Lead Opinion
Opinion for the Court filed by Senior Circuit Judge WILLIAMS.
Dissenting opinion filed by Circuit Judge HENDERSON.
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 losarían potassium products — used primarily to treat hypertension. The approval will become final once the “pediatric exclusivity period”
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 losarían potassium products right out of the gate. In short, Teva says that, effective April 6, 2010, the agency’s interpretation will de
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,
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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,
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,
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 drag 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.”
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.
*1307 (BB) In an infringement action or a declaratory judgment action described in subitem (AA), a court signs a settlement order or consent decree that enters a final judgment that includes a finding that the patent is invalid or not infringed.
(CC) The patent information submitted under subsection (b) or (c) of this section is withdrawn by the holder of the application approved under subsection (b) of this section.
21 U.S.C. § 355(j)(5)(D)(i)(I) (emphasis added).
The FDA stated its view of the matter in terms echoing the so-called “first prong” of Chevron, U.S.A. Inc. v. NRDC,
Teva filed the ANDAs at issue in this case on December 18, 2003, for Cozaar, and May 24, 2004, for Hyzaar. Both contained a paragraph IV certification targeting Merck’s U.S. patent No. 5,608,075, which does not expire until 2014, and left unchallenged Merck’s other, earlier-expiring patents on the drugs. In response to Teva’s filing, Merck chose not to sue for infringement, as it might have. Instead, on March 18, 2005, Merck asked the FDA to delist the 075 patent, which the agency did, though without making the action public until April 18, 2008. Appellees’ Br. at 17. As of the present date, the FDA has awarded tentative approval to Teva’s ANDAs, see Teva,
But in light of the Hi-Tech Letter, Teva saw the writing on the wall: under the interpretation of the “plain language” of the amended statute that the FDA had twice adopted, Teva had by the fall of 2008 already forfeited the exclusivity it believed it had earned — on August 12, 2006 for the generic Cozaar ANDA, and on January 16, 2007 for the generic Hyzaar ANDA.
The posture of this case raises several significant questions about its justiciability. One concerns conventional ripeness. A second, an issue of standing, implicates a potential — though ultimately illusory — conflict between, on one hand, decisions of this court regarding a plaintiffs ability to obtain pre-enforcement review of a policy adopted by an agency in an adjudication and, on the other hand, the well-established teaching of Lujan v. Defenders of Wildlife,
Ripeness
Pre-enforcement judicial review of an agency’s policy is available only if the dispute is ripe. Nat’l Park Hospitality Ass’n v. Dep’t of Interior,
In this case, the substantive issues Teva raises are undoubtedly “purely legal” in the relevant sense. They turn on questions of statutory construction, see Shays
While the FDA could in principle change its position as to the effect on generics’ exclusivity of brand makers’ requests to delist, an about-face seems extraordinarily unlikely. In its brief, the agency maintains, as it did in the Cobalt matter and the Hi-Tech matter, that the interpretation it adopted in those instances is compelled, by the statute and that arguments to the contrary are plainly futile. Appellees’ Br. at 42-43 (“[T]he plain language of subsection (CC) makes clear that the provision applies whenever a patent is withdrawn by the [patent holder.]” (emphasis in original)). The mere theoretical possibility that an agency could alter its views on a legal issue before enforcing them against a party has not, in the past, precluded pre-enforcement review of those views. The same possibility exists for rulemakings, as we observed in Association of Bituminous Contractors, Inc. v. Andrus,
The government argues, however — relying chiefly on Pfizer Inc. v. Shalala,
The absence of any colorable factual dispute in Teva’s case compels a different outcome from Pfizer. The FDA makes no suggestion that any possible deficiency or uncertainty in Teva’s ANDA could thwart final approval. It offers no reason to doubt the conclusion that the first paragraph IV certification against Hyzaar, filed on May 24, 2004, was the paragraph IV certification against Hyzaar that Teva filed on May 24, 2004 — which in turn dictates that Teva has satisfied the threshold requirement for exclusivity. The agency does caution that one or more of the statutory “forfeiture events” other than a “failure to market” might in any case deprive Teva of exclusivity before final approval—
The second prong of the ripeness analysis addresses “whether postponing judicial review would impose an undue burden on” the parties. National Ass’n of Home Builders,
District courts in this circuit routinely reach the merits of generic manufacturers’ claims to exclusivity before the FDA has granted final approval to any ANDA concerning the drug at issue. See, e.g., Teva,
When the question at issue is well-defined, and when withholding judicial consideration would cause undeniable harm, as here, ripeness concerns pose no obstacle to pre-enforcement review.
