Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-95-05399/USCOURTS-caDC-95-05399-0/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 March 22, 1996 Decided August 16, 1996

No. 95-5399

BRISTOL-MYERS SQUIBB COMPANY,

APPELLANT

v.

DONNA E. SHALALA,

SECRETARY OF HEALTH AND HUMAN SERVICES, AND

DAVID A. KESSLER, M.D.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 94cv01516)

Michael B. Waitzkin argued the cause for appellant. Terry S. Coleman, John D. Kiser and Matthew

D. Peterson were on the briefs.

Howard S. Scher, Attorney, United States Department ofJustice, argued the cause for appellee, with

whom Douglas N. Letter, Litigation Counsel, and Eric H. Holder, Jr., United States Attorney, were

on the brief.

Before: GINSBURG, RANDOLPH and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge: Bristol-Meyers Squibb brought an action in the district court to

challenge the regulations ofthe Food and Drug Administration that govern approvalof a new generic

drug based upon research paid for by the manufacturer of the "innovator" or "pioneer" drug with

which the generic product is therapeutically interchangeable. The district court dismissed the

company's complaint on the ground that the allegations therein did not satisfy the constitutional

requirements for standing to sue in federal court, as explicated by the Supreme Court in Lujan v.

Defenders of Wildlife, 504 U.S. 555 (1992). The district court subsequently denied the appellant's

motion for leave to file an amended complaint intended to cure the standing problem. That was an

error; we hold that the supplemental allegations in the amended complaint suffice to establish the

appellant's standing.

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BMS urges us, in the interest of economy, also to determine the merit of its claim as a matter

of law, and the Secretary does not object. For the reasons stated below, we read the Food, Drug,

and Cosmetic Act, as amended, in the same way the Secretary does. Accordingly, we remand this

case to the district court with instructions to dismiss the complaint pursuant to Federal Rule of Civil

Procedure 12(b)(6) and to enter judgment for the appellees.

I. Background

The Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent

Term Restoration Act of 1984, provides that "[n]o person shall introduce or deliver for introduction

into interstate commerce any new drug, unless [FDA] approval ... is effective with respect to such

drug." 21 U.S.C. § 355(a). In order to obtain such approval, a drug manufacturer must ordinarily

file a new drug application (NDA), pursuant to 21 U.S.C. § 355(b); if the new drug is a generic

version of a "listed" (i.e., previously approved) drug, however, then the manufacturer may file an

abbreviated new drug application (ANDA), pursuant to 21 U.S.C. § 355(j).

The principal advantage of securing approval under § 355(j) is that the applicant may rely

upon research paid for by the manufacturer of the listed drug. An NDA for a pioneer drug submitted

under § 355(b) must include test data demonstrating that the drug is safe and effective for one or

more indicated uses. Section 355(j) allows the manufacturer of a generic drug to prove that its

generic product is safe and effective by demonstrating its similarity to a pioneer drug already found

by the FDA to be safe and effective. (The generic drug must contain the same active ingredients as

the pioneer drug, but need not contain the same inactive ingredients. United States v. Gentrix Drug

Corp., 460 U.S. 453, 454-55 (1983)).

The purpose of § 355(j) isto promote competition, but not without limitation. The Act offers

the manufacturer of a pioneer drug protection from the competition of generic drugs for a period of

five years from the date upon which the FDA approves an NDA submitted under § 355(b). During

that period no applicant (with an exception not relevant here) may submit an ANDA "which refers

to the drug for which the [§ 355(b)] application wassubmitted." § 355(j)(4)(D)(ii). In addition, and

of more immediate concern:

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If a supplement to an application approved under [§ 355(b)] is approved ... and the

supplement contains reports of new clinical investigations (other than bioavailability

studies) essential to the approval of the supplement and conducted or sponsored by

the person submitting the supplement, the Secretary may not make the approval of an

application submitted under [§ 355(j)] for a change approved in the supplement

effective before the expiration of three years from the date of the approval of the

supplement under [§ 355(b)]....

§ 355(j)(4)(D)(iv).

The precise scope of the protection thus conferred upon the manufacturer of a pioneer drug

is at issue in this dispute, but our resolution of that issue depends upon whether the Secretary has

correctly construed another provision in the same section of the Act. That provision, §

355(j)(2)(A)(v), describes one of the ways in which a new generic drug product must resemble a

pioneer drug if the manufacturer of the generic is to benefit from research undertaken in order to

secure FDA approval of the pioneer: The § 355(j) applicant must

show that the labeling proposed for the new drug isthe same asthe labeling approved

for the listed drug ... except for changes required because of differences approved

under a petition filed under [§ 355(j)(2)(C)] or because the new drug and the listed

drug are produced or distributed by different manufacturers.

