Mylan Pharmaceuticals, Incorporated v. United States Food

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 MYLAN PHARMACEUTICALS,
INCORPORATED,
Plaintiff-Appellant,
v.
UNITED STATES FOOD AND DRUG
ADMINISTRATION; LESTER M.
CRAWFORD, Acting Commissioner of
the Food and Drug Administration,
Defendants-Appellees,
and
No. 05-2160  PROCTER & GAMBLE
PHARMACEUTICALS, INCORPORATED;
PROCTER & GAMBLE COMPANY;
WATSON PHARMACEUTICALS,
INCORPORATED; WATSON
LABORATORIES, INCORPORATED,
Defendants.
GENERIC PHARMACEUTICAL
ASSOCIATION,
Amicus Supporting Appellant. 
Appeal from the United States District Court
for the Northern District of West Virginia, at Clarksburg.
Irene M. Keeley, Chief District Judge.
(CA-04-242-1)
Argued: May 23, 2006
Decided: July 5, 2006
Before MICHAEL, MOTZ, and SHEDD, Circuit Judges.

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Affirmed by published opinion. Judge Michael wrote the opinion, in
which Judge Motz and Judge Shedd joined.
COUNSEL
ARGUED: William A. Rakoczy, RAKOCZY MOLINO MAZ-
ZOCHI SIWIK, L.L.P., Chicago, Illinois, for Appellant. Jeffrey Stuart
Bucholtz, Deputy Assistant Attorney General, UNITED STATES
DEPARTMENT OF JUSTICE, Civil Division, Appellate Section,
Washington, D.C., for Appellees. ON BRIEF: Christine J. Siwik,
Lara E. Monroe-Sampson, RAKOCZY MOLINO MAZZOCHI
SIWIK, L.L.P., Chicago, Illinois; Gordon H. Copland, STEPTOE &
JOHNSON, P.L.L.C., Clarksburg, West Virginia, for Appellant. Paula
M. Stannard, Acting General Counsel, Sheldon T. Bradshaw, Asso-
ciate General Counsel, Food and Drug Division, Eric M. Blumberg,
Deputy Chief Counsel, Litigation, Wendy S. Vicente, Associate Chief
Counsel, UNITED STATES DEPARTMENT OF HEALTH &
HUMAN SERVICES, Office of the General Counsel, Rockville,
Maryland; Peter D. Keisler, Assistant Attorney General, Eugene M.
Thirolf, Director, Office of Consumer Litigation, Andrew E. Clark,
UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellees. Arthur Y. Tsien, OLSSON, FRANK & WEEDA,
P.C., Washington, D.C., for Amicus Supporting Appellant.
OPINION
MICHAEL, Circuit Judge:
The Food and Drug Administration (FDA) approved Mylan Phar-
maceuticals, Inc.’s application to sell a generic version of a drug that
Procter & Gamble Pharmaceuticals, Inc. sold under the brand name
Macrobid. Just as Mylan began selling its generic drug, a third party
under license from Procter & Gamble started selling a competing
generic version. Sales of the generic authorized by Procter & Gamble
crimped revenues from Mylan’s version. Mylan petitioned the FDA
for a ruling that under a provision of the Federal Food, Drug, and
Cosmetic Act (FFDCA or Act) the authorized generic could not be
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sold until Mylan’s drug had been on the market for 180 days. See 21
U.S.C. § 355(j)(5)(B)(iv). After the FDA denied the petition, Mylan
commenced this action against the agency under the Administrative
Procedure Act. 5 U.S.C. § 706(2)(A). The district court dismissed the
case. We affirm the dismissal, concluding that the statute does not
grant the FDA the power to prohibit the marketing of authorized
generics during the 180-day exclusivity period afforded to a drug
company in Mylan’s position.
I.
A.
Drugs fall into two broad categories: pioneer drugs sold under
brand names and generics. United States v. Generix Drug Corp., 460
U.S. 453, 454-55 (1983). Pioneer and generic drugs are regulated
under the FFDCA, 21 U.S.C. § 301 et seq., which Congress amended
extensively in 1984. See Drug Price Competition and Patent Term
Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat. 1585 (com-
monly known as the Hatch-Waxman Act). The Hatch-Waxman Act
made it easier to obtain FDA approval of generic drugs. The legisla-
tion aimed to "strike a balance between two conflicting policy objec-
tives: to induce name-brand pharmaceutical firms to make the
investments necessary to research and develop new drug products,
while simultaneously enabling competitors to bring cheaper, generic
copies of those drugs to market." aaiPharma Inc. v. Thompson, 296
F.3d 227, 230 (4th Cir. 2002) (punctuation omitted).
