Court Opinion

ID: 3000502
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:05:38.865388+00
Date Added: 2024-06-11T13:22:59.060414
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 05-4608
UNITED STATES OF AMERICA,
                                             Plaintiff-Appellee,
                               v.

GENENDO PHARMACEUTICAL, N.V.,
                                         Defendant-Appellant.
                         ____________
       Appeal from the United States District Court for the
          Northern District of Illinois, Eastern Division.
       No. 03 C 6495—James F. Holderman, Chief Judge.
                         ____________
   ARGUED SEPTEMBER 6, 2006—DECIDED MAY 10, 2007
                  ____________

 Before ROVNER, EVANS, and SYKES, Circuit Judges.
  ROVNER, Circuit Judge. This case involves Genendo
Pharmaceutical’s attempt to import prescription drugs
intended for sale in other countries into the United
States for repackaging and distribution. Genendo main-
tains that the importation is authorized pursuant to
certain statutory exemptions for drugs being repackaged
within the United States. The district court disagreed, and
granted the United States’ motion for seizure and con-
demnation of the drugs, as well as a permanent injunc-
tion barring further importation.
2                                                    No. 05-4608

                                I.
  Genendo, located in Curaçao, Netherlands Antilles,
purchases, trades, and sells pharmaceuticals. One portion
of its business includes obtaining prescription drugs
overseas and importing them into the United States for
resale. Some of the drugs it imports were originally
intended for sale outside of the United States. As relevant
here, in September 2003, Genendo imported 60 boxes of
prescription Lipitor containing 10 milligram tablets of
Lipitor, and 48 boxes containing 20 milligram tablets of
Lipitor.1 Lipitor is manufactured by Pfizer, Incorporated
and is used to treat high cholesterol. Genendo purchased
the Lipitor in Brazil in order to import it into the United
States.
  Before importing the Lipitor, Genendo filed an action
for a declaratory judgment that its importation of Lipitor
was permissible under the Federal Food, Drug, and
Cosmetic Act (“the FDCA”). 21 U.S.C. §§ 301-399. The
United States successfully moved to dismiss the action on
the grounds that there was not yet an agency action ripe
for review. Several months later, Genendo imported, and
the government seized, the Lipitor.
  At issue is whether the seized Lipitor is an “unapproved
new drug,” see 21 U.S.C. § 355(a), because it does not
comply in certain respects with the existing FDA-approved
New Drug Application for Lipitor. The new drug approval
process is one piece of the FDCA’s comprehensive scheme
regulating the manufacture, sale, and importation of
prescription drugs. Before a drug is introduced into
interstate commerce, a drug manufacturer must obtain
FDA approval (specific to each drug and each manufac-

1
  The action initially also involved 24,990 tablets of 40 milligram
Zocor (another cholesterol-lowering drug).
No. 05-4608                                                3

turer) of the manufacturing process, labeling, and packag-
ing of the drug. 21 U.S.C. § 355(b)(1). The approval process
addresses the drug’s safety and effectiveness, id.
§ 355(b)(1)(A), its chemical composition, id. § 355(b)(1)(B),
and how it is distributed—i.e., “the methods used in, and
the facilities and controls used for, the manufacture,
processing, and packing” and the proposed labeling for the
drug, id. §§ 355(b)(1)(D) & (F). Thus, before gaining FDA
approval for Lipitor as a “new drug” under the FDCA, see
21 U.S.C. § 321(p), Pfizer submitted a New Drug Applica-
tion (“NDA”) which contains, among other things, detailed
specifications regarding the drug’s manufacture and
packaging. See 21 U.S.C. § 355(a) (stating necessity of an
approved new drug application).
  As relevant here, the NDA for Lipitor specifies the
following relating to its manufacture and packaging for
sale in the United States: (1) the Lipitor must be manufac-
tured at a Pfizer facility in Loughbeg, Ireland; (2) it must
be packaged in either Frieburg, Germany or Vega Baja,
Puerto Rico; (3) it must be packed in 100-tablet boxes
containing ten blister cards of ten tablets each; and (4) it
must be labeled in English. Additionally, the NDA pro-
vides for a two-year expiration period for Lipitor distrib-
uted in the United States.
   At the time the United States seized the Lipitor im-
ported by Genendo, it deviated from the FDA-approved
NDA in several important respects. First, although it
was manufactured in the listed Pfizer facility in Ireland,
it was packaged at a facility in São Paulo, Brazil, instead
of one of the NDA-approved facilities in Frieburg, Ger-
many or Vega Baja, Puerto Rico. Secondly, it was pack-
aged in boxes containing thirty tablets, housed on three
blister sheets of ten tablets each, and labeled, not in
English, but in Portuguese. Lastly, the seized lots of
Lipitor were manufactured in January 2003 and February
2003, and bore expiration dates of January 2006 and
February 2006, respectively—three years after the manu-
4                                               No. 05-4608

