Misleadingness caused by plaintiff's own actions doesn't violate Lanham Act

U.S. Pharmaceutical Corp. v. Trigen Laboratories, Inc., 2011 WL 446148 (N.D. Ga.) USPC sells patented, prescription-only prenatal nutritional supplements containing iron and Vitamin C (which enhances absorption of iron); insufficient iron is a risk factor for various adverse pregnancy outcomes. Trigen, a generic manufacturer, developed a competing supplement. USPC sued for false advertising and unfair competition because Trigen allegedly falsely advertised its supplements as functional equivalents of USPC's. USPC's supplements are the only prescription supplements that contain ProAscorb C, USPC's trademarked name for its patented mixture of Vitamin C components and other ingredients. ProAscorb C is patented and USPC is the exclusive licensee. Vitamin C may be introduced to the diet in various ways, and manufacturers sometimes claim that certain formulations of ascorbic acid increase its effectiveness. The patent claims that administration of Vitamin C initially causes a period of reduced immune system activity, followed by enhancement, and further claims to prevent or reduce the initial suppression of immune system activity with a unique formulation of ascorbic acid that is a mixture of water and fat soluble forms. The patent further claims that its formulation causes ascorbic acid to be absorbed more quickly and retained longer by the body, and that the oil soluble ester form of ascorbic acid aids in the absorption of the ascorbic acid and enhances the effect of Vitamin E. Unlike USPC, Trigen doesn't use a sales force to market its supplements. Instead, it relies on being linked to targeted competitors' supplements in drug information databases, so that when healthcare providers or pharmacists search for a supplement, the results include both the competitor's and Trigen's. Trigen looked at the USPC labels to identify the ingredients and examined the relevant patent to determine the amount and type of Vitamin C. Trigen chose a mixture of ascorbic acid and the ascorbic acid salts preferred by the Patent, and several of the metabolites and amino acids preferred by the Patent. However, Trigen did not include the oil-soluble ascorbyl ester (present in very small amounts), which Trigen claimed it did because oil-soluble ascorbyl ester is broken down into ascorbic acid before it is absorbed by the body, and thus its omission would not impact the overall effectiveness of the Vitamin C in the formulation. This also had the helpful effect of avoiding patent infringement. Trigen then applied to have its supplements listed in the drug databases. The list of active ingredients for each of its supplements matched the list of active ingredients for the targeted USPC supplements. The amount of Vitamin C was the same, but where USPC's Supplements said "Vitamin C (from ProAscorb C)," Trigen's Supplements said "Vitamin C (compare to ProAscorb)" with a footnote: "Compare to ProAscorb, a patented pharmaceutical grade material consisting of ascorbic acid plus Ascorbic Acid Precursors …." In the applications for the drug databases, Trigen specifically listed USPC's supplements as "reference" drugs to which Trigen's supplements should be linked. Trigen succeeded with one database, and then had to change the iron formulation to get another database to link the parties' supplements, changing the label to reflect this. After the PI hearing at which the court expressed reservations about "Compare to," Trigen removed that language from its labels and sent the revised labels to the drug databases, which continued to link the supplements. Healthcare providers rely on the databases when deciding which prescribed items to dispense. The databases provide information on active ingredients, price, pharmaceutical equivalence, and potentially therapeutic equivalence. Pharmaceutical equivalence is generally understood to mean the FDA definition, "drug products in identical dosage forms that contain identical amounts of the identical active drug ingredient." Pharmaceutical alternatives, however, "contain the identical therapeutic moiety [essentially, the part of the molecule or ion responsible for the physiological or pharmacological action of the drug substance], or its precursor, but not necessarily in the same amount or dosage form or as the same salt or ester." The database companies rely on the information provided by drug manufacturers to classify drugs based on pharmaceutical equivalence. The companies do not independently verify the accuracy of the information. They classify drugs based on active ingredient, strength, dosage, and route of administration. "If two drugs are identical across those four attributes then their generic alphanumeric identifiers will also be the same, indicating that they are pharmaceutically equivalent." Such drugs, and only such drugs, will be linked, so searching for one drug in the database will retrieve information on both drugs. Pharmaceutical equivalence does not necessarily mean therapeutic equivalence, which includes the additional requirement that the drugs "can be expected to have the same clinical effect and safety profile when administered." This requires bioequivalence, in that there is no "significant difference in the rate and extent to which the active ingredient … becomes available at the site of drug action." According to the FDA's industry standard Orange Book, "[d]ifferent salts and esters of the same therapeutic moiety are regarded as pharmaceutical alternatives …, [and] are not considered to be therapeutically equivalent." The Orange Book lists generics that have been determined by the FDA to be therapeutically equivalent to a name-brand drug. These equivalences are reported in the drug databases. However, the supplements here contain