USV Pharmaceutical Corporation v. Richardson, 71-1596.

• Decision Date: 24 May 1972
• Docket Number: No. 71-1596.,71-1596.
• Citation: 461 F.2d 223
• Parties: USV PHARMACEUTICAL CORPORATION, Appellee, v. Elliot L. RICHARDSON, Secretary of Health, Education, and Welfare, and Herbert L. Ley, Jr., Commissioner of Food and Drugs, Food and Drug Administration, Appellants.
• Court: U.S. Court of Appeals — Fourth Circuit

461 F.2d 223 (1972)

USV PHARMACEUTICAL CORPORATION, Appellee, v. Elliot L. RICHARDSON, Secretary of Health, Education, and Welfare, and Herbert L. Ley, Jr., Commissioner of Food and Drugs, Food and Drug Administration, Appellants.

No. 71-1596.

United States Court of Appeals, Fourth Circuit.

Argued December 8, 1971.

Decided May 24, 1972.

COPYRIGHT MATERIAL OMITTED

Howard S. Epstein, Atty., Dept. of Justice (Richard W. McLaren, Asst. Atty. Gen., Bruce B. Wilson, C. Coleman Bird, and Cheryl S. Karner, Attys., Dept. of Justice, and Peter Barton Hutt, Asst. Gen. Counsel, Joanne S. Sisk, Richard S. Silverman, Attys., Food, Drugs, and Environmental Health Div., Dept. of Health, Education, and Welfare, on brief), for appellants.

Joel E. Hoffman, Washington, D. C., (Robert L. Wald, Selma M. Levine, and Wald, Harkrader & Ross, Washington, D. C. on brief), for appellee.

Before WINTER, RUSSELL and FIELD, Circuit Judges.

RUSSELL, Circuit Judge:

Unlike the drug manufacturers in Bentex,¹ this plaintiff markets a line of citrus bioflavonoid drugs,² of which all but two were covered by NDAs issued at various times in 1955 and 1956. Like the plaintiffs in Bentex, however, it seeks by an action for declaratory judgment to secure the benefit of the exemption available under the "grandfather clause"³ from the enlarged definition of a "new drug" included in the 1962 Amendments to the Federal Food, Drug, and Cosmetic Act of 1938. The defendants, who are the Secretary of Health, Education and Welfare (hereinafter referred to as HEW) and the Commissioner of the Food and Drug Administration (hereafter referred to as Commissioner), urge that jurisdiction should be refused on two grounds: 1. Primary jurisdiction lies with HEW; and 2. Failure to exhaust administrative remedies. They, also, attack the right of the plaintiff to claim the exemption. The District Court sustained jurisdiction and, largely on the basis of a Stipulation of Facts, upheld plaintiff's right to the statutory exemption both for its NDA'd and its non-NDA'd drugs. We reverse.

The threshold question raised by the defendants and overruled by the District Court may be quickly disposed of. Under similar circumstances in Bentex, we sustained the right of the District Court to entertain an action for declaratory judgment. We reach the same result here. Since we dismiss the claim of the plaintiff for exemption on behalf of its drugs on substantive grounds, it is unnecessary to consider the additional objection that plaintiff has failed to exhaust administrative remedies.

The substantive issue posed by this action is the right of the plaintiff to the exemption provided by section 107(c) (4) from the revised definition of "new drug" incorporated in the 1962 Amendments. In resolving that issue, we must differentiate, even as the "grandfather clause" itself does, between the plaintiff's drugs, which were covered by an "effective NDA",⁴ and those, which were marketed without an NDA. The Act makes a distinction in "grandfather" rights between a drug marketed under an NDA⁵ and one marketed without an NDA. In the case of a drug covered by a previously approved NDA, the 1962 Amendments required the Secretary to withdraw the approved NDAs if after notice and opportunity of hearing, the applicant failed to file substantial evidence,⁶ that the drug previously approved is both safe and effective.⁷ For such drugs, however, a grace period or temporary "grandfather right" was granted. Under it, the manufacturer was given two years within which to develop his showing of effectiveness and, during this period, the Secretary was prohibited from withdrawing or suspending the previously granted NDA.⁸ On the other hand, a non-NDA'd drug which met the criteria stated in section 107(c) (4) was exempted permanently from the amended definition of "new drug" made by the 1962 Amendments and was thereby relieved of securing an approved NDA as a condition for marketing clearance. The statutory criteria for this permanent "grandfather" exemption are stated as "any drug which, on the day immediately preceding the enactment date, (A) was commercially used or sold in the United States, (B) was not a new drug as defined in section 201(p) of the basic Act as then in force, and (C) was not covered by an effective application under section 505 of that Act".