facture date, as opposed to the two-year period required
by the NDA.
  Genendo believes these deviations from the requirements
in the FDA-approved NDA are excused by 21 U.S.C.
§ 353(a) and its implementing regulation, 21 C.F.R.
§ 201.150. Genendo claims § 353(a) establishes an exemp-
tion from all labeling and packaging requirements in the
FDCA, including the NDA requirements, so long as a drug
is en route to or being held at an authorized drug
repackager. Section 353(a), titled in part “Exemptions
and consideration for certain drugs,” provides as follows:
    (a) Regulations for goods to be processed, labeled, or
    repacked elsewhere
    The Secretary is directed to promulgate regulations
    exempting from any labeling or packaging requirement
    of this chapter drugs and devices which are, in accor-
    dance with the practice of the trade, to be processed,
    labeled, or repacked in substantial quantities at
    establishments other than those where originally
    processed or packed, on condition that such drugs
    and devices are not adulterated or misbranded under
    the provisions of this chapter upon removal from such
    processing, labeling, or repacking establishment.
21 U.S.C. § 353(a).
The regulation promulgated is 21 C.F.R. § 201.150, which
provides in pertinent part that a drug that will be repack-
aged “shall be exempt, during the time of introduction into
and movement in interstate commerce and the time of
holding in such establishment, from compliance with the
labeling and packaging requirements of sections 501(b)
and 502(b), (d), (e), (f), and (g) of the act” if, among other
things, there exists a written agreement—known as a
§ 201.150 agreement—that ensures the ultimate drugs
will not be adulterated or misbranded. See 21 C.F.R.
§ 201.150(a)(2).
No. 05-4608                                                   5

  At the time it was seized, the imported Lipitor was
destined for the Illinois corporation Phil & Kathy’s, an
FDA-registered repacker and labeler. Genendo had a
written § 201.150 agreement with Phil & Kathy’s for the
repacking and labeling of drugs for sale in the United
States. Before trial, the government filed a seizure action
for certain drugs held at Phil & Kathy’s, and Phil &
Kathy’s entered into a consent decree resolving the gov-
ernment’s claims against it. Although the government
also contended in the district court that Genendo’s
§ 201.150 agreement with Phil and Kathy’s was inade-
quate, the court did not reach that issue.
  Instead, the district court held a one-day trial, and
ultimately ruled on the basis of the uncontested facts
that by importing the Lipitor,2 Genendo had introduced
unapproved new drugs into interstate commerce in
violation of 21 U.S.C. § 355(a). The court concluded that
reading the exemption in § 353(a) as Genendo proposed
would eviscerate the protections afforded by the new drug
approval process. It thus attempted to harmonize the
requirements of the new drug approval process and the
§ 353(a) exemption by reading the “labeling and packaging
requirements” referred to in § 353(a) to apply to general
“labeling and packaging,” but not the detailed require-
ments for packaging set forth in the NDA, which the
court concluded were not affected by the exemption in
§ 353(a). The court also granted the government’s request
for condemnation of the drugs and injunctive relief.

