Carve Outs: Into The Belly of the Hatch-Waxman Beast Part 2

In my first installment on Paragraph IV Certifications under Hatch-Waxman, I explored the basics of this “beast.”  See A Primer on Paragraph IV Certifications: Into the Belly of the Hatch-Waxman Beast Part 1  .  And as promised, in this second installment, I’ll now focus on one of the more litigated “trouble spots” for Paragraph IV Certifications, namely the “carve out” cases.  (In my third and final installment, I’ll talk about the other “trouble spot,” namely Hatch-Waxman “reverse payment” cases, which is now before the Supreme Court in the 11th Circuit case of FTC v. Watson Pharmaceuticals, renamed as FTC v. Actavis, and for which oral argument was recently heard.)  So strap on your safety belts again, and let’s dive back into the “belly” of Hatch-Waxman Paragraph IV Certification “beast” to look at “carve outs.”

“Carve outs” essentially involve a situation where there is an FDA approved drug for which the generic drug maker seeks to market that drug, again through an Abbreviated New Drug Application (ANDA), but instead for an FDA approved use, where also that FDA approved use is unpatented.  While these “carve outs” also involve the filing of a Paragraph IV Certification, there is a slight but important twist in that Certification:  inclusion of what is called a “section viii statement”[1] that the generic drug maker “is not seeking approval for a method of use that is claimed in the patent.”[2]  When submitting the “section viii statement,” the generic drug maker must also provide a proposed label that removes or “carves out” the claimed method of use.[3]  The FDA will then approve this “carve out” statement only if:  (1) there is no overlap between the proposed label submitted by the generic drug maker and a use described in the Orange Book; and (2) removing the information about the claimed method of use from the label doesn’t render the drug less safe or effective.[4]

The first time the Federal Circuit dealt with “carve outs” was in the 2003 case of Warner-Lambert Co. v. Apotex Corp.[5]  In Warner-Lambert, the patentee/NDA holder (Warner-Lambert) had patented a method for treating neurogenerative diseases with a class of cyclic amino acid compounds, the key one of which was commonly known as “gabapentin” sold by Warner-Lambert under the trade name Neurontin®.  Warner-Lambert was also the owner of patents on these compounds (including gabapentin) which had already expired, as well as an unexpired patent on a specific crystalline form of gabapentin monohydrate.  In 1993, Warner-Lambert filed an NDA for gabapentin for use in an “adjunctive therapy in the treatment of partial seizures with and with secondary generalization in adults with epilepsy” which was one of several indications noted in the expired patents on the drug itself.  But the FDA had not approved gabapentin for any other indications, including the indication covered by the patented method for treating neurogenerative diseases.


The generic drug maker (Apotex) filed for an ANDA seeking to market gabapentin only for this “adjunctive therapy” indication approved in the NDA.  In its Paragraph IV Certification, Apotex skirted around Warner-Lambert’s patent on the specific crystalline form of gabapentin monohydrate by asserting that it would not infringe because its formulation of gabapentin would be anhydrous (i.e., would not contain water as in the monohydrate form).  Apotex’s Paragraph IV Certification also skirted around Warner-Lambert’s patented method for treating neurogenerative diseases with gabapentin by declaring in its ANDA that labeling for its generic drug would “not include any indication for use in the treatment of either neurodegenerative or neurogenerative diseases.”  In other words, and without saying it specifically, Apotex’s proposed label “carved out” Warner-Lambert’s patent method for treating neurogenerative diseases with gabapentin.

In its infringement suit against Apotex, Warner-Lambert argued that, while gabapentin had not been approved for treating neurogenerative diseases according to its patented method, doctors would nonetheless prescribe Apotex’s generic anhydrous gabapentin for such use, thus making Apotex’s ANDA for use of the drug, even for an approved but unpatented use, an act of infringement under 35 U.S.C. § 271(e)(2).  The district court granted Apotex’s motion for summary judgment of noninfringement, ruling that 35 U.S.C. § 271(e)(2) did not apply to Apotex’s ANDA.  The Federal Circuit affirmed, holding that 35 U.S.C. § 271(e)(2) only applied to FDA approved uses but not to unapproved uses, even if the doctor might prescribe the generic drug for those unapproved patented uses.  In fact, the Federal Circuit specifically pointed to the “section viii statement” language[6] in Hatch-Waxman that approved of the “carve out” that Apotex had made on its proposed label for its generic anhydrous gabapentin.  Although not called as such in the Warner-Lambert case, thus were borne “carve out” labels by generic drug makers.[7]  Such “carve outs” that exclude the patented used will also avoid infringement under 35 U.S.C. § 271(e)(2).[8]

