Eagle Pharm., Inc. v. Azar

• Decision Date: 13 March 2020
• Docket Number: C/w 18-5254, 18-5255, 18-5292,No. 18-5207,18-5207
• Parties: EAGLE PHARMACEUTICALS, INC., Appellee v. Alex Michael AZAR, II, In His Official Capacity as Secretary of Health and Human Services, et al., Appellees Apotex, Inc., Appellant Fresenius Kabi USA, LLC, Appellee
• Court: U.S. Court of Appeals — District of Columbia Circuit

952 F.3d 323

EAGLE PHARMACEUTICALS, INC., Appellee

v.Alex Michael AZAR, II, In His Official Capacity as Secretary of Health and Human Services, et al., Appellees

Apotex, Inc., Appellant

Fresenius Kabi USA, LLC, Appellee

No. 18-5207

C/w 18-5254, 18-5255, 18-5292

United States Court of Appeals, District of Columbia Circuit.

Argued October 17, 2019

Decided March 13, 2020

Melissa N. Patterson, Attorney, U.S. Department of Justice, argued the cause for federal appellants. With her on the briefs was Scott R. McIntosh.

Steven E. Feldman, Sherry L. Rollo, Chicago, IL, John K. Hsu, and Jeffrey D. Skinner, Washington, DC, were on the briefs for intervenors-appellants Apotex, Inc, et al.

Gregory G. Garre, Washington, DC, argued the cause for plaintiff-appellee. With him on the brief were Phillip J. Perry, Andrew D. Prins, and Benjamin W. Snyder, Washington, DC.

Before: Henderson and Rao, Circuit Judges, and Williams, Senior Circuit Judge.

Dissenting Opinion filed by Senior Circuit Judge Williams.

Karen LeCraft Henderson, Circuit Judge:

In 2014, the United States Food and Drug Administration (FDA) designated a drug developed by Eagle Pharmaceuticals, Inc. (Eagle) as an "orphan drug" under the Orphan Drug Act (ODA), 21 U.S.C. §§ 360aa – 360ee. In 2015, the FDA approved Eagle’s drug for marketing but denied Eagle’s request for a seven-year period of marketing exclusivity under 21 U.S.C. § 360cc(a), concluding that Eagle failed to prove its drug was clinically superior to a previously designated and approved version of the same drug. Eagle appealed, arguing that the ODA’s plain language required the FDA to automatically grant Eagle marketing exclusivity upon designating its drug as an orphan drug and approving it for marketing. The district court agreed, granting summary judgment in Eagle’s favor because the Congress’s intent was clearly expressed in the unambiguous language of § 360cc(a). The FDA appeals. Because the text of § 360cc(a) unambiguously entitles a manufacturer to marketing exclusivity upon designation and approval, we affirm.

I. BACKGROUND

In 1983, the Congress enacted the ODA to address the problem of "orphan drugs." See Pub. L. No. 97-414, § 1, 96 Stat. 2049 (1983). An orphan drug is one that "is designed to treat a rare disease or condition that historically received little attention from pharmaceutical companies, and hence became ‘orphaned’ because the comparatively small demand for treatment left little motive for research and development."¹ Spectrum Pharm., Inc. v. Burwell , 824 F.3d 1062, 1064 (D.C. Cir. 2016) (citing § 1(b)). The ODA’s goal is to "reduce the costs of developing" and "provide financial incentives to develop [orphan] drugs." § 1(b).

To accomplish this goal, the ODA allows the FDA to designate a drug, at its development stage, as an orphan drug. 21 U.S.C. § 360bb.² Designation as an "orphan drug" provides benefits designed to promote orphan drug development such as tax credits, assistance with investigations and the approval process and monetary grants to defray the costs of developing orphan drugs. See 26 U.S.C. § 45C ; 21 U.S.C. §§ 360aa(a), 360ee. Before the sponsor of an orphan drug can sell its drug, it must obtain marketing approval from the FDA. Generally, before any drug can be sold or marketed in interstate commerce, the FDA must "certify[ ] the drug’s safety and efficacy." Otsuka Pharm. Co. v. Price , 869 F.3d 987, 989 (D.C. Cir. 2017) (citing 21 U.S.C. § 355(a), (b) ).

After a sponsor’s drug has been designated as an orphan drug and approved for marketing, the FDA provides the sponsor with a seven-year period of exclusive approval rights during which time the FDA may not approve another "such drug for such disease or condition" for marketing until the end of the seven-year exclusivity period. 21 U.S.C. § 360cc(a) (2012).³ At the time of this case, § 360cc(a) provided that:

Except as provided in subsection (b) of this section, if the Secretary-

(1) approves an application filed pursuant to section 355 of this title,

...

for a drug designated under section 360bb of this title for a rare disease or condition, the Secretary may not approve another application under section 355 of this title ... for such drug for such disease or condition for a person who is not the holder of such approved application ... until the expiration of seven years from the date of the approval of the approved application ....

