The FTC’s Criticism of “Junk” Orange Book Filings: The Latest Squall in a Regulatory Rainstorm

Seizing yet another arrow in the Biden administration’s quiver to combat what they see as artificially high drug prices, on April 30, the FTC quadrupled the size of its list of so-called “junk” Orange Book listings—patents listed in the Orange Book but alleged by the FTC to be improper or inaccurate—from about 100¹ to 400 patents.² The 300 additional patents relate to 20 distinct products owned by 10 pharmaceutical companies, primarily targeting device patents that do not claim the specific drug.³ The FTC claims that these improper listings are delaying cheaper generics from being able to enter the market.⁴ The letters gave the branded drug manufacturers 30 days to withdraw or amend the listing, or else certify under penalty of perjury that the listing complies with applicable statutory and regulatory requirements.⁵

Background: FTC Campaign Against “Improper” Orange Book Listings

• In September 2023, the Federal Trade Commission (FTC) embarked upon a campaign against pharmaceutical manufacturers’ “improper listing” of patents in the Food and Drug Administration’s (FDA) Orange Book by issuing a policy statement putting market participants on notice that it intends to scrutinize improper Orange Book listings and take “actions against companies and individuals that improperly list patents in the Orange Book.”⁶ The statement also suggested an opportunity for private enforcers to bring suit against a branded manufacturer with allegedly improper or inaccurate listings, under a theory of willful and illegal monopolization.⁷
• Following the policy statement, the FTC sent warning letters to ten pharmaceutical companies, challenging more than 100 patents as improperly listed.⁸ FTC Chair Lina Khan asserted that “Wrongfully listed patents can significantly drive up the prices Americans must pay for medicines and drug products while undermining fair and honest competition.”⁹
• Chair Khan recently prepared a speech for a White House event, crediting the agency’s efforts to reduce healthcare costs for Americans.¹⁰ She noted that since putting companies on notice of the disputed patents, several were de-listed and “opened up the market for generics to come in and offer cheaper medicines.”¹¹ She promised that “we’re not stopping. At the FTC we’re going to keep challenging unlawfully listed patents that block competition from cheaper generic drugs.” She vowed to “use all of our tools” to lower healthcare costs, including “challenging pharma companies that use bogus patents to inflate prices.”¹²
• Making good on its promises, the FTC has continued its campaign against so-called “junk” patents listed in the FDA Orange Book, which Chair Khan described as “an obscure registry of patents that lets pharma companies delay or block new and cheaper generic options.”¹³

The Latest Squall in a Regulatory Rainstorm

Although the FTC’s scrutiny of Orange Book listings can be traced back to 2002,¹⁴ in its most recent flurry of activity, the FTC has taken the position that improper listing of patents in the Orange Book is a method of competition, thereby giving it regulatory authority under Section 5 of the FTC Act to enforce against improper Orange Book listing practices as an unfair method of competition.¹⁵ The FTC has also asserted that “willfully and knowingly” submitting improper patents for listing could be a criminal offense under 18 U.S.C. 1001.¹⁶

The Orange Book, first published in 1980 and codified by the 1984 Hatch-Waxman Amendments, provides lists of brand-name drugs, their patents, and their therapeutic equivalents, including available generics.¹⁷ The FTC asserted that for a patent to be properly listed in the Orange Book, the patent must claim a drug’s “active ingredient”; this makes drug devices, such as inhaler devices, multidose bottles, and autoinjectors, particularly vulnerable to criticism and more likely to be targeted.¹⁸

So far, the FTC has not taken any enforcement action, but may instead be gathering evidence while in search of the first test case to bring. Although it remains to be seen whether the FTC will bring suit against branded drug manufacturers, the FTC’s scrutiny has effectively encouraged private entities to bring civil actions for alleged improper listings. The FTC recently filed several amicus briefs in private lawsuits, asserting its views that improper listings “thwart competition” and are “actionable under the antitrust laws.”¹⁹

