Pacira BioSciences, Inc. v. Nephron Sterile Compounding
Center, LLC, No. 3:23-cv-05552-CMC, 2026 WL 2267750 (D.S.C. Aug. 6, 2026)

Pacira sells an FDA-approved pain management drug called
EXPAREL. Nephron allegedly made various false and misleading statements about
two of Nephron’s competing compounded drug products. Specifically, Nephron
allegedly represented those products as compliant with Section 503B of the FDCA,
and as safe, effective, and superior to EXPAREL. The court granted partial
summary judgment to both sides on the resulting Lanham Act claim.

Section 503B defines an “outsourcing facility” as a facility
that “is engaged in the compounding of sterile drugs”; “has elected to register
as an outsourcing facility”; and “complies with all of the requirements of
[Section 503B].” Outsourcing facilities may distribute compounded drugs without
obtaining a patient-specific prescription. They are also exempt from the FDCA’s
new-drug approval process and certain labeling and supply-chain requirements. But
they have to satisfy 11 statutory “conditions.”

The condition central to this case restricts outsourcing
facilities’ use of “bulk drug substances” in compounding. They can’t be used
unless the government properly identifies a clinical need or a drug shortage.
In 2016, the FDA said it needed time to evaluate nominations and wouldn’t act
when a bulk drug substance appeared on a list of “Category 1” substances the
FDA maintained on its website, which “may be eligible for inclusion on the
[clinical need] list, were nominated with adequate supporting information for
FDA to evaluate them, and [had] not been identified by FDA as presenting
significant safety risks.”

Nephron compounded BKK, a compounded drug product consisting
of bupivacaine, ketorolac, and ketamine; later, it switched to RKK, with
ketorolac, ketamine, and ropivacaine. Nephron advertised and sold them as “503B
products” and as lower-cost alternatives to Pacira’s EXPAREL. In August 2019,
Pacira wrote to the FDA urging it to take action against Nephron over its
“illegal marketing and promotion” of BKK. It sued in November 2023, alleging
false advertising of both products in terms of 503B compliance, comparability
to/substitutability for Exparel, and related safety/efficacy claims.

Laches barred claims based on BKK; Pacira knew about the
alleged false advertising since at least August 2019 and failed to offer more
than conclusory argument to rebut the presumption of prejudice arising from its
more than four-year delay in filing suit (period borrowed from state law). Even
without the presumption of prejudice, defendants noted that several key
witnesses no longer work for Pacira; some witnesses often could not recall
basic facts related to the litigation during their depositions, and two, “both
of whom reside beyond the subpoena power of the court, indicated they do not
intend to appear at trial.” Of the 28 Nephron employees identified in Pacira’s
Rule 26(a) initial disclosures, 17 were now former employees, including 11 who
“would have still been current employees had Pacira filed within three years of
January 2020.” “The unavailability of witnesses, faded memories, and changes in
personnel are all indicators of evidentiary prejudice.”

But RKK came later and was allegedly discovered later. Nephron
identified no “facts otherwise indicating a lack of vigilance” on the part of
Pacira.

The court first held that the RKK Section 503B claims
weren’t statements of opinion. Though lay claims about law are generally
opinion, sometimes a law is “so clear on its face that no good faith doubt
concerning its interpretation [is] possible, even without an explicit statement
from [a court or agency].” In that circumstance, the law’s meaning is “so clear
as to be a fact for Lanham Act purposes,” and Section 503B is “clear on its
face.” Determining whether an outsourcing facility’s claims of compliance with
Section 503B’s “bulk drug substance” provision are true “requires no more than
consulting two lists.”

Nephron argued that Section 503B permits an outsourcing
facility to market and sell a drug (say, RKK) without FDA approval as long as
the individual components of that drug appear on the drug shortage list. But
that wasn’t true: the drug shortage exception allows outsourcing facilities to
“compound using bulk drug substances” only if “the drug compounded from such
bulk drug substance appears on the drug shortage list.” Section 503B also defines
“compounding” as “the combining, admixing, mixing, diluting, pooling,
reconstituting, or otherwise altering of a drug or bulk drug substance to
create a drug.” That’s what making RKK is.

