Genus Lifesciences, Inc. v. Azar

• Court: District Court, District of Columbia
• Decided: January 27, 2021
• Docket: Civil Action No. 2020-0211
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

GENUS LIFESCIENCES, INC.,

Plaintiff,

v. Case No. 1:20-cv-00211 (TNM)

ALEX M. AZAR II, et al.,

Defendants,

LANNETT CO., INC.,

Intervenor-Defendant.

MEMORANDUM ORDER

The Court granted partial summary judgment to Plaintiff Genus Lifesciences, Inc.

(“Genus”) on Count III of its Complaint and deferred ruling on Counts I and II. See Order, ECF

No. 64. At a telephonic status conference, the Court ordered the parties to brief the appropriate

remedy for Count III and scheduled briefing on motions for reconsideration proposed by the

Federal Defendants (“FDA”) and Intervenor-Defendant Lannett Company, Inc. (“Lannett”). See

Docket Entry dated October 7, 2020. Now ripe are Motions for Reconsideration filed by FDA

and Lannett (collectively, the “Defendants”), Genus’s Motion to Vacate FDA’s approval of

Lannett’s drug product Numbrino, and Genus’s Motion to Supplement the Record.

I.

First up is Genus’s Motion to Complete the Administrative Record. Genus seeks to add

documents obtained in a related FOIA action. See Latham & Watkins LLP v. FDA, No. 1:20-cv-

0509-TNM (D.D.C.). Specifically, Genus requests that the Court order FDA to add to the

administrative record 33 pages of email communications that Genus claims are relevant to FDA’s approval of Numbrino and should have appeared in the record that FDA compiled. See

Pl. Genus Lifesciences, Inc.’s Mot. to Compete the Admin. R. (“Genus Record Br.”) at 8, ECF

No. 54. 1 Genus also asks the Court to review in camera unredacted versions of the documents to

determine whether the redactions were proper. Id. at 28. FDA counters that Genus has failed to

rebut the strong presumption that the record was complete, and it contends that the documents

contain information that is immaterial or cumulative of material that appears elsewhere in the

record. See Federal Defs.’ Resp. in Opp’n to Pl. Genus Lifesciences, Inc.’s Mot. to Complete the

Admin. R. (“FDA Record Br.”) at 12–22, ECF No. 58. FDA also maintains that in camera

review would be unnecessary and inappropriate. Id. at 22–25.

To be sure, the record produced by an agency in an APA challenge “is entitled to a strong

presumption of regularity.” Univ. of Colorado Health at Mem’l Hosp. v. Burwell, 151 F. Supp.

3d 1, 13 (D.D.C. 2015). So “a plaintiff must do more than simply assert that [missing] materials

were relevant or were before an agency when it made its decision,” as it “must identify

reasonable, non-speculative grounds for its belief that the [missing] documents were considered

by the agency.” Id. (cleaned up). What the agency “considered” extends to “all information it

considered either directly or indirectly.” Stand Up for California! v. U.S. Dep’t of Interior, 315

F. Supp. 3d 289, 293 (D.D.C. 2018). “The goal, ultimately, is for the Court to have before it a

record that delineates the path by which the agency reached its decision.” Standing Rock Sioux

Tribe v. U.S. Army Corps of Engineers, No. CV 16-1534 (JEB), 2019 WL 2028709, at *2

(D.D.C. May 8, 2019) (cleaned up). So the complete record should cover “any document that

might have influenced the agency’s decision and not merely those documents the agency

expressly relied on in reaching its final determination.” Id. (cleaned up).

1 All page citations refer to the pagination generated by the Court’s CM/ECF system.

2 Genus has met its burden. It does not rely on pure conjecture, as it seeks to add 33

specific pages out of the thousands of pages obtained in the FOIA action. See Genus Record Br.

at 8; cf. Stand Up for California!, 315 F. Supp. 3d at 295 (rejecting motion to supplement the

record that relied on “speculation that other documents may exist”). Genus also distinguishes

three categories of documents, sufficiently explaining the import of each and how the

communications played a role in FDA’s decision. See id. at 15–28. In so finding, the Court does

not necessarily adopt Genus’s interpretation of every communication in every document; FDA is

free to contest and contextualize the contents in future briefing. But Genus has made a

reasonable, non-speculative showing that the documents were considered by FDA yet not

included in the record. See id.

