Eagle Pharms., Inc. v. Alex M. Azar II in His Official Capacity, Civil Action No. 16-790 (TJK)

CourtUnited States District Courts. United States District Court (Columbia)
Writing for the CourtTIMOTHY J. KELLY United States District Judge
PartiesEAGLE PHARMACEUTICALS, INC., Plaintiff, v. ALEX M. AZAR II in his official capacity as Secretary of Health and Human Services et al., Defendants.
Docket NumberCivil Action No. 16-790 (TJK)
Decision Date08 June 2018

ALEX M. AZAR II in his official capacity as Secretary
of Health and Human Services et al., Defendants.

Civil Action No. 16-790 (TJK)


June 8, 2018


Plaintiff Eagle Pharmaceuticals, Inc. ("Eagle") brings this case to challenge a decision by the Food and Drug Administration ("FDA") pursuant to its regulations implementing the Orphan Drug Act, Pub. L. No. 97-414, 96 Stat. 2049 (1983), a part of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq. The Orphan Drug Act provides pharmaceutical companies like Eagle with benefits that subsidize and incentivize the development of "orphan drugs"—that is, drugs that treat rare diseases. One of those benefits, typically referred to as "orphan-drug exclusivity," is a seven-year period during which the FDA may not approve any other manufacturer's application to market the same drug to treat the same rare disease. Eagle claims that it has a statutory right to orphan-drug exclusivity for its drug Bendeka, which the FDA designated as an orphan drug and approved to treat two rare forms of cancer. The FDA (sued here alongside the Department of Health and Human Services, and the heads of both the FDA and the Department in their official capacities) disagrees, arguing that it properly denied orphan-drug exclusivity to Bendeka because it is the same as another drug, Treanda, that previously enjoyed orphan-drug exclusivity.

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The parties have filed cross-motions for summary judgment, each claiming that it is entitled to judgment as a matter of law based on the administrative record. As explained below, Eagle's motion will be granted and the FDA's will be denied. The Court will enter an order requiring the FDA to recognize orphan-drug exclusivity for Bendeka.

I. Background

A. The Orphan Drug Act and the FDA's Implementing Regulations

In general, before a company may market a drug in interstate commerce, it must first receive FDA approval of an application for the drug based on its safety and effectiveness. See 21 U.S.C. § 355. By the early 1980s, concerns had arisen that the high costs of research, development, and winning FDA approval had deterred the development of drugs to treat rare diseases, often referred to as "orphan drugs." See Spectrum Pharm., Inc. v. Burwell, 824 F.3d 1062, 1064 (D.C. Cir. 2016); Genentech, Inc. v. Bowen, 676 F. Supp. 301, 302-03 (D.D.C. 1987). Accordingly, in 1983, Congress enacted the Orphan Drug Act to encourage pharmaceutical companies to develop such drugs. See Spectrum, 824 F.3d at 1064; Genentech, 676 F. Supp. at 302-03. Under the Act, while a drug is under development, the FDA may designate it as an orphan drug, one "for a rare disease or condition." 21 U.S.C. § 360bb(a)(1). Designation brings several benefits, including a streamlined approval process and tax advantages. See Baker Norton Pharm., Inc. v. FDA, 132 F. Supp. 2d 30, 31 (D.D.C. 2001); Genentech, 676 F. Supp. at 303. If the FDA subsequently approves an application to market the designated drug, the drug sponsor receives an additional benefit: the FDA "may not approve" any other application for "such drug" to treat the same rare disease until seven years have passed. 21 U.S.C. § 360cc(a) (2012). Because FDA approval is mandatory, this scheme effectively grants the first manufacturer to receive approval the exclusive ability to market the drug during the seven years.

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The Orphan Drug Act does not explain when two "drugs" are the same or different, even though that distinction controls the scope of the statute's exclusivity provision. If the sponsor of a particular "drug" has won exclusivity under the statute, no other manufacturer may receive approval to market the same "such drug" to treat the same rare disease. See id. By contrast, the statute does not restrict approval of applications for different drugs. See id. Thus, even if the FDA recognizes exclusivity for a particular orphan drug, that would not bar the FDA from approving a different drug to treat the same rare disease during the exclusivity period. As noted above, the statute itself does not explain when two drugs are the same or different. See Baker Norton, 132 F. Supp. 2d at 34-36; Genentech, 676 F. Supp. at 311-13. FDA regulations do address that issue, providing that a new drug is generally the same as a previously approved drug if both share the same active ingredient—except if the new drug is "clinically superior" to the previously approved drug, in which case the new drug is considered different. See 21 C.F.R. § 316.3(b)(14). "Clinically superior" means that the drug is more effective, is safer, or "otherwise makes a major contribution to patient care." Id. § 316.3(b)(3). Thus, if the new drug is clinically superior, then the FDA can approve it even though the older drug (which, once again, has the same active ingredient) continues to enjoy its seven-year period of orphan-drug exclusivity.

