Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-05188/USCOURTS-caDC-97-05188-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 3, 1997 Decided October 27, 1998

No. 97-5188

Serono Laboratories, Inc.,

Appellee

v.

Donna E. Shalala, et al.,

and

Ferring Pharmaceuticals Inc.,

Appellants

Consolidated with

No. 97-5227

Appeals from the United States District Court

for the District of Columbia

(No. 97cv01227)

Christine N. Kohl, Attorney, U.S. Department of Justice,

argued the cause for the federal appellants, with whom Frank

W. Hunger, Assistant Attorney General, Mary Lou Leary,

U.S. Attorney, and Douglas N. Letter, Litigation Counsel,

U.S. Department of Justice, were on the briefs.

John R. Fleder, David F. Weeda and Arthur Y. Tsien were

on the briefs for appellant Ferring Pharmaceuticals Inc.

Bruce S. Manheim, Jr. argued the cause for appellee, with

whom Terry S. Coleman and Matthew D. Peterson were on

the brief. Michael D. Petty entered an appearance.

Before: Henderson, Rogers and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Garland.

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Garland, Circuit Judge: In this case we consider the

validity of a district court order, preliminarily enjoining approval by the Food and Drug Administration ("FDA") of a

generic drug, that was issued at the behest of the manufacturer of the competing brand-name drug. We previously

stayed the preliminary injunction pending our resolution of

this appeal. Because we find plaintiff has not satisfied the

standards for a preliminary injunction, and in particular has

not shown a likelihood of success on the merits, we now

vacate the injunction.

I

The Food, Drug, and Cosmetic Act (the "Act") provides

that "[n]o person shall introduce or deliver for introduction

into interstate commerce any new drug" without first obtaining FDA approval. 21 U.S.C. s 355(a). To obtain FDA

approval, the first applicant to market a drug, known as the

"pioneer," must submit a new drug application ("NDA")

containing, among other things, "full reports of investigations" made "to show whether or not such drug is safe for use

and whether such drug is effective in use." Id. s 355(b)(1).

Recognizing that the NDA process is costly and timeconsuming, and seeking "to make available more low cost

generic drugs," Congress amended the Act in 1984. H.R.

Rep. No. 98-857, pt. 1, at 14 (1984), reprinted in 1984

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U.S.C.C.A.N. 2647, 2647. The Drug Price Competition and

Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98

Stat. 1585 (known as the "Hatch-Waxman Amendments"),

permits a manufacturer of a generic alternative to a pioneer

drug to seek FDA approval by submitting an abbreviated new

drug application ("ANDA") that need contain only the more

limited information specified in 21 U.S.C. s 355(j)(2).1

Two aspects of the ANDA process, corresponding to two

kinds of drug ingredients, are relevant to this case. First,

with respect to "active ingredients," the statute provides that

the Secretary of Health and Human Services shall approve an

application for a generic drug unless the Secretary finds,

among other things, that "information submitted with the

application is insufficient to show that the active ingredients

are the same as the active ingredients of the listed [pioneer]

drug...." 21 U.S.C. s 355(j)(3)(C)(ii). The FDA defines an

"active ingredient" as "any component 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

body...." 21 C.F.R. s 210.3(b)(7).

Second, with respect to "inactive ingredients," the statute

provides that the Secretary shall approve an application

unless she finds that "information submitted in the application or any other information available to the Secretary

shows" that "the inactive ingredients of the drug are unsafe"

or "the composition of the drug is unsafe ... because of the

type or quantity of inactive ingredients included or the manner in which the inactive ingredients are included." 21 U.S.C.

s 355(j)(3)(H). The FDA defines an "inactive ingredient" as

__________

1 Prior to the Hatch-Waxman Amendments, the FDA had established its own abbreviated procedures for generic copies of pioneer

drugs approved before 1962, but not of pioneer drugs approved

after 1962. The Amendments generally extended those procedures

to cover generic copies of post-1962 pioneer drugs. See H.R. Rep.

No. 98-857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N. 2647,

2647; 130 Cong. Rec. 23,057 (1984) (statement of Rep. Waxman).

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"any component other than an active ingredient." 21 C.F.R.

s 210.3(b)(8).

In 1969, the FDA approved an NDA submitted by plaintiff

Serono Laboratories, Inc. ("Serono") for Pergonal, a pioneer

drug. Pergonal is a "menotropins" product administered by

intramuscular injection and used to treat male and female

infertility. A menotropins product is extracted from the

urine of post-menopausal women, and contains two active

ingredients: follicle-stimulating hormone ("FSH") and luteinizing hormone ("LH"). See Joint Appendix ("J.A.") 473;

Dorland's Illustrated Medical Dictionary 1013 (28th ed.

1994). FSH and LH make up less than five percent of

Pergonal, with lactose and uncharacterized urinary proteins

("UUPs") constituting the remainder. See FDA Br. at 6;

Serono Br. at 4.

In 1990, Lederle Parenterals, Inc. ("Lederle") submitted an

ANDA to the FDA seeking approval of a generic version of

Pergonal, now known as Repronex. Defendant-intervenor

Ferring Pharmaceuticals Inc. ("Ferring") acquired the rights

to Lederle's ANDA while it was pending. In December 1992,

Serono filed a "citizen petition," pursuant to 21 C.F.R.

s 10.30, urging the FDA to withhold approval of the ANDA.

Serono argued, among other things, that the UUPs in the

proposed generic drug were "inactive ingredients" that differed from those in Pergonal and had not adequately been

demonstrated to be safe. J.A. 465-69.

In a subsequent meeting, and in a supplemental filing on

March 21, 1997, Serono also argued that the active ingredient

FSH in the proposed generic drug was not, as required by

statute, "the same as" the FSH in Pergonal because of

differences in "isoforms" of the two products. Id. at 481.

