Arbor Pharmaceuticals, LLC v. ANI Pharmaceuticals, Inc.
Filing
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MEMORANDUM OPINION AND ORDER - Defendant's Motion to Dismiss (Doc. No. 14 ) is GRANTED IN PART and DENIED IN PART as follows: Count III is DISMISSED WITHOUT PREJUDICE. (Written Opinion) Signed by Judge Donovan W. Frank on 8/2/2018. (las)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Arbor Pharmaceuticals, LLC,
Civil No. 17-4910 (DWF/LIB)
Plaintiff,
v.
MEMORANDUM
OPINION AND ORDER
ANI Pharmaceuticals, Inc.
Defendant.
_______________________________________________________________________
Andre T. Hanson, Esq., Katharyn Ann Grant, Esq., and Saul H. Perloff, Esq., Norton
Rose Fulbright US LLP, counsel for Plaintiff.
Adam Edward Szymanski, Esq., Erin H. Chadwick, Esq., and Sarah M. Stensland, Esq.,
Patterson Thuente Pederson, PA; and James Thomas Wilcox, Esq., and Scott Lloyd
Smith, Esq., Buchanan Ingersoll & Rooney PC, counsel for Defendant.
_______________________________________________________________________
INTRODUCTION
This matter is before the Court on a Motion to Dismiss brought by Defendant ANI
Pharmaceuticals, Inc. (Doc. No. 14.) For the reasons set forth below, the Court grants
the motion insofar as Defendant seeks dismissal of Plaintiff’s common law unfair
competition claim and denies the motion in all other respects.
BACKGROUND
Plaintiff Arbor Pharmaceuticals, LLC, researches, develops, and manufactures
prescription drug products. In particular, Plaintiff markets prescription erythromycin
ethylsuccinate for oral suspension under the brand names EryPed® and E.E.S.®
Granules, both of which are approved by the U.S. Food and Drug Administration
(“FDA”). (Doc. No. 1, Compl. ¶ 2.) EryPed® and E.E.S.® Granules are
prescription-only antibiotics. (Id. ¶ 11.) According to the Complaint, these products are
the only FDA-approved products of their kind on the market. (Id. ¶ 14.)
On or around September 2016, Defendant announced the launch of its own
Erythromycin Ethylsuccinate for Oral Suspension product (the “Product” or “Defendant’s
Product”), claiming it to be a generic version of EryPed® and E.E.S.®. (Id. ¶¶ 17-18.)
Plaintiff alleges that Defendant promotes its Product as FDA-approved and AB-rated
pursuant to an approved Abbreviated New Drug Application (“ANDA”). (Id. ¶ 27.)
Plaintiff further alleges that these promotions are false and misleading because
Defendant’s Product is not FDA-approved, does not have an AB-rating, and that
Defendant does not have a current, approved ANDA for its Product. (Id. ¶¶ 29, 30.)
Instead, Plaintiff alleges, on information and belief, that Defendant acquired an ANDA
from another pharmaceutical company for a discontinued product that had been
manufactured using a process that differs from that used by Defendant. (Id. ¶ 30.)
Plaintiff further alleges that the FDA considers this ANDA to be discontinued and that in
December 2016, notified Defendant that its application in connection with its Product
was not approvable. (Id. ¶ 32.)
Defendant acknowledges that it purchased the ANDA and took steps to market its
Product as a generic to EryPed® and E.E.S.® Granules. Defendant submits that the
relevant ANDA was originally approved in 1978 for Barr Pharmaceuticals, that Barr
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stopped marketing the approved product in 2003, and that the ANDA was discontinued.
(Doc. No. 16 at 3.) Defendant also represents that on August 26, 2016, it filed a
supplement to the ANDA with the FDA, detailing changes it made to the manufacturing
process of the Product. Defendant indicated its intent to market the Product if the FDA
did not advise otherwise within 30 days. Having not received an objection from the FDA
within that period, Defendant now contends that the FDA is aware that it is distributing
its Product and has not asked Defendant to stop. (Doc. No. 16 at 5.) 1
In this action, Plaintiff asserts the following claims: False Advertising in
Violation of the Lanham Act (Count I); Unfair Competition in Violation of the Lanham
Act (Count II); Common Law Unfair Competition (Count III); Violation of the
Minnesota Unfair Trade Practices Act (Count IV); Violation of the Minnesota Uniform
Deceptive Trade Practices Act (Count V); and Violation of the Minnesota False
Advertising Act (Count VI). (Compl.) At the heart of all of Plaintiff’s claims is the
assertion that Defendant is falsely advertising its Product as an FDA-approved, AB-rated,
generic substitute for EryPed® and E.E.S.® Granules. Defendant moves to dismiss all of
Plaintiff’s claims with prejudice.
