Court: Court of Appeals for the D.C. Circuit; October 25, 2017; Federal Appellate Court
The Food, Drug, and Cosmetic Act (FDCA) prohibits the introduction of new drugs into interstate commerce without an effective application approval under 21 U.S.C. § 355(a). A new drug application (NDA) must include comprehensive safety and efficacy reports (Id. § 355(b)(1)(A)). To streamline this process, the 1984 amendment allows manufacturers of generic drugs to submit an Abbreviated New Drug Application (ANDA) that references an approved pioneer drug, thus not requiring independent safety and efficacy proof. Instead, the ANDA must demonstrate that the generic functions similarly to the pioneer drug. FDA regulations mandate comparisons of active ingredients, administration routes, dosage forms, and strengths against the reference listed drug (21 C.F.R. § 314.94(a)(5-6)). The ANDA must also detail manufacturing methods and facilities (21 U.S.C. § 355(b)(1)(D); 21 C.F.R. § 314.94(a)(9)(i)). The FDA checks compliance with current Good Manufacturing Practice (cGMP) during facility inspections to ensure the drug’s identity, strength, quality, and purity (21 U.S.C. § 355(j)(4)(A)). Upon ANDA approval, the sponsor can market the drug lawfully (21 U.S.C. § 355). The FDCA outlines conditions for ANDA withdrawal, requiring due notice and a hearing for the applicant. The FDA may rescind approval based on "new information" indicating non-compliance with cGMP if adequate corrective actions are not taken after notification (21 U.S.C. § 355(e)).
The FDA has the authority to withdraw ANDA approval not only under specific statutory circumstances but also through its "inherent authority," provided this is done within a reasonable timeframe and Congressional guidance is absent. Administrative agencies can revisit prior decisions unless Congress has established a corrective mechanism. Lannett Company, Inc., a generic drug manufacturer, filed an ANDA on February 15, 2011, for generic Temozolomide, an oral chemotherapy drug, with Lannett Holdings, Inc. owning the drug approval. Lannett designated Chongqing Lummy Pharmaceutical Co. Ltd. as the manufacturer of the active ingredient. The FDA inspected Lummy's facility in July 2013, finding it in acceptable compliance with cGMP requirements. A subsequent inspection from March 14 to 16, 2016, revealed Lummy was transitioning operations to a new facility and uncovered significant cGMP compliance issues related to data integrity, including falsified manufacturing records. The FDA investigator documented these issues and requested Lummy to outline corrective actions.
On March 15, 2016, an FDA investigator recommended classifying the Lummy facility as "Official Action Indicated" (OAI) due to identified objectionable conditions. However, the absence of the customary "field alert" form delayed the entry of this alert into the electronic compliance platform, leading to a misrepresentation of Lummy's compliance status as acceptable. Consequently, on March 23, 2016, the FDA approved Lannett's Abbreviated New Drug Application (ANDA), unaware of the facility’s OAI status.
Subsequently, the Office of Surveillance rectified the oversight by entering an OAI alert, which should have prevented approval recommendations for applications referencing Lummy. On March 31, Lummy submitted a corrective action plan to the FDA, and on April 1, the FDA requested a teleconference with Lannett regarding the distribution of Temozolomide products and the potential withdrawal of its ANDA. During this call on April 5, Lannett acknowledged awareness of the FDA's findings but did not commit to withdrawing its ANDA.
On April 21, 2016, the FDA acknowledged an error in approving Lannett's ANDA, given the unacceptable compliance status of Lummy at the time of approval. The FDA presented Lannett with three options regarding its ANDA: request withdrawal of approval, agree to immediate rescission of approval, or provide evidence of Lummy's acceptable compliance status by May 23, 2016. In response, Lannett proposed a fourth option to submit a supplement for moving production to a different site, while asserting legal arguments against the FDA's ability to rescind approval without following required procedures.
Lannett failed to provide the FDA with information regarding its current cGMP compliance status within the required thirty-day period following the March 23, 2016 ANDA approval. Consequently, on May 16, 2016, the FDA issued a letter to Lannett rescinding the ANDA approval and reverting it to pending status. The FDA’s rescission included a cGMP Complete Response letter detailing deficiencies and requiring Lannett to respond per 21 C.F.R. § 314.110(b). Following unsuccessful attempts to resolve the matter, Lannett initiated a civil action on June 28, 2016, and filed a protective appeal in the D.C. Circuit, which has exclusive jurisdiction over ANDA approval withdrawals. Lannett requested a stay of the appeal pending the outcome of the civil case, which was granted. Both parties now seek summary judgment. Under the Administrative Procedure Act (APA), judicial review of agency actions is conducted through summary judgment, focusing on whether the agency's decision is supported by the administrative record. Courts base their reviews on materials available to the agency at the time of its decision, and the typical summary judgment standards do not apply. Instead, the agency is responsible for resolving factual issues, while the district court determines if the agency's decision was legally permissible based on the administrative record.
The Administrative Procedure Act (APA) outlines the judicial authority to review executive agency actions for procedural correctness, mandating that courts set aside actions deemed "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" (5 U.S.C. § 706(2)(A)). The "arbitrary and capricious" standard allows for limited judicial review, with courts refraining from substituting their judgment for that of the agency. Agencies are required to analyze relevant data and provide a coherent explanation linking the facts to their decisions. Courts will uphold agency decisions if the rationale can be reasonably inferred, even if clarity is lacking.
