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Teva Pharmaceuticals USA, Inc. v. Sebelius

July 31, 2009

TEVA PHARMACEUTICALS USA, INC., PLAINTIFF,
v.
KATHLEEN SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

Teva Pharmaceuticals USA, Inc. ("Teva"), a manufacturer of generic drugs, seeks a preliminary injunction to invalidate a "Delisting Rule" instituted by the Food and Drug Administration ("FDA"). The FDA contends that there is no such "Delisting Rule." Instead, in informal adjudications regarding other drugs, the FDA has held that a name brand manufacturer's withdrawal of a patent as a basis for its drug(s) (i.e., a request that the patent be "delisted") triggers a forfeiture provision excising the generic company's eligibility for a 180-day exclusive marketing period. Teva contends that by way of these decisions the FDA has created a "rule" that is subject to challenge. The FDA moves to dismiss, arguing that its decisions do not constitute a final rule subject to challenge and that, because there has been no final agency action on Teva's own request for generic drug approval, the matter is not ripe and Teva lacks standing. The Court held oral argument on July 13, 2009, and now decides that the FDA's motion to dismiss will be denied. Further, the preliminary injunction proceedings are combined with trial on the merits and judgment will be granted in favor of the FDA. The FDA's statutory interpretation is not arbitrary or capricious.

I. BACKGROUND FACTS

A. Statutory Scheme

The Drug and Price Competition and Patent Term Restoration Act of 1983 (the "Hatch-Waxman Amendments"),*fn1 21 U.S.C. § 355 & 35 U.S.C. §§ 156, 271, & 282, established a streamlined procedure for FDA approval of generic drugs. Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1063 (D.C. Cir. 1998). The original applicant for approval of a drug (the "Innovator") must file a New Drug Application ("NDA"), including data from studies showing the drug's safety and effectiveness. Id.; see also 21 U.S.C. § 355(a) & (b). The Innovator also is required to submit information on any patent that claims the drug or a method of using the drug for which patent infringement could be asserted against an unauthorized party. 21 U.S.C. § 355(b)(1) & (c)(2). The FDA lists such patent information in a publication called the "Approved Drug Products with Therapeutic Evaluations," commonly known as the "Orange Book." Id.; 21 C.F.R. § 314.53(e).

Subsequent applicants who want to manufacture generic versions of the Innovator's drug may file an Abbreviated New Drug Application ("ANDA"). Mova, 140 F.3d at 1063; 21 U.S.C. § 355(j). The ANDA is not required to include new safety and effectiveness data, but instead may rely on the safety and effectiveness data in the original filing. 21 U.S.C. § 355(j). In this way, the Hatch-Waxman Amendments were intended both to encourage innovative new drugs and to permit the marketing of lower cost generic drugs quickly. Tri-Bio Labs., Inc. v. United States, 836 F.2d 135, 139 (3d Cir. 1987).

An ANDA applicant must certify whether the generic drug would infringe any existing patents relied on and listed by the Innovator. The applicant may certify:

(I) that the required patent has not been filed;

(II) that the patent has expired;

(III) that the patent has not expired, but will expire on a particular date; or

(IV) that the patent is invalid or will not be infringed by the manufacture, use or sale of the new drug for which the application is submitted.

21 U.S.C. § 355(j)(2)(A)(vii).*fn2 A paragraph III certification means that the ANDA applicant does not intend to market the drug until after the patent expires; approval of the ANDA may be made effective on the expiration date. Id. § 355(j)(5)(B)(ii). A paragraph IV certification contemplates that the ANDA applicant challenges the validity of the patent or claims that the patent would not be infringed by the generic product proposed in the ANDA. An applicant must provide notice of a paragraph IV certification to the Innovator. Id. § 355(j)(2)(B). The filing of a paragraph IV certification constitutes an act of infringement under patent law, 35 U.S.C. § 271(e)(2)(A), and the Innovator, as patent holder, has 45 days to bring suit against the ANDA applicant. Id. § 355(j)(5)(B)(iii). If the Innovator brings such a suit, the FDA must delay approving the ANDA for 30 months. Id. This provision, known as the 30-month stay, gives the Innovator time to assert its patent rights before the generic competitor is permitted to enter the market. Mova, 140 F.3d at 1064. If the Innovator does not bring suit within 45 days, the FDA may approve a paragraph IV ANDA, and the approval may be effective immediately despite the unexpired patent, provided that other conditions have been met. Id.; 21 C.F.R. § 314.107(f)(2).

