Teva Pharmaceutical Industries Ltd. v. Crawford

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 9, 2005 Decided June 3, 2005

No. 05-5004

TEVA PHARMACEUTICAL INDUSTRIES LTD . AND

TEVA PHARMACEUTICALS, USA, INC.,

APPELLANTS

v.

LESTER M. CRAWFORD, JR., ACTING COMMISSIONER OF FOOD

AND DRUGS, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 04cv01416)

William H. Rooney argued the cause for appellants.

With him on the briefs were Theodore C. Whitehouse and James

N. Czaban.

William A. Rakoczy, Christine J. Siwik, Amy D. Brody,

and Lara E. Monroe-Sampson were on the brief for amicus

curiae Mylan Pharmaceuticals, Inc. in support of appellants.

Jeffrey S. Bucholtz, Deputy Assistant Attorney General,

U.S. Department of Justice, argued the cause for federal

appellees. With him on the brief were Peter D. Keisler,

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Assistant Attorney General, Eugene M. Thirolf, Director,

Andrew E. Clark, Attorney, Alex M. Azar, II, General Counsel,

Food & Drug Administration, and Eric M. Blumberg, Deputy

Chief Counsel.

Bert W. Rein argued the cause for appellees Pfizer Inc.,

et al. With him on the brief were Karyn K. Ablin and Jeffrey B.

Chasnow.

Before: GINSBURG , Chief Judge, and SENTELLE and

ROGERS, Circuit Judges.

Opinion for the Court filed by Chief Judge GINSBURG.

GINSBURG, Chief Judge: Teva Pharmaceutical Industries

has sued to overturn the Food and Drug Administration’s denial

of its “citizen petition” requesting that the agency prohibit

Pfizer, Inc., the holder of the approved New Drug Application

(NDA) for gabapentin, from marketing that drug in “generic”

form during the 180-day exclusivity period provided by the

Drug Price Competition and Patent Term Restoration Act, also

known as the “Hatch-Waxman Amendments” to the Food, Drug,

& Cosmetic Act. Because the exclusivity provision does not

apply to the holder of an approved NDA, the district court

entered a summary judgment for the FDA, which we now

affirm.

I. Background

Section 355(j) of 21 U.S.C. provides that a drug

manufacturer may submit an “Abbreviated New Drug

Application” (ANDA) for approval to market a so-called

“generic” drug, which is the bioequivalent to a “branded” drug

previously approved pursuant to a NDA filed under 21 U.S.C.

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§ 355(b). Unlike a NDA, an ANDA need not contain clinical

evidence of the safety or efficacy of the drug.

The ANDA must certify either that the approved product

is not protected by a patent or “that such patent is invalid or will

not be infringed by the manufacture, use, or sale of the new drug

for which the application is submitted.” 21 U.S.C. §

355(j)(2)(A)(vii)(para. IV). The statute rewards the first generic

applicant successfully to challenge the patent on an approved

drug with a 180-day exclusivity period during which no other

ANDA for the same drug may be approved. Id. at §

355(j)(5)(B)(iv).*

*

Prior to December 2003, § 355(j)(5)(B)(iv) provided:

If the [ANDA] contains a certification described in

subclause (IV) ... and is for a drug for which a previous

[ANDA] has been submitted under this subsection

[containing] such a certification, the [ANDA] shall be made

effective not earlier than one hundred and eighty days after --

(I) the date the Secretary receives notice from the

applicant under the previous [ANDA] of the first

commercial marketing of the drug under the previous

[ANDA], or

(II) the date of a decision of a court in an action ...

holding the patent which is the subject of the

certification to be invalid or not infringed,

whichever is earlier.

The Medicare Prescription Drug, Improvement, and Modernization

Act of 2003 (MMA), Pub. L. No. 108-173, 117 Stat. 2066 (Dec. 8,

2003), amended this provision, but it did not substantively alter the

statutory provisions at issue in this case. Because the decisions of the

FDA and of the district court refer to the pre-MMA text, we do so as

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Teva entered into an agreement by which Purepac

Pharmaceutical Co., the first ANDA filer to challenge the patent

for gabapentin, agreed to share its exclusivity period with Teva

in exchange for a portion of Teva’s revenues. During that

period, which ends on June 6, 2005, Pfizer has marketed its own

“generic” version of gabapentin, which it has priced

substantially below its name-brand equivalent (Neurontin),

packaged in “generic” trade dress, and distributed through many

of the same channels Teva uses for its generic product. Pfizer’s

so- called “brand-generic” or “authorized-generic” gabapentin

qualifies for “generic substitution” under state laws and third-

party purchasing plans, such as HMO formularies, and thus has

competed directly with Teva’s product during its period of

exclusivity.