Standing
The FDA embraced the statutory interpretation that Teva now seeks to challenge not in a rulemaking but in two adjudications to which Teva was not a party (though actively commenting in one). Our past cases suggest some uncertainty whether a dispute in that posture can ever be justiciable. See, e.g., Radiofone, Inc. v. FCC,
But straightforward application of hornbook doctrine yields the conclusion that Teva has standing. Article III of the Constitution requires that a federal court plaintiff allege an actual or imminent injury that is fairly traceable to the defendant’s challenged conduct and redressable in the judicial proceeding. Lujan,
The “injury” prong of the standard standing inquiry is a bit thornier — but only to the extent of the trivial uncertainty whether the FDA will on April 6, 2010 stick to the interpretation that Teva attacks here. As discussed in the ripeness analysis above, however, we find no uncertainty to speak of on the matter. It is clear what the FDA will do absent judicial intervention and what the effect of the agency’s action will be. The inescapable implication is that Teva faces an imminent threat of the same harm that has sufficed for Article-Ill injury purposes in all of our past drug-approval cases: the impending prospect of allegedly unlawful competition in the relevant market. See, e.g., Bristol-Myers Squibb Co. v. Shalala,
The question, then, is whether the normal application of the constitutional standing doctrine is suspended when the court’s knowledge that an agency is about to inflict injury on a party derives from an agency policy that originated in an adjudication (or several). The strongest support for such a principle would be Sea-Land Service, Inc. v. Department of Transportation,
In all of these cases, we rebuffed efforts to obtain pre-enforcement review of policies embraced by agencies in adjudications. In each instance, however, the failure to demonstrate standing is more naturally understood as arising from the lack of a sufficiently imminent and concrete injury than from some sort of ad hoc exception to otherwise-universally applicable constitutional doctrine. Radiofone, for example, addressed whether parties allegedly aggrieved by reasoning employed by the FCC in an adjudication could appeal the agency’s order even though the recipient of the order had since ceased doing business.
Sea-Land,, too, did not involve a party pointing to a particular imminent application of the disputed agency policy. The justiciability problem in that case arose from the “principle that prevailing parties lack standing to appeal,”
No other case we’ve decided concerning a pre-enforcement challenge to an agency interpretation adopted via adjudication counsels a contrary result. See AFLAC,
We have, on the other hand, allowed a party to challenge in advance an agency policy adopted via adjudication when the prospect of impending harm was effectively certain. In International Brotherhood of Electrical Workers v. ICC,
We have, moreover, explicitly sanctioned review of a case in the present posture — albeit while framing the justiciability question as one of ripeness rather than standing. Association of Bituminous Contractors v. Andrus,
On the merits, we review de novo the district court’s grant of summary judgment to the FDA. See Kersey v. Washington Metropolitan Area Transit Authority,
Teva offers two principal reasons to conclude that the FDA may not allow a brand manufacturer’s request to delist a challenged patent to trigger a statutory “forfeiture event” resulting in the loss of a generic’s exclusivity. One reason takes the form of linguistic analysis focused almost entirely on the text of the “failure to market” forfeiture event and a related provision. The 2003 amendments, Teva explains, introduced a new procedure, a counterclaim in the brand manufacturer’s patent infringement suit, through which generic companies can force brand companies to delist an improperly asserted patent. See 21 U.S.C. § 355(j)(5)(C)(ii)(I).
The FDA, for its part, responds that “the plain language of the statute contains no limitation on when delisting can occur.” Appellees’ Br. at 44. Brand manufacturers are thus free to delist challenged patents whenever they please — and any such delisting satisfies subsection (CC) of the “failure to market” forfeiture section. Id. at 45-46. In effect, the agency says, the counterclaim provision says nothing about its being an exclusive route to delisting, and if Congress meant to confine subsection (CC) delistings to those arising from the counterclaim procedure, it would have been natural for it to place that limitation in (CC).
