aaiPharma v. Thompson , 296 F.3d 227 ( 2002 )

Filed: August 5, 2002
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 01-2113
(CA-01-152-F)
aaiPharma Incorporated,
Plaintiff - Appellant,
versus
Tommy G. Thompson, etc., et al.,
Defendants - Appellees.
O R D E R
The court amends its opinion filed July 10, 2002, as follows:
On page 21, first full paragraph, line 19 -- “FTC” is
corrected to read “FDA.”
For the Court - By Direction
/s/ Patricia S. Connor
Clerk
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
AAIPHARMA INCORPORATED,
Plaintiff-Appellant,
v.
TOMMY G. THOMPSON, Secretary of
Health and Human Services;
BERNARD SCHWETZ, DVM, Ph.D.,
Acting Commissioner of the United No. 01-2113
States Food and Drug
Administration; UNITED STATES
FOOD AND DRUG ADMINISTRATION,
Defendants-Appellees,
BARR LABORATORIES, INCORPORATED;
PHARMACEUTICAL, INCORPORATED,
Intervenors.
Appeal from the United States District Court
for the Eastern District of North Carolina, at Wilmington.
James C. Fox, Senior District Judge.
(CA-01-152-F)
Argued: February 25, 2002
Decided: July 10, 2002
Before MICHAEL, Circuit Judge, Raymond A. JACKSON,
United States District Judge for the Eastern District of Virginia,
sitting by designation, and Jerome B. FRIEDMAN, United States
District Judge for the Eastern District of Virginia, sitting by
designation.
Affirmed by published opinion. Judge Michael wrote the opinion, in
which Judge Jackson and Judge Friedman joined.
____________________________________________________________
COUNSEL
ARGUED: James C. Burling, HALE & DORR, L.L.P., Washington,
D.C., for Appellant. Howard Stanley Scher, Appellate Staff, Civil
Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash-
ington, D.C., for Appellees. ON BRIEF: Mark A. Heller, HALE &
DORR, L.L.P., Washington, D.C.; James D. Myers, Richard P. Vitek,
MYERS, BIGEL, SIBLEY & SAJOVEC, P.A., Cary, North Carolina,
for Appellant. Robert D. McCallum, Jr., Assistant Attorney General,
Douglas N. Letter, Appellate Staff, Civil Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C.; Daniel E. Troy,
Chief Counsel, Eric M. Blumberg, Deputy Chief Counsel for Litiga-
tion, Michael N. Druckman, Associate Chief Counsel for Enforce-
ment, UNITED STATES FOOD AND DRUG ADMINISTRATION,
Rockville, Maryland, for Appellees. Dan Hartzog, Gregory Brown,
CRANFILL, SUMNER & HARTZOG, L.L.P., Raleigh, North Caro-
lina; George C. Lombardi, Christine J. Siwik, James F. Hurst, WIN-
STON & STRAWN, Chicago, Illinois; Robert W. Spearman,
PARKER, POE, ADAMS & BERNSTEIN, L.L.P., Raleigh, North
Carolina; Edgar H. Haug, Daniel G. Brown, FROMMER, LAW-
RENCE & HAUG, L.L.P., New York, New York, for Intervenors.
____________________________________________________________
OPINION
MICHAEL, Circuit Judge:
The Federal Food, Drug, and Cosmetic Act (FFDCA) requires the
manufacturer of a brand name drug approved by the Food and Drug
Administration (FDA) to provide the FDA with a listing of all patents
that claim the approved drug or a method of using the drug. See 21
U.S.C. § 355 (b)(1), (c)(2). The FDA publishes these listings in its
Approved Drug Products With Therapeutic Equivalence Evaluations,
a publication commonly known as the Orange Book. The plaintiff,
aaiPharma Inc., has sued the FDA, contending that the agency has a
2
duty to ensure the accuracy of Orange Book listings and that the agen-
cy's refusal to do so violates the Administrative Procedure Act
(APA). The district court rejected aaiPharma's APA challenge, con-
cluding that the FFDCA assigns the FDA a purely ministerial role
regarding Orange Book listings. We affirm.
I.
Orange Book listings play an important role in the statutory and
regulatory framework created by the Drug Price Competition and
Patent Term Restoration Act of 1984, Pub. L. No. 98-417, 98 Stat.
1585 (codified at 21 U.S.C. §§ 355, 360cc and 35 U.S.C. §§ 156, 271,
282), commonly known as the Hatch-Waxman Act (Hatch-Waxman
or the Act). Hatch-Waxman amended both the FFDCA and the patent
laws in an effort to strike a balance between "two conflicting policy
objectives: to induce name-brand pharmaceutical firms to make the
investments necessary to research and develop new drug products,
while simultaneously enabling competitors to bring cheaper, generic
copies of those drugs to market." Abbott Labs. v. Young, 920 F.2d
984, 991 (D.C. Cir. 1990) (Edwards, J., dissenting on other grounds).