The Hatch-Waxman scheme distinguishes between New Drug
Applications (NDAs) and Abbreviated New Drug Applications
(ANDAs). To seek FDA approval for a pioneer drug, the manufac-
turer must file a complete NDA. Such a filing must "provide the FDA
with a listing of all patents that claim the approved drug or a method
of using the drug." aaiPharma Inc., 296 F.3d at 230. The NDA must
also set forth data establishing that the drug is safe and effective. See
21 U.S.C. § 355(b). Later, a company that makes a generic drug that
is biologically equivalent to the pioneer drug may seek FDA approval
for the drug by filing an ANDA. The ANDA relies on the pioneer
drug’s safety and effectiveness studies. See 21 U.S.C. § 355(j); aai-
Pharma Inc., 296 F.3d at 231.
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The ANDA must contain a certification as to whether the proposed
generic drug would infringe the patent protecting the pioneer drug,
and if not, why not. Pertinent here is the fourth of the statute’s four
certification options (the paragraph IV option), allowing the ANDA
applicant to certify that the pioneer drug’s patent is "invalid or will
not be infringed by the manufacture, use, or sale of the new drug for
which the application is submitted." 21 U.S.C. § 355(j)(2)(A)
(vii)(IV). Thus, "an ANDA applicant making a paragraph IV certifi-
cation intends to market its product before the relevant patents have
expired." aaiPharma Inc., 296 F.3d at 232. The patent holder and the
NDA holder (which usually are the same company, the pioneer drug
maker) are entitled to notice that a paragraph IV ANDA has been
filed. If, upon receiving such notice, the patent holder sues the appli-
cant for patent infringement within 45 days, the FDA must stay a
decision on whether to approve the ANDA for 30 months (unless the
patent expires or a court holds that it is invalid or not infringed during
that time). 21 U.S.C. § 355(j)(5)(B)(iii).
The first applicant to file a paragraph IV ANDA enjoys a unique
advantage. For 180 days it may sell its drug without competition from
later ANDA applicants. The 180-day period starts to run on the earlier
of two dates: (1) the date the FDA receives notice "of the first com-
mercial marketing of the drug under the previous application" (the
commercial marketing trigger) or (2) the date a court decides that the
patent is either invalid or not infringed (the patent litigation trigger).
See 21 U.S.C. § 355(j)(5)(B)(iv) (preventing the FDA from making
effective a later paragraph IV ANDA earlier than 180 days after one
of these two triggering events)*
*Throughout this opinion we refer to the statute as worded in January
2003, when Mylan filed the paragraph IV ANDA at issue here. In
December 2003 Congress amended the Act. See Medicare Prescription
Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-
173, 117 Stat. 2066. As the FDA noted, the amendments "altered the eli-
gibility requirements and triggering events for 180-day exclusivity and
established circumstances under which forfeiture of exclusivity can
occur." J.A. 368 n.1. But the FDA determined, and the parties agree, that
the amendments do not change the analysis here because they did not
"substantively alter" § 355(j)(5)(B)(iv), the provision in dispute. Id.
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The 180-day exclusivity period created in § 355(j)(5)(B)(iv) is a
significant boon to the recipient. As the Federal Trade Commission
put it, the period "increases the economic incentives for a generic
company to be the first to file, because the generic applicant has the
potential to reap the reward of marketing the only generic product
(and, thus, to charge a higher price until more generic products enter
[the market])." Federal Trade Commission, To Promote Innovation:
The Proper Balance of Competition and Patent Law and Policy, Ch.
3, at 12 (Oct. 2003), available at http://www.ftc.gov/os/2003/10/
innovationrpt.pdf. This benefit motivates "generic manufacturers to
challenge the validity of listed patents and to ‘design around’ patents
to find alternative, noninfringing forms of patented drugs" so that they
can be the first to file paragraph IV ANDAs. Teva Pharms. USA, Inc.
v. Pfizer, Inc., 395 F.3d 1324, 1328 (Fed. Cir. 2005).
