United States v. Vepuri, (US Court of Appeals for the Third Circuit), 20 July 2023

Snapshot

The Defendants successfully challenged parts of their criminal indictment for conspiracy to violate the Food, Drug and Cosmetic Act by introducing unapproved drugs for interstate trade and commerce. The mere fact that the active ingredient was manufactured at an unapproved facility was not, on its own, enough to state the charge.

Take-aways

Whilst currently limited to the 3rd circuit, this case exposes a potential loophole in the regulation of drugs and likely requires a legislative fix from congress. At footnote 7, the Court of Appeals suggested as much. The FDA does not appear to have sought to appeal the decision.?

The case suggests that if a company manufactures a drug which has the same chemical composition (and labeling) to approved drugs; it could argue, as the Defendants did in this case, that they were not in violation of 21 USC section 355(a). They could also potentially supply the drugs without FDA approval. It also potentially provides a basis to circumvent the process to file supplements for approval of changes in manufacturing site(s) such as under 21 USC section 356a, if the change does not change the composition or labeling of the drug. The 3rd circuit did not directly grapple with this.

Watch this space!

Question

Is a drug made from active ingredients from an unapproved manufacturer a ‘New Drug’ for the purposes of 21 USC section 355(a)? Unapproved in this context, is a manufacturer not listed in a New Drug Application (or similar) or supplement.

Answer

Only if it can be shown that the labeling and/or composition is different. The mere fact that the active ingredient is manufactured at an unapproved facility is not, on its own, enough.?

Facts??

Murty Vepuri, was the de facto director of KVK-Tech (the Defendants), a generic drug manufacturer who sold Hydroxyzine, a prescription generic drug used to treat anxiety and tension. Hydroxyzine was a “new drug” and required an Abbreviated New Drug Application (ANDA): 21 USC section 355(j).?

A ‘new drug’, is relevantly defined as ‘any drug…the composition of which is that such drug is not “generally recognized, among experts… as safe and effective…for use under the conditions prescribed, recommended, or suggested in the labeling”: 21 USC section 355(a).?

Between 2006 and 2008, three ANDA’s and a supplement were submitted by the Defendants and approved by the FDA for Hydroxyzine which permitted the active ingredient to be sourced from facilities in Belgium and Italy. In 2010, Vepuri authorized the purchase of the active ingredient from a facility in Mexico, which was not approved by the FDA.

In June 2013, a shipment was detained by the FDA due to the lack of approval of the facility in Mexico. Following investigation by the FDA, it was alleged that more than 368,000 bottles of Hydroxyzine made with the active ingredient from Mexico were supplied to customers.?

The Government, relevantly and amongst other things alleged that the Defendants sourced active ingredients for Hydroxyzine from a facility that was not included in the approvals from the FDA contrary to 21 USC section 355(a). This section prohibits the introduction of a ‘new drug’ into interstate commerce unless an FDA approval is effective with respect to such drug.?

The Defendants successfully moved to, relevantly, dismiss the portion of the indictment in the District Court that they conspired to violate 21 USC section 355(a) on the basis that the charges were not stated. The Government appealed.

The Court of Appeals

The Government effectively alleged that the Defendants supplied an “unapproved” drug. Two different theories of liability were put forward by the Government: the use of an unapproved (or listed) manufacturing facility means that that:

1. the existing approval of the ANDAs were not effective “with respect to such drug” ‘because the distributed “new drug” is not the “such drug” that has an effective approval”; and/or
2. The ANDAs for Hydroxyzine were no longer “effective” with respect to that drug.

However, these characteristics were not accepted by the Court. It was held that the ‘relevant statutory provisions do not prohibit the introduction of “unapproved” drugs. They instead prohibit the introduction of any “new drug, unless an approval of an [NDA or ANDA] is effective with respect to such drug”’.?

The Court held that ‘[u]nder a plain reading of the provision…for a “new drug” to no longer be the “such drug” with the effective approval of an NDA or ANDA, it must have a different composition or labeling than the “new drug” with the effective approval’.?

The relevant portion of the indictment was dismissed because it did not include any allegations that the KVK-Tech Hydroxyzine manufactured with active ingredients from Mexico had a different composition or labeling than the product with effective approval. The Government could not state an offense under either theory of liability.?

The Court indicated in footnote 8, that the ‘FDA has long interpreted the term [composition] to refer only to a drug’s chemical makeup - the “name and amount of each active and inactive ingredient”...And a drug’s “composition does not include the location or identity of the manufacturer of those ingredients’: referencing 21 USC section 355(b)(1)(A) (distinguishing between the “composition of such drug” and the methods, facilities, and controls used to make the drug).

The second theory of liability was previously rejected by the Supreme Court in Weinberger v Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 633 93 S.Ct. 2469, 37 L.Ed.2d 207 (1973). The case supported the proposition that ‘an NDA or ANDA only stops being effective when the procedures for suspension or withdrawal in section 355(e) are followed’ [which was not the case in this instance, despite their availability].

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