In Neurelis v. Brenner, The FDA’s “Indication-Specific” View of Orphan Exclusivity Is (Again) Struck Down
The legal battle over the scope of orphan drug exclusivity continues, as the U.S. Food and Drug Administration (“FDA”) has recently lost a second case concerning the exclusivity provisions of the Orphan Drug Act (“ODA”). In Neurelis v. Brenner, the U.S. District Court for the District of Columbia held that the FDA’s regulatory interpretation of the ODA’s exclusivity provisions violated the Administrative Procedures Act (“APA”), because it was contrary to the statute’s plain text.1 The case is now on appeal to the D.C. Circuit, with briefing currently scheduled to run from September to November of this year. The outcome of that appeal will have significant implications for pharmaceutical and biotech companies developing rare disease therapies—and may finally spur Congress to amend the exclusivity provisions in line with the FDA’s view.
The FDA’s “Indication-Specific” Interpretation of Orphan Drug Exclusivity
The ODA authorizes the FDA to grant orphan-drug designation to a drug being developed for a “rare disease or condition,” i.e., one that affects fewer than 200,000 people in the United States.2 Orphan‑drug designation triggers several statutory incentives and benefits, the most important of which is a seven-year exclusivity period. Thus, if a sponsor of an orphan‑designated drug obtains approval for an indication that is consistent with its designation, the statute directs the FDA not to approve a competitor application for the “same drug for the same disease or condition” for seven years (with limited exceptions not relevant here).3
Although the statutory exclusivity provision broadly refers to a “rare disease or condition,” the FDA has long taken a narrower, “indication-specific” view of orphan exclusivity. Under the FDA’s interpretation, formally promulgated in a 2013 rulemaking, a drug product’s orphan exclusivity is limited to the indication or use for which the drug product was approved.4 However, the agency’s “indication-specific” interpretation was successfully challenged by an orphan exclusivity holder in 2022, in Catalyst Pharms., Inc. v. Becerra, where the Eleventh Circuit held that the plain language of the ODA imposes a broader, “disease-specific” scope of orphan exclusivity. Under the Catalyst holding, orphan drug exclusivity extends beyond the approved indication or use to the entire “rare disease or condition” for which the drug product obtained orphan-drug designation.5 We have previously written about the Catalyst decision and its implications.
The FDA complied with the Eleventh Circuit’s order in Catalyst with respect to the products at issue in that case. Nevertheless, the agency issued a Federal Register Notice in January 2023 announcing that the “FDA intends to continue to apply its regulations tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved.”6 As we predicted at that time, the FDA appeared to be inviting just the kind of challenge that Neurelis has now successfully brought.
Neurelis v. Brenner: Factual Background
Two pharmaceutical manufacturers, Neurelis, Inc., (“Neurelis”) and Aquestive Therapeutics, Inc. (“Aquestive”), both developed novel versions of diazepam to treat acute repetitive seizures (“ARS”), an orphan disease. Both companies obtained orphan-drug designation for diazepam for the “management of acute repetitive seizures.” Neurelis secured the designation in 2015, and Aquestive in 2016.
Neurelis was the first to obtain FDA approval of its product, VALTOCO (diazepam) nasal spray, in January 2020, for “treatment of intermittent, stereotypic episodes of frequent seizure activity … in patients with epilepsy 6 years of age and older.” The FDA granted seven-year orphan drug exclusivity, which is set to expire on January 10, 2027.
In 2019, prior to approval of VALTOCO, Aquestive initially sought approval of its own drug, Libervant (diazepam) buccal film, for the treatment of acute seizures in patients 12 years and older. The FDA declined to approve that application and issued Aquestive a Complete Response Letter in September 2020. Aquestive resubmitted its application in 2021, continuing to seek approval for ARS patients 12 and older. In August 2022, the FDA granted tentative approval of Libervant, on the basis that final approval was blocked by VALTOCO’s orphan exclusivity.
Despite this setback, Aquestive submitted another application for Libervant in June 2023, this time seeking approval only for patients “2 to 5 years of age.” Subsequently, in April 2024, the FDA granted final approval to Libervant for this narrow subpopulation, on the basis that this “indication or use” was outside the scope of VALTOCO’s orphan exclusivity. Under the FDA’s “indication-specific” view, VALTOCO’s exclusivity was limited only to its approved use, i.e., treatment of ARS in adult and pediatric patients six years and older.
