                        UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA
____________________________________
                                     )
WATSON LABORATORIES, INC.,          )
                                     )
                   Plaintiff,       )
                                     )
       v.                           )    Civil Action No. 12-1344 (ABJ)
                                     )
KATHLEEN SEBELIUS, Secretary of      )          UNDER SEAL
Health and Human Services, et al.,   )
                                     )
                   Defendants.       )
____________________________________)

                                 MEMORANDUM OPINION

       Plaintiff Watson Laboratories, Inc. (“Watson”) brings this action against defendants

Kathleen Sebelius, Secretary of Health and Human Services; Margaret A. Hamburg, M.D.,

Commissioner of Food and Drugs, U.S. Food and Drug Administration (“FDA”); and FDA

(collectively “FDA”) under the Administrative Procedure Act (“APA”), 5 U.S.C. § 551, et seq.

(2006), and the Food, Drug & Cosmetic Act (“FDCA”), 21 U.S.C. § 301, et seq. (2006), 1 for

interpreting the FDCA’s 180-day exclusivity provision to deny Watson shared exclusivity to

market the generic drug pioglitazone. Watson maintains that FDA’s decision is contrary to the

express terms of the statute; that it is an unreasonable interpretation of the FDCA; and that it is

arbitrary and capricious.     Am. Compl.        [Dkt. # 22].     On August 16, 2012, Mylan

Pharmaceuticals, Inc. (“Mylan”) filed a motion to intervene on behalf of FDA [Dkt. # 9], which

was granted. On August 27, 2012, Watson filed a motion for summary judgment [Dkt. # 25],

1
        The FDCA was amended in 2003 by the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (“MMA”), Pub. L. No. 108-173, 117 Stat. 2066 (codified at 21
U.S.C. § 355 (2006)). Because the relevant filings in this case pre-date the December 8, 2003
effective date of the MMA, the pre-MMA version of the FDCA controls in this case. Pl.’s Mem.
of P. and A. in Support of Mot. for Summ. J. (“Pl.’s Mem.”) [Dkt. # 25] at 3, citing Ranbaxy
Labs., Ltd. v. Leavitt, 459 F. Supp. 2d 1, 2 n.2 (D.D.C. 2006).
and on September 5, 2012, FDA responded with a motion to dismiss Watson’s complaint, or, in

the alternative, for summary judgment. [Dkt. # 36]. The Court heard argument on the motions

on September 14, 2012. [Dkt. # 50]. For the reasons stated below, the Court finds that FDA’s

decision to deny Watson shared exclusivity was contrary to the plain language of the statute, and

that even if the statute is ambiguous and FDA’s interpretation of the relevant provision is

reasonable as a general matter, its decision was arbitrary and capricious under the unique factual

circumstances of this case. Thus, the Court will overturn FDA’s decision and order FDA to

approve Watson’s ANDA for generic pioglitazone effective immediately so that Watson may

enjoy what remains of the shared exclusivity previously awarded to other filers.

   I.        BACKGROUND

             A. Statutory Background

          The FDCA requires all new drugs to be approved by the FDA before they are introduced

into interstate commerce. 21 U.S.C. § 355(a) (2006). It provides two primary pathways for

obtaining approval: (1) the new drug application (“NDA”), described in section 355(b); and

(2) the abbreviated new drug application (“ANDA”) for generic products, set forth in section

355(j).

          A drug that follows the NDA pathway is referred to as a “pioneer” drug because it is the

first drug of its kind to go through an approval process with the FDA. The NDA procedure

requires the applicant to conduct a spectrum of safety and effectiveness tests and to inform the

FDA of the results. See 21 U.S.C. § 355(b)(1). In addition, it requires the applicant to file

information about “any patent which claims the drug for which the applicant submitted the

application or which claims a method of using such drug and with respect to which a claim of

patent infringement could reasonably be asserted if a person not licensed by the owner engaged



                                                 2
in the manufacture, use, or sale of the drug.” 21 U.S.C. § 355(b)(1). Once the drug is approved,

it is referred to as a “listed” drug. See 21 C.F.R. § 314.3(b).

       A drug that follows the ANDA pathway seeks to rely on research conducted by a third

party – the maker of the listed drug – in order to meet the approval requirements. 21 U.S.C.

§ 355(b)(2), (j)(2)(A). Congress added the truncated ANDA approval process to the FDCA as

part of the 1984 Hatch-Waxman amendments, which sought “to make available more low cost

generic drugs” by providing a pathway that was less costly and time consuming than the NDA

process. Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1316 (D.C. Cir. 1998), quoting H.R. Rep.

No. 98-857, pt. 1, at 14 (1984), reprinted in 1984 U.S.C.C.A.N. 2647, 2647 (internal quotation

marks omitted). ANDA applicants must file information showing that the conditions of use,

active ingredient, dosage form, strength, route of administration, and labeling of the generic drug

are “the same as” those of the reference listed drug that was previously approved. 21 U.S.C.

§ 355(j)(2)(A)(i)-(iii), (v). They are thereby relieved of the obligation to perform the extensive

testing demonstrating safety and effectiveness that is the hallmark of the NDA process. See

§ 355(b)(1)(A).

       To protect the patent rights of NDA holders, ANDA applicants must provide one of four

“certifications” for “each patent which claims the listed drug . . . or which claims a use for such

listed drug for which the application is seeking approval.” § 355(j)(2)(A)(vii); see also Andrx

Pharm., Inc. v. Biovail Corp. Int’l, 256 F.3d 799, 802 (D.C. Cir. 2001). Thus, for each relevant

patent, ANDA applicants must certify either:

               (I)     that such patent information has not been filed,
               (II)    that such patent has expired,
               (III)   of the date on which such patent will expire, or
               (IV)    that such patent is invalid or will not be infringed by the
                       manufacture, use, or sale of the new drug for which the application
                       is submitted . . . .


                                                  3
§ 355(j)(2)(A)(vii)(I)–(IV). FDA may approve an ANDA containing either of the first two

certifications effective immediately, § 355(j)(5)(B)(i), and it may approve an ANDA containing

the third type of certification effective on the relevant patent’s expiration date, § 355(j)(5)(B)(ii).

       But the filing of the fourth type of certification – the certification referred to as a

“paragraph IV certification” which is relevant here – is an act of patent infringement on the part

of the ANDA applicant, 35 U.S.C. § 271(e)(2)(A), and it can delay the approval process in two

different ways. First, the FDCA requires an ANDA applicant to notify the patent holder of the

filing of a paragraph IV certification, 21 U.S.C. § 355(j)(2)(B), and the filing allows the patent

owner to sue the ANDA filer. If the patent holder brings a suit within 45 days of receipt of the

notice, the FDCA bars approval of the applicant’s ANDA, or any other ANDA relating to the

drug, for thirty months, unless the applicant wins the patent infringement suit earlier or the court

hearing the suit shortens the period. § 355(j)(5)(B)(iii).

       Second, approval of an ANDA containing a paragraph IV certification is delayed if FDA

determines that “a previous application has been submitted . . . [containing] such a certification”

for the drug. § 355(j)(5)(B)(iv); see also 21 C.F.R. § 314.107(c)(1). In such a situation, FDA

may not approve the subsequent ANDA until 180 days from either the date of the “first

commercial marketing of the drug” by the previous applicant or the date on which the previous

applicant wins a patent infringement suit involving the relevant patent, whichever is earlier.

§ 355(j)(5)(B)(iv). This delay gives the earlier applicant what is referred to as a “180-day

exclusivity period,” during which the applicant has the right to sell its product and compete




                                                   4
against the brand without competition from other generic manufacturers. See id. It is this

exclusivity grant that is at issue in this case. 2

        Patent certifications are not the only way to address a pioneer drug’s patents. An

applicant seeking approval for a use that is not claimed by a patent need only file a “statement

that the method of use patent does not claim such a use” under 21 U.S.C. § 355(j)(2)(A)(viii).

This is called a “section viii statement.” For example, if a pioneer drug applicant’s patent claims

a use for treating depression, and an ANDA applicant seeks approval of the drug for treatment of

any other condition, then only a section viii statement is required. See Purepac Pharm. Co. v.

Thomson, 354 F.3d 877, 880 (D.C. Cir. 2004). “Thus, whereas applicants use paragraph IV

certifications to challenge the validity of admittedly applicable patents, they use section viii

statements to assert that patents do not apply.” Id. If an applicant submits a section viii

statement, the applicant must omit or “carve out” from the proposed labeling submitted with its

application any information pertaining to the use or uses claimed by the patent. See 21 C.F.R.

§ 314.94(a)(12)(iii)(A) (providing that applicants may use a section viii statement when “the

labeling for the drug product for which the applicant is seeking approval does not include any

indications that are covered by the use patent”).

        Section viii statements are not subject to either of the delays attendant to paragraph IV

certifications. Filing a section viii statement is not an act of infringement, so it does not require

applicants to provide notice to the pioneer applicant or wait thirty months for FDA approval. See

21 U.S.C. § 355(j)(2)(B); Purepac, 354 F.3d at 880. Further, section viii applications cannot be


2       FDA indicates that prior to the 2003 amendments, it granted exclusivity on a patent-by-
patent basis. A.R. at 7. This meant that a period of exclusivity could potentially arise for each
patent claimed by a drug. Id. In the event that such a practice blocked applicants from getting to
the market – i.e., each applicant is blocked by an exclusivity period held by another applicant as
to one or more patents – FDA might decide that exclusivity should be shared among those
applicants. Id.; Apotex Inc. v. FDA, 414 F. Supp. 2d 61, 75 (D.D.C. 2006)..
                                                     5
delayed by previous applicants awarded exclusivity, because previous filers of section viii

statements are not eligible for an exclusivity period. See 21 U.S.C. § 355(j)(5); Purepac, 354

F.3d at 880.    As this Circuit has explained, “the FDA may [thus] approve a section viii

application immediately, making it an attractive route for generic manufacturers, even though a

section viii statement does not entitle a successful applicant to the 180-day period of exclusivity

bestowed on paragraph IV applicants.” Purepac, 354 F.3d at 880 (internal quotation marks

omitted).

