Ranbaxy Labs., Ltd. v. Burwell

• Decision Date: 11 March 2015
• Docket Number: Civil Action No. 14–1923 BAH
• Citation: 82 F.Supp.3d 159
• Parties: Ranbaxy Laboratories, Ltd, et al., Plaintiffs, v. Sylvia Mathews Burwell, Secretary, United States Department of Health and Human Services, et al., Defendants, v. Dr. Reddy's Laboratories, Inc., Endo Pharmaceuticals, Inc., Ivax Pharmaceuticals, Inc, Teva Pharmaceuticals USA, Inc. Defendant–Intervenors.
• Court: U.S. District Court — District of Columbia

82 F.Supp.3d 159

Ranbaxy Laboratories, Ltd, et al., Plaintiffs

v.Sylvia Mathews Burwell, Secretary, United States Department of Health and Human Services, et al., Defendants

v.Dr. Reddy's Laboratories, Inc., Endo Pharmaceuticals, Inc., Ivax Pharmaceuticals, Inc, Teva Pharmaceuticals USA, Inc. Defendant–Intervenors.

Civil Action No. 14–1923 BAH

United States District Court, District of Columbia.

First Issued: February 27, 2015

Interim Redacted Opinion Issued: March 11, 2015

John Kevin Dolan Crisham, Robert Anthony Gretch, Stephen S. Schwartz, Kirkland & Ellis LLP, New York, NY, Michael D. Shumsky, Kirkland & Ellis, LLP, Washington, DC, for Plaintiffs.

Roger Joseph Gural, U.S. Department of Justice, Portland, OR, for Defendants.

Douglas B. Farquhar, James Philip Ellison, Jennifer McVey Thomas, Hyman, Phelps & McNamara, P.C., Chad A. Landmon, Axinn, Veltrop & Harkrider LLP, Brian Burgess, William M. Jay, Goodwin Procter, LLP, Washington, DC, David K. Ludwig, Thomas K. Hedemann, Axinn, Veltrop & Harkrider LLP, Hartford, CT, for Defendant–Intervenors.

MEMORANDUM OPINION

BERYL A. HOWELL, United States District Judge

A subsidiary of the plaintiffs, Ranbaxy Laboratories, Ltd. and Ranbaxy, Inc. (collectively, “Ranbaxy” or the “plaintiffs”), paid, in 2013, what was then the “largest drug safety settlement” in history, amounting to $500 million, in connection with criminal charges for falsifying data and manufacturing adulterated drugs at two of its facilities in India. U.S. Dep't of Justice, “Generic Drug Manufacturer Ranbaxy Pleads Guilty and Agrees to Pay $500 Million to Resolve False Claims Allegations, cGMP Violations and False Statements to the FDA,” May 13, 2013, available at http://www.justice.gov/opa/pr/generic-drug-manufacturer-ranbaxy-pleads-guilty-and-agrees-pay-500-million-resolve-false. During the course of the investigation into the plaintiffs' (now) admitted wrongdoing, the Federal defendants in this case—the Secretary of Health and Human Services, the Commissioner of the U.S. Food and Drug Administration (“FDA”), and the FDA—granted “tentative approval” to five Abbreviated New Drug Applications (“ANDAs”) submitted by the plaintiffs for the manufacture of certain generic drugs at the same facilities involved in the plaintiffs' subsidiary's criminal case. See Defs.' Mem. Opp'n Pls.' Mot. Prelim. Inj. and Supp. Defs.' Mot. Summ. J. (“Defs.' Mem.”) at 10–17, ECF No. 52.

Years after the grant of those ANDAs, when two of these tentative approvals were preventing other drug manufacturers from coming to market with generic versions of costly medications, the FDA reexamined and revoked two of those five tentative approvals, for esomeprazole and valganciclovir, stating the approvals had been granted “erroneously.” Defs.' Mem. at 3; Compl. ¶ 38, ECF No. 1; Administrative Record (“AR”) at 1 (Letter from FDA to plaintiffs regarding esomeprazole and valganciclovir ANDAs, Nov. 4, 2014 (the “Rescission Letter”)). This agency action prompted the plaintiffs to file the instant suit, contending that the Federal defendants had no authority, statutory or otherwise, to correct their egregious error and rescind the tentative approvals. See generally Compl. Now pending before the Court is the plaintiffs' Motion for Preliminary Injunction (the “Pls.' Mot.”), ECF No. 41; the Federal defendants' Motion for Summary Judgment (the “Defs.' Mot.”), ECF No. 51; and the Motions for Summary Judgment from four other generic drug manufacturers, Dr. Reddy's Laboratories (“Dr.Reddy's”), Endo Pharmaceuticals, Inc. (“Endo”), Ivax Pharmaceuticals, Inc. (“Ivax”), and Teva Pharmaceuticals USA, Inc. (“Teva”),¹ which have each been granted leave to intervene in this matter as defendants, ECF Nos. 53 and 73.² Although the FDA's practices, which apparently led to these errors, raise grave concerns, the Federal defendants' interpretation of the relevant portions of the Food, Drug, and Cosmetics Act (the “FDCA”) as permitting the rescission of the erroneously issued tentative approvals is reasonable. Consequently, the Federal defendants' and defendant-intervenors' motions are granted and the plaintiffs' motion is denied.³

I. BACKGROUND⁴

The statutory regime under which generic drug applications, such as those at issue here, are approved, is complex. Thus, a brief summary of the regulations governing ANDAs and their approval is provided before turning to the history of the plaintiffs' applications, the concurrent investigations into the plaintiffs' manufacturing processes by the FDA, and the procedural background of the instant matter.

