RUDOLPH CONTRERAS, United States District Judge.
Plaintiff Ferring Pharmaceuticals, Inc. ("Ferring") is the manufacturer of PREPOPIK, a fixed-dose combination drug product that contains three drug substances: sodium picosulfate, magnesium oxide, and anhydrous citric acid. When it submitted a New Drug Application ("NDA") for PREPOPIK to the U.S. Food and Drug Administration ("the FDA"), Ferring sought a five-year period of marketing exclusivity because one of the drug substances, sodium picosulfate, had never previously been approved in a NDA. The Federal Food, Drug, and Cosmetics Act ("FDCA") provides for a five-year period of marketing exclusivity when a drug application is approved "for a drug, no active ingredient (including any ester or salt of the active ingredient) of which has been approved in any other application." 21 U.S.C. § 355(j)(5)(F)(ii). During that five-year period, "no application may be submitted... which refers to the drug for which the subsection (b) application was submitted." Id.
In this Administrative Procedure Act ("APA") action, Ferring challenges the FDA's prior interpretation as contrary to the plain language of the FDCA, or an unreasonable interpretation of statutory ambiguity, under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Alternatively, Ferring claims that even if the FDA's prior interpretation was permissible, the agency's refusal to apply its new interpretation retroactively is arbitrary and capricious. For the foregoing reasons, the Court concludes that the term "drug" as used in the five-year exclusivity provision is ambiguous and that the FDA's prior interpretation was a reasonable one. This conclusion preserves the agency's discretion to choose among the reasonable interpretations of an ambiguous statutory term, and accords with the Supreme Court's admonition that "`change is not invalidating, since the whole point of Chevron is to leave the discretion provided by the ambiguities of a statute with the implementing agency.'" Nat'l Cable & Telecomms. Ass'n v. Brand X Internet Servs., 545 U.S. 967, 981, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) (quoting Smiley v. Citibank (South Dakota), N.A., 517 U.S. 735, 742, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996)). Thus, the Court will grant summary judgment in part to Defendants on the Chevron issues. The Court concludes that supplemental briefing is necessary on the retroactivity question, however, and the Court will deny both motions for summary judgment on that ground, without prejudice. The Court will direct the parties to file renewed motions for summary judgment on the retroactivity issue that discuss the authorities identified below.
The FDCA requires that all new prescription drugs be approved by the FDA before they can be marketed. See 21 U.S.C. § 355(a). Generally, when a pharmaceutical manufacturer submits a NDA for approval, it must support that application with full reports of clinical studies that demonstrate that the product is safe and effective. See id. § 355(b). In 1984, Congress altered aspects of this process when it enacted what are popularly referred to as the Hatch-Waxman Amendments. See Drug Price Competition and Patent Term
As part of that balance, Congress simplified the approval process for generic versions of listed drugs. The Hatch-Waxman Amendments provided for the submission of an abbreviated new drug application ("ANDA") for the generic version of a previously approved drug. See 21 U.S.C. § 355(j)(1). To file an ANDA, a pharmaceutical manufacturer may rely on the FDA's finding that a previously approved drug — referred to as the "listed drug" — is safe and effective, so long as the applicant can demonstrate that the proposed generic drug is the "same as" the reference listed drug in several essential respects. See generally id. § 355(j)(2)(A). The Hatch-Waxman Amendments also provide for the approval of a NDA in which some or all of the investigations relied upon to show that the drug is safe and effective "were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted." Id. § 355(b)(2). Such applications are referred to as "505(b)(2) applications."
Despite the availability of these less onerous approval avenues, Congress also put in place incentives to promote the development of new drugs. As relevant to this case, the Hatch-Waxman Amendments established a five-year marketing exclusivity period for certain types of drugs, protecting a manufacturer from the submission of an ANDA or 505(b)(2) application and, thus, from generic competition. As amended, the FDCA provides that:
21 U.S.C. § 355(j)(5)(F)(ii); see id. § 355(c)(3)(E)(ii) (parallel provision providing the same five-year exclusivity period to prevent the filing of a 505(b)(2) application).
