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GENENTECH, INC. v. BOWEN

September 18, 1987

Genentech, Inc., et al., Plaintiffs,
v.
Otis R. Bowen, et al., Defendants



The opinion of the court was delivered by: HARRIS

 Stanley S. Harris, United States District Judge.

 This matter is before the Court on the separate, but similar, motions of plaintiff Genentech, Inc. (Genentech), intervenor-defendant Ares-Serono, Inc. (Serono), and intervenor-plaintiffs Nordisk Gentoffe A/S and Nordisk-U.S.A. (Nordisk) for partial summary judgment. In its complaint, Genentech, the manufacturer and marketer of a synthetic human growth hormone produced through recombinant DNA technology, alleges that the recent decision of the Food and Drug Administration (FDA), represented in this Court by defendants Otis R. Bowen, Secretary of Health and Human Services, and Frank E. Young, Commissioner of the Food and Drugs Administration, to approve a recombinant DNA human growth hormone product manufactured by intervenor-defendant Eli Lilly and Company (Lilly) violated the Administrative Procedure Act, the Orphan Drug Act, and the Fifth Amendment to the United States Constitution. The pending motions challenge the validity of the FDA's designation, prior to marketing approval, of Lilly's drug as an orphan drug. Upon consideration of the motions, the oppositions thereto, and the entire record, the motions for partial summary judgment are denied.

 Background

 This case revolves around certain elements of the FDA's implementation of the Orphan Drug Act, Pub. L. No. 97-414, 96 Stat. 2049 (1983) (codified, as amended, at 21 U.S.C. §§ 360aa-360ee). *fn1" Accordingly, it is appropriate to begin with a review of the history and purposes of the Orphan Drug Act, as well as the particular circumstances which gave rise to this lawsuit.

 I. The Orphan Drug Act

 As food and drug regulatory statues go, the Orphan Drug Act (the Act) is relatively straightforward and politically uncontroversial. A pharmaceutical company often must spend $ 80 million or more to develop a single new drug. 128 Cong. Rec. S15307 (daily ed. Dec. 16, 1982) (statement of Sen. Hawkins) (remarks inserted in record). When the potential market for a drug is small - because the number of persons afflicted with the particular disease or condition which the drug treats is relatively small - it may be impossible for the manufacturer to recover its sizable research and development investment, much less realize an acceptable return on that investment. Id. The Act is designed to combat the general unwillingness of pharmaceutical manufacturers to invest in the development of commercial drugs for the treatment of diseases which, although devastating to their victims, afflict too small a proportion of the population to make them commercially viable. Id.2

 The Act seeks to encourage the development of "orphan drugs" by reducing the overall financial cost of development, while enhancing the developer's ability to recover that cost through sale of the drug. Specifically, the Act attempts to reduce development costs by streamlining the FDA's approval process for orphan drugs, *fn3" by providing tax breaks for expenses related to orphan drug development, *fn4" by authorizing the FDA to assist in funding the clinical testing necessary for approval of an orphan drug, *fn5" and by creating an Orphan Products Board to coordinate public and private development efforts. *fn6" The Act seeks to enhance the orphan drug manufacturer's ability to recover his investment by granting the manufacturer seven years of exclusive marketing rights "for such drug for such [rare] disease or condition." *fn7" A "rare disease or condition" is one which "affects less than 200,000 persons in the United States," or one which "affects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug." 21 U.S.C. § 360bb(a)(2). *fn8"

 While any number of drugs may receive the development-phase benefits of the Act, only one manufacturer may receive exclusive marketing rights. This post-development benefit is reserved for the first manufacturer to receive full FDA approval of its drug as safe and effective for commercial sale. The Act provides, in pertinent part:

 
If the [FDA] . . . approves an application . . . for a drug designated under section 360bb of this title for a rare disease or condition, the [FDA] may not approve another application . . . for such drug for such disease or condition for a person who is not the holder of such approved application . . . until the expiration of seven years from the date of approval of the approved application . . . .

 21 U.S.C. § 360cc(a). *fn9" The FDA may authorize another manufacturer to produce "such drug for such disease or condition" only if the exclusive marketer consents in writing or is incapable of providing sufficient quantities of the drug. See supra note 7.

