Paragraph Four Explained

Indeed, most, if not all, generic companies have made the Paragraph IV certification a routine part of doing business.   For example, at the start of 2003, Teva Pharmaceutical Industries Ltd, one of the largest generic companies in terms of sales, had 61 product registrations currently pending with the Food and Drug Administration (FDA), 41 of which the company filed under a Paragraph IV certification. 1

When reviewing the timing of these filings, it appears that the Paragraph IV certifications are on the rise.   A sample of three companies active in filing certifications – Barr Laboratories, Andrx Corporation, and Impax Laboratories – shows that the generic companies appear to be more willing to file Abbreviated New Drug Applications (ANDA) with Paragraph IV certifications.

Figure 2 shows the data trend.   Examining the filing activities of these three companies between 1990-1997, they had among them 5 Paragraph IV filings.   However, they have collectively filed 54 certifications in the five years since.

Figure 2 (Source: Company SEC filings and press releases) 2

As more generic companies employ the certification as a business tactic, the increase in filings is predictable.   However, two elements of this activity remain unpredictable.

Size of Brand is No Barrier

First, it appears the size of product sales may not be the determining factor as to whether its patent is challenged.   Of course, intuition suggests that blockbusters such as Prilosec and Claritin would be primary targets for Paragraph IV challenges.  

Not only have generic companies challenged the patents of large products, but they have also challenged multiple products of top-selling drug classes.   For example, the large statin class has seen Paragraph IV certifications filed against the top three products -- Zocor®(simvastatin), Lipitor®(atorvastatin), and Pravachol® (pravastatin).3   In 2002, these products accounted for $15B in global sales. 4

While challenges such as these can be expected, generic companies have filed Paragraph IV certifications against smaller products.   For example, Andrx has challenged Naprelan®(naproxen) which had estimated annual sales of $31M in 2002, and Impax Labs has filed a declaratory action against Aventis over the patents for Rilutek®(riluzole), a $35M year product. 5

When Paragraph IV Certifications are Filed is Often Unpredictable

Second, it is also unpredictable as to the timing when a generic company may file a patent challenge. It can literally happen at any time before the patent is set to expire.   However, with a recent clarification of the regulations, a Paragraph IV challenge can occur as soon as four years after a product launches.  

Figure 3 illustrates this point and shows a bar chart of selected products Impax Laboratories has challenged.   The gray bar shows the date when the first patent listed in the Orange Book is set to expire, and the striped bar shows the date when the last patent is set to expire.   The red triangle shows the filing date of the ANDA.


Figure 3 (Source: Orange Book and Company SEC filings)

As Figure 3 shows, Impax Labs Paragraph IV filings appear to happen at any time. For some products, the filing occurred as little as two years before patent expiry but for others the time could be as many as eight to ten years.

Moreover, though it may be too early to evidence a trend, some data suggest that these certifications are being made earlier than before. For example, two recently-approved products have already received Paragraph IV challenges. On August 15, 2001, FDA approved Ultracet®(acetaminophen and tramadol HCl) from Ortho-McNeil, and on December 24, 1998, FDA approved Provigil®(modafinil) from Cephalon. In spite of the fact that both of these products have been on the market for less than five years, each received Paragraph IV challenges in the first part of 2003.

In any event, generic companies have every incentive to file these certifications as early as possible in order to achieve first-to-file status.   With such a strong incentive, it can be expected that more of these certifications will be made four to five years after products launch.

1 As of February 21, 2003, Source: SEC 20-F filing for year ending December 31, 2002

2 The graph depicts “patent challenges” per product. In some cases, there can be several challenges by one generic company over one product.   For purposes of this sample, multiple challenges over one product are counted as one challenge.   Also included is a one patent challenge by Impax against Aventis for Rilutek®(riluzole) which may not have been made under a Paragraph 4 certification.

3 Source: FDA/CDER

4 Company Annual Reports

5 Andrx and Impax SEC filings

The Paragraph Four Report® is a registered trademark of Parry Ashford Inc. • © Parry Ashford Inc. 2012