Teva Pharmaceuticals Usa, Inc. v. Sebelius

• Decision Date: 02 March 2010
• Docket Number: No. 09-5281.,No. 09-5308.,09-5281.,09-5308.
• Citation: 595 F.3d 1303
• Parties: TEVA PHARMACEUTICALS USA, INC., Appellant v. Kathleen SEBELIUS, In her Official Capacity as Secretary of Health and Human Services, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

595 F.3d 1303

TEVA PHARMACEUTICALS USA, INC., Appellant v. Kathleen SEBELIUS, In her Official Capacity as Secretary of Health and Human Services, et al., Appellees.

No. 09-5281.

No. 09-5308.

United States Court of Appeals, District of Columbia Circuit.

Argued December 7, 2009.

Decided March 2, 2010.

Appeals from the United States District Court for the District of Columbia, (No. 1:09-cv-01111-RMC).

Michael D. Shumsky argued the cause for appellant. With him on the briefs were Jay P. Lefkowitz and Gregory L. Skidmore.

Carmen M. Shepard and Kate C. Beardsley were on the briefs for cross-appellant Apotex, Inc. in No. 09-5308.

Drake Cutini, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Eugene M. Thirolf Jr., Director, David S. Cade, Acting General Counsel, United States Food and Drug Administration, Michael M. Landa, Acting Associate General Counsel, and Eric M. Blumberg, Deputy Chief Counsel.

Carmen M. Shepard and Kate C. Beardsley were on the brief for amicus curiae Apotex, Inc. in support of appellees.

Before: HENDERSON and GRIFFITH, Circuit Judges, and WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge WILLIAMS.

Dissenting opinion filed by Circuit Judge HENDERSON.

WILLIAMS, Senior Circuit Judge:

This is the latest installment in a long-running series of cases concerning an incentive that Congress established for companies to bring "generic" versions of branded drugs to market faster than they otherwise might. Teva Pharmaceuticals USA, Inc., a manufacturer of generics, has received tentative approval from the U.S. Food and Drug Administration to sell losartan potassium products—used primarily to treat hypertension. The approval will become final once the "pediatric exclusivity period"¹ ends, following the expiration of the last remaining patent on Merck's pioneered versions of the same drugs, sold under the names Cozaar and Hyzaar. When that date arrives (April 6, 2010), Teva believes that it should be entitled to the six-month period of marketing exclusivity that generic drug makers earn, in some circumstances, for successfully taking the risks and bearing the costs of showing the invalidity or inefficacy of a patent that a brand-name drug maker has said blocks competing products. See Mova Pharmaceutical Corp. v. Shalala, 140 F.3d 1060, 1063-65 (D.C.Cir.1998) (describing the incentive regime established by the Hatch-Waxman Act of 1984); Ranbaxy Laboratories Ltd. v. Leavitt, 469 F.3d 120, 121-22 (D.C.Cir.2006).

Thwarting its receipt of that entitlement, however, is an FDA interpretation of the operative statutory regime (the Food, Drug, and Cosmetic Act, as amended by various other laws, codified in relevant part at 21 U.S.C. § 355) that will allow not only Teva but all generic manufacturers to sell their approved losartan potassium products right out of the gate. In short, Teva says that, effective April 6, 2010, the agency's interpretation will deprive the company of the competitive advantage Congress has said it should enjoy.

To ward off this danger, Teva filed suit in the federal district court for the District of Columbia in June 2009, seeking a declaration that the relevant FDA policy is unlawful and an injunction compelling the agency to act in accordance with Teva's reading of the statute. Despite protestations by the government that the matter was not ripe for review and that Teva lacked standing, the district court reached the merits of the claim—but ruled in the FDA's favor. Teva Pharmaceuticals U.S.A, Inc. v. Sebelius, 638 F.Supp.2d 42 (D.D.C.2009). Teva now appeals that decision. We agree that the suit is justiciable, and hold that the FDA's interpretation is inconsistent with, and thus foreclosed by, the statutory scheme.

* * *

In the process of obtaining FDA approval to sell a pioneering new drug, an applicant lists publicly all of the patents that, it believes, would be infringed by "bioequivalent" versions of the product sold by other companies. Ranbaxy, 469 F.3d at 121-22 (discussing 21 U.S.C. § 355(a)-(b)(1)). Prospective generic competitors need not, however, take these lists as gospel. After a new drug hits the market, they can effectively challenge the brand maker's pronouncement by filing a certification that a proposed generic version of the brand drug would not run afoul of one (or more) of the putatively blocking patents, either because the patent is invalid or because the generic maker has found a way to design around it. See id. at 122 (discussing 21 U.S.C. § 355(j)(2)(A)(vii)(IV)). The generic producer's filing, called a "paragraph IV certification" in our past cases, comes in the course of the generic's own application for FDA approval, known as an Abbreviated New Drug Application, or ANDA. See id. (discussing 21 U.S.C. § 355(j)(2)).

