By William T. Koustas –      

Today, the FTC announced that it is delaying enforcement of the controversial Red Flags Rule (“the Rule”) until November 1, 2009.  The FTC press release states that it is extending the August 1, 2009 deadline, previously discussed in this blog, by three months to allow small businesses and low risk entities more time to develop and implement Identity Theft Prevention Programs.  In order to clear up the uncertainties many small businesses and low risk entities have with the Rule, FTC will also create additional compliance guidance and a special link for small and low risk entities on the FTC’s Red Flags Rule website.  It appears that the FTC was encouraged to extend the enforcement deadline by a request from the House Appropriations Committee to “defer enforcement in conjunction with additional efforts to minimize the burdens of the Rule on health care providers and small businesses with a low risk of identity theft problems.”  The American Bar Association and American Medical Association have also vigorously opposed the application of the Rule to lawyers and doctors and have requested a delay of its enforcement as well. 

By Cassandra A. Soltis –

In Pom Wonderful LLC v. Ocean Spray Cranberries, Inc., 2009 WL 2151355 (C.D. Cal. 2009), the U.S. District Court for the Central District of California determined that Pom Wonderful LLC’s (Pom’s) false advertising claim against Ocean Spray Cranberries, Inc. (Ocean Spray) under the Lanham Act was not precluded or barred by the Federal Food, Drug, and Cosmetic Act (FDC Act).  The court also found that Pom’s false advertising and unfair competition claims under California law were not preempted by the FDC Act. 

Pom alleged that Ocean Spray “made false and misleading representations regarding the primary ingredients” in Ocean Spray’s pomegranate and cranberry juice blend beverage, which “is almost entirely comprised of apple and grape juice.”  Pom, 2009 WL 2151355, at *1.  Indeed, the court noted that, based on the product’s label, “cranberry juice ranks third and pomegranate juice ranks fifth” among the five juices in the product.  Id.  Pom also alleged that Ocean Spray marketed the product as being high in antioxidants when, in fact, this is untrue.  Id.  Pom argued that “[a]s a result of [Ocean Spray’s] misrepresentations,” Ocean Spray’s “costs to produce the Beverage are lower and [it] can charge less for its product than competitors such as” Pom.  Id.  Further, “consumers are ‘tricked’ into thinking they are getting a product that is similar to [Pom’s] (whose product is primarily pomegranate juice) for a lower price.”  Id. 

Ocean Spray’s motion to dismiss Pom’s complaint was denied.  The court explained that although the “Lanham Act and the [FDC Act] have overlapping jurisdiction in areas such as marketing and product labeling,” the “purposes of the two statutes are different,” with the Lanham Act “’intended to protect commercial interests’ from unfair competition,” and the FDC Act, “to protect the public from unsafe or mislabeled products.”  Id. at *2 (citations omitted).  Further, “the Lanham Act may be enforced by private litigants,” but only FDA or the Department of Justice can enforce the FDC Act.  Id.  Because of the differences in these two laws, Lanham Act claims are generally “barred where private litigants ask the district court to ‘determine preemptively how [the FDA] will interpret and enforce its own regulations.’”  Id. (citations omitted).  “Put differently, the key issue in the line of cases dealing with [the FDC Act] or FDA regulation preclusion of Lanham Act claims is whether the false advertising involves a fact that can be ‘easily verified,’ without requiring the truth of the fact to be determined by the FDA.”  Id. (citations omitted).

The district court opined that “determining the primary ingredients of the Beverage and whether [Ocean Spray’s] representations are misleading is not contingent on a decision of fact by the FDA or the enforcement of its regulations.”  Id. at *3.  Indeed, the FDC Act provision stating that a food will be misbranded if its labeling is false or misleading does not define what constitutes “false or misleading.”  Id.  Although there are several requirements for the labels of beverages containing multiple juices, Pom’s complaint “does not reference or attempt to enforce these requirements.” Id. at *4.  “Accordingly, [Pom] has stated a permissible claim under the Lanham Act for false advertising.”  Id. 

