’s Laboratories sought approval of a generic version of the sleep medication marketed as Lunesta®. The Orange Book listed patent claimed a form of the active ingredient in Lunesta® that is “essentially free” of a certain isomer of the compound. The court determined that “essentially free” means less than 0.25% of the isomer.
The drug substance specification in Dr. Reddy’s ANDA limited the amount of the isomer to “no more than 0.6%” which meant that Dr. Reddy’s specification overlapped the range of isomer covered by the patent claim. In an effort to avoid infringement, Dr. Reddy submitted a certification to the court that notwithstanding its ANDA specification, it would manufacture its generic drug in a manner to insure the quantity of isomer in its product would always be more than 0.3% but less than 0.6% of the active ingredient. The district court granted Dr. Reddy’s motion for summary judgment of non-infringement based on the certification.
On appeal, the Federal Circuit reversed the district court and ruled that Dr. Reddy infringed. The Federal Circuit explained that “if a product that an ANDA applicant is asking the FDA to approve for sale falls within the scope of an issued patent, a judgment of infringement must necessarily ensue.” Id. at 1278. The Federal Circuit disregarded Dr. Reddy’s certification to the district court stating, “Allowing Reddy to avoid infringement based on its unconventional and unenforceable ‘guarantee’ when it is asking for and may receive FDA approval to market a product within the scope of the innovator’s patent, would be incompatible with the basic principles of patent law.” Id. at 1279.
Thus, in Sunovion Pharm., the Federal Circuit ruled that the ANDA’s drug substance specification controlled the analysis of infringement. Dr. Reddy’s separate promise to make the drug in a non-infringing manner was irrelevant. Ordinarily, therefore, the specifications included in the ANDA or paper NDA will be the focal point of the direct infringement analysis. However, the applicant’s specifications are not always determinative of the infringement analysis--especially where there is evidence that the chemical or physical properties of the drug will likely change over time or under certain conditions.
For example, in SmithKline Beecham Corp. v. Apotex Corp. et al., 247 F. Supp. 2d 1011 (N.D. Ill. 2003), aff’d, 365 F.3d 1306 (Fed. Cir. 2004), opinion vacated on reh’g en banc, 403 F.3d 1328 (Fed. Cir. 2005) and opinion superseded, 403 F.3d 1331 (Fed. Cir. 2005) and aff’d on other grounds, 403 F.3d 1331 (Fed. Cir. 2005), the Orange Book listed patent claimed the hemihydrate crystalline form of the active ingredient in the antidepressant drug Paxil®. The generic manufacturers in the cases attempted to avoid the patent claim by producing amorphous forms or different crystalline polymorphic forms of the active ingredient.
The plaintiff introduced evidence at trial that the hemihydrate form of the drug was the most physically stable form and that under the manufacturing and storage conditions specified in their ANDAs, each of the generic manufacturers would necessarily produce at least small amounts of the patented hemihydrate form in their drug products. The district court entered judgment of non-infringement, ruling that the patent claim implied and required at least a commercially significant amount of the hemihydrate form of the drug.
On appeal, the Federal Circuit reversed, ruling that the patent claim was not limited to drugs containing a commercially significant amount of the hemihydrate form of the active ingredient but that the proper claim scope covered drugs containing even just one hemihydrate crystal. The Federal Circuit therefore found that the accused generic drug products infringed the patent because although the ANDA specifications required the production of non-infringing polymorphic forms of the drug, the evidence showed that at least small amounts of the infringing hemihydrate form of the drug would necessarily be included in the commercial product.
Accordingly, proof of direct infringement in Hatch-Waxman litigation is often challenging and is complicated by the hypothetical nature of the accused generic drug product. Although the courts have ruled that the ANDA or paper NDA product specifications ordinarily control the infringement inquiry, courts often permit plaintiffs to challenge the practicalities of making drugs according to the specifications and likelihood that some portion of the generic drug product is susceptible to changing into an infringing form.