The FDA regulation implementing this provision, 21 C.F.R. § 314.94(a)(8)(iv), states:

Labeling (including the container label and package insert) proposed for the new drug

product must be the same as the labeling approved for the reference listed drug,

except for .... omission of an indication or other aspect of labeling ... accorded

exclusivity under [§ 355(j)(4)(D)].

See also 21 C.F.R. § 314.127(a)(7) (grounds upon which FDA will deny ANDA).

BMS takes issue with the exception, arguing that it "virtually eliminate[s]" any benefit that

the manufacturer of a pioneer drug might have obtained from the three-year exclusivity that §

355(j)(4)(D)(iv) provides with respect to supplemental indications. Under the regulation, the FDA

will not reject an ANDA merely because the agency has approved, within the preceding three years,

a supplemental indication for the pioneer drug upon which the new generic is based. The agency will

not approve the generic version for the supplemental indication, but may approve it for others.

To illustrate, in its proposed supplemental complaint BMS alleged that it holdsthe marketing

rightsfor the pioneer drug Capoten®, generically known as "captopril." The FDA initially approved

an NDA for the use of Capoten in treating hypertension. Based upon new clinical investigations, it

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hassince approved two supplemental indicationsfor use: one (in September 1993) for left ventricular

dysfunction following myocardial infarction, and another (in January 1994) for diabetic nephropathy

in patients with Type I insulin-dependent diabetes mellitus and retinopathy. Under the agency's

interpretation of the Act, as manifested in the challenged regulations, the FDA could approve an

ANDA for generic captopril for use in the treatment of hypertension five years after it approved the

original NDA for Capoten; not until 1997, however, will the FDA approve the listing of diabetic

nephropathy as an indication for use on the label of a generic version of Capoten.

BMS argues that § 355(j)(2)(A)(v) bars the FDA from approving any ANDA for generic

captopril before 1997 if that application refers to research submitted to secure the approval of

Capoten. Its argument is this: once the FDA has approved the listing of a supplemental indication

on the label of a pioneer drug, the label of a generic version approved under § 355(j) less than three

years later would necessarily include at least one fewer indication than the label approved for the

pioneer drug. Section 355(j) prohibits that result, according to BMS, by requiring that the labels of

the pioneer and of the generic version be "the same." Moreover, although the generic drug will not

have been approved for the supplemental indication, physicians and pharmacists mayand in some

cases state law or health insurance contracts require them touse the generic product for the

supplemental indication.

The FDA acknowledges that it "does not regulate ... the possible substitution of a generic

drug for the pioneer bydoctors or pharmacists." See Federal TradeComm'n v. Simeon Mgmt. Corp.,

391 F. Supp. 697, 706 (N.D. Cal. 1975) (Act does not "interfere in or [ ] regulate the practice of

medicine between the physician and the patient"); Legal Status of Approved Labeling for

Prescription Drugs; Prescribing for Uses Unapproved by the Food and Drug Administration, 37 Fed.

Reg. 16503 (1972) (Notice of Proposed Rulemaking) ("the new drug provisions apply only at the

moment ofshipment in interstate commerce and not to action taken subsequent[ly].... Once the new

drug is in a local pharmacy ... the physician may, as part of the practice of medicine, lawfully ... vary

the conditions of use fromthose approved in the package insert"). This explains why BMS considers

it cold comfort that the FDA would withhold approval of a generic version of captopril for some

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indications but not others; once the FDA approves the sale of generic captopril for hypertension, the

agency can offer BMS no assurance that physicians and pharmacists will not substitute it for Capoten

in the treatment of diabetic nephropathy.

BMS first challenged the regulations byconcurrentlyfiling with the agencya citizen's petition,

21 C.F.R. § 10.30, and a petition for stay of action, 21 C.F.R. § 10.35. In the former, BMS asked

the agency to repealthe offending regulations. In the latter, BMS asked the FDA to stay the approval

of any ANDA for the generic drug estradiol that makes reference to the appellant's listed drug

Estrace® until the agency had responded to the citizen's petition. The FDA denied both petitions,

after which BMS brought this action in the district court.

II. Analysis

The district court dismissed the case on the ground that the allegationsin the complaint failed

to establish that BMS has standing to sue under Article III of the Constitution of the United States.

