The Supreme Court will soon decide a case that could upend the balance built into a bipartisan law that has accelerated the launch of generic drugs and saved American patients, employers, and taxpayers trillions of dollars in recent decades — while still incentivizing biopharmaceutical companies to research and develop medicines in the first place.
The stakes of the case, Hikma Pharmaceuticals USA Inc. v. Amarin Pharma, Inc., extend well beyond the two companies involved. The ruling could have a dramatic effect on incentives to invest in researching additional uses for FDA‑approved medicines.
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At the center of the dispute is the “skinny label,” a mechanism created by the Hatch-Waxman Act. The 1984 law established the modern regulatory framework for approving generic drugs. And it helped ensure that once an innovator’s patents on an originally-approved drug product expire, a generic manufacturer may market and sell a chemically identical, far cheaper version — but only for the FDA-approved uses that are no longer shielded by patents or exclusivity periods.
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As a simple example, imagine the FDA first approves a drug to treat diabetes. The manufacturer then conducts additional clinical trials and subsequently discovers that the drug also helps reduce patients’ risk of cardiovascular death and hospitalizations. So it seeks approval from the FDA for these uses and receives patent protection from the U.S. Patent and Trademark Office for the new “methods of use.”
Once any FDA-granted exclusivity periods and the patents on the original drug and the diabetes method-of-use expire, generic companies can introduce cheaper copycat versions of the medicine. But by law, they can only market their versions for treating diabetes — they can’t also label and advertise them for the treatment of cardiovascular disease, which is still protected. That restriction is known, in the industry, as a “skinny label.”
Congress created this restriction deliberately. Pharmaceutical companies frequently test whether their existing medicines are safe and effective at treating other diseases — and they aim to protect their investments by filing applications for patents on these new methods of use accordingly.
If generic drug companies had to wait until these new method-of-use patents expired, it would delay generic competition for years — and deprive patients, employers, and taxpayers of billions of dollars in annual savings. Simply put, skinny labels allow generic competition to begin sooner.
At the same time, by prohibiting generic companies from immediately marketing their copycat versions for all FDA-approved uses, skinny labels also incentivize brand-name drug firms to invest in the expensive research needed to find new uses for already-approved medicines. Without that protection, brand-name drug companies would never be able to earn revenue on the R&D investments required to discover and validate those additional indications.
For decades, this framework has successfully balanced the need for both affordability and innovation.
Consider that pharmacists fill about 90% of all U.S. prescriptions with cheaper generics, including many generics that were approved under skinny labels. That’s the highest generic utilization rate in the world.
Yet companies also continue to invest heavily in post-approval research. About 65% of all “small-molecule drugs used to treat conditions related to oncology, cardiology, and immunology were used to treat patients with a follow-on indication,” according to the Employee Benefits Research Institute.
In other words, post-approval research arguably helps even more patients than the research that leads to an initial FDA approval.
At issue in Hikma v. Amarin is whether a generic manufacturer can be found liable for inducing patent infringement if it broadly markets its drug as a “generic version” of a brand-name product approved for multiple indications — some of which are still protected by method-of-use patents — knowing that many patients may use the medicine off-label for the indication that is covered by the later, still active method-of-use patent.
The case specifically involves a generic company, Hikma, that launched a copycat version of Amarin’s brand-name cholesterol drug that the FDA also approved to reduce the risk of heart attack and stroke — a use that was still patent-protected.
If the Court rules that Amarin cannot make a plausible claim that Hikma’s marketing tactics induced infringement of the patented use, it could destroy the delicate balance embedded in the Hatch-Waxman framework.
Drugmakers would undoubtedly forgo much of the post-approval research required to identify new uses for existing drugs. And as a result, tens of millions of Americans would go without the treatments that could save and improve their lives.
Kristina M. L. Acri née Lybecker, PhD, is the Gerald L. Schlessman Professor of Economics at Colorado College, a senior fellow at the Fraser Institute, and a research fellow at the Eira Initiative.