The pioneer drug maker who holds the approved NDA wants to
stave off possible competition from the ANDA applicants (the generic
makers). One strategy for the NDA holder is to grant a third party a
license to sell a generic version of the drug described in the approved
NDA. The economic benefits of this practice are clear. Such an autho-
rized generic appeals to patients because it is sold at a lower price
than the branded pioneer drug. It also appeals to the pioneer drug
maker, who benefits from sales of the authorized generic even after
the patent protecting the pioneer drug has expired. By selling an
authorized generic during the exclusivity period enjoyed by the first
paragraph IV ANDA applicant, the pioneer drug maker prevents that
applicant from winning all of the customers who want to switch from
the branded drug to a cheaper generic form. "[T]he additional compe-
tition [for the applicant] from an authorized generic may result in sig-
nificantly less profit during the period of 180-day exclusivity than if"
the applicant "had no authorized-generic competition during that
time." Federal Trade Commission Information Collection Notice, 71
Fed. Reg. 16,779, 16,780 (Apr. 4, 2006). The question before us is
whether § 355(j)(5)(B)(iv) empowers the FDA to prohibit sale of
authorized generics during the exclusivity period.
B.
This dispute began when Mylan filed a paragraph IV ANDA seek-
ing authorization to produce nitrofurantoin, a generic version of a
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drug to treat urinary tract infections. Procter & Gamble held the
approved NDA for the drug and sold it under the brand name Macro-
bid. The FDA approved Mylan’s application on March 22, 2004.
Mylan began commercial marketing of nitrofurantoin on March 23,
the same day that Watson Pharmaceuticals began selling the autho-
rized generic version of Macrobid under a license from Procter &
Gamble. Mylan lost sales worth "tens of millions" of dollars as a
result of this competition. J.A. 42.
Anticipating Procter & Gamble’s move, Mylan had filed a citizen
petition in February 2004 requesting that the FDA "prohibit the mar-
keting and distribution of ‘authorized generic’ versions of brand name
drugs until the expiration of the first generic applicant’s 180-day
exclusivity period." J.A. 335. Teva Pharmaceuticals USA, Inc.,
another generic drug maker, submitted a petition in June 2004 seeking
a similar ruling. The FDA denied these two petitions in a letter dated
July 2, 2004. The agency concluded in part that the Act did not "pro-
hibit an ANDA or NDA holder’s use of alternative marketing prac-
tices for its own approved new drug (so long as any related
manufacturing changes do not pose safety or effectiveness concerns
. . .)." J.A. 373. The agency also rejected the argument that the FDA’s
position in Mylan Pharmaceuticals, Inc. v. Thompson, 207 F. Supp.
2d 476 (N.D. W.Va. 2001), a case concerning the hypertension and
angina medicine nifedipine, obligated the agency to treat authorized
generics "as the legal and functional equivalents of ANDA generics"
for exclusivity period purposes. J.A. 377.
In August 2004 Teva and Mylan each sued the FDA, contending
that the agency’s denial of the petitions was "arbitrary, capricious . . .
or otherwise not in accordance with law" under the Administrative
Procedure Act. 5 U.S.C. § 706(2)(A). Teva sued in the district court
for the District of Columbia while Mylan sued in the district court for
the Northern District of West Virginia. Mylan sought a preliminary
injunction, but voluntarily dismissed its complaint on August 30,
2004, the same day the district court had been expected to decide on
the request for preliminary relief. In November 2004 Mylan again
filed its case against the FDA in the Northern District of West Vir-
ginia. The district court for the District of Columbia ruled against
Teva in December 2004. Teva appealed to the D.C. Circuit, and
Mylan filed an amicus brief in support of Teva. (The West Virginia
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district court granted Mylan’s request to stay its case while the appeal
in the D.C. Circuit was pending.) The D.C. Circuit affirmed in June
2005. Teva Pharms. Indus. Ltd. v. Crawford, 410 F.3d 51 (D.C. Cir.
2005). That court held that 21 U.S.C. § 355(j)(5)(B)(iv) did not by its
terms prohibit the holder of an approved NDA from marketing an
authorized generic during the exclusivity period. Rather, the court
held that the statute’s limits expressly apply only to later-filed
ANDAs. Id. at 53-55.