The court then denied the appellant's motion to file an amended complaint because the new

allegations failed to cure the constitutional deficiency. As the plaintiff's standing is a prerequisite to

our jurisdiction, we turn to that issue before considering the appellant's request that we address the

merits of its claim as a matter of law.

A. Article III Standing

"[T]he irreducible constitutional minimum of standing contains three elements," Lujan, 504

U.S. at 560, commonly referred to as (1) injury-in-fact, (2) causation (or traceability), and (3)

redressability. We examine the proposed amended complaint to see whether the allegations contained

therein establish BMS's standing under Lujan.

1. Injury-in-Fact

To satisfy the first element of Article III standing

the plaintiff must have suffered an "injury in fact"an invasion of a legally protected

interest which is (a) concrete and particularized, and (b) "actual or imminent, not

"conjectural' or "hypothetical'."

Lujan, 504 U.S. at 560 (citations omitted). In this case, we start with the more specific proposition

that where, as here, a statutory provision reflects a legislative purpose to protect a competitive

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interest, the protected competitor has standing to require compliance with that provision. Hardin v.

Kentucky Utilities Co., 390 U.S. 1, 6-7 (1968).

At the pleading stage, a plaintiff can satisfythe injury-in-fact requirement byalleging factsthat

"demonstrate a realistic danger of [the plaintiff's] sustaining a direct injury." Babbitt v. United Farm

Workers Nat'l Union, 442 U.S. 289, 298 (1979); see also Lujan, 504 U.S. at 561 ("general factual

allegations of injury resulting from the defendant's conduct may suffice" to establish standing, "for

on a motion to dismiss we presume that general allegations embrace those specific facts that are

necessary to support the claim"). Moreover, under what we have termed the "competitor standing

doctrine ... when a challenged agency action authorizes allegedly illegal transactions that will almost

surely cause [a] petitioner to lose business, there is no need to wait for injury from specific

transactionsto claimstanding." El Paso Natural Gas Co. v. FERC, 50 F.3d 23, 27 (D.C. Cir. 1995);

see also Investment Co. Inst. v. FDIC, 815 F.2d 1540, 1543 (D.C. Cir. 1987).

In its initial complaint, BMS alleged it held the marketing rights to the pioneer drug Estrace,

for which the FDA had approved a supplemental indication in September 1992. BMS explained as

follows the nature of its injury:

17. ... Although a generic drug will be approved by FDA without the

protected supplemental indication in its labeling, the omission fails to protect the

innovator's rights [under § 355(j)(4)(D)(iv)] because the generic drug will be

dispensed for the protected indication as a result of two factors:

(a) First, every state has a law that either permits or requires a pharmacist to

substitute a generic drug for the brand-name drug prescribed by a physician if the

generic drug is considered therapeutically equivalent. In addition, health insurance

contracts often require pharmaciststo dispense a generic version to an insured patient

if a therapeutically equivalent version is available.

(b) Second, in determining whether a generic drug is therapeutically

equivalent for these purposes, states and pharmacies typically look to the FDA as

authority. FDA considers a generic drug to be therapeutically equivalent to the

innovator drug on which it is based even if the labeling of the generic drug does not

include all of the indications approved for the innovator drug.

18. FDA publishes Approved Drug Products with Therapeutic Evaluations,

commonlyknown asthe "OrangeBook," a publication listing each approved drug and

stating whether it is considered therapeutically equivalent to other drugs containing

the same active ingredient(s). When a generic version of a drug is approved, the

Orange Book lists it as therapeutically equivalent to the innovator drug on which it

is based. Thus, pharmacists throughout the country, when presented with a

prescription for the innovator drug, may, or in some cases must, dispense a generic

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drug instead.

19. This substitution occurs even if the labeling of the generic drug does not

include the indication for which the innovator drug is prescribed. Where FDA has

approved one or more supplemental indications for the innovator drug entitled to

exclusivity that are not also approved for the generic versions, the only difference in

the Orange Book is that it contains a note, in an Appendix, setting forth the

innovator's exclusivity right over the indication. Generic drugs are nevertheless listed

as fully interchangeable with innovator drugs. Thus, when a physician prescribes an

innovator drug for a recently approved and exclusive supplemental indication, the

pharmacist often will be required to dispense a generic drug, even though the FDA

has not approved the generic drug for that supplemental indication. This action

renders any ... exclusivity rights covering the supplemental indication largely

meaningless.

