Exela Pharma Sciences, LLC v. Sandoz, Inc., 2020 WL 5535026, No. 19-cv-00318-MR (W.D.N.C. Sept. 15, 2020)
Exela sued Sandoz for unfair and deceptive trade practices
in violation of North Carolina law; tortious interference with prospective
business advantage; and Lanham Act false advertising and unfair competition. It sought a TRO etc. forcing Sandoz to recall its L-Cysteine product.
Exela makes an FDA-approved L-Cysteine injection product,
used for high-risk patients, such as preterm or low-weight newborns and
patients with severe liver disease, as part of a nutritional supplement regimen
(aka “total parenteral nutrition” or TPN). “Aluminum is a known contaminant of
TPN solutions, and aluminum toxicity can cause serious health problems
including dementia and impaired neurologic development among others. High-risk
infants who receive TPN are particularly susceptible to harm from excessive,
toxic amounts of aluminum, as they have immature kidneys, which impairs the removal
of aluminum from the body.”
Sandoz makes an L-Cysteine product in Canada with a label
stating that it contains as much as 5,000 mcg/L of aluminum; it’s not FDA-approved.
But starting in 2014, there was an L-Cysteine shortage in the US, so the FDA
asked Sandoz to import its product under the FDA’s “shortage program,” without requiring
FDA approval. On April 12, 2016, the FDA stated that it would not bring an
enforcement action for importing the product for 6 months if Sandoz followed
certain conditions, including distributing a “Dear Healthcare Provider” letter
alongside its L-Cysteine product that explained the product, the drug shortage,
and the lack of other similar FDA-approved products. The letters had to be
reviewed by the FDA before distribution.
Sandoz sought several extensions, each of which was granted.
The last Dear Healthcare Provider letter was approved on June 21, 2019,
instructing Sandoz to ensure that the “previously reviewed Dear Healthcare
Provider letter continues to accompany [its] L-Cysteine in distribution.” Every
version of the letter stated that “there are currently no FDA-approved
L-Cysteine Hydrochloride Injection products in the United States.”
However, Exela developed an L-Cysteine product with low
aluminum levels. The FDA wanted no more than 145
mcg/L of aluminum for permanent approval. In April 2019, the FDA approved Exela's NDA. By late May 2019, Exela had manufactured sufficient inventory to meet the
entire market demand for L-Cysteine.
Exela made “numerous efforts” to get Sandoz’s product off
the market, including repeatedly asking the FDA to act. The FDA declared
an end to the shortage in September 2019, and asked Sandoz to stop importing
its product; Sandoz complied but continued distributing its existing
inventory. Exela’s marketing team “claims to have observed customers
buying or committing to buy up to a year’s supply” even after its product received
FDA approval. In October 2019, the FDA told Sandoz to stop distribution, which
it did. However, even with Exela’s sole-approved-product status, it has less
than 20% of the L-Cysteine market while Sandoz “maintain[s] over” 80%.
The FDCA gives the FDA “complete discretion” to “decide how
and when [its power] should be exercised.” This can’t be evaded by putting a
state law label on what is really a complaint about FDCA violation. [Note that
this discussion applies only to drugs/devices; the situation for food/supplements
has more leeway for states, consistent with the lesser federal regulation to
which they are subject.] “The test for
determining whether a state law claim is impliedly preempted is whether or not
the claim would exist in the absence of the FDCA.”
NC unfair/deceptive practices: the allegedly violative
action was selling the unapproved product and “stuff[ing]” the distribution
channels, including failing to update its 2018 Dear Healthcare Provider letter
after the FDA approved the Exela product, failing to warn its customers about
its product’s aluminum content, and misusing “its incumbent status in the
market and its huge market power and reach to block hospitals and distributors
from switching.”
The complaint fundamentally
challenged “the FDA’s decision not to bring enforcement proceedings against the
Defendant under the FDCA for importing and selling an unapproved and unsafe
drug.” That was preempted under conflict preemption, including claims about the
safety of Sandoz’s product. Even after Exela received FDA approval, the FDA
still had to account for the risk that it might not be able to meet the entire
market demand for L-Cysteine, the risk of supply chain issues during the
transition, other associated risks, and the parties’ interests (including
Sandoz’s interests in selling “inventory it created in response to the FDA’s
requests to help with the drug shortage.” Unlike failure-to-warn cases that escape
preemption, the only way to comply with state law would have been for Sandoz to
leave the market.
Similar analysis applied to the associated claims. The FDA regularly “weans unapproved products off the market once a
competing product has been approved.” In fact, it gave Sandoz only six months, not
the year it has suggested in the past; and Exela did not even allege that it had
sufficient production to satisfy the market for a significant portion of that
period.
Failing to update the “Dear Healthcare Provider” letter to
disclose the approved Exela product was also ok, even though it said “there are
currently no FDA-approved L-Cysteine Injection products in the United States.” The letters were “mandated, overseen, and preapproved
by the FDA,” and the last renewal was approved by the FDA after it approved
Exela’s product; the 2019 renewal “mandated (under threat of enforcement action)” the use of the
previously approved letter. Preemption was appropriate given that, “when a
party cannot satisfy its state duties without the Federal Government’s special
permission and assistance, which is dependent on the exercise of judgment by a
federal agency, that party cannot independently satisfy those state duties for
pre-emption purposes.” And state law likewise couldn’t require Sandoz to send
other letters “contradicting” the FDA-approved letters.
Failure to warn about aluminum content, even though the
aluminum content “far exceed[s]” the standard the FDA required Exela to meet: The
FDA didn’t set upper limits on the aluminum content of these products, and the
FDA later responded to Exela that Sandoz’s product had aluminum levels that
were “well within the standards agreed upon with FDA” and that “[i]t is thus
inappropriate to suggest that the Sandoz product is somehow unsafe.” And anyway,
“a merchant’s failure to inform its customers as to how its product compares
unfavorably to a competitor’s product” isn’t itself deceptive.
Ultimately, Sandoz “imported, marketed, and sold a product that it was
permitted by the FDA to import, market, and sell, and in quantities that did
not exceed that permission.”
Tortious interference claims fared similarly.
Lanham Act: The false/misleading representations were
similar to those discussed above. Unless an omission makes an affirmative
statement misleading, the Lanham Act doesn’t require disclosures. Although the
Dear Healthcare Provider letters were plausibly “commercial advertising or
promotion,” this was still a case where bringing a Lanham Act claim would
interfere too much with the FDCA, even after Pom Wonderful, which held
out the possibility of precluding a Lanham Act claim if “it turns on the
content” of something that has been “previously preapproved by the FDA” or
conflicts “with an affirmative policy judgment by the FDA.” Both scenarios
applied here.
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