Prior to Hatch-Waxman's passage in 1984, both pioneer (brand
name) and generic drug manufacturers who wished to bring a drug to
market were required to file a New Drug Application (NDA) with the
FDA. This requirement posed a formidable barrier to market entry for
generic drug companies because preparation of an NDA requires
expensive clinical studies demonstrating the proposed drug's safety
and effectiveness. In addition, a generic manufacturer could not begin
the necessary research and clinical studies until any patents on the
brand name drug it sought to copy had expired because its research
efforts would have infringed the patents held by the pioneer drug
company. This meant that a pioneer drug company's monopoly on its
brand name drug was effectively extended to include not only the
terms of any patents on the brand name drug, but also the time it took
generic competitors to complete the NDA process after these patents
had expired. Hatch-Waxman addressed these problems by creating a
streamlined procedure for FDA approval of generic drugs. A drug
company that wishes to market a generic version of a brand name
drug may now submit an Abbreviated New Drug Application
(ANDA) to the FDA. See 21 U.S.C. § 355(j). By filing an ANDA, a
3
generic manufacturer can rely on the clinical studies performed by the
pioneer drug manufacturer and is not required to prove the safety and
effectiveness of its generic drug from scratch. Instead, the generic
manufacturer must prove only that its drug is bioequivalent to the
brand name drug it wants to copy. See id. § 355(j)(2)(A). In addition,
Hatch-Waxman amended the patent laws so that a generic drug manu-
facturer no longer infringes the patents on a brand name drug by per-
forming acts necessary to prepare an ANDA. See 35 U.S.C.
§ 271(e)(1).
Hatch-Waxman also contains a complex set of provisions designed
to protect the intellectual property rights of pioneer drug companies
and others holding patents on brand name drugs. The Act requires
each drug company filing an NDA to include in its application a list
of all the patents that "claim[ ] the drug for which the applicant sub-
mitted the application or which claim[ ] a method of using such drug
and with respect to which a claim of patent infringement could rea-
sonably be asserted if a person not licensed by the owner engaged in
the manufacture, use, or sale of the drug." 21 U.S.C. § 355(b)(1). If
the FDA approves the application, the agency is required to publish
this list in the Orange Book.1 An NDA applicant must also amend its
application to include information about any new patents claiming its
drug that issue while the NDA is pending. Id. In addition, the holder
of an approved NDA is required to submit to the FDA for Orange
Book listing any new patents that claim the approved drug within
thirty days of their issuance. Id. § 355(c)(2). With respect to each
patent listed in the Orange Book for a pioneer drug, an ANDA appli-
cant seeking to copy that drug must make one of the following four
certifications in its initial application for FDA approval: (I) that no
patent information for the pioneer drug has been submitted to the
FDA (a "paragraph I certification"), (II) that the patent has expired (a
"paragraph II certification"), (III) that the patent will expire on a spe-
cific date (a "paragraph III certification"), or (IV) that the patent "is
____________________________________________________________
1
For ease of reference, we will refer to those patents that meet the stat-
utory criteria for Orange Book listing with respect to a given drug as pat-
ents that claim the drug. We need not explain the statutory criteria in any
detail, but the general idea is that a patent claims a drug under 21 U.S.C.
§ 355(b)(1) if the patent might be infringed by a generic version of that
drug.
4
invalid or will not be infringed by the manufacture, use, or sale of the
new drug" for which the ANDA applicant seeks approval (a "para-
graph IV certification"). Id. § 355(j)(2)(A)(vii)(I)-(IV). An ANDA
applicant must also make an additional certification as to any new
patent listed in the Orange Book while its application is pending, so
long as the NDA holder submits the new patent to the FDA for listing
no more than thirty days after the patent's issuance. 21 C.F.R.
§ 314.94(a)(12)(vi). The certification made by the ANDA applicant
determines the date on which FDA approval of the application can
become effective. ANDAs containing paragraph I or II certifications
may be approved immediately if the FDA finds that all the relevant
scientific and regulatory requirements have been met. 21 U.S.C.
§ 355(j)(5)(B)(i). An ANDA that contains a paragraph III certification
becomes effective on the patent's expiration date, assuming that other
FDA requirements have been satisfied. Id. § 355(j)(5)(B)(ii). Thus,
certifications under paragraphs I, II, and III tell the FDA that it need
not worry about the patent law implications of the generic drug
because the drug will not enter the market until any relevant patents
have expired. In contrast, an ANDA applicant making a paragraph IV
certification intends to market its product before the relevant patents
have expired. The effective date for an ANDA containing a paragraph
IV certification is determined by the outcome of the following
sequence of events.
An ANDA applicant making a paragraph IV certification with
respect to a patent must give notice of this certification to both the
NDA holder and the patent holder (often, but not always, these will
be the same party) and must explain in detail why it believes that the
patent is invalid or will not be infringed by the generic drug for which
it seeks approval. Id. § 355(j)(2)(B). Hatch-Waxman provides that the
act of filing a paragraph IV certification with respect to a patent
creates a cause of action for patent infringement in the patent holder.
See 35 U.S.C. § 271(e)(2)(A) ("It shall be an act of infringement to
submit . . . [an ANDA] . . . if the purpose of such submission is to
obtain [FDA] approval . . . to engage in the commercial manufacture,
use, or sale of a drug . . . claimed in a patent . . . before the expiration
of such patent."). Once the patent holder receives notice of the certifi-
cation, it has forty-five days in which to file a suit for patent infringe-
ment. Failure to file within this forty-five day period means that the
FDA may approve the ANDA without delay. 21 U.S.C.
5
§ 355(j)(5)(B)(iii). But if the patent holder files suit, FDA approval of
the ANDA is automatically stayed for up to thirty months.2 Together,
these provisions protect the holder of a patent that claims a brand
name drug by giving the patent holder a chance to vindicate its intel-
lectual property rights before the FDA approves a generic version of
the drug. See Bristol-Myers Squibb Co. v. Royce Labs., Inc., 69 F.3d
1130, 1135 (Fed. Cir. 1995). Orange Book listing of a patent is impor-
tant because it is the trigger for this protection. If a patent is not listed
in the Orange Book, ANDA applicants do not have to file a paragraph
IV certification, and the patent holder is unable to take advantage of
the thirty-month stay.
II.