The district court concluded that these allegations describe an injurythat is neithersufficiently

imminentbecause BMS had not alleged that any competitor was seeking approval to market a

generic substitute for Estracenor fairly traceable to the challenged FDA regulations, and therefore

fails both the first and the second requirements for standing explicated by the Supreme Court in

Lujan, 504 U.S. at 560. BMS sought leave to file an amended complaint alleging that in 1993 and

1994 the FDA approved supplemental indications for another innovator drug, Capoten, for which

BMS held the marketing rights and that a competitor, Geneva Pharmaceuticals, had not only

submitted an ANDA for a generic substitute, but had in fact obtained FDA approval.

The district court deniedBMS leave to file the amended complaint. Without deciding whether

the allegations regarding Capoten described an injury-in-fact, the court held that the amended

complaint still failed to describe an injury traceable to the challenged FDA regulationsthe issue to

which we shall turn next. First, however, we take up the Secretary's argument that even the amended

complaint fails adequately to allege an injury-in-fact.

The Secretary's argument rests entirely upon the premise that BMS suffered no injury from

the FDA's approval of Geneva's generic product because BMS and Geneva have entered into an

agreement, in settlement of a patent-infringement suit, that bars Geneva from marketing generic

captopril during the period for which BMS claimsstatutory protection. The FDA, however, cites no

authority for the proposition that a plaintiff loses its standing to challenge allegedly unlawful

Government action by obtainingpresumably at some costa private remedy against the realistic

danger of direct injury caused by that Government action; the assertion is too absurd to require

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refutation. Moreover, that proposition seems patently inequitable where the Government action, here

the challenged regulations, creates a threat of recurring harmsindeed, the FDA concedesthat it has

tentativelyapproved seven other ANDAsfor generic captopriland the aggrieved partyhasshielded

itself against only the most immediate threat.

2. Causation

The second element of constitutional standing is that

there must be a causal connection between the injury and the conduct complained

ofthe injury hasto be "fairly... trace[able]to the challenged action ofthe defendant,

and not ... th[e] result [of] the independent action of some third party not before the

court."

Lujan, 504 U.S. at 560 (citations omitted). As noted earlier, the district court denied BMS leave to

amend its complaint on the ground that any competitive injury to BMS is not fairly traceable to action

by the FDA. Rather, "[t]he plaintiff's quarrel, if it exists, is with the pharmacists who dispense

generics for protected indications or with the state statutes and health insurers who require this

substitution. It is not with the defendants, whose regulation does no more than allow the marketing

of generics properly labeled for unprotected indications."

This reasoning is inconsistent with the competitor standing doctrine. Consumers always

decide whether to purchase the product of one competitor or another. The injury claimed here is not

lost sales, per se; nor does BMS claim that the FDA has unlawfully authorized doctors and

pharmacists to substitute generic captopril for Capoten. Rather the injury claimed is exposure to

competition as a result ofthe FDA's authorizing Geneva Pharmaceuticalsto market generic captopril.

BMS claims that the Act makes such authorization unlawful, and does so for the purpose of

protecting the manufacturer of a pioneer drug from the competition of generics. If BMS is correct,

then it is no answer to say that the FDA is merely permitting a competitive product to enter the

market and leaving the purchasing decision to the consumer. See Telephone and Data Systems, Inc.

v. FCC, 19 F.3d 42, 47 (D.C. Cir. 1994) ("injurious private conduct is fairly traceable to the

administrative action contested in the suit if that action authorized the conduct or established its

legality").

3. Redressability 

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Neither the district court nor the parties have expressed doubt about the adequacy of BMS's

allegations to show it is "likely, as opposed to merely speculative, that the injury will be redressed by

a favorable decision." Lujan, 504 U.S. at 561. Nor do we see any reason for doubt. A physician

cannot prescribe and a pharmacist cannot sell what a manufacturer cannot market. If BMS were to

prevail, then it would surely secure the broad relief from competition to which it says it is entitled

under the statute.

B. The Merits

Although the district court did not reach the merits of this case, BMS assures us that it has

nothing to add to its complaint and so invites us, in the interest of judicial economy, to resolve the

merits now rather than to remand the case to the district court. Ever anxious to conserve judicial

resources, and hearing no objection from the Secretary, we accept the invitation.

The crux ofthe dispute is whether 21 U.S.C. § 355(j)(2)(A)(v) permitsthe agency to approve

an ANDA for a new generic drug even though the label of the generic product will not include one

or more indications that appear on the label of the pioneer drug upon which the ANDA is based.

