One of the advantages that the FDA (and other government agencies) have over other litigants is that it gets to ignore court decisions it doesn’t like, in hopes of trying again later in what the Agency considers a more favorable forum. Here’s how one court described the same policy by a different agency:
Understood in the most charitable light, not acquiescing to a given circuit’s diverging legal interpretation until the Supreme Court has the last word puts two roles in harmony − the [administrative agency’s] role of national say in what [administrative] law should be, and the judicial department’s emphatic province and duty to say what the law is. . . .
To that end, nonacquiescence allows for an issue’s “percolation” among the circuits; generating a circuit split that can improve the likelihood of certiorari being granted. But, nonacquiescence is justifiable only as a means to judicial finality, not agency aggrandizement. . . . [N]onacquiescence is divorced from its purpose when an agency asserts it with no stated intention of seeking certiorari.
Heartland Plymouth Court MI, LLC v. NLRB, 838 F.3d 16, 21-22 (D.C. Cir. 2016) (citations, quotation marks, and footnote omitted). FDA uses nonaquiescence as do other federal agencies. We believe that the FDA’s failure to appeal United States v. Caronia, 703 F.3d 149 (2d Cir. 2012), is an example of this policy. So far the FDA’s gotten away with it. The First Amendment/off-label promotion issue hasn’t reached any other circuit, and the FDA can do what it wants in all other circuits.
However, it doesn’t always work out that way, and FDA took one on the chin recently in Eagle Pharmaceuticals, Inc. v. Azar, 952 F.3d 323 (D.C. Cir. 2020). The issue in Eagle Pharmaceuticals was marketing exclusivity under an FDA “orphan drug” approval. Orphan drugs are those that treat rare diseases. Development of such drugs is problematic “because the comparatively small demand for treatment left little motive for research and development.” Id. at 325 (citation and quotation marks omitted).
Congress passed the Orphan Drug Act to provide incentives to overcome this barrier, one of which is “a seven-year period of exclusive approval rights during which time the FDA may not approve another” competing drug “for a person who is not the holder of” the original application. Id. (citing 21 U.S.C. §360cc(a)). The FDA added its own gloss to the statute:
[T]he FDA considers a drug the same as a previously-approved drug if it shares the same active moiety and is not otherwise clinically superior; it considers the drug to be different − and thus entitled to its own seven-year exclusivity period upon designation and approval − if it does not have the same active moiety or is clinically superior.
Id. at 326. For those not familiar with FDA-speak, or chemistry, “moeity” is simply the drug’s “active ingredient.” Id. Another FDA gloss – and the one on which decision in Eagle Pharmaceuticals turns − is on this concept of “clinical superiority.” At the beginning of the entire process – the “designation stage” – an applicant can obtain orphan drug status simply by “present[ing] a plausible hypothesis that its drug may be clinically superior to the first drug.” Id. at 327 (quoting 21 C.F.R. 316.20(a)) (emphasis original with the court). Later on, after the FDA acts, a person holding an approved application must “demonstrate . . . that the drug is clinically superior to the previously approved drug.” Id. (quoting 21 C.F.R. §316.34(c)) (emphasis original with the court).
The reason for the FDA’s distinction is to prevent a process known as “evergreening” – which is the original applicant being able to use superiority claims to tack of one exclusivity period after another so as to “[o]btain infinite, successive 7-year periods of exclusivity for the same drug for the same use.” Id. (quoting 78 Fed. Reg. 35117, 35127 (FDA June 12, 2013)).
That sounds like a laudable goal for FDA to pursue. The only problem is that there’s no basis for it in the statute. And that was what a court held back in 2014.
[T]he language of the Act’s exclusivity provision does not permit or invite any discretion on the part of the FDA regarding whether or not to continue authorizing new such drug marketing applications once an orphan drug has been so designated and approved. Indeed, Congress has specifically established the only two situations in which the FDA can carry on regardless [and neither involves this situation].
