Graceway sells prescription benzoyl peroxide, Benziq, for treating acne. River’s Edge markets a benzoyl peroxide product, Benprox, created specifically to compete with Benziq. They’re both available as a 5.25% wash and 5.25% and 2.75% gel. Graceway sued over River’s Edge’s allegedly false and misleading promotion of Benprox as “generically equivalent or otherwise substitutable” for Benziq, and over allegedly false representations on Benprox’s label about active ingredient strength, dosage form, and expiration date.
River’s Edge sent new product submission forms to various pharmaceutical databases, which are key to most retail pharmacy dispensing systems. It was critical to the sale of Benprox that it be listed as a generic or equivalent to Benziq so that it would show up when pharmacists looked up drugs and brand names. As a result of River’s Edge’s submissions, Benprox was linked with Benziq in the First DataBank and Wolters Kluwer databases. River’s Edge argued that its submissions occurred on standardized forms and didn’t include any claims of generic or equivalent status, and didn’t mention Benziq by name. But once the products were linked, it did contact pharmacies and drug distributors to market Benprox as a substitute for Benziq, and entered into drug supply agreements with drug wholesalers to increase Benprox’s market share.
In addition, River’s Edge gave a flyer to Kinray, a wholesale distributor for generic drugs, to give to its customers. It said, “Get your money-saving, quality River’s Edge generic products through Kinray today,” and promoted Benprox as “compet[ing] with” Benziq. River’s Edge argued that the flyer was prepared in a format prescribed by Kinray, which supplied the headline and the table heading “competes with.” It also included a disclaimer that River’s Edge products don’t claim bioequivalence to products they “compete with” unless noted otherwise—a disclaimer that also was on the email transmittal sheet accompanying the new product submission form discussed above.
In a survey of pharmacists, 39% stated that when a database shows that a benzoyl peroxide drug is linked to a specific brand name, it means that the drug is a generic equivalent. River’s Edge argued that the survey was flawed, among other reasons, because it didn’t specify that the question covered unrated, topical products like the parties’. This is an important point: neither party’s products had been tested or approved by the FDA. No NDA for Graceway; no ANDA (used to approve generics for already-approved drugs) for River’s Edge. The FDA publishes the Orange Book of approved drug products with therapeutic equivalence evaluations; neither Benziq nor Benprox is listed and the FDA has not made any equivalency determination.
So: to summarize, what we have is the consequence of a scheme that grandfathered in some drugs. Today, pharmacists (like medical personnel and patients, I imagine) are likely to default to the assumption that FDA standards govern all prescription drugs. If we really took consumer belief seriously, albeit belief generated by an underlying regulatory regime, we would apply FDA standards for approval beyond what the statute actually requires of the grandfathered drugs. And this is precisely the question the survey here might force the court to answer. Can it get out of this conundrum?
The court found that substitutability was governed by state law. The Georgia Pharmaca Practice act allows a pharmacist to substitute a drug that is “pharmaceutically equivalent” to the prescribed brand name product, defined as “drug products that contain identical amounts of the identical active ingredient, in identical dosage forms, but not necessarily containing the same inactive ingredients.” This does not require therapeutic equivalence. By law, if a doctor prescribes a benzoyl peroxide wash or gel without specifying a brand name, a pharmacist shall dispense the lowest retail priced drug product in stock which is, in the pharmacist’s reasonable professional opinion, pharmaceutically equivalent. Based on pricing, that’s Benprox.
As for the dosage form, active ingredient strength, and expiration date, Graceway asserted concerns about the integrity of the manufacturing process (done by Corwood Labs), which underlay much of its argument against substitutability as well. River’s Edge lists a two-year expiration date on its label, on deal sheets to distributors, and on each certificate of analysis. Graceway’s expert found that Benprox failed stability testing due to a change in the drug's color, viscosity, gravity, and benzoyl peroxide strength, falling below specifications six months into accelerated testing. River’s Edge argued that the long-term stability of color, viscosity, and gravity are irrelevant and immaterial; the expert acknowledged that the FDA doesn’t require viscosity and gravity to be measured in a topical benzoyl peroxide product. Moreover, a two-year expiration date is supported by meeting the active ingredient specifications three months into an accelerated test, as Benprox did.
Graceway also argued that River’s Edge misrepresented that some of its products are gels, because Benprox fails to meet the FDA definition of a gel: a “semisolid dosage form that contains a gelling agent to provide stiffness to a solution or a collodial dispersion.” Semisolids don’t flow at low shear stress. But Benprox, because of manufacturing shortcomings, allegedly separates and runs, behaving “more like a lotion than a gel,” and one of River’s Edge’s experts acknowledged that some Benprox gel products “flow like a liquid” and were “pourable.” River’s Edge argued that the FDA Data Standards Manual definition above was irrelevant, and the US Pharmacopeia standard, which is the uniform industry standard, only requires that a benzoyl peroxide gel be in a “suitable gel base.”