An unusual inverse variant of such a “carve out” occurred in the 2012 case of Bayer Schering Pharma AG v. Lupin, Ltd., which also involved a split Federal Circuit panel decision.  In Bayer Schering, the NDA holder (Bayer) produced and marketed the unpatented drug Yasmin as an oral contraceptive.  The generic drug manufacturers filed ANDAs for use of Yasmin as an oral contraceptive.  Bayer had also patented methods of use of Yasmin but only for simultaneously achieving three effects:  a contraceptive effect, an anti-androgenic effect, and an anti-aldosterone effect.  The FDA has also not approved Yasmin for this simultaneous treatment for these three effects.  A bare majority of the Federal Circuit panel in Bayer Schering affirmed the district court ruling that there was no inducing infringement by the filing of the ANDA because the generic drug label was only approved for the unpatented use (i.e., for contraception), even though the Indications and Usage section of the generic label also contained references to equivalents of the other two effects (i.e., the anti-androgenic effect, and the anti-aldosterone effect) of Yasmin according to Bayer’s patented method for simultaneous treatment of all three effects.  Judge Newman vigorously dissented, arguing that the failure of the generic label to specifically prescribe use of Yasmin for the other two effects didn’t necessarily immunize the generic drug makers from liability for infringement under 35 U.S.C. § 271(e)(2) where the other two potential effects were also indicated (although passively) on that generic label.

An issue that often goes hand-in-hand with “carve outs” is proper “use codes” by the patent owner/NDA holder.  As noted in my first installment, some patent owners/NDA holders had engaged in certain “delay tactics” to frustrate the approval of ANDAs.  One such tactic related to the submission of properly described “use codes”(or as generic drug makers would argue, improperly described “use codes”) so that the generic drug maker could provide the appropriate label to “carve out” the excluded patented use(s).  And in fact, as also noted in my first installment, Congress in 2003 created a statutory counterclaim under 21 U.S.C. § 355(b)or(c) that would appear to allow generic drug makers to seek correction of incorrectly described “use codes” submitted by the patent owner/NDA holder “on the ground that the patent does not claim   .   .   .  an approved method of using the drug.”

That proposition was to be tested in the case of Novo Nordisk A/S v. Caraco Pharmaceutical Laboratories, Ltd., eventually ending up before the Supreme Court as Caraco Pharmaceutical Laboratories v. Novo Nordisk.  In Caraco Pharmaceutical Laboratories, the NDA holder (Novo Nordisk) marketed the drug repaglinide under the brand name PRANDIN as an adjunct to diet and exercise to improve glycemic control in adults with non-insulin dependent diabetes (i.e., type 2 diabetes).  The FDA had approved three uses for PRANDIN:  (1) repaglinide itself (i.e., monotherapy); (2) repaglinide in combination with metformin; and (3) repaglinide in combination with thiazolidinedioses (“TZDs”), referred to hereafter as Use No. 1, Used No. 2, and Use No. 3.  The FDA Orange Book listed two patents for PRANDIN, one covering the combination repaglinide with metformin (i.e., Use No. 2) which expired in 2018, and which the FDA initially assigned the “use code” of “U-546-Use of repaglinide in combination with metformin to lower blood glucose.”  The other Novo Nordisk patent covered repaglinide which expired in March 2009.  But Novo Nordisk had no patents on the Use No. 1 or Use No. 3.

In 2005, the generic drug maker (Caraco) filed an ANDA for the drug repaglinide which included a Paragraph IV Certification for the Novo Nordisk patent covering Use No. 2 and a Paragraph III Certification for the Novo Nordisk patent covering repaglinide per se.  In 2008, Caraco stipulated that its ANDA would infringe the patent covering Use No. 2 “if it included a label that discussed the combination of repaglinide and metformin,” but around the same time, submitted an amended ANDA with a Paragraph IV Certification for the Novo Nordisk patent covering Use No. 2, but with a “carve out” statement declaring that Caraco wouldn’t seek approval for Use No. 2.

When the FDA indicated that it would approve Caraco’s proposed “carve out” label, Novo Nordisk moved for reconsideration that allowing this “carve out” would “render the drug less effective” (i.e., would fail the second prong of a “section viii statement”).  Not long after, Novo Nordisk updated its Orange Book “use code” narrative for its patent covering Use No. 2 which caused the FDA to remove prior “use code” U-546 and to substitute new “use code” U-968 having the narrative “ A method for improving glycemic control in adults with type 2 diabetes mellitus.”  As a result, the FDA now disallowed Caraco’s “carve out” statement on its proposed label as now overlapping with new “use code” U-968 for Novo Nordisk’s patent covering Use. No. 2. (and also now failing the first prong of a “section viii statement”).

