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Case number 22-5202, Santos, Inc.

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at balance versus Xavier Vizera in his official capacity as Secretary of Health and Human Services at AL.

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Mr. J. for the balance, Mr. Hazel for the appellees.

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Morning.

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Morning, Your Honors.

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May I please the Court, William J. for the appellant, start by thanking the Court for hearing this on an expedited basis.

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Sanofi should not have received a second five-year period of exclusivity in this case.

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New chemical entity exclusivity was inappropriate because teraflunamide had been approved.

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It was not newly approved.

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When FDA reviewed the new drug application for Arava, it approved that application and all of its components, including teraflunamide.

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FDA sent permissible levels for teraflunamide.

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It determined that a drug containing that amount of teraflunamide was safe and effective, could be used in humans.

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And it did so knowing that teraflunamide was responsible for the activity of the drug product in the human body.

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Now, Abagio may well have qualified.

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Can I ask you a fact question?

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Do impurities get listed on the label?

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I'm sorry.

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Do impurities get listed on the label as an ingredient?

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Impurities do not get listed on the label as an ingredient.

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The specification is where impurities and their control is held.

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Right, they don't go over a certain amount.

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Pardon?

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The limitation on going over, is it 0.3 or 0.35 in this case, right?

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That's right.

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It's in the specification that's part of the new drug application file.

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It is not one of the things that has to appear on the label, just as, for example, the quantity of an inactive ingredient is controlled, but doesn't have to appear on the label either.

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The inactive ingredients don't appear on the label at all?

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The names of the inactive ingredients do, the quantity does not.

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Okay, let me try asking again then.

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Do the names of impurities get listed on the label too?

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No, they don't.

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The difference between inactive ingredients and impurities in that respect?

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That is a difference in how they're treated.

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I wouldn't say that that's a difference relevant to whether they're approved.

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because the ordinary meaning of approved, which I think we and the district court and the government basically agree on, is whether the FDA has given its permission or its sanction for, in this case, teraflumide to appear in the drug product in particular quantities.

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And it does.

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If the teraflumide exceeded that quantity in Arava, the drug would be misbranded.

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Mr. Jay, assume for a moment,

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I think at a very kind of hyper literal level, your reading of the statute makes sense.

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But what I am having more trouble seeing though is how that

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understanding of those words fits with the structure of the statute and the way that the FDA approves new drugs.

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Because it seems, if you're just looking at these few words out of context, perhaps your argument holds up.

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But when I go broader to the rest of the statute, it seems much harder to fit.

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I think we embrace the look at the statutory structure, Your Honor, and I think there are several things I'd like to point to.

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One is the approval statute, and one is how impurities are treated in the approval, the agency's practice of approval, which is, of course, not in the statute.

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If you wanted to look at that, we think of that.

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So statutorily, the exclusivity statute refers you back to B. It says applications approved under B. How is an application approved under B?

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Well, you look at C. C1 says, if none of the things that are in D are true, then you shall approve the application.

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And it says you approve the application, not an active ingredient, not

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You know, a set of the ingredients, not any subset like the subset that the government is pushing for.

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It says you approve the application.

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And that's common ground that actually the government has said that it agrees that inactive ingredients are approved as well.

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So in other words, there is nothing in the approval statute that points you to the approval of active ingredients specifically, right?

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This statute and its cognate for 505b2s are the only place you will find a reference to approval of an active ingredient.

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I'm statutes now been amended says active way, but it's the only place to find that and the district court said Well the statute refers to approval of an active ingredient But it just referred back to this same statute which is completely circular the only of references to approval in the approval courses of section 505

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refer to approval of the application.

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So we think that structurally, at a statutory level, it makes complete sense to say that FDA is approving each of the components of the drug product as a whole.

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That makes structural sense because... That's right, except that it's approval as such.

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I mean, that's really the most reasonable way to read it, isn't it?

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It's the way the FDA has for 30 years read it, that the approval is of an

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impurity as an impurity, an active ingredient as an active ingredient, and an inactive ingredient as an inactive ingredient.

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I mean, that's what is approved, is a drug so described.

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So what's approved is the entire combination, right?

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And so I certainly agree that there's a difference between approving something in a small quantity and a large quantity.

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FDA might well say, well, we've approved this in small quantities before, but this is a much larger quantity, so we have to look at it more carefully.

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And it is looking at the combination as a whole.

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I don't think it is the label, though, that is significant to what FDA is approving.

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It's looking at the safety and effectiveness of the drug product as a whole.

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You don't mean the drug label.

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You mean the reference to the ingredient as active, inactive, or an impurity?

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That's right.

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I don't mean the drug labeling.

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FDA's job under the statute is to determine whether the product is safe and effective.

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The control of impurities is absolutely part of that, and this is the agency practice point that I was getting the second half of my answer to Judge Routh.

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And if you look, for example, at the manual that appears at Joint Appendix 686,

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You will see that it says specifications are critical quality standards.

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They are approved by regulatory authorities as conditions of approval.

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So you have to follow your specification.

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That is where the impurity criteria appear in the specification.

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That is just a label.

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Again, not the labeling.

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That is just a word, a name, a characterization that I think doesn't have significance for the statutory question before this court, which is, is that substance approved in the prior application?

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They approve it.

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They not approve drugs to be, I mean, they go, they tell you with some granular detail what has to be on labels, correct?

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Yes, and don't they approve it for use consistent with what they've approved on the labeling?

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It has to be safe and effective as labeled.

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And so does that not tell us, and since the impurities make no appearance on the label, that what they are approving, and we can

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table the question of inactive ingredients for now, because they do show up on that label, that that is in fact what they are approving.

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for you to market to the public?

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I don't think so for a couple of reasons.

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Let me just note parenthetically, because I want to be more precise in my answer to your prior question.

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You asked whether impurities generally appear on labels.

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I just want to point out that teraflutamide, in this case, does appear in the ARRABA labeling, because the labeling makes clear that it is responsible for the activity in vivo.

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Oh, right.

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They're talking about the in vivo part, but not the impurity part.

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That's right.

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I just wanted to be clear on that.

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So if the question is, does the set of things that are required to be on the labeling govern what is approved for purposes of the exclusivity statute?

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I don't think so for a couple of reasons.

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I'm just adding that to Judge Rouse's structural point here.

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That's really the understanding, the general understanding of what is.

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approved and approved in a very, you know, it's very regimented review.

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Well, it is, it is regimented.

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And for example, inactive ingredients are absolutely approved, not just as a name or as an ingredient, but in a particular quantity and together with the other, with the rest of the combination.

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The quantity of the inactive ingredient doesn't have to appear in the labeling in the same way, but just as the good manufacturing practices might or might not be reflected in the labeling, but the FDA controls those quite rigorously.

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So just as a product could still be misbranded if it contains too much of an inactive ingredient,

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a product can be misbranded if it contains too much of an impurity, especially where the purpose of control... Sure, because they haven't approved you to market it with that extra amount of impurity in there.

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That's right.

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Exactly.

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It has been approved to market with that amount of impurity.

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But not under the label.

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Well, it's not labeled, but in other words, the FDA has not decided.

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I think your point is precisely this, that part of the big picture of what they sign off on is this amount of active ingredient, this amount of inactive ingredient, which they are, and we will not tolerate anything more than X amount of impurity.

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I take it that's your point.

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That's sort of the big picture here of what gets authorized to avoid using the loaded term approved, authorized for release of the public at the end of the day.

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That is what gets it approved.

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And the piece of the statutory standard for approval that this goes to is safety.

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Because if you look at the two guidances and the manual that are in the record, so in particular, there's a whole guidance devoted to degradation products.

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and at what level they must be reported, at what level they must be identified, and at what level they must be qualified.

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And that means... Is the manufacturer were to throw in a whole new ingredient altogether?

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Just add a little bit of this thing because it makes everybody feel good.

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Out of impurity, this is small amounts.

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It's never mentioned it to the FDA.

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That's certainly forbidden, correct?

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Any change in the composition.

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Any change in the composition.

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So at some level when they approve, they are approving these things and nothing else.

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They were approving the composition.

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Now, because of the phenomenon of degradation, some portions of the active ingredient may degrade into other things when they react chemically with the packaging or with the inactive ingredients, which is exactly what we have here.

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That means that there is some

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But they sign off on how much of that.

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Exactly.

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The approval extends to, so start with 10 milligrams of leflunamide, but some portion of that is going to degrade into teraflunamide over the life of the product, including before it's even put on the shelf.

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That's exactly right.

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And all of that goes to the composition, which is one of the statutory

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things that FDA is required to detail.

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Is the approval different for active ingredients and inactive ingredients and impurities?

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I mean, so the FDA is looking to see what the therapeutic benefit is of the active ingredient, right?

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It looks at these, I know it has to approve the application as a whole, but what it's really approving is to five milligrams of this drug.

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have a certain effect, a certain therapeutic effect.