Mylan’s suit thereafter resumed and the FDA moved to dismiss.
See Fed. R. Civ. P. 12(b)(6). In September 2005 the district court dis-
missed Mylan’s complaint for failure to state a claim upon which
relief could be granted, and Mylan appealed. Our review is de novo.
II.
Mylan’s claim that the FDA’s denial of its petition was "arbitrary,
capricious . . . or otherwise not in accordance with law" boils down
to a challenge to the agency’s interpretation of 21 U.S.C.
§ 355(j)(5)(B)(iv). Specifically, Mylan argues that the FDA imper-
missibly ignored two considerations in construing the statute: legisla-
tive intent and the agency’s prior interpretation.
To evaluate the FDA’s interpretation of the statute, we must deter-
mine at the first step "whether Congress has directly spoken to the
precise question at issue." Chevron U.S.A. Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837, 842 (1984). "If so, courts, as well as the
agency, ‘must give effect to the unambiguously expressed intent of
Congress.’" Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232,
239 (2004) (quoting Chevron, 467 U.S. at 842-843). At the second
step, "whenever Congress has ‘explicitly left a gap for the agency to
fill,’ the agency’s regulation is ‘given controlling weight unless [it is]
arbitrary, capricious, or manifestly contrary to the statute.’" Id. (quot-
ing Chevron, 467 U.S. at 843-844). At the first step a court focuses
purely on statutory construction without according any weight to the
agency’s position because "[t]he traditional deference courts pay to
agency interpretation is not to be applied to alter the clearly expressed
intent of Congress." Board of Governors, FRS v. Dimension Fin.
Corp., 474 U.S. 361, 368 (1986). And although "[s]tatutory construc-
tion is a holistic endeavor," Koons Buick Pontiac GMC, Inc. v. Nigh,
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543 U.S. 50, 60 (2004) (punctuation omitted), "[i]t is well established
that when the statute’s language is plain, the sole function of the
courts — at least where the disposition required by the text is not
absurd — is to enforce it according to its terms," Lamie v. United
States Trustee, 540 U.S. 526, 534 (2004) (punctuation omitted).
Mylan concedes that the language of § 355(j)(5)(B)(iv) is plain.
The provision makes no mention of drugs under approved NDAs. It
speaks only about the rights of the paragraph IV ANDA applicant
who files first as against all subsequent paragraph IV ANDA appli-
cants. Indeed, the statute describes the 180-day exclusivity period
entirely from the point of view of a later-filing paragraph IV ANDA
applicant. See 21 U.S.C. § 355(j)(5)(B)(iv) (an application containing
a paragraph IV certification "shall be made effective not earlier than
one hundred and eighty days after (I) the date the Secretary receives
notice from the applicant under the previous application of the first
commercial marketing of the drug under the previous application, or
(II) the date of [a court decision on patent infringement] . . . , which-
ever is earlier."). Because the exclusivity is described from the per-
spective of the later-filing paragraph IV ANDA applicant, the FDA
could only read the statute to cover drugs under approved NDAs by
completely redefining the language describing paragraph IV ANDAs
to also include NDAs. Interpretation of this kind would amount to
rewriting rather than reading. It would dramatically depart from the
statute’s language and would be tantamount to an agency effort to
exercise authority never delegated by Congress.
Mylan would have us set aside the statutory language and instead
give determinative weight to its asserted understanding of the con-
gressional intent behind the statute. Mylan contends that authorized
generics may not be sold during the 180-day exclusivity period
because Congress sought to give the first-filing paragraph IV ANDA
applicant the sole right to sell a generic during that period. For three
reasons Mylan’s legal arguments cannot prevail. First, Mylan points
to no textual ambiguity of the sort that would ordinarily lead us to
consult materials outside the statute’s four corners. "Given the
straightforward statutory command, there is no reason to resort to leg-
islative history." United States v. Gonzales, 520 U.S. 1, 6 (1997); see
also Black & Decker Corp. v. United States, 436 F.3d 431, 436 (4th
Cir. 2006). The statute’s tolerance of the sale of authorized generics
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during the exclusivity period is not an outcome that "shock[s] the gen-
eral moral or common sense," and therefore it does not count as the
sort of "absurd" result that courts seek to avoid in construing statutes.
