FTC v. Shire ViroPharma: Start with a Bang, Finish with a Whimper
Lynn C. Tyler
With considerable publicity, in February, 2017, the Federal Trade Commission (“FTC”) filed a complaint against Shire ViroPharma, Inc. (“Shire”) in Delaware, alleging that Shire had committed an unfair method of competition in violation of § 13(b) of the FTC Act, 15 U.S.C. § 53(b) (“the Act”). The basis for the allegations was that Shire had abused FDA’s citizen petition process and filed other papers in an effort to delay competition for Vancocin, a highly profitable drug for treating a life-threatening gastrointestinal infection. The district court dismissed the complaint, however, because the FTC did not allege Shire was currently violating the Act or was about to violate the Act. The FTC appealed to the Third Circuit, which affirmed.
WHY IT MADE THE LIST
The high prices for pharmaceuticals, and allegedly anti-competitive actions taken by pharmaceutical manufacturers to maintain or even increase those prices, are regularly in the news these days. These actions can include patent “evergreening,” “patent thickets,” and “pay-for-delay” deals, among others. FDA’s citizen petition process has also been criticized and received congressional attention over the years as one source of the potentially anti-competitive actions taken to maintain high drug prices. This case appears to have been the first in which the FTC sought judicial relief for an alleged abuse of the citizen petition process. The question can be complex because it also involves a company’s First Amendment right to petition the government.
Factual and Procedural Background
Vancocin capsules are an oral antibiotic used to treat Clostridium-difficile associated diarrhea, which is a serious, potentially life-threatening gastrointestinal infection. When Vancocin capsules were developed, the New Drug Application (NDA) submitted to FDA did not include in vivo clinical endpoint studies because the capsules were an alternative delivery system to Vancocin oral solution, which FDA already knew to be safe and effective. Instead, the NDA included in vitro dissolution data (which measures how quickly the capsules dissolve) and in vivo pharmacokinetic data (which compares the absorption of the drug in capsule form versus oral solution form).
Shire acquired Vancocin capsules in 2004. From then until 2009, Vancocin capsules accounted for all of Shire’s net revenue and in 2011 for fifty-three percent of Shire’s net revenue. Vancocin was vulnerable to generic competition, however, because it lacked both patent protection and regulatory exclusivity. One primary barrier to generic entry remained, however. Even though Vancocin capsules had been approved based on in vitro dissolution testing and in vivo pharmacokinetic studies, initially FDA recommended that generic manufacturers seeking to demonstrate bioequivalence conduct more expensive in vivo clinical endpoint studies. In October 2004, however, FDA convened an Advisory Committee meeting to reassess bioequivalence testing for locally-acting gastrointestinal drugs like Vancocin.
Shire soon became concerned that FDA would allow the approval of a generic version of Vancocin based on in vitro dissolution testing and in vivo pharmacokinetic studies, rather than traditional bioequivalence studies. In November, 2005, Shire hired a consultant who confirmed its fears and recommended filing a citizen’s petition supported by clinical data. In February, 2006, FDA advised a generic manufacturer that it could show bioequivalence for Vancocin by in vitro dissolution testing. FDA also shared this guidance with other generic manufacturers. In March, 2007, the first generic manufacturer submitted its ANDA for Vancocin and two other generic manufacturers followed suit later that year.
During the relevant time period, FDA would automatically suspend the approval of an Abbreviated New Drug Application (ANDA) if a branded manufacturer filed a citizen’s petition. Although FDA was obligated at the time to respond to every citizen’s petition within 180 days FDA’s response did not have to dispose of the entire petition within that time. FDA’s response could deny the petition, approve it in whole or in part, provide a tentative response, or delay a decision by modifying or postponing any suggested action.
Between March, 2006 and April, 2012, Shire submitted forty-three filings to FDA and instituted three federal court proceedings. In its 2017 Complaint, the FTC alleged these filings were designed to delay the approval of generic Vancocin capsules by convincing FDA to require ANDA applicants to conduct in vivo clinical endpoint studies. Shire’s FDA filings included a citizen’s petition and various amendments to it, as well as public comments on other manufacturers’ ANDAs.
