Lannett Company, Inc. et al v. United States Food And Drug Administration et al

MOTION for Summary Judgment and Memorandum in Support of Motion for Summary Judgment

D.D.C.February 3, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA LANNETT COMPANY, INC. and LANNETT HOLDINGS, INC., Plaintiffs, ) ) ) ) ) ) ) ) v. UNITED STATES FOOD AND DRUG ADMINISTRATION and UNITED STATES OF AMERICA, Defendants. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 1:16-cv-01350-RBW PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT (ORAL HEARING REQUESTED) Daniel G. Jarcho (D.C. Bar No. 391837) Marc J. Scheineson (D.C. Bar No. 367201) Tamara R. Tenney (D.C. Bar No. 975481) ALSTON & BIRD LLP 950 F Street, N.W. Washington, D.C. 20004 (202) 239-3254 (telephone) (202) 239-3333 (fax) daniel.jarcho@alston.com Attorneys for Plaintiffs Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 1 of 61 In this case, a generic drug company (Lannett Company, Inc. and Lannett Holdings, Inc. (“Lannett”)) seeks judicial review of an action by the U.S. Food and Drug Administration (“FDA”) under the Administrative Procedure Act. FDA’s action revoked the marketing approval for one of Lannett’s generic drugs, based on the agency’s determination that it had mistakenly granted the approval. FDA’s governing statute (the Federal Food, Drug, and Cosmetic Act) and the Due Process Clause of the Fifth Amendment both require a hearing before FDA could revoke Lannett’s approval. FDA nonetheless “rescinded” the approval without conducting the hearing that the statute and the Constitution require. For the reasons set forth in the Memorandum accompanying this Motion, the Court should grant Lannett’s Motion for Summary Judgment, set aside FDA’s rescission action, declare that the action is unlawful, and enjoin FDA from rescinding Lannett’s approval in the future without following hearing procedures required by law. Plaintiffs respectfully request an oral hearing on this Motion. Respectfully submitted, /s/ Daniel G. Jarcho October 6, 2016 Daniel G. Jarcho (D.C. Bar No. 391837) Marc J. Scheineson (D.C. Bar No. 367201) Tamara R. Tenney (D.C. Bar No. 975481) ALSTON & BIRD LLP 950 F Street, N.W. Washington, D.C. 20004 (202) 239-3254 (telephone) (202) 239-3333 (fax) daniel.jarcho@alston.com Attorneys for Plaintiffs Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 2 of 61 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA LANNETT COMPANY, INC. and LANNETT HOLDINGS, INC., Plaintiffs, ) ) ) ) ) ) ) ) v. UNITED STATES FOOD AND DRUG ADMINISTRATION and UNITED STATES OF AMERICA, Defendants. ) ) ) ) ) ) ) ) ) ) ) C.A. No. 1:16-cv-01350-RBW MEMORANDUM IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT Daniel G. Jarcho (D.C. Bar No. 391837) Marc J. Scheineson (D.C. Bar No. 367201) Tamara R. Tenney (D.C. Bar No. 975481) ALSTON & BIRD LLP 950 F Street, N.W. Washington, D.C. 20004 (202) 239-3254 (telephone) (202) 239-3333 (fax) daniel.jarcho@alston.com Attorneys for Plaintiffs Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 3 of 61 i TABLE OF CONTENTS Page STATUTORY AND REGULATORY BACKGROUND.............................................................. 2 A. The Federal Food, Drug, and Cosmetic Act and the Authorities Granted to the Secretary of Health and Human Services and the Commissioner of FDA............. 2 B. The FDA Approval Process for Generic Drugs...................................................... 4 C. The Regulatory Process for Amending the Terms of an Approved ANDA........... 6 D. The Statutory Process for Withdrawing Approval for Generic Drugs ................... 6 E. FDA’s Enforcement Mechanisms for Approved Drugs ......................................... 8 STATEMENT OF FACTS ............................................................................................................. 8 A. Lannett’s Generic Temozolomide Capsules ........................................................... 8 B. FDA’s July 2013 Pre-Approval Inspection of Lummy........................................... 9 C. Lannett’s 2013 Receipt of Active Ingredient Manufactured by Lummy................ 9 D. FDA’s March 2016 Pre-Approval Inspection of Lummy..................................... 10 E. The March 23, 2016 Approval Decision and Subsequent Events ........................ 10 F. The Preliminary Decision to Rescind the Approval ............................................. 11 G. The Fourth Option Proposed by Lannett .............................................................. 12 H. The May 17, 2016 Rescission Letter .................................................................... 13 I. This Case............................................................................................................... 14 ARGUMENT................................................................................................................................ 15 I. FDA’s Rescission Action is Arbitrary and Capricious ......................................... 16 A. FDA’s Rescission Action is Based Upon Internally Inconsistent Rationales Concerning the Agency’s Statutory Authority to Correct the Claimed Mistake...................................................................................................... 16 1. FDA Concluded Both that it Did — and Did Not — Have Authority to Withdraw the Approval Under Section 355(e) ........ 17 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 4 of 61 ii 2. FDA Concluded Both that it Can — and Cannot — Use Inherent Reconsideration Authority to Rescind an Approval Based on Information Not Previously Received by the Agency .................. 19 B. The Agency Cannot Resolve its Contradictions Now Through Post-Hoc Rationalizations of Counsel ...................................................................... 20 II. FDA’s Rescission Action Conflicts with the Statute............................................ 21 A. Section 355(e) Procedures Were Capable of Rectifying the Claimed Mistake...................................................................................................... 21 1. Section 355(e)’s Plain Language Authorizes FDA to Withdraw an ANDA Approval Based on cGMP Compliance Information that FDA Officials Did Not Consider During the Decision to Approve the ANDA ..................................................................................... 22 2. Other Provisions of the Statute Confirm FDA’s Authority Under Section 355(e) to Withdraw an Approval Based on Information FDA Officials Did Not Consider During the Decision to Approve the ANDA ..................................................................................... 26 B. FDA Violated Section 355(e) by Revoking the Approval Without Conducting a Hearing Where the Agency Would Need to Prove its Case and the Presiding Officer Would Need to Consider Corrective Actions Taken ....................................................................................................... 30 C. FDA Has Not Justified its Failure to Follow Section 355(e) Procedures . 32 1. FDA’s Statutory Interpretation Relies Upon Inapplicable Passages in a 26-Year Old District Court Decision ..................................... 32 2. FDA Has No Basis for Suggesting that the Magnitude of its Regulatory Compliance Concerns Justifies Short-Circuiting the Statutory Process........................................................................... 34 3. FDA’s Statutory Interpretation is Not Entitled to Judicial Deference ...................................................................................... 37 III. FDA’s Rescission Action Violated Due Process Requirements........................... 41 A. Lannett Has a Protected Property Right in its ANDA Approval .............. 42 B. Lannett was Entitled to a Hearing Addressing Whether its Legitimate Claim of Entitlement to the Approval was in Fact a Legal Entitlement to the Approval.............................................................................................. 43 CONCLUSION............................................................................................................................. 45 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 5 of 61 iii TABLE OF AUTHORITIES Page(s) CASES 3883 Connecticut LLC v. District of Columbia, 336 F.3d 1068 (D.C. Cir. 2003) ...............................................................................................42 Al Bahlul v. United States, 767 F.3d 1 (D.C. Cir. 2014) .....................................................................................................41 Alaska Airlines, Inc. v. CAB, 545 F.2d 194 (D.C. Cir. 1976) .................................................................................................45 Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 (1998)...........................................................................................................16, 17 American Methyl Corp. v. EPA, 749 F.2d 826 (D.C. Cir. 1984) ...................................................................................................1 American Therapeutics, Inc. v. Sullivan, 755 F. Supp. 1 (D.D.C. 1990) ......................................................................................32, 33, 34 Arizona v. Thompson, 281 F.3d 248 (D.C. Cir. 2002) ........................................................................................... 39-40 Barnes v. Shalala, 865 F. Supp. 550 (W.D. Wis. 1994) ........................................................................................34 Barry v. Barachi, 443 U.S. 55 (1979)...................................................................................................................42 Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).........................................................................................37, 38, 39, 40, 41 Comm. for Humane Legislation, Inc. v. Richardson, 540 F.2d 1141 (D.C. Cir. 1976) ...............................................................................................23 Cutler v. Hays, 818 F.2d 879 (D.C. Cir. 1987) .................................................................................................34 Delaware Dep’t of Nat. Res. and Envtl. Control v. EPA, 785 F.3d 1 (D.C. Cir. 2015) .....................................................................................................19 Dep’t of Homeland Security v. MacLean, 135 S. Ct. 913 (2015).........................................................................................................28, 30 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 6 of 61 iv District Hosp. Partners v. Burwell, 786 F.3d 46 (D.C. Cir. 2015) ...................................................................................................23 Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275 (D.C. Cir. 1981) ...................................................................................................9 FCC v. Fox Television Stations, Inc., 556 U.S. 504 (2009).................................................................................................................17 Freeman v. FDIC., 56 F.3d 1394 (D.C. Cir. 1995) .................................................................................................43 Fuentes v. Shevin, 407 U.S. 67 (1972)...................................................................................................................44 Genentech, Inc. v. Bowen, 676 F. Supp. 301 (D.D.C. 1987) ..............................................................................................34 Goldberg v. Kelly, 397 U.S. 254 (1970).................................................................................................................42 Griffith v. FLRA, 842 F.2d 487 (D.C. Cir. 1988) .................................................................................................33 Gulf Power Co. v. FERC, 983 F.2d 1095 (D.C. Cir. 1993) ...............................................................................................19 Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149 (2010).............................................................................................................22 *Ivy Sports Medicine, LLC v. Burwell, 767 F.3d 81 (D.C. Cir. 2014) ................................................1, 15-16, 21-22, 25, 33, 35, 39, 44 Ivy Sports Medicine, LLC v. Sebelius, 938 F. Supp. 2d 47 (D.D.C. 2013), vacated and remanded, 767 F.3d 81 (D.C. Cir. 2014) .................................................................................................................................44 Kizas v. Webster, 707 F.2d 524 (D.C. Cir. 1983) .................................................................................................44 Leedom v. Kyne, 358 U.S. 184 (1958)...........................................................................................................32, 33 Leocal v. Ashcroft, 543 U.S. 1 (2004).....................................................................................................................23 Lewis v. Sec’y of the Navy, 2016 WL 3659882 (D.D.C. July 1, 2016)................................................................................24 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 7 of 61 v Loughrin v. United States, 134 S. Ct. 2384 (2014).............................................................................................................29 Manin v. Nat’l Transp. Safety Bd., 627 F.3d 1239 (D.C. Cir. 2011) ...............................................................................................21 Mathews v. Eldridge, 424 U.S. 319 (1976).................................................................................................................43 Mazaleski v. Treusdell, 562 F.2d 701 (D.C. Cir.1977) ..................................................................................................42 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983)............................................................................................................. 