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Defendant submits much of the above information in its briefing without citation
to the Complaint or documents embraced therein.
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DISCUSSION
I.
Legal Standard
In deciding a motion to dismiss under Rule 12(b)(6), a court assumes all facts in
the complaint to be true and construes all reasonable inferences from those facts in the
light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th
Cir. 1986). In doing so, however, a court need not accept as true wholly conclusory
allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th
Cir. 1999), or legal conclusions drawn by the pleader from the facts alleged, Westcott v.
City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). A court deciding a motion to
dismiss may consider the complaint, matters of public record, orders, materials embraced
by the complaint, and exhibits attached to the complaint. See Porous Media Corp. v. Pall
Corp., 186 F.3d 1077, 1079 (8th Cir. 1999).
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative
level.” Id. at 555. As the Supreme Court reiterated, “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements,” will not pass muster
under Twombly. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S.
at 555). In sum, this standard “calls for enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence of [the claim].” Twombly, 550 U.S. at 556.
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II.
The FDCA and FDA
The primary regulatory system governing prescription drugs was created by the
Food, Drug and Cosmetic Act (“FDCA”). 21 U.S.C. §§ 301, et al. To implement the
FDCA, the FDA has promulgated rules and regulations regarding drug labeling. The
FDCA requires FDA approval, through a new drug application (“NDA”), before a new
drug may enter the market. Id. § 355(a). A product similar to an NDA-approved drug
may be approved and marketed based on an ANDA, which requires the manufacturer of
the similar drug to demonstrate that the two drugs are therapeutically equivalent. Id. at
§ 355(j)(2)(A)(i)-(viii). If the FDA determines that a Reference Listed Drug and the
ANDA product are therapeutically equivalent, it gives the ANDA product an AB-rating.
(Compl. ¶ 13.) An AB-rating communicates that the product is a true generic. (Id.)
III.
Defendant’s Motion
A.
Lanham Act Claims
In Counts I and II, Plaintiff asserts Lanham Act claims based on the allegations of
false and deceptive advertising. Section 43(a) of the Lanham Act provides a cause of
action when “[a]ny person,” in connection with any good or services, uses in commerce
“any word” or “misleading description of fact” which “in commercial advertising or
promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his
or her or another person’s goods.” 15 U.S.C. §1125(a)(1)(B). The Lanham Act is
intended “to protect persons engaged in [] commerce against unfair competition.”
Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1389 (2014)
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(quoting 15 U.S.C. § 1127). To establish a Lanham Act claim, a plaintiff must
demonstrate that: (1) the defendant made a false statement of fact in a commercial
advertisement about its own or another’s product; (2) the statement actually deceived or
has the tendency to deceive a substantial segment of its audience; (3) the deception is
material; (4) the defendant caused its false statement to enter into interstate commerce;
and (5) plaintiff has been or is likely to be injured as a result of the false statement.
United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1180 (8th Cir. 1998). The false
statement normally falls into one of two categories: (1) commercial claims that are
literally false as a factual matter; and (2) claims that may be literally true or ambiguous
but which implicitly convey a false impression, are misleading in context, or are likely to
deceive consumers. Id. (citation omitted).
Defendant argues that Plaintiff’s allegations of a Lanham Act violation are bald
and conclusory and therefore do not satisfy Iqbal and Twombly. Defendant’s argument is
brief and made as a final argument for dismissal. Nonetheless, the Court dispenses with
the argument at the outset and determines that Plaintiff’s pleading is sufficient. In its
Complaint, Plaintiff alleges that its EryPed® and E.E.S.® Granules are the only
FDA-approved products of their kind on the market, and that Defendant launched an
unapproved product. (Compl. ¶¶ 12-28.) Plaintiff further claims that Defendant makes
three literally false claims when promoting its Product, namely that the Product is: (1) a
generic equivalent to EryPed® and E.S.C.® Granules; (2) AB-rated; and (3) FDAapproved. Plaintiff also alleges in the Complaint that these statements are deceptive and
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material, that Defendant’s Product is advertised in interstate commerce, that Defendant
intended to succeed in taking sales away from Plaintiff. (Compl. ¶¶ 17, 34, 35, 48.)
