failure to detail harm dooms medical food complaint despite plausible falsity

Alfasigma USA, Inc. v. Nivagen Pharmaceuticals, Inc., 2018 WL 4409350, No. 2:17-cv-01974-MCE-GGH (E.D. Cal. Sept. 17, 2018)

Somewhat surprisingly, failure to tell a detailed harm story torpedoes this complaint; given the specific allegations of falsity, I wonder if it will be successfully amended (as the court allowed).

Alfasigma makes “medical foods,” which can be prescribed but do not require prescriptions. They are not eligible for reimbursement by Medicaid, Medicare, or many private insurers. Breckenridge makes a purportedly generic version of Alfasigma’s Foltx called Folbic. Pharma databases allegedly link generic foods to name brand equivalents on the honor system, without verification by any independent entity. Thus, relying on a company’s representation that its product contains the same active ingredients in the same amounts as a listed brand or equivalent generic product, industry databases will represent to the pharmaceutical industry that the generic product is pharmaceutically equivalent to the listed products.

Nivagen began marketing a generic—Niva-Fol— that it represented was equivalent to Alfasigma’s branded product, Foltx, and Breckenridge’s generic, Folbic. However, Nivagen allegedly characterized its product as a prescription drug that requires an “Rx” on the label, thereby entitling users to reimbursement. Nivagen allegedly caused Niva-Fol to be shown as having a National Drug Code (“NDC”) or National Health Related Items Code (“NHRIC”) number, which identifiers are provided for approved drugs and medical devices only. Those identifiers also appear to qualify Niva-Fol for federal reimbursement. Finally, Nivagen allegedl falsely designated its product as “Made in the USA.” This allegedly gave Nivagen a competitive advantage over non-reimbursable products offered by Alfasigma, allowing it to capture market share.

Even applying Rule 9, the complaint sufficiently pled false advertising (except for the “Made in the USA” part, which didn’t even pass Rule 8 scrutiny).

Nivagen argued that the complaint failed to allege the factual basis for Alfasigma’s belief that Niva-Fol lacks the same active ingredients as Alfasigma’s products, or why it is not substitutable, or why any of the challenged representations would be misleading, or how Nivagen got the NDC/NHRIC designations if that wasn’t ok.  None of that was a problem; the allegations Alfasigma did make sufficed. “Though Plaintiff does not allege the exact statements made to the FDA, or even who made them, this case does not lend itself to Plaintiffs having those kind of details at this point. If the allegations are to be substantiated, that information is known only to Defendant at this time, and is not required to be pleaded up front.”  Arguments about whether Niva-Fol really was entitled to an Rx designation were not suitable for judgment on the pleadings. The only exception was “Made in the USA,” where Alfasigma didn’t allege any factual basis for the claim that the slogan was false or misleading—the allegation that the product wasn’t actually made in the USA was conclusory and devoid of supporting facts.  Alfasigma could amend to fix this problem, if it could do so.

Then, the court found that the complaint failed to sufficiently allege injury in fact by failing to allege anything more than that Alfasigma had been harmed by the falsity.  [Query: without Breckinridge in the picture, shouldn’t it have been enough to allege the falsity and materiality of the claims? In that case it would follow almost automatically that business gained by Nivagen would have been lost by Alfasigma, unless you believe that a generic substitute is going to grow the market somehow.]