Eagle Pharms., Inc. v. Azar
Anne K. Walsh* and Rachael E. Hunt**
Why It Made the List
This case is the second time that the U.S. District Court for the District of Columbia required FDA to grant marketing exclusivity to a drug under the plain language of the Orphan Drug Act. The first decision, Depomed, Inc. v. U.S. Dep’t of Health & Human Servs., was not appealed. The Eagle case, however, is under appeal and will determine the proprietary of FDA’s authority to require a showing of clinical superiority before granting orphan drug exclusivity. While this holding is limited to exclusivity decisions made prior to the amendment of the statute,  it has broader implications regarding FDA’s ability to impose extra-statutorial requirements on industry.
The Orphan Drug Act was enacted on January 4, 1983, to incentivize the development of drugs for rare diseases and conditions that would not otherwise be developed given the small market for their use. An orphan-drug designation automatically entitles the recipient to certain incentives and benefits that are designed to ease the cost and financial risk associated with drug development for such a small market, such as tax credits for qualified clinical research and waivers of certain application fees.
If FDA subsequently approves an application to market the designated drug, the drug sponsor receives an additional benefit: the FDA “may not approve” any other application for “such drug” to treat the same rare disease until seven years have passed. This effectively grants the first manufacturer to receive approval seven years of marketing exclusivity.
The Orphan Drug Act does not define when two drugs are the same or different for purposes of the exclusivity analysis. FDA regulations, however, state that a new drug is generally the same as a previously approved drug if both share the same active ingredient. The exception to this general rule is if FDA finds that the new drug is “clinically superior” to the previously approved drug, in which case the new drug is considered different. FDA defines a drug as “clinically superior” when it is determined to be more effective, safer, or “otherwise makes a major contribution to patient care.”
FDA analyzes the clinical superiority of two drugs both when first designating an orphan drug and when determining whether to recognize orphan-drug exclusivity after the drug is approved. At the designation stage, the drug sponsor must submit “a medically plausible hypothesis for the possible clinical superiority of the subsequent drug.” At the marketing-approval stage, by contrast, FDA requires applicants to provide evidence of actual clinical superiority in order to obtain orphan-drug exclusivity.
The Earlier Depomed Decision
In 2012, in a case that largely mirrors the facts in Eagle, a pharmaceutical company, Depomed, Inc., filed a lawsuit challenging FDA’s requirement that manufacturers show clinical superiority at the marketing-approval stage. In Depomed, the court held that the Orphan Drug Act was unambiguous and required FDA to recognize orphan-drug exclusivity once a drug is designated and approved. Any concerns regarding serial exclusivity, the court reasoned, must be addressed at the designation stage.
Although FDA initially appealed the district court decision, FDA withdrew its appeal and limited the application of the Depomed decision to limit the court’s ruling to the specific drug at issue in that case. The Agency stated that it planned to continue to apply the clinical-superiority framework to the orphan-drug exclusivity analysis.
Factual and Procedural Background
FDA designated Eagle Pharmaceutical’s Bendeka (bendamustine HCl) as an orphan drug on July 2, 2014, for the treatment of two types of cancer: chronic lymphocytic leukemia and non-Hodgkin’s lymphoma (“NHL”). Because FDA had previously approved Teva Pharmaceutical Industries Ltd.’s (“Teva’s”) Treanda (bendamustine HCl) for these cancers, FDA required Eagle to provide a plausible hypothesis of clinical superiority to obtain orphan-drug designation. As a ready-to-dilute concentrate solution for injection administered by infusion over 10 minutes, FDA accepted Eagle’s hypothesis that the lower volume of Bendeka could provide a benefit to patients.
Teva’s orphan-drug exclusivity for Treanda for the treatment of NHL remained in effect until May 1, 2016. However, because of a licensing agreement between Teva and Eagle, Teva agreed to waive its unexpired orphan-drug exclusivity with respect to Bendeka. That waiver allowed for the December 2015 approval of Bendeka without Eagle having to “break” Teva’s unexpired orphan-drug exclusivity for Treanda by demonstrating “clinical superiority” over Treanda. But “clinical superiority” remained an issue for FDA in determining whether Bendeka would be granted orphan-drug exclusivity.
On March 24, 2016, FDA denied Eagle’s request for orphan-drug exclusivity, concluding that Eagle had not shown that Bendeka was clinically superior to Treanda.
District Court Decision
On April 27, 2016, Eagle filed a lawsuit challenging FDA’s exclusivity decision under the Administrative Procedure Act. The parties filed cross-motions for summary judgment. On June 8, 2018, Judge Timothy J. Kelly granted Eagle’s motion for summary judgment and ordered FDA to recognize orphan-drug exclusivity for Bendeka.
FDA argued in its motion that the Orphan Drug Act is ambiguous as to whether the same “such drug” may enjoy orphan-drug exclusivity more than once to treat the same disease. According to FDA, the clinical-superiority framework appropriately resolved this ambiguity and should be granted deference pursuant to Chevron’s two-step analysis: a court must first determine whether a statute is silent or ambiguous with respect to a specific issue, if so, then the court proceeds to the second step and must determine whether the agency’s answer is based on a permissible construction of the statute.