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Do 15 milligrams have a different effect, right?

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It's looking at the therapeutic operation of the active ingredient and then it's, I think, also looking to see whether, you know, the impurities and

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the inactive ingredients are safe to be included with the active ingredients.

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I mean, doesn't that make a difference for how we think about what's happening in the statute?

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I don't think so, because as your question recognizes, there's effectiveness and there's also safety.

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The inactive ingredients, for example, may not contribute to effectiveness, but they absolutely have, although they might.

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let me just say parenthetically, they might, in some instances, create a problem for effectiveness if they react with the drug substance to degrade it or have some undesirable interaction.

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But the portion of the review that extends to safety, I think, looks at the entire composition and whether it is safe and effective together.

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That includes with the quantity of impurity that is controlled.

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Q3B guidance that is in the record, you will see that qualification of an impurity is an important step that the agency takes because an impurity has to be qualified in order for the agency to reassure itself that that impurity is safe.

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that may well include review of clinical or non-clinical studies, published literature, and so on.

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It's not just sort of whatever the manufacturer wants.

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You know, they write a number down.

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The fact that those may be approved or used as part of, you know, some other therapeutic application.

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I mean, why does that mean that the FDA has approved it for all future uses in a way that doesn't get future exclusivity?

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So if a drug manufacturer has put in a lot of time and effort to determine that a product

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previously, like an ingredient that was once inactive has new therapeutic use, why shouldn't that get five-year exclusivity?

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Well, I think the answer is because it gets three-year exclusivity.

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Three-year exclusivity is exactly what the statute contemplates for a new use of an old molecule.

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And a non-new chemical entity can absolutely be the basis of a significant

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clinical innovation and you get a lesser reward for that, three years of exclusivity.

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But where it's not a new chemical entity, you have to look at the countervailing consequence that giving five years of exclusivity, which actually blocks generic competition for even longer than five years, let's say seven and a half years, that is a reward that is limited for the most significant innovations involving a genuinely new chemical entity.

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And the fact that this case illustrate why, because the

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Obagio NDA was able to jump the line a little bit.

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It was able to, you know, I wanted to put it this way, to stand on the shoulders of the leflunomide NDA in relevant senses because paraflunomide had already been extensively studied.

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And you can see that in a couple of spots, 497, the agency says in the safety review of Obagio, oh, these two drugs are fairly viewed as one and the same in terms of their effects.

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So, Adi.

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But Mr. Jay, we don't have

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any evidence that is it hushed in 1998 intended teraflutamide degradant to have a therapeutic effect?

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Do we have no evidence of that?

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You have the patent application filed by them before that date?

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Filed by Sanofi Aventis.

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or it merged with.

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So we're talking about the U.S.

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patent application.

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You think so?

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Right in front of me, but so.

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I think it was a different firm that filed it.

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I'm not sure that's correct, but let me look at that and confirm.

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But my understanding is that at least some of the patents that we're talking about here are

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have been assigned to Sanofi because they now own books.

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That is one point about the

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one source of evidence about the desirability of the small amounts of teraflutamide and why they might- As a degradant in ARABA.

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So in the same quantity.

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Yeah.

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So if you look at the claims of the 222 US patent- But not as a degradant?

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Well, it doesn't say it's a degradant.

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It just says a composition that comprises

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substance number two, which is teraflutamide, in a range, the bottom end of which is 0.3% of the other ingredient, substance one, which is lifflutamide.

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So that is a range into which the approved levels of teraflutamide in a RAVA would fall.

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Zero to 0.3%, is it?

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0.3% and up, and the upper limit is substantially above anything that would be in the,

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in the ARAVA NDA, but 0.3% is below the approval level, both at the time of launch and certainly above, below, sorry, it is below the 3.5% that the product is allowed to contain.

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And tell us a little bit about your opposition to their contention that you never preserved in the administrative process, your current claim that it was not a challenge to the state.

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I mean, as they point out several times in their brief, this is their longstanding interpretation that goes, you know, which they proposed in 1989 and adopted in 1994.

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They say they've been rock solidly behind it ever since.

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Given that, and that they would have to change their regulation, if you don't, if this court doesn't declare it invalid, even if they would have to change their regulation, I think that pursuing it within the agency would have been futile in general.

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But here's, there's a specific reason why that's so here, because recall that

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This is all about whether Sandoz is the first filer, the first applicant, right?

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And so if the agency were to promulgate a new rule today to say, here's our new interpretation, it is not at all clear that they could give us relief by changing their rule from our filing back in 2006.

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So that I think is the same.

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What if they were to promulgate a new rule when you, if you had raised this issue in your first letter,

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to the FDA objecting.

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Would that have been enough time to promulgate a new rule?

[00:18:20] Speaker 02:
I don't think so.

[00:18:22] Speaker 04:
When did you initiate this regulatory process?

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When did you first forget the first filing date?

[00:18:29] Speaker 02:
So we initiated the process a short time before filing our and our generic application.

[00:18:35] Speaker 02:
Which was what date?

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That was September of 2006, September 7th, 2006.

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2016, I'm sorry.

[00:18:43] Speaker 04:
2016 to 2022 isn't enough time to issue a new regulation.

[00:18:48] Speaker 02:
Oh no, I think that once the

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once the other generics filed their applications a few days later and remember that Abagio had already been awarded exclusivity and so the agency had already acted on its view and refused to receive our application and then received everyone else on the on the four-year anniversary.

[00:19:11] Speaker 02:
I think it's not it's not at all clear to us that the agency if it conducted notice and comment rulemaking could have

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retroactively said that Albaggio was not going to be entitled to... It's not at all clear, which sounds like a good reason for exhaustion.

[00:19:29] Speaker 04:
I take your point, they had a published regulation.

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Are you aware of a case that said the existence of a published regulation isn't...

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counts as futility that automatically qualifies as a futility exception to exhaustion?

[00:19:45] Speaker 02:
Well, let me just quickly automatically, but let me answer your question, because we're not saying it's automatic, but in the circumstances at this case, we think it's futile.

[00:19:52] Speaker 02:
Do you have a case?

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So we cite Verizon.

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Verizon in turn cites OmniPoint.

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Both of those cases are FCC cases.

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In those cases, the FCC did not even have a regulation on point.

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The FCC had taken this longstanding position in a published order.

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which obviously is subject to lesser restrictions on change by the EVA.

[00:20:11] Speaker 02:
So we do think that it follows from those cases that where there's a published regulation that not quite a for sure, but certainly under the circumstances.

[00:20:19] Speaker 04:
So anytime an agency has an announced interpretation, some formally announced, not something informal or internal, but a formally publicly announced interpretation of a statute,

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to challenge that exhaustion is no longer required.

[00:20:37] Speaker 02:
I want to say that I think you would look, as you always do, at whether the purposes of the exhaustion doctrine would be furthered by requiring the litigant to bring up not just a challenge.

[00:20:48] Speaker 02:
In this case, FDA has its procedure for bringing a challenge.

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We followed that.

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But we also have had to bring a petition for rulemaking separately.

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And I do not think that that would have been practicable to give us relief in time to get our- Can ask for expedited rulemaking.

[00:21:07] Speaker 06:
Is it not relevant?

[00:21:12] Speaker 05:
I'm just not sure about how much leeway the FDA has here.

[00:21:19] Speaker 05:
I mean, just thinking about the last case, and I know you heard the argument there.

[00:21:23] Speaker 05:
I mean, what if exhaustion just gives the agency a chance to come to a resolution?

[00:21:28] Speaker 02:
So, they could have taken the view that terraflutamine is an active ingredient.

[00:21:38] Speaker 02:
uh, in a Rava and they could have granted our administrative petition on that basis.

[00:21:44] Speaker 05:
I don't raised it in the administrative petition.

[00:21:47] Speaker 05:
It was after the reconsideration requests that it was raised in the complaint, right?

[00:21:51] Speaker 05:
A couple of years after.

[00:21:53] Speaker 05:
Yeah.

[00:21:54] Speaker 05:
So I'm just saying that they, they could have resolved it with you.

[00:21:58] Speaker 02:
Yeah.

[00:21:58] Speaker 02:
I don't, I don't think so, your honor.

[00:22:00] Speaker 02:
I mean, just because, uh, nothing in the,

[00:22:03] Speaker 02:
And anything that the government has said at any point, agency level, the appeal level, the district court were here, suggests that

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any shakiness in their view on the regulatory point, in any way infected or affected their review of whether, under their ordinary standards, teraflunamide was an active ingredient in Arava.

[00:22:29] Speaker 02:
So we, of course, the position that we're advancing is that it doesn't have to be an active ingredient, but I don't think there's anything about that

[00:22:36] Speaker 02:
that affects the agency's answer to the question whether it was an active ingredient or not.

[00:22:43] Speaker 04:
Are you on the same point?

[00:22:48] Speaker 04:
You didn't go speeding through the agency saying we're in a hurry.