The court also found that Pom’s state law claims under the Sherman Act were neither expressly preempted nor barred by field preemption.  Although the FDC Act expressly preempts state requirements for food labeling that are not identical to certain sections of the FDC Act, the Act does not preempt false or misleading labeling or unfair competition claims.  Id. at *5-6.  The court also stated “that Congress did not intend federal law to exclusively occupy the fields of food labeling and advertising.”  Id. at *7.  Finally, the court found that application of the primary jurisdiction doctrine was not warranted in this case and that Pom met the heightened pleading requirements of Rule 9(b).  Id. at *7-8.

By Kurt R. Karst –      

On July 28, 2009, FDA will publish a final rule amending the Agency’s regulations requiring that NDA holders submit in annual reports certain information to the Agency concerning authorized generics.  The regulations, which were first proposed in September 2008 – both as a proposed rule and as a direct final rule (that was later withdrawn after FDA received significant adverse comment) – implement Section 920 of the FDA Amendments Act (“FDAAA”).  FDAAA § 920 amended the FDC Act to create new § 505(t) – “Database for Authorized Generic Drugs” – that requires FDA to compile and publish a complete list of all authorized generic drugs identified in annual reports submitted to the Agency since January 1, 1999.

FDC Act § 505(t) defines an “authorized generic” as a drug listed in FDA’s Orange Book that was approved under FDC Act § 505(c) (i.e., a “full” 505(b)(1) NDA or 505(b)(2) application) and that “is marketed, sold, or distributed directly or indirectly to retail class of trade under a different labeling, packaging (other than repackaging as the listed drug in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trade mark than the listed drug.”  FDAAA requires that the authorized generic list be updated on a quarterly basis.  FDA first published its authorized generic list in June 2008.  Among other uses, this list is intended to assist the Federal Trade Commission (“FTC”) as that agency moves forward to complete its study of the competitive effects of authorized generics.  As we previously reported, in June 2009, the FTC published an interim report on authorized generic drugs.  The report provides the results of the FTC’s preliminary data analysis on the short-term effects of authorized generics on competition during 180-day exclusivity.

The authorized generics final rule, which goes into effect in six months, amends FDA’s regulations at 21 C.F.R. § 314.3(b) to add the following definition of an “authorized generic drug” that is substantially identical to that in FDC Act § 505(t):

Authorized generic drug means a listed drug, as defined in this section, that has been approved under section 505(c) of the act and is marketed, sold, or distributed directly or indirectly to retail class of trade with labeling, packaging (other than repackaging as the listed drug in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trademark that differs from that of the listed drug.

The final rule also amends FDA’s postmarketing reporting requirements to add 21 C.F.R. § 314.81(b)(2)(ii)(b) to require NDA holders to include in their annual reports information detailing: (1) the date each authorized generic entered the market; (2) the date each authorized generic ceased being distributed; and (3) the corresponding brand name drug.  FDA considers each dosage form and/or strength to be a different authorized generic drug that should be separately listed in an annual report.  Moreover, the first annual report submitted after implementation of this regulation must provide information regarding “any authorized generic drug that was marketed during the time period covered by an annual report submitted after January 1, 1999.” 

The final rule makes some changes to the proposed rule, particularly with regard to the electronic submission of authorized generic information.  Specifically, FDA states in the final rule that:

After considering the comments, we have concluded that it is appropriate to make a revision to the proposed rule to permit e-mail submission of the required information in addition to regular mail, including courier delivery.  The final rule revises proposed 314.81(b)(2)(ii)(b) to allow NDA holders to send the required information to the Authorized Generics electronic mailbox at AuthorizedGenerics@fda.hhs.gov with Authorized Generic Submission indicated in the subject line.

We also revised the last line of that section to clarify when separate submission of the authorized generics information is required by this rule.  When information is included in an annual report about an authorized generic drug, the final rule requires that a copy of that portion of the annual report be sent to a central office in the agency that will compile the list of authorized generic drugs and update it quarterly.  At such time as FDA requires electronic submission of annual reports through a system that allows for the extraction of relevant information from annual reports, separate submission of the information will no longer be required.

