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Collagenez v. Pharmaceuticals

July 22, 2003

COLLAGENEX PHARMACEUTICALS, INC., PLAINTIFF,
v.
TOMMY G. THOMPSON, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL., DEFENDANTS.



MEMORANDUM OPINION

This case presents an interesting conundrum. CollaGenex Pharmaceuticals, Inc. ("CollaGenex") seeks review of a decision by the Food and Drug Administration ("FDA") that its primary medical product, Periostat® ("Periostat"), is an "antibiotic drug" within the meaning of the Food Drug and Cosmetic Act, 21 U.S.C. § 321(jj) ("FDCA"). Because FDA appears to be on the verge of approving generic equivalents of Periostat, CollaGenex seeks a preliminary injunction to forestall that competition, as well as a finding that Periostat is not an antibiotic drug. FDA advised the Court that it intended to act on Monday, July 21, 2003, now extended to later in the week. No administrative record of FDA's decision on Periostat has been submitted. The D.C. Circuit has clearly held that courts should not issue preliminary injunctions without a review of the entire administrative record to determine a plaintiff's likelihood of success on the merits. See American Bioscience, Inc. v. Thompson, 243 F.3d 579 (D.C. Cir. 2001). What can be done?

Pending before the Court is CollaGenex's Motion for a Preliminary Injunction, which Secretary Thompson, the Department of Health and Human Services, Commissioner McClellan and FDA ("Federal Defendants"), along with Intervenor Defendant Mutual Pharmaceutical Company, Inc. ("Mutual"), oppose. The Federal Defendants have also filed a Motion to Dismiss under FED. R. CIV. P. 12(b)(1) and 12(b)(6). Upon consideration of the briefs and oral argument of the parties, the Court finds that CollaGenex has made a strong showing of irreparable harm, that the balance of harms clearly favors CollaGenex, and that the public interest will be served by the issuance of a preliminary injunction. Because FDA is mute on the merits of the case and the Court does not have the administrative record, it cannot perform the normal evaluation of likelihood of success on the merits. Nonetheless, it appearing that CollaGenex has at least a colorable claim under § 321(jj), the Court finds that this is a sufficient showing of likelihood of success under these circumstances. CollaGenex's Motion for a Preliminary Injunction will be granted in part and denied in part and the Federal Defendants' Motion to Dismiss will be granted in part and denied in part pending receipt of the administrative record and its full review.

Background

I. Statutory Framework

New drugs are approved by FDA only after an extensive investigation into their safety and efficacy. An applicant files a new drug application ("NDA") containing detailed data. See 21 U.S.C. § 355(j)(7). As described by the parties during oral argument, the process to achieve FDA approval of a new or "pioneer" drug*fn1 entails a form of negotiation between the applicant and FDA in which the government "gets whatever it wants." It can take tens of millions of dollars and years to develop a new drug and obtain FDA approval.

In 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984), commonly known as Hatch Waxman. One purpose of Hatch Waxman was to make it easier for drug manufacturers to obtain FDA approval for generic drugs. The generic manufacturer does not have to repeat the expensive and extensive testing associated with obtaining initial approval of an NDA. The generic manufacturer instead may file an abbreviated new drug application ("ANDA"), relying on the testing conducted by the original manufacturer that showed safety and effectiveness. See Am. Bioscience, 243 F.3d at 580. The generic manufacturer need only establish that the generic drug is the "bioequivalent" of the brand name drug. 21 U.S.C. §§ 355(j)(2)(A), (j)(8).

In enacting Hatch Waxman, Congress also sought to encourage research and innovation by providing a period of market exclusivity and patent protection for certain pioneer drugs. See Am. Bioscience, 243 F.3d at 580. These protections allow recoupment of the costs of development and the approval process without competition from less expensive generic versions of a drug. See 59 FED. REG. 50,338 (Oct. 2, 1994). Under Hatch Waxman, certain pioneer drugs enjoy a five-year period of market exclusivity during which no ANDA for a generic copy of the drug may be approved. See 21 U.S.C. §§ 355(c)(3)(D), (j)(5)(D)(ii). With respect to patent protection, an NDA applicant must submit the patent number and expiration date of any patents that claim the drug. When a manufacturer files an ANDA to market a generic copy of a drug, the ANDA applicant must certify "(1) that no patent has been filed with the FDA; or (2) that the patent has expired; or (3) that the patent has not expired, but will expire on a particular date; or (4) that the patent is either invalid or the generic drug will not infringe it." Am. Bioscience, 243 F.3d at 580. If the ANDA makes a certification under subsection four (commonly called a Paragraph IV certification), the applicant must provide notice to the patent holder that it has filed the ANDA. See id. The patent holder then has a forty-five day period in which to file a patent infringement action. If suit is filed within this period, FDA may not approve the ANDA application until the patent dispute is resolved, or for 30 months, whichever is sooner. See id.

Congress enacted the Food and Drug Administration Modernization Act of 1997 ("FDAMA") in November 1997. Prior to its enactment, NDA applications for antibiotic drugs were governed by 21 U.S.C. § 357, and NDA applications for all other drugs were governed by 21 U.S.C. § 355. FDAMA repealed § 357 and requires that NDA applications for antibiotic drugs be submitted under § 355. FDAMA also contains exemption provisions that make antibiotic drugs ineligible for the Hatch Waxman market exclusivity period and patent protections. See FDAMA § 125(d)(2). An "antibiotic drug" is defined by FDCA as

any drug (except drugs for use in animals other than humans) composed wholly or partly of any kind of penicillin, streptomycin, chlortetracycline, chloramphenicol, bacitracin, or any other drug intended for human use containing any quantity of any chemical substance which is produced by a micro-organism and which has the capacity to inhibit or destroy micro-organisms in dilute solution (including a chemically synthesized equivalent of any such substance) or any derivative thereof. 21 U.S.C. § 321(jj).

