The opinion of the court was delivered by: Amy Berman Jackson United States District Judge
Plaintiff K-V Pharmaceutical Company ("KV") and its wholly owned subsidiary, plaintiff Ther-RX Corporation ("Ther-RX"), own and market a drug called Makena, which is a hydroxyprogestoerone caproate injection. Makena was approved in 2011 for use by pregnant women with a history of preterm birth to reduce the risk that they would experience another preterm birth. Plaintiffs have sued the United States Food and Drug Administration ("FDA"), its Commissioner Margaret A. Hamburg, the United States Department of Health & Human Services ("HHS"), and HHS Secretary Kathleen Sebelius, alleging that defendants are violating the Administrative Procedure Act ("APA") and several provisions of the Food, Drug, and Cosmetic Act ("FDCA") by failing to take action against pharmacies that compound the drug and thereby creating a cheaper alternative for doctors to prescribe. The compounded form of the drug is referred to as "17P" in this action.
In particular, plaintiffs challenge a March 30, 2011 press release in which FDA announced its intention not to take enforcement action against the compounders except under certain circumstances. They also challenge FDA's failure to block foreign shipments of the active pharmaceutical ingredient ("API") used in 17P from entering the United States. According to plaintiffs, FDA's actions have given rise to unlawful competition with Makena and caused them irreparable economic harm.
Defendants have moved to dismiss the action under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). [Dkt. # 7]. They argue that plaintiffs lack standing, and that the actions they challenge are the types of discretionary enforcement decisions that the Supreme Court found to be unreviewable in Heckler v. Chaney, 470 U.S. 821 (1985). Alternatively, they argue that the complaint fails to state a claim upon which relief can be granted. The Court concludes that Counts I through III of the complaint challenge FDA's discretionary enforcement activities and therefore assert unreviewable claims, and that Count IV fails to state a claim under Rule 12(b)(6).
Plaintiff KV is the owner of the drug Makena, which has been approved by the FDA. Compl. ¶ 24. Plaintiff Ther-RX is a "wholly-owned subsidiary of KV [that] markets, sells, and distributes Makena on behalf of KV." Id. ¶ 25. On January 25, 2007, FDA designated Makena as an "orphan drug" to be used for the prevention of preterm birth in women who have a singleton pregnancy and a history of prior preterm delivery.*n1 Id. ¶¶ 50--51.
Under the Orphan Drug Act, 21 U.S.C. §§ 360aa--ee ("ODA"), an "orphan drug" is a drug used to treat a disease or condition that affects fewer than 200,000 people in the United States. Compl. ¶ 36. Congress passed the ODA in 1983, as an amendment to the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301, et seq ("FDCA").*fn1 The congressional findings reflect that Congress sought to create incentives for the development of drugs for rare conditions. Pub. L. No. 97-414, § 1(b)(4), 96 Stat. 2049, 2049 (1983). Accordingly, when a drug receives the FDA's orphan drug designation, section 360cc(a) of the OCA prevents the Secretary of Health from "approving another application under section 355 of this title . . . for such drug for [the same] disease or condition" within seven years after the approval date of the orphan drug. 21 U.S.C. § 360cc(a).
Makena, a hydroxyprogesterone caproate injection is the first drug approved by FDA to reduce the risk of preterm birth in women with a singleton pregnancy who have a history of singleton spontaneous preterm birth. Compl. ¶ 1. Because it has been designated as an "orphan drug," its seven year exclusivity period began running on the day it was approved, February 3, 2011. Compl. ¶ 14.
However, for a number of years before FDA approved Makena, women were treated for risk of preterm birth with versions of hydroxyprogesterone caproate that were compounded by entities known as "compounding pharmacies" or "compounders." Id. ¶ 9. According to the complaint:
Drug compounding is a process by which a pharmacist or doctor combines, mixes, or alters ingredients to create a medication customized to the needs of an individual patient. Compounded drugs generally are not reviewed or approved by FDA. Compounded versions of 17P were not and are not reviewed or approved by FDA; and, in general, their individual formulations, manufacturing processes, labeling, and adverse-event and treatment-failure histories were and are unknown to FDA. The facilities in which the compounding occurred and continues to occur generally were not and are not registered with or routinely inspected by FDA. Compl. ¶ 9.
When Makena was released, the media began reporting on its high list price of $1,500 per injection, or up to $30,000 for a course of treatment. Id. ¶ 68. Plaintiffs allege that these reports were misguided, see id. ¶¶ 69--73, but that the press accounts prompted members of Congress to pressure FDA to make the 17P injection available at a lower price than the initial list price for Makena. Id. ¶ 74.
