Otsuka Pharmaceutical Co., Ltd. v. Burwell

• Court: District Court, District of Columbia
• Decided: July 28, 2016
• Docket: Civil Action No. 2015-1688
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

) OTSUKA PHARMACEUTICAL CO., ) LTD., et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 15-cv-1688 (KBJ) ) SYLVIA MATHEWS BURWELL, in her ) official capacity as Secretary of the ) United States Department of Health and ) Human Services, et al., ) ) Defendants, ) ) and ) ) ALKERMES, INC., et al., ) ) Intervenor-Defendants. ) )

MEMORANDUM OPINION

To incentivize the development and marketing of safe, effective, and affordable

drug products, the Federal Food, Drug, and Cosmetic Act (“FDCA”), 21 U.S.C. § 321 et

seq., provides a variety of benefits for drug manufacturers, including prescribed periods

of “exclusivity” in the marketplace. Drug manufacturers that develop and get approval

for drug products containing entirely new chemical entities—i.e., drugs in which “no

active ingredient” has ever before been approved for marketing—receive a five-year

period of exclusivity for marketing that drug product, during which time the Food and

Drug Administration (“the FDA”) is prohibited from approving applications for the

marketing of certain other drugs. 21 U.S.C. § 355(c)(3)(E)(ii); see also 21 C.F.R. § 314.108(b)(2). Similarly, if a manufacturer submits an application for a drug product

that contains a previously approved active ingredient, and if certain “new clinical

investigations” are included in that application, that manufacturer can claim a three-

year period of marketing exclusivity for the drug in that application. See 21 U.S.C.

§ 355(c)(3)(E)(iii); see also 21 C.F.R. § 314.108(a), (b)(4). These provisions and

others demonstrate Congress’s clear intent to establish a statutory and regulatory

scheme that provides a substantial reward (marketing exclusivity) for those

pharmaceutical companies that either invest in the development of entirely new drug

substances or that study existing chemical compounds to demonstrate that they can be

safe and effective when prescribed for use in a new way.

In the instant case, Plaintiff Otsuka Pharmaceuticals Company Limited (along

with related entities, collectively referred to herein as “Otsuka”) asserts that the FDA

has improperly truncated its right to marketing exclusivity for its drug Abilify

Maintena, which the FDA approved in 2013 for the treatment of schizophrenia in

acutely relapsed patients. It is undisputed that Abilify Maintena and a related

supplement received three-year periods of exclusivity under the FDCA; in the instant

lawsuit, Otsuka maintains that the FDA ran afoul of the FDCA and its own regulations

in October of 2015, when it approved Intervenor Alkermes’s application for Aristada—

a drug product that also treats schizophrenia and is administered in the same way as

Abilify Maintena but that contains a different “active moiety” than Otsuka’s drug. (See

Compl., ECF No. 1, ¶ 52 (“FDA denied Otsuka’s citizen petition and approved the

Alkermes [new drug application] in derogation of Otsuka[’s] exclusivity rights.”).)

Otsuka’s three-count complaint, which it filed against the FDA and other associated

2 official-capacity defendants (referred to herein, collectively, as the “FDA”), specifically

asserts that the FDA’s approval of Aristada within the three-year windows of

exclusivity that were afforded to Abilify Maintena and its supplement violated the

Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701–06, because that approval

contravened the FDCA (Count One) and the agency’s own regulations (Count Two), and

because, without implementing the APA’s notice-and-comment procedures, the agency

essentially promulgated a new rule regarding the circumstances under which the FDA

will consider a subsequent drug application to be barred (Count Three). (See Compl.

¶¶ 51–74.)

Before this Court at present are three cross-motions for summary judgment that

the parties in this matter have filed. (See Pls.’ Mot. for Summ. J. (“Pls.’ Mot.”), ECF

No. 24; Defs.’ Cross Mot. for Summ. J. (“Defs.’ Mot.”), ECF No. 26; Intervenor-Defs.’

Mot. for Summ. J. (“Alkermes’s Mot.”), ECF No. 27.) Each motion first addresses a

question of statutory interpretation regarding the meaning of the applicable exclusivity

provisions of the FDCA, and in particular, the issue of whether or not the FDA may

read that statute and its own regulations to establish an exclusivity bar that extends only

to second-in-time applications for a drug with the same “active moiety” as the drug with

exclusivity. This Court has applied the legal analysis established in Chevron, U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and as explained

fully below, it concludes that the FDCA does not unambiguously prevent the FDA from

determining that the FDCA’s three-year exclusivity bar blocks only subsequent

applications for drugs with the same active moiety, and that it was not unreasonable for

the FDA to have employed that interpretation when it considered the applications at

3 issue here. Similar reasoning compels the Court to reject Otsuka’s contention that the

FDA violated its own regulations, and Otsuka’s notice -and-comment claim also

necessarily fails because it is premised on the faulty contention that, when the FDA

decided to approve Aristada despite Abilify Maintena’s exclusivity, the agency thereby

amended a regulation that unambiguously required the opposite result. Consequently,

the summary judgment motions that the FDA and Alkermes have filed will be

GRANTED and Otsuka’s motion for summary judgment will be DENIED. A separate

order consistent with this Memorandum Opinion will follow.

I. BACKGROUND

A. Marketing Approval And Exclusivity Under The FDCA

Originally enacted in 1938, the FDCA “governs the pharmaceutical drug

approval process for both new and generic drugs.” Veloxis Pharm., Inc. v. FDA, 109 F.

Supp. 3d 104, 107 (D.D.C. 2015) (citation omitted); see also Christopher v. SmithKline

Beecham Corp., 132 S. Ct. 2156, 2163 n.4 (2012). In 1984, Congress amended the

statute via the Drug Price Competition and Patent Term Restoration Act (“Hatch -

Waxman Amendments”), Pub. L. No. 98–417, 98 Stat. 1585, in a manner that strikes a

balance between “‘two competing interests in the pharmaceutical industry: (1) inducing

pioneering research and development of new drugs[,] and (2) enabling competitors to

bring low-cost, generic copies of those drugs to market[,]’” Takeda Pharm., U.S.A.,

Inc. v. Burwell, 78 F. Supp. 3d 65, 68 (D.D.C. 2015) (quoting Janssen Pharmaceutica,

N.V. v. Apotex, Inc., 540 F.3d 1353, 1355 (Fed. Cir. 2008)). As mentioned, one critical

aspect of this Hatch-Waxman balance is the period of marketing exclusivity that is

afforded to pharmaceutical companies under certain circumstances, the primary purpose

4 of which is to incentivize companies to invest substantial time and money into

developing useful drug products. See, e.g., Abbott Labs. v. Young, 920 F.2d 984, 985

(D.C. Cir. 1990) (noting that the exclusivity provisions aim, in part, to protect “the

interests of drug manufacturers who produce new drugs” by providing “greater

incentives for the invention of new products”); see also Abbreviated New Drug

Application Regulations; Patent and Exclusivity Provisions (“1994 Rule”), 59 Fed. Reg.

50,338, 50,358 (Oct. 3, 1994) (“1994 Rule”) (observing that the three-year-exclusivity

provision was “created . . . to protect products whose development required a

significant time commitment and ‘an investment of some magnitude’” (citing legislative

history)).

The first step on the road to receiving marketing exclusivity is to seek and obtain

FDA approval for the marketing of a “new” drug pursuant to a process that is set forth

in the U.S. Code and that has been fully explained in several published opinions in this

district. See, e.g., Takeda Pharm., 78 F. Supp. 3d at 71–72 (discussing 21 U.S.C.

§ 355); see also Ferring Pharm., Inc. v. Burwell, No. 15-0802, 2016 WL 1060199, at *2

(D.D.C. March 15, 2016) (same). 1 Specifically, as amended, the FDCA “requires drug

manufacturers seeking to market a new drug to first obtain FDA approval via one of

three different application pathways: (1) a full New Drug Application (‘NDA’); (2) an

Abbreviated New Drug Application (‘ANDA’); or (3) an intermediate process known as

a Section 505(b)(2) NDA.” Takeda Pharm., 78 F. Supp. 3d at 71 (citing 21 U.S.C.

1 As relevant here, a drug is “new” when its “composition . . . is such that such drug is not generally recognized, among experts . . . as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof,” or if its “composition . . . is such tha t such drug, as a result of investigations to determine its safety and effectiveness for use under such conditions, has become so recognized, but which has not, otherwise than in such investigations, been used to a material extent or for a material time under such conditions.” 21 U.S.C. § 321(p)(1) –(2).

5 § 355). The requirements for the full NDA and Section 505(b)(2) pathways, which are

the only methods implicated in the instant case, are set forth in section 505(b) of Hatch-

Waxman, which has been codified at 21 U.S.C. § 355(b). 2

Hatch-Waxman’s subsection 505(b)(1) provides a detailed list of what a full

NDA must include. See 21 U.S.C. § 355(b)(1). The only NDA requirement that is

relevant to the instant case is located in subdivision (A): the application must include

“full reports of investigations which have been made to show whether or not such drug

is safe for use and whether such drug is effective in use[.]” 21 U.S.C. § 355(b)(1)(A);

see also Warner-Lambert Co. v. Shalala, 202 F.3d 326, 327 (D.C. Cir. 2000).

The Section 505(b)(2) NDA pathway relates to a subset of new drug

applications: those that are submitted “for a drug for which the investigations described

in [subsection 505(b)(1)(A)] and relied upon by the applicant for approval of the

application were not conducted by or for the applicant and for which the applicant has

not obtained a right of reference or use[.]” 21 U.S.C. § 355(b)(2); see also Ferring

Pharm., 2016 WL 1060199, at *2. A Section 505(b)(2) NDA applicant must include

certain patent-related certifications “with respect to each patent which claims the drug

for which such investigations were conducted or which claims a use for such drug for

which the applicant is seeking approval[.]” 21 U.S.C. § 355(b)(2)(A). Thus, so long as

the requisite patent certifications are provided, Section 505(b)(2) NDA applicants may

discharge their duty to demonstrate the safety and efficacy of the drug for which they

seek approval by relying upon investigations they did not conduct or have not licensed

2 The approval pathway for ANDAs is described in 21 U.S.C. § 355(j); it “provides a framework for the introduction of generic versions of previously approved branded drugs.” Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 227 (3d Cir. 2013). As the parties all agree, the ANDA pathway is not pertinent here.

6 (hereinafter “unoriginal” investigations), which can include “clinical studies that were

previously submitted to [the] FDA in support of another drug[,]” Takeda Pharm., 78 F.

Supp. 3d at 72, or “published literature” that may not have any association with a

specific, previously approved drug application (see Draft Guidance for Industry:

Applications Covered by Section 505(b)(2), Admin. R. App. (“AR”), ECF Nos. 35-1–

35-6, 001328–29). See also Ferring Pharm., 2016 WL 1060199, at *2; Erika Lietzan,

The Myths of Data Exclusivity, 20 Lewis & Clark L. Rev. 91, 97 (2016).

Once a drug application is submitted to the FDA pursuant to the full NDA or

Section 505(b)(2) NDA pathways and the agency approves it, the FDCA’s separate

exclusivity provisions—which are set forth and discussed at length infra Part III.A—

can apply automatically to prevent the FDA from approving subsequent drug products

for a specified number of years. See, e.g., 21 U.S.C. § 355(c)(3)(E)(ii)–(iv) (creating

and demarcating five-year and three-year exclusivities). Notably, as explained below,

the statutory exclusivity provisions specifically address the circumstances under which

an approved new drug is entitled to exclusivity, as well as the circumstances under

which subsequent products are to be deemed barred by that exclusivity. Thus, the

FDCA itself delineates the scope of an approved drug product’s exclusivity benefit.

B. The FDA’s Approval Of Otsuka’s Abilify Drug Products

In 2002, Otsuka submitted, and the FDA approved, a drug application for Abilify

Tablets, an orally administered drug for the treatment of several mental disorders, most

notably schizophrenia. (FDA Decision Rejecting Otsuka’s Exclusivity Petition (“FDA

Decision”), Ex. A to Compl., ECF No. 1-2, at 14–15; Abilify Tablet Original Approval

7 Letter, AR 000373.) 3 The active moiety of Abilify Tablets is the molecule aripiprazole,

which is also the drug’s active ingredient. (See FDA Decision at 14–15.) 4 Otsuka

supported the drug application for Abilify Tablets with multiple original studies (see,

e.g., Abilify Tablet Original Approval Letter, AR 000374–75; Abilify Tablet Original

Labeling, id. 000383). Furthermore, because the FDA had never before approved a

drug with aripiprazole as its active moiety or ingredient, Abilify Tablets received a

five-year period of marketing exclusivity (see FDA Decision at 14). See also 21 U.S.C.

§ 355(c)(3)(E)(ii) (directing that, once the FDA approves a new drug application for a

drug with a never-before-approved active ingredient, no subsequent application that

“refers to [that] drug” and that relies on unoriginal investigations under section

505(b)(2) may be submitted (or approved) for five years).

