Those familiar with the Hatch-Waxman Act and its various incentives to stimulate drug innovation know that New Chemical Entity (“NCE”) exclusivity is the holy grail of small molecule exclusivity. Though orphan drug may give a sponsor two more years of exclusivity than NCE, it only applies to a specific indication and patient population, both of which can be designed around. Other exclusivities, like three year or QIDP, can also be designed-around or are traditionally add-on exclusivities. NCE exclusivity, on the other hand, blocks the submission of any 505(b)(2) application or ANDA for the same active moiety regardless of the indication. NCE exclusivity, therefore, is coveted, as it forces any competitor seeking approval of the same active moiety to run its own expensive and time-consuming trials or wait at least four years to even submit an application—five years if the follow-on application does not include a Paragraph IV certification. Specifically, the statute says:
. . . no application which refers to the drug for which the subsection (b) application was submitted . . . may be submitted under subsection (b) before the expiration of five years form the date of the approval of the application under subsection (b), except that such an application may be submitted under subsection (b) after the expiration of four years from the date of the approval of the subsection (b) application if it contains a certification of patent invalidity or noninfringement described in clause (iv) of subsection (b)(2)(A).
21 U.S.C. § 355(c)(3)(E)(ii), (j)(5)(F)(ii) (emphasis added). Of course, the bar on the submission of a follow-on application for an NDA with NCE is great because it means that FDA cannot start reviewing the follow-on application until either the expiration of the five-year period (or, in the case of a follow-on application with a Paragraph IV certification, four years, subject to a 30-month stay), thereby providing a de facto extension of the five years of exclusivity.
Not so fast. While NCE exclusivity is a major incentive, that submission provision in the statutory language provides a loophole. While other periods of exclusivity block the approval of a follow-on application for the statutory period of exclusivity, the statutory language of the NCE provision blocks only the submission of a follow-on application. FDA has long interpreted this provision to mean that applications submitted prior to approval of a product with NCE exclusivity are neither barred from approval, nor must they be withdrawn. See FDA, Citizen Petition Response, Docket No. FDA-2011-P-0606 (May 17, 2011).FDA recognized this issue when adopting its regulations implementing NCE exclusivity back in 1989, noting that two applicants could submit and file 505(b)(2) applications for the same drug product, and one of the applications could subsequently be approved with an NCE exclusivity, leaving the question of what happens to the other application. FDA decided “to interpret this phrase to mean that any 505(b)(2) application submitted to FDA before the approval of another new drug application that qualifies for [NCE exclusivity] is not affected by this exclusivity provision” other than when “the competing applicant amends its application to include the first applicant’s published data. Where that data would be essential to the competing application, the second application will be deemed to refer to the first application.” Abbreviated New Drug Application Regulations, 54 Fed. Reg. 28,872, 28,901 (July 10, 1989).
Last week, after several rounds of Citizen Petitions (here and here) Genus Lifesciences Inc. (“Genus”) sued FDA over its stance relating to dueling 505(b)(2)s. In the suit, Genus accuses FDA of intentionally undermining its NCE exclusivity for its cocaine HCL nasal solution by accepting an incomplete 505(b)(2) application from a competitor mere weeks before it approved Genus’s 505(b)(2). Genus received FDA approval for its cocaine product, called Goprelto and indicated for “the induction of local anesthesia of the mucous membranes” in certain diagnostic procedures and surgeries, on December 14, 2017. Prior to December 2017, cocaine HCL products were on the market but only as unapproved drugs. FDA required Genus to perform a battery of time-consuming and expensive testing prior to submission of its NDA, but Genus alleges that FDA admittedly required significantly less testing when its competitor, Lannett Company Inc. (“Lannett”), submitted its 505(b)(2) for its cocaine HCL nasal solution, Numbrino, on November 29, 2017. Further, when Lannett received a Complete Response Letter for Numbrino in July 2018, FDA permitted Lannett to resubmit its application based on FDA’s position that a post-CRL resubmission is an amendment to the original 505(b)(2) rather than a submission. This, Genus argues, amounts to allowing Lannett to submit an incomplete and inadequate “placeholder” application right before Goprelto’s five years of exclusivity took effect.
Genus sets forth three main arguments in its complaint: (1) That FDA’s acceptance of Lannett’s Numbrino 505(b)(2) application without the same rigorous data requirements FDA required for submission of Genus’s Goprelto 505(b)(2) treats similarly situated parties differently in violation of the Administrative Procedure Act; (2) That FDA’s acceptance of Lannett’s amendment and resubmission of its 505(b)(2) after its CRL, notwithstanding Genus’s NCE exclusivity, was arbitrary and capricious under the Administrative Procedure Act and in violation of the federal Food, Drug, and Cosmetic Act (“FDCA”); and (3) that approval of Genus’s NCE exclusivity is in violation of the NCE provisions of the FDCA. Basically, Genus is accusing FDA of letting the ends (approval of a competing cocaine HCL product) justify the means (disparate treatment and nullification of Genus’s NCE exclusivity), similar to litigation filed by Catalyst in its June 2019 suit against FDA challenging the approval of a Firdapse competitor.
Genus’s objections are compounded by the fact that cocaine HCL was, until Goprelto’s approval, a drug marketed without FDA approval. Genus made a significant investment to meet FDA’s standards in an effort to voluntarily comply with FDA’s request that all unapproved drugs undergo the approval process. As such, once a company obtains “approval of an NDA for a product that other companies are marketing without approval,” FDA is supposed to take enforcement action against “remaining unapproved drugs” because “they present a direct challenge to the drug approval system.” FDA’s Compliance Policy Guide for Marketed Unapproved Drugs § 440.100. Enforcement action is intended to “provide an incentive to firms to be the first to obtain approval to market a previously unapproved drug.” Id. Genus was in exactly this situation, but instead of exercising its enforcement authority with respect to cocaine HCL, Genus alleges that FDA held a competing product to a lower bar so that it could submit its 505(b)(2) prior to Goprelto approval and not be blocked by Goprelto’s 5-years of exclusivity.
This lawsuit is just the latest in a trend of suits against FDA, most of which have involved FDA trying to legally justify policies after-the-fact. We saw this with Genus Medical Group (a different Genus), in which FDA tried to backfill its policy of regulating all contrast agents as devices regardless of the statutory text. We also see this in the aforementioned Catalyst litigation, as well as the Eagle/Depomed litigation, in which FDA did not have statutory authority to require a demonstration of clinical superiority after granting orphan drug designation (the statute has since been changed to provide that authority). Some of these recent challenges have been successful, but on Chevron Step 1 bases. It looks like Genus will mostly be making a Step 2 arbitrary and capricious argument—though that won’t be clear until the inevitable Motion for Summary Judgment is filed—but industry has some success with Step 2 as well (e.g., Braeburn litigation). It will be interesting to see how Genus frames these arguments in light of these recent rulings.