Indirect Patent Infringement
Cases of indirect infringement involve accusations that a person indirectly induces or contributes to the direct infringement of the patent by another person. Although there have been a few Hatch-Waxman cases involving issues of contributory infringement under Section 271(c) of the U.S. Patent Act, the majority of the indirect infringement cases have involved issues of induced infringement under Section 271(b) of the Patent Act.
The typical allegation of induced infringement in the Hatch-Waxman context involves method-of-use patent claims that are directed to one or more therapeutic uses of the drug product. The generic drug manufacturer does not directly infringe the method-of-use patent claims by making and selling the generic drug. Instead, the direct infringers of the method-of-use patent claims are doctors and their patients--the people who use the drug in an infringing manner. The question then becomes whether the generic drug manufacturer plays any legally significant role in inducing the infringement committed by the doctors and their patients.
Under Section 271(b) of the U.S. Patent Act, a person induces the infringement of another by “actively and knowingly aiding and abetting another’s direct infringement.” In the context of non-drug products, merely selling a product that could be used in an infringing manner is ordinarily not enough to prove induced infringement. However, the uses of drug products are regulated, and therefore courts have struggled to judge the legal consequences of selling a drug product that is indicated for certain approved therapeutic uses and their relationship to method-of-use patent claims.
Warner-Lambert v. Apotex, 316 F.3d 1348 (Fed. Cir. 2003) is a leading indirect infringement case involving uses of the drug gabapentin. Warner-Lambert obtained FDA approval of gabapentin as a treatment for epilepsy. However, Warner-Lambert later discovered that gabapentin was useful for the treatment of certain neurodegenerative diseases and obtained a method-of-use patent covering those therapeutic uses. Although FDA had not approved the use of gabapentin for the treatment of neurodegenerative disease, physicians began prescribing the drug “off label” for that use. At one point it was estimated that 89% of all gabapentin sales were devoted to the treatment of neurodegenerative disease.
Apotex submitted its ANDA seeking approval to sell generic gabapentin for the treatment of epilepsy--the only FDA approved use of the drug. Warner-Lambert sued Apotex, alleging that Apotex’s commercial sale of generic gabapentin would induce infringement of Warner-Lambert’s method-of-use patent for the treatment of neurodegenerative disease. Warner-Lambert introduced evidence that Apotex knew or should know that at least 89% of its sales of generic gabapentin would result in infringing uses of the drug.
The court, however, disagreed with Warner-Lambert. The court held that unless there was clear proof of instruction, promotion, or other activity inducing doctors to prescribe gabapentin for the treatment of neurodegenerative disease, Apotex’s mere knowledge of how the drug would likely be used in the marketplace was irrelevant. Indeed, the evidence showed only that Apotex would sell gabapentin with a product label stating that the drug was approved for the treatment of epilepsy. Accordingly, Apotex could not be held liable for inducing the direct infringement by doctors and their patients.
Allergan, Inc. v. Alcon Labs., Inc., 324 F.3d 1322 (Fed. Cir. 2003) is another example showing that court’s view the drug product label as controlling the indirect infringement analysis. Allergan obtained approval to sell the drug brimonidine for the treatment of intraocular pressure. However, Allergan had method-of-use patents covering the use brimonidine for the treating nerves in the eye, which became the predominant off-label use for the drug.
Alcon submitted an ANDA seeking approval to sell generic brimonidine for the treatment of intraocular pressure. Allergan sued Alcon alleging that Alcon’s sale of generic brimonidine would induce the direct infringement by doctors and their patients of Allergan’s method-of-use patents. As in the Warner-Lambert case, the court ruled that Alcon’s sale of generic brimonidine with a product label for the indicated use of the drug to treat intraocular pressure would not induce the infringement of Allergan’s method-of-use patent claims. Since Allergan did not have evidence that Alcon had promoted or intended to promote brimonidine for the treatment of optic nerves, the court ruled that Allergan had failed to prove induced infringement.