Otsuka’s five-year exclusivity period for Abilify Tablets has long since come

and gone. The events giving rise to the exclusivities in question here took place in

February of 2013, when the FDA approved an application for another Otsuka drug—

Abilify Maintena—which has aripiprazole as its active moiety and active ingredient ,

just like Abilify Tablets. (See FDA Decision at 16; Abilify Maintena Approval Letter,

3 Page-number citations to the documents the parties have filed (other than the administrative record) refer to the page numbers that the Court’s electronic filing system automatically assigns. 4 FDA regulations define active moiety as “the molecule or ion , excluding those appended portions of the molecule that cause the drug to be an ester, salt (including a salt with hydrogen or coordination bonds), or other noncovalent derivative (such as a complex, chelate, or clathrate) of the molecule, responsible for the physiological or pharmacological action of the drug substance.” 21 C.F.R. § 314.108(a). Although no regulation directly defines the term “active ingredien t,” Amarin Pharm. Ir. Ltd. v. FDA, 106 F. Supp. 3d 196, 199 (D.D.C. 2015), the FDA has long ass erted that “active ingredient”—as used in the exclusivity provisions at issue here —“means active moiety[,]” 1994 Rule, 59 Fed. Reg. at 50,358. A recent opinion from this district has questioned the propriety of that equivalency in at least some contexts, see Amarin Pharm., 106 F. Supp. 3d at 207–10, 216–17; however, in the instant case, no one disputes that the active moiety and active ingredient of the relevant Abilify drugs are one and the same (aripiprazole) . Furthermore, no one argues that the issue t o be decided here—i.e., the scope of Abilify Maintena’s exclusivities —turns on the proper definition of active ingredient.

8 AR 000487; Abilify Maintena Exclusivity Summary, id. 000600–01.) Abilify

Maintena’s novelty was that it is administered through extended-release injectable

suspension rather than orally. (FDA Decision at 16; Abilify Maintena Approval Letter,

AR 000487.) Otsuka established the efficacy of Abilify Maintena partly “on the basis

of efficacy data from trials with the oral formulation of aripiprazole” ( Abilify Maintena

Original Labeling, AR 000530), and it also sponsored “new clinical investigations[,]”

21 U.S.C. § 355(c)(3)(E)(iii), without which the FDA would not have approved the drug

for marketing (see Abilify Maintena Exclusivity Summary, AR 000602–05). 5

Significantly for present purposes, the fact that Otsuka relied on new, essential studies

when it sought approval for Abilify Maintena (a drug that contained a previously

approved active ingredient) meant that Abilify Maintena was indisputably entitled to a

three-year period of exclusivity under 21 U.S.C. § 355(c)(3)(E)(iii), which is referred to

herein as “romanette iii.” 6 There is no dispute that Abilify Maintena deserved this

period of marketing exclusivity. (See Pls.’ Mem. in Supp. of Pls.’ Mot. (“Pls.’ Mem.”),

ECF No. 24-1, at 9–10; Defs.’ Mem. in Supp. of Defs.’ Mot. (“Defs.’ Mem.”), ECF No.

26-1, at 16–17; Intervenor-Defs.’ Mem. in Supp. of Alkermes’s Mot. (“Alkermes’s

Mem.”), ECF No. 27-1, at 20–21; FDA Decision at 16, 21.)

5 A “new clinical investigation” is “an investigation in humans” that produced results that “have not been relied on by FDA to demonstrate substantial evidence of effectiveness of a previously approved drug product for any indication or of safety for a new patient population” and “do not duplicate the results of another investigation that was relied on by the agency to demonstrate the e ffectiveness or safety in a new patient population of a previously approved drug product.” 21 C.F.R. § 314.108(a). An investigation is essential to approval if “there are no other data available that could support approval of the application.” Id. 6 A “romanette” is a “lower case version of a Roman numeral[.]” Karmely v. Wertheimer, 737 F.3d 197, 198 & n.1 (2d Cir. 2013).

9 Thereafter, on December 5, 2014, the FDA approved an application supplement,

which is also known as a “supplemental new drug application,” for Abilify Maintena.

(See Abilify Maintena Supplement Approval Letter, AR 000607–611; FDA Decision at

16 & n.55.) An application supplement is a filing that updates an already approved

application in a new way, see 21 C.F.R. § 314.70—e.g., with a different indication for

the drug. See AstraZeneca Pharm. LP v. FDA, 713 F.3d 1134, 1136 (D.C. Cir. 2013);

ViroPharma, Inc. v. Hamburg, 898 F. Supp. 2d 1, 7 (D.D.C. 2012); Lietzan, supra, at

141–42. Pursuant to such a supplement, Otsuka updated its application for Abilify

Maintena with “the results of a controlled clinical study treating adult patients with

schizophrenia experiencing an acute relapse” (FDA Decision at 16 n.55 (internal

quotation marks omitted)). And per what this Memorandum Opinion calls “romanette

iv,” Otsuka’s application supplement received a separate three-year exclusivity period

analogous to the one romanette iii provides, see 21 U.S.C. § 355(c)(3)(E)(iv); it is also

undisputed that Otsuka’s supplement was entitled to that exclusivity. (See Pls.’ Mem.

at 9–10; Defs.’ Mem. at 16–17; Alkermes’s Mem. at 20–21; FDA Decision at 16, 21.)

C. The FDA’s Approval Of Alkermes’s Aristada (Over Otsuka’s Objection)

What is at issue in the instant case is the scope of the exclusivities that were

conferred to Abilify Maintena and its supplement by statute; the reach of the exclusivity

benefit became a point of contention when, late in 2014, Alkermes submitted to the

FDA a Section 505(b)(2) NDA for its drug Aristada. Aristada treats schizophrenia, and

it is administered through an extended-release injectable suspension formula, like

Abilify Maintena. (See Aristada Approval Letter, AR 001217; FDA Decision at 16.)

However, Aristada’s chemical structure differs from the Abilify line of drugs.

10 Aristada’s active ingredient is aripiprazole lauroxil—a substance that metabolizes in the

body into N-hydroxymethyl aripiprazole, which is Aristada’s active moiety. (See

Active Moiety Determination For Aripiprazole Lauroxil, AR 000665–67, 000670; Pls.’

Mem. at 16 n.7 (disclaiming any challenge to the FDA’s determination on these

points).) Furthermore, although some of the unoriginal investigations that Alkermes

provided to establish the safety and effectiveness of Aristada were studies that Otsuka

had sponsored with respect to Abilify Tablets (see FDA Decision at 17 (“The 505(b)(2)

NDA for Aristada relied for approval, in part, on the [FDA’s] finding of safety and

effectiveness for the listed drug, Abilify (aripiprazole) Tablets[.]”); Memorandum:

Division Director Summary Review of Aristada (“Division Director Review”), AR

001177 (same)), Alkermes did not rely on the new clinical investigations that Otsuka

had undertaken with respect to Abilify Maintena. Instead, Alkermes conducted and

submitted its own original studies to support the Section 505(b)(2) NDA for Aristada.

(See FDA Decision at 17; Division Director Review, AR 001177 (observing that the

FDA’s “previous finding of safety and efficacy from oral aripiprazole tablets was

considered as evidence,” as well as “pharmacokinetic evidence from [Alkermes’s]

studies that demonstrate[d] similar serum concentrations for oral aripiprazole given

daily at approved doses and aripiprazole lauroxil given monthly at the studied doses”). )

1. Otsuka’s Citizen Petition Urging Rejection Of The Aristada Application

Otsuka objected to Alkermes’s Section 505(b)(2) drug application for Aristada in

a citizen petition that it filed with the FDA on July 13, 2015. (See generally Otsuka’s

Citizen Petition, AR 000025–44.) 7 Otsuka’s objection related specifically to the FDA’s

7 Federal regulations permit any “interested person” to petition the FDA “to issue, amend, or revoke a

11 failure to apply the statutory provisions that confer exclusivity, which are discussed

briefly here and at length below. As already mentioned, both romanette iii and iv

delineate and describe the new drug applications that are entitled to exclusivity (the

industry refers to this language as the “eligibility clause”) . (See, e.g., FDA Decision at

11–12 (discussing 21 U.S.C. § 355(c)(3)(E)(iii), (iv)).) In addition, these statutory

provisions also identify the particular subset of second-in-time applications that are

barred by that exclusivity. (See id. at 12–13 (calling the language identifying that

subset of applications the “bar clause”).) The text and function of the bar clauses in

romanettes iii and iv are crucial to the legal issue presented in this case (see infra Part

III.A–B); for now, it suffices to note that romanette iii’s bar clause limits the FDA for a

period of three years, preventing it from approving a second-in-time Section 505(b)(2)

NDA that is “for the conditions of approval of such drug in the approved subsection (b)

application[.]” 21 U.S.C. § 355(c)(3)(E)(iii). The bar clause in romanette iv pertains to

supplements that have received exclusivity; for a three-year period, the FDA is

prohibited from approving a second-in-time Section 505(b)(2) application if that

application is “for a change approved in the supplement[.]” 21 U.S.C.

§ 355(c)(3)(E)(iv). The implementing regulations (also discussed at length below)

contain bar clauses that are structured similarly. See 21 C.F.R. § 314.108(b)(4)–(5).

Otsuka’s citizen petition maintained that the Aristada application fell within the

scope of the bar clauses that pertained to Abilify Maintena’s exclusivity periods, and

that, thus, Aristada should not be approved. In this regard, Otsuka specifically asserted

that Abilify Maintena’s “conditions of approval” were the “treatment of schizophrenia

regulation or order, or to take or refrain from taking any other form of administrative action.” 21 C.F.R. § 10.25(a).

12 using a once-monthly, long-acting injectable formulation of aripiprazole[,]” (Otsuka’s

Citizen Petition, AR 000033), and that the Aristada application was for Abilify

Maintena’s conditions of approval because it treated the same condition in a similar

way and had relied on the same sort of clinical trials, despite the fact that Aristada and

Abilify Maintena have different active ingredients and active moieties (see id. 000030,

000038–39.) Accordingly, and based solely on these allegedly overlapping “conditions

of approval,” Otsuka maintained that Abilify Maintena’s romanette iii exclusivity

should bar Aristada. (Id. 000039.) Similarly, Otsuka asserted that the “change” spoken

of in romanette iv refers to changes in conditions of approval as addressed in a

supplement, and thus, Otsuka argued, the exclusivity afforded to Abilify Maintena’s

supplement per romanette iv should have also precluded Aristada’s approval because

Aristada purports to treat schizophrenia in the way describ ed in the supplement. (Id.

000034, 000036–37.)

2. The FDA’s Response To Otsuka’s Citizen Petition

The FDA disagreed that Aristada was barred. In a detailed letter decision issued

on October 5, 2015, the FDA explained that, in its view, the FDCA’s exclusivity

provisions do not bar a second-in-time drug application if the drug with exclusivity and

the drug for which approval is being sought have different active moieties. (See FDA

Decision at 12 (explaining that the “FDA interprets [the statute] to mean that, for a

single entity drug to be potentially barred by 3-year exclusivity for another single entity

drug, the drug must contain the same active moiety as the drug with 3 -year

exclusivity”).) The FDA explained that it interprets the phrase “for the conditions of

approval of such drug in the approved subsection (b) application” in romanette iii, 21

U.S.C. § 355(c)(3)(E)(iii) (emphasis added), to mean that the FDA may not approve “a

13 505(b)(2) NDA for ‘such drug’ (i.e., a drug containing the active moiety [of the drug

with exclusivity]) for those same conditions of approval for 3 years after the approval ”

of the drug with exclusivity. (FDA Decision at 21). Thus, as the FDA reads the statute,

“such drug” directs the agency to consider certain defining characteristics of the drug

with exclusivity as compared to the drug in the second-in-time application (including

the relative active moieties of these drugs), and that only a second-in-time application

that relates to a drug with both the same active moiety (“such drug”) and the same

conditions of approval as the drug with exclusivity will be blocked. (See, e.g., id. at

21–22 (explaining that “any approval of Aristada will not be an approval of ‘such drug’

(a drug containing the active moiety aripiprazole) and therefore will not be for the

‘conditions of approval of such drug’” in the Abilify Maintena application) ; see also id.

at 21 (“[B]ecause the scope of the 3-year exclusivities for Abilify Maintena, like the

scope of any 3-year exclusivity, is tied to the active moiety of Abilify Maintena and

because Aristada contains a different active moiety than Abilify Maintena, FDA

concludes that approval of the Aristada NDA is not blocked.”). )

The FDA’s response letter applied similar logic to the exclusivity that pertains to

supplements under romanette iv. According to the letter, the FDA does not permit

active-moiety changes through supplemental new drug applications; thus, “a change

approved in a supplement must [necessarily] be a change in conditions of approval for

the same drug (active moiety) approved in the original NDA .” (Id. at 13; see also

Letter from Janet Woodcock, M.D., Director, CDER, FDA to William H. Carson,

Otsuka and Ralph S. Tyler, Venable LLP, AR 000353 & n.43; Guidance for Industry—

Submitting Separate Marketing Applications and Clinical Data for Purposes of

14 Assessing User Fees, id. 001593; Otsuka’s Citizen Petition, id. 000034 (agreeing that

the “change referred to in [romanette iv] is simply a change in the conditions of

approval” (internal quotation marks and footnote omitted).) As a result, the FDA

concluded that a second-in-time application is only barred as being for “a change

approved in [a] supplement” if the second-in-time application pertains to a drug that has

the same active moiety as the drug that was the subject of the approved supplemental

application. (FDA Decision at 13.) And based on the undisputed fact that Abilify

Maintena and Aristada do not have the same active moiety, the FDA concluded that the

Abilify Maintena supplement’s exclusivity period did not bar the approval of a second-

in-time application for Alkermes’s Aristada. (See id. at 21.)

