Nov 10, 2014 Zogenix vs Deval Patrick_Zogenix Opposition to Motion to Dismiss

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSSACHUSETTS

) ZOGENIX, INC., ) ) Plaintiff, ) ) v. ) Civil Action No. 1:14-cv-11689 ) DEVAL PATRICK, in his official capacity as ) GOVERNOR OF MASSACHUSETTS, ) ) CHERYL BARTLETT, RN, in her official capacity ) as DEPARTMENT OF PUBLIC HEALTH ) COMMISSIONER, ) ) CANDACE LAPIDUS SLOANE, M.D., et al., ) in their official capacities as members of the ) MASSACHUSETTS BOARD OF REGISTRATION ) IN MEDICINE, ) ) KAREN M. RYLE, MS, R.PH, et al., ) in their official capacities as members of the ) MASSACHUSETTS BOARD OF ) REGISTRATION IN PHARMACY, and ) ORAL ARGUMENT REQUSTED ) DIPU PATEL-JUNANKAR, PA-C, et al., ) in their official capacities as members of the ) MASSACHUSETTS BOARD OF ) REGISTRATION OF PHYSICIAN ASSISTANTS, ) ) Defendants. ) )

MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S VERIFIED THIRD AMENDE D COMPLAINT

Case 1:14-cv-11689-RWZ Document 83 Filed 11/10/14 Page 1 of 26

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The gravamen of Defendants’ argument is that this Court should dismiss Zogenix’s Third

Amended Complaint because the challenged regulations have been revised several times over the

past six months in response to this Court’s Orders. Defs. Br. at 1. The implication is clear:

Zogenix should be appeased because the latest regulations – although still targeting only

Zohydro® ER, and although doing so for the explicit purpose of seeking to prevent patients from

accessing the drug – are nonetheless “better” than their predecessors. This argument gets it all

wrong. Although Defendants have been forced by this Court to retreat from their earlier

regulations, the legacy of those earlier regulations looms over Zohydro® ER in Massachusetts;

the latest iteration of the regulations must be viewed in the context of their predecessors in order

to fully understand their purpose and intended effect.

Defendants have been frank about their motivations all along: they want to force Zogenix

to reformulate the drug in order to incorporate abuse deterrent features. They want to do so even

though FDA approved Zohydro® ER in its current formulation as both safe and effective, and

even though FDA has expressed grave skepticism about the benefits of abuse deterrent

technology in deterring drug overdoses. Third Amended Complaint ¶ 38. And Defendants’

regulations have had their intended effect. For more than a year, doctors in other states have

been prescribing Zohydro® ER to patients for whom other similar products pose health risks,

while Massachusetts patients with similar needs have been denied the benefits of this FDA-

approved alternative. In the meantime, prescriptions are still nearly nonexistent in

Massachusetts, thanks to Defendants’ regulatory game of cat-and-mouse in which they have

sidestepped each successive order of this Court by making minimal changes to the regulations.

And while Zogenix has been diligently seeking approval for abuse deterrent formulations of

Zohydro® ER, every single day that passes with the unconstitutional restrictions in place in


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Massachusetts is another day lost from the critical three-year exclusivity period afforded to

Zohydro® ER as an innovative drug manufacturer under the Food, Drug, and Cosmetics Act

(“FDCA”), see 21 U.S.C. §§ 355(c)(3)(E)(iii) and (j)(5)(F)(iii). Once lost, this exclusivity period

is gone forever and can never be replaced. Defendants already have managed to erase over eight

months of that three-year exclusivity period through their constantly-evolving regulatory and

litigation strategy, including filing baseless motions like the one before the court. Enough is

enough. Zogenix is entitled to be heard on the merits of its claims.

STANDARD OF REVIEW

When considering a Rule 12(b)(6) motion to dismiss, “the court assumes the truth of all

well-pled factual allegations and draws all reasonable inferences in the nonmovant’s favor.”

Epoxy Tech., Inc. v. Daizo Corp., No. CIV.A. 12-11409-RWZ, 2013 WL 2146844, at *1 (D.

Mass. May 16, 2013) (Zobel, J.) (citing Genzyme Corp. v. Fed. Ins. Co., 622 F.3d 62, 68 (1st Cir.

2010)). A claim will survive a motion to dismiss if it contains “sufficient factual matter such that

it is actionable as a matter of law and plausible on its face.” Asymmetrx Med., Inc. v. McKeon,

932 F. Supp. 2d 232, 238 (D. Mass. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 667 (2009)).

“A claim is facially plausible if, after accepting as true all non-conclusory factual allegations, the

court can draw the reasonable inference that the defendant is liable for the misconduct alleged.

Id. (citing Ocasio–Hernandez v. Fortuno–Burset, 640 F.3d 1, 12 (1st Cir. 2011)).

ARGUMENT

I. The Final Regulations Are Preempted By Federal Law.

The government’s newest1 regulations on Zohydro® ER are preempted by federal law for

at least two independent reasons. First , the most recent pharmacy (BORIP) requirements

1 Defendants devote an entire argument section to refuting this Court’s jurisdiction to hear a purported challenge to earlier regulations that have since expired. Defs. Br. at 4-5 (Argument


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prohibit certified pharmacy technicians from handling Zohydro® ER (and only Zohydro® ER),

even for purposes of unpacking boxes, stocking supplies, or ringing up sales with a customer,

247 CMR 8.05(3). Because certified pharmacy technicians are integral to pharmacy operations,

the new regulation places an insurmountable burden on pharmacists and renders the regulations

equivalent to a total ban on the drug that is preempted for the same reason as the original ban

enjoined by this Court. Second, by singling Zohydro® ER out for all of the restrictions

enumerated in the physician (BORIM), pharmacy (BORIP), and physician assistant (BOROPA)

regulations— particularly in the context of its earlier regulations and its historical commentary

on the drug— the government has sought to force Zogenix to offer Zohydro® ER in an abuse-

deterrent formulation, even though the current formulation already was approved as safe and

effective by FDA. Lest there be any doubt about the true object of the latest regulations, they

provide Zogenix with an escape hatch: it may escape regulation under the new BORIM rules if it

reformulates Zohydro® ER with an abuse-deterrent formulation. 243 CMR 2.07(25). But FDA

already considered and rejected a requirement of abuse-deterrent technology for Zohydro® ER.

