In mid-May, the U.S. Supreme Court opted not to take up a patent-infringement case between two pharmaceutical companies – Teva and GlaxoSmithKline (GSK). While it largely went unnoticed among those who are not patent lawyers, IP nerds, or drug companies, the decision’s ripple effects could have a negative impact for patients across the country looking to get access to newer, better treatments.

The case dealt with “skinny labeling,” a strategy used by many generics or biosimilars manufacturers to get their products approved and marketed on a more expedited basis. Put simply, U.S. law gives manufacturers of new medications a period of market exclusivity before generic versions can be approved. While the exclusivity is ostensibly five years for typical pharmaceutical treatments and 12 years for biologics, originators often take legal steps to delay the launch of generics and biosimilars, including petitioning for supplemental exclusivity for indications or uses developed after initial approval and introduction. In such cases, the original companies maintain “method-of-use” patents covering only specified uses of their products.

Manufacturers of brand-name medications are required to publicly identify to the FDA what uses for their product are still covered under patent. It is common practice for generics companies to use that information to determine what uses should be carved out in the applications for approval. The FDA approves “skinny labels” for generics and biosimilars that exclude indications that are still under patent, allowing competitive products to be introduced for a limited set of uses where the originator’s exclusivity has already expired.

The benefits of skinny labels are pretty obvious. For manufacturers, it means they can produce and prepare to market a generic or biosimilar without expensive and lengthy patent litigation. For patients, it means more treatment options and increased competition, which can drive down their costs and give them more access to new and better treatments.

In Teva’s case, the FDA sent a redlined label showing what to carve out based on the patented uses GSK identified to the FDA. Even though Teva used that label, GSK filed suit claiming that, although the FDA approved label correctly carved out the patented uses of its medication, the label still intentionally encouraged infringement on those uses. The company was awarded $235 million and the case was subsequently upheld on appeal. Teva petitioned the Supreme Court to take their case, but the petition was denied in last month’s decision.

The Teva-GSK litigation has created some uncertainty about the future of skinny labeling – and many experts believe the Supreme Court’s refusal to hear the case will have a chilling effect on the generics and biosimilars industries.

For example, in a brief filed in support of Teva’s position, 42 professors of law, economics, business, and medicine argued that, due to the massive increase in the number of method-of-use patents over the last three decades, generic companies will have to contend with an average of three potential allegations of induced patent infringement if other brand-name manufacturers follow GSK’s lead. And, the professors note, because many of the drugs skinny-label generics typically compete with often generate millions in revenue every single day, companies holding method-of-use patents have “every incentive to engage in costly, time-consuming inducement litigation to the fullest extent.”

In another brief, the Association for Accessible Medicines – a leading trade association for companies making generics and biosimilars – GSK’s litigation successes offer “a roadmap for bringing inducement claims that will chill generic availability even for manufacturers such as Teva that were ‘about as faithful as it gets’ adhering to Congress’s skinny label framework.”

Both briefs – as well as arguments laid out by others regarding this case – highlight the fact that Teva, by all accounts, followed the steps required by the law for obtaining approval and marketing their generic product. Yet, GSK successfully claimed Teva had intentionally encouraged uses of their product that infringed on their patent. If other major drug companies follow this approach, more companies may simply decide to avoid releasing a competing generic or biosimilar altogether until all exclusivity periods have expired. In the end, this means more delays for the introduction of competing generics and biosimilars and higher costs for patients.

As we noted in report earlier this year, threats and uncertainty surrounding skinny labeling could have a particularly harmful impact on the development and launch of new biosimilars. Prior to 2022, over half the biosimilars approved by the FDA had skinny labels. So, any outcomes that add time or costs to product development will have a disproportionate impact on biosimilars, not to mention the patients hoping to finally get access to affordable and more effective treatments.

The regulatory systems governing the approval and marketing of generics and biosimilars were designed ensure a balance between the desire to give patients more timely access to cheaper versions of medications with the need to ensure innovative companies can recoup the massive time and capital investments required to produce a new treatment. Congress specifically laid out the procedure for skinny labeling to further preserve that balance and prevent companies from unduly extending their market exclusivity.

With policymakers across the country keenly focused on bringing down drug prices – tackling major issues like PBM abuses and Medicare price negotiations – they should also consider taking steps to clarify the law to ensure more generics and biosimilars are launched to deliver on the promises of increased competition. After the recent Supreme Court decision – or non-decision – all interested stakeholders should be watching closely to ensure the balance doesn’t shift against patients looking for more treatment options.