While Teva’s purely linguistic argument shows its understanding of the relevant language to be perfectly plausible, it hardly rules out alternative readings that, absent consideration of statutory structure, also appear plausible. See Chevron,
This brings us to Teva’s structural argument. Ranbaxy, Teva notes, concerned an FDA policy with a virtually identical effect. See
by delisting its patent, to deprive the generic applicant of a period of marketing exclusivity. By thus reducing the certainty of receiving a period of marketing exclusivity, the FDA’s delisting policy diminishe[d] the incentive for a manufacturer of generic drugs to challenge a patent ... in the hope of bringing to market a generic competitor for an approved drug without waiting for the patent to expire. The FDA may not, however, change the incentive structure adopted by the Congress, for the agency is 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.”
Id. at 126 (emphasis added, citation omitted). Nothing in the 2003 amendments to the Food, Drug, and Cosmetic Act altered that essential incentive structure, says Teva, so the preceding portion of Ranbaxy remains applicable even under the new regime. Indeed, it is true that the 2003 amendments say nothing specific to undermine our prior understanding of the statute’s intended incentive structure.
But the FDA sees a way in which its interpretation of subsection (CC) accomplishes at least some congressional purpose. Without the possibility of a forfeiture of exclusivity resulting from the delisting of a challenged patent, a generic manufacturer that had been awarded exclusivity could delay all generic competition more or less indefinitely, since by statute the agency can’t approve competing generics until 180 days after the first paragraph-IV filer has begun commercial marketing of its newly approved product. See 21 U.S.C. § 355(j)(5)(B)(iv)(I). Congress enacted the “failure to market” provision, in the agency’s view, precisely to avoid such “parking” of exclusivity; allowing a brand maker to trigger forfeiture by delisting a challenged patent positively furthers that legislative aim. Appellees’ Br. at 45. Besides, the agency says, “Consumers benefit from lower drug prices immediately without having to wait for one generic company to enjoy 180 days of exclusivity when the patent owner itself takes the position that a patent should not hinder FDA approval ofANDAs.” Id.
The real issue, then, is whether the FDA is right that the 2003 addition of the “failure to market” forfeiture provision, 21 U.S.C. § 355(j)(5)(D)(i)(I), altered the statute’s incentive structure to the point that Ranbaxy’s reasoning no longer controls the agency’s treatment of a delisting request in the wake of a paragraph-IV filing.
The terms of § 355(j)(5)(D)(i)(I), quoted in full in the opening of this opinion, create five possible dates on which a generic manufacturer otherwise entitled to exclusivity can forfeit it: (1) 75 days after the agency finally approves the relevant ANDA; (2) 30 months after the generic submits the relevant ANDA; (3) 75 days after a court judgment that the challenged patent is invalid or not infringed; (4) 75 days after a suit over the challenged patent is settled favorably to the ANDA filer; and (5) 75 days after the challenged patent is delisted. No forfeiture occurs, however, unless one of dates (l)-(2) and one of dates (3)-(5) have come to pass. See id.; FDA Letter re 180-day exclusivity, Docket No. 2007N-
The FDA’s view turns the last alternative among events (3)-(5) into a fundamentally different forfeiture trigger: it is satisfied when the patent targeted in a paragraph-IV filing “is withdrawn by the” brand manufacturer, full stop — meaning that Congress has now explicitly provided for a scenario in which the brand maker can unilaterally deprive the generic of its exclusivity. The agency, however, offers not a single cogent reason why Congress might have permitted brand manufacturers to trigger subsection (CC) by withdrawing a challenged patent, outside the counterclaim scenario identified by Teva.
The argument that the plain language of the statute imposes no limit on the circumstances in which the agency may effectuate delisting requests fails. Precisely the same could have been said of the version of the statute that Ranbaxy addressed, and we nevertheless concluded that its structure precluded an FDA rule allowing the agency “to delist a patent upon the request of the [brand manufacturer]” when the delisting would rob the generic maker of earned exclusivity.
