Pancreatic enzyme can't dissolve Lanham Act claims

Axcan Scandipharm Inc. v. Ethex Corp., 2007 WL 3095367 (D. Minn.)

Plaintiff makes the Ultrase line of pancreatic enzyme supplements. The supplements contain enzymes that some disease sufferers need to break down nutrients in food; Ultrase has three formulations, MT12, MT18, and MT20, which correspond to the amount of lipase (an enzyme) in each. Defendants sell “generics” for Ultrase called Pangestyme and Lipram. Plaintiff alleged that neither Pangestyme nor Lipram was truly a “generic equivalent” to Ultrase.

In addition to Ultrase, there are two other major-brand name lines – Creon (by Solvay) and Pancrease (by Ortho-McNeil) – which also come in different formulations, differing from Ultrase in the amounts of amylase and protease (other pancreatic enzymes) they contain.

In 1999, Lipram came on the market as a “generic equivalent,” in three formulations. In 2000, Pangestyme also came on the market in three formulations, UL12, UL18, and UL20. Plaintiff alleged that defendants advertise their drugs as “identical in formulation to Ultrase” even though they contain different amounts of lipase and other pancreatic enzymes from Ultrase. Separately, plaintiff alleged that the Defendants invite pharmacists and others to compare the labeled ingredients in their drugs with Ultrase, and thereby imply that those drugs are “generic equivalent substitute[s] for Ultrase,” when in fact they contain different formulations.

Solvay sued defendants over similar conduct in 2003, eventually culminating in a jury verdict for defendants. Solvay’s lead counsel represents plaintiff here.

Defendants argued that the FDA has exclusive jurisdiction over the claims at issue. Relying heavily on the Solvay reasoning, the court disagreed. This is a slightly unusual situation because none of the drugs at issue are FDA-approved; though in 1995 the FDA announced that NDA/ANDA approval would be required of all pancreatic enzyme drugs, it permitted them to remain on the market while fleshing out the approval process. (Comment: it’s been 12 years. How fleshy does the approval process have to be?)

So naturally defendants’ drugs haven’t been tested, approved, compared, or otherwise evaluated by the FDA, any more than plaintiff’s have been. Defendants argued that only the FDA can determine whether their drugs are “equivalent” to Ultrase, if “equivalent” means pharmaceutical and bioequivalence. (Comment: it’s interesting, though perhaps not particularly surprising, that the FDA hasn’t jumped in to claim preemption in Lanham Act cases the way it’s been doing in consumer class action cases, though logically one might expect the same arguments to apply.)

The court didn’t buy it. Plaintiff wasn’t claiming a false implication of equivalence “in the FDA sense --that is, bioequivalent and pharmaceutically equivalent to Ultrase.” Rather, plaintiff was arguing that defendants’ claims were false under “the proper market definition[s]” of “generic equivalents” and “substitutes.” (This doesn’t really get at the underlying issue – that the market, reasonably enough, defines these terms with reference to the FDA standards that usually govern – but I think it’s the right result anyway.) Plaintiff’s claims don’t require the court to make the FDA’s judgments for it, nor do they concern safety and efficacy (though presumably differences in the products would enter into the deceptiveness and public interest inquiries).

The court further noted that plaintiff could rely on the FDA’s definitions of bioequivalence and pharmaceutical equivalence in seeking to prove its claims, in order to establish the standard that defendants allegedly failed to meet.

On other matters, the court applied a six-year statute of limitations borrowed from state law to bar claims prior to June 1, 2007 based on the date plaintiff’s complaint was filed. It rejected plaintiff’s invocation of the continuing violation doctrine, holding that the conduct here was a series of repeated identical violations, each of which could have been separately challenged, rather than one incessant violation.

The court held off on the question of whether res judicata applies. Defendants argued that plaintiff was “virtually represented” by and in privity with Solvay. In assessing virtual representation, courts look at (1) identity of interests between the parties, (2) the closeness of the parties’ relationship, (3) participation in the prior litigation, (4) acquiescence in the prior litigation, (5) whether the present party “deliberately maneuvered” to avoid the effects of the first case, (6) “adequacy of representation” --whether the first litigant had a “strong incentive” to protect the current litigant’s interests, and (7) whether a public-law issue or a private-law issue is raised (if the former, the concern is that res judicata is necessary to prevent an endless stream of plaintiffs).

The problems here came especially in (6) – plaintiff competes with Solvay and thus their interests are not necessarily aligned; the same rationale creates uncertainties about (2). Use of the same counsel is not dispositive. And there are other factual uncertainties about other elements.

Likewise, the court deferred consideration of defendants’ laches argument. Though plaintiff did wait out the conclusion of litigation on a similar claim, it argued that it was attempting to convince defendants to stop their false advertising. Moreover, it will be difficult for defendants to demonstrate prejudice, a showing of which depends on the idea that they would have changed their conduct had they been sued earlier. Given that they continued making these claims throughout the Solvay litigation, there’s good reason to think that they can’t demonstrate any change in their position due to plaintiff’s delay.

Defendants argued that claims based on “compare to” and “alternative to” ads should be dismissed because such ads are acceptable comparative advertising as a matter of law. This didn’t work. The court discussed other cases that had allowed “compare to” false advertising cases to proceed; one case held that “compare” makes an implied establishment claim, suggesting that a product’s performance has been tested and verified. The idea of an implied establishment claim makes sense for drugs and supplements; with house brand shampoos, the implied claim is more likely just equivalence of the relevant active ingredients and a similar smell. Here, plaintiff alleges that inviting pharmacists and others to “compare” the drugs falsely suggests equivalence in efficacy or ingredients.

Likewise, “alternative to” ads may violate the Lanham Act if they falsely suggest that drugs have the same active ingredients in the same quantities – again, something that makes perfect sense in the drug context, whereas pear sauce might be a perfectly good alternative to apple sauce.

Finally, the court rejected defendants’ argument that plaintiffs had failed to plead with particularity under Rule 9(b). As the court pointed out, there is a split over whether the Rule even applies to Lanham Act claims. But assuming that it did apply, plaintiff’s allegations satisfied the heightened pleading requirement.