Second Circuit narrowly interprets materiality for Lanham Act purposes

Apotex Inc. v. Acorda Therapeutics, Inc., — F.3d —-,
2016 WL 2848911, No. 14–4353–cv (2d Cir. May 16, 2016)
The parties compete to make tizanidine, a drug for treating
spasticity. Apotex alleged that Acorda (i) filed a sham citizen petition with
the FDA to hinder approval of Apotex’s competing formulation in violation of
Section Two of the Sherman Act, and (ii) violated the Lanham Act’s proscription
on false advertising. The factual dispute focused on the relative efficacy of
tablets or capsules in controlling somnolence, one of the key side effects of
tizanidine; tablets and capsules aren’t bioequivalent, and there’s a substantial
difference in drug absorption when capsules are taken with food.  Taking the capsules with food thus diminishes
sleepiness as a side effect, and Acorda had a patent on capsules while Apotex
sold generic tablets.  The district court
dismissed the claims and the court of appeals affirmed, in the process hinting
at the instability that Caronia has
introduced into advertising law.
As for the antitrust claims, “Although precedent supports an
inference that a citizen petition is an anticompetitive weapon if it attacks a
rival drug application and is denied the same day that the application is
approved, that inference has been undercut by recent FDA guidance.”
False advertising: capsules carried an FDA label instructing
doctors to distinguish between tablets and capsules and between taking the drug
with food and without: “The prescriber should be thoroughly familiar with the
complex effects of food on tizanidine pharmacokinetics.”  The label also had a graph showing “Mean
Tizanidine Concentration vs. Time Profiles for Zanaflex Tablets and Capsules (2
x 4 mg) Under Fasted and Fed Conditions.” The peak for the curve representing
tizanidine capsules (taken with food) was lower, and occured later than the
peak for the curve charting concentration over time for tizanidine tablets
(taken with food).  As the label
explains, pharmacokinetic differences between the fed and fasted state may
affect the frequency and onset of certain adverse events, including sleepiness.
Once Apotex’s ANDA for capsules was approved, Acorda “countered
with its own authorized generic version.” 
Apotex argued that Acorda’s sales reps misrepresented to doctors that
its capsules reduced the maximum concentration of the drug in comparison with
tablets, and then improperly used reduction in that measure as a proxy for
decreased sleepiness.
On the Lanham Act claims, the court spends a bit of time
hammering home that its old “inherent quality or characteristic” language
really, really just means materiality, like every other circuit requires.  Then the court explicitly holds that “representations
that are wholly consistent with an FDA label” aren’t subject to Lanham Act
liability, for some reason not mentioning Pom
.  A footnote cautions that “Lanham
Act liability might arise if an advertisement uses information contained in an
FDA-approved label that does not correspond substantially to the label, or
otherwise renders the advertisement literally or implicitly false.”  However, the general rule “reflects proper ‘deference
to the expertise’ of the FDA as the regulatory agency responsible for issuing
the label by respecting the exhaustive process preceding the issuance of a
label.”  Furthermore, this rule “insulates
pharmaceutical companies from liability when they engage in First Amendment
speech that is consistent with the directive of the regulatory body having
oversight of product labels.” 
A couple of things: of course, assuming Central Hudson is still good law, the Lanham Act also insulates companies from liability
when they engage in truthful, nonmisleading commercial speech (presumably what
the court means by “First Amendment speech,” since even false advertising is covered by the First Amendment, albeit
not protected).  That is, the Lanham Act regulates less than what Central Hudson supposedly allows, because false/misleading
commercial speech may simply be banned. 
In that regard, there is no need to refer to the FDA, unless the First
Amendment requires a safe harbor for FDA-approved speech.  I think a rather more complex theory would be
required to justify that claim, and
it’s also inconsistent with what the Supreme Court has held with respect to
product liability claims about drugs, not to mention arguably (though not
necessarily) with Pom Wonderful.
