District Court Rules for FDA in Battle Over the Scope of 3-Year Exclusivity in the Context of Dueling Tacrolimus NDAs

By Kurt R. Karst – 

For months now we’ve been waiting patiently for anything out of the U.S. District Court for the District of Columbia with respect to the case that Veloxis Pharmaceuticals, Inc. (“Veloxis”) initially lodged against FDA in December 2014 (and then re-upped in January 2015) after the Agency tentatively approved the company’s 505(b)(2) NDA 206406 for ENVARSUS XR (tacrolimus extended-release tablets), 0.75 mg, 1 mg, and 4 mg, for prophylaxis of organ rejection in kidney transplant patients, citing a period of 3-year exclusivity expiring on July 19, 2016 for another drug – Astellas Pharma US, Inc.’s (“Astellas’s”) 505(b)(1) NDA 204096 for ASTAGRAF XL (tacrolimus extended-release capsules), 0.5 mg, 1 mg, 5 mg, approved on July 19, 2013 for prophylaxis of organ rejection in adult patients receiving kidney transplants – as the basis for the ENVARSUS XR tentative approval.  You see, almost everything in the court docket was placed under seal, including FDA’s rather lengthy exclusivity determination, putting us and the rest of the world in the dark as to what was going on.  The silence was finally broken late last week when the Judge Reggie B. Walton issued an Order denying Veloxis’ Motion for Summary Judgment, and granting FDA’s Motion to Dismiss, or in the Alternative, Motion for Summary Judgment.  But Judge Walton’s Memorandum Opinion was placed under seal.  That Opinion was released earlier this week. 

We won’t get into all of the nitty-gritty details of the case.  After all, we put up a rather lengthy post shortly after the lawsuit was filed (see here).  In sum, the case has to do with the scope of 3-year new clinical investigation exclusivity and whether or not that exclusivity operates to block the approval of a 505(b)(2) application (referred to by the court as a “second-in-time 505(b)(2) drug”) that does not rely on FDA’s previous approval of a drug with exclusivity (referred to by the court as a “first-in-time 505(b) drug”), but that shares conditions of approval with the exclusivity-bearing first-in-time 505(b) drug. 

As we previously noted, Veloxis alleged that FDA’s decision to deny final approval of ENVARSUS XR in light of the 3-year exclusivity for ASTAGRAF XL is erroneous as a matter of law and a violation of the Administrative Procedure Act (“APA”) for three independent reasons:

First, according to the unambiguous statutory language of the [FDCA], Astagraf XL was never entitled to three-year exclusivity.  For drug products like Astagraf XL, exclusivity is only available if an application for approval was submitted to FDA after October 2008.  Because the initial NDA for Astagraf XL was submitted in 2005, FDA’s grant of exclusivity to Astagraf XL exceeded its statutory authority.

Second, even if Astagraf XL is eligible for three-year exclusivity (and it is not), that exclusivity, as a matter of law, cannot block approval of Envarsus XR because the Envarsus XR NDA did not rely upon any of the studies or data supporting approval of Astagraf XL.

Third, even if the reliance requirement was read out of the FDCA, Envarsus XR still would not be subject to the exclusivity granted Astagraf XL because Envarsus XR does not share conditions of approval with Astagraf XL.  In this regard, FDA arbitrarily and capriciously concluded that the two drugs share the same conditions of approval, ignoring the significant clinical differences between the two drugs and the material differences in the package inserts, and abandoning more than 20 years of its own precedent.

Veloxis later alleged a fourth reason: that FDA erroneously identified an Astellas clinical study in the ASTAGRAF XL NDA – Study 158 – as a “new clinical investigation” pursuant to FDC Act § 505(c)(3)(E)(iii).  Judge Walton refused to consider the argument, however, saying that it “was neither brought to the FDA’s attention prior to this lawsuit nor even alluded to in the plaintiff’s complaint,” and that “[b]ecause [Veloxis] did not give the FDA an opportunity to consider the merits of its arguments. . . , the plaintiff has waived judicial review of the arguments related to it.”