       It has been FDA’s position that paragraph IV certifications and section viii statements are

mutually exclusive, and neither party in this case challenges this proposition. See Abbreviated

New Drug Application Regulations; Patent and Exclusivity Provisions, 59 Fed. Reg. 50,338,

50,347 (Oct. 3, 1994) (“[T]he two provisions . . . are not overlapping, and an applicant does not

have the option of making a certification under [paragraph IV] in lieu of, or in addition to, a

statement under [section viii].”); see also, e.g., Purepac, 354 F.3d at 880. For example, where an

applicant seeks approval of a drug for a use that is not claimed by a listed patent, only a section

viii statement is appropriate; a paragraph IV certification may not be used. 3

       FDA’s procedure for receiving all ANDA applications – whether they contain paragraph

IV certifications, section viii statements, or both – is outlined in its regulations. Within sixty

days of submission of an ANDA, FDA reviews the application to determine whether it “may be

filed.” 21 C.F.R. § 314.101(a)(1). Before an application may be filed, FDA must make “a


3        There are instances, however, where it may be appropriate to file both a paragraph IV
certification and a section viii statement to address the same listed patent. See 59 Fed. Reg. at
50,347. FDA refers to this as a “split certification.” FDA’s Mem. in Support of Mot. to Dismiss
or, in the alternative, for Summ. J. (“FDA’s Mem.”) [Dkt. # 36] at 7. This situation arises when
a listed patent contains both product and method of use claims, such that a paragraph IV
certification is needed to address the product claim and a section viii statement is needed to
address the method of use claim. 59 Fed. Reg. at 50,347. In this case, both Watson and Mylan
originally filed split certifications as to the drug composition/use patents. See A.R. at 10.
                                                 6
threshold determination that the application is sufficiently complete to permit a substantive

review.” Id. FDA’s regulations provide various grounds on which FDA may refuse to receive

an application. See § 314.101(d)–(e). For example, it may refuse to receive an application if it

“is incomplete because it does not on its face contain information required under section 505(b),

section 505(j), or section 507” of the FDCA or relevant regulations. § 314.101(d)(3). If FDA

does not consider an application to be filed for any of these reasons, the regulations provide that

FDA notify the applicant, “ordinarily by telephone,” giving the applicant three options:

(1) withdraw the application under [21 C.F.R.] § 314.99; (2) amend the application to cure the

deficiencies; or (3) take no action, in which case FDA will refuse to receive the application.

§ 314.101(b)(3). According to FDA, if an applicant chooses the second option and FDA receives

the amended application, agency practice is to consider the amended application to have been

received on the date on which it was first submitted. See FDA’s Mem. in Supp. of Mot. to

Dismiss or, in the alternative, for Summ. J., and Opp. to Pl.’s Mot. for Summ. J. (“FDA’s Opp.”)

[Dkt. # 36] at 4, citing A.R. at 3.

            B. Factual Background

        On July 15, 2003, Watson submitted an ANDA for approval to market a generic version

of pioglitazone hydrochloride tablets. Brannan Decl. ¶ 9 [Dkt # 3-2]. Pioglitazone, originally

developed and marketed by Takeda Pharmaceutical Company Ltd. (“Takeda”) under the trade

name Actos®, is widely prescribed for the treatment of type 2 diabetes. Id. ¶¶ 7–8. Watson filed

its ANDA on the earliest date on which ANDAs could be filed with FDA for this particular drug.

Id. ¶ 9.   Watson submitted the ANDA with labeling for the use of the generic drug as a

monotherapy, or as a therapy taken by itself, as opposed to a combination therapy, which

involves using more than one medication or therapy. Id. ¶ 11; Pl.’s Mem. of P. and A. in



                                                7
Support of Mot. for Summ. J. (“Pl.’s Mem.”) [Dkt. # 25] at 7. A second applicant, Mylan, also

submitted an ANDA on July 15, 2003. A.R. at 8.

       Watson’s ANDA included paragraph IV certifications for all of the patents covering the

brand name drug. A.R. at 8. Ten of those patents are relevant to this case. Id. Eight of the ten

patents are referred to as use-only patents, 4 which contain only method of use claims. Id. The

remaining two patents are referred to as drug composition/use patents, 5 which contained two

types of claims: drug composition claims and method of use claims. Id. Drug composition

claims relate to use of pioglitazone as a monotherapy, while method of use claims relate to use of

the drug as a combination therapy. See Am. Compl. ¶ 31.

       On August 18, 2003, FDA contacted Watson by telephone to discuss its application. See

A.R. at 37. And on August 27, 2003, Watson responded by filing a “telephone amendment” to

its ANDA. Id. The administrative record does not contain any documents that memorialize the

content of the telephone communication or the nature of FDA’s objections to the original ANDA

other than this statement in Watson’s telephone amendment:

               As a result of conversations . . . , we understand that FDA will not accept
               Paragraph IV certifications against method of use patents for uses for
               which Watson is not seeking approval.

A.R. at 38; see also Brannan Decl. ¶ 12 (“On August 18, 2003, FDA communicated to Watson

that, among other things, Watson should revise its labeling to include language regarding

pioglitazone as a combination therapy because Watson had asserted Paragraph IV certifications

to the Combination Therapy Patents.”).



4       The use-only patents are U.S. Patent Nos. 6,211,205; 6,271,243; 6,303,640; 6,166,042;
6,166,043; 6,172,090; 6,150,383; and 6,150,384. Brannan Decl. ¶ 11. Watson refers to these
patents as “Combination Therapy” patents. Id.
5       The drug composition/use patents are U.S. Patent Nos. 5,965,584 and 6,329,404. Id.


                                                8
       FDA contends in its pleadings that the original ANDA was defective because Watson

filed paragraph IV certifications for all of the patents when it also “sought to carve out (i.e., omit

from its proposed labeling) the methods of use protected by the various patents.” FDA’s Opp. at

10. According to FDA, the FDCA prohibits an ANDA applicant from filing a paragraph IV

certification challenging a patent for a use that it has carved out from its proposed labeling. Id. at

6–7, citing 59 Fed. Reg. at 50,347; see also Purepac, 354 F.3d at 880. Rather, an applicant must

file section viii statements for a proposed carve-out of labeling referring to a patented method of

use. FDA’s Opp. at 6–7.

       According to FDA, at that time, Watson was faced with four options. It could:

               (1) withdraw its ANDA; (2) maintain paragraph IV certifications to all the
               patents, but submit new labeling that included (i.e., did not carve out) the
               protected methods of use; (3) maintain paragraph IV certifications
               challenging only the drug composition claims contained in the two Drug
               Composition/Use Patents, and file section viii statements as to the method-
               of-use claims in the Drug Composition/Use Patents and to the Use-only
               patents . . . ; or (4) take no action, in which case FDA would refuse to
               receive the application due to the invalid certifications and Watson would
               lose any benefits associated with its original filing date.

A.R. at 9. Watson “amended its ANDA to change its certifications to the Combination Therapy

Patents to Section viii statements, while maintaining its Paragraph IV certifications as to the

composition claims of the Composition Patents.” Brannan Decl. ¶ 13; A.R. at 38. According to

FDA, choosing this option meant that Watson could maintain its carved-out labeling rather than

submitting new labeling that included the protected methods of use. A.R. at 9; FDA’s Opp. at

11.

       But in making this amendment, Watson explicitly reserved its rights. The telephone

amendment stated: “Watson does not agree with the Agency’s position . . . . However, solely to

facilitate ANDA review, and without prejudice to Watson’s position, Watson is amending the



                                                  9
ANDA by changing Paragraph IV certifications . . . to section viii statements . . . .” A.R at 38.

Watson went on:

              Watson makes this amendment without prejudice to its right to reinstate its
              original Paragraph IV Certifications with the effective date of original
              submission on July 15th, 2003, should a court or the Agency hold in the
              future that Paragraph IV Certifications should have been made and/or
              maintained.

Id.; Am. Compl. ¶ 36.

       On September 4, 2003, FDA informed Watson that its ANDA was deemed acceptable for

filing as of the original filing date of July 15, 2003. 6 A.R. at 33. On December 13, 2005, FDA

informed Watson that its ANDA had been tentatively approved. Ex. C to Brannan Decl., Aug.

23, 2012 [Dkt. # 33] (FDA referencing “tentative approval letter issued by this office on

December 13, 2005”); Pl.’s Mem. at 11.

       On September 9, 2003, Watson sent the required letter to the patent holder Takeda

notifying Takeda that its ANDA contained paragraph IV certifications to two of Takeda’s

patents. A.R. at 29. Takeda responded to the letter by filing a lawsuit against Watson and other

ANDA filers, including intervenor defendant Mylan, in the U.S. District Court for the Southern

District of New York for infringement of U.S. Patent Nos. 5,965,584 and 6,329,404 – the drug

composition/use patents. A.R. at 30; see Takeda Chemical Indus. Ltd. v. Watson Pharms., Inc.,

No. 03-cv-8254 (S.D.N.Y. filed Oct. 17, 2003) [Dkt. # 46-1]. This litigation settled in March

2010, and both Watson and Mylan entered into settlement agreements with Takeda, providing

that they would receive non-exclusive licenses to the drug composition/use patents that were the

subject of the paragraph IV certifications to be effective August 17, 2012. Brannan Decl. ¶ 16;


6      On the same date, FDA filed Mylan’s original ANDA, which also contained paragraph
IV certifications to the drug composition/use-only patents and section viii statements to the
remaining use-only patents. See A.R. at 10.

                                               10
Sept. 14, 2012 Tr. [Dkt. # 50] at 17; 7 see also Ex. A to Brannan Decl. (Takeda press release

announcing settlement of the patent litigation with Watson and Mylan). But the agreement also

specified that Watson (and presumably Mylan, but the Court does not have any exhibits that

specify the terms of its agreement) would withdraw the section viii statements in the ANDA and

receive licenses for the use-only patents as well. Sept. 14, 2012 Tr. at 16–17; see also Watson

Minor Amendment dated March 7, 2012 (“Watson Minor Amendment”) [Dkt. 45].