On March 30, 2011, FDA issued a statement for immediate release titled, FDA Statement on Makena.*fn2 FDA Statement (Mar. 20, 2011), available at www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm249025.htm ("March Statement"). The statement explained that FDA had approved Makena on February 3, 2011, and that as a result, Makena obtained seven years of exclusivity under the Orphan Drug Act. Id. It further explained that for many years, a version of the active ingredient of Makena had been available to patients whose physicians requested the drug from a pharmacist who compounded the drug, and that FDA had generally exercised enforcement discretion with respect to those drugs. Id. The March Statement went on:
Because Makena is a sterile injectable, where there is a risk of contamination, greater assurance of safety is provided by an approved product. However, under certain conditions, a licensed pharmacist may compound a drug product using ingredients that are components of FDA approved drugs if the compounding is for an identified individual patient based on a valid prescription for a compound product that is necessary for that patient. FDA prioritizes enforcement actions related to compounded drugs using a risk-based approach, giving the highest enforcement priority to pharmacies that compound products that are causing harm or that amount to health fraud.
FDA understands that the manufacturer of Makena, KV Pharmaceuticals has sent letters to pharmacists indicating that FDA will no longer exercise enforcement discretion with regard to compounded versions of Makena. This is not correct.
In order to support access to this important drug, at this time and under this unique situation, FDA does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient unless the compounded products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products. As always, FDA may at any time revisit a decision to exercise enforcement discretion. Id.
In their complaint, plaintiffs do not mention the language in the press release that suggests that the March Statement may have been prompted by their own actions. Instead, they allege that the March Statement was issued in response to public pressure about the price of Makena. Compl. ¶ 75. They further allege that some Medicaid programs have interpreted the March Statement as "authorizing the total displacement of Makena by compounded 17P." Id. ¶ 86.*fn3 Plaintiffs assert that "numerous compounded versions of 17P (not customized for individual patients) have entered, re-entered, or remained on the U.S. market, some manufactured on a commercial scale"; and that FDA is permitting unapproved 17P API to be imported into the United States. Id. ¶ 15. According to the complaint, many or all of the compounders of 17P use active ingredients manufactured in China by establishments that have not been identified in an approved new drug application and are not inspected by FDA. Id. ¶ 89.
Since issuing the March Statement, FDA has issued three additional press releases regarding Makena, Compl. ¶ 94, two of which are relevant to this action.*fn4 On June 15, 2012, FDA addressed safety concerns plaintiffs had raised about the 17P compounds, and it described the enforcement approach it was following with respect to compounded 17P. It announced that it had tested API from sixteen samples of 17P, and thirteen samples of compounded 17P prepared by eight different pharmacies, and that it had not identified any major safety problems. Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate (the active ingredient in Makena) (June 15, 2012), available at www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm308546.htm ("June Statement"). However, it also stated that "approved drug products, such as Makena, provide a greater assurance of safety and effectiveness than do compounded products." Id.
The June Statement further explained:
The drugs that pharmacists compound (including compounded hydroxyprogesterone caproate) are not FDA approved, which means they do not undergo premarket review nor do they have an FDA finding of safety and efficacy. Compounding large volumes of drugs that are copies of FDA-approved drugs circumvents important public health requirements, including the Federal Food, Drug, and Cosmetic Act's drug approval provisions. Consumers and health professionals rely on the Act's evidence-based drug approval process to ensure that drugs are safe and effective. For that reason, one factor that the agency considers in determining whether a drug may be compounded is whether the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA-approved commercially available drug product.
FDA emphasizes that it is applying its normal enforcement policies for compounded drugs to compounded hydroxyprogesterone caproate. The compounding of any drug, including hydroxyprogesterone caproate, should not exceed the scope of traditional pharmacy compounding. As the Agency has previously explained, FDA generally prioritizes enforcement actions related to compounded drugs using a risk-based approach, giving the highest enforcement priority to pharmacies that compound products that are causing harm or that amount to health fraud. Id.
Then, in a press release titled, Questions and Answers on Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate (the active ingredient in Makena), FDA provided further clarification. (June 29, 2012), available at www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm310215.htm ("Questions and Answers"). It posed and answered the following questions:
Will the agency take any enforcement action against pharmacies compounding versions of hydroxyprogesterone caproate products?
The FDA may take enforcement action against compounding pharmacies if warranted. The FDA makes its enforcement decisions about compounded products on a case-by-case basis after considering the particular facts at issue. As we explained in the June 15, 2012, statement, the compounding of any drug, including hydroxyprogesterone caproate, should not exceed the scope of traditional pharmacy compounding.
Are pharmacies free to compound large volumes of hydroxyprogesterone caproate as long as none of their drugs are tested and found to be unsafe?
No. The FDA does not consider compounding large volumes of copies, or what are essentially copies, of any approved commercially-available drug to fall within the scope of traditional pharmacy practice. One factor that the agency considers in determining whether a drug may be compounded is whether the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA-approved commercially available drug product. . . .
The FDA stated it is using a risk-based approach to enforcement action against compounding pharmacies. The FDA also stated that its investigation did not identify a major safety issue, so does that mean that the FDA does not intend to take enforcement action against the compounders of hydroxyprogesterone caproate?
No. A risk-based approach to enforcement relates to how the FDA generally prioritizes its enforcement efforts. The FDA's June 15, 2012 statement should not be interpreted to mean that the FDA will take enforcement action only if the agency identifies a particular safety problem. We reiterate that the compounding of any drug, including hydroxyprogesterone caproate, should not exceed the scope of traditional pharmacy compounding.
