Rx label and database linkages plausibly deceive consumers; mostly not precluded by FDCA

Method Pharmaceuticals, LLC v. H-2 Pharma, LLC, 2022 WL 327738, No. 2:20-CV-753-ECM (M.D. Ala. Feb. 3, 2022)

The parties make fluoride products. “Fluoride supplements, often given to children or cancer patients to prevent tooth decay, carry risk of tooth damage if taken in excessive amounts. In consideration of this risk, some manufacturers require that their supplements be dispensed only by prescription.” Method makes prescription-only supplements; H-2 does not, though the FDA has not yet determined whether fluoride supplements should be treated as drugs or as dietary supplements. If they’re drugs, they require serialization—“standardized numerical identifier[s] on each product package” to track potential defects in production. H-2 does not serialize, saving it millions of dollars and allowing it to offer lower prices than Method or other prescription-only competitors.

Despite this, H-2 prints its labels “Rx,” which allegedly falsely represents that the products are prescription drugs and thus serialized per FDA requirements. Those same labels often conspicuously say “dietary supplement,” “fluoride supplement,” and include a “Supplement Facts” panel, but Method alleged that nevertheless, the market considers H-2’s products to be prescription drugs and treats them accordingly. This includes “linking” H-2’s products to Method’s in databases and reimbursing their purchase through Medicare & Medicaid, both of which do not reimburse dietary supplement purchases. H-2 also allegedly misled the market by falsely advertising that its fluoride products have “National Drug Codes,” (“NDCs”), “unique universal product identifier[s] for drugs,” allegedly conveying that the products are prescription drugs. In addition, H-2 allegedly mislead DailyMed, the “official provider of FDA label information and package inserts,” managed by the United States National Library of Medicine because its pages for H-2’s products do not include the customary disclaimer that “[t]his drug has not been found by the FDA to be safe and effective, and this labeling has not been approved by [the] FDA.”

The court largely rejected H-2’s FDA preclusion arguments against Method’s Lanham Act claims. “In Belcher Pharmaceuticals, LLC v. Hospira, Inc., the Eleventh Circuit extended the POM Wonderful rule to Lanham Act claims concerning drug labels. 1 F.4th 1374, 1380–81 (11th Cir. 2021).” As long as courts are not asked “to contradict a conclusion of the FDA or to make an original determination on an issue committed to the FDA’s discretion,” a Lanham Act claim about pharmaceutical labels is not precluded.

There was no allegation that H-2’s actions “violated the FDCA”—there is no direct attempt to “circumvent the FDA’s exclusive enforcement authority” by asking the Court to make an “enforcement determination[ ] that the FDA and other regulatory agencies did not themselves make.” So, the question was whether Method’s claims “stray too close to the exclusive enforcement domain of the FDA.” A court generally may not “make determinations about the safety, legality, and classification of new drugs that are more properly within the exclusive purview of the FDA.” Claims are also precluded “where, in order to determine the falsity or misleading nature of the representation at issue, the court would be required to interpret and then apply FDCA statutory or regulatory provisions,” or “when the FDA has failed to take a position on the particular issue that is the subject of the alleged false representation comprising the Lanham Act claim.”

H-2 argued that, because the FDA “has yet to determine whether [H-2’s] Products are to be regulated, and therefore viewed, as supplements or drugs,” the claims were precluded. H-2 was only partly correct. One count alleged that H-2 simultaneously promoted its products as dietary supplements and prescription drugs, and that this was misleading. But it could be that H-2’s products aren’t dietary supplements at all, such that all fluoride supplement products are to be classified solely as prescription drugs. “Only if H-2’s products are indeed dietary supplements do representations to the contrary mislead the market.” Since the FDA hasn’t weighed in, the court wouldn’t either.

However, other claims were not precluded. A different count alleged that by listing its products with the Drug Databases, H-2 falsely represented that its products “are prescription drugs that comply with federal serialization requirements.” This was not a question about whether the FDA requires serialization of H-2’s products, it’s a question of whether H-2 affirmatively represents that the products are serialized when they aren’t. “The veracity of those two facts is wholly independent of any collateral consideration of whether the FDA requires serialization for H-2’s products.”  [The court is making it easier on itself by characterizing this as a question of affirmative representation. What’s really going on is that if people think H-2’s products are prescription drugs, they then think that all sorts of FDA oversight has gone on that doesn’t exist for supplements, presumably including serialization. I think this should still be actionable, but it’s because of the implications and not affirmative statements.]

H-2 argued that the FDCA still governed this because it requires prescription-requiring drugs to be labeled “Rx only.” Thus, since its products only say “Rx,” it can’t possibly be representing them as prescription drugs. But Method’s argument was not about FDCA requirements. Instead, it alleged that the “Rx” label induces market participants to think that H-2’s products are prescription drugs, “regardless of whether they are or what the regulatory scheme might require. Indeed, if H-2 is correct that FDA regulations do require all prescription drugs to be marked with ‘Rx Only,’ that it marks its products with the similar ‘Rx’ appears to make it more likely that the market would be confused, not less.” Method wasn’t alleging FDCA misbranding. “So, while it may be the case that only prescription drugs are subject to federal serialization requirements, that fact has little bearing on whether H-2’s representations on databases and its labels led the market to think its products were, indeed, serialized.” And the court’s language indicates that it understands this can work through implication: “That Method believes the market will interpret H-2’s alleged representations through the lens of FDA regulations (e.g., that a pharmacist believes the mark ‘Rx’ means the product is serialized because she interprets ‘Rx’ to mean drug, and drugs are serialized under FDA rules) does not mean that the Court is required to determine if those regulations require those interpretations.”

FDCA preclusion aside, were the claims plausible? H-2 argued that the “Rx only” rules made it implausible that consumers would think “Rx” meant “drug.” But “[t]he statute does not answer whether a mark can lead a consumer to think, incorrectly, that a product is a prescription drug, even if that mark does not cause the product to be ‘misbranded.’”

H-2 also argued that the entire context of the label wasn’t false or misleading. The labels clearly say “Supplement,” include “Supplement Fact” panels, and nowhere mention the word, “Drug.” But Method alleged that the pharmaceutical market, as a matter of fact, believes “Rx” to mean the product is a prescription drug, and thus serialized. That was enough. In addition, Method wasn’t just targeting the label. It also identified H-2’s alleged listing of its products with NDC numbers, which Method alleged H-2 knew its products didn’t actually have. Method also alleged that H-2 knowingly omitted the proper disclaimer on DailyMed to indicate its products were not FDA-approved, leading consumers to believe the opposite was true.

Deception/capacity to deceive: H-2 argued that the market here, including pharmacies, pharmacists, wholesalers, or insurance companies, are “sophisticated and well-acquainted with labeling strictures,” making deception implausible. “The market’s greater regulatory sophistication speaks only to the ultimate likelihood that Method’s claims succeed on the merits. But at this early litigation stage, the Court is to take as true all factual allegations.” Method alleged that these sophisticated entities were in fact duped (and indeed if 90% of the market behaves in a predictable way, then even sophisticated entities may not know about the regulatory lacunae for substances of long standing). As the court pointed out, “Method’s complaint teems with examples of such confusion: that H-2’s products appear improperly in the pharmaceutical dispensing software of CVS and Walgreens; that the Drug Databases improperly link H-2’s products to other drugs; that Medicare and Medicaid improperly reimburse purchase of H-2’s products despite not reimbursing for dietary supplements; or that the market prescribes H-2’s products thinking they are prescription drugs.” That was plausible enough to survive a motion to dismiss.