Filing a paragraph IV certification comes with a risk, though: it constitutes an act of patent infringement, 35 U.S.C. § 271(e)(2)(A), with the hazard of sparking costly litigation. In order, then, to "compensate [generic] manufacturers for research and development costs as well as the risk of litigation from patent holders," Teva Pharmaceuticals USA, Inc. v. Leavitt, 548 F.3d 103, 104 (D.C.Cir.2008), the statute provides that the first company to file an ANDA containing a paragraph IV certification earns an "exclusivity" period of 180 days, during which the FDA may not approve for sale any competing generic version of the drug at issue, id. (discussing 21 U.S.C. § 355(j)(5)(B)(iv)). This promise of initial marketing exclusivity is thus intended to increase competition by expediting the availability of generic equivalents. See id.; Serono Laboratories, Inc. v. Shalala, 158 F.3d 1313, 1326 (D.C.Cir.1998).

A potential bug in the system is the ability of the brand manufacturer, after a generic has filed a paragraph IV certification, to announce that in fact the challenged patent is not one that protects the drug at issue and to ask the FDA to "delist" the patent, thus purporting to pull the rug from under the paragraph IV certification. In Ranbaxy we considered "whether the FDA may delist a patent upon the request of the [brand manufacturer] after a generic manufacturer has filed an ANDA containing a paragraph IV certification so that the effect of delisting is to deprive the applicant of a period of marketing exclusivity." 469 F.3d at 125. The answer, we said, was no; an FDA policy that allowed brand manufacturers to strategically delist challenged patents, thereby unilaterally stripping generic manufacturers of marketing exclusivity, was "inconsistent with the structure of the statute." Id.

Ranbaxy, however, interpreted the law as it stood before Congress amended it in 2003 via the Medicare Prescription Drug, Improvement, and Modernization Act, Pub.L. No. 108-173, 117 Stat. 2066. Id. at 122 n. *. Three times since the effective date of the amendments, the same series of events at issue in Ranbaxy has arisen— once involving the generic manufacturer Cobalt Pharmaceuticals and the brand drug Precose, made by Bayer; once involving the generic manufacturer Hi-Tech Pharmacal Co. and the brand drug COSOPT, made by Merck; and now involving Teva, the drugs Cozaar and Hyzaar, and Merck. In the first two instances, the generic makers presented arguments to the FDA why they should still, in the modified statutory regime, be entitled to exclusivity notwithstanding the brand companies' delisting a challenged patent. Teva itself responded to the FDA's solicitation of comments in the Cobalt matter, advocating the same pro-exclusivity reading of the amended statute's treatment of post-paragraph-IV-filing delisting requests. See Letter from Marc Goshko, Executive Director, Teva North America, In Response to FDA Request for Comments re Generic Drug Applications for Acarbose Tablets (Oct. 16, 2007), in Joint Appendix ("J.A.") 78 et seq. In both cases, the FDA ruled that the 2003 amendments required a different outcome from the one Ranbaxy ordered under the old version of the law.

The agency pointed to the 2003 amendments' addition of a critical new term to the statute: the "forfeiture event." See 21 U.S.C. § 355(j)(5)(D)(ii). On the occurrence of any one of six defined scenarios, the law now says, the entitlement to a 180-day exclusivity period "shall be forfeited by a first applicant." See id. In both the Cobalt and Hi-Tech disputes, the FDA decided that the facts at issue, paralleling those in Ranbaxy and our case, had satisfied the terms of the first listed forfeiture event, "failure to market," and in each case denied the generic manufacturer exclusivity.

The statutory definition of the first listed forfeiture event is as follows:

(I) FAILURE TO MARKET. — The first applicant fails to market the drug by the later of —

(aa) the earlier of the date that is—

(AA) 75 days after the date on which the approval of the application of the first applicant is made effective under subparagraph (B)(iii); or

(BB) 30 months after the date of submission of the application of the first applicant; or

(bb) with respect to the first applicant or any other applicant (which other applicant has received tentative approval), the date that is 75 days after the date as of which, as to each of the patents with respect to which the first applicant submitted and lawfully maintained a certification qualifying the first applicant for the 180-day exclusivity period under subparagraph (B)(iv), at least 1 of the following has occurred:

(AA) In an infringement action brought against that applicant with respect to the patent or in a declaratory judgment action brought by that applicant with respect to the patent, a court enters a final decision from which no appeal (other than a petition to the Supreme Court for a writ of certiorari) has been or can be taken that the patent is invalid or not infringed.

(BB) In an infringement action or a declaratory judgment action described in subitem (AA), a...