          After the litigation and pursuant to their settlement agreements, both Mylan and Watson

amended their ANDAs by changing their section viii statements to the use-only patents to

paragraph IV certifications. Pl.’s Mem. at 10; A.R. at 9–10. Mylan did so first, on March 22,

2010. A.R. at 9; FDA’s Opp. at 12. Two years later, Watson amended its application on March

7, 2012, via a letter entitled “Minor Amendment.” Watson Minor Amendment; see also A.R. at

10. Watson characterizes its amendment as “reinstat[ing]” the paragraph IV certifications to the

use-only patents in its original application. See, e.g., Brannan Decl. ¶ 16; Pl.’s Mem. at 2, 10,

12, 23.

          The following charts summarize Watson’s and Mylan’s relevant patent certifications:




7      At the motions hearing, Watson’s counsel confirmed that Watson and Mylan have
separate settlement agreements, and stated that that “the general understanding is that [the
agreements] were the same or roughly the same at least in substance.” Sept. 14, 2012 Tr. at 17.
                                                11
                                                          Watson’s First       Watson’s
                                         Watson’s
                                                            Amended             Second
                                         Original
                                                           Application         Amended
                      Patent Type       Application
                                                           Accepted by        Application
                                       Submitted on
                                                          FDA Effective      Submitted on
                                         7/15/03
                                                             7/15/03            3/7/12
                    Drug
5,965,584                             IV                 IV/viii            IV
                    Composition/Use
                    Drug
6,329,404                             IV                 IV/viii            IV
                    Composition/Use
6,150,383           Use-only          IV                 viii               IV
6,150,384           Use-only          IV                 viii               IV
6,166,042           Use-only          IV                 viii               IV
6,166,043           Use-only          IV                 viii               IV
6,172,090           Use-only          IV                 viii               IV
6,211,205           Use-only          IV                 viii               IV
6,271,243           Use-only          IV                 viii               IV
6,303,640           Use-only          IV                 viii               IV

                                         Mylan’s
                                         Original
                                        Application        Mylan’s Amended Application
                      Patent Type
                                        Accepted by            Submitted on 3/22/10
                                       FDA Effective
                                          7/15/03
                    Drug
5,965,584                             IV/viii            IV
                    Composition/Use
                    Drug
6,329,404                             IV/viii            IV
                    Composition/Use
6,150,383           Use-only          viii               IV
6,150,384           Use-only          viii               IV
6,166,042           Use-only          viii               IV
6,166,043           Use-only          viii               IV
6,172,090           Use-only          viii               IV
6,211,205           Use-only          viii               IV
6,271,243           Use-only          viii               IV
6,303,640           Use-only          viii               IV

A.R. at 10; Pl.’s Mem. at 11.

       Pursuant to the settlement agreement with Takeda and in anticipation of FDA’s

acceptance of its ANDA, Watson planned to launch its generic drug on August 17, 2012, and it

claims that it expended “significant resources,” including “millions of dollars on materials,


                                                12
studies and overhead, for its anticipated [] entry” into the market. Brannan Decl. ¶ 19. Watson

states that as recently as July 6, 2012, FDA indicated to Watson that its ANDA “should be on

track for full approval come August.” Id. ¶ 20 (internal quotation marks omitted). But in August

2012, a representative from Watson spoke with an FDA representative, who told Watson that

FDA no longer planned to approve Watson’s ANDA on August 17, 2012. Id. ¶ 21. That is what

prompted plaintiff’s lawsuit.

       On August 23, 2012, FDA sent Watson a letter confirming FDA’s decision to delay

approval of Watson’s ANDA. A.R. at 1–15. The letter explained that Mylan’s ANDA was the

first application “with a paragraph IV certification for all of the patents” and was thus a previous

application barring approval of Watson’s ANDA for 180 days:

               FDA does not dispute that Watson is a first-applicant with respect to the
               drug composition claims within the Drug Composition/Use Patents.
               Because Watson’s initial paragraph IV certifications on the remaining
               patent claims and patents were invalid . . . and because Watson so delayed
               in changing its section viii statements to paragraph IV certifications after
               the patent settlement, Watson was not a first application with respect to
               the method-of-use claims in the Drug Composition/Use Patents and the
               Use-only Patents. . . . Mylan . . . filed valid paragraph IV certifications to
               the method-of-use claims in the Drug Composition/Use Patents and the
               Use-only Patents . . . approximately two years before Watson did.

A.R. at 14. In the same letter, FDA notified Watson of its finding that Mylan and one or more

other ANDA applicants (presumably Ranbaxy) were entitled to exclusivity instead. A.R. at 1.

Sometime after August 17, 2012, Mylan (and presumably one or more other ANDA applicants)

began marketing generic pioglitazone exclusively. Aug. 21, 2012 Tr. at 17 (Mylan’s counsel

stating that Mylan had already begun selling the drug).

           C. Procedural History

       On August 15, 2012, Watson filed this lawsuit against FDA, seeking a temporary

restraining order and a preliminary injunction that would (1) enjoin FDA from granting final


                                                13
approval to any ANDA for generic pioglitazone hydrochloride, or in the alternative, (2) if FDA

granted final approval to any other ANDA for generic pioglitazone hydrochloride, that the Court

also grant Watson’s ANDA for the drug. [Dkt. # 3]. Soon after filing the lawsuit, FDA sent

Watson a “Bioequivalence Deficiencies” letter regarding its ANDA. Brannan Decl. ¶ 22, Aug.

23, 2012. Based on this letter, the Court denied the motion for temporary restraining order

without prejudice. Minute Order, Aug. 16, 2012.

        Watson responded to the deficiencies letter and renewed its motion for temporary

restraining order and preliminary injunction on August 16, 2012. Brannan Decl. ¶ 22, Aug. 23,

2012.    The Court again denied the motion for temporary restraining order and issued the

following minute order:

              For the reasons explained at the August 16, 2012 hearing, the Court finds
              that plaintiff did not show a substantial likelihood of success on the merits
              in its motion for a temporary restraining order concerning its [ANDA] . . .
              Specifically, plaintiff was told by the Food and Drug Administration
              (“FDA”) on August 15, 2012 that its application was deficient and that it
              was required to submit additional information. The Court denied
              plaintiff’s initial motion for a temporary restraining order without
              prejudice in view of the FDA’s request. Plaintiff then responded to the
              FDA’s request and renewed its motion. During the August 16 hearing on
              plaintiff's renewed motion, the FDA informed plaintiff that it had not
              submitted sufficient information in response to the August 15 request.
              Accordingly, at that time, plaintiff’s application was still deemed deficient
              by the FDA and plaintiff was unable to demonstrate a likelihood of
              success on the merits; indeed, plaintiff’s counsel conceded that the Court
              could not grant injunctive relief if its application was deemed deficient.

              Even if plaintiff had provided sufficient information to the FDA prior to
              the August 17, 2012 release date of Generic Pioglitazone, however, the
              Court finds that plaintiff did not present the Court with any case law or
              other legal authority that would persuade the Court that it has the authority
              to compel the FDA to immediately process and approve Watson’s ANDA
              under the facts of this case. Plaintiff’s alternative requests for relief also
              fail. Plaintiff requested, inter alia, that the Court enjoin the FDA from
              approving any other company’s ANDA for Generic Pioglitazone if the
              FDA were not to approve Watson’s ANDA on August 17, 2012. This
              request fails because such relief would plainly cause substantial injury to


                                               14
                the other providers of Generic Pioglitazone who would have been
                approved on August 17, 2012. Furthermore, the public interest would not
                be furthered by an injunction that prevents approved companies from
                selling a generic drug. Accordingly, for the reasons stated by the Court on
                August 16, 2012 and for the reasons explained above, plaintiff’s motion
                for a temporary restraining order is DENIED.

Minute Order, Aug. 17, 2012. At a status hearing on August 24, 2012, Watson withdrew its

previously filed motions for preliminary injunction. Aug. 24, 2012 Tr. at 8.

         On August 27, 2012, Watson filed a motion for summary judgment [Dkt. # 25], which is

currently pending before the Court. In its motion, Watson asks the Court to order FDA to

(1) “refrain from denying Watson’s ANDA approval on the basis of FDA’s determination that

such approval is barred by exclusivity granted to any other ANDAs” and (2) grant final approval

to Watson’s ANDA. Proposed Order [Dkt. # 25-3].

   II.      STANDARD OF REVIEW

         The APA establishes the scope of judicial review of agency action. See Vt. Yankee

Nuclear Power Corp. v. Natural Res. Def. Council, Inc., 435 U.S. 519, 545–549 (1978).

            A. Chevron Deference

         Courts are required to analyze an agency’s interpretation of a statute by following the

two-step procedure set forth in Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S.

837 (1984). First, the court must determine “whether Congress has directly spoken to the precise

question at issue.” Id. at 842. “If the intent of Congress is clear, that is the end of the matter; for

the court, as well as the agency, must give effect to the unambiguously expressed intent of

Congress.” Id. at 842–43. Courts “use ‘traditional tools of statutory construction’ to determine

whether Congress has unambiguously expressed its intent,” Serono Labs., Inc., v. Shalala, 158

F.3d 1313, 1319 (D.C. Cir. 1998), including an examination of the statute’s text, structure,

purpose, and legislative history. Bell Atl. Tel. Co. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997).