The agency fares no better in suggesting that allowing the delisting of challenged patents prevents the ANDA filer from “creating] a bottleneck” blocking generic competition by “parking” its exclusivity. Appellees’ Br. at 45. As a parking-prevention device, letting brand makers delist challenged patents in order to trigger a forfeiture of exclusivity would be completely ineffective; given the incentives for the brand manufacturer, it will be used only where its impact on Congress’s scheme is most destructive. If the generic appears likely to park its exclusivity, the brand maker will simply refrain from delisting altogether, thus enjoying an extended period during which it faces no generic competition while the exclusivity-holder bides its time.
Finally, the FDA’s sole effort to root its interpretation in the policy underlying Hatch-Waxman — the thought that the interpretation benefits consumers by allowing full generic competition without a 180-day delay — betrays a misunderstanding of the exclusivity incentive. The statute’s grant of a 180-day delay in multiple generic competition for the first successful paragraph IV filer is a pro-consumer device. And it happens to be precisely the device Congress has chosen to induce challenges to patents claimed to support brand drugs. The statute thus deliberately sacrifices the benefits of full generic competition at the first chance allowed by the brand manufacturer’s patents, in favor of the benefits of earlier generic competition, brought about by the promise of a reward for generics that stick out their necks (at the potential cost of a patent infringement suit) by claiming that patent law does not extend the brand maker’s monopoly as long as the brand maker has asserted. As Congress deliberately created the 180-day exclusivity bonus, the FDA cannot justify its interpretation by proudly proclaiming that it has eviscerated that bonus.
We see nothing in the 2003 amendments to the Food, Drug, and Cosmetic Act that changes the structure of the statute such that brand companies should be newly able to delist challenged patents, thereby triggering a forfeiture event that deprives generic companies of the period of marketing exclusivity they otherwise deserve. For that reason, the interpretation of the statute that the FDA has adopted in two recent adjudications, and that it regards itself as bound by law to apply to Teva’s ANDAs for losartan products, fails at Chevron step one. Cf. Ranbaxy,
One matter remains. Teva’s prospective generic losartan competitor, Apotex, sought to intervene as a defendant in Teva’s suit before the district court. The court denied the intervention on the ground that Apotex lacked standing. Teva,
We therefore reverse the judgment of the district court, but, as the court has yet to address the appropriateness of each form of relief that Teva has sought, we remand for further proceedings not inconsistent with this opinion.
So ordered.
Notes
. This is a six-month extension of the time during which all generic competition against a branded drug is prohibited, see 21 U.S.C. § 355a; it is not a subject of dispute here.
. The calculation under the FDA’s understanding of the statute looks like this: With respect to Cozaar, the date satisfying paragraph (aa) of the "Failure to Market” forfeiture event is August 12, 2006 (30 months since the filing of the ANDA, see sub section (BB)) — and the date satisfying paragraph (bb) is 75 days after March 18, 2005 (when Merck asked that the drug be delisted, see subsection (CC)); of the two dates, August 12, 2006 is the later one, hence (under the opening clause of § 355(j)(5)(D)(i)(I)) the forfeiture event. With respect to Hyzaar, the analysis is the same, except that 30 months from the date of the ANDA’s filing fell on January 16, 2007. See also Hi-Tech Letter at 15 (saying that the subsection (CC) event is calculated from the date of the brand maker's delisting request, not the date that FDA makes public the delisting).
