Corporate & Securities Law

FDA Citizen Petition Found To Be Objectively Baseless

By Sheppard Mullin Richter Hampton, LLP

FDA regulations provide that anyone can file a "Citizen Petition" to request that the FDA take, or refrain from taking, administrative action based on genuine safety, scientific, or legal concerns.  In recent years, owners of branded drugs approved by the FDA have sometimes filed Citizen Petitions on the eve of FDA approval of generic equivalents.  Such filings are often challenged in Court under the antitrust laws, with the plaintiffs asserting that such filings are simply a sham to delay generic entry and the resultant price competition.

In Louisiana Wholesale Drug Co. v. Sanofi-Aventis, 2008 U.S. Dist. LEXIS 3611 (S.D.N.Y.) the defendant Aventis had a 5 ½ year exclusive marketing rights for the drug Arava in 10 milligram (mg), 20 mg, and 100 mg strengths.  Arava is the branded version of leflunomide, a rheumatoid-arthritis drug.  Several generic manufacturers submitted Abbreviated New Drug Applications ("ANDAs") to the FDA seeking approval to market and sell generic equivalents at the expiration of the Aventis exclusive marketing period.  On the eve of such approval, Aventis filed a Citizen Petition which delayed final approval of the ANDAs.  The FDA denied the petition six months later.

Plaintiff was a wholesaler that purchased drugs, including Arava, from Aventis.  Its Complaint alleged that the Citizen Petition by Aventis was "objectively baseless" and filed simply for the purpose of delaying genetic entry, thereby preserving its ability to charge higher prices for Arava.  It alleged this violated Section 2 of the Sherman Act.  Aventis moved to dismiss the Complaint as barred by Noerr-Pennington immunity, lack of standing, and the failure to sufficiently allege relevant market and market power.  The Court denied the motion.

The Court noted that Noerr-Pennington immunity is not absolute and there is a sham exception.  As set forth by the Supreme Court PRE decision, the sham exception is satisfied when the lawsuit is objectively baseless in that no reasonable litigant could reasonably expect success on the merits, and the baseless suit conceals an attempt to directly interfere with a competitor's business relationships through use of a governmental process.  Professional Real Estate Investors, Inc. v. Columbia Picture Indus., 508 U.S. 49, 60-61 (1993).  Plaintiff alleged, and the FDA record showed, that Aventis' Citizen Petition was grounded on purported violations of labeling regulations by the ANDA applicants.  Specifically, they planned to cross refer to other brands and strengths when they themselves did not manufacture either the drug or strength indicated.  The FDA denied the petition in part because Aventis itself had used such cross references in similar circumstances.  Its petition also did not raise any new health or safety issues, or identify any new FDA regulations on labeling.  The Court found such allegations were sufficient at the pleading stage to satisfy the sham exception and prevent dismissal.

On the standing issue, the Court stated "It is beyond preadventure  …" that the Aventis petition decreased competition…." It rejected defendant's argument that, as a wholesaler rather than a competitor, plaintiff should be denied standing as it was not the most "efficient enforcer" of the antitrust laws.  As a direct purchaser from Aventis, plaintiff had to continue to pay the higher prices for Arava.  This constituted direct injury sufficient for standing.

Finally, on relevant market and market power, the Court held the relevant market was Arava and its generic equivalents was sufficient and consistent with Second Circuit authority.  Geneva Pharm. Tech. Corp. v. Barr Laboratories, Inc., 386 F. 3d 485 (2d Cr. 2006).  It rejected defendant's argument that other anti-rheumatoid treatments should be included, stating that at most this could raise an issue of fact which cannot be resolved in a motion to dismiss.

Authored by:

Carlton A. Varner

(213) 617-4146

cvarner@sheppardmullin.com

Full post as published by Antitrust Blog Review on March 12, 2008 (boomark / email).