Parke, Davis & Co. v. Califano

• Decision Date: 23 November 1977
• Docket Number: No. 77-1224,77-1224
• Citation: 564 F.2d 1200
• Parties: PARKE, DAVIS & COMPANY, Plaintiff-Appellee, v. Joseph A. CALIFANO, Secretary of Health, Education and Welfare, Donald Kennedy, Commissioner of Food and Drugs, and the Food and Drug Administration, Defendants-Appellants, and United States of America, Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1200

564 F.2d 1200

PARKE, DAVIS & COMPANY, Plaintiff-Appellee, v. Joseph A. CALIFANO, Secretary of Health, Education and Welfare, Donald Kennedy, Commissioner of Food and Drugs, and the Food and Drug Administration, Defendants-Appellants and United States of America, Appellant.

No. 77-1224.

United States Court of Appeals Sixth Circuit.

Argued June 14, 1977.

Decided Oct. 26, 1977.

Rehearing Denied Nov. 23, 1977.

Donald I. Baker, Carl D. Lawson, Asst. Atty. Gen., Dept. of Justice, Washington, D. C., Andrea Limmer, Dept. of Justice, Washington, D. C., Philip Van Dam, U. S. Atty., Detroit, Mich., Richard A. Merrill, Chief Counsel Food & Drug Administration, Dept. of H.E.W., Rockville, Md., for defendants-appellants.

Paul C. Warnke, Thomas R. Spradlin, Clifford, Glass, McIlwain & Finney, Terence J. Fortune, Thomas D. Finney, Washington, D. C., Wolfgang Hoppe, Miller, Canfield Paddock & Stone, Detroit, Mich., Charles E. Lents, Parke, Davis & Co., Detroit, Mich., for plaintiff-appellee.

Before PHILLIPS, Chief Judge, and WEICK and LIVELY, Circuit Judges.

LIVELY, Circuit Judge.

The question in this case is whether the district court properly enjoined enforcement actions by the Food and Drug Administration (FDA) which were instituted as libels for the seizure of drugs in warehouses of the plaintiff, Parke, Davis & Company (Parke Davis). The appellants contend that the judgment of the district court constitutes an unwarranted interference with a discretionary determination of the FDA commissioner, whereas the appellee argues that the district court properly exercised its authority under the Administrative Procedure Act (APA) to enjoin capricious and arbitrary action by the commissioner. The district court found that the FDA's threat to initiate enforcement actions against Parke Davis under the circumstances of this case was a "final agency action for which there is no other adequate remedy in a court . . ." and subject to judicial review pursuant to 5 U.S.C. § 704. The district court further found that it was necessary in order to prevent an irreparable injury to Parke Davis to grant injunctive relief pending review of the agency action, as authorized by 5 U.S.C. § 705. ¹

The dispute in the case concerns the right of Parke Davis to market as an antitussive (cough inhibitor) a nonprescription, over-the-counter drug product containing diphenhydramine hydrochloride (DPH). In 1948 Parke Davis received FDA approval for the marketing of a product in which the active ingredient is DPH under the label name "Benylin Expectorant." Benylin Expectorant was limited to use under professional supervision; i. e., it could be dispensed only on prescription, and dispensing otherwise would result in the drug being misbranded while held for sale. Under the Food, Drug and Cosmetic Act of 1938 (the Act) a new drug application (NDA) was required to be submitted and approved before any drug could be marketed. "New drug" is the term of art which refers to any drug which requires pre-marketing clearance under the 1938 Act, whether it is being introduced for the first time or has actually been marketed previously. Prior to the adoption of an alternate procedure referred to, infra, the only means of eliminating a prescription-only restriction on the marketing of a given drug was by filing and obtaining approval of a supplemental NDA.

On May 11, 1972 the FDA published a rule entitled "Procedures for Classification of O-T-C Drugs." This rule provided for the establishment of panels of experts to determine whether various over-the-counter (OTC) drugs are generally recognized as safe and effective. Determination with respect to OTC drugs ^* were to be in the form of "final monographs." Parke Davis construed the May 11, 1972 rule as providing an alternate method of obtaining approval for OTC marketing of drugs previously restricted to prescription sales. Thereafter Parke Davis submitted to the appropriate panel data pertaining to the safety and effectiveness of its Benylin product as an antitussive, and its representatives appeared before the panel. On September 11, 1974 the panel concluded that DPH was safe and effective as an antitussive and thus that products containing DPH were suitable for OTC sale as antitussives. On November 25, 1974 Parke Davis submitted a supplemental NDA seeking approval for over-the-counter marketing of Benylin under the traditional procedure prescribed in 21 CFR § 310.200, known as a "switch over." Thus, as of November 25, 1974, Parke Davis was proceeding on two separate courses of action with FDA in its attempts to free Benylin from prescription-sale limitations.

