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John Doe, Inc. v. Gonzalez

June 29, 2006

JOHN DOE, INC., PLAINTIFF,
v.
ALBERTO R. GONZALEZ, ATTORNEY GENERAL OF THE UNITED STATES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge

MEMORANDUM OPINION

Plaintiff John Doe, Inc., a manufacturer of generic pharmaceutical products, brings this action for preliminary and permanent mandatory injunctive relief based on a contention that the decision of Defendants Alberto R. Gonzales,*fn1 the Attorney General of the United States; the United States Department of Justice ("DOJ"); Karen P. Tandy, the Administrator of the United States Drug Enforcement Administration ("DEA"); and the DEA itself (collectively, "Defendants") to deny Plaintiff its April 18, 2006 application to import Dronabinol in sesame oil, encapsulated in a soft gelatin capsule, was (1) in excess of the DEA's statutory authority, see Compl. ¶¶ 50-52 (Count I -- Agency Action in Excess of Statutory Authority); (2) contrary to law, arbitrary and capricious, and in violation of the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701 et seq., see Compl. ¶¶ 53-55 (Count II -- APA Claim); and (3) a deprivation of a liberty and property interest without due process, in violation of the 5th Amendment, see id. ¶¶ 56-59 (Count III -- Agency Action in Violation of 5th Amendment).In response, Defendants assert that Plaintiff's allegations are without merit, as the "product" that Plaintiff is seeking to import is properly categorized as a Schedule I controlled substance, not a Schedule III substance as claimed by Plaintiffs.

Currently before the Court are Plaintiff's Motion for Preliminary Mandatory Injunctive Relief, Defendants' Opposition, Plaintiff's Reply, Defendants' Surreply, and Plaintiff's Surrebuttal. Upon a searching examination of the parties' filings, the attached exhibits, the relevant case law, and the Administrative Record herein, the Court concludes that it lacks subject-matter jurisdiction over this dispute. As such, the Court shall dismiss without prejudice Plaintiff's Complaint and Motion for Mandatory Injunctive Relief.

I. BACKGROUND

A. The Regulatory Framework for Controlled Substances

1. The CSA and the DEA's Five Schedules of Controlled Substances

The DEA regulates controlled substances through the Controlled Substances Act of 1970 ("CSA"), 21 U.S.C. § 801 et seq., as well as DEA regulations promulgated thereunder. In recognition of the fact that certain controlled substances have "useful and medical purpose[s]," see id. § 801(1), Congress has authorized the Attorney General to regulate their distribution within a closed system. The Attorney General has delegated his regulatory authority under the Act to the Administrator of the DEA. See 21 U.S.C. § 871(a); 28 C.F.R. § 0.100(b). As part of its statutory responsibilities under the CSA, the DEA is authorized to "promulgate rules and regulations and to charge reasonable fees relating to the registration and control of the manufacture, distribution, and dispensing of controlled substances." 21 U.S.C. § 821. The CSA also provides authority for the Administrator of the DEA to "promulgate and enforce any rules, regulations, and procedures which

[s]he may deem necessary and appropriate for the efficient execution of his functions under [the Act]." Id. § 871(b). Pursuant to this authority, the DEA has issued extensive regulations implementing the CSA, which are found in 21 C.F.R. §§ 1300-1316.

The DEA's rules and regulations itemize all controlled substances on a list of five "schedules." See 21 U.S.C. § 812; 21 C.F.R. § 1308 (listing Schedules I--V). Schedule I controlled substances have the most stringent regulations and requirements because they have "no currently accepted medical use in treatment in the United States," "a lack of accepted safety for use . . . under medical supervision," and "a high potential for abuse." 21 U.S.C. § 812(b)(1). Among other things, Schedule I controlled substances may not be prescribed and dispensed for medical use, and human consumption of such Schedule I substances is limited to "the confines of a Government-approved research project." United States v. Oakland Cannabis Buyers' Coop., 532 U.S. 483, 491, 121 S.Ct. 1711, 149 L.Ed.2d 722 (2001). In contrast, controlled substances falling within Schedules II through V have accepted medical uses and decreasing potential for both abuse and physical/psychological dependence. See 21 U.S.C. § 812(b)(2)-(5). For example, to be classified on Schedule III, a substance must have a lower potential for abuse than the substances in Schedule I and II; to be a Schedule III controlled substance, the drug must have a currently accepted medical use in treatment in the United States and abuse of the drug may lead to moderate or low physical dependence or high psychological dependence. See id. § 812(b)(3).

