The United States Court of Federal Claims in Washington, D.C. recently denied the United States’ motion to dismiss Vanda Pharmaceuticals Inc. claim against the United States for the Food and Drug Administration (FDA) engaging in an uncompensated taking under the Fifth Amendment to the United States Constitution of Vanda’s trade secrets and confidential information. Vanda is seeking compensation from the United States for the takings it contends took place through the FDA’s improper communication and disclosure of trade secrets and confidential information to certain generic drug manufacturers.
According to Vanda’s Complaint, the FDA “breached its confidentiality obligations with respect to Vanda” by “blatantly and forthrightly rel[ying] on data in one of Vanda’s drug applications and then disclos[ing] that information to Vanda’s competitors.” Vanda goes on to allege that while the FDA was disclosing that information to Vanda’s competitors, the agency “continued to refuse to release that same information to the public, on the basis that it constituted trade secret or confidential commercial information.” Vanda alleges that these actions by the FDA of disclosing Vanda’s trade secrets and confidential commercial information to Vanda’s competitors “constitutes a taking under the Fifth Amendment for which Vanda has never received compensation” and that it also “constitutes a breach of implied-in-fact contact, as a result of which Vanda has suffered substantial monetary damages.”
The Complaint also alleges that this conduct was not isolated, but instead the “FDA routinely directly or indirectly discloses confidential portions of drug sponsors’ applications to competitors seeking to market generic knockoffs.”
Vanda told the Court that the FDA provided confidential information about its only two drugs to generic competitors, including revealing is dissolution specifications for the drugs, which note how much they must dissolve after administration to be safe and effective. Vanda also alleged that the FDA disclosed information about one of the drugs’ manufacturing processes during generic manufacturer’s bids for generic approval.
Vanda initially filed the lawsuit on May 1, 2023, and the government moved to dismiss shortly thereafter. On January 8, 2024, the court held an oral argument on the government’s motion and denied the government’s motion in part on January 18, 2024, allowing Vanda’s takings claim to proceed. More specifically, the Court found that Vanda did adequately state a takings claim based on the FDA’s disclosures but did not state a claim for breach of an implied-in-fact contract. Additionally, the Court further disallowed the case to move forward with respect to one generic drug manufacturer, as those claims were outside the Tucker Act’s six-year statute of limitations.
Vanda and the United States will now engage in the discovery process. If Vanda is ultimately successful in this case, it is possible that the FDA may be prohibited in the future from helping generic drug applicants with setting product specifications, which may make it more difficult (and potentially costly) for generics to obtain approval.