2
  The district court also concluded that the seized Zocor was an
unauthorized new drug, but Genendo does not appeal that
conclusion.
6                                              No. 05-4608

                            II.
  The sole issue on appeal is whether the seized Lipitor is
an unapproved “new drug.” See 21 U.S.C. § 355(a). Since
Genendo admits that the seized Lipitor was not completely
compliant with the NDA at the time it was seized, the
only relevant question is whether, as Genendo main-
tains, § 353(a) exempts it from compliance with the NDA.
This is a question of statutory interpretation subject to de
novo review. See Disability Rights Wis., Inc. v. Wis. Dep’t
of Pub. Instruction, 463 F.3d 719, 724 (7th Cir. 2006). The
FDA argues that the labeling and packaging require-
ments contained in the NDA are a critical piece of the
new drug approval process and must be adhered to at all
stages of the drug’s production and distribution, and that
§ 353(a) does not change that. Genendo, however, contends
that because the Lipitor was en route to an authorized
repackager at the time it was seized, it is exempt from
all labeling and packaging requirements, including all of
those contained in the NDA.
  As a threshold matter, we must determine the level of
deference to be accorded the FDA’s interpretation of
§ 353(a). As the agency that administers the statute, the
FDA claims that its interpretation is entitled to Chevron
deference. See Chevron U.S.A., Inc. v. Natural Res. Def.
Counsel, Inc., 467 U.S. 837 (1984) (explaining deference
due agency’s interpretation of statute it administers).
Genendo, however, claims that the unambiguous lan-
guage of § 353(a)—directing the Secretary to promulgate
regulations exempting certain drugs from “any labeling or
packaging requirement of this chapter”—compels the
conclusion that the Lipitor is exempt from all labeling
and packaging requirements—including those contained
in the NDA. According to Genendo, any other interpreta-
tion flies in the face of the plain statutory language and
is thus undeserving of our deference. In determining
No. 05-4608                                                7

what level of deference to afford the FDA’s interpretation,
we ask first whether Congress has spoken to the precise
question at issue. Chevron, 467 U.S. at 842-43. Genendo
claims that it has done so in the form of § 353(a), and that
the phrase “any labeling and packaging requirement”
necessarily ends the matter.
  But § 353(a) simply directs “the Secretary” to promulgate
regulations exempting drugs en route to a repackager
from labeling and packaging requirements; it does not
itself provide for a complete exemption. See Arner Co. v.
United States, 142 F.2d 730, 736 (1st Cir. 1944) (“Had
Congress intended an outright exemption of bulk ship-
ments from the labeling requirement without restrictive
terms of any sort, there would have been no need for it to
provide for regulations formulating the exemption; the
law would have simply stated the exemption.”). The
problem with Genendo’s argument is that it largely ignores
the fact that the promulgated regulation, § 201.150, sets
forth specific labeling and packaging requirements from
which drugs being repackaged are exempt. The particular
sections of the FDCA referenced in § 201.150 relate to the
requirement that the package contain the name and
address of the manufacturer or distributor, a statement
of the quantity of the contents, the established name of
the drug, active and inactive ingredients, and adequate
warnings and directions for use. See 21 U.S.C. §§ 351(b),
352(b), (d), (e), (f), and (g). Section 201.150 thus does not
exempt drugs in transit to or at a repackager from all
labeling and packaging requirements in the Act, as
Genendo suggests—simply those listed.
  Thus the statute is not so crystal clear as Genendo
insists. Genendo’s argument flows from an unstated belief
that the word “any” in § 353(a) necessarily means “all.”
But that is not so. On the contrary, the first definition
given for the word any is “one, a, an, or some.” Webster’s
8                                                      No. 05-4608

