Justia Drugs & Biotech Opinion Summaries

Articles Posted in Tax Law
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Mylan regularly submitted abbreviated new drug applications (ANDAs) to the FDA, often including Paragraph IV certifications stating that the proposed generic drug at issue would not infringe valid patents. Mylan incurred tens of millions of dollars in legal fees defending itself in about 120 patent infringement suits, 35 U.S.C. 271(e)(2). Mylan incurred additional, much lower legal fees in preparing the notice letters associated with the Paragraph IV certifications. Mylan's fees were $46,158,403, $38,211,911, and $38,618,993 during 2012, 2013, and 2014, respectively, for preparing notice letters and litigating the ANDA suits. In tax filings, Mylan deducted those amounts in the years incurred. The IRS responded that Mylan could not deduct the nearly $130 million of legal expenses incurred from 2012-2014 and that its additional tax liability was about $50 million.The Tax Court considered expert testimony regarding internal FDA processes and the typical course of dealing between an ANDA applicant and the FDA during the submission process for an ANDA with a paragraph IV certification and held that the legal expenses Mylan incurred to prepare notice letters were required to be capitalized because they were necessary to obtain FDA approval of its generic drugs. The Third Circuit affirmed its holding that the legal expenses incurred to defend patent infringement suits were deductible as ordinary and necessary business expenses because the patent litigation was distinct from the FDA approval process. View "Mylan Inc v. Commissioner of Internal Revenue" on Justia Law

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Alpenglow Botanicals, LLC (“Alpenglow”) sued the Internal Revenue Service (“IRS”) for a tax refund, alleging the IRS exceeded its statutory and constitutional authority by denying Alpenglow’s business tax deductions under 26 U.S.C. 280E. The federal government classified marijuana as a “controlled substance” under schedule I of the Controlled Substances Act (“CSA”), but it is legal for medical or recreational use in Colorado. This appeal was the product of the clash between these state and federal policies: Alpenglow is a medical marijuana business owned and operated by Charles Williams and Justin Williams, doing business legally in Colorado. After an audit of Alpenglow’s 2010, 2011, and 2012 tax returns, however, the IRS issued a Notice of Deficiency concluding that Alpenglow had “committed the crime of trafficking in a controlled substance in violation of the CSA” and denying a variety of Alpenglow’s claimed business deductions under section 280E. Alpenglow’s income and resultant tax liability were increased based on the denial of these deductions. Because Alpenglow was a “pass through” entity, the increased tax liability was passed on to Charles Williams and Justin Williams. The two men paid the increased tax liability under protest and filed for a refund, which the IRS denied. The district court dismissed Alpenglow’s suit under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief could be granted, and denied Alpenglow’s subsequent motion under Federal Rule of Civil Procedure 59(e) to reconsider the judgment. Finding no reversible error in the district court's judgment, the Tenth Circuit affirmed. View "Alpenglow Botanicals v. United States" on Justia Law