2. The Importation of Controlled Substances

The importation of controlled substances into the United States is governed by statute, which explicitly recognizes importation for medical and scientific uses and grants the Attorney General the authority to issue permits for such importation. See, e.g., id. §§ 952, 958. As such, the CSA requires any person or company that manufactures, distributes, or imports a controlled substance to obtain -- on an annual basis -- a registration from the Attorney General. See id. §§ 822(a)(1), 958. Moreover, persons and companies registered with the DEA to handle controlled substances are only authorized to engage in such activities "to the extent authorized by their registration and in conformity with other provisions of [the CSA]." Id. § 822(b); see also id. § 958(b) ("Registration granted under this section shall not entitle a registrant to import or export controlled substances other than specified in the registration."). Indeed, it is a felony violation of the CSA to import any controlled substance except as authorized by the Act. See id. § 960; see also Decl. of Demetra Ashley, Deputy Section Chief of the DEA's Drug and Chemical Evaluation Section, DEA Headquarters (hereinafter, "Ashley Decl."), attached as Ex. A to Defs.' Opp'n, at ¶ 9 (the registration "specifies not only the Schedule, but the particular controlled substance(s), each [registrant] is authorized to possess").

a. Schedule I Controlled Substances

In deciding whether to grant an application to import a Schedule I controlled substance, the DEA must apply the criteria set forth in 21 U.S.C. § 823(a).*fn2 See id. § 958(a) ("The Attorney General shall register an applicant to import or export a controlled substance in schedule I or II if he determines that such registration is consistent with the public interest and with the United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971. In determining the public interest, the factors enumerated in paragraph (1) through (6) of section 823(a) of this title shall be considered."). In determining the public interest pursuant to a request to import a Schedule I controlled substance, the DEA weighs the following factors:

1. maintenance of effective controls against diversion of particular controlled substances and any controlled substance in schedule I or II compounded therefrom into other than legitimate medical, scientific, research, or industrial channels, by limiting the importation and bulk manufacture of such controlled substances to a number of establishments which can produce an adequate and uninterrupted supply of these substances under adequately competitive conditions for legitimate medical, scientific, research, and industrial purposes;

2. compliance with applicable State and local law; 3. promotion of technical advances in the art of manufacturing these substances and the development of new substances; 4. prior conviction record of applicant under Federal and State laws relating to the manufacture, distribution, or dispensing of such substances; 5. past experience in the manufacture of controlled substances, and the existence in the establishment of effective control against diversion; and 6. such other factors as may be relevant to and consistent with the public health and safety.

Id. § 823(a)(1)-(6). Moreover, under the applicable regulations for registration as a handler of a Schedule I controlled substance, the DEA must publish the applicant's petition in the Federal Register and provide notice of the application to each registered manufacturer of that controlled substance and any other applicants for registration for the same substance. See 21 C.F.R. § 1301.34(a).

In addition to the registration requirement, a separate provision of the CSA sets forth additional prerequisites for the importation of a Schedule I controlled substance. Pursuant to 21 U.S.C. § 952(a), a particularized determination must be made with respect to the specific shipment proposed to be imported. Section 952(a) generally prohibits the importation of Schedule I controlled substances, except under certain circumstances. See id. § 952(a)(1)-(3). Where the applicant seeks to import a Schedule I controlled substance for research, the applicant must demonstrate -- and the DEA must determine -- that such importation is "necessary to provide for the medical, scientific, or other legitimate needs of the United States," and the amount of the proposed importation "is in limited quantities exclusively for scientific, analytical, or research uses." Id. § 952(a)(2)(C).

Section 952(a) also provides that the proposed import comply with the import regulations promulgated by the DEA. Those regulations provide that no person shall import any Schedule I or II controlled substance, or any controlled substance that the Administrator has specifically designated, "unless and until such person is properly registered under the Act . . . and the Administrator has issued him a permit to do so pursuant to § 1312.13." 21 C.F.R. § 1312.11. A separate import permit is required for each "consignment of controlled substances to be imported." 21 C.F.R. § 3211.11(c).

b. Schedule III Controlled Substances

In contrast to Schedule I controlled substances, in deciding whether to grant an application to import a Schedule III controlled substance, the DEA must apply the criteria set forth in 21 U.S.C. § 823(d). See id. § 958(c)(1) ("The Attorney General shall register an applicant to import or export a controlled substance in schedule III or IV, unless he determines that the issuance of such registration is inconsistent with the public interest. In determining the public interest, the factors enumerated in paragraph (1) through (6) of section 823(d) of this title shall be considered."). In determining the public interest pursuant to a request to import a Schedule III controlled substance, the DEA weighs the following factors:

1. maintenance of effective controls against diversion of particular controlled substances and any controlled substance in schedule III, IV, or V compounded therefrom into other than legitimate medical, scientific, or industrial channels;

2. compliance with applicable State and local law; 3. promotion of technical advances in the art of manufacturing these substances and the development of new substances; 4. prior conviction record of applicant under Federal and State laws relating to the manufacture, distribution, or dispensing of such substances; 5. past experience in the manufacture of controlled substances, and the existence in the establishment of effective control against diversion; and 6. such other factors as may be relevant to and consistent with the public health and safety.

Id. § 823(d)(1)-(6).

