allegedly false generic claims not actionable, but contributory liability possible

Concordia Pharm. Inc., S.À.R.L. v. Winder Laboratories, LLC,
16-CV-00004 (N.D. Ga. Mar. 15, 2017)
Concordia makes Donnatal to treat irritable bowel syndrome
and acute enterocolitis.  (There’s
related litigation
that ended
badly for the defendant there
.) 
Concordia’s predecessor had conditional approval for ANDAs for Donnatal
tablets and elixir, which had become necessary when the FDA was required to
retrospectively evaluate previously approved drugs.  Concordia alleged that it was the only
company legally permitted to market PBA (phenobarbital and belladonna alkaloid)
products. 
Winder makes generic drugs; Steven Pressman owns
Winder.  In 2013, Winder began plans to
manufacture a generic version of Donnatal to be marketed by a third party,
Method, under the name Me-PB-Hyos. After Me-PB-Hyos was listed on several drug
databases, Concordia sued in the Western District of Virginia.  Defendants here were dismissed from that litigation
for lack of jurisdiction, and they subsequently took steps to begin production
and marketing of a generic version on their own.  In 2016, Winder listed B-Donna and Phenohytro
pharmaceutical products with the FDA and subscription pharmaceutical drug
databases, including Medi-Span and First DataBank.  B-Donna was removed from the FDA website but
remains listed with the drug databases.  Health
care professionals, insurers, payers, and pharmaceutical manufacturers use the
drug databases to determine whether generic substitutes are available for brand
named products. Pharmaceutically equivalent products are “linked” in the drug databases.
The B-Donna and Phenohytro products were submitted with labels and package
inserts indicating that they contained the same active ingredients, in the same
amounts, and in the same dosage forms as Donnatal products, and were thus
linked. The labels and package inserts also indicated that the B-Donna and
Phenohytro products had been reviewed and classified by the FDA.
The court declined to be bound by the false advertising
reasoning in Concordia Pharmaceuticals, Inc. v. Method Pharmaceuticals, LLC,
2016 WL 1271082, No. 3:14CV00016 (W.D. Va. Mar. 29, 2016).  As to the claim of literal falsity in claims
about FDA review and classification, those were precluded by the FDCA.  Concordia’s theory of liability was that
statements that B-Donna and Phenohytro were reviewed and classified by the FDA
and that Phenohytro was indicated for certain uses were false.  Their falsity depended on the meaning of the
word “drug” in an FDA regulation. That is, once a “Drug Efficacy Study
Implementation notice on a prescription drug” has been published in the Federal
Register, the FDA requires all labeling to include “an appropriate
qualification of all claims evaluated as other than ‘effective.’”  Donnatal includes such language in its
packaging and inserts because of a 1975 DESI notice classifying Barbidonna (the
former name) tablets and elixir as “possibly effective.”  If “drug” means “specific producer’s product,”
then a similar claim for B-Donna and Phenohytro would be false.  But if “drug” means “specific combination of
active ingredients in particular strengths and dosage amounts,” as defendants
contended (which seems more plausible at first glance), it would be true.  The FDA hasn’t set forth its interpretation
of “drug” in this context, and the court declined to interpret the FDCA/the
DESI notice without letting the FDA weigh in first. 
Pom Wonderful
didn’t prevent this result.  There,
falsity could be determined independent of FDA regulations. Here, finding
defendants’ statements to be false would require an interpretation in the first
instance of FDA regulations under the FDCA.
Second: Concordia alleged that defendants falsely claimed
that B-Donna and Phenohytro were FDA-approved and substitutable for Donnatal,
including by listing them in the drug databases in such a way as to produce
linkage with Donnatal. The “FDA-approved” claims were precluded, as above. For
the rest, the court did not accept that including the active ingredients, their
strengths, and their dosages in the promotion materials provided to the drug databases
constituted false or misleading advertisements. 
The argument was that the databases took accurate information and improperly
linked the parties’ products; this wasn’t enough.
Contributory false advertising: This theory is recognized in
the Eleventh Circuit.  (Important note:
the court didn’t discuss “commercial advertising or promotion.”  If the databases aren’t engaging in
