FDA Says Tenth Circuit Should Say Adieu to Grandfather Drug Case Without Much Ado; Not So Fast, Says Cody/Lannett

By Kurt R. Karst –      

The court battle over the “new drug” status of Cody Laboratories, Inc.’s and Lannett Co., Inc.’s (collectively “Cody/Lannett’s”) Morphine Sulfate Oral Solution 20mg/mL drug product has taken a new turn.  FDA’s Motion to Dismiss the case on mootness grounds has been met with opposition from Cody/Lannett in court papers filed with the U.S. Court of Appeals for the Tenth Circuit late last week.

As we previously reported, in a November 16, 2010 decision, Judge Alan Johnson of the U.S. District Court for the District of Wyoming granted FDA’s Motion to Dismiss the case, which stems from FDA’s March 2009 Warning Letters to Cody/Lannett (among other companies) to stop manufacturing certain unapproved narcotic drugs, including morphine sulfate oral solutions.  Judge Johnson ruled that the court “does not have jurisdiction over any of the agency actions [Cody/Lannett] ask this Court to review, as the FDA has yet to complete a final agency action,” and that “[a]ny attempt to review such actions would be premature and contrary to law.”  Cody/Lannett raised three issues in the litigation: (1) FDA’s alleged determination that Cody/Lannett’s product is a “new drug;” (2) FDA’s alleged failure to develop an administrative record for its determination that Cody/Lannett’s Morphine Sulfate Oral Solution 20mg/mL product is a “new drug;” and (3) FDA’s alleged disparate treatment of Cody/Lannett’s standard review NDA compared to a competitor, which obtained priority NDA review status and NDA approval in January 2010.  Following Judge Johnson’s decision, Cody/Lannett appealed the decision to the Tenth Circuit.  On June 23, 2011, however, FDA approved Lannett Holdings, Inc.’s NDA No. 201517 for Morphine Sulfate Oral Solution, 100 mg per 5 mL (20 mg per mL). 

FDA says in its Motion to Dismiss that, as a result of the approval of NDA No. 201517, “there is no likelihood that FDA will undertake enforcement action against Cody for marketing unapproved morphine sulfate, which is what Cody sought to prevent when it filed its complaint.”  Moreover, according to FDA,

For this reason, the “grandfather” issue should be moot.  In order to make it a “live” issue, Cody would have to make a convincing case that the “grandfathering” issue presents a current case or controversy.  Among other things, Cody would have to state that it would withdraw its NDA if its product were found to be grandfathered, and that it would for some reason prefer to market its product as a “grandfathered” product rather than under its approved NDA.  Unless and until Cody makes such a showing, this issue is moot.

And with respect to Cody/Lannett’s issue of alleged unfair treatment, FDA says that it “is no longer a live controversy, and it cannot be resuscitated.”  “Cody now has approval, and even if it could prove that it was treated unfairly (which it cannot do), it does not (and cannot) cannot seek damages for this alleged unfair treatment;” thus, there is “no ‘effective relief’ the Court can grant on this issue, and it is moot,” according to FDA. 

Cody/Lannett swings back at FDA in its opposition to the Agency’s Motion to Dismiss, saying that “[f]rom the very beginning, the Government has sought at every turn to deny Cody/Lannett an opportunity for judicial review of the FDA’s actions,” and that FDA’s Motion to Dismiss “is simply the latest attempt by the Government to permanently insulate the FDA’s decision-making from judicial oversight.”  According to Cody/Lannett, FDA’s June 23rd approval of NDA No. 201517 did not moot the case:

If this appeal were to be dismissed at this point in the litigation, Cody/Lannett would be forced to endure forever the additional financial and administrative burdens of manufacturing and selling the Product under a NDA rather than as a grandfathered product.  Furthermore, Cody/Lannett would never have an opportunity to obtain judicial review of their disparate treatment claim, though Cody/Lannett would suffer ongoing harm as a result of such disparate treatment.  They would likely face similar disparate treatment by the FDA in the future. 

Among other things, Cody/Lannett notes that the manufacture and sale of its morphine sulfate under an approved NDA will result in significant administrative and financial burdens.  Although not specifically mentioned, one of those burdens may be the need to pay FDA annual product and establishment user fees.  In addition, operating under an approved NDA “creates a new opportunity for generic competitors to use Lannett’s NDA as the basis for the preparation of a simple ANDA application to become generic to Lannett’s formulation.”  Moreover, “FDA could still pursue enforcement actions with respect to past sales of the Product,” says Cody/Lannett.  Thus, the grandfather status of Cody/Lannett’s Morphine Sulfate drug product is not moot and is “still a live issue between the parties.”

Cody/Lannett’s disparate treatment claims are also live and subject to judicial review, according the their opposition papers, because Cody/Lannett “continue to suffer harm as a result of the FDA’s actions” – namely, the alleged loss of their once dominant 44% share of the Morphine Sulfate Oral Solution 20mg/mL market – and because the “disparate treatment claims are capable of repetition yet evading review.”  In particular, Cody/Lannett notes that the company manufactures and distributes two other “grandfathered” products – oxycodone and topical cocaine – for which Cody/Lannett  intends to seek NDA approval because of “FDA’s current, exceedingly narrow interpretation of the FDCA’s grandfather clause and given the FDA’s demonstrated willingness to engage in de facto enforcement against manufacturers and distributors of unapproved drugs without any form of due process.”  Cody/Lannett’s competitors, however, are also likely to seek NDA approval for these drugs, and as a result, Cody/Lannett “will be denied expedited treatment while a competitor will receive such expedited consideration.”  “Thus, Cody/Lannett are faced with the very real prospect of being in exactly the same position that they are in now in the very near future.”