failure to detail harm dooms medical food complaint despite plausible falsity

Alfasigma USA, Inc. v. Nivagen Pharmaceuticals, Inc., 2018
WL 4409350, No. 2:17-cv-01974-MCE-GGH (E.D. Cal. Sept. 17, 2018)
Somewhat surprisingly, failure to tell a detailed harm story
torpedoes this complaint; given the specific allegations of falsity, I wonder if it
will be successfully amended (as the court allowed).
Alfasigma makes “medical foods,” which can be prescribed but
do not require prescriptions. They are not eligible for reimbursement by
Medicaid, Medicare, or many private insurers. Breckenridge makes a purportedly generic
version of Alfasigma’s Foltx called Folbic. Pharma databases allegedly link
generic foods to name brand equivalents on the honor system, without
verification by any independent entity. Thus, relying on a company’s
representation that its product contains the same active ingredients in the
same amounts as a listed brand or equivalent generic product, industry
databases will represent to the pharmaceutical industry that the generic
product is pharmaceutically equivalent to the listed products.
Nivagen began marketing a generic—Niva-Fol— that it
represented was equivalent to Alfasigma’s branded product, Foltx, and
Breckenridge’s generic, Folbic. However, Nivagen allegedly characterized its
product as a prescription drug that requires an “Rx” on the label, thereby
entitling users to reimbursement. Nivagen allegedly caused Niva-Fol to be shown
as having a National Drug Code (“NDC”) or National Health Related Items Code
(“NHRIC”) number, which identifiers are provided for approved drugs and medical
devices only. Those identifiers also appear to qualify Niva-Fol for federal
reimbursement. Finally, Nivagen allegedl falsely designated its product as
“Made in the USA.” This allegedly gave Nivagen a competitive advantage over
non-reimbursable products offered by Alfasigma, allowing it to capture market
Even applying Rule 9, the complaint sufficiently pled false
advertising (except for the “Made in the USA” part, which didn’t even pass Rule
8 scrutiny).
Nivagen argued that the complaint failed to allege the factual
basis for Alfasigma’s belief that Niva-Fol lacks the same active ingredients as
Alfasigma’s products, or why it is not substitutable, or why any of the
challenged representations would be misleading, or how Nivagen got the
NDC/NHRIC designations if that wasn’t ok. 
None of that was a problem; the allegations Alfasigma did make sufficed.
“Though Plaintiff does not allege the exact statements made to the FDA, or even
who made them, this case does not lend itself to Plaintiffs having those kind
of details at this point. If the allegations are to be substantiated, that
information is known only to Defendant at this time, and is not required to be
pleaded up front.”  Arguments about
whether Niva-Fol really was entitled to an Rx designation were not suitable for
judgment on the pleadings. The only exception was “Made in the USA,” where
Alfasigma didn’t allege any factual basis for the claim that the slogan was
false or misleading—the allegation that the product wasn’t actually made in the
USA was conclusory and devoid of supporting facts.  Alfasigma could amend to fix this problem, if
it could do so.
Then, the court found that the complaint failed to
sufficiently allege injury in fact by failing to allege anything more than that
Alfasigma had been harmed by the falsity. 
[Query: without Breckinridge in the picture, shouldn’t it have been
enough to allege the falsity and materiality of the claims? In that case it
would follow almost automatically that business gained by Nivagen would have
been lost by Alfasigma, unless you believe that a generic substitute is going
to grow the market somehow.]

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