Grandfathered pediatric drugs: compare and save, or compare and be deceived?

PediaMed Pharmaceuticals, Inc. v. Breckenridge Pharmaceutical, Inc., 2006 WL 544525 (D. Md.)

This case involves an unusual situation: competing prescription drugs that haven’t been through the FDA’s extensive evaluation and testing scheme, because the active ingredient has been used since before that scheme existed. Plaintiff PediaMed focuses on developing medicines for children. It makes Viravan-S (active ingredients: a nasal decongestant and an antihistamine), using a patented process that allegedly allows for sustained release, masks the taste better, and results in fewer impurities. PediaMed has heavily promoted Viravan to doctors.

Defendant Breckenridge is a generic drug company that produces a generic version of Viravan under the name . V-Tann’s advertising materials state: “Compare the active ingredients in Viravan-S.” Defendant markets primarily to drug wholesalers, distributors, chain drugstores, and pharmacists. The labels on both products list the same amounts of the two active ingredients.

PediaMed asserted that the two medications are not pharmaceutically equivalent because of differences in the amount of active ingredients and the variation from ideal accepted by Breckenridge (80%-120% of the label amount in any given batch, while PediaMed accepts only 90%-110%). Also, Viravan is made with United States Pharmacopeia/National Formulary ("USP")-grade ingredients, while V-Tann contains non-USP grade active ingredients – except that, the court noted, there are no USP standards for these active ingredients, so Viravan’s active ingredients are also non-USP. Moreover, the manufacturing processes differ. Defendant didn’t test V-Tann for bioequivalence before launching it.

Maryland law follows the FDA, whose Orange Book allows substitution of a generic for a brand name drug if there’s therapeutic equivalence, which requires the same active ingredients, dosage form, method of administration, and strength or concentration. The generic has to meet the same quality and purity standards, but may differ in such characteristics as shape, flavors, preservatives, and expiration date. However, V-Tann isn’t in the Orange Book, since Viravan was grandfathered into the pharmacopoeia. If the original/brand name drug is grandfathered, the drug that claims to be the generic equivalent doesn’t have to go through an abbreviated new drug application (requiring a demonstration of therapeutic, pharmaceutical, and bioequivalence), and thus doesn’t end up in the Orange Book.

PediaMed alleged false advertising and unfair competition under the Lanham Act, common law unfair competition, and tortious interference with its business relationships with distributors, pharmacists, etc. It also requested a declaratory judgment that pharmacists may not lawfully fill prescriptions written for Viravan with V-Tann.

The FDA has sole and exclusive jurisdiction to enforce the FDCA. But the federal courts have jurisdiction over false advertising claims. Which is this? Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130 (4th Cir.1993), the relevant circuit precedent, is not quite on point because it dealt with a non-grandfathered drug, as to which the FDA had made a determination of equivalency. The court found that PediaMed could litigate whether Breckenridge’s claims of generic or pharmaceutical equivalence are false because that doesn’t require the court to interpret any FDA rules or reject an FDA determination. However, PediaMed’s claims based on the argument that the V-Tann label is literally false because it misstates the amount of the active ingredient fall within the FDA’s exclusive jurisdiction over labeling and are precluded. Breckenridge’s unclean hands argument, which alleged that Viravan was poorly manufactured and adulterated, suffered the same fate.

But Breckenridge had another unclean hands argument: PediaMed falsely advertised Viravan – though its advertising suggests children prefer Viravan, PediaMed never conducted any testing to support this claim, and it uses fictitious testimonials. The court found that Breckenridge hadn’t shown it was harmed by the false advertising, so it couldn’t invoke the unclean hands defense. (This seems weak to me: unless there are a lot of competitors in the market, Breckenridge seems like the obvious target of PediaMed’s superiority claims; if those claims are false, Breckenridge has suffered harm from them.)

PediaMed argued that Breckenridge’s “compare” statement was a literally false claim that the two drugs are equivalent and pharmacists may substitute V-Tann for Viravan at will. PediaMed also submitted survey evidence showing that, when 150 pharmacists reviewed Breckenridge’s specification sheet, which states “compare the active ingredients,” 51.3% believed the two drugs to be pharmaceutically equivalent.

While PediaMed argued that all four differences mentioned above make the drugs non-equivalent, its expert witnesses only opined that the different amounts of active ingredient and different specification ranges mattered.

Breckenridge argued that its claims were true. The manufacturing process concededly starts with more active ingredient than stated on the label, but time and loss during processing account for that; in testing, the actual amount of active ingredients in the finished product ranged from about 110% to 114% of the label. As to specifications, Breckenridge argued that, given that the active ingredients are not in the USP, other federal regulations provide authoritative guidance; those regulations require a drug to have at least 100% of its stated active ingredients. For a non-USP drug, only a manufacturer can determine appropriate ranges, because of variations in production processes; Breckenridge argued that its range was within industry standards. In addition, it argued that PediaMed had no tests to show that PediaMed’s process was unique or distinguishable from standard manufacturing processes.

Finally, Breckenridge argued that “compare” is not literally false because it has many possible meanings, citing Zoller Labs., LLC v. NBTY, Inc., 111 Fed.Appx. 978 (10th Cir.2004) (there is more than one reasonable interpretation of "compare to the ingredients"). The court distinguished Zoller, however, because it involved advertising claims made to the general public, not claims made to pharmacists, who may understand the word "compare" as having certain specific connotations.

Thus, the court concluded that there was a dispute of material fact. Both sides’ evidence showed that some deviation from the amount stated on the label is acceptable, although the parties dispute what is the acceptable amount of deviation, how to calculate it, and whether the end result allows Breckenridge to claim that V-Tann is equivalent and therefore substitutable.

PediaMed’s request for a declaratory judgment that it’s unlawful for pharmacists to substitute V-Tann for Viravan was inapt because it hadn’t named any pharmacists in the suit.