10th Circuit Tackles Challenge to FDA Enforcement Actions Taken Under Unapproved Drugs Initiative

Staff Writers
November 30, 2011 at 07:00 PM EST

A federal appeals court Nov. 3 affirmed the judgment of a district court in Wyoming rejecting a challenge brought by manufacturers of a morphine sulfate solution against actions taken by the FDA as part of the agency's Unapproved Drugs Initiative (Cody Laboratories, Inc. v. Sebelius, No. 11-8001, 2011 WL 5222910 (10th Cir. Nov. 3, 2011)). The decision demonstrates some of the administrative law barriers that can be faced by companies that attempt to challenge FDA enforcement actions in the courts.

The Dispute

Cody Laboratories Inc. and Lannett Co. first brought their challenge in the U.S. District Court for the District of Wyoming in July 2010 after the FDA sent Warning Letters to them and to other manufacturers and distributors of unapproved morphine sulfate products as part of the enforcement initiative. In the letters the FDA announced its intention to temporarily exercise enforcement discretion with regard to unapproved morphine sulfate products, eventually scheduling the period of enforcement discretion to end 180 days after any manufacturer received approval for one of the products.

Cody and Lannett asserted that the product they manufactured was exempt from the new drug application (NDA) approval requirements of the Federal Food, Drug and Cosmetic Act under a grandfather provision exempting some drugs marketed before enactment of the 1938 statute. After the FDA approved a competitor's NDA for a morphine sulfate solution product under priority review, the agency announced its intention to follow through on its plans to end the period of enforcement discretion within 180 days. Cody and Lannett later filed an NDA for their product, but the FDA declined to give their application priority review. The manufacturers then filed their court challenge.

Decisions by the District Court

The district court rejected the manufacturers' motion for a temporary restraining order and preliminary injunction blocking the FDA from taking enforcement action against their product, saying that the court did not have jurisdiction over the companies' claims because the enforcement moves did not constitute final agency action ripe for judicial review, as is required by the Administrative Procedure Act (Cody Laboratories, Inc. v. Sebelius, No. 10-cv-00147-ABJ, 2010 WL 3119279 (D. Wyo. July 26, 2010); see "Court Dismisses Challenge to Enforcement Taken Against Narcotic Under Unapproved Drug Initiative," September 2010, p. 6).

Four months later, the district court dismissed the manufacturers' complaint, which sought a declaratory judgment and injunctive relief (Cody Laboratories, Inc. v. Sebelius, No. 10-cv-00147-ABJ (D. Wyo. Nov. 16, 2010); see "Court Grants FDA's Motion To Dismiss in Dispute Over Enforcement Action Against Unapproved Drug," January 2011, p. 9). The court first rejected their claim that the FDA's determination that the product needed an approved NDA was unlawful. According to the court, the Warning Letters and other correspondence from the FDA did not constitute final agency action.

The district court also rejected a second claim by the manufacturers: the allegation that the FDA's refusal to grant Cody and Lannett priority review of their product was unlawful. The FDA had made only a "conclusory argument" that the manufacturers had not exhausted their administrative remedies by not filing a citizen petition seeking priority review, the court said. Nevertheless, it concluded, the agency's decision not to grant priority review also did not constitute final agency action. The court determined that it could not determine whether the application procedures were proper until the agency either approved or denied the NDA.

NDA Approved; Mootness Questions Raised

The manufacturers appealed to the U.S. Court of Appeals for the 10th Circuit. While the appeal was pending, the FDA approved the manufacturers' NDA. The FDA then filed a motion to dismiss the appeal as moot. The agency first argued that the approval had mooted both the claim about the need for an NDA and the claim regarding disparate treatment as to priority review of the NDA. Later, the FDA contended only that the disparate treatment claim was mooted. The manufacturers maintained that neither of its claims was mooted by the NDA approval.

The appeals court agreed with the parties that the approval of the NDA did not moot the claim that the product was exempt from the NDA requirements. If the requirements did not apply, the court said, the manufacturers "would face a different and apparently lighter regulatory burden," including no assessment of user fees. Moreover, the product's labeling requirements would be "perhaps less onerous." In sum, the court said, if the manufacturers prevailed on their claim, they "could still obtain meaningful relief in the form of freedom from those burdens."

Disparate Treatment Claim Is Moot

By contrast, the court found that the disparate treatment claim had been mooted by the NDA approval. At this point, the 10th Circuit panel said, the manufacturers' disparate treatment claim amounted merely to a request for "a retrospective opinion that [they] were wrongly harmed" — an opinion that federal courts do not have the power to issue under Article III of the U.S. Constitution, the court said.

The disparate treatment claim also did not fall under an exception to the mootness doctrine for disputes that are capable of repetition but evading review, the court said, because there was no reasonable expectation that the manufacturers would be subjected to the same adverse action in the future. With respect to the NDAs that the manufacturers said they intended to file with the FDA, the court said that the companies "[had] not given ... reason to expect that the agency will deny [their] request for expedited review while granting that of [their] competitors."

NDA Requirement Exemption Issue Not Reached

Even though the claim that the manufacturers' product was exempt from the NDA requirements was not moot, the appeals court nevertheless concluded that it could not reach the claim's merits.

The FDA's enforcement actions toward the manufacturers had included a Warning Letter, subsequent correspondence confirming the agency's position, and other "de facto enforcement actions" — such as notifying the manufacturers' customers of the agency's views, as well as notifying the Drug Enforcement Agency (DEA), which allegedly resulted in the DEA's refusal to give the manufacturers authorization to buy the raw materials needed to make morphine sulfate. The manufacturers contended that together these acts constituted final agency action, making their claim ripe for judicial review.

What Is 'Final Agency Action'?

The appeals court first noted that every court that has considered the question has concluded that the issuance of a Warning Letter does not constitute final agency action. Moreover, whatever the consequence of the full set of enforcement actions taken by the FDA, the court said, the manufacturers' failure to avail themselves of available administrative remedies — specifically, the citizen review process — "defeats [their] claim even if we were inclined to hold that the FDA's action were otherwise final."

The court agreed with the manufacturers that, because the citizen petition procedure is "a regulatory rather than a statutory creation," the court could decide not to consider it when determining whether the available administrative remedies had been exhausted. But the fact that the FDA "is sometimes dilatory in substantively responding to citizen petitions" did not mean that the manufacturers were unduly prejudiced by having to file a petition, the court said. Moreover, the court found no evidence that, in the manufacturers' words, the FDA was "biased or has otherwise predetermined the issue before it."

In the end, the court said, the fact remained that the FDA had made its "initial determination" regarding the need for an NDA "in the absence of a factual record .... If [the manufacturers] were to follow the regulations and file a citizen petition, the agency would have to undertake a full review of the factual record and public comments." Given that the issue "hinges on the fact-intensive history of the drug's marketing and use," the 10th Circuit panel concluded, "we do not anticipate that the agency will blindly refuse to consider evidence submitted by [the manufacturers]." The appeals court thus affirmed the district court's dismissal of the manufacturers' claim that no NDA was required.

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