A $75 Million Drug Sale Lands Teva a $235 Million Penalty

(Bloomberg) --

Teva Pharmaceutical Industries Ltd.’s sale of $74.5 million of a generic heart treatment resulted in a court ruling ordering it to pay a penalty three times that amount to reimburse GlaxoSmithKline Plc.

A U.S. appeals court on Friday said Teva should pay $235 million over its sale of a generic version of Glaxo’s heart drug Coreg. A trial court had thrown out a verdict won by Glaxo, but the U.S. Court of Appeals for the Federal Circuit, in a 2-1 ruling, reinstated both the infringement finding and the damages award, which was based on the profits Glaxo lost.

“It was ultimately more costly for Teva to sell an unpatented drug for unpatented uses than it would have been to stay out of the market altogether,” Circuit Judge Sharon Prost said in dissent.

Prost said the majority opinion would slow the introduction of low-cost generic medicines. The vast gulf between the damages award and Teva’s sales reflects the differences in price between the brand-name and generic drug. Prost said Teva’s drug cost less than 4 cents a pill, while Glaxo’s cost at least a $1.50 pill.

Teva said it maintains that it doesn’t infringe the patent and will ask the Federal Circuit to reconsider the decision. It said it also will “present additional defenses to the district court.” London-based Glaxo said it was pleased with the ruling.

The ruling could have broad implications for other generic-drug makers. Glaxo’s patent is for the use of the compound carvedilol to lessen the chance of death from congestive heart failure. The company claimed Teva infringed the patent, even when it was only selling its generic version of Coreg for hypertension.

Teva said it used a so-called “skinny label” that excluded hypertension as an indication for the generic drug. It began selling its copycat version of Coreg in 2007, when the main patent on the drug expired.

Even after a drug is approved by regulators, brand companies sometimes discover their medicine can be used for new indications, and will obtain a patent on the drug for that use. Skinny labels are used when a generic-drug maker gets Food and Drug Administration approval to sell a medicine, but only for uses that aren’t covered by active patents.

Glaxo argued Teva marketed the generic version as being the same as Coreg, and so led doctors to prescribe it for heart failure in violation of the patent, and the majority of the appeals court panel agreed.

There was “ample record evidence of promotional materials, press releases, product catalogs, the FDA labels, and testimony of witnesses from both sides, to support the jury verdict,” Circuit Judge Pauline Newman wrote.

The patent expired in June 2015, but the June 2017 verdict was based on Teva’s sales of its generic version of Coreg before the patent expired.

Teva argued it wasn’t responsible for the actions of doctors who prescribed the generic for congestive heart failure, because the doctors were acting based on their knowledge of Coreg’s uses that they learned from Glaxo.

The damages award was based on the amount the jury said Glaxo lost in Coreg profit between 2007 and when its patent expired in 2015. Glaxo had been seeking $750 million.

Teva argued that Glaxo should have been forced to prove that every sale made by Teva would have been a sale for Glaxo and not for other generic versions.

The case is GlaxoSmithKline LLC v. Teva Pharmaceuticals USA LLC, 18-1976, U.S. Court of Appeals for the Federal Circuit (Washington).

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