FSH is a protein-based hormone consisting of two protein

chains in a backbone-like configuration, with carbohydrate

side chains. Natural variation in the carbohydrate elements

leads to different isoforms of the hormone. See id. at 482-83.

Serono argued that this isoform variation in FSH rendered

Repronex different from Pergonal, and hence ineligible for an

ANDA. Id. at 481-82.

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On January 30, 1997, the FDA approved the ANDA for

Repronex. Id. at 459-60. The FDA gave Repronex an "AB"

rating in its publication, Approved Drug Products with Therapeutic Equivalence Evaluations (known as the "Orange

Book"), meaning that physicians and pharmacists could substitute Repronex for Pergonal. See FDA Br. at 7-8. In a

memorandum to the administrative record filed on that date,

Gordon Johnston, the Deputy Director of the FDA's Office of

Generic Drugs, addressed another issue that had surfaced

during the review--a difference in the concentration of the

inactive ingredient lactose in Repronex and Pergonal. Johnston noted that although a 1992 regulation required an inactive ingredient in a generic drug to be in the same concentration as in the pioneer drug, that regulation was not in effect

when the ANDA for Repronex was filed in 1990. Johnston

concluded that since FDA policy was to review an application

under the regulations in effect at the time of filing, the

different lactose concentrations did not preclude ANDA approval. He also found that they posed no safety concerns.

Id. at 457-58 (Memorandum to Record by G. Johnston, Jan.

30, 1997) (hereinafter "Johnston Memorandum").

On May 30, 1997, Serono sued the FDA in district court,

raising many of the same issues contained in its still-pending

citizen petition as well as the additional issue of the differing

lactose concentrations. See Complaint WW 21-23. On June 13,

1997, Serono moved for a preliminary injunction rescinding

the FDA's approval of Repronex, and Ferring intervened as a

defendant.

On June 17, 1997, the FDA issued its final decision denying

Serono's citizen petition. J.A. 472-86 (Letter from J. Woodcock to Serono, June 17, 1997) (hereinafter "Woodcock Letter"). Dr. Janet Woodcock, Director of the FDA's Center for

Drug Evaluation and Research, rejected Serono's claim that

the isoform variation in the active ingredient FSH meant that

the FSH in Repronex was not the "same as" the FSH in

Pergonal. Dr. Woodcock acknowledged the isoform variation,

but concluded that it was not "clinically significant for the

product's intended uses" and therefore did not preclude a

"sameness" finding for purposes of 21 U.S.C. s 355(j). Id. at

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484. Dr. Woodcock further concluded that the differing

lactose concentrations in the two products, as well as the

differing UUP profiles, did not affect the safety of Repronex.

Id. at 480-81 & n.12. She also rejected the characterization

of the UUPs as "inactive ingredients," classifying them instead as "impurities." Id. at 479-80.

On July 28, 1997, the district court granted Serono's motion

for a preliminary injunction, barred the FDA "from approving

the Ferring ANDA," and ordered it to "rescind immediately

its designation of an 'AB' rating [for Repronex] in the Orange

Book." Serono Lab. v. Shalala, 974 F. Supp. 29, 37 (D.D.C.

1997). The district court found that Serono was likely to

prevail on the merits of its claims; that Serono would suffer

irreparable injury if interim relief were not granted; and that

both the balance of harms to Serono and Ferring, and the

public interest, favored granting injunctive relief. See id. at

32-37.

II

A court considering a plaintiff's request for a preliminary

injunction must examine whether: (1) there is a substantial

likelihood plaintiff will succeed on the merits; (2) plaintiff will

be irreparably injured if an injunction is not granted; (3) an

injunction will substantially injure the other party; and (4)

the public interest will be furthered by the injunction. See

Washington Metro. Area Transit Comm'n v. Holiday Tours,

Inc., 559 F.2d 841, 843 (D.C. Cir. 1977). These factors

interrelate on a sliding scale and must be balanced against

each other. "If the arguments for one factor are particularly

strong, an injunction may issue even if the arguments in

other areas are rather weak." CityFed Fin. Corp. v. Office of

Thrift Supervision, 58 F.3d 738, 746 (D.C. Cir. 1995); see

Holiday Tours, 559 F.2d at 843-45.

We review the district court's weighing of the preliminary

injunction factors under the "abuse of discretion" standard,

see Transohio Sav. Bank v. Director, Office of Thrift Supervision, 967 F.2d 598, 614 (D.C. Cir. 1992), and its findings of

fact under the "clearly erroneous" standard, see National

Wildlife Fed'n v. Burford, 835 F.2d 305, 319 (D.C. Cir. 1987).

"[T]o the extent the district court's decision hinges on questions of law," however, "our review is 'essentially de novo.' "

O'Hara v. District No.1-PCD, 56 F.3d 1514, 1522 (D.C. Cir.

1995) (quoting Transohio, 967 F.2d at 614).

III

Serono's argument that it is likely to succeed on the merits

depends upon the validity of its contentions regarding three

of Repronex's ingredients: FSH, lactose, and UUPs. We

consider each of these in turn.

A

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As noted above, FSH is an active ingredient in both

Repronex and Pergonal. The Hatch-Waxman Amendments

provide that the FDA "shall approve" an ANDA for a generic

drug unless it finds, among other things, that the information

submitted "is insufficient to show that the active ingredients

are the same as the active ingredients of the listed drug." 21

U.S.C. s 355(j)(3)(C)(ii) (emphasis added). FDA regulations

also state that "[f]or determining the suitability of an abbreviated new drug application, the term 'same as' means identical in active ingredient(s)...." 21 C.F.R. s 314.92(a)(1) (emphasis added).