D. Procedural History

On October 15, 2015, Otsuka filed a complaint against the FDA in this Court,

claiming that the agency’s decision to approve Aristada violates the APA in three ways .

First, Otsuka argues that the FDA “severely misconstrued the three-year exclusivity

provisions” of the FDCA (Compl. ¶ 55), and thereby reached a conclusion with respect

to the scope of Abilify Maintena’s exclusivities that was arbitrary and capricious and

“directly contrary to law” (id. ¶ 59). Second and similarly, Otsuka asserts that the

FDA’s decision arbitrarily and capriciously contradicted the agency’s implementing

regulations. (See id. ¶¶ 60–64.) Third and finally, Otsuka maintains that the FDA’s

decision to approve Aristada required notice and comment, because the agency

effectively “amended” the terms of its exclusivity-related regulations by creating an

inconsistent rule of future applicability. (See id. ¶¶ 65–74.)

This Court permitted Alkermes to intervene in the litigation on October 26, 2015

(see Order, ECF No. 11), after which Otsuka moved for summary judgment (see Pls.’

15 Mot.; Pls.’ Mem.). The FDA filed a brief in opposition and simultaneously moved for

summary judgment in its favor. (See Defs.’ Mot.; Defs.’ Mem.) And, thereafter,

Alkermes filed its own motion for summary judgment, agreeing with the FDA’s

position. (See Alkermes’s Mot.; Alkermes’s Mem.) This Court held a hearing

regarding these motions on January 7, 2016, and took each of the cross-motions for

summary judgment under advisement. 8

II. LEGAL STANDARDS

Although Federal Rule of Civil Procedure 56 provides the ordinary summary

judgment standard, it is well established that, in cases “involving review of a final

agency action[,] . . . the standard set forth in [Rule 56] does not apply because of the

limited role of a court in reviewing the administrative record.” ViroPharma, Inc. v.

Hamburg, 916 F. Supp. 2d 76, 79 (D.D.C. 2013) (internal quotation marks omitted)

(quoting Sierra Club v. Mainella, 459 F. Supp. 2d 76, 89 (D.D.C. 2006)). The Court’s

function in administrative-law cases is solely “to determine whether or not as a matter

of law the evidence in the administrative record permitted the agency to make the

decision it did.” Id. (internal quotation marks and citation omitted). Moreover, as

applicable here, the APA permits the Court to set aside agency action “only if it is

arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

8 On February 29, 2016, Defendants filed a notice informing the Court that the three -year exclusivity period afforded to Abilify Maintena under romanette iii had expired the previous day (on February 28, 2016). (See Notice, ECF No. 36.) This meant that the scope and applicability of roma nette iii (and its implementing regulation) was no longer a live issue; however, Otsuka maintained its claim that the FDA violated the APA when it failed to block Aristada based on the exclusivity that pertains to the Abilify Maintena supplement pursuant to romanette iv and its implementing regulation, and in this Court’s view, it is not possible to analyze Otsuka’s argument that the supplement’s exclusivity bars Aristada separate and apart from Otsuka’s arguments regarding the scope and applicability of th e exclusivity conferred by romanette iii. Consequently, this Court has proceeded to analyze all of the issues in full in the context of this Memorandum Opinion.

16 Zevallos v. Obama, 793 F.3d 106, 112 (D.C. Cir. 2015) (internal quotation marks and

citations omitted); see also 5 U.S.C. § 706(2)(A).

It is routine in this jurisdiction to analyze APA claims that arise out of the

FDA’s letter-decision interpretations of the FDCA under the familiar two -step

framework of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837 (1984), which applies to “an agency’s interpretation of a statute that it

administers[,]” W. Minn. Mun. Power Agency. v. FERC, 806 F.3d 588, 591 (D.C. Cir.

2015). See AstraZeneca Pharm., 713 F.3d at 1139 (applying Chevron to an FDA

statutory interpretation contained in a letter decision); Mylan Labs., Inc. v. Thompson,

389 F.3d 1272, 1279–80 (D.C. Cir. 2004) (same, collecting cases). Step One directs

that, if “Congress has directly spoken to the precise question at issue,” the court must

give effect to that “unambiguously expressed intent,” Nat’l Treasury Emps. Union v.

Fed. Labor Relations Auth., 414 F.3d 50, 57 (D.C. Cir. 2005) (internal quotation marks

omitted) (quoting Chevron, 467 U.S. at 842–43), and the question is not whether the

pertinent statutory terms are “in some abstract sense, ambiguous, but rather whether,

read in context and using the traditional tools of statutory construction,” the terms

unambiguously mean what the party claiming victory at Step One says they mean. Cal.

Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 400 (D.C. Cir. 2004) (citation

omitted); see also Sierra Club v. EPA, 551 F.3d 1019, 1027 (D.C. Cir. 2008)

(explaining that the tools used to evaluate statutory provisions include an examination

of the provision in its full context and, as appropriate, references to legislative history).

If the statute at issue “can be read more than one way” and thus is ambiguous,

AFL-CIO v. FEC, 333 F.3d 168, 173 (D.C. Cir. 2003) (citation omitted), or if the statute

17 is “silent” regarding the relevant question, see Van Hollen, Jr. v. FEC, 811 F.3d 486,

495 (D.C. Cir. 2016), then the Court proceeds to Step Two. At Step Two, the statutory

ambiguity or silence is effectively deemed “‘an implicit delegation from Congress to

the agency to fill in the statutory gaps.’” Id. at 495 (quoting FDA v. Brown &

Williamson Tobacco Corp., 529 U.S. 120, 159 (2000) (emphasis omitted)).

Consequently, the court must “accept the agency’s [reasonable] construction of the

statute, even if the agency’s reading differs from what the court believes is the best

statutory interpretation[,]” Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs.,

545 U.S. 967, 980 (2005) (citation omitted). This reflects the principle that the agency

is “the authoritative interpreter (within the limits of reason)” of “an ambiguous statute

[it] is charged with administering[.]” Id. at 983. Moreover, the nature of judicial

review at Step Two is “highly deferential[,]” Vill. of Barrington, Ill. v. Surface Transp.

Bd., 636 F.3d 650, 667 (D.C. Cir. 2011) (internal quotation marks and citation omitted),

which means that plaintiffs bear an “arduous[]” burden at this stage, Am. Meat Inst. v.

USDA, 968 F. Supp. 2d 38, 59 (D.D.C. 2013), aff’d, 746 F.3d 1065 (D.C. Cir. 2014),

aff’d after reh’g en banc, 760 F.3d 18 (D.C. Cir. 2014).

The deference framework that the Supreme Court recognized in Auer v. Robbins,

519 U.S. 452 (1997), is also potentially applicable in the instant case, because Otsuka

contends that the FDA’s approval of Aristada not only contradicts the mandates of the

FDCA but also transgresses the boundaries of the agency’s own regulations. Under

Auer, when an agency interprets “its own ambiguous regulation[s],” courts will defer to

that interpretation unless it is “plainly erroneous or inconsistent with the

regulation[s][,]” or there “is reason to suspect that the agency’s interpretation does not

18 reflect the agency’s fair and considered judgment on the matter in question.”

Christopher, 132 S. Ct. at 2166 (internal quotation marks and citations omitted). Thus,

“an agency’s interpretation need not be the only possible reading of a regulation —or

even the best one—to prevail.” Decker v. Nw. Environ. Def. Ctr., 133 S. Ct. 1326, 1337

(2013). And courts have generally concluded that the Auer standard provides for “an

even greater degree of deference” to the agency than the standard that Chevron

establishes. Conservation Force v. Salazar, 919 F. Supp. 2d 85, 91 (D.D.C. 2013)

(internal quotation marks omitted) (quoting Consarc Corp. v. U.S. Treasury Dep’t,

Office of Foreign Assets Control, 71 F.3d 909, 915 (D.C. Cir. 1995)). Be that as it may,

the clear corollary of the Auer rule is that deference to the agency’s interpretation of its

own regulations is not required if the meaning of the regulation is plain. See, e.g.,

Christensen v. Harris Cty., 529 U.S. 576, 588 (2000) (declining to apply Auer deference

where the regulation was unambiguous).

Finally, with respect to Otsuka’s claim that the FDA violated the APA when it

failed to employ notice-and-comment procedures, no special deference standard applies.

Instead, whether an agency action necessitates the notice-and-comment process is a

legal question that is subject to de novo review. See Mendoza v. Perez, 754 F.3d 1002,

1020 (D.C. Cir. 2014); Nat’l Min. Ass’n v. Jackson, 768 F. Supp. 2d 34, 46 (D.D.C.

2011) (citing Cement Kiln Recycling Coal. v. EPA, 493 F.3d 207, 215 (D.C. Cir. 2007)).

As a general matter, the agency is permitted to forgo notice -and-comment procedures if

its act qualifies as an adjudication (formal or informal), see Blanca Tel. Co. v. FCC,

743 F.3d 860, 867 (D.C. Cir. 2014); Int’l Internship Program v. Napolitano, 718 F.3d

986, 988 (D.C. Cir. 2013)), or if it issues an “interpretative rule” under 5 U.S.C.

19 § 553(b)(A), see Perez v. Mortg. Bankers Ass’n, 135 S. Ct. 1199, 1204 (2015). But

other forms of rulemaking (e.g., legislative rulemaking) trigger the notice-and-comment

requirements. See, e.g., Ass’n of Flight Attendants-CWA, AFL-CIO v. Huerta, 785 F.3d

710, 716–17 (D.C. Cir. 2015).

III. ANALYSIS

Otsuka’s APA claims require this Court to evaluate the FDA’s analysis regarding

the scope of the exclusivity balance that Congress has struck in romanettes iii and iv.

See 21 U.S.C. § 355(c)(3)(E)(iii), (iv). In essence, Otsuka maintains that the FDA was

plainly prohibited from approving Alkermes’s drug Aristada during the relevant time

period, and thus the agency’s authorization of the marketing of Aristada was arbitrary,

capricious, and in violation of the law, because the three-year periods of marketing

exclusivity that Abilify Maintena and its supplement received under romanettes iii and

iv (and their accompanying regulations) were broad enough to block the approval of

subsequent drug applications that have the same “conditions of approval.” But the FDA

has taken the position that the exclusivity provisions in the FDCA and the agency’s

regulations only prohibit approval of a subsequent new drug application that pertains to

a drug that has the same active moiety as the drug that received exclusivity, regardless

of any overlap with respect to the conditions of approval, and so, the FDA argues,

because Aristada and Abilify Maintena have different active moieties, the agency was

permitted to approve the Aristada NDA within Abilify Maintena’s exclusivity periods .

As explained below, this Court has employed the familiar deference principles of

Chevron and Auer and has reached several conclusions. First, the Court concludes that

the FDCA’s terms do not unambiguously preclude the FDA from viewing the

20 exclusivity bar as pertaining only to drugs that contain the same active moiety as the

drug with exclusivity, and, in fact, the Court finds that the FDA’s interpretation of the

FDCA’s exclusivity provisions is entirely reasonable. Furthermore, to the extent that

the FDA reads its own implementing regulations in the same way as it has interpreted

the pertinent statutory provisions, this Court concludes that the agency’s reading is not

plainly erroneous and is entitled to deference. In this same vein, the Court also finds

that the agency’s resolution of the regulation’s ambiguity through its active-moiety

interpretation is not a “de facto” rulemaking, as Otsuka argues. Consequently, the

summary judgment motions that the FDA and Alkermes have submitted must be

granted; Otsuka’s motion for summary judgment must be denied; and Otsuka’s claims

against the FDA will be dismissed.

A. The FDCA Did Not Unambiguously Preclude Aristada’s Approval

As explained, per Chevron, this Court must begin by evaluating whether or not

the bar clauses of romanettes iii and iv unambiguously required the FDA to reject the

Aristada NDA as barred by Abilify Maintena’s exclusivities, and if not, the Court must

proceed to determine whether the FDA’s interpretation of those statutory provisions as

permitting approval of an application concerning a drug with a different active moiety

than the drug with exclusivity is reasonable. See Vill. of Barrington, 636 F.3d at 659–

60. Otsuka insists that romanettes iii and iv speak unambiguously to the matter of the

scope of the exclusivities conferred upon Abilify Maintena, and that, when read along

with other statutory provisions related to the submission of drug applications, the text

makes crystal clear that the FDA could not approve Alkermes’s drug Aristada within

three years of the agency’s approval of Abilify Maintena and its supplement (see Pls.’