[00:22:53] Speaker 04:
As you said, you went in and you started this whole process in 2016 and you chose to go to the agency and you chose to make a couple arguments to them, neither of them which were the statutory interpretation question that you've raised here.

[00:23:06] Speaker 04:
And then you all chose at the literal last minute to send them a copy of your complaint raising this issue.

[00:23:15] Speaker 04:
So we can't say that there's an exception to exhaustion here because of the timeframe that you all chose to press your objections with the FDA.

[00:23:28] Speaker 04:
And that you all, for some reason, I mean, why did you send them that complaint?

[00:23:34] Speaker 02:
So we wanted them to be aware of what we were going to raise in court.

[00:23:39] Speaker 04:
It had been... Did you have... How many pages was that complaint?

[00:23:43] Speaker 02:
It's almost exactly the same as the complaint that you have.

[00:23:46] Speaker 04:
So like 40 something pages.

[00:23:47] Speaker 04:
Was there a cover letter that said, please note on page XX that we have this new argument?

[00:23:54] Speaker 04:
Is there anything to alert them that you were making a new argument?

[00:23:57] Speaker 04:
Because they interpreted it as you were trying to light a fire.

[00:24:01] Speaker 02:
I don't know of a cover letter that's responsive to your point, but I think- Is there a cover letter?

[00:24:06] Speaker 04:
It must have been.

[00:24:08] Speaker 04:
I'm just curious.

[00:24:08] Speaker 04:
It's not in the record.

[00:24:10] Speaker 04:
It's your obligation to show why exhaustion should be excused.

[00:24:16] Speaker 04:
And we don't have any of that material before.

[00:24:19] Speaker 04:
It's all we're told is that at literally the last possible minute in this agency procedure that had gone on for five years,

[00:24:26] Speaker 04:
You lobbed in a 40 page complaint and that was supposed to give them notice that on page X of those 40 pages you were raising for the first time a whole new statutory argument.

[00:24:38] Speaker 04:
You've got nothing to say that we pointed them to it.

[00:24:40] Speaker 02:
I can't say that that other than that it's broken out his account, but that that we pulled it out in a cover letter.

[00:24:49] Speaker 02:
I'm not because that's not the record.

[00:24:51] Speaker 02:
I'm not going to say that to the court.

[00:24:53] Speaker 02:
I do think, however, it's not quite fair to say this was logged in at the literal last minute.

[00:24:58] Speaker 02:
We didn't know when, if ever, they were going to rule on this.

[00:25:01] Speaker 02:
They had sat on it for three years.

[00:25:03] Speaker 02:
So as it turned out, they did in fact render their dispute resolution request.

[00:25:08] Speaker 04:
It's a couple of years after your petition for reconsideration, but your petition for motion for consideration with them.

[00:25:17] Speaker 04:
So it really was the last procedural step and it was a couple of years after that last procedural step of it.

[00:25:22] Speaker 02:
It was.

[00:25:23] Speaker 02:
I mean, recall that under the FDA's procedures, you have to file that reconsideration request quickly, and they are supposed to rule on it quickly as well.

[00:25:30] Speaker 02:
They go through their internal deadlines quite substantially.

[00:25:34] Speaker 04:
Which has nothing to do with your obligation to exhaust.

[00:25:36] Speaker 02:
I agree with that, Your Honor, but you asked me a couple of moments ago about the leisurely pace with which you perceived my client as having proceeded in the agency, which I don't think is a fair question.

[00:25:48] Speaker 04:
You proceeded in time to have included this argument amongst the other ones that you raised.

[00:25:53] Speaker 04:
Even if you figured they're going to say no, there was no reason that you couldn't have included it with the other arguments you raised, unless

[00:25:59] Speaker 04:
It wasn't something someone thought of until the very last minute.

[00:26:02] Speaker 04:
That's why you lobbed in the complaint.

[00:26:04] Speaker 04:
But then that seems a very sandbagging concern that exhaustion is supposed to do that.

[00:26:08] Speaker 02:
That, I think, just goes back to my answer to Judge Pillard.

[00:26:10] Speaker 02:
I don't think that there is any meaningful way in which the agency is sandbagged by having us say, we disagree with your long-standing position, but here is a way in which we win under your long-standing position.

[00:26:24] Speaker 02:
In other words, I don't think that there's any way in which the answer to the second question turns on the answer to the first question.

[00:26:30] Speaker 02:
We see them as separate.

[00:26:32] Speaker 02:
And certainly, if you look at the agency's decision,

[00:26:37] Speaker 02:
they're applying their standards for what an active ingredient is, what a fixed combination product is, and so forth.

[00:26:43] Speaker 02:
None of that would have been different if we had said, and by the way, we don't think it has to be an active ingredient at all.

[00:26:48] Speaker 00:
Well, Mr. Jay, maybe you can speak a little to what precisely the exhaustion requirement is here, because there's no statutory exhaustion requirement.

[00:26:57] Speaker 00:
There is, you know, there's always maybe some, you know, judicially imposed exhaustion requirement, but that is often not

[00:27:05] Speaker 00:
as robust as, of course, if there is a statutory exhaustion.

[00:27:10] Speaker 00:
So maybe you can speak to how you have met our circuit standards for judicial exhaustion.

[00:27:17] Speaker 02:
I think that under the applicable standards

[00:27:20] Speaker 02:
We gave the agency a fair opportunity to answer the question that was open before the agency.

[00:27:27] Speaker 02:
It would not have been either effective or practicable to bring the other challenge in a petition for rulemaking precisely because, just to go back to the timing in question,

[00:27:41] Speaker 02:
We first raised this in a letter in August of 2016.

[00:27:46] Speaker 02:
We could not raise this until we had an ANDA ready to file or we would have had no stake in the issue.

[00:27:52] Speaker 02:
We filed that ANDA within a week after first raising this with the agency.

[00:27:56] Speaker 02:
A very short time after that, everyone else filed their ANDAs as well.

[00:28:00] Speaker 02:
And so Judge Millett posited that perhaps we could have sought an expedited rulemaking.

[00:28:06] Speaker 02:
But I don't think that there's any circumstance in which we could have gotten the rules changed between having our ANDA in condition to submit.

[00:28:15] Speaker 02:
Because remember, you don't get first applicant status if you don't submit a substantially complete ANDA until you have a

[00:28:22] Speaker 02:
If it gets bounced as not substantially complete, there's no point in submitting it at all.

[00:28:26] Speaker 02:
You won't get first output.

[00:28:28] Speaker 02:
So very little room for error in between having a substantially complete ANDA, raising the challenge, and then the time arrives when everyone else is going to file their ANDAs.

[00:28:38] Speaker 02:
And then just the point about the agency's ability to act retroactively after that point.

[00:28:43] Speaker 02:
I mean, under Bowen versus Georgetown University Hospital, the agencies don't automatically have ability to make changes in people's vested rights retroactively.

[00:28:53] Speaker 02:
And we don't know of any statutory authority for the agency to do so here.

[00:28:57] Speaker 02:
So both because it's the agency's longstanding position, and because of the end of circumstance here, and because of this bowing point, I think those are all reasons why, under the applicable exhaustion standards, we weren't required to do more than we did.

[00:29:09] Speaker 00:
Do you think the government here has forfeited a reliance on Chevron deference?

[00:29:14] Speaker 02:
The government's answer is purely that they're right.

[00:29:21] Speaker 02:
In other words, that they're

[00:29:24] Speaker 02:
that their answer is the correct reading of the statute.

[00:29:27] Speaker 02:
The one thing that I'll say is that they cite a justice for such as concurrence in the judgment in Kaiser and we which they say in which they say.

[00:29:39] Speaker 02:
The agency's contemporaneous interpretation, I dispute that it is actually contemporaneous, but let's bracket that, of the statute could be evidence of the original public meaning.

[00:29:50] Speaker 02:
And I took that to be a nod in the direction of their own interpretation is enough to make it ambiguous, but it's not clear that that's the direction in which they're going.

[00:30:00] Speaker 02:
But I took them to join issue with us on what is the correct interpretation of the statute, which is basically on-step

[00:30:11] Speaker 02:
So what they don't really join issue with us on, and they really only have one sentence on this on their brief, is the point about inactive ingredients.

[00:30:18] Speaker 02:
Because their regulation says, their brief says, their position is that only active ingredients matter.

[00:30:26] Speaker 02:
But I just don't see how they can square that with their position that, with the agency's acknowledgement, that inactive ingredients are approved.

[00:30:33] Speaker 02:
They have the district court correctly recognize that there is no textual basis for distinguishing between inactive ingredients

[00:30:39] Speaker 02:
and other parts of the specification that are approved by the agency.

[00:30:45] Speaker 02:
Either it's everything or it's just active ingredients, but they don't have any argument for how they can get inactive ingredients in that.