On July 10, 2001, aaiPharma received a patent (the '853 patent) on
a polymorphic variant of the active ingredient in Prozac, a widely pre-
scribed antidepressant drug manufactured by Eli Lilly & Company
(Lilly). U.S. Patent No. 6,258,853. Lilly's claim of exclusivity for
Prozac under the patent laws was scheduled to expire on August 2,
2001. Several generic drug manufacturers (including intervenors Barr
Laboratories, Inc. and Par Pharmaceuticals, Inc.) were set to begin
marketing generic versions of Prozac the next day. aaiPharma was
concerned that its new patent might be infringed by these generic
drugs, and the company therefore sought to have its '853 patent
included in the Orange Book listing for Prozac. As explained above,
Orange Book listing of the '853 patent would confer significant bene-
fits on aaiPharma. An ANDA applicant seeking to market a generic
version of Prozac before the expiration of the '853 patent would be
required to make a paragraph IV certification regarding the patent.
aaiPharma would then have the ability to trigger the thirty-month stay
(and so delay FDA approval of the ANDA applicant's generic version
of Prozac) by filing a patent infringement suit against the applicant.3
____________________________________________________________
2
More precisely, the stay continues until the earliest of (1) the expira-
tion of the patent, (2) judicial resolution of the patent infringement suit,
or (3) thirty months from the patent holder's receipt of notice. 21 U.S.C.
§ 355(j)(5)(B)(iii). In addition, a court in which a patent suit is pending
may order a shorter or longer stay if "either party to the action fail[s] to
reasonably cooperate in expediting the action." Id.3
As the district court observed, aaiPharma does not have a drug of its
own ready for market. The record does not disclose the reasons for aai-
6
Because only the NDA holder can submit patents claiming its
approved drug for listing in the Orange Book, aaiPharma asked Lilly
to submit the '853 patent to the FDA. Lilly refused.4 aaiPharma then
sent a letter to the FDA asking the agency to "contact Lilly to confirm
the correctness of Lilly's omission of information about the '853
patent from the list of Prozac-related patents in the Orange Book."
aaiPharma suggested that if Lilly persisted in its refusal to list the
'853 patent, the FDA had an obligation to intervene. The FDA, how-
ever, has determined that it will not become an arbiter of the correct-
ness of Orange Book listings. Its regulations implementing the Hatch-
Waxman Act provide only a very limited mechanism for resolving
disputes regarding those listings. See 21 C.F.R. § 314.53(f). Consis-
tent with its regulation, the FDA responded to aaiPharma's request by
sending a letter to Lilly requesting that Lilly confirm the correctness
of its Orange Book listing for Prozac. The letter explained that the
FDA would make no change to the listing unless Lilly asked it to do
so. The record does not indicate whether Lilly has responded to this
letter.
Having failed in its efforts to secure Orange Book listing for the
'853 patent by contacting Lilly and the FDA, aaiPharma brought this
lawsuit under the Administrative Procedure Act in the Eastern District
of North Carolina on August 2, 2001, only hours before the FDA was
set to approve the marketing of several generic versions of Prozac.
aaiPharma alleged that the FDA's failure to require Lilly to list the
'853 patent in the Orange Book was "arbitrary, capricious . . . or oth-
erwise not in accordance with law" under § 706(2)(A) of the APA and
asked the court to order the FDA to require Lilly to submit the '853
patent for listing in the Orange Book. aaiPharma also filed a motion
for preliminary relief under Fed. R. Civ. P. 65. It sought a temporary
____________________________________________________________
Pharma's avid interest in securing the thirty-month stay. We decline to
speculate about aaiPharma's motives as they are not material to the reso-
lution of this case.
4
Lilly would have benefitted significantly from any delay in the intro-
duction of generic Prozac, and so it had a strong financial incentive to
grant aaiPharma's request that the '853 patent be listed in the Orange
Book. There is nothing in the record to indicate why Lilly refused aai-
Pharma's request despite this financial incentive.
7
restraining order and a preliminary injunction that would prevent the
FDA from approving any ANDAs for generic Prozac until the court
could determine whether the FDA had a duty to require the listing of
the '853 patent. The district court held a non-evidentiary hearing on
August 2, 2001, and denied the motion for preliminary relief from the
bench. In a subsequent opinion dated August 13, 2001, the court
explained that it had denied aaiPharma's request for preliminary relief
primarily on the ground that there was no likelihood of success on the
merits because the FDA's interpretation of the relevant statutes was
not only reasonable, but correct. See Blackwelder Furniture Co. of
Statesville, Inc. v. Seilig Mfg. Co., 550 F.2d 189, 195 n.3 (4th Cir.
1977) (stating that the probability of success on the merits is the most
important factor in evaluating a motion for a preliminary injunction
when there is no decided imbalance of hardship in the plaintiff's favor
if the injunction is denied). The court reasoned that Hatch-Waxman
places the responsibility for deciding which patents to list in the
Orange Book solely on NDA holders like Lilly and that the FDA's
role in Orange Book listings is purely ministerial: "Congress decided
that the FDA's task simply is to publish — without question — what-
ever patent information . . . is supplied to it by the NDA holder pursu-
ant to the statute." Although the court had given no notice to the
parties of any intention to enter final judgment in the case, the court
noted in the conclusion of its opinion that it was "effectively . . . rul-
ing against [aaiPharma] `on the merits.'" The court therefore directed
the clerk "to enter judgment and to close [the] file." aaiPharma
appeals on both procedural and substantive grounds. Specifically, it
contends that the district court erred procedurally by entering a final
judgment on the merits without providing aaiPharma with notice and
an adequate opportunity to be heard and that the court erred substan-
tively by upholding the FDA's policy of non-intervention in Orange
Book listing disputes.
III.
