Opinion ID: 4516149
Heading Depth: 3
Heading Rank: 2

Heading: Structure and Purpose

Text: Having no luck with the text of § 360cc(a), the FDA turns to other provisions of § 360cc, other sections of the ODA and the overarching FDCA—the larger statute that the ODA amended—as well as the ODA’s overall purpose to argue that § 360cc(a) is ambiguous. Granted, “court[s] must . . . interpret the statute ‘as a symmetrical and coherent regulatory scheme,’ and fit, ‘if possible, all parts into an harmonious whole,’” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (citation omitted) (first quoting Gustafson v. Alloyd Co., 513 U.S. 561, 569 (1995); and then quoting FTC v. Mandel Bros., Inc., 359 U.S. 385, 389 (1959)), but “[r]eliance on context and structure in statutory interpretation is a ‘subtle business, calling for great wariness lest what professes to be mere rendering becomes creation and attempted interpretation of legislation becomes legislation itself,’” King v. Burwell, 135 S. Ct. 2480, 2495 (2015) (quoting Palmer v. Massachusetts, 308 U.S. 79, 83 (1939)). Indeed, although it does not couch its argument this way on appeal, the FDA essentially argues that applying the district court’s and Eagle’s literal interpretation of § 360cc(a)’s text would lead to such odd results that we should look to other evidence beyond the text itself to determine the Congress’s intent. In explaining the limitations of such an argument, we have held that “[t]he plain meaning of legislation should be v. United States, 242 U.S. 409, 417 (1917); City of Paragould v. Ark. Utils. Co., 70 F.2d 530, 533 (8th Cir. 1934). To the extent the canon even applies here, however, it is only relevant to construing an ambiguous statute—something we find missing in this case. See 37 C.J.S. Franchises § 21 (2019) (explaining that rules for interpreting franchises conferred by the government “are to be applied only when doubt arises, for, when the meaning is clear, there is not room for construction”). 18 conclusive, except in the ‘rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.’” Engine Mfrs. Ass’n, 88 F.3d at 1088 (alteration in original) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989)). Although “literal interpretation need not rise to the level of ‘absurdity’ . . ., there must be evidence that Congress meant something other than what it literally said before a court can depart from plain meaning.” Id. (quoting Pub. Citizen v. U.S. Dep’t of Justice, 491 U.S. 440, 453 n.9 (1989)). Absent such evidence, we “cannot ignore the text by assuming that if the statute seems odd to us . . . it could be the product only of oversight, imprecision, or drafting error.” Id. at 1088–89. It is not our “role . . . to ‘correct’ the text so that it better serves the statute’s purpose, for it is the function of the political branches not only to define the goals but also to choose the means for reaching them.” Id. at 1089 (quoting Consol. Rail Corp. v. United States, 896 F.2d 574, 579 (D.C. Cir. 1990)). Thus, for the FDA to avoid the literal interpretation of § 360cc(a) “at Chevron step one, it must show either that, as a matter of historical fact, Congress did not mean what it appears to have said, or that, as a matter of logic and statutory structure, it almost surely could not have meant it.” Id. at 1089. The FDA fails to clear this high bar. The FDA begins its structure argument by pointing to the two exceptions to exclusive approval in § 360cc(b). The FDA points out that the first exception—allowing the FDA to approve other drugs to ensure a sufficient quantity—directs it to consider only the exclusivity holder’s capability to ensure sufficient quantities of the drug. The FDA argues that the exception’s focus on the exclusivity holder’s capability makes sense only in its single-exclusivity holder regime. Under the serial exclusivity regime contemplated by Eagle and the district court, the second drug manufacturer to receive exclusive 19 approval rights shares the market with the initial holder (creating a duopoly), the third drug shares the market the first and second holders (creating a triopoly) and so on. The FDA argues that under this serial scheme, it makes little sense for the Congress to focus solely on the exclusivity holder’s ability to make sufficient quantities when other drug manufacturers would also be in the market. Although the first exception may make more sense when applied to the initial exclusivity holder, it does not show definitively that the Congress intended a period of exclusive approval to apply only to the first manufacturer of a drug and it does not show a result so odd that it justifies overriding § 360cc(a)’s plain text. First, § 360cc(b) gives the FDA discretion to apply the exception. See § 360cc(b) (“[T]he Secretary may . . . approve another application . . . .” (emphasis added)). Thus, if the FDA thought that a current exclusivity holder could not meet demand but other manufacturers on the market were otherwise making sufficient quantities, it has discretion to find that there are sufficient quantities of the drug to meet the needs of persons with the disease for which the drug was designated. Moreover, if the FDA thought there was an insufficient quantity of one version of a drug it believed to be more beneficial (even if not clinically superior), it could at least theoretically use the exception to increase supply of that version of the drug: for example, if the FDA thought, despite the availability of Treanda, the supply of the different dosage version Bendeka (the current holder) was insufficient. As for the second exception that allows the FDA to approve another application with the exclusivity holder’s