Rxusa Wholesale v. Dept. of Health and Human Serv., 06-CV-5086 (JS)(AKT).

• Decision Date: 11 December 2006
• Docket Number: No. 06-CV-5086 (JS)(AKT).,06-CV-5086 (JS)(AKT).
• Citation: 467 F.Supp.2d 285
• Parties: RxUSA WHOLESALE, INC., Alden Surgical, Co., Inc., Atlantic Biologicals, Inc., Bell Medical Services, Inc., C.O. Truxton, Inc., Hygen Pharmaceuticals, Inc., Medex Medical, Inc., Medsource Direct, Inc., Mika Pharmaceuticals, Inc., and Stat Pharmaceuticals, Inc., Plaintiffs, v. DEPARTMENT OF HEALTH AND HUMAN SERVICES, U.S. Food and Drug Administration, Defendants.
• Court: U.S. District Court — Eastern District of New York

467 F.Supp.2d 285

RxUSA WHOLESALE, INC., Alden Surgical, Co., Inc., Atlantic Biologicals, Inc., Bell Medical Services, Inc., C.O. Truxton, Inc., Hygen Pharmaceuticals, Inc., Medex Medical, Inc., Medsource Direct, Inc., Mika Pharmaceuticals, Inc., and Stat Pharmaceuticals, Inc., Plaintiffs, v. DEPARTMENT OF HEALTH AND HUMAN SERVICES, U.S. Food and Drug Administration, Defendants.

No. 06-CV-5086 (JS)(AKT).

United States District Court, E.D. New York.

December 11, 2006.

COPYRIGHT MATERIAL OMITTED

Michael L. Levine, The Law Firm, of Michael Levine, P.C., Scarsdale, NY, for Plaintiffs.

Vincent Lipari, United States Attorneys Office, Eastern District of New York, Central Islip, NY, for Defendants.

ORDER ADOPTING REPORT AND RECOMMENDATION

SEYBERT, District Judge.

INTRODUCTION

Before this Court is Magistrate Judge A. Kathleen Tomlinson's Report and Recommendation, dated November 30, 2006, regarding Plaintiffs' motion for a preliminary injunction. The. Magistrate recommended that this Court preliminarily enjoin the Defendants from implementing certain regulations that were to take effect on Friday, December 1, 2006. Pursuant to FED.R.Cry P. 72(b), the Defendants objected to certain parts of the Report and Recommendation, and Plaintiffs responded. Pursuant to 28 U.S.C. § 636(b)(1), this Court reviews de novo those portions of the Report and Recommendation to which Defendants object. Such de novo review does not entirely replace the Magistrate's efforts.

After carefully reviewing Defendants' objections and hearing oral argument on December 4, 2006, this Court adopts in part and modifies in part the Report and Recommendation and grants Plaintiffs' request for a preliminary injunction. For purposes of this Order, familiarity with the facts of the case is presumed. The Court refers the parties to the facts as stated in the Report and Recommendation.

DISCUSSION

Defendants have objected to several parts of the Magistrate's Report and Recommendation. Defendants have challenged the Magistrate's conclusion that Plaintiffs will suffer irreparable harm and have a likelihood of success on the merits. Defendants also raise issue with the Magistrate's factual findings. The Court turns to each of Defendants' objections.

I. Defendants Do Not Deny Plaintiffs Will Be Irreparably Harmed Without An Injunction.

For this Court to issue a preliminary injunction against "government action taken in the public interest pursuant to a statutory or regulatory scheme," the Plaintiffs must show "(i) irreparable harm absent the injunction and (ii) a likelihood of success on the merits." Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112, 114 (2d Cir.2005) (citations omitted). A plaintiff satisfies the irreparable harm requirement when it shows that absent a preliminary injunction, it "will suffer `an injury that is neither remote nor speculative, but actual and imminent,' and one that cannot be remedied `if a court waits until the end of trial to resolve the harm.'" Id. (citations omitted). Because irreparable harm is "the single most important prerequisite" before a preliminary injunction will issue, Plaintiffs must show first that the injury is "likely" before showing any other requirements. Id.

Defendants attempt to challenge Plaintiffs' claim that they will suffer irreparable harm. However, the Court rejects this argument at the outset because Defendants' argument is circuitous. First, Defendants do not directly address Plaintiffs' claims that they will suffer irreparable harm. Instead, Defendants claim that staying the FDA regulation will not save Plaintiffs from any irreparable harm because the statute — which the FDA regulation "mirrors" — still requires pedigree information back to the manufacturer. Thus, Defendants have essentially acknowledged that Plaintiffs will suffer irreparable harm — it is just a matter of the source of the harm: the PDMA or the FDA regulation.

