new Posner opinion on the meaning of literal falsity

Schering-Plough Healthcare Products, Inc. v. Schwarz Pharma, Inc., -- F.3d --, 2009 WL 3460808 (7th Cir.)

As entertaining as a Posner opinion always is, I fear this one has more than enough casual language in it to do mischief to the law; it will likely be much cited, whether for heat or for light. Discussion of opinion below, dismissing Schering’s false advertising claims. Schering sells an OTC polyethelyne glycol 3350 laxative, MiraLax. Defendants sell prescription polyethelyne glycol 3350, which has created a problem under FDA rules. I will let Posner explain:

MiraLAX was originally a prescription drug too. After the patent on it expired, the Food and Drug Administration approved defendants' ANDAs (Abbreviated New Drug Applications), which authorized them to sell a generic version of the drug. Later the FDA approved an over-the-counter version of MiraLAX but required that the label contain a warning to "use [for] no more than 7 days." Constipation that lasts longer than that may be symptomatic of a serious medical condition, so a consumer who wants to use a laxative longer should do so under a doctor's supervision.

The Food, Drug, and Cosmetic Act requires that the labeling of the generic drug be the same (with immaterial exceptions) as that of the original drug-- the "pioneer" drug, as it is called, which in this case was the prescription-only version of MiraLAX. And if the generic drug is approved for use as a prescription drug, the label of the generic drug must "bear, at a minimum, the symbol 'Rx only.' " The labels of the defendants' generic versions of MiraLAX do bear that symbol.

Problem: defendants’ labels and package inserts differ from Schering’s in omitting the 7-day warning and in saying “Rx only.” On the one hand, those are required differences; on the other, the labels are required not to differ! Schering thus argues that the labels are false; they say that polyethylene glycol 3350 is sold only by prescription, but in fact there’s an OTC version. (E.g., insert language: “Polyethylene Glycol 3350, NF Powder for Oral Solution is a prescription only laxative which has been prescribed by your physician to treat constipation.”) “And should the patient’s condition change, so that he didn’t need to use a laxative for more than seven days, he might be unaware that he could switch to an over-the-counter version of the laxative that had been prescribed for him.”

The FDA is currently conducting a proceeding to determine whether defendants’ drugs are now misbranded. Because the FDCA doesn’t allow both Rx-only and OTC versions of the same drug to be sold simultaneously, the proceeding encompasses the issue of whether there’s a meaningful difference between the pioneer and the generic. Defendants argue (rather unconvincingly, it seems to me) that the drugs are different because their versions aren’t subject to the 7-day warning.

This is a matter for the FDA. The FDA may determine the generic can’t be sold any more if the drugs are the same, or it may decide that the label needs to change if they’re different. Posner thought that the FDA might or might not agree with Schering’s argument that the defendants’ labels “occlude, in the mind of the consumer, the existence of its over-the-counter version of the drug.” The FDA might just care that the labeling induces doctors, pharmacists, and consumers to use the drug safely. “It is not obvious that the goal of protecting consumers is furthered by making sure that they are aware of the existence of an over-the-counter equivalent, and, if it is not, there would be no conflict between the FD & C Act and the Lanham Act. But we do not know, and see no need to guess while the misbranding proceeding is wending its way through the FDA.”

Schering argued that all that was required was a disclaimer indicating that not all polyethylene glycol 3350 drugs need a prescription. But the court thought this was a potential Lanham Act-FDCA conflict, in which the FDCA would need to prevail. “A disclosure required to protect a competing seller might mislead a consumer, in which event the drug would be mislabeled and could not be sold, so that the seller's concern with unfair competition would be moot; it would have no competitor because there would be no competing product.” This would be inconsistent with the FDA’s permission to sell the drug, in the same way as a copyright lawsuit against a competitor for copying the label of a pioneer drug—as the FDA requires a generic to do—is inconsistent, and thus the non-FDCA law must give way.

But courts do try to give as much effect to both statutes as possible, so Schering argued that the FDCA shouldn’t be interpreted to forbid a misrepresentation-curing disclaimer. But Schering “has been coy” about what the disclaimer should say, and this coyness made the court doubt that the matter could be resolved without FDA involvement. The FDA might worry that a disclaimer might make consumers think that only one product is prescription only (when there are at least two generics that are), or would lead consumers to think the brands might be chemically different. The FDA has more experience with consumer understanding of drug labels and should get a chance to rule.

This case, Posner wrote, could be contrasted to others in which FDA involvement is not required, for example when a defendant says that the FDA has approved a drug for a number of uses that were in fact unapproved. Courts can evaluate such a claim without using the FDA’s insights. Likewise, if the defendants’ label had said that it was “the only polyethylene glycol 3350 that won't make hair grow on the palm of your hand, or that each container contains 727 grams of the drug, when in fact it contains only 527 grams, like its competitors’ containers,” no FDA involvement would be required. This case, however, was “subtler,” because it’s unclear how consumers understand “Rx only” labels, and how a disclaimer could be worded to improve that understanding.

