Court Upends FDA’s Clinical Superiority Requirement for Granting Orphan Drug Exclusivity; Decision Leaves a Lot of Questions to Be Answered

By Michelle L. Butler & Kurt R. Karst –

As we recently reported, the U.S. District Court for the District of Columbia granted Depomed Inc.’s ("Depomed’s") Motion for Summary Judgment and ordered FDA to recognize orphan drug exclusivity for Gralise (gabapentin) Tablets “without requiring any proof of clinical superiority or imposing any additional conditions on Depomed.”  The court’s Memorandum Opinion is now available.  This decision, which finds that “the plain language of the exclusivity provisions of the Orphan Drug Act requires the FDA to recognize exclusivity for any drug that the FDA has designated and granting marketing approval,” Mem. Op. at 33 (emphasis added), has far-reaching implications for FDA’s orphan drug program (and perhaps beyond).

The facts of the case are discussed in our previous posts (here and here).  The court, in its September 5th opinion, decided the case on Chevron Step 1 grounds, which means that the court determined that “the plain language of the Orphan Drug Act requires the FDA to recognize exclusivity for Gralise.”  Id. at 18.  The court stated that the statute

employs the familiar and readily diagrammable formula, ‘if x and y, then z.’  Congress has crafted its command to the Secretary of the FDA in a manner that sets forth two circumstances – a drug that has been designated for a rare disease or condition, and the FDA’s approval of a marketing application for that drug – that, if present, result in a particular consequence: a seven-year period of abstinence regarding marketing approval for other such drugs.

Id. at 20.  Importantly, the court described the orphan drug exclusivity incentive not as a benefit conveyed to manufacturers, but rather as “a restriction of the FDA’s ability to approve the marketing of other such drugs for the same rare disease or condition (referred to herein as ‘new such drugs’) when a drug that has been designated as an orphan drug is approved for marketing.”  Id.  The court asserted that the statute “does not permit or invite discretion on the part of the FDA regarding whether or not to continue authorizing new such drug marketing applications once an orphan drug has been so designated and approved,” citing the fact that the statute specifically identifies only two exceptions to the grant of exclusivity.  Id. at 21 (citing 21 U.S.C. § 360cc(b), which provides exceptions if the manufacturer of a drug with marketing exclusivity cannot assure availability of the drug or provides written consent for approval of other applications).

The court rejected FDA’s arguments that the statute was ambiguous under the circumstances presented, and, therefore, permitted FDA to impose its clinical superiority requirements.  Id. at 22-26.  Among other things, the court stated that

[t]ry as they might, Defendants cannot square their insistence that the FDA has the discretion to address this situation with the fact that, under the statute, Congress did not give the FDA any discretionary authority to grant or deny exclusivity at all – rather, as mentioned previously, Congress forbade the FDA from granting any further approvals when the statutory conditions were met.

Id. at 25.  The court also stated that the structure of the statute “suggests that the intent of Congress was to provide the FDA with a merely ministerial role in the exclusivity process” and operated “by removing FDA discretion to approve the marketing of certain other drugs.”  Id. (emphasis in original).

The court also rejected FDA’s policy arguments that giving effect to the plain language of the statute would lead to an absurd result.  FDA argued that (1) affirming exclusivity for Gralise could permit Depomed to cut off new gabapentin entrants to the market without providing any benefit in the treatment of post-herpetic neuralgia ("PHN") and (2) such an interpretation could result in serial exclusivity for the same drug.  Id. at 27.  The court rejected both arguments.  As to FDA’s first policy argument, the court commented

This policy argument misses the mark by a mile.  To the extent that Defendants’ contention is that Congress never would have intended for a “me too” drug like Gralise to get a benefit that the legislature devised to entice new entrants into the rare-disease treatment market, Defendants’ point is unfounded—nothing in the statute even remotely suggests that Congress intended to incentivize only one sponsor to produce a particular drug (although Congress certainly could have specified as much), and general market forces provide a plausible reason for a legislative scheme that deliberately incentivizes multiple manufacturers of the same pharmaceutical product.  Nor can it be said that permitting Depomed to grasp the brass ring of exclusivity for Gralise is unfair to the manufacturers of the prior iterations of the drug, since each had every opportunity to seek exclusivity and failed to do so.  If, on the other hand, Defendants are making the . . . argument that it would be ‘absurd’ for the same drug as others already on the market to be permitted to cut off the development of new and improved versions, that result appears to be a function of granting a drug marketing exclusivity in any event – i.e., the statute plainly incentivizes investment in drugs for rare disease and conditions precisely because it prevents new (and potentially better) drugs from being adopted and marketed for that same condition – and this is inherent in the exclusivity statute. 