As we also have noted, the chemical structure of FSH

roughly consists of two components: (1) a protein backbone

with a specific amino acid sequence, and (2) carbohydrate side

chains. See J.A. 482-83 (Woodcock Letter). In concluding

that the FSH in Repronex is the "same as" or "identical" to

that in Pergonal, the FDA determined that their protein

backbones and amino acid sequences are identical. Id. at 483.

There are, however, slight natural variations in the configuration of the carbohydrate side chains, a phenomenon known as

"microheterogeneity." See id. at 482-83. But, the FDA

observed, "complete chemical identification of all the carbohydrate variants in a protein product often is not possible or

feasible," id. at 482, a point Serono does not dispute. Indeed,

it usually is not even possible "to assure by chemical analysis

that different batches" of the same product "are identical at

the level of the carbohydrate side chains"--including different

batches of Pergonal itself. Id. at 482-83.

In light of the fact that "most glycoprotein products will

have microheterogeneity," the FDA determined that the relevant "question is how much variation should be permitted."

Id. at 482. The agency answered that question as follows:

To be considered to have the same active ingredients as

the reference listed drug, generic FSH products based

on Pergonal as the reference listed drug must have the

same primary structure, i.e., the same protein backbone

and amino acid sequence as Pergonal (assured by using

the same natural source material), the same potency, and

the same degree of batch-to-batch uniformity. The

batch-to-batch uniformity of Pergonal is achieved using

in vivo rat potency tests, specified by the U.S. Pharmacopeia [USP].... The bioactivity of each batch of generic Menotropins ... is also controlled using USP rat

bioassays, which provides the same assurance of potency

and batch-to-batch uniformity as is provided by Serono

for Pergonal.

Id. at 483. After reviewing additional clinical data, the FDA

found "that any potential variations in FSH isoforms between

the Ferring menotropins product and Pergonal appear not to

be clinically significant for the product's intended uses." Id.

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ders menotropins products "the same for the purposes of 21

U.S.C. s 355(j)," id., as long as the protein backbone, amino

acid sequence, and potency are the same, and the degree of

batch-to-batch variation in isoforms is no different than that

in Pergonal itself, id. at 483.

Serono argues, and the district court agreed, that "same

as" under the statute, and "identical" under the regulation,

must mean absolute "chemical" identity. The court rejected

the FDA's view that "clinical" identity is sufficient for a

menotropins product as long as the above-described conditions are met, and therefore concluded that Serono was likely

to prevail on the merits of its claim that the FSH in Repronex

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and Pergonal is not the same. See Serono Lab., 974 F. Supp.

at 32-34. Since the district court's conclusion rests on issues

of statutory and regulatory interpretation, we review that

conclusion de novo.

Chevron U.S.A. Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837 (1984), governs our analysis of the validity

of an agency's interpretation of a statute. Under Chevron,

we first ask "whether Congress has directly spoken to the

precise question at issue," in which case we "give effect to the

unambiguously expressed intent of Congress." Id. at 842-43.

But if Congress has been silent or ambiguous about the

meaning of the specific question at issue, we defer to the

agency's interpretation so long as it is "based on a permissible construction of the statute." Id. at 843.

In evaluating the first Chevron inquiry, we use "traditional

tools of statutory construction" to determine whether Congress has unambiguously expressed its intent. Id. at 843 n.9.

In this case, the statute does not define the term "same as,"

and does not indicate whether chemical or clinical identity

was contemplated. We need to consider, therefore, what the

terms mean in context. See McCarthy v. Bronson, 500 U.S.

136, 139 (1991). What the statute requires to be the "same"

are the two drugs' "active ingredients," and FDA regulations

pre-dating the Hatch-Waxman Amendments define an "active

ingredient" as "any component that is intended to furnish a

pharmacological activity or other direct effect." 21 C.F.R.

s 210.3(b)(7) (1978). Hence, the ingredients that are to be

compared for "sameness" are themselves defined in terms of

pharmacological activity, adding credibility to the FDA's view

that chemical identity is not the only way to read the statutory language.

The district court rejected this reading, in part because in

its view, "[n]othing in [s 355(j)] permits an ANDA applicant

to substitute USP animal assays for information demonstrating that the active ingredients of the proposed generic product are identical to those in the innovator product." Serono

Lab., 974 F. Supp. at 33. As noted above, the FDA permitted

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to-batch uniformity of Pergonal. But while the court was

correct in noting that nothing in the statute permits the use

of animal assays, the important point is that nothing in the

statute prohibits their use. Indeed, the statute says nothing

at all about the type of information an applicant must submit

to demonstrate "sameness," nor about the type of information

upon which the FDA may rely. It says only that the information must not be "insufficient" to show that the active ingredients are the same. 21 U.S.C. s 355(j)(3)(C)(ii). If anything,

this broad grant of discretion to the agency with respect to

the information it may consider in making a finding of

"sameness" indicates that Congress did not have one precise

definition of the term in mind. Cf. Schering Corp. v. FDA, 51

F.3d 390, 399-400 (3d Cir. 1995) (holding that FDA's interpretation of 21 U.S.C. s 355(j)(7)(B) "as not limiting its discretion to determine what tests or studies would provide it with

appropriate information from which to determine bioequivalence is a reasonable construction of the Act").

Moreover, the statutory phrase must be read in the context

of the kind of drug at issue. As Dr. Woodcock noted, "it is

usually not possible to assure by chemical analysis that

different batches of [a protein product like FSH] are identical

at the level of the carbohydrate side chains." J.A. 482. For

the same reason, "batch to batch variability in isoform patterns" exist for Pergonal itself. Id. at 483. This means that

if absolute chemical identity were required, it would not be

possible to say any generic was the "same as" Pergonal,

because the "batch to batch variability" would make the

target of the comparison (not just Pergonal, but the specific

batch of Pergonal) indeterminate. Indeed, the Woodcock

Letter indicates that if absolute chemical identity were required, not only menotropins but other categories of protein

products would be excluded from the ANDA process as well.