In cases involving statutory interpretation, the Chevron two-step process is applied. First, courts assess whether Congress has directly addressed the issue, using traditional statutory construction methods. If Congress's intent is clear, that intent must be followed. If the statute is ambiguous after this analysis, courts defer to the agency's interpretation, provided it is a permissible construction, allowing agencies discretion in interpreting ambiguous statutes.
The FDA argues against the court's consideration of Lannett's claims based on the doctrine of exhaustion of administrative remedies, asserting that no final, reviewable decision has been made regarding Lannett's manufacturing compliance status. After rescinding Lannett's ANDA approval, the application reverted to pending status, subject to regulatory requirements outlined in the Complete Response Letter. Therefore, the FDA claims Lannett's request for judicial review is an attempt to circumvent the administrative process.
Lannett contends that the FDA's rescission action represents a definitive conclusion of the agency's decision-making process regarding the revocation of its approval to market Temozolomide capsules, qualifying it as a "final agency action" under the Administrative Procedure Act (APA). Lannett argues it was not obligated to exhaust administrative remedies prior to litigation, as the rescission action irrevocably stripped it of its marketing rights, citing relevant case law. The APA permits judicial review only of final agency actions, which must both conclude the agency's decision-making process and impact the rights or obligations of the party seeking review. Finality under the APA necessitates exhaustion of all available administrative remedies. Additionally, courts typically refrain from intervening in agency matters until internal remedies have been pursued, emphasizing the importance of allowing agencies to rectify mistakes and develop adequate records for judicial review. The Court, however, finds that the FDA's rescission letter and Complete Response Letter do not constitute a reviewable final agency action under the APA, noting that the question of whether such rescission qualifies as a final action appears to be novel, with no existing legal precedent directly addressing it. Despite the absence of specific authority, the Court concludes that sufficient legal grounds support its determination.
For an agency action to be considered final, it must complete the agency's decision-making process. Lannett claims that the FDA's rescission of its ANDA for Temozolomide marks this consummation. However, the Court finds this view too narrow, as it overlooks the FDA's subsequent treatment of the action. Although the FDA rescinded the ANDA approval, it indicated that the ANDA was in "pending status" and expressed willingness to consider amendments, suggesting the decision-making process was ongoing. The FDA also provided regulatory options and required actions for Lannett to regain approval, indicating that the rescission did not conclude the review process or determine Lannett's rights or obligations. The Court notes that agency actions are not final if their adverse effects hinge on future administrative actions. Even if the rescission could be seen as final, it does not satisfy the requirement that Lannett's rights or obligations have been determined, as Lannett does not possess an inherent right to market the drug when public health concerns are present. The Court cites past cases to underscore that the FDA is entitled to correct its mistakes without assuming Lannett had a vested right to market the drug.
The FDCA prohibits the FDA from approving an Abbreviated New Drug Application (ANDA) if the manufacturing methods and facilities do not ensure the drug's identity, strength, quality, and purity (21 U.S.C. § 355(j)(4)(A)). Following a mistaken approval of Lannett's ANDA for Temozolomide capsules, the FDA rescinded the authorization due to its invalidity, a point Lannett does not contest. Lannett argues instead that it was entitled to notice and a pre-rescission hearing under § 355(e), citing incomplete information regarding compliance with current Good Manufacturing Practices (cGMP) during the approval process.
Lannett's claim is challenged by the principle that it must exhaust all administrative remedies before seeking judicial relief, as established in Woodford v. Ngo and McKart v. United States. The FDA's cGMP Complete Response Letter indicated that Lannett had options to comply with FDA regulations, such as resubmitting or supplementing its ANDA, withdrawing it, or requesting a hearing. Instead, Lannett chose to pursue judicial review without exhausting these remedies.
The court supports the FDA's position that requiring exhaustion serves the purposes of the doctrine: it allows agencies to rectify their errors and promotes judicial efficiency. Resolving claims at the administrative level can often be faster and more economical, and may yield a more useful record for any subsequent court proceedings.
Permitting Lannett to proceed with litigation without exhausting its administrative remedies would violate FDA procedures outlined in 21 C.F.R. § 314.110(b) and hinder the FDA's ability to address the alleged mistakes. Bypassing these remedies undermines the regulatory process and the potential for Lannett to resolve its issues directly with the FDA, either through an ANDA supplement or a hearing regarding its application. The FDA's decisions would then constitute final agency actions subject to judicial review under 21 U.S.C. § 355(h). The Court found that the FDA's rescission of Lannett's action is not a final agency decision eligible for review under the Administrative Procedure Act (APA), and Lannett failed to exhaust its administrative remedies prior to filing in federal court. Consequently, summary judgment was granted in favor of the defendants. The Court also noted that it had considered multiple filings from both parties in reaching its decision. While the Secretary of Health and Human Services has delegated authority to the FDA Commissioner to approve or withdraw drug applications, Lannett was not denied a factual hearing to support its qualifications for selling Temozolomide capsules. The Court concluded that the issues regarding Lannett's claims under the APA and its constitutional claim need not be addressed, as the failure to exhaust remedies precludes consideration of the merits. Additionally, the defendants' motion to strike extra-record documents was deemed moot. An Order consistent with this Memorandum Opinion will be issued.