We first address the procedural question of whether the district
court, after holding a hearing on aaiPharma's motion for preliminary
relief, erred by entering judgment against the company without giving
notice that it was considering final disposition on the merits.
Although Fed. R. Civ. P. 65(a)(2) allows a district court to order con-
solidation of a preliminary injunction hearing with a trial on the mer-
8
its, we have long held that before consolidation is ordered, "the
parties should normally receive clear and unambiguous notice to that
effect either before the hearing commences or at a time which will
still afford the parties a full opportunity to present their respective
cases." Gellman v. Maryland, 538 F.2d 603, 604 (4th Cir. 1976)
(internal quotation marks and citation omitted). The notice require-
ment is necessary because "`the facts adduced [at a preliminary
injunction hearing] often will not be sufficient to permit an informed
determination of whether a direction for the entry of judgment is
appropriate.'" Berry v. Bean, 796 F.2d 713, 719 (4th Cir. 1986) (quot-
ing 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 2950 at 492 (1973)). As a result, "a party addressing
only issues of preliminary relief should not ordinarily be bound by its
abbreviated and only partially informed presentation of the merits."
Id. Here, the district court gave the parties no notice of any kind that
it might enter judgment on the merits after the hearing on the motion
for preliminary relief. Although this case turns completely on legal
issues, and aaiPharma has not pointed to any factual evidence that it
might have presented to the district court, the company contends that
it did not have the opportunity to present the district court with the
full battery of legal arguments in favor of its position. Specifically,
aaiPharma claims that if it had received notice that the district court
intended to rule on the merits, it would have submitted further brief-
ing addressing such issues as "the Hatch-Waxman Act's application
to non-NDA holders [and] the mandatory nature of NDA holders'
obligations under the Act to provide information on eligible patents
to [the] FDA." Brief for Appellant at 20. We agree with aaiPharma
that the district court's spontaneous entry of final judgment was error
because it deprived aaiPharma of a full and fair opportunity to present
its case. Cf. U. S. Dev. Corp. v. Peoples Fed. Sav. & Loan Ass'n, 873
F.2d 731, 736 (4th Cir. 1989) (stating that "regardless of a claim's
merits, a district court may not sua sponte enter summary judgment
against it until the claim's proponent has been given notice and a rea-
sonable opportunity to be heard"). Ordinarily, the proper course
would be to vacate the district court's judgment and to remand for
that court to decide the merits of the case after the parties have had
a fair chance to develop their positions.
In this case, however, special circumstances allow us to put aside
the district court's procedural error and render a decision on the mer-
9
its. First, aaiPharma acknowledges that it has now presented us with
all the legal arguments that it would have made to the district court
if given the opportunity. Indeed, aaiPharma's counsel stated at oral
argument that his client "would welcome" a decision on the merits
from this court. This, we conclude, amounts to a waiver of aaiPhar-
ma's objection to the district court's procedural error. Second, the
case turns wholly on the legal question of whether the FDA's refusal
to police the correctness of Orange Book listings violates the APA.
If we were to remand the case, we would likely find ourselves review-
ing the district court's ruling on this issue next year in light of the
same record and the same arguments we have before us now. Under
these circumstances, we conclude that it is appropriate to reach the
merits of the case. We therefore turn to the question of whether the
FDA's refusal to conduct any independent inquiry into the correctness
of Orange Book listings is arbitrary, capricious, or otherwise not in
accordance with law.
IV.
Because Lilly's NDA for Prozac was approved long before aai-
Pharma obtained the '853 patent, 21 U.S.C. § 355(c)(2) determines
Lilly's obligations with respect to that patent. It provides that for pat-
ents issued after the approval of an NDA, the NDA holder
shall file with the [FDA] the patent number and the expira-
tion date of any patent which claims the drug for which the
application was submitted or which claims a method of
using such drug and with respect to which a claim of patent
infringement could reasonably be asserted if a person not
licensed by the owner engaged in the manufacture, use, or
sale of the drug. . . . [I]f the [NDA holder] could not file [the
required patent information as part of its application]
because no patent had been issued when an application was
filed or approved, the holder shall file [the required informa-
tion regarding the new patent] not later than thirty days after
the date the patent involved is issued. Upon the submission
of patent information under this subsection, the [FDA] shall
publish it.
10
21 U.S.C. § 355(c)(2). It is clear, then, that if (as aaiPharma asserts)
the '853 patent "claims" Prozac in the sense provided in § 355(c)(2),
Lilly is obligated to submit the '853 patent for listing in the Orange
Book, and the FDA is required to publish the submitted listing.5 It is
unclear, however, whether there is any effective way to enforce an
NDA holder's obligation to submit for Orange Book listing every
patent that claims its approved drug (or its corresponding obligation
not to submit patents that do not claim its approved drug).
The question is important because, as we explained earlier, listing
of a patent in the Orange Book triggers the availability of the thirty-
month stay. If there is no enforcement mechanism to ensure that an
NDA holder complies with its statutory obligations, an NDA holder
can abuse the Orange Book listing process in such a way that (1) the
NDA holder enjoys the protection of the thirty-month stay when it is
not entitled to do so, or (2) a third party patentee (a person or entity
other than the pioneer drug company that holds a patent claiming a
pioneer drug) fails to receive the protection of the stay even though
it is entitled to receive that protection. The first (and more serious)
problem arises when an NDA holder wrongly lists a patent in the
Orange Book that does not actually claim its approved drug under the
standard set forth in § 355(c)(2). Once the patent is listed, the NDA
holder can delay an ANDA applicant's entry into the marketplace for
up to thirty months (and extend its monopoly power) simply by filing
a patent infringement suit. The NDA holder receives this benefit
regardless of whether the patent meets the statutory criteria for
Orange Book listing. Thus, the absence of any mechanism for ensur-
ing the accuracy of Orange Book listings means that "the paten-
tee/NDA holder [can receive] almost automatic injunctive relief for
even marginal infringement claims." Terry G. Mahn, Patenting Drug
Products: Anticipating Hatch-Waxman Issues During the Claims
Drafting Process, 54 Food Drug Cosm. L.J. 245, 250 (1999). The
harm to generic drug manufacturers, and ultimately to the consuming
public, is obvious. The second problem arises when an NDA holder
refuses to submit an eligible third-party patent for listing in the
Orange Book. This is the wrong complained of by aaiPharma.