Even if a drug is not eligible for a five-year period of marketing exclusivity, the Hatch-Waxman Amendments provide for a shorter, three-year period of exclusivity for certain changes to previously approved drugs. If an applicant submits one or more new clinical studies in support of a change in the conditions of an approved drug's use, the FDCA confers a three-year period of marketing exclusivity, so long as the FDA considers those studies to have been essential to the agency's approval of the change. 21 U.S.C. § 355(j)(5)(F)(iii); see also id. § 355(c)(3)(E)(iii). Unlike the five-year exclusivity provision, which prohibits the FDA from even accepting an application during the exclusivity period, the
The two clauses of the five-year exclusivity provision relevant to this case are what the parties refer to as the "eligibility" and the "bar" clauses. See A.R. 203; Pl.'s Mem. Supp. Summ. J. at 13 ("Pl.'s Mem. Supp."), ECF No. 20-1. The "eligibility clause" describes whether a drug is eligible for five-year exclusivity. To be eligible, a drug must be "a drug, no active ingredient (including any ester or salt of the active ingredient) of which has been approved in any other application under subsection (b) of [§ 355]." 21 U.S.C. § 355(j)(5)(F)(ii). If a drug meets that requirement, it will bar the types of ANDAs or 505(b)(2) applications identified in the "bar clause." Specifically, "no application may be submitted ... which refers to the drug for which the subsection (b) application was submitted before the expiration of five years from the date of the approval of the application." Id. (emphasis added).
The meaning of the word "drug" as used in the five-year exclusivity provision (or the other exclusivity provisions, for that matter) is not defined in section 355. In the FDCA Congress has codified various definitions of that term. See 21 U.S.C. § 321(g)(1). "Drug" can alternatively mean: "articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them"; "articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals"; or "articles (other than food) intended to affect the structure or any function of the body of man or other animals." Id. § 321(g)(1)(A)-(C). But, "drug" can also mean any "articles intended for use as a component of any article specified in" those prior three definitions. Id. § 321(g)(1)(D) (emphasis added).
By regulation, the FDA has also defined two key terms that the parties invoke in this case: "drug product" and "drug substance." The FDA defines a "[d]rug product" as "a finished dosage form, for example, tablet, capsule, or solution, that contains a drug substance, generally, but not necessarily, in association with one or more other ingredients." 21 C.F.R. § 314.3(b). A "[d]rug substance" is defined in relevant part as "an active ingredient that is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease or to affect the structure or any function of the human body." Id.
Until recently, the FDA read the term "drug" in the "eligibility clause" to refer to a finished "drug product." In a 1988 guidance letter to the industry, and before regulations implementing the Hatch-Waxman Amendments were promulgated, Dr. Carl Peck, Director of the Center for Drug Evaluation and Research, advised NDA and ANDA holders and applicants that the FDA "considers a drug product eligible for the five-year period if it contains no active moiety that was previously approved by the agency." A.R. 324 (emphasis added). To assist the agency in making exclusivity determinations, Dr. Peck therefore encouraged applicants to inform the agency whether "any active moiety in the drug product for which approval is sought has ever been approved in another drug product in the United States either as a single entity or as part of a combination product." Id. (emphases added).
The FDA codified its interpretation of the five-year exclusivity provision in 21
21 C.F.R. § 314.108(b)(2). The regulation further defines several of these terms. First, the FDA defined "new chemical entity" as "a drug that contains no active moiety that has been approved by FDA in any other application submitted under section 505(b) of the [A]ct." Id. § 314.108(a). "[A]ctive moiety," in turn, is defined as "the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt (including a salt with hydrogen or coordination bonds), or other noncovalent derivative (such as a complex, chelate, or clathrate) of the molecule, responsible for the physiological or pharmacological action of the drug substance." Id.
Consistent with Dr. Peck's guidance letter, the FDA admits that it interpreted the term "drug" in the regulation's definition of a "new chemical entity" ("a drug that contains no active moiety that has been approved ...") to mean a "drug product." See, e.g., A.R. 208. Under that interpretation, those "drug products" that contain no active moiety that had previously been approved would be eligible for five-year exclusivity. See id. At the time it promulgated the regulation, however, the FDA acknowledged that the statute posed a potential problem for the exclusivity holder, and that the Act "is ambiguous as to which ANDA[s] or 505(b)(2) applications are affected by an innovator's exclusivity." Proposed Rule, 54 Fed. Reg. at 28,897. Specifically, under a narrow interpretation of the "bar clause," in which the "protection offered by exclusivity is that exclusivity covers only specific drug products ..., an innovator's exclusivity could lose its value as soon as FDA approved a second full new drug application for a version of the drug." Id. That is because "an ANDA could be approved by reference to the second approved version of the drug" — a separate drug product — "which would not be covered by exclusivity." Id. (emphasis added). Thus, "[d]epending on the meaning of the phrase `refer to' and the word `drug,'" the FDA was concerned that the five-year exclusivity provision and the other exclusivity provisions in the Hatch-Waxman Amendments "could be interpreted to allow ANDA[s] and 505(b)(2) applicants, once FDA approved subsequent new drug applications for different versions of the same drug, to circumvent the innovator's exclusivity by `referring to' the subsequent versions of the innovator's drug." Id.