[00:30:52] Speaker 02:
Judge Millett was positing something having to do with the labeling and the fact that the name of an inactive ingredient, though not its quantity, appears in the labeling.

[00:30:59] Speaker 02:
That's not an argument.

[00:31:00] Speaker 02:
It's not a point the agency's ever made, not in the government, not in the agency's regulation, not in the agency's brief in this case.

[00:31:07] Speaker 02:
I think I've responded to it on the merits, but I don't think that that would.

[00:31:11] Speaker 04:
Your standard of review does like section does raise Chevron explicitly.

[00:31:16] Speaker 02:
There's citation of the standard of review.

[00:31:20] Speaker 02:
They raise the Chevron.

[00:31:22] Speaker 02:
And in fairness, we have not made a Chevron step two argument to this work.

[00:31:27] Speaker 04:
So I thought you're saying they hadn't raised it as barely in their standard of review that they get deference.

[00:31:34] Speaker 02:
I mean, I think that if you.

[00:31:36] Speaker 02:
Yes, that's right.

[00:31:38] Speaker 02:
That's right.

[00:31:38] Speaker 02:
But I think then both they and we think that the issue here is whether the statute.

[00:31:44] Speaker 00:
My question is, I know they raise it in the standard of review, but they don't develop the argument.

[00:31:48] Speaker 00:
So I was interested to know whether you thought they had forfeited.

[00:31:52] Speaker 02:
I do think that if you go back to look at where this interpretation comes from, so they cite several times the 1994 rulemaking.

[00:32:02] Speaker 02:
I think you will look in vain in the 1994 rulemaking or the 1989 proposed rule for a reasoned interpretation of the statute underlying this interpretation.

[00:32:12] Speaker 02:
They just say that this is going to be their interpretation.

[00:32:15] Speaker 02:
And I think that, so to the extent that they could develop some application of agency expertise that explains why this is their interpretation, I don't think that they have it.

[00:32:27] Speaker 02:
There is basically an offhanded site in the proposed rule to agency practice, but that's not what's picked up in the statute.

[00:32:36] Speaker 02:
So I think that that recognized that I am well over my time.

[00:32:42] Speaker 02:
But I did want to just point to one other thing, which is the other sides of the lines on the generics of the statutory provisions for approval of generics.

[00:32:55] Speaker 02:
which they suggest supports them.

[00:32:57] Speaker 02:
I'll just deal with that very, very briefly, which is that a generic has to have the same active ingredient as the brand product.

[00:33:03] Speaker 02:
That's how generic approval works.

[00:33:05] Speaker 02:
It is the basis for the abbreviated new drug application that generics are approved with.

[00:33:10] Speaker 02:
So the fact that it has to have the same active ingredient probably has anything to do with whether the FDA is approving a generic's composition

[00:33:19] Speaker 02:
including its inactive ingredients, which it does.

[00:33:21] Speaker 02:
And the statute specifically says that safety considerations are to include any safety considerations raised by the inactive ingredients.

[00:33:27] Speaker 02:
I think that just confirms our point that the agency approves a new drug application or an abbreviated new drug application in total, including the entire composition of the product.

[00:33:37] Speaker 02:
Does the court has any further questions?

[00:33:39] Speaker 04:
We'll give you some time for rebuttal.

[00:33:40] Speaker 04:
Thank you.

[00:33:41] Speaker 04:
Thank you very much.

[00:33:42] Speaker 04:
Mr. Hazel.

[00:33:52] Speaker 03:
Good morning, Your Honors.

[00:33:53] Speaker 03:
May it please the court?

[00:33:54] Speaker 03:
I'd like to start with- It's a little quiet.

[00:33:58] Speaker 05:
Maybe if you pull the- Is this better?

[00:34:03] Speaker 05:
It's actually quite localized, so sometimes a little movement can make a difference.

[00:34:07] Speaker 03:
Is this better, Your Honor?

[00:34:12] Speaker 03:
Let me know if this isn't working.

[00:34:15] Speaker 03:
Thank you.

[00:34:15] Speaker 03:
I'd like to start with the exhaustion point where things left off.

[00:34:19] Speaker 03:
Nothing stops Sandoz from raising the statutory argument in 2016.

[00:34:23] Speaker 03:
The argument was available then.

[00:34:25] Speaker 03:
It had able counsel this entire time.

[00:34:27] Speaker 03:
They filed two detailed submissions, including one that they described as

[00:34:31] Speaker 03:
comprehensive statement of each issue to be raised.

[00:34:34] Speaker 03:
There was simply no reason why they couldn't have put the statutory interpretation argument for the agency.

[00:34:40] Speaker 03:
I think I heard counsel say it's not at all clear that the agency could have amended its regulations by 2023.

[00:34:47] Speaker 03:
That's a seven-year gap in the

[00:34:51] Speaker 03:
for this futility exception in particular is certainty.

[00:34:55] Speaker 03:
So if it's not at all clear, then it is clear that they haven't met this narrow futility exception to the exhaustion requirement.

[00:35:03] Speaker 03:
Council also said, you know, exhaustion has to be considered in terms of its purposes and what purpose this would have served.

[00:35:11] Speaker 03:
For one thing, this would have put the statutory interpretation argument squarely before the agency.

[00:35:17] Speaker 03:
FDA routinely considers statutory interpretation arguments as part of this process.

[00:35:21] Speaker 03:
This court has recognized in continental that it's commonplace for agencies to reconsider their views of statutes.

[00:35:29] Speaker 00:
But this question wouldn't have required any further factual development by the agency in order for us to review this pure question of law.

[00:35:37] Speaker 03:
Your honor, it wouldn't have required any additional factual development.

[00:35:41] Speaker 03:
I don't read these discourse cases as saying that questions of law need not be exhausted.

[00:35:46] Speaker 03:
In fact, I think there are numerous cases where questions of law have needed to be exhausted.

[00:35:51] Speaker 03:
I think it would have been particularly important in a case like

[00:35:53] Speaker 03:
one where much of Sandow's argument is not just about the statutory text, but about how it operates in practice.

[00:36:00] Speaker 03:
For example, Council earlier was discussing, you know, what FDA has said about inactive ingredients, what, you know, various operating manuals, other procedures like that.

[00:36:10] Speaker 03:
So this isn't a case where it's just the text and only the text.

[00:36:14] Speaker 03:
It's a case where the agency could have said, here's what we do think about inactive ingredients.

[00:36:19] Speaker 03:
Here's how all of this fits together.

[00:36:21] Speaker 05:
Is that an expertise point?

[00:36:23] Speaker 05:
And Mr. Jay pointed out that in 1994, the FDA didn't advert to its expertise or these kind of structural arguments that you're making now or practical or procedural arguments that you're making now.

[00:36:40] Speaker 05:
in the rulemaking?

[00:36:41] Speaker 05:
Do we have anywhere to look for an exercise of the agency's expertise on this point?

[00:36:48] Speaker 03:
You know, aside from the rule, I'm not sure, Your Honor.

[00:36:51] Speaker 03:
I think that's yet another reason why it would have been helpful for Sandoz to raise this argument before the agency.

[00:36:57] Speaker 03:
You know, it was certainly very strange for Sandoz to go through this long process, to have these two detailed submissions, to have this idea that the agency's long-standing

[00:37:08] Speaker 03:
totally inconsistent with the statute and to not say anything about that at all until district court.

[00:37:14] Speaker 03:
I don't think that's the sort of situation where this court has typically found an exception to the exhaustion.

[00:37:20] Speaker 04:
Well, had it been raised, I assume there could have been at least some explanation from the agency about

[00:37:28] Speaker 04:
at least impurities, because it seems to be sort of the three categories, active ingredient, inactive ingredient, and impurities.

[00:37:35] Speaker 04:
I guess you can toss in the in vivo ingredient, but everyone agrees that's not what's approved.

[00:37:44] Speaker 04:
But in this situation, all we're talking about is an impurity, whether it's approved.

[00:37:51] Speaker 04:
And if they had raised it, I'm assuming the agency could have at least elaborated on what it thinks it's doing with respect to impurities and whether that's the purposes of the statutory language, how that is the same or not, or talked about the structure or operation or practical consequences of their interpretation.

[00:38:11] Speaker 03:
I think that's exactly right.

[00:38:12] Speaker 03:
I think if Sandoz had raised this argument, FDA, as I said, routinely considers statutory interpretation arguments, and that would have been- Even if they've got a published regulation on them, they entertain them again.

[00:38:22] Speaker 03:
My understanding is that they do, Your Honor, and like other agencies, one thing that agencies do is sometimes they amend and revise the regulations, and there's certainly no certainty that the agency wouldn't have done so here.

[00:38:35] Speaker 00:
Mr. Rosalito.

[00:38:38] Speaker 00:
Talk a little bit about the difference between three-year exclusivity and five-year exclusivity.

[00:38:44] Speaker 00:
So why in this case does Obagio get five-year exclusivity as opposed to three-year exclusivity?

