Midlothian Laboratories, L.L.C. v. Pamlab, L.L.C., --- F.Supp.2d ----, 2007 WL 2458409 (M.D. Ala.)
Time for more fun with the FDA! Plaintiff makes generic versions of prescription drugs and vitamins. Defendant is a competitor and owns a federal registration for FOLTX for a folic acid/B-complex medical food supplement, marketed to physicians for the treatment of B12 deficiency. Plaintiff sued for false advertising and to cancel defendant’s mark. Defendant counterclaimed for false advertising.
Foltx is a “medical food,” defined by law as a food formulated to be used under a doctor’s supervision for dietary management of a disease or condition with distinctive nutritional requirements. Under FDA rules, “[m]edical foods do not have to include nutrition information on their labels, and their claims do not need to meet specific standards.” As a result, medical foods are much less regulated than other foods intended for general consumption. The FDA considered regulating them using drug-type standards, but gave up in 2004 for lack of resources. So medical foods are also much less regulated than prescription drugs.
Plaintiff began marketing a medical food with the same amounts of folic acid, B12, and B6 as Foltx, calling it a “generic equivalent” and “bioequivalent” to Foltx. Rather than marketing to doctors, plaintiff markets to drug wholesalers and retailers including pharmacy chains. They may – and in some cases by law must – substitute a generic product when filling Foltx prescriptions.
The manufacturer of plaintiff’s products analyzed each batch and measured the active ingredients; plaintiff never asked for a report on any batch until after March 2005, more than 14 months after it had begun marketing. At least one test revealed that one of the active ingredients was missing.
In mid-2004, defendant launched a new version of Foltx with twice as much B12, allegedly because the new formulation would better meet patients’ nutritional requirements. It discontinued the old formulation and recalled the remaining stock, replacing it with Foltx labeled “Improved” and “New Strength.” It mailed explanatory letters to 53,000 pharmacists and 57,000 doctors and published ads in industry media such as Pharmacy Times. The letters announced “an important improvement” based on “SAFETY and EFFICACY,” cautioning that all new and refill Foltx prescriptions should be filled with “New Strength Foltx.” After new Foltx was introduced, two major pharmacy chains stopped buying plaintiff’s product.
Meanwhile, a related company, Red River, began advertising itself as the “sole authorized generic licensee” for Foltx, claiming that its products Folbalin and Folbalin Plus (with the same active ingredients as old and new Foltx, respectively) were made by the same company with the same formula and specifications as Foltx – the manufacturer’s own “generics.”
Plaintiff alleged that defendant abandoned the Foltx mark because the reformulation is too different to be sold under the same mark. Abandonment by this route is difficult and usually requires a product so wholly different as to defraud the public. Variation in product composition is “inevitable,” depending on discoveries or changed conditions. Doubling the amount of an active ingredient was not the type of “extreme discontinuity” that could justify an abandonment finding, at least not without evidence that it transformed the product. Plaintiff pointed out that precedents dealing with non-pharmaceutical products might be too broad, because changes in a prescription formulation could have severe consequences for patients. Here, there was no evidence that this change could have severe consequences; plaintiff’s own expert pointed out that B12 doses of this size were not known to have negative effects.
The FDA, plaintiff argued, had never allowed a company to market two prescription products with different amounts of active ingredients under the same name. But the court refused to determine whether the FDA would consider new Foltx misbranded; plaintiff could petition the FDA for such a finding.
Plaintiff also argued that using the same name for new Foltx and telling pharmacists to fill all old Foltx prescriptions with new Foltx was false advertising, causing consumer confusion about whether it was the same product. Product names can be false advertising – Mylanta Night Time Strength antacid and BreathAsure breath freshener are examples from the Third Circuit. The court found that, “if a mark has not been abandoned, then as a logical matter, a company’s rightful continuing use of that mark, alone, cannot constitute false advertising, because no deception is involved in that continuing use.”
Still, plaintiff contended that the letter to pharmacists was misleading because doctors had written existing prescriptions with old Foltx in mind, so there was no reason to think they’d want the prescriptions filled with new Foltx. The court found that such substitutions could cause valid safety concerns, but that plaintiff’s commercial interests were not harmed by those safety concerns and plaintiff couldn’t act as a public avenger. “In other words” defendant’s instructions weren’t misleading about Foltx “as a product” and thus not actionable. Comment: What? Plaintiff’s commercial interests were quite obviously harmed when defendant told pharmacists they could no longer substitute its generic product; the potential safety concerns are one reason the switch is arguably deceptive.
The court found that, because defendant recalled original Foltx, the statement might not be misleading in any way, because new Foltx was the only version of the product available. (Except for plaintiff’s product, which was – at least on this analysis, but see below – the generic version of old Foltx. A pharmacist who filled a post-recall prescription – which, not incidentally, would have been written for old Foltx -- with plaintiff’s product would be doing the same thing as a pharmacist who filled a pre-recall prescription with plaintiff’s product.)
Plaintiff challenged two other statements: “(1) pharmacists violate the law when they dispense [plaintiff’s] product in response to prescriptions written for new Foltx and (2) new Foltx is safer and more effective than original Foltx.” The first is certainly an important statement, but there was no evidence that defendant actually said it. The second was an argument in the alternative: if the new product isn’t different enough to cause deception when it’s called by the old name, then claims of improvement are false and misleading. The court thought there was a middle ground: a change might be irrelevant for trademark continuity but relevant in a pharmaceutical context.
So, how to analyze defendant’s claims that new Foltx was put on the market for “SAFETY and EFFICACY” reasons? The court found no need to analyze falsity because there was no evidence of materiality. In many circumstances, the court noted, representations about safety and efficacy automatically satisfy the materiality element of a false advertising claim, especially in the context of drugs and medical foods, where consumers are primarily concerned with safety and efficacy.