FDA carefully approved Zohydro® ER, which like many other opioids is in a non-abuse

deterrent formulation, as part of the aggregate mix of drug options intended to be approved for

public use under the agency’s expertise. Third Amended Complaint ¶ 38-39.

Whether through an effective ban or because of a preempted purpose, there can be no

doubt that the final regulations are preempted by federal law. FDA intended for Zohydro® ER

to be available to citizens of Massachusetts when it approved Zogenix’s New Drug Application

Heading I). But that is a straw man argument. Zogenix is not asking this Court to enjoin regulations that are no longer in effect. Instead, those regulations are part of the broader context of the final regulations: the purpose and effect of the final regulations can only be understood in the context of Defendants’ earlier efforts to ban Zohydro® ER by regulation. It simply was not improper for Zogenix to describe this context in its Third Amended Complaint.


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on October 25, 2013. Where Congress intends for one agency to approve a range of safe choices

for public consumption under one set of federal standards, states cannot constrain the “variety

and mix” of those options. Geier v. Am. Honda Motor Co., Inc., 529 U.S. 861, 881 (2000)

(internal citation omitted). Instead, state restrictions—even those that might otherwise

conceivably “stand in harmony with federal law”—must fall where Congress intended to “avoid

conflict, uncertainty, cost, and occasional risk to safety itself that too many different safety-

standard cooks might otherwise create.” Id. at 871. And a state law that seeks to accomplish that

which is expressly preempted – such as a total ban of an FDA-approved drug – for a pretexted

reason also is preempted. As the Supreme Court has noted: “Pre-emption is not a matter of

semantics. A State may not evade the pre-emptive force of federal law by resorting to . . .

description at odds with the statute’s intended operation and effect.” Wos v. E.M.A. ex rel.

Johnson, 133 S. Ct. 1391, 1398 (2013). Thus, “[i]n a preemption case, a proper analysis requires

consideration of what the state law in fact does, not how the litigant might choose to describe it.”

Id.; see also AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1747-48 (2011) (state could

not evade preemptive effect of the FAA by characterizing its rule preventing class arbitrations as

a general contract defense, where it foreclosed in practice the Congressional goal of enforcing

arbitration agreements in order to streamline proceedings). And as this Court noted in its July 8,

2014 Order, a regulation that “severely frustrate[s] Zohydro’s availability” – as Defendants’

stream of regulations surely have -- would “pose significant constitutional concerns.” July 8,

2014 Mem. (D.E. 66) at 9.

Defendants do not challenge these arguments on their face. Instead, Defendants suggest

that Zogenix somehow waived these arguments during oral argument in the context of a

preliminary injunction hearing relating to claims raised in a different, now-superseded


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Complaint. The transcript from the hearing at issue does not substantiate Defendants’ waiver

claims, and their arguments that Zogenix voluntarily relinquished its challenge to the

unconstitutional regulations therefore must fail.

A. Zogenix Never Conceded That Barring Certified Pharmacy Technicians From Handling Zohydro® ER Was Constitutional.

Defendants disingenuously suggest that Zogenix “benefitted from changed regulations”

regarding pharmacy personnel who may handle Zohydro® ER and therefore “is estopped from

reversing course now.” Defs. Br. at 23. But Zogenix never took the position – orally or in

writing – that it would be acceptable for the government to bar certified pharmacy technicians

from handling Zohydro® ER. In fact, the very passage quoted by Defendants in their brief

makes clear that Zogenix expressly contested pharmacy (BORIP) rules barring certified

pharmacy technicians from handling Zohydro® ER:

THE COURT: And which part or all of the pharmacy regulation do you object to? MR. HOLLMAN: The pharmacy restrictions that require that only the pharmacist himself, not certified pharmacy technicians, pharmacy technicians, pharmacy technician trainees or pharmacy interns, anyone else who works in the pharmacy, but only the physician [sic] may handle Zohydro in a non-abuse-deterrent formulation. So, the licensed pharmacist is the one who has to unpack, stock and re-stock in special locked cabinets, fill every prescription, and hold it in a locked cabinet until the patient comes to pick it up, ring up every sale at the register, and hand every prescription to a customer. The others we don’t challenge and we don’t quibble with.

June 10, 2014 Tr. at 9-10. Zogenix has maintained all along that the restriction on certified

pharmacy technicians handling Zohydro® ER – a restriction not imposed upon any other

Schedule II drug – creates an effective ban on Zohydro® ER and therefore is preempted by

federal law. Second Am. Compl. ¶ 92; Mem. Supp. Pl.’s Mot. for Prelim. Inj. 9-10; Mem. Opp.

Defs.’ Mot. To Dismiss 2-4; Opp. to Mot. to Vacate 2-3; Third Amended Complaint ¶ 85.

Having failed to notify Zogenix in advance of its proposed changes to the regulations – let alone


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solicit Zogenix’s views on those regulations – Defendants’ suggestion that Zogenix somehow

“benefited” from regulations retaining the very restriction that Zogenix consistently has

complained about in this case is nothing short of audacious.