Based on FDA’s historical review of annual reports, the Agency estimates that approximately 60 NDA sponsors will submit about 400 annual reports containing  authorized generic information required to be reported under new 21 C.F.R. § 314.81(b)(2)(ii)(b).

By Ricardo Carvajal –      

On July 23, FDA held the first of three public workshops to explain the Reportable Food Registry requirements that will take effect on September 8, 2009.  One thing was made clear: the agency has no plans to offer a definition of the standard that triggers the reporting obligation. Rather, it will be left to individual firms to determine, on a case-by-case basis, what constitutes a “reasonable probability that the use of, or exposure to, [the] article of food will cause serious adverse health consequences or death to humans or animals.”  In response to questions, agency officials acknowledged that firms can look to past Class I recall situations to get some indication of how the agency has interpreted and applied what is essentially the same standard in that context. 

The electronic reporting form that firms must use to submit instances of reportable food is a work in progress.  The agency presented the latest version of the form, but will continue to work on the form and present updated versions at the remaining workshops.  In addition, the agency plans to release a step-by-step guide to preparation of the form prior to September 8.  A brief reminder: to ensure that FDA considers comments on its draft guidance on the Reportable Food Registry before the date on which the Registry takes effect, the Agency asks that comments be submitted by July 27, 2009.  For more on the Registry, see our prior post here.

By Carmelina G. Allis –

We previously reported that Synthes, Inc., Norian Corporation, and four of Synthes’s executives had been charged by the United States government for allegedly violating several provisions of Titles 18 and 21 of the United States Code.  The defendants allegedly conducted clinical trials of medical devices without obtaining prior authorization from the Food and Drug Administration.  Now the New York Times and the Philadelphia Business Journal report that two Synthes executives, Michael D. Huggins and John J. Walsh, “pleaded guilty on Monday in federal court in Philadelphia to one misdemeanor count of shipping misbranded Norian XR across state lines.”  Mr. Huggins’s attorney issued a statement, indicating that his client’s guilty plea “‘is grounded in the principle that Mike Huggins was a responsible corporate officer at Synthes’ . . . Mr. Huggins has always made clear that he did not do anything knowingly or intentionally wrong.”  The attorney’s statement was likely made in reference to the Supreme Court’s 1975 decision in United States v. Park concerning responsible corporate officer liability.

Each defendant faces the possibility of one year in prison and a $100,000 fine.

Hyman, Phelps & McNamara’s John R. Fleder has written an article in the July/August 2009 edition of the Food and Drug Law Institute’s Update Magazine.  The article is entitled: “Vindicated on Appeal – It Does Happen.”  The article discusses a recent ruling in United States v. Farinella by a federal appeals court in Chicago.  That decision vacated and reversed a felony criminal conviction in a FDA-related case.  The theme of the article is that although the government provides incentives for individuals and companies to plead guilty in criminal cases, the government has a heavy burden to overcome in order to convict someone and make that conviction stick on appeal.  This case teaches that mistakes by federal prosecutors and others on the prosecution team can destroy a case that might otherwise seem to have prosecutorial merit.  Thus, going to trial, and even appealing after a conviction can lead to a total vindication of the individual or company targeted by the government for prosecution.  In this case, the appellate court had harsh words about the prosecution of the case, using general language that could be helpful to many FDA-regulated companies, whether or not they are being criminally prosecuted.

By William T. Koustas –

Last week, FDA announced the approval of Onsolis (fentanyl buccal soluble film) with a substantial Risk Evaluation and Mitigation Strategy ("REMS"), as well as a boxed warning.  Onsolis is a potent opioid that is administered through the mucous membranes of a patient’s mouth through a dissolvable film applied to the inner cheek.  Similar to other oral fentanyl products, Onsolis is only indicated for the “management of breakthrough pain in patients with cancer…who already use opioid pain medication around the clock and who need and are able to safely use high doses of an additional opioid medicine.”  However, FDA’s view of fentanyl’s potential for abuse/misuse has resulted in a REMS requirement under the FDA Amendments Act of 2007 (“FDAAA”).