The documents mainly contain communications among relevant FDA personnel. While

internal email communications about FDA application timelines would typically fall outside an

administrative record, the relative timelines of these drug applications had outsized implications

and are critical to resolving the unique claims in this case. More, when the documents include

“deliberative” communications unsuitable for an administrative record, FDA has already had a

chance to redact those portions. See Stand Up for California!, 315 F. Supp. 3d at 293 (noting

that intra-agency deliberative documents are usually privileged). The unredacted portions at the

very least clarify when FDA officials were confronting decisions about Lannett’s application that

Genus now challenges. And they help “delineate[] the path by which the agency reached its

decision.” Standing Rock Sioux Tribe, 2019 WL 2028709, at *2. FDA should supplement the

record with the 33 pages that Genus attached to its motion. See Genus Record Br. at Exs. A, B,

and C, ECF Nos. 54-2, 54-3, 54-4.

3 As for in camera review, the Court does not find it necessary now to review any of the

redacted material. See DeFraia v. CIA, 311 F. Supp. 3d 42, 50 (D.D.C. 2018) (“the mere

possibility of” erroneous redaction “does not warrant in camera review”).

II.

Next up are the Motions for Reconsideration. FDA and Lannett both seek

reconsideration of the Court’s decision under Federal Rule of Civil Procedure 54(b). See

Intervenor-Def. Lannett Co., Inc.’s Mot. for Recons. and Opp’n to Mot. for Vacatur (“Lannett

Mot.”) at 6, ECF No. 67; Federal Defs.’ Mem in Support of their Mot. for Recons. and in Opp’n

to Pl.’s Mot. to Vacate (“FDA (Mot.”) at 7, ECF No. 70-1. Courts may grant reconsideration “as

justice requires,” considering “whether the court ‘patently’ misunderstood a party, made a

decision beyond the adversarial issues presented to the court, made an error in failing to consider

controlling decisions or data, or whether a controlling or significant change in the law or facts

has occurred since the submission of the issue to the Court.” Youssef v. Holder, 62 F. Supp. 3d

96, 98 (D.D.C. 2014) (citation omitted). This is a discretionary matter. The Court may reverse

course even if the appropriate legal standard is unmet but “there are other good reasons for doing

so.” Id. at 99.

The Defendants suggest that the Court’s ruling went beyond the adversarial issues

presented when it concluded that FDA erred by not requiring Lannett to submit a patent

certification with its drug application and not considering the associated timelines for approval.

See Lannett Mot. at 6; FDA Mot. at 7; see also Genus Lifesciences, Inc. v. Azar, No. 1:20-CV-

00211 (TNM), 2020 WL 5530218, at *10–13 (D.D.C. Sept. 15, 2020). Even if this were true,

the Court had requested supplemental briefing on this point. It ordered the parties to address

“whether Romanette ii requires the FDA to approve Lannett’s application within the timeframes

4 prescribed in 21 U.S.C. § 355(c)(3).” Order at 5–6, ECF No. 53. That obligation stems from the

timelines applicable to Section 505(b) applications with patent certifications. So that inquiry

included the question of if Lannett’s application did have or should have had a patent

certification. Lannett recognized as much, explaining in its supplemental brief why it believed

that Lannett did not have to submit a patent certification. See Intervenor-Def. Lannett Company,

Inc.’s Supplemental Br. in Support of Cross-Motion for Summary Judgment at 4, ECF No. 55.

FDA’s brief focused instead on the ramifications of Lannett’s application not containing a

certification. See Federal Defs.’ Supplemental Br. at 5, ECF No. 56. The Defendants may now

wish that they had made more “fulsome” arguments on whether a patent certification was

required, see Lannett Mot. at 6, but this was not for lack of opportunity. 2

In any event, the Defendants’ latest motions do not sway the Court. The plain text of the

statute states that every Section 505(b)(2) application “shall also include” a patent certification.

21 U.S.C. § 355(b)(2)(A). FDA’s regulations emanating from this statute confirm that the

certification is mandatory. See 21 C.F.R. § 314.50(i)(1) (“A 505(b)(2) application is required to

contain the following: . . . ”). An applicant who believes that there are no relevant patents must

submit a certification with specific language to that effect. See § 314.50(i)(1)(ii). FDA’s novel

arguments to the contrary require the Court to interpret the word “drug” as meaning a “drug

product” and not also a “drug substance,” and that the statute meant to refer only to a “listed

drug”—that is, a drug product already approved by FDA and appearing in its “Orange Book.”

2 The Court’s Order requesting supplemental briefing granted the parties “no more than 10 pages per brief.” Mem. Order at 5, ECF No. 53. FDA and Lannett each submitted fewer than seven full pages.

5 FDA Mot. at 8–14; Lannett Mot. at 6–7. Of course, Congress did not use those words. See 21

U.S.C. § 355(b)(2).