To be sure, Defendants did take it upon themselves to revise the pharmacy (BORIP)

regulation by expanding the personnel who can handle Zohydro® ER to include pharmacy

interns in a misguided effort to avoid another injunction, but they did so in a way that failed to

ameliorate the constitutional problems with the previous version of the law. While the new

pharmacy (BORIP) regulations now permit pharmacy interns to handle Zohydro® ER, they

continue to prohibit certified pharmacy technicians from handling the drug – even though

certified pharmacy technicians can handle all other Schedule II controlled substances, including

other non-abuse deterrent extended-release/long acting opioid products. Compare 247 CMR

8.05(3) with 247 CMR 8.05(2). There is a very palpable difference between a “pharmacy intern”

and a “certified pharmacy technician.” See Third Amended Complaint ¶ 69. Certified pharmacy

technicians must merely be 18 years old, certified by a Board-approved certifying body, and

registered with the Board of Pharmacy. 247 CMR 8.04. In contrast, pharmacy interns must (i)

currently be enrolled in an approved school of pharmacy (i.e., be candidates for their Doctorate

of Pharmacy), (ii) have completed two years of education in the approved school of pharmacy in

which the candidate is currently enrolled, and (iii) submit appropriate information regarding the

internship and a certified statement from the school of pharmacy in advance to the Board. 247

CMR 8.01. In addition, in order for a pharmacist to hire a pharmacy intern, the pharmacist must

be a registered pharmacy preceptor educator – qualified through actual practice and approved by

BORIP to supervise and train pharmacy interns. 247 CMR 8.01(2). A registered pharmacy

preceptor may not supervise more than two pharmacy interns at one time. 247 CMR 8.01(13).


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Due to such existing administrative burdens, only a minority of Massachusetts pharmacies accept

pharmacy interns, and those that do still continue to rely heavily upon certified pharmacy

technicians to handle and process Schedule II drugs. Third Amended Complaint ¶ 69.

The pharmacy (BORIP) rules, particularly those barring certified pharmacy technicians

from handling Zohydro® ER, have had their intended effect of preventing pharmacies from

stocking Zohydro® ER. This is no surprise. Under the newest rules, a licensed pharmacist or

pharmacy intern personally must unpack all deliveries of the drug, handle stocking and

restocking of the special locked cabinet purchased solely for handling of Zohydro™ ER (other

locked cabinets typically are accessible to technicians and interns), fill every prescription, place

every filled prescription back in the special locked cabinet, ring up every sale at the cash register,

and hand every prescription directly to a customer. This burden is simply too great for

pharmacies to take on. As a result, the regulation has the effect of severely restricting Zohydro®

ER’s availability in violation of the Supremacy Clause. See, e.g., July 8, 2014 Mem. (D.E. 66) at

9 (noting that a regulation that “severely frustrate[s] Zohydro’s availability” would “pose

significant constitutional concerns”).

Defendants also suggest that whether pharmacies will dispense the drug is irrelevant so

long as physicians will write prescriptions for it. Defs. Br. at 24. First, nothing could be further

from the truth. When pharmacies refuse to dispense a drug, that fact becomes known to patients

and, eventually, physicians. But more importantly, this is not an appropriate argument on a

motion to dismiss, where the only issue is whether the plaintiff has properly alleged a claim.

Factual arguments challenging the fact and effect of pharmacies’ refusals to stock Zohydro® ER

are not proper at the motion to dismiss stage, where the allegations in the complaint are required


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to be taken at face value.2 Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008) (in ruling on a

motion to dismiss, courts are “limited to considering facts and documents that are part of or

incorporated into the complaint”).

Finally, Defendants resort to a policy argument: if the most recent pharmacy (BORIP)

restrictions are stricken, it asks, what room is left for states to regulate drugs? Defs. Br. at 24-25.

The answer is simple: a state cannot take steps to ban an FDA-approved drug from the market,

whether that takes the form of an express ban or whether it takes the form of onerous regulation

with the stated purpose of creating an effective ban. See, e.g., July 8, 2014 Mem. (D.E. 66) at 9

(noting that a regulation that “severely frustrate[s] Zohydro’s availability” would “pose

significant constitutional concerns”). That is what Defendants have done here, and that is why

their regulations are preempted.

B. Zogenix Has Not Waived Its Arguments Regarding the Cumulative Effect of the Medical (BORIM) and Physician Assistant (BOROPA) Regulations.

Defendants also seek dismissal of Zogenix’s claims as they relate to the medical

(BORIM) and physician assistant (BOROPA) regulations because, they claim, both Zogenix and

this Court have conceded that those regulations are constitutional. Defs. Br. at 18. Nothing

could be further from the truth. While Zogenix’s counsel did concede at the hearing that – for

purposes of a preliminary injunction hearing on an earlier version of the complaint – Zogenix

was not challenging on their face any portion of the regulations not specifically discussed at the

2 In fact, when Zogenix sought permission to take discovery into this very issue at the last status conference, Defendants’ counsel specifically promised both Zogenix and the Court that their forthcoming motion to dismiss would not delve into factual issues regarding pharmacies’ refusal to carry Zohydro® ER— and yet, that is precisely what this argument seeks to do. In the meantime, Defendants have refused to produce documents in response to Zogenix’s Public Records Law requests seeking information about their intent in drafting the legislation, hiding behind deliberative process privilege and seeking to impose search and production fees to the tune of tens of thousands of dollars. Zogenix is entitled to take discovery into this issue and prove its case at trial.


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hearing (i.e. – the “forced failure” requirement and the pharmacy restrictions on handling the

drug), Zogenix’s counsel reserved the argument that applying the entire scheme of restrictions

only to Zohydro® ER for the express purpose of making the drug less available creates a

preemption problem because it seeks to undermine the federal regulatory approval of the drug.

