Intellectual property (IP) challenges related to pharmacy compounding, center around three allegations which pharmaceutical manufacturers are increasingly willing to assert against compounding pharmacies: patent infringement, trademark infringement and unfair competition. Most recently, GLP-1 compounding of semaglutide and tirzepatide are particularly targeted for such allegations. This article lays the foundation for compounders to avoid getting sued by manufacturers.
Patent Infringement
Over 40 countries exclude compounding from patent infringement.[1] Excluding patent infringement in compounding is designed to avoid both limiting access to medications needed for an individual patient, and interference with the prescriber/patient relationship. Patents should not restrict the physician’s freedom to prescribe medications in the interest of health promotion. In the United States, Section 503A of the Food, Drug & Cosmetic Act (FDC Act) provides certain exceptions for pharmacies to permit compounding medications. One of the exceptions[2] is that pharmacies can compound an existing drug without having to file an Abbreviated New Drug Application (ANDA). Section 505 of the Hatch-Waxman Act[3] regulates how pharmaceutical manufacturers obtain FDA approval and what avenues of judicial relief are available to patent holders[4] and their generic competition. Under the Hatch Waxman Act, the filing of a Paragraph IV certification by an ANDA applicant is an act of patent infringement[5] for which the brand company must bring a lawsuit within 45 days. Since compounded drugs are exempt from the ANDA requirements, no patent assertions are required and pharmaceutical manufacturers cannot bring lawsuits for patent infringement. The FDC Act preempts 503A compounding patent infringement claims.
This provision is not absolute as certain conditions must be met. To fall under this drug approval and patent infringement exemption, a 503A compounding pharmacy must adhere to the requirements of Section 503A of the FDC Act.[6] Pharmacies often find out they are not adhering to Section 503A, only when undergoing an FDA inspection and receive an FDA 483[7] or Warning Letter. FDA will usually assert that since the compound was not compounded in compliance with 503A, the pharmacy has distributed an unapproved new drug since it failed to obtain ANDA approval. Pharmacies are often confused as to why that statement is made by FDA following an inspection.
What are the requirements under 503A for the exemption? The compounding must be patient-specific pursuant to a prescription, not compounded for ‘office use’, not compounded in large batches and not compounded in quantities beyond what is considered ‘anticipatory’ compounding. The pharmacy cannot be engaged in false advertising. The term false advertising is also elusive to pharmacy compounders. Since compounds are not FDA approved for safety and efficacy (S&E) (i.e. no NDA or ANDA requirement), no S&E claims are permitted (including FDA-approved indications but especially for off-label uses). Many pharmacies learned this lesson when advertising ivermectin off-label to treat COVID. Claims that the active ingredient or components are FDA-approved, comparisons with any FDA-approved product, and particularly any claim of superiority of the compounded drug (e.g. better absorption via the sublingual vs oral route) are prohibited. The Supreme Court has long held that there is no prohibition on soliciting prescriptions for compounded prescriptions.[8] A pharmacy can advertise that it compounds and identify the drugs it compounds, subject to these limitations.
Suppose a pharmacy is compounding ‘essentially a copy’[9] of a commercially available drug? Does that change the patent infringement analysis? There are restrictions[10] pertaining to compounding drugs that are ‘essentially a copy’ of a commercially available drug. The restriction ensures that pharmacies do not compound drug product under the exemption for patients who could use a commercially available product, e.g. as a less expensive substitute. The only reason a 503A would compound ‘essentially a copy’ is if the drug appears on the 506e FDA shortage list. A patent holder’s allegation that a 503A is infringing a patent of the commercially available product is arguably defeated when the pharmacy has compounded ‘essentially a copy’, when the drug is on the 506e shortage list. Since the drug is on shortage, it is not commercially available and an exact copy may be compounded. However, once off the FDA list, the drug can only be compounded if there is a medical necessity for an individual patient. This is defined as “a change made for an individual patient that produces a significant difference for that patient”. There are specific documentation requirements in the pharmacy’s records for this medical necessity.