Mem. at 21–23). For the reasons that follow, this Court disagrees with Otsuka’s

21 assessment.

1. The Bar Clauses Are Susceptible Of More Than One Interpretation

A careful parsing of the relevant statutory provisions is required in order to

determine Congress’s intent for the purpose of the Chevron Step One inquiry. See

Sierra Club, 551 F.3d at 1027. The dense text of romanettes iii and iv is quoted below;

the Court has used different font styles (italics and underlining) to assist in

demonstrating that each of these provisions contains varying criteria that relate to

different aspects of the exclusivity dynamic.

The first part of romanette iii—the previously mentioned “eligibility clause,”

which is italicized below—establishes which of the many new drug applications that the

FDA receives is entitled to claim a three-year period of marketing exclusivity upon

approval. The second portion of romanette iii is the previously mentioned “bar clause”

(underlined below); this language defines those subsequent new drug applications that

are barred or blocked during the exclusivity period and thereby establishes the scope of

the exclusivity that the eligibility clause confers. The full text of romanette iii is as

follows:

If an application submitted under subsection (b) of this section for a drug, which includes an active ingredient (including any ester or salt of the active ingredient) that has been approved in another application approved under subsection (b) of this section, is approved after September 24, 1984, and if such application contains reports of new clinical investigations (other than bioavailability studies) essential to the approval of the application and conducted or sponsored by the applicant, the Secretary may not make the approval of an application submitted under subsection (b) of this section for the conditions of approval of such drug in the approved subsection (b) application effective before the expiration of three years from the date of the approval of the application under subsection (b ) of this section if the investigations described in clause (A) of subsection (b)(1) of this section and relied upon by the applicant for approval of the application were not conducted by or for the applicant and if the applicant

22 has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

21 U.S.C. § 355(c)(3)(E)(iii) (italics and underlining added). Both clauses of romanette

iii mention “an application submitted under subsection (b),” which refers to the full

NDAs and Section 505(b)(2) NDAs described in section 505(b) of the Hatch-Waxman

Amendments and set forth at 21 U.S.C. § 355(b), see supra Part I.A, and when one

recognizes this, romannette iii’s directives begin to come into focus. That is, per the

text of romanette iii’s eligibility clause, three years of marketing exclusivity must be

granted if a new drug application submitted per section 505(b) is approved, when two

criteria are met: (1) the drug product for which the application was submitted includes

an active ingredient that has previously been approved, and (2) the application contains

reports of new clinical investigations essential to approval that the applicant itself

conducted or sponsored. See 130 Cong. Rec. 24,425 (1984) (statement of Rep.

Waxman) (“[A] 3-year period of exclusive market life is afforded to nonnew chemical

entities approved after enactment of the bill which have undergone new clinical studies

essential to FDA approval.”); see also 21 C.F.R. § 314.108(b)(4). If a drug application

satisfies these two criteria and is approved, thereby receiving a three-year period of

marketing exclusivity, then the statute’s bar clause directs the FDA to refrain from

approving subsequent (herein called “second-in-time”) new drug applications based on

two other statutory criteria: (1) the second-in-time drug application must be “for the

conditions of approval of such drug,” and (2) the second-in-time drug application must

rely at least in part upon investigations to prove safety and efficacy that the applicant

did not conduct/sponsor or license. Thus, per the plain text of the statute, subsequent

drug applications that are for “the conditions of approval” of the drug with exclusivity

23 and that are of the Section 505(b)(2) NDA variety (insofar as they rely on unoriginal

studies) are blocked during the three-year period.

Romanette iv, which confers exclusivity for supplemental new drug applications,

reflects, and builds upon, this framework:

If a supplement to an application approved under subsection (b) of this section is approved after September 24, 1984, and the supplement contains reports of new clinical investigations (other than bioavailabil[i]ty studies) essential to the approval of the supplement and conducted or sponsored by the person submitting the supplement, the Secretary may not make the approval of an application submitted under subsection (b) of this section for a change approved in the supplement effective before the expiration of three years from the date of the approval of the supplement under subsection (b) of this section if the investigations described in clause (A) of subsection (b)(1) of this section and relied upon by the applicant for approval of the application were not conducted by or for the applicant and if the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

21 U.S.C. § 355(c)(3)(E)(iv) (footnote omitted) (italics and underlining added). The

italicized portion—what this Court will call the “supplement eligibility clause”—

plainly grants exclusivity to supplemental new drug applications that update existing

drug applications on the basis of new investigations conducted by the applicant. The

“supplement bar clause” explains that this exclusivity bars a second-in-time Section

505(b)(2) application if that application is “for a change approved in the supplement [.]”

21 U.S.C. § 355(c)(3)(E)(iv). That is, those later applications are barred if (1) they are

for a change approved in the supplement, and (2) the applicant relies on clinical

investigations that the applicant did not conduct/sponsor or license.

Significantly for present purposes, the term “active moiety” does not appear on

the face of either exclusivity provision, and in this limited sense, Congress obviously

has not spoken directly to “the precise question[,]” Chevron, 467 U.S. at 842, of

24 whether new drug applications for drugs that have a different active moiety than the

drug with exclusivity are blocked by the exclusivity benefit that romanettes iii and iv

confer. At a different level of abstraction, however, a more substantial question of

congressional intent emerges: whether the bar-clause criteria in romanettes iii and iv so

unambiguously apply to the Aristada NDA that the FDA had no choice but to deny

Alkermes’ new drug application on the basis of its prior approval of Abilify Maintena

and its supplement. See Vill. of Barrington, 636 F.3d at 659 (observing that Congress

may speak directly to the precise question at issue “either by prescribing a precise

course of conduct” for the agency or by setting forth a clearly delineated “range of

interpretive discretion”); Depomed, Inc. v. U.S. Dep’t of Health & Human Servs., 66 F.

Supp. 3d 217, 228 (D.D.C. 2014) (explaining that the mandate at Chevron Step One is

to “give effect to the unambiguously expressed intent of Congress” (internal quotation

marks omitted) (quoting Chevron, 467 U.S. at 842–43)). Put another way, the relevant

Step One question is whether the requirements that Congress has listed in the statutory

bar clauses—that the blocked application be a Section 505(b)(2) NDA that is “for the

conditions of approval of such drug in the approved subsection (b) application[,]” 21

U.S.C. § 355(c)(3)(E)(iii), or one that is “for a change approved in [a] supplement” that

received exclusivity, id. § 355(c)(3)(E)(iv)—are susceptible of multiple plausible

interpretations and are thus ambiguous, see AFL-CIO v. FEC, 333 F.3d at 174, or

whether there is only one possible interpretation of this statutory language. See Petit v.

U.S. Dep’t of Educ., 675 F.3d 769, 781 (D.C. Cir. 2012) (explaining that victory at Step

One requires plaintiffs to show the pertinent language “is susceptible of only [one]

possible interpretation” (alteration in original) (internal quotation marks and citation

25 omitted)). Upon examination of the text and structure of the exclusivity provisions, the

legislative history of the FDCA, and the parties’ arguments, this Court concludes that

there are multiple plausible interpretations of the bar clauses of romanettes iii and iv,

and thus, these provisions are ambiguous for Step One purposes, for several reasons.

The first clue to the ambiguous nature of the provisions in question is that

neither the FDCA’s overarching definition section nor the particular section at issue

here specifically defines the phrases “conditions of approval of such drug” or “change

approved in the supplement.” See generally 21 U.S.C. § 321 (FDCA’s definition

section); id. § 355 (FDCA’s section governing “new drugs”). True, standing alone, “the

absence of a statutory definition does not render a word ambiguous[,]” Petit, 675 F.3d

at 781 (internal quotation marks and citation omitted), but the operative words in these

statutory provisions have multiple potential meanings. For example, a “condition” can

be (among other things) a “future and uncertain event on which the existence or extent

of an obligation or liability depends[,]” or alternatively, a “state of being; an essential

quality or status.” Black’s Law Dictionary 354, 356 (10th ed. 2014). And

contextualizing the term in the context of the phrase “conditions of approval” does not

help, because that phrase could reasonably be interpreted to mean all sorts of things in

the drug-approval context, including the tasks that the FDA tells an applicant must be

completed before the application’s approval, or the diseases (the “conditions”) for

which the drug is approved as a treatment, or the particular circumstances that the FDA

finds relevant to its determination that a drug should be approved for marketing, such as

its method of delivery, the class of patients to whom it is to be delivered, or the nature

of the chemical substance involved. Cf. Veloxis Pharm., 109 F. Supp. 3d at 120

26 (observing that the parties “essentially concede[d] that [conditions of approval] is

ambiguous” and proceeding to Chevron Step Two).

The phrase “such drug”—as in the “conditions of approval of such drug in the

approved subsection (b) application[,]” 21 U.S.C. § 355(c)(3)(E)(iii) (emphasis

added)—also has different potential meanings. To be sure, “such, when used as an

adjective, . . . nearly always operates as a reference back to something previously

discussed[,]” Takeda Pharm., 78 F. Supp. 3d at 99 (internal quotation marks omitted)

(citing, inter alia, United States v. Ashurov, 726 F.3d 395, 398–99 (3d Cir. 2013)), but,

here, more than one drug is being referenced in the previous part of romanette iii

because the text specifically mentions more than one subsection (b) application: there is

the application that is “submitted under subsection (b) for a drug” that is presently

eligible for exclusivity per the eligibility clause, and there is the application that was

previously “approved under subsection (b)” that contained an active ingredient shared

by the drug that is eligible for exclusivity. This renders “such drug” ambiguous when

one attempts to ascertain what Congress meant when it used the phrase “conditions of

approval of such drug.”

What is more, it is also unclear from the statutory text what role “such drug”

plays in the phrase “conditions of approval of such drug”; and there are at least two

possibilities. On the one hand, “such drug” might serve only to point the reader to the

relevant cluster of conditions of approval—i.e., those attached to whichever drug

Congress intended to reference with that phrase—regardless of any essential qualities of

the drug not encompassed in its “conditions of approval.” (Otsuka makes this type of

argument when it asserts that Abilify Maintena was approved for the “treatment of

27 schizophrenia using a once-monthly, long-acting, injectable formulation of

aripiprazole[,]” (Otsuka’s Citizen Petition, AR 000033), and suggests that these

“conditions of approval”—which Aristada shared—were, alone, sufficient to trigger the

bar clause, irrespective of active moiety differences. (See id. 000033, 000039; Pls.’

Mem. at 21; Pls.’ Reply in Supp. of Pls.’ Mot. (“Pls.’ Reply”), ECF No. 30, at 12.))

Alternatively, “such drug” might have been intended not only to identify the relevant

conditions of approval but also to establish that only subsequent applications for

duplicative drugs—i.e., those with the same active moieties—are barred, and only if the

second-in-time application for the marketing of that same drug has the same conditions

of approval. (The FDA adopts this reading when it “focuses on the drug at issue” as the

first step of its determination regarding whether the bar clause blocks a second-in-time

application (FDA Decision at 12)). Nothing in the text of romanette iii clearly resolves

this dispute or otherwise establishes Congress’s intent with respect to the meaning of

“such drug.”

And romanette iv presents similar ambiguities. The bar clause of that statutory

provision states that “the Secretary may not make the approval of an applicat ion

submitted under subsection (b) of this section for a change approved in the

supplement[,]” 21 U.S.C. § 355(c)(3)(E)(iv) (emphasis added), but nowhere is the

phrase “change approved in the supplement” defined. By their nature, supplements are

additive; therefore, “change” likely refers to some new knowledge or utility brought

into being via the supplement that is entitled to eligibility. See, e.g., ViroPharma, 898

F. Supp. 2d at 7; Merriam-Webster’s Collegiate Dictionary 206 (11th ed. 2003)

(defining the noun change, inter alia, as “alteration” or “transformation”). But the

28 nature and scope of the relevant change is not patently obvious, and one could imagine

that Congress might intend for subsequent drug applications to be blocked under

romanette iv only if the second-in-time application involves both the same chemical

substance present in the drug product that was initially approved and then

supplemented, and also the particular change that was approved in the supplement.

Alternatively, the only concern of Congress might be whether the subsequent

application involves the same change in circumstances that the approved supplement

requested (e.g., where the supplement sought a change in the method of administration

of a previously approved drug and the second-in-time application seeks approval for

that same new method of administration), and thus, the active moiety or ingredients of

the drug in the supplement versus that in the second-in-time application could be

considered irrelevant to the application of the bar clause. Notably, the D.C. Circuit has

already found analogous supplement-exclusivity language to be “permeated by

ambiguities.” AstraZeneca Pharm., 713 F.3d at 1139 (considering 21 U.S.C.