                                                  15
Thus, the Chevron step I exercise involves not only an analysis of the text, but a consideration of

the provisions at issue in light of the statute’s purpose. See Mova Pharm. Corp. v. Shalala, 140

F.3d 1060, 1067–68 (D.C. Cir. 1998), quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 51

(1987) (“[I]n expounding a statute, we must not be guided by a single sentence or member of a

sentence, but look to the provisions of the whole law, and to its object and policy.”). And, at the

Chevron I stage, the Court must consider not only the provision in question, but also the statutory

structure as a whole. See United Savs. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., 484

U.S. 365, 371 (1988) (“A provision that may seem ambiguous in isolation is often clarified by

the remainder of the statutory scheme – because the same terminology is used elsewhere in a

context that makes its meaning clear, or because only one of the permissible meanings produces

a substantive effect that is compatible with the rest of the law.”) (internal citations omitted). See

also K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291 (1988) (“In ascertaining the plain meaning

of the statute, the court must look to the particular statutory language at issue, as well as the

language and design of the statute as a whole.”); U.S. Nat. Bank of Or. v. Indep. Ins. Agents of

Am., Inc., 508 U.S. 439, 455 (1993) (noting that courts “must not be guided by a single sentence

or member of a sentence, but look to the provisions of the whole law, and to its object and

policy”); Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 574 F.3d 748, 771 (D.C. Cir.

2009) (“[T]he words of a statute must be read in their context and with a view to their place in

the overall statutory scheme.”), quoting Davis v. Mich. Dep’t of Treasury, 489 U.S. 803, 809

(1989); N. Singer & J. Singer, 2A Sutherland Statutes and Statutory Construction 189–90 (7th

ed. 2007).

       If the Court concludes that the statute is either silent or ambiguous, the second step of the

Court’s review process is to determine whether the interpretation proffered by the agency is



                                                 16
“based on a permissible construction of the statute.”       Chevron, 467 U.S. at 843. Once a

reviewing court reaches the second step, it must accord “considerable weight” to an executive

agency’s construction of a statutory scheme it has been “entrusted to administer.” Id. at 844.

Indeed, “under Chevron, courts are bound to uphold an agency interpretation as long as it is

reasonable – regardless whether there may be other reasonable or, even more reasonable, views.”

Serono, 158 F.3d at 1321.       And the Court must defer to an agency’s reading of its own

regulations unless it is “plainly erroneous or inconsistent with the regulation.” Id. at 1320

(internal quotation marks omitted).

           B. Arbitrary and Capricious Review

       “Even where [an agency’s] construction satisfies Chevron, [the court] must still ensure

that its action is not otherwise arbitrary and capricious.” Nat'l Ass'n of Clean Air Agencies v.

EPA, 489 F.3d 1221, 1228 (D.C. Cir. 2007). The agency action will be upheld if it “has

considered the relevant factors and articulated a ‘rational connection between the facts found and

the choice made.’” Id., quoting Allied Local & Reg'l Mfrs. Caucus v. EPA, 215 F.3d 61, 68

(D.C. Cir. 2000). The review is “[h]ighly deferential” and “presumes the validity of agency

action.” Id., citing AT&T Corp. v. FCC, 349 F.3d 692, 698 (D.C. Cir. 2003). “[The] court is not

to substitute its judgment for that of the agency[,] . . . [but] the agency must examine the relevant

data and articulate a satisfactory explanation for its action[,] including a rational connection

between the facts found and the choice made.” Motor Vehicle Mfrs. Ass'n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 43 (1983) (internal quotation marks omitted).




                                                 17
   III.      ANALYSIS

             A. Chevron Step One

          The issue presented in this case is whether FDA correctly interpreted the 180-day

exclusivity provision in 21 U.S.C. § 355(j)(5)(B)(iv) when it delayed approval of Watson’s

ANDA until the expiration of Mylan’s 180-day exclusivity period. The statute provides that if

an ANDA contains a paragraph IV certification “and is for a drug for which a previous

application has been submitted . . . [containing] such a certification,” approval of the ANDA

must be delayed for 180 days. § 355(j)(5)(B)(iv). Watson challenges FDA’s determination that

because Mylan amended its ANDA after the litigation to include paragraph IV certifications as to

all of the patents applicable to pioglitazone two years before Watson did, Mylan’s application

was a “previous” application requiring the 180-day delay in the approval of Watson’s

application.

          The relevant chronology is as follows:

          7/15/2003: Both Watson and Mylan submitted ANDAs to market generic
          pioglitazone hydrochloride tablets on the first day such applications could be
          submitted. Watson’s ANDA contained paragraph IV certifications for all of the
          applicable patents. Mylan’s ANDA contained paragraph IV certifications for
          only the drug composition/use patents, and contained section viii statements for
          the remaining patents.

          8/18/2003: FDA informed Watson that            it would not accept paragraph IV
          certifications against the use-only patents

          8/27/2003: Watson filed a “telephone amendment” to its ANDA to change its
          paragraph IV certifications to section viii certifications for the use-only patents,
          and reserved its right to reinstate its original certifications with the effective date
          of its original submission of July 15, 2003. Watson did not change its paragraph
          IV certifications to the drug composition/use patents, so there were at least two
          ANDAs (Watson’s and Mylan’s) containing at least two paragraph IV
          certifications received by the FDA on July 15, 2003.




                                                    18
        9/4/2003: FDA informed Watson that its amended ANDA had been deemed
        acceptable for filing and that its filing date would be July 15, 2003, the date of
        Watson’s original ANDA submission.

        9/9/2003: Watson notified Takeda, the patent holder, that it had filed paragraph
        IV certifications to two of Takeda’s patents. Presumably Mylan also informed
        Takeda of its paragraph IV certifications.

        10/17/2003: Takeda filed a patent infringement lawsuit against Watson, Mylan,
        and other ANDA filers in the U.S. District Court for the District of New York for
        infringement of U.S. Patent Nos. 5,965,584 and 6,329,404 – the drug
        composition/use patents.

        12/13/2005: FDA informed Watson that its ANDA had been “tentatively
        approved.”

        3/2010: The patent infringement litigation settled and both Watson and Mylan
        entered agreements providing that they would each receive non-exclusive licenses
        to the drug composition/use and use-only patents effective on August 17, 2012.
        The agreements required both to amend their ANDAs to change their section viii
        statements to the use-only patents to paragraph IV certifications.

        3/22/2010: Mylan amended its ANDA to change its section viii statements to the
        use-only patents to paragraph IV certifications.

        3/7/2012: Watson, in a letter entitled “minor amendment,” amended its ANDA to
        change its section viii statements to the use-only patents to paragraph IV
        certifications.

Based on that record, FDA decided the following:

                FDA does not dispute that Watson is a first-applicant with respect to the
                drug composition claims within the Drug Composition/Use Patents.
                Because Watson’s initial paragraph IV certifications on the remaining
                patent claims and patents were invalid . . . and because Watson so delayed
                in changing its section viii statements to paragraph IV certifications after
                the patent settlement, Watson was not a first application with respect to
                the method-of-use claims in the Drug Composition/Use Patents and the
                Use-only Patents. . . . Mylan . . . filed valid paragraph IV certifications to
                the method-of-use claims in the Drug Composition/Use Patents and the
                Use-only Patents . . . approximately two years before Watson did.

A.R. at 14. FDA went on to conclude that Mylan was the first applicant “with a paragraph IV

certification for all of the patents.” Id.


                                                 19
       Watson objects to FDA’s first line of reasoning – that Watson was not the first because

its initial application was invalid. It argues that it was in fact the first to “submit” an application

with paragraph IV certifications for all of the patents, pointing to its original July 15, 2003

ANDA. A.R. at 47. There is not enough information in the record for the Court to accept FDA’s

representations in its briefs about why Watson’s initial paragraph IV certifications were

“invalid.” 8 The administrative record reveals little more than the fact that there was a telephone

conference and Watson amended its application, A.R. at 37–39, after which FDA accepted it and

deemed it filed as of the original filing date. But the record also does not support Watson’s

assertion that it filed paragraph IV certifications for all of the patents first. Once it substituted

the section viii statements, A.R. at 38, FDA accepted the revised application and deemed that

application as having been filed on July 15, 2003, A.R. at 33. The original application was

essentially nullified – not because it was inherently invalid, but because it was retroactively

amended. So the Court is not inclined to find as a matter of law that Watson filed before Mylan,

but the characterization in the chart contained on page 10 of the FDA decision letter stating that


8       The Court notes that FDA does provide authority for the proposition that paragraph IV
certifications and section viii statements are mutually exclusive. See, e.g., Purepac, 354 F.3d at
880. That potentially explains why FDA deemed Watson’s initial paragraph IV certifications
“invalid” for purposes of ultimate approval of its ANDA, but it does not explain why FDA
deemed those certifications “invalid” for purposes of granting exclusivity. In other words, FDA
does not explain why it reads a “previous application . . . [containing] a paragraph IV
certification” as a “previous application . . . [containing] a valid paragraph IV certification.”
Watson argues that to be eligible for exclusivity, a first-filed ANDA need only include “a
certification” and the results of the required bioequivalence studies. See Pl.’s Mem. at 18–19,
citing 21 C.F.R. § 314.107(c)(2). It argues that its first-filed application was eligible because it
contained both. Id. Watson goes on to cite a passage in the Federal Register that, while it
relates to bioequivalence studies and not paragraph IV certifications, appears to support FDA’s
point: “In order for an ANDA to be considered substantially complete for purposes of
exclusivity, the bioequivalence studies submitted in the ANDA at the time it is initially
submitted must, upon review by the agency, meet the appropriate standards for approval. If the
applicant must conduct a new bioequivalence study to obtain approval of the ANDA, the
application will not be considered to be substantially complete and the applicant will not be
eligible for exclusivity.” 64 Fed. Reg. 42,873, 42, 875 (Aug. 6, 1999).
                                                  20
Watson’s “valid certification” was filed on August 27, 2003 – i.e., suggesting that Watson filed

after Mylan – is not supported by the record either. As the decision letter to Watson stated on

page 9:

                 FDA determined that the ANDA as amended was sufficiently complete to
                 begin substantive review, and, consistent with FDA practice, sent an
                 acknowledgement letter on September 9, 2003, indicating the application
                 as amended was received as of July 15, 2003 (the initial submission date).

A.R. at 9.