Id. at 29 (emphasis in original).  As to FDA’s second policy argument, that also fell flat with the court:

The second potentially absurd result that Defendants identify is a variation on this same theme—and fails for the opposite reason. . . .  As far as this Court can tell, Defendants are worried that interpreting the statute to mandate exclusivity whenever a drug has obtained designation and approval could lead to a situation in which sponsors that have exclusivity for a particular drug could simply tweak their formulation for that drug and resubmit applications for designation and approval after the initial exclusivity period has expired, thereby gaining successive exclusivity periods. . . .  However, under the statutory scheme as it currently exists, this result would only occur if the FDA permitted it to happen.

Id. at 30 (emphasis in original). 

Taken together, the court’s statements about the effect of exclusive approval could potentially be read to put in jeopardy FDA’s “same drug” regulations, which permit FDA to ignore a previously approved drug’s exclusivity in order to approve a “clinically superior” drug with the same active moiety that will be marketed for the treatment of the same orphan disease.  The court does not explicitly reach this conclusion, but some of the court’s statements about Congressional intent in providing for exclusivity and FDA’s lack of discretion with regard to matters of exclusivity could be read to suggest that, once exclusivity is granted, other drugs with the same active moiety for the same orphan indication cannot be approved during that period of exclusivity.  On the other hand, the court’s statements are generally in the context of whether FDA can decline to grant exclusivity in the first place as opposed to whether the exclusivity, once granted, is inviolable.

Interestingly, the court also notes that

as luck would have it for the FDA, the agency has the ability and the opportunity to control the circumstances under which marketing exclusivity attaches because the FDA is responsible for determining when to designate a drug as an orphan drug under section 360bb, and it is also the agency that has the duty of deciding when and under what circumstances a drug will be approved for marketing.

Id. at 21.  The court seems to be suggesting that, if FDA is unhappy with this turn of events, it can affect whether a drug ultimately obtains exclusivity by applying a stricter standard at the designation step.  Indeed, the court later states that “FDA could require designation applicants to show clinical superiority before granting their product orphan-drug designation. . . .”  Id. at 30. 

There are many initial questions raised by this decision, and there are likely more that will arise as we continue to think through the implications.  Here’s a short list of some of our initial questions:

• Will FDA appeal the decision?  What will the Agency do in the meantime – perhaps seek a stay of the decision?
• What effect will the decision have on pending ANDAs for gabapentin (citing Neurontin as the reference listed drug) that currently include the PHN indication, as well as ANDAs for generic Neurontin approved after the January 28, 2011 approval of Gralise?  Language in the opinion about the scope of exclusive approval suggests that FDA cannot approve any applications (including ANDAs) that contain the same active ingredient (gabapentin) as Gralise for the orphan indication during the period of orphan drug exclusivity.  Would the sponsors of those pending ANDAs need to now “carve out” the PHN indication?
• What effect will the decision have on other drugs with orphan drug designations that obtained approval but were unable to obtain orphan drug exclusivity due to an inability to demonstrate clinical superiority?  Will FDA now grant exclusivity to those drugs?
• What effect will the decision have on FDA’s ability to approve a second drug during a period of orphan drug exclusivity on the basis that the second drug is not “such drug” as the approved drug (i.e., is not the “same drug” under FDA’s regulations) on the basis that it is clinically superior to the approved drug? 
• What effect will the decision have on FDA’s designation process?  Will FDA impose a higher bar at the designation step for drugs that are claimed to be clinically superior?  How can a higher bar to designation be squared with other benefits under the Orphan Drug Act (e.g., tax credits)?  
• What effect will the decision have on FDA’s orphan drug regulations?  If FDA accedes to the court’s reasoning, the current regulations, at least with respect to FDA’s recognition of exclusive approval at 21 C.F.R. § 316.34(c), would need to be revised.  Would FDA take a new look at the clinical superiority requirements more broadly?