Taken together, then, prior to 2014, the FDA interpreted the five-year exclusivity provision to provide that only drug products containing no previously approved drug substances were eligible for exclusivity. Once eligible, however, the FDA interpreted the bar clause to bar all ANDAs and 505(b)(2) applications referencing that drug product or any later-approved products containing the product's drug substances, in order to preserve the innovator's exclusivity to the greatest extent possible.
Ferring's drug product PREPOPIK is intended for use in cleansing the colon in preparation for colonoscopy in adults. Compl. ¶ 32, ECF No. 2. PREPOPIK is a fixed-dose combination drug product. Id. Fixed-dose combination drug products "generally include two or more drug substances (active ingredients) in a fixed ratio, synthetically combined in a single dosage form." A.R. 200. PREPOPIK in fact contains three different active ingredients: sodium picosulfate, magnesium oxide, and anhydrous citric acid. Id. at 201; Compl. ¶ 32. Two of these ingredients, magnesium oxide and anhydrous citric acid, had previously been approved in a NDA. By contrast, sodium picosulfate, a stimulant laxative, had never previously been approved in any NDA. A.R. 201. Because sodium picosulfate constituted a new drug substance, Ferring sought five-year exclusivity for PREPOPIK when it submitted its NDA. See Pl.'s Mot. Summ. J. Ex. 3 at 2, ECF No. 20-6. Ferring alleges that it was unable to seek a NDA for sodium picosulfate as a single-ingredient drug product because picosulfate's therapeutic benefit is realized only in combination with the other active ingredients. A.R. 70 Ferring points out that the FDA did not require factorial studies — which are employed to evaluate the contribution of each of a drug product's individual substances to the drug's overall efficacy — because of "serious ethical concerns" that "each component as a
The FDA approved Ferring's NDA for PREPOPIK on July 16, 2012. See Compl. ¶ 33; A.R. at 201. Consistent with its interpretation of the five-year exclusivity provision, however, the FDA only awarded Ferring three-year exclusivity because the drug product contained two active moieties (magnesium oxide and citric acid) that had previously been approved. See Pl.'s Mot. Summ. J. Ex. 3 at 3; A.R. at 201.
Ferring submitted a Citizen Petition on January 29, 2013 requesting that the FDA change its exclusivity determination. A.R. 64. In short, Ferring argued that the FDA's denial of five-year exclusivity was inconsistent with Congress's intent in passing the Hatch-Waxman Amendments, as discerned from the relevant legislative history, id. at 70-76, and that the interpretation also conflicted with various other FDA policies, id. at 76-94. Around the same time, two other pharmaceutical companies, Gilead Sciences, Inc., and Bayer Healthcare Pharmaceuticals, Inc., whose respective fixed-combination drug products had also been denied five-year exclusivity on the ground that at least one of the active ingredients had been previously approved, filed similar Citizen Petitions challenging the FDA's prevailing interpretation. See generally id. at 98-140; id. at 144-158.
On February 21, 2014, the FDA issued a single response to all three companies' Citizen Petitions. Id. at 199. In that response, the FDA summarized its prior interpretation of the FDCA and its own regulation. Id. at 207-09. The FDA stated that although it believed its "current interpretation of the relevant statute and regulations is permissible, Petitioners have articulated an alternative interpretation of the relevant statute and regulations that would also be permissible." Id. at 212. As the FDA asserted, "in either the eligibility or the bar clause, FDA may reasonably interpret `drug' narrowly to mean `drug product' or broadly to mean `drug substance.'" Id. The agency further acknowledged, however, that "recent changes in drug development, particularly in the field of fixed-combination development in the last 20 years, and the importance of fixed-combinations to key therapeutic areas — such as HIV, cardiovascular disease, tuberculosis, and cancer — warrant[ed] revising [its] current policy," particularly as "fixed-combinations containing new active moieties are becoming more prevalent in drug development." Id. The FDA noted that combination therapies could improve treatment response, lower risks of developing resistance to drugs, and lower the rate of adverse effects, in addition to simplifying drug regimens and improving patients' adherence to those regimens. Id. at 212-13. Because of these changes, the FDA conceded that its existing interpretation "may result in drug development strategies that are suboptimal from a public health perspective" because if sponsors "prefer to submit two NDAs" — one for a single-entity drug containing the new active moiety and another for a combination product — "undue importance" may be placed on "the order in which these two NDAs are approved." Id. at 213-14. Additionally, "in some situations, such a strategy may not be available if a new active moiety does not clinically lend itself to approval in a single-entity drug product." Id. at 214.