          What we have then is a tie: both Watson and Mylan filed ANDAs with some paragraph

IV certifications – the ones for the drug composition/use patents, but not the use-only patents –

on July 13, 2003. 9

          So the question at Chevron step one is: does the FDCA exclusivity provision permit the

FDA to use the date that Mylan changed its section viii statements for the use-only patents to

paragraph IV certifications as the critical date instead? Is that when the exclusivity attached?

The statute says that an ANDA applicant has to wait 180 days for approval “[i]f the application

contains a certification described in subclause (IV) of paragraph (2)(A)(vii) and is for a drug for

which a previous application has been submitted . . . [containing] such a certification . . . .”

Thus, on its face, the statute refers to the date an application is submitted containing a

certification, not the date of any later, additional certifications, and not the date of the

amendment of an application (much less the “minor amendment” of an application) to substitute

a paragraph IV certification for a section viii statement. 10



9       FDA does not dispute that Watson was a first-filer as to the drug composition/use patents.
See A.R. at 14.
10      The parties have pointed the Court to passages in the Federal Register related to the
amendment of paragraph IV certifications, but none addresses whether an application amended
to substitute paragraph IV certifications (i.e., our use would infringe, but we have a license) for
section viii statements (the method of use patent at issue does not claim the use for which we are
                                                  21
        And did FDA properly interpret the statute as commanding it to award exclusivity to the

first applicant with paragraph IV certifications for “all” of the patents? Again, such a decision is

not mandated by the language of the provision: an applicant must wait 180 days for approval “if

the application contains a certification described in subclause (IV) of paragraph (2)(A)(vii) and

is for a drug for which a previous application has been submitted . . . [containing] such a

certification . . . .” So the statute is written in terms of the drug, not one or all of the patents. It

does not say that an applicant has to wait 180 days if the application involves any patent that

claims the drug for which a previous certification has been submitted; it says if the application

contains a paragraph IV certification and is for a drug for which a previous application has been

submitted. 11 Nor does it say: “and is for a drug for which a previous application has been

submitted containing paragraph IV certifications for all of the patents.”




seeking approval) may be deemed a “previous” application for purposes of exclusivity. Only
one relates to the effect of such an amendment on the filing date of an ANDA: an amendment to
a certification “cannot be read to suggest that the application will be considered to have
contained only the changed certification retroactively to the date that the original certification
was filed.” 68 Fed. Reg. 36,676, 36,689 (June 18, 2003) (stating that the reason for prohibiting
backdating in such a situation is that an “applicant could amend certifications to other patents
and make them paragraph IV certifications. Among other difficulties, an applicant could then
argue that, by virtue of relating back, such a paragraph IV certification was the ‘first’ application
with a paragraph IV certification, potentially entitling the applicant to exclusivity under section
505(j)(5)(B)(iv) of the act.”). The other Federal Register cites are not on point. See, e.g., 59
Fed. Reg. at 50,350 (stating that FDA does not permit an applicant to notify a patent holder of its
filing of a paragraph IV certification until FDA deems its application sufficiently complete for
substantive review).
11       The court in Apotex found the statute to be silent and thus ambiguous as to whether more
than one exclusivity period could arise for any given drug, but it ultimately upheld FDA’s patent-
based approach as reasonable and not arbitrary and capricious. Apotex, 414 F. Supp. 2d at 68–
69. But see Torpharm, Inc. v. FDA, No. 03-2401, 2004 WL 64064 (D.D.C. Jan. 8, 2004)
(finding that FDA’s award of shared exclusivity to multiple applicants was contrary to the plain
language of the statute and finding that Torpharm was entitled to sole exclusivity). The 2003
amendments under the MMA have since foreclosed FDA from granting exclusivity on a patent-
by-patent basis, as they only permit one period of exclusivity to be awarded per drug to the first-
filer as to any patent covered by the drug. See A.R. at 7 n.19.
                                                  22
        But the provision cannot be interpreted standing alone. It does not say: if the application

contains a paragraph IV certification . . . and is for a drug for which a previous application has

been submitted containing a paragraph IV certification. It says: “if the application contains a

certification described in subclause (IV) of paragraph (2)(A)(vii) . . .” and the previous

application contains “such a certification.” So what is “a certification described in subclause

(IV) of paragraph (2)(A)(vii)?” Does looking at that provision resolve the question?

        Unfortunately, no. Paragraph (2)(A) states that “an abbreviated application for a new

drug shall contain” the items enumerated in eight subparagraphs. The seventh, subparagraph

(2)(A)(vii), requires “a certification . . . with respect to each patent which claims the listed

drug . . . or which claims a use for such listed drug for which the applicant is seeking

approval . . . :

                   (I)     that such patent information has not been filed,
                   (II)    that such patent has expired,
                   (III)   of the date on which such patent will expire, or
                   (IV)    that such patent is invalid or will not be infringed by the
                           manufacture, use, or sale of the new drug for which the application
                           is submitted . . . .

So, while it is clear that under paragraph (2)(A)(vii), before an application can be approved, there

must be “a” certification” for “each patent which claims the listed drug,” referring to that

section does not shed any light on the decision this Court has to make: whether FDA can fairly

say that Mylan was a “previous application . . . [containing] such a certification” – that is, a

paragraph (2)(A)(vii)(IV) certification – when both Mylan and Watson submitted applications

containing at least “a” certification on the same date in July of 2003. Thus, FDA’s interpretation

of the exclusivity provision in this case is not compelled by the statute. In other words, it is not

Chevron I for the agency, as FDA contends.




                                                   23
       The few authorities FDA provides in support of its position that Congress mandated its

action in this case are not dispositive. FDA cites two authorities for the proposition that “[i]f one

ANDA applicant is the first applicant to all of the listed patents, that applicant will have sole

exclusivity.” FDA’s Opp. at 9. First, it cites its own decision letter to Watson. See id.

Although the Watson decision letter sets out that principle on page 8, that letter merely cites two

other decision letters issued by FDA. See A.R. at 8. 12 Second, it cites a footnote in another

pharmaceutical case decided in this court, Mylan Pharms., Inc. v. Sebelius, 856 F. Supp. 2d 196

(D.D.C. 2012), which states that “when more than one patent relates to the brand drug, as

became the case [in the action before the court], the FDA awards exclusivity to the company that

is the first filer as to all of the patents referencing the brand drug.” Id. at 204 n.12. This

statement is simply the court’s observation of what does happen in such a case; the court in

Mylan was not deciding what the statute says should happen in such a case.

       FDA’s reliance upon Mylan is further misplaced because the situation in that case is

different from the situation presented here. In Mylan, four generic manufacturers filed paragraph

IV certifications with respect to the only applicable patent for the brand name drug on the same

date, and their ANDAs were all tentatively approved by FDA. Id. at 202. Their certifications

prompted the brand manufacturer to file a patent infringement action against them. Only after

that litigation was resolved did the manufacturer obtain a second patent. On the first date that

applicants could file certifications challenging the second patent, only one of the original four

companies, Teva, and a company that had not been one of the original first filers, Watson, filed

ANDAs with paragraph IV certifications to that patent. Mylan, also one of the original first

filers, waited another three years to do so.          In the meantime, Teva acquired the brand


12    One of the decision letters cited is FDA’s decision letter issued to Mylan in Mylan
Pharm. v. Sebelius, 856 F. Supp. 2d 196 (D.D.C. 2012).
                                                 24
manufacturer. So, the issue the court had to resolve was whether Teva’s corporate (and non-

adversarial) relationship with the brand manufacturer rendered its 180-day exclusivity period

invalid. 13 But for the purposes of the preliminary injunction motion before it, the court did not

have to resolve the issue posed in this case. It simply noted that it “proceeds on the basis that

Teva USA was the only first filer as to both . . . patents and, therefore, was the only ANDA

applicant entitled to 180-day exclusivity.” Id. at 206–07. So, Mylan produced no holding that is

authoritative here because the question was not presented.        Moreover, there is something

different in nature between a situation where a second patent comes along that was not originally

involved and the situation we have here: where the list of patents remained constant from the

beginning, and all of the parties put the manufacturer on notice from the start of their positions

with respect to all of them.

       Defendant Mylan cites several other cases for the proposition that 180-day exclusivity

must be awarded solely to Mylan in this case. [Dkt. # 43]. However, those cases are also

distinguishable. The analysis in the Apotex decision comes closest to the situation presented in

this case, because it dealt with the same provision at issue here. But the question there was

whether more than one exclusivity period could arise in connection with a given drug. The court

found the statute to be silent on the issue, and it found FDA’s position – that a separate 180-day

exclusivity period arises in connection with each patent that is listed for the drug, for whichever

ANDA applicant was first to file the paragraph IV certification to that patent – to be




13       The court also addressed whether Teva had abandoned its ANDA, an issue not presented
in this case. See Mylan, 856 F. Supp. 2d at 213–15.
                                                25
reasonable. 14 So the Apotex court did not reach the issue of whether FDA may deny exclusivity

to an applicant in the circumstances presented in this case.

       Other cases cited by Mylan deal with provisions of the statute that are only tangentially

related to the 180-day exclusivity provision. The court in Torpharm, Inc. v. Thompson, 260 F.

Supp. 2d 69 (D.D.C. 2003), for example, addressed FDA’s interpretation of the notice provision

in 355(j)(2)(B), specifically, the effect of an applicant’s failure to simultaneously file its

certification and its notice to the patent holder as required by the statute. Id. at 81. In that case,

FDA established priority for the filing of the certifications based upon when the filer notified the

patent holder. Id. (finding the statute silent on the issue in part because the notice provision

“does not purport to govern when a paragraph IV amendment actually becomes effective for

exclusivity purposes” and thus finding FDA’s interpretation permissible). Here, even if Mylan

filed its notification of the amended ANDA containing the new paragraph IV certifications

before Watson did, FDA does not seem to be basing its decision on that circumstance. Instead, it

is working from the date of the filing of the amendments. A.R. at 10–11. The court in Purepac

also assessed FDA’s interpretation of the effect of failure to follow the simultaneity requirement.