See id. at 482; see also id. at 317 (internal FDA memorandum

noting that other products derived from natural sources

besides proteins, including lipids, phospholipids and oligosaccharides, also "can not be fully characterized chemically").

Yet, it seems likely--although by no means certain--that if

Congress had intended to exclude entire categories of drugs

from the scope of the Hatch-Waxman Amendments, which

were passed to "facilitat[e] the approval of generic copies of

drugs," Mead Johnson Pharm. Group v. Bowen, 838 F.2d

1332, 1333 (D.C. Cir. 1988), there would be some mention of

that fact in the statute or legislative history. Instead, both

are wholly silent on the subject. We thus conclude that the

statute does not unambiguously require the term "same as"

to be defined as complete chemical identity.

Turning to the second Chevron inquiry, we ask whether the

agency's definition is "based on a permissible construction of

the statute," Chevron, 467 U.S. at 843, which requires only

that its construction be a "reasonable" one, id. at 844. Similarly, we defer to an agency's reading of its own regulations,

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here the regulation defining "same as" as "identical to,"

unless it is "plainly erroneous or inconsistent with the regulation." Auer v. Robbins, 117 S. Ct. 905, 911 (1997) (internal

quotation omitted); Cassell v. FCC, No. 97-1005, slip op. at

10, 1998 WL 598099 at *6 (D.C. Cir. Sept. 11, 1998). We

conclude that the FDA's definition of "same as" and "identical," as applied to menotropins products, is reasonable.

The FDA concluded that "[t]o be considered to have the

same active ingredients as the reference listed drug, generic

FSH products based on Pergonal ... must have the same

primary structure, i.e., the same protein backbone and amino

acid sequence as Pergonal (assured by using the same natural

source material), the same potency, and the same degree of

batch-to-batch uniformity." J.A. 483. The agency thus endeavored to guarantee the greatest degree of "sameness"

possible for this kind of product, by ensuring an identical

chemical structure where possible (in the primary structure),

while reducing natural batch-to-batch variance (in the carbohydrate side chains) to the same degree as that found in the

pioneer drug. To accomplish the latter, the FDA observed

that Serono controls the batch-to-batch uniformity of Pergonal by using USP rat potency tests, and that Ferring does the

same for Repronex. Id. at 483-84. The agency concluded

that "it would be unreasonable to hold the generic menotropins product to a higher standard of uniformity than the

standard used for Pergonal." Id. at 484 n.17.

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Finally, Dr. Woodcock noted that there also were isoform

variations between Pergonal and another approved menotropins product, Humegon, and that clinical trials and published

literature on those two drugs "demonstrated no differences in

safety and efficacy." Id. at 483. Those studies, the FDA

found, indicate that "any currently observed differences in

FSH isoforms do not have clinical significance." Id. at 484.

In light of the standards it set, and the evidence of clinical

equivalence, Dr. Woodcock concluded that "the active ingredients, FSH and LH, of the approved menotropins products are

the same for purposes of 21 U.S.C. s 355(j)." Id. (emphasis

added).

The FDA's determination of what is required to establish

"sameness" for purposes of the Act rests on the "agency's

evaluations of scientific data within its area of expertise," and

hence is entitled to a "high level of deference" from this court.

A.L. Pharma, Inc. v. Shalala, 62 F.3d 1484, 1490 (D.C. Cir.

1995); see Schering Corp., 51 F.3d at 399-400. The district

court appeared to grant the FDA's determination less than

this usual deference because internal FDA memoranda indicated there was some disagreement among FDA chemists as

to whether the isoform variation rendered the active ingredients different. See Serono Lab., 974 F. Supp. at 33 & n.6.2

But Chevron deference is owed to the decisionmaker authorized to speak on behalf of the agency, not to each individual

agency employee. See Michigan Citizens For An Indep.

Press v. Thornburgh, 868 F.2d 1285, 1293 (D.C. Cir. 1989)

(giving Chevron deference to Attorney General's statutory

interpretation over contrary view of Antitrust Division, be-

__________

2 The district court also read the minutes of a 1993 meeting

between FDA staff and Lederle (the original ANDA applicant) to

indicate that the staff "implicitly" rejected the use of "the USP

bioassay for menotropins" as a method for evaluating "pharmaceutical equivalence"--because the staff required Lederle to do additional chemical testing. Serono Lab., 974 F. Supp. at 33 n.7. Whether

or not this was the implication of the staff's actions, the views of

FDA staff do not bind the agency's final decisionmaker. See 21

C.F.R. s 10.65(a) (action at meetings with FDA staff does not

constitute final administrative action).

cause Congress "place[d] responsibility for reconciling the

conflicting policies and values called for in this type of case

[not] upon the Antitrust Division, but rather on the Attorney

General"); cf. San Luis Obispo Mothers For Peace v. United

States Nuclear Regulatory Comm'n, 789 F.2d 26, 33 (D.C.

Cir. 1986) (en banc) (holding that the "position of an agency's

staff, taken before the agency itself decided the point, does

not invalidate the agency's subsequent application and interpretation of its own regulation"); Homemakers N. Shore, Inc.

v. Bowen, 832 F.2d 408, 413 (7th Cir. 1987) (" 'The Secretary's

position' is the position of the Department as an entity, and

the fact that people in the chain of command have expressed

divergent views does not diminish the effect of the agency's

resolution of those disputes."). Indeed, were we to hold

otherwise, we would effectively empower any individual emUSCA Case #97-5188 Document #391994 Filed: 10/27/1998 Page 12 of 25
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ployee not just to veto the views of the agency head, but to

preclude any deference to the agency at all, since we would

have no basis for deciding to whose view we should defer.