When responding to the Court’s request that it identify the problematic regulations,

Zogenix’s counsel specifically stated: “We would note that it seems unfair to us to single out

Zohydro Extended-Release from all of the other opioid medications that have contributed to

what the Governor says was a public health crisis before Zogenix got into prescribing Zohydro in

Massachusetts.” June 10, 2014 Tr. at 11:8-12. Zogenix’s counsel also said, at the end of the

discussion during which the Court walked counsel through each and every new regulation:

Mr. HOLLMAN: So those are the restrictions, Your Honor, but the point of the restrictions, again, as the Governor articulated in his press release, is to restrict the availability of Zohydro. *** So, the intent is to make the drug less available and to deter people from going on the drug, and the reason for that intention is exactly what the Governor stated when he announced the complete ban. It is to require Zogenix to make the drug available in an abuse-deterrent formulation that has not yet been approved by the FDA. In view of that stated purpose and the effect of the state restrictions, they stand as an obstacle to the FDA’s purposes and objectives in approving Zohydro Extended-Release in its current formulation as safe and effective. Namely, to add to the mix of safe hydrocodone products available to patients who suffer severe chronic pain. Because they stand as an obstacle to that clearly-articulated objective of the FDA’s approval, they are preempted.

Id. at 13:14-14:15.

The difference between the narrow “forced failure” restriction that was the focus of

Zogenix’s arguments at the preliminary injunction hearing and its current argument regarding the

cumulative effect of all of the regulations is simple. The “forced failure” requirement directly


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contradicted FDA’s approved indication. For that reason, the “forced failure” requirement would

have been preempted regardless of whether it applied equally to other pain drugs and whether it

was done for the purpose and effect of banning the drug. In short, it was preempted on its face.

The other regulations – most of which remain unchanged– are preempted only because they

target Zohydro® ER, and because they do so for a preempted purpose (to induce a formulation

change). In other words, if they applied to other drugs too and did not have the purpose and

effect of creating a de facto ban on Zohydro® ER, they would not be preempted. Zogenix may

have conceded at oral argument that they were not objectionable on their face, but that does not

mean that Zogenix is barred from arguing that their “purpose and effect” is a preempted one.

II. Defendants’ Regulations Violate the Equal Protection Clause.

Defendants’ regulations also violate the Equal Protection Clause by singling out

Zohydro® ER for burdensome and unnecessary restrictions not applicable to any other extended-

release opioid products. Defendants contend that Zogenix’s claim fails as a matter of law

because Zogenix has not properly alleged its claim and because the Massachusetts regulations

are shielded by government discretion. Defs. Br at 5-10. These arguments fail.

First, the case relied upon heavily by Defendants and the Court in its prior ruling,

Engquist v. Oregon Dep’t of Agriculture, 553 U.S. 591 (2008), does not categorically bar

challenges to state action that involve some degree of agency discretion. See Defs. Br. at 5-7;

July 8, 2014 Mem. (D.E. 66) at 4, n.4. The Engquist case eliminated class-of-one claims in the

public employment context in which the case arose, and to which the Court expressly limited its

holding. 553 U.S. at 591, 599 (finding specifically that the “class-of-one theory of equal

protection does not apply in the public employment context” and explaining that “government

has significantly greater leeway in its dealings with citizen employees than it does when it brings


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its sovereign power to bear on citizens at large”). The Court recognized, and Zogenix does not

dispute, that:

There are some forms of state action . . . which by their nature involve discretionary decisionmaking based on a vast array of subjective, individualized assessments. In such cases treating like individuals differently is an accepted consequence of the discretion granted to government officials. This principle applies most clearly in the employment context . . . [u]nlike the context of arms-length regulation, such as in Olech, treating seemingly similarly situated individuals differently in the employment context is par for the course.

Id. at 592 (emphasis added). But Engquist should not be read to apply broadly to any action that

could involve some level of discretion; rather, by its own terms it is limited to situations – like

employment – in which decisions are made in a highly fact-specific, individualized manner.

That is not the case here. Indeed, if class-of-one claims were wholly barred in cases where

agencies utilized some degree of discretion, there likely would be no circumstances under which

a class-of-one claim could ever survive.

Defendants do not cite to any cases that hold unequivocally that class-of-one claims are

prohibited whenever an agency exercises any discretion. Nor can they. In fact, several Circuits

have held the opposite. See Hanes v. Zurick, 578 F.3d 491, 495-96 (7th Cir. 2009); Franks v.

Rubitschun, 312 F. App’x 764, 766, n.3 (6th Cir. 2009) (noting “Engquist’s holding was

specifically limited to the public-employment context, the concerns of which the Court described

as ‘unique.’”). One of Defendants’ own cited cases held “that Engquist does not bar all class-of-

one claims involving discretionary state action.” Analytical Diagnostic Labs, Inc. v. Kusel, 626

F.3d 135, 142 (2d Cir. 2010). In so holding, the court noted the limited reach of Engquist,

stating that the decision “eliminated class-of-one claims for government employees” and was


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“[i]n essence . . . a jurisdiction-limiting decision.” Id. at 140-41 (emphasis added). 3 Thus,

Engquist simply does not act to preclude Zogenix’s class-of-one claim, as Defendants contend.

Despite Defendants’ protestations, Defs. Br. at 8, Engquist should not be extended to the

regulation of drug products. This is not a situation where there are thousands of public

employees, each with their own individualized employment records, who bargained directly with

the government in exchange for individual rights. Here, the government is acting not as an

employer but as a sovereign, exercising its powers and authorities to regulate a drug product.

The fundamental rule that persons subject to regulation must be treated alike under like

circumstances is a key tenet in ensuring fair government. It should not simply be wiped away

under the guise of applying a doctrine set up to address the very different situation when a

government acts as an employer rather than a sovereign.

