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FISONS CORP. v. SHALALA

May 5, 1994

FISONS CORPORATION, Plaintiff,
v.
DONNA SHALALA, et al., Defendants.


RICHEY


The opinion of the court was delivered by: CHARLES R. RICHEY

I. INTRODUCTION

 Before the Court are the Plaintiff's Application for a Preliminary Injunction, the Defendants' Motion to Dismiss, and Plaintiff's Motion to Compel Production of the Administrative Record. To advance the ends of justice and further judicial economy, the Court consolidated the Plaintiff's application for a preliminary injunction with its request for permanent injunctive relief, pursuant to Fed. R. Civ. P. 65(2).

 Seeking declaratory and injunctive relief, Plaintiff Fisons Corporation ("Fisons") brought this action to prevent the Food and Drug Administration ("FDA") from approving abbreviated new drug applications ("ANDAs") for generic versions of Fisons' Intal Nebulizer Solution ("Intal NebSol") without requiring specific testing, information, and analysis. More specifically, Fisons claims that both (1) the FDA regulation permitting the waiver of certain testing for generic drug applications, 21 C.F.R. § 320.22(b), and (2) FDA's policy of waiving testing and approval of these generic drugs, are arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law, in violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706.

 After careful consideration of the papers filed by the parties, the arguments of counsel at oral argument, and the underlying law, the Court shall grant the Defendants' Motion to Dismiss, and deny Plaintiff's Application for a Preliminary Injunction and Plaintiff's Motion to Compel Production of the Administrative Record.

 II. BACKGROUND

 The Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984) ("Hatch-Waxman Act"), which amended the Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301-392, governs the FDA's approval for applications for generic versions of pioneer drugs. Pursuant to 21 C.F.R. § 10.30, Fisons filed a Citizen Petition regarding potential generic competition to Intal Nebsol on January 8, 1993. Fisons alleges that it filed this petition when it "became aware of the FDA's intention to waive in vivo bioequivalence testing for generic versions of Intal Nebsol." Complaint, P 52. After stating that such a waiver exceeded the FDA's authority, Fisons requested that Defendant David Kessler, M.D., Commissioner of the FDA, "adopt an in vivo bioequivalence standard for ANDAs for inhaled dosage forms of cromolyn sodium based on Intal NebSol." Complaint, P 53. The FDA responded on August 6, 1993, informing the Plaintiff that the agency is still evaluating the requests made in the Petition. Defendants' Motion, Exhibit 3. On May 18, 1993, Fisons also filed a Petition for Stay of Action pursuant to 21 C.F.R. § 10.35, requesting that the FDA require a bioequivalence showing before approving any ANDAs for generic versions of Intal NebSol.

 Fisons met with FDA officials on July 9, 1993, to discuss the petition. According to the Affidavit of Aaron M. Taub, Fisons' Senior Director of Regulatory Affairs:

 
During the course of the meeting, FDA representatives stated that, based on the information presented by Fisons to date, FDA made a final determination that FDA will waive in vivo bioequivalence testing for ANDAs based on Intal NebSol. FDA representatives also stated that FDA does not require ANDA applicants to present impurity analyses to the same extent and level as that which FDA requires of applicants for full NDAs (new drug applications).

 Taub Affidavit, PP 8-9; see also Affidavit of Robert Parker, PP 6-9. The Plaintiff alleges that in this meeting, the FDA "unequivocally" told Fisons that it will approve ANDAs for generic versions of Intal NebSol lacking any showing of bioequivalence, and that the FDA will not demand the degree of impurity analysis mandated by statute and regulations.

 Fisons' patent protecting its monopoly profits on Intal Nebsol expired on August 17, 1993, but despite its concern, no competitor's generic product has been approved since that time. The FDA responded to the Petitions on March 31, 1994, denying both (1) Fisons' request that the agency require a demonstration of bioequivalence through comparative clinical trials for the generic counterparts of Intal Nebsol, and (2) Fisons' request that the FDA establish special controls for nebulizers. FDA's Response to Fisons' Citizen Petition, at 8-9. *fn2"

 III. THE PLAINTIFF HAS STANDING TO CHALLENGE THE FDA'S REGULATIONS UNDER THE CONSTITUTIONAL AND PRUDENTIAL PREREQUISITES TO STANDING, AS WELL AS THE FDA'S OWN REGULATIONS.