Onsolis’ REMS are comprised of a medication guide, communication plan and elements to assure safe use (as well as a timetable to assessment and implementation system).  The medication guide will contain information useful to patients, such as important directions for safe use and potential adverse side effects, whereas the communication plan appears to consist of a letter to prescribers explaining the REMS.  The elements to assure safe use consist of a restrictive distribution scheme that requires prescribers, pharmacies and patients to be enrolled in the Full Ongoing Commitment to User Safety (“FOCUS”) Program.  Prescribers and patients must sign an enrollment form detailing the responsibilities of both, while pharmacies must, among other things, only dispense Onsolis via a courier to the patient’s home and not via a retail store. 

FDA has indicated that it intends to approve REMS for Actiq and Fentora (both already approved fentanyl products) in the “coming months.” 

The approval of Onsolis’ REMS raises the question of whether this creates a precedent for elements to be included in the wide-ranging extended-release opioid REMS (being developed by FDA).  FDA stresses that Onsolis is not an extended-release opioid product and is only to be prescribed to opioid tolerant patients, which FDA believes requires different and possibly more stringent REMS than what may be required for extended-release opioids that have the potential to be used by a broader patient population.  FDA claims that the Onsolis REMS is independent of the REMS currently being developed for extended-release opioids and therefore is not precedent setting.

By John A. Gilbert & Larry K. Houck –

The Senate recently passed S. 256 which places additional requirements on retailers that sell ephedrine and pseudoephedrine.  The bill, known as the “Combat Methamphetamine Enhancement Act of 2009,” was referred to the House (H.R. 2923), which in turn referred it to the Energy and Commerce Committee and the Committee on the Judiciary.

The bill would amend the federal Controlled Substances Act by restricting the distribution and sale of “scheduled listed chemical products,” ephedrine and pseudoephedrine, following restrictions imposed by the Combat Methamphetamine Epidemic Act of 2005.   In summary, the bill would:

• restrict regulated sellers like pharmacies from selling ephedrine and pseudoephedrine at retail unless they have self-certified to the Drug Enforcement Administration (“DEA”), and include a statement that they understand the requirements;
• require DEA to implement self-certification criteria for mail order distributors;
• require DEA to make the list of those who have self-certified with the agency publicly available, and post it on the DEA website;
• prohibit distribution of ephedrine or pseudoephedrine to regulated sellers like pharmacies unless they are registered with DEA or are on DEA’s self-certification list; and
• provide a civil penalty for the negligent failure to self-certify.

The bill is the most recent attempt by Congress to restrict the availability of ephedrine and pseudoephedrine, including cough and cold products, from illicit use in the clandestine manufacture of methamphetamine.  The 2005 Act limited sales and purchase quantities, prohibited direct access by customers, required sellers to maintain a logbook of sales with customer information and train their employees on the requirements and self-certify that training to DEA.

The current bill eases the burden somewhat on distributors by requiring them to confirm that prospective customers are registered with DEA or confirm with the public self-certification list on DEA’s website that they have self-certified with DEA.  This is a better result than requiring that distributors in all cases have to maintain an document the self certification of its customers.  It also requires the DEA to update the self-certification list on a daily basis.

The bill is an attempt to make yet more refinements to the federal law to stop the ability of so called “smurfers” from targeting retail sellers by purchasing ephedrine or pseudoephedrine for the purposes of diverting the product for illicit production of methamphetamine.  We continue to be concerned that the continued emphasis on restrictions of distributors and retailers of these legitimate medicines adversely effect the ability of legitimate customers to purchase these products.  There needs to be more thought to how these continued restrictions on retail sales effect these customers while looking for a more comprehensive approach to stopping the smurfers.

By Ricardo Carvajal –

The Institute of Food Technologists (“IFT”) has published an expert report that addresses the challenge of responding to food contamination events in the face of limited scientific information.  The report describes the U.S. legal framework that governs substances intentionally or inadvertently added to food, relevant standards and guidance of the Codex Alimentarius Commission, applicable European Union food law and policy (including application of the precautionary principle), and the conduct of risk analysis.  The report proposes a “threshold of toxicological concern” approach to managing low levels of chemicals, and addresses in detail the need for evaluation of both risks and benefits.  Hyman, Phelps & McNamara’s Diane McColl was a member of the Expert Committee that prepared the report.  The report was funded by the IFT Foundation.