“commercial advertising or promotion” of their own products when they
distribute the information, how can they be violating the Lanham Act to create
a primary violation allowing for secondary liability?  If the answer is that the database providers
are engaged in commercial advertising because of the promotional interests of
the data-submitters, that seems a bit
worrisome for any reporter who reports out positive promotional information
from a commercial source.  If drug
databases aren’t engaged in
commercial advertising or promotion when they distribute the linkage
information, though, then plaintiffs will have to find some tort that isn’t
limited to commercial advertising or promotion to challenge any resulting
falsehood.  If I were defendants, I’d
seek some clarity on this—and maybe an amicus from the drug databases, which
stand here accused of primary liability for violating the Lanham Act even if
un-sued at present.)
Anyway, once direct liability is established, the plaintiff
has to allege that the defendant contributed to the conduct by acting with “the
necessary state of mind—in other words that it intended to participate in or
actually knew about the false advertising.” In addition, the plaintiff has
allege that the defendants “actively and materially furthered the unlawful
conduct—either by inducing it, causing it, or in some other way working to
bring it about.”  The court found that
this had been properly alleged, since the result of the database’s linkage was
the misleading implication that defendants’ products were “FDA-approved
‘generic’ products that are therapeutically equivalent or A-rated to and/or
substitutable” for Donnatal.  Literal
truth can still be misleading. 
The court rejected defendants’ preclusion argument, which
was that the FDA requires them to include the active ingredients, their strengths,
and their amounts in the advertising material sent to the drug databases.  FDA requirements/authorizations aren’t a
ceiling on the regulation of drug labeling, since “Congress intended the Lanham
Act and the FDCA to complement each other . . . .”
Trademark infringement: Defendants argued that there was no
use in commerce, and that any likelihood of confusion was prevented by the
indication on the Medi-Span listing that B-Donna is labeled by Winder.  But use in commerce is broad enough to cover
listing on the databases without any sale. 
And Concordia properly alleged likely confusion at the motion to dismiss
stage.  Donnatal was at least suggestive,
and not used by other parties, making it strong.  (But the part of the marks that overlaps,
donna, has to be at most descriptive of belladonna derivatives.)  Concordia also alleged sufficient similarity
between the marks (the court didn’t break that down further) and the
products/sales channels, as well as an intent “to exploit the reputation and
success of DONNATAL.”
As to labeling Winder as the supplier, that wasn’t enough at
the motion to dismiss stage.
The common-law unfair competition claim was preempted
because it was equivalent to the precluded direct false advertising claim
above. The Georgia Uniform Deceptive Trade Practices Act was analogous to §
43(a), so the trademark-related claims survived and not the false advertising
claims.
Unjust enrichment: The “essential elements of the claim are
that (1) a benefit has been conferred, (2) compensation has not been given for
receipt of the benefit, and (3) the failure to so compensate would be
unjust.”  Concordia alleged sufficient
facts to state a claim: “Defendant gained a benefit by copying Plaintiff’s
DONNATAL labels for use with B-Donna and Phenohytro, thus saving Defendant the
time and resources needed to create its own.” 
[There is simply no way this is not preempted by §301 of the Copyright
Act.  Courts have held time and again
that unjust enrichment claims are preempted when they’re based on copying of
this sort.]
Additionally, Concordia alleged that being linked in the
databases consituted unjust enrichment. 
[If they’d been FDA-approved generics for a non-grandfathered drug,
would it constitute unjust enrichment? 
If not, why not?  This gets to the
difficulty we often have in defining “unjust” enrichment or “unfair”
competition as distinct from fair free riding.]

Tortious interference: Concordia failed to plead more than
the conclusory allegation that, “[u]pon information and belief, Defendants’
wrongful and intentional conduct has caused third parties to discontinue or
fail to enter into anticipated relationships with Plaintiff.” This wasn’t
enough

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