On February 28, 1975 Parke Davis wrote FDA requesting approval of OTC sale of Benylin or an administrative indication that OTC sale would not provoke regulatory action. The acting director of a Division of the Bureau of Drugs wrote Parke Davis on March 11, 1975 that FDA was deferring action on its supplemental NDA pending completion of OTC review under the procedures prescribed in the May 11, 1972 rule. One week later the Associate Chief Counsel for Enforcement of FDA wrote Parke Davis in response to its February 28th inquiry. (the Yingling letter). The Yingling letter contained the following language:

When the FDA began the OTC Review we said that we would institute legal action against new products only where they were fraudulent or represented a health hazard. Since the new product in question (Benylin Cough Syrup) conforms to the recommendations of the OTC Panel considering this particular type of product and has actually been marketed as a prescription preparation (Benylin Expectorant) for a significant period of time, there would be almost no possibility that we would institute legal action at this time. Faced with the limited resources and higher priority issues, the FDA does not intend to institute wholesale enforcement action except to require compliance with published monographs. This is the only position that the Agency can take as it seeks to obtain more efficient uses of its available resources.

You realize, of course, if Benylin Cough Syrup is marketed now, your company assumes the risk that the Agency may not adopt this panel's categorization of diphenhydramine hydrochloride as generally recognized as safe and effective or that the FDA may eventually require different labeling from that which is presently accepted by the panel.

On May 9, 1975 FDA published new procedure and practice regulations in which it adopted a policy of refraining from granting informal exemptions. In September 1975 Parke Davis began marketing Benylin Cough Syrup as an OTC antitussive. On December 4, 1975 the FDA published a notice of proposed rule making which evolved into final regulations published August 4, 1976 at 41 Fed.Reg. 32580. The preamble to the August 4 publication provided that an OTC drug product which contained an active ingredient previously limited to prescription use which is classified by an OTC review panel in category I (generally recognized as safe and effective and not misbranded) "shall be considered a new drug if marketed before the date of publication in the FEDERAL REGISTER of a proposed monograph for the ingredient." The preamble further provided that such a product "may be marketed after the date of publication of a proposed monograph in the FEDERAL REGISTER, but before the effective date of a final monograph, subject to the risk that the commissioner may not accept a panel's recommendation but adopt a different position that could require relabeling, recall, or other regulatory action." The actual regulations, which now appear at 21 CFR § 310.200 and § 330.13 provide that an OTC drug product which contains an active ingredient that was limited on or after May 11, 1972 to prescription use and is under OTC review and has not thereafter been exempted from such limitation,

. . . which is marketed after the date of publication in the FEDERAL REGISTER of a proposed monograph but prior to the effective date of a final monograph shall be subject to the risk that the Commissioner may not accept the panel's recommendation and may instead adopt a different position that may require relabeling, recall, or other regulatory action. The Commissioner may state such position at any time by notice in the FEDERAL REGISTER, either separately or as part of another document; appropriate regulatory action will commence immediately and will not await publication of a final monograph. Marketing of such a product with a formulation or labeling not in accord with a proposed monograph or tentative final monograph also may result in regulatory action against the product, the marketer, or both.

On September 8, 1976 Parke Davis was advised by the FDA that its supplemental NDA was not approvable and therefore could not be filed as a supplemental application. On September 9, 1976 the commissioner published a proposed order which contained the monograph developed by the advisory panel classifying DPH as category I. In the preamble to the September 9 order the commissioner stated that the status of DPH as an antitussive would be determined through a supplemental NDA procedure. Parke Davis protested the September 8, 1976 notice that its supplemental NDA was not approvable, following procedures prescribed in 21 CFR § 314.110(d). On November 22, 1976 the appropriate officer at FDA signed a notice of proposed denial of Parke Davis' supplemental NDA which had been filed over protest. Parke Davis was notified that it might request a hearing, and the hearing has now been scheduled. On the same day, November 22, 1976, the commissioner issued an order styled "Notice of Decision on Diphenhydramine as an Antitussive." This order contained his dissent from the panel recommendations on DPH as an antitussive and stated that products containing DPH marketed over the counter would be subject to regulatory action. Both the commissioner's November 22 dissent and the ...