Dr. Woodcock was the authorized decisionmaker for the

agency on this matter, see 21 C.F.R. s 5.31(a)(2)(i) (Director

of Center for Drug Evaluation and Research authorized to

grant or deny citizen petition), and hers is the view to which

the courts owe deference.

Of course, differing views among an agency's staff may

indicate that there is more than one reasonable way to read a

statute. And there may well be more than one reasonable

way to read this one. But under Chevron, courts are bound

to uphold an agency interpretation as long as it is reasonable--regardless whether there may be other reasonable, or

even more reasonable, views. Here, the FDA interpreted

"same as," in the context of menotropins products, to require:

clinical equivalence to the pioneer, chemical identity to the

extent possible, and limitations on inherent isoform variation

to the same extent as in the pioneer. This interpretation is a

reasonable, and hence permissible, reading of the statutory

term. Cf. Bristol-Myers Squibb Co. v. Shalala, 91 F.3d 1493,

1499-1500 (D.C. Cir. 1996) (upholding FDA determination

that statutory provision requiring that labeling of generic be

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the "same as" labeling of pioneer, permitted FDA to approve

a generic even though its label would not include all of the

indications on the label of the pioneer). It is also a reasonable interpretation of the word "identical" in the agency's own

regulation.3

We conclude that the district court erred as a matter of law

in ruling that the FDA's interpretation of the statute and

regulations was impermissible. As that ruling was the principal basis for the court's conclusion that Serono was likely to

succeed on the merits of its claim that the active ingredient

FSH in Repronex was not the "same as" that in Pergonal, the

court erred in that conclusion as well.

__________

3 The Federal Register notice accompanying 21 C.F.R.

s 314.92(a)(1), which defines the term "same as" to mean "identical," supports the FDA's view that the regulation does not require

complete chemical identity regardless of the kind of drug at issue.

The notice indicates the FDA decided against adopting a proposal

that would have required "applicants to demonstrate that their

active ingredients 'exhibit the same physical and chemical characteristics[;] that no additional residues or impurities can result from

the different manufacture or synthesis process; and that the stereochemistry characteristics and solid state forms of the drug have not

been altered.' " 57 Fed. Reg. 17,950, 17,958-59 (1992). Instead,

the notice indicates the FDA adopted a more flexible approach:

FDA will consider an active ingredient to be the same as that

of the reference listed drug if it meets the same standards for

identity. In most cases, these standards are described in the

U.S. Pharmacopeia [USP]. However, in some cases, FDA

may prescribe additional standards that are material to the

ingredient's sameness. For example, for some drug products,

standards for crystalline structure or stereoisomeric mixture

may be required. Should questions arise, an applicant should

contact the Office of Generic Drugs to determine what information would be necessary to demonstrate that its active ingredient is the same as that in the reference listed drug.

Id. at 17,959 (emphasis added). As discussed in the text above, the

FDA followed this approach here, "rely[ing] on the USP test for its

determination of the sameness of the active ingredients" in Repronex and Pergonal. J.A. 483 (Woodcock Letter).

B

Lactose is an inactive ingredient in both Repronex and

Pergonal. With regard to inactive ingredients, the Act directs the FDA to approve an ANDA for a generic drug unless

the agency finds the inactive ingredients are "unsafe for use"

or the composition of the drug is unsafe "because of the type

or quantity" of the inactive ingredients. 21 U.S.C.

s 355(j)(3)(H). Although the statute itself contains no other

limitation, an FDA regulation that became effective in 1992

provides that the agency will not grant an ANDA for a

generic drug intended for parenteral (injectable) use, "unless

it contains the same inactive ingredients ... in the same

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concentration as the listed drug...." 21 C.F.R.

s 314.127(a)(8)(ii)(B). Repronex is intended for parenteral

use and, although there is no dispute that the lactose in

Repronex and Pergonal is the same, it is conceded that the

concentration of lactose in the two drugs is different. Repronex contains twice as many milligrams of lactose per vial as

Pergonal. See J.A. 457.

Deputy Director Johnston addressed this issue in his January 1997 memorandum, determining that because the ANDA

for Repronex was filed in 1990, the regulations that were in

effect in that year rather than those that went into effect in

1992 should apply. He explained his determination as follows:

OGD [the Office of Generic Drugs] has generally used

the filing and approval criteria in effect at the time of

submission as the basis for approval of applications. At

the time that [the Repronex] applications were submitted

in June 1990, the regulations implementing the WaxmanHatch amendments were not in effect. The regulations

in effect at that time did not require that

parenteral products contain the same inactive ingredients

at the same concentration. [See, e.g., 21 C.F.R.

ss 314.125(b)(2), (3), (4) (1990); 21 C.F.R. s 314.2

(1984).] Moreover, OGD did not have a specific policy

that addressed limitations on inactive ingredients in parenteral products. Thus, with regard to inactive ingredients, the generic menotropins application was approvable

under the regulations in effect at the time the application

was submitted.

J.A. 457.

The district court rejected Johnston's determination. The

court did not dispute the FDA's representation that its policy

has been to apply the regulations in effect at the time of the

submission of the ANDA. See, e.g., 48 Fed. Reg. 2751, 2753

(1983) (in pre-Hatch-Waxman period, applying regulations

only to ANDAs submitted after the regulations' effective

date). Instead, it pronounced itself "dumbfound[ed]" by the

contention that a new drug could "come to market on a more

lenient basis than required by existing law." Serono Lab.,

974 F. Supp. at 34-35. "While the court understands Grandfather clauses," it said, "if one does exist in this case, they

have no place where the public safety is involved." Id. at 35.