20-21 N.B. ex rel. Peacock v. District of Columbia, 794 F.3d 31 (D.C. Cir. 2015) .............................................................................................41, 44 Nat’l Auto. Dealers Ass’n v. FTC, 630 F.3d 268 (D.C. Cir. 2012) .................................................................................................14 National Mining Ass’n v. Kempthorne, 512 F.3d 702 (D.C. Cir. 2008) .................................................................................................41 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010) .................................................................................................20 New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008) .................................................................................................16 Northpoint Tech., Ltd. v. FCC, 412 F.3d 145 (D.C. Cir. 2005) .................................................................................................38 Olim v. Wakinekona, 461 U.S. 238 (1983).................................................................................................................42 Portland Cement Ass’n v. EPA, 665 F.3d 177 (D.C. Cir. 2011) ...........................................................................................17, 19 Powerex Corp. v. Reliant Energy Services, Inc., 551 U.S. 224 (2007).................................................................................................................26 Prill v. NLRB, 755 F.2d 941 (D.C. Cir. 1985) .................................................................................................40 Ralls Corp. v. Comm. on Foreign Inv. in U.S., 758 F.3d 296 (D.C. Cir. 2014) .................................................................................................43 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 8 of 61 vi Regan v. Time, Inc., 468 U.S. 641 (1984).................................................................................................................40 Riegel v. Medtronic, Inc., 552 U.S. 312 (2008).................................................................................................................38 Roberts v. Sea-Land Servs., Inc., 132 S. Ct. 1350 (2012).............................................................................................................26 Russello v. United States, 464 U.S. 16 (1983)...................................................................................................................28 Select Specialty Hosp. Bloomington, Inc. v. Burwell, 757 F.3d 308 (D.C. Cir. 2014) .................................................................................................21 Sosa v. Alvarez-Machain, 542 U.S. 692 (2004).................................................................................................................28 Tarpeh–Doe v. United States, 904 F.2d 719 (D.C. Cir. 1990) .................................................................................................42 Transitional Hospitals Corp. v. Shalala, 222 F.3d 1019 (D.C. Cir. 2000) ...............................................................................................40 Trudeau v. FTC, 456 F.3d 178 (D.C. Cir. 2006) .................................................................................................33 United States v. Two Plastic Drums * * * of An Article of Food, 984 F.2d 814, (7th Cir. 1993) ..................................................................................................38 United States v. 29 Cartons * * * of An Article of Food, 987 F.2d 33 (1st Cir. 1993)......................................................................................................38 U.S. Dep’t of the Treasury IRS Office of Chief Counsel v. FLRA, 739 F.3d 13 (D.C. Cir. 2014) .............................................................................................20, 38 United States Sugar Corp. v. EPA, No. 11-1108 2016, WL 4056404 (D.C. Cir. July 29, 2016) ....................................................19 University of Texas Southwestern Medical Center v. Nassar, 133 S. Ct. 2517 (2013).......................................................................................................23, 28 Washington Legal Clinic for the Homeless v. Barry, 107 F.3d 32 (D.C. Cir. 1997) ...................................................................................................42 Watts v. SEC, 482 F.3d 501 (D.C. Cir. 2007) .................................................................................................34 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 9 of 61 vii Weinberger v. Bentex Pharms., Inc., 412 U.S. 645 (1973).................................................................................................................34 STATUTES AND REGULATIONS Administrative Procedure Act: 5 U.S.C. § 556(d) ...........................................................................................................................31 5 U.S.C. § 706(2)(A)......................................................................................................................16 Federal Food, Drug, and Cosmetic Act: 21 U.S.C. § 321(d) ...........................................................................................................................2 21 U.S.C. § 321(ee)..........................................................................................................................2 21 U.S.C. § 332................................................................................................................................8 21 U.S.C. § 333(a) ...........................................................................................................................8 21 U.S.C. § 334................................................................................................................................8 21 U.S.C. § 335a(g)(1)............................................................................................................. 35-36 21 U.S.C. § 335a(g)(1)(A)(ii)(II) ...................................................................................................36 21 U.S.C. § 335a(i) ........................................................................................................................36 21 U.S.C. § 335c(a)(1)...................................................................................................................37 21 U.S.C. § 335c(a)(2)...................................................................................................................36 21 U.S.C. § 335c(b) .................................................................................................................36, 37 21 U.S.C. § 350d(b)(1) ....................................................................................................................3 21 U.S.C. § 350d(b)(7) ....................................................................................................................3 21 U.S.C. § 350l(d) ..........................................................................................................................3 21 U.S.C. § 350l(h) ..........................................................................................................................3 21 U.S.C. § 351(a)(2)(B) ...........................................................................................................5, 23 21 U.S.C. § 355(a) ...........................................................................................................................4 21 U.S.C. § 355(b) ...........................................................................................................................4 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 10 of 61 viii 21 U.S.C. § 355(d) ...........................................................................................................................4 21 U.S.C. § 355(d)(4) ....................................................................................................................27 21 U.S.C. § 355(d)(5) ....................................................................................................................27 21 U.S.C. § 355(e) ..... 2, 6-7, 8, 12, 14, 16, 18, 20, 21, 22-23, 24, 26, 28-29, 30-31, 32, 34, 37, 43 21 U.S.C. § 355(h) ...................................................................................................7, 14, 32, 33, 34 21 U.S.C. § 355(j) ............................................................................................................................5 21 U.S.C. § 355(j)(2)(A)(i) ..............................................................................................................5 21 U.S.C. § 355(j)(2)(A)(ii) .............................................................................................................5 21 U.S.C. § 355(j)(2)(A)(iii)............................................................................................................5 21 U.S.C. § 355(j)(2)(A)(v) .............................................................................................................5 21 U.S.C. § 355(j)(4) .....................................................................................................................43 21 U.S.C. § 355(j)(4)(A)..................................................................................................................5 21 U.S.C. § 355(j)(4)(F) ..................................................................................................................5 21 U.S.C. § 355(j)(8)(B) ..................................................................................................................5 21 U.S.C. § 360b(e) .......................................................................................................................37 21 U.S.C. § 360b(e)(1).....................................................................................................................2 21 U.S.C. § 360b(e)(1)(C) .............................................................................................................30 21 U.S.C. § 360b(e)(2)(B) .............................................................................................................29 21 U.S.C. § 360b(e)(2)(C) .............................................................................................................30 21 U.S.C. § 360bbb-6(a)(1) .............................................................................................................2 21 U.S.C. § 360bbb-6(a)(2) .............................................................................................................2 21 U.S.C. § 360fff-3(a)(2) ...............................................................................................................2 21 U.S.C. § 360fff-3(d)....................................................................................................................3 21 U.S.C. § 379d..............................................................................................................................3 21 U.S.C. § 382(b)(1)(B) .................................................................................................................2 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 11 of 61 ix 21 U.S.C. § 399f ..............................................................................................................................3 28 U.S.C. § 1331............................................................................................................................34 Drug Amendments of 1962, Pub. L. 87-781, § 102(e), 76 Stat. 780, 782 (1962) ...................24, 28 21 C.F.R. § 7.45 ...............................................................................................................................8 21 C.F.R. § 10.50(c)(16)..................................................................................................................7 21 C.F.R. part 12..............................................................................................................................7 21 C.F.R. § 12.1(a)...........................................................................................................................7 21 C.F.R. § 12.87(c).......................................................................................................................31 21 C.F.R. part 16............................................................................................................................44 21 C.F.R. parts 210-211.............................................................................................................5, 23 21 C.F.R. § 314.70(b) ......................................................................................................................6 21 C.F.R. § 314.70(c).......................................................................................................................6 21 C.F.R. § 314.70(d) ......................................................................................................................6 21 C.F.R. § 314.72 .....................................................................................................................6, 43 21 C.F.R. § 314.150(a)...................................................................................................................18 21 C.F.R. § 314.150(b) ..................................................................................................................18 21 C.F.R. § 314.150(d) ............................................................................................................12, 18 21 C.F.R. § 314.152.......................................................................................................................18 81 Fed. Reg. 11,140, 11,142 (March 3, 2016) ...............................................................................26 OTHER AUTHORITIES Donald O. Beers & Kurt R. Karst, Generic and Innovator Drugs: A Guide to FDA Approval Requirements (8th ed. 2013) ....................................................................................43 FDA Staff Manual Guide 1410.1, available at http://www.fda.gov/AboutFDA/ReportsManualsForms/StaffManualGuides/uc m213316.htm .............................................................................................................................4 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 12 of 61 x FDA Staff Manual Guide 1410.10, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManu alGuides/UCM273771.pdf.........................................................................................................3 FDA Staff Manual Guide 1410.21, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManu alGuides/UCM273783.pdf.........................................................................................................4 FDA Staff Manual Guide 1410.104, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManu alGuides/UCM336918.pdf.........................................................................................................4 FDA Staff Manual Guide 1410.106, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManu alGuides/UCM273969.pdf.........................................................................................................4 Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 13 of 61 In this case, a generic drug company (Lannett Company, Inc. and Lannett Holdings, Inc. (“Lannett”)) seeks judicial review of an action by the U.S. Food and Drug Administration (“FDA”) under the Administrative Procedure Act. FDA’s action revoked the marketing approval for one of Lannett’s generic drugs, based on the agency’s determination that it had mistakenly granted the approval. Because an FDA drug approval is a constitutionally-protected property right, FDA’s governing statute requires notice and an opportunity for a hearing before the agency may revoke an approval. FDA nonetheless “rescinded” Lannett’s approval without conducting the hearing that the statute and the Constitution require. The D.C. Circuit recently rejected FDA’s analogous “rescission” of premarket clearance for a medical device (in circumvention of applicable statutory procedures) after FDA concluded it had mistakenly granted that clearance. Ivy Sports Medicine, LLC v. Burwell, 767 F.3d 81 (D.C. Cir. 2014). The Circuit relied in part on an earlier decision that emphasized how fleeting and flimsy a government-granted marketing authorization could be if an agency could unilaterally revoke it without following statutory hearing procedures: Like the sword suspended by a hair above the courtier Damocles, the Administrator’s claimed revocation authority would pose an ever-present threat to the marketing of new [regulated products], fostering great uncertainty in the business community. Technologically-advanced [regulated products] could be taken off the market at any time, and neither specified hearing procedures nor rules of repose would cabin the Administrator’s discretion. American Methyl Corp. v. EPA, 749 F.2d 826, 840 (D.C. Cir. 1984). Because generic drug manufacturers should be able to avoid such uncertainty and rely confidently upon approvals granted by FDA, the principle that Lannett defends in this case has implications for the entire industry. Following Ivy Sports Medicine and American Methyl, this Court should set aside FDA’s rescission action, declare that it is unlawful, and enjoin FDA from rescinding the approval in the future without following hearing procedures required by law. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 14 of 61 2 STATUTORY AND REGULATORY BACKGROUND The legal issues in this case arise in the context of a complex regulatory regime. We outline the essential elements of that regime below as context for the Court’s consideration of the issues presented. A. The Federal Food, Drug, and Cosmetic Act and the Authorities Granted to the Secretary of Health and Human Services and the Commissioner of FDA In 1938, Congress enacted the Federal Food, Drug, and Cosmetic Act (“FFDCA”), which established FDA, now housed within the Department of Health and Human Services (“HHS”). The statute distinguishes between “the Secretary” of HHS and “the Commissioner” of FDA; the two terms are not interchangeable. Compare 21 U.S.C. § 321(d) (defining “Secretary”) with id. § 321(ee) (defining “Commissioner”). The FFDCA accordingly distinguishes between powers expressly given to the Secretary and those expressly given to the FDA Commissioner.1 To the extent permitted by Congress, the Secretary may delegate (to the FDA Commissioner) authority that the statute expressly grants to “the Secretary.” In some unusual cases, the FFDCA prohibits delegation from the Secretary to anyone — even to the Commissioner.2 In other cases, the statute provides that the Secretary can delegate authority to 1 See, e.g., 21 U.S.C. § 360fff-3(a)(2) (providing that if “the Secretary” does not issue a timely proposed sunscreen order “the Commissioner” shall issue the order); compare 21 U.S.C. § 360bbb-6(a)(1) (authorizing “the Secretary” to establish advisory committee on risk communication) with id. § 360bbb-6(a)(2) (requiring the advisory committee to advise “the Commissioner” on risks associated with FDA-regulated products). 