consent, the FDA argues that a serial exclusivity regime would allow the exception to be improperly manipulated. The FDA argues that the initial exclusivity holder could undercut future holders by consenting to numerous manufacturers or the initial 20 holder could agree with one manufacturer to effectively gain a fourteen-year period of exclusivity, as Teva did by entering a licensing agreement with Eagle to commercially market Bendeka. See supra note 6. First, as with the first exception, the FDA has discretion to approve or deny such a consent waiver. Moreover, the fact that the Congress chose to give the exclusivity holder, whether it be the first or a subsequent one, the ability to completely waive its right to exclusive approval does not speak to whether one or multiple drugs could enjoy the privilege of exclusivity. Indeed, an initial holder could waive its exclusivity period one month into its seven-year period or could wait to consent to the approval of other applications until the final month of its seven-year period. Plainly, the benefits of § 360cc(a)’s exclusive approval right decrease as more drugs are added to the market over time but that the first holder or first few holders enjoy more benefits and the ability to decide when to consent to other applications does not mean that the Congress meant for § 360cc(a) to apply only to the first holder against the provision’s express language. Rather, the Congress specifically chose to leave this exception in the hands of the exclusivity holder subject to the FDA’s discretion. Next, the FDA fashions a structure and purpose argument based on the interplay between designation and exclusivity. The FDA argues that Eagle’s (and the district court’s) view will undermine the purposes of the ODA because, without a postapproval requirement of clinical superiority, it will be forced to grant exclusivity to drug manufacturers that merely tweak a drug’s design to meet the plausible hypothesis standard at the designation stage—thus allowing drugs that may not end up being clinically superior to earlier versions of the same drug to obtain exclusivity. This result, the FDA argues, would lead to the problem of evergreening or serial exclusivity in which either the same manufacturers or multiple manufacturers can 21 obtain multiple periods of sequential exclusivity for the same drug to treat the same disease. In rejecting this argument, the district court explained that this result could occur only if the FDA allowed it to happen. The district court reasoned that because the FDA has “unchallenged statutory authority” to impose requirements for designation, it could raise the clinical superiority threshold at the designation stage. Eagle Pharm., 2018 WL 3838265, at . The FDA asserts that the district court’s view presents the FDA with a dilemma: either increase the requirements for designation—stifling drug development of clinically superior drugs—or leave the current requirements in place—allowing manufacturers to enjoy serial exclusivity for drugs that are only marginally different from earlier versions. The FDA argues that its post-approval clinical superiority requirement avoids these problems by harmonizing the designation and exclusivity provisions of § 360bb and § 360cc. 14 Granted, the Congress’s goal in enacting the ODA was to reduce the cost of and incentivize orphan drug development but the fact that following the text of a statute may conflict with the statute’s larger purpose alone does not warrant departing from the text. See Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2169 (2015) (“Our job is to follow the text even if doing so will supposedly undercut a basic objective of the statute.” (internal quotation marks omitted)); Landstar Express Am., Inc. v. Fed. Mar. Comm’n, 569 F.3d 493, 498 (D.C. Cir. 2009) (“[N]either courts nor federal agencies can rewrite a statute’s plain text to correspond to its supposed purposes.”). It is not 14 Before diving into the FDA’s structural arguments, it is important to note that, unlike § 360aa and § 360bb of the ODA, § 360cc contains no express delegation from the Congress to promulgate regulations under that section, further evidencing that it did not intend the FDA to alter the plain text requirements of § 360cc. 22 our job to say how the Congress should accomplish its goals; rather, we will ignore what the Congress has written only if we are so convinced by a conflict between the text and the purpose that we think the Congress “almost surely could not have meant” what it said. Engine Mfrs. Ass’n, 88 F.3d at 1089. Here, we are not so convinced. To begin, the FDA fails to appreciate the significance of the plausible hypothesis requirement. It is not as if any drug with any “minor tweak” to its formulation can be designated. Rather, the drug’s manufacturer must be able to show a plausible hypothesis of clinical superiority to be granted designation—a threshold that has some teeth. The plausible hypothesis requirement necessarily weeds out drugs that cannot provide at least some evidentiary basis for their claim of clinical superiority. See Def.’s Resp. to Mot. Summ. J. 11, ECF No. 19, United Therapeutics Corp. v. HHS, No. 17-cv01577-ESH (D.D.C.) (Dec. 22, 2017) (noting FDA denied manufacturer’s designation request for failure to show plausible hypothesis because FDA found that “convincing hypothesis of greater safety cannot be meaningfully entertained until at least some clinically-relevant evidence of comparable treatment effectiveness has been established”). 