We do not find the FDA's policy so dumbfounding. First,

the agency's decision not to apply the 1992 "same concentration" rule did not free the agency to disregard safety considerations. The statute's bottom line--that the agency must be

satisfied that the lactose in the generic is not unsafe--still

holds. Second, as long as the agency continues to ensure an

ingredient's safety on a case-by-case basis, the decision not to

retroactively apply a per se rule regarding concentration is

not irrational. The application process for new drugs can be

a long one--even the "abbreviated" ANDA process utilized

here took more than six years for an agency decision. If

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every pending application had to be revised each time the

FDA changed its regulations, the process would become much

more lengthy--even Sisyphean if the rules of the game

changed each time the application neared the finish line.

Indeed, if complete retroactivity were required, the unintended consequence might well be to force the agency to limit its

revision of regulations, in order to prevent the process from

becoming unworkable.

More important, however we or the district court may

appraise the reasonableness of grandfather clauses in drug

regulation, Congress itself plainly contemplated that the FDA

would follow a grandfather policy. Although the HatchUSCA Case #97-5188 Document #391994 Filed: 10/27/1998 Page 16 of 25
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Waxman Amendments authorized the FDA to promulgate

regulations to implement its new ANDA provisions, and one

such regulation was the 1992 "same concentration" rule, the

Amendments also expressly stated that ANDAs "may be

submitted in accordance with" the FDA's existing regulations

until the new regulations "take effect." Pub. L. No. 98-417,

s 105(b), 98 Stat. 1585, 1597 (codified at 21 U.S.C. s 355

note). As the FDA rightly points out, for this provision to

have any meaning, the FDA must also be permitted to review

applications under the regulations in effect at the time of the

submission. Accordingly, the district court erred as a matter

of law in concluding that Serono was likely to succeed on the

merits because the FDA had failed to apply its 1992 regulation to the Repronex ANDA.4

The district court further stated that even if the FDA did

not have to apply the 1992 regulation, the court nonetheless

was "uncertain" whether the bottom-line requirement that

the lactose in Repronex not be "unsafe" was satisfied. Serono Lab., 974 F. Supp. at 35. The court's uncertainty derived,

it said, from the following sentence in the Johnston Memorandum: " '[T]he difference in the amount of lactose present in

[Repronex] does not raise serious questions of safety.' " Id.

(citing J.A. 458 (Johnston Memorandum)) (emphasis added by

district court). The agency's use of the word "serious," the

district court suggested, indicated too much "tentativeness" to

give the court comfort. Id.

The FDA contends, and we agree, that the district court

misread the memorandum. Presumably the court thought

the use of the adjective "serious" indicated the FDA still

might harbor questions, even if not serious ones. In context,

however, it is apparent that Deputy Director Johnston did not

use "serious" to suggest that unresolved questions remained.

Rather, he used serious as a synonym for "reasonable." This

__________

4 Serono's citations to cases regarding an agency's duty to comply

with its own regulations are inapposite. The FDA did not "fail to

comply" with an applicable regulation. Rather, it found that under

its existing policy, the 1992 regulation was inapplicable to the

earlier-filed ANDA for Repronex.

usage is made clear by the language Johnston used to summarize his analysis of the safety issue: "[T]here is no reasonable basis to conclude that the lactose would have been or is a

safety concern." J.A. 458 (emphasis added); see also id. at

481 n.12 (Woodcock Letter) ("[T]he lactose concentration

variation between Ferring's product and Serono's product

does not pose safety concerns.").5

Nor does anything in the Johnston Memorandum suggest

the FDA reached its conclusion cavalierly. Deputy Director

Johnston made clear that although the Repronex ANDA was

not subject to the "same concentration" regulation, the agency had "assured that safety was not a problem." Id. at 458.

There was "no reasonable basis" for a safety concern arising

from the different concentrations of lactose, he said, for four

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reasons. First, "lactose is a sugar obtained from milk" which

is commonly used as an inactive ingredient in many parenteral drug products, and which "has been found to be generally

recognized as safe (GRAS) in preclinical or animal studies by

the Center for Drug Evaluation and Research (CDER)." Id.

Second, "lactose has been used safely in amounts that far

exceed[ ] the amount present in [Repronex]." Id. Third,

"every lot of [Repronex] is checked for efficacy by [a recognized] method." Id. And finally, "three safety studies were

performed on the product that showed no demonstrated

potential for an increase in the incidence and severity of

cardiovascular incidents or hypersensitivity and anaphylactic

reactions." Id.

Nothing in the Johnston Memorandum, then, suggests the

agency was left with any residual safety concerns. To the

contrary, Deputy Director Johnston concluded: "Thus, FDA

determines that there is not [a] safety concern (from the

__________

5 Johnston's use of the word "serious" appears to have been

nothing more than a parroting of the language in the FDA regulation cited by Serono in its citizen petition. See J.A. 465 ("An

inactive ingredient ... will be considered unsafe if there is a

reasonable basis to conclude that the ingredient ... raises serious

questions of safety.") (emphasis added) (citing 21 C.F.R.

s 314.127(a)(8)(ii)(A)).

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inactive ingredients or the impurity profile), efficacy concern,

or bioequivalence problem that would preclude approval of

the generic drug product." Id. To the extent the district

court concluded otherwise regarding the firmness of the

FDA's view, that conclusion was clearly erroneous.

Serono contends that however certain the agency may have

been about the safety of the lactose in Repronex, the district

court's decision was still justified because the three safety

studies referred to in the Johnston Memorandum were animal studies. According to Serono, the Hatch-Waxman

Amendments prohibit the use of such studies to analyze

safety. The district court did not explicitly rely on this

argument, but Serono presses it as an alternate ground for

affirmance. Serono Br. at 33-35.