Depomed, Inc. v. United States Dep’t of HHS, 66 F. Supp.3d 217, 231 (D.D.C. 2014). However, rather than appeal the Depomed decision, FDA close to ignore it through nonacquiescence. “The FDA initially appealed the Depomed decision but ultimately withdrew its appeal, opting instead to nonacquiesce to the decision in future cases.” Eagle Pharmaceuticals, 952 F.3d at 328 (citation omitted).
We’d love it if our clients could do that. But one problem with nonacquiescence is that it’s a recipe for procrastination. It’s also why federal courts have increasingly resorted to nationwide injunctions to force the government to obey court orders. Here, with no nationwide injunction having issued, the FDA (and Congress) did nothing to address the Depomed holding for the next six years – until the District of Columbia Circuit decided Eagle Pharmaceuticals.
First, the Chevron doctrine didn’t help the FDA, since (like Depomed) the appellate court in Eagle Pharmaceuticals found no ambiguity in the controlling statute:
Under the plain language of this provision, the FDA is barred from approving another application for “such drug” for the same disease for seven years once it approves an orphan drug for marketing. Based on this language, the seven-year marketing exclusivity period applies automatically − the text leaves no room for the FDA to place additional requirements on a drug that has been designated and approved before granting its manufacturer the right to exclusivity.
952 F.3d at 331. Eagle Pharmaceuticals thus rejected the FDA’s contrary arguments. While the statute did not speak to “whether one or multiple manufacturers can win a period of exclusive approval,” that was not an ambiguity, merely an application of the statute’s requirements to a particular fact pattern. Id. Given the statutory context in which it was used “expiration” was not ambiguous, since it was modified by the phrase “of seven years.” Id. at 332. In sum:
We conclude that the text of §360cc(a) is unambiguous: if the FDA approves a previously-designated orphan drug, it cannot approve another such drug for the same condition for seven years. This language leaves no room for the FDA to add an after-the-fact requirement that a designated and approved drug prove clinical superiority before receiving that exclusive approval benefit. Nothing in the statute’s text, structure or purpose limits this benefit to only one drug manufacturer.
Id. at 340.
The other escape hatch from plain statutory language is – as we have seen in removal before service – is to argue that the statute as written leads to an “absurd” result. The DC Circuit was no friendlier to that argument than the circuits recently evaluating it in the removal context:
Granted, the Congress’s goal in enacting the [Act] was to reduce the cost of and incentivize orphan drug development but the fact that following the text of a statute may conflict with the statute’s larger purpose alone does not warrant departing from the text. It is not our job to say how the Congress should accomplish its goals; rather, we will ignore what the Congress has written only if we are so convinced by a conflict between the text and the purpose that we think the Congress almost surely could not have meant what it said.
Id. at 334-35 (citations omitted). Further, the issue that the FDA identified as an “absurdity” “could occur only if the FDA allowed it to happen.” Id. at 334.
Finally, as to the FDA’s desire to prevent consecutive exclusivity periods the court pointed out “that the FDA may have created the self-evergreening problem itself.” Id. at 336. The FDA only needs to get off its collective duff (which nonacquiescence encouraged) and act:
[T]his result assumes that the FDA’s regulations for designation are correct and static. Not so. The self-evergreening problem is within the FDA’s power to manage and, if needed, alter. . . . Were the FDA to change its regulations for designation to take into account both the active moiety and the formulation, for example, that would prevent a manufacturer from obtaining successive, automatic exclusivity periods for various formulations of the same drug simply by relying on its original designation.
Id. In short, the FDA “cannot avoid the Congressional intent clearly expressed in the text simply by asserting that its preferred approach would be better policy.” Id. at 337 (citation and quotation marks omitted).
It appears to us that FDA’s nonacquiescence maneuver here left it worse off than if it had pursued an appeal in the Depomed case six years ago. Not only has the Agency wasted six years, now it has lost in the District of Columbia Circuit, the preeminent circuit for administrative law issues such as this. Does the FDA now appeal to the Supreme Court? Does the FDA feel lucky? Unlike six years ago, there may now be a majority on the Supreme Court that would seek to use an appeal like this one to knock down the entire Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), edifice under which Eagle Pharmaceuticals was decided.
Go ahead, make our day.