[00:38:52] Speaker 03:
So, Your Honor, the three-year exclusivity covers things including finding new dosing regimens or a new patient population.

[00:39:01] Speaker 03:
Those are important innovations, but they pale in comparison to something like Obejio, where there's a substance that is

[00:39:10] Speaker 03:
discovered and demonstrated as having a therapeutic effect for the first time.

[00:39:14] Speaker 03:
Before Obejio, there was no drug out there that had established that teraflunamide did have this therapeutic effect.

[00:39:23] Speaker 00:
So if there's a known ingredient that's put to a new use that always gets five-year exclusivity,

[00:39:32] Speaker 03:
It depends on what you mean by known ingredient, Your Honor.

[00:39:35] Speaker 03:
If the ingredient was known as having a therapeutic effect, then that would not get five years.

[00:39:40] Speaker 03:
That would not be what FDA thinks of as a major innovation.

[00:39:43] Speaker 03:
It might get three years, depending on whether it's some new dosing regimen or something like that.

[00:39:48] Speaker 03:
In this case, because this was the first sponsor to discover and demonstrate that teraflinamide did have that therapeutic effect, it was a major innovation.

[00:39:58] Speaker 03:
And that was reflected in years-long clinical trials of thousands of multiple sclerosis patients that Bayview sponsored before.

[00:40:05] Speaker 03:
That's the sort of major innovation that FDA assigns this five-year exclusivity.

[00:40:14] Speaker 04:
If Sanofi came forward, instead of with Abragio, but with what it called Arava-2.

[00:40:25] Speaker 04:
And they said Arava-2 consists, its active ingredient consists of the 3%, whatever the impurity level was, that was, as you say, tolerated on the prior labeling.

[00:40:36] Speaker 04:
And they go, as it turns out, and as we kind of knew all along, it turns out that that 3% amount of teraflunamide

[00:40:44] Speaker 04:
is sufficient to treat this exact same rheumatoid arthritis.

[00:40:49] Speaker 04:
They have a new, they say it's a new drug, because you didn't previously approve Teraflavide as an active ingredient.

[00:40:56] Speaker 04:
We're going to use the exact amount that was accepted as an impurity.

[00:41:03] Speaker 04:
And they figured out some way to make it consistently that amount instead of the instability you all point out.

[00:41:08] Speaker 04:
And they're going to use it to treat the exact same disease.

[00:41:13] Speaker 04:
Do they get five years of exclusivity then?

[00:41:17] Speaker 03:
Your Honor, if they found a way to have a fixed amount of teriflunamide in that drug, they would then have had to establish that that teriflunamide did have a therapeutic effect.

[00:41:26] Speaker 03:
They'll do the tests that you require for this.

[00:41:29] Speaker 03:
They do the clinical trials and everything like that, then yes.

[00:41:31] Speaker 04:
It turns out it's the exact same amount that was in here all along.

[00:41:36] Speaker 04:
And everyone knows that the really therapeutic, once you swallow the pill, because nobody's treated until they swallow the pill.

[00:41:42] Speaker 04:
And once you swallow the pill, it's teraflunamide that's doing all the work for treatment.

[00:41:48] Speaker 04:
And they've now found out that all it takes is it was a 3% or 3.5% of teraflunamide to do that.

[00:41:55] Speaker 04:
Here's our test showing that that amount is therapeutic.

[00:41:59] Speaker 04:
And so they're gonna get five years of exclusivity when that's what they were doing all along.

[00:42:05] Speaker 03:
Your honor, if they really did show that, so I guess I should clarify that.

[00:42:09] Speaker 04:
For my hypothetical, we're assuming that the amount

[00:42:12] Speaker 04:
I guess the max amount of the impurity is 3%, is that right?

[00:42:16] Speaker 04:
Around that, you're right.

[00:42:18] Speaker 03:
I think 3.5.

[00:42:19] Speaker 03:
3.5.

[00:42:19] Speaker 04:
I'm going to keep it straight in my head.

[00:42:21] Speaker 04:
So 3.5.

[00:42:22] Speaker 04:
We are now want to market a drug with 3.5% paraffinamide.

[00:42:29] Speaker 04:
And that's the only active therapeutic ingredient that we are claiming.

[00:42:34] Speaker 04:
And it's to treat the exact same disease.

[00:42:36] Speaker 04:
And we're going to use Arava 2 as our name so the public will recognize it again as treating that disease.

[00:42:42] Speaker 04:
That gets five years of exclusivity.

[00:42:45] Speaker 03:
Yes, Your Honor.

[00:42:46] Speaker 03:
Let me explain why that makes sense.

[00:42:49] Speaker 03:
In ARAVA 1.0, I guess you can call it, there were no studies, there were no tests of the degradant teraflunomide, the teraflunomide before it entered the body.

[00:43:00] Speaker 03:
Those clinical trials were focused only on once it metabolizes.

[00:43:04] Speaker 03:
And it turns out that you can infer from the fact that the metabolite has a therapeutic effect, that if you take that and put it in the drug product, it will have the same effect.

[00:43:12] Speaker 03:
Sometimes it does.

[00:43:13] Speaker 03:
Sometimes it does something totally different.

[00:43:15] Speaker 03:
Sometimes it does nothing at all.

[00:43:18] Speaker 03:
someone came along and said, you know, you thought you had this impurity in this earlier drug.

[00:43:22] Speaker 03:
No one really had a good idea of what it did.

[00:43:25] Speaker 03:
We've, we've done the clinical trials.

[00:43:26] Speaker 03:
We've done the tests and we found, wow, that, that actually really is, it's effective.

[00:43:30] Speaker 03:
And we've demonstrated that to FDA.

[00:43:32] Speaker 03:
Then yes, that would, you know, that, that would qualify.

[00:43:34] Speaker 04:
This is a situation where no one had any idea what that impurity did.

[00:43:37] Speaker 04:
Everyone has known from the beginning that teraflumimide is doing all the therapeutic work here.

[00:43:42] Speaker 04:
It's just whether you need the amount that comes in through the pill or whether this 3.5% impurity would be sufficient by itself.

[00:43:52] Speaker 04:
That's all that they've proved in the intervening years.

[00:43:56] Speaker 04:
It doesn't seem like innovative is all I'm trying to say.

[00:44:00] Speaker 03:
Your Honor, I mean, so this court has recognized an activist that if you take a, you have a metabolite and a prior approved drug and someone else comes along and takes that and puts that in the pro drug or the drug product, then that can still get the... For treating the exact same disease?

[00:44:16] Speaker 03:
even for treating the exact same same disease and so I think if that's true then certainly someone who comes along and says this was an impurity it hadn't been studied in the same way exact ingredients you know we're going to use that in the prodra that that certainly too would qualify as the major innovation.

[00:44:31] Speaker 05:
I'm a little confused by your answer.

[00:44:33] Speaker 05:
I thought on the facts here that the ex vivo teraflutamide wasn't 3.5 percent it was a range

[00:44:43] Speaker 05:
dependent, because it's a degradant.

[00:44:45] Speaker 05:
This is the ex vivo.

[00:44:46] Speaker 05:
And so can you approve an active ingredient that is a degradant and there's a range from 0 to 3.5%?

[00:44:56] Speaker 03:
Or am I wrong in facts?

[00:44:58] Speaker 03:
No, I understand the hypothetical as positing a situation where there was a fixed amount.

[00:45:02] Speaker 03:
And so different from the facts of this case, because as you point out, in this case, it was from 0.3% to 3.5%.

[00:45:10] Speaker 03:
So a 10-fold range.

[00:45:14] Speaker 03:
an active ingredient for an enormous range like that, for obvious reasons.

[00:45:20] Speaker 03:
Just to focus a little bit more on the statutory argument, I think as counsel acknowledged, this exclusivity provision asks whether the active ingredient in particular is approved.

[00:45:34] Speaker 03:
But the rest of the statute asks and calls for FDA to make this approval determination not for each particular part of a drug, but for the whole drug.

[00:45:44] Speaker 03:
And so I think the core statutory question here is when does that overall approval establish approval of a particular part?

[00:45:53] Speaker 03:
And I think we actually all agree that that doesn't happen all the time.

[00:45:56] Speaker 03:
It's not in total.

[00:45:59] Speaker 03:
So for drug applications, for example, everyone agrees that metabolites have to be discussed.

[00:46:04] Speaker 03:
They have to be analyzed in the drug application.

[00:46:06] Speaker 03:
But they are not approved within the meaning of this provision.

[00:46:10] Speaker 03:
So it's not in total.

[00:46:12] Speaker 03:
The same is true for drug products.

[00:46:14] Speaker 03:
Everyone agrees that sometimes impurities do not need to be identified.

[00:46:18] Speaker 03:
They don't need to be reported to the FDA.

[00:46:20] Speaker 03:
And so not everything in the drug product needs to be approved either.