. Teva also alleges hardship resulting from the severe impact of uncertainty on investment decisions that it must make well before the first legal opportunity to sell its generic, whether as an exclusive (as it claims) or not (under the FDA's view). Delayed resolution of the issues in this case will, depending on the assumptions under which it operates, either (1) cost the company much of a valuable (and lawful) commercial opportunity, if it mistakenly assumes that the FDA view will prevail and therefore refrains from investing sufficient resources to prepare for the increased demand that would accompany an exclusive as opposed to a non-exclusive product launch, or (2) waste hundreds of millions in company resources invested in anticipation of fully exploiting its exclusivity, if it mistakenly assumes that its view will prevail. See Declaration of David Marshall, Vice President of New Products Portfolio Strategy for Teva Pharmaceuticals USA, Inc., at 4-8, J.A. 128— 32. (Of course a straddling investment decision would entail some of each cost.) We express no view as to whether such harm counts in the ripeness analysis. Cf. Exxon Mobil Corp. v. FERC,
. The purpose of this procedure, says Teva, is to offer generics a means of combating brand companies’ practice of delaying generic competition by listing “sham patents,” baiting a generic into filing a paragraph IV certification, and then filing an infringement suit— which typically brings a 30-month stay of generic competition. Appellant's Br. at 42; see 21 U.S.C. § 355(j)(5)(B)(iii) (creating the stay and subjecting it to various limits such as the generic manufacturer’s earlier success in the suit); aaiPharma Inc. v. Thompson,
. We note, in fact, that many instances of generics' parking their exclusivity have evidently arisen thanks to agreements with the brand maker itself to delay generic competition. See Federal Trade Commission, Authorized Generics: An Interim Report ch. 2, at 1 (2009).
Dissenting Opinion
dissenting:
I dissent from the majority opinion because the issue Teva seeks to litigate — its statutory eligibility vel non to exclusively market generic versions of Cozaar and Hyzaar, brand name drugs manufactured by Merck & Co., Inc. (Merck) — will not be ripe unless and until the United States Food and Drug Administration (FDA) issues its final decision either granting or denying Teva’s Abbreviated New Drug Application (ANDA). The United States Supreme Court has established a two-pronged test for determining ripeness, requiring that the court analyze: “(1) the fitness of the issues for judicial decision and (2) the hardship to the parties of withholding court consideration.” Nat’l Park Hospitality Ass’n v. Dep’t of Interi- or,
In that case, Pfizer filed a “citizen petition” with the FDA asking that the agency recognize as “a distinct dosage form” a patented “osmotic pump” used as an extended release mechanism for Pfizer’s brand drug Procardia XL. Pfizer,
We first rejected Pfizer’s argument that “once having decided, based upon the information contained in Mylan’s application, that Mylan’s drug uses the same dosage form as Procardia XL®, the FDA will not ‘alter its views with respect to the necessity of Mylan filing a suitability petition.’ ” Id. at 978. We explained:
*1320 The decision to accept Mylan’s ANDA for processing as a pharmaceutical equivalent to Procardia XL® is ... merely the first step in the agency’s approval process. The critical fact remains that the FDA may never approve Mylan’s application — whether because it decides in the end that the dosage form of Mylan’s drug is different from that of Procardia XL® or for some entirely different reason, such as a lack of bioequivalence. Therefore, “depending upon the agency’s future actions ... review now may turn out to have been unneces- ■ sary” and could deprive the agency of the opportunity to apply its expertise and to correct any mistakes it may have made.
Id. (quoting Ohio Forestry Ass’n v. Sierra Club,
Nor does Teva fare better under the test’s hardship prong as we applied it in Pfizer. There we explained that Pfizer was not able to “point to any imminent hardship arising from the FDA’s acceptance of Mylan’s ANDA”:
Before Pfizer could suffer its claimed “economic injury from unlawful competition,” FDA approval for a pharmaceutical equivalent to Procardia XL® would have to be not only sought but granted. That has not happened. Therefore “no irremediable adverse consequences flow from requiring a later challenge.”
Pfizer,
For the foregoing reasons, I would find the appeal is unripe and dismiss it for lack of jurisdiction.
. The FDA’s "tentative approval” of Teva’s ANDA is not, as Teva suggests, Reply Br. at 10-11, the final word on its generic drug’s equivalence. See Pfizer,
. And contrary to my colleagues' lack of confidence in judicial alacrity, maj. op. at 1311, courts make speedy decisions on injunction applications in ANDA cases all the time. See, e.g., Apotex, Inc. v. FDA, C.A. No. 06-627,
. In support of ripeness, the majority asserts: “District courts routinely reach the merits of generic manufacturers' claims to exclusivity before the FDA has granted final approval to any ANDA concerning the drug at issue.” Maj. op. at 1311 (citing Teva Pharms., USA, Inc. v. Leavitt,