 Fisons satisfies the injury-in-fact test for constitutional standing. Under this test, a petitioner must assert "an injury in fact, fairly traceable to the challenged actions of the respondent, and likely to be redressed by a favorable court ruling." Associated Gas Distributors v. FERC, 283 U.S. App. D.C. 265, 899 F.2d 1250, 1259 (D.C. Cir. 1990). In challenging Fisons' Article III standing to bring this action, the FDA makes two arguments. First, it claims that the alleged injury that is the basis for this suit, the approval of a generic competitor and the consequent loss of a monopoly market, is almost inevitable, even if Fisons prevails on the merits in this case. Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982). However, this argument misstates Fisons' claim. As argued by the Plaintiff, it does not seek to ban the approval of generic competitors, but to prevent improper approvals lacking the testing that it believes is mandated by statute. Fisons is correct in stating that if it were to prevail on the merits of its case, its generic competitors will not have obtained an unfair advantage that would improperly reduce Fisons' profits and market share, and that a favorable court ruling is likely to redress that injury.

 Second, the FDA challenges Fisons' standing on the grounds that its loss of profits is too speculative, because no Intal NebSol competitor has been approved. In an action brought by a gas association challenging the Federal Energy Regulatory Commission's interpretation of a statute, this Circuit stated:

 
we find here . . . that petitioners sufficiently establish their constitutional standing by showing that the challenged action authorizes allegedly illegal transactions that have the clear and immediate potential to compete with the petitioners' own sales. They need not wait for specific, allegedly illegal transactions to hurt them competitively.

 Associated Gas Distributors v. FERC, 283 U.S. App. D.C. 265, 899 F.2d 1250, 1259 (D.C. Cir. 1990). Therefore, this Court finds that the alleged injuries are not too speculative, because of the "clear and immediate potential" for an improper FDA approval of a generic drug to hurt Fisons competitively.

 Fisons also meets the "zone of interests" test for prudential standing. This test is based on the notion that Congress may not specify which parties may invoke judicial power to enforce the terms of a statute, and that the judiciary must therefore inquire into Congressional intent. There are two types of parties possessing the appropriate incentives to monitor an agency's enforcement of administrative laws: (1) Regulated interests, who are the object of regulation and have the interest to watch for an excessive burden imposed by an agency, beyond legislative contemplation; and (2) Protected interests, parties who are supposedly protected by the agency, to make sure that the protection is to the full extent intended by Congress. HWTC IV, 885 F.2d at 921-22. Along with intended beneficiaries, the D.C. Circuit also included in the class of protected interests "suitable challengers" possessing a "marginal relationship" to statutory purpose, who are those parties "whose interests, while not in any specific or obvious sense among those Congress intended to protect, coincide with the protected interests." Id. at 922-924.

 Fisons is correct in asserting that Congress intended the Hatch-Waxman Act to benefit pioneer drug manufacturers, and therefore falls within the Act's "zone of interest." Title I of the Act included a series of provisions granting FDA exclusive extensions for innovations by pioneer manufacturers like Fisons. A variety of federal courts have recognized that this Act represents a compromise, and aids both sets of drug manufacturers. See, e.g., Tri-Bio Laboratories, Inc. v. United States, 836 F.2d 135, 139 (3rd Cir. 1987) (noting that the Hatch-Waxman Act reflected a statutory compromise between generic and pioneer drug manufacturers, and that the Act also provided several market advantages for pioneer drug manufacturers), cert. denied, 488 U.S. 818, 102 L. Ed. 2d 35, 109 S. Ct. 57 (1988). Upon examining the entire structure of Title I, and recognizing the breadth of the statutory scheme, the Court is sufficiently convinced that Congress intended to benefit pioneer drug manufacturers enough to warrant standing for Fisons in this case. *fn3"

 IV. THE WAIVER PROVISION OF 21 C.F.R. § 320.22, CONCERNING THE FDA'S WAIVER OF IN VIVO BIOEQUIVALENCE TESTING IN CERTAIN SITUATIONS, DOES NOT EXCEED THE STATUTORY AUTHORITY PRESCRIBED BY 21 U.S.C. § 355(J)(7)(B).

 In the First Claim for Relief in its Complaint, Fisons alleges states that without a bioequivalence showing, the FDA's approval of Intal Nebsol would violate the APA. Complaint, P 76. More specifically, Fisons contends that "FDA's waiver regulation, 21 C.F.R. § 320.22(b), exceeds the agency's authority. As a consequence of the Hatch-Waxman Act, FDA cannot waive bioequivalence testing for any drug." Id., P 75. The Government counters that its regulation does not permit the waiver of the bioequivalence requirement. Rather, the FDA argues that this regulation merely permits ...


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