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In a decision with enormous implications for the U.S. health care system, a federal appeals court panel issued a ruling that throws into question the ability of generic companies to “carve out” uses for their medicines and supply Americans with lower-cost alternatives to pricey brand-name drugs.

At issue is skinny labeling, which refers to an effort by a generic company to seek regulatory approval to market its medicine for a specific use, but not other patented uses for which a brand-name drug is prescribed. For instance, a generic drug could be marketed to treat one type of heart problem, but not another. By doing so, the generic company seeks to avoid lawsuits claiming patent infringement.


This tactic has been a linchpin among generic companies ever since a federal law known as the Hatch-Waxman Act went into effect nearly four decades ago. The law established the mechanisms by which generic drugs can more readily enter the marketplace. And skinny labeling, which amounts to a carve-out, is one way that Congress attempted to foster more competition to benefit consumers.

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