Graceway’s expert also examined the certificates of analysis with respect to label strength. Benprox 5.25% wash is expected to contain between 90-110% of the amount listed on the label. But five of the ten batches manufactured by Corwood that he looked at contained over 110%, up to 120%. Three batches of 5.25% gel ranged from 113-119%, while two batches of 2.75% gel contained 120 and 124%.
River’s Edge argued that Graceway didn’t identify an appropriate range of variation for the gel. Also there’s no FDA or USP monograph establishing the appropriate range for a benzoyl peroxide wash. And the FDA doesn’t recognize “wash” as a dosage form at all, so for the court to find such would preempt the FDA’s responsibility. Alternatively, River’s Edge submitted the USP definition of a benzoyl peroxide gel, which used a range of 90-125%, and argued that the court should apply the gel definition to the unrecognized “wash,” which Corwood describes as an opaque gel. Once viewed as a gel, all batches of Benprox wash fall within the USP guidelines of a benzoyl peroxide gel.
The first issue for the court was whether the FDA’s authority under the FDCA precluded its determination of any of these issues. There’s no automatic bar to Lanham Act claims, and in particular courts may evaluate claims of equivalance between non-Orange Book drugs. This case didn’t require the court to interpret the FDCA or FDA regulations in determining truthfulness. However, with respect to the labeling claims, the court wanted to be careful not to get too close to the FDA’s exclusive enforcement domain.
Ultimately, the court found that for it to take a stance on the challenged representations of dosage form, expiration date, and strength would go too far. The dosage form claim was limited to the Benprox gel, premised on the fact that it didn’t meet the FDA definition of a gel. However, the USP standard was the industry standard, and only required a “suitable gel base”; Graceway hadn’t alleged falsity under that definition. The court refused to hold that the FDA definition of a gel is the only acceptable standard for a non-FDA approved drug; that would be a matter for the FDA.
As to strength, the court also rejected Graceway’s claims that Benprox varied too much. The allowable range Graceway alleged was not based on an FDA or USP monograph for a benzoyl peroxide wash, because no such monograph exists, and anyway the FDA doesn’t recognize wash as a dosage form. The court wouldn’t define a dosage form without backing from the FDA or USP. As a result, there was no established range of variation in strength, and no way for a jury to decide whether the percentage in the Benprox wash was appropriate.
As to expiration date, Graceway’s expert conceded that the percentage of benzoyl peroxide three months into accelerated testing was sufficient to warrant a 2-year expiration date. And the other changes in color, viscosity, and gravity were not enough. The FDA doesn’t care about them for topical benzoyl peroxide products, and Georgia law only requires identical amounts of the same active ingredient in the same dosage form for pharmaceutical equivalence. Graceway didn’t demonstrate that color was relevant to those things, and thus to substitutability, and so it didn’t show that color change was material. Viscosity or specific gravity might be relevant to whether Benprox was properly labeled a gel or a wash, but there was no evidence that the difference was material.
As a result, River’s Edge won summary judgment on all the composition/label claims.
What remained was substitutability. The court assumed for the sake of argument that River’s Edge falsely represented generic equivalence, but found that any misrepresentation was immaterial, because there was no evidence that the Kinray flyer affected pharmacies’ decisions to buy Benprox or pharmacists’ decisions to dispense it in place of Benziq. In Georgia, generic or therapeutic equivalence is not required to substitute a drug, only pharmaceutical equivalence. Graceway didn’t provide any evidence that would allow a jury to find that Benprox was not pharmaceutically equivalent to Benziq. Thus, any misrepresentation would not have been material to substitutions. In regards to the New Product Submission form in particular (listing the active ingredient, strength, and dosage form), there was no evidence from which a jury could conclude that any of these representations were false.
Graceway argued that River’s Edge hadn’t conducted any comparison testing to determine the accuracy of its substitutability claim, but it wasn’t River’s Edge’s burden to do so. (If the claim is of the sort that reasonable pharmacists would believe was backed up with comparison tests, then it’s a necessarily implied “tests prove” claim and can be falsified by showing the absence of tests. However, it seems more plausible that a substitutability claim in the pharmaceutical context is reasonably understood to be backed up by some scientific evidence, not necessarily comparison testing, and River’s Edge does seem to have plenty of evidence about the active ingredient in its product, which would satisfy that standard.)
The court granted summary judgment on the Lanham Act claims and the coordinate state law claims. It also rejected the common-law misappropriation claim. River’s Edge gained an advantage because it wasn’t burdened with the expenses of development and marketing, and its business plan was obviously likely to do just that, but it’s not illegal to copy an unpatented article.