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By Bryan Koenig, Law 360, August 25, 2021

The Second Circuit found on Wednesday that Takeda cannot upend a New York federal judge’s decision to preserve antitrust claims that it delayed entry of generic alternatives to diabetes treatment Actos, rejecting assertions that the drugmaker was required to list the therapy in a way that broadly extended patent protections.

The three-judge panel affirmed U.S. District Judge Ronnie Abrams’ refusal to nix antitrust claims brought by two groups of Actos buyers. The buyers claim that, in order to win exclusivity guarantees extending the treatment’s monopoly after its original patent expired, Takeda falsely told the U.S. Food and Drug Administration that two new patents — describing how to combine the drug with others — covered its chemical ingredients, rather than simply covering methods of using the drug.

The panel found that Takeda cannot argue it was obligated to say that U.S. Patent Nos. 5,965,584 and 6,329,404 covered both the means of using Actos and the drug itself when “listing” them in the FDA’s Orange Book — a master list of approved drugs and the patents covering them.

“The problem with Takeda’s proposed interpretation of the listing requirement is that it would render multiple statutory terms and concepts unnecessary, obliterating the presumption that ‘statutes do not contain surplusage,'” U.S. Circuit Judge Richard C. Wesley wrote for the panel.

Takeda attorney Steven A. Reed of Morgan Lewis & Bockius LLP told the panel in oral arguments in April that the company was simply following the rules, listing Actos and its primary ingredient pioglitazone in the Orange Book as required. The patents at issue “contain both types of claims” —the Actos product and methods of use, he said — and the U.S. Patent and Trademark Office granted the patents on those grounds.

But the panel held on Wednesday that Takeda is wrong to say it had to list the patents as covering Actos — and thus prohibiting generic competition because unauthorized generics of Actos would necessarily infringe them. If “risk of infringement” was the only relevant factor for Orange Book listing, according to the panel’s ruling, “there would be no need to separately identify either type of claim” on the brand-name treatment.

According to the panel, the distinction between method-of-use and drug claims “serves a central purpose in the regulatory scheme,” indicating whether a generic drugmaker wants to directly challenge a drug’s patent exclusivity or if it wants to avoid an infringement lawsuit by carving out an unpatented means of using the treatment.

“Takeda’s reading would undermine the ‘delicate balance’ between rewarding innovation and stimulating generic market entry,” Judge Wesley said.

The end-payors, such as employee health care benefit plans and direct payer wholesalers, initially accused Takeda of making unlawful reverse payments through settlement agreements with several generics companies, but they abandoned their pay-for-delay claims after Judge Abrams dismissed the case in 2015.

The Second Circuit revived the indirect buyers’ monopolization claims in February 2017. Those claims accused Takeda of triggering a six-month exclusivity period for the three companies that were the first to seek approval from the FDA to make generic versions, as well as a waiting period for six more companies that also wanted to produce generics, when it misrepresented its patents to the FDA.

In October 2018, Takeda asked the district court to dismiss the antitrust claims but Judge Abrams refused.

On Wednesday, a similar argument about the statutory language of the Hatch-Waxman Act, that laid down the rules for generic drug approval and patent infringement lawsuits contesting generic applications, was “a closer call,” according to the ruling. But the panel said that on balance,

Takeda nevertheless cannot argue that the legal requirement to list patents claiming a drug is broader than assertions directly covering that treatment, such as through combination therapies that also include it.

“In any event, defining ‘claims’ in the manner Takeda suggests would yield consequences at odds with the Hatch–Waxman Act’s main goals. As explained above, were all patents for which infringement is reasonably likely automatically considered to ‘claim the drug,’ there would be little-to-no room left for method-of-use claims,” Judge Wesley said.

The panel also rejected Takeda’s assertion that even it “misinterpreted the listing requirement,” the plaintiffs still needed to say that its listing was “unreasonable.”

Under that argument, the monopolization claims would have to fail, because the “claims the drug” requirement could be “reasonably” read as allowing listing based on any plausible infringement risk to Actos. The panel found, however, that there’s no such requirement to sue only over “unreasonable” listing.

Counsel for the end-payors welcomed the ruling on Wednesday.

“After wins on two interlocutory appeals, we are anxious to get down to the business of litigating the few issues that remain in this case and obtaining redress for these drug purchasers,” Steve D. Shadowen of Hilliard Shadowen LLP said in an email.

An attorney for the direct buyers, Thomas Sobol of Hagens Berman Sobol Shapiro LLP, expressed a similar sentiment.

“Having now made two successful trips to the Second Circuit, we look forward to discovery, getting a trial date and moving this case forward,” Sobol said in an email.

Counsel for Takeda did not immediately respond to a press inquiry.

U.S. Circuit Judges Debra Ann Livingston, Richard C. Wesley and Susan L. Carney sat on the panel for the Second Circuit.

Takeda is represented by Morgan Lewis & Bockius LLP.

The end payors are represented by Hilliard Shadowen LLP, Shepherd Finkelman Miller & Shah LLP, Wexler Wallace LLP and Motley Rice LLC.

The direct purchasers are represented by Hagens Berman Sobol Shapiro LLP, Nussbaum Law Group PC and Sperling & Slater PC.

The case is In re: Actos Antitrust Litigation, case numbers 20-1994 and 20-2002, in the U.S. Court of Appeals for the Second Circuit

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