Purepac, 354 F. 3d at 888–89 (concluding that statute was silent on the effect of an applicant’s

failure to simultaneously file and notify the patent holder), citing Torpharm, 260 F. Supp. 2d at

80. 15 The court in Teva Pharms. USA, Inc. v. Sebelius, 595 F.3d 1303 (D.C. Cir. 2010),




14      Interestingly, in that case, FDA did not claim, as here, that the clock does not start ticking
until someone has filed certifications for all of the patents.
15      The Purepac court also addressed several other issues under the arbitrary and capricious
standard: (1) FDA’s decision to change the use code for a patent in the Orange Book and thus
reject Purepac’s section viii statement as to that patent; (2) FDA’s decision to delist a patent
upon finding that no applicant was eligible for exclusivity for that patent; and (3) FDA’s decision
to deny an applicant an equitable exception the mutual exclusivity rule for section viii statements
and paragraph IV certifications, where the applicant had filed both a statement and certification
                                                 26
addressed FDA’s interpretation of a wholly different provision not present in the pre-MMA

version of the statute – the “failure to market” forfeiture provision. Id. at 1317–18 (finding that

FDA’s interpretation of that provision as permitting a brand manufacturer to unilaterally trigger

the forfeiture of an applicant’s exclusivity period by delisting a patent failed Chevron I because it

ran contrary to the incentive structure of the FDCA, which the MMA did not purport to change).

       So, the Court finds that neither the statute nor the case law compels the FDA’s decision

in this case. But is the FDA’s decision precluded by the statute? In other words, does Watson

prevail at the Chevron step one stage?

       The Court concludes that FDA’s decision is contrary to the plain language of the statute.

As noted above, the FDCA says if the application contains a paragraph IV certification and it is

for a drug for which there was a previous application containing such a certification, approval

of the application is delayed for 180 days. Here, when Watson filed its application containing a

paragraph IV certification for the drug composition/use patents on July 15, 2003, there was no

previous application containing such a certification on file for that drug. Mylan’s application

came in on the same day.

       FDA regulations are also consistent with Watson’s position. 21 C.F.R. § 314.107(c)(1)

provides that approval is barred for 180 days:

               If an abbreviated new drug application contains a certification that a
               relevant patent is invalid, unenforceable, or will not be infringed and the
               application is for a generic copy of the same listed drug for which one or
               more substantially complete abbreviated new drug applications were
               previously submitted containing a certification that the same patent was
               invalid, unenforceable, or would not be infringed . . . .




for the same patent. The court found the first decision arbitrary and capricious, and the second
and third decisions not arbitrary and capricious.
                                                 27
       More important, the meaning of the provision becomes clear in light of the entire

statutory scheme and the purpose that the exclusivity provision is intended to serve. The cases

that FDA and Mylan cite explain that the purpose of the paragraph IV certification is to put the

patent holder on notice that its patent is about to be infringed by a generic manufacturer: the

statute requires that the ANDA applicant notify the patent holder and then notify FDA that the

notice was actually received. But the purpose of the 180-day exclusivity period is to reward the

generic manufacturer who does this and thereby takes on the risk of being sued, and of being

forced to participate in expensive patent litigation to earn the right to market the generic drug. In

other words, to provide some incentive for manufacturers to take on the patent holders for the

benefit of consumers, they get a pot at the end of the rainbow. The case law is clear and

consistent about this. See e.g., Teva Pharms. , 595 F. 3d at 1304, citing Mova Pharm. Corp. v.

Shalala, 140 F. 3d 1060, 1063–65 (D.C. Cir. 1998) (generic drug manufacturers earn the six

month period of exclusivity “for successfully taking the risks and bearing the costs of showing

the invalidity or inefficacy of a patent that a brand-name drug maker has said blocks competing

products”), id. at 1305 (“In order . . . to compensate [generic] manufacturers for research and

development costs as well as the risk of litigation from patent holders, . . . the statute provides

that the first company to file an ANDA containing a paragraph IV certification earns an

‘exclusivity’ period . . . . This promise of initial marketing exclusivity is thus intended to

increase competition by expediting the availability of generic equivalents.”) (internal citations

and quotation marks omitted). FDA was equally clear on this point in its decision letter to

Watson, as well as in other decision letters it has issued in the past. See A.R. at 7 (stating that

the “narrow purpose of the 180-day exclusivity provision [is] to reward the first ANDA applicant

to challenge a listed patent” and rejecting the application of patent-based exclusivity in a



                                                 28
situation where the result “would be so at odds with . . . the narrow purpose of the 180-day

exclusivity provision . . . as to defeat the purpose of the generic drug provisions”).

       Thus, looking at the plain terms of the statutory provision, and considering the purpose of

the provision within the overall statutory scheme, see Mova Pharm. Corp., 140 F.3d at 1067

(“[I]n expounding a statute, we must not be guided by a single sentence or member of a sentence,

but look to the provisions of the whole law, and to its object and policy.”) (internal quotation

marks omitted), it is the Court’s view that FDA’s interpretation of the exclusivity provision to

deny shared exclusivity to Watson is inconsistent with the FDCA. 16

           B. Chevron Step Two

       But the Court is aware of the prior decisions of this Court finding this and other

provisions of the FDCA to be ambiguous.            See, e.g., Apotex, 414 F. Supp. 2d at 68–69

(concluding that “the provision lends itself to multiple interpretations, and hence is ambiguous

under Chevron step one”). And certainly FDA and the parties have grappled with its terms,

settling on different interpretations in different situations. See, e.g., id. at 72–76 (FDA reading

exclusivity provision to award an exclusivity period for each patent covered by a drug, but

creating a shared exclusivity exception to that rule in exclusivity “standoff” situations); Mylan,



16      Although not a factor to be considered as part of the Chevron step one inquiry, it is worth
noting that if the Court had to apply the current version of the statute, as it has been amended to
more clearly implement Congress’s intent, there is no question that Watson would enjoy shared
exclusivity with Mylan. See A.R. at 7 n.19 (noting that the 2003 amendments under the MMA
foreclosed granting exclusivity on a patent-by-patent basis, permitting only one period of
exclusivity to be awarded per drug to the first-filer as to any patent covered by the drug). Here,
FDA admits that Watson was a first-filer of paragraph IV certifications to the drug
composition/use patents, and no other applicant filed a paragraph IV certification to any other
patent before Watson filed its original ANDA. Only Mylan (and one or more other ANDA
filers) filed applications containing certifications to the same patents on the same day.
Moreover, FDA does not argue that Watson’s original paragraph IV certifications to the drug
composition/use patents were invalid, so it would have no basis for denying Watson shared
exclusivity to market the drug.
                                                 29
856 F.Supp.2d at 207–09 (Mylan reading exclusivity provision to impose a requirement that

ANDA filer and NDA holder must be adverse throughout the exclusivity period, in a situation

where ANDA filer and NDA holder subsequently came under control of the same parent

company).     So the Court finds it prudent to go on to consider step two of the Chevron

framework.

        Assuming that the exclusivity provision is silent or ambiguous as to the issue presented

in this case, the question under step two becomes whether FDA’s interpretation is a reasonable

one. FDA’s interpretation could be viewed as unreasonable in light of the purpose of exclusivity

provision and of the statute generally. However, at this stage of the Chevron analysis, the Court

must accord deference to FDA’s interpretation of the statute, see, e.g., Apotex, 414 F. Supp. 2d at

72, 17 and it is difficult to conclude that the agency’s reading of the statute to award exclusivity to

the first-filer to file certifications as to all the patents is not based on a permissible reading of the

statute, see Chevron, 467 U.S. at 843.

        Watson argues that even if FDA’s position in this case is based on a reasonable

construction of the statute, that position need not be accorded deference because “it is . . .

inconsistent with [FDA’s] prior practice.” Pl.’s Reply Mem. of P. and A. in Further Support of

Mot. for Summ. J., and Pl.’s Opp. to FDA’s Mot. to Dismiss, or, in the alternative, for Summ. J.

(“Pl.’s Reply”) [Dkt. # 41] at 3. It claims that FDA’s prior practice commands against granting

sole exclusivity to Mylan because that practice “makes clear that Watson’s ANDA was

substantially complete when filed, that Watson was a First Filer to the [Use-only] Patents and


17      This is not a situation, though, in which the Court must give heightened deference to an
agency’s decision because that decision falls within the agency’s particular scientific expertise.
See, e.g., A.L. Pharma, Inc. v. Shalala, 62 F.3d 1484, 1490 (D.C. Cir. 1995) (“[C]ourts give a
high level of deference to an agency’s evaluations of scientific data within its area of
expertise.”).

                                                   30
that if Watson is not entitled to exclusivity for the [Use-only] Patents, it can only be because this

exclusivity was rendered unavailable to any party when Watson amended its ANDA.” Id.

       It is true that “[a]n agency interpretation of a relevant provision which conflicts with the

agency’s earlier interpretation is ‘entitled to considerably less deference’ than a consistently held

agency view.’” INS v. Cardoza-Fonseca, 480 U.S. 421, 446 n.30 (1987); see also King Broad.

Co. v. FCC, 860 F.2d 465, 470 (D.C. Cir. 1988) (holding that “result reached by the agency is

impermissible under the second prong of Chevron . . . [because it] is inconsistent with its prior

analysis in similar situations without any acknowledgement of the fact, or cogent explanation as

to why”). In King, the FCC had determined that the plaintiff’s proposed radio program did not

qualify for a statutory exemption, but it had failed to apply a two-part test that it previously

found necessary to making such a determination. Id. at 470–71. Because the FCC did not offer

a reasonable explanation for departing from its previous practice and not applying the test, the

Court found its determination as to the plaintiff unreasonable under Chevron step two. Id.

Watson argues that FDA acted inconsistently because it failed to apply two rules that it has

applied to amended applications similar to Watson’s in the past: (1) a rule against backdating the

filing date of an amended application that was only deemed sufficiently complete upon

amendment and (2) a rule against rolling exclusivity from a first filer to a subsequent filer.