Plaintiffs complain that none of these statements evince an agency plan to take enforcement action against those compounding and marketing 17P on a large scale basis as opposed to individually customizing it for patients for whom Makena is medically inappropriate. Compl. ¶ 94. They allege that notwithstanding FDA's public statements, compounded versions of 17P are still actively being sold on the U.S. market. Id. ¶ 95. See also Plaintiffs' Opposition to Def's Motion to Dismiss and Reply Mem. in Support of Mot. for Temporary, Prelim., and Permanent Relief [Dkt. # 12] at 4--5 ("Pls.' Opp.") ("FDA has failed to date to take any action against the compounding of 17P. . . . In practical effect . . . FDA's lack of enforcement against unlawful compounding of 17P has not changed; and because FDA has done nothing to change the perception in the marketplace that it will not act against unlawful compounding of 17P, the unlawful compounding of 17P continues."). In essence, what plaintiffs challenge is defendants' failure to take enforcement action:
The bottom line is that Defendants have done and, unless ordered by the Court, will do, nothing -- nothing -- to enforce the law against unlawful uncustomized compounding of 17P, unless and until FDA learns that patients have actually been harmed or defrauded by compounded 17P. Pls.' Opp. at 6.
Plaintiffs assert that FDA's statements and inaction have undermined the exclusivity conferred with the orphan drug designation and devalued their substantial investment in the drug. Compl. ¶¶ 95--99. The complaint alleges that KV is almost entirely reliant on the success of Makena to generate the cash it needs to finance its operations and to make obligatory debt payments, id. ¶ 95, and that the illegal production of 17P has displaced Makena in the market and substantially undercut plaintiffs' sales, id. ¶ 96. Since the time the complaint was filed, plaintiffs KV and Ther-Rx have filed voluntary Chapter 11 petitions in the United States Bankruptcy Court for the Southern District of New York.*fn5 See Notice of Filing for Bankruptcy Protection by K-V Pharma. Co., Ther-Rx Corp. [Dkt. # 18] (Aug. 6, 2012).
Plaintiffs filed a four-count complaint in this Court on July 5, 2012, [Dkt. # 1], along with a motion for temporary restraining order and preliminary injunction, [Dkt. # 2]. x Count I alleges that FDA's March Statement and the policy it sets forth violate section 360cc(a) of the FDCA by effectively nullifying Makena's statutory seven-year period of market exclusivity. It further alleges that by issuing the March Statement for the purpose of "support[ing] access to" HPC injection, FDA failed to comply with the procedural requirements of section 360cc(a), in violation of the APA, 5 U.S.C. § 558(c); section 360cc(a) of the FDCA, 21 U.S.C. § 360cc; and the Due Process Clause of the Fifth Amendment of the United States Constitution, and acted arbitrarily, capriciously, in an abuse of discretion, and in excess of its authority, in violation of the APA, 5 U.S.C. § 706(2)(A)--(D). Compl. ¶¶ 103--09. x Count II alleges that the March Statement and the policy it sets forth are contrary to section 353a of the FDCA and are arbitrary, capricious, an abuse of discretion, and exceed FDA's authority, in violation of the APA, 5 U.S.C. § 706(2)(A), (C). Compl. ¶¶ 110--13. x Count III alleges that the March Statement and the policy it sets forth "approve, authorize, invite, encourage, and permit the introduction, and delivery for introduction, into interstate commerce of unapproved new drugs" in violation of FDCA sections 355(a) and 301(d), 21 U.S.C. §§ 355(a), 331(d), and the APA, 5 U.S.C. § 706(2)(A), (C). Compl. ¶¶ 114--16. x Count IV alleges that by allowing the import of API for compounded 17P, FDA is engaging in an ongoing violation of section 381(a) of the FDCA. Furthermore, the March Statement "announcing implicitly that [FDA] would allow such imports" is arbitrary and capricious, an abuse of discretion, and otherwise not in accordance with the law, in violation of the APA, 5 U.S.C. § 706(2)(A), (C)--(D). Compl. ¶¶ 117--25. The complaint seeks a comprehensive regime of temporary, preliminary, and permanent declaratory and injunctive relief. It asks the Court to order defendants to withdraw the March and June statements in a formal announcement, and to discontinue the policy of non-enforcement that was set forth in the March Statement. Compl. 42 ¶ 5(a). It requests that the Court order defendants: to "take sufficient enforcement actions to stop the unlawful competition with Makena" by non-customized compounded 17P, id. ¶ 5(b); to report to the Court quarterly for one year and semi-annually for the following two years the actions they have taken to terminate shipments of non-customized compounded 17P, id. ¶ 5(c); and to bar entry into the United States, and release into domestic commerce, of any future shipments of foreign-manufactured API for use in compounding non-customized 17P except in certain specified instances. Id. ¶ 5(d).
After a telephone conference held on July 5, 2012, the Court consolidated the motion for temporary restraining order and preliminary injunction with the merits and issued an accelerated briefing schedule for a partial dispositive motion to be filed by defendants. Minute Order (July 5, 2012). In accordance with that schedule, defendants filed the instant motion to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). In addition, this Court granted Alere Women's and ...