____________________________________________________________
5
We express no opinion, of course, on the question of whether the '853
patent meets the statutory criteria for inclusion in the Orange Book list-
ing for Prozac.
11
Although an improper refusal to list a patent in the Orange Book is
less obviously threatening to the public interest than an improper list-
ing of a patent, we agree with aaiPharma that third-party holders of
patents claiming an approved drug are also entitled to the thirty-
month stay. Accordingly, aaiPharma has a legitimate grievance if
Lilly has wrongfully refused to list the '853 patent in the Orange
Book.
We are not the first court to consider whether parties aggrieved by
an NDA holder's Orange Book listings have any remedy. Generic
drug manufacturers have brought suits against NDA holders to com-
pel them to de-list certain patents on the ground that the patents did
not claim the approved drug under the statutory criteria in
§§ 355(b)(1) and (c)(2). It is now well established, however, that "a
generic drug manufacturer cannot bring a declaratory judgment action
or an injunctive action against a NDA holder under either the FFDCA
or the patent laws requiring it to take steps to`delist' a patent from
the Orange Book." Andrx Pharm., Inc. v. Biovail Corp., 276 F.3d
1368, 1373-74 (Fed. Cir. 2002). If a generic manufacturer cannot sue
an NDA holder to compel delisting of a patent, it follows that a third-
party patentee cannot sue an NDA holder to compel listing of a
patent. This is why aaiPharma has brought suit against the FDA rather
than against Lilly. The Federal Circuit, however, has acknowledged
that a party aggrieved by an NDA holder's Orange Book listing could
properly bring a lawsuit under the APA raising a challenge to the
FDA's practice of "refusing to inquire into the correctness of [an
Orange Book] listing." Id. at 1379 n.8. This is that case.
The FDA's policy regarding Orange Book listing disputes is codi-
fied in § 314.53(f) of the regulations implementing Hatch-Waxman:
Correction of patent information errors. If any person dis-
putes the accuracy or relevance of patent information sub-
mitted to the agency under this section and published by the
FDA in the list [the Orange Book], or believes that an appli-
cant has failed to submit required patent information, that
person must first notify the agency in writing stating the
grounds for disagreement. . . . The agency will then request
of the applicable new drug application holder that the cor-
rectness of the patent information or omission of patent
12
information be confirmed. Unless the application holder
withdraws or amends its patent information in response to
FDA's request, the agency will not change the patent infor-
mation in the list.
21 C.F.R. § 314.53(f) (emphasis added). The regulation goes on to
say that ANDA applicants must make a proper certification regarding
each patent listed in the Orange Book "despite any disagreement as
to the correctness of the patent information." Id. In short, the FDA's
position is that if the NDA holder stands on its Orange Book listing,
aggrieved parties are out of luck. The FDA defends this purely minis-
terial conception of its role in the Orange Book listing process by
explaining that it lacks both the resources and the expertise to police
the correctness of Orange Book listings. aaiPharma acknowledges
that the FDA has no responsibility to independently evaluate the cor-
rectness of every patent listing submitted by an NDA holder. It simply
argues that if a party alerts the FDA to concerns that an NDA holder
has incorrectly failed to list a patent, the FDA must do more than sim-
ply ask the NDA holder to look into the matter and accept whatever
it says. Specifically, aaiPharma contends that upon learning of a dis-
pute about the correctness of an Orange Book listing, "the FDA is
required to make a substantive determination about eligibility and to
take remedial measures against the NDA holder if it determines that
the patent should be listed." Reply Brief for Appellant at 6 n.1.
According to aaiPharma, the FDA's refusal to inquire into the correct-
ness of Orange Book listings improperly delegates the FDA's statu-
tory duties to NDA holders.6
In evaluating the FDA's interpretation of its governing statute, we
____________________________________________________________
6
The parties frame the central issue in this case somewhat differently.
aaiPharma says that the issue is whether the FDA has a duty to ensure
that all eligible patents are listed in the Orange Book. In contrast, the
FDA says the issue is whether it has a duty to ensure that Orange Book
listings are correct (neither underinclusive nor overinclusive). For rea-
sons that we explain below, see infra at 18-19, we do not think these dif-
ferent formulations of the issue have any impact on the outcome of this
case because we conclude that if the FDA has a duty to police improper
refusals to list patents, it must also have a duty to police improper listings
of patents.
13
employ the familiar two-step analysis established by the Supreme
Court in Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467
U.S. 837, 842-45 (1984). In step one of the Chevron analysis, we ask
whether "Congress has directly spoken to the precise question at
issue." Here, that question is whether the FDA has an obligation to
police the correctness of an NDA holder's Orange Book listings. "If
the intent of Congress is clear, that is the end of the matter; for the
court, as well as the agency, must give effect to the unambiguously
expressed intent of Congress." Id. at 842-43. If, on the other hand, we
find that "the statute is silent or ambiguous with respect to the specific
issue, the question . . . is whether the agency's answer is based on a
permissible construction of the statute." Id. at 843.