§ 355(j)(5)(F)(iv) and finding ambiguity in the phrase “a change approved in the

supplement”). This Court sees no reason to believe that the meaning of “change” in the

context of NDA-supplement exclusivity is any clearer.

All this means that, in this Court’s reading, the plain text of the bar clauses of

romanettes iii and iv “can support [multiple] plausible interpretations [.]” AFL-CIO v.

FEC, 333 F.3d at 174 (citation omitted). Moreover, this Court has found nothing in the

legislative history of the FDCA that would resolve or remove the many ambiguities in

the pertinent provisions. See Sierra Club, 551 F.3d at 1027 (explaining that legislative

history may be consulted at Chevron Step One). Therefore, the conclusion that

29 romanettes iii and iv are “ambiguous for purposes of Chevron analysis[,]” AFL-CIO,

333 F.3d at 174 (citation omitted), appears inescapable.

2. Otsuka’s Arguments Fail To Demonstrate That The Key Terms Have A Single Plain Meaning

Otsuka’s arguments to the contrary are wholly unpersuasive. The first

questionable aspect of Otsuka’s reasoning is its insistence that this Court should not

focus so intently on the plain text of the bar clauses themselves, because the clear and

unambiguous intent of Congress to prohibit approval of Aristada can be gleaned from

reading the bar-clause provisions in conjunction with an entirely different set of

statutory criteria with a dissimilar role—i.e., the criteria for successful submission of a

Section 505(b)(2) application. (See Pls.’ Mem. at 23 (arguing that the exclusivity

provisions of romanettes iii and iv “must be interpreted together” with the section of the

FDCA that establishes the pathways for submission of a Section 505(b)(2) NDA).)

Otsuka never adequately explains how operative phrases in the pertinent provisions that

are themselves rife with ambiguity (see supra Part III.A.1) can be deemed unambiguous

because of how Congress defined the class of applications that romanettes iii and iv

block. Nevertheless, according to Otsuka, romanettes iii and iv “can only be read so

that a 505(b)(2) application cannot be approved for the conditions of approval of the

drug it relies on to meet the FDCA’s drug approval requirements” (Pls.’ Mem. at 25–26

(emphasis added)), which, Otsuka says, means that the Aristada application was

unambiguously barred because that application (1) relies on aripiprazole-related

research that Otsuka submitted to support Abilify Tablets, and (2) has the same

conditions of approval as Abilify Maintena (see id. at 31; Pls.’ Reply at 9, 16).

30 To say that Otsuka’s reasoning is difficult to follow is an understatement. But as

far as this Court can tell, Otsuka’s point appears to be that the FDA contravened

romanettes iii and iv when it approved Alkermes’s Section 505(b)(2) application for

Aristada because that application relied upon clinical investigations that had originally

supported Abilify Tablets (a drug approved pursuant to section 505(b)(1) of the Hatch-

Waxman Amendments), and even though the five-year exclusivity period for Abilify

Tablets has long expired, the bar clause related to the three-year exclusivity period for

Abilify Maintena was triggered due to the fact that Aristada and Abilify Maintena have

the same “conditions of approval” (romanette iii) and same “change” (romanette iv).

(See Pls.’ Mem. at 21, 25–26; Otsuka’s Citizen Petition, AR 000033–34, 000039); see

also Koretoff v. Vilsack, 707 F.3d 394, 398 (D.C. Cir. 2013) (per curiam) (explaining

that a plaintiff challenging agency action in federal court may only make the “specific

argument[s]” it made to the agency below).

This Court fully appreciates the considerable amount of creativity and effort that

it took for Otsuka to craft a textual argument that transcends the plain text of

romanettes iii and iv in an attempt to deliver Otsuka’s desired result. Indeed, it requires

considerable planning and foresight to proceed down the tortuous path that Otsuka

constructs: it appears that one must, first, notice that romanettes iii and iv establish that

the barred applications are of the Section 505(b)(2) variety and accept Otsuka’s bald

contention that “Sections 505(b)(2) and [romanettes iii & iv] must be interpreted

together[.]” (Pls.’ Mem. at 23.) Then, one must discount entirely the common

understanding of “such” as it relates to “such drug” in romanette iii, and instead of

viewing that word as referencing a previously mentioned drug, see Takeda Pharm., 78

31 F. Supp. 3d at 99, read “such drug” in romanette iii to refer prospectively to the portion

of the bar clause that mentions “subsection (b)(1)[.]” (See Pls.’ Mem. at 24 (arguing

that “such drug” refers to “multiple drugs” including “the drug in the first-in-time

505(b)(1) application” because “such . . . refer[s]” to “something to come later in the

sentence” (internal quotation marks and citations omitted))). Then, one must ignore the

obvious possibility that the bar clause’s reference to “subsection (b)(1)” serves not to

enshrine reliance on a drug approved under that subsection as the key marketing-

exclusivity consideration but simply to establish that the bar clause only reaches

Section 505(b)(2) applications, i.e., applications that contain unoriginal “investigations

. . . relied upon by the applicant for approval of the application[,]” 21 U.S.C.

§ 355(c)(3)(E)(iii) (emphasis added). (See Pls.’ Mem. at 22 (“When the word ‘drug’ is

appropriately considered in the statutory structure, it is clear that a 505(b)(2) NDA is

blocked by exclusivity attaching to the ‘conditions of approval’ or ‘change’ of the drug

the 505(b)(2) relies on to meet the drug approval requirements.” (emphasis added)).)

And, finally, after reading romanette iii to establish that Alkermes’s reliance on Abilify

Tablets somehow matters with respect to the determination of the scope of exclusivity,

one must infer that the “conditions of approval” or “change” of Abilify Maintena or its

supplement impermissibly overlap with the same “conditions of approval” and “change”

that the Aristada application seeks, and reason that, for that reason alone, Abilify

Maintena’s exclusivity bar applies even though Aristada and Abilify Maintena have an

admittedly distinct active ingredient and moiety. (See id. at 22 (“[T]he text of the

provisions limits exclusivity to the ‘conditions of approval’ derived from ‘new clinical

investigations’ . . . and not to a specific ‘drug.’” (citations omitted)); see also id. at 21

32 (“The focus on the scope of a first-in-time drug’s exclusivity is appropriately on the

‘conditions of approval’ or ‘change,’ not the active moiety at issue.”).)

Only if one does all this, is it even remotely conceivable to reach the conclusion

that Congress meant for Aristada to be blocked under romanettes iii and iv based on

Alkermes’s reliance on investigations that were submitted to support Abilify Tablets (a

drug whose exclusivity period has expired), given that Abilify Maintena and Aristada

allegedly have the same conditions of approval and notwithstanding the differences in

active moiety. (Cf. id. at 30 (heralding “[t]he plain language reading of the statute set

forth by Otsuka” as consistent with clear congressional intent because it “reward[s]

drug manufacturers, like Otsuka, for engaging in research of already approved drugs

(e.g., Abilify tablets) to create new products (e.g., Abilify Maintena)”).) And while

Otsuka repeatedly, and perhaps even earnestly, asserts that this interpretation of the bar

clauses was Congress’s obvious intent, never before has this Court seen a more

convoluted reading of a statute’s text to support the contention that its meaning is plain!

Otsuka also seemingly (unwittingly) acknowledges that romanette iii is ambiguous as it

struggles to explain what it contends is the only proper reading of the statutory text.

(See, e.g., id. at 24–25 (arguing that the term “such drug” in romanette iii is broad

enough to “include[] in its scope [both] what FDA has interpreted to mean active

moiety and the ‘drug’ in the 505(b)(1) application”(emphasis added)).) And it fails

entirely to offer a developed, independent argument regarding romanette iv, presumably

because, in Otsuka’s view, success on that front rises and falls with the viability of its

33 romanette iii assertions. (See, e.g., id. at 21 (treating “conditions of approval” and

“change” as essentially equivalent).) 9

In the instant morass of text and arguments, at least one thing is abundantly

clear: even if Otsuka is correct that romanettes iii and iv can be read to bar Aristada

under the reasoning Otsuka puts forward, nothing in Otsuka’s briefs or oral argument

persuades this Court that the FDA was required to read the statute in this fashion (i.e.,

that romanettes iii and iv unambiguously direct Otsuka’s desired result). Thus, contrary

to Otsuka’s contentions, these statutory provisions cannot be deemed to provide a

single, definitive answer to the key question (for Chevron Step One purposes): “What

are the relevant criteria for determining the applicability of the three-year exclusivity

period under romanettes iii and iv?” And it certainly cannot be said that Congress’s

9 A closer look at the exclusivity process generally—and specifically, the three-year exclusivity dynamic—only underscores the implausibility of Otsuka’s statutory interpretation (as this Court understands it), which makes it all the more likely that romanettes iii and iv do not demand it. Per the eligibility clause, three-year exclusivity can occur only when a drug application that includes a particular active ingredient has been approved at some point in the past (which the Court will call T1); the Abilify Tablets application is the T1 application here. If, sometime later (at T2), a drug applica nt submits a subsection 505(b) application for a drug that includes that (now previously approved) active ingredient, the eligibility clause establishes that the T2 drug application (Abilify Maintena here) can receive exclusivity if it contains reports of new clinical investigations essential to the application’s approval that it conducted or sponsored. This much is not in dispute. See 21 U.S.C. § 355(c)(3)(E)(iii). When a later application like Aristada’s comes on the scene (at T3), the question is whether that application is for the “conditions of approval of such drug in the appr oved subsection (b) application” for the purpose of the bar clause, id., and answering that question requires identifying which conditions of approval matter: the conditions of approval of the drug in the T2 application or those of the drug in the T1 application? Notably, whatever else one thinks about romanettes iii and iv, their eligibility clauses parcel exclusivity out in the first instance based on the nature of the T2 dru g application, and also, with respect to romanette iii, based on a look at the active ingredient of the T2 drug and the supporting clinical investigations. Yet, Otsuka’s “unambiguous” statutory reading of the bar clause inexplicably unmoors the scope of t he exclusivity bar from the trigger that created it. The strangeness of the view that the T1 drug application is determinative of the applicability of the exclusivity bar is made even stranger when one realizes that a T1 drug application like Abilify Tablets got its own exclusivity period when it was first approved; and, indeed, Abilify Tablets likely received five years of exclusivity under 21 U.S.C. § 355(c)(3)(E)(ii) be cause it contained a never-before- approved active ingredient. Otsuka does not explain why Congress would use romanettes iii and iv to, in effect, provide what amounts to yet another period of exclusivity based on the second -in-time applicant’s reliance on a T1 drug that has already enjoyed such protection, and this Court sees no good reason why it would do so.

34 unambiguous response to that question is that the only things that matter are the second-

in-time applicant’s reliance on another drug and any similarity in the conditions of

approval of the drug with exclusivity (or, for that matter, the drug upon which the

applicant relied) and the drug in the second-in-time application, as Otsuka insists. This

means that Otsuka has failed to demonstrate that its interpretation of romanette iii is the

only viable reading of that provision, and its tag-along romanette iv contentions also

necessarily fail.

Thus, Otsuka has not shown that “the statute unambiguously forecloses the

[agency’s] interpretation” in a manner that would preclude this Court’s move to

Chevron’s Step Two. Vill. of Barrington, 636 F.3d at 661 (citation omitted) (emphasis

omitted); see also Pharm. Research and Mfrs. of Am. v. FTC, 790 F.3d 198, 207 (D.C.

Cir. 2015) (“To prevail on its Chevron Step One argument, [the plaintiff] has to do

better than concoct an interpretation purportedly based on the statute’s context. [It]

must show that the statute unambiguously forecloses the [agency’s] interpretation.”

(internal quotation marks and citation omitted) (third alteration and emphasis in

original)). 10

10 Notably, and for what it’s worth, in addition to being essentially incomprehensible, Otsuka’s view of romanettes iii and iv appears to undermine the balance that Congress struck in the Hatch -Waxman Amendments in at least one obvious way. See Petit, 675 F.3d at 782 (observing that considering “the problem Congress sought to solve” is critical at Step One (internal quotation marks and citation omitted)). The overriding goal of the amendments was to “balance two competing interests in the pharmaceutical industry: (1) inducing pioneering research and development of new drugs and (2) enabling competitors to bring low-cost, generic copies of those drugs to market[,]” Takeda Pharm., 78 F. Supp. 3d at 68 (internal quotation marks and citation omitted); yet, Otsuka’s reading would harm the first interest and do nothing for the second. Aristada contains a never-before-seen chemical entity (two, in fact); and indeed, it appears that the Aristada NDA received five years of marketing exclusivity precisely for that reason. (See FDA Decision at 20.) Yet Otsuka’s statutory reading would not only delay Alkermes’s access to those five years of exclusivity for its new -chemical-entity based drug, but it would at least arguably allow Otsuka to chain together aripiprazole -based supplements based on Abilify Maintena—or perhaps entirely new aripiprazole-based applications—and indefinitely delay Alkermes’s access to the benefits of its different chemical entities (N-hydroxymethyl aripiprazole and aripiprazole

35 B. The FDA’s Determination That Romanettes iii And iv Only Block Approval Of Subsequent Applications For New Drugs That Have The Same Active Moiety As The Drug With Exclusivity Survives Scrutiny At Chevron Step Two

Having concluded that romanettes iii and iv are ambiguous regarding the criteria

that must be applied when the FDA determines whether or not a second-in-time NDA is

barred by the exclusivity those provisions confer, this Court now turns to an evaluation

of the reasonableness of the FDA’s conclusion that only those second-in-time

applications for drugs that have the same active moiety as a drug with exclusivity are

barred. At Chevron Step Two, this Court must accept a reasonable agency construction

of a statutory provision, even if it “differs from what the [C]ourt believes is the best

statutory interpretation.” Brand X, 545 U.S. at 980 (citation omitted). This is so

because ambiguity in a statute may properly be considered to be implicit authorization

from Congress to the agency to deliver a reasonable interpretation that resolves it, see

Van Hollen, Jr., 811 F.3d at 495, and the agency is “the authoritative interpreter (within

the limits of reason)” of “an ambiguous statute [it] is charged with administering [.]”