The only provision of the Act to which Serono points for

support of its no-animal-studies proposition is one that states

the FDA "may not require that an abbreviated application

contain information in addition to that required by clauses (i)

through (viii)" of 21 U.S.C. s 355(j)(2)(A). Id. Because

nothing in those clauses mentions animal studies, Serono

contends they are barred. This provision, however, does not

bear the weight Serono applies.

First, the indicated clauses do not suggest that animal

studies are in any way disfavored. The clauses simply describe what the "information" in an application must "show."

They do not specify the kinds of studies that can or cannot be

used to satisfy the requirement. See, e.g., id.

s 355(j)(2)(A)(ii)(II) ("An abbreviated application for a new

drug shall contain ... information to show that the active

ingredients of the new drug are the same as those of the

listed drug.").

Moreover, the most the provision cited by Serono does is

bar the FDA from requiring an applicant to submit more

information than required by the statute. It does not bar an

applicant from voluntarily submitting additional information--including animal studies--as part of its ANDA. Nor

does it bar the FDA from relying on animal studies to make

its findings. To the contrary, the statute expressly provides

that the FDA may make safety determinations on the basis of

information submitted in the ANDA "or any other information available to the Secretary." Id. s 355(j)(3)(H). Accordingly, we reject Serono's contention that the Act prohibits

reliance on animal studies to confirm the safety of Repronex's

inactive ingredients. See Schering Corp., 51 F.3d at 399

(holding that FDA's "judgments as to what is required to

ascertain the safety and efficacy of drugs fall squarely within

the ambit of the FDA's expertise and merit deference from

us").6

In sum, we conclude the district court erred in finding that

Serono was likely to succeed on the merits regarding its

lactose claim, because that finding was based on (1) the

legally erroneous conclusion that the FDA was bound to

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apply its 1992 "same concentration" regulation to Repronex's

1990 ANDA, and (2) the clearly erroneous factual finding that

the agency was "tentative" in its views regarding Repronex's

safety. Serono's alternative rationale, that the FDA unlawfully employed animal studies in this case, also fails.

C

Finally, Serono argues that the conceded differences in the

UUPs in Repronex and Pergonal render the former unfit for

ANDA approval. Serono regards the UUPs as inactive ingredients, and again cites the FDA's 1992 regulation, which

__________

6 We also reject Serono's contention that FDA policy bars the

agency's use of animal studies in the manner in which they were

used here. Serono relies on a Federal Register notice stating that

an ANDA is not an appropriate vehicle for approval of a drug if

animal or clinical studies are "necessary to show that the drug is

safe or effective." 57 Fed. Reg. at 17,958. The notice explains,

however, that such studies are permitted if they constitute "limited

confirmatory testing," i.e., "simple studies [that are] intended to

rule out unlikely problems" and that are not "necessary" to demonstrate overall safety. Id. The FDA's determination that the

animal studies at issue here fall within that category is supported

by the fact that the studies were only one of four grounds upon

which the agency relied for its conclusion that the lactose in

Repronex is safe. See J.A. 458.

requires that an ANDA not be approved unless the generic

drug "contains the same inactive ingredients ... in the same

concentration as the listed drug...." 21 C.F.R.

s 314.127(a)(8)(ii)(B). The district court relied heavily on

what it characterized as the FDA's "efforts to skirt" this

regulation in concluding that Serono was likely to succeed on

the merits of this claim. See Serono Lab., 974 F. Supp. at 34.

As we have already held, however, the FDA appropriately

declined to apply its 1992 regulation to Ferring's 1990 ANDA,

leaving only the statutory (and similar 1990 regulatory) requirement that available information not show the generic

drug's inactive ingredients are "unsafe." 21 U.S.C.

s 355(j)(3)(H). The Woodcock Letter adequately addressed

that requirement. Dr. Woodcock noted that Ferring "performed three confirmatory safety studies to rule out the

unlikely possibility [asserted in Serono's citizen petition] that

the differences in impurity profiles between the Ferring and

Serono products might affect the safety of the generic drug

product." J.A. 480. Although the studies involved animals,

we have held above that the statute does not bar FDA from

relying on such studies for this purpose. Moreover, Woodcock further determined that the results of the animal studies

were "consistent with human clinical studies" submitted by

another menotropins manufacturer, Organon, in support of its

NDA for another menotropins product, Humegon, which "like

Ferring's product, contains urinary proteins that may be

different from Pergonal." Id. at 481. After reviewing those

studies, Woodcock concluded that "Ferring has adequately

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demonstrated that the potential difference (from Pergonal) in

urinary proteins is not a safety concern." Id. Both this

court and the district court are bound to show deference to

the agency's fact-finding in this area of its technical expertise.

See, e.g., Schering Corp., 51 F.3d at 399.

Serono interposes one final argument. It contends we

should ignore the Woodcock Letter because it was a post hoc

rationalization of the agency's action. Although the letter

was the agency's response to Serono's citizen petition, Serono

labels it post hoc because it was issued after Serono had

already moved for injunctive relief in the district court. In

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this case, however, timing isn't everything. Dr. Woodcock's

letter represents the considered views of the agencydecisionmaker herself, announced at the usual point in the

agency's decision-making process (the end), rather than the

views of litigation counsel trying to come up with an explanation after the fact. See Auer, 117 S. Ct. at 912 ("There is

simply no reason to suspect that the interpretation does not

reflect the agency's fair and considered judgment on the

matter in question."). The fact that Serono filed for preliminary injunctive relief before the agency ruled on its petition

does not change the analysis. Cf. Local 814, Int'l Bhd. of

Teamsters v. NLRB, 546 F.2d 989, 992 (D.C. Cir. 1976)

(" 'The post hoc rationalization' rule is not a time barrier

which freezes an agency's exercise of its judgment after an

initial decision has been made and bars it from further

articulation of its reasoning. It is a rule directed at reviewing

courts which forbids judges to uphold agency action on the

basis of rationales offered by anyone other than the proper

decisionmakers.").