In April, 2012, the FDA denied Shire’s citizen’s petition, stating it “lacked merit” and was “unsupported,” and also approved three generic versions of Vancocin. Within a few months, Shire lost seventy percent of its sales of Vancocin. Shire divested itself of Vancocin in 2014. Nonetheless, as noted above it was not until February, 2017 that the FTC filed the suit over Shire’s actions, alleging that the filings were anti-competitive and were also shams and thus not protected by the First Amendment.
Section 13(b) of the FTC Act authorizes the FTC to seek relief against an unfair method of competition when the defendant “is violating” or “is about to violate” the Act. The Third Circuit began its analysis by considering whether § 13(b) is jurisdictional. Citing Arbaugh v. Y&H Corp., the Third Circuit wrote that the Supreme Court “has instructed us to assume that statutory limitations are nonjurisdictional unless Congress provides otherwise.” The court saw no indicia in § 13(b) suggesting that Congress intended to “rank a statutory limitation . . . as jurisdictional.” Rather, the FTC’s claim arose under a law of the United States and thus fell within the district court’s original jurisdiction under 28 U.S.C. § 1331.
Turning to the merits, the Third Circuit affirmed the district court’s dismissal of the FTC’s complaint. The court first reviewed administrative remedies available to the FTC under § 5 of the FTC Act. The court then noted that § 13(b) was not part of the original FTC Act, but rather was added later to give FDA the ability to quickly enjoin ongoing or imminent illegal conduct. In § 5 administrative proceedings, the FTC must prevail to obtain a cease and desist order. Even if the FTC issues a cease and desist order, it must seek a court’s aid to enforce the order. To provide a quicker remedy, Congress amended the FTC Act in 1973 to allow the FTC to obtain a temporary restraining order or preliminary injunction in district court whenever it “has reason to believe” that violations of the FTC Act are occurring or are about to occur. Section 13(b) thus empowers the FTC to address ongoing or impending illegal conduct promptly, rather than wait for an administrative proceeding to conclude.
According to the court, the FTC’s position was that it was entitled to pursue immediate relief in a district court under § 13(b), rather than via the administrative remedy set forth in § 5. The court began its analysis with the language of the FTC Act, citing Murphy v. Millennium Radio Grp. LLC, for the proposition that when a statute’s language is clear “the sole function of the courts—at least where the disposition required by the [text] is not absurd—is to enforce [the statute] according to its terms.”
Section § 13(b) provides in part:
Whenever the [FTC] has reason to believe—
(1) that any person, partnership, or corporation is violating, or is about to violate, any provision of law enforced by [the FTC,] and
(2) that the enjoining thereof pending the issuance of a complaint by the [FTC] and until such complaint is dismissed by the [FTC] or set aside by the court on review, or until the order of the [FTC] made thereon has become final, would be in the interest of the public—
the [FTC] by any of its attorneys designated by it for such purpose may bring suit in a district court of the United States to enjoin any such act or practice.
Applying this language to the case, the court wrote:
Section 13(b) requires that the FTC have reason to believe a wrongdoer “is violating” or “is about to violate” the law. Id. § 53(b)(1). We conclude that this language is unambiguous; it prohibits existing or impending conduct. Simply put, Section 13(b) does not permit the FTC to bring a claim based on long-past conduct without some evidence that the defendant “is” committing or “is about to” commit another violation.
The court added that § 13(b)’s history reinforced the plain language. The section was not added to afford the FTC a remedy against hypothetical conduct, but rather to afford immediate access to the enforcement powers of the courts pending the completion of its own administrative process. “In short, we reject the FTC’s contention that Section 13(b)’s ‘is violating’ or ‘is about to violate’ language can be satisfied by showing a violation in the distant past and a vague and generalized likelihood of recurrent conduct.”