BMS rests its case squarely upon the first step in the analysis prescribed in Chevron, U.S.A., Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Thus, the question is whether the

Congress has directly addressed the issue now in dispute. BMS argues that it has, and that the statute

clearly precludes such approval, as follows: Section 355(j)(2)(A)(v) requires that the generic label

be "the same" as that of the pioneer; there are two exceptions in the statute that, by negative

implication, preclude allothers; and neither exception permits the label of a generic product approved

under § 355(j) to list fewer than all the indications listed on the label of the pioneer drug upon which

the ANDA of the generic drug is based. Q.E.D.

Not so, says the Secretary. One of the statutory exceptions to the same-label requirement

does "accommodate the situation in which the generic drug manufacturer has sought [§ 355(j)]

approval for fewer than all of the indications of the pioneer manufacturer's drug." That exception is

for "changes required ... because the new drug and the listed drug are produced or distributed by

different manufacturers." 21 U.S.C. § 355(j)(2)(A)(v). We agree.

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First, onlytheSecretary'sinterpretationof§ 355(j)(2)(A)(v) worksin harmonywith two other

provisions of the Act. Section 355(j)(2)(A)(i) requires that an ANDA include "information to show

that the conditions of use prescribed, recommended, or suggested in the labeling proposed for the

new drug have been previously approved for a [listed] drug." This requirement would be redundant

if the same label-requirement in § 355(j)(2)(A)(v) applied to indications for use. In addition, §

355(j)(3) lists the circumstances in which the Secretary may disapprove an ANDA; that the labeling

proposed for the new generic does not list every indication approved for the pioneer is not among

these. Instead, § 355(j)(3)(B) provides that the Secretary may disapprove an ANDA if "the

information submitted with the application isinsufficient to showthat eachofthe proposed conditions

of use have [sic] been previously approved for the listed drug referred to in the application." In other

words, the statute expresses the legislature's concern that the new generic be safe and effective for

each indication that will appear on its label; whether the label for the new generic lists every

indication approved for use of the pioneer is a matter of indifference.

Second, and still more persuasive, § 355(j)(4)(D)(iv), by its terms, appears to protect the

manufacturer of a pioneer drug only against the manufacture of a generic substitute using the

pioneer's proprietary research undertaken to obtain approval for a supplemental indication. The

appellant's interpretation of § 355(j)(2)(A)(v), however, would turn § 355(j)(4)(D)(iv) into a bar to

the generic manufacturer's use of research undertaken to obtain approval for any indication for the

pioneer drug, a reading that offersmuch broader protection fromcompetition than § 355(j)(4)(D)(iv)

would otherwise confer. Under BMS's interpretation, every time a supplemental indication is added

to the labeling of a pioneer drug, the manufacturer of the pioneer would get three more years of

protection against the approval of any ANDA based upon that pioneer drug, including one that lists

only the original indication(s) ofthe pioneer. By way of contrast, under the Secretary's interpretation

of the Act, a pioneer drug manufacturer that obtains approval for a supplemental indication based

upon proprietary research will enjoy three years during which the FDA will not approve any ANDA

that includes the supplemental indication. BMS claims that economic reality renders the protection

offered by the Secretary largely an illusion. Perhaps so, but why? By BMS's own account, it is

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because the value of the protection the Congress most clearly conferred upon pioneers would be

greater but for some state laws and health insurers that mandate substitution of generic drugs. That

is not a sufficient basis upon which to conclude that the Congress intended to confer upon the

manufacturers of pioneer drugs the much broader protection that BMS now seeks.

Finally, we note that the Secretary's interpretation finds unusually strong support in the

legislative history of § 355(j). The Report accompanying the House bill expressly noted that it

"permits an ANDA to be approved for less than all of the indications for which the listed drug has

been approved." H.R. Rep. No. 857 (Part I), 98th Cong., 2d Sess. 21-22, reprinted in 1984

U.S.C.C.A.N. 2654-55. BMS points out that the three-year period of exclusivity for supplemental

indications in § 355(j)(4)(D)(iv) was added to the bill after the report was written, but that does not

undermine the Secretary's argument. It suggests merely that the Congress added that provision

understanding that § 355(j)(2)(v) does not prevent a generic manufacturer from obtaining approval

for fewer indicationsthan the FDA has approved for the pioneerwhich is preciselythe wayinwhich

the Secretary interprets the Act.

III. Conclusion

The district court erred in denying the appellant's motion for leave to amend its complaint on

the ground that the appellant had not established its standing to sue. On the merits, however, the

appellant's claim comes up short as a matter of law. We therefore remand this case to the district

court with instructions to dismiss the complaint pursuant to Rule 12(b)(6) and to enter judgment in

favor of the Secretary.

So ordered.

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