Second, Defendants wrongly contend that Zogenix’s claim must fail because it is not the

“subject” of the challenged regulations. Defs. Br. at 6-7. While the medical (BORIM),

physician assistant (BOROPA), and pharmacist (BORIP) regulations on their face restrict actions

taken by physicians, physician assistants, and pharmacists, there can be no doubt of the intended

target of the regulations: Zohydro® ER. Defendants never have argued otherwise. Indeed, the

Governor’s office issued a press release specifically stating that the regulations were designed to

“restrict the availability” of Zohydro® ER, and not any other opioid. Third Amended Complaint

3 The other cases cited by Defendants are equally inapposite. Defs. Br. 7-8, n.9, citing Towery v. Brewer, 672 F.3d 650, 660 (9th Cir. 2012); Novotny v. Tripp County, 664 F.3d 1173, 1179 (8th Cir. 2011); Srail v. Village of Lisle, 588 F.3d 940, 944-45 (7th Cir. 2009); Flowers v. City of Minneapolis, 558 F.3d 794, 799-800 (8th Cir. 2009); Del Marcelle v. Brown Cnty. Corp., 680 F.3d 887, 904 (7th Cir. 2012). None of these cases hold, as Defendants claim, that class-of-one claims are “foreclose[d]” when officials exercise discretion. Rather, the cases are merely examples of instances in which courts have found the Engquist rationale appropriate – and in each case, the discretion exercised was done in a significantly more fact-specific, individualized context. Here, there is no reason to apply Engquist to bar Zogenix’s claim.


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¶ 61, Ex. B. A regulation governing what drugs a physician may prescribe or a pharmacy may

fill certainly imposes “liabilities” on the pharmaceutical companies that manufacture the drugs,

and therefore Zogenix properly may claim that it has been treated disparately in violation of the

Equal Protection clause. Engquist, 553 U.S. 602.

Third, contrary to Defendants’ assertions, Zogenix has alleged a standard against which

departures can be assessed. Defs. Br. at 8. Here, the Commonwealth’s normal standard of

regulation is clear: in the face of what it identifies as a class-wide “public health emergency

around opioid abuse,” it has applied the newest regulations to no other drug besides Zohydro®

ER. Thus, Defendants’ discriminatory regulations – singling out Zohydro® ER for draconian

restrictions not levied upon any other member of its drug class – constitute a striking departure

from a clear standard of non-restriction that can be “readily assessed” by this Court.

Defendants attempt to justify this unconstitutional action by claiming that the regulations

were taken “amidst a declared public health emergency.” Defs. Br. at 8. However, this

argument fails for two reasons. For one, the final regulations currently before the Court were

promulgated months after Governor Patrick’s declared public health emergency, and after

multiple rounds of hearings before this Court. These were not actions taken in haste that “must

be tackled quickly and decisively” like the “disease outbreaks” and drinking water protections

cited by Defendants. Id. Instead, these were deliberate decisions, carefully constructed to limit

Zohydro® ER’s availability while at the same time avoid running afoul of this Court’s prior

rulings. Thus, Defendants may not claim that their actions should be protected from a

constitutional challenge because they faced an emergent threat. Defendants had ample time to

consider appropriate and effective ways to deal with the scourge of opioid abuse and chose,

instead, to single out Zohydro® ER to the exclusion of all other drugs.


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Moreover, even if these final regulations had been promulgated as emergency actions, it

would not alter the analysis. Zogenix does not challenge Massachusetts’ choice to take action in

order to combat opioid abuse, see Am. Grain Prods. Processing Inst. v. Dep’t of Public Health,

467 N.E.2d 455, 467 (Mass. 1984), but rather its choice to do so in a way that treats Zohydro®

ER differently from similarly-situated drugs, without any rational basis. Indeed, Zohydro® ER

could not have been the cause of the declared public health emergency of opioid abuse – it had

not been on the market at the time the Governor made his declaration and therefore could not

have been abused by patients at that time. It is precisely this disconnect – between the putative

reason for the claimed emergency and the asserted need for a regulatory “fix,” and the reality of

Defendants’ efforts to use the putative emergency as an excuse to force Zogenix to make

Zohydro® ER available in an abuse deterrent formulation – that underscores how arbitrary and

irrational Defendants’ actions truly are.

Fourth, Defendants challenge that Zogenix has not alleged that it is similarly situated “in

all relevant respects” to the other members of its drug class that have not been burdened by the

Commonwealth’s onerous regulations. Defs. Br. at 9. To begin with, the cases cited by

Defendants do not require any such magic language, especially where the complaint does not

suggest that there are differences between the plaintiff and other members of the purported class.

See, e.g., Barrington Cove Ltd. P’ship v. R.I. Hous. & Mortg. Fin. Corp., 246 F.3d 1, 10 (1st Cir.

2001) (noting that ruling was based in part on the fact that the “complaint alleg[ed] additional

facts arguably differentiating the plaintiff in important respects from fellow class members”);

Freeman v. Town of Hudson, 714 F.3d 29, 39 (1st Cir. 2013) (focusing on alleged facts and not

whether any particular language was used). In any event, the Third Amended Complaint alleged,

repeatedly, that Zohydro® ER has been unfairly targeted with restrictions not applicable to other


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similarly-situated opioid products, and it went into extensive detail about how and why those

other products were similarly-situated in all relevant respects, including in the eyes of FDA. See,

e.g., Third Amended Complaint ¶¶ 36, 61-65 (describing similarities between Zohydro® ER and

other ER/LA opioids). Of course, Defendants already have recognized these similarities by

invoking a “class wide” emergency involving all opioids as the supposed basis for imposing the

restrictions on Zohydro® ER.

Rather than attacking the legal sufficiency of the Third Amended Complaint, Defendants

appear to be arguing the merits of Zogenix’s “similarly situated” claims. Their arguments must

fail. “As a general rule, whether individuals are similarly situated is a factual question for the

jury” and therefore not appropriate for determination on a motion to dismiss. See McDonald v.