Here, however, the court found that defendant’s claims can’t be material to consumers’ purchasing decisions, because new Foltx is the only Foltx on the market, and plaintiff’s product isn’t a market competitor. Because plaintiff only markets to pharmacists, doctors never choose between Foltx and the “generic” version; plaintiff’s product is no longer generic for Foltx. Pharmacies may have stopped doing business with plaintiff, but they would have done so once defendant changed its formula no matter what the advertising explanation for the change was. Comment: This seems more like a proximate cause argument than a materiality argument, but it is certainly an unusual situation.
Defendant counterclaimed for false advertising in plaintiff’s use of “bioequivalent” and “generic equivalent” in its ads. The basic argument: those terms have specific meaning in the industry, derived from their specific meaning established by the FDCA. Any use of those terms necessarily implies that tests have proved such equivalence, but plaintiff never performed tests. Plaintiff’s claims were therefore literally false – or at best misleading, because they induced pharmacists to violate state laws on prescription substitutions.
So we plunge once again into the murky waters dividing the FDA’s jurisdiction from claims actionable under the Lanham Act. A generic prescription drug will only be approved by the FDA if the maker shows therapeutic equivalence – both pharmaceutical equivalence (composition of active ingredients) and bioequivalence (absorption in the body). The FDA publishes approved generic products in the Orange Book; some states only allow pharmacy-based drug substitution when a generic is in the Orange Book, while others require therapeutic equivalence but do not specifically mention the Orange Book. But medical foods are outside the Orange Book regime.
To avoid preemption, a Lanham Act claim must be resolvable without invoking the FDA’s jurisdiction and expertise. A party can use the FDA’s standards to establish falsity as long as no interpretation of those standards is required. So, a claim of bioequivalence is actionable because that claim can be falsified by showing that tests disprove (or fail to prove) it. However, defendant can’t use the mere fact that plaintiff’s product isn’t in the Orange Book to establish falsity.
Defendant argued that a claim of “generic equivalence” requires the same substantiation as listing in the Orange Book: both pharmaceutical and bioequivalence. Here, defendant offered an industry survey showing that pharmacists don’t differentiate prescription dietary foods from prescription drugs. In fact, the parties agreed that pharmacists and doctors are deeply confused about, or altogether ignorant of, the medical foods category – the CEO of plaintiff’s parent company estimated that 95% of them didn’t know Foltx’s category (and he himself misidentified Foltx as a “nutritional supplement,” which is actually a name for a whole different category of products). But the survey didn’t isolate consumers' opinions about the relevant standards for substituting one medical food for another. Plaintiff argued that defendant’s ads led pharmacists to expect that the FDA had approved equivalence – but any claim that FDA approval was required is preempted by the FDCA.
This leaves us with the usual gap between what the FDCA requires and what people believe. People routinely assume that the FDA regulates more, and more vigorously, than it actually does. They are more likely to assume that advertisers wouldn’t be allowed to make untrue or unproved claims when it comes to food and drugs, and thus more vulnerable to deception.
The court pointed out that defendant relied on the FDA’s regulatory gaps in its own business dealings – an ad for Folbalin stated that Red River was the “sole authorized generic licensee” for Foltx, but explicitly stated that there were no FDA requirements for therapeutic equivalence. As a result, the ad continued, plaintiff’s product shouldn’t be considered a generic of Folbalin or Foltx. As the court noted, this fails to explain how Folbalin could be considered generic to Foltx, since there’s no indication it’s been tested for therapeutic equivalence. Red River – “which seemingly is nothing more than [defendant’s] own operation to create a generic” – is using the regulatory loophole for medical foods, “while at the same time--and in the same advertisement--attempting to close that loophole to exclude competitors by suggesting that their products must be rated therapeutically equivalent to be considered generic.”
Okay, so is therapeutic equivalence the proper standard for whether a substance is “generic” for another substance outside the drug regulatory scheme? Yes, at least if defendant can show that pharmacists understand “generic equivalence” to imply therapeutic equivalence. That would mean that the falsity claim was based on market conditions, not violation of FDA regulations. (Though the market is itself responding to expectations created by FDA regulations of pharmaceuticals.)
Relatedly, what kind of claim is “bioequivalent”? The court found that the term was necessarily a “tests prove” claim, inherently implying substantiation. Thus, it could be falsified either by evidence that the products weren’t bioequivalent, or by evidence that plaintiff’s tests didn’t prove bioequivalence. The FDA typically requires in vivo testing for bioequivalence, but of course that doesn’t apply to medical foods because nothing does. Defendant didn’t offer any evidence of the proper testing standards, but plaintiff itself argued that pharmaceutical equivalence could allow pharmacists to presume bioequivalence. And pharmaceutical equivalence was where plaintiff was in big trouble.
As noted above, one of the active ingredients was missing in at least one test of plaintiff's product, thus flunking pharmaceutical equivalence and bringing the whole “bioequivalent”/“generic equivalent” house down, preventing summary judgment.
Plaintiff argued that, regardless, defendant couldn’t show any actual harm, because other distributors of generic versions of Foltx would have captured the lost sales (recall that many states require substitution of a generic where available). But the court refused to grant summary judgment on this point. Unlike products competing through advertising, where harm can often only be circumstantially shown, plaintiff’s product sold because pharmacists substituted it for Foltx, allowing for a very clear picture of damages.
There is a factual dispute about damages if other generic competitors would have filled in the gaps, but that is for a trial to resolve. Given that defendant showed actual injury, it doesn’t have to prove the hypothetical negative about alternative sources of injury.
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