FDA Prevails in Challenge Over Methylphenidate ANDA Rating Downgrade, But the Decision is Appealed; Meanwhile, the Agency Flip-Flops on Dexmethylphenidate Bioequivalence Requirements

By Kurt R. Karst –

Earlier this week, the U.S. District Court for the District of Maryland unsealed a 73-page Opinion handed down on July 29, 2015, along with an Order, in a challenge brought by Mallinckrodt Inc. (“Mallinckrodt”) last November after FDA downgraded from “AB” to “BX” the Therapeutic Equivalence (“TE”) rating for Mallinckrodt’s generic version of CONCERTA (methylphenidate HCl) Extended-Release Tablets, 27 mg, 36 mg, and 54 mg, approved under ANDA 202608.  According to FDA, “an analysis of adverse event reports, an internal FDA re-examination of previously submitted data, and FDA laboratory tests . . .  have raised concerns that the products may not produce the same therapeutic benefits for some patients as the brand-name product, Concerta. . . .”  FDA also revised the Agency’s Draft Guidance on Methylphenidate Hydrochloride (“2014 Draft Guidance”), changing the bioequivalence metrics for approval of generic CONCERTA.  The district court granted FDA’s Motion to Dismiss with respect to three of the five counts in the Complaint and granted summary judgment in favor of FDA with respect to the two remaining counts. 

As we previously reported, Mallinckrodt alleged in the company’s five-count Complaint violations of the Administrative Procedure Act (“APA”) and a direct cause of action under the Fifth Amendment’s Due Process Clause:

• Count I: Alleges a violation of the APA because FDA’s TE rating downgrade was done without a hearing, thereby violating Mallinckrodt’s Fifth Amendment due process rights in violation of 5 U.S.C. 706(2)(B).
• Count II: Asserts a direct right of action under the Fifth Amendment based on FDA’s failure to provide Mallinckrodt a hearing in conjunction with the TE rating downgrade.
• Count III: Alleges a violation of the APA insofar as FDA’s TE rating downgrade was in excess of its statutory authority in violation of 5 U.S.C. § 706(2)(C), because “FDA has no authority to take a drug off the market without following the procedures set forth in 21 U.S.C. § 355(e).”
• Count IV: Alleges a violation of the APA insofar as FDA issued the 2014 Draft Guidance without first going through the required notice-and-comment procedure.   
• Count V: Alleges a violation of the APA insofar as FDA’s TE rating downgrade was arbitrary and capricious because it did “not satisfy the evidentiary standard set forth in the Orange Book’s description of code BX[,]” was “not the product of reasoned decisionmaking, is not rationally related to the facts, and/or does not account for evidence contrary to its conclusions.”

Judge Deborah K. Chasnow divided her analysis of the allegations into three parts, first tacking Counts I, III, and V (APA claims challenging FDA’s TE rating downgrade), then moving on to Count IV (APA claims challenging FDA’s issuance of the 2014 Draft Guidance), and finally, addressing Count II (Fifth Amendment due process right of action). 

With respect to Counts I, III, and V, Judge Chasnow did not view FDA’s TE rating downgrade as final agency action subject to challenge; however, she left open the litigation door if FDA ultimately pursues withdrawal of the ANDA.  We finally get to that conclusion on page 35 of the decision, where Judge Chasnow writes:

FDA’s reclassification of the drug’s TE rating is not a final agency action, but rather appears to be an intermediate step taken by FDA to inform the public that Mallinckrodt’s drug may not be therapeutically equivalent and therefore have “the same” clinical effect as Concerta. . . .  The record also indicates that the agency’s position concerning the therapeutic equivalence of Mallinckrodt’s product is a tentative one: FDA indicates that it may take steps in the future to remove Mallinckrodt’s product from the market if the drug’s TE is not established, but at this time it has not made a final decision as to the product’s TE or that Mallinckrodt’s ANDA must be removed from the market. . . .  FDA has not instigated formal proceedings to withdraw Mallinckrodt’s product from the market, it has simply indicated that pending further review it may choose to instigate a withdrawal proceeding if it determines that Mallinckrodt’s product is not TE. . . .  Although FDA has asked Mallinckrodt voluntarily to withdraw its ANDA, it has not compelled or ordered Mallinckrodt to take any action. . . .  Should FDA choose to instigate a withdrawal proceeding, then all procedures required under 21 U.S.C. § 355(e), including notice and hearing, would apply, and if FDA makes a determination following these proceedings that Mallinckrodt’s drug is not therapeutically equivalent to Concerta and revokes its ANDA approval, this final agency decision would be subject to judicial review.