As to Veloxis’ first argument – that FDA should not have granted 3-year exclusivity for ASTAGRAF XL in the first place because it is an “old antibiotic” not subject to changes made to the FDC Act by the 2008 QI Program Supplemental Funding Act of 2008 (“QI Act”) conferring eligibility for exclusivity to new NDAs for “old antibiotics” – Judge Walton was not convinced (as we thought might be the case).  According to Judge Walton:

Under the FDCA, as amended by the QI Act, the Court agrees with the parties that the language is clear that an old antibiotic can be afforded three-year exclusivity to the extent that it was the subject of a new NDA that was submitted after October 8, 2008.   Here, although an Astagraf XL NDA was pending before October 2008, it was eventually withdrawn in 2009 and a new Astagraf XL NDA was submitted in 2012, which contained clinical information absent from the previous Astagraf XL NDA.  Under these circumstances, Astagraf XL is eligible for the FDCA’s three-year exclusivity.

To the extent that Congress did not address the precise conflict presented here, i.e., the FDCA is silent as to the withdrawal and “resubmission” of an old antibiotic NDA that was pending on or before October 2008,7 the FDA’s interpretation of the statute to allow three-year exclusivity for an old antibiotic that is the subject of a withdrawn and resubmitted NDA is reasonable. [(Emphasis in original; internal citations omitted)]

Moving on to what we think is the meat of the case – Veloxis’ second and third arguments – Judge Walton refused to accept Veloxis’ arguments under a Chevron analysis.

As to Veloxis’ “relied upon” argument, Judge Walton said that the plain text of the FDC Act supports FDA.  Here’s the set-up to that conclusion:

The parties’ conflicting interpretations of the term “relied upon” in [FDC Act § 505(c)(3)(E)(iii)] stand in stark contrast to one another.  On the one hand, the plaintiff argues that the term “relied upon” “unambiguously requires” that the three-year exclusivity of a first-in-time 505(b) drug, i.e., the drug that is the subject of a first-in-time 505(b) NDA, can block a second-in-time 505(b)(2) drug from market entry, i.e., the drug that is the subject of a second-in-time 505(b)(2) NDA, only if the second-in-time 505(b)(2) NDA has “relied upon” the first-in-time 505(b) NDA.  Specifically, the plaintiff contends that there must be “an overlap” between the “new clinical investigations” in both NDAs.  On the other hand, the FDA argues that the contested term “does not . . . mean that reliance is required to trigger exclusivity.”  Rather, according to the defendant, the term “is used only to distinguish [between] 505(b)(1) [NDAs] from 505(b)(2) [NDAs],” because it is included in the statutory provision “as part of the lengthier [FDCA] definition of a 505(b)(2) [NDA].”  In other words, “[n]owhere in this provision does . . . [it] say that a[] [second-in-time 505(b)(2) NDA] will be blocked only if the [clinical] studies it ‘relied upon’ were . . . included in the . . . [first-in-time 505(b) NDA].”  [(Emphasis in original; internal citations omitted)]

From there, Judge Walton parsed out the statutory text, saying that although the the FDC Act does not define the term “relied upon,” the statutory provision is clear as to how 3-year exclusivity operates, and that it can be separated into two components: “entitlement to exclusivity and scope of that exclusivity.”  As to the scope component, Judge Walton concluded:

[T]he FDA may not approve a second-in-time NDA that shares “conditions of approval” with the first-in-time 505(b) drug.  Moreover, the FDA is prohibited only from approving a second-in-time NDA that is a 505(b)(2) NDA, as [FDC Act § 355(c)(3)(E)(iii)] does not speak to a second-in-time 505(b)(1) NDA. . . .  Exclusivity under [FDC Act § 355(c)(3)(E)(iii)] is triggered by an overlap in the conditions of approval between the first-in-time 505(b) drug and the second-in-time 505(b)(2) NDA and not an overlap between the “new clinical investigations” supporting the first-in-time 505(b) NDA and second-in-time 505(b)(2) NDA. Indeed, it would frustrate Congress’s intent to incentivize new drug development through, among other means, marketing exclusivities, if a second-in-time 505(b)(2) NDA could escape the reach of the three-year exclusivity by simply relying on a 505(b) NDA different than the first-in-time 505(b) NDA. That result would reduce the incentive of the sponsor of the first-in-time 505(b) NDA to research and develop new drugs.  [(Emphasis in original; internal citations omitted)]

And even if the statute was not clear, and the term “relied upon” is somehow ambiguous, Judge Walton said in a footnote (note 14) that he would still rule for FDA on this issue:

Assuming the term “relied upon” in 21 U.S.C. § 355(c)(3)(E)(iii) is somehow ambiguous, and it became necessary to proceed to the second step of the Chevron analysis, the Court finds that the FDA has reasonably interpreted the term in the context of the statute.  As already explained, the FDA’s interpretation of “relied upon” is incongruous with neither the words of the statute nor the intent of Congress.  Further, the FDA’s interpretation is consistent with its past practices.

Given Judge Walton’s emphasis on “conditions of approval” when considering Veloxis’second argument, it wasn’t difficult to predict what his reasoning would be when evaluating Veloxis’ third argument – that ENVARSUS XR and ASTAGRAF XL do not share the same conditions of approval. 

Although Veloxis and FDA agreed that the scope of 3-year exclusivity for ASTAGRAF XL is limited to the conditions of approval of the drug based on the new clinical investigations conducted (or sponsored) by Astellas in support of NDA 204096, the parties differed on what the relevant conditions of approval are.  According to FDA:

the [three-year] exclusivity for Astagraf XL cover[ed] [the Envarsus XR extended release] dosage form and its once-daily dosing regimen [for de novo patients], both of which were changes from the previously approved tacrolimus drug, Prograf, and were supported by new clinical investigations essential to the approval of Astagraf XL.  Because Envarsus XR is also an [extended release] dosage form of tacrolimus with a once-daily dosing regimen [for de novo patients], [the] FDA determined . . . that Envarsus XR shares Astagraf XL’s exclusivity-protected conditions of approval.

Veloxis argued that despite these shared conditions, myriad other differences differentiated the drugs, making the 3-year exclusivity for ASTAGRAF XL inapplicable to ENVARSUS XR.

Citing the District Court’s decision in AstraZeneca Pharms. LP v. FDA, 872 F. Supp. 2d 60, 80 (D.D.C. 2012) (see our previous posts here and here), Judge Walton wrote:

The scope of Astagraf XL’s three-year exclusivity can only be as broad as the conditions of approval that were based upon the new clinical investigations identified in the Astragraf XL NDA. . . .  The plaintiff makes much of the fact that despite the similarities between Astagraf XL and Envarsus XR—that is, they are both once-daily, extended release tacrolimus formulations— there are many other “clinically meaningful” differences between Astagraf XL and Envarsus XR.  But that is beside the point.  The effect of marketing exclusivity in [FDC Act § 505(c)(3)(E)(iii)] turns on whether a second-in-time 505(b)(2) NDA shares any conditions of approval with the first-in-time 505(b) drug granted exclusivity. [(Emphasis added)]

It’s unclear whether or not Veloxis will appeal Judge Walton’s decision to the U.S. Court of Appeals for the District of Columbia Circuit.  The company might decide to forgo an appeal and choose “door number 2” previously offered by FDA: accept approval of an indication outside the scope of exclusivity granted to Astellas for ASTAGRAF XL (i.e., for prophylaxis of organ rejection for use in conversion patients).  As for the long-term effects of the decision, we’ll see.  Companies are increasingly using the 505(b)(2) NDA route to approval, so this issue is almost certain to come up again.