The FDA applies the same-drug concept not only when determining whether it can approve subsequent drugs for marketing during an orphan drug's seven-year exclusivity window, but also in deciding whether to afford a subsequent drug its own exclusivity period after the seven years have expired. That is, 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. This restriction emerges in part from concerns regarding potential "evergreening" of orphan-drug exclusivity, also called "serial

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exclusivity" (an analogous term the parties have generally used in this litigation). "Serial exclusivity" means the possibility of repeating the seven-year exclusivity period that follows the statutory designation-and-approval process for a given drug and disease. See Orphan Drug Regulations, 78 Fed. Reg. 35,117, 35,127 (June 12, 2013) (final rule). The FDA has concluded that limiting orphan-drug exclusivity to the first manufacturer who obtains approval "best effectuates Congress' aim in enacting the Orphan Drug Act." Id. The FDA has thus taken steps to avoid successive grants of orphan-drug exclusivity for the "same drug" to treat the same disease. See 21 C.F.R. §§ 316.20(b)(5), 316.25(a)(3), 316.34(c).

The FDA does so at two stages of the process: first when determining whether to designate a drug as an orphan drug, and again when determining whether to recognize orphan-drug exclusivity once the drug has obtained marketing approval. At each stage, the FDA uses its "clinical superiority" framework to determine if the new drug is the same "such drug" as the previously approved drug. However, it applies a different evidentiary standard at each stage. At the designation stage, the drug sponsor must submit "a medically plausible hypothesis for the possible clinical superiority of the subsequent drug." 21 C.F.R. § 316.25(a)(3). At the marketing-approval stage, the FDA requires applicants to go beyond a mere hypothesis and provide evidence of actual clinical superiority in order to obtain orphan-drug exclusivity. See id. § 316.34(c).

In 2012, pharmaceutical company Depomed, Inc. filed a lawsuit challenging the FDA's requirement that manufacturers show clinical superiority at the marketing-approval stage. Depomed, Inc. v. U.S. Dep't of Health & Human Servs., 66 F. Supp. 3d 217, 226 (D.D.C. 2014). Under the version of the statute in effect at the time—which is the same version at issue in this case—the FDA "may not approve another application" for a drug to treat a rare disease if the

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FDA "approves an application" for "a drug designated" under the Orphan Drug Act. 21 U.S.C. § 360cc(a) (2012). This language, Depomed argued, meant that orphan-drug exclusivity followed automatically from designation and marketing approval, leaving no room for the FDA to impose any other conditions on Depomed prior to recognizing its right to orphan-drug exclusivity. See Depomed, 66 F. Supp. 3d at 226; see also 78 Fed. Reg. at 35,127 (discussing similar arguments by commenters during FDA rulemaking process). The FDA claimed that its regulations that require a showing of clinical superiority at the approval stage were valid under the doctrine of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Depomed, 66 F. Supp. 3d at 228-29. The court disagreed with the FDA. It held that the statute was unambiguous and required the FDA to recognize orphan-drug exclusivity once a drug is designated and approved. Id. at 230. To the extent that the FDA was concerned about the possibility of serial exclusivity, the court reasoned, it must address those concerns at the designation stage. Id. at 235-36.

The FDA ultimately withdrew its appeal of the Depomed decision. See Depomed Inc. v. U.S. Dep't of Health & Human Servs., No. 14-5271, 2014 WL 5838247 (D.C. Cir. Nov. 7, 2014) (dismissing appeal on government's motion). Instead, while complying with the judgment in that case, the FDA announced that it would continue to apply its regulations as written, effectively taking the position that Depomed was wrongly decided. See Policy on Orphan-Drug Exclusivity; Clarification, 79 Fed. Reg. 76,888 (Dec. 23, 2014).

In 2017, during the pendency of this litigation, Congress amended the Orphan Drug Act so as to effectively supersede Depomed's holding going forward. See FDA Reauthorization Act of 2017, Pub. L. No. 115-52, sec. 607(a), § 527(c)-(d), 131 Stat. 1005, 1049-50 (amending 21

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U.S.C. § 360cc). However, the amendments do not apply retroactively to any decision made before their enactment. See id. sec. 607(b), 131 Stat. at 1050.

B. The FDA's Decision on Orphan-Drug Exclusivity for Bendeka

In 2008, the FDA granted marketing approval for Treanda, a chemotherapy drug manufactured by a subsidiary of Teva Pharmaceutical Industries, Ltd., to treat two types of cancer. AR 10.1 Treanda's active ingredient is a chemical known as bendamustine. AR 1. The...

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