Andrx Pharmaceuticals v. Biovail Corporation International, Nos. 00-5050

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Writing for the Court: Karen LeCraft Henderson
• Citation: 256 F.3d 799
• Parties: (D.C. Cir. 2001) Andrx Pharmaceuticals, Inc., Appellee v. Biovail Corporation International, Appellant & 00-5396
• Docket Number: Nos. 00-5050
• Decision Date: 31 July 2001

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256 F.3d 799 (D.C. Cir. 2001) Andrx Pharmaceuticals, Inc., Appellee
v.
Biovail Corporation International, Appellant Nos. 00-5050 & 00-5396 United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT Argued February 12, 2001
Decided July 31, 2001

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Appeals from the United States District Court for the District of Columbia (No. 98cv00099)

Richard J. Leighton argued the cause for the appellant. John B. Dubeck, Douglas J. Behr and Eric H. Singer were on brief.

Louis M. Solomon argued the cause for the appellee. Eugene M. Pfeifer, James D. Miller and Peter M. Todaro were on brief.

Before: Henderson, Randolph and Garland, Circuit Judges.

Opinion for the court filed by Circuit Judge Henderson.

Karen LeCraft Henderson, Circuit Judge:

Appellant Biovail Corporation (Biovail) appeals two district court decisions. One dismissed with prejudice its antitrust counterclaim against appellee Andrx Pharmaceuticals, Inc (Andrx). The second denied its motion for reconsideration of the court's dismissal. For the reasons that follow, we affirm the district court's dismissal of the counterclaim but reverse its decision to do so with prejudice.

I. Statutory Background

A company wishing to market a new drug must seek the approval of the United States Food & Drug Administration (FDA) by completing a "New Drug Application" (NDA). See American Bioscience, Inc. v. Thompson, 243 F.3d 579, 580 (D.C. Cir. 2001); Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1063 (D.C. Cir. 1998); see also 21 U.S.C. 355(a) ("No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application filed pursuant to (b) or (j) of this section is effective with respect to such drug."). An NDA is timeconsuming and costly to prepare because it must include data from studies showing the drug's safety and effectiveness. See Mova, 140 F.3d at 1063. In 1984 the Congress enacted the Hatch-Waxman Amendments to the Food, Drug and Cosmetic Act (Amendments) to, inter alia, simplify the procedure for FDA approval. See Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (1984) (codified in various sections of titles 21, 35 & 42 U.S.C.); see generally Allan M. Fox & Allan R. Bennett, The Legislative History of the Drug and Patent Term Restoration Act of 1984, at 259 (1987); James J. Wheaton, "Generic Competition and Pharmaceutical Innovation: the Drug Price Competition and Patent Term Restoration Act of 1984," 35 Cath. Univ. L. Rev. 433 (1986). Under the Amendments, the original applicant for FDA approval (the "pioneer" applicant) must still prepare an NDA. Subsequent applicants who wish to manufacture generic versions¹ of the pioneer drug, however, need only complete an Abbreviated New Drug Application (ANDA) that relies on the FDA's previous determination that the drug is safe and effective.² See Mova, 140 F.3d at 1063.

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The generic drug share of the prescription drug market has grown from 19 per cent in 1983 to over 40 per cent in 1995. See Congressional Budget Office, How Increased Competition from Generic Drugs Has Affected Prices and Returns in the Pharmaceutical Industry ix (1998). In addition, almost all of the most popular pioneer drugs with expired patents now have generic versions available. Id. at xii.

Although the Congress was interested in increasing the availability of generic drugs, it also wanted to protect the patent rights of the pioneer applicants. See David A. Balto, "Pharmaceutical Patent Settlements: The Antitrust Risks," 55 Food & Drug L.J. 321, 324 (2000). The Amendments, therefore, require that an NDA contain a list of any patents "which claim[ ] the drug ... or which claim[ ] a method of using such drug and with respect to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug." 21 U.S.C. 355(b)(1). The FDA maintains a record of such information in its publication entitled Approved Drug Products with Therapeutic Equivalence, commonly known as the Orange Book. See 21 U.S.C. 355(j)(7)(A). For each patent applicable to the pioneer drug listed in the Orange Book, an ANDA applicant must certify whether the proposed generic drug would infringe that patent and, if not, why not. An ANDA applicant has four certification options. It may certify (1) that the required patent information has not been filed, (2) that the patent has expired, (3) that the patent has not expired but will expire on a particular date or (4) that the patent is invalid or will not be infringed by the drug for which the applicant seeks approval. See 21 U.S.C. 355(j)(2)(A)(vii). The last of these options, and the one relevant here, is the Paragraph IV certification. After an applicant makes a Paragraph IV certification, the statute provides a 45-day window during which the patent holder may bring suit against the applicant. If the patent holder brings a timely suit, the statute bars the FDA from approving the applicant's ANDA, or any subsequent ANDA, for thirty months or until the successful resolution of the patent infringement suit, whichever is earlier, at which time the first ANDA applicant is eligible for FDA approval and upon such approval is awarded a 180-day exclusivity period in which to market its generic version. See 21 U.S.C. 355(j)(5)(B)(iii). The statute permits the court to lengthen or shorten the 30-month waiting period if it determines that either party has failed to "reasonably cooperate in expediting the action." Id.³