By Ricardo Carvajal –

The Council to Improve Foodborne Outbreak Response (“CIFOR”) has published guidelines intended to help local, state and federal agencies improve their response to foodborne disease outbreaks. The guidelines address planning and preparation, surveillance and outbreak detection, investigation of clusters and outbreaks, control measures, multijurisdictional outbreaks, and legal preparedness.  Although targeted to public health officials, the guidelines should be useful to food company officials who are unfamiliar with public health agency responses to foodborne disease outbreaks.  Hyman, Phelps & McNamara’s Ricardo Carvajal served as a reviewer for the guidelines.  The report is available on CIFOR’s web site.

By JP Ellison –

The amicus brief recently filed by the Department of Justice’s (“DOJ”) Antitrust Division makes it clear that at least on the issue of so-called “reverse payments” the antitrust lawyers at DOJ agree with their colleagues at the Federal Trade Commission (“FTC”) – reverse payments are a bad thing.  That was not the case in the Bush Administration when the two antitrust enforcement agencies openly quarreled about the propriety of such payments.

DOJ’s brief does not go so far as to say that reverse payments are per se illegal, and thus stops short of current legislative proposals to ban such payments entirely.  Rather, the brief says that the payments are presumptively illegal.  While few law-abiding companies aspire to engage in presumptively illegal conduct, the really important question is how does one rebut the presumption?  That’s where the recent DOJ brief makes life complicated.

In virtually all litigated disputes, there are at least two settlement reference points: (1) the expected loss/gain resulting from a judgment; and (2) the cost of litigation to get to number 1.  At different points in the litigation settlement process, each of the parties to the litigation may have different calculations for those two numbers, but even so they tend to represent the goal posts of the field on which the settlement game is played.  In its amicus brief, DOJ seems to narrow the Hatch-Waxman settlement playing field – at least in certain respects – but doesn’t clearly identify the out-of-bounds areas. 

There are some markers on the field.  Nuisance value/cost of litigation settlements are OK with DOJ.  See Amicus Brief at 28 (“The defendants clearly rebut the presumption if they show the payment was no more than an amount commensurate with the patent holder’s avoided litigation costs.”).  DOJ similarly makes clear what is not OK, namely a settlement that prevents generic competition until the end of the patent term.  Id. at 29 (“The defendants will be unable to carry their burden [of rebutting the presumption of illegality] if the settlement allowed no generic competition until patent expiration.”).  Significantly, DOJ explicitly states:  “That is so even if the parties believed that the patentee would have a greater than 50% likelihood of prevailing if the case were litigated to conclusion.”  Id.  Thus, if the parties agree that there is a 99.99% chance that the patent holder will win, and as a result, the patent holder agrees to pay a $1 settlement in exchange for dismissal of the claims and no generic competition, an illegal agreement has been struck.

DOJ’s brief similarly makes it clear that entry of a generic before the expiration of the patent is a necessary ingredient in any reverse payment settlement.  Id. at 30 (“If the settlement provides for generic entry before the expiration of the patent, the defendants can carry their burden by showing that the settlement preserved a degree of competition reasonably consistent with what had been expected if the infringement litigation went to judgment.”) (emphasis added).  DOJ concedes that in making this calculation “precision is impossible,” id. at 31, and states that “defendants can carry their burden by providing a reasonable explanation . . . .”

For more than five years, the FTC and DOJ have received copies of reverse payment settlements (and other Hatch-Waxman settlements) pursuant to the Medicare Modernization Act of 2003.  The antitrust enforcers are under no obligations to approve such settlements, however.  Nevertheless, one would expect that parties contemplating settlement would increasingly use these and other channels to seek feedback from FTC and DOJ prior to entering into any reverse payment settlements.  Additionally, DOJ’s position is likely to increase the prevalence and importance of safety valve or escape clause provisions that address a challenge to the legality of the settlement by the antitrust enforcement agencies.