Responses from Manufacturers, Elizabeth Warren, and other Interested Parties

On December 13, 2023, Elizabeth Warren and Pramila Jayapal sent letters to the CEOs of companies that had received warning letters from the FTC in November. Warren’s letters reiterated the messaging from the FTC, stating that “Big Pharma players are […] incentivized to strategically list sham patents in the Orange Book” and requesting each CEO to de-list all of its “improperly and inaccurately listed Orange Book patents.”²⁰  Each company responded in turn, stating that listing their products in the Orange Book was a good faith effort to comply with statutory guidance, and that their products are properly listed.²¹

A few of these response letters detailed that the FDA specifies that for drug product patents, the Orange Book listing requirements apply to patents covering the dosage form, which includes the “physical manifestation of containing the active and inactive ingredients that delivers a dose of the drug product.”²²  This would mean that each manufacturer was actually required to list the patents in question.²³

Some response letters explained that questionable listings are a reflection of vague messaging and a lack of enforcement from the FDA, rather than an improper monopolistic scheme.²⁴ Multiple letters mentioned that, dating back to 2006, there have been numerous requests for advisory opinions about when it is appropriate to list drug delivery system patents in the Orange Book—requests which the FDA has, to date, denied.²⁵

In response to the FTC’s November warning letters, a few manufacturers withdrew the allegedly improper listings, while others maintained their listings despite the FTC’s warning letters.²⁶ One such company, confident in the validity of its Orange Book listings, brought a patent infringement suit to enforce 12 patents against a generic manufacturer—seven of which were challenged listings.²⁷ The other branded manufacturers in receipt of the April warning letters have yet to respond.

As for private action, several plaintiffs—some pharmaceutical companies and some class actions by health groups—have seized on the FTC’s theory of monopolization, filing suits or countersuits against branded drug manufacturers for their allegedly improper Orange Book listings.²⁸ Because a cause of action alleging monopolization “requires proof that ‘the defendant has engaged in improper conduct that has or is likely to have the effect of controlling prices or excluding competition,’”²⁹ at least one plaintiff has argued that branded manufacturers with alleged improper listings have been extracting profits from drugs that should have been available in generic form years prior.³⁰ Under this theory, plaintiffs may seek damages for overcharges during the period of their alleged improper listing.³¹

The Government’s Other Current Strategies to Regulate Drug Pricing

This latest resurgence of scrutiny for Orange Book listings is part of a multi-pronged effort from the Biden administration to reduce drug prices. Other initiatives include the following:

• The FTC is exploring options to exercise its “march-in rights” under the Bayh-Dole Act, which allows the government to “march in” and grant licenses for drugs whose development was at least partially publicly funded—often by grants through the National Institutes of Health (NIH).³²
• The Inflation Reduction Act of 2022 gives authority to the Centers for Medicare & Medicaid Services (CMS) to select qualifying drugs with high Medicare spend for price negotiation.³³
• The U.S. Patent and Trademark Office (USPTO) has issued a notice of proposed rulemaking that would create a repository of settlements between generics and brand name drugs, to determine how often pay-for-delay deals are occurring.³⁴ The stated purpose of the program is to assist the FTC in determining whether antitrust laws have been violated.³⁵

The FTC’s recent Orange Book scrutiny is propelled by a similar desire to curtail “patent thickets,” encourage pharmaceutical competition, and reduce overall costs to consumers.³⁶

Conclusion

In light of the heightened regulatory scrutiny surrounding drug pricing, branded drug manufacturers should expect, and prepare for, a continuation of the FTC’s campaign against so-called “junk” Orange Book listings. Although the FTC has not brought its first test case, the agency is clearly devoting significant resources to this issue, and the first case may be on the horizon.

In addition to the FTC disputing proper listing of patents, and risk of drawing an FTC investigation, the FTC warning letters have prompted Congressional inquiries, and inspired private action relating to these allegedly improper listings. Given high stakes on this issue, branded manufacturers should pay particular attention to auditing current and future statutory compliance of their Orange Book listings, particularly those relating to drug devices.