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Jerome Stevens Pharmaceuticals, Inc. v. Food and Drug Administration

May 28, 2004

JEROME STEVENS PHARMACEUTICALS, INC., PLAINTIFF,
v.
FOOD AND DRUG ADMINISTRATION, DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND THE UNITED STATES OF AMERICA, DEFENDANTS.



The opinion of the court was delivered by: Ricardo M. Urbina, United States District Judge.

Document No. 8

MEMORANDUM OPINION GRANTING THE DEFENDANTS' MOTION TO DISMISS

I. INTRODUCTION

Plaintiff Jerome Stevens Pharmaceuticals, Inc. ("Jerome") is a small company that manufactures levothyroxine sodium ("LS") tablets under the name of Unithroid. Jerome brings suit against the Food and Drug Administration ("FDA"), Department of Health and Human Services ("HHS"), and United States (collectively, "the defendants"*fn1 alleging violations of the Federal Tort Claims Act ("FTCA"), 28 U.S.C. §§ 1346(b), 2671-2680; Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq.; and Fifth Amendment to the Constitution. The defendants moved to dismiss Jerome's claims pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6). Because the court lacks subject-matter jurisdiction under the FTCA, the APA and the Constitution, the court grants the defendants' motion to dismiss.

II. BACKGROUND

A. Background

Since the 1950s, physicians have prescribed LS tablets for the treatment of thyroid diseases. Compl. ¶ 8. In August 1997, however, FDA issued a notice that new information had shown significant stability and potency problems with currently marketed LS products, and that this lack of stability and consistent potency had the potential to cause serious public-health consequences. Id. ¶¶ 15-16 (citing 62 FED. REG. 43535 (Aug. 14, 1997)). Accordingly, notwithstanding the history of LS use, FDA announced that orally administered LS products were "new drugs," and that manufacturers wishing to continue marketing LS products would have to submit New Drug Applications ("NDAs") for FDA approval by August 14, 2000 or be subject to adverse regulatory action. Id. ¶ ¶ 14, 17.

FDA initially set a deadline of August 14, 2000 for the NDA approval date. Id. ¶ 17. In April 2000, however, a few months prior to the deadline, FDA extended the deadline by one year, to August 14, 2001. Id. ¶ 29 (citing 65 FED. REG. 24488 (Apr. 26, 2000)). On August 21, 2000, FDA approved Jerome's NDA, making Jerome's Unithroid the first LS drug approved under the new requirements. Id. ¶ 30.

One day after the approval, FDA posted on its website information that, according to Jerome, contained Jerome's confidential and trade-secret information for Unithroid ("the Jerome information").*fn2 Id. ¶ 31. Jerome discovered this disclosure about four months later. Id. ¶ 35. Jerome then notified FDA of the disclosure and demanded that FDA remove the Jerome information from its website. Id. ¶¶ 35-37. FDA removed some of the Jerome information on January 12, 2001, and, after receiving additional calls from Jerome, removed the remaining information on January 23, 2001. Id. ¶¶ 38-41.

Meanwhile, in May 2001, FDA approved the NDA for Levoxyl, a competing LS drug manufactured by Jones Pharma. Id. ¶¶ 51-52. Jones Pharma's Levoxyl thereby became the second LS drug approved prior to the August 2001 deadline. Id. No other LS drugs – including Synthroid, Abbott Laboratories' LS drug that traditionally dominated the market – received NDA approval prior to the August 2001 deadline.*fn3 Id. ¶¶ 54-65.

In July 2001, one month before the August 2001 deadline, FDA announced that it was "continu[ing] to exercise its enforcement discretion by establishing a gradual phase-out of unapproved [LS] products." Id. ¶ 44 (quoting 66 FED. REG. 36794 (July 13, 2001)). Specifically, FDA stated that those LS manufacturers who filed but did not receive approval for an NDA ("the non-approved manufacturers") before the August 2001 deadline could nonetheless continue marketing their LS products for another two years through August 2003, although they had to gradually phase out distribution during that period.*fn4 Id. ¶¶ 44-45. Jerome reports that after FDA's announcement, Abbott Laboratories "flooded the retail market with mass quantities of its then unstable LS drug product [Synthroid]." Id. ¶ 47. Having lost de facto market exclusivity "due to FDA's publication of its secrets and FDA's extensions of compliance deadlines," Jerome laid off 22 employees hired to supply the previously anticipated demand for Unithroid, and Jerome's partner Watson Laboratories destroyed drums of Unithroid valued at up to $33 million. Id. ¶ 48.

Jerome subsequently filed a six-count complaint in this court.*fn5 Id. ¶¶ 66-117. Counts one and two ("the tort claims") allege that the defendants misappropriated Jerome's trade secrets and breached a confidential relationship by disclosing the Jerome information via FDA's website. Id. ¶¶ 66-86. Counts three and four ("the constitutional claims") assert that the defendants violated Jerome's procedural and substantive due-process Fifth Amendment rights by disclosing the Jerome information. Id. ¶¶ 87-97. Finally, count five ("the APA disclosure claim") and count six ("the APA deadline-extension claim") allege that the defendants' failure to guard against disclosure of the Jerome information and granting of the deadline extensions*fn6 qualify as arbitrary and capricious under the APA. Id. ¶¶ 98-117. For relief, Jerome seeks compensatory damages of more than $1.3 billion for the tort claims and declaratory relief for the remaining claims. Id. ¶¶ 118-24. In response, the defendants moved to dismiss for lack of subject-matter jurisdiction and failure to state a claim on which relief may be granted. The court now addresses the defendants' motion to dismiss.

III. ANALYSIS

A. Legal Standard for a Motion to Dismiss Pursuant to Rule 12(b)(1)

Federal courts are courts of limited jurisdiction and the law presumes that "a cause lies outside this limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938); see also Gen. Motors Corp. v. Envtl. Prot. Agency, 363 F.3d 442, 448 (D.C. Cir. 2004) (noting that "[a]s a court of limited jurisdiction, we begin, and end, with an examination of our jurisdiction").

Because "subject-matter jurisdiction is an 'Art. III as well as a statutory requirement[,] no action of the parties can confer subject-matter jurisdiction upon a federal court.'" Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C. Cir. 2003) (quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxite de Guinea, 456 U.S. 694, 702 (1982)). On a motion to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject-matter jurisdiction. Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999); Rasul v. Bush, 215 F. Supp. 2d 55, 61 (D.D.C. 2002) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 182-83 (1936)). The court may dismiss a complaint for lack of subject-matter jurisdiction only if "'it appears beyond doubt that the plaintiff can ...


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