ingredients that were grandfathered in to the current FDCA, and thus the FDA has not made a determination about their safety and effectiveness. They are therefore also not included in the Orange Book, and the FDA does not check for therapeutic equivalence. The databases don't represent that the supplements are therapeutically equivalent. To the contrary, they explicitly warn that drugs that are listed together as pharmaceutically equivalent may have different efficacies. Pharmacists sometimes substitute drugs based on the information in the databases; state law governs how and when substitutions may or must be made. Some states ban substitution unless the Orange Book shows therapeutic equivalence. Others, including Georgia, only require pharmaceutical equivalence. There are other variations as well. After USPC failed to get a database to delink the parties' supplements, it sued on a theory of implicit falsity: Trigen's statements misled pharmacists, healthcare providers, and consumers into thinking that the parties' supplements are equivalent or substitutable. The question was not end consumer confusion. The relevant entities were the database companies, which relied on Trigen's statements to link the supplements, and pharmacists (and other healthcare providers), who rely on the information in the databases to substitute Trigen's products for USPC's, where allowed. The court found that it was not credible to argue that the database companies had been misled by the "compare to" statement, the statement that USPC supplements were reference drugs, or the request for linkage. (The court earlier noted that companies sometimes request linkage and are denied unless the four key attributes match.) "At first blush it may seem that the 'compare to' language is misleading." This was because it used a footnote listing the components of Trigen's formulation, which could give the impression that the compounds in Trigen's Vitamin C were the same even though ProAscorb contains additional compounds. However, the evidence showed that the "compare to" language and footnote were irrelevant to the database companies' linking decisions. Representatives from two major database companies testified that the "compare to" language was irrelevant to the linking decision. USPC's label has a parenthetical note that the Vitamin C in its supplements was "from ProAscorb C," which one representative said "doesn't actually represent the ingredient. It appears to represent a product name that's trademarked." Thus, it wouldn't have affected the decision; the other representative testified similarly. Anyway, that language is gone, even if it might have deceived consumers or healthcare providers; the only ongoing injury is the linkage in the databases, and the "compare to" language was not a cause of that linkage. What about listing USPC supplements as reference drugs? The court concluded that the reference didn't materially affect the database companies' linking decisions. Both representatives testified that they independently analyze label information from the manufacturer. The classification is based solely on the quantity of active ingredients, the dosage form, and the route of administration. Because the parties' products share the four unities, they would have been linked even if Trigen hadn't listed USPC's supplements as references. Indeed, despite the reference, one database initially did not link two Trigen supplements to USPC supplements because of a small difference in iron content, later changed. USPC argued that database companies don't perform independent analyses of equivalence, instead relying on manufacturers' representations. But the evidence was that they only rely on representations about those four characteristics, none of which USPC challenged as false. "USPC argues that the linking is inaccurate, not the label, and the evidence shows that the drug database companies make the decision to link two drugs and that decision is made independent of a manufacturer's recommendation." Is it misleading for Trigen to continue to allow the linkage, when Trigen admits its products don't contain the same Vitamin C ingredients? USPC argued that Trigen manipulated the database companies' policies of not distinguishing between different sources of Vitamin C, linking the products despite an absence of proof of equivalent effectiveness. The court was unsure whether the databases would unlink the drugs in response to a manufacturer's classification request as long as the four unities were present, so it wasn't clear whether USPC could get a real remedy unless Trigen changed its formulation. The companies might resist any delinkage otherwise; one representative testified that customers value having pharmaceutical equivalents linked to a common identifier. The court stated that it wouldn't order relief that would mandate potentially adverse action on part of nonparties. But the more fundamental problem was that linkage didn't seem to be misleading. The supplements might not be equally effective, but that goes to therapeutic equivalence, and neither Trigen nor the databases make any representation about therapeutic equivalence. "The drug database companies only list drugs as therapeutically equivalent if the FDA publishes a finding of therapeutic equivalence in the Orange Book. The database link therefore implies only what the evidence shows to be true, and nothing more: that the two companies' supplements have the same active ingredients, strength, dosage, and route of administration." If USPC wants the databases to opine on therapeutic equivalence, it needs to convince the database companies, regulators, or someone else. The court also concluded that to the extent the linking could be considered confusing, the confusion appears to arise not from Trigen's actions but from