RCI Tech. Corp. v. Sunterra Corp. (In re Sunterra Corp.), 361 F.3d
257, 265 (4th Cir. 2004). Second, Mylan relies heavily on public criti-
cism of authorized generics by some members of Congress in October
and November 2004. These comments came some 20 years after the
1984 enactment of the Hatch-Waxman Act, and we give "little
weight" to such post-enactment statements by legislators. Kofa v. INS,
60 F.3d 1084, 1089 (4th Cir. 1995) (punctuation omitted). Third,
Mylan’s characterization of Congress as having been solely con-
cerned with making generic drugs available more speedily fails to rec-
ognize a countervailing interest that Congress sought to protect,
namely, the intellectual property rights of pioneer drug companies.
See aaiPharma Inc., 296 F.3d at 230. Nothing in the statute restricts
the established right of such companies to make ordinary licensing
agreements with third parties. As the D.C. Circuit recognized, compa-
nies were free to license generic versions of their pioneer drugs at any
time before the passage of the Hatch-Waxman Act, and Hatch-
Waxman did not purport to restrain that freedom. Teva, 410 F.3d at
53.
Mylan fares no better with its argument that the FDA’s interpreta-
tion of the statute here is fatally inconsistent with the agency’s posi-
tion in the nifedipine case. The Supreme Court has observed that
"[u]nexplained inconsistency is, at most, a reason for holding an inter-
pretation to be an arbitrary and capricious change from agency prac-
tice under the Administrative Procedure Act." Nat’l Cable &
Telecomms. Ass’n v. Brand X Internet Servs., 125 S. Ct. 2688, 2699
(2005). That principle has no application here. Prior agency interpre-
tation (whether or not it supports Mylan’s reading) is irrelevant
because the statute unambiguously forecloses that reading.
Mylan’s inconsistency argument would fail even if we were to
entertain it. The nifedipine case simply did not pose the same question
that this case does. In the previous case Mylan filed the earliest para-
graph IV ANDA seeking authorization to make nifiedipine, a generic
form of Procardia XL, a pioneer drug for which Pfizer, Inc. held the
approved NDA. Mylan, 207 F. Supp. 2d at 481. Pfizer sued Mylan for
patent infringement but later settled and granted Mylan a license to
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make the authorized generic form of Procardia XL. Id. When Mylan’s
competitor Teva subsequently sought an FDA ruling that Mylan’s
180-day exclusivity period had expired, the FDA determined that the
period began to run on the date that Mylan first sold the authorized
generic form of Procardia XL. Id. at 482-83. In the FDA’s view, sale
of that authorized generic constituted the "first commercial marketing
of the drug under the [earliest paragraph IV ANDA],"
§ 355(j)(5)(B)(iv)(I), which started the clock on the exclusivity
period. The agency rejected Mylan’s argument that the exclusivity
period could not have begun until Mylan started selling the generic
form of nifedipine described in its ANDA. See id. at 488. For pur-
poses of the commercial marketing trigger the agency thus refused to
distinguish between Mylan’s authorized generic form of Procardia XL
on the one hand and Mylan’s paragraph IV ANDA generic on the
other hand. In short, that case was about the proper scope of the com-
mercial marketing trigger. The FDA did not decide that generic drugs
made under approved NDAs and those made under paragraph IV
ANDAs are "functional equivalents" for all statutory purposes.
Rather, the FDA determined that a paragraph IV ANDA applicant’s
marketing of an authorized generic activates the commercial market-
ing trigger. The agency’s prior position was not inconsistent with its
action here.
III.
Although the introduction of an authorized generic may reduce the
economic benefit of the 180 days of exclusivity awarded to the first
paragraph IV ANDA applicant, § 355(j)(5)(B)(iv) gives no legal basis
for the FDA to prohibit the encroachment of authorized generics on
that exclusivity. The denial of Mylan’s petition therefore was not "ar-
bitrary, capricious . . . or otherwise not in accordance with law," and
the district court correctly dismissed the case. The judgment of the
district court is therefore affirmed.
AFFIRMED
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