Snowball effect of pharmaceutical snow job

Solvay Pharmaceuticals, Inc. v. Global Pharmaceuticals, 2006 WL 626079 (D. Minn.)

Defendant Global markets a (purported) generic alternative to Solvay’s pancreatic enzyme supplements, which are used to treat cystic fibrosis patients and others who don’t produce the proper enzymes to digest food. An enteric coating is supposed to ensure that stomach acid doesn’t entirely use up the enzyme activity of the supplement before it reaches the duodenum, which is where the enzymes are important. Solvay argues that manufacturing differences in formulation, blending, and coating of supplements can lead to different enzyme activity and release rates, even if they are truthfully labeled as containing the same enzyme content.

Global’s Lipram CR5, CR10, and CR20 compete with Solvay’s Creon 5, 10, and 20, respectively. Global worked to have major drug information databases characterize Lipram-CR as a generic substitute for Creon. Global also told pharmacists that Lipram is “equivalent” to, a "pharmaceutical alternative" to, a "true alternative to," and "the generic form" of Creon. (Although an NDA is pending for Creon, the products remain on the market; the FDA banned OTC sales of pancreatic enzyme supplements in 1995, while allowing prescription products to remain on the market until 2008, pending FDA approval.)

Global argued that it never advertised Lipram as an FDA-approved generic, bioequivalent, "therapeutically equivalent," or "pharmaceutically equivalent" to Creon. However, Global representatives testified that people in the business understand the terms "pharmaceutical alternative" and "generic alternative" to mean the same thing, and its pharmacy expert also stated that generic substitution required therapeutic equivalence. Moreover, Solvay’s surveys of retail pharmacists indicated that 89% of pharmacists agreed that a generic substitute must be therapeutically equivalent to the name-brand product and 93% agreed that the generic must be bioequivalent to the name-brand product. The court denied Global’s motion for summary judgment on literal falsity.

As is common in generic substitute cases, the court found evidence that the relevant consumers – here, pharmacists – understand "pharmaceutical alternative," "alternative," "generic alternative" and the like to mean equivalence. (The court’s acceptance of evidence of meaning to consumers is just another example of the fundamental unsupportability of the analysis in Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883 (7^th Cir. 2000), which rejected consumer surveys about the meanings of particular words. For false advertising cases, a word means what consumers think it means.)

There was undisputed evidence throwing equivalence into doubt: Although Global markets Lipram as an "alternative" to “name-brand supplements (namely, Creon, Pancrease, and Ultrase), and the labeling specifies that these supplements are specially formulated to match each name-brand drug, the supplements all contain exactly the same active ingredients, but each wears a different name and label.” The court continued, in a vein that seems unpromising for Global: “Considering that fact questions exist as to whether Lipram even contains the same ingredients as Creon, the Court finds that genuine issues of fact exist as to whether Lipram could be as safe and effective as Creon or an alternative, substitute, equivalent, generic alternative, or comparable to Creon.” Likewise, there were factual issues as to whether Lipram had caused therapeutic failures and was an unsafe substitute.

As to damages, Global contended that Solvay’s surveys did not show that pharmacists had engaged in automatic substitution (substitution without consulting a physician, which some states allow pharmacists to do based on their own judgments about drug equivalence) because of Global’s advertising. Instead, doctors are proactively substituting Lipram for Creon. Certainly, Global argued, there wasn’t enough evidence to support Solvay’s claim for $60 million in damages. Solvay disagreed, pointing to its surveys showing many prescribing physicians claimed never to have heard of Lipram, indicating that substantial automatic substitution was going on.

Solvay also argued that Global’s false advertising was transmitted to physicians via pharmacists, who convinced the physicians to authorize substitution, so that even “non-automatic” substitution could be blamed on Global. The court adopted Solvay’s view of this “snowball effect”: sales of Lipram caused in fact by Global’s false representations could be counted as part of Solvay’s damages, even if the prescribing physicians had the false claims retransmitted by pharmacists.

Questions about the snowball theory: were the pharmacists engaging in commercial speech independently regulable under the Lanham Act or consumer protection laws? (Does it matter that the pharmacies make more profit from generics than name brands?) The court pointed to evidence that using pharmacists as de facto detailers for physicians was part of Global’s business plan – but suppose this was an expected but not specifically intended effect of Global’s marketing; would Global still be responsible for physicians’ prescriptions? Suppose, as seems likely, there’s a bit of a telephone effect when pharmacists promote Lipram to physicians; is Global responsible for the distortions added by pharmacists? It seems that their distortions could constitute false advertising – even if Global’s claims are strictly true, if they become misleading when transmitted through pharmacists, then all the harms of false advertising are present. If this bothers you, what’s the proper role of intent in false advertising cases generally? Alternatively, does the fact that the court uses the snowball theory to support a damages claim, but not as part of the basic false advertising case, provide a proper limiting principle?

There was some good news for Global: the court also denied summary judgment on its counterclaim for tortious interference with business opportunity. Global claimed that Solvay interfered with Global's relationship with the Cystic Fibrosis Foundation ("CFF"). Although Global had been working with the CFF “to determine whether Lipram would be stocked and listed on the formulary of its for-profit pharmacy subsidiary, Solvay hijacked its efforts by falsely notifying the CFF that generic pancrelipase products were illegal and subject to regulatory action.” Solvay was involved in drafting a memo sent to CF care centers and physicians nationwide that called generic pancrelipase products “illegal,” even though it knew that the FDA did not believe the marketing was illegal. Moreover, Solvay donated money to the CFF to ensure it would drop Lipram from its pharmacy. Though Solvay disputed these facts and added context of its own, the court found that a jury could decide in Global’s favor (presumably only if it rejected Solvay’s claims).