As a result, the FDA "agree[d] that the increasing importance of fixed-combinations for certain therapeutic areas means that it would be in the interest of public health to encourage the development of fixed-combinations as a policy matter," and determined that "[o]ne way to accomplish
Despite altering its interpretation of the five-year exclusivity provision, the FDA declined to recognize five-year exclusivity for PREPOPIK and the other drugs sponsored by the companies that had filed the Citizen Petitions. See id. at 216. The agency concluded that "[e]xclusivity runs from the date of approval of a product," and noted that the agency's existing interpretation had been in effect when the drugs at issue were approved. Id. at 215. The agency based its decision on several factors, including that its "existing interpretation of these provisions is longstanding and has been consistently applied in many prior cases presenting similar facts," that the agency wished to "avoid any unnecessary disruptions to the regulated industry," and that the new interpretation "could impose a burden on the ANDA sponsors, who relied on [the agency's] existing interpretation in filing their applications." Id. The agency also concluded that applying its new interpretation to the companies' drugs would not further the goals of the Hatch-Waxman Amendments because the products had "already ... been developed and approved." Id.
Ferring filed a Petition for Reconsideration and Petition for Stay, arguing that the FDA's new interpretation is the correct one — indeed, the only one in line with congressional intent — and that, in any event, it was arbitrary and capricious for the agency to decline to apply its new interpretation to Ferring's products. See id. at 1-42. The FDA denied that petition. See id. at 829-42.
Ferring then initiated this APA action, alleging that the FDA's action was contrary to the FDCA and the agency's own regulations, and that its decision was arbitrary and capricious, in violation of 5 U.S.C. § 706(2)(A). See Compl. ¶¶ 58-71. Ferring has now moved for summary judgment (ECF No. 20), and the government has cross-moved for summary judgment (ECF No. 22).
A court may grant summary judgment when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). When assessing a motion for summary judgment in an APA case, however, "the district judge sits as an appellate tribunal." Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C.Cir.2001). In such cases the complaint "actually presents no factual allegations, but rather only arguments about the legal conclusion to be drawn about the agency action." Marshall Cnty. Health Care Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C.Cir.1993). Therefore, "[t]he entire case on review is a question of law, and only a question of law." Id. The Court's review "is based on the agency record and limited to determining whether the agency acted arbitrarily or capriciously," Rempfer v. Sharfstein, 583 F.3d 860, 865 (D.C.Cir.2009), or in violation of another
Ferring challenges the FDA's action here as "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" in several ways. 5 U.S.C. § 706(2)(A). First, Ferring contends that the FDA's prior interpretation, under which PREPOPIK was denied five-year exclusivity, contravened the plain language of the FDCA. Second, Ferring argues that, even if the language of the FDCA is ambiguous, the FDA's interpretive choice to read "drug" in the eligibility clause to mean "drug product" was an unreasonable reading of the statute or was arbitrary and capricious because it treated similarly situated parties differently. Finally, Ferring claims that, even if the FDA's prior interpretation was permissible, its decision not to apply the new interpretation retroactively was arbitrary and capricious. The Court considers each argument in turn.
First, Ferring argues that "Congress plainly intended that a drug substance would be entitled to five-year exclusivity if it is based on a novel active ingredient."
The five-year exclusivity provision does not itself define the term "drug." And the FDCA, generally, is of limited assistance. The Act provides several alternative definitions of the term, which the parties agree can encompass both the terms "drug product" and "drug substance." See 21 U.S.C. § 321(g)(1); see also Pl.'s Mem. Supp. at 13-14; Defs.' Mem. Supp. Cross-Mot. Summ. J. & Opp'n Pls.' Mot. at 15 ("Defs.' Mem. Supp."), ECF No. 22. Even
Ferring resists this conclusion by pointing out that a term that appears ambiguous in the abstract may, upon closer inspection and, after considering statutory structure and context, reveal itself to be unambiguous. See Pl.'s Mem. Supp. at 12-13; see also Brown v. Gardner, 513 U.S. 115, 118, 115 S.Ct. 552, 130 L.Ed.2d 462 (1994) ("Ambiguity is a creature not of definitional possibilities but of statutory context."). True enough. But here Ferring has not persuasively identified any statutory structure or context that definitively resolves whether "drug," when used in the five-year exclusivity provision, means "drug product" or "drug substance."
Ferring first contends that both uses of the term "drug" must be read the same. Ferring relies on the eligibility clause's use of the indefinite article "a" in the phrase "a drug, no active ingredient ... of which has been approved," followed by the bar clause's subsequent use of the definite article "the" in the phrase "no application ... which refers to the drug for which the subsection (b) application was submitted." 21 U.S.C. § 355(j)(5)(F)(ii) (emphases added); see Pl.'s Mem. Supp. at 14-15. In Ferring's view, Congress's use of "the" definitively indicates that "the drug" was meant to refer back to the same "a drug" mentioned earlier in the eligibility clause. Ferring cites several cases construing Congress's use of the definite article "the" in this way.