Village of Winnetka, 371 F.3d 992, 1002 (7th Cir. 2004) (citing Harlen Assoc. v. Vill. of Mineola,

273 F.3d 494, 499 n.2 (2d Cir. 2001)); see also Cordi-Allen v. Conlon, 494 F.3d 245, 251 (1st

Cir. 2007) (“To be sure, the ultimate determination as to whether parties are similarly situated is

a fact-bound inquiry and, as such, is normally grist for the jury’s mill.”).

Regardless, First Circuit case law confirms that in evaluating the “similar situation” of

parties for Equal Protection purposes, “[e]xact correlation is neither likely nor necessary, but the

cases must be fair congeners . . . apples should be compared to apples.” Dartmouth Review v.

Dartmouth Coll., 889 F.2d 13, 19 (1st Cir. 1989). As noted above, the Commonwealth has

proclaimed that it has taken action against a class-wide “public health emergency around opioid

abuse.” Defs.’ Opp. to Mot. for Expedited Scheduling, Ex. N at 1. It makes no sense, then, that

Defendants have declined to take action against all opioid products, or even all extended-

release/long-acting opioid products. Instead, the BORIM, BORIP, and BOROPA restrictions

apply solely against Zohydro® ER. Principled regulation combatting a class-wide problem


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would not focus relentlessly on eliminating access to one – and only one – product, either as a

matter of Equal Protection or sound public policy reasonably calculated to achieve the stated

objective of curbing opioid abuse.

Defendants contend that their regulatory fixation on Zohydro® ER is reasonable, relying

on excuses unrelated to sound medical science. Defendants first assert that the regulations are

rationally drawn simply because Zohydro® ER is the first single-entity hydrocodone product and

the first extended release hydrocodone product. Defs. Br. at 9. But FDA already has made clear

that the abuse potential for single ingredient opioids simply does not differ from that of

combination products. See Third Amended Complaint ¶ 62. Indeed, combination products, not

single-entity products, are the most widely abused opioid drugs. Id. Next, Defendants assert that

Zohydro® ER, as an extended-release/long-acting medication, contains higher amounts of

hydrocodone per pill than other combination hydrocodone drugs. Defs. Br. at 9. The concern in

the opioid misuse context, however, is not just dosage: it is potency, considering not just the

amount of drug per pill but the strength of the drug itself. On a milligram-to-milligram basis,

Zohydro® ER is less potent than several widely marketed opioids. See Third Amended

Complaint ¶ 62. Finally, Defendants suggest that Zohdyro® ER is different because it is new to

the market, such that the regulations would not disrupt existing patient plans as they would if

imposed on other opioid drugs. Defs. Br. at 9. This argument misses the point entirely, as the

temporal situation of Zohydro® ER’s market launch has nothing to do with – and does nothing

to improve – the substantive manner in which Defendants have drawn their regulatory classes. In

any event, the regulations do not address any other new opioids that might come on the market

over the coming weeks or months; they single out one: Zohydro® ER.


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In short, Zohydro® ER and other opioid medications, particularly those with extended-

release/long-acting formulations, are “fair congeners” for purposes of misuse risk assessment.

This is why FDA has supported “requirements for the class-wide ER/LA [Extended

Release/Long Acting] opioid analgesics” and expressed concern about “some misinformation

circulating about Zohydro’s safety and potency” that “has caused diversion of attention from

comprehensive policy solutions to focus on a single drug.” Third Amended Complaint Ex. I at

1-3. Zohydro® ER is situated similarly in all relevant aspects to the other members of its drug

class, Cordi-Allen, 494 F.3d at 250-51, and therefore must be “treated alike” by the

Commonwealth, Pagan, 448 F.3d at 34. The Equal Protection Clause will not tolerate

Defendants’ failure to do so.4

III. Defendants’ Final Regulations Violate the Contracts Clause.

Defendants allege that Zogenix has not stated a viable claim under the Contracts Clause

because the impairment of Zogenix’s contracts purportedly is not substantial, and because any

impairment is justified by the regulations’ supposed purpose. Defs. Br. at 10-14. These

arguments, however, are contradicted by Defendants’ own case law.

4 Defendants argue, in a footnote only, that Zogenix’s Equal Protection claim must fail because it has not alleged that Defendants targeted Zohydro® ER based on “personal hostility” or malice. Defs. Br. at 10, n.13. For the same reasons discussed in Zogenix’s prior opposition to Defendants’ motion to dismiss, Defendants’ argument misses the mark. See D.E. 57 at 14-15. As previously noted, multiple First Circuit cases examining class-of-one claims after Buchanan declined to require malice or bad faith as an element. See SBT Holdings, LLC v. Town of Westminster, 547 F.3d 28, 34, 35 n.4 (1st Cir. 2008); Cordi-Allen, 494 F.3d at 250 n.3-4. However, even if this Court were to require an allegation of malice in class-of-one claims, the government’s tenacious and irrational fixation on Zohydro® ER clearly would meet that standard, and the facts supporting that malice are clearly spelled out in the Third Amended Complaint and exhibits thereto. See, e.g., Third Amended Complaint ¶¶ 1, 10, 14-16, 50, 59-61, 66, 96, Ex. W at Tr. 97:8-9.


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A. Defendants’ Regulations Substantially Impaired Zogenix’s Contract Rights.

Defendants argue that because Zogenix operates within a regulated industry, it was on

notice that future regulations may affect its contractual obligations and therefore “any

impairment of a contract is, as a matter of law, insubstantial.” Defs. Br. at 11-13 (emphasis

added). This is a gross misstatement of the law. In deciding whether a contractual impairment is

substantial, courts look to the reasonable expectations of the parties. Houlton Citizens’ Coal. v.