Moving on to Count IV, Judge Chasnow concluded that the 2014 Draft Guidance “was an interpretive rule rather than a legislative rule, and therefore the agency did not violate the APA by failing to go through formal notice and comment procedures before issuing the document.”  Although Mallinckrodt argued that even if the 2014 Draft Guidance is an interpretive rule, FDA nevertheless violated the APA’s notice-and-comment requirements insofar as they apply to significant amendments to agency interpretive rules, Judge Chasnow pointed to the U.S. Supreme Court’s recent decision in Perez v. Mortgage Bankers Association that does away with the so-called “Paralyzed Veterans doctrine.”  As we previously posted, that doctrine had held that an agency must use notice-and-comment procedures as required under the APA when the agency wishes to significantly change its previous interpretation of a regulation, even if the original regulation was not one for which notice-and-comment rulemaking was required. 

With respect to Mallinckrodt’s assertion of a direct right of action under the Fifth Amendment based on FDA’s failure to provide Mallinckrodt a hearing in conjunction with the TE rating downgrade, Judge Chasnow concluded that Mallinckrodt failed to show that FDA has deprived the company of a property interest in its ANDA.  Moreover, Judge Chasnow was unconvined by Mallinckrodt’s “partial deprivation theory,” which is “premised on the fact that pharmacists will no longer automatically substitute [Mallinckrodt’s] for Concerta and fewer of its major distributors will purchase its drug due to its new TE rating, which will purportedly result in decreased market share and profits for Mallinckrodt.”  According to Judge Chasnow:

FDA’s reclassification of Mallinckrodt’s TE rating in the Orange Book did not deprive Mallinckrodt of its ANDA approval.  Mallinckrodt has argued that because of its new TE rating in the Orange Book pharmacists will no longer automatically substitute its drug for Concerta and fewer customers will purchase its drug, resulting in a loss of market share and profits.  Mallinckrodt has provided some evidence . . . of the anticipated impact on its market share, shortly following the TE rating change. . . .  Evidence of the impact on its market share and sales, however, does not show that its property right — the ability to sell its product lawfully — has been deprived by FDA and instead, shows third party and market reactions to FDA’s reclassification. . . .  FDA did not compel the pharmacists or Mallinckrodt’s customers to change their dispensing and buying habits.  It merely changed the drug’s TE classification in the Orange Book in accordance with its duty to provide updated drug information to the public on a regular basis.  Taking Mallinckrodt’s facts as true, it has failed to show a deprivation of its property interest by FDA. [(Emphasis in original; internal citations omitted.)]

Will Mallinckrodt appeal the decision?  Mallinckrodt initially commented that the company was “evaluating its options with respect to the court’s decision, including a possible appeal to the U.S. Court of Appeals for the Fourth Circuit.”  Well, that evaluation has concluded, and on August 12, 2015, Mallinckrodt appealed Judge Chasnow's decision to the Fourth Circuit (Notice of Appeal).

We found it quite interesting that shortly after Judge Chasnow issued her decision under seal, Intellipharmaceutics International Inc. (“Intellipharmaceutics”) issued a press release explaining the company’s travails with FDA over the bioequivalence requirements for FOCALIN XR (dexmethylphenidate HCl) Extended-release Capsules, a drug closely related to CONCERTA. 

We previously posted on the approval landscape for generic FOCALIN XR, explaining that FDA approved Intellipharmaceutics’ ANDA 078992 for the 15 mg and 30 mg strengths, but only tentatively approved the 5 mg, 10 mg, 20 mg, and 40 mg strengths.  It seems that FDA wants Intellipharmaceutics to supply new bioequivalence data – using updated bioequivalence metrics – but only with respect to the tentatively approved strengths.  That seems odd, no?  Just as odd, however, is the on-again, off-again (and now on-again) requirement that Intellipharmaceutics evaluate bioequivalence using FDA’s revised criteria.  Here’s how Intellipharmaceutics summarizes the volley with FDA:

• In November 2013, the FDA granted the Company tentative approvals for the 5 mg, 10 mg, 20 mg, and 40 mg strengths of its generic Focalin XR®.
• In June 2015, the FDA required that the Company demonstrate bioequivalence with Focalin XR® for the 40 mg strength, under new bioequivalence criteria, as a basis for the approval of each of the affected strengths.
• In July 2015, the FDA rescinded its June 2015 requirement that the Company demonstrate bioequivalence with Focalin XR® for the 40 mg strength, under new bioequivalence criteria, as a basis for the approval of each of the affected strengths.
• The FDA has now reinstated the requirement that the Company demonstrate bioequivalence with Focalin XR® for the 40 mg strength, under new bioequivalence criteria, as a basis for the approval of each of the affected strengths.  More specifically, in reverting to the requirement for a demonstration of bio-equivalence under new criteria, the FDA stated “Upon review, we have concluded that our rescission was issued in error.”