Schering cited FDA regulations allowing a seller to make minor labeling changes without FDA approval, though it must notify the FDA. Moderate label changes require more FDA involvement, and major changes require preapproval. The court held that major changes are the default category, to preserve the strength of the regulatory system, and that Schering’s proposed change did not fall within the definition of “minor” or “moderate.” The FDA would probably want to require pre-approval of a possibly misleading disclaimer. And the issue was further complicated by the requirement that generic labels be identical to those of the pioneer.

As a result of all these concerns, Schering jumped the gun by suing before the FDA ruled on whether the generics are now misbranded.

It’s hard to say whether what comes next is dicta. But the Seventh Circuit also agreed that Schering should have lost its motion for partial summary judgment on falsity regardless of how the FDA rules.

Schering argued literal falsity, because polyethylene glycol 3350 is not Rx only. The court first expressed some uncertainty about, I think, whether the labels and inserts at issue are “advertising,” given that the only people who see them are people who’ve been prescribed the generic. The ad for one of defendant’s drugs on its website had “just the sort of disclaimers” Schering wanted.

Regardless, Posner concluded that Schering had been “misled” by general language in false advertising cases. “[U]ncritical generalization is a path to error. One form of uncritical generalization, ironically in view of Schering’s invocation of the doctrine of ‘literal falsity,’ is reading general language literally.”

Many literally false statements aren’t deceptive. Posner gave the example of the Soviet Union’s slogan “2 2 = 5,” which was designed to spur workers to complete the Five-Year Plan in four years, as well as the example of an ad touting “The Most Fabulous Jewels in the World.” The latter, he wrote, was literally false because the jewels were no more fabulous than the Crown Jewels or the Hope Diamond, but no one was deceived. As he noted, the doctrine used is puffery, “but the principle cuts deeper; if no one is or could be fooled, no one is or could be hurt.”

On the other hand, “a representation may be so obviously misleading that there is no need to gather evidence that anyone was confused.” And misleadingness is often clearer than literal falsity, because literalness is often a semantic question. So, what the cases mean when they say that proof of literal falsity allows the plaintiff to skip proving likely deception is that “the seller who places an indisputably false statement in his advertising or labeling probably did so for a malign purpose, namely to sell his product by lies, and if the statement is false probably at least some people were misled, and since it was a lie why waste time on costly consumer surveys?” “Literal” must therefore be understood in the “common colloquial sense.” “A ‘literal’ falsehood is bald-faced, egregious, undeniable, over the top.” We know this is what literal means because the case law includes the caution that the statements must be assessed in context.

So: a beautifully subtle importation of fault, which is a misdescription of traditional Lanham Act doctrine. Where did that “lie” in the previous paragraph come from? It’s no necessary part of the cost-saving rationale for allowing plaintiffs to dispense with consumer surveys. Perhaps if Posner had recalled the connection between false advertising and trademark law he would have been less seduced into the error of intent. Moreover, many literal falsehoods in the caselaw are far from “bald-faced, egregious, undeniable, [or] over the top.” They are simply, on the weight of the evidence, wrong. Consider the line of cases about “tests prove” claims. If the tests don’t prove the stated claim, because the plaintiff shows the tests to be unreliable or to be unrelated to the claim actually made, the defendant loses. It’s not a matter of obviousness or good faith, as Posner’s list of adjectives suggests. It’s a matter of evidence.

The funny thing is that Posner’s explanation is so much further-reaching and unsupported than his conclusion, which is much more in line with existing caselaw: a literally false statement is one “that means what it says to any linguistically competent person.” That’s a matter of interpretation, not a matter of speaker’s intent, and it leaves open the possibility that a false statement can be false—that is, not true—without any moral flaw in the speaker. Where Posner conflates the process of communicating meaning with the evidence supporting any particular statement, he unfortunately encourages misreading the scope of the Lanham Act.

Here, Posner offered a counterexample of a linguistically simple message: “suppose the labels on the defendants’ products stated: ‘All polyethylene glycol 3350, by whomever made, can be sold only by prescription; there is no over-the-counter version of this drug.’ That would be false and misleading per se; there would be no need to consider context or audience.” But, he noted, that’s not what the labels say. “There is no statement in the ordinary sense, because there is no verb.” (I doubt we’re meant to take this seriously as a reason why claims in general wouldn’t be literally false: consider “55 MPG”; linguistic competence includes the occasional ability to infer some additional words.) Instead, there’s “Rx only,” accompanied by some other information, including the name of the active ingredient. Obviously this product is prescription only, but it’s not obvious that all other products with the same active ingredient are prescription only.

Nonetheless, the court concluded that the district court was right not to dismiss the suit with prejudice. FDA findings might ultimately put the issue of consumer confusion in a different light.