Separately, when the court of appeals says that, “in order
to avoid chilling speech that ought to be protected, Acorda’s advertisements
cannot form the basis for Apotex’s claims to the extent they were in line with
the FDA-approved label,” it is a bit disingenous about its own precedent. The
court is surely aware of its own decision in US v. Caronia, holding that the First Amendment protects much, much
more than FDA-approved statements, but it is shying away from the implications
of that decision for other regulatory regimes. 
As this awkward attempt foretells, the day of reckoning can only be
staved off so long.
The court mostly found that the challenged statements were
supported by the FDA-approved label.  E.g., a rep said, “I explained to [the doctor]
that the [C]apsule[ ] [is] really unique in that it counteracts a lot of the
drowsiness when you dose it with food. He said he would give that a try and see
how well it works for his patients.”  “When
Acorda learned that its representatives may have made unauthorized promotional
claims for Zanaflex Capsules, Acorda’s head of sales sent a memorandum to the
sales team explicitly forbidding promotions that Zanaflex Capsules had fewer
side effects and less sedation than the tablets.”  Though representations that capsules provided
more “flexibility” than tablets weren’t on the label, Apotex’s burden was to show
falsity, not just lack of FDA approval. 
And there was no evidence that claims about flexibility were false or
misleading.  Nor did the reps’ claims
explicitly or implicitly represent test-proven superiority in sleepiness, only that
the pharmacokinetic results suggested less sleepiness.  “It is immaterial that no study has shown a
reduction in somnolence associated with Zanaflex Capsules; … Apotex must show
falsity, not merely uncertainty.” 
Moreover, the FDA label backed up the sleepiness claims—something that
the court specifically called a “harbor,” albeit not a “safe harbor”—because the
label warned that adverse events such as sleepiness might occur when switching
between tablets and capsules in the fed state.
In a brochure, Acorda superimpsed “30% INCREASE FOR TABLETS”;
“20% DECREASE FOR CAPSULES” on the FDA-approved graph.  Apotex argued that this was misleading,
because the graph showed mean
tizanidine concentration, which is the average drug concentration at different
points in time, while the text relates to the maximum drug concentration and,
by definition, was different from the mean drug concentration.  
The court of appeals found that there was a triable issue of
fact on falsity only with respect to the graph. 
The brochure also used sun and moon graphics and discussed day and night
dosing, but that wasn’t an unambiguous representation about efficacy against
sleepiness and there was no consumer reaction evidence.  And here the court implicitly rejects case
law suggesting that deliberate attempts to mislead can substitute for consumer
reaction evidence: “Apotex relies on internal marketing statements from Acorda
focusing on reduced [maximum concentration] and somnolence; but Acorda’s
motivations for launching the gatefold brochure do not constitute extrinsic
evidence as required.”  This isn’t a full
rejection, though, because of the issue with respect to falsity about the
concentration-sleepiness link: an intent to make an unsubstantiated claim doesn’t
translate into an intent to make a related false claim.
Apotex argued that the district court erred by examining the
brochure in isolation while ignoring the context of Acorda’s launch letters and
other documents detailing Acorda’s marketing efforts. “But the relevant context
of the advertisement is the overall message conveyed by the brochure. The
district court was not required to consider external marketing documents.”
The only real issue was the graph with the superimposed
text.  Since maximum concentration values
aren’t time dependent, and the graph displayed mean drug concentration over
time, a jury could find literal falsity. However, a jury could not find
materiality.  Apotex argued that literal
falsity allowed a factfinder to infer materiality, but that’s not so, despite
statements in case law indicating that “consumer deception is presumed, and
‘the court may grant relief without reference to the advertisement’s [actual]
impact on the buying public.’ ”  The
falsity here was only an exaggeration of the scale of the differences, and
there was no record evidence that this “inaccuracy” would deter capsule
purchases.  [Surely the court means “tablet”
purchases.] “Apotex fails to make the necessary showing that the specific
misrepresentation in the graphic—in any of Acorda’s advertisements—was likely
to influence consumers’ purchasing decisions.” 
Just how broadly the Second Circuit means this statement to stretch–for example, whether plaintiffs will be required to show that ads without the false statement at issue were less persuasive, versus whether they’ll be required to show that the claim is the kind of thing consumers care about–remains to be seen.

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