Resistance Or Defiance? The FDA And The 11th Circuit Spar Over Statute On Orphan Drug Statutory Exclusivity

By Chad Landmon, partner, and Gabriella McIntyre, associate, Axinn, Veltrop & Harkrider LLP

Last September, the 11th Circuit Court of Appeals sided with a challenge to the FDA’s long-standing interpretation of the Orphan Drug Act by broadening the scope of orphan drug exclusivity under step one of the Chevron legal analysis. The FDA has officially pushed back, stating in no uncertain terms that the 11th Circuit’s holding will not otherwise change the FDA’s interpretation beyond the specific drugs involved in the court challenge. Despite the FDA’s clarifying notice, the conflicting interpretation by the 11th Circuit has created uncertainty for drug developers seeking orphan drug exclusivity for narrow drug indications and for generic drug companies that may be planning to develop a generic version of an orphan drug. And the FDA’s resistance to the 11th Circuit’s order raises further questions about the status of the Chevron framework and how courts may scrutinize the FDA’s decisions in the future.

The Orphan Drug Act Incentivizes Drug Development… Maybe

Much like the Hatch-Waxman Act, the Orphan Drug Act (the Act) serves competing goals of encouraging drug development and preserving public access to innovative and sometimes life-saving treatments. Orphan drugs — defined as those treating a disease or condition impacting fewer than 200,000 patients in the U.S.¹ — are a key priority for the FDA, which has authority under the Act to grant Orphan Drug designation to drugs or biological products that prevent, diagnose, or treat a rare disease or condition.² Such a designation gives orphan drug sponsors tax credits for qualified clinical trials, exemption from user fees, and, most importantly, the potential for seven years of market exclusivity from “the same drug for the same disease or condition” following FDA approval.³ As intended, these incentives prompt orphan drug sponsors to continue developing drugs for rare conditions that otherwise might not exist because, due to these drugs’ limited applicability, the cost of investment and research may outweigh any potential profit.

If profit is unlikely or impossible, it goes without saying that a drug company will be less likely to pursue that treatment in favor of something more lucrative. Preserving the Act’s clear incentives is therefore vital to encourage new treatments for rare diseases.

For the last 30 years, the FDA has consistently tied orphan drug exclusivity to the use or indication for which the drug was approved. The FDA has interpreted the Act’s “same disease or condition” to allow it to approve, for example, separate drugs treating the same condition but indicated for use on different populations, such as adults and children. But the 11th Circuit recently disagreed with the FDA’s long-standing practice, deciding based on a Chevron analysis that the Act unambiguously requires the FDA to block approval of another company’s application for the same drug for the entire disease or condition for which the drug is granted Orphan Drug designation, regardless of the scope of its approved indication.⁴

This shakeup obviously impacts drug developers seeking narrow indications of drugs that, based on the 11th Circuit’s ruling, may be barred from market entry pending a related drug’s seven-year period of exclusivity. Note: may be barred.⁵

In an act of apparent resistance, the FDA announced on Jan. 24, 2023, that it will apply the 11th Circuit’s ruling only to the drugs at issue and will otherwise “continue to apply its regulations tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved to matters beyond the scope of that order.”⁶  The FDA’s intended course places it in direct conflict with the 11th Circuit, exposing the FDA to more lawsuits by companies wishing to keep competing orphan drug indications off the market, creating uncertainty for orphan drug developers seeking approval and exclusivity for narrower indications, and lending credence to administrative law scholars prophesying Chevron’s death.

Deference Or Nothing: The Catalyst Case And The FDA’s Response

The two-part test⁷ articulated in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.⁸ for courts reviewing a decision by a federal agency has undergone unique scrutiny in recent years following political shifts in the courts, including the Supreme Court. Many scholars and some newer members of the Supreme Court⁹ have questioned whether Chevron deference is the appropriate constitutional standard upon which courts review agency decisions, while other scholars have suggested that the legal standard articulated in Skidmore v. Swift¹⁰ will reemerge as the dominant form of deference at the Supreme Court.¹¹

Chevron’s conspicuous absence from the Supreme Court’s rulings last term may indeed indicate a quiet death, but the district courts have continued to at least nominally use the Chevron framework to evaluate agencies’ interpretations of statutory language. Without an explicit statement from the Supreme Court or adverse congressional action, any shift away from Chevron will likely be gradual and agency-specific. Perhaps more enlightening, then, are the agencies’ responses to adverse decisions using the Chevron framework and the impact those responses may have on future courts reviewing agency decisions.