[00:46:24] Speaker 03:
Instead, it's this practical inquiry.

[00:46:26] Speaker 03:
What does FDA's review actually mean for this particular part of the drug?

[00:46:31] Speaker 03:
In this case, it's particularly useful to compare what FDA does for active ingredients versus what it does for impurities because they're really night and day.

[00:46:41] Speaker 03:
For active ingredients, FDA determines that it has a therapeutic effect and it's good for some particular purpose.

[00:46:49] Speaker 03:
And it does that based on these extensive clinical trials.

[00:46:53] Speaker 03:
And then it requires the active ingredient to actually be in the drug in a particular quantity.

[00:46:58] Speaker 03:
None of that is true for impurities.

[00:47:01] Speaker 03:
There's no determination that it's good for any therapeutic use or that it's good for anything at all.

[00:47:07] Speaker 03:
And there's no requirement that it be in the drug.

[00:47:11] Speaker 03:
Someone could sell Arava if they found a way to remove the degradant teraflinamide.

[00:47:15] Speaker 03:
Someone could sell Arava with zero teraflinamide in the drug product.

[00:47:19] Speaker 03:
And that would be within the scope of this approval.

[00:47:22] Speaker 03:
So what

[00:47:23] Speaker 03:
you know, what this statute is establishing is FDA approves the overall, and as part of that, it establishes approval of a particular active ingredient.

[00:47:33] Speaker 03:
It certainly doesn't make a particular approval decision for impurities.

[00:47:38] Speaker 00:
What about inactive ingredients?

[00:47:40] Speaker 00:
I mean, should we think about impurities and inactive ingredients in the same way?

[00:47:43] Speaker 00:
I mean, does your interpretation for the purposes of this case, which involves impurities, also affect how we should think about inactive ingredients?

[00:47:52] Speaker 03:
So your honor, I don't think there's anything in the statute that requires them to rise and fall together.

[00:47:57] Speaker 03:
Of course, FDA's longstanding understanding is that

[00:48:01] Speaker 03:
only active ingredients are approved.

[00:48:04] Speaker 03:
Impurities, I think, are a particularly clear case of something that is not approved.

[00:48:09] Speaker 03:
Some of the same reasons that we raise for impurities would extend to inactive ingredients, but I don't think there's any particular reason in this case that the court would need to go that far.

[00:48:19] Speaker 00:
So we wouldn't have to reach the question of inactive ingredients.

[00:48:22] Speaker 03:
I don't think so.

[00:48:22] Speaker 03:
There's certainly no argument here that xeriflinamide was an inactive ingredient.

[00:48:29] Speaker 03:
I did, on the statutory point, I did want to also highlight subsection 355U, which really provides strong support for FDA's long-standing interpretation.

[00:48:40] Speaker 03:
That's the section that allows when certain sorts of drugs that the sponsor can make an election and say, you know, there was an active ingredient in a prior drug.

[00:48:53] Speaker 03:
we have the same active ingredient in our drug and we want to make the selection that says, you know, we don't want that to be considered the same active ingredient.

[00:49:02] Speaker 03:
I think, you know, that election would have effect.

[00:49:06] Speaker 03:
It makes perfect sense under our reading.

[00:49:08] Speaker 03:
Under Sandoz's reading, it just wouldn't have any effect at all.

[00:49:12] Speaker 03:
So this entire subsection that Congress created would be superfluous.

[00:49:17] Speaker 04:
If the amount of an impurity is found to change beyond say your, I'm sorry, you said 3.5% limit here.

[00:49:25] Speaker 04:
It turns out it's coming in at, at least sometimes it's coming in at 3.7.

[00:49:29] Speaker 04:
And my understanding is that the FDA requires a resubmission if the amount of impurity has changed from what you, from the basis on which the drug was previously approved for marketing.

[00:49:42] Speaker 04:
Is that resubmission 505B2 application, or what is it?

[00:49:48] Speaker 03:
There is a provision that describes these supplemental applications.

[00:49:53] Speaker 03:
I don't have at my fingertips the particular subsection, but that is right.

[00:49:58] Speaker 04:
It's right that they have to do a resubmission, but you don't know whether it's right that it's a 505B2 submission?

[00:50:04] Speaker 03:
That's right.

[00:50:06] Speaker 03:
If the amount of the impurity increases, Your Honor, then my understanding is that they do have to file a supplemental for obvious reasons.

[00:50:15] Speaker 03:
There's more of something in a drug than it was approved for.

[00:50:19] Speaker 03:
FDA wants to know.

[00:50:20] Speaker 03:
That's not necessarily true if the amount of the impurity decreases.

[00:50:24] Speaker 03:
So, for example, if a RAVA sponsor had found a way to remove... We get the decrease because it's a cap.

[00:50:30] Speaker 04:
It's not a floor on impurities.

[00:50:32] Speaker 04:
Okay.

[00:50:33] Speaker 04:
But if it's more and they do a resubmission and then run whatever studies you all require to say it's fine.

[00:50:41] Speaker 04:
It's not an amount that has any harmful effect.

[00:50:45] Speaker 04:
And then does FDA then approve marketing the drug with that increased amount of impurity?

[00:50:53] Speaker 03:
You are in that hypothetical.

[00:50:55] Speaker 03:
Yes, I believe FDA would approve.

[00:50:56] Speaker 04:
And the only thing they're approving is the supplemental.

[00:50:59] Speaker 03:
Right.

[00:51:03] Speaker 03:
a new impurity or if there's more of an impurity than FDA wants to know about it.

[00:51:09] Speaker 03:
Just to give an example.

[00:51:10] Speaker 04:
It just sounds kind of like they're approving the impurity in that situation because everything else stays the same in my hypothetical.

[00:51:16] Speaker 04:
So there's no changes in the active ingredient or the inactive ingredients or anything else.

[00:51:20] Speaker 04:
So the only thing that's changed is the amount of the impurities increased and FDA signs off and that's not an approval.

[00:51:27] Speaker 03:
know your honor so let me try a hypothetical often as the district were pointing out these impurities will be toxic or carcinogenic arsenic could be an impurity if someone made a change and hopefully increase the amount of arsenic by

[00:51:41] Speaker 03:
the FDA, you know, review the supplemental application and said, well, that doesn't overmind the overall safety and effectiveness of the drug.

[00:51:48] Speaker 03:
You know, I don't think any ordinary person looking at that would say what FDA has done there is approved.

[00:51:54] Speaker 04:
It improves marketing with that amount of arsenic.

[00:51:58] Speaker 03:
FDA approved the overall drug application or overall supplemental drug application.

[00:52:07] Speaker 03:
FDA didn't approve the toxic.

[00:52:11] Speaker 04:
Well, in the recent mission, that's the only thing they're studying is the impurity and the amount of the impurity.

[00:52:17] Speaker 04:
Everything else has already been signed off.

[00:52:20] Speaker 03:
Your Honor.

[00:52:21] Speaker 03:
Just to sort of shift the hypothetical in the other way, if the amount decreased, right?

[00:52:26] Speaker 04:
If the amount decreased or the impurity was totally removed, then, you know, FDA... They don't have to do a resubmission because the impurity is a range from 0 to 3.5%.

[00:52:37] Speaker 04:
So if it goes down to nothing, they don't have to do a resubmission, correct?

[00:52:41] Speaker 03:
Right.

[00:52:41] Speaker 04:
So you're only going to get a resubmission if it's increased.

[00:52:46] Speaker 03:
That's generally right, Your Honor.

[00:52:47] Speaker 03:
There may be cases where they're significant, where the decrease in the impurity is a result of a change in the manufacturing process.

[00:52:55] Speaker 03:
And in that case, there would need to be a supplemental application.

[00:52:57] Speaker 03:
But I think the bottom line point here is that FDA is looking at these.

[00:53:03] Speaker 04:
They're making sure that they're not... Sorry, if they just, in their manufacturing process, they figured out a way just to have a little less degradation in the...

[00:53:15] Speaker 04:
Well, flunamide, so they are even more under that 3.5% cap, and nothing else has changed.

[00:53:24] Speaker 04:
They have to resubmit.

[00:53:26] Speaker 03:
Your Honor, if it was a significant change in the manufacturing process.

[00:53:30] Speaker 04:
What's a significant one that changes the level of impurity?

[00:53:33] Speaker 03:
The mere fact that the impurity has changed wouldn't trigger the supplemental requirement.

[00:53:39] Speaker 04:
Nothing else has changed in my hypothetical, so they wouldn't have to resubmit if it goes down.

[00:53:43] Speaker 04:
It's a complicated process and you know it more than me so I'm just I'm trying to be too simple probably.

[00:53:50] Speaker 03:
I think that's all generally right your honor.

[00:53:52] Speaker 03:
I'm just trying to leave this caveat that there are significant changes in the manufacturing process.

[00:53:58] Speaker 03:
FDA does want to see that which I think is sort of.