In sum, the district court's conclusion that Serono was

likely to succeed on the merits of this claim was substantially

based on its determination that the law compelled the FDA to

apply its 1992 regulation requiring that the inactive ingredients in a generic drug be the same as those in the pioneer.

That determination was legally erroneous. On the other

hand, the record indicates that the FDA's treatment of the

UUPs is likely to satisfy the statutory safety requirement for

inactive ingredients. See J.A. 480-81 (evaluating safety of

UUPs as if they were inactive ingredients). Accordingly, we

need not consider the FDA's alternative argument that the

UUPs are not "inactive ingredients" at all, but rather are

merely "impurities" not subject to that requirement. See id.

at 479-80.

IV

In this case, our conclusion that Serono is not likely to

succeed on the merits effectively decides the preliminary

injunction issue. Here, the other preliminary injunction facUSCA Case #97-5188 Document #391994 Filed: 10/27/1998 Page 22 of 25
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tors--injury to Serono, injury to Ferring, and the public

interest--either are a wash or are inextricably linked to the

merits.

Serono contends that it will be irreparably injured if the

FDA is not enjoined from approving Repronex, because it will

suffer an unrecoverable loss of sales to Ferring. But even if

such a loss does constitute irreparable injury, as the district

court found and defendants dispute, see Serono Lab., 974

F. Supp. at 35, that injury must be weighed against the next

factor--the extent to which an injunction will substantially

injure the other party, Ferring. And that balance of harms

results roughly in a draw. Whatever sales Serono will lose to

Ferring in the absence of an injunction, Ferring will lose to

Serono in the presence of one. See Serono Lab. v. Shalala,

Civ. No. 97-1227 (D.D.C. Aug. 19, 1997) (J.A. 622) (district

court order denying Ferring motion for stay pending appeal,

because "while Ferring may be harmed by the granting of the

preliminary injunction, Plaintiff would be equally harmed if

the injunction were to be stayed"). As a consequence, even

Serono concedes that the court should "ignore[ ] the injury to

both companies when balancing the harms since the lost

revenues at issue are offsetting." Serono Br. at 39-40;7 see

Delaware & Hudson Ry. Co. v. United Transp. Union, 450

F.2d 603, 620 (D.C. Cir. 1971) ("It often happens that ... one

party or the other will be injured whichever course is taken.

A sound disposition ... must [then] depend on a reflective

and attentive appraisal as to the outcome on the merits.").

The final preliminary injunction factor, the public interest,

also offers Serono no support because it is inextricably linked

with the merits of the case. If, as we have held, Serono is not

likely to establish that Ferring's ANDA was wrongly approved, then public interest considerations weigh against an

injunction. The purpose of the Hatch-Waxman Amendments

was, after all, "to increase competition in the drug industry by

facilitating the approval of generic copies of drugs." Mead

__________

7 Because Ferring plans to sell Repronex for less than Serono

sells Pergonal, whether the lost revenues are exactly offsetting

depends upon the elasticity of demand.

Johnson, 838 F.2d at 1333. Congress expected that competition "to make available more low cost generic drugs." H.R.

Rep. No. 98-857, pt. 1, at 14 (1984), reprinted in 1984

U.S.C.C.A.N. 2647, 2647. Congress' purpose is directly implicated here, the FDA argues, because Ferring has priced

Repronex to sell at 40% below the price of Pergonal, and

because there has been a shortage of this type of fertility

drug. FDA Br. at 46 (citing J.A. 123, 133, 420, 458). As

Deputy Director Johnston put it, "the availability of a generic

menotropins injection ... will enable some patients to afford

the drug product that previously could not." J.A. 458.8

Of course if the ANDA should not have been granted in

this case, because the statute's standards--particularly its

safety standards--were not met, then the public interest

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balance plainly would weigh in favor of an injunction. But on

the current record it appears likely that the ANDA was

properly granted, and the FDA has assured this court, in the

strongest possible terms, that there are no safety concerns.

See FDA Br. at 46; Oral Arg. Tr. at 34. Neither we, nor the

district judge, are scientists independently capable of assessing the validity of the agency's determination--beyond holding it to the standards of rationality required by the Administrative Procedure Act, 5 U.S.C. s 706(2)(A). See Troy Corp.

v. Browner, 120 F.2d 277, 283 (D.C. Cir. 1997); Schering

Corp., 51 F.3d at 399. Indeed, not even Serono argues that

the evidence shows Repronex represents a safety concern.

At oral argument, Serono's counsel, choosing his words carefully, would say no more than that "we don't know whether

there are unresolved safety issues." Oral Arg. Tr. at 22.

Such agnosticism is too insubstantial a basis for us to rescind

the decision of the expert agency entrusted by Congress with

the authority to assess the safety of drugs.

__________

8 For this reason, one of the public interest considerations relied

upon by the district court--that "the reproductive potential of each

woman declines with age ... and any lost cycle (usually of a

month's duration) will contribute to the loss of reproductive potential"--cuts against rather than in favor of an injunction. Serono

Lab., 974 F. Supp. at 36.

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V

For the foregoing reasons, we vacate the preliminary injunction entered by the district court and remand the case for

further proceedings consistent with this opinion. Our opinion

does not foreclose the possibility that at a trial on the merits,

and upon a fuller record, Serono may be able to establish that

there are grounds for overturning the grant of Repronex's

ANDA. We hold only that upon the current record, Serono

has failed to establish that it meets the criteria for the grant

of a preliminary injunction.

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