Nor did the FDCA preclude Pacira’s Lanham Act claim. The
“logical building blocks” of Pom Wonderful apply with equal force to
“drug marketing, medical device labeling, cosmetics branding, or any other kind
of marking or representation which would fall under both the Lanham Act and the
FDCA,” Thus, “courts adjudicating Lanham Act disputes outside of the food and
beverage realm” have “almost uniformly” interpreted POM Wonderful “to
cover products in other FDA-regulated industries,” including pharmaceuticals. The
issue here was not an exception because it wouldn’t “require the expertise of
the FDA to resolve,” would call on the court “to make an original determination
on an issue committed to the FDA’s discretion,” or would “otherwise conflict
with an affirmative policy judgment by the FDA.”

The court declined to consider alleged falsehoods not
identified in the complaint: statements allegedly conveying that RKK was
compounded “in compliance with Section 503B” or “in a 503B-compliant
outsourcing facility,” along with the specific statements that RKK is “generic
to or substitutable for EXPAREL,” provides “improved value” over EXPAREL,
“reduces post-operative pain[,] complications, risk of readmission, length of
stay, [and] patient morbidity and mortality,” “eliminates opioid related
adverse drug effects,” and has “low reported incidents of nausea and vomiting.”

Were they false? Nephron’s product lists and pricing sheets were
distributed to members of group purchasing organizations (GPOs), healthcare
systems, and individual hospitals, enough to constitute commercial
advertising/promotion. They listed RKK among Nephron’s “503B Products.” This
was a false claim as matter of law: “By listing RKK under that heading, Nephron
necessarily communicated to purchasers that RKK belonged to the class of
products meeting the statute’s requirements; no other conclusion can be drawn
from its designation as a ‘503B Product.’”

But statements that Nephron is “a leading manufacturer of
503B outsourcing products” weren’t literally false; appearing at the bottom of
a Nephron “Opioid Free” product handout featuring BKK, RCK, and RKK “could be
understood as conveying that Nephron manufactures ‘503B outsourcing products’ as
part of its broader business, without necessarily implying that BKK, RCK, and
RKK fall within that category.” Pacira’s survey didn’t test the “leading
manufacturer” statement, so Nephron got summary judgment.

Nephron’s “503B outsourcing facility” logo appeared
throughout Nephron’s materials, including the “Opioid Free” handout and the
product label for RKK. Again, this was too ambiguous to be literally false.
Here Pacira did have a survey, presenting respondents with a sample marketing
email about BKK. Pacira’s expert concluded that a net 14.8% of respondents
believed BKK was a Section 503B-compliant drug. “That percentage would
ordinarily be sufficient to support a finding that an advertisement misled or
tended to mislead consumers.”

The court denied Nephron’s motion to exclude. First, though
the email shown to participants focused only on BKK, the deception rate
calculated by Butler could be “extrapolated” to RKK; the difference went to
weight rather than admissibility:

This is not a scenario where Pacira
seeks to extend survey results to an entirely separate and untested statement
(as with the “leading manufacturer” statement). Rather, the same “503B
outsourcing facility” logo appeared on the product labels for both BKK and RKK,
and it is not immediately clear consumers would perceive the logo differently
depending on the product to which it was affixed. Under these circumstances,
the weight to be given [the survey’s] findings, as applied to RKK, is for the
jury to decide.

Other challenges also went to weight: Using closed-ended
questions after open-ended questions has both critics and supporters and their
limits could be the subject of cross-examination. The survey asked, “Which of
the following, if any, are message(s) communicated by this email?” and offered
the following response options:

1. BKK, an admixture of bulk drug
substances from Nephron, is a 503B compliant drug

2. BKK, an admixture of bulk drug
substances from Nephron, is opioid free

3. BKK, an admixture of bulk drug
substances from Nephron, is packaged in syringe form

4. None of these

5. Don’t know / unsure

Respondents who selected the first option were asked a
follow-up open-ended question to assess why they believed this.