 As originally enacted, the Act limited the availability of exclusive marketing rights to drugs "for which a United States Letter of Patent may not be issued . . . ." See Pub. L. No. 97-414, § 2(a), 96 Stat. 2049, 2050 (1983). In considering the proposed legislation, the House Committee on Energy and Commerce found that many potential orphan drugs are not patentable, and stated: "In order to provide some incentive for the development of these particular orphan drugs, the Committee's bill includes an exclusive marketing right for the sponsor of such a drug." H.R. Rep. 840, 97th Cong., 2d Sess. 11, reprinted in 1982 U.S. Code Cong. & Admin. News 3577, 3583; see also 128 Cong. Rec. S13224 (daily ed. Oct. 1, 1982) (statement of Sen. Kassebaum) (Act "attempts to address the problems created when a promising drug treatment is not patentable by providing a 7-year exclusive marketing right for the sponsor of the drug.") Thus, the exclusivity provision of the Act was designed to complement the patent laws, filling gaps which might leave orphan drug manufacturers unprotected.

 In 1985, Congress amended the Act to delete the non-patentability criterion in the exclusivity provision. See Orphan Drug Amendments of 1985, Pub. L. No. 99-91, § 2, 99 Stat. 387, 387. The most extensive discussion of the purposes of the Act's exclusivity provision appears in the report prepared by the House Committee on Energy and Commerce to accompany the 1985 amendments to the Act. H.R. Rep. 153, 99th Cong., 1st Sess., reprinted in 1985 U.S. Code Cong. & Admin. News 301. The Committee began by noting that in the two-and-one-half years since its passage, the Act had "stimulated substantial new commitments" to the development of orphan drugs. Id. at 2, 1985 U.S. Code Cong. & Admin. News at 301. In discussing exclusivity, the Committee stated: "The purpose of the seven year period is to allow the sponsor of the orphan drug to recoup the cost of development by capturing all revenues from the sale of the drug for the rare disease." Id. at 3, 1985 U.S. Code Cong. & Admin. News at 303.

 The Committee's expectation when it drafted the original provision in 1983 had been that exclusivity "would be used primarily by orphan drugs that [could] not get product patents." Id.10 However, experience under the Act demonstrated that reliance on the incentives of patent protection for all patentable orphan drugs would be insufficient. First, many patents expire before completion of the clinical testing necessary for FDA marketing approval. Id.11 Second, in many cases the product patent on a drug is held by an individual or company other than the one that intends to test the drug for use against a rare disease, and prior academic publication in the area precludes issuance of a use patent. Id. Accordingly, the fact that a product patent has been issued does not always ensure that a manufacturer will have a sufficient incentive to apply for permission to market the drug as an orphan drug.

 In expanding the exclusivity provision to cover both patented and unpatented orphan drugs, the Committee noted that the provision would only benefit the sponsors of drugs with less than seven years of product patent protection available, and explained the difference between exclusivity under the Act and traditional patent protection. First, traditional patents generally offer much broader protection than orphan drug exclusivity, which is limited to treatment of a particular disease. Id. at 5, 1985 U.S. Code Cong. & Admin. News at 305. Second, while the inviolability of a patent is limited only by the holder's ability to enforce his rights in court, orphan drug exclusivity exists only so long as the sponsor adequately supplies the market. Id.

 The Committee expressed its desire that elimination of the patentability distinction, while probably still not making orphan drugs profitable business ventures, would strengthen development by providing greater certainty to potential orphan drug sponsors.

 
The Act and this bill do attempt to reduce the disincentives for their development and give drug company sponsors some certainty as to the drug approval process at FDA and the market conditions they will face upon approval. The Committee hopes and anticipates that the amendment . . . will encourage the development of new orphan drugs for use in previously untreated rare diseases.

 Id. at 6-7, 1985 U.S. Code Cong. & Admin. News at 306. In floor debates, the exclusivity amendment either went undiscussed or was referred to as merely an administrative correction. See 131 Cong. Rec. S7025 (daily ed. May 23, 1985) (statement of Sen. ...


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