Both aaiPharma and the FDA claim that this case can be resolved
at step one of the Chevron analysis because Congress has clearly
expressed its intentions about the proper role of the FDA in Orange
Book listing disputes. The FDA relies on the language of 21 U.S.C.
§ 355(c)(2), which says:
[I]f the holder of an approved [new drug] application could
not file patent information [for a patent claiming the new
drug] because . . . no patent had been issued when an appli-
cation was filed or approved, the holder shall file such infor-
mation . . . not later than thirty days after the date the patent
involved is issued. Upon the submission of patent informa-
tion under this subsection, the [FDA] shall publish it.
According to the FDA, this statute clearly indicates that the NDA
holder bears the sole responsibility for filing the required information
on all the patents that claim its approved drug and that the FDA's role
in the process is completely passive. aaiPharma relies on two different
provisions, 21 U.S.C. §§ 355(d)(6) and (e)(4), to claim that Congress
clearly intended for the FDA to play some role in ensuring that all eli-
gible patents are listed in the Orange Book. Subsection (d) outlines
the various grounds on which the FDA may refuse to approve an
NDA. It states, among other things, that if, after notice and an oppor-
tunity for hearing, the FDA finds that "(6) the application failed to
contain the patent information prescribed by subsection (b) of this
section [a list of the patents claiming the drug] . . . [it] shall issue an
order refusing to approve the application." 21 U.S.C. § 355(d). Simi-
14
larly, § 355(e) says that, after notice and opportunity for hearing, the
FDA "shall . . . withdraw approval of an application" if it finds that
"(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 [FDA] specifying the failure to file such information." Id.
§ 355(e). According to aaiPharma, these provisions indicate that the
FDA has a duty to ensure that a pioneer drug company has submitted
all the patents eligible for inclusion in the Orange Book.
Considered in isolation, the provisions cited by the FDA and aai-
Pharma could arguably qualify as clear expressions of congressional
intent about the proper role of the FDA in Orange Book listing dis-
putes. Step one of Chevron, however, requires us to look to the statute
as a whole to determine whether Congress has unambiguously
expressed its intent. See Mova Pharm. Corp. v. Shalala, 140 F.3d
1060, 1067-68 (D.C. Cir. 1998). Because subsection (c)(2) appears to
conflict with subsections (d)(6) and (e)(4), we conclude that Congress
has failed to express clearly its intent about the FDA's role in the
Orange Book listing process. Accordingly, we proceed to step two of
Chevron and ask whether the FDA's interpretation of its role as
purely ministerial rests on a permissible construction of § 355.
There can be no question that the FDA's reading of subsection
(c)(2) is reasonable. Indeed, that provision's requirement that the
FDA "shall file" the patent information submitted by NDA holders is
most naturally read to suggest that Congress intended for the FDA to
play a purely ministerial role. The harder question is whether the
apparent reasonableness of the FDA's position is undermined by the
language of subsections (d)(6) and (e)(4).
Subsection (d)(6) requires the FDA to refuse to approve an NDA
that fails to contain the patent information required by § 355(b)(1),
namely, a listing of the patents that claim the drug for which the
application was submitted. According to aaiPharma, this provision
obligates the FDA to independently determine whether the NDA
applicant has listed all the patents that meet the statutory criteria for
Orange Book listing. We conclude, however, that the statute can rea-
sonably be read to impose only a much more limited duty on the
FDA. This is because an NDA's "failure to contain the patent infor-
mation prescribed by subsection (b)" can be understood in two differ-
15
ent ways. On the reading proposed by aaiPharma, an NDA applicant
fails to file the required patent information whenever its submissions
for Orange Book listing fail to properly identify those patents that
meet the statutory criteria. In other words, aaiPharma reads subsection
(d)(6) to say that an NDA must be denied whenever the NDA appli-
cant's patent law judgments are incorrect. There is, however, a far
more modest interpretation of subsection (d)(6). On this more modest
reading, an NDA applicant fails to file the required patent information
only when it completely fails to submit a list of patents or a declara-
tion that its drug is not claimed by any current patents. See 21 C.F.R.
§ 314.53(c)(3). In other words, the FDA's duty is not to ensure the
correctness of the list of patents submitted for Orange Book listing,
but simply to ensure that either a patent list has been filed or a decla-
ration has been made that there are no patents to be listed. This sec-
ond reading of subsection (d)(6) is at least as reasonable as the first.
Further, aaiPharma's reading of subsection (d)(6) leads to an implau-
sibly broad account of the FDA's duties under Hatch-Waxman. aai-
Pharma concedes that the Act does not require the FDA to assess the
correctness of every determination by an NDA applicant that a patent
claims or fails to claim its drug. Instead, aaiPharma contends that the
FDA must make its own determination about whether a patent is eli-
gible for listing only if a dispute is brought to the FDA's attention.
We find it difficult, however, to read subsection (d)(6) as imposing
only this relatively limited enforcement obligation on the FDA. If the
statute requires the FDA to police the correctness of Orange Book
listings at all, the obligation is far broader than aaiPharma is prepared
to acknowledge. Subsection (c)(1)(A) requires the FDA to "approve
[an NDA] if [it] . . . finds that none of the grounds for denying
approval specified in subsection (d) of this section applies." This
means that the FDA has an obligation to evaluate every NDA for
compliance with the standards in subsection (d), including the
requirement in subsection (d)(6) that the application "contain the
patent information prescribed in subsection (b) of this section." If as
aaiPharma contends, subsection (d)(6) commands the FDA to second
guess the NDA applicant's judgments about which patents claim its
drug, that command is not limited to cases in which a third party has
questioned the correctness of those judgments. In short, aaiPharma's
reading of subsection (d)(6) must be wrong because it would require
the FDA to "screen the universe of patents to determine which ones
16
should be listed" - a result aaiPharma explicitly disclaims. Reply Brief
for Appellant at 9. We conclude that on the better reading of subsec-
tion (d)(6), the FDA is required only to ensure that each NDA appli-
cant has submitted either a list of patents claiming its drug or a
declaration that there are no patents to be listed.