2 See, e.g., 21 U.S.C. § 355(e) (authority for “the Secretary or in his absence the officer acting as Secretary” to suspend drug approval based on imminent health hazard “shall not be delegated”); id. § 360b(e)(1) (authority for “the Secretary (or in his absence the officer acting as Secretary)” to suspend animal drug approval based on imminent health hazard “shall not be delegated”); id. § 382(b)(1)(B) (“The Secretary shall not delegate the authority” to designate countries that may receive exports of certain unapproved drugs and devices). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 15 of 61 3 the Commissioner, but to no one else.3 In still other cases, the statute expressly delegates the Secretary’s authority to the Commissioner.4 If the statute does not prohibit or constrain delegation, the Secretary has in general delegated her authorities under the FFDCA to the Commissioner, through an express written directive.5 Similarly, subordinate officials within FDA cannot exercise statutory authority given (or delegated from the Secretary) to the Commissioner without an express written delegation of authority. In some cases the FFDCA prohibits such a delegation to subordinate officials.6 If delegation is not prohibited, it is allowed, as long as it is consistent with internal FDA rules. There is a strict set of rules governing who within FDA has been redelegated the legal authority to take actions that Congress, by statute, authorized the Secretary to take (and which the Secretary in turn has delegated to the Commissioner). Redelegations from the Commissioner to subordinate officials are “acts of empowering with legal authority” that must be “made in 3 See, e.g., 21 U.S.C. §§ 350d(b)(1), (b)(7) (authority to suspend a food facility registration is vested in “the Secretary” and “shall not be delegated to any officer or employee other than the Commissioner”); id. §§ 350l(d), (h) (authority to mandate a recall of food is vested in “the Secretary” and “shall not be delegated to any officer or employee other than the Commissioner”). 4 See, e.g., 21 U.S.C. § 379d (providing that “[t]he Secretary, acting through the Commissioner of Food and Drugs,” shall automate certain FDA activities); id. § 399f (providing that “[t]he Secretary of Health and Human Services (referred to in this section as ‘the Secretary’), acting through the Commissioner of Food and Drugs,” shall review a specified communications plan). 5 See FDA Staff Manual Guide 1410.10 ¶¶ 1.A.1 and 2, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManualGuides/UCM273771.pdf (Secretarial delegation to the FDA Commissioner of certain Secretarial authorities under the Federal Food, Drug, and Cosmetic Act). 6 See, e.g., 21 U.S.C. § 360fff-3(d) (responsibility “vested in the Commissioner” to take certain actions regarding sunscreen products “shall not be delegated”); see also 21 U.S.C. §§ 350d(b)(1), (b)(7) (Secretarial authority “shall not be delegated to any officer or employee other than the Commissioner”); id. §§ 350l(d), (h) (same). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 16 of 61 4 writing,” must identify by title the “official position[ ]” of the official receiving the delegated authority, and must be “signed by the official with the authority to make the delegation.”7 The redelegations from the Commissioner are formally and publicly catalogued.8 One such redelegation designates the officials, by title, to whom the FDA Commissioner has redelegated Secretarial authority to approve drugs.9 Another such redelegation designates the officials, by title, to whom the FDA Commissioner has redelegated Secretarial authority to withdraw drug approvals.10 B. The FDA Approval Process for Generic Drugs In general, the FFDCA prohibits shipment of a drug in interstate commerce without prior approval from the FDA officials described above. See 21 U.S.C. § 355(a). In order to obtain FDA approval to market and sell a brand-name (or “innovator”) drug, the sponsoring company must submit a New Drug Application (“NDA”). An NDA must outline and explain the drug’s ingredients, the results of clinical tests, the results of animal studies, how the drug behaves in the body, and how the drug is manufactured, processed, and packaged. Before approving an NDA, FDA officials must evaluate numerous statutorily-defined criteria, including whether the drug is safe and effective for its intended use. See 21 U.S.C. §§ 355(b), (d). 7 FDA Staff Manual Guide 1401.1 ¶¶ 4.C., 5.B., 5.E., available at http://www.fda.gov/AboutFDA/ReportsManualsForms/StaffManualGuides/ucm213316.htm. 8 FDA Staff Manual Guide 1410.21 ¶1.A., available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManualGuides/UCM273783.pdf (specifying that the FDA Commissioner’s redelegations of authority received from the Secretary of HHS are set out in the 1410 series of FDA’s Staff Manual Guides). 9 FDA Staff Manual Guide 1410.104, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManualGuides/UCM336918.pdf. 10 FDA Staff Manual Guide 1410.106, available at http://www.fda.gov/downloads/AboutFDA/ReportsManualsForms/StaffManualGuides/UCM273969.pdf. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 17 of 61 5 In order to obtain FDA approval to market and sell a generic drug, the sponsoring company typically must submit an Abbreviated New Drug Application (“ANDA”). An ANDA applicant may obtain FDA approval without conducting the full battery of clinical and non- clinical studies required for an NDA. See generally 21 U.S.C. § 355(j). An ANDA applicant may rely upon a prior FDA finding of safety and efficacy for the approved brand-name drug that is referred to in the ANDA (known as the reference listed drug), provided that the proposed generic drug is the “same” with regard to active ingredients, dosage form, route of administration, strength, and labeling. Id. § 355(j)(2)(A)(i), (ii), (iii), and (v). In addition, before approving an ANDA, FDA officials must determine that the proposed generic drug is “bioequivalent” to its counterpart brand-name drug. See 21 U.S.C. § 355(j)(4)(F). In general, a generic drug is “bioequivalent” if, in single-dose or multiple dose clinical studies, the “rate and extent of absorption” of the generic drug and its brand-name counterpart are not significantly different. See 21 U.S.C. § 355(j)(8)(B). In order to approve an ANDA, FDA officials also must find that the methods used in, and the facilities and controls used for, the manufacture, processing, and packing of the drug are adequate to preserve its identity, strength, quality, and purity. See 21 U.S.C. § 355(j)(4)(A). These requirements are also known as the current Good Manufacturing Practice (“cGMP”) requirements, and their specifics are set forth in FDA regulations. See 21 U.S.C. § 351(a)(2)(B); 21 C.F.R. parts 210-211. Among other things, FDA assesses cGMP compliance by inspecting the facility or facilities where the drug will be manufactured. If the finished drug manufacturer will use an active pharmaceutical ingredient manufactured by a different company, FDA will review the compliance status of each named facility and inspect the facilities of both the finished drug manufacturer and the active pharmaceutical ingredient manufacturer as needed. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 18 of 61 6 C. The Regulatory Process for Amending the Terms of an Approved ANDA Once FDA approves an ANDA, the terms of the approval are not set in stone. FDA has established procedures to amend an approved ANDA through a post-approval “supplement.” If an applicant seeks a “major” change in the approval, FDA must approve an ANDA supplement before drugs affected by the change can be distributed. 21 C.F.R. § 314.70(b). If an applicant seeks a “moderate” change in the approval, the applicant must submit an ANDA supplement to FDA at least 30 days before distributing drugs affected by the change. Id. § 314.70(c). For a “moderate change,” the applicant may begin distributing the changed drug 30 days later if FDA does not affirmatively object. This supplement for “moderate” changes is also known as a “CBE 30” supplement (which is an abbreviation for “changes being effected” in 30 days). Finally, if an applicant seeks a “minor” change in an approval, the applicant simply notifies FDA of the change in an annual report. Id. § 314.70(d) D. The Statutory Process for Withdrawing Approval for Generic Drugs This case focuses on the statutory process for withdrawing approval for generic drugs. When FDA approves an ANDA, it grants the ANDA sponsor permission to market its drug lawfully in interstate commerce. FDA’s regulations recognize that an approved ANDA is a right that can be bought or sold (21 C.F.R. § 314.72), and the statute accordingly provides due process rights before the agency may invalidate this right by withdrawing the approval. 21 U.S.C. § 355(e) expressly addresses FDA’s withdrawal of an ANDA approval. See Addendum.11 Section 355(e) requires “due notice and opportunity for hearing to the applicant” before an ANDA approval can be withdrawn. FDA conducts section 355(e) withdrawal 11 21 U.S.C. § 355(e) is section 505(e) of the FFDCA. Some of the administrative record documents in this case therefore refer to the provision as section 505(e). In this Memorandum we refer to the provision by the U.S. Code nomenclature. The Addendum to this Memorandum sets forth the entire text of section 355(e). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 19 of 61 7 proceedings under its procedural regulations for a “formal evidentiary public hearing.” 21 C.F.R. §§ 10.50(c)(16), 12.1(a). Among other things, these regulations provide for discovery of certain FDA records and a trial-type evidentiary hearing before a neutral agency Presiding Officer involving testimony by, and cross-examination of, witnesses. See generally 21 C.F.R. part 12. The statute also expressly provides for judicial review, by establishing exclusive jurisdiction in the Court of Appeals to hear appeals of section 355(e) orders withdrawing ANDA approvals. 21 U.S.C. § 355(h). 21 U.S.C. § 355(e) requires FDA to withdraw approval of an ANDA for five enumerated reasons, including circumstances under which there is evidence that an approved drug is unsafe or ineffective. Section 355(e) also permits FDA, in its discretion, to withdraw approval of an ANDA for three other specified reasons. The present case involves one of the three grounds for permissive withdrawal — a claim that the applicant’s manufacturing process does not comply with cGMP requirements. 21 U.S.C. § 355(e) (Secretary “may” withdraw approval if he finds that “the methods used in, or the facilities and controls used for, the manufacture, processing, and packing of such drug are inadequate to assure and preserve its identity, strength, quality, and purity”). The statute only authorizes withdrawal of an approval based on claimed cGMP violations if the applicant has failed to cure the violations “within a reasonable time after receipt of written notice from the Secretary specifying the matter complained of.” Id. In a phrase that is a focal point of the present case, the statute specifies that the Secretary must justify any withdrawal “on the basis of new information before him, evaluated together with the evidence before him when the application was approved.” Id. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 20 of 61 8 E. FDA’s Enforcement Mechanisms for Approved Drugs If FDA wishes to prevent distribution of a violative drug, it does not need to withdraw the drug’s approval. FDA has numerous enforcement mechanisms that allow it to prevent distribution of a drug without withdrawing the drug’s approval. Working with the Department of Justice, FDA has authority to seize violative drugs or enjoin their distribution. 21 U.S.C. §§ 334, 332. FDA can demand recalls of violative drugs. 21 C.F.R. § 7.45. FDA also can prevent importation of foreign-manufactured finished drugs or drug active ingredients, through an “import alert” that prohibits every import entry of a violative product. Threat of criminal prosecution also prevents distribution of violative drugs. See 21 U.S.C. § 333(a). FDA typically utilizes these other enforcement mechanisms, instead of withdrawal of approval, to prevent distribution of a violative drug. Among other things, FDA can utilize these other enforcement mechanisms if the agency needs to prevent distribution of a violative drug during the pendency of proceedings to withdraw an ANDA approval under 21 U.S.C. § 355(e). STATEMENT OF FACTS A. Lannett’s Generic Temozolomide Capsules Lannett is a generic pharmaceutical manufacturer located in Philadelphia, Pennsylvania. Lannett currently has more than 60 approved ANDAs, and the company has submitted other ANDAs that FDA has not yet approved.12 Temozolomide is an oral chemotherapy drug used in the treatment of certain cancers. More than five years ago, in February 2011, Lannett filed an ANDA with FDA, seeking approval to market generic Temozolomide capsules in a variety of different strengths. (AR FDA658.) 12 Plaintiff Lannett Company, Inc. is the entity that manufactures the drugs. Its subsidiary, Plaintiff Lannett Holdings, Inc., maintains, owns and manages the intangible assets of Lannett Company, Inc., including ANDAs such as the one at issue in this case. We refer to both Plaintiffs collectively as “Lannett.” Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 21 of 61 9 Lannett’s ANDA identified a different company in China — Chongqing Lummy Pharmaceutical Co. Ltd. (“Lummy”) — as the proposed manufacturer of the active pharmaceutical ingredient for the finished drug product. (AR FDA659.) B. FDA’s July 2013 Pre-Approval Inspection of Lummy FDA’s review of the ANDA proceeded. In July 2013, one or more FDA investigators conducted a pre-approval inspection of Lummy’s factory in connection with Lannett’s ANDA. The purpose of the inspection was to determine whether Lummy’s manufacturing was in accordance with cGMP requirements. (AR FDA659 n.5.); see also supra at 5. Based on the inspection, FDA compliance officials concluded that the Lummy facility had “an acceptable compliance status.” (AR FDA659 n.5.) Lummy’s acceptable compliance status was recorded in an FDA electronic Platform that contained information pertinent to the ANDA approval. (Id.) C. Lannett’s 2013 Receipt of Active Ingredient Manufactured by Lummy The following month, in August 2013, Lummy manufactured a batch of Temozolomide active ingredient that it shipped to Lannett two months later. Declaration of John M. Abt (“Abt Decl.”) ¶¶ 2, 4. Lannett obtained this active ingredient to perform any testing needed before ANDA approval, and for manufacturing finished product after ANDA approval. Id. ¶ 3. The amount of active ingredient purchased was a sufficient quantity for Lannett to manufacture finished drug product needed to launch the product (once FDA approved the ANDA). Id. ¶ 4. The stated shelf life of the active ingredient allowed its use for manufacturing in finished drug product through August 26, 2016. Id. ¶ 2. Lannett tested the active ingredient and confirmed that it met Lannett’s specifications. Id. ¶¶ 5-8.13 13 Lannett has filed the Abt Declaration as background information, to fill gaps in the background information contained in the administrative record. See Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 286 (D.C. Cir. 1981). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 22 of 61 10 D. FDA’s March 2016 Pre-Approval Inspection of Lummy Review of the ANDA by approval officials at FDAs Office of Generic Drugs was unexpectedly delayed and proceeded into 2016. Unbeknownst to Lannett, from March 14 to 16, 2016, an FDA investigator (from an FDA compliance unit that was not within the Office of Generic Drugs) conducted a second pre-approval inspection of Lummy, to confirm that its cGMP compliance status was still acceptable. At the time of this second pre-approval inspection, Lummy was in the process of moving its manufacturing operations from a site in the City of Chayuan to a new industrial park in the City of Chongqing, China. (AR FDA68.) The inspection covered both sites. The investigator had a suspicion that manufacturing had not previously occurred at the older Chayuan site but had no concrete evidence to support the suspicion. (AR FDA21.) The investigator did conclude that there were significant cGMP compliance problems relating to data integrity, including numerous records relating to manufacturing that the investigator determined to have been falsified. (AR FDA4-7.) The suspect records identified by the investigator were generated in 2015 and 2016, beginning more than a year after date Lummy had manufactured the Temozolomide active ingredient received by Lannett. (Id.) At the time of the March 2016 reinspection, this cGMP compliance information was not conveyed either to Lannett or to officials in FDA’s Office of Generic Drugs responsible for reviewing and approving the ANDA. (AR FDA659, FDA820.) E. The March 23, 2016 Approval Decision and Subsequent Events The following week, on March 23, 2016, an official in FDA’s Office of Generic Drugs issued a letter formally approving the ANDA. (AR FDA19-20.). According to FDA’s records, the information before officials in the Office of Generic Drugs at the time of the March 23 approval did not include the results of the 2016 reinspection of Lummy described above, because Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 23 of 61 11 FDA’s electronic Platform had not been updated to include that information. The electronic Platform (which the Office of Generic Drugs relied upon for Lummy’s compliance status when approving Lannett’s drug) instead continued to reflect the acceptable compliance status determined during FDA’s July 2013 pre-approval inspection (shortly before Lummy manufactured the active ingredient received by Lannett). (AR FDA659; Abt Decl. ¶ 2.) On March 31, Lummy sent FDA a corrective action plan that included a commitment not to release any new Temozolomide active ingredient into the U.S. market until FDA compliance concerns were resolved. (AR FDA32-58.) The following day, FDA first contacted Lannett about the foregoing issues, requesting a conference call to discuss (1) a commitment by Lannett not to distribute any Temozolomide product, or to recall Temozolomide product already distributed; and (2) a “necessary withdrawal” of Lannett’s ANDA. (AR FDA649-50.) The conference call took place on April 5, 2016. During the call, Lannett confirmed that its Temozolomide product had not been launched and that there was none on the market. Lannett also confirmed that it would not distribute any Temozolomide product with active pharmaceutical ingredient manufactured by Lummy. FDA requested Lannett to withdraw the ANDA approval and also indicated that it would be an option for FDA to rescind the approval. Lannett did not agree to withdrawal or rescission of the approval. (AR FDA651-52.) Lannett later requested FDA to state its position regarding withdrawal or rescission in writing. F. The Preliminary Decision to Rescind the Approval On April 14, 2016, FDA sent Lannett a letter stating that FDA had preliminarily determined that it had made a mistake in approving Lannett’s ANDA and also had preliminarily decided to “rescind” the approval. The letter stated that an inspection of Lummy had documented “significant deviations from cGMP regulations” but did not provide any specifics. (AR FDA663.) The letter gave Lannett three options. The first option was for Lannett to request Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 24 of 61 12 FDA to “withdraw approval” of the ANDA. (AR FDA662.) FDA specified that “withdrawal” should be requested “under 21 C.F.R. § 314.150(d).” (AR FDA664.) That regulation addresses withdrawal of approval under 21 U.S.C. § 355(e). The second option was for Lannett to agree to “immediate rescission of approval.” (AR FDA662.) Addressing this option, FDA conceded that “[n]o statute or regulation specifically addresses FDA’s authority or appropriate process to rescind approval of an application when that approval appears to have been a mistake, and the application does not appear to have met the requirements for approval.” (AR FDA 663.) The third option was to respond to FDA’s preliminary decision to rescind the approval, by providing information within 30 days demonstrating that Lummy’s cGMP compliance status was acceptable as of the date of the ANDA approval. (AR FDA662.) FDA also stated that it would not accept any information about corrective actions undertaken by Lummy after the approval date, claiming that such information “is not relevant to this specific inquiry.” FDA also said that it may rescind approval if it affirmed its “preliminary conclusion that the facility was not in compliance after reviewing any written submissions” from Lannett. (AR FDA663.) G. The Fourth Option Proposed by Lannett Lannett’s counsel responded to the April 14 letter, arguing that the agency has no statutory authority to “rescind” the ANDA, and that to revoke the ANDA the agency must follow the “withdrawal” procedures established by 21 U.S.C. § 355(e) (which include a formal hearing). (AR FDA668-69.) Lannett’s counsel further argued that before FDA could even pursue section 355(e) withdrawal it must provide notice and an opportunity to cure the claimed cGMP violations; the agency had not given any such notice or opportunity to cure. (AR FDA669.) To resolve the dispute, Lannett’s counsel proposed a fourth option (different than the three proffered by FDA). Lannett proposed supplementing the ANDA to replace Lummy with a Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 25 of 61 13 different active ingredient manufacturer. Lannett emphasized that FDA had recently inspected this substitute manufacturer and found that it complied with cGMP requirements. (AR FDA667.) Lannett maintained that the specific type of post-approval supplement (a CBE 30) would allow this change to be effectuated within 30 days. See supra at 6. Lannett committed not to manufacture or distribute any Temozolomide under the ANDA until it could submit (and FDA could review) the supplement. (AR FDA667.) While FDA considered Lannett’s proposal, Lummy initiated a recall of all Temozolomide active ingredient distributed to U.S. clients. (AR FDA672.) The recall paralleled a prior import alert, imposed by FDA on April 19, which ensured that no new Temozolomide active ingredient from Lummy could be imported into the United States. (AR FDA817; see supra at 8.) H. The May 17, 2016 Rescission Letter On May 17, 2016, an official at FDA’s Office of Generic Drugs issued a letter rescinding the ANDA approval based on the cGMP compliance issues at Lummy. (AR FDA 818-23.) The letter acknowledged that Lannett had voluntarily agreed not to manufacture or distribute product with ingredients from Lummy and referred to the import alert that prevents future imports of such ingredients. (AR FDA821-22.) However, the letter also stated that the approval was a mistake, because the cGMP compliance information from the most recent inspection of Lummy “was not adequately conveyed to the FDA officials making the final decisions about the ANDA approval.” (AR FDA820.) The letter concluded that “FDA is correcting its error and rescinding the approval letter issued for ANDA 202750 on March 23, 2016.” (AR FDA822.) In deciding to rescind the ANDA, the Office of Generic Drugs did not consider information about Lummy’s corrective actions, which Lummy submitted to FDA beginning in March, the week after the approval. (AR FDA32-58; AR FDA816-17 & n.1.) Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 26 of 61 14 The May 17 letter also set forth a rationale for the claim that FDA had statutory authority to “rescind” the ANDA instead of following section 355(e) “withdrawal” procedures. FDA claimed that section 355(e) procedures could not be applied under the facts of this case, even though on April 14 FDA had given Lannett the option of pursuing a voluntary “withdrawal” under section 355(e). (AR FDA662, FDA664, FDA819-21.) FDA acknowledged that if section 355(e) applied, the statute would displace any “inherent” authority FDA would have to rescind the approval. However, FDA concluded that section 355(e) does not apply, such that there is “no applicable statute displac[ing] FDA’s inherent authority to correct its mistake.” (AR FDA821.) The May 17 letter also stated that section 355(e) applies (and therefore displaces any authority to rescind) if the agency considers “new information” that it has never previously received, but emphasized that some officials within FDA did possess the Lummy cGMP information at issue at the time of approval. (AR FDA820.) FDA did not, however, explain why it had (just one month earlier) solicited cGMP information from Lannett that the agency had not previously received, under the rubric of a “rescission” decision. (See AR FDA662-63.) I. This Case Following an unsuccessful effort to settle this dispute, Lannett filed this action on June 28. On the same day, Lannett filed a protective appeal in the D.C. Circuit under 28 U.S.C. § 355(h) (the jurisdictional provision governing review of section 355(e) withdrawal orders). See supra at 7; see also Nat’l Auto. Dealers Ass’n v. FTC, 630 F.3d 268, 272 (D.C. Cir. 2012) (approving simultaneous district court and court of appeals filings in case seeking judicial review of agency action). In response to a motion by Lannett that FDA did not oppose, the Court of Appeals stayed the protective appeal pending the conclusion of the present case. The parties then stipulated to a briefing schedule in this Court to resolve the merits on cross-motions for summary judgment. This motion followed. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 27 of 61 15 ARGUMENT The D.C. Circuit recently held, in Ivy Sports Medicine, 767 F.3d 81, that FDA had no statutory authority to “rescind” the premarket clearance of a medical device and must instead revoke the clearance, if at all, through procedures expressly stated in the FFDCA. There are striking similarities between Ivy Sports Medicine and this case. In both cases, FDA decided with hindsight that its premarket clearance of a regulated medical product “‘was in error’” (id. at 85) based on “procedural irregularities . . . during the agency’s review” of the product (id. at 82). In both cases, FDA notified the manufacturer that to “‘rectify this error’ FDA would rescind” the premarket clearance although the agency had no express statutory authority to do so. Id. at 85. And in both cases, FDA “short-circuited the statutory . . . process by relying on what it called its inherent reconsideration authority” to rescind the premarket clearance. Id. at 82. In Ivy Sports Medicine, the D.C. Circuit held that “it would be unreasonable under this statutory scheme to infer that FDA retains inherent authority to short-circuit or end-run the carefully prescribed statutory . . . process in order to correct the same mistake” through a rescission. Id. at 87. This Court should reach the identical conclusion here. Ivy Sports Medicine articulates a simple fundamental principle that is the crux of this case: when Congress establishes a statutory process “to rectify [an] agency’s mistakes,” the agency must follow the statutory process, and has no “inherent reconsideration authority” to rectify the mistakes through a different process. Ivy Sports Medicine, 767 F.3d at 86. That is because the statutory process “displace[s]” any inherent authority an agency might otherwise have had to reconsider and reverse a mistaken action through procedures not specified in the statute. Id. As the D.C. Circuit emphasized, “any inherent reconsideration authority does not Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 28 of 61 16 apply in cases where Congress has spoken.” Id.; see also New Jersey v. EPA, 517 F.3d 574, 583 (D.C. Cir. 2008) (“Congress . . . undoubtedly can limit an agency’s discretion to reverse itself”). The essence of this fundamental principle is that statutory reconsideration authority and inherent reconsideration authority are mutually exclusive; if Congress gives an agency express statutory authority to cure a given mistake through a specific process, the agency cannot cure the same mistake by invoking “inherent reconsideration authority” and pursuing a different process. In this case, the express statutory authority at issue is the section 355(e) power to “withdraw” approval, and the inherent reconsideration authority at issue is the claimed power to “rescind” approval. Therefore if section 355(e) applies, FDA has no power to rescind. Applying this principle establishes that FDA’s rescission action is invalid. First, during the course of its decisionmaking process, FDA took contradictory positions about whether section 355(e) “withdrawal” authority and implied “rescission” authority are mutually exclusive. That unexplained contradiction rendered FDA’s rescission action arbitrary and capricious. Second, FDA misconstrued section 355(e), erroneously concluding that it does not apply under the facts of this case. Because section 355(e) does apply here, FDA had no statutory authority to “rescind” the ANDA approval. This Court therefore should enter summary judgment for Lannett. I. FDA’S RESCISSION ACTION IS ARBITRARY AND CAPRICIOUS A. FDA’s Rescission Action is Based Upon Internally Inconsistent Rationales Concerning the Agency’s Statutory Authority to Correct the Claimed Mistake FDA’s rescission action is arbitrary and capricious, and therefore unlawful, under section 706(2)(A) of the Administrative Procedure Act. To survive judicial review under section 706(2)(A), an agency action must be supported by “reasoned decisionmaking.” Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 374 (1998) (citing Motor Vehicle Mfrs. Ass’n v. State Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 29 of 61 17 Farm Mut. Auto. Ins. Co., 463 U.S. 29, 52 (1983)). The “‘importance of reasoned decisionmaking in an agency action cannot be overemphasized.’” Portland Cement Ass’n v. EPA, 665 F.3d 177, 188 (D.C. Cir. 2011) (quoting Greyhound Corp. v. ICC, 668 F.2d 1354, 1359 (D.C. Cir. 1981)). Reasoned decisionmaking includes the requirement that “the process by which [the agency] reaches [its] result must be logical and rational.” Allentown Mack, 522 U.S. at 374 (emphasis added). But FDA’s decisionmaking process here was not logical or rational. FDA started the process with one legal rationale and concluded the process with a new legal rationale that contradicted the first one. Switching from one rationale to the other, FDA never even acknowledged that it was changing position, even though “the requirement that an agency provide reasoned explanation for its action would ordinarily demand that it display awareness that it is changing position.” FCC v. Fox Television Stations, Inc., 556 U.S. 504, 515 (2009). Accordingly, FDA’s rescission action fails the test for reasoned decisionmaking. 