Mylan Pharmaceuticals v. U.S. Food and Drug

• Decision Date: 05 July 2006
• Docket Number: No. 05-2160.,05-2160.
• Citation: 454 F.3d 270
• Parties: MYLAN PHARMACEUTICALS, INCORPORATED, Plaintiff-Appellant, v. UNITED STATES FOOD AND DRUG ADMINISTRATION; Lester M. Crawford, Acting Commissioner of the Food and Drug Administration, Defendants-Appellees, and Procter & Gamble Pharmaceuticals, Incorporated; Procter & Gamble Company; Watson Pharmaceuticals, Incorporated; Watson Laboratories, Incorporated, Defendants. Generic Pharmaceutical Association, Amicus Supporting Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 270

454 F.3d 270

MYLAN PHARMACEUTICALS, INCORPORATED, Plaintiff-Appellant, v. UNITED STATES FOOD AND DRUG ADMINISTRATION; Lester M. Crawford, Acting Commissioner of the Food and Drug Administration, Defendants-Appellees, and Procter & Gamble Pharmaceuticals, Incorporated; Procter & Gamble Company; Watson Pharmaceuticals, Incorporated; Watson Laboratories, Incorporated, Defendants Generic Pharmaceutical Association, Amicus Supporting Appellant.

No. 05-2160.

United States Court of Appeals, Fourth Circuit.

Argued: May 23, 2006.

Decided: July 5, 2006.

ARGUED: William A. Rakoczy, Rakoczy Molino Mazzochi Siwik, L.L.P., Chicago, Illinois, for Appellant. Jeffrey Stuart Bucholtz, Deputy Assistant Attorney General, United States Department of Justice, Civil Division, Appellate Section, Washington, D.C., for Appellees. ON BRIEF: Christine J. Siwik, Lara E. Monroe-Sampson, Rakoczy Molino Mazzochi Siwik, L.L.P., Chicago, Illinois; Gordon H. Copland, Steptoe & Johnson, P.L.L.C., Clarksburg, West Virginia, for Appellant. Paula M. Stannard, Acting General, Sheldon T. Bradshaw, Associate General, Food and Drug Division, Eric M. Blumberg, Deputy Chief, Litigation, Wendy S. Vicente, Associate Chief, United States Department of Health & Human Services, Office of the General, Rockville, Maryland; Peter D. Keisler, Assistant Attorney General, Eugene M. Thirolf, Director, Office of Consumer Litigation, Andrew E. Clark, United States Department of Justice, Washington, D.C., for Appellees. Arthur Y. Tsien, OLSSON, Frank & Weeda, P.C., Washington, D.C., for Amicus Supporting Appellant.

Before MICHAEL, MOTZ, and SHEDD, Circuit Judges.

Affirmed by published opinion. Judge MICHAEL wrote the opinion, in which Judge MOTZ and Judge SHEDD joined.

OPINION

MICHAEL, Circuit Judge:

The Food and Drug Administration (FDA) approved Mylan Pharmaceuticals, Inc.'s application to sell a generic version of a drug that Procter & Gamble Pharmaceuticals, Inc. sold under the brand name Macrobid. Just as Mylan began selling its generic drug, a third party under license from Procter & Gamble started selling a competing generic version. Sales of the generic authorized by Procter & Gamble crimped revenues from Mylan's version. Mylan petitioned the FDA for a ruling that under a provision of the Federal Food, Drug, and Cosmetic Act (FFDCA or Act) the authorized generic could not be sold until Mylan's drug had been on the market for 180 days. See 21 U.S.C. § 355(j)(5)(B)(iv). After the FDA denied the petition, Mylan commenced this action against the agency under the Administrative Procedure Act. 5 U.S.C. § 706(2)(A). The district court dismissed the case. We affirm the dismissal, concluding that the statute does not grant the FDA the power to prohibit the marketing of authorized generics during the 180-day exclusivity period afforded to a drug company in Mylan's position.

I.

A.

Drugs fall into two broad categories: pioneer drugs sold under brand names and generics. United States v. Generix Drug Corp., 460 U.S. 453, 454-55, 103 S.Ct. 1298, 75 L.Ed.2d 198 (1983). Pioneer and generic drugs are regulated under the FFDCA, 21 U.S.C. § 301 et seq., which Congress amended extensively in 1984. See Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (commonly known as the Hatch-Waxman Act). The Hatch-Waxman Act made it easier to obtain FDA approval of generic drugs. The legislation aimed to "strike a balance between two conflicting policy objectives: to induce name-brand pharmaceutical firms to make the investments necessary to research and develop new drug products, while simultaneously enabling competitors to bring cheaper, generic copies of those drugs to market." aaiPharma Inc. v. Thompson, 296 F.3d 227, 230 (4th Cir.2002) (punctuation omitted).

