Otsuka Pharm. Co., Ltd. v. Burwell (D. Md. Apr. 29, 2015)

Two hours after the U.S. Food and Drug Administration (FDA) approved generic versions of Abilify® (aripiprazole) (excluding pediatric indications and dosage information), the U.S. District Court for the District of Maryland held a hearing on Plaintiff Otsuka Pharmaceutical’s motion for a temporary restraining order (TRO) seeking to enjoin the FDA from granting further approvals and the generic companies from launching their generic products. Since the FDA had recently approved a pediatric indication for Abilify that is protected by orphan drug exclusivity, Otsuka argued that the FDA could not approve any generic form of Abilify within its seven-year period of orphan drug market exclusivity. The district court held, however, that the Food, Drug and Cosmetics Act (FDCA) likely did not support such a position and, as a result, denied Otsuka’s request for emergency injunctive relief. Otsuka Pharmaceutical Co., Ltd. v. Burwell, Case No. 15‑852, 2015 WL 1962240 (D. Md. April 29, 2015). 

In considering Otsuka’s motion for a TRO, the court performed the standard four-part TRO analysis, evaluating (1) the likelihood that Otsuka would succeed on the merits; (2) the likelihood that Otsuka would suffer irreparable harm in the absence of preliminary relief; (3) whether the balance of the equities tip in Otsuka’s favor; and (4) whether injunctive relief is in the public’s interest.

Likelihood of Success on the Merits

Otsuka argued that, in general, where a specific pediatric indication exists, that pediatric indication must be described under the “indications and usage” section of a drug label. In addition, the “dosage and administration” section of the label must include any appropriate pediatric dosage information. Moreover, Otsuka argued that, under 21 U.S.C. § 355(j)(2)(A)(V), generic labels must contain the same information as the label of the respective brand-name drug. Thus, because the label for Abilify included a pediatric indication, and pediatric dosage information, Otsuka argued that any label for a generic version of Abilify must contain that same information. However, the pediatric indication for use of Abilify fell within Otsuka’s orphan drug market exclusivity, so no generic could be approved for this indication until 2021. Contrary to Otsuka’s view of the FDCA, however, the FDA approved the generic applications that omitted pediatric indications and dosage information to avoid Otsuka’s orphan drug exclusivity for pediatric indications.

Otsuka objected to the FDA’s approval of the generic version of Abilify without pediatric indications and dosage information, arguing that Section 505A(o) of the FDCA permitted approval of generic drugs with labels omitting such information in only two circumstances: (1) When the information was protected by a patent; and (2) when that information was protected by three-year new clinical study exclusivity. Otsuka maintained that neither of those circumstances existed here, and as a result, the FDA was prohibited from approving the generic labels. In response, the FDA argued that, while 505A(o) limits the ability to deny approval of generic drugs with labels omitting pediatric information in those two circumstances, it does not limit the ability to grant approval in other circumstances, such as where a pediatric indication falls within a period of orphan drug exclusivity.

Observing that the arguments presented turned on the FDA’s construction of the FDCA—a statute which the FDA administers—the district court explained that it was required to apply the two-step Chevron analysis to address the scope of Section 505A(o).

Chevron Analysis Step One: Did Congress Directly Address This Question?

First, the court considered whether Congress had directly spoken on the precise question at issue and whether the intent of Congress was clear. The court looked to the explicit language of 505A(o), which states that an application for approval of a generic drug may not be denied because it omits pediatric indications when the pediatric indications are protected by a patent or subject to a three-year new clinical study exclusivity.

Otsuka argued that, because 505A(o) did not limit the FDA’s ability to reject applications omitting pediatric information, 505A(o) effectively requires the FDA to reject such applications. The court noted that Otsuka was imprudently relying on a principle of statutory construction known as expressio unius esi exclusion alterius (i.e., the expression of one thing is the exclusion of another). The court did not agree that such a principle should be applied here, because no evidence suggested that Congress considered other exclusions (such as orphan drug exclusivity), but intended to exclude them by silence. Nevertheless, the court conceded that the intent of Congress was not sufficiently clear. Accordingly, the court was required to consider step two of the Chevron analysis.

Chevron Analysis Step Two: Was the Agency’s Action Based on a Permissible Construction of the Statute?

Under step two of the Chevron analysis, the district court considered whether the FDA’s approval of generic Abilify was based on a permissible construction of 505A(o). In performing this analysis, the court recognized that it could overturn the FDA’s interpretation only if the statute unambiguously foreclosed the particular construction. Believing that the statute itself, relevant case law, and FDA regulations all supported the FDA’s construction, the court concluded that it would likely find that the FDA’s interpretation of 505A(o) was permissible. Thus, since it was unlikely that the court would depart from the FDA’s interpretation of 505A(o), the court concluded it was unlikely that Otsuka would succeed on the merits. As a result, the court held that Otsuka was not entitled to the requested TRO.

Remaining Factors for TRO and Preliminary Injunction

Even though the district court concluded that Otsuka was not entitled to a TRO, the court nevertheless considered the remaining three prongs of the TRO inquiry for the sake of completeness.

On the issue of irreparable harm, Otsuka argued that it would suffer irreparable harm if a TRO was not granted, because the release of generic Abilify would result in price erosion, loss of market share, loss of profits, layoffs and loss of goodwill. Otsuka maintained that, because it could not recover monetary damages from the FDA, the potential damages were irretrievable and irreparable. The court rebuffed Otsuka’s arguments and suggested that courts typically find irreparable harm where the monetary losses are so severe that they “threaten the very existence of the company.” In this case, the court noted that Otsuka had been preparing for the entry of generic Abilify, and had even been releasing other products to compensate for the anticipated loss of exclusivity. Accordingly, the court concluded that the release of generic Abilify would not constitute a catastrophic event or “sound the death knell” for Otsuka. As a result, the court concluded that Otsuka would not suffer irreparable harm.

In addressing the balance of the hardships, the court relied heavily on a prior decision by Judge Jerome Simandle on a related TRO motion brought by Otsuka in the U.S. District Court for the District of Delaware. The court merely echoed Judge Simandle’s opinion that a TRO would be devastating to a generic that has undertaken extensive and costly steps to enter a market, particularly where Otsuka’s likelihood of success was low. Accordingly, the court concluded that the balance of the hardships tipped away from Otsuka.

Finally, on the issue of public interest, the court concluded that a TRO would not serve the public interest. Indeed, the court concluded that Otsuka had enjoyed 12 years of exclusivity, and made over $100 billion in revenue over that time period. Thus, Otsuka’s desire for additional exclusivity should yield to the public’s interest in having access to low-cost generic versions of Abilify.