DOJ’s position is also likely to affect the structure of Hatch-Waxman settlements.  Given the sophisticated nature of the parties in these cases, some cases may still settle for the parties’ assessment of the expected value of the judgment, but with different generic entry dates and payment structures than might otherwise have existed absent the presumed illegality of reverse payments.  In sum, it is too early to tell what the DOJ brief means, which is a bit of problem if you are otherwise ready to settle your pending Hatch-Waxman case.

By Ricardo Carvajal –      

In a complaint filed on July 1, the government is asking a federal district court to enjoin certain manufacturers of protein powder mixes and dietary supplements from further marketing of products alleged to be adulterated under FDC Act section 402(a)(4) due to the manufacturers’ failure to minimize cross-contact with a major food allergen.  The complaint makes clear that FDA interprets section 402(a)(4) and 21 C.F.R. Part 110 to require manufacturers to take “all reasonable precautions. . . to ensure that production procedures do not contribute to contamination from any source, including food allergens.”

The task of determining what constitutes a failure to take “reasonable precautions” appears to have been made easier in this case by the fact that the defendants are alleged to have repeatedly failed to comply with their own standard operating procedure calling for the use of dedicated equipment for particular products, and to have repeatedly deviated from their own cleaning procedures.  As a result of these and other practices, the government maintains that “there is a reasonable possibility that (a) an allergenic ingredient from one product will be incorporated into other products not intended to contain the allergen, and (b) consuming products cross-contaminated with a food allergen will lead to adverse reactions in susceptible individuals,” thereby giving rise to a violation of section 402(a)(4).

The complaint should be considered required reading for all food and dietary supplement manufacturers.  The case is United States of America v. Quality Formulation Labs., et al., C.A. No. 2:09-CV-03211 (D.N.J. filed July 1, 2009).

By Kurt R. Karst –      

Following the introduction of several proposals last week, as well as a proposal from Senator Sherrod Brown (D-OH), the U.S. Senate Health, Education, Labor, and Pensions (“HELP”) Committee voted 16-7 late Monday night in favor of a proposal offered by Sens. Kay Hagan (D-NC), Michael Enzi (R-WY), and Orrin Hatch (R-UT) to create a Follow-On Biologics (“FOB”) pathway that provides 12 years of exclusivity for pioneer biologics.  By a vote of 5 to 17, the committee rejected Sen. Brown’s proposal to provide 7 years of base exclusivity for pioneer biologics, according to various press reports (here, here, and here).  The HELP Committee reportedly did not vote on other competing FOB proposals that would have provided exclusivity periods shorter than 12 years.

The 12-year exclusivity proposal passed by the Committee, which is reportedly substantively identical to a bill passed by the HELP Committee in 2007 (S. 1695), is now part of a larger health reform measure that will eventually be voted on by the Committee and the full Senate.  The House of Representatives is still debating FOB legislation.  On July 14th, the House Judiciary Committee, Subcommittee on the Courts and Competition Policy is scheduled to hold a hearing on FOB legislation.  Representative Anna Eshoo, who introduced a bill (H.R. 1548) that would provide for up to 14.5 years of market exclusivity for a new biologic product, is scheduled to testify at the hearing. 

By Diane B. McColl & Riëtte van Laack –

On June 25, 2009, Ovos Natural Health Inc. ("Ovos") filed a citizen petition asking FDA to promulgate a regulation allowing use of homotaurine, a new dietary ingredient, in dietary supplements under sections 201(ff)(3)(B)(ii) and 301(ll)(2) of the Federal Food, Drug, and Cosmetic Act. Homotaurine, an amino acid found in certain species of seaweed (kelp), was the subject of an investigational new drug application ("IND") under which clinical trials were conducted for treatment of Alzheimer’s disease.  On the same date, Ovos also submitted a FDC Act §413(a)(2) premarket notification advising FDA of its intent to market homotaurine as a new dietary ingredient and the basis for its conclusion that there is a reasonable expectation of safety when used in accordance with the labeling.

This appears to be the first citizen petition asking FDA to authorize use of a substance through the notice and comment rulemaking exception to the 201(ff) dietary supplement exclusionary clause and the 301(ll) prohibition.  Past petitions concerning the section 201(ff) exclusion or the 301(ll) prohibition sought to  prevent the dietary supplement or food use of a substance.  See pyridoxamine petition, pyridoxal 5′-phosphate petition and stevia petition.