A. The Statutory Regime

All pharmaceutical manufacturers wishing to sell their products in interstate commerce must first seek approval from the FDA in compliance with 21 U.S.C. § 355. New drug applications (“NDAs”) are subject to rigorous application protocols under which the applicant must prove the drug is safe and effective. See 21 U.S.C. § 355(b) ; Defs.' Opp'n Pls.' Mot. Temp. Restraining Order (“Defs.' TRO Opp'n”) at 5, ECF No. 22–1. The applicant must also provide information about patents used in the drug, or for using the drug, “to which a claim of patent infringement could reasonably be asserted if a person not licensed by the owner engaged in the manufacture, use, or sale of the drug.” 21 U.S.C. § 355(c)(2).

1. The Hatch–Waxman Amendments

Between 1962 and 1984, companies wishing to manufacture generic versions of drugs already approved for use had to follow the same rigorous steps as in a new drug application before the drug could be approved and sold, even though the generic equivalent was effectively identical to a brand name drug.⁵ H.R Rep. No. 98–857, pt. 1, (Report of the House Committee on Energy and Commerce on Drug Price Competition and Patent Term Restoration Act) at 14–15 (1984). In 1984, Congress passed the Drug Price Competition and Patent Term Restoration Act, codified in 21 U.S.C. § 355. Colloquially known as the “Hatch–Waxman Amendments,” the amendments created a process by which generic drugs could be approved on the basis of an “abbreviated” new drug application, an ANDA, by “piggy-back[ing]” on the studies already completed by the pioneer drug manufacturer. FTC v. Actavis, Inc. (Actavis ), –––U.S. ––––, 133 S.Ct. 2223, 2228, 186 L.Ed.2d 343 (2013) ; see Mylan Labs, Inc. v. Thompson, 389 F.3d 1272, 1274–75 (D.C.Cir.2004).

This statutory change removed a major expense for generic drug manufacturers, since “[u]nlike an NDA, an ANDA need not contain clinical evidence of the safety or efficacy of the drug.” See Teva Pharm. Indus. Ltd. v. Crawford, 410 F.3d 51, 52 (D.C.Cir.2005). Its purpose is “to speed the introduction of low-cost generic drugs to market,” Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S (Caraco ), ––– U.S. ––––, 132 S.Ct. 1670, 1676, 182 L.Ed.2d 678 (2012), thus increasing competition and, theoretically, lowering prices, Teva Pharms. USA, Inc. v. Sebelius, 595 F.3d 1303, 1305 (D.C.Cir.2010). To further this goal, the Hatch–Waxman Amendments included the “so-called paragraph IV certification.”

Caraco, 132 S.Ct. at 1677. Since “the FDA cannot authorize a generic drug that would infringe a patent,” id. at 1676, Congress required ANDA applicants, in 21 U.S.C. § 355(j)(2)(A)(vii), to certify that the generic drug would not infringe upon any valid patents.

2. Paragraph IV Certification

Relevant to the instant matter, one of the bases on which an ANDA applicant may certify that its product will not infringe any valid patents is by certifying that some or all of the patents used in the making of the pioneer drug are invalid. 21 U.S.C. § 355(j)(2)(A)(vii)(IV). Known as a paragraph IV certification, this course of action entails significant risk since it will almost inevitably “provok[e] litigation” and, indeed, the mere filing of a paragraph IV certification is deemed to be “an act of infringement, which gives the [pioneer drug manufacturer] an immediate right to sue.” Caraco, 132 S.Ct. at 1677 ; see 35 U.S.C. § 271(e)(2)(A). Assuming the pioneer drug manufacturer timely files suit, the FDA may not approve the ANDA, “usually for a 30–month period,” while the patent dispute is litigated. Actavis, 133 S.Ct. at 2228.

To incentivize manufacturers to take advantage of paragraph IV certifications, despite the considerable expense and difficulties, the Hatch–Waxman Amendments included a provision allowing the first generic manufacturer to file an ANDA predicated on this certification to “enjoy a period of 180 days exclusivity (from the first commercial marketing of its drug).” Id. at 2228– 29 (citing 21 U.S.C. § 355(j)(5)(B)(iv) ); Teva Pharms. USA, Inc., 595 F.3d at 1305 (noting exclusivity provision designed to “compensate [generic] manufacturers for research and development costs as well as the risk of litigation from patent holders” (internal quotation marks and citation omitted; alteration in original)). This exclusivity functions as a mini-generic monopoly for the generic drug manufacturer, providing a 180–day period in which only the first generic manufacturer may compete with the pioneer drug. Actavis, 133 S.Ct. at 2229. This incentive can be worth “several hundred million dollars,” but it can “belong only to the first generic to file.” Id. (citations omitted).

3. Forfeiture Triggers

While the 180–day exclusivity period holds out the promise of substantial monetary compensation for first-to-file generic manufacturers, it is not guaranteed. The exclusivity is forfeited if any statutorily defined “forfeiture event” occurs. 21 U.S.C. § 355(j)(5)(D)(i). An applicant forfeits any 180–day exclusivity by (1) failing timely to market the drug after certain specified events have occurred, id. § 355(j)(5)(D)(i)(I) ; (2) withdrawing the ANDA, either itself or constructively by the agency, “as a result of a determination by the Secretary that the application does not meet the requirements for approval under [21 U.S.C. § 355(j)(4) ],” id. § 355(j)(5)(D)(i)(II) ; (3) amending or withdrawing the applicant's paragraph IV c...