1. FDA Concluded Both That it Did — and Did Not — Have Authority To Withdraw the Approval Under Section 355(e) In rendering its decision to rescind the ANDA approval, FDA relied on conflicting rationales stating both that it did — and did not — have authority to “withdraw” the approval instead (under section 355(e)). In its April 14, 2016 letter communicating its preliminary decision to rescind, FDA concluded that the agency could cure the claimed mistake either by “withdrawing” or by “rescinding” Lannett’s ANDA approval: At this point there are three options with respect to this application: you may request that FDA withdraw approval of the application, you may agree to immediate rescission of approval, which would put your ANDA back into pending status, or FDA will give you 30 days to provide information relevant to its preliminary decision to rescind the approval (as described below). (AR FDA 662 (emphasis added).) In addressing the “withdrawal” option, FDA was referring to the statutory procedure established by section 355(e), which uses the term “withdraw” to address Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 30 of 61 18 revocation of an approval. Accordingly, FDA’s April 14 letter specified that any withdrawal would proceed “under 21 C.F.R. § 314.150(d).” (AR FDA664.) That regulation addresses a process for voluntary withdrawal of an approval under section 355(e).14 By contrast, in addressing “rescission” as an option different than “withdrawal,” FDA’s April 14 letter was referring to a claimed inherent reconsideration authority implied under the statute, for which there is no implementing regulation. FDA therefore acknowledged that “[n]o statute or regulation specifically addresses FDA’s authority or appropriate process to rescind approval of an application when that approval appears to have been a mistake . . . .” (AR FDA663.) By asserting that it either could “withdraw” or “rescind” the approval, the agency took the position that “withdrawal” authority and “rescission” authority are not mutually exclusive. FDA directly contradicted itself one month later on this essential question of its statutory power. The May 17, 2016, letter formally rescinding the ANDA approval asserted that the agency had no authority to “withdraw” the ANDA under section 355(e). (See AR FDA819 (disagreeing with “your counsel’s argument that section 355(e) applies here”); AR FDA820 (asserting that “the statute does not provide a mechanism for withdrawal of approval”).) The May 17 letter also asserted (contrary to the April 14 letter) that “withdrawal” authority and “rescission” authority are mutually exclusive. Citing Ivy Sports Medicine, FDA acknowledged that if section 355(e) applied (such that the agency had authority to “withdraw” the ANDA approval) the agency could not “rescind” the approval. That is because the statutory process 14 21 C.F.R. § 314.150(d) applies if FDA requests an applicant to agree to a voluntary withdrawal of approval. Under those circumstances, the applicant “waive[s] the opportunity for hearing otherwise provided for under this section.” 21 C.F.R. § 314.150(d). The hearing otherwise provided for is a hearing “under section 355(e) of the act.” 21 C.F.R. §§ 314.150(a), 314.150(b). Once the section 355(e) hearing right is waived, 21 C.F.R. § 314.150(d) requires the agency to publish notice of the withdrawn approval in the Federal Register, just like any other approval withdrawn under section 355(e). See 21 C.F.R. § 314.152. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 31 of 61 19 under section 355(e) would “displace[ ] FDA’s inherent authority to correct its mistake . . . .” (AR FDA821.) Although reasoned decision making requires an agency to “explain its reasoning” when it “takes inconsistent positions” (Gulf Power Co. v. FERC, 983 F.2d 1095, 1101 (D.C. Cir. 1993)), FDA did not even admit that its rationale had completely changed. The rescission action was “‘internally inconsistent and inadequately explained’” and therefore arbitrary and capricious. Portland Cement Ass’n, 665 F.3d at 187 (quoting Gen. Chem. Corp. v. United States, 817 F.2d 844, 846 (D.C. Cir. 1987)). See also United States Sugar Corp. v. EPA, No. 11-1108 2016, WL 4056404, at **50-51 (D.C. Cir. July 29, 2016) (EPA action that “shifted its position” without explanation was arbitrary and capricious because justifications for the final action “contradict[ed] earlier findings”); Delaware Dep’t of Nat. Res. and Envtl. Control v. EPA, 785 F.3d 1, 15-16 (D.C. Cir. 2015) (agency action was arbitrary and capricious where its “later statements contradicted earlier responses”). 2. FDA Concluded Both That it Can — and Cannot — Use Inherent Reconsideration Authority to Rescind an Approval Based on Information Not Previously Received by the Agency FDA’s rationale concerning its own statutory authority also is internally inconsistent, because the agency concluded both that it can — and cannot — use inherent reconsideration authority to “rescind” an ANDA approval based on information that the agency has not previously received. FDA first concluded that it can consider such information in rescinding an approval. In its April 14, 2016 letter, FDA gave Lannett “30 days to provide information relevant to [the agency’s] preliminary decision to rescind the approval.” (AR FDA662.) FDA stated that this information must address Lummy’s regulatory compliance as of the date of approval. (AR FDA663.) FDA concluded that it could and would consider such information (not previously received by the agency) in making the final rescission decision: Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 32 of 61 20 If FDA affirms its preliminary conclusion that the facility was not in compliance after reviewing any written submissions made within 30 days, or if you tell us that you agree that the approval may be rescinded at an earlier date, FDA may rescind approval of the application and issue a complete response letter. (AR FDA663 (emphasis added).) FDA directly contradicted itself one month later in the letter announcing the final rescission decision. In that May 17 letter, FDA concluded that section 355(e) covers correction of a mistake based on information that is brand new to the agency (AR FDA820) and also stated that where section 355(e) applies, it displaces any authority to “rescind” the approval through inherent reconsideration authority. (AR FDA820-821.) A centerpiece of this statutory construction was FDA’s conclusion that if it had considered information brand new to the agency it would have been required to follow section 355(e) procedures — not “rescission.” In sum, FDA reached internally contradictory conclusions about whether it may consider information that the agency has not previously received when rescinding an ANDA approval. The rescission action was arbitrary and capricious, because FDA did not even acknowledge the contradiction, much less justify why its statutory interpretation changed. NetCoalition v. SEC, 615 F.3d 525, 536 (D.C. Cir. 2010) (“[a]n agency acts arbitrarily by ‘fail[ing] adequately to justify departing from its own prior interpretation’ of a statute”) (citation omitted); U.S. Dep’t of the Treasury IRS Office of Chief Counsel v. FLRA, 739 F.3d 13, 15 (D.C. Cir. 2014) (by “adopting two inconsistent interpretations of the same statutory language, the [agency] has acted arbitrarily and capriciously”). B. The Agency Cannot Resolve its Contradictions Now Through Post-Hoc Rationalizations of Counsel FDA cannot resolve its internal contradictions now through any “post-hoc rationalizations for agency action” proffered by counsel. Motor Vehicle Mfrs. Ass’n, 463 U.S. at Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 33 of 61 21 50. It is “well established that an agency’s action must be upheld, if at all, on the basis articulated by the agency itself.” Id. Accordingly, it is a bedrock principle of administrative law that the Court’s review is “constrained to the rationale provided by the [agency].” Select Specialty Hosp. Bloomington, Inc. v. Burwell, 757 F.3d 308, 314 (D.C. Cir. 2014); Manin v. Nat’l Transp. Safety Bd., 627 F.3d 1239, 1243 (D.C. Cir. 2011) (agency decision cannot be affirmed “on a ground other than that relied upon by the agency”). Because that rationale is arbitrary and capricious, the Court should enter summary judgment for Lannett. II. FDA’S RESCISSION ACTION CONFLICTS WITH THE STATUTE A. Section 355(e) Procedures Were Capable of Rectifying the Claimed Mistake The essential holding of Ivy Sports Medicine — that express statutory authority to correct a mistake displaces any inherent reconsideration authority that might otherwise be available — requires FDA to follow section 355(e) procedures if they are capable of correcting a mistake: an agency may not rely on inherent reconsideration authority ‘when Congress has provided a mechanism capable of rectifying mistaken actions.’ Ivy Sports Medicine, 767 F.3d at 86 (emphasis added) (quoting American Methyl, 749 F.2d at 835). If the express statutory authority “covers the same concerns, and achieves the same result” as any inherent reconsideration authority would, the statutory process is “capable” of rectifying the mistake, and the agency cannot cure the mistake through inherent reconsideration authority. Id. at 87.15 We explain below why section 355(e) is capable of rectifying the claimed mistake. 15 In Ivy Sports Medicine, the mistake related to a premarket clearance decision influenced by improper political pressure. The statutory procedure was a notice-and-comment process that focused on different issues but was “capable” of rectifying the mistake by taking the medical device off the market. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 34 of 61 22 Therefore in this case, as in Ivy Sports Medicine, “it would be unreasonable under this statutory scheme to infer that FDA retains inherent authority to short-circuit or end-run the carefully prescribed statutory . . . process in order to correct the same mistake.” Id.16 1. Section 355(e)’s Plain Language Authorizes FDA to Withdraw an ANDA Approval Based on cGMP Compliance Information That FDA Officials Did Not Consider During the Decision to Approve the ANDA The scope of section 355(e) turns on its text, because the court should “‘assume that the ordinary meaning of that language accurately expresses the legislative purpose.’” Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2156 (2010) (citation omitted). Section 355(e) expressly states that the Secretary may withdraw approval “on the basis of new information before him” regarding cGMP compliance, “evaluated together with the evidence before him when the application was approved”: The Secretary may . . . , after due notice and opportunity for hearing to the applicant, withdraw the approval of an application . . . with respect to any drug under this section if the Secretary finds . . . that on the basis of new information before him, evaluated together with the evidence before him when the application was approved, the methods used in, or the facilities and controls used for, the manufacture, processing, and packing of such drug are inadequate to assure and preserve its identity, strength, quality, and purity and were not made adequate within a reasonable time after receipt of written notice from the Secretary specifying the matter complained of. 16 FDA’s April 14 letter conceded that the section 355(e) withdrawal procedures can be applied under the facts of this case. See supra at 17-18. Here Lannett addresses FDA’s conflicting statutory interpretation, in the May 17 letter, asserting that section 355(e) withdrawal procedures cannot be applied under the facts of this case. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 35 of 61 23 21 U.S.C. § 355(e) (emphasis added).17 This language empowered FDA to correct its claimed mistake by withdrawing the ANDA approval based on the cGMP compliance information at issue, which was “new information” because FDA decision makers did not consider it when approving the ANDA. First, the preposition “before” (when used to modify the noun “information”) connotes presentment of the information to a decision maker for active consideration. Information is placed “before” a decision maker who renders a decision based on that information. See, e.g., District Hosp. Partners v. Burwell, 786 F.3d 46, 55 (D.C. Cir. 2015) (referring to the administrative record “‘before the Secretary’ when she made her decision”) (citation omitted); Comm. for Humane Legislation, Inc. v. Richardson, 540 F.2d 1141, 1145-1146 (D.C. Cir. 1976) (equating statutory term “evidence before the Secretary” with information “upon which he proposes to base” a regulation). Second, the terms “Secretary” and “him” refer to the decision maker “before” whom the information is placed for consideration. These terms in the “[t]ext may not be divorced from context” (University of Texas Southwestern Medical Center v. Nassar, 133 S. Ct. 2517, 2530 (2013)), and the court should construe this statutory language “in light of the terms surrounding it.” Leocal v. Ashcroft, 543 U.S. 1, 9 (2004). In context, the terms “Secretary” and “him” refer to the FDA officials who have been delegated the Secretary’s statutory authority to make the 17 The reference to inadequacies in methods, facilities and controls is a reference to cGMP violations. See supra at 5. A parallel provision of the statute imposes cGMP requirements by establishing that a drug is “adulterated” if “the methods used in, or the facilities or controls used for, its manufacture, processing, packing, or holding do not conform to or are not operated or administered in conformity with current good manufacturing practice to assure that such drug meets the requirements of this Act as to safety and has the identity and strength, and meets the quality and purity characteristics, which it purports or is represented to possess.” 21 U.S.C. § 351(a)(2)(B). FDA has established implementing regulations to enforce these cGMP requirements. See 21 C.F.R. parts 210 and 211. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 36 of 61 24 pertinent (ANDA approval or withdrawal) decision, based on the information “before” those decision makers. In the sentence of section 355(e) that immediately precedes the withdrawal provision at issue, Congress gave certain emergency powers to “the Secretary” of HHS (“or in his absence [to] the officer acting as Secretary”) to suspend drug approvals for imminent health hazards; Congress expressly required that these powers “shall not be delegated.” 21 U.S.C. § 355(e) (emphasis added). By contrast, when Congress addressed withdrawal of applications by “the Secretary” in the very next sentence of section 355(e) in the operative provision at issue here — based on “new information before him” — Congress did not prohibit delegation to subordinate officials at FDA. In context, the reference to “the Secretary” in this operative second sentence refers to the Secretary or to the Secretary’s relevant delegates (i.e., FDA officials who have been delegated the Secretary’s authority to approve (or withdraw approval for) drugs). That conclusion is reinforced by the fact that Congress enacted both the first sentence (prohibiting delegation) and the operative second sentence (permitting delegation) at the very same time. Drug Amendments of 1962, Pub. L. 87-781, § 102(e), 76 Stat. 780, 782 (1962). As explained supra at 2-4, that delegation did occur, channeling the Secretary’s ANDA approval and withdrawal authority to specifically-identified FDA officials under strict written guidelines required to make the delegation lawful. Cf. Lewis v. Sec’y of the Navy, 2016 WL 3659882, at *6-7 (D.D.C. July 1, 2016) (Walton, J.) (holding regulation invalid because it improperly authorized action by agency staff member who had not been delegated Navy Secretary’s statutory authority). Third, the statute’s text contrasts “new information before him” with “evidence before him when the application was approved.” The plain meaning of the phrase “evidence before him Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 37 of 61 25 when the application was approved” is information considered by FDA officials (with properly- delegated Secretarial authority) as part of the drug approval decision. The plain meaning of the phrase “new information before him” means information not considered as part of the drug approval decision — but later considered by FDA officials (with properly-delegated Secretarial authority) as part of the decision to withdraw approval. The latter phrase easily embraces cGMP information at issue here, which pertinent FDA officials did not consider at the time they approved the drug (even though others at FDA with no delegated approval authority evidently possessed the information at the time). (See AR FDA820 (Lummy cGMP information “was not adequately conveyed to the FDA officials making the final decisions about the ANDA approval”).) Finally, the foregoing interpretation draws support from Ivy Sports Medicine, which confirms that the term “new information” can describe a new evaluation of information already possessed by the agency; “new information” does not need to mean — as FDA asserts — information that is brand new to everyone at the entire agency. The statutory process at issue in Ivy Sports Medicine applied, by its terms, only to agency decisions based on “‘new information respecting