In view of the current uncertainty as to whether the 301(ll) prohibition applies to dietary supplements, it is not surprising that petitioner requested rulemaking under section 301(ll)(2).  In the recent Senate Appropriations Committee Report on S. 1406 – the Agriculture, Rural Development, FDA, and Related Agencies Appropriations Act of2010 – the Committee noted that FDA has been slow to resolve the interpretation of 301(ll) and directed FDA to dispose of the issue.

The Ovos petition may well be a sign of things to come.  FDA is likely to see more requests for rulemaking as industry focuses on the limited routes to market for substances that do not succeed in drug development trials but offer nutritional value or other benefits as dietary supplements or food ingredients.  FDA can also expect to receive more petitions intended to prohibit , rather than permit, marketing under the 201(ff) exclusion and the 301(ll) prohibition as these provisions are factored into marketing strategies. 

By Kurt R. Karst –      

We recently reported on a Complaint and a Motion for Preliminary Injunction Teva Pharmaceuticals USA, Inc. (“Teva”)  filed in the U.S. District Court for the District of Columbia against FDA concerning 180-day exclusivity forfeiture for generic versions of Merck & Co., Inc.’s (“Merck’s”) blockbuster angiotensin II receptor antagonist drugs COZAAR (losartan potassium) Tablets and HYZAAR (hydrochlorothiazide; losartan potassium) Tablets.  Although FDA has made no determination with respect to generic COZAAR and HYZAAR 180-day exclusivity, Teva is challenging FDA’s interpretation of the “failure to market” 180-day exclusivity forfeiture provisions at FDC Act § 505(j)(5)(D)(i)(I), and in particular, FDA’s interpretation of the patent information withdrawal provision at FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC), which was added to the law in December 2003 by the Medicare Modernization Act (“MMA”).  This provision, which Teva terms as the “Delisting Rule” in its court papers, is used to determine whether a “first applicant” that is eligible for 180-day exclusivity has forfeited such eligibility.  According to Teva, FDA’s interpretation of the Delisting Rule, as stated and applied in recent 180-day exclusivity forfeiture decisions (here and here) is unlawful, “open[s] the proverbial floodgates to manipulative, exclusivity-divesting patent delistings by brand manufacturers,” and “abrogate[s] the longstanding prohibition against such delistings that Ranbaxy recognized.”  (In Ranbaxy Labs. Ltd. v. Leavitt, the U.S. Court of Appeals for the District of Columbia Circuit held in 2006 in a pre-MMA case that FDA may not condition the delisting of a patent on the existence of patent litigation and deprive an ANDA applicant eligible for 180-day exclusivity of such exclusivity.)

Earlier this month, FDA filed a Motion to Dismiss the case on several grounds – specifically, that Teva is not challenging final agency action, Teva’s claims are not ripe, Teva has not suffered sufficient injury for Article III standing, and Teva has failed to exhaust administrative remedies.  According to FDA:

In an attempt to avoid these major flaws in its case, Teva argues that an FDA decision regarding another generic drug that was approved by FDA in May 2008 – which is not manufactured by Teva – constitutes a “rule” that Teva is entitled to challenge in this Court.  Teva is thus asking this Court to declare that this decision – made in an informal adjudication, not a rulemaking – constitutes a “rule” subject to judicial review, and then to declare that this “rule” will be used by FDA to improperly deny Teva 180 days of marketing exclusivity when Teva’s generic products are eligible for approval next year. The decision FDA made in the context of another generic drug application, however, is not “rule.”  Teva has failed to demonstrate the basic prerequisites necessary to bring a case in this Court: final agency action and a ripe, actual injury.  Significantly, this Court recently faced essentially the same issue in the same context; i.e., a generic drug manufacturer sued FDA before FDA had taken final action on its application because it wanted to know ahead of time whether it would receive 180 days of marketing exclusivity.  Hi-Tech Pharmacal Co., Inc. v. FDA, 587 F. Supp.2d 1 (D.D.C. 2008). (Teva participated as amicus in Hi-Tech).  There, Judge Bates had no trouble recognizing that the case presented no final agency action: “Hi-Tech is not entitled to judicial review of the interpretation and application of the exclusivity forfeiture provisions of the Medicare Modernization Act until the FDA itself first interprets and applies those provisions with respect to Hi-Tech’s ANDA – i.e., until there is final agency action.”  Id. at 8.