In granting Eagle’s motion for summary judgment, the court found that “FDA’s argument does not make it past the first step” because the Orphan Drug Act is unambiguous: “if the FDA approves a drug previously designated under the Orphan Drug Act, then it ‘may not approve’ another application ‘for such drug for such disease or condition’ for a period of seven years.”
FDA also argued that the Orphan Drug Act is ambiguous when viewed in the context of its “legislative history, structure, and purpose.” Specifically, FDA posited that “the central purpose of the Orphan Drug Act is to incentivize drug development for otherwise untreated patients” which is “furthered only if the benefit of orphan-drug exclusivity is reserved for the first manufacturer to earn it.” The court, however, disagreed, holding that “the statute’s broad purpose simply cannot override its text, which provides an unambiguous answer to the question at hand.” Moreover, the court continued that FDA is not required to hand out orphan-drug exclusivity to undeserving drug manufacturers because FDA “has unchallenged statutory authority at the designation stage” to determine which drugs receive orphan-drug designation.
The court found FDA’s arguments about legislative history to be similarly unavailing because “courts ‘do not resort to legislative history to cloud a statutory text that is clear.’” Even so, the court noted that FDA failed to identify anything in the Orphan Drug Act’s legislative history “that supports its interpretation of the statute.”
Thus, the court granted Eagle’s motion for summary judgment and held that “Bendeka is entitled to orphan-drug exclusivity under the version of the statute in force at the time of the FDA’s decision.”
Impact of the Decision
Cases in which FDA loses are all impactful, but in this case, Congress has limited the potential application of this decision. As noted above, in 2017 during the pendency of the case, Congress amended the Orphan Drug Act to allow for the clinical superiority analysis in determining orphan-drug designation. Although the amendments do not apply retroactively to any decision made before their enactment, there is a limited number of drugs that would benefit from the Eagle ruling. There is a pending case that will be directly impacted by the Eagle appeal: United Therapeutics Corp. v. Dept. of Health and Human Services, et al, 17-cv-01577 (D.D.C. Aug. 4, 2017).
As of the time of publication, the case is on appeal before the United States Court of Appeals for the D.C. Circuit. The outcome of the appeal will provide a circuit-level decision regarding the permissibility of FDA’s conduct and interpretation of its own authority.
* Anne K. Walsh is a director at Hyman, Phelps & McNamara, P.C., where she investigates, negotiates, and litigates cases brought under the Federal Food, Drug, and Cosmetic Act and the False Claims Act.
** Rachael Hunt is an associate at Hyman, Phelps & McNamara, P.C., where she defends clients facing False Claims Act suits and other enforcement actions initiated by the Department of Justice, the Food and Drug Administration (“FDA”), and the Drug Enforcement Administration.
 , 66 F. Supp. 3d 217 (D.D.C. 2014).
 In 2017, during the pendency of the Eagle case, Congress amended the Orphan Drug Act to allow FDA to impose a clinical superiority requirement when determining whether a drug will obtain orphan-drug exclusivity. See FDA Reauthorization Act of 2017, Pub. L. No. 115-52, § 607(a), 131 Stat. 1005, 1049-50 (amending 21 U.S.C. § 360cc).
 Pub. L. No. 97-414, § 1(b), 96 Stat. 2049, 2049 (1983); see also H.R. Rep. No. 97-840, 1 (1982).
 26 U.S.C. § 45C.
 21 U.S.C. § 379h(a)(1)(F).
 Id. § 360cc(a) (2012).
 See 21 C.F.R. § 316.3(b)(14).
 Id. § 316.3(b)(3).
 Id. § 316.25(a)(3).
 See id. § 316.34(c).
 Depomed, Inc., 66 F. Supp. 3d at 226.
 Id. at 230.
 Id. at 235-36.
 See Depomed Inc. v. U.S. Dep’t of Health & Human Servs., No. 14-5271, 2014 WL 5838247 (D.C. Cir. Nov. 7, 2014) (dismissing appeal on government’s motion).
 See Policy on Orphan-Drug Exclusivity; Clarification, 79 Fed. Reg. 76,888 (Dec. 23, 2014).
 Eagle Pharms., Inc., v. Burwell, No. 16-cv-00790 (D.D.C. Apr. 27, 2016) (date of original complaint).
 Order, Eagle Pharms., Inc. v. Azar, No. 16-cv-00790, 2018 U.S. Dist. LEXIS 101735 (D.D.C. June 8, 2018).
 City of Clarksville v. FERC, 888 F.3d 477, 482 (D.C. Cir. 2018) (quoting Chevron, 467 U.S. at 843).
 Order, 2018 U.S. Dist. LEXIS 101735 at *17.
 Id. at *20-21.
 Id. at *21.
 Id. at *21-22.
 Id. at *22.
 Id. at *27.
 Id. at *28.
 Id. at *31.
 See FDA Reauthorization Act of 2017, Pub. L. No. 115-52, § 607(a), 131 Stat. 1005, 1049-50 (amending 21 U.S.C. § 360cc).
 See id. § 607(b), 131 Stat. at 1050.
 Eagle Pharms., Inc. v. Azar, No. 18-cv-5207 (D.C. Cir. docketed July 10, 2018).