15 Moreover, the district court here (as well as the Depomed district court) was correct in holding that the FDA could further avoid its concern regarding serial exclusivity by changing its clinical superiority requirement at the designation stage. Indeed, the FDA can “by regulation promulgate procedures for the implementation of” the ODA’s provisions regarding 15 United Therapeutics is currently stayed in district court pending the outcome here. We do not weigh in on the merits of that case. We merely cite its background facts as an example of how the plausible hypothesis threshold is not an automatic greenlight to designation. 23 designation. 21 U.S.C. § 360bb(d). In doing so, the FDA has elected to require manufacturers to show a “plausible hypothesis” of clinical superiority to existing orphan drugs with the same active moiety before receiving designation. The FDA argues that the lower threshold—compared to proving clinical superiority—is necessary to allow drugs that are not yet developed or are still being developed to obtain designation and the benefits that come with that designation. But the fact that the FDA must balance the goals of drug development against the concern over serial exclusivity does not change the fact that it has the ability to control the definition of “such drug” and the evidentiary threshold of clinical superiority. For example, the FDA could require a more stringent threshold that requires a manufacturer to be further along in the development process if it wishes to be designated for a clinically superior drug. See 21 C.F.R. § 316.23(a) (“A sponsor may request orphan-drug designation at any time in its drug development process prior to the time that sponsor submits a marketing application for the drug for the same rare disease or condition.”). The FDA contends that raising the evidentiary threshold for designation would run counter to the purposes of the ODA by requiring a manufacturer to spend more money on the front end to develop a drug to the point of demonstrating clinical superiority. But whether such upfront costs would in fact discourage the development of orphan drugs is a question that we are not well-positioned to resolve. Indeed, the Congress could well have concluded that the guaranteed financial benefits of market exclusivity following designation and approval would outweigh concerns about upfront costs, as a manufacturer could likely recoup those costs during its sevenyear period of exclusivity. In light of an unambiguous statutory directive, it is not our place to second-guess how the Congress 24 chose to effectuate the policy goals underlying the statute as a whole. The FDA also points to a problem of “self-evergreening.” It argues that a literal interpretation of § 360cc(a) will allow the first manufacturer of an orphan drug to extend its own exclusivity period indefinitely by continually seeking and obtaining approval for different formulations of the same drug while its current exclusivity period is in effect, as the provision prohibits the FDA from approving applications from “person[s]” who are “not the holder[s]” of the approved application only. 21 U.S.C. § 360cc(a). According to the FDA, the only way to combat the “infinite bar on approving others’ applications” that could result from this interpretation would be to promulgate a regulation limiting the scope of a drug’s exclusivity to the precise formulation approved—a result that would render the benefits of the exclusivity period “virtually meaningless” by permitting subsequent manufacturers to obtain exclusivity for any slight variation on the exclusivity holder’s formulation while that exclusivity period is in effect. But this result assumes that the FDA’s regulations for designation are correct and static. Not so. The self-evergreening problem is within the FDA’s power to manage and, if needed, alter. The ODA gave the FDA authority to promulgate regulations defining orphan drug designation. See 21 U.S.C. § 360bb(d). In doing so, it appears that the FDA may have created the self-evergreening problem itself. In practice, “[o]rphan drug designation is generally conferred to the active moiety rather than the product formulation; therefore, changes to the product formulation should not generally affect orphan drug designation status.” FDA, Frequently Asked Questions (FAQ) About Designating an Orphan Product, https://www.fda.gov/industry/designating -orphan-product-drugs-and-biological-products/frequently25 asked-questions-faq-about-designating-orphan-product (last visited November 19, 2019). This means that a manufacturer can automatically receive designation for any later formulation of the same drug regardless whether the manufacturer presents a plausible hypothesis of clinical superiority, so long as the later drug contains the same active moiety as a previously approved one. Based on this definition where designation follows the active moiety, a manufacturer of a drug could potentially develop a new and only slightly different formulation of a previously designated and approved drug while its exclusivity period remains in effect—and rely on the same designation for its original drug to obtain infinite exclusivity periods upon approval of each formulation of the same drug. But it was the FDA’s decision to permit designation to be linked to an active moiety rather than a particular formulation. Were the FDA to change its regulations for designation to take into account both the active moiety and the formulation, for example, that would prevent a manufacturer from obtaining successive, automatic exclusivity periods for various formulations of the same drug simply by relying on its original designation. Moreover, the FDA can use its plausible hypothesis of clinical superiority requirement to weed out incremental changes by requiring a manufacturer to show a plausible hypothesis of clinical superiority for every formulation of a drug, regardless whether the active moiety has previously been designated. And if the FDA is worried that the plausible hypothesis standard is too low, it is free to raise the standard. In summary, the serial exclusivity and self-evergreening concerns do not result purely from a literal reading of the statutory text of § 360cc(a) but from the way the FDA has 26 decided to regulate its definitions for designation and the scope of exclusivity. That the FDA’s current regulatory scheme for designation could result in some of these problems does not change its obligation to follow the plain text of § 360cc(a). 