USPC's decision to conceal relevant information about its Vitamin C formulation on its supplement label and in the application to the drug database companies. If, as USPC argues, it is misleading to link the supplements as pharmaceutically equivalent, it is because the link misleadingly obscures important differences in the sources of ascorbic acid. But it would have been difficult if not impossible for the database companies to consider those differences because USPC chose not to disclose that information. USPC says that it is not required by the FDA to disclose the sources of its Vitamin C, but that is immaterial to deciding whether the implication of pharmaceutical equivalence is misleading due to USPC's actions rather than Trigen's actions. The evidence does not show whether more detailed information would have changed the database companies' classification of USPC's Supplements, but even if it would have changed the classification, the evidence shows that the current classification exists in significant part because of USPC's omission of information on its supplement's labels and drug listing applications. One might say that the defendant was not the proximate cause of the harm. Can this be distinguished from a case in which the plaintiff changes the formula of its national brand and then says that a competitor's comparative advertising is now false, since the new formula is better than (or at least distinct from) the old one? In that case, I think the competitor is definitely at risk if it continues to make the old claims, and should be, even though it's the plaintiff's acts that made the defendant's ads misleading. I am not sure any distinction can be found between my hypothetical and the USPS case that is not in some sense moral: in my hypothetical, the plaintiff is entitled to change its formula (unless its conduct is otherwise wrongful, for example violating the antitrust laws) and may be promoting competition/product improvement by doing so, whereas, while USPS may not be violating any laws in its practices, its failure to disclose is not the kind of baseline to which we should give moral force. One could also argue that this is the unusual case in which the plaintiff is the least cost avoider. The trouble with that is that it's easy to argue (in fact, it's a feature of the anti-consumer-protection-law literature) that competitors are almost always least cost avoiders: among other things, they should just engage in counteradvertising self-help as a more efficient way of dealing with bad information in the marketplace. In order to make the case at bar different, you'd have to say that the Lanham Act incorporates a general (nonrebuttable) presumption that counteradvertising won't work, and then provides for liability when the defendant is the least cost avoider; I don't think that makes more sense than saying that the court here is using a fundamentally moral baseline. Anyway: As the court further noted, even if the database companies looked at the patent, the patent itself discusses numerous alternative formulations of Vitamin C so that it would still be impossible to figure out the precise content of USPC's supplements. The court even commented that USPC seemed to be violating FDA labeling regulations. For these purposes, "dietary ingredients" are nutrients being supplemented, and "ingredients" are the actual compounds used to manufacture the supplement. The FDA provides that ingredients that are the sources of dietary ingredients may be listed in the Supplemental Facts panel-e.g., "Calcium (as calcium carbonate)"-and that when ingredients are listed this way, they don't have to be listed again in the ingredient statement. But USPC, the court said, hasn't listed the ingredients it used as a source of its Vitamin C in the Supplement Facts panel, and thus should list them in the ingredient list. "This is sensible, because patients concerned about intake of, for example, sodium, calcium, or potassium, may care to know that a supplement provides those in the form of sodium ascorbate, calcium ascorbate, or potassium ascorbate." (I don't know what if anything the regulations provide about using a TM instead of a scientific name for the ingredient, though it really seems like one would want the scientific name, for precisely the reasons the court articulates.) Piling on, USPC failed to prove that the "presence or absence of a small amount of oil soluble ascorbic acid ester has a material effect on … decisions" of database companies or pharmacists. The evidence was that the databases considered the supplements to be pharmaceutically equivalent in spite of the absence of oil soluble ester in Trigen's product; the databases don't distinguish between sources of Vitamin C. The court noted that it had focused on the database companies, but USPC also failed to produce evidence that pharmacists were misled; its affidavit from a pharmacist did not show that the pharmacist believed that linked products were pharmaceutically equivalent. The software programs he used to purchase and dispense drugs listed USPC's and Trigen's supplements as "generic equivalents." This was an ambiguous term, "but it is being used by software companies two steps removed from Trigen and one step removed from the database companies. USPC has failed to show whether the term 'generic' is misleading in these circumstances and has not argued what relationship Trigen has with these separate companies that would cause Trigen to be liable under the Lanham Act for their decision to classify the drugs as equivalent." The relevant decision makers didn't consider the differences between the parties' formulation to be material to pharmaceutical equivalence. Thus, USPC was unlikely to succeed. Preliminary injunction denied.

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