Catalyst Pharmaceuticals, Inc. sued the FDA in the Southern District of Florida in June 2019, challenging the FDA’s approval of Jacobus Pharmaceutical Company’s application for Orphan Drug designation under the Administrative Procedure Act. Catalyst and Jacobus each received Orphan Drug designation for their amifampridine drugs, which treat Lambert-Eaton myasthenic syndrome (LEMS). The FDA approved Catalyst’s Firdapse, indicated to treat LEMS in adults, in November 2018 and Jacobus’s Ruzurgi, indicated to treat LEMS in children, in May 2019. Catalyst argued, inter alia, that the plain language of Section 360cc(a) prohibited the FDA from approving Ruzurgi because it undisputedly is the “same drug” as Firdapse and treats the “same disease or condition.”¹² Citing Chevron, the district court affirmed a magistrate ruling that “the phrase ‘same disease or condition’ in § 360cc(a) of the Orphan Drug Act is ambiguous and that the FDA’s interpretation of the phrase [is] reasonable.”¹³ The district court agreed that “it is unclear whether [“same disease or condition”] refers to the use for which the drug is approved after it submits its [NDA] — here, LEMS for adults — or the disease or condition for which it…received orphan [drug] designation — LEMS for all patients.”¹⁴ Thus, the district court concluded that the FDA reasonably interpreted the statute to tie orphan drug exclusivity to the uses or indications for which the drug was approved and that the FDA did not err by approving Jacobus’ Ruzurgi. Catalyst appealed.

The 11th Circuit reversed on appeal, concluding that “same disease or condition” unambiguously foreclosed the FDA’s interpretation of the orphan drug exclusivity provision. In so holding, the court concluded that “the district court erred in treating this as a Chevron-deference case and deferring to the FDA’s interpretation of the statutory language.”¹⁵

The ordinary and plain meaning of “same drug or condition” read in the context of this sentence yields only one result — the term unambiguously refers to the “rare disease or condition” designated under § 360bb. Thus, the scope of exclusivity under § 360cc(a) is determined by what has been designated under § 360bb.¹⁶

The 11th Circuit reversed the district court at Chevron step one and granted summary judgment for Catalyst, ordering the FDA to set aside its approval of Jacobus’ drug.

The FDA originally called on Congress to affirm its interpretation of the statute by clarifying language in either its FDA user fee program or the FDA Omnibus Reform Act, but the desired provisions were ultimately left out of both. Meanwhile, the FDA stopped taking action on exclusivity requests altogether,¹⁷ and orphan drug sponsors already approved for narrow indications face costly uncertainty about the status of their seven-year exclusivity.

On Jan. 24, 2023, in an attempt to provide orphan drug developers with more clarity, the FDA announced that it would comply with the 11th Circuit’s order to set aside approval of Jacobus’ drug, but it “intends to continue to apply its regulations tying the scope of orphan drug exclusivity to the uses or indications for which a drug is approved to matters beyond the scope of that order.”¹⁸ Adopting a “deference or nothing” attitude, the FDA’s announcement effectually vacates the 11th Circuit’s Chevron holding for all but the specific drugs at issue in the Catalyst case.

Watch Out For More Court Challenges To Orphan Exclusivity

As discussed above, and according to the FDA, the 11th Circuit’s interpretation of Section 360cc(a) may “affect the incentives for research and development of medical products for rare diseases.”¹⁹ Under the FDA’s existing interpretation of the Act, “drug companies can continue to study and seek approval for other uses of the drug for that disease or condition, such as pediatric indication for a product that had been approved for adults.”²⁰ But, however tailored to the public interest, the FDA’s notice does not erase the 11th Circuit’s statutory interpretation, nor does it resolve the uncertainty many companies now face about their orphan drug exclusivities. Until Congress intervenes or the FDA changes its approval philosophy, the 11th Circuit’s conflicting interpretation of Section 360cc(a) will invite additional court challenges to the FDA’s orphan drug approvals. Despite the Supreme Court’s denial of certiorari, the FDA’s resistance to the 11th Circuit’s Chevron holding may further erode Chevron’s status or at least cause courts to more explicitly broaden their holdings to combat resistance from apparently defiant agencies.