Id. The Congress provided two exceptions to the seven-year exclusivity period: the FDA "may" approve another manufacturer’s drug if the holder of the exclusive approval right (1) "cannot assure the availability of sufficient quantities of the drug" or (2) consents to the approval of "other applications ... before the expiration of such seven-year period." Id. § 360cc(b).

The FDA has adopted regulations to implement the ODA that further define the requirements necessary to be designated and approved as an orphan drug. The ODA does not define "such drug" for the purpose of the seven-year exclusivity period—a key term because it defines the scope of the exclusivity. See id. § 360cc(a) ("[I]f the Secretary ... approves an application ... for a drug designated under section 360bb ... the Secretary may not approve another application ... for such drug ..." (emphasis added)). The FDA has interpreted "such drug" to mean "same drug," 21 C.F.R. § 316.31(a), and has determined that a drug is the "same" as a previously approved drug if it shares the same "active moiety"—the same active ingredient—and "is intended for the same use," 21 C.F.R. § 316.3(b)(14)(i). The FDA has also determined, however, that, "if the subsequent drug can be shown to be clinically superior to the first drug"—despite having the same active moiety—"it will not be considered to be the same drug." Id. A drug is clinically superior if it "is shown to provide a significant therapeutic advantage over and above that provided by an approved drug (that is otherwise the same drug) in one or more of the following ways: (i) [g]reater effectiveness ... (ii) [g]reater safety ... or (iii) [i]n unusual cases, ... otherwise makes a major contribution to patient care." Id. § 316.3(b)(3).

Putting this all together, then, the FDA considers a drug the same as a previously-approved drug if it shares the same active moiety and is not otherwise clinically superior; it considers the drug to be different—and thus entitled to its own seven-year exclusivity period upon designation and approval—if it does not have the same active moiety or is clinically superior. The FDA applies this scheme not only when determining whether it can approve another drug for marketing during an orphan drug’s seven-year exclusivity period but also in deciding whether to grant a subsequent drug its own period of exclusive approval after the seven years have expired. Put differently, "the FDA will not grant the Act’s benefits to a drug if it has previously approved that same drug for a particular rare disease." Eagle Pharm., Inc. v. Azar , No. CV 16-790 (TJK), 2018 WL 3838265, at *1 (D.D.C. June 8, 2018).

The FDA applies its clinical superiority scheme differently at the two stages of the orphan drug process. At the designation stage, the sponsor of a drug that is otherwise the same—that is, with the same active moiety—as an already approved drug "may seek and obtain orphan-drug designation for the subsequent drug for the same rare disease or condition if it can present a plausible hypothesis that its drug may be clinically superior to the first drug." 21 C.F.R. 316.20(a) (emphasis added). Later, after the drug has been approved for marketing, the FDA requires the manufacturer to "demonstrate ... that the drug is clinically superior to the previously approved drug" in order to receive the seven-year exclusivity period. 21 C.F.R. § 316.34(c) (emphasis added).

The FDA imposed this heightened post-approval clinical superiority requirement because, in its view, "sponsors could otherwise: (1) [o]btain infinite, successive 7-year periods of exclusivity for the same drug for the same use when the previously approved drug had such exclusivity, known as ‘evergreening,’⁴ or (2) obtain an exclusivity period for a drug without providing any meaningful benefit to patients over previously approved therapies, when the previously approved drug did not have orphan exclusivity"—two results which the FDA views as being "at odds with the Orphan Drug Act." Orphan Drug Regulations, 78 Fed. Reg. 35,117, 35,127 (June 12, 2013). Thus, from the FDA’s perspective, implementing a post-approval clinical-superiority requirement supports its long-held view that the ODA "accord[s] orphan exclusive approval only to the first drug approved for the disease or condition" because it allows a drug to receive the seven-year exclusivity period only if it is different (and thus an entirely new drug) from a previously approved drug—i.e. , it does not have the same active moiety or can prove that it is clinically superior. Id.

In 2012, a drug manufacturer alleged the FDA’s post-approval clinical superiority requirement violated the ODA’s plain language. Depomed, Inc. v. United States Dep’t of Health & Human Servs. , 66 F. Supp. 3d 217, 220 (D.D.C. 2014). Depomed Inc. had developed a drug called Gralise to treat a rare condition. Id. It sought and obtained designation for Gralise as an orphan drug. Id. at 226. The FDA subsequently approved Gralise for marketing but it denied Depomed a seven-year exclusivity period, asserting that Depomed failed to prove that Gralise was clinically superior to a previously approved drug with the same active moiety.⁵ Id. Depomed argued that it was automatically entitled to market exclusivity under § 360cc(a) upon being designated and approved. Id. at 228. The FDA countered that under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the ODA was silent or ambiguous as to whether exclusivity must be recognized when a drug is designated...