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II. Background

Hoechst Marion Roussel, Inc. (HMRI) is the manufacturer, marketer and patent holder of the brand name prescription drug Cardizem CD, which consists of a once-daily dosage of the chemical compound dilitiazem hydrochloride. Cardizem CD is widely prescribed for the treatment of chronic chest pains (angina) and hypertension and for the prevention of heart attacks and strokes. See In re Cardizem CD Antitrust Litig., 105 F. Supp. 2d 618, 622 (E.D. Mich. 2000). On September 22, 1995 Andrx filed an ANDA with the FDA seeking approval to manufacture and sell a generic form of Cardizem CD. On December 31, 1995 it made the Paragraph IV certification with regard to all unexpired patents included in the Orange Book's Cardizem CD entry and certified that its generic form of Cardizem CD did not infringe the patents owned or controlled by HMRI or its affiliates. See 21 U.S.C. 355(j)(2)(A)(vii)(IV); 21 C.F.R. 314.94(a)(12)(i)(A)(4). In early 1996 HMRI filed a timely suit against Andrx for patent infringement.⁴ The filing of the suit triggered the statutory 30-month waiting period during which any subsequent ANDA applicant, including Biovail, could not receive final approval of its generic version of Cardizem CD. See 21 U.S.C. 355(j)(5)(B)(iii).

In June 1997 Biovail filed an ANDA with the Paragraph IV certification for its generic version of Cardizem CD but HMRI filed no patent infringement suit against it. On September 15, 1997 the FDA issued its tentative approval of Andrx's ANDA.⁵. Nine days later, on September 24, 1997, HMRI and Andrx entered into an agreement (Agreement or HMRI-Andrx Agreement) purporting to maintain the status quo pending the outcome of HMRI's patent infringement suit against Andrx. Under the terms of the Agreement, Andrx agreed not to sell its generic version of Cardizem CD until a specific time agreed upon by the parties. It also agreed to diligently prosecute its ANDA and not to relinquish or otherwise compromise any right accruing thereunder. HMRI agreed to make interim payments to Andrx in the amount of $40 million per year, payable quarterly, beginning on the date Andrx's generic version of Cardizem CD received FDA approval and ending on the date Andrx either began to sell its generic version or was adjudged liable for patent infringement.

In early 1998 Andrx filed suit against the FDA and certain ANDA applicants (including Biovail) to clarify its right as the

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first to file an ANDA for Cardizem CD. The suit sought injunctive relief requiring the FDA to provide Andrx with "a period of 180 days of marketing exclusivity for its controlledrelease generic formulations of the drugs Dilacor XR and Cardizem CD." JA 13. It also requested injunctive relief prohibiting the FDA "from approving any ANDA submitted by defendant Biovail ... for a generic version of Cardizem CD that contains a paragraph 4 certification until 180-days after Andrx begins marketing its generic formulation of Cardizem CD or a court enters a judgment in the patent litigation brought by HMRI in the Southern District of Florida, whichever is earlier." JA 22. Biovail counterclaimed, alleging that Andrx had violated sections 1 and 2 of the Sherman Act as well as New Jersey common law.⁶

On July 3, 1998 the FDA granted final approval to Andrx's ANDA for a generic version of Cardizem CD. JA 44. By then, the 30-month waiting period had expired and Andrx was no longer restricted under the statutory scheme from marketing and selling its generic drug. Andrx, however, did not do so and on July 9, 1998, pursuant to the Agreement, HMRI began making quarterly payments of $10 million to Andrx. By not marketing its generic version of Cardizem CD, Andrx did not trigger the 180-day market exclusivity period, which in turn prevented the FDA from giving final approval to any subsequently filed applications for competing generic versions of Cardizem CD.

Approximately one year later, HMRI and Andrx terminated their Agreement and entered into a stipulation settling the patent litigation. On June 23, 1999, Andrx then began to market its generic version and its 180-day exclusivity period began to run. In October 1999 the FDA gave tentative approval to Biovail's ANDA and final approval on December 23, 1999.⁷ Neither Andrx nor Biovail, however, informed the district court of...