Antitrust Law Daily Shire’s five-year-old FDA filings no basis for relief under Sec. 13(b) of FTC Act
Monday, February 25, 2019

Shire’s five-year-old FDA filings no basis for relief under Sec. 13(b) of FTC Act

By Jeffrey May, J.D.

Third Circuit panel rejects the FTC’s expansive view of Sec. 13(b).

The FTC was not entitled to a permanent injunction and equitable monetary relief under Section 13(b) of the FTC Act against Shire ViroPharma, Inc. more than five years after the drug company filed petitions with the Food and Drug Administration (FDA) in an effort to delay approval of generics that challenged the company's monopoly on the Vancocin market. The language of Section 13(b), which requires that the FTC have reason to believe a wrongdoer "is violating" or "is about to violate" the law, was unambiguous. The section did not permit the FTC to bring a claim based on long-past conduct without some evidence that the defendant "is" committing or "is about to" commit another violation. The U.S. Court of Appeals in Philadelphia suggested that rather than seeking immediate relief in court, the FTC could have pursued an administrative remedy set forth in Section 5. "The FTC’s understandable preference for litigating under Section 13(b), rather than in an administrative proceeding, does not justify its expansion of the statutory language," the appellate court explained. Dismissal was affirmed (FTC v. Shire ViroPharma Inc., February 25, 2019, Smith, D.).

Section 13(b) generally provides that the FTC may bring suit to enjoin an action when it has reason to believe: (1) that a person or corporation is violating, or is about to violate, any provision of law enforced by the agency and (2) that the enjoining thereof pending the issuance of an FTC complaint and until such complaint is dismissed by the agency or set aside by the court on review, or until the order of the FTC become final, would be in the public interest. The appellate court explained that Section 13(b) was not originally part of the FTC Act and was added later in an effort to solve one of the main problems of the FTC’s relatively slow-moving administrative regime—the need to quickly enjoin ongoing or imminent illegal conduct. "Section 13(b) thus empowers the FTC to speedily address ongoing or impending illegal conduct, rather than wait for an administrative proceeding to conclude," the court explained. The court also pointed to the legislative history to support its holding.

The court was unconvinced by the FTC's arguments that Section 13(b) was appropriate when it showed a reasonable likelihood that past violations will recur or that a remedial statute like the FTC Act should be construed broadly. The court came back to the language of the statute. "[T]he FTC’s attempt to squeeze Shire’s conduct into the "about to violate" category distorts Section 13(b) beyond its intended purpose," the court noted.

At oral argument in the district court, the FTC apparently provided more support for its argument that Shire "is about to violate" the law based on its marketing of another drug. However, none of those facts were in the complaint. Given the paucity of allegations in the complaint, the FTC failed to state a claim under any reasonable definition of "about to violate."

Jurisdiction. Although the district court apparently assumed that Section 13(b) did not impose a jurisdictional requirement, the appellate court reached the issue of whether Section 13(b)’s requirements are jurisdictional. According to the appellate court, Section 13(b)’s "is" or "is about to violate" requirement is nonjurisdictional. The appellate court concluded that the district court had jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345.

The case is No. 18-1807.

Attorneys: Bradley S. Albert, Meredyth Andrus, Thomas J. Dillickrath, Matthew M. Hoffman, June Im, Nicholas Leefer, Joel R. Marcus, Joseph Mathias, and James H. Weingarten for the FTC. J. Clayton Everett, Jr., Scott A. Stempel, Noah J. Kaufman, Steven A. Reed, and Jessica J. Taticchi (Morgan, Lewis & Bockius LLP) for Shire ViroPharma Inc.

Companies: Shire ViroPharma Inc.

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