Section 355(e)(4) says that the FDA shall withdraw approval of an
NDA if "the patent information prescribed by subsection (c) of this
section [a list of patents claiming the approved drug] was not filed
within thirty days after the receipt of written notice from the [FDA]
specifying the failure to file such information." According to aai-
Pharma, this provision allows the FDA to make a written demand that
an NDA holder submit a patent for listing and to enforce compliance
with that demand by threatening to withdraw approval of an NDA.
The company argues that the FDA must necessarily have made a prior
determination that a patent is eligible for listing before making such
a written demand. This means, aaiPharma says, that the FDA has a
duty to ensure that all eligible patents are listed in the Orange Book.
The argument is somewhat more persuasive than aaiPharma's argu-
ment regarding subsection (d)(6). It sounds plausible to say that
because subsection (e)(4) concerns the withdrawal of a previously
approved NDA, its reference to an NDA holder's failure to file the
patent information prescribed by subsection (c) must mean that the
NDA holder has failed to list some specific patent that is eligible for
listing. The conclusion appears to follow because an NDA that failed
to contain a list of patents (or a declaration that there were no patents
to be listed) would never have been approved in the first place. We
note, however, that subsection (c)(2) requires the submission of patent
information by holders of approved NDAs in two different situations.
The situation emphasized by aaiPharma occurs when a new patent
claiming a pioneer drug is issued after the NDA for that drug has been
approved. In this situation, the NDA holder is obligated to submit the
new patent for Orange Book listing no later than thirty days after the
patent is issued. However, subsection (c)(2) also addresses the situa-
tion of drug companies whose NDAs were approved before the pas-
sage of the Hatch-Waxman Act. Such companies had never submitted
information about patents claiming their drugs to the FDA because
they were not required to do so. Subsection (c)(2) required these NDA
holders to submit patents for listing in the Orange Book no later than
thirty days after September 24, 1984, the date of Hatch-Waxman's
17
enactment. We think it likely that in drafting subsection (e)(4), Con-
gress intended to provide the FDA with a means to ensure that holders
of NDAs approved prior to the Act's passage would comply with the
new patent listing requirements. Accordingly, we conclude that, just
as in subsection (d)(6), the "failure to file the required patent informa-
tion" discussed in subsection (e)(4) can reasonably be read to mean
that the pioneer drug company has failed to submit a list of patents
claiming the drug or a declaration that there are no patents to be
listed. It follows that subsection (e)(4) does not undermine the reason-
ableness of the FDA's reading of 21 U.S.C. § 355.
Two additional points support the reasonableness of the FDA's
reading of the statute. First, aaiPharma's appeals to subsections (d)(6)
and (e)(4) derive much of their force from the way in which aai-
Pharma frames its argument. According to aaiPharma, the "failure to
contain" and "failure to file" language in these subsections indicates
that the FDA has a duty to intervene when pioneer drug companies
fail to submit an eligible patent for listing in the Orange Book. In
other words, aaiPharma explicitly claims only that the FDA has a duty
to ensure that all eligible patents are listed in the Orange Book and
takes no position on whether the FDA also has a duty to ensure that
ineligible patents are not listed in the Orange Book. The company's
argument ignores an important point. We think it clear that if Con-
gress had intended to impose any duty on the FDA to police Orange
Book listings, it would have required the FDA to ensure that ineligi-
ble patents are not listed in the Orange Book. This is because, as we
noted earlier, improper listing of patents in the Orange Book is a far
more serious problem than the improper refusal to list patents. By tak-
ing advantage of the thirty-month stay, a pioneer drug company that
improperly lists a patent can cost consumers millions of dollars by
keeping its generic competitors from bringing their products to mar-
ket. In contrast, a drug company's improper refusal to list an eligible
patent held by a third party like aaiPharma principally harms only the
third party by depriving it of its statutory right to receive the protec-
tion of the thirty-month stay.7 As a result, it is hard to believe that
____________________________________________________________
7
It is important to recognize that the third-party patentee can still pur-
sue patent infringement suits against generic manufacturers. It is simply
deprived of the opportunity to litigate its infringement claims under the
shelter of the thirty-month stay.
18
Congress would impose a duty on the FDA to police the improper
refusal to list patents without also imposing a duty to police the
improper listing of patents. This means that for aaiPharma's argument
to succeed, the company must show that subsections (d)(6) and (e)(4)
require the FDA to ensure that Orange Book listings are correct: nei-
ther underinclusive nor overinclusive. Once this point is appreciated,
aaiPharma's appeal to these subsections loses much of its force. The
"failure to contain" and "failure to file" language in subsections (d)(6)
and (e)(4) makes sense if, as we suggest, these provisions simply
require the FDA to ensure that patent lists are submitted in a timely
fashion. It might also make sense if Congress had intended to require
the FDA to police only improper refusals to list patents in the Orange
Book. But it seems odd language in which to articulate a general FDA
duty to ensure that Orange Book listings are correct. We conclude that
if Congress had meant for the FDA to ensure that Orange Book list-
ings are neither underinclusive nor overinclusive, it would have not
have used the language it did in subsections (d)(6) and (e)(4).