In addition to the registration requirement, a separate provision of the CSA sets forth additional prerequisites for the importation of a Schedule III controlled substance. Pursuant to 21 U.S.C. § 952(b), a particularized determination must be made with respect to the specific shipment proposed to be imported. Section 952(b) provides:

[i]t shall be unlawful to import . . . into the United States from any place outside thereof, any nonnarcotic controlled substance in schedule III, unless such nonnarcotic controlled substance (1) is imported for medical, scientific, or other legitimate uses and (2) is imported pursuant to such notification, or declaration, or in the case of any nonnarcotic controlled substance in schedule III, such import permit, notification, or declaration, as the Attorney General may by regulation prescribe . . . . Id. § 952(b).

Similar to the requirements to import a Schedule I controlled substance, Section 952(b) also provides that the proposed import comply with the import regulations promulgated by the DEA. Those regulations provide that no person shall import "any narcotic controlled substance listed in Schedule III or any non-narcotic controlled substance in Schedule III which the Administrator has specifically designated by regulation in § 1312.30 of this part . . unless and until such person is properly registered under the Act . . . and the Administrator has issued him a permit to do so pursuant to § 1312.13." 21 C.F.R. § 1312.11. A separate import permit is required for each "consignment of controlled substances to be imported." Id. § 3211.11(c).

3. The Import Application Process

As noted, registrants seeking to import controlled substances must first obtain a permit from the Administrator of the DEA. See id. § 1312.11. Applications for import permits must be submitted on DEA Form 357. Id. § 1312.12. The application must contain, inter alia, (1) the date of execution; (2) the registration number of the importer; (3) and a detailed description of each controlled substance to be imported, including the drug name, dosage form, National Drug Code ("NDC") number, the Administration Controlled Substance Code Number, and quantity and size of the packages or containers. Id. The "Administration Controlled Substances Code Number" is "a unique four-digit number" assigned to a controlled substance "which appears on Certificates of Registration." Defs.' Opp'n, Ex. A (Ashley Decl.) ¶ 10; see also 21 C.F.R. § 1308.03(a). "Applicants for import and export permits must include the appropriate code number on the application." Id.

The Administrator "may" issue an import permit authorizing the "importation of any controlled substance listed in Schedule I . . . or any narcotic drug listed in Schedule III[,]" 21 C.F.R. § 1312.13(a), or the importation of "such non-narcotic substances in Schedule III as [s]he shall designate by regulation in § 1312.30 of this part," id. § 1312.13(b), if (s)he finds:

1. That the substance is crude opium, poppy, straw, concentrate of poppy straw, or coca leaves, in such quantity as the Administrator finds necessary to provide for medical, scientific, or other legitimate purposes;

2. That the substance is necessary to provide for medical and scientific needs or other legitimate needs of the United States during an emergency where domestic supplies of such substance or drug are found to be inadequate, or in any case in which the Administrator finds that competition among domestic manufacturers of the controlled substance is inadequate and will not be rendered adequate by registration of additional manufacturers under section 303 of the Controlled Substances Act (21 U.S.C. 823); or

3. That the domestic supply of any controlled substance is inadequate for scientific studies, and that the importation of that substance for scientific purposes is only for delivery to officials of the United Nations, of the United States, or of any State, or to any person registered or exempted from registration under sections 1007 and 1008 of the Act (21 U.S.C. 957 and 958).

4. That the importation of the controlled substance is for ballistics or other analytical or scientific purposes, and that the importation of that substance is only for delivery to officials of the United Nations, of the United States, or of any State, or to any person registered or exempted from registration under sections 1007 and 1008 of the Act (21 U.S.C. 957 and 958).

Id. § 1312.13(a). A permit is not valid after the date specified therein. See id. § 1312.16(b). The Administrator, however, is authorized to cancel a permit at any time for proper cause. Id. § 1312.16(a).

Any applicant denied an import permit may request a hearing within thirty (30) days after the denial of its application. Id. § 1312.44. The Administrator "shall hold such hearing" if requested and provide notice of the date and time of the hearing to the denied applicant at least thirty (30) days before the hearing. Id. § 1312.46. The Administrator has the burden of demonstrating at the hearing that the applicant did not satisfy the requirements for an import permit. Id. § 1312.45. As soon as practicable following the hearing and certification of record, the Administrator shall issue a final order that sets forth his findings of fact and conclusions of law. Id. § 1312.47.

B. Plaintiff and Its Interest in Developing a Generic Form of Marinol(r)

Plaintiff is a generic drug manufacturer incorporated and based in the United States. See Aff. of the President & CEO of John Doe, Inc. (hereinafter, "President Aff."), attached as Ex. A to Pl.'s Mot. for Prelim. Inj., at ΒΆ 6. In order to continue to offer lower-cost alternatives to brand-name pharmaceuticals, Plaintiff pursues partnerships or collaborative relationships with other companies, a process that has allowed ...


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