What to expect from Big Pharma (and Biden’s push to lower drug prices) in 2024

Several notable legal and regulatory developments in 2023 have and will continue to shape the pharmaceutical industry in 2024. First, the Supreme Court weighed in on the “skinny label” case between GSK and Teva Pharmaceuticals. Teva was asking the high court to reverse a $235 million loss to GSK in a patent dispute over a generic heart drug, but the court declined the case.

In addition, the current administration announced new regulatory objectives and initiatives with implications for the pharmaceutical industry, including announcements regarding the use of artificial intelligence (AI) in drug development, and concerted efforts from the White House and Federal Trade Commission to lower prescription drug costs through challenges to the propriety of patents listed in the FDA Orange Book.

Supreme Court decisions

In May of 2023, in Amgen v. Sanofi, the Supreme Court unanimously affirmed the Federal Circuit’s decision that Amgen’s asserted patent, covering a wide range of antibodies, were invalid for lack of enablement. Defendant Sanofi argued Amgen’s broad claims were not enabled based on the patent’s disclosure, particularly because the claims were written to capture antibodies based on their function—namely, all antibodies capable of binding to two different molecules—rather than their specific structure.

Although the functional language was not fatal on its face, the court found the specification, which included 26 examples, merely issued “two research assignments” and failed to “identify a quality common” to the functional embodiments. Thus, the court held the claims were not enabled as the specification’s instructions would lead to more than “a reasonable degree of experimentation” to discover which antibodies were covered by the claims.

In light of these developments, patents are expected to face increased scrutiny in 2024. Despite the Supreme Court’s willingness to wrestle with enablement issues in Amgen, the high court declined to hear other patent cases this year. First, in January the Court denied a petition for rehearing in Juno Therapeutics v. Kite Pharma, again declining to review the Federal Circuit’s August 2021 decision.

In May 2023 the Supreme Court denied Teva Pharmaceutical’s petition in GlaxoSmithKline v. Teva Pharmaceuticals USA, despite Teva’s attempts to “carve-out” the claimed indication from its drug label. The “skinny label,”—a reference to a generic drug manufacture’s label which omits indications covered under patented uses—has long been a tool for generic manufacturers to avoid infringement claims under a theory of inducement.

This case has raised concerns as to the effectiveness of “skinny labels” in avoiding liability.

Regulatory announcements

In June of 2023, the first drug candidate generated with the use of AI entered phase 2 studies. Along with that development, the FDA announced new initiatives on artificial intelligence and machine learning in drug development. As part of the announcement, the FDA issued discussion papers to communicate with stakeholders and to explore relevant considerations for the use of AI/ML in the development of drugs and biologic products.

Although the papers do not provide specific policy proposals, they demonstrate FDA’s recognition that AI/ML will play a critical role in drug development, and its desire to adopt a flexible risk-based regulatory framework that promotes innovation with AI while protecting patient safety.

Additionally, in October, President Biden issued an executive order on artificial intelligence, outlining new initiatives broadly aimed at promoting safety and security in the rapidly evolving AI space. The measures include instructing the US Patent and Trademark Office (USPTO) director to publish within 120 days guidance on inventorship in the use of AI and within 270 days to address “other considerations at the intersection of AI and IP,” potentially including guidance on patent eligibility. Thus, requested guidance is expected in February and July, respectively, at which time interested parties will have the opportunity to review and comment, to help shape USPTO regulations involving AI.

Federal agencies also issued new objectives and policies aimed at reducing drug costs in 2023. First, in September, the FTC announced new objectives aimed at combating improper Orange Book listings, which the Commission views as an anti-competitive bar on generic drug manufacturers’ ability to enter the pharmaceutical market. In November, the FTC challenged more than 100 patents via an FDA regulatory process that it alleged were improperly listed in the Orange Book.

On the heels of this FTC activity, in December, Senator Elizabeth Warren and Representative Pramila Jayapal sent joint letters to the CEOs of the companies targeted by the FTC requesting the companies address the “deeply troubling allegations” mounted by the FTC and urging the companies to voluntarily delist the challenged Orange Book patents. The industry is evaluating these challenges and based on currently public information it appears that not all challenged patents will be withdrawn.

In light of this, the FTC has stated that it is “discussing next steps for the companies that ignored [the] warning letters.” Thus, the industry anxiously awaits the results of the remainder of challenge patents and what, if any, action the FTC will pursue next in its attempts to reduce drug costs. In the meantime, parties should continue to review their drug portfolios for compliance with Orange Book regulations and relevant case law, as well as their current patent prosecution portfolios to determine if modifications to the proposed claims are warranted in light of the FTC’s standard for challenging patent listings.

New initiatives aimed at reducing drug prices

Finally, in December 2023, the Biden Administration announced new policy objectives and initiatives aimed broadly at reducing prescription drug prices. The same day, the National Institution of Standards and Technology (NIST) released a draft interagency framework for the exercise of “march-in” rights: a tool under the Bayh-Dole Act which empowers the federal government to license patents which result from federally-funded research under certain circumstances. Notably, the draft guidance would allow agencies to consider the price and terms by which a drug is commercialized in weighing whether to exercise these “march-in” rights—a reversal from a proposed framework under the Trump administration, which sought to forbid agencies from considering price alone. Even though Bayh-Dole’s “march-in” provisions have been available since 1980, they have never been utilized.

Related: GlaxoSmithKline & other drugmakers delist FDA patents, after FTC ‘Big Pharma’ scrutiny

In sum, 2023 was a year highlighted by judicial interpretation of patentability requirements which will shape the drafting of pharmaceutical patent claims and be the subject of scrutiny in pharma patent litigation. In addition, the year saw increased federal and regulatory scrutiny aimed at addressing developments in AI and reducing drug costs.

Jeanna M. Wacker is a partner in Kirkland & Ellis’s New York office, where she concentrates her practice on patent litigation in the life sciences field. Tasha Gerasimow is a partner in the firm’s Chicago office, where she focuses her practice on intellectual property litigation with an emphasis on patent litigation. Nick Johnston is an intellectual property associate in the firm’s Chicago office.