       Watson first argues that it is FDA’s practice to “refus[e] to grant an ANDA applicant an

‘acceptable for filing’ date earlier than the date on which its amendment rendered the ANDA

substantially complete.” Pl.’s Mem. at 20. It therefore concludes that FDA acted inconsistently

with that practice when it deemed Watson’s amended ANDA to have been filed on the original

submission date of July 15, 2003. It argues that if FDA did not deem Watson’s application

sufficiently complete until August 23, 2003, it was improper to give Watson’s amended ANDA



                                                 31
an effective filing date any earlier than August 23. At first blush, this argument does not seem to

advance Watson’s position: there were reasons why deeming the amended ANDA to have been

filed on the date of the original submission may have been in Watson’s interest at the time. But

at this juncture, Watson maintains that should never have happened. In short, Watson’s position

now is that its original ANDA – which contained the paragraph IV certifications as to all of the

patents – was the application that was filed on July15, 2003. That would put it first in line for

FDA’s paragraph-IV-certifications-for-all-patents exclusivity period.

       But FDA responds that it has no such practice. In fact, it represents that it backdates

applications that were only deemed sufficiently complete upon amendment “all the time.” Sept.

14, 2012 Tr. at 51 (“[FDA] does this all the time. It does a preliminary review of an ANDA to

decide if it’s sufficient. If there are deficiencies, they make calls, and they are corrected. And it

deems [the corrected ANDA] substantially complete as of the day it was submitted.”); see also

FDA’s Opp. at 18 (“[W]hen such corrections are made to errors in applications before the filing

decision is made, FDA will deem the application to be received, as amended, as of the date it

was originally filed, which can give the applicant the benefit of an original filing date.”), citing

21 C.F.R. § 314.101. 18    So, FDA argues that its decision to backdate Watson’s amended



18      The Court notes that neither party has pointed to sufficient evidence in the record to
allow the Court to find whether such a practice does or does not exist. Both parties cite to 21
C.F.R. § 314.101 for support, but that regulation, which addresses the filing and receipt of
ANDAs, does not contain any provisions governing the date of corrected or amended
applications. It does suggest, though, that there is a difference between the date when an ANDA
is “received,” which triggers an FDA review to determine whether it “may be filed,” and when it
is “filed,” which “means that FDA has made a threshold determination that the application is
sufficiently complete to permit a substantive review.” 21 C.F.R. § 314.101(a)(1). Under the
terms of that regulation, then, Watson’s ANDA was “filed” only after it had been amended. But
the FDCA does not use the word “received” or “filed” when it discusses the previous application
that will delay a subsequent application’s approval. Section 355(j)(5)(B)(iv) requires that an
ANDA applicant must wait 180 days for approval if a previous application containing paragraph
IV certification has been “submitted.” 21 U.S.C. § 355(j)(5)(B)(iv). But at most, this lack of
                                                 32
application – the first Watson application that was actually accepted for filing -- was in fact

consistent with its regulations and past practices, and indeed, it was that action that supplied the

grounds for an award of shared exclusivity with Mylan.

        Watson goes on to argue that FDA’s decision to grant Mylan exclusivity in this case

contradicts a second FDA policy against permitting exclusivity to “roll” from one applicant to

the next. 19 Watson submits that “[b]ecause Watson’s ANDA was both substantially complete

when filed and contained Paragraph IV certifications to the [Use-only Patents], Watson was

eligible for exclusivity with respect to the Use-only Patents” as a “first filer.” Pl.’s Mem. at 26.

So, according to Watson, when it withdrew its paragraph IV certifications on August 23, 2003, it

destroyed eligibility for itself and all other applicants, because “only First Filers can be eligible

for 180-day exclusivity.” Id. at 27–28 (arguing that “FDA cannot justify why it has decided that

the facts of this situation differ so that somehow the exclusivity with respect to the [Use-only

Patents] has rolled to another applicant”). This time, FDA does not dispute that the policy



clarity would lend more support to the argument that the provision is ambiguous, and that this
Court must defer to the agency’s interpretation that a previously submitted application is one that
was accepted for filing.
        Watson also cites 21 C.F.R. § 314.94, which speaks to the content and form of an
abbreviated application. In particular, it points to subsection (a)(12)(viii)(A), which it claims is
“directed to the amendment of certifications in cases like this where an original paragraph IV
certification was later found to be incorrect.”                     Pl.’s Reply at 4.          However,
§ 314.94(a)(12)(viii)(A) governs only a situation where an applicant is required to change its
paragraph IV certifications to paragraph III certifications after a court has found that the
applicant has infringed the patent holder’s patents. Upon the applicant making such a change,
“the application will no longer be considered to be one containing a [paragraph IV]
certification.” That is not the situation presented here.
19      The rule against rolling exclusivity is described in the Federal Register: “[O]nly the
applicant submitting the first substantially complete ANDA for a listed drug with a paragraph IV
certification to [a] patent . . . for the listed drug . . .would be eligible for exclusivity.” So, “if the
first applicant subsequently withdraws its application or changes or withdraws its paragraph IV
certification, either voluntarily or as a result of a settlement or defeat in patent litigation, no
ANDA applicant will be eligible for 180-day exclusivity.” 59 Fed. Reg. at 50, 350; see also 21
C.F.R. § 314.07(c).
                                                   33
against rolling exclusivity exists. But it argues that the policy does not apply in this case. FDA’s

Opp. at 20–21 (arguing that Watson was never a “first filer” eligible for exclusivity as to the use-

only patents because its invalid paragraph IV certifications rendered its original application

insufficient for filing). And it is true that FDA regulations confer the authority on the agency to

review an application and deem it to be acceptable before it can ever be acknowledged as filed.

       In any event, in this case, on these specific facts, as will be discussed below, the Court

finds that FDA’s decision to deny shared exclusivity to Watson is arbitrary and capricious.       It

thus finds that the proper remedy is awarding Watson shared exclusivity, and it need not reach

the question of whether FDA should have applied the rolling exclusivity rule and denied

exclusivity to everyone.

       So, while the Court is troubled by the fairness of the agency action in this particular case,

given the deference that must be accorded the agency at step two of the Chevron analysis, the

Court finds that FDA’s reading of the exclusivity provision is reasonable, and that the points

made by Watson in its Chevron argument support the Court’s finding that the agency decision

was arbitrary and capricious in this case. 20

           C. Arbitrary and Capricious Review

       Watson asserts that, even if FDA’s denial of shared exclusivity to Watson survives

Chevron, it nevertheless must be overturned in this case because it is arbitrary and capricious.

Pl.’s Mem. at 23–26. The Court agrees. The FDA’s decision is contrary to the purpose

underlying the exclusivity provision and not supported by the proffered explanations.


20     To the extent that Watson further argues that FDA’s decision is unreasonable because it
produced results contrary to the purpose of the statute, the Court will address that argument in its
analysis under the arbitrary and capricious standard. See, e.g., Gen. Instrument Corp. v. FCC,
213 F.3d 724, 732 (D.C. Cir. 2000) ("[W]e have recognized that an arbitrary and capricious
claim and a Chevron step two argument overlap . . . ."); see also Nat'l Treasury Employees
Union v. Chertoff, 385 F. Supp. 2d 1 (D.D.C. 2005).
                                                34
       The Court finds that FDA’s decision to deny Watson shared exclusivity in this

circumstance is arbitrary and capricious because it produces absurd results that are contrary to

the purpose of the Hatch-Waxman Amendments and the exclusivity provision in particular. 21

See Teva Pharms., USA, Inc. v. FDA, 182 F.3d 1003, 1011 (D.C. Cir. 1993) (“FDA must

interpret the [FDCA] to avoid absurd results and further congressional intent.”). In Teva, the

court found that FDA’s narrow interpretation of the court-decision trigger for 180-day

exclusivity was arbitrary and capricious because it meant that the generic drug was “not available

for a number of months despite the fact that appellants both stood ready to market them” – an

absurd result that contradicted the Act’s purpose of expediting the approval of generic drugs. Id.

Here, although denial of shared exclusivity to Watson does not mean that generic pioglitazone

cannot be marketed at all – Mylan and presumably Ranbaxy can still market the drug 22 – the

result is still at odds with the sole purpose of the exclusivity provision: to encourage generic

applicants to file paragraph IV certifications and incur the risks and costs of patent litigation

necessary to clear the patents out of the way and facilitate the entry of generics into the market.

See A.R. at 7 (stating that the “narrow purpose of the 180-day exclusivity provision [is] to

reward the first ANDA applicant to challenge a listed patent, and the broader purpose of the


21       Watson further argues that “[b]ecause FDA’s own regulations and past practice show
that, if Watson is not entitled to exclusivity for the [Use-only Patents], no ANDA holder is
entitled to such exclusivity, FDA’s decision to deny Watson approval of its ANDA must be
reversed as arbitrary and capricious.” Pl.’s Mem. at 29. But, because the Court finds granting
shared exclusivity to Watson is the appropriate remedy in this case, its analysis focuses on
FDA’s decision to deny shared exclusivity.
22       Watson argues in its summary judgment motion that granting exclusivity to Mylan does
in fact lead to the absurd result of keeping generics off the market because Mylan agreed to delay
market entry as part of its settlement with Takeda. Pl.’s Reply at 9. But, at the motions hearing,
Watson conceded that “the general understanding is that [Watson’s and Mylan’s agreements]
were the same or roughly the same at least in substance.” Sept. 14, 2012 Tr. at 17. So,
presumably Watson agreed to delay entry into the market, as well. But, at this stage in the
process, it appears that any delay in market entry agreed to has since expired. See Aug. 21, 2012
Tr. at 17 (Mylan’s counsel stating that Mylan had already begun selling the drug).
                                                35
[Hatch-Waxman Act is] to encourage generic competition.”).             As Watson argues, FDA’s

decision produces the absurd result of denying Watson the reward it earned just as Mylan did: by

instigating and participating in costly patent litigation against Takeda. Pl.’s Reply at 9.

       It is true that after the litigation was resolved, Mylan amended its original ANDA to

include the relevant paragraph IV certifications first, but that was nothing more than a formality.

