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Pioneer Drug Maker Throws First Punch at Pharmacy Outsourcing Facilities (503B)

Client Alert

Authors: Raymond A. Miller, N. Nicole Stakleff and Callan G. Stein

2/24/2020
Pioneer Drug Maker Throws First Punch at Pharmacy Outsourcing Facilities (503B)

Azurity Pharmaceuticals, Inc. — a pioneer drug company that markets its FDA-approved oral vancomycin hydrochloride solution, FIRVANQ® — has sued Edge Pharma, LLC, an outsourcing facility operating pursuant to section 503B of the Federal Food, Drug, and Cosmetic Act (FDCA), for compounding an oral vancomycin hydrochloride solution that is identical or nearly identical to FIRVANQ. In its complaint, Azurity alleges that Edge’s production and sale of its oral vancomycin hydrochloride solution is unlawful under the FDA’s recent bulk manufacturing guidelines (21 U.S.C. § 503B), misleads health care providers as to the lawfulness of Edge’s activities, and is therefore a violation of the Lanham Act (15 U.S.C. § 1125) and the Massachusetts consumer protection act (Massachusetts General Laws Chapter 93A). This appears to be one of the first punches thrown by a pioneer drug manufacturer against one of the newly commissioned outsourcing facilities that is compounding essential copies of its drug, thereby taking away market share and profits. This is likely to be a multiround fight over standing, remedies, and the general rights of compounding pharmacies and outsourcing facilities. This case raises important issues, including:

  • Does Azurity have standing to bring this suit?

  • Do Edge’s alleged violations of section 503B of the FDCA support claims for unfair competition and false advertising?

  • Can Azurity allege patent infringement of its Orange Book-listed patent?

  • Should Azurity be required to assert its Orange Book-listed patents?

Azurity filed its complaint against Edge Pharma in federal court in Massachusetts, alleging that Edge’s practice of manufacturing and selling an oral vancomycin hydrochloride solution that is identical or nearly identical to Azurity’s FIRVANQ constitutes unfair competition and false advertising in violation of the Lanham Act and unfair and deceptive trade practices in violation of Massachusetts General Law Chapter 93A. The basis of Azurity’s complaint is that Edge is manufacturing its oral vancomycin hydrochloride solution in violation of the FDA’s recently enacted outsourcing facilities bulk manufacturing requirements set forth in 21 U.S.C. § 503B and is, therefore, misleading consumers and improperly circumventing FDA regulations.

Edge is registered as an outsourcing facility, meaning it may only produce compounded drugs pursuant to the specific requirements set forth in section 503B of the FDCA and in compliance with related FDA guidance. Among the requirements imposed on an outsourcing facility like Edge is that the outsourcing facility is prohibited from compounding a drug product that includes a “bulk drug substance” unless that particular drug is on either the FDA’s “clinical need” list or “drug shortage” list. Azurity asserts that vancomycin is not found on either list, and Edge is therefore precluded from using it to compound medications.

Azurity also accuses Edge of violating the foundational requirement of section 503B that an outsourcing facility not compound drug products that are “essentially copies of one or more approved drugs” unless, again, the particular drug appears on the FDA shortage list. This allegation goes to the very heart of section 503B, which created outsourcing facilities, in large part, to ensure doctors and patients can obtain medications that are not available from FDA-regulated manufacturers. Outsourcing facilities are pharmacies and are subject to less rigorous regulation than manufacturers, including being exempted from FDA drug approval requirements. Section 503B recognizes that, in the narrow set of circumstances when a medication is not available from an FDA-regulated manufacturer, outsourcing facilities can play a vital role in ensuring access to those necessary medications by compounding them, even though they are not subject to all of the litany of FDA regulations. However, outsourcing facilities that compound medications that are essentially copies of drugs that are available from FDA-regulated manufacturers do not fill this specialized need and, it can be argued, are merely doing an end run around of the stricter regulatory approvals required by the FDA.