The court considered the allegations in the FTC’s complaint and found them insufficient to meet the “is violating” or “is about to violate” standards. Relevant to this issue, the court stated that the complaint:
alleges generally that Shire “is engaged in the business of, among other things, developing, manufacturing, and marketing branded drug products, including inter alia, Cinryze.” Compl. ¶ 8. As to the likelihood that Shire will engage in illegal behavior, the FTC alleges, “[a]bsent an injunction, there is a cognizable danger that [Shire] will engage in similar conduct causing future harm to competition and consumers. [Shire] knowingly carried out its anticompetitive and meritless petitioning campaign to preserve its monopoly profits. It did so conscious of the fact that this conduct would greatly enrich it at the expense of consumers.” Id. ¶ 150. Without mentioning Cinryze by name, the FTC alleges that Shire “has the incentive and opportunity to continue to engage in similar conduct in the future. At all relevant times, [Shire] marketed and developed drug products for commercial sale in the United States, and it could do so in the future. Consequently, [Shire] has the incentive to obstruct or delay competition to these or other products.” Id. ¶ 151.
The court found these “vague” allegations “woefully inadequate” to state a claim under § 13(b). More specifically, the court faulted the complaint for failing to allege that Shire had “engaged in sham petitioning in the five-year gap between the 2012 cessation in petitioning and the 2017 lawsuit” and for not including “specific allegations that Shire is ‘about to violate’ the law by petitioning as to Cinryze, the only other drug mentioned.” Accordingly, as noted above, the court affirmed the dismissal of the FTC’s complaint.
The FTC did not seek review of the court’s decision, either from the panel, the Third Circuit en banc, or the Supreme Court. Going forward, it appears that if the FTC wants to challenge alleged abuse of FDA’s citizen’s petition process, it will have to either pursue its own administrative process first or go to court while the alleged abuse is ongoing or about to occur, not years after it has been completed. Litigation in a district court to enjoin anticipated or ongoing conduct could prove rather difficult because it may require the FTC to show the citizen’s petition is a sham before FDA has ruled on the petition. The sham showing would be necessary to overcome the defendant’s First Amendment defense. Thus, as a practical matter, FTC v. Shire ViroPharma may leave the FTC with only its administrative process to challenge alleged abuses of the citizen’s petition process.
Also, the issue may now be less likely to arise in this specific context. As the Court observed, in the FDAAA Congress provided that FDA cannot delay the approval of an ANDA based on a citizen petition unless “a delay is necessary to protect the public health.” Under the amendment, FDA may also deny a citizen petition filed “with the primary purpose of delaying” ANDA approval that “does not on its face raise valid scientific or regulatory issues.”
 Lynn Tyler is a partner and registered patent attorney in the Indianapolis office of Barnes & Thornburg LLP. He is chair of the firm’s Food, Drug & Device Group and concentrates his practice in patent litigation, patent opinions, and FDA counseling.
 FTC v. Shire ViroPharma, Inc., 917 F.3d 147 (3d Cir. 2019).
 Id. at 151.
 Id. at 151-52.
 Subsequently, Congress passed the Food and Drug Administration Amendments Act of 2007 (FDAAA), which provided that FDA cannot delay ANDA approval due to a citizen petition unless “a delay is necessary to protect the public health.” 21 U.S.C. § 355(q)(1)(A)(ii). Under the amendment, FDA may also deny a citizen petition filed “with the primary purpose of delaying” an ANDA approval that “does not on its face raise valid scientific or regulatory issues.” Id. § 355(q)(1)(E).
 The regulation now states FDA “intends to furnish a response” within 150 days. 21 C.F.R. § 10.30(e)(5).
 The lawsuits were either dismissed or withdrawn.
 917 F.3d at 152.
 Id. at 153.
 15 U.S.C. § 53(b).
 917 F.3d at 153.
 546 U.S. 500, 503 (2006).
 917 F.3d at 153.
 Id. at 154.
 15 U.S.C. § 45.
 See id. § 45(b).
 Id. § 45(l).
 Id. § 53(b).
 917 F.3d at 155.
 650 F.3d 295, 302 (3d Cir. 2011).
 917 F.3d at 156.
 15 U.S.C. § 53(b)(1)–(2). Emphasis added.
 917 F.3d at 156.
 Id. at 159.
 Id. at 160.
 Id. at 152 n.7 (citing 15 U.S.C. § 355(q)(1)(A)(ii)).
 Id. (citing 15 U.S.C. § 355(q)(1)(E)).