a device.’” Ivy Sports Medicine, 767 F.3d at 84 (quoting 21 U.S.C. § 360c(e)(1) (2011)). The D.C. Circuit held that the statutory process applied (and displaced any inherent reconsideration authority) even though FDA was “reconsider[ing] a decision on its initial record” instead of considering information brand new to everyone at the entire agency. Id. at 97 (Pillard, J., dissenting). That holding was not surprising, given that under the medical device provisions of the statute, FDA has repeatedly “‘read ‘new information’ to also encompass the reevaluation of existing information.’” Id. n.4 (citing 67 Fed. Reg. 76,768, 76,679 (2002) and Holland-Rantos Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 38 of 61 26 v. U.S. Dep’t of Health, Educ., & Welfare, 587 F.2d 1173, 1174 n.1 (D.C. Cir. 1978)).18 Plainly the process set forth in section 355(e) is capable of rectifying the approval mistake claimed here. 2. Other Provisions of the Statute Confirm FDA’s Authority Under Section 355(e) to Withdraw an Approval Based on Information FDA Officials Did Not Consider During the Decision to Approve the ANDA The Court should construe the critical words “before him” in their “‘context and with a view to their place in the overall statutory scheme.’” Roberts v. Sea-Land Servs., Inc., 132 S. Ct. 1350, 1357 (2012) (quoting Davis v. Michigan Dep’t of Treasury, 489 U.S. 803, 809 (1989)). In so doing, the Court should conclude that other provisions of the statute confirm Lannett’s interpretation of section 355(e). a. Other Statutory Provisions Confirm That “Before Him” Means “Considered By” Pertinent FDA Decision Makers at the Time of Approval The Supreme Court has repeatedly held that “identical words and phrases within the same statute should normally be given the same meaning.” Powerex Corp. v. Reliant Energy Services, Inc., 551 U.S. 224, 232 (2007). Other provisions of the FFDCA use the term “before him” and corroborate that the term means “considered by” pertinent FDA decision makers.19 For example, another subsection of section 355 expressly states that “information before him” means information actually evaluated by the Secretary as part of the approval decision. Under this provision, the Secretary must refuse approval of an NDA if there is an insufficient showing of the drug’s effectiveness, “evaluated on the basis of the information submitted to him 18 We count at least 80 times, over more than three decades, that FDA has published Federal Register notices, pertaining to medical device reclassification, which state that “new information” includes re-evaluation of information already possessed by the agency. See, e.g., 81 Fed. Reg. 11,140, 11,142 (March 3, 2016). 19 For ease of reference, the discussion below refers to the original statutory text in discussing “the Secretary,” although in context “the Secretary” means FDA officials who have been delegated the Secretary’s authority. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 39 of 61 27 as part of the application and any other information before him with respect to such drug.” 21 U.S.C. § 355(d)(5) (emphasis added). In other words, the Secretary must evaluate all information “before him” (whether or not contained in the NDA) and refuse approval if there is insufficient proof of effectiveness. Similarly, the Secretary must refuse approval of an NDA if there is an insufficient showing of the drug’s safety, “upon the basis of the information submitted to him as part of the application, or upon the basis of any other information before him with respect to such drug.” 21 U.S.C. § 355(d)(4) (emphasis added). In other words, the Secretary must make findings based upon all information “before him” (whether or not contained in the NDA) and refuse approval if there is insufficient proof of safety. b. FDA’s Statutory Interpretation Ignores the Textual Distinction Between Information “Before” the Secretary and Information “Available to” the Secretary FDA’s statutory interpretation in the May 17 letter conflicts with the statute, because the agency claims that “new information before him” means information that was not even available to anyone at FDA at the time of approval (because the agency did not even possess the information then). According to FDA’s logic, the cGMP information at issue is not “new” because it was “available” to FDA (though not considered by approval officials) at the time of approval.20 Congress would have said so expressly if it had intended the phrase “new information before him” to mean information not previously “available to” the Secretary. That is precisely what Congress did in another phrase of section 355(e), which speaks of evidence that is “new” because it was not even “available” to the Secretary at the time of approval: 20 See, e.g., AR FDA658, FDA661 (characterizing cGMP information as “information available to the Agency at the time”); AR FDA662 (claiming that “information available to the agency at the time indicated that the compliance status of a facility identified in the ANDA was not acceptable to support approval”). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 40 of 61 28 The Secretary shall . . . withdraw approval of an application . . . if the Secretary finds . . . that new evidence of clinical experience, not contained in such application or not available to the Secretary until after such application was approved . . . evaluated together with the evidence available to the Secretary when the application was approved, shows that such drug is not shown to be safe . . . . 21 U.S.C. § 355(e). By using the phrase “new information before him” in the part of section 355(e) at issue in this case — and choosing the different phrase “new evidence . . . not available to the Secretary until after such application was approved” in a different part of section 355(e) — Congress intended a different meaning for both terms. Congress enacted both phrases at the very same time. See Drug Amendments of 1962 § 102(e). There is no question that “Congress’s choice of words is presumed to be deliberate.” Nassar, 133 S. Ct. at 2529. Accordingly, “‘when the legislature uses certain language in one part of the statute and different language in another, the court assumes different meanings were intended.’” Sosa v. Alvarez-Machain, 542 U.S. 692, 711 n.9 (2004) (citation omitted). That is because “Congress generally acts intentionally when it uses particular language in one section of a statute but omits it in another.” Dep’t of Homeland Security v. MacLean, 135 S. Ct. 913, 919 (2015); see also Russello v. United States, 464 U.S. 16, 23 (1983) (“‘[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.’” (quoting United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972))). Furthermore, it is significant here that Congress used this different phraseology in the very same section of the statute (section 355(e)). The “interpretive canon that Congress acts intentionally when it omits language included elsewhere applies with particular force” if different terminology occurs “in close proximity” in the statute. MacLean, 135 S. Ct. at 919; see Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 41 of 61 29 also Loughrin v. United States, 134 S. Ct. 2384, 2390 (2014) (Congress intended different meaning by using different terminology “in the very next provision” of the statute). Finally, it is significant that Congress drew the same distinction between the term “before him” and the term “available to him” when describing the information that FDA decision makers could consider together with “new information” in withdrawing an approval. The chart below demonstrates how section 355(e) distinguishes between the phrase “before him when the application was approved” and the different phrase “available to him when the application was approved” (with the column on the left quoting the specific statutory provision at issue in this case): Section 355(e) Permissive Withdrawal Based on cGMP Issues Section 355(e) Permissive Withdrawal Based on False or Misleading Labeling Section 355(e) Mandatory Withdrawal Based on Lack of Effectiveness Withdrawal “on the basis of new information before him, evaluated together with the evidence before him when the application was approved” Withdrawal “on the basis of new information before him, evaluated together with the evidence before him when the application was approved” Withdrawal “on the basis of new information before him with respect to such drug, evaluated together with the evidence available to him when the application was approved” 21 U.S.C. § 355(e) (emphasis added). Congress repeated the same distinctions between the phrase “before him” and the phrase “available to him” in the statutory provisions governing withdrawal of approval for animal drugs.21 By using this different terminology “repeatedly,” 21 21 U.S.C. § 360b(e)(2)(B) (permissive withdrawal based on cGMP issues “on the basis of new information before him, evaluated together with the evidence before him when the application was approved”) (emphasis Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 42 of 61 30 Congress provided particularly compelling evidence that it intended the two phrases to have different meanings. MacLean, 135 S. Ct. at 919. The plain meaning of the foregoing distinction is that information “before” the Secretary means information actually considered by FDA officials as part of the approval decision, and that information “available to” the Secretary is a broader category embracing information that FDA officials had access to, but did not necessarily consider, as part of the approval decision. FDA’s construction errs by using these terms interchangeably. Compare AR FDA818 (referring to “information available to” FDA) with AR FDA820 (referring to “information before” FDA). The cGMP information at issue was not “before” the Secretary at the time of approval — because it was not considered during the approval decision — and therefore is “new information” properly considered under section 355(e). B. FDA Violated Section 355(e) by Revoking the Approval Without Conducting a Hearing Where the Agency Would Need to Prove its Case and the Presiding Officer Would Need to Consider Corrective Actions Taken FDA violated section 355(e) by revoking the ANDA approval without conducting a hearing. This was not simply a technical violation. FDA’s failure to conduct the required hearing unfairly prejudiced Lannett in at least two ways. First, if a section 355(e) hearing had been held, Lannett would have had the opportunity to present, for the Presiding Officer’s consideration, corrective actions taken to address FDA’s cGMP concerns. Under section 355(e), an ANDA can only be withdrawn based on cGMP issues if there is a finding — “after” the statutorily-required hearing — that manufacturing conditions “were not made adequate within a added); id. § 360b(e)(2)(C) (permissive withdrawal based on false or misleading labeling “on the basis of new information before him, evaluated together with the evidence before him when the application was approved”) (emphasis added); id. § 360b(e)(1)(C) (mandatory withdrawal based on lack of effectiveness “on the basis of new information before him with respect to such drug, evaluated together with the evidence available to him when the application was approved”) (emphasis added). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 43 of 61 31 reasonable time after receipt of written notice from the Secretary specifying the matter complained of.” 21 U.S.C. § 355(e). There are two types of corrective actions at issue here. The first is Lannett’s proposal to substitute a different active ingredient manufacturer already deemed compliant by FDA. See supra at 12-13. The second is the corrective action plan that Lummy itself embarked upon within a week after the problematic FDA inspection. See supra at 11. FDA flatly refused to consider either corrective action when it rescinded the ANDA. See supra at 12-13. Second, FDA would have had the burden of proof at the hearing. 5 U.S.C. § 556(d); 21 C.F.R. § 12.87(c) (proponent seeking revocation of order has burden of proof if not based on drug safety or effectiveness). By rescinding the ANDA instead of conducting a hearing, FDA approval officials had no burden to — and did not — prove anything to a neutral Presiding Officer. To justify withdrawal of approval at a hearing, FDA might have had to prove (among other things) that the active ingredient that Lannett received from Lummy in 2013 did not comply with cGMP requirements, even though FDA had inspected Lummy and rated its cGMP compliance status as “acceptable” at the time the active ingredient was manufactured.22 22 It was only after Lannett filed this case that FDA produced underlying evidence supporting its claims to Lannett (in the administrative record). The administrative record indicates that FDA’s July 2013 inspection found “an acceptable compliance status” at Lummy. The Lummy active ingredient, which Lannett held in sufficient quantity to launch the finished drug product (following FDA approval), was manufactured in August 2013 and received by Lannett in October 2013. Upon receipt, Lannett tested the active ingredient and found that it complied with all Lannett specifications. Supra at 9. FDA did not document the serious cGMP compliance concerns at Lummy until March 2016, based on an inspectional finding that specific records had been falsified in 2015 and 2016. Supra at 10. One such finding related to the cGMP requirement that manufacturers set aside and retain samples of product from production runs for testing periodically over time, to monitor the product’s continuing effectiveness throughout its shelf life. Among other things, FDA’s March 2016 inspection addressed Lummy’s long-term stability testing (in 2016) for a specific lot of Temozolomide active ingredient manufactured in 2013. This lot appears to be the same one received by Lannett in 2013 and described above. The FDA investigator found that Lummy backdated the 2016 testing work to make it look like it had occurred in 2015. (AR FDA74.) To justify withdrawal of approval at a hearing, FDA might have had to prove that Lummy’s backdating of long-term stability testing records in 2016 somehow retroactively tainted the active ingredient that was manufactured and shipped to Lannett in 2013 (and tested by Lannett in 2013 and annually thereafter to confirm that it complied with Lannett’s specifications). See Abt Decl. ¶¶ 5-8. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 44 of 61 32 C. FDA Has Not Justified its Failure to Follow Section 355(e) Procedures 1. FDA’s Statutory Interpretation Relies Upon Inapplicable Passages in a 26-Year Old District Court Decision The May 17 rescission letter only cites one case that specifically discusses the agency’s “rescission” of an ANDA approval: American Therapeutics, Inc. v. Sullivan, 755 F. Supp. 1 (D.D.C. 1990). Although the May 17 letter suggests that this 26-year old decision supports the agency’s action here, American Therapeutics addressed rescission in a different context and never actually ruled on the question whether FDA has statutory authority to rescind an approval. In American Therapeutics, FDA rescinded an ANDA approval on the ground that the “approving official” had mistakenly overlooked facts indicating that the applicant could not satisfy approval requirements. 755 F. Supp. at 1. The applicant filed suit in the District Court to challenge the rescission action. The District Court’s decision turned on whether it had jurisdiction. Although FDA had not acted pursuant to its section 355(e) “withdrawal” authority, the District Court held that the judicial review provision applicable to section 355(e) withdrawals applied. That provision grants exclusive jurisdiction to the Court of Appeals to review section 355(e) withdrawal orders. See 21 U.S.C. § 355(h); supra at 7. Concluding that the case should have been filed in the Court of Appeals, the District Court dismissed the case for lack of jurisdiction, without ruling on the merits of the applicant’s challenge to the rescission action. 