Town of Houlton, 175 F.3d 178, 190 (1st Cir. 1999). The fact that a party operates within a

regulated industry is merely one factor in this analysis; it is not dispositive as Defendants

contend. See Easthampton Sav. Bank v. City of Springfield, 874 F. Supp. 2d 25, 32 (D. Mass.

2012). Rather, the First Circuit has explained that the reasonable expectations of the parties are a

consideration at which courts must “look long and hard.” Houlton, 175 F.3d at 190.

It would not have been reasonable for Zogenix to anticipate Defendants’ regulations.

While Zogenix expected to be subject to federal regulations restricting its ability to enter the

marketplace, it could hardly foresee that after successfully navigating the federal approval

process, that approval would be constructively revoked by a state on grounds considered, and

rejected, by the FDA. In this manner, Defendants’ regulations “impose[d] a completely

unexpected liability in potentially disabling amounts.” Allied Structural Steel Co. v. Spannaus,

438 U.S. 234, 246 (1978) (decided on other grounds but finding substantial impairment where a

state retroactively imposed pension funding charges on companies closing state offices). This

exemplifies the very type of impairment that the Contract Clause was designed to address. See

id. at 245 ( “[t]he severity of an impairment of contractual obligations can be measured by the

factors that reflect the high value the Framers placed on the protection of private contracts…

Once arranged, those rights and obligations are binding under the law, and the parties are entitled

to rely on them.”).


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Defendants attempt to obscure Zogenix’s reasonable expectations by pointing out that

states commonly regulate the handling of prescriptions. Defs. Br. at 11-13. But that is a far cry

from the regulations at issue here, which are targeted solely to one drug, Zohydro® ER, and

which have the stated goal of forcing Zohydro® ER off the market until it is approved in an

abuse-deterrent formulation. In any event, it is well established that in considering a motion to

dismiss for failure to state a claim, a plaintiff’s allegations are taken as true, and the complaint is

viewed in the light most favorable to the plaintiff. United States ex rel. Hutcheson v. Blackstone

Med., Inc., 647 F.3d 377, 384 (1st Cir. 2011), cert. denied, 132 S. Ct. 815 (2011); Clorox Co.

Puerto Rico v. Proctor & Gamble Commercial Co., 228 F.3d 24, 35 (1st Cir. 2000) (“We must

draw all reasonable inferences as to the claim made in the advertisements in favor of

[plaintiff].”). It is not appropriate at this stage for the Court to engage in a factual inquiry

regarding whether Zogenix had reasonable expectations of draconian regulation of the type

presented here.

B. Defendants’ Regulations Are Not Reasonable or Necessary to a Legitimate Public Purpose.

Defendants also assert that even if their regulations substantially impair Zogenix’s

contracts, Zogenix’s Contracts Clause claim fails because the regulations are reasonable and

necessary to a legitimate public purpose. Defs. Br. at 13-14. Not so. In evaluating a regulation

that impairs private contracts, “the State has the burden of demonstrating that the impairment

was both reasonable and necessary to serve an important State purpose.” U.S. Trust Co. v. New

Jersey, 431 U.S. 1, 31 (1977). Blanket statements do not suffice. “[A] state must do more than

mouth the vocabulary of the public weal in order to reach safe harbor; a vaguely worded or

pretextual objective… will not serve to avoid the full impact of the Contracts Clause.” McGrath

v. Rhode Island Ret. Bd., 88 F.3d 12, 16 (1st Cir. 1996).


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The vague pronouncements regarding health and safety espoused by Defendants in their

brief do not satisfy this standard. Defendants do not explain how regulating a single drug that

has never been prescribed will remedy a pre-existing epidemic of abuse that spans across the

entire opioid class. Defendants cannot justify as “reasonable” regulations that fail to address the

hydrocodone and opioid drugs that are actively contributing to the emergency they seek to

remedy. And they do not explain why more moderate regulatory measures, like those taken in

the cases of other high-risk drugs, would not serve their purposes equally well. Because

Defendants have made no showing as to the legitimacy, reasonableness, or necessity of their

narrow and debilitating regulations, their arguments must fail.

Nor are Defendants entitled to the broad deference they claim their judgment demands.

Defs. Br. at 14. Deference to a government’s judgment on these matters is “limited,”

Massachusetts Cmty. Coll. Council v. Com., 420 Mass. 126, 133 (1995), and the determination of

reasonableness and necessity “requires careful judicial scrutiny in all events.” McGrath, 88 F.3d

at 16 (emphasis added). Where, as here, there is “no showing… that [a] severe disruption of

contractual expectations [i]s necessary to meet an important general social problem, [t]he

presumption favoring legislative judgment as to the necessity and reasonableness of a particular

measure simply cannot stand.” Allied, 438 U.S. at 247 (internal quotations omitted).

IV. Defendants’ Final Regulations Violate the Dormant Commerce Clause.

Defendants also fail to meet their burden of establishing that Zogenix has failed to state a

claim under the Commerce Clause, U.S. Const., Art. I, § 8, cl. 3. Defendants wrongly assert that

dismissal is warranted under Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) because the final

regulations fail to impose a burden on interstate commerce. Defs. Br. at 14-18. But the Exxon

case relied upon by Defendants specifically notes that the Supreme Court has held that “the


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Commerce Clause itself pre-empts an entire field from state regulation . . . when a lack of

national uniformity would impede the flow of interstate goods.” Exxon Corp. v. Governor of

Maryland, 437 U.S. 117, 128 (1978).

Indeed, the Supreme Court has held on several occasions that where a market is

inherently nationwide in nature, state restrictions that impose burdens on that market violate the

dormant Commerce Clause. See Gen. Motors Corp. v. Tracy, 519 U.S. 278, 298, n.12 (1997);

CTS Corp. v. Dynamics Corp. of Am., 481 U.S. 69, 88 (1987). Such laws “undermine[] a

compelling need for national uniformity in regulation” by subjecting the nationwide market to

inconsistent regulations and causing a burdensome level of chaos and confusion. Id.