Teva petitioned the FDA first simply to “prohibit the

marketing and distribution of ‘authorized generic’ versions of

brand name products until after the expiration of any ‘180-day

exclusivity period’ applicable to an [ANDA] for the drug

product.” Teva argued in the alternative that the FDA should

“require Pfizer to submit a pre-approval supplemental new drug

application (sNDA) [under 21 U.S.C. § 356a(d)] before

marketing or distributing any version of [a name-brand drug]

changed in any way such that the product purports to be,

resembles, or could be confused with, a generic (unbranded)

version of [the drug].”

By letter of July 2, 2004 the FDA denied Teva’s petition,

concluding § 355(j)(5)(B)(iv) “does not contemplate or

countenance delaying the marketing of authorized generics.”

The Agency further held “there is no statutory basis for

imposing categorical approval requirements for the marketing of

authorized generics, as a means to prevent their marketing

well.

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during a 180-day exclusivity period applicable to the drug under

an ANDA.”

Teva then brought this action in the district court, which,

like the Agency, concluded that “[n]othing in the statute

provides any support for the argument that the FDA can prohibit

NDA holders from entering the market with [an authorized]

generic drug during the exclusivity period.” Teva Pharm. Indus.

v. FDA, 355 F. Supp. 2d 111, 117 (D.D.C. 2004). The court

granted summary judgment for the FDA and Intervenor-

defendant Pfizer, from which Teva now appeals.

II. Analysis

Teva urges this court to adopt what it calls a “functional”

interpretation of § 355(j)(5)(B)(iv), arguing that “literal

interpretation cannot defeat statutory purpose”; the Congress’s

purpose, according to Teva, was to grant the first ANDA filer

complete exclusivity in the generic market for 180 days. The

FDA and Pfizer argue the words the Congress chose simply

cannot bear the result Teva seeks.

We review the FDA’s interpretation of the Act it

administers under the two-step framework of Chevron, U.S.A.,

Inc. v. NRDC, 467 U.S. 837 (1984); see Mylan Labs., Inc. v.

Thompson, 389 F.3d 1272, 1279 (D.C. Cir. 2004) (reviewing

FDA letter ruling on generic exclusivity under Chevron). We do

not reach step two, however, if the court, “employing traditional

tools of statutory construction, ascertains that Congress had an

intention on the precise question at issue[;] that intention is the

law and must be given effect.” Chevron, 467 U.S. at 843 n.9.

Of the traditional tools of statutory construction, the “cardinal

canon” is the first: We “must presume that a legislature says in

a statute what it means and means in a statute what it says ....

When the words of a statute are unambiguous ... this first canon

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is also the last: judicial inquiry is complete.” Conn. Nat’l Bank

v. Germain, 503 U.S. 249, 253-54 (1992).

Section 355(j)(5)(B)(iv) says nothing about how the

holder of an approved NDA may market its drug; rather, that

provision grants “exclusivity” to the first to file an ANDA

containing a paragraph IV certification by delaying the effective

date upon which the FDA may approve any subsequent ANDA

containing a paragraph IV certification with respect to the same

drug. Further, as the FDA explained in its decision letter, other

provisions of the Act “establish[] numerous express grounds for

refusal to approve [a NDA], and ... grounds for compelling the

withdrawal of previously approved products .... [but none]

addresses marketing arrangements in any manner.” See 21

U.S.C. § 355(d) & (e). Indeed, as Teva’s counsel conceded at

oral argument, prior to the Hatch-Waxman Amendments,

nothing in the Act prohibited the holder of an approved NDA

from marketing a “brand-generic” version of its drug; thus Teva

asks the court to declare that a previously lawful practice

became unlawful when the Congress passed a statute that said

nothing about that practice.