References:

1. By statute, the “rare disease[s] or condition[s]” for which orphan drugs are created affect less than 200,000 patients in the United States or otherwise provide “no reasonable expectation” of profitability. Orphan Drug Act of 1983, Pub. L. No. 97–414, 96 Stat 2049 (Jan. 4, 1983).
2. FDA, Designating an Orphan Product: Drugs and Biological Products (Jul. 8, 2022), available at https://www.fda.gov/industry/medical-products-rare-diseases-and-conditions/designating-orphan-product-drugs-and-biological-products.
3. 21 C.F.R. § 360cc(a)(2).
4. See Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299, 1305 (11th Cir. 2021), cert. dismissed sub nom. Jacobus Pharm. Co. v. Catalyst Pharms., 142 S. Ct. 2904 (2022).
5. Running conflicts between FDA’s practice and the 11th Circuit’s ruling have rendered the future of many companies’ orphan drug exclusivities uncertain.
6. Clarification of Orphan-Drug Exclusivity Following Catalyst Pharms., Inc. v. Becerra; Notification, 88 F.R. 4086 (Jan. 24, 2023), https://www.federalregister.gov/documents/2023/01/24/2023-01179/clarification-of-orphan-drug-exclusivity-following-catalyst-pharms-inc-v-becerra-notification [hereinafter Clarification]; see also 21 CFR 316.31(b) (“Orphan-drug exclusive approval protects only the approved indication or use of a designated drug.”).
7. Setting forth the legal test for when the court should defer to an agency’s interpretation of a relevant statute, Chevron first requires the court to determine (1) whether the statute in question is ambiguous, and, if so, (2) whether the agency’s interpretation of the statute is reasonable. If the court determines that the statute is not ambiguous, the inquiry ends there. See Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).
8. 468 U.S. 837 (1984).
9. See, e.g., Buffington v. McDonough, 143 S. Ct. 14, 22 (2022) (Gorsuch, J., dissenting) (“At this late hour, the whole project deserves a tombstone no one can miss.”)
10. 323 U.S. 134, 140 (1944) (evaluating the weight of an agency’s interpretation based on “the thoroughness evident in its considerations, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control”).
11. See Richard J. Pierce, Is Chevron Deference Still Alive?, GW Reg. Studies Ctr. (Jul. 14, 2022), available at https://regulatorystudies.columbian.gwu.edu/chevron-deference-still-alive.
12. Catalyst, 14 F.4th at 1305.
13. Id. at 1305; see also Catalyst Pharms., Inc. v. FDA., No. 19-CV-22425, 2020 WL 5792595, at *8 (S.D. Fla. Sept. 29, 2020), rev'd and remanded sub nom. Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021).
14. Catalyst, 2020 WL 5792595, at *6 (internal quotations and citations omitted).
15. Catalyst, 14 F.4th at 1312.
16. Id. at 1308.
17. George A. O’Brien, Orphan Exclusivity in Catalyst’s Aftermath: FDA Inaction Leaves Rare Disease Sponsors in Limbo (Nov. 30, 2022), available at https://www.mayerbrown.com/en/perspectives-events/publications/2022/11/orphan-exclusivity-in-catalysts-aftermath-fda-inaction-leaves-rare-disease-sponsors-in-limbo?source=email.
18. See Clarification, supra note 7.
19. FDA, FDA’s Overview of Catalyst Pharms., Inc. v. Becerra (Jan. 23, 2023), available at https://www.fda.gov/industry/medical-products-rare-diseases-and-conditions/fdas-overview-catalyst-pharms-inc-v-becerra.
20. Id.

About The Authors:

Chad Landmon is a partner at Axinn, Veltrop & Harkrider LLP, where he chairs the firm’s Intellectual Property and FDA practice groups and focuses on patent and FDA issues in the life sciences industry, including pharmaceuticals, biologics, and regenerative medicines products.

Gabriella McIntyre is an associate in Axinn’s Intellectual Property and FDA practice groups.