Unabridged Dictionary of the English Language 96 (2d ed.
2001). Although the statute could be read as if any meant
all (the fourth possible definition given for the word “any”),
it could also be read to give effect to the aforementioned
definition of “any”—as directing the Secretary to promul-
gate regulations exempting drugs in transit to a
repackager from some labeling and packaging require-
ments contained in the FDCA. See First Bank & Trust v.
Firstar Info. Servs., Corp., 276 F.3d 317, 325-26 (7th Cir.
2001) (rejecting argument that phrase “any services” in
contract necessarily meant “all services” and concluding
that phrase was ambiguous). Given that § 201.150 ex-
empts drugs in transit only from specified labeling and
packaging requirements, the Secretary apparently under-
stood it to mean the latter.3

3
  After argument, Genendo filed a letter of supplemental
authority pursuant to Federal Rule of Appellate Procedure 28(j),
calling the panel’s attention to the recently decided Supreme
Court case Massachusetts v. E.P.A., 127 S. Ct. 1438 (2007). In
Massachusetts, the Court interpreted the phrase “any air pol-
lutant” in the Clean Air Act to include carbon dioxide, reasoning
in part that the use of the word “any” suggested that the statute
was intended to require regulation of all air pollutants. Genendo
argues that Massachusetts stands for the proposition generally
that the use of the word “any” in a statute necessarily means
“all.” Massachusetts, however, is not so broad. First, the Court’s
interpretation of the phrase “any air pollutant” was guided by
the Clean Air Act’s “sweeping definition of ‘air pollutant,’ ” a
definition that embraced “all airborne compounds of whatever
stripe . . . through the repeated use of the word ‘any.’ ” Id. at 1460
(emphasis added). The exemption in § 353(a) has no such
“sweeping” language, nor does it contain anything else to
convince us that the word “any” necessarily means “all.” Nor does
Massachusetts itself stand for such a proposition. Indeed, the
Court cited with approval Dep’t of Hous. & Urban Dev. v. Rucker,
535 U.S. 125 (2002), where it observed that the word “any” “has
                                                      (continued...)
No. 05-4608                                                   9

  Reading the statute in isolation, Genendo’s interpreta-
tion may be a plausible one, but so too is the FDA’s,
particularly in light of the “ ‘well-accepted principle that
remedial legislation such as the Food, Drug, and Cosmetic
Act is to be given a liberal construction consistent with the
Act’s overriding purpose to protect the public health.’ ”
United States v. Baxter Healthcare Corp., 901 F.2d 1401,
1408 (1990) (quoting United States v. Article of Drug . . .
Bacto-Unidisk . . ., 394 U.S. 784, 798 (1969)). In short,
there is enough ambiguity in the statute that we ask
only whether the FDA’s interpretation is based on a
permissible construction of the statute. Chevron, 467 U.S.
at 843. Section 201.150’s provision exempting drugs
in transit from only certain labeling and packaging
requirements is a permissible exercise of the authority
delegated by the statute, and is consistent with the
public health concerns animating the new drug approval
process and the FDCA as a whole. See id. at 843, 866
(agency’s interpretation comporting with purposes of
underlying Clean Air Act Amendments is permissible
given ambiguity in statute). Thus, unless the regulation
(and the FDA’s interpretation of it) is “arbitrary, capri-
cious, or manifestly contrary to the statute,” we will defer
to it. Id. at 843-44.
  We cannot say that the FDA’s interpretation of the
regulation and statute is “arbitrary, capricious, or mani-
festly contrary to the statute.” Id. at 843. Indeed, the
FDA’s interpretation makes good sense given that
§ 201.150 enumerates particular labeling and packaging