Accordingly, the Court finds that Plaintiffs have met their burden regarding the irreparable harm prong of a preliminary injunction. Defendants do not deny Plaintiffs will be irreparably harmed. It simply challenges the source of the harm, which does not change that such harm is bound to occur without a preliminary injunction. The Court adopts that portion of the Report and Recommendation finding that Plaintiffs will suffer irreparable harm.

II. Plaintiffs Have Shown A Likelihood Of Success On The Merits.

The second prong that Plaintiffs must meet for this Court to issue a preliminary injunction is a likelihood of success on the merits. See Freedom Holdings, Inc., 408 F.3d at 114. For purposes of a preliminary injunction, however, this Court need not find with "absolute certainty" that Plaintiffs will succeed on the merits of their claims. Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir.1984) ("A movant . . . need not show that success is an absolute certainty. He need only make a showing that the probability of his prevailing is better than fifty percent. There may remain considerable room for doubt.") Thus, a finding that a plaintiff has more than a fifty-fifty chance of succeeding on the merits of their claims would warrant a finding of a likelihood of success on the merits.

A. Defendants' Arguments

First, Defendants object to the Magistrate's conclusion that the classification fails rational basis review because authorized distributors purchase a significant volume of drugs from unauthorized distributors and then resell those drugs without a pedigree. (Def.'s Mem. of Law 5.) Second, Defendants also claim the Magistrate erred when she found that it was not rational to believe that Congress intended to create a situation where it was impossible for four thousand unauthorized distributors to comply with the law. (Id. at 6.) Defendants specifically claim that this is a disputed factual issue.

Third, Defendants claim the Magistrate erred when she relied on certain statements made after the Prescription Drug Marketing Act ("PDMA") was passed. (Id. at 8-9.) Specifically, Defendants argue that the Magistrate should have looked solely to facts as they were when Congress enacted the PDMA.

B. The Rational Basis Test & Review Of Administrative Actions

Defendants do not object to the Magistrate's conclusion that a statute must be rationally related to its' stated purpose to be Constitutional. A court cannot overturn a statute "unless the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that we can only conclude that the, government's actions were irrational." Kimel v. Fla. Bd. of Regents, 528 U.S. 62, 84, 120 S.Ct. 631, 145 L.Ed.2d 522 (2000) (quoting Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 59 L.Ed.2d 171 (1979)). The Court must inquire whether a statute is "rationally related to legitimate [governmental] interest." Vance, 440 U.S. at 97, 99 S.Ct. 939 (quoting Mass. Bd. of Ret. v. Murgia, 427 U.S. 307, 312, 96 S.Ct. 2562, 49 L.Ed.2d 520 (1976)).

Defendants also do not object to the Magistrate's conclusion that the FDA's administrative actions are subject to review by the Court under the Administrative Procedure Act ("APA"). (Report at 20.) The FDA's actions may be disturbed only "if arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). "When a court reviews an agency's construction of a statute it administers," a court must determine "whether Congress has directly spoken to the precise question at issue." Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). "[I]f the statute is silent or ambiguous with respect to the specific issue," a court must determine whether such regulation is "a permissible construction of the statute." Id. at 843, 104 S.Ct. 2778.

However, in Bldg. and Const. Trades Dep't v. Donovan, 543 F.Supp. 1282, 1290 (D.C.1982), the court preliminarily enjoined an agency from enforcing regulations issued to implement the Davis-Bacon Act. The Donovan court analyzed the new administrative actions with "more exacting vigilance" because the agency was changing a "longstanding administrative position" that had originally been taken contemporaneously with or shortly after the legislation. Id. at 1290.

At the outset, the Court notes that Congress had a rational basis when it required unauthorized distributors to provide pedigree information for the drugs it distributed. The Magistrate, this Court, and both parties agree on this. The. PDMA's pedigree requirement is important and necessary in light of Congress's findings that "most of the drugs that were counterfeits, stolen, expired, or obtained through fraud were handled by secondary wholesalers, who were not authorized to distribute that manufacturer's product." H.R.Rep. No. 100-76, at 17 (1987). PDMA's purpose "is to protect American consumers from mislabeled, subpotent, adulterated, expired, or counterfeit pharmaceuticals, which are being dispensed under existing law and practice, and to restore competitive balance in the marketplace." Id. at 6. Accordingly, the Court rejects that portion of the Report and Recommendation that finds the PDMA had no rational basis.

The issue, however, is whether the regulatory scheme created to enforce the PDMA is arbitrary and capricious in light of the FDA's position for the last sixteen years and its findings stated in its various reports to Congress. Defendants do not dispute the Magistrate's finding that both manufacturers and authorized distributors are exempt from the pedigree requirement. (Report at 12.) When the PDMA was first enacted in 1988, the statute read as follows:

Each person who is engaged in the wholesale distribution of the drugs . . . and who is not an authorized distributor of record of such drugs shall provide to each wholesale distributor of such drugs a statement identifying each sale of the drug (including the date of bale) before the sale to...