More, this interpretation is still at odds with the most relevant portions of FDA’s own

regulations. Section 314.50(i) directs applicants to submit certifications for “the drug substance

or drug product” that were the subject of investigations relied on by the applicant. And it states

without qualification that when the applicant believes that “there are no patents described in

paragraph (i)(1),” an application must contain a “no relevant patents” certification. 3 21 C.F.R.

§ 314.50(i)(1)(ii). The Court does not regret its conclusion that “FDA takes a position so clearly

in opposition to its regulations,” and that FDA erred. Genus Lifesciences, 2020 WL 5530218, at

*11.

The Defendants also assert that the Court should reconsider its ruling on Count III

because any error by FDA was harmless. Lannett Mot. at 5; FDA Mot. at 9–10. The

Administrative Procedure Act directs reviewing courts to take “due account . . . of the rule of

prejudicial error.” 5 U.S.C. § 706; see PDK Labs. Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir.

2004) (“In administrative law, as in federal civil and criminal litigation, there is a harmless error

rule.”). The error here was no mere technicality—like a “wrong citation or clerical error” that

could not have affected the outcome of the agency decision. PAM Squared At Texarkana, LLC

v. Azar, 436 F. Supp. 3d 52, 59 (D.D.C. 2020) (noting the “fine line between ‘harmless error’

and ‘arbitrary and capricious’”). Lannett neglected to submit a patent certification, and FDA

3 Lannett wonders why an FDA reviewer even had the option of checking a box marked “No patent certifications are required” in FDA’s 505(b)(2) assessment of Lannett’s application, if such a certification is mandatory. See Intervenor-Def. Lannett Co., Inc.’s Reply in Support of Mot. for Recons. at 10, ECF No. 74. So does the Court. But the Court again notes that it is the only option on FDA’s form that fails to cite to any statutory or regulatory basis. See J.A. 1787– 88. The unchecked “No relevant patents” option cites 21 C.F.R. § 314.50(i)(1)(ii).

6 could have rejected the application on that basis. FDA’s failure to require a certification and

consider the associated timelines rested not on an accident but on an apparent mistaken

interpretation of the governing statute and regulations. And mistaken analysis crosses the border

into arbitrary and capricious territory. Id. Nor is it clear to the Court precisely how FDA would

have handled the situation had it realized then that Lannett’s application was deficient in this

way. Cf. Combat Veterans for Cong. Political Action Comm. v. Fed. Election Comm’n, 795 F.3d

151, 156 (D.C. Cir. 2015) (harmless error where plaintiffs “failed to show any likelihood that

any material [agency] action or decision would have been different”). FDA’s error was not so

minor and the outcome so clear as to justify now waiving it away as no practical error at all.

III.

The proper remedy is a different question. Genus urges vacatur of FDA’s approval of

Numbrino. See Pl. Genus Lifesciences, Inc.’s Mot. to Vacate (“Genus Mot.”) at 5–14, ECF No.

66. When an agency action was arbitrary and capricious, the court ordinarily should “hold

unlawful and set aside [the] agency action.” 5 U.S.C. § 706(2)(A). But despite Genus’s doubts

about the legality of a court remanding to an agency without vacatur, see Genus Mot. at 6–7,

under binding circuit precedent the Court must consider it, see Allied-Signal, Inc. v. Nuclear

Regulatory Comm’n, 988 F.2d 146, 150–51 (D.C. Cir. 1993); Am. Great Lakes Ports Ass'n v.

Schultz, 962 F.3d 510, 518–19 (D.C. Cir. 2020). The Court will examine “first, the seriousness

of the [agency action’s] deficiencies, and, second, the likely disruptive consequences of vacatur.”

Am. Great Lakes Ports Ass’n, 962 F.3d at 518 (cleaned up).

The first prong concerns “the likelihood that ‘deficiencies’ in an [agency action] can be

redressed on remand, even if the agency reaches the same result.” Black Oak Energy, LLC v.

F.E.R.C., 725 F.3d 230, 244 (D.C. Cir. 2013) (cleaned up); see also United States Sugar Corp. v.

7 Envtl. Prot. Agency, 830 F.3d 579, 630 (D.C. Cir. 2016) (characterizing factor as “likelihood of

cure on remand”). So this inquiry differs from the Court’s retrospective assessment that FDA’s

flawed analysis did not amount to harmless error. See supra at 6–7.

Genus contends that FDA cannot cure the procedural defects on remand without violating

its regulations, and that Lannett will have to submit a new application. See Genus Mot. at 7.

That is far from clear. Genus relies on several provisions that address ancillary matters, but none

speak directly to the issue. In contrast, FDA credibly asserts that it could cure the procedural

defects and confirm its decision to approve Lannett’s application, and it suggests possible

options on remand. See FDA Mot. at 16–17. The Court will not prejudge FDA’s choices before

its personnel make them; the agency must take the first pass at interpreting and applying its

regulations. See Vermont Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S.

