Allergan gets small damages award in case against compounder

Allergan USA, Inc. v. Imprimis Pharmaceuticals, Inc., 2019
WL 4546897, No. 17-cv-01551-DOC-JDE (C.D. Cal. Aug. 2, 2019)
discussion of liability issues
in this pharmaco v. compounder false
advertising case. After the court awarded partial summary judgment to Allergan
(falsity and materiality, not damages), the court excluded Allergan’s expert
report that based all its damages estimates on the Imprimis business model, not
on the impact of the particular statements at issue. And the jury was to rule
on Lanham Act damages only (there were also UCL violations, but the relief
there is equitable and Allergan couldn’t get disgorgement). The jury awarded Allergan
$48,500 in damages and zero in disgorgement of profits.
Imprimis renewed its motion for judgment as a matter of law,
which the court denied. Imprimis argued that Allergan presented no credible
evidence linking the false advertisements to lost Allergan sales. Mot. at 3. It
relied on Out of the Box Enterprises, LLC v. El Paseo Jewelry Exchange, Inc.,
732 Fed. App’x 532 (9th Cir. Apr. 30, 2018), where the jury found in favor of
the plaintiff and awarded $1.5 million in lost profits due to false
advertisements. The Ninth Circuit held that the plaintiff’s expert’s testimony
“established only a correlation—not a causal relationship—between [the]
advertisements and a decline in Out of the Box’s projected profits.” The
testimony also “did not provide the jury with a way to determine by a
preponderance of evidence the amount of any lost profits … In short, the record
provides ‘no way to determine with any degree of certainty what award would be
compensatory,’ as required by our precedent.”
Imprimis likewise argued that Allergan’s references to a
drop in its sales established a correlation, not a causal relationship, making
both (1) the fact of damage and (2) the amount of damage unproven.
As for the fact of damage, the Ninth Circuit has “generally
presumed commercial injury when defendant and plaintiff are direct competitors
and defendant’s misrepresentation has a tendency to mislead consumers.” “The
Court instructed that the parties are in direct competition and consumer
deception existed; the jury could therefore infer that the false statements
caused some injury to Allergan.”
As for the amount, a court “must ensure that the record
adequately supports all items of damages … lest the award become speculative
or violate [the Lanham Act’s] prohibition against punishment.” For jury awards,
courts accept “crude” measures of damages based upon reasonable inferences so
long as those inferences are neither “inexorable … [nor] fanciful.” The Court
instructed the jury: “Allergan does not need to quantify its damages in any
particular way or provide expert testimony; many sources can provide the
requisite information upon which you may calculate damages. Only the fact of
damages must be established with reasonable certainty. You need not calculate
the amount of damages with absolute exactness but there must be a reasonable
basis for computing the amount of damages.” The jury was allowed to consider
both direct and circumstantial evidence.
There was no direct testimony from a relevant consumer that
she purchased from Imprimis rather than Allergan due to the false
advertisements; and there was no survey of relevant consumers indicating actual
confusion or economic harm. But Allergan presented sufficient circumstantial
evidence. For example, a medical practice requested information on Imprimis’s
FDA report from July 2017, and in response, Imprimis’s VP of Quality stated
that “FDA found our products and services to be safe and effective.” A doctor
from the practice placed an order with Imprimis only two weeks later. An
Imprimis sales rep told another practice that Imprimis’s drugs combine
“FDA-approved” component before the practice made a purchase. There was also
evidence that Allergan lost market share during the time in which Imprimis made
the false promotional statements at issue.
Allergan argued to the jury that it should use the following
methodology: (1) begin with Imprimis’s unit sales during the time period the
jury believed that Imprimis’s false advertising had an effect; (2) multiply
that number by the percentage of Imprimis’s sales the jury found was
attributable to false advertising; (3) discount the product of that calculation
by Allergan’s market share for that drug to determine Allergan’s lost sales
units caused by false advertising; and (4) multiply that by Allergan’s per-unit
profitability. Imprimis disagreed, but this was a reasonable way to ask the jury
to think about the case. The jury asked the Court for the “summary document
showing the market share of Allergan Products,” and the jury could reasonably
have reached the $48,500 figure from this information and circumstantial
evidence before it.
It’s true that other factors affected the market, and
Allergan’s sales trends in the pre-wrongdoing period might have supported a
different conclusion.  “But that does not
mean that the jury could not infer any connection between lost sales and false
advertisements.” Imprimis mostly convinced the jury that there wasn’t much in the way of lost sales, but not entirely.

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