Sterling Drug, Inc. v. Weinberger

• Decision Date: 07 January 1975
• Docket Number: D,No. 549,549
• Citation: 509 F.2d 1236
• Parties: STERLING DRUG, INC. et al., Plaintiff-Appellants, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare, and Alexander M. Schmidt, Commissioner of Food and Drugs, Defendants-Appellees. ocket 74--2477.
• Court: U.S. Court of Appeals — Second Circuit

Page 1236

509 F.2d 1236

STERLING DRUG, INC. et al., Plaintiff-Appellants, v. Caspar W. WEINBERGER, Secretary of Health, Education and Welfare, and Alexander M. Schmidt, Commissioner of Food and Drugs, Defendants-Appellees.

No. 549, Docket 74--2477.

United States Court of Appeals Second Circuit.

Argued Dec. 18, 1974.

Decided Jan. 7, 1975.

William F. Weigel, New York City (Rogers, Hoge & Hills, James B. Swire, E. Carrington Boggan, James H. Luther, Jr., and Roger M. Rodwin, New York City, of counsel), for plaintiffs-appellants.

Jerry L. Siegel, Asst. U.S. Atty. (Paul J. Curran, U.S. Atty., S.D.N.Y., and Gerald A. Rosenberg, Asst. U.S. Atty., of counsel), for defendants-appellees.

Before FRIENDLY, TIMBERS and GURFEIN, Circuit Judges.

FRIENDLY, Circuit Judge:

Six and a half years after the Food and Drug Administration began its bumbling efforts to withdraw approval of the New Drug Application (NDA) for Alevaire, an aerosol prescription drug administered to patients with chronic respiratory diseases, on the ground of lack of substantial evidence that it will have the effect it is represented to have under the conditions of use set out in its labeling, the case is back again--only a few months after we thought we had sent it on its way to agency disposition, Sterling Drug, Inc. v. Weinberger, 503 F.2d 675 (2 Cir. 1974). On this occasion it is here on appeal from a decision by Judge Pierce in the District Court for the Southern District of New York denying an injunction and dismissing the complaint in an action by the plaintiff manufacturers and distributors for a declaratory judgment declaring that the FDA's proposal of August 1, 1974, to withdraw approval of the NDA pursuant to a notice of opportunity for hearing published on August 13, 1974, 39 F.R. 29013, was barred by res judicata in part and illegal in remaining part and for an injunction to prevent the FDA from withdrawing approval of the NDA. We affirm, although, with respect to the res judicata argument, on an analysis differing from that of the district court.

We shall not repeat the ancient and medieval history of FDA and court proceedings relating to Alevaire which are recounted in Judge Bryan's opinion of last May, 503 F.2d 675, but will confine the narration to subsequent developments. The notice of August 13, 1974, after summarizing the prior proceedings, went into a discussion substantially as follows: 'It is possible to conclude that Alevaire is a combination product, with several ingredients intended to contribute to the overall claimed therapeutic effect.' The chief basis for this is that 'in its labeling the sponsor has at times indicated adherence to this interpretation.' ¹ 'On the other hand, it is also possible to consider Alevaire as a single active component, tyloxapol, with a vehicle that happens to have some activity of its own in the treatment of patients with difficulty in mobilizing pulmonary secretions,' as indicated by recent packaging. ² It is by no means surprising that the same product could be either a 'fixed combination' or a 'single entity' drug, depending upon how it is characterized by its manufacturers and distributors, since the statutory authority underlying these FDA actions lays stress on representations of effectiveness made in the drug's labeling. ³ How the product is categorized has important bearing, however, on the nature of the 'adequate and well-controlled investigations,' 21 U.S.C. § 355(d), necessary to sustain the burden of 'substantial evidence that the drug will have the effect it purports or is represented to have,' 21 U.S.C. § 355(e), and thus justify a hearing. If Alevaire is a combination, demonstration of effectiveness 'would require, at a minimum, a study including groups treated with water alone, water plus bicarbonate, water plus tyloxapol, water plus bicarbonate plus tyloxapol.' ⁴ See 21 C.F.R. 3.86 & 314.111(a)(5)(ii)(a)(4). On the other hand, if Alevaire is a single active component in a several component vehicle, the evidence need only show 'that Alevaire is more effective than its admittedly active vehicle.' See 21 C.F.R. 314.111(a)(5)(ii)(a)(4). This would demand only 'a two-group trial: patients treated with the vehicle (water, bicarbonate, and glycerin) alone vs. patients treated with Alevaire.' ⁵ The Bureau of Drugs was presently of the view, based in part on the pre-1970 labeling, that Alevaire is a fixed combination drug product. Any request for a hearing should either provide evidence of effectiveness as a fixed combination drug product or demonstrate that Alevaire is a single entity drug product ⁶ and is effective as such. Failing the submission of evidence warranting a hearing, the Bureau proposed to withdraw approval of the NDA on the ground of ineffectiveness. Requests for a hearing had to be filed by September 12 and supporting evidence by October 15, 1974. See 21 C.F.R. 314.200. Plaintiffs requested such a hearing on September 10 but did not follow up by submitting data to support that request.