Under certain circumstances, the statute provides a 180-day exclusive marketing period vis-a-vis other ANDA applicants to the first applicant who files an ANDA with a paragraph IV certification. 21 U.S.C. § 355(j)(5)(B)(iv). That is, the first patent-challenging generic applicant may be awarded a six-month period during which that applicant is the only company allowed to sell a generic version of the name brand drug. Thus, the statute may reward the first generic manufacturer that exposes itself to the risk of patent litigation. Teva Pharm. Indus. Ltd. v. Crawford, 410 F.3d 51, 52 (D.C. Cir. 2005); Mova, 140 F.3d at 1064.

Congress amended 21 U.S.C. § 355(j) in 2003 to add the exclusivity provisions raised by Teva in this case. See 21 U.S.C. § 355(j)(5)(D) (part of the Medicare Modernization Act of 2003 (the "MMA"); see The Access to Affordable Pharmaceuticals provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (Dec. 8, 2003).*fn3 The MMA contains certain "forfeiture provisions" setting forth the conditions under which an ANDA applicant may lose eligibility for the 180-day exclusivity period. 21 U.S.C. § 355(j)(5)(D)(i) & (ii). The forfeiture provision at issue in this case is the one that provides that a first ANDA filer will forfeit exclusivity if it fails to market the drug by a certain date:

(I) Failure to Market. The first [ANDA] applicant fails to market the drug by the later of -- (aa) the earlier of the date that is --

(AA) 75 days after the date on which the approval of the application of the first applicant is made effective under subparagraph (b)(iii); or

(BB) 30 months after the date of submission of the application of the first applicant; or (bb) with respect to the first applicant or any other applicant (which other applicant has received tentative approval), the date that is 75 days after the date as of which, as to each of the patents with respect to which the first applicant submitted and lawfully maintained a certification qualifying the first applicant for the 180-day exclusivity period under subparagraph (B)(iv), at least 1 of the following has occurred:

(AA) In an infringement action brought against that applicant with respect to the patent or in a declaratory judgment action brought by that applicant with respect to the patent, a court enters a final decision from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that the patent is invalid or not infringed. (BB) In an infringement action or a declaratory judgment action described in subitem (AA), a court signs a settlement order or consent decree that enters final judgment that includes a finding that the patent is invalid or not infringed. (CC) The patent information submitted under subsection (b) or (c) is withdrawn by the holder of the application approved under subsection (b) of this section [i.e., the Innovator].

Id. § 355(j)(5)(D)(i)(I) (emphasis added to highlight provision at issue here). Forfeiture occurs only when the "later" of the events in (aa) or (bb) occurs.

The FDA has twice applied the subsection (bb)(CC) forfeiture provision in public letter decisions, after providing notice and comment. For example, with regard to an ANDA for the drug acrabose, the FDA applied the failure to market forfeiture provision under (bb)(CC), finding that this subsection requires marketing within 75 days from when the patent information is withdrawn by the Innovator. Compl. Ex. 5, Letter from Gary Buehler, Director, Office of Generic Drugs, at 7-9 (May 7, 2008), FDA Dkt. No. 2007-N-0445 ("Acrabose Decision"). The FDA announced its interpretation of subsection (bb)(CC) in broadly applicable terms - "Therefore, FDA reads the plain language of 505(j)(5)(D)(i)(I)(bb)(CC) to apply whenever a patent is withdrawn (or requested to be 'delisted') by the NDA holder." Id. at 8 (emphasis added). Likewise, with regard to an ANDA for generic Cosopt, the FDA again explained its interpretation of subsection (bb)(CC) of the MMA - that this subsection applies "whenever" a patent is withdrawn by the Innovator. Compl. Ex. 9, Letter from Gary Buehler, Director, Office of Generic Drugs, at 14 n.15 (Oct. 28, 2008), FDA Dkt. No. 2008-N-0483 ("Cosopt Decision").*fn4

B. Facts of This Case

The facts of this case are not in dispute. Merck & Co., Inc. ("Merck") is the name brand manufacturer that holds approved NDA No. 20-386 for losartan potassium ("losartan") tablets (sold under the name "Cozaar") and NDA No. 20-0387 for losartan potassium hydrochlorothiazide ("losartan HCTZ") tablets (sold under the name "Hyzaar"). Cozaar and Hyzaar are primarily used to treat hypertension. During the twelve month period that ended March 31, 2009, pharmacists in the United States filled over fifteen million prescriptions for Cozaar and Hyzaar, dispensing 848 million tablets, ...


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