Even if one were to share Ferring's conclusion that the two uses of "drug"
Accordingly, the Court considers the term "drug" to be ambiguous at Chevron Step One.
The Court therefore moves to Step Two of the Chevron framework, and assesses whether the FDA's interpretation in effect when PREPOPIK was approved was reasonable.
Chevron instructs that if a statute is "silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." 467 U.S. at 843, 104 S.Ct. 2778. Unlike the Court's assessment under Step One, the Court's review at Step Two "is `highly deferential.'" Village of Barrington, Ill. v. Surface Transp. Bd., 636 F.3d 650, 665 (D.C.Cir.2011) (quoting Nat'l Rifle Ass'n of Am., Inc. v. Reno, 216 F.3d 122, 137 (D.C.Cir.2000)). The permissibility of an agency's interpretation is assessed "in light of [the statute's] language, structure, and purpose.'" Nat'l Treasury Empls. Union v. Fed. Labor Relations Auth., 754 F.3d 1031, 1042 (D.C.Cir.2014) (quoting Am. Fed'n of Labor v. Chao, 409 F.3d 377, 384 (D.C.Cir.2005)). Chevron Step Two "does not require the best interpretation, only a reasonable one," Am. Forest & Paper Ass'n v. FERC, 550 F.3d 1179, 1183 (D.C.Cir.2008), and the court therefore "need not conclude that the agency construction was the only one it permissibly could have adopted to uphold the construction, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding," Chevron, 467 U.S. at 843 n. 11, 104 S.Ct. 2778. If
An agency's interpretation of an ambiguous statutory term may invariably require some measure of policy-making or line drawing. And it is "entirely appropriate" for an agency "to make such policy choices — resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities." Chevron, 467 U.S. at 865-66, 104 S.Ct. 2778. "Chevron demands" a court's "deference when an agency's interpretation is `a reasonable accommodation of conflicting policies that were committed to the agency's care by the statute.'" Van Hollen, Jr. v. FEC, 811 F.3d 486, 494 (D.C.Cir.2016) (quoting Chevron, 467 U.S. at 845, 104 S.Ct. 2778). At Step Two, a court must simply ask whether the agency "has reasonably explained how the permissible interpretation it chose is `rationally related to the goals of the statute." Village of Barrington, Ill., 636 F.3d at 665 (quoting AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 388, 119 S.Ct. 721, 142 L.Ed.2d 835 (1999)). A "`reasonable' explanation of how an agency's interpretation serves the statute's objectives is the stuff of which a `permissible' construction is made." Northpoint Tech., Ltd. v. FCC, 412 F.3d 145, 151 (D.C.Cir. 2005) (quoting Chevron, 467 U.S. at 863, 104 S.Ct. 2778).
In the Court's view, and assessed with the appropriate level of deference to the FDA, the agency's prior interpretation of the term "drug" in the eligibility clause as referring to a "drug product" was reasonable. As already noted, the FDCA explicitly defines the term "drug" in a way that encompasses entire drug products. See 21 U.S.C. § 321(g)(1); accord Generix Drug Corp., 460 U.S. at 458-60, 103 S.Ct. 1298. Unless the statute unambiguously requires otherwise — and the Court has already determined that it does not — it would be odd for the Court to nevertheless conclude that the agency's choice of one statutory definition over the other was unreasonable. In addition, the eligibility clause makes reference to "an application submitted under subsection (b) of [§ 355] for a drug ...." 21 U.S.C. § 355(j)(5)(F)(ii) (emphasis added). The agency contends that because "applications are generally submitted for drug products, not drug substances, a reading of `drug' as `drug product' flows logically" from this language. A.R. 208. To be sure, the reference to an application may not be definitive. Ferring urges that because the subsection continues on to reference "no active ingredient ... of which has been approved in any other application," the FDA's reading is inconsistent with the statute because active ingredients, in addition to drug products, are "approved" through NDAs. See Pl.'s Mem. Supp. at 16; Pl.'s Mem. in Opp'n to Defs.' Cross-Mot. for Summ. J. & Reply at 6 ("Pl.'s Reply"), ECF No. 23; accord Amarin Pharm. Ir. Ltd. v. FDA, 106 F.Supp.3d 196, 214 (D.D.C.2015) (concluding that "[i]t is not correct, however, to say that the FDA does not approve `active ingredients' when it approves drugs or drug products"). Yet, the FDA draws what the Court considers a conceivable distinction between the article for which an application is submitted — a finished drug product — and what the agency approves, even if a drug's approval inevitably results in the approval of the active ingredients or drug substances contained within a finished drug
In addition, the statute speaks of a drug "no active ingredient ... of which has been approved," implying that the "drug" may contain several active ingredients. 21 U.S.C. § 355(j)(5)(F)(ii). But the agency's definition of a "drug substance" appears to treat a drug substance as the equivalent of a single active ingredient. 21 C.F.R. § 314.3(b) (defining "[d]rug substance" as "an active ingredient that is intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease or to affect the structure or any function of the human body"). Ferring seems to share this view. Pl.'s Mem. Supp. at 6 (asserting that "[a] drug substance usually is comprised of an active ingredient intended to furnish pharmacological activity"). Thus, the Court does not consider it unreasonable for the FDA to have read "drug" to refer to an article that presumably might include more than one active ingredient. This tracks the agency's regulation implementing the various exclusivity provisions — analyzed in more detail below — which asks whether an entire "drug product" contains "a new chemical entity" or instead contains "an active moiety that has been previously approved." 21 C.F.R. § 314.108(b)(2), (b)(4)(iii).