It is the contention of the plaintiff that all its drugs in question, both those previously NDA'd and those not, are protected by the permanent "grandfather clause" (i. e., Section 107(c) (4)). Because the statute seemingly makes a distinction between the two, it is proper to consider separately the two groups of drugs: i. e., those having NDAs and those without NDAs.

Taking up first plaintiff's NDA'd drugs: There is no dispute that such drugs met criteria (A) and (B), as set forth in the "grandfather clause", but the defendants seriously dispute the claim that they meet condition (C). Facially at least, this contention of the defendants seems unanswerable. These drugs are "covered by an effective application" or NDA, and are thus specifically barred by condition (C) from qualifying for exemption from the application of the effectiveness Amendments of 1962. The District Court found, however, that before "the day immediately preceding the enactment date", which was October 9, 1962, the previously granted NDAs had been effectively and practically withdrawn and that accordingly the drugs were not covered by an effective NDA on the crucial date of October 9, 1962. The error in this reasoning, however, is that it assumes that a manufacturer may effect a withdrawal of an effective NDA, either by a formal notice or by discontinuing compliance with the reporting requirements for NDA'd drugs. While an applicant may, during the pendency of his application, withdraw his application, he has no such right after approval of the application by the Secretary. At that point only the Secretary can withdraw the approval. As one commentator has accurately summed up, "It is true that a manufacturer may withdraw a pending NDA. Sec. 21 C.F.R. sec. 130.8 (1971). However, no provision in the law permits a manufacturer to withdraw an effective NDA; only the FDA can do so through Section 505(e) procedure".⁹ Prior to October 9, 1962, there was in this case no proceeding by FDA under Section 505(e) with reference to plaintiff's NDA'd drugs and there was accordingly no valid withdrawal of the plaintiff's effective NDAs, on or before the enactment date of the 1962 Amendments.

The plaintiff, though, presses another theory upon the basis of which it claims the previously issued NDAs are to be regarded as ineffective on October 9, 1962. Thus it argues that its pre-1962 NDA'd drugs became generally recognized as safe on or before October 9, 1962. So much the defendants seem to concede in the Stipulation of Facts submitted to the District Court. From this fact, it reasons that its NDA drugs ceased to be "new drugs" as defined in the Act, on or before October 9, 1962, and, ergo, its previously issued NDAs were no longer needed or "effective" on the critical date of October 9.¹⁰ The difficulty with this argument, plausible though it may be, is that it would make surplusage of requirement (C) in the exemption statute. Thus, if a drug met the test set up in (B), that is, was generally recognized as safe on October 9, 1962, it would not be necessary, under the plaintiff's argument, to consider whether (C) was applicable or not. Such a construction of the exemption statute, under which a clearly stated condition to its application is to be treated as a nullity, offends the well-settled rule of statutory construction that all parts of a statute are to be given effect if at all possible.¹¹ It is manifestly possible to give effect to the conditions enunciated in both (B) and (C). There are many drugs that satisfy both conditions, that is, are generally recognized as safe and effective and are being marketed without an approved NDA. There is nothing inconsistent in the two requirements. Moreover, condition (C) represented a limitation on the right to an exemption that the Congress clearly and unmistakably intended to apply. The Congress never intended that a drug being marketed under an approved NDA might qualify under the "grandfather clause." This is plain from the comment in the Conference Committee Report that the exemption was to apply "to existing labeling claims of drugs that have never previously been subject to the new-drug procedure". (Italics added.) Conference Rep. 2526, 87th Cong., 2d Sess., p. 23. Moreover, the argument of the plaintiff would run counter to the principle that statutory exemptions, particularly as applied to statutes concerned with public health and safety, are to be strictly and narrowly construed.¹²

The plaintiff has, however, two drugs,¹³ involved in this proceeding, which were generally recognized as safe and were¹⁴ marketed as "old drugs" without an approved NDA on October 9, 1962. These drugs, as we earlier indicated, present separate problems from those drugs for which there are approved NDAs. They fall into the category of what are generally described in the trade as "me-too" drugs.¹⁵ Such a drug, if generally regarded as safe on October 9, 1962, meets literally the criteria for exemption stated in the "grandfather clause". To sustain the exemption, however, creates an inequitable result, provided the pioneer drug was NDA'd. In that event, the pioneer drug would be subject to withdrawal of marketing privilege absent substantial evidence of effectiveness, whereas its copy would enjoy immunity from any such requirement under Section 107(c) (4). Most commentators, while admitting the incongruity of this result, justify it as one compelled by the literal language of the statute.¹⁶ Their reasoning is similar to that of the Court in Pfizer, Inc. v. Richardson (2d Cir. 1970) 434 F.2d 536, 542, where speaking to a somewhat illogical provision in this same A...