Trademark Infringement and Unfair Competition
Brand manufacturer attempts to limit market availability and intimidate compounders are clearly increasing. While most of the patent infringement allegations have been limited to ‘cease & desist’ letters, in the areas of trademark infringement where there is a higher likelihood for success, litigation is more likely to occur.
As an example, in June 2023 Novo Nordisk filed lawsuits against several 503A pharmacies alleging trademark infringement for the pharmacies compounded semaglutide products. Similarly, in September 2023 Eli Lilly filed lawsuits against compounding pharmacies where it was alleged they invoked Mounjaro® in their advertising.[11] Claims have also been alleged for deceptive advertising and ‘unfair competition’. In some cases, the claims are made under various state acts, e.g. Florida’s Deceptive and Unfair Trade Practices Acts, where brand manufacturers allege that the compounding pharmacies are selling ‘unapproved new drugs’ because there is no ANDA (even though compounders are exempt from ANDA requirements under section 503A the FDC Act).
Elements of trademark infringement, such as likelihood of confusion, can be met where a pharmacy: advertises using the brand company’s tradename, or claims the compound is actually the brand product (i.e. passing off), or uses the brand company’s trade dress (lettering, colors, etc.) or asserts that the compounded product is ‘similar to’, ‘the same ingredient as brand name X’ , ‘a generic version’ or makes other comparisons to a pharmaceutical manufacturers brand name. Manufacturer’s sometimes use the compounder’s advertisements to show a ‘likelihood of confusion’ or that they ‘induce infringement’ by physicians. Additionally, a 503A could be liable for Contributory trademark infringement if selling/dispensing to patients of an entity making such comparisons to the brand product (‘willful blindness’ could apply). In one case where the advertising stated the commercially available product was “not ideal for use”, a ‘superiority claim’, and there were other misleading and false claims on the compounder’s website, the manufacturer included causes of action under both the Lanham Act and a state consumer protection law.
How Can Frier Levitt Help
For nearly twenty five years, Frier Levitt has advised 503A compounding clients. We assess the strengths and vulnerabilities of the myriad legal/FDA/IP issues pertaining to contemporary compounding practice. Across a spectrum of different pharmacy business models, we can anticipate opportunities and warn of potential regulatory/legal issues and provide invaluable advice to mitigate risks. Our team has a deep understanding of the 503A space, coupled with decades of patent and trademark experience. Additionally, Frier Levitt offers a full range of IP legal services to protect your most crucial IP assets including patents, trademarks, copyrights and trade secrets.
[1] World Intellectual Property Association (WIPO). Standing Committee on the Law of Patents. Exceptions and limitations to patent rights: extemporaneous preparation of medicines. Geneva, Jan 27, 2014.
[2] Other exceptions pertain to T3 requirements under the Drug Supply Chain Security Act for which compounded products are exempt, cGMP requirements and certain labeling requirements.
[3] 21 U.S.C. §355.
[4] Per Section 505(b) of the Hatch Waxman Amendment “The applicant (NDA holder) shall file with the application the patent number and the expiration date of any patent which claims the drug … or which claims a method of using such drug.”
[5] 35 U.S.C. § 271(e)(2)(A).
[6] Similar exemptions pertain to 503B outsourcing facility compounding.
[7] Notice of Inspectional Observations.
[8] Thompson v. Western States Medical Center, 535 U.S, 357 (2002).
[9] FDA Guidance “ Compounded Drug Products That Are Essentially Copies of a Commercially Available Drug Product Under Section 503A of the Federal Food, Drug & Cosmetic Act” defines what is meant by ‘essentially a copy.’
[10] A complete list of the conditions that must be met for a compounded drug product to quality for the 503A exemption appears in the FDA Guidance “Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food Drug, and Cosmetic Act. It is beyond the scope of this article to enumerate all of conditions, e.g. drugs which present demonstrable difficulty compounding.
[11] Kaplan A. Eli Lilly launches 10 suits over new diabetes drug. Law 360 2023 Sep 21.
