Federal Court Strikes Down FDA's Narrow Interpretation of Orphan Drug Exclusivity in Neurelis v. Brenner
Key Insights
The U.S. District Court for the District of Columbia ruled that the FDA's "indication-specific" interpretation of orphan drug exclusivity violates federal law, marking the second such defeat for the agency.
The court held that Neurelis (search)'s VALTOCO (search) exclusivity for acute repetitive seizures (search) blocks approval of Aquestive's competing Libervant (search) across all age groups, not just the originally approved population.
The FDA has appealed the decision to the D.C. Circuit, with briefing scheduled through November 2024, while orphan drug sponsors face continued uncertainty about exclusivity scope.
The U.S. Food and Drug Administration suffered another significant legal setback in its ongoing battle over orphan drug exclusivity interpretation, as a federal district court ruled against the agency's narrow view of market protection for rare disease treatments. In Neurelis (search) v. Brenner, the U.S. District Court for the District of Columbia held that the FDA's regulatory interpretation of the Orphan Drug Act's exclusivity provisions violated the Administrative Procedures Act because it contradicted the statute's plain text.
The decision represents the second major court defeat for the FDA's "indication-specific" approach to orphan exclusivity, following the Eleventh Circuit's 2022 ruling in Catalyst Pharms (search)., Inc. v. Becerra. The case centers on competing diazepam products developed to treat acute repetitive seizures (search), an orphan disease affecting fewer than 200,000 people in the United States.
Competing Diazepam Products Spark Legal Challenge
The dispute arose between two pharmaceutical manufacturers developing novel diazepam formulations for acute repetitive seizures (search). Neurelis (search) secured orphan-drug designation for its nasal spray formulation in 2015, followed by Aquestive Therapeutics obtaining designation for its buccal film version in 2016. Both companies received designation for the "management of acute repetitive seizures."
Neurelis (search) achieved first-to-market status when the FDA approved VALTOCO (search) (diazepam) nasal spray in January 2020 for "treatment of intermittent, stereotypic episodes of frequent seizure activity in patients with epilepsy (search) 6 years of age and older." The approval triggered a seven-year orphan drug exclusivity period set to expire on January 10, 2027.
Aquestive initially sought approval for its competing product, Libervant (search) (diazepam) buccal film, for patients 12 years and older in 2019. The FDA declined approval and issued a Complete Response Letter in September 2020. After resubmission in 2021, the agency granted tentative approval in August 2022, acknowledging that final approval was blocked by VALTOCO (search)'s orphan exclusivity.
The regulatory landscape shifted when Aquestive submitted a new application in June 2023, this time seeking approval only for patients "2 to 5 years of age." In April 2024, the FDA granted final approval to Libervant (search) for this narrow pediatric subpopulation, determining that this "indication or use" fell outside VALTOCO (search)'s exclusivity scope under the agency's "indication-specific" interpretation.
Court Rejects FDA's Narrow Exclusivity View
The district court decisively rejected the FDA's position, adopting the broader "disease-specific" interpretation established in the Catalyst decision. "This court wholly agrees with the holding and rationale of Catalyst and adopts it as its own," the court stated. "The plain text of § 360cc(a) is decisive."
The court determined that because both VALTOCO (search) and Libervant (search) share the same active ingredient and treat the same orphan disease, Libervant constitutes the "same drug for the same disease or condition" prohibited under the Orphan Drug Act. The ruling effectively blocks Libervant's approval across all age groups during VALTOCO's exclusivity period, regardless of the specific patient population targeted.
Aquestive and the FDA had argued that the Orphan Drug Act's text and structure supported an "indication-specific" scope of exclusivity, contending that exclusivity should be limited to the particular use for which safety and efficacy have been demonstrated. They also warned that a "disease-specific" reading would create perverse incentives for manufacturers to seek narrow approvals that could block broader competitor applications.
The court found these arguments unpersuasive, emphasizing that the statutory language clearly refers to exclusivity for the "same drug for the same disease or condition," not specific indications or uses.
Post-Chevron Legal Landscape
The Neurelis (search) decision carries additional significance as it was rendered after the Supreme Court's Loper Bright ruling, which eliminated the Chevron deference doctrine that previously granted agencies interpretive authority over ambiguous statutes. The district court noted that agencies are generally granted no deference in matters of statutory construction, strengthening the position that courts must independently interpret statutory language.
The court found that § 360cc(a) contains unambiguous language that forecloses the FDA's interpretation, noting that the statute does not contain an express delegation of interpretative authority to the agency.
Regulatory and Legislative Implications
The FDA has appealed the decision to the D.C. Circuit, with briefing scheduled to run from September through November 2024. Aquestive, which intervened in the district court proceedings, remains a party to the appeal.
Despite the legal setbacks, the FDA issued a Federal Register Notice in January 2023 announcing its intention to "continue to apply its regulations tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved." This stance has invited continued legal challenges from orphan drug sponsors.
Congressional efforts to codify the FDA's regulatory interpretation have been proposed but have not gained significant traction. Similar legislation was initially introduced in 2022 following the Catalyst decision but failed to advance.
Alternative Regulatory Pathways
The FDA retains options for addressing competing orphan drugs within existing regulatory frameworks. Under current regulations, a second drug is not considered the "same drug" if it demonstrates clinical superiority to the first drug through greater efficacy, greater safety, or a major contribution to patient care.
Aquestive could potentially avoid Neurelis (search)'s orphan exclusivity if the FDA determined that Libervant (search) demonstrated clinical superiority to VALTOCO (search), particularly in the two- to five-year-old patient population. However, the agency has shown reluctance to pursue this pathway, apparently preferring a legislative solution.
The ongoing legal uncertainty leaves orphan drug sponsors in limbo regarding the scope of market exclusivity protections, potentially affecting investment decisions and development strategies for rare disease therapies. The D.C. Circuit's eventual ruling will have significant implications for pharmaceutical and biotech companies developing treatments for rare diseases, and may ultimately determine whether Congressional intervention becomes necessary to clarify the exclusivity framework.