pharmaceutical equivalence case fails, including weird materiality holding

Stiefel Laboratories, Inc. v. Brookstone Pharmaceuticals, L.L.C., 2013 WL 4406504 (11^th Cir. Aug. 19, 2013)

Stiefel sued Brookstone, alleging that Brookstone falsely advertised its acne gel BPO Gel as a generic equivalent to Stiefel’s competing acne gel Brevoxyl.  The court of appeals affirmed the grant of summary judgment in favor of Brookstone.  They’re prescription drugs, but “generally recognized as safe and effective” (GRAS/E) and BPO Gel didn’t need FDA approval before calling itself “generic.”  Indeed, there are no paths to approval for such a use, since the FDA doesn’t approve or accept comparative testing for this category of drugs, and they’re not in the Orange Book of FDA-approved generics.

Stiefel alleged that BPO Gel was not generic for Brevoxyl, so that Brookstone falsely advertised it when it (1) submitted “Labeling Statements” to a pharmaceutical database listing the product name as “Benzoyl Peroxide 4% Gel” and “Benzoyl Peroxide 8% Gel” instead of “BPO 4% Gel” and “BPO 8% Gel; (2) announced publicly that its BPO Gel was a generic for Brevoxyl; and (3) said on a Texas Medicaid Form that BPO Gel was graded an “A” in the “Orange Book.”  The district court found that Stiefel had shown the falsity of (1) and (3), but didn’t show enough material impact from those to survive summary judgment.

Stiefel argued that the district court erred in failing to consider misleadingness and looking only for literal falsity, when the evidence included an expert report offered for the purpose of proving misleadingness. But Stiefel didn’t clearly identify its theory or tell the district court that it was relying on the expert report for misleadingness, so the court of appeals confined its review to literal falsity.

Stiefel didn’t produce enough proof to show literal falsity on Brookstone’s “generic” statements.  It didn’t establish the meaning of “generic” in the relevant context.  Stiefel pointed to the FDA definition of “generic,” but Brookstone countered that the FDA definition didn’t apply to GRAS/E drugs not subject to FDA approval.  The court concluded that Stiefel didn’t show that, in this unregulated context, pharmacists understand the term “generic” to have the same meaning as it does in the regulated context.  Rather, the evidence reflected uncertainty about the proper meaning of the term. Thus, a reasonable jury could not decide that Brookstone’s statements were literally false.

Anyway, even if Stiefel had shown the meaning of “generic,” it didn’t present bioequivalency tests showing that BPO Gel wasn’t a generic, even though it argued that bioequivalence testing is the only way to establish genericity as understood by the FDA.  Rather, Stiefel argued that BPO Gel had never been tested for bioequivalence.  (I guess the court isn’t going for the Third Circuit’s rule that completely unsupported claims are false, eh?)

Finally, Stiefel argued that the district court was wrong in its assessment of the materiality of the false statements in the Texas Medicaid form and the labeling statements.  Stiefel argued that it had shown materiality by showing that pharmacies linked BPO Gel and Brevoxyl, which caused pharmacists to substitute BPO Gel for the more expensive Brevoxyl.  But this showed only that Brookstone got some of Stiefel’s market share; it didn’t show that the false statements influenced pharmacists’ purchasing choices, so Stiefel failed to show materiality. 

Comment: Hunh?  If Brookstone concededly used a false name, and that name produced the linkage—that is, if the database wouldn’t have linked the two products without the false name equating it to Stiefel’s product, which is how I understand these databases to work—then how can that not be material, in the ordinary sense of “causing a different purchase to happen than would have happened if the defendant hadn’t used a false statement”?  The linkage influenced what products were used to fill prescriptions. 

 

Yes, once the linkage was in place, substitution may have been automatic because of policies favoring generics.  But that doesn’t mean that the falsity wasn’t material.  It just means that in the pharmaceutical market many material decisions get made behind the scenes.  Suppose a fraudster convinces the purchasing department for Georgetown’s cafeteria that it’s delivering organic eggs, but they’re actually conventional eggs.  Thus, every time a patron orders eggs, believing them organic, she gets conventional eggs, never aware of the problem.  In that sense, her decision isn’t influenced, but only in that she doesn’t know that she’s not getting what she ordered (or, in the case at bar, what her doctor prescribed).  I would call that false advertising even though the impact of the substitution is felt distant from the purchasing agent who’s been misled.  This seems like a very weird, mechanical reading of “influencing [consumers’] purchasing choices.”