For example, in Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520, 529-30 (1959), the

Supreme Court held that while states typically have great leeway in establishing laws relating to

public health and safety, a state statute regulating the type of mud flap used on trucks traveling

through the state imposed too significant a burden on interstate commerce. Requiring truckers to

change mud flaps every time they entered the state would cause too much delay and

inconvenience; as a result, national uniformity outweighed the state’s traditional power. Id. The

Supreme Court also noted the problems that would arise if different states were allowed to

impose differing requirements on these issues, concluding that the conflict between two (or

more) states’ regulations was impermissibly burdensome. Id.; see also Southern Pacific Co. v.

Arizona ex rel. Sullivan, 325 U.S. 761 (1945) (invalidating state statute regulating train lengths);

Kassel v. Consolidated Freightways Corp. of Delaware, 450 U.S. 662, 671 (1981) (invalidating

state statute governing freight truck length). Here, too, there is a clear need for national

uniformity in how prescription drugs are regulated. That is the very purpose of the FDA.

Defendants’ regulations, on the other hand, impose burdens both inside and outside


22

Massachusetts – and if replicated across multiple states, will significantly burden interstate

commerce.

The restrictions on Zohydro® ER harm patients living in Massachusetts, as well as

patients residing outside of Massachusetts who see health care providers in the state. Third

Amended Complaint ¶ 112. Patients being treated by Massachusetts physicians will have to

jump through unacceptably burdensome hoops in order to obtain FDA-approved medication,

which they would not have to do in other states. In particular, the BORIP final regulations will

effectively prevent national pharmacy chains from dispensing Zohydro® ER, and thus impact

commerce beyond the borders of the state. Id. If Defendants (and other states) are allowed to

enact such burdensome regulations on the pharmaceutical market, it will result precisely in the

patchwork of conflicting state-specific regulation that the Supreme Court decided was

unacceptable in Bibb and Southern Pacific.5 For this reason, Defendants’ actions do not simply

impose a significant burden on Zogenix itself – though of course the burden is most onerous on

Zogenix; rather, the restrictions on prescribing and dispending Zohydro® ER burden the

interstate market for opioids by creating an untenable conflict among state laws. Third Amended

Complaint ¶ 111.

Zogenix does not, as Defendants contend, allege that only it is burdened by

Massachusetts’ actions. See Defs. Br. at 18. Instead, Zogenix properly alleges that the interstate

market for pharmaceutical drugs is burdened at both the micro (i.e., patient) and macro (i.e.,

5 Defendants assert that Zogenix has failed to state a claim because Massachusetts “has not regulated how Zohydro is designed or formulated, but rather how it is prescribed and dispensed.” Defs. Br. at 16. Not so. It is undisputed that the BORIM, BORIP, and BOROPA regulations are targeted and apply only to Zohydro® ER. See id. at 2-3 (acknowledging that regulations apply only to Zohydro® ER). The regulations do not, for instance, restrict prescribing or dispensing other formulations of opioids. Thus, the crux of the state’s issue with Zohydro® ER is with its unique design and formulation, and not with the manner in which it arrives in patients’ hands.


23

nationwide market) level. Third Amended Complaint ¶¶ 111-12. That market includes

pharmacies prescribing Zohydro® ER as well as Zogenix itself.

The so-called putative benefits ascribed to Defendants’ actions are not only unfounded,

but they fly in the face of the careful and considered judgment of the FDA in finding Zohydro®

ER safe and effective. Defs. Br. at 17. Although the stated purpose behind the BORIM and

BOROPA regulations is “to enhance the public health and welfare” by curbing opioid abuse,

there is no reason to believe that the regulations will do anything to accomplish that goal. There

is no way that the regulations could have been designed to curb actual abuse of Zohydro® ER

itself since the product had not entered the market when the state decided unfairly to target the

drug. And contrary to Defendants’ oft-repeated and still-incorrect refrain, there is nothing

unique to Zohydro® ER that makes it especially susceptible to abuse; in fact, Department of

Justice studies have shown that combination products, not single ingredient opioids like

Zohydro® ER, currently are the most widely abused opioid products. Third Amended

Complaint ¶ 62. Now that Zohydro® ER has been on the market everywhere except

Massachusetts for over a year, the data is in: and the incidence of abuse of Zohydro® ER

exceptionally low. Third Amended Complaint ¶ 2. Thus, Defendants should not be able to hide

behind an appeal to public health and safety when the regulations are on their face illogical and

belied by reality.


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CONCLUSION

For the foregoing reasons, Zogenix respectfully requests that the Court deny Defendants’

motion to dismiss.

Dated: November 10, 2014 Respectfully Submitted,

/s/ Steven P. Hollman Kenneth J. Parsigian (BBO # 550770) Steven J. Pacini (BBO # 676132) LATHAM & WATKINS LLP John Hancock Tower, 20th Floor 200 Clarendon Street Boston, MA 02116 Tel: (617) 948-6000 Fax: (617) 948-6001 [email protected] [email protected] HOGAN LOVELLS US LLP Steven P. Hollman (pro hac vice) Susan M. Cook (pro hac vice) 555 Thirteenth Street, N.W. Washington, D.C. 20004 (202) 637-5672 (Telephone) (202) 637-5910 (Fax) [email protected] [email protected] Attorneys for Plaintiff Zogenix, Inc.


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CERTIFICATE OF SERVICE

I certify that the Memorandum of Law in Opposition to Defendants’ Motion to Dismiss Plaintiff’s Verified Third Amended Complaint was filed through the ECF system on November 10, 2014 and will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF).

/s/ Steven P. Hollman


Documents

Nov 10, 2014 Zogenix vs Deval Patrick_Zogenix Opposition to Motion to Dismiss