Brand X, 545 U.S. at 983. Thus, at this stage in the review process, this Court’s only

task is to ensure that the FDA’s interpretation is a permissible construction of the text

of the statute, see Abbott Labs., 920 F.2d at 988 (explaining that the court must evaluate

the “construction’s ‘fit’ with the statutory language as well as its conformity to

statutory purposes”), and that the FDA has satisfied the strictures of reasoned decision

making in selecting that interpretation, see Vill. of Barrington, 636 F.3d at 660 (“At

Chevron step two we defer to the agency’s permissible interpretation, but only if the

lauroxil). Again, if the statute actually required this result, the Court would have no choice but to enforce it. But this is one more nail in the coffin that encapsulates Otsuka’s Step One averments.

36 agency has offered a reasoned explanation for why it chose that interpretation.”

(citation omitted)). For the reasons that follow, this Court concludes that the FDA’s

interpretation of the bar clauses in romanettes iii and iv is permitted by the statutory

text and that the agency satisfactorily explained its choice.

1. The Text Of Romanette iii Permits The FDA’s “Active Moiety” Interpretation, And The FDA Has Provided A Cogent Explanation For That Interpretation

The FDA has determined that the unclear phrase “conditions of approval of such

drug in the subsection (b) application” in romanette iii should be read to block only

those second-in-time applications that, as a threshold matter, seek marketing approval

for a drug that has the same active moiety as the drug with exclusivity. As applied to

the instant circumstances, for example, the FDA has concluded that “any approval of

Aristada will not be an approval of ‘such drug’ (a drug containing the active moiety

aripiprazole) and therefore will not be for the ‘conditions of approval of such drug’” in

the Abilify Maintena application. (FDA Decision at 21–22). Courts employ “all the

tools of statutory interpretation” when determining permissibility, Loving v. IRS, 742

F.3d 1013, 1016 (D.C. Cir. 2014) (citation omitted); PDK Labs. Inc. v. DEA, 438 F.3d

1184, 1190 (D.C. Cir. 2006) (noting that “[e]ven at Chevron’s second step, we begin

with the statute’s language” (citing Abbott Labs., 920 F.2d at 988)), and this Court finds

that the text and structure of romanettes iii and iv permit the FDA’s reading, for several

reasons.

First of all, per its plain text, romanette iii’s bar clause expressly prohibits

approval of subsequent Section 505(b)(2) applications “for the conditions of approval

of such drug in the approved subsection (b) application[.]” See 21 U.S.C.

§ 355(c)(3)(E)(iii) (emphasis added). It is permissible to read “such drug” as referring

37 back to the previous use of “drug” pursuant to the most natural reading of “such,” see

Takeda Pharm., 78 F. Supp. 3d at 99, and the prior use of “drug” (in the eligibility

clause) describes the drug product in the application that receives exclusivity. (See

FDA Decision at 12 (reading “[t]he phrase ‘such drug in the approved subsection (b)

application’ in the bar clause [to] refer[] to the earlier use of the term ‘drug’ in the

eligibility clause”).) Furthermore, the language of the bar clause clearly permits the

agency’s contention that the pertinent identifying characteristic of the drug that receives

exclusivity is its active moiety. For approximately two decades now, the FDA has

focused on the active moiety of a drug—i.e., “the molecule or ion, excluding [certain

appended portions of the molecule,] responsible for the physiological or

pharmacological action of the drug substance[,]” 1994 Rule, 59 Fed. Reg. at 50,368

(codified at 21 C.F.R. part 314)—to identify and distinguish different drugs, and Otsuka

has not pointed to a characteristic that better defines a “drug” and, thus, better

articulates the meaning of “such drug” as that phrase appears in romanette iii. Put

another way, when a drug application is submitted for approval, the manufacturer must

demonstrate that the substance it seeks to market “will have the effect it purports or is

represented to have[,]” 21 U.S.C. § 355(d), and it is well established that the active

moiety of a drug substance is the feature that makes the drug “go,” insofar as it

provides the drug substance’s “physiological or pharmacological action[.]” 21 C.F.R.

§ 314.108(a). Thus, Congress’s use of the phrase “such drug” is certainly amenable to

an interpretation that relates to what the agency has long determined is a drug’s

distinguishing feature. 11

11 The fact that romanette iii’s eligibility clause speaks of “active ingredient[s]” instead of active moieties, 21 U.S.C. § 355(c)(3)(E)(iii), is of no moment, as far as the bar clause is concerned. A

38 It is also clear to this Court that the FDA’s interpretation is consistent with the

structure and purpose of romanette iii and the relevant legislative history. Specifically,

by providing a three-year period of marketing exclusivity under the specific

circumstances romanette iii prescribes, Congress apparently intended to incentivize a

particular type of effort on the part of drug manufacturers: the investments that are

needed to demonstrate that a previously approved drug substance can be used in a new

way. See 21 U.S.C. § 355(c)(3)(E)(iii); 130 Cong. Rec. 24,425 (1984) (statement of

Rep. Waxman) (“[A] 3-year period of exclusive market life is afforded to nonnew

chemical entities . . . which have undergone new clinical studies essential to FDA

approval. This provision will encourage drugmakers to obtain FDA approval for

significant therapeutic uses of previously approved drugs.” (emphasis added)); (see also

Pls.’ Mem. at 18 (admitting that “[t]hree-year exclusivity was meant to incentivize drug

manufacturers to invest in new clinical trials to demonstrate the safety a nd effectiveness

for new uses of already approved drugs.” (citations omitted)) . Thus, it makes eminent

sense for the FDA to conclude that the scope of the three-year-exclusivity benefit

should relate to the particular drug substance that was studied in order to give rise to

exclusivity in the first place; indeed, to find otherwise would upset the “careful

balance” that Congress struck in the Hatch-Waxman Amendments insofar as it would

specific “congressional mandate in one section and silence in another often suggests not a prohibition but simply a decision not to mandate any solution in the second context, i.e., to leave the question to agency discretion[,]” Van Hollen, Jr., 811 F.3d at 493–94 (internal quotation marks and citation omitted), and it cannot be disputed that a drug’s active moiety is a highly salient drug characteristic that an expert agency might well deem relevant to the exclusivity analysis. Furthermore, there is no question that the FDA generally deems the active moiety of a drug to be the equivalent of that drug’s active ingredient. See, e.g., 1994 Rule, 59 Fed. Reg. at 50,358 (explaining the agency’s longstanding view that “‘active ingredient,’ as used in the phrase ‘active ingredient (including any salt or ester of the active ingredient),’ means active moiety”).

39 seemingly permit a drug manufacturer who made investments related to one particular

drug substance to prevent the marketing of other drug products and substances that

might be safe and effective as treatments for the same or similar conditions. (See, e.g.,

FDA Decision at 27 & n.94.) Nothing in the statutory scheme suggests that Congress

intended that result, and in fact, it appears that Congress strongly desired to affect the

drug market in precisely the opposite manner. See Glaxo, Inc. v. Novopharm, Ltd., 110

F.3d 1562, 1568 (Fed. Cir. 1997); see also Takeda Pharm., 78 F. Supp. 3d at 100

(explaining that Hatch-Waxman was designed both to “incentiviz[e] investment in the

innovation of new drugs” and also to “encourag[e] the production of less-costly

alternative drug products” (citation omitted)). Thus, an agency interpretation that views

romanette iii’s exclusivity as only extending to second-in-time applications for the

marketing of drugs that are, in essence, the same as the drug that was previously studied

(i.e., those that have the same active moiety) is entirely consistent with the way the

statutory scheme was intended to operate and accords fully with the purposes animating

Hatch-Waxman. See AstraZeneca Pharm. LP v. FDA, 872 F. Supp. 2d 60, 85 (D.D.C.

2012) (testing the FDA’s statutory interpretation against Hatch-Waxman’s “careful

balance” to ascertain its reasonableness (citations omitted)), aff’d, 713 F.3d 1134 (D.C.

Cir. 2013).

It is also clear that, in selecting this interpretation, the FDA plainly wielded its

“expertise to produce a reasoned decision.” Vill. of Barrington, 636 F.3d at 660

(citation omitted). Policy considerations may guide “an agency’s choice among

plausible meanings of a statute[,]” Cent. Tex. Tel. Co-op, Inc. v. FCC, 402 F.3d 205,

212 (D.C. Cir. 2005), and as the FDA has explained, employing active moiety as a

40 relevant criterion for determining whether a second-in-time application is barred

promotes Hatch-Waxman’s goals by protecting “against approval of drugs with the

same active moiety for the same exclusivity-protected use[,]” while simultaneously

encouraging competition by ensuring that exclusivity could “not block approval of

drugs with different active moieties . . . that may have some advantages over previously

approved active moieties[,]” (FDA Decision at 23–24 (footnote omitted)). Moreover,

the FDA has noted that the active-moiety approach can “be applied consistently with

scientific rigor across drug products.” (Id. at 27.) In light of the just-discussed

centrality of the active moiety of a drug to its usefulness, the FDA’s interpretation is a

quintessential—and quite cogent—policy-based resolution of statutory ambiguity. See

Vill. of Barrington, 636 F.3d at 666.

2. The FDA’s Interpretation Of Romanette iv—Which Is Partly Based On Its View Of The Scope Of The Exclusivity Conferred In Romanette iii—Is Permissible, Reasoned, And Rationally Related To The Goals Of The FDCA

At this point in time, the FDA’s construction of romanette iv is the only live

legal basis for Otsuka’s claim that the FDA’s approval of Aristada violates the

exclusivity provisions of the FDCA. (See Compl. ¶¶ 51–59; see also Notice, ECF No.

36 (alerting Court that Abilify Maintena’s romanette iii exclusivity has expired). In

interpreting romanette iv, the FDA agrees with Otsuka that the “changes” in a

supplement are adjustments to the conditions of approval of a preexisting NDA ( see

FDA Decision at 13; Otsuka’s Citizen Petition, AR 000034); however, even prior to

assessing Aristada’s conditions of approval, the FDA determined that the exclusivity

that attaches to Abilify Maintena’s supplement did not preclude approval of Aristada

because, in the FDA’s view, a supplement’s changes to the conditions of approval relate

41 to a particular drug (i.e., a product with a particular active moiety) and thus, a second-

in-time application for a drug with a different active moiety than the initially approved

drug was not blocked by romanette iv’s exclusivity. (See FDA Decision at 13 (“[A]

change approved in a supplement must be a change in conditions of approv al for the

same drug (active moiety) approved in the original NDA.”).) Notably, the text of

romanette iv provides fewer concrete hooks for interpretation than romanette iii, and as

a result, to a large extent, the FDA’s construction of the former is roote d in its

conclusions about the latter. That is precisely why this Court considered it necessary to

analyze the permissibility and cogency of the “active moiety” interpretation that the

FDA has employed with respect to romanette iii as a precursor to its discussion of the

FDA’s interpretation of romanette iv. See supra Part III.B.1. And in light of that prior

analysis, this Court easily concludes that the FDA’s interpretation of romanette iv

satisfies Chevron’s Step Two.

Specifically, as explained above, romanette iii plainly teaches that conditions of

approval matter when the FDA determines whether a second-in-time application is

barred by exclusivity, and although the phrase “conditions of approval” does not appear

in romanette iv, there is no obvious reason why overlapping conditions of approval

would be deemed significant when exclusivity is conferred to an application submitted

under subsection (b) in the first instance, but not when exclusivity attaches to “a

supplement to an application approved under subsection (b)[.]” 21 U.S.C.