755 F. Supp. at 1-2. American Therapeutics’ jurisdictional ruling was based upon the premise that the statute established exclusive jurisdiction in the Court of Appeals (under 21 U.S.C. § 355(h)) unless a rare exception applied: the “‘ultra vires-type of exception’ recognized in Leedom v. Kyne, 358 U.S. 184, 188-89 (1958).” American Therapeutics, 755 F. Supp. at 2. Leedom v. Kyne recognizes a right of judicial review when an agency exceeds its statutory authority to an Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 45 of 61 33 extraordinary and obvious extent, committing an “agency error so extreme that one may view it as jurisdictional or nearly so.” Griffith v. FLRA, 842 F.2d 487, 493 (D.C. Cir. 1988); see also Trudeau v. FTC, 456 F.3d 178, 190 (D.C. Cir. 2006). This “narrow exception” has “extremely limited scope.” Griffith, 842 F.2d at 492-93. It does not apply every time an agency exceeds its statutory authority. For Leedom v. Kyne jurisdiction to exist, an agency “‘must have stepped so plainly beyond the bounds of the Act, or acted so clearly in defiance of it, as to warrant the immediate intervention of an equity court.’” Id. at 493 (quoting Local 130, IUERMW v. McCulloch, 345 F.2d 90, 95 (D.C. Cir. 1965)). The American Therapeutics court held that the applicant fell short of establishing that FDA’s rescission action was “so clearly ultra vires” as to satisfy the stringent Leedom v. Kyne standard. 755 F. Supp. at 2. American Therapeutics did not, however, hold affirmatively that FDA acted within its statutory authority in rescinding the ANDA approval. To the contrary, American Therapeutics failed to reach the merits of that question and left its resolution to any action filed in the Court of Appeals. The court concluded only that FDA’s rescission authority was “an unresolved issue of statutory interpretation and administrative law” that was not contradicted by any current “precedent from this circuit.” Id. (emphasis added). The situation is very different now, given that the D.C. Circuit (in Ivy Sports Medicine) reaffirmed that a statutory process (such as section 355(e)) displaces any inherent reconsideration authority that an agency otherwise might have. It is important to add that the American Therapeutics court erred by concluding that the exclusive jurisdiction provision applied in the first place. In a single sentence the court simply asserted, without explanation, that “[j]urisdiction to review orders of the FDA is exclusively vested in the United States Court of Appeals. 21 U.S.C. § 355(h).” Id. at 1. By its terms, section 355(h) embraces judicial review of actions “withdrawing” ANDAs under the formal Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 46 of 61 34 procedures established by section 355(e). Section 355(h) is silent about judicial review of actions revoking ANDAs under other authority or other procedures.23 That silence is not surprising, because as FDA acknowledges, “[n]o statute or regulation specifically addresses FDA’s authority or appropriate process to rescind approval” based on a mistake. (AR FDA663.) In American Therapeutics — as in the present case — the District Court had jurisdiction to review a “rescission” action under 28 U.S.C. § 1331. See, e.g., Watts v. SEC, 482 F.3d 501, 505 (D.C. Cir. 2007) (referring to the “‘normal default rule’” that “‘persons seeking review of agency action go first to district court rather than to a court of appeals’”) (citation omitted). FDA itself appears to concede tacitly that the American Therapeutics jurisdictional ruling is wrong, by agreeing to litigate the present case in the District Court instead of the Court of Appeals. See supra at 14. The Court should conclude that American Therapeutics provides no meaningful guidance here. 2. FDA Has No Basis for Suggesting That the Magnitude of its Regulatory Compliance Concerns Justifies Short-Circuiting the Statutory Process When FDA revoked the ANDA approval without following section 355(e) procedures, it stressed that Lummy had “significant deviations” from cGMP requirements. (AR FDA819.) FDA has no basis for suggesting that the magnitude of its regulatory compliance concerns justifies short-circuiting the statutory process for withdrawing approval. 23 The exclusive jurisdiction provision covers an appeal only “from an order . . . refusing or withdrawing approval under [section 355].” 21 U.S.C. § 355(h). A rescission action based on inherent reconsideration authority is not a “withdraw[al of] approval under [section 355].” In addition, a withdrawal order (subject to the exclusive jurisdiction provision) has an associated “record” described in “section 2112 of title 28” (which is a formal hearing record) and must be supported by formal factual “findings.” 21 U.S.C. § 355(h). The statute is silent as to the procedures applicable to any other type of approval revocation. It is well established that section 355(h) jurisdiction is narrowly construed, and that FDA orders that neither “refuse” nor “withdraw” drug approvals under section 355 fall outside the scope of section 355(h) and are reviewable in District Court under 28 U.S.C. § 1331. See, e.g., Weinberger v. Bentex Pharms., Inc., 412 U.S. 645, 651 (1973); Cutler v. Hays, 818 F.2d 879, 887 n.61 (D.C. Cir. 1987); Genentech, Inc. v. Bowen, 676 F. Supp. 301, 311 (D.D.C. 1987); see also Barnes v. Shalala, 865 F. Supp. 550, 555-57 (W.D. Wis. 1994). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 47 of 61 35 In Ivy Sports Medicine, the D.C. Circuit held that FDA must follow statutory notice-and- comment procedures to withdraw a medical device from the market — instead of immediately “rescinding” premarket clearance — notwithstanding evidence of serious agency misconduct in the medical device premarket clearance process: FDA obviously thinks notice and comment is unnecessary here, a not-uncommon sentiment among agencies that want to take action more promptly. But notice and comment helps to prevent mistakes, because agencies receive more input and information before they made a final decision. And notice and comment also helps ensure that regulated parties receive fair treatment, a value basic to American administrative law. So notice and comment, while somewhat burdensome, serves important purposes both generally and in this statute. Ivy Sports Medicine, 767 F.3d at 87-88. In the present case, as in Ivy Sports Medicine, the process that is due under the statute is an entirely separate issue than the underlying substantive regulatory issues that must be adjudicated through that process. It therefore is worth noting that in the FFDCA, Congress expressly required FDA to follow formal hearing procedures when curtailing or revoking ANDA approvals even when cGMP compliance concerns are at least as significant as those claimed here. For example, Congress required that FDA officials must conduct a hearing just to suspend distribution of drugs under an ANDA based on claimed cGMP violations — even if the violations are flagrant, repeated and material, even if the violations may undermine the safety and efficacy of drugs, and even if the manufacturer is under an active federal civil or criminal investigation: If . . . the Secretary finds . . . that a person has engaged in flagrant and repeated, material violations of good manufacturing practice . . . in connection with the development, manufacturing, or distribution of one or more drugs approved under an abbreviated new drug application during a 2-year period, and . . . such violations may undermine the safety and efficacy of such drugs, and . . . the causes of such violations have not been corrected within a reasonable period of time following notice of such violations by the Secretary, and . . . such person is under an Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 48 of 61 36 active investigation by a Federal authority in connection with a civil or criminal action involving [the foregoing] conduct . . . the Secretary shall issue an order suspending the distribution of all drugs the development or approval of which was related to such conduct . . . . * * * * The Secretary may not take any action under [the foregoing provision] with respect to any person unless the Secretary has issued an order for such action made on the record after opportunity for an agency hearing on disputed issues of material fact. 21 U.S.C. §§ 335a(g)(1), 335a(i) (emphasis added).24 Similarly, Congress required that FDA officials must conduct a hearing to withdraw an ANDA approval based on claimed cGMP violations even if the manufacturer has repeatedly shown that it is incapable of complying with cGMP requirements: The Secretary . . . may withdraw approval of an abbreviated new drug application if the Secretary finds that the applicant has repeatedly demonstrated a lack of ability to produce the drug for which the application was submitted in accordance with the . . . manufacturing practice set forth in the abbreviated drug application and has introduced, or attempted to introduce, such adulterated or misbranded drug into commerce. * * * * The Secretary may not take any action under [the foregoing provision] with respect to any person unless the Secretary has issued an order for such action made on the record after opportunity for an agency hearing on disputed issues of material fact. 21 U.S.C. §§ 335c(a)(2), 335c(b) (emphasis added). 24 In addition, even under these extreme circumstances, FDA has no authority even to suspend distribution unless the manufacturer has first had an opportunity to cure. 21 U.S.C. § 335a(g)(1)(A)(ii)(II) (authorizing suspension only if “the causes of such violations have not been corrected within a reasonable period of time following notice of such violations by the Secretary”). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 49 of 61 37 The foregoing statutory provisions are fully consistent with others that expressly require a hearing in connection with restrictions upon, or withdrawal of, drug approvals — even for the most serious regulatory compliance concerns. See 21 U.S.C. § 335c(a)(1), 335c(b) (hearing required before withdrawing ANDA approval on the ground that it was “obtained, expedited, or otherwise facilitated through bribery, payment of an illegal gratuity, or fraud or material false statement”); 21 U.S.C. § 355(e) (hearing required in connection with suspension of drug approval on the ground that there is an “imminent hazard to the public health”); 21 U.S.C. § 360b(e) (hearing required in connection with suspension of animal drug approval on the ground that there is an “imminent hazard to the health of man or of the animals for which such drug is intended”). 3. FDA’s Statutory Interpretation is Not Entitled to Judicial Deference a. Congress Has Spoken Directly to Issue Before the Court The Court should reject FDA’s statutory interpretation for the foregoing reasons, without according that interpretation any judicial deference. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) establishes a familiar two-step framework that typically determines whether a court should accord deference to an agency’s statutory interpretation. The first step provides that if “Congress has directly spoken to the precise question at issue,” the Court must give effect to the unambiguously expressed intent of Congress. Chevron, 467 U.S. at 842-43. If Congress “has not directly addressed the precise question at issue,” the Court then reaches the second step of the framework, under which the Court defers to the agency’s interpretation if it is “reasonable.” Id. at 843-44. Here Congress has spoken directly to the question at issue, which is whether information possessed by FDA but not “before” pertinent decisionmakers is “new information” properly considered under section 355(e). The answer is “yes,” based on the plain and ordinary meaning Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 50 of 61 38 of the statute. See supra at 21-30. There is no basis for deferring to FDA’s interpretation under Chevron step II. b. No Deference is Due Because FDA’s Statutory Interpretation is Internally Inconsistent Even assuming arguendo that Congress had not spoken directly to the question at issue, FDA’s statutory interpretation would fail the “reasonableness” test of Chevron step II. FDA’s interpretation is filled with unexplained internal contradictions that render it arbitrary and capricious. See supra at 17-21. An arbitrary and capricious statutory interpretation is unreasonable, and therefore not entitled to deference, under Chevron step II. Northpoint Tech., Ltd. v. FCC, 412 F.3d 145, 151 (D.C. Cir. 2005); U.S. Dept of the Treasury IRS Office of Chief Counsel, 739 F.3d at 15 (refusing to defer to internally contradictory statutory interpretation); cf. Riegel v. Medtronic, Inc., 552 U.S. 312, 329-30 (2008) (refusing to defer to FDA statutory interpretation “that can add nothing to our analysis but confusion”); United States v. Two Plastic Drums * * * of An Article of Food, 984 F.2d 814, 817, 819 (7th Cir. 1993) (refusing to defer to FDA statutory interpretation that was an “Alice-in-Wonderland approach” and “an end-run around the statutory scheme”); United States v. 29 Cartons of * * * An Article of Food, 987 F.2d 33, 39 (1st Cir. 1993) (refusing to defer to FDA statutory interpretation that “defenestrates common sense”). c. No Deference is Due, Because FDA Did Not Purport to Make a Discretionary Decision When Concluding That the Agency Could Not Rectify the Claimed Mistake Under Section 355(e) There also is no basis for deference to FDA’s statutory interpretation, because the agency did not purport to make a discretionary decision when concluding that it could not invoke Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 51 of 61 39 section 355(e) procedures to rectify its claimed mistake.25 In reaching that conclusion, FDA was not simply proffering a preferred interpretation of the statute based on considerations of policy. FDA was instead asserting that it could not possibly interpret the term “new information” to cover the cGMP information at issue. (AR FDA820 (“Here, there is no new information. In the absence of such new information, the statute does not provide a mechanism for withdrawal of approval of an ANDA.”); AR FDA821 (stating that “section 505(e) by its own terms does not apply”).) FDA concluded, in other words, that on these facts it was prohibited from invoking section 355(e) “withdrawal” procedures. If FDA had instead concluded that it was possible to use section 355(e) procedures — but made a discretionary decision, as a policy matter, not to follow them — section 355(e) would still be “capable” of rectifying the claimed mistake (see Ivy Sports Medicine, 767 F.3d at 86). And that would have required FDA to concede that the statute displaces any inherent reconsideration authority to “rescind” the ANDA. See supra at 21. That is not the approach that FDA took. FDA asserted instead that “no applicable statute displaces FDA’s inherent authority to correct its mistake, as it did in Ivy.” (AR FDA821.) The fact that FDA did not purport to be exercising discretion when interpreting section 355(e) means there is no basis for Chevron deference. As the D.C. Circuit has emphasized, “[t]he Court’s direction in Chevron was to accord deference to an agency’s reasonable policy choice where Congress delegated to the agency the discretion to make such a choice.” Arizona v. Thompson, 281 F.3d 248, 253 (D.C. Cir. 2002) (Garland, J.). Accordingly, “[d]eference to an 25 As explained supra at 17-18, FDA contradicted itself by concluding, at the same time, that it could invoke section 355(e) procedures to rectify its claimed mistake. That portion of its interpretation is not subject to deference, because it is obviously inconsistent with the D.C. Circuit’s decision in Ivy Sports Medicine (which establishes that if section 355(e) applies it displaces any “rescission” authority claimed by FDA). