Baker Norton Pharm. v. U.S. Food & Drug Admin.

• Decision Date: 06 February 2001
• Docket Number: No. CIV. A. 98-927 SSH.,CIV. A. 98-927 SSH.
• Citation: 132 F.Supp.2d 30
• Parties: BAKER NORTON PHARMACEUTICALS, INC., Plaintiff, v. UNITED STATES FOOD AND DRUG ADMINISTRATION, Bernard A. Schwetz, Acting Principal Deputy Commissioner, and Tommy G. Thompson, Secretary, United States Department of Health and Human Services,<SMALL><SUP>1</SUP></SMALL> Defendants, and Bristol-Myers Squibb Co., Defendant-Intervenor.
• Court: U.S. District Court — District of Columbia

132 F.Supp.2d 30

BAKER NORTON PHARMACEUTICALS, INC., Plaintiff, v. UNITED STATES FOOD AND DRUG ADMINISTRATION, Bernard A. Schwetz, Acting Principal Deputy Commissioner, and Tommy G. Thompson, Secretary, United States Department of Health and Human Services,¹ Defendants and Bristol-Myers Squibb Co., Defendant-Intervenor.

No. CIV. A. 98-927 SSH.

United States District Court, District of Columbia.

February 6, 2001.

Richard M. Cooper, Paul K. Dueffert, Williams & Connolly, Washington, DC, for Plaintiffs.

AUSA Meredith Manning, U.S. Attorney's Office, Washington, DC, for Defendants.

Michael B. Waitzkin, Fox Kiser, Washington, DC, for Defendant-Intervenor.

OPINION

STANLEY S. HARRIS, District Judge.

This case involves three groups: plaintiff Baker Norton, defendants Food and Drug Administration ("FDA") and two government officials (collectively "the FDA defendants"), and defendant-intervenor Bristol-Myers Squibb ("BMS"). Before the Court are three motions for summary judgment, submitted by each of the three groups. The Court held a hearing on these motions. Upon careful consideration of the entire record, the Court concludes that no genuine issue of material fact exists and that judgment should be entered in favor of defendants and defendant-intervenor. "Findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56." Fed. R.Civ.P. 52(a); Summers v. Department of Justice, 140 F.3d 1077, 1079-80 (D.C.Cir. 1998). Nonetheless, the Court sets forth its reasoning.

I. Background

A. The Orphan Drug Act

When the potential market for a drug is small because the target market is relatively small, it is difficult for a pharmaceutical manufacturer to recover the large research and development costs, and even more difficult to realize a worthwhile return on that investment. The Orphan Drug Act therefore was enacted in 1983 to provide an incentive to develop and test drugs for the treatment of "rare diseases or conditions," which is defined to include diseases or conditions affecting fewer than 200,000 Americans. According to the FDA, in the ten years prior to the passage of the Orphan Drug Act, only ten products for rare diseases were developed and approved for marketing without federal funding. Since the passage of the Orphan Drug Act, the FDA has approved at least 172 orphan drugs and biological products; furthermore, more than 700 orphan-designated products currently are being developed.

Designation and approval of a drug as an orphan drug provides certain benefits to the sponsor of the drug. For example, such a designation permits the FDA to assist the sponsor in studying the drug, and allows the sponsor to claim the benefit of certain tax incentives. 26 U.S.C. § 28. More importantly, orphan drug designation and approval confers seven years of non-patent marketing exclusivity. 21 U.S.C. § 360cc(a).

In 1992, the FDA promulgated its final orphan drug regulations on how to implement the orphan drug exclusivity right. One of the regulations, 21 C.F.R. § 316.3(b)(13)(i), provided a definition for determining when two drugs are the "same drug" and thus the second drug may not be approved for market exclusivity. In essence, that regulation provides that two drugs will be considered the same drug if they contain the same active moiety, unless the second drug is deemed to be "clinically superior." 21 C.F.R. § 316.3(b)(13)(i).

To be eligible for orphan drug exclusivity, a drug's sponsor must submit a request to the FDA for designation as an orphan drug. 21 U.S.C. § 360bb(a)(1)(C). If the FDA determines that the drug targets a rare disease or condition, or that there is no reasonable expectation that the cost of developing and making a drug available will be recovered in the United States, the drug is designated as an orphan drug. 21 U.S.C. § 360bb(a)(2). Because the drug is designated as an orphan drug before it is approved, more than one applicant may receive orphan designation for what later may be deemed the same "drug" for treatment of the same disease or condition. Once the drug is designated an orphan drug, it goes through the approval process for orphan drug exclusivity under 21 U.S.C. § 360cc.