Indeed, there appears to have been an implicit assumption persisting from the time of Dr. Peck's guidance letter, through the agency's promulgation of its regulations, and unchallenged — at least as far as the parties have identified — until Ferring's Citizen Petition, that the term "drug" in the eligibility clause meant "drug product." Although the Court acknowledges that the presumption in favor of reading a statutory term in close proximity to mean the same thing is a weighty one, once the FDA resolved the eligibility clause's ambiguity in favor of the term "drug product," it made ample sense for the agency to broadly interpret the five-year exclusivity provision "once it attaches, such that it protects not only the drug product that is the subject of the application but also subsequently approved drug products that contain the same active moiety." A.R. 209. To conclude otherwise would have meant that "an innovator's exclusivity could lose its value as soon as FDA approved a second full new drug application for a version of the drug." Proposed Rule, 54 Fed. Reg. at 28,897. The FDA "d[id] not believe that Congress intended the exclusivity provisions to discourage innovators from making improvements in their drug products nor from authorizing the marketing of competitive products." Id. Under these circumstances, and although the FDA appreciated that reading the bar clause to also refer to "drug products" "would have been the more natural reading," the agency reasonably "declined to adopt this reading in the context of the umbrella policy, because such a reading would not preserve the incentive to innovate and improve upon the initially approved product during the exclusivity period." A.R. 209.
To the extent Ferring hints that the need to make such an accommodation should have caused the FDA to doubt its eligibility clause interpretation — and to instead
Ferring's various counterarguments are not persuasive. First, Ferring contends that the FDA's prior interpretation patently conflicts with the agency's own regulation. That regulation, as noted above, provides that:
21 C.F.R. § 314.108(b)(2). A "new chemical entity," in turn, is defined as "a drug that contains no active moiety that has been approved by FDA in any other application submitted under section 505(b) of the act." Id. § 314.108(a) (emphasis added). From these definitions, Ferring contends that the regulation makes clear that a drug product contains the "new chemical entity," requiring one to read the reference to "drug" in the "new chemical entity" definition to mean "drug substance." Pl.'s Mem. Supp. at 20-21. Were one instead to read "drug" to mean "drug product," and substitute that definition in the place of "new chemical entity," Ferring urges that the regulation would redundantly read: "If a drug product that contains a drug product that contains no active moiety ...." Id. at 21. Courts are "hesitant to substitute an alternative reading" of a regulation "for the Secretary's unless that alternative reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation." Gardebring v.
The Court disagrees. "An agency's interpretation of its own regulations is entitled to judicial deference." Actavis Elizabeth LLC v. FDA, 625 F.3d 760, 763 (D.C.Cir.2010). That deference is "all the more warranted when" a regulation concerns "`a complex and highly technical regulatory program,' in which the identification and classification of relevant `criteria necessarily require significant expertise and entail the exercise of judgment grounded in policy concerns.'" Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994) (quoting Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697, 111 S.Ct. 2524, 115 L.Ed.2d 604 (1991)). An "agency's interpretation of its own rule is given `controlling weight unless it is plainly erroneous or inconsistent with the regulation.'" High Plains Wireless, L.P. v. FCC, 276 F.3d 599, 606 (D.C.Cir.2002) (quoting Capital Network Sys., Inc. v. FCC, 28 F.3d 201, 205 (D.C.Cir.1994)). The Court acknowledges that the regulation is imprecise — and perhaps internally redundant — because it uses the general term "drug" following the more specific term "drug product." Even the FDA concedes "this reading is cumbersome." Defs.' Reply at 6, ECF No. 25. But, as Dr. Peck's guidance letter evidences, even before it first promulgated the regulation, the FDA maintained that the statute granted five-year exclusivity to new drug products only if they contained no previously-approved active moiety. See A.R. 324. It would be strange, indeed, to conclude that the FDA unintentionally hamstrung itself from achieving its stated interpretation through its somewhat confusingly worded regulation. Moreover, both the three-and five-year exclusivity provisions in the regulation are framed at the "drug product" level, and ask whether a "drug product" contains a "new chemical entity" or "an active moiety that has been previously approved." Compare 21 C.F.R. § 314.108(b)(2), with id. § 314.108(b)(4)(iii). Although the FDA now interprets "drug" in the definition of "new chemical entity" to mean "drug substance," and not "drug product," it is difficult to conclude that the regulation's text plainly compels that reading, given its overall emphasis on "drug products." At most, like the statute, the regulation is somewhat ambiguous, and thus falls short of providing the "plain language" necessary to compel Ferring's preferred interpretation.
