MD Pharmaceutical, Inc. v. Drug Enforcement Admin.

• Decision Date: 16 January 1998
• Docket Number: No. 96-1256,96-1256
• Citation: 133 F.3d 8
• Parties: MD PHARMACEUTICAL, INC., Petitioner, v. DRUG ENFORCEMENT ADMINISTRATION, Respondent, Mallinckrodt Chemical, Inc., Intervenor for Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 8

133 F.3d 8

328 U.S.App.D.C. 145

MD PHARMACEUTICAL, INC., Petitioner, v. DRUG ENFORCEMENT ADMINISTRATION, Respondent Mallinckrodt Chemical, Inc., Intervenor for Respondent.

No. 96-1256.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 17, 1997.

Decided Jan. 16, 1998.

John R. Fleder, Washington, DC, argued the cause for petitioner, with whom Tish E. Pahl was on the briefs.

Lena Watkins, Associate Deputy Chief, United States Department of Justice, argued the cause for respondent, with whom John C. Keeney, Acting Assistant Attorney General, Washington, DC, was on the brief.

Steven J. Poplawski, St. Louis, MO, and Scott M. Badami, Washington, DC, were on the brief for intervenor.

Before: WILLIAMS, SENTELLE and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

This case arises out of the Drug Enforcement Administration's ("DEA") approval of an application submitted by Mallinckrodt Chemical, Inc. ("Mallinckrodt") for registration as a bulk manufacturer of methylphenidate, a generic form of the drug commonly known by the brand name of Ritalin. MD Pharmaceutical, Inc. ("MD"), a current producer of methylphenidate, petitions for review of three decisions made by DEA, namely: (1) the decision to permit withdrawal of Mallinckrodt's two previous applications for registration as a bulk manufacturer of methylphenidate; (2) the order terminating the hearings on those two applications upon their withdrawal; and (3) the order approving the issuance of the certificate of registration to Mallinckrodt. We conclude that MD, as a current manufacturer of the drug, has standing to seek review of the actions taken by DEA. We also conclude that MD's objections to DEA's decisions are without merit, and accordingly deny the petition for review.

I.

The Controlled Substance Act ("CSA") establishes a comprehensive regulatory system that controls the manufacture, distribution, and use of hazardous drugs. 21 U.S.C. § 801 et seq. The level of restriction on any given drug is determined by its classification into one of five schedules. The Administrator of DEA, having received authority from the Attorney General by delegation, 28 C.F.R. § 0.100(b), is required to classify each drug into a schedule, depending upon factors such as its potential for abuse and its risk to the public health. 21 U.S.C. § 811. Methylphenidate is a Schedule II drug, which means that it has a high potential for abuse, that it has a currently accepted medical use, and that abuse of the drug may lead to severe psychological or physical dependence. Id. at § 812(b)(2).

A company seeking to become a manufacturer of a Schedule II drug must apply for and obtain a certificate of registration from DEA. 21 U.S.C. § 822(a). The Administrator grants a certificate only if he determines that "registration is consistent with the public interest" when measured against a six-part test created by Congress. 21 U.S.C. § 823(a)(1)-(6). When DEA receives such an application for registration, it must publish a notice in the Federal Register, and send individual notices to other applicants and to currently registered bulk manufacturers of the drug. 21 C.F.R. § 1301.43(a) (1996). The other applicants and registrants are free to file comments on the proposed registration within 60 days. Id. Registered manufacturers had the additional right, prior to July 20, 1995, to request and obtain an evidentiary hearing on an applicant's proposed registration. 21 C.F.R. § 1301.43 (1994). Ultimately, DEA either issues the certificate of registration, or issues an order to show cause as to why the application should not be denied. 21 U.S.C. § 824(c).

On May 13, 1994, DEA announced that Mallinckrodt had applied for registration as a bulk manufacturer of methylphenidate. MD, as a registered manufacturer of the drug, received notice of the application and promptly requested an evidentiary hearing. On January 30, 1995, Mallinckrodt filed a second application for registration, this time for methylphenidate and other drugs. MD once again objected to Mallinckrodt's application with respect to methylphenidate. The parties agreed to consolidate the proceedings for the two applications. An Administrative Law Judge ("ALJ") presided over the first stage of an evidentiary hearing from May 2-5, 1995, but did not announce a decision at that time.