The Hatch-Waxman scheme distinguishes between New Drug Applications (NDAs) and Abbreviated New Drug Applications (ANDAs). To seek FDA approval for a pioneer drug, the manufacturer must file a complete NDA. Such a filing must "provide the FDA with a listing of all patents that claim the approved drug or a method of using the drug." aaiPharma Inc., 296 F.3d at 230. The NDA must also set forth data establishing that the drug is safe and effective. See 21 U.S.C. § 355(b). Later, a company that makes a generic drug that is biologically equivalent to the pioneer drug may seek FDA approval for the drug by filing an ANDA. The ANDA relies on the pioneer drug's safety and effectiveness studies. See 21 U.S.C. § 355(j); aaiPharma Inc., 296 F.3d at 231.

The ANDA must contain a certification as to whether the proposed generic drug would infringe the patent protecting the pioneer drug, and if not, why not. Pertinent here is the fourth of the statute's four certification options (the paragraph IV option), allowing the ANDA applicant to certify that the pioneer drug's patent is "invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted." 21 U.S.C. § 355(j)(2)(A)(vii)(IV). Thus, "an ANDA applicant making a paragraph IV certification intends to market its product before the relevant patents have expired." aaiPharma Inc., 296 F.3d at 232. The patent holder and the NDA holder (which usually are the same company, the pioneer drug maker) are entitled to notice that a paragraph IV ANDA has been filed. If, upon receiving such notice, the patent holder sues the applicant for patent infringement within 45 days, the FDA must stay a decision on whether to approve the ANDA for 30 months (unless the patent expires or a court holds that it is invalid or not infringed during that time). 21 U.S.C. § 355(j)(5)(B)(iii).

The first applicant to file a paragraph IV ANDA enjoys a unique advantage. For 180 days it may sell its drug without competition from later ANDA applicants. The 180-day period starts to run on the earlier of two dates: (1) the date the FDA receives notice "of the first commercial marketing of the drug under the previous application" (the commercial marketing trigger) or (2) the date a court decides that the patent is either invalid or not infringed (the patent litigation trigger). See 21 U.S.C. § 355(j)(5)(B)(iv) (preventing the FDA from making effective a later paragraph IV ANDA earlier than 180 days after one of these two triggering events)^* The 180-day exclusivity period created in § 355(j)(5)(B)(iv) is a significant boon to the recipient. As the Federal Trade Commission put it, the period "increases the economic incentives for a generic company to be the first to file, because the generic applicant has the potential to reap the reward of marketing the only generic product (and, thus, to charge a higher price until more generic products enter [the market])." Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, Ch. 3, at 12 (Oct. 2003), available at http://www.ftc.gov/os/2003/10/ innovationrpt.pdf. This benefit motivates "generic manufacturers to challenge the validity of listed patents and to `design around' patents to find alternative, noninfringing forms of patented drugs" so that they can be the first to file paragraph IV ANDAs. Teva Pharms. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1328 (Fed.Cir.2005).

The pioneer drug maker who holds the approved NDA wants to stave off possible competition from the ANDA applicants (the generic makers). One strategy for the NDA holder is to grant a third party a license to sell a generic version of the drug described in the approved NDA. The economic benefits of this practice are clear. Such an authorized generic appeals to patients because it is sold at a lower price than the branded pioneer drug. It also appeals to the pioneer drug maker, who benefits from sales of the authorized generic even after the patent protecting the pioneer drug has expired. By selling an authorized generic during the exclusivity period enjoyed by the first paragraph IV ANDA applicant, the pioneer drug maker prevents that applicant from winning all of the customers who want to switch from the branded drug to a cheaper generic form. "[T]he additional competition [for the applicant] from an authorized generic may result in significantly less profit during the period of 180-day exclusivity than if" the applicant "had no authorized-generic competition during that time." Federal Trade Commission Information Collection Notice, 71 Fed.Reg. 16,779, 16,780 (Apr. 4, 2006). The question before us is whether § 355(j)(5)(B)(iv) empowers the FDA to prohibit sale of authorized generics during the exclusivity period.

B.

This dispute began when Mylan filed a paragraph IV ANDA seeking authorization to produce nitrofurantoin, a generic version of a drug to treat urinary tract infections. Procter & Gamble held the approved NDA for the drug and sold it under the brand name Macrobid. The FDA approved Mylan's application on March 22, 2004. Mylan began commercial marketing of nitrofurantoin on March 23, the same day that Watson Pharmaceuticals began selling the authorized generic version of Macrobid under a license from Procter & Gamble. Mylan lost sales worth "tens of millions" of dollars as a result of this competition. J.A. 42.

Anticipating Procter & Gamble's move, Mylan had filed a citizen petition in February 2004 requesting that the FDA "prohibit the marketing and distribution of `authorized generic' versions of brand name drugs until the expiration of the first generic applicant's 180-day exclusivity period." J.A. 335. Teva Pharmaceuticals USA, Inc., another generic drug maker, submitted a petition in June 2004 seeking a similar ruling. The FDA denied these two petitions in a letter dated July 2, 2004. The agency concluded in part that the Act did not "prohibit an ANDA or NDA holder's use of alternative marketing practices for its own approved new drug (so long as any related manufacturing changes do not pose safety or effectiveness concerns . . .)." J.A....