16 Ultimately, the FDA’s concerns do not come close to showing that the Congress could not have meant what it said when it wrote § 360cc(a). That the FDA’s use of the postapproval clinical superiority requirement may be a more reasonable approach that, in its view, “harmonizes” the sections of the ODA does not mean that interpreting the text as written contravenes the statute’s purpose. Although the FDA may believe that the addition of a post-approval clinical superiority requirement better accomplishes the ODA’s goals, “under Chevron,” an agency cannot “avoid the Congressional intent clearly expressed in the text simply by asserting that its preferred approach would be better policy.” Engine Mfrs. Ass’n, 88 F.3d at 1089. Indeed, inherent in any sort of exclusivity period is a tradeoff between incentivizing research and development and promoting competition. In making that trade-off in the ODA, the Congress chose to authorize exclusive approval rights upon designation and approval without any qualification for the number of manufacturers that could enjoy that privilege or any other requirement. “Where a statute’s language carries a plain meaning, the duty of an administrative agency is to follow its commands as written, not to supplant those commands with others it may prefer.” See SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1355 (2018). 16 Our dissenting colleague tags us with “reconstructive rulemaking.” Dissent at 15. We do no such thing. Instead, we discuss various interpretations of the FDA’s regulations to emphasize that its concerns stem from its regulations, not the statute. Its concerns, however, do not authorize it to depart from the statute’s plain text. 27 Looking beyond the ODA, the FDA next turns to other provisions of the FDCA to argue that the Congress could not have meant for § 360cc(a) to apply to multiple manufacturers of the same drug. First, the FDA notes that the ODA’s sevenyear exclusivity period is one of the longest exclusivity periods in the FDCA, which it says indicates that the Congress could not have intended such a long period to continue by “mere tweaking” of a previously approved drug. We have already rejected the “mere tweaking” argument and, beyond that, the fact that § 360cc(a)’s period of exclusive approval is longer than other similar periods does not affect whether that exclusivity period is limited to one or multiple manufacturers under the provision’s plain text. Second, the FDA argues that other FDCA provisions that extend already existing exclusionary periods, see 21 U.S.C. §§ 355a(b), (c), § 355f, show that, if the Congress intended to allow multiple exclusivity periods, it would have said so. This argument fails because, in those provisions, the Congress lengthens already existing exclusionary periods; they have no bearing on the issue of other exclusionary periods after an earlier exclusivity period has ended. 17 Third, the FDA looks to the Hatch-Waxman Act that amended the FDCA, see Pub. L. No. 98-417, 98 Stat. 1585 (1984), arguing that the Congress uses “unmistakable language” when it wishes to create a duopoly. The Act provides that a generic drug manufacturer has a 180-day exclusivity period during which time “no other generic can compete with the brand-name drug.” FTC v. Actavis, Inc., 570 U.S. 136, 143–44 (2013) (citing 21 U.S.C. § 355(j)). It is unclear how this amendment supports the FDA’s argument 17 It also matters not that § 355f refers to the extension of an “exclusivity period” as this phrase could refer to the first or to a subsequent exclusivity holder. 28 because a provision involving a generic drug automatically involves a duopoly—the generic and the name brand. Moreover, the amendment in fact supports Eagle’s argument in that § 355(j)(5)(D) specifically states that, if the 180-day exclusivity period for a generic drug is forfeited by the first applicant to file, then no other generic can obtain it, showing that the Congress knows how to limit an exclusivity period to one manufacturer. In contrast, the Congress chose not to do so in § 360cc(a) and the FDA has given us no basis in the FDCA for overriding that choice. Finally, the FDA argues that Eagle’s categorical interpretation of § 360cc(a) would require the FDA to give and maintain drug exclusivity to sponsors even if the FDA discovered fraud or mistake within the designation process. Reading § 360cc(a) based on its plain language to prevent the FDA from approving other applications upon a drug’s designation and approval, however, does not prevent the FDA from later revoking any designation or approval procured by fraud. The FDA’s own regulations provide for this possibility. See 21 C.F.R. § 316.29. The FDA’s ability to revoke designation or approval (and thus exclusivity) because of fraud or mistake does not run afoul of the language of § 360cc(a) in the same way that including an additional post-approval hurdle a manufacturer must clear before obtaining its right to exclusive approval would.