The US Court of Appeals for the Federal Circuit ordered that the only Orange Book patent asserted in a lawsuit must be delisted since its claims were directed to the computer-implemented distribution system and not a method of use. Jazz Pharms., Inc. v. Avadel CNS Pharms., LLC, Case No. 23-1186 (Fed. Cir. Feb. 24, 2023) (Lourie, Reyna, Taranto, JJ.)

Jazz Pharmaceuticals holds a new drug application (NDA) for Xyrem, an oral sodium oxybate solution prescribed to help those with certain narcolepsies manage cataplexy. Sodium oxybate itself is no longer covered by patents because it has been used in relation to narcolepsy since the 1960s. For this reason, Jazz built its patent portfolio around Xyrem’s formulation, use and distribution.

Jazz uses a single-pharmacy distribution system for Xyrem, known as a risk evaluation mitigation strategy (REMS). Implementing REMS was a condition of Xyrem’s US Food & Drug Administration (FDA) approval because it mitigates safety risks of dangerous active pharmaceutical ingredients such as sodium oxybate. One of Jazz’s patents is directed to this REMS distribution system. Abbreviated New Drug Application (ANDA) 505(b)(2) NDA (Hybrid NDA) approval is similarly conditioned on implementing a REMS that is sufficiently comparable to any that the NDA holder must implement. The FDA eventually determined that single-pharmacy systems were unnecessary for Xyrem and potentially detrimental.

Avadel submitted a hybrid NDA for a drug that requires only a single nightly dose, unlike Xyrem, which requires a patient to wake up during the night to ingest a second dose. Avadel’s application also proposed a more lenient REMS that utilizes multiple pharmacies. In view of these differences, Avadel believed that it could avoid a lengthy FDA approval process because all of Jazz’s Xyrem Orange-Book-listed patents seemed addressable without making any Paragraph IV certifications. As for the REMS patent, Avadel filed a statement under 21 U.S.C. § 355(b)(2)(B) because the patent was listed as claiming a method of use and Avadel was not seeking approval for the REMS system to which that patent’s claims were directed.

Jazz sued Avadel asserting seven patents, of which the REMS patent was the only Orange-Book-listed patent. Avadel asserted a counterclaim requesting that the district court order Jazz to delist the REMS patent from the Orange Book. The district court subsequently held a Markman hearing finding that the REMS patent’s claims were directed to a system and not a method. The district court granted Avadel’s motion for judgment on the pleadings, finding that the REMS patent did not claim “the drug for which the application was approved” and thus had to be delisted from the Orange Book. Jazz appealed.

Jazz argued that because the FDA permitted the REMS patent to be Orange Book listed, Avadel was prohibited from availing itself of the statutory delisting provision. The Federal Circuit disagreed, concluding that the language of the delisting provision was only concerned with whether a listed patent met the provisions’ conditions at the time of the triggering litigation.

Jazz also argued that there was no evidence that Congress imported patent-law concepts into the delisting provisions and that patent law did not provide the correct framework for determining whether a patent should be Orange Book listed. The Federal Circuit explained that a premise to Jazz’s position was that the statutory delisting provisions were at some level functionally coupled with the statutory and regulatory listing provisions. The Court disagreed, finding that patent law is controlling when the Federal Food, Drug, and Cosmetic Act and its subsequent amendments require assessing the scope of patent claims and plays a significant role in construing at least the Orange Book delisting and listing statutory provisions and regulations. The Court noted that the relevant statutory provisions and regulations recite conjugations of “claim.” For example, the listing provision 21 U.S.C. § 355(b)(1)(A)(viii)(II) is concerned with whether a patent “claims a method of using [the] drug,” and the listing regulation 21 C.F.R. § 314.53(b)(1) is concerned with patents that “claim[] the drug or a method of using the drug.” The Court concluded that the answer to these questions—regarding what a patent claims—“should be derived using the tools and framework of patent law, including claim construction.”

The Federal Circuit then addressed the language of the delisting provision that stated “an approved method of using the drug.” The Court rejected Jazz’s argument that the language of listing regulation expanded the meaning of “method” beyond that given to “method” under patent law. The Court found that nothing in the relevant rule contradicted applying patent law principles to interpret “method” as recited in the Orange Book delisting and listing statutory provisions and regulations.

Finally, the Federal Circuit concluded that the REMS patent was directed to a system, not a method. The Court found that the claims described the components of a whole (a “computer-implemented system” that comprises “one or more computer memories” and a “data processor”) and that is by definition a system. The Court, therefore, determined that the REMS patent should be delisted from the Orange Book.

Practice Note: While this decision makes clear that a system is not method when it comes to the statutory delisting provisions, the Federal Circuit did not otherwise substantively engage in interpreting what the statutory language “an approved method of using the drug” means. The decision left undecided the extent to which the listing regulation 21 C.F.R. § 314.53(b)(1) (and the Federal Circuit’s comments about the same) applies to the statutory delisting provisions. While the Court noted that the regulation is not an interpretation of the delisting provisions, it also stated that the regulation is inapplicable to the issue of whether the term “method” as recited in the delisting provisions encompasses “systems” as those terms are understood in patent law.

Avadel also argued that Jazz engaged in REMS misuse by listing the REMS patent in the Orange Book. The Federal Circuit declined to address this argument because it concluded that the patent should be delisted based on alternative grounds. The concept of REMS misuse was first raised in the amicus brief that the Federal Trade Commission (FTC) filed with the district court, and in that brief the FTC appeared to take a strong position against Orange Book listing abuses. The last time the FTC substantively engaged with the misuse issue, the delisting provisions at issue here were added to the statute within a year.