slicing and dicing claims about unapproved drugs, court allows challenge to some under Lanham Act

G&W Laboratories, Inc. v. Laser Pharmaceuticals, LLC, No. 17-cv-3974-BRM-DEA, 2018 WL 3031943 (D.N.J. Jun. 19, 2018)

G&W sells Anucort, a prescription drug for use in treatment of hemorrhoids. G&W alleged that its formulation delivers 25 mg of the active ingredient “in a reasonable amount of time.” Anucort isn’t FDA approved, and G&W has been “actively working” with the FDA to obtain an approved New Drug Application (NDA) for Anucort. G&W submitted an Investigational New Drug (IND) application, spending “millions of dollars conducting clinical studies of the safety and efficacy of Anucort for treating symptomatic internal hemorrhoids.” Despite its lack of approval, Anucort has been on the market for about thirty years, because the FDA has exercised enforcement discretion as to it.  Anucort is allegedly a leading prescription product for the treatment of hemorrhoids, selling one million units a year.

Laser sells Hemmorex as a competing product, but G&W alleged that “[l]aboratory testing shows that Hemmorex releases less than 20%—that is, less than 5 mg—of the 25 mg labeled amount of hydrocortisone acetate active ingredient into a two-hour period.” Laser markets Hemmorex to generic buyers at drug wholesalers and retailers as an “equivalent to and substitute for Anucort.” Laser also tells databases that Hemmorex is equivalent to Anucort and requests that the databases link Hemmorex to Anucort, communicating to subscribers that the products are equivalent and may be substituted for each other. G&W alleged that many wholesalers, retailers, and pharmaceutical chains purchase, stock, and dispense only one brand of hydrocortisone acetate 25 mg suppository, basing their purchasing decisions on price as between linked products; thus, G&W alleged that it lost sales to Laser.

Because G&W’s dissolution testing determined that Hemmorex doesn’t release its labeled active ingredient to the patient in the same amount of time, G&W argued that Hemmorex isn’t equivalent to or substitutable for Anucort. Laser also advertised “that the FDA allows Hemmorex to be marketed and sold as a ‘DESI drug’ – that is, a drug covered by an ongoing Drug Efficacy Study Implementation (‘DESI’) program.” G&W alleged that this was false. Laser also claimed that it has submitted a Pre-IND application to the FDA for Hemmorex, and that it is the only manufacturer of a 25 mg hydrocortisone acetate suppository to have done so. G&W alleged that Laser hadn’t “participated in a Pre-IND meeting with the FDA, nor has it submitted an IND application to the FDA for Hemmorex, nor has it done any predicate clinical toxicology or animal testing.” G&W is also currently working with the FDA to obtain NDA approval and submitted an IND application, making Laser’s statement false.

G&W also alleged that InvaDerm, which manufactured Hemmorex for Laser, knew about the falsity and continued to supply the product.

The court said some things about primary jurisdiction, which is essentially a discretionary doctrine that pauses a case for regulatory action, but really treated this as a preclusion case.  We know that the FDCA and Lanham Act can both apply to drugs.  But “where a claim requires interpretation of a matter that is exclusively within the jurisdiction and expertise of the FDA and FDCA, plaintiffs cannot use the Lanham Act as a run around to private enforcement.”

Laser argued that Anucort was unapproved, and thus couldn’t be a reference drug against which Hemmorex could be compared; thus no equivalency claim could be falsified.  Moreover, “the variety of very specific data-driven and medical-scientific determinations attendant to demonstrating ‘equivalence’” counseled in favor of letting the FDA act.  But the court agreed with G&W. The issue was whether advertising Hemmorex as “equivalent to or substitutable” for Anucort when the drugs allegedly didn’t contain the same active ingredients was false or misleading. G&W “is not relying on either explicit or implicit FDA enforcement or terms that only the FDA can define.”

However, G&W couldn’t argue that the label, stating that Hemmorex contains 25 mg of hydrocortisone acetate, was literally false because Hemmorex released less than 20% of its active ingredient in two hours, whereas Anucort releases 90% in the same time period.  Whether this was false or misleading was better left to the FDA; there was no standard for how much of a suppository’s active ingredient had to be released.  By contrast, had G&W alleged that Hemmorex didn’t produce or contain 25 mg of hydrocortisone acetate at all, that would be actionable, “assuming science could determine such an answer.”

Similarly, whether Hemmorex is a DESI drug was a question for the FDA, since answering it would require the court to determine whether Hemmorex is similar to a drug listed in a drug efficacy notice without permitting the FDA to do so first. The FDA leaves it to a manufacturer, in the first instance, to determine whether it is DESI approved as being “similar” to a product that was specifically reviewed. Under federal regulations, a determination as to whether a drug is identical, related, or similar can be made by “an individual who is knowledgeable about drugs and their indications for use,” but “[w]here the relationships are more subtle and not readily recognized, the purchasing agent may request an opinion by writing to the [FDCA].”

The court then turned to Laser’s alleged statements that it has submitted a Pre-IND application to the FDA for Hemmorex, and that it is the only manufacturer of 25 mg hydrocortisone acetate suppositories to have done so.  Laser, ridiculously in my opinion, argued that this couldn’t be material because INDs are confidential and so no reasonable purchaser would rely on a statement that an IND application had been submitted.  Among other things, why did Laser (allegedly) say this, if not to win consumers?  Also, people rely on credence claims all the time, and it should not be rule that consumers have to expect drug companies to outright lie to them.

Nonetheless, the court found that G&W sufficiently pled falsity on the “only” part of the statement, but not for the “Laser submitted a pre-IND application” part, because those allegations were conclusory. G&W failed to plead why it believed Laser “has not participated in a Pre-IND meeting with the FDA, nor has it submitted an IND application, nor has it done any predicate clinical toxicology or animal testing,” especially given that IND applications are confidential.

The court also rejected Laser’s unclean hands defense predicated on the argument that Anucort was currently unapproved, and shouldn’t be able to challenge the market presence of a competing unapproved drug product. “The unclean hands doctrine should not bar Lanham Act claims when the doctrine is premised on allegations of non-compliance with the FDCA because such a use of the doctrine would essentially permit a private enforcement action—a power reserved for the FDA.” Whether Anucort was on the market illegally was a matter for the FDA, and anyway Laser failed to allege or demonstrate how it was injured “as a result of [G&W’s] misconduct.”

The actual manufacturer, InvaDerm, argued that there was no basis for aiding and abetting liability under the Lanham Act, and the court agreed, but contributory infringement [for which read false advertising] was an available theory and was sufficiently pled.