Defendant's belief its ads were effective is evidence of injury

Sandoz Inc. v. Amgen Inc., 2023 WL 4681569, No. 2:22-cv-05326-RGK-MARx (C.D. Cal. Jun. 29, 2023)

Sandoz brought state and federal false advertising claims against Amgen for its advertising of Neulasta, a pegfilgrastim injection used to treat the immunity-reducing side effects of chemotherapy, in particular the risk of the life-threatening infection febrile neutropenia (FN), by stimulating the production of neutrophils, a type of white blood cell that helps the body fight infections.

Thanks to its patents, Amgen enjoyed a temporary exclusivity period for pegfilgrastim injections until 2015. In 2014, Amgen introduced Onpro, a new method for delivering Neulasta through an “on-body injector.” With Onpro, patients could receive timed pesfilgrastim injections the day after chemotherapy without returning to the healthcare facility. The first pegfilgrastim biosimilar hit the market in November 2018, and would ultimately be followed by five others, including Sandoz’s Ziextenzo in November 2019.

A few months after Ziextenzo launched, Amgen launched a multi-million-dollar ad campaign to promote Onpro. These ads claimed that “Pegfilgrastim PFS resulted in a significantly higher risk of FN vs. Onpro” and “[w]ith PFS, FN incidence increased by 31% vs Onpro.” These ads were based on an obseivational study Amgen conducted itself, in an effort to remain competitive with the emerging biosimilar market. But the FDA, independent reviews at scientific journals, and even some of Amgen’s own employees criticized the advertising claims as unsupported and misleading. A second Amgen study received similar criticism. But Amgen continues to run its ads, now with updated claims that Onpro lowered the incidence of FN by 36% as compared to pegfilgrastim PFS based on its new study. Amgen saw the ads as successful, believing that they increased sales and convinced customers not to switch to biosimilars.

Ziextenzo did not perform well at launch, but the true cause was disputed. Amgen argued that there was no impact because the ads didn’t refer to Sandoz or Ziextenzo, and Sandoz couldn’t identify a single patient, prescriber, or insurer that would have used Ziextenzo but chose Onpro because of the advertising claims. After all: (1) Ziextenzo was not the first biosimilar on the market; (2) Ziextenzo was not reimbursable by Medicare; (3) Ziextenzo was more expensive than both Onpro and its biosimilar competitors; and (4) the COVID-19 pandemic drove a higher demand for on-body injectors like Onpro because on-body injectors minimized patients’ need to travel to healthcare facilities. But Sandoz’s experts claimed over $32 million in lost net profits even after accounting for these.

Injury: Damages and disgorgement under the Lanham Act require injury (for false advertising, not trademark infringement, despite the same statutory language covering both; no, I am not going to stop pointing this out any time soon). Proving an injury through lost sales data can be challenging because lost sales are often “predicated on the independent decisions of third parties; i.e., customers.” Thus, “[a] plaintiff who can’t produce lost sales data may therefore establish an injury by creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business.” Such an inference may be established through economic models using “actual market experience and probable market behavior.”

The evidence here, including direct competition between the parties, would allow a jury to reasonably infer injury:

Ziextenzo was among the handful of pegfilgrastim biosimilar PFS products on the market in late 2019. … According to Defendant’s internal memoranda, the advertising campaign was designed to “optimally position Onpro in [the] face of biosimilar competition.” These ads ultimately succeeded, driving 89,000 additional units by Defendant’s own estimates. From these facts, a jury could reasonably infer that the entire pegfilgrastim biosimilar market lost sales as a direct result of Defendant’s advertising. And, because Ziextenzo was one of those biosimilars, a jury could further infer that Ziextenzo lost sales, thereby causing Plaintiff an injury.

Although some cases disparage defendants’ own expectations and beliefs about causation as evidence of injury (in false advertising cases; never in TM cases), I believe this is both the majority and the correct rule. The court found Amgen’s evidence corroborated by Sandoz’s experts, who opined that the entire biosimilar market suffered as a result of Defendant’s advertising. “Courts routinely find expert testimony sufficient evidence of an injury to survive summary judgment. And economic analysis is a valid means of proving an injury caused by false advertising.”

Because the advertisements are ongoing, there was also a genuine dispute of fact as to the likelihood of future injury.

California law requires an “economic injury”; there was also a material fact issue on that for the same reasons.