B. Baker Norton's and BMS's FDA applications

Baker Norton and BMS are pharmaceutical manufacturers. Baker Norton developed a drug called Paxene, and BMS developed a drug called Taxol. Although the two drugs are manufactured differently, contain some different inactive ingredients (or "excipients"), and have different profiles of impurities, they both contain paclitaxel as their active component. Paclitaxel is the generic name of a naturally-occurring anti-cancer agent extracted in trace amounts from the Pacific yew tree. Both Taxol and Paxene dissolve paclitaxel in ethanol and polyethoxylated castor oil for delivery by injection into a patient's body. While the castor oil provides adequate solubility of the paclitaxel, it also promotes chemical degradation of the paclitaxel. A principal difference between Taxol and Paxene is how each controls the rate of degradation. One of the ways that BMS controls the degradation rate is by removing certain compounds by passing the castor oil over a solid absorbent. Baker Norton uses citric acid, an inactive ingredient, which changes the physical formation of components so as to reduce the rate of long-term degradation of the paclitaxel.²

On March 31, 1997, Baker Norton submitted a new drug application requesting approval for Paxene. Among the potential uses of Paxene is for treating Kaposi's sarcoma, an AIDS-related cancer. Because Kaposi's sarcoma qualifies under the Orphan Drug Act as a "rare disease," Baker Norton also sought designation as an orphan drug. On April 15, 1997, the FDA granted orphan designation.

Meanwhile, BMS requested orphan designation for Taxol for treatment of Kaposi's sarcoma on January 31, 1997, and it filed a supplemental new drug application for Taxol on February 4, 1997.³ On March 25, 1997, the FDA granted Taxol orphan designation for Kaposi's sarcoma.

What ensued essentially was a race for orphan drug approval since both Taxol and Paxene had been granted orphan drug designation; whichever drug was approved first would receive the seven-year period of market exclusivity. On August 4, 1997, the FDA granted approval to BMS to market Taxol as a second-line treatment for Kaposi's sarcoma. On December 24, 1997, the FDA issued a letter decision to Baker Norton indicating that it had determined Paxene to be safe and effective and, in all other respects, approvable, but that it could not confer final approval until August 4, 2004, due to Taxol's period of exclusivity. See Letter to Baker Norton dated 12/24/97, Ex. H to Mem. in Supp. of Pl.'s Mot. for Summ. J. Baker Norton could, however, obtain final approval for marketing prior to August 4, 2004, if it could show that Paxene and Taxol should not be considered the "same drug" as defined in 21 C.F.R. Part 316. Id. On January 8, 1998, Baker Norton requested reconsideration, supported by further evidence that Paxene was different from Taxol. See Letter to FDA dated 1/8/98, Ex. I to Mem. in Supp. of Pl.'s Mot. for Summ. J. The FDA denied that request on March 19, 1998.

C. Baker Norton's lawsuit

On April 14, 1998, Baker Norton filed a two-count complaint against the FDA, challenging its December 24, 1997, deferral of the effective date of approval of its new drug application. Baker Norton does not challenge the FDA's scientific application of its regulation to its new drug application. Rather, Baker Norton contends that the regulation itself is contrary to law, because the FDA's interpretation of the word "drug" is contrary to unambiguous legislative intent, or, alternatively, that its interpretation is unreasonable and impermissible. Baker Norton also contends that the effect of this ruling is to extend improperly an ongoing monopoly by BMS on drugs manufactured from the naturally-occurring cancer-treating compound paclitaxel.

Count I of the complaint alleges that the FDA's interpretation of the term "drug" to encompass just the active ingredient, rather than the entire drug product, as well as its refusal to grant final approval of Paxene, are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." See 5 U.S.C. § 706(2)(A) of the Administrative Procedure Act ("APA"). In Count II of the complaint, Baker Norton argues that the FDA's refusal to grant final approval of Paxene exceeds its statutory authority, see 5 U.S.C. § 706(2)(C), since the Orphan Drug Act's definition of "drug" provides no basis for the FDA to defer the effective date of approval of Paxene's application. Baker Norton therefore seeks: (1) a declaratory judgment that the FDA's decision was arbitrary, capricious, an abuse of discretion, contrary to law, and short of statutory right; (2) an injunction to grant approval of Baker Norton's Paxene application effective immediately; and (3) costs and reasonable attorneys' fees.

The FDA defendants and BMS maintain that the FDA regulations interpreting what constitutes the "same drug" are permissible under Chevron U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), because the Orphan Drug Act leaves the definition of "drug" ambiguous, and the FDA's interpretation is reasonable, permissible, and consistent with legislative intent.

II. Legal Standards

A. Summary judgment standard

Summary judgment may be granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In considering a summary judgment motion, all evidence and the inferences to be drawn from it must be considered in a light most favorable to the nonmoving party. See Matsushita Elec....