5 minutes on... ANDA disputes

With 578 abbreviated new drug application (ANDAs) already filed with FDA by mid-year, 2021 looks set to be a bumper year for this type of application, likely surpassing filings of 865 in 2020 and 909 in 2019.  Whether the pace of ANDA filings leads to an increase in Hatch-Waxman litigations remains to be seen, but with 225 new cases filed in 2021 already (compared with 264 in 2020), this year may also be a bumper year for litigation.

The pharmaceutical industry is no stranger to high stakes litigation, and while infringement litigation against brand manufacturers tends to receive the most coverage due to massive damage awards, generics development carries equally significant cost and risk. Below, we take five minutes to discuss ANDAs, which look likely to increase given FDA approvals of new drug applications.

How do ANDAs work?

Filed by generics developers, an ANDA is submitted to FDA for review and approval of a generic drug product.

Innovative pharmaceutical companies seeking to market a new drug have to undergo an extensive FDA approval process that includes safety and efficacy testing, as well as filing a new drug application (NDA). But generics developers get to bypass this arduous process, although they must file an ANDA, which seeks approval for a generic drug that is “bioequivalent” to the brand-name drug, meaning it has the same active ingredient and performs the same as the brand name. If the ANDA is approved, a new generic drug can be brought to market, offering the public a low-cost alternative to the brand-name drug.

Generics litigation resulting from ANDAs  

Introducing a generic drug to the market stimulates competition and drives down the cost of the brand name drug—an unwelcome development for patent owners. As a result, manufacturers pursuing an ANDA with a Paragraph IV certification expect litigation.

The Hatch-Waxman Act ensures that would-be generics developers can challenge the validity and/or infringement of patents covering brand name drugs before commercial marketing (and therefore monetary damages) by filing an ANDA with a paragraph IV certification, notifying the branded drug company and patent owner. A patent owner in turn can (and often will) file a suit within 45 days of receiving the notice, which triggers an automatic 30-month stay of regulatory approval. During this time, FDA can’t approve the generic drug, and the stay can be shortened or extended if a party fails to reasonably cooperate in expediting the action.

The patent challenger needs to be able to fund what may be an expensive process. But patent challengers often lack the financial resources and risk tolerance to pursue and sustain litigation against cash-rich pharma brands whose businesses depend on protecting their IP and exclusive sales.

Financing ANDA litigation

Legal finance may help generics manufacturers challenge weak patents, allowing meritorious claims to proceed and protecting both consumers and drug makers alike. It’s also a way for companies to manage litigation costs, freeing up funds to spend on revenue-generating areas of the business, such as research and development.

Because ANDA disputes do not result in a monetary judgment, which is how legal finance providers typically recover their investment, generics manufacturers need to engage with a sophisticated finance provider like Burford that can structure their returns around future revenue.