As shown in the Warner-Lambert and Allergan cases, the focus of the infringement inquiry for indirect infringement allegations directed to the inducement of direct infringement by doctors and patients is properly upon the product label. Here, the Hatch-Waxman Act specifically provides generic manufacturers great flexibility in “carving out” patented uses of the drug and seeking FDA approval for only non-patented uses of the drug. See 21 U.S.C. § 355(j)(2)(A)(viii).
Litigation & Trial
As discussed previously, the litigation of Hatch-Waxman cases closely resembles litigation of other patent infringement cases. Hatch-Waxman cases arise under the U.S. Patent Act and are subject to the jurisdiction of the U.S. federal courts. Orange Book patent owners and NDA holders initiate their lawsuits in U.S. District Court by filing a complaint alleging patent infringement. The venue and personal jurisdiction rules generally require that the lawsuits be filed in the state where the generic manufacturer is incorporated or where it has a regular and established place of business. As a result of these rules, a large number of cases are filed in the U.S. District Court of Delaware where many companies incorporate under Delaware’s favorable corporate law. Also, many cases are filed in the U.S. District Court of New Jersey where many pharmaceutical companies maintain a regular place of business.
It is common to have multiple ANDA filers for a single branded drug--sometimes as many as ten or more ANDA filers for blockbuster drugs. The NDA holder and patent owner attempt to simplify the overall litigation by filing as many of the lawsuits as possible in the same U.S. district court. When the cases are pending in the same court, the judge will often consolidate the cases and place all of the cases on the same schedule for pre-trial discovery and trial. When the cases are consolidated in this way, the defendants typically form a “defense group” and in many ways act as a single defendant in taking discovery from the plaintiffs and working through the pre-trial steps of the case in single group. The cases are also typically consolidated into a single trial, creating further efficiencies for the court and the parties.
As a consequence of the venue and personal jurisdiction rules, however, it is often not possible to file all lawsuits in the same judicial district. In such situations, the plaintiffs typically petition the Judicial Panel for Multi-District Litigation (“JPML”) for assistance. The JPML is a panel of U.S. district court judges who periodically sit together to hear and rule on consolidation requests. Because of the venue and personal jurisdiction rules, the JPML is not able to formally transfer a case from a district court in one state where venue and personal jurisdiction are proper to a district court in another state where venue and personal jurisdiction are not proper. However, the JPML can transfer cases to a single U.S. district court for purposes of pretrial proceedings only. That means that the cases will be consolidated in one location for purposes of fact and expert discovery. At the conclusion of fact and expert discovery, the cases will be returned to their original jurisdictions for trial. In that way, the JPML creates procedural efficiencies for the longest and often most costly aspects of a litigation--fact and expert discovery.
The generic drug defendants answer the lawsuit’s complaints in the same way as defendants in any other patent litigation. They either admit or deny the allegations of infringement made by the plaintiffs. As mentioned previously, defendants sued on pioneer patents will often admit infringement of the patent but deny that the patent is valid. During the litigation, they will attempt to develop evidence that the drug claimed in the patent lacks novelty because it was previously made or described in prior art publications.
Alternatively, the defendants may allege that the patented drug was obvious by pointing to a combination of prior art publications showing similar compounds or formulations and relying on expert testimony to prove that it would have been obvious to a person of ordinary skill in the art to make minor modifications to the prior art compounds or formulations to arrive at the patented invention. An allegation of obviousness in a case can have significant impact on the scope of discovery. In addition to the scientific issues of the obviousness questions, the U.S. patent law permits discovery into “secondary considerations of non-obviousness” which include, among others, a long-felt but unsatisfied need for the invention and the commercial success of the invention. The underlying assumption of these factors is that if the drug product had long been desirable and would produce commercial success, then one or more other persons would have made the obvious modifications to the prior art to create the new drug product. The factual discovery into these factors may involve extensive disclosures by the patent owner and NDA holder about their research and development, clinical histories, marketing of the brand drug, and the financial returns from the sale of the drug.