§ 355(c)(3)(E)(iv) (emphasis added). Thus, as the parties here agree, it is permissible

and proper to treat the supplement’s “changes” as relating to the conditions of approval

of the drug with exclusivity. (See FDA Decision at 13; Otsuka’s Citizen Petition, AR

42 000034.) Moreover, to the extent that supplemental NDAs relate “to an application

approved under subsection (b)[,]” 21 U.S.C. § 355(c)(3)(E)(iv), they necessarily

augment an application that was previously approved for a drug with a particular active

moiety. Cf. AstraZeneca Pharm. LP., 713 F.3d at 1136 (discussing the supplement

process). Accordingly, the ambiguous phrase “change approved in the supplement”

permits the interpretation that the exclusivity granted to a supplement that alters the

relevant conditions of approval of an approved drug application bars only second-in-

time applications for products with the same active moiety. Such an interpretation is

consistent with the previously noted principle that exclusivity is a reward for work on a

particular drug substance, which is gleaned from the statutory structure and legislative

history. See, e.g., 130 Cong. Rec. 23,766 (1984) (statement of Sen. Hatch) (describing

supplements as “restric[ting] coverage to only those alterations, like some changes in

strength, indications, and so forth”). And, indeed, while there may be other, and

potentially better, ways of reading romanette iv, the FDA was not required to pick the

best interpretation; all that matters is that nothing in romanette iv forecloses the active-

moiety limitation, and it is a restriction that makes sense in light of what we know

about the statutory scheme and the way drugs work. See NationsBank of N.C., N.A. v.

Variable Annuity Life Ins. Co., 513 U.S. 251, 257 (1995) (explaining that, at Step Two,

the agency’s judgment receives “‘controlling weight’” if it “fills a gap or defines a term

in a way that is reasonable in light of the legislature’s revealed design” (quoting

Chevron, 467 U.S. at 844)).

This Court explained above why the FDA’s romanette iii reasoning satisfied the

requirements of reasoned decisionmaking, and the justifications provided there were

43 also offered to support the FDA’s romanette iv reasoning. To begin with, the FDA is an

expert agency charged with making precisely these sorts of highly technical

determinations, and its interpretation of romanette iv is premised on “the agency’s

evaluations of scientific data within its area of expertise.” Actavis Elizabeth LLC v.

FDA, 625 F.3d 760, 766 (D.C. Cir. 2010) (internal quotation marks and citation

omitted). What is more, the FDA has seamlessly situated its decision within the history

of the Hatch-Waxman Amendments, and, specifically, the problems that Congress

sought to solve. That history tells the story of a focused legislative effort to better

harmonize innovation and competition, see Takeda Pharm., 78 F. Supp. 3d at 68—i.e.,

Congress unquestionably wanted to “provide incentives for new drug development,”

ViroPharma, 898 F. Supp. 2d at 7 (internal quotation marks and citation omitted) , while

at the same time preserving the market’s unique ability to ensure that low-priced drugs

are provided to the public, see Teva Pharm., USA, Inc. v. Leavitt, 548 F.3d 103, 107

(D.C. Cir. 2008); Glaxo, Inc., 110 F.3d at 1568. As the FDA has noted, it was against

that backdrop that marketing exclusivities were created (see FDA Decision at 4), and

requiring that the exclusivity benefit be limited based on the active moieties of the

relevant drugs—such that it is deemed to block only second-in-time drug applications

that, in effect, concern the same drug—encourages innovation by guarding “against

approval of drugs with the same active moiety for the same exclusivity-protected use”

(id. at 23), and simultaneously promotes market competition by ensuring that this

exclusivity “does not block approval of drugs with different active moieties . . . that

may have some advantages over previously approved active moieties” (id. at 23–24

(footnote omitted)). To be sure, one might imagine a bigger (or smaller) exclusivity bar

44 than the “active moiety” approach permits, but, at the end of the day, the myriad

ambiguities in the relevant statutory language makes clear to this Court that striking the

desired balance between an innovator with an expansive exclusivity benefit (on the one

hand) and a host of stifled future potential competitors (on the other) was a policy

choice that Congress intended the FDA to make. See Health Ins. Ass’n of Am., Inc. v.

Shalala, 23 F.3d 412, 416 (D.C. Cir. 1994) (“Resolution of an ambiguity in a statute, if

it has consequences, inevitably requires the agency to consider competing policy

objectives, and it is the reconciliation of such conflicts that is entitled to judicial

deference.” (internal quotation marks omitted) (quoting Wagner Seed Co. v. Bush, 946

F.2d 918, 923 (D.C. Cir. 1991))); Ariz. Pub. Serv. Co. v. EPA, 211 F.3d 1280, 1287

(D.C. Cir. 2000) (“[A]s long as the agency stays within [Congress’] delegation, it is

free to make policy choices in interpreting the statute, and such interpretations are

entitled to deference.” (alterations in original) (internal quotation marks omitted)

(quoting Arent v. Shalala, 70 F.3d 610, 615 (D.C. Cir. 1995))); ViroPharma, 898 F.

Supp. 2d at 21 (upholding an FDA decision at Step Two where drug company failed to

show that the interpretation was “anything other than a reasonable policy choice for the

[FDA] to [have made].” (alterations in original) (internal quotation marks and citation

omitted)).

3. Otsuka’s Romanette iv Arguments (Such As They Are) Are Unavailing

Otsuka has trained all of its fire on the FDA’s interpretation of romanette iii ( see

supra Part III.A.2) and makes little-to-no effort to mount an independent attack on the

FDA’s reading of romanette iv. Thus, only a small set of cross-over arguments is worth

addressing here. With respect to Otsuka’s contention that the FDA’s active moiety

45 construction leads to “absurd” results under the circumstances presented in this case

because Aristada ultimately converts in the body to aripiprazole, which is the active

moiety of the Abilify line of drugs (Pls.’ Reply at 27–28), it suffices to note that the

complex scientific endeavor of determining whether or not the drug in the second-in-

time application is actually too similar to the drug with exclusivity to be deemed

innovative is precisely the kind of determination that Congress most certainly intended

to be left to the FDA. See Cmty. Care Found. v. Thompson, 318 F.3d 219, 225 (D.C.

Cir. 2003) (observing heightened deference when the agency’s interpretation “concerns

. . . a complex and highly technical regulatory program ” (internal quotation marks and

citation omitted)).

Otsuka’s suggestion that the FDA’s explanation for the “active moiety”

interpretation inexplicably contradicts its past practice fares no better. (See Pls.’ Mem.

at 33–35 (pointing to statements the FDA made in a prior letter in response to a citizen

petition submitted by Pfizer relating to its product Xalatan)); see also King Broad. Co.

v. FCC, 860 F.2d 465, 470 (D.C. Cir. 1988) (finding that an agency acts arbitrarily and

capriciously if it issues a decision “inconsistent with its prior analysis in similar

situations without any acknowledgement of the fact, or cogent explanation as to why” ).

Several years ago, the FDA permitted the marketing of Allergan’s Lumigan and Alcon’s

Travatan, over Pfizer’s (non-exclusivity-based) objection. (See Letter from Janet

Woodcock, MD, Director, CDER to Alessandra Ravetti, Pfizer (“Xalatan Letter”), AR

001508, 001518, 001533.) According to Otsuka, although the three drugs there all had

different active moieties, the FDA nevertheless indicated that Lumigan and Travatan

would have been blocked by a previously extant (but at that point expired) period of

46 exclusivity that had attached to a supplement to Pfizer’s Xalatan. (See Pls.’ Mem. at

33–34 (citing Xalatan Letter, AR 001532).) In contrast to Otsuka’s suggestion that the

FDA has acted arbitrarily and capriciously by approving Aristada despite this past

policy statement, the FDA has expressly addressed the statements that it previously

made under those markedly different circumstances, and it has explained both that the

prior statements are not fairly attributable to the establishment of a contrary policy , and

that, in any event, its current view represents the considered judgment of the agency

about how broad the exclusivity benefit should be. (See FDA Decision at 25 n.87

(expressly grappling with the potential implications of the Xalatan letter, and

concluding that, under the circumstances, the question of exclusivity’s relationship to

active moieties was simply not before the agency and the agency’s statements did not

represent the proper interpretation in light of “the statute, regulations, science, and

policy”).) An agency may change its mind on policy issues and legal interpretations

without being accused of arbitrariness, so long as its decision is “adequately

explained[,]” Arkema Inc. v. EPA, 618 F.3d 1, 6 (D.C. Cir. 2010); thus, when a party

nonetheless claims that an agency has deviated impermissibly from past statements,

courts in this jurisdiction have reviewed the agency’s explanation only to ensure

“minimal standards of rationality” in cases much like this one. Sanofi-Aventis U.S. LLC

v. FDA, 733 F. Supp. 2d 162, 173 (D.D.C. 2010) (internal quotation marks omitted)

(quoting Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 521 (D.C.

Cir. 1983)).

It seems that the real gravamen of Otsuka’s complaint is the alleged unfairness of

a statutory construction that permits “the true innovator that first engaged in the

47 necessary trials to prove the beneficial effects of treating patients with a long -acting

formulation of aripiprazole” to be “penalized by the entry to market of a drug that

referenced aripiprazole to shortcut the drug approval requirements[.]” (Pls.’ Reply at

28 (footnote omitted); see also Pls.’ Mem. at 27 (complaining about the “absurd[ity]” of

permitting Alkermes to rely on investigations associated with Abilify Tablets and “at

the same time” avoid the exclusivity associated with Abilify Maintena).) This may very

well prove to be a bad policy choice, but for the reasons explained, it does not defy

rationality, and that is especially so given that Otsuka’s alternative reading is

transparently orchestrated to extend the marketing exclusivity of the initial innovator

drug in perpetuity (see supra note 10), which, in this Court’s view, is an even more

absurd result.

The bottom line is this: the FDA has made the permissible and reasonable choice

to consider the exclusivity conferred by romanette iv to be cabined by the active moiety

of the drug that triggers it, and the agency has provided an adequate explanation of how

and why it decided that this was the place to draw the exclusivity boundary line. (See,

e.g., FDA Decision at 21–24, 27) (coupling the FDA’s interpretive analysis of the role

of “such drug” in understanding romanette iii (and by extension romanette iv) with its

policy-based arguments); see also id. at 27 (asserting that the active-moiety approach

“can be applied consistently with scientific rigor across drug products”). Otsuka has

failed to demonstrate that Step Two of the Chevron analysis requires anything more.

C. The FDA’s Interpretation Of Its Own Regulations To Conform With Its Reasonable Statutory Construction Is Not Plainly Erroneous Or Inconsistent With The Text Of The Applicable Regulations

The FDA’s regulations regarding the three-year exclusivity benefit mirror

romanettes iii and iv, and thus have a familiar structure. The regulation corresponding

48 to romanette iii, which appears at 21 C.F.R. § 314.108(b)(4), states (in relevant part)

that:

If an application: (i) Was submitted under section 505(b) of the act; (ii) Was approved after September 24, 1984; (iii) Was for a drug product that contains an active moiety that has been previously approved in another application under section 505(b) of the act; and (iv) Contained reports of new clinical investigations (other than bioavailability studies) conducted or sponsored by the applicant that were essential to approval of the application, the agency will not make effective for a period of 3 years after the date of approval of the application the approval of a 505(b)(2) application . . . for the conditions of approval of the original application[.]

21 C.F.R. § 314.108(b)(4)(i)–(iv) (hereinafter referred to as “subdivision (b)(4)”). The

regulation implementing romanette iv appears in the next subdivision, at 21 C.F.R.

§ 314.108(b)(5); it provides:

If a supplemental application: (i) Was approved after September 24, 1984; and (ii) Contained reports of new clinical investigations (other than bioavailability studies) that were conducted or sponsored by the applicant that were essential to approval of the supplemental application, the agency will not make effective for a period of 3 years after the date of approval of the supplemental application the approval of a 505(b)(2) application . . . for a change[.]

21 C.F.R. § 314.108(b)(5)(i)–(ii) (“subdivision (b)(5)”). The FDA has made

clear that it views these regulations as dovetailing with the mandates of romanettes iii

and iv and requiring the same result: that a second -in-time drug with a different active

moiety is not barred by the three-year exclusivity period. (See Defs.’ Mem. at 37; see

also FDA Decision at 10–11 (“The statute and regulations for 3-year exclusivity

describe which original NDAs and supplements (sNDAs) are eligible for [three-year]

exclusivity and which are barred or blocked from approval by that exclusivity.”

(emphasis added)).) Otsuka argues here that the FDA somehow cannot do this due to

(minor) wording differences between the text of the regulations and the statutes that

implement them, and as a result of what Otsuka calls the overall “regulatory context.”

49 (Pls.’ Mem. at 37; see also id. at 36–39.) This Court finds Otsuka’s argument wholly

unpersuasive.