So too here. Teva has failed to challenge a final agency action under the Administrative Procedure Act (“APA”), and presents no ripe injury to this Court.  There is therefore no final, ripe action for Teva to challenge under the APA, much less any justification to grant its request for emergency relief, and Teva’s complaint should be dismissed and its motion for preliminary injunction denied.

Teva fires back in ite reply brief that “FDA makes no effort to defend its Delisting Rule on the merits.  Instead, it mounts a kitchen-sink attack on the Court’s jurisdiction to consider the merits at all. . . .”  With respect to FDA’s position that its interpretation of FDC Act § 505(j)(5)(D)(i)(I)(bb)(CC) is not a rule and that there is no final agency action, Teva argues that:

there is no basis for FDA’s insistence that this Court lacks statutory jurisdiction to consider Teva’s claims under the APA because the Agency has not taken any “final action” with respect to Teva’s ANDA or Teva’s exclusivity. As a threshold matter, that argument misses the point: Teva is not challenging FDA’s failure to approve Teva’s ANDA or its failure to announce that Teva is entitled to 180-day exclusivity. Instead, it is challenging the Delisting Rule on its own terms – as a final agency action that definitively fixes the parties’ rights and obligations and thereby already has harmed Teva. 

FDA tries to get around this point by arguing that the Delisting Rule is not really a “rule” because it allegedly lacks “legislative” or “future effect.” FDA Br. at 16. But regardless of whether the Delisting Rule is called a “rule” or an “order,” it is a final agency action subject to review under the APA. And in any event, the D.C. Circuit long has made clear that the relevant inquiry is a “practical” one that seeks simply to determine whether a given agency pronouncement functionally “binds” the parties or the agency – either because it appears to be binding on its face or because the agency itself treats the rule as binding in practice.  Gen. Elec. Co. v. EPA, 290 F.3d 377, 383 (D.C. Cir. 2002). The Delisting Rule meets both of these independent tests. On its face, the Delisting Rule speaks in broad and unqualified terms, declaring that the delisting trigger applies “whenever” a brand manufacturer seeks to delist a patent and, thus, even when doing so would divest the first applicant of its right to exclusivity.  Acarbose Dec. at 8; COSOPT® Dec. at 14 & n.15.  And in practice, FDA already has given the Delisting Rule future effect: after announcing that rule in the acarbose matter, it rejected Hi-Tech’s efforts to evade the rule in the COSOPT® matter because it deemed the relevant issues settled.  COSOPT® Dec. at 14 & n.15. [(Emphasis in original)]

Apotex, Inc. (“Apotex”) is also seeking to intervene in the case as a defendant.  The company recently submitted a Motion to Intervene and a brief in opposition to Teva’s motion for preliminary injunctive relief.  Apotex argues that Teva’s motion for a preliminary injunction should be denied, because it does not meet the standards for injunctive relief.  With respect to the forfeiture of 180-day exclusivity under the “failure-to-market” provisions, Apotex argues that Teva’s reliance on Ranbaxy is misplaced, and that although the MMA forfeiture provisions are complex, their “complexity should not be allowed to obscure its plain meaning” and result – “Teva has forfeited its eligibility for exclusivity.”

Teva opposes Apotex’s intervention, arguing that Apotex “has no business assuming party status, because it has no legal standing to exercise the rights to which intervening parties otherwise are entitled.”  Instead, Teva states that “[i]f Apotex would like to express its views on the merits, it is free to participate as an amicus curiae.”  Indeed, this is the route Teva took in a recent forfeiture case.

A preliminary injunction hearing in the case is set for July 13, 2009 at 3:15 PM in Courtroom 2 before Judge Rosemary M. Collyer.