After an NDA is awarded, the holder may voluntarily withdraw the drug from sale. FDA then moves the drug to the Discontinued Drug List to provide notice that it has been withdrawn. When this happens, any petition for an ANDA that refers to the prior drug must be accompanied by a petition requesting FDA to determine that the drug was not withdrawn for reasons of safety or efficacy. See 21 C.F.R. § 314.122. FDA may not approve the ANDA until FDA makes this determination. See 21 C.F.R. § 314.161(a)(1). If FDA determines the drug was withdrawn for safety or effectiveness reasons, the ANDA will not receive government approval. See 21 C.F.R. § 314.162.

II. Factual Background*fn2

CollaGenex is a small pharmaceutical company that employs approximately 150 people. Its primary product is a prescription pharmaceutical, Periostat, that is used to treat adult periodontitis. Periostat works by reducing the levels of enzymes, known as collagenase, that destroy the connective tissues that support teeth. The active ingredient in Periostat consists of a 20 milligram ("mg") dose of doxycycline hyclate.

CollaGenex states that it spent nearly twelve years and $70 million dollars developing Periostat. In addition, since 1999, CollaGenex states that it has expended over $87.5 million dollars in direct sales and marketing expenses related to Periostat. Without contradiction, CollaGenex asserts that its only significant revenue comes from sales of Periostat. During 1999, 2000, 2001, and 2002, Periostat accounted for 95%, 84%6, 87%, and 82%, respectively, of the total revenues of CollaGenex, with total revenue during 2002 amounting to $44.5 million. While CollaGenex yielded a net positive income in the last two quarters of 2002, it has experienced net losses each year.

In August 1996, CollaGenex submitted an NDA for 20 mg Periostat capsules under Section 505 of the FDCA, 21 U.S.C. § 355. Shortly thereafter, FDA requested that CollaGenex resubmit its NDA under Section 507 of the FDCA, 21 U.S.C. § 357, the section that governed the review and approval of antibiotic drugs at the time. CollaGenex protested, asserting that Periostat did not meet the statutory definition of an antibiotic drug. FDA advised CollaGenex that it could pursue its claim and postpone approval of its application or submit the NDA as an antibiotic drug and contemporaneously attempt to get it re-classified. CollaGenex elected to submit the NDA as an antibiotic drug under § 357 and concurrently pursue its objections during the NDA review. On September 11, 1997, CollaGenex submitted a Request for Designation to the FDA Ombudsman asking that Periostat be designated a nonantibiotic drug under 21 U.S.C. § 355, rather than an antibiotic drug under 21 U.S.C. § 357. Two years after the application process began, FDA approved the NDA for Periostat in September 1998. The approval stated, without explanation, that Periostat is subject to the exemption provisions of FDAMA § 125(d)(2), and not eligible for market exclusivity and patent protections available to drugs approved under 21 U.S.C. § 355. In 2001, the FDA approved an NDA permitting CollaGenex to market Periostat tablets.

CollaGenex voluntarily stopped distributing and marketing Periostat capsules in August 2001. CollaGenex wrote to FDA in September 2001 to withdraw the NDA for Periostat capsules, and submitted the requisite paperwork under 21 C.F.R. § 314.81(b)(3)(iii). FDA neither published a notice in the Federal Register announcing this withdrawal nor moved the capsules to the "Discontinued Product List."*fn3 On July 10, 2002, CollaGenex submitted a Citizen Petition to FDA and a Petition for Stay of Action. The Citizen Petition requested that FDA not approve any ANDA for Periostat capsules until FDA determined that the capsules had not been withdrawn for safety and effectiveness reasons, that FDA refuse to receive or approve any ANDA for a generic version of Periostat capsules not accompanied by a petition seeking a determination regarding whether the capsules were withdrawn for safety or effectiveness reasons, that FDA immediately move the capsules to the Discontinued Product List, and that FDA publish a Federal Register notice announcing the withdrawal of the NDA for Periostat capsules. In the Stay Petition, CollaGenex requested that FDA not to take any action on any ANDA for a generic version of Periostat until it had decided the Citizen Petition. FDA has yet to issue a decision on these Petitions.

FDA's Chief Counsel, Daniel E. Troy, has encouraged companies that are considering filing suit against FDA to "lay [their] cards on the table" by meeting with him and discussing the potential suit. See Unsupported Claims Should Be Brought to FDA by Industry, F-D-C Rep. ("The Tan Sheet"), Oct. 14, 2002, at 11. Pursuant to this approach, counsel for CollaGenex met with him in January 2003 to discuss FDA's determination that Periostat is an antibiotic drug and CollaGenex's contemplated federal court litigation. Mr. Troy suggested that CollaGenex submit a letter following the meeting rather than file a citizen petition or a petition for stay of action, outlining its arguments concerning the classification of Periostat. CollaGenex complied with this request on January 21, 2003, submitting a lengthy letter explaining its arguments that Periostat is not an antibiotic drug. See Federal Defendants' Memorandum in Support of its Motion to Dismiss and in Opposition to Plaintiff's Motion for Preliminary Injunction, Attachment A at 1 ("Federal Opposition"). In this letter, CollaGenex noted that it had delayed filing suit to enable the parties to resolve the matter short of litigation. It also requested ten business days notice if FDA were going to approve a pending ANDA, in order to allow CollaGenex time to initiate litigation. See id. at 12.

In the meantime, at least two companies, Intervenor Mutual and West-ward Pharmaceutical Corporation, have submitted an ANDA to market a generic version of Periostat.*fn4 FDA has not acted on these applications yet, ...


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