With respect to Otsuka’s threshold contention that these regulations

“unambiguously prevent FDA from approving a [Section] 505(b)(2) application for the

conditions of approval of the original application or a change, irrespective of the active

moieties[,]” and thus that the FDA’s contrary interpretation is not entitled to Auer

deference (id. at 36 (internal quotation marks omitted)), Otsuka fails to demonstrate

that the text of these regulations is any clearer than the text of the statutes upon which

the regulations are based. See Christopher, 132 S. Ct. at 2166 (explaining that Auer

requires courts to defer to an agency’s “fair and considered” interpretation of an

ambiguous regulation unless the interpretation is “plainly erroneous or inconsistent with

the regulation” (internal quotation marks and citations omitted)). Of course, it would

be difficult for Otsuka to clear this hurdle, because the regulation has largely imported

the same inherently ambiguous “conditions of approval” and “change” language that

one finds in the statute, and the critical question of what it means for an application to

be for the “conditions of approval” or “change” likewise remains unanswered in the

regulatory context. Moreover, although Otsuka makes much of the fact that the bar

clause of subdivision (b)(4) directs one’s attention to “the conditions of approval of the

original application”—in contrast to romanette iii’s bar clause, which homes in on

“such drug”—Otsuka never manages to explain why this distinction makes any

difference, especially given that, as the FDA reads them, both provisions point to the

same set of conditions: those that are associated with the drug application that has

obtained exclusivity. (See, e.g., Defs.’ Mem. at 37.) And in this regard, the regulations

50 clearly permit the agency to employ the same reasoning that it applies when it interprets

the statute, which means that “the conditions of approval of the original application”

language is permissibly viewed as, in effect, incorporating the nature of the drug in the

original application itself. (See, e.g., Alkermes’s Mem. at 39.) Thus, the FDA’s view

is entitled to deference because it is not “plainly erroneous or inconsistent with the

regulation[,]” Christopher, 132 S. Ct. at 2166 (internal quotation marks and citation

omitted), in any meaningful sense.

Undaunted, Otsuka points out that subdivision (b)(4) expressly mentions “active

moiety,” but only with respect to the drug in the first-in-time application, as a criterion

for determining eligibility for three-year exclusivity. See 21 C.F.R.

§ 314.108(b)(4)(iii). Meanwhile, Otsuka says, the regulation that relates to five-year

exclusivity explicitly limits the scope of its exclusivity based on the active moiety of

the drug in the application with exclusivity, see id. § 314.108(b)(2). 12 According to

Otsuka, this shows that the FDA knew how to use active moiety to cabin exclusivity

when it wanted to, so the lack of any reference to active moiety in either of the

regulatory bar clauses that relate to three-year exclusivity “unequivocally evidences”

that active-moiety considerations have no place in defining the scope of that exclusivity

period. (Pls.’ Mem. at 37.)

12 In pertinent part, the regulation that relates to five-year exclusivity provides:

If a drug product that contains a new chemical entity was approved after September 24, 1984, in an application submitted under section 505(b) of the act, no person may submit a 505(b)(2) application . . . for a drug product that contains the same active moiety as in the new chemical entity for a period of 5 years from the date of approval of the first approved new drug application [with exceptions not relevant here].

21 C.F.R. § 314.108(b)(2) (emphasis added).

51 Otsuka’s argument goes much too far for at least two reasons. First of all, it is

clear to this Court that the FDA’s use of “active moiety” in subdivision (b)(4)’s

eligibility clause can be interpreted to leave precisely the opposite impression, insofar

as the insertion of this language plainly underscores the agency’s belief that the active

moiety of the drug in the original application is related (perhaps inextricably) to the

exclusivity period that is being conferred. Thus, instead of proving that active moiety

makes no difference to the exclusivity inquiry (as Otsuka asserts), the express “active

moiety” condition in subdivision (b)(4) arguably demonstrates that active moiety

matters. Second, and even more important, it is not at all clear that the FDA references

“active moiety” in the bar clause of the five-year exclusivity regulation yet omits it

from the three-year exclusivity directives because the regulations consider that

characteristic to have no bearing on the “conditions of approval” or “change” in those

latter provisions. In this regard, Otsuka is relying on an inference that the FDA

intended to indicate the irrelevance of active moiety to the scope of three -year

exclusivity, and much more is needed to defeat the deference that is due to the FDA’s

interpretation of subdivisions (b)(4) and (b)(5), given their ambiguous language . See

Chase Bank U.S.A, N.A. v. McCoy, 562 U.S. 195, 207 (2011) (finding regulation

ambiguous where each party’s interpretation was “plausible, and the text alone [did] not

permit a more definitive reading”). For example, in contrast to Otsuka’s view, the

FDA’s decision not to include an express “active moiety” limitation in the regulatory

bar clauses of subdivisions (b)(4) and (b)(5) might m ean that the scope of the three-year

exclusivities does not turn solely on active moieties, unlike the five-year exclusivity

grant. Thus, it cannot be said that the FDA’s knowledge of how to use a phrase

52 necessarily means that failing to use that phrase in the pertinent context leads to only

one possible interpretation; in other words, the text and structure of the five-year

exclusivity regulation is simply too thin a reed upon which to rest Otsuka’s argument

for unambiguous text.

Nor can it be said that the FDA’s interpretation of its regulations, which links the

scope of the three-year exclusivities to the active moiety of the drug in the application

that receives exclusivity, is “plainly erroneous or in consistent with the regulation[.]”

Christopher, 132 S. Ct. at 2166 (internal quotation marks and citation omitted). All

that the Court has said before with respect to its analysis of romanettes iii and iv applies

and leads inexorably to the conclusion that the FDA has not committed plain error or

acted inconsistently with its regulations, and indeed, the fact that these regulations

involve “a complex and highly technical regulatory program, in which the identification

and classification of relevant criteria necessarily require significant expertise and entail

the exercise of judgment grounded in policy concerns” makes deference to the FDA’s

interpretation “all the more warranted[.]” Thomas Jefferson Univ. v. Shalala, 512 U.S.

504, 512 (1994) (internal quotation marks and citation omitted). These ambiguous

regulations do not preclude the conclusion that an active-moiety overlap is needed in

order for a second-in-time application to be “for” the “conditions of approval” of an

earlier NDA regarding a drug, or “for” a “change approved” in a supplement regarding

a drug with exclusivity. To the contrary, as already discussed, the use of active moiety

in the eligibility clause of subdivision (b)(4) supports the FDA’s interpretation, and the

structure and purpose of the five-year exclusivity regulation actually furthers the FDA’s

view, because there is no logical reason that “the range of drugs blocked by exclusivity

53 for a less innovative change” would be “broader than the range of drugs that are

blocked by exclusivity for a more innovative change[.]” (FDA Decision at 23.) 13

In sum, this Court finds that the regulations that the FDA promulgated to

implement the ambiguous provisions of the FDCA regarding the three-year period of

exclusivity are themselves ambiguous, and thus permit the agency to select a reasonable

resolution of the competing policy concerns about the scope of that exclusivity. See

Cent. Tex. Tel., 402 F.3d at 213. This Court has already recounted the FDA’s

discussion of its resolution, see Part III.B.2, and because there is no reason to second-

guess the FDA’s policy and scientific judgment here, the agency’s interpretation must

be given “controlling weight[.]” High Plains Wireless, L.P. v. FCC, 276 F.3d 599, 606

(D.C. Cir. 2002) (internal quotation marks and citation omitted).

D. Otsuka’s Notice-And-Comment Claim Necessarily Fails Because It Relies On The Premise That The FDA Has Changed Its Regulations Regarding The Scope Of Exclusivity

Otsuka’s final claim can be resolved in mercifully short order. Count Three of

Otsuka’s complaint contends that the FDA’s decision to approve Aristada

impermissibly evaded required notice-and-comment procedures. (See Compl. ¶¶ 65–

74.) The central premise of this assertion is that the FDA’s decision amounted to a “de

facto” amendment of a duly promulgated regulation, insofar as it “changed significantly

13 Otsuka repeatedly denies that it questions the validity of the FDA’s five -year exclusivity regulation (see Pls.’ Mem. at 39; Pls.’ Reply at 38 n.15) and, in this regard, the Court takes Otsuka at its word. To the extent that Otsuka’s reply brief hints that the five-year exclusivity regulation is illegitimate because the corresponding statute does not use the phrase “active moiety” and only purports to block applications “which refer[] to the drug for which the” application with exclusivity was submitted ( Pls.’ Reply at 30 (quoting 21 U.S.C. § 355(c)(3)(E)(ii))), this Court merely notes that Otsuka cannot have it both ways. If it intends to rely on the plain text of the five -year exclusivity regulation to bolster its argument that the FDA has misinterpreted the three-year exclusivity regulations at issue here —and it clearly does (see Pls.’ Mem. at 37–38)—then it cannot simultaneously seek to undermine the five -year exclusivity criteria, and this is especially so when its subversive attack appears for the fi rst time in its reply brief and, thus, would be waived in any event, see Am. Wildlands v. Kempthorne, 530 F.3d 991, 1001 (D.C. Cir. 2008).

54 [the regulations] by effectively adding language to—and amending—[them].” (Pls.’

Mem. at 40; see also Compl. ¶¶ 65–74; Pls.’ Reply at 44–46.) But Otsuka can only rely

on that premise if the FDA’s pre-decision regulations had an unambiguous meaning that

the FDA “altered” when it decided that the Aristada NDA should be approved. See

Marseilles Land & Water Co. v. FERC, 345 F.3d 916, 920–21 (D.C. Cir. 2003).

Anything short of that renders the FDA’s action a mere clarification or interpretation of

the existing rules. See Perez, 135 S. Ct. at 1208 (explaining that “[o]ne would not

normally say that a court ‘amends’ a statute when it interprets its text. So too can an

agency ‘interpret’ a regulation without ‘effectively amend[ing]’ the underlying source

of law” (second alteration in original)); see also id. at 1207 (“The act of ‘amending,’

. . . in both ordinary parlance and legal usage, has its own meaning separate and apart

from the act of ‘interpreting.’” (citation omitted)). Therefore, this Court’s prior

rejection of Otsuka’s argument that the three-year exclusivity regulations have an

unambiguous meaning that foreclosed the FDA’s “active moiety” interpretation and

consequent approval of Aristada (see supra Part III.C), also compels the rejection of

Otsuka’s contention that the FDA transgressed the APA by improperly “amending” an

unambiguous regulation. Accordingly, the Court need not parse the lines between rules

and adjudications or between interpretative and legislative rules ; Otsuka offers no

authority for treating the FDA’s unremarkable resolution of the regulation’s ambiguities

as an action requiring notice and comment, and the Court has found none.

IV. CONCLUSION

This Court has resolved the instant dispute on the basis of indisputable first

principles. It is well established that, when it enacted the FDCA, Congress intended for

55 marketing exclusivity to be a substantial reward for pharmaceutical companies that

invest in the development of entirely new drugs or that study existing chemical

compounds to demonstrate that they can be safe and effective when prescribed for use

in a new way, and that exclusivity works as an incentive to innovate precisely because a

drug manufacturer can make the substantial investments necessary to bring a new

product to market, secure in the knowledge that the FDA will bar second-in-time

products that could undermine the value of that investment . But it also must be

acknowledged that providing such reassurances comes with a cost—it stifles innovation

during the exclusivity period—and, thus, it is clear that Congress has broadly identified

not only those circumstances under which the exclusivity benefit is to be conferred (the

eligibility clause) but also the general description of the subsequent new drug

applications that will be blocked by exclusivity (the bar clause ), leaving it to the expert

agency that administers this policy to determine the specific criteria that will properly

balance these competing concerns. Otsuka maintains that the FDA has interpreted the

statutory exclusivities in a manner that contradicts the text of the statute, conflicts with

the agency’s own regulations, and requires application of notice-and-comment

procedures, but the principles established in Chevron and Auer demand that this Court

give deference to the FDA’s interpretation of the ambiguous terms of the statutory and

regulatory provisions if the agency’s construction is permissible and reasonable, and for

the reasons explained in this Opinion, this Court has no doubt that both of these

requirements are satisfied here. At bottom, and in clear contrast to the interpretation

that Otsuka offers, the FDA’s active-moiety comparison ensures that the scope of the

exclusivity benefit actually relates to, and is in proportion to, the contribution that the

56 first-in-time manufacturer has made to the body of scientific knowledge that entitles it

exclusivity to begin with, and as such, it is an eminently rational policy choice.

Furthermore, given that the relevant statutory and regulatory provisions authorize this

option, the FDA did not improperly amend or otherwise alter its regulations in

contravention of the requirements of notice and comment when it selected this

interpretation in the context of the instant case. Consequently, Otsuka has failed to

sustain its claims that the FDA violated the APA when the agency viewed the scope of

Otsuka’s exclusivity benefit as limited and permitted approval of Alkermes’s Aristada,

which is a drug that indisputably has a different active moiety than Abilify Maintena.

Accordingly, and as set forth in the order accompanying this opinion, Otsuka’s

motion for summary judgment is DENIED, Defendants’ and Intervenor-Defendants’

motions for summary judgment are GRANTED, and JUDGMENT WILL BE

ENTERED IN DEFENDANTS’ FAVOR.

DATE: July 28, 2016 Ketanji Brown Jackson KETANJI BROWN JACKSON United States District Judge