On June 20, 1995, DEA issued a final rule altering the certification process in two pertinent respects. Under the amended regulations, which went into effect on July 20 of that year, registered manufacturers retained the right to comment on another firm's application, but no longer had the right to a hearing on an application other than their own. 60 Fed.Reg. 32,099-102 (1995) (codified at 21 C.F.R. § 1301.43(a) (1996)). The second alteration concerned an applicant's ability to withdraw a pending application. Under the old rules, an application could be withdrawn without the Administrator's permission at any time before the date on which an applicant receives an order to show cause, or before the date on which a notice of hearing on the application was published, whichever came first. 21 C.F.R. § 1301.37(a) (1994). Because the new regulations eliminated the opportunity for third parties to obtain a hearing, the new rules stated that an application could be withdrawn without the permission of the Administrator at any time before the applicant receives an order to show cause. 21 C.F.R. § 1301.37(a) (1996). Under both the old and the new regulations, an applicant could also amend or withdraw an application "with permission of the Administrator at any time where good cause is shown by the applicant or where the amendment or withdrawal is in the public interest." 21 C.F.R. § 1301.37(a) (1994); 21 C.F.R. § 1301.37(a) (1996).

On July 20, 1995, the date that the new regulations went into effect, Mallinckrodt submitted a letter to DEA requesting withdrawal of its 1994 and 1995 applications. On the same day, Mallinckrodt submitted a new application for registration as a bulk manufacturer of methylphenidate under the newly amended regulations. MD strenuously opposed the withdrawal of the applications, arguing that Mallinckrodt was simply trying to circumvent the hearing requirement under the old rules. DEA nonetheless approved the withdrawal of Mallinckrodt's first two applications. The ALJ subsequently terminated all proceedings with respect to those two applications. DEA later announced that Mallinckrodt's third application would be considered under the amended rules.

MD filed two petitions for review with this court, challenging DEA's decision to permit withdrawal of the first two applications and to terminate the hearings. We dismissed the petitions on ripeness grounds, explaining that DEA had not yet ruled on Mallinckrodt's third application for registration. MD Pharmaceutical, Inc. v. Drug Enforcement Administration, Nos. 95-1474, 95-1475, 1996 WL 135318 (D.C.Cir. Feb. 2, 1996). We made clear that the dismissal was "without prejudice to any right MD may have to challenge Mallinckrodt's withdrawal of its original application to bulk manufacture methylphenidate by way of a petition for review of the DEA's final resolution of Mallinckrodt's pending application." Id.

In a subsequent comment arguing against Mallinckrodt's third application, MD raised a number of issues, including Mallinckrodt's alleged history of noncompliance with DEA and FDA regulations. MD also took the position that there was no need for an additional manufacturer of this drug because the market was sufficiently competitive. On January 31, 1996, Mallinckrodt filed a fourth application adding other drugs to its methylphenidate application. MD filed comments and incorporated by reference its earlier objections. On July 16, 1996, DEA granted Mallinckrodt's fourth application to be a bulk manufacturer of methylphenidate. The agency published a Notice that briefly explained its decision and responded to a number of issues raised by MD. 61 Fed.Reg. 37,079-81 (1996). The agency declined to take action on the third application filed July 20, 1995.

In the present action, MD seeks review of three decisions by DEA: first, the decision to permit withdrawal of Mallinckrodt's first two applications; second, the decision to terminate the hearings on those two applications; and third, the order approving Mallinckrodt's registration as a producer of methylphenidate.

II.

Before reaching the merits, we must address the issue of whether MD has standing to challenge the actions taken by DEA. The government takes the position that MD has not satisfied the requirements of either constitutional or prudential standing. We reject both contentions.

The well-established "irreducible constitutional minimum" of standing requires three elements:

First, the plaintiff must have suffered an injury in fact--an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of--the injury has to be fairly traceable to the challenged action of the defendant.... Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992) (internal citations and punctuation omitted). DEA does not allege that MD has not suffered an injury in fact, nor that the action taken by the government has not caused the alleged injury. Indeed, such arguments would be unavailing in this case. We have previously held that "increased competition represents a cognizable Article III injury," Liquid Carbonic Industries Corp. v. FERC, 29 F.3d 697 (D.C.Cir.1994), and MD's competitive injury is fairly traceable to DEA's decision to issue a certificate of...