In this suit, Azurity alleges that Edge manufactures and sells a cherry-flavored, liquid, oral dose solution of vancomycin in 125 mg, 250 mg and 500 mg doses, and that these products are essentially copies of Azurity’s FIRVANQ, which is a 25 mg/ml or 50 mg/ml kit containing vancomycin hydrochloride powder for an oral solution and a bottle of grape-flavored diluent for reconstitution. If Azurity’s allegations prove true, Edge’s formulation would seem to qualify as “essentially a copy of [Azurity’s] commercially available drug” under the FDA’s final guidance on this topic, which focuses on comparing three aspects of the two products: (1) the active pharmaceutical ingredient; (2) the identicality or similarity of the dosage strength; and (3) the route of administration. Azurity identifies FIRVANQ as one of two FDA-approved vancomycin hydrochloride oral solutions that are currently available on the market.

While Azurity alleges numerous violations of section 503B by Edge, Azurity does not bring a cause of action directly against Edge under the FDCA. Presumably, this is because Azurity does not believe that the FDCA provides it with a private right of action to enforce its requirements. Instead, Azurity uses Edge’s alleged FDCA violations as the basis for claiming Edge is misrepresenting itself to consumers and, thus, engaging in unfair competition and false advertising. Specifically, Azurity states that it believes that Edge Pharma falsely and misleadingly represents to hospitals, physicians and other health care providers that the drugs it manufactures and sells are lawfully compounded and exempt from FDA drug approval requirements, and further that Edge is a registered and inspected FDA outsourcing facility that is in compliance with the applicable laws and regulations. Azurity also states that it believes that Edge is falsely representing that the commercially available, FDA-approved vancomycin oral solution products, such as FIRVANQ, are not ideal for use in the hospital.

Azurity has listed one patent on the Orange Book, U.S. Patent No. 10,493,028, which expires in March 2035. Based on the eligibility requirements for listing patents on the Orange Book, this Orange Book listing suggests that the ‘028 Patent covers FIRVANQ. If Edge’s vancomycin is “nearly identical” to FIRVANQ, then it would stand to reason that Azurity’s patent portfolio would be applicable. Notably, however, Azurity has not asserted a claim of patent infringement against Edge despite the fact that Azurity alleges that Edge’s compounded product is essentially a copy of FIRVANQ. The claims of the ‘028 Patent are generally directed to a nonsterile liquid formulation for oral administration consisting of 25-50 mg/ml of vancomycin and particular amounts of other ingredients, wherein the formulation has a specific pH and is stable for at least 30 days at ambient and refrigerated temperatures. Azurity may not have brought a patent infringement claim against Edge because the ‘028 Patent claims do not cover the Edge product, literally or under the doctrine of equivalents, or Azurity may be waiting to see if it can successfully stop Edge’s compounding without bringing such a suit. It should be pointed out that litigation is not compulsory against a compounder, but is compulsory (both to identify and to assert) against a generic. If Azurity’s ‘028 Patent does not cover Edge’s compounded product, it may have the ability to issue claims that do so through its other related, pending patent applications.

Conclusion

Azurity’s lawsuit is novel and creative, and it highlights important lessons for both 503B outsourcing facilities and FDA-regulated drug manufacturers. For compounding pharmacies and outsourcing facilities, this lawsuit is a reminder of the critical importance of strict compliance with section 503B’s requirements for lawful pharmacy compounding or manufacturing as an outsourcing facility. Compounders should periodically review their own compliance with the FDCA and the guidance promulgated by the FDA. Compounding pharmacies and outsourcing facilities should not be producing and selling copies of an available FDA-approved product. Failure to comply with these requirements could result in a civil or criminal enforcement action by the federal government, as well as a civil lawsuit like what Azurity brought here (or something similar brought by a state attorney general). If successful, this lawsuit could become a roadmap for pioneer drug companies, generics and other competitors to go after compounding pharmacies and outsourcers they believe are improperly and illegally copying their products.

On the other side, this lawsuit provides drug manufacturers with a potentially powerful new method for attacking compounding pharmacies and outsourcing facilities that they believe are siphoning profits and market share by selling what are essentially copies of their FDA-approved products. Pioneer drug companies should consult with their own patent and regulatory counsel to identify possible tools to combat competitive compounding and manufacturing — including pursuing claims for unfair competition, false advertising, trademark infringement and patent infringement. As the demand for compounding continues to rise, the ability to successfully neutralize this competition will become a more crucial part of creating an exclusivity strategy for pioneers.

Raymond A. Miller, N. Nicole Stakleff and Callan G. Stein are members of Pepper Hamilton's Health Sciences Department, a team of 110 attorneys who collaborate across disciplines to solve complex legal challenges confronting clients throughout the health sciences spectrum.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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