3
  (...continued)
an expansive meaning, that is, one or some, indiscriminately of
whatever kind.” (emphasis added). Massachusetts interpreted
a particular statute in an entirely different context, and con-
cluded that in that case, “any” meant “all.” The Court’s holding
does not in any way imply that in every case “any” means “all.”
10                                            No. 05-4608

requirements from which drugs in transit are exempt,
and the NDA requirements are not among those enumer-
ated. This understanding of the statute and regulation
together is in keeping with our observation in Baxter that
the new drug approval process “illustrates a congressional
view that the way in which drugs are mixed and packaged
is no less important than the chemical makeup of the
drugs at issue,” 901 F.2d at 1411. As the FDA points out,
this precise packaging operation is subject to compromise
if Genendo is given carte blanche to disregard the specifi-
cations in the NDA. Genendo maintains that the require-
ment in both § 353(a) and § 201.150 that the ultimate
repackaged drugs cannot be adulterated or misbranded
protects the consumer from any deviations from the NDA
that occur before the drugs are repackaged. But even
assuming a flawless repackaging process at Phil & Kathy’s
pursuant to a satisfactory § 201.150 agreement (an
assumption the government contests), certain deviations
from the NDA’s requirements are never rectified despite
the repackaging. Notably, the fact that the Lipitor was
packaged at an unapproved facility in Brazil can never
be brought into compliance with the NDA (unlike the
other deviations from the NDA such as the Portuguese
labeling, improper expiration dates, and numbers of
tablets in blister packs, which could theoretically be
later rectified). It would be odd indeed for the FDA to go
to such lengths to set up the process whereby facilities
are approved for packaging new drugs, and yet allow
drugs that will be repackaged to be packaged in an
unapproved facility. If such a result were intended, we
believe that the statute and accompanying regulation
would say so explicitly.
  Genendo’s reliance on a Third Circuit case, United States
v. Kaybel, 430 F.2d 1346 (3d Cir. 1970), does not convince
us otherwise. In Kaybel the court overturned a wholesale
drug distributor’s conviction for introducing an unap-
No. 05-4608                                             11

proved new drug into interstate commerce. The court in
Kaybel rejected the government’s claim that the distributor
needed to obtain approval of an additional new drug
application before repacking a drug that complied in all
respects with an already approved NDA from 500-unit
bottles into 100-unit bottles. Id. at 1347. Not only does
Kaybel not deal with the exemption provision in § 353(a),
its application to Genendo’s situation is further limited
by the fact that the distributor in Kaybel was repackaging
a drug that was compliant in all respects with the NDA,
not attempting to remedy noncompliance through re-
packaging. In short, we think Kaybel is far less applicable
than Genendo believes. Moreover, the primary rationale
in Kaybel—that other mechanisms exist to prevent con-
tamination of drugs by repackagers—does not extend to
the situation where drugs are first packaged at an unap-
proved facility that lacks the FDA oversight of the packag-
ing facilities listed in the NDA. See In re Canadian Imp.
Antitrust Litig., 470 F.3d 785, 789-90 (8th Cir. 2006)
(explaining importance of FDA oversight and FDCA
labeling requirements in excluding “noncompliant and
potentially unsafe pharmaceuticals”).
  The FDA’s interpretation of § 353(a) and § 201.150 is
entitled to deference, and it is neither arbitrary nor
capricious. Although § 353(a) may have been interpreted
as Genendo suggests, it is also open to the construction
provided by the FDA, and that construction is entitled to
deference under Chevron and is consistent with the
language of § 201.150. It also comports with the underly-
ing purposes of the FDCA, which exists to protect aspects
of “the lives and health of people which, in the circum-
stances of modern industrialism, are largely beyond self-
protection.” Arner, 142 F.2d at 736; see also Canadian
Import, 470 F.3d at 790 (labeling requirements are
“manifestation of a congressional plan to create a ‘closed
system’ designed to guarantee safe and effective drugs
12                                           No. 05-4608

for consumers in the United States”). In sum, the exemp-
tion in § 353(a), as implemented by § 201.150, does not
excuse compliance with an FDA-approved NDA, and thus
the seized Lipitor, which Genendo concedes is noncom-
pliant, is an unapproved new drug. See 21 U.S.C. § 355(a).

                           III.
  For the foregoing reasons, we affirm the judgment of the
district court.

A true Copy:
      Teste:

                      ________________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit

                  USCA-02-C-0072—5-10-07