Teva’s argument proceeds from the following premises:

(1) the purpose of the 180-day exclusivity period was “to

encourage generic companies to file Paragraph IV challenges to

brand-drug patents”; (2) the marketing of a brand-generic

competitor during that period will reduce the revenues going to

the first to file an ANDA; and (3) such “brand-generic intrusion

[into the exclusivity period] developed only recently as a routine

brand-company business strategy.” Neither the FDA nor Pfizer

disputes any of these propositions. The parties part company,

however, when Teva goes on to argue that because the Congress

could not have anticipated brand-generic competition during the

exclusivity period, adhering to the “literal” terms of the statute

would lead to an absurd result, namely, that § 355(j)(5)(B)(iv)

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grants only a “meaningless” exclusivity against subsequent

ANDA filers rather than a “commercially effective” exclusivity

that runs against the NDA holder as well.

It does not follow, however, from the Congress having

intended to create an incentive to challenge brand-drug patents

-- as it clearly did -- that the incentive it created is without

limitation. Rather, as even the formal name of the Hatch-

Waxman Amendments (the Drug Price Competition and Patent

Term Restoration Act) reflects, the Congress sought to strike a

balance between incentives, on the one hand, for innovation, and

on the other, for quickly getting lower-cost generic drugs to

market. Because the balance struck between these competing

goals is quintessentially a matter for legislative judgment, the

court must attend closely to the terms in which the Congress

expressed that judgment. As Teva itself points out, without any

apparent sense of irony, the FDA may not

revise the specific statutory incentive that Congress

enacted or ... alter the means chosen by Congress to

implement its purpose by offering a different incentive.

See MCI Telecommunications Corp. v. AT&T, 512 U.S.

218, 231 n.4 (1994) (stating that agencies “are bound,

not only by the ultimate purposes Congress has selected,

but by the means it has deemed appropriate, and

prescribed for the pursuit of those purposes”).

The means the Congress “deemed appropriate, and

prescribed” to give generic drug makers an incentive to

challenge brand-drug patents is unambiguous: The FDA may

not approve a second or later ANDA containing a paragraph

(IV) certification until 180 days after the first filer with such a

certification begins commercially marketing the drug or wins a

court decision against the patent holder. There is simply no way

to read that limitation upon what the FDA may do in such a way

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as to prevent the holder of an approved NDA, which does not

need to file an ANDA and certainly would not challenge its own

patent, from marketing a brand-generic product. Nor, contra

Teva, is the result of reading the Act as it is written to render

“meaningless” the “specific statutory incentive that Congress

enacted.” For 180 days the generic market is the exclusive

preserve of two firms; absent an agreement of the sort by which

Teva itself entered the market for generic gabapentin, no other

firm may enter and take any part of either company’s market

share.

Finally, nothing in § 356a(d) -- which allows the FDA to

require the holder of an approved NDA to submit a

supplemental application for “manufacturing changes that are

not major” -- permits the agency to create a de facto type of

exclusivity against the NDA holder’s brand-generic drug. As

the FDA points out, the purpose of requiring a sNDA is to

“validate[] the effects of the change [in manufacturing] on the

identity, strength, quality, purity, and potency of the drug as

[they] may relate to the safety or effectiveness of the drug,” 21

U.S.C. § 356a(b). The FDA may not, as it says, “require sNDAs

... for reasons wholly unrelated to the safety or efficacy of the

brand company’s product.” Nor may the FDA use this general

authority to expand the specific but more limited grant of

exclusivity in § 355(j)(5)(B)(iv). Cf. Am. Petroleum Inst. v.

EPA, 52 F.3d 1113, 1119 (D.C. Cir. 1995) (“general grant of

rulemaking power ... cannot trump specific portions of the

[statute]”).

III. Conclusion

We hold § 355(j)(5)(B)(iv) of the Act clearly does not

prohibit the holder of an approved NDA from marketing, during

the 180-day exclusivity period, its own “brand-generic” version

of its drug. We therefore do not reach Teva’s argument that the

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FDA previously interpreted that section in a manner inconsistent

with its ruling in this case. For the foregoing reasons, the

judgment of the district court is

Affirmed.