In response, Caraco added in June 2009 (i.e., after the Novo Nordisk patent covering repaglinide per se had expired) a counterclaim under 21 U.S.C. § 355(j)(5)(C)(ii) (the counterclaim statute) to its amended answer in the infringement suit, requesting an order to require Novo Nordisk to change the “use code” from the new U-968 code back to the former U-546 code, claiming the new U-968 code was overbroad because it incorrectly suggested that the Novo Nordisk’s unexpired patent covering Use No. 2 also covered Use Nos. 1 and 3.  The district court granted Caraco’s motion on the counterclaim, finding that Novo Nordisk had “improperly filed an overbroad use code narrative” that should have covered only Use. No. 2, but not Use Nos. 1 and 3.

A bare majority of the Federal Circuit panel (opinion by then Judge Rader with Judge Clevenger concurring) vacated the district court injunction based on a very technical reading of the counterclaim statute as being applicable only where the patented use did not cover any FDA approved method.  Because Novo Nordisk’s patent did cover at least one approved method (i.e., Use No. 2), the bare Federal Circuit majority ruled that counterclaim statute didn’t apply.  In fact in Judge Clevenger’s concurrence indicated that, while he agreed with Rader’s analysis of the language of the counterclaim statute, he wasn’t so sure that the “ongoing Paragraph IV litigation will cleanly resolve the dispute between the parties.”[9]  Judge Dyk vigorously dissented, arguing that the panel majority had misconstrued the counterclaim statute, thus undermining the intent by Congress to permit such counterclaims to rectify such incorrect “patent information” statements (e.g., “use codes”) by the patent owner/NDA holder with respect to approved drugs/method of uses.  Judge Dyk was later joined by Judge Gajarsa in dissenting from the denial of the request by Caraco for a rehearing en banc.

The Supreme Court (Justice Kagan writing the Opinion of the Court) reversed the Federal Circuit ruling, unanimously holding that a generic drug maker like Caraco could use this counterclaim statute to “force correction of a use code that inaccurately describes” the NDA holder’s patent “as covering a particular method of using the drug in question.”  The Supreme Court clearly viewed Novo Nordisk’s interpretation of the counterclaim statute as more like “gamesmanship” when compared to Caraco’s position that was more consistent with Congress’ intention of “facilitating the approval of non-infringing generic drugs under section viii.”  The Supreme Court also rebuffed Novo Nordisk’s argument that “use codes” were not “patent information” that could be corrected under the counterclaim statute.  In the Supreme Court’s view, while the counterclaim statute didn’t define “patent information,” “a use code must qualify” because it “describes the method of use claimed in the patent,” citing 21 CFR §§ 314.53(c)(2)(ii)(P)(3), (e).

That’s it for “carve outs,” so stay tuned for my third and final installment on “reverse payment” cases under Hatch-Waxman.  And by the way, keep those safety belts handy!

*© 2013 Eric W. Guttag.  Posted April 11, 2013 on


[1] See 21 U.S.C. § 355(j)(2)(A)(viii).

[2]Bayer Schering Pharma AG v. Lupin, Ltd., ___ F.3d ___, ___ (Fed. Cir. 2012).

[3]Bayer Schering Pharma AG v. Lupin, Ltd., ___ F.3d ___, ___ (Fed. Cir. 2012), citing AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, 1046 (Fed. Cir. 2010).

[4]Bayer Schering Pharma AG v. Lupin, Ltd., ___ F.3d ___, ___ (Fed. Cir. 2012), citing 21 CFR § 314.127(a)(7) and Applications for FDA Approval to Market a New Drug, 68 Fed. Reg. 36,676, 36,682 (June 18, 2003) (“A section viii statement would not be appropriate [when] the ANDA applicant is seeking approval for exactly the same labeling as that in the NDA for which the patent was submitted.”).

[5].316 F.3d 1348 (Fed. Cir. 2003).  The Federal Circuit did not refer to these statements as “carve outs” until much later.  See, e.g., AstraZeneca LP v. Apotex, Inc., 633 F.3d 1042, [1046] (Fed. Cir. 2010), citing Novo Nordisk A/S v. Caraco Pharm. Labs., Ltd., 601 F.3d 1359, 1361 (Fed. Cir. 2010)

[6] See 21 U.S.C. § 355(j)(2)(A)(viii).

[7] See also Allergan, Inc. v. Alcon Labs, Inc., 324 F.3d 1322 (Fed. Cir. 2003) (no inducing infringement under 35 U.S.C. § 271(e)(2) by ANDA for use of unpatented brimonidine for approved but unpatented use of reducing of intraocular pressure, even though brimonidine might be used for two other patented but unapproved uses, citing the Warner-Lambert case).

[8] See AstraZeneca Pharmaceuticals LP v. Apotex Corp., 669 F.3d 1370 (Fed. Cir 2012) (again citing the holding in Warner-Lambert case).

[9] How clairvoyant was Judge Clevenger’s statement to be when the Supreme Court eventually reviewed the Federal Circuit’s decision after the denial of the request for rehearing en banc.


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