Allergan gets small damages award in case against compounder

Allergan USA, Inc. v. Imprimis Pharmaceuticals, Inc., 2019 WL 4546897, No. 17-cv-01551-DOC-JDE (C.D. Cal. Aug. 2, 2019)

Previous discussion of liability issues in this pharmaco v. compounder false advertising case. After the court awarded partial summary judgment to Allergan (falsity and materiality, not damages), the court excluded Allergan’s expert report that based all its damages estimates on the Imprimis business model, not on the impact of the particular statements at issue. And the jury was to rule on Lanham Act damages only (there were also UCL violations, but the relief there is equitable and Allergan couldn’t get disgorgement). The jury awarded Allergan $48,500 in damages and zero in disgorgement of profits.

Imprimis renewed its motion for judgment as a matter of law, which the court denied. Imprimis argued that Allergan presented no credible evidence linking the false advertisements to lost Allergan sales. Mot. at 3. It relied on Out of the Box Enterprises, LLC v. El Paseo Jewelry Exchange, Inc., 732 Fed. App’x 532 (9th Cir. Apr. 30, 2018), where the jury found in favor of the plaintiff and awarded $1.5 million in lost profits due to false advertisements. The Ninth Circuit held that the plaintiff’s expert’s testimony “established only a correlation—not a causal relationship—between [the] advertisements and a decline in Out of the Box’s projected profits.” The testimony also “did not provide the jury with a way to determine by a preponderance of evidence the amount of any lost profits … In short, the record provides ‘no way to determine with any degree of certainty what award would be compensatory,’ as required by our precedent.”

Imprimis likewise argued that Allergan’s references to a drop in its sales established a correlation, not a causal relationship, making both (1) the fact of damage and (2) the amount of damage unproven.

As for the fact of damage, the Ninth Circuit has “generally presumed commercial injury when defendant and plaintiff are direct competitors and defendant’s misrepresentation has a tendency to mislead consumers.” “The Court instructed that the parties are in direct competition and consumer deception existed; the jury could therefore infer that the false statements caused some injury to Allergan.”

As for the amount, a court “must ensure that the record adequately supports all items of damages ... lest the award become speculative or violate [the Lanham Act’s] prohibition against punishment.” For jury awards, courts accept “crude” measures of damages based upon reasonable inferences so long as those inferences are neither “inexorable ... [nor] fanciful.” The Court instructed the jury: “Allergan does not need to quantify its damages in any particular way or provide expert testimony; many sources can provide the requisite information upon which you may calculate damages. Only the fact of damages must be established with reasonable certainty. You need not calculate the amount of damages with absolute exactness but there must be a reasonable basis for computing the amount of damages.” The jury was allowed to consider both direct and circumstantial evidence.

There was no direct testimony from a relevant consumer that she purchased from Imprimis rather than Allergan due to the false advertisements; and there was no survey of relevant consumers indicating actual confusion or economic harm. But Allergan presented sufficient circumstantial evidence. For example, a medical practice requested information on Imprimis’s FDA report from July 2017, and in response, Imprimis’s VP of Quality stated that “FDA found our products and services to be safe and effective.” A doctor from the practice placed an order with Imprimis only two weeks later. An Imprimis sales rep told another practice that Imprimis’s drugs combine “FDA-approved” component before the practice made a purchase. There was also evidence that Allergan lost market share during the time in which Imprimis made the false promotional statements at issue.

Allergan argued to the jury that it should use the following methodology: (1) begin with Imprimis’s unit sales during the time period the jury believed that Imprimis’s false advertising had an effect; (2) multiply that number by the percentage of Imprimis’s sales the jury found was attributable to false advertising; (3) discount the product of that calculation by Allergan’s market share for that drug to determine Allergan’s lost sales units caused by false advertising; and (4) multiply that by Allergan’s per-unit profitability. Imprimis disagreed, but this was a reasonable way to ask the jury to think about the case. The jury asked the Court for the “summary document showing the market share of Allergan Products,” and the jury could reasonably have reached the $48,500 figure from this information and circumstantial evidence before it.

It’s true that other factors affected the market, and Allergan’s sales trends in the pre-wrongdoing period might have supported a different conclusion.  “But that does not mean that the jury could not infer any connection between lost sales and false advertisements.” Imprimis mostly convinced the jury that there wasn't much in the way of lost sales, but not entirely.