[00:54:01] Speaker 04:
But it's I'm just curious what's interesting so is significant defined somewhere as an impact on active ingredient or inactive ingredients or

[00:54:10] Speaker 04:
therapeutic consequence or what makes a change significant?

[00:54:14] Speaker 03:
So the relevant regulation I believe is 31470 and it defines a number of things that would trigger a supplemental application.

[00:54:24] Speaker 03:
I think, you know, as

[00:54:26] Speaker 03:
as we've discussed, you know, a mere reduction or elimination in an impurity by itself would not trigger.

[00:54:33] Speaker 04:
So what does, is that regulations?

[00:54:35] Speaker 04:
I'm sorry, I don't have that one.

[00:54:37] Speaker 04:
Does that regulation define significant in terms of the active ingredient or the ingredients anywhere?

[00:54:45] Speaker 03:
I don't believe it does, Your Honor.

[00:54:46] Speaker 03:
It provides a number of examples of sorts of manufacturing changes that FDA might want to know about.

[00:54:53] Speaker 05:
Just stepping back, if we were to disagree with you and to accept Mr. Jay's reading of the statute, how broad would the disruption be for the agency?

[00:55:07] Speaker 05:
I thought I heard you say this is the only place where approval of active ingredients is called out separately.

[00:55:18] Speaker 05:
And it made me wonder, I know this is a longstanding practice and that a lot of the activity of the agency focuses on active ingredients, but I'm just trying to understand more broadly what the FDA faces if we disagree with your statutory interpretation.

[00:55:37] Speaker 03:
Your honor, the disruption for the agency and for sponsors would be significant.

[00:55:41] Speaker 03:
So let me take each of those in turn.

[00:55:44] Speaker 03:
There obviously are very many prior approved drugs.

[00:55:48] Speaker 03:
Many of those drugs have multiple impurities.

[00:55:50] Speaker 03:
They haven't been tracked.

[00:55:52] Speaker 03:
And many of them are protected as trade secrets.

[00:55:54] Speaker 03:
So if you're an innovator today, you really have no way of knowing whether there are prior impurities that are going to block

[00:56:01] Speaker 03:
or drug, that's a substantial injection of uncertainty in a statute that really depends on certainty.

[00:56:09] Speaker 05:
You track impurities, you track inactive ingredients.

[00:56:13] Speaker 03:
The important difference, Your Honor, aside from the fact that FDA hasn't tracked impurities over all these years, is that impurities are often trade secrets.

[00:56:20] Speaker 03:
So that they couldn't, perhaps FDA themselves could track them, but they couldn't be disclosed.

[00:56:26] Speaker 05:
And not true with inactive ingredients?

[00:56:27] Speaker 05:
I would think often somebody's special

[00:56:31] Speaker 03:
I don't know, coding or filler or... So, Your Honor, details about how to produce that active ingredient might be trade secrets, but the identity of the active ingredient itself... Inactive.

[00:56:44] Speaker 03:
Of inactive ingredients?

[00:56:46] Speaker 05:
Yeah, because you're comparing impurities and inactive ingredients, I thought.

[00:56:51] Speaker 03:
I was, Your Honor, I was comparing impurities and active ingredients.

[00:56:55] Speaker ?:
Okay.

[00:56:56] Speaker 03:
So active ingredients, their identities are disclosed on the FDA website.

[00:57:01] Speaker 03:
Impurities, they're not disclosed and many of them couldn't be because of the trade secrets.

[00:57:05] Speaker 05:
Inactive ingredients are exposed on the website, but some of them must also be trade secrets.

[00:57:13] Speaker 05:
That was my

[00:57:16] Speaker 03:
So my understanding is that inactive ingredients themselves, their identities are not trade secrets.

[00:57:24] Speaker 03:
Those are disclosed on the website that everyone can take a look at that.

[00:57:28] Speaker 03:
Again, that's not something I've studied for this case just because we're not dealing with inactive.

[00:57:36] Speaker 05:
So you were saying that there were many things that would be disruptive either for the agency and or for sponsors.

[00:57:42] Speaker 05:
And you started with that it would be hard

[00:57:47] Speaker 05:
track impurities.

[00:57:51] Speaker 03:
That's right, Your Honor.

[00:57:52] Speaker 03:
So if you're a sponsor today, thinking about whether to invest in this varied time and money intensive process, you have to think about these hundreds or thousands of impurities in prior drugs that might block your exclusivity, block your status as a major innovation.

[00:58:10] Speaker 03:
I think that's a substantial disruption.

[00:58:12] Speaker 03:
Of course, you also asked about disruption for the FDA.

[00:58:17] Speaker 03:
FDA has been doing this for 30 years.

[00:58:21] Speaker 03:
maybe many current drugs that have the five-year exclusivity that may lose that exclusivity as a result of saying, well, any prior impurity could have barred your major innovation status.

[00:58:35] Speaker 03:
So I think there's significant disruption for the agency and significant disruption for sponsors themselves.

[00:58:43] Speaker 05:
But it wouldn't really change the examination, the distinct treatment

[00:58:48] Speaker 05:
active ingredients which, as you say, have to be supported by clinical studies versus impurities and maybe inactive ingredients where the question is just are they safe?

[00:59:00] Speaker 05:
That you would still be able to operate with that focus or not?

[00:59:08] Speaker 05:
Well, it just seems like the kind of attention in an approval of a drug varies depending on

[00:59:17] Speaker 05:
what the role is of the ingredients.

[00:59:20] Speaker 05:
And it seems like one of the potential unsettling facts of Mr. J's interpretation is that it kind of mixes and matches those roles in successor drugs.

[00:59:36] Speaker 05:
And I just, I don't know, you're the expert, but it just seemed to me that that might actually have a deeper impact on the agency in terms of what you'd have to

[00:59:47] Speaker 05:
examine in approving something as an inactive ingredient or impurity in a drug if it's going to then be considered to be approved in a broader sense.

[01:00:00] Speaker 03:
I think that's exactly right, Your Honor.

[01:00:02] Speaker 03:
I mean, FDA has thought of impurities in this particular way that I've described earlier, and I think for Sandoz, under their interpretation, FDA would be thinking of impurities as very different as things that, you know, if this is

[01:00:21] Speaker 03:
drugs from this five-year exclusivity based on the presence of that substance.

[01:00:26] Speaker 03:
I think it's right.

[01:00:27] Speaker 03:
I mean, FDA would need to give quite a bit of thought to how exactly to operationalize that and how its review of impurities would need to change as a result.

[01:00:36] Speaker 03:
I think the other

[01:00:38] Speaker 03:
The odd effect of Sandoz's reading is that it means that someone who comes along today discovers and demonstrates that a substance has a therapeutic effect for one disease that's a cancer drug.

[01:00:51] Speaker 03:
That could be blocked by the pure happenstance that some drug decades ago for heart disease or something

[01:01:01] Speaker 03:
on in your cancer drug.

[01:01:03] Speaker 03:
It's really hard to understand why Congress would have designed the scheme.

[01:01:06] Speaker 05:
Well, you're saying blocked, but it's actually quite the opposite.

[01:01:09] Speaker 05:
It would open up to development.

[01:01:14] Speaker 05:
But I guess you're saying it would block the exclusivity, meaning it would deprive people of the carrot, companies of the carrot that might spur them.

[01:01:25] Speaker 03:
Right.

[01:01:25] Speaker 03:
It would deprive them of this significant incentive that Congress created to spur the development of these

[01:01:33] Speaker 04:
Just one quick question about these impurities.

[01:01:35] Speaker 04:
Here the impurity is actually a chemical ingredient.

[01:01:41] Speaker 04:
But could an impurity be water that comes in through condensation, something commonplace?

[01:01:50] Speaker 03:
I don't know enough about the science to know whether water would qualify, but certainly there are

[01:01:58] Speaker 03:
substances like that that are either they're sort of byproducts of manufacturing, they're just a natural degradation process.

[01:02:08] Speaker 03:
I think we've given some examples and the district court gave a couple others, but you know it could be something either toxic or something that's pretty obviously innocuous that no one you know neither the sponsor or the agency is particularly worried about.

[01:02:25] Speaker 04:
I'm just thinking that if some

[01:02:27] Speaker 04:
If water or something, that's a chemical at the end of the day, but water, just something completely routine and generally unregulated could come in, then that would mean no one could get five years of exclusivity, even if some condensation came in, because that would be deemed approved.

[01:02:47] Speaker 04:
Trying to have a sense of what the breadth is.

[01:02:49] Speaker 04:
If it really is just all chemicals that I can't pronounce, if that's sort of the rule, then that seems different.

[01:02:57] Speaker 03:
And I think that's exactly right, and that's another problem with their interpretation.

[01:03:00] Speaker 03:
An impurity, a substance that appears an impurity in one drug might be a substance that's used in all sorts of ways and all sorts of future drugs.