This conclusion similarly brushes aside Ferring's second contention: that the FDA's prior interpretation merits less deference because "the agency has offered several different inconsistent interpretations of the statute." Pl.'s Mem. Supp. at 22. In the Court's view the agency has taken only two positions. And those interpretations are not erratic, as Ferring seems to imply. While an "[u]nexplained inconsistency" might be "a reason for holding an interpretation to be an arbitrary and capricious change from agency practice under the Administrative Procedure Act," Brand X, 545 U.S. at 981, 125 S.Ct. 2688, "[a]n initial agency interpretation is not instantly carved in stone," Chevron, 467 U.S. at 853-64, 104 S.Ct. 2778. An agency "must consider varying interpretations and the wisdom of its policy on a continuing basis." Id. Thus, "if the agency
Finally, Ferring claims that the FDA's prevailing interpretation at the time it submitted the NDA for PREPOPIK was out of step with the statute's purpose because the interpretation denied exclusivity to some fixed-dose combination products that contained a new active ingredient. In Ferring's view, it "should not matter under the statute whether the active ingredient is approved alone or in combination with other, older active ingredients" because the statute was intended to "encourage drug companies to research and develop new drug substances." Pl.'s Mem. Supp. at 23. But the legislative history phrases that purpose in the most general terms and, facing "the classic question of the appropriate trade-off between greater incentives for the invention of new products and greater affordability of those products," Congress endeavored to strike "a balance between expediting generic drug applications and protecting the interests of the original drug manufacturers." Abbott Labs., 920 F.2d at 985. The ambiguous use of the word "drug" leaves some question about exactly where Congress intended to draw that line. In such circumstances, courts leave it to the relevant agency to "resolv[e] the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities." Chevron, 467 U.S. at 865-66, 104 S.Ct. 2778. While the FDA now acknowledges that "recent changes" in the development and importance of fixed-combination drugs "warrant[ed] revisiting [its] current policy," A.R. 212, the Court does not view the FDA's previous interpretation as outside the boundaries of the reasonable policy choice that the ambiguous phrase "drug" committed to the agency's discretion.
This conclusion largely resolves Ferring's related claim that FDA's prior interpretation was arbitrary and capricious. The scope of a court's "arbitrary and capricious" review "is narrow" and "a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). To satisfy the standard, an agency "must examine the relevant data and articulate a satisfactory explanation for its action including a `rational connection between the facts found and the choice made.'" Id. (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)). "The analysis of disputed agency action under Chevron Step Two and arbitrary and capricious review is often `the same, because under Chevron step two, [the court asks] whether an agency interpretation is arbitrary or capricious in substance.'" Agape Church, Inc. v. FCC, 738 F.3d 397, 410 (D.C.Cir.2013) (quoting Judulang v. Holder, ___ U.S. ___, 132 S.Ct. 476, 483 n. 7, 181 L.Ed.2d 449 (2011)); see also Nat'l Ass'n of Broad. v. FCC, 789 F.3d 165, 171 (D.C.Cir.2015) ("[A] Chevron step-two argument and a claim that the agency has acted arbitrarily and capriciously (which petitioners also assert here) overlap.").
Ferring argues, however, that even if the FDA's prior interpretation was a reasonable reading of the statute, it arbitrarily
If there were, in fact, situations in which a drug was eligible for five-year exclusivity under the FDA's prevailing interpretation but failed to receive it because of the order in which it was approved, those circumstances might render the FDA's policy arbitrary and capricious. Instead, the distinction Ferring identifies flows naturally from the policy choice the FDA made when it settled on its prior interpretation. In each example Ferring identifies, a drug was first approved in a single entity drug product,
What distinguishes PREPOPIK is not the mere sequence in which its NDA was approved, but that PREPOPIK's novel active ingredient, sodium picosulfate, was not appropriate in a single-entity form. The difference is subtle, but significant. Unlike the other drug substances Ferring identifies (and unless sodium picosulfate was included in a combination product that contained only new active ingredients) the
As a result of the statute's ambiguity, the FDA was left to determine at what level of specificity to define "drug": at the "drug product" level, and in reference to all of the product's "drug substances," or at the "drug substance" level. Although scientific and policy considerations may have now persuaded the FDA to modify its interpretation, given the statutory ambiguity and the considerations discussed above, it was neither unreasonable nor arbitrary and capricious for the FDA to define "drug," in the "eligibility clause" as "drug product," and to thereafter ensure the greatest benefit for pharmaceutical manufacturers who are provided with exclusivity by interpreting "drug" in the "bar clause" as "drug substance." Therefore, Ferring's Chevron Step Two argument fails.