Filing those certifications did not put the patent holder on notice of anything it did not already

know. Moreover, it did not require Mylan to risk patent litigation. The litigation was over. It is

thus unfair and inconsistent with the sole purpose of the 180-day exclusivity provision to reward

Mylan with sole exclusivity simply because it accomplished the final housekeeping task of

amending its ANDA to reflect the results of the litigation first. Such a decision elevates form

over substance.

       It is important to note that the need to substitute paragraph IV certifications for the

section viii statements in the Watson and Mylan ANDAs was not required by any decision of the

court in the patent case, and it was not prompted because of any deficiency identified in the

ANDAs by the FDA. It was simply a term of the settlement of the Takeda litigation negotiated

by private parties. See Watson Minor Amendment at 3. The lawsuit alleged patent infringement

as to the drug composition/use patents that were the subject of Watson’s and Mylan’s

simultaneously filed July 2003 paragraph IV certifications. See Takeda Am. Compl. [Dkt. # 46-

3]; see also A.R. at 12. Had the parties resolved the case with licenses for those patents alone,

there would be no question that Watson and Mylan would be entitled to shared exclusivity.

       Furthermore, the decision is particularly arbitrary and capricious in this instance because

it was Watson, and not Mylan, that intended to file an application with paragraph IV

certifications as to all of the patents from the start. And it was FDA, and not Watson, that was



                                                 36
the moving force behind the amendment of the July 15, 2003 ANDA to substitute section viii

statements for the use-only patents. Indeed, in the very document that effectuated the change –

the telephone amendment – Watson specifically reserved its rights and sought to preserve its

position. “Watson does not agree with the Agency’s position . . . . However, solely to facilitate

ANDA review, and without prejudice to Watson’s position, Watson is amending . . . .” A.R. at

38. Watson reiterated: “Watson makes this amendment without prejudice to its right to reinstate

its original Paragraph IV Certifications with the effective date of original submission on July 15,

2003, should a court or the Agency hold in the future that Paragraph IV Certifications should

have been made and/or maintained.” Id.

       The FDA said nothing in response. And in the years leading up to its decision, FDA did

nothing to lead Watson or any other party to believe that it would not grant shared exclusivity.

As recently as July 6, 2010, FDA indicated to Watson that its ANDA “should be on track for full

approval come August.” Brannan Decl. ¶ 20.

       In its decision letter, FDA took the position that Watson derived some benefit from

FDA’s insistence that the paragraph IV certifications be removed from the original ANDA:

               You fail to acknowledge the critical impact of Watson’s amendment to its
               application that removed the paragraph IV certifications and substituted
               section viii statements regarding the method-of-use claims in the Drug
               Composition/Use Patents and the Use-only Patents. As a result of this
               amendment, Watson gained the benefits that flow from filing a section viii
               statement to a patent rather than a[] paragraph IV certification, including,
               among other things, not having to provide the detailed notice required for
               paragraph IV certifications to the NDA sponsor and patent holder
               describing why these patents were invalid and not infringed, and not
               running the attendant risk of a 30-month stay of approval of its ANDA
               while validity and infringement was litigated. These are not small
               benefits. . . . Watson gained the benefit of its section viii statements, and
               cannot now seek to essentially gain the benefit of 180-day exclusivity . . . .




                                                37
A.R. at 11–12. But the notion that a generic manufacturer faces fewer risks and delays when it

files section viii statements as a general matter is a completely irrelevant point in this case.

Because Watson did file paragraph IV certifications with respect to two patents, it did have to

file the detailed notice to the NDA sponsor and patent holder, and it did run the risk of a stay of

approval while the costly litigation ensued. So that cannot be a reason for denying Watson

exclusivity. And the fact that Watson bowed to FDA’s request that it file section viii statements

at the outset cannot be the reason for granting exclusivity to Mylan instead, since Mylan filed

section viii statements for the exact same patents and received the very same “not small benefits”

that the FDA saw fit to highlight in its decision.

        Further, FDA fails to provide an adequate explanation for why it did not apply shared

exclusivity in this particular situation. See Pl.’s Reply at 9–10. FDA’s stated rationale for

applying shared exclusivity in mutually-blocking situations – to avoid a result that is “so at odds

with both the narrow purpose of the 180-day exclusivity provision to reward the first ANDA

applicant to challenge a listed patent, and the broader purpose of the [Hatch-Waxman Act] to

encourage generic competition, as to defeat the purpose of the generic drug provisions,” see A.R.

at 7 – certainly applies in this case. 23



23       FDA states that it did not award shared exclusivity in this case because shared exclusivity
is reserved for “mutually blocking” situations, and it was not presented with such a situation
here. FDA describes a “mutually blocking” situation as a situation where “two or more
applicants are each eligible for exclusivity based upon paragraph IV certifications to different
listed patents, and each is blocked by previous paragraph IV certifications on another patent to
which it was not first to certify.” A.R. at 7–8. From this, FDA concludes that Watson’s case “is
not . . . a situation in which shared exclusivity applies [because] Mylan and one or more other
ANDA applicants block Watson [as to the use-only patents] but Watson does not block Mylan
and the one or more other applicants [as to the drug composition/use patents].” A.R. at 14.
         Watson asserts that this is the sort of blocking situation for which shared exclusivity is
the remedy because as things stand, Watson is being blocked by the FDA’s decision to give
Mylan exclusivity for the use-only patents. It further asserts that FDA provides “no case law, no
statute and no regulatory support for its position that shared exclusivity can only exist in a
                                                 38
       Finally, FDA’s decision to delay Watson’s approval cannot be deemed rational when

viewed in the context of parties’ understanding all along that Mylan and Watson would share

exclusivity. 24 See, e.g., Brannan Decl. ¶ 20 (stating that “as recently as July 6, 2012, FDA

indicated that Watson’s ANDA ‘should be on track for full approval come August”). Watson

filed suit when it learned that its ANDA might not be approved by the time that Mylan was

scheduled to launch, and it initially sought to block the FDA’s ability to approve Mylan first.

But those claims fell by the wayside once Mylan’s ANDA was approved. Thereafter, at the

status conference before the Court on August 21, 2012, everyone seemed clear that shared

exclusivity was what was left at stake. Mylan’s counsel began expressing her point of view

before she ever took to the lectern. Aug. 21, 2012 Tr. at 15 (“The Court: I was very interested in

the vigorous shaking of heads going on at the defense table when plaintiff said the [Mylan]

approval letter issued on Friday is inherently denying shared exclusivity.”). Counsel for Mylan

then informed the court that the approval letter it received allowed for the possibility of shared

exclusivity, and that Mylan was intervening in the case simply to protect its right to go to market



‘multiple [or mutually]-blocking’ situation,” and so that position should not govern here. Pl.’s
Reply at 8 (quoting FDA’s Opp. at 9, 20). The Court disagrees that there is no precedent for
FDA’s position, and finds that there does exist at least some support that FDA’s practice has
been to limit shared exclusivity to “multiple blocking” situations. In Apotex, the court noted that
FDA had limited the application of shared exclusivity to “true blocking situation[s]” since at
least March 2002. See Apotex, 414 F. Supp. 2d at 76 (upholding FDA’s decision to deny shared
exclusivity where plaintiff was blocked from marketing its product not by another applicant’s
exclusivity period but by a court decision). So, FDA’s decision to refuse to apply shared
exclusivity in the absence of a true blocking situation is not on its face inconsistent with its past
practices, and it is not what drives the Court’s determination that its action is arbitrary and
capricious.
24      A press release issued by Takeda on April 28, 2010, attached as an exhibit to the Brannan
declaration, states that the entire “industry,” including Takeda, also expected Mylan and Watson
to share exclusivity as well. See Ex. A to Brannan Decl. (stating that “Mylan, Watson and
Ranbaxy are first-filers of ANDAs with paragraph IV certifications for generic ACTOS, and it is
anticipated that the U.S. Food and Drug Administration (FDA) will grant them 180-day
marketing exclusivity”).
                                                 39
at all, not to go alone. Aug. 21, 2012 Tr. at 16–17 (suggesting that Mylan’s only interest at the

hearing was in making sure that Watson was only pursuing shared exclusivity and not sole

exclusivity: “Under shared exclusivity, we weren’t wrong, so . . . my interest and purpose here

today . . . is whether or not Watson is making the argument that Mylan should be enjoined from

continuing its sales or . . . should the final approval be rescinded.”). Watson also clarified that

what it was seeking was shared exclusivity. Aug. 21, 2012 Tr. at 18. The Court then expressed

its understanding of the state of the matter at that time:

                Well the only thing I understand is at issue anymore is shared exclusivity.
                There’s no ability – they’re not asking to divest [Mylan] of your approved
                [ANDA]; they were trying to keep you from getting it, but you’ve gotten
                it, so that part of the lawsuit according to both sides, I believe, is moot. So
                the only question on the table is whether they can be approved in time to
                get what they believe they are entitled to which is to share this 180 day
                period with [Mylan], and you may not like that, but I think that was . . .
                what they were asking for all along.

Aug. 21, 2012 Tr. at 17. No one from FDA spoke up to suggest that the Court was operating

under a misimpression.

         Therefore, in light of this unique combination of facts and circumstances, the Court finds

that it was arbitrary and capricious for the FDA to deny Watson – which filed paragraph IV

certifications and risked patent litigation at the same time as Mylan, and indeed, delivered

paragraph IV certifications for all of the patents to the FDA years before Mylan – the right to

share in the 180-day marketing opportunity prescribed by the statute.

   IV.      CONCLUSION

         For the reasons stated above, the Court finds that FDA’s interpretation of the exclusivity

provision is at odds with the statute, but that even if the statute is ambiguous and FDA’s

interpretation is entitled to deference, its decision is arbitrary and capricious under the unique




                                                  40
circumstances of this case. Thus, the Court will grant Watson’s motion for summary judgment

and deny FDA’s motion to dismiss.




                                          AMY BERMAN JACKSON
                                          United States District Judge

DATE: October 22, 2012




                                            41