Plaintiff further alleges that Defendant’s advertising is false and misleading because the
ANDA that it acquired is discontinued and therefore cannot be relied upon to support
Defendant’s marketing claims. (Id. ¶¶ 29-33.) These allegations are sufficient to state
claims under the Lanham Act. 2
Defendant’s primary argument for the dismissal of Plaintiff’s Lanham Act claims
is that they are precluded under the FDCA. Specifically, Defendant argues that any
determination on the Lanham Act claims (namely, the falsity of Defendant’s promotions)
would require the Court interpret and apply the FDCA. The primary case relevant to this
argument, which is discussed at length by both parties, is POM Wonderful LLC v.
Coca-Cola Co., 134 S. Ct. 2228, 2233 (2014). In POM, the maker of juice products sued
its competitor under the Lanham Act for the use of an allegedly deceptive and misleading
label on a juice product—namely a label with a prominent display of “pomegranate
blueberry” when the product contained only small amounts of pomegranate and blueberry
juice. Id. at 2233. The question before the Supreme Court was whether a private party
may bring a Lanham Act claim challenging a food label that is regulated by the FDCA.
Id. at 2236. The Supreme Court considered the intersection of the Lanham Act and the
2
Similarly, Plaintiff’s claims under the Minnesota Unlawful Trade Practices Act
(Count IV), Minnesota Deceptive Trade Practices Act (Count V), and Minnesota False
Advertising (Count VI), are sufficiently pled. See LensCrafters, Inc. v. Vision World,
Inc., 943 F. Supp. 1481, 1488 (D. Minn. 1996) (applying Lanham Act analysis to
state-law claims).
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FDCA, noting that the Lanham Act creates a private right of action for competitors to
protect against unfair competition through misleading advertising and that the FDCA
statutory regime is designed primarily to protect the health and safety of the public and
does not provide a private right of action. Id. at 2230, 2234. The Supreme Court
explained that “Congress intended the Lanham Act and the FDCA to complement each
other with respect to food and beverage labeling” and declined to “elevate the FDCA and
the FDA’s regulations over the private cause of action authorized by the Lanham Act.”
Id. at 2240-41. Accordingly, the Supreme Court held that the FDA’s exclusive
enforcement authority over the FDCA did not preclude a Lanham Act claim for false
advertising involving FDA-regulated labeling. Id. at 2233 & 2237 (explaining that
FDCA-regulated labeling is not “under the terms of either statute, off limits to Lanham
Act claims”). It is worth noting, however, the Supreme Court appears to have left open
the possibility that certain Lanham Act claims could be precluded by the FDCA:
Unlike other types of labels regulated by the FDA, such as drug labels, see
21 U.S.C. § 355(d), it would appear the FDA does not preapprove food and
beverage labels under its regulations and instead relies on enforcement
actions, warning letters, and other measures.
Id. at 2239. At least one court has indicated that the above passage suggests, “at a
minimum, that the Court might find a Lanham Act claim precluded by the FDCA where
it turns on the content of a drug label, especially if that drug label were preapproved by
the FDA.” JHP Pharm., LLC v. Hospira, Inc., 52 F. Supp. 3d 992, 998 (C.D. Cal. 2014).
Defendant argues that POM does not apply to this case and that courts have
continued to find preclusion where a plaintiff’s claims would require the Court to
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interpret and apply the FDCA. See, e.g., Church & Dwight Co. Inc. v. SPD Swiss
Precision Diagnostics, GmbH, 104 F. Supp. 3d 348, 361 (S.D.N.Y. 2015) (finding a
Lanham Act claim is not precluded, but agreeing with “the longstanding proposition that
private parties may not use the Lanham Act as a vehicle to enforce the FDCA”); Catheter
Connections, Inc. v. Ivera Med. Corp., Civ. No. 14-70, 2014 WL 3536573, at *4-6 (D.
Utah July 17, 2014) (finding a Lanham Act claim regarding advertisements of a medical
device as “FDA approved” precluded where a determination of such approval is within
the agency’s purview). The Court acknowledges that there are cases where a party’s
Lanham Act claims are properly precluded under the FDCA, but finds that this is not
such a case.