Second, the FDA's reading of the statute is reasonable in light of
the division of intellectual labor established by the Hatch-Waxman
Act. The FDA points out that the whole point of the Act's paragraph
IV certification scheme is to let private parties sort out their respec-
tive intellectual property rights through patent infringement suits
while the FDA focuses on its primary task of ensuring that drugs are
safe and effective. This division of labor is appropriate because the
FDA has no expertise in making patent law judgments. It seems
unlikely, then, that Congress intended to require the FDA to take on
the responsibilities urged upon it by aaiPharma. For all these reasons,
we conclude that the FDA's conception of its role in Orange Book
listings as purely ministerial rests on a permissible construction of
§ 355.
aaiPharma also contends that the FDA's refusal to police the cor-
rectness of Orange Book listings is arbitrary and capricious in viola-
tion of the APA because it delegates the FDA's statutory
responsibilities to private parties. aaiPharma claims that it is arbitrary
for the FDA to allow NDA holders, in their unreviewable discretion,
to determine whether eligible patents are listed in the Orange Book.
According to aaiPharma, the inevitable result of the FDA's policy is
that similarly situated patent holders will be treated differently. We
19
are unpersuaded. The first problem with the argument is that by
accusing the FDA of wrongfully delegating its statutory duties to
NDA holders, aaiPharma assumes that the FFDCA imposes these stat-
utory duties on the FDA in the first place. This, of course, is the very
question at issue. As we have already explained, the FDA's conclu-
sion that it has no statutory duty to police the correctness of Orange
Book listings rests on a permissible construction of the statute. Fur-
ther, we think that the FDA has provided a reasoned explanation for
its policy that is sufficient to satisfy the standard of review set forth
in Motor Vehicle Mfrs. Ass'n of the United States, Inc. v. State Farm
Mutual Auto. Ins. Co., 463 U.S. 29, 43 (1983). In State Farm the
Supreme Court explained that the scope of review under the arbitrary
and capricious standard is narrow. We must ensure that "the agency
[has] examine[d] the relevant data and articulate[d] a satisfactory
explanation for its action including a rational connection between the
facts found and the choice made." Id. (internal quotation marks and
citation omitted). An agency rule would normally be arbitrary and
capricious, however, if "the agency has relied on factors which Con-
gress has not intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its deci-
sion that runs counter to the evidence before the agency, or is so
implausible that it could not be ascribed to a difference in view or the
product of agency expertise." Id. In issuing its final rules regarding
the patent listing requirements imposed by Hatch-Waxman, the FDA
explicitly considered objections to its proposed § 314.53(f). Two
commenters argued that the FDA should "ensure that the patent infor-
mation submitted to the agency is complete and applies to a particular
NDA." Abbreviated New Drug Application Regulations, Patent and
Exclusivity Provisions, 59 Fed. Reg. 50,338, 50,345 (Oct. 3, 1994).
The FDA responded that it did not have "the resources or the exper-
tise to review patent information for its accuracy and relevance to an
NDA." Id. It also pointed out that an NDA applicant's potential liabil-
ity for submitting untrue statements of fact to the agency would pro-
vide some check against abuse of the listing process. Finally, the
agency observed that the informal procedure described in § 314.53(f)
had proven effective in the past because "most NDA holders have
amended or corrected their patent information after FDA has
informed them of a dispute." Id. These explanations of the FDA's
position are not especially detailed, but we cannot say the agency's
20
decision making was arbitrary and capricious. As we have explained,
the FDA was asked by commenters to take on enforcement responsi-
bilities that are not clearly imposed by its governing statute. When an
agency has discretion about whether to take on enforcement responsi-
bilities, an explanation that it lacks the resources and the expertise to
do so is enough to satisfy the requirement of reasoned agency deci-
sion making articulated in State Farm.
None of this is to say that we are unsympathetic to aaiPharma's
concerns. We agree with aaiPharma that Hatch-Waxman protects the
intellectual property rights of third-party patentees and that, if the
'853 patent claims Prozac, aaiPharma is entitled to enjoy the benefits
of the thirty-month stay. Ultimately, aaiPharma's argument boils
down to the plausible claim that if NDA holders have a statutory obli-
gation to submit the correct list of patents for publication in the
Orange Book and the failure to comply with that obligation deprives
third parties of benefits conferred by Congress, there must be some
mechanism to enforce this obligation. Because the FFDCA clearly
does not allow private enforcement of an NDA holder's listing obliga-
tions, aaiPharma concludes that enforcement responsibility must fall
on the FDA and that the agency's refusal to accept that responsibility
is arbitrary and capricious. Although we find some force in this argu-
ment, we cannot accept the proposition that an agency's failure to fill
an enforcement gap created by a statute is necessarily arbitrary and
capricious.8 We conclude that until Congress takes further action to
address the enforcement gap in Hatch-Waxman's patent listing provi-
sions, the FDA may persist in its purely ministerial approach to the
Orange Book listing process.
____________________________________________________________
8
We are encouraged to learn that there does appear to be at least one
mechanism for enforcing an NDA holder's obligation not to list patents
that do not claim its approved drug. Generic drug manufacturers, state
agencies, and consumer groups have begun to bring antitrust suits against
NDA holders who seek to use improper Orange Book listings to extend
their monopoly power. See In re Buspirone Patent Litigation, 185 F.
Supp. 2d 363 (S.D.N.Y. 2002). The Federal Trade Commission has also
begun to address the potentially anticompetitive effects of improper
Orange Book listings. See Prepared Statement of the Federal Trade Com-
mission Before the Committee on Commerce, Science, and Transporta-
tion, United States Senate (April 23, 2002), available at
www.ftc.gov/os/2002/04/pharmtestimony.htm.
21
V.
For the foregoing reasons, the district court's order rejecting aai-
Pharma's APA challenge is affirmed.
AFFIRMED
22