Instead the manufacturers began this action in the district court on September 30, 1974, against the Secretary of Health, Education and Welfare and the Commissioner of Food and Drugs. The theory of the complaint was as follows: By the proceedings culminating in our last decision, the defendants had formally conceded and abandoned any claim that the effectiveness of Alevaire as a single component drug can only be tested against its vehicle, and relitigation of that issue was barred on grounds of res judicata and/or collateral estoppel. With respect to the claim that Alevaire was a fixed combination drug and ineffective as such, the notice published on August 13 showed that the FDA would be unable to meet the 'new information' test prescribed by § 505(e)(3) of the Food, Drug and Cosmetics Act, 21 U.S.C. § 355(e)(3). ⁷ Plaintiffs sought a declaration that defendants were barred by res judicata and/or collateral estoppel from withdrawing approval of the NDA for Alevaire on the ground that effectiveness must be demonstrated by comparing Alevaire to its vehicle and that they were barred by statute from proceeding against Alevaire as a fixed combination. Plaintiffs also moved for preliminary injunctive relief to prevent defendants from proceeding with the August 1 proposal to withdraw approval of the NDA and for permanent injunctive relief to prevent defendant's action on that or any other like proposal.

On October 1, Judge Pierce ordered defendants to show cause why they should not be temporarily enjoined from proceeding on their proposal to withdraw approval of the NDA during the pendency of this action. The order was returnable on October 10, on which day the order was consolidated with a trial on the merits and that trial completed. On October 23, Judge Pierce signed a stipulation in which the parties agreed that plaintiffs would be given an extension of time during which to file data in support of their request for a hearing from October 15 until 15 days after the district court's decision on the motion for a preliminary injunction.

Judge Pierce rendered an opinion on October 31 denying the motion for an injunction and dismissing the complaint. He concluded that he need not reach the merits of plaintiffs' arguments since the complaint must be dismissed for failure to exhaust administrative remedies. On November 12, 1974, a panel of this court granted an injunction pending the hearing of an expedited appeal; at argument on December 18 this panel extended the injunction pending decision.

Plaintiffs' basic position is that we have entered a brave new world with respect to injunctions against the conduct of administrative proceedings. We are told in effect that the warning against judicial intrusion in Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938), long regarded as the leading case in this area, is old-hat and that Leedom v. Kyne, 358 U.S. 184, 79 S.Ct. 180, 3 L.Ed.2d 210 (1958), has become the seminal decision. Plaintiffs seemingly are not concerned with the Supreme Court's statement that:

The Kyne exception is a narrow one, not to be extended to permit plenary district court review of Board orders in certification proceedings whenever it can be said that an erroneous assessment of the particular facts before the Board has led it to a conclusion which does not comport with the law.

Boire v. Greyhound Corp., 376 U.S. 473, 481, 84 S.Ct. 894, 899, 11 L.Ed.2d 849 (1964). They are likewise not discouraged over the fact that the two cases cited by them for the proposition that 'Leedom has been increasingly followed and used to check illegal agency action,' namely Boire v. Miami Herald Publishing Co., 343 F.2d 17 (5 Cir.), cert. denied, 382 U.S. 824, 86 S.Ct. 56, 15 L.Ed.2d 70 (1965), and FTC v. J. Weingarten, Inc., 336 F.2d 687 (5 Cir. 1964), cert. denied, 380 U.S. 908, 85 S.Ct. 890, 13 L.Ed.2d 796 (1965), reversed injunctions granted by district courts. Nothing advanced by plaintiffs persuades us to depart from the general position we took after full analysis, only two years ago, that the most that can be extrapolated from Leedom v. Kyne is that an injunction may be issued 'if an agency refuses to dismiss a proceeding that is plainly beyond its jurisdiction as a matter of law or is being conducted in a manner that cannot result in a valid order,' Pepsico, Inc. v. FTC, 472 F.2d 179, 187 (2 Cir. 1972) (footnote omitted), cert. denied, 414 U.S. 876, 94 S.Ct. 44, 38 L.Ed.2d 122 (1973)--a 'possibly over-generous' standard we found not to have been met by the plaintiff there. ⁸ Until otherwise instructed we shall continue to regard Myers as stating the general rule and Leedom v. Kyne as being what the Supreme Court says it is--a narrow exception.

Relying on the per curiam reversal of Otis & Co. v. SEC, 85 U.S.App.D.C. 122, 176 F.2d 34, in SEC v. Otis & Co., 338 U.S. 843, 70 S.Ct. 89, 94 L.Ed. 516 (1949), defendants would apparently contend that...