pharma databases as commercial speech? court says maybe

Alfasigma USA, Inc. v. First Databank, Inc., 2019 WL 3532844,
No. 18-cv-06924-HSG (N.D. Cal. Aug. 2, 2019)
Alfasigma sued First Databank for state and federal false
advertising after it re-classified Alfasigma medical food products from Class F
(prescription) to Class O (over-the-counter) in its widely-used MedKnowledge
database. First Databank moved to strike under California’s anti-SLAPP statute
and to dismiss; it failed in the first but was partially successful in the
second.
Federal law defines a medical food as “a food which is
formulated to be consumed or administered enterally under the supervision of a
physician and which is intended for the specific dietary management of a
disease or condition for which distinctive nutritional requirements, based on
recognized scientific principles, are established by medical evaluation.” Alfasigma
markets its medical foods “directly to physicians.”
MedKnowledge is the largest and most widely used drug database,
and insurers rely on it to decide which products to cover.  It uses F and O codes to divide the products
in its database between Rx and OTC.  Subscribers
allegedly “universally understand[ ] that a product designated ‘O’ is an OTC
drug, available over-the-counter and without physician supervision.” The
Alfasigma Products were allegedly “historically and correctly” designated as
F-Class, meaning that “their cost was often covered by insurance plans that
limit coverage to prescription products,” which improved usage and compliance.
In 2016, First Databank reclassified the Alfasigma products
to Class O, allegedly “falsely representing that these products are available
OTC, when in fact they are available by prescription, and should not be taken
by a patient without physician supervision.” First Databank claimed that it
moved the Alfasigma Products from the F-Class to the O-Class to be “in alignment
with [ ] FDA standards.” But this was allegedly not based on any FDA request or
advice, and the FDA’s Medical Director for the Infant Formula and Medical Foods
Staff allegedly told it that “[m]edical foods are not OTC drugs” and that its “misinterpretation
of FDA’s position and policies on medical foods” was leading to patients losing
insurance coverage because “their insurance providers belie[ve] that the
[Alfasigma Products] are over-the-counter (OTC) drugs.” The reclassification
allegedly caused confusion in the marketplace, including causing physicians to
stop prescribing the products and pharmacies to not stock them.
In 2018, First Databank announced that it was creating a new
Q-Class for the MedKnowledge database, in order to “distinguish” medical foods “from
over-the-counter drugs and devices.” Class Q will include products “that are
neither drugs nor devices, such as dietary supplements (including prenatal and
other vitamins), medical foods, herbal preparations, and bulk flavorings or
colorants.” But Alfasigma argued that “[n]one of these products are regulated
as medical foods, and none of them carry a federal requirement that they be
used under physician supervision.” It thus alleged that putting its foods into
the Q-Class “will cause further confusion among physicians and other
prescribers, pharmaceutical wholesalers and distributors, pharmacies,
pharmacists, and insurers, to Alfasigma’s continuing injury.” [This allegation reads
like it involves some fancy footwork: is there really a “federal requirement”
in the sense that one violates the law by providing medical foods to someone
who is not currently under physician supervision?  How would one even check that this was so?]
Anti-SLAPP law: First Databank’s reclassification was a
speech act about matters in the public interest within the scope of the
anti-SLAPP statute. To survive an anti-SLAPP motion, the plaintiff must “show a
reasonable probability of prevailing in its claims,” and “the trial court does
not weigh the evidence or determine questions of credibility; instead the court
accepts as true all of the evidence favorable to the plaintiff.”
First Databank argued that the information in its database was
pure noncommercial speech and thus outside the scope of the UCL/FAL and unfair
competition common law.  But the database
was at “the heart of every pharmacist claims processing system,” and was in
fact designed and marketed to be that vital to reimbursement. First Databank
cited Dex Media West, Inc. v. City of Seattle, 696 F.3d 952 (9th Cir. 2012), in
which the Ninth Circuit held that “telephone listings and community information
contained in [a yellow pages phone book directory] constitute noncommercial
speech.” The court thought that case was sufficiently different in procedural
(and perhaps factual) posture. Nor was the database equivalent to consumer-posted
reviews. Alfasigma’s allegations, including that First Databank customers “rely
on the information drug databases provide to make decisions about which
products to prescribe, purchase, dispense, and reimburse,” created a reasonable
probability that Alfasigma would be able to show that First Databank engaged in
commercial speech. [I’m not sure that the argument that the audience uses the
speech for self-regarding commercial purposes makes the speech itself
commercial—the question of whose motives need to be commercial here is
an interesting one.]
Alfasigma also adequately alleged falsity. Misleadingness:
First Databank argued that its database was entirely accurate: “the ‘O’ Class
value explicitly includes medical foods” because “the products do not require a
prescription under federal law.” But Alfasigma sufficiently pled that
MedKnowledge database subscribers “universally understand[ ] that a product
designated ‘O’ is an OTC drug, available over-the-counter and without physician
supervision,” making the classification of the Alfasigma products as OTC drugs false
or misleading.  [This suggests that the
previous classification was also false, albeit not harmful to Alfasigma.] “Even
if First Databank has redefined Class O to expressly include medical foods, the
understanding and expectations of its subscribers based on an earlier, stable
definition may override a subtle definitional change, particularly when
Alfasigma has pled that consumers are confused.”
Alfasigma also argued that First Databank misled its
subscribers when it claimed that “the source of its information” about the
classes was Alfasigma and the FDA. “Taken at face value, the FDA’s statements,
as relayed by Alfasigma, tend to support Alfasigma’s inference that First
Databank could not be telling the truth when it said that it decided to
reclassify the Products based on information received from the FDA.” [Though
harm causation might be a problem here; the reclassification itself, and not
its source, seems like the key issue .]
Motion to dismiss: as above, commercial speech was
sufficiently pled.  But not “commercial
advertising and promotion.” The Ninth Circuit uses the Gordon & Breach
test (though the court indicated its approval of the consensus that Lexmark
deleted the competition prong).  Alfasigma
didn’t plausibly allege that First Databank’s representations were made “for
the purpose of influencing customers to purchase” First Databank’s services. Influincing
decisions that consumers made to buy Alfasigma’s goods wasn’t
enough.  Alfasigma argued at oral
argument that the second alleged falsity—claiming data came from the FDA—was made
to encourage consumers to buy subscriptions, but the complaint didn’t allege
that with respect to the false advertising causes of action. Alfasigma was
given leave to amend. 
Note: state law claims survived, as did what the court
described as “false description” claims under the Lanham Act, though I don’t
see the basis for a §43(a)(1)(A) unfair competition claim here.  It might mean just theory two of the falsity
claims? 

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