Orphan drug maker fails to enjoin competitors

Mut. Pharm. Co. v. Watson Pharm., Inc., 2009 WL 3401117 (C.D. Cal.)

The parties distribute a prescription drug whose sole active ingredient is colchicine. Colchicine has been used to treat gout and Familial Mediterranean Fever (FMF) since before the FDA was established. Until recently, everyone sold colchicine products without FDA approval, and for seven years plaintiffs bought their colchicine from one of the defendants. During this time, the parties’ products were listed in various drug dispensing databases and pricing services known as Price Lists and could be ordered by drug wholesalers or retail pharmacies.

In 2007, plaintiffs applied to the FDA for an orphan drug designation for its colchicine product, and in 2009, the FDA granted plaintiffs a three-year exclusivity period to market their product, Colcrys, for gout flares, and seven years for FMF. The price increased from $9 per bottle to $485 per bottle. (Apparently this generic-to-orphan transition isn't unknown, nor is the resultant price spike.) Nonetheless, defendants allegedly continued to distribute their competing colchicine products at substantially lower prices.

Days after achieving orphan drug status, plaintiffs sued under the Lanham Act and state unfair competition law, alleging that defendants falsely advertised their colchicine products as FDA-approved. Rather than alleging literal falsity, plaintiffs’ claim is that including defendants’ products on Price Lists and drug ordering systems confuses pharmacists into believing that they’re FDA-approved. Plaintiffs also alleged that the labels and product inserts for defendants’ products falsely imply FDA approval and greater safety than Colcrys. Thus, plaintiffs sought to enjoin defendants from listing their products on Price Lists and drug ordering systems and from distributing their products without labels and inserts containing information that the FDA required plaintiffs to put on Colcrys labels and inserts.

Plaintiffs principally relied on an opinion in a very similar action they brought against a different group of defendants who were distributing a different drug for which plaintiffs had also obtained an orphan drug designation and exclusivity period.

See Mutual Pharm. Co. v. Ivax Pharm., Inc., 459 F.Supp.2d 925 (C.D. Cal.2006). In that case, the court rejected defendants’ argument that the matter was one for the primary jurisdiction of the FDA and found likely success on the merits.

Here, however, defendants also attacked the merits of the false advertising claim, including the equity of enjoining defendants from doing exactly what plaintiffs were doing until days before they filed suit. The court found that plaintiffs hadn’t shown likely success on the merits. Ivax read the Lanham Act broadly; by contrast, Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993), rejected a false advertising claim that placing drugs on the market falsely implied FDA approval. Plaintiffs’ survey evidence, the court thought, showed only that pharmacists are confused about what the inclusion of a drug on a Price List or drug ordering system means about FDA approval. And, the court noted, it wasn’t convinced that having drugs on a Price List or drug ordering system was “commercial advertising or promotion.” Anyway, there was little evidence that defendants “in any way created” pharmacists’ confusion. The product label/insert arguments were even weaker, both because evidence of confusion was weaker and because content disputes fall even more squarely within the FDA’s primary jurisdiction.

At least at this early stage, the court found that unclean hands substantially decreased plaintiffs’ likelihood of success. Almost up to the moment they sued, plaintiffs did the same things they now seek to enjoin.

Plaintiffs also failed to show irreparable harm. This was a dispute about money, and damages would be easily calculable based on defendants’ sales.