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From Health Law Daily, March 22, 2018

FTC’s authority to seek permanent injunction against pharmaceutical company requires impending violation

By Jeffrey H. Brochin, J.D.

A Federal Trade Commission (FTC) lawsuit against Shire ViroPharma Inc. (ViroPharma) alleging unfair competition practices and seeking a permanent injunction against the company, failed to establish that the company was about to violate a law enforced by the FTC—which was a necessary allegation for adequate pleading—a federal district court in Delaware has ruled. The alleged misconduct had ceased almost five years before the filing of the complaint, and the allegations did not meet the likelihood of recurrence standard (Federal Trade Commission v. Shire ViroPharma Inc., March 20, 2018, Anderson, R.).

Background. On February 7, 2017, the FTC filed an action against ViroPharma, alleging that the company engaged in an unfair method of competition. Specifically, the FTC cited ViroPharma's use of the FDA’s citizen petition process in which it allegedly "inundated the FDA with regulatory and court filings" between March 2006 and April 2012. These filings included twenty-four citizen petition filings, eighteen public comments, a Supplemental New Drug Application, and three lawsuits. All of those actions were alleged to maintain a monopoly on a ViroPharma drug while harming competition and consumer welfare. The FTC complaint sought a permanent injunction and other relief.

FTC’s authority to file suit. The court first examined the operative statute to address the question of whether the FTC acted within its authority in seeking a permanent injunction. Section 13(b) of the FTC Act (15 U.S.C. §41 et seq.) is divided into two parts, with the first authorizing the FTC to seek, and district courts to grant, preliminary relief in aid of administrative proceedings; and the second authorizing the FTC to seek, and district courts to grant, permanent injunctions without the FTC's initiating the administrative proceedings prerequisite to a grant of relief.

There was no dispute that the FTC brought the action pursuant to the second part, and the issue before the court then became one of whether this section constituted an independent grant of authority for the FTC to file suit in federal court. More specifically, at issue was whether the language "is violating, or is about to violate," applies to cases where the FTC seeks a permanent injunction.

Not a stand-alone provision. The court interpreted the second part of the FTC Act section to mean that the language did not serve as a stand-alone grant of authority for the FTC to file suit in federal court whenever it seeks permanent injunctive relief. The court noted that the wording "may bring suit" does not have the same meaning as the phrase "may seek." The statutory language was unambiguous in that "may bring suit" refers to the FTC's authority to file suit in federal court, whereas "may seek" refers to the FTC's authority, once it is properly in federal court, to seek a particular remedy including permanent injunction. The court therefore agreed with ViroPharma that if Congress intended for the permanent injunction provision to be an independent grant of authority, it would have used the language "may bring suit," rather than "may seek."

"Is about to violate." Having concluded that the permanent injunction proviso was not an independent grant of authority for the FTC to bring suit, the court moved on to the issue of whether the language of "is about to violate" was properly pleaded by the FTC. Relying on the "likelihood of recurrence standard," the court found that the FTC complaint did not allege facts establishing that ViroPharma was about to violate an FTC law, especially in light of the fact that the complaint was filed almost five years after the conduct referred to had ceased. Accordingly, the court granted ViroPharma’s motion to dismiss based on the FTC’s failure to meet the pleading requirements necessary for permanent injunctive relief.

The case is No. 1:17-cv-00131-RGA.

Attorneys: Thomas J. Dillickrath for the FTC. Colm F. Connolly (Morgan, Lewis & Bockius LLP) for Shire ViroPharma Inc.

Companies: Shire ViroPharma Inc.

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