Second Circuit narrowly interprets materiality for Lanham Act purposes

Apotex Inc. v. Acorda Therapeutics, Inc., --- F.3d ----, 2016 WL 2848911, No. 14–4353–cv (2d Cir. May 16, 2016)

 

The parties compete to make tizanidine, a drug for treating spasticity. Apotex alleged that Acorda (i) filed a sham citizen petition with the FDA to hinder approval of Apotex’s competing formulation in violation of Section Two of the Sherman Act, and (ii) violated the Lanham Act’s proscription on false advertising. The factual dispute focused on the relative efficacy of tablets or capsules in controlling somnolence, one of the key side effects of tizanidine; tablets and capsules aren’t bioequivalent, and there’s a substantial difference in drug absorption when capsules are taken with food.  Taking the capsules with food thus diminishes sleepiness as a side effect, and Acorda had a patent on capsules while Apotex sold generic tablets.  The district court dismissed the claims and the court of appeals affirmed, in the process hinting at the instability that Caronia has introduced into advertising law.

 

As for the antitrust claims, “Although precedent supports an inference that a citizen petition is an anticompetitive weapon if it attacks a rival drug application and is denied the same day that the application is approved, that inference has been undercut by recent FDA guidance.”

 

False advertising: capsules carried an FDA label instructing doctors to distinguish between tablets and capsules and between taking the drug with food and without: “The prescriber should be thoroughly familiar with the complex effects of food on tizanidine pharmacokinetics.”  The label also had a graph showing “Mean Tizanidine Concentration vs. Time Profiles for Zanaflex Tablets and Capsules (2 x 4 mg) Under Fasted and Fed Conditions.” The peak for the curve representing tizanidine capsules (taken with food) was lower, and occured later than the peak for the curve charting concentration over time for tizanidine tablets (taken with food).  As the label explains, pharmacokinetic differences between the fed and fasted state may affect the frequency and onset of certain adverse events, including sleepiness.

 

Once Apotex’s ANDA for capsules was approved, Acorda “countered with its own authorized generic version.”  Apotex argued that Acorda’s sales reps misrepresented to doctors that its capsules reduced the maximum concentration of the drug in comparison with tablets, and then improperly used reduction in that measure as a proxy for decreased sleepiness.

 

On the Lanham Act claims, the court spends a bit of time hammering home that its old “inherent quality or characteristic” language really, really just means materiality, like every other circuit requires.  Then the court explicitly holds that “representations that are wholly consistent with an FDA label” aren’t subject to Lanham Act liability, for some reason not mentioning Pom Wonderful.  A footnote cautions that “Lanham Act liability might arise if an advertisement uses information contained in an FDA-approved label that does not correspond substantially to the label, or otherwise renders the advertisement literally or implicitly false.”  However, the general rule “reflects proper ‘deference to the expertise’ of the FDA as the regulatory agency responsible for issuing the label by respecting the exhaustive process preceding the issuance of a label.”  Furthermore, this rule “insulates pharmaceutical companies from liability when they engage in First Amendment speech that is consistent with the directive of the regulatory body having oversight of product labels.” 

 

A couple of things: of course, assuming Central Hudson is still good law, the Lanham Act also insulates companies from liability when they engage in truthful, nonmisleading commercial speech (presumably what the court means by “First Amendment speech,” since even false advertising is covered by the First Amendment, albeit not protected).  That is, the Lanham Act regulates less than what Central Hudson supposedly allows, because false/misleading commercial speech may simply be banned.  In that regard, there is no need to refer to the FDA, unless the First Amendment requires a safe harbor for FDA-approved speech.  I think a rather more complex theory would be required to justify that claim, and it’s also inconsistent with what the Supreme Court has held with respect to product liability claims about drugs, not to mention arguably (though not necessarily) with Pom Wonderful.