That leaves Ferring's argument regarding the FDA's decision to apply its new interpretation only prospectively. Ferring frames the issue as a question of whether the FDA acted arbitrarily and capriciously. Yet, neither party cites a case considering an agency's decision to apply a new interpretation retroactively (or not) under that framework. Overall, the parties' arguments on this issue are thin on legal citations. In addition, the Court's review of the FDA's initial response to Ferring's Citizen Petition reveals that the agency cited the D.C. Circuit's decision in Retail Wholesale & Department Store Union v. NLRB, 466 F.2d 380 (D.C.Cir.1972) as support for the agency's conclusion that its retroactivity decision "strikes the appropriate balance among the congressional intent of the Hatch-Waxman Amendments and the interests of the parties who may be affected by [the FDA's] decision." A.R. 215. And that case does appear to be potentially relevant here.
The D.C. Circuit has described Retail Union as "provid[ing] the framework for evaluating retroactive applications of rules announced in agency adjudications." Clark-Cowlitz Joint Operating Agency v. FERC, 826 F.2d 1074, 1081 (D.C.Cir.1987) (en banc); see also Williams Nat. Gas Co. v. FERC, 3 F.3d 1544, 1553-54 (D.C.Cir. 1993). Retail Union instructs a court to consider the following when determining whether retroactive application of a new interpretation is warranted, or should be avoided:
466 F.2d at 390. These "factors `boil down... to a question of concerns grounded in notions of equity and fairness," Cassell v. FCC, 154 F.3d 478, 486 (D.C.Cir.1998) (quoting Clark-Cowlitz, 826 F.2d at 1082 n. 6), and a Court should ask whether "the inequity in applying" the new rule in the case before the agency "outweighs the interests that might be furthered if it were applied," Retail Union, 466 F.2d at 390; accord McDonald v. Watt, 653 F.2d 1035, 1044 (5th Cir. Unit A Aug. 1981) ("In general, the ill effect of retroactivity is the frustration of the expectations of those who have justifiably relied on a prior rule; the ill effect of prospectivity is the partial frustration of the statutory purpose which the agency has perceived to be advanced by the new rule." (citing Retail Union, 466 F.2d at 390)). Determining "[w]hich side of the balance preponderates" in a particular instance is "a question of law," which a court should resolve "with no overriding obligation of deference to the agency decision." Retail Union, 466 F.2d at 390; accord Qwest Servs. Corp. v. FCC, 509 F.3d 531, 537 (D.C.Cir.2007).
The Circuit has also drawn a "basic distinction... between (1) new applications of law, clarifications, and additions, and (2) substitution of new law for old law that was reasonably clear.'" Williams Nat. Gas Co., 3 F.3d at 1554 (internal quotation mark omitted) (quoting Aliceville Hydro Assocs. v. FERC, 800 F.2d 1147, 1152 (D.C.Cir.1986)). In the former circumstances, the court "start[s] with the presumption of retroactivity for adjudications," Qwest, 509 F.3d at 539, but under the latter circumstances the D.C. Circuit has suggested that a "new rule may justifiably be given prospective[ ]-only effect in order to `protect the settled expectations of those who had relied on the preexisting rule,'" Pub. Serv. Co. of Colo. v. FERC, 91 F.3d 1478, 1488 (D.C.Cir.1996) (quoting Williams Nat. Gas Co., 3 F.3d at 1554). If the Retail Union line of authority applies in this case, this distinction may also be of import.
Despite the FDA's citation to Retail Union, the parties' here neither grapple with that case and its progeny nor explain, alternatively, why it is inapplicable. The parties' limited reliance on case law is also a hindrance to the Court's analysis of the retroactivity question. And because the Court has held that the FDA's prior interpretation passes muster under Chevron, the retroactivity issue will be dispositive of Ferring's claims. Accordingly, the Court will deny each party's motion for summary judgment on this ground, without prejudice. The parties will be directed to file renewed motions for summary judgment that more fully address the retroactivity issue, as reflected in the order accompanying this memorandum opinion.
For the foregoing reasons, Defendants' motion for summary judgment (ECF No. 22) is