Another defense that is often asserted by defendants is that the patent is not enforceable because it was procured by inequitable conduct during prosecution of the patent application before the U.S. Patent & Trademark Office (“USPTO”). Generally, the defendants asserting this defense are required to prove that in order to obtain the issued patent, the patent owner intended to deceive the USPTO during the patent application process and either made material false statements to the USPTO or withheld material false information from the USPTO in order to obtain the patent. Successful assertion of this defense has involved evidence that patent owners either intentionally submitted false test data to show an improvement of the alleged invention over the prior art or intentionally withheld prior art documents that would have shown that the invention was obvious. This defense can also have significant impact on the scope of discovery sought from the patent owner and NDA holder as the defendants seek all information in the possession of the inventors, their R&D group, the in-house patent department, and outside patent counsel. Individuals from each of these groups are often subject to providing oral testimony by deposition and at trial.
As shown by the preceding discussion, Hatch-Waxman litigation typically involves complex scientific questions as well as far-ranging factual discovery. Consequently, the pretrial and trial stages of the litigations often consume most of the 30-month stay. Hatch-Waxman litigation differs from other patent litigation in one significant way. The cases are almost always decided by the U.S. district court judge in a “bench” trial instead of a jury trial. The reason for this result is found in the historical development of the U.S. courts. Previously, “courts at law” awarded money damages to compensate plaintiffs for their injuries. Other courts, “courts in equity” did not award money damages but could order the accused person to stop doing a certain activity that adversely affected the plaintiff. Both functions have merged into the U.S. district courts but some of the historical differences between law and equity continue. Today, where a plaintiff seeks money damages, the plaintiff may request a trial by jury. However, where the plaintiff seeks only an injunction--an order affecting another’s conduct, then the case may be tried before the judge only in a bench trial. In Hatch-Waxman litigation, the plaintiffs do not seek money damages--no commercial sale of the generic drug has occurred. Instead, the plaintiffs seek an injunction--an order preventing FDA from finally approving the generic drug manufacturer’s ANDA or paper NDA before expiration of the patent. As a result, the cases are tried before the U.S. district court judge in a bench trial.
There are advantages to bench trials in Hatch-Waxman litigation. As discussed previously, the vast majority of the cases are brought in Delaware and New Jersey. Consequently, the judges sitting in those jurisdictions have extensive experience with drug cases. The judges have more time than juries to devote to the complex technical issues in the case. Ordinarily, the judges do not decide the cases immediately upon conclusion of trial as would a jury. Instead, the judges typically receive extensive post-trial briefing from the parties that help the judge further understand the significance of the evidence presented at trial and the legal issues. Instead of issuing a simple verdict like a jury, indicating who wins and who loses, the judges issue extensive written opinions explaining the factual and legal reasons for how they arrived at their judgments. The written opinions significantly assist the parties in any appeals they make to the U.S. Court of Appeals for the Federal Circuit, the appeals court in the U.S. that has exclusive jurisdiction over patent cases. Although it is possible to further appeal Hatch Waxman cases to the U.S. Supreme Court, the Supreme Court often declines to hear the appeals. As a result, most cases end when the Federal Circuit issues its decision either affirming or reversing the judgment of the U.S. District Court.
Settlement of Hatch-Waxman Cases
In the United States, most patent cases are settled before reaching trial. The cost of litigation and uncertainties of outcome provide strong incentives for the parties to settle. In the typical settlement of a patent case, the accused infringer admits infringement of a valid patent and agrees to pay some percentage of the money damages demanded by the plaintiff. That settlement arrangement is often amenable to the accused infringer because the infringer has presumably sold and earned revenues from the accused products and has funds to pay the settlement.