[01:03:09] Speaker 03:
And if its presence and mere presence in the hierarchy of drug really blocks this five-year exclusivity, then that is undermining this incentive created by Congress.

[01:03:21] Speaker 03:
I know I'm well over time, so unless there are any further questions.

[01:03:25] Speaker 04:
All right, thank you very much.

[01:03:26] Speaker 04:
Appreciate your extra time.

[01:03:28] Speaker 04:
And Mr. J will give you three minutes.

[01:03:38] Speaker 04:
Can impurity be something just like water?

[01:03:40] Speaker 02:
Generally not, no.

[01:03:41] Speaker 02:
A contaminant is not an impurity in the relevant sense.

[01:03:46] Speaker 02:
So something that comes in from outside and is not part of the manufacturing, not part of,

[01:03:52] Speaker 02:
Something that comes in from outside, extrinsically, is not a impurity in the relevant sense.

[01:03:57] Speaker 04:
That's at the beginning of each... I don't know what you mean by inside or outside.

[01:03:59] Speaker 04:
Some water could drip in or some condensation on the machine.

[01:04:03] Speaker 04:
Drop some water in.

[01:04:04] Speaker 02:
No, that would not be as I understand it.

[01:04:08] Speaker 02:
So degradation products, which is what we're specifically talking about, that's addressed in the second of the two guidances.

[01:04:14] Speaker 04:
But there's lots of impurities and your position is about impurities.

[01:04:16] Speaker 02:
Well, only impurities that rise to the level of qualification so that they actually get set in the specification.

[01:04:22] Speaker 02:
but so like a limit gets set for them in the specification.

[01:04:25] Speaker 02:
So where we're talking about this type of impurity, there are two kinds where the drug substance reacts with either an inactive or with the packaging and produces something else.

[01:04:35] Speaker 02:
So in other words, a degradation product is a

[01:04:37] Speaker 02:
It is a result of a chemical reaction that the drug substance, you know, which probably is the active ingredient, degrades into after reacting with something else.

[01:04:47] Speaker 04:
And I'm sorry, I'll give you a couple more minutes for my colleagues' questions.

[01:04:49] Speaker 04:
Is there just a definition of impurity somewhere that's different from outside contaminant?

[01:04:54] Speaker 02:
The agency has defined an impurity as a component that is not an active ingredient or an inactive ingredient.

[01:05:01] Speaker 02:
I realize that that's not super satisfying.

[01:05:06] Speaker 02:
So our position really only goes to impurities that are approved.

[01:05:10] Speaker 02:
And the agency has thresholds below which.

[01:05:15] Speaker 02:
So set aside the contaminants.

[01:05:16] Speaker 02:
Impurities that are below the identification threshold, those are the out.

[01:05:22] Speaker 02:
Sorry, the reporting threshold will be out.

[01:05:24] Speaker 02:
Impurities that are below even the identification threshold, those would be out.

[01:05:28] Speaker 02:
The ones that are controlled by the agency are those for which a limit is set in the specification.

[01:05:33] Speaker 02:
Often that's done through what the agency calls qualification.

[01:05:36] Speaker 02:
You've heard, you've kind of heard my answer.

[01:05:38] Speaker 05:
Okay.

[01:05:38] Speaker 05:
Great.

[01:05:38] Speaker 05:
Sorry.

[01:05:38] Speaker 05:
And that is a process that doesn't also have a parallel with respect to inactive ingredients?

[01:05:44] Speaker 05:
It does.

[01:05:45] Speaker 02:
So it absolutely does.

[01:05:46] Speaker 02:
Right.

[01:05:47] Speaker 02:
And this really takes one of my central points.

[01:05:49] Speaker 05:
So your, your position would affect that too.

[01:05:54] Speaker 02:
anything that the agency is doing.

[01:05:55] Speaker 02:
That's all right.

[01:05:56] Speaker 05:
But it would affect the implications of an approval of a drug that included defined

[01:06:03] Speaker 05:
inactive ingredient.

[01:06:04] Speaker 02:
Absolutely.

[01:06:05] Speaker 02:
Absolutely.

[01:06:05] Speaker 02:
That's a central part of our point.

[01:06:07] Speaker 02:
And I heard no satisfying response from my friend too, which is the point that the agency acknowledges that it approves inactive ingredients, but they're long standing.

[01:06:16] Speaker 02:
As such.

[01:06:17] Speaker 02:
Sure.

[01:06:17] Speaker 02:
That's right.

[01:06:18] Speaker 02:
But so that's then the question is, does the statute require approval or approval as an inactive, sorry, as an active ingredient, but there's no distinction there between no daylight between inactive ingredients

[01:06:28] Speaker 02:
and impurities like either they're approved in the relevant sense and we say that they are because they both go to safety or there's some you know extrinsic requirement that applies only to active ingredients.

[01:06:41] Speaker 00:
Now my friend cited 355U or 505U the thing about... Can you say on the inactive ingredients I mean so your position would block five-year exclusivity for any inactive ingredient

[01:06:54] Speaker 00:
or impurity that was previously part of a drug application.

[01:06:58] Speaker 02:
It would, it would allow them to get three-year exclusivity.

[01:07:01] Speaker 00:
And I think- That it would block five-year exclusivity for any inactive ingredient or impurity.

[01:07:05] Speaker 02:
Well, I mean, this came up in the top side of the argument, right?

[01:07:08] Speaker 02:
Blocking is what's done by the exclusivity itself.

[01:07:11] Speaker 02:
It would make them ineligible for five-year exclusivity and remit them to the lesser, but still significant three-year exclusivity.

[01:07:18] Speaker 02:
And I think my friend's discussion of

[01:07:20] Speaker 02:
three-year exclusivity really sold that form of exclusivity short.

[01:07:24] Speaker 02:
Think, for example, the innovations in which a molecule is completely repurposed for a completely different therapeutic use.

[01:07:33] Speaker 02:
That may require a lot of study, both as to safety and efficacy, but you still only get three-year exclusivity.

[01:07:38] Speaker 02:
In particular, it might have only appeared in a product as one of multiple active ingredients.

[01:07:43] Speaker 02:
When you study it for a new use, you still only get three-year exclusivity.

[01:07:47] Speaker 02:
This is not a major disruption.

[01:07:50] Speaker 02:
Five-year exclusivity is for genuinely new chemical entities.

[01:07:54] Speaker 02:
And one specific element of that is the enantiomer racemate

[01:07:59] Speaker 02:
a statute that my friend referred to.

[01:08:01] Speaker 02:
I just, I think it's important context to note that that statute overturned in a targeted way, a long-standing FDA interpretation, which was set out in the federal register in 1989, 54, Fedreg 28898.

[01:08:13] Speaker 02:
The agency had second thoughts about it, thought about changing it.

[01:08:18] Speaker 02:
Congress waited 10 years from its request for comment in 1997.

[01:08:21] Speaker 02:
And then finally- Say it again.

[01:08:23] Speaker 05:
It's 54, Fedreg 29- 28898.

[01:08:28] Speaker 02:
which the agency said a single enantiomer, so like the left-handed version of a previously approved racemate with, you know, a 50-50 mixture, both left and right hands.

[01:08:38] Speaker 02:
contains a previously approved active moiety and is therefore not considered a new chemical entity.

[01:08:42] Speaker 02:
So Congress, and this is very clear from the background of this statute, got tired of waiting for the agency to change that and said, you're going to, in a third way, overturn that interpretation so that if you have just the left-handed NDA, you can say this is not the same thing as the active ingredient in the old one.

[01:08:59] Speaker 02:
And a racemic drug is one that has a 50-50 mixture as its active ingredient.

[01:09:04] Speaker 02:
So we would still think that that is probative.

[01:09:06] Speaker 02:
And I wanted to give the background.

[01:09:08] Speaker 02:
Cognizant of not going over time, I did want to answer Judge Pillard your question about the patents.

[01:09:16] Speaker 02:
I think the answer is the US patent, which was issued in 2006.

[01:09:19] Speaker 02:
By that time, the assignment to Sanity was complete.

[01:09:23] Speaker 02:
But when it was filed, which is what you and I were talking about in 1997, I believe, Hoekst was the applicant.

[01:09:30] Speaker 02:
And you can see that in a Canadian patent from the same year, which is issued to Hoekst.

[01:09:36] Speaker 02:
I think everything that I wanted to cover except just a point that the timing has now run very, very short.

[01:09:46] Speaker 02:
And if the court does not act, if it is to rule in our favor, if it does not act in time for FDA to implement that by March 12, all this will have been for naught because the other generics will be able to launch as of that date.

[01:09:59] Speaker 02:
Now, unless the court has any further questions.

[01:10:03] Speaker 02:
Thank you very much, Your Honors.

[01:10:04] Speaker 04:
Thank you very much.

[01:10:05] Speaker 04:
We appreciate Council's helpful arguments and the cases submitted.