The FDA’s approval of Libervant set the stage for Neurelis to challenge the agency and effectively relitigate the same question that the Eleventh Circuit had previously addressed in Catalyst.7
Neurelis v. Brenner: The District Court Decision
Neurelis filed suit against the FDA in May 2024, challenging the FDA’s April 2024 decision to approve Libervant, and the district court subsequently granted Aquestive’s motion to intervene as a defendant. Neurelis’s primary argument mirrored the successful challenge in Catalyst, namely, that the FDA’s “indication-specific” interpretation of orphan exclusivity violates the statutory exclusivity provision’s broader, “disease-specific” language. Specifically, Neurelis argued that its approval for treatment of ARS in patients six years and older blocked approval of Libervant for the treatment of ARS patients, no matter the age or specific subpopulation.8
Aquestive and the FDA countered with two sets of arguments: (1) the text and structure of the ODA support the FDA’s reading of an “indication-specific” scope of exclusivity, because exclusivity is triggered by the approval of a new drug application, which is limited to the particular use or indication for which the drug has been shown to be safe and effective; and (2) a “disease‑specific” reading of the exclusivity provisions would create a perverse incentive for pharmaceutical manufacturers to obtain approval for a “narrow” use or indication, and thereby block competitor approvals for the broader disease or condition. The court was unpersuaded by both sets of arguments and reiterated the holding of the Catalyst decision:
This court wholly agrees with the holding and rationale of Catalyst and adopts it as its own. The plain text of § 360cc(a) is decisive. The FDA approved an application for Valtoco—a “drug designated under section 360bb” to treat the “rare disease or condition” of acute repetitive seizures. Libervant shares the same active moiety as Valtoco, and it too is used to manage acute repetitive seizures. Libervant therefore is the “same drug” as Valtoco “for the same disease or condition.” Accordingly, § 360cc(a) prohibited the FDA from approving the application for Libervant during Valtoco’s period of exclusivity. That is the ODA’s clear command, and the FDA violated it.9
Interestingly, the Neurelis case was decided after the Supreme Court overturned the Chevron deference doctrine in Loper Bright.10 That being said, the D.C. District Court took much the same view as the Eleventh Circuit—effectively at what would have been Chevron Step 1—that the text of § 360cc(a) is unambiguous and thus forecloses FDA’s interpretation. Citing Loper Bright, the district court noted that the FDA and other agencies are generally granted no deference in matters of statutory construction.11 While Loper Bright did recognize an exception where Congress expressly delegates interpretative authority to an agency,12 § 360cc does not appear to contain such a delegation and FDA, notably, did not argue otherwise in its summary judgment briefing.
What’s Next? An Appeal. And Potential Legislative or Regulatory Fixes?
The FDA has appealed the case to the D.C. Circuit, and Aquestive, which intervened in the district court, remains a party to the appeal. A briefing schedule has been issued, which, as currently extended, calls for briefing from September to November of this year.13
Meanwhile, legislation to codify the FDA’s regulatory interpretation has been proposed, but not gained much traction.14 As we noted in our previous Legal Update, similar legislation was initially proposed back in 2022, shortly after the Catalyst decision.
There is another path for the FDA that would be compliant with the statute and existing orphan drug regulations. As we alluded to above, a second drug is not the “same drug”—and therefore is not blocked by a competitor’s orphan exclusivity—if its drug demonstrates clinical superiority to the first drug.15 Clinical superiority can be shown in one of three ways: greater efficacy, greater safety, or a major contribution to patient care.16 As a result, Aquestive could avoid Neurelis’s orphan exclusivity if the FDA determined that Libervant were clinically superior to VALTOCO, at least in the two- to five-year-old subpopulation. The FDA has been reluctant to take this step—instead seemingly holding out for a legislative fix.
In the meantime, orphan drug sponsors will be left in limbo once again regarding the scope of orphan drug exclusivity, as they were following the Catalyst decision.
1 Neurelis, Inc. v. Brenner, 2025 WL 506578 (DDC 2025).
2 21 U.S.C. 360bb. As used in the ODA, the statutory term “drug” includes both drug and biological products.
5 Catalyst Pharms., Inc. v. Becerra, 14 F.4th 1299, 1311 (11th Cir. 2021).
6 Clarification of Orphan-Drug Exclusivity Following Catalyst Pharms., Inc. v. Becerra, 88 Fed. Reg. 4068 (Jan. 24, 2023).
7 To further complicate matters, the FDA granted Aquestive its own period of orphan exclusivity for the use of diazepam in ARS patients two to five years of age. On that basis, the agency also concluded that a second application from Neurelis for use of VALTOCO in patients two to five years of age was blocked from final approval. Given the District Court’s decision in Neurelis, and the subsequent vacatur of the Libervant approval, the FDA has ultimately granted approval to VALTOCO for pediatric patients aged two to five.
8 Neurelis at *6. Neurelis also argued that (1) the FDA impermissibly approved Libervant with labeling for adults and older pediatric patients, despite the narrow indication in patients two to five years old, and (2) the FDA acted arbitrarily and capriciously to approve Libervant with much less data than the agency required of Neurelis for the same pediatric subpopulation. Given the court’s holding, these arguments became moot.
10 Loper Bright Enterprises, et al. v. Raimondo, Secretary of Commerce, et al., 603 U.S.C. 369 (2024).
11 Neurelis at *5 (citing Loper Bright at 387, 394).
12 Loper Bright, 603 U.S. at 394.
13 See Order, Neurelis, Inc. v. Makary, et al., Case No. 25-5125 (D.C. Cir. June 27, 2025).
14 See, e.g., S. 891, 119th CONGRESS, 1st Session (Mar. 6, 2025).