The economic incentives for settlement are different in Hatch-Waxman litigations where the accused infringer has not generated revenues from the sale of infringing generic drug products. To the contrary, the accused generic drug manufacturer would largely forfeit its development expense and lose opportunities to sell its generic drug by settling the case. As a result, in the early days of Hatch-Waxman litigation, the brand manufacturer and patentee would agree to pay the generic drug manufacturer to settle the case--compensating for the development expense and lost opportunities. This is the opposite of what happens in typical patent litigation where the defendant pays the patentee to settle.
Accordingly, the U.S. Department of Justice, Antitrust Division, and the Federal Trade Commission took the position that these “reverse payments” in the settlement of Hatch-Waxman litigation were anti-competitive, harmed consumers, and constitute antitrust violations. The Antitrust Division and Federal Trade Commission now closely scrutinize Hatch-Waxman settlements. In fact, as a matter of routine, parties to Hatch-Waxman settlements submit their proposed settlement agreements to the Antitrust Division and Federal Trade Commission for review before finalizing the agreements.
Because of this heightened scrutiny of Hatch-Waxman settlements, it has become somewhat difficult to settle the cases. As a consequence, a high percentage of Hatch-Waxman cases proceed all the way through trial and appeal and are decided on the merits of the case. However, settlements do occur and are possible. One typical form of settlement involves the agreement of the patent owner and NDA holder to allow the generic drug manufacturer to enter the market before the patent expires. The economic value of this type of settlement depends upon how early the generic drug manufacturer is allowed to enter. Generic drug competition typically has immediate and substantial adverse effects on the sale of branded drugs. The main reason for the adverse impact on branded sales are the mandatory substitution rules in most states.
Most states require the pharmacist to automatically substitute the cheaper generic drug for the branded drug unless the prescribing doctor has expressly ordered the prescription of the branded drug. As a result of these substitution rules, branded companies have strong incentives to prevent the launch of competing generic drugs. Thus, settlement negotiations over the early entry of generic drugs are often complex and time consuming. Reaching a successful settlement often involves intense negotiation over adding even a small number of days or weeks to the early entry license.
Another form of settlement involves licensing the generic drug manufacturer to sell an authorized generic before expiration of the patent. These settlement negotiations involve all the complexities of the early entry settlement arrangement discussed above. In addition, the parties will further negotiate about who will make the authorized generic drug product. In most cases, the generic manufacturer will prefer to buy the drug from the brand company and then sell the drug under the generic company’s own label. In those situations, the parties will negotiate extensively over wholesale price for the sale of the drug from the brand company to the generic company. In some situations, the generic company will seek to sell its own manufactured generic drug product. Branded companies are often amenable to the generic company making and selling its own product unless the brand company has concerns about the quality of the manufactured generic drugs or if the branded company believes that it can make a small profit by selling its own drug to the generic drug company.
The Antitrust Division and Federal Trade commission typically allow these early entry and authorized generic type settlements. The settlements are viewed as pro-competitive because they result in cheaper generic drug products becoming available to consumers before patent expiration. Also, the settlements do not involve any reverse payments from the brand company to the generic company.
These types of settlements are also often favorable to the Orange Book patent owner and NDA holder because they remove litigation risk. As discussed in the foregoing pages of this book, bringing a new drug to market involves walking a very long and expensive regulatory path to the market. A new drug candidate can fail and hundreds of millions of dollars of investment can be lost at almost any step on the path. Consequently, there are often only a handful of years of patent term remaining to earn back that sizable investment and earn profits toward investments in future drug products.
Unfortunately, it is not possible to guarantee the validity of patents, and it is not possible to guarantee proof of infringement at trial. Litigating Hatch-Waxman cases therefore is a necessary but risky final step in the life a new drug product. And, maximizing profits from the new drug product often depends on the decision to press forward in litigation through trial or to seek certainty through settlement. There are never easy answers to these questions. This is what makes drug development, production, and sale so difficult. Each step on the path, whether in the laboratory, the clinic, the regulatory process, the patent application process, or marketplace, the company faces uncertainty and risk. Remarkably, these companies and teams of people have worked together time and again to bring useful therapies to market that not only produce profits for shareholders but also essential therapies for people in need.