Federal Trade Commission. Photo: Michael A. Scarcella/ ALM Media

The U.S. Court of Appeals for the Third Circuit on Monday blocked the Federal Trade Commission from reviving a lawsuit accusing a Shire unit years ago of using a web of sham regulatory filings to protect its top-selling gastrointestinal drug.

In a precedential ruling, a three-judge panel of the appeals court upheld a Delaware district court ruling, which found that the FTC's 2017 suit came too late under Section 13(b) of the Federal Trade Commission Act, which requires the agency to show that a defendant “is violating, or is about to violate,” the law with excessive filings meant to improperly suppress generic competition.

The FTC's appeal had asked the court to expand its interpretation of the statutory language to allow a showing that past violations created a “reasonable likelihood” that misconduct would continue in the future.

Though the court declined to directly address the meaning of the statute, Chief Judge D. Brooks Smith wrote that the statute “means what it says,” and held that the FTC was barred from challenging acts that occurred five years before its suit was filed.

“Given the paucity of allegations in the complaint, the FTC fails to state a claim under any reasonable definition of 'about to violate.' Whatever the outer reach of 'about to violate' may be, the facts in this case do not approach it,” Brooks wrote in a 36-page opinion.

The FTC's suit targeted 43 regulatory filings and three federal lawsuits that Shire had filed from 2006 to 2012, after the U.S. Food and Drug Administration changed its standards for assessing bioequivalence.

According to the FTC's complaint, Shire viewed the new rules as a direct threat to sales of Vancocin, then its top revenue-generator, used to treat a certain type of serious gastrointestinal infection. The FTC said Shire's “serial, and meritless” filings lacked any supporting scientific evidence and allowed Shire for years to continue its dominance by delaying FDA approval of generic alternatives to its Vancocin capsules.

The campaign, however, eventually fizzled out, and Shire dropped its product in 2014, two years after generic competition entered the market.

The FTC admitted in court filings that Shire was no longer actively violating the law, but still hinted that it needed an injunction to stop the company from potentially launching a similar petitioning campaign with regard to its hereditary angioedema drug Cinryze.

In his opinion, Smith called those allegations “woefully inadequate” to state a claim against Shire and instead opted to enforce the statute as written.

“Here, the FTC wants to use the most advantageous aspects of each statutory provision—to punish Shire for a past violation using the less onerous enforcement mechanism. But the FTC's attempt to squeeze Shire's conduct into the 'about to violate' category distorts Section 13(b) beyond its intended purpose,” Smith said.

“Section 13(b) cannot accommodate the FTC's interpretation—that 'about to violate' means only that a violation could recur at some future point.”

A spokesman for the FTC did not return a call Tuesday seeking comment on the ruling.

Steven A. Reed, a partner with Morgan, Lewis & Bockius who represented Shire, said the company was “pleased” with the appeals court's ruling but decline to comment any further.

The FTC was represented by agency attorneys Matthew M. Hoffman, Bradley S. Albert, Meredyth Andrus, Thomas J. Dillickrath, June Im, Nicholas Leefer, Joel R. Marcus and Joseph Mathias.

Shire was represented by Reed and Jessica J. Taticchi from Morgan Lewis' Philadelphia office; J. Clayton Everett Jr. and Scott A. Stempel in Washington, D.C., and Noah J. Kaufman from the firm's Boston office.

The case was captioned FTC v. Shire ViroPharma.