519, 545–46 (1978). But the Court believes that FDA can likely cure the deficiencies on

remand. Cf. Allied-Signal, 988 F.2d at 151 (remanding without vacatur where there was “at least

a serious possibility that the Commission will be able to substantiate its decision on remand”).

The Court also considers the disruptive consequences of vacatur. “[A] quintessential

disruptive consequence arises when an agency cannot easily unravel a past transaction in order to

impose a new outcome.” Am. Great Lakes Ports Ass’n, 962 F.3d at 519. Here vacatur would

dissolve FDA’s approval of Numbrino, meaning Lannett would have to pull the drug from the

market until at least 2022. Lannett Mot. at 12–13. Genus does not dispute these facts but

suggests that any harm would be “economic harm” restricted to Lannett. See Pl. Genus

Lifesciences, Inc.’s Opp’n to Defs.’ and Intervenor-Def.’s Mots. for Recons. and Reply in

Support of Mot. to Vacate at 25, ECF No. 72. Not so, as it would also affect the consumers and

healthcare providers who rely on Numbrino for medical treatment. See Lannett Mot. at 12–13.

8 Nor would remand without vacatur frustrate the objectives of the Federal Food, Drug,

and Cosmetic Act. To be sure, courts must be wary of an easier-to-seek-forgiveness attitude

toward required regulations. See Standing Rock Sioux Tribe v. U.S. Army Corps of Engineers,

No. 20-5197, 2021 WL 244862, at *12 (D.C. Cir. Jan. 26, 2021) (expressing concern over

incentivizing agencies to purposefully skip “fundamental procedural steps,” undertaking them on

remand only if challenged). But there is no hint of bad faith here on the missing certification.

There is no suggestion, for example, that Lannett or FDA tried to game the system by not,

respectively, filing and requiring a patent certification stating that there were no applicable

patents. And while the byzantine statutory and agency provisions require the certification, no

one would characterize the omitted procedural step as “fundamental.” See id. (analogizing to

entirely “bypass[ing] required notice and comment rulemaking”). Remand without vacatur has

been characterized as an “exceptional remedy” by many courts who have ordered it, see, e.g.,

Am. Great Lakes Ports Ass’n, 962 F.3d at 519, but the Court finds it appropriate here.

The Court, however, does not ignore Genus’s understandable concerns over the prejudice

that remand without vacatur on Count III could pose. See Genus Mot. at 13–14. If FDA is in

fact unable to cure the defects on remand, and vacatur of Lannett’s approval is necessary, Genus

would be prejudiced for every day of market exclusivity lost. Counts I and II also remain

pending. So while the Court presumes FDA will act expeditiously, it will ensure that this is so

by imposing a 60-day deadline. If in that time FDA fails to cure the deficiencies and justify why

Numbrino’s approval is proper, the Court will vacate the prior approval. Cf. A.L. Pharma, Inc. v.

Shalala, 62 F.3d 1484, 1492 (D.C. Cir. 1995) (staying vacatur for 90 days while on remand with

FDA); NAACP v. Trump, 298 F. Supp. 3d 209, 245 (D.D.C. 2018) (staying vacatur for 90 days

pending agency action on remand).

9 IV.

Therefore, it is hereby

ORDERED that Plaintiff Genus Lifesciences, Inc.’s [54] Motion to Complete the

Administrative Record is hereby GRANTED. On or before February 27, 2021, FDA shall file an

amended administrative record in conformity with this order; it is further

ORDERED that Intervenor-Defendant Lannett Co., Inc.’s [67] Motion for

Reconsideration is DENIED; it is further

ORDERED that Federal Defendants’ [70] Motion for Reconsideration is DENIED; it is

further

ORDERED that Plaintiff Genus Lifesciences, Inc.’s [66] Motion to Vacate is

GRANTED. FDA’s approval of Intervenor-Defendant Lannett Company, Inc.’s drug product

Numbrino is VACATED; it is further

ORDERED that the vacatur of Numbrino’s approval is STAYED 60 days for FDA to

reconsider Lannett’s application and take actions it deems necessary based on the Court’s ruling

that every Section 505(b)(2) application must include a patent certification; it is further

ORDERED that the matter is REMANDED to FDA for further action consistent with

this Order and the Court’s [63] Memorandum Opinion dated September 15, 2020; and it is

ORDERED that on or before March 19, 2021, FDA shall submit a status report

informing the Court of the actions taken by the agency to comply with this Order.

SO ORDERED.

2021.01.27 17:41:15 -05'00' Dated: January 27, 2021 TREVOR N. McFADDEN, U.S.D.J.