Nephron argued that closed-ended questions should be avoided
when testing consumer deception because they are “highly susceptible to demand
effects and focalism.” But “there is nothing inherently wrong in using
closed-ended questions to test consumer impressions.” They can be “suitable for
assessing choices between well-identified options” and “may remind respondents
of options that they would not otherwise consider or which simply do not come
to mind as easily.” And open-ended questions have their own problems, such as
decreasing reporting of actually-held views: “respondents answering open-ended
questions may be less likely to report some information that they would reveal
in response to a closed-ended question when that information seems self-evident
or irrelevant” (quoting Shari Diamond). They also require subjective coding:
“Because respondents are answering in their own words and may not provide
precise answers, many answers are simply not clear enough to definitively
evaluate or categorize reliably.” Also, the “Don’t know / unsure” answer choice
is a recognized way “to screen out respondents who may not have an opinion on
the issue under investigation.”

Nephron also argued that the survey expert made “excessive
and biased” changes to the stimulus shown to the control group. The control
group saw an email that (1) removed both instances of the “503B outsourcing
facility” logo; (2) added a disclaimer stating, “Note: the admixture of bulk
drug substances sold as BKK is not compounded in compliance with Section 503B”;
(3) removed the statement “Nephron continues to strive to provide drugs that
are critically short and meet all needs of the Country!”; and (4) modified the
statement “This is something that will be huge in helping hospitals decrease
opioid and Exparel use” by deleting the reference to EXPAREL. The disclaimer,
Nephron argued, was “overly broad and inaccurate” because it “would likely lead
participants to conclude that no part of BKK is 503B-compliant.”

It was logical to address only BKK in the disclaimer because
that was the specific product being tested by the survey. “The court struggles
to see why respondents needed to be informed of the compliance status of
bupivacaine, ketorolac, and ketamine individually when they were being asked
about the admixture BKK.” Anyway, this was for cross-examination.

Finally, Nephron argued that the survey was an improper
“reading test” because the stimulus was visible while respondents answered
questions. Again, experts disagree on this, so it was for cross-examination and
competing expert testimony. Thus, there was a genuine issue of material fact on
misleadingness for use of “503B outsourcing facility” logo on the “Opioid Free”
product handout and RKK’s product label.

Statements that RKK (1) is “generic to or substitutable for
EXPAREL” and (2) provides “improved value” over EXPAREL: Pacira didn’t show any
use of the exact phrase. The closest it got was one email stating “Nephron
produces BKK, RKK, & RCK as generic, clinical need medications as requested
by physicians across the country.” That didn’t mention EXPAREL at all.  Summary judgment granted on (1).

The “improved value” statement was in the “Opioid Free”
product handout. But it didn’t make an express or implicit comparison to
EXPAREL, and it was puffery.

RKK safety and efficacy: these statements claimed that RKK
(1) “reduces post-operative pain[,] complications, risk of readmission, length
of stay, [and] patient morbidity and mortality”; (2) “eliminates opioid related
adverse drug effects”; and (3) has “low reported incidents of nausea and
vomiting.” These weren’t establishment claims [side note that courts used to be
much more open to the argument that scientific/health claims are establishment
claims by necessary implication, which seems right to me], and Pacira showed
only that they weren’t substantiated.

Of the remaining statements, there was no genuine dispute
that “503B Product” was material, given that GPO customers “required Nephron to
warrant that the compounded drugs it sold complied with Section 503B.” “Parties
do not typically bargain for guarantees on matters they consider unimportant.
That Nephron’s contracts with GPOs included an express warranty of Section 503B
compliance is compelling evidence that such compliance mattered to purchasers
of RKK.”

But the materiality of the “503B outsourcing facility” logo
was still in dispute.

There was also a factual issue of injury based on evidence
that certain customers who had previously purchased EXPAREL (1) began buying
RKK when it came on the market, (2) simultaneously reduced their purchases of
EXPAREL, and (3) were members of GPOs that had received Nephron pricing sheets
listing RKK as a “503B Product.” So these issues, and damages and/or
disgorgement, remained for trial.

from Blogger https://tushnet.blogspot.com/2026/08/compounding-pharmacy-must-face.html