 

Separately, when the court of appeals says that, “in order to avoid chilling speech that ought to be protected, Acorda’s advertisements cannot form the basis for Apotex’s claims to the extent they were in line with the FDA-approved label,” it is a bit disingenous about its own precedent. The court is surely aware of its own decision in US v. Caronia, holding that the First Amendment protects much, much more than FDA-approved statements, but it is shying away from the implications of that decision for other regulatory regimes.  As this awkward attempt foretells, the day of reckoning can only be staved off so long.

 

The court mostly found that the challenged statements were supported by the FDA-approved label.  E.g., a rep said, “I explained to [the doctor] that the [C]apsule[ ] [is] really unique in that it counteracts a lot of the drowsiness when you dose it with food. He said he would give that a try and see how well it works for his patients.”  “When Acorda learned that its representatives may have made unauthorized promotional claims for Zanaflex Capsules, Acorda’s head of sales sent a memorandum to the sales team explicitly forbidding promotions that Zanaflex Capsules had fewer side effects and less sedation than the tablets.”  Though representations that capsules provided more “flexibility” than tablets weren’t on the label, Apotex’s burden was to show falsity, not just lack of FDA approval.  And there was no evidence that claims about flexibility were false or misleading.  Nor did the reps’ claims explicitly or implicitly represent test-proven superiority in sleepiness, only that the pharmacokinetic results suggested less sleepiness.  “It is immaterial that no study has shown a reduction in somnolence associated with Zanaflex Capsules; … Apotex must show falsity, not merely uncertainty.”  Moreover, the FDA label backed up the sleepiness claims—something that the court specifically called a “harbor,” albeit not a “safe harbor”—because the label warned that adverse events such as sleepiness might occur when switching between tablets and capsules in the fed state.

 

In a brochure, Acorda superimpsed “30% INCREASE FOR TABLETS”; “20% DECREASE FOR CAPSULES” on the FDA-approved graph.  Apotex argued that this was misleading, because the graph showed mean tizanidine concentration, which is the average drug concentration at different points in time, while the text relates to the maximum drug concentration and, by definition, was different from the mean drug concentration.  

 

The court of appeals found that there was a triable issue of fact on falsity only with respect to the graph.  The brochure also used sun and moon graphics and discussed day and night dosing, but that wasn’t an unambiguous representation about efficacy against sleepiness and there was no consumer reaction evidence.  And here the court implicitly rejects case law suggesting that deliberate attempts to mislead can substitute for consumer reaction evidence: “Apotex relies on internal marketing statements from Acorda focusing on reduced [maximum concentration] and somnolence; but Acorda’s motivations for launching the gatefold brochure do not constitute extrinsic evidence as required.”  This isn’t a full rejection, though, because of the issue with respect to falsity about the concentration-sleepiness link: an intent to make an unsubstantiated claim doesn’t translate into an intent to make a related false claim.

 

Apotex argued that the district court erred by examining the brochure in isolation while ignoring the context of Acorda’s launch letters and other documents detailing Acorda’s marketing efforts. “But the relevant context of the advertisement is the overall message conveyed by the brochure. The district court was not required to consider external marketing documents.”

 

The only real issue was the graph with the superimposed text.  Since maximum concentration values aren’t time dependent, and the graph displayed mean drug concentration over time, a jury could find literal falsity. However, a jury could not find materiality.  Apotex argued that literal falsity allowed a factfinder to infer materiality, but that’s not so, despite statements in case law indicating that “consumer deception is presumed, and ‘the court may grant relief without reference to the advertisement’s [actual] impact on the buying public.’ ”  The falsity here was only an exaggeration of the scale of the differences, and there was no record evidence that this “inaccuracy” would deter capsule purchases.  [Surely the court means “tablet” purchases.] “Apotex fails to make the necessary showing that the specific misrepresentation in the graphic—in any of Acorda’s advertisements—was likely to influence consumers’ purchasing decisions.” 

Just how broadly the Second Circuit means this statement to stretch--for example, whether plaintiffs will be required to show that ads without the false statement at issue were less persuasive, versus whether they'll be required to show that the claim is the kind of thing consumers care about--remains to be seen.