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 52 of 61 40 agency’s statutory interpretation ‘is only appropriate when the agency has exercised its own judgment,’ not when it believes that interpretation is compelled by Congress.” Id. at 254 (quoting Phillips Petroleum Co. v. FERC, 792 F.2d 1165, 1169 (D.C. Cir. 1986). That means deference is not appropriate where, as here, the agency “[does] not purport to exercise discretion” and believes its interpretation is mandated by statute. Arizona, 281 F.3d at 253; Prill v. NLRB, 755 F.2d 941, 942 (D.C. Cir. 1985) (no deference where agency concluded that Congress mandated the agency’s interpretation of a statutory phrase and “fail[ed] to exercise the discretion delegated to it by Congress”). It is important to add that it was FDA’s contemporaneous understanding that it was following a statutory command instead of exercising discretion — and not any actual statutory command — that forecloses Chevron deference here. “In Chevron terms, then, the agency itself . . . stopped at step one” because it believed that the statute mandates a particular interpretation, and that the agency was “without discretion to reach another result.” Arizona, 281 F.3d at 254; see also Transitional Hospitals Corp. v. Shalala, 222 F.3d 1019, 1029 (D.C. Cir. 2000) (Garland, J.) (refusing to defer to agency statutory interpretation where the agency “did not believe” it had discretion to reach a different result, and noting that “discretion must be exercised through the eyes of one who realizes she possesses it”). The question whether the agency’s interpretation “is actually compelled by statute is a question of law, which [the Court] review[s] de novo.” Arizona, 281 F.3d at 254 (emphasis added). Based on that de novo review, the Court should reject FDA’s statutory interpretation. d. No Deference is Due Because FDA’s Interpretation Presents Constitutional Questions That the Court Should Avoid The courts are obliged to “construe Acts of Congress to avoid constitutional questions.” Regan v. Time, Inc., 468 U.S. 641, 697 (1984). Under this “constitutional avoidance” canon, if a Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 53 of 61 41 court “‘[applies] ordinary textual analysis’” and concludes that a statute is “‘susceptible of more than one construction’” (one of which presents constitutional questions), the court should choose the construction that avoids the constitutional question. Al Bahlul v. United States, 767 F.3d 1, 15 (D.C. Cir. 2014) (quoting Clark v. Martinez, 543 U.S. 371, 385 (2005)). The “canon of constitutional avoidance trumps Chevron deference” that might otherwise apply if the agency’s statutory interpretation “‘presents serious constitutional difficulties.’” National Mining Ass’n v. Kempthorne, 512 F.3d 702, 711 (D.C. Cir. 2008) (citation omitted). If FDA’s statutory interpretation were correct, and section 355(e) did not require a hearing, the Court would need to reach the question whether a hearing is constitutionally required under the Due Process Clause of the Fifth Amendment. See section III infra. No Chevron deference is due to FDA’s interpretation, because the “constitutional avoidance” canon dictates that the court should not defer to an agency’s statutory interpretation that unnecessarily presents that serious constitutional question. III. FDA’S RESCISSION ACTION VIOLATED DUE PROCESS REQUIREMENTS If the Court were to reach the constitutional question, it should hold that FDA’s rescission action violated Due Process requirements. A Due Process claim has three elements: “(i) deprivation of a protected liberty or property interest; (ii) by the government; (iii) without the process that is ‘due’ under the Fifth Amendment.” N.B. ex rel. Peacock v. District of Columbia, 794 F.3d 31, 41 (D.C. Cir. 2015) (internal citations omitted). FDA violated Lannett’s Due Process rights, because (i) Lannett’s ANDA approval is a protected property interest; Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 54 of 61 42 (ii) FDA rescinded that interest; and (iii) FDA did so without conducting the hearing due under the Fifth Amendment.26 A. Lannett Has a Protected Property Right in its ANDA Approval It is well established that a private party has a protected property interest in a benefit conferred by the government if a federal statute gives the party a “‘legitimate claim of entitlement’” to that benefit. Washington Legal Clinic for the Homeless v. Barry, 107 F.3d 32, 36 (D.C. Cir. 1997) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)); Goldberg v. Kelly, 397 U.S. 254, 256 n.1, 262 (1970) (referring to property interest in welfare benefits created by the Social Security Act as “a matter of statutory entitlement for persons qualified to receive them”). Such a legitimate claim of entitlement exists if the statute places “substantive limitations on [the] official discretion” involved in granting or removing the benefit. Olim v. Wakinekona, 461 U.S. 238, 249 (1983); Tarpeh–Doe v. United States, 904 F.2d 719, 722 (D.C. Cir. 1990). Numerous courts therefore have held that a government-issued license or permit (which only can be granted or revoked under defined circumstances) is a protected property right. See, e.g., Barry v. Barachi, 443 U.S. 55, 64, 64 n.11 (1979) (horse trainer had protected “property interest in his license” because it could be “suspended only upon a satisfactory showing of” misconduct); 3883 Connecticut LLC v. District of Columbia, 336 F.3d 1068, 1073 (D.C. Cir. 2003) (holder of land use permits had “a property interest in them” because discretion to revoke them “is not unfettered . . . but instead is constrained”). Lannett’s ANDA approval easily meets the foregoing test for a protected property right. That approval is a valuable government-issued permit authorizing Lannett to sell Temozolomide. 26 Lannett brings this claim under the Due Process Clause of the Fifth Amendment. Because “the principles addressed [in Fourteenth Amendment Due Process Clause cases] are fully applicable to the fifth amendment’s ‘liberty or property’ language,” the cases discussed below that arise under the Fourteenth Amendment apply fully to Lannett’s Fifth Amendment challenge. Mazaleski v. Treusdell, 562 F.2d 701, 709 n.22 (D.C. Cir.1977). Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 55 of 61 43 The FFDCA precisely defines the circumstances under which FDA has granted that benefit (see 21 U.S.C. §§ 355(j)(4)) and strictly limits the situations in which (and the procedures by which) FDA may withdraw the benefit (see id. § 355(e)). It therefore is not surprising that FDA’s own regulations recognize that an approved ANDA is a property right, by describing an ANDA as an interest that is “owne[d]” and indicating that “rights to the application” can be “transferred to [a] new owner.” 21 C.F.R. § 314.72; see also Donald O. Beers & Kurt R. Karst, Generic and Innovator Drugs: A Guide to FDA Approval Requirements § 3.04[D][2][a] (8th ed. 2013) (“It seems clear that the approval of an abbreviated new drug application, an approval of considerable financial value in many instances, would be considered a property right in the due process context.”). B. Lannett Was Entitled to a Hearing Addressing Whether its Legitimate Claim of Entitlement to the Approval Was in Fact a Legal Entitlement to the Approval Because Lannett has a legitimate claim of entitlement to its ANDA approval, FDA violated Lannett’s Due Process rights by revoking the approval without a hearing addressing the implications of the factual circumstances at Lummy and any proffered corrective actions. The Due Process clause ensures “the opportunity to be heard at a meaningful time and in a meaningful manner.” Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (quotation marks and citation omitted); Ralls Corp. v. Comm. on Foreign Inv. in U.S., 758 F.3d 296, 318 (D.C. Cir. 2014). Accordingly, an adequate hearing is the “root requirement” of Due Process. Freeman v. FDIC., 56 F.3d 1394, 1403 (D.C. Cir. 1995) (internal quotations omitted).27 27 The D.C. Circuit has specified that if a “‘property interest’ exists, and an individual’s entitlement turns upon material questions of disputed fact, the due process clause guarantees minimum procedural protections, Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 56 of 61 44 In the face of these precedents, FDA’s rationale for rescinding approval without a hearing is not persuasive. FDA asserted that there was no Due Process right to a hearing because the agency already had determined the merits of the controversy and found that Lannett had no entitlement to the ANDA approval from the inception. (AR FDA821.) If the government could foreclose Due Process hearing rights by unilaterally determining the merits of a property-rights controversy behind closed doors, the procedural protections of the Due Process Clause would be meaningless. In fact, Lannett did not need to make an “advance showing that [it would] surely prevail at the hearing” on the merits simply to have a procedural “right to be heard,” because protection of property under the Due Process Clause “has never been interpreted to safeguard only the rights of undisputed ownership.” Fuentes v. Shevin, 407 U.S. 67, 86, 87 (1972). It is “enough to invoke the procedural safeguards of [Due Process] that a significant property interest is at stake, whatever the ultimate outcome of a hearing.” Id. at 87. The whole purpose of the hearing would have been to determine whether Lannett’s claim of entitlement was correct on the merits and therefore a legal entitlement. See, e.g., N.B. ex rel. Peacock v. District of Columbia, 794 F.3d at 41, 42 (clarifying that “[a] ‘legitimate claim of entitlement’ means that a person would be entitled to receive the government benefit assuming she satisfied the preconditions to obtaining it” and that the “procedural protections of the Due Process Clause exist to give [parties] a fair typically notice and an evidentiary hearing, when the individual is deprived of the benefit.” Kizas v. Webster, 707 F.2d 524, 539 (D.C. Cir. 1983). It appears that there could be disputed issues of fact here, at a minimum with respect to the adequacy of corrective actions and the cGMP compliance status of the active ingredient actually received by Lannett (in 2013). See supra at 31. FDA should have given Lannett an opportunity to establish that such disputed issues exist and an opportunity to resolve them in an evidentiary hearing. Under the parallel circumstances in Ivy Sports Medicine, FDA offered the company the opportunity to request an evidentiary hearing, under the procedures established by 21 C.F.R. part 16, before rescinding premarket clearance. (The company declined the offer). See Joint Appendix pp. 1340-42, Ivy Sports Medicine, LLC v. Burwell, D.C. Cir. No. 13-5139 (filed Sept. 16, 2013); Ivy Sports Medicine, LLC v. Sebelius, 938 F. Supp. 2d 47, 54 (D.D.C. 2013), vacated and remanded, 767 F.3d 81 (D.C. Cir. 2014). FDA did not offer Lannett any such opportunity for an evidentiary hearing before rescinding the ANDA approval at issue here. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 57 of 61 45 opportunity to show that [they] meet[] the criteria for” receipt of the benefit); Alaska Airlines, Inc. v. CAB, 545 F.2d 194, 199-200 (D.C. Cir. 1976) (legitimate claim of entitlement to exemption authority triggered Due Process hearing providing an “‘opportunity to vindicate [those claims]’” even though “it is not clear that the exemption authority is as broad as [the plaintiff] contends”) (internal citations omitted). FDA violated Lannett’s Due Process rights by rescinding the ANDA approval without a hearing. CONCLUSION The Court should enter summary judgment for Lannett, set aside the rescission action, declare that the action is unlawful, and enjoin FDA from rescinding Lannett’s ANDA approval for Temozolomide in the future without following hearing procedures required by law. Respectfully submitted, /s/ Daniel G. Jarcho October 6, 2016 Daniel G. Jarcho (D.C. Bar No. 391837) Marc J. Scheineson (D.C. Bar No. 367201) Tamara R. Tenney (D.C. Bar No. 975481) ALSTON & BIRD LLP 950 F Street, N.W. Washington, D.C. 20004 (202) 239-3254 (telephone) (202) 239-3333 (fax) daniel.jarcho@alston.com Attorneys for Plaintiffs Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 58 of 61 ADDENDUM Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 59 of 61 21 U.S.C. § 355 (e) Withdrawal of approval; grounds; immediate suspension upon finding imminent hazard to public health The Secretary shall, after due notice and opportunity for hearing to the applicant, withdraw approval of an application with respect to any drug under this section if the Secretary finds (1) that clinical or other experience, tests, or other scientific data show that such drug is unsafe for use under the conditions of use upon the basis of which the application was approved; (2) that new evidence of clinical experience, not contained in such application or not available to the Secretary until after such application was approved, or tests by new methods, or tests by methods not deemed reasonably applicable when such application was approved, evaluated together with the evidence available to the Secretary when the application was approved, shows that such drug is not shown to be safe for use under the conditions of use upon the basis of which the application was approved; or (3) on the basis of new information before him with respect to such drug, evaluated together with the evidence available to him when the application was approved, that there is a lack of substantial evidence that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the labeling thereof; or (4) the patent information prescribed by subsection (c) of this section was not filed within thirty days after the receipt of written notice from the Secretary specifying the failure to file such information; or (5) that the application contains any untrue statement of a material fact: Provided, That if the Secretary (or in his absence the officer acting as Secretary) finds that there is an imminent hazard to the public health, he may suspend the approval of such application immediately, and give the applicant prompt notice of his action and afford the applicant the opportunity for an expedited hearing under this subsection; but the authority conferred by this proviso to suspend the approval of an application shall not be delegated. The Secretary may also, after due notice and opportunity for hearing to the applicant, withdraw the approval of an application submitted under subsection (b) or (j) of this section with respect to any drug under this section if the Secretary finds (1) that the applicant has failed to establish a system for maintaining required records, or has repeatedly or deliberately failed to maintain such records or to make required reports, in accordance with a regulation or order under subsection (k) of this section or to comply with the notice requirements of section 360(k)(2) of this title, or the applicant has refused to permit access to, or copying or verification of, such records as required by paragraph (2) of such subsection; or (2) that on the basis of new information before him, evaluated together with the evidence before him when the application was approved, the methods used in, or the facilities and controls used for, the manufacture, processing, and packing of such drug are inadequate to assure and preserve its identity, strength, quality, and purity and were not made adequate within a reasonable time after receipt of written notice from the Secretary specifying the matter complained of; or (3) that on the basis of new information before him, evaluated together with the evidence before him when the application was approved, the labeling of such drug, based on a fair evaluation of all material facts, is false or misleading in any particular and was not corrected within a reasonable time after receipt of written notice from the Secretary specifying the matter complained of. Any order under this subsection shall state the findings upon which it is based. The Secretary may withdraw the approval of an application submitted under this section, or suspend the approval of such an application, as provided under this subsection, without first ordering the applicant to submit an assessment of the approved risk evaluation and mitigation strategy for the drug under section 355-1(g)(2)(D) of this title. Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 60 of 61 CERTIFICATE OF SERVICE I, Daniel G. Jarcho, counsel for Plaintiffs, hereby certify that on October 6, 2016, I served the foregoing sealed Motion for Summary Judgment and supporting Memorandum, Declaration and Proposed Order on the following counsel for the Federal Defendants by hand: Natalie N. Sanders United States Department of Justice Consumer Protection Branch 450 Fifth Street, N.W. Washington, D.C. 20001 /s/ Daniel G. Jarcho Daniel G. Jarcho Case 1:16-cv-01350-RBW Document 34 Filed 02/03/17 Page 61 of 61