Here, Plaintiff asserts an injury as a competitor and seeks to enforce the Lanham
Act, not the FDCA or the FDA regulations. Courts construing POM have found that
false advertising claims based on false representations of FDA approval are not
precluded. For example, in JHP Pharm., LLC v. Hospira, Inc., the manufacturer of
injectable epinephrine brought Lanham Act claims against defendant manufacturers for
selling injectable epinephrine products that are not FDA-approved while representing that
they are so approved. 52 F. Supp. 3d at 1000. In JHP, the court explained that false
representations that a drug is approved “undermine the Lanham Act’s public policy goals
both by confusing consumers and by enabling unfair competition.” Id. After considering
the impact of POM on the law of preclusion with regard to Lanham Act cases and the
FDCA, the court held that the Lanham Act claims were not precluded. Id. at 1001. In
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JHP, the defendants did not deny that their products were not FDA-approved, a fact the
Court found pertinent in determining that the claim was not precluded. Id. (noting the
case was “very different” than one where a manufacturer could plausibly claim that its
product was approved until and unless the FDA determined otherwise).
In this case, Defendant argues that it owns an ANDA for its Product and that
Plaintiff cannot circumvent the FDA’s regulatory and enforcement authority by seeking
to assert that its Product is not FDA-approved. Defendant also argues that the FDA is
aware that it is distributing its Product, has not instructed it to cease distribution, and
therefore tacitly approves of the ANDA while it considers Defendant’s supplement.
Defendant, however, does not rely on any pleaded facts in support of these contentions
and, instead, simply recites them in its brief. Plaintiff, however, alleges in the Complaint
that the FDA considers the ANDA to be discontinued and that Defendant was notified of
this in December 2016. Moreover, the FDA maintains a list of approved generics at
https://www.fda.gov/downloads/Drugs/ResourcesforYou/Consumers/Buying
UsingMedicineSafely/UnderstandingGenericDrugs/UCM564441.pdf, and as of the latest
printing on June 29, 2018, the list does not include Defendant’s Product. 3 Because
Plaintiff alleges that Defendant is promoting its product as a generic equivalent when the
facts, as alleged, demonstrate that it is not listed as a generic equivalent, the Court is not
3
The Court takes judicial notice of the information contained on the FDA website.
See, e.g., Missourians for Fiscal Responsibility v. Klahr, 830 F.3d 789, 793 (8th Cir.
2016) (recognizing authority to take judicial notice of government websites).
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required to interpret or apply the FDCA in determining whether the statements are false.
In addition, any determination of falsity lies outside of the expertise and authority of the
FDA. Accordingly, the Court concludes that Plaintiff’s Lanham Act claims are not
precluded.
B.
Primary Jurisdiction Doctrine
Defendant also argues that this case should be dismissed under the doctrine of
primary jurisdiction. The doctrine of primary jurisdiction “applies where a claim is
originally cognizable in the courts, and comes into play whenever enforcement of the
claim requires the resolution of issues which, under a regulatory scheme, have been
placed within the special competence of an administrative body.” Alpharma, Inc. v.
Pennfield Oil Co., 411 F.3d 934, 938 (8th Cir. 2005) (citation omitted). The applicability
of the doctrine is not governed by a fixed formula and any given case depends on
“whether the reasons for the existence of the doctrine are present and whether the
purposes it serves will be aided by its application.” Id. (citation omitted). Such reasons
include the promotion of consistency and uniformity within the areas of regulation and
the use of agency expertise. Id. Defendant argues that deference to the FDA is
appropriate here because it is currently engaged with the FDA concerning its supplement
to the ANDA and the FDA has allowed Defendant to continue to market its Product
during the regulatory review process.
For the same reasons discussed above with respect to preclusion, the Court rejects
Defendant’s argument that primary jurisdiction is a bar to Plaintiff’s claims. As
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explained above, Plaintiff’s allegations do not require the Court to interpret or apply the
FDCA, and any determination of whether Defendants’ statements are false lies outside of
the expertise and authority of the FDA. See, e.g., JHP Pharms, 52 F. Supp. 3d at 1002
(explaining that there is no need to invoke the primary jurisdiction doctrine where it takes
no special expertise to determine whether the FDA has granted approval or not).
C.
State and Common-Law Claims
Plaintiff also asserts state-law claims under the Minnesota Unfair Trade Practices
Act, Minnesota Uniform Deceptive Trade Practices Act, Minnesota False Advertising
Act, and for common law unfair competition. Defendant argues that these claims are
preempted by the FDCA because each of Plaintiff’s state-law claims would require the
Court to interpret and apply the FDCA. Again, for the reasons discussed above, the
Court need not interpret or apply the FDCA or FDA regulations in order to determine
whether Defendants’ statements are false. Therefore, these claims are not preempted.
Finally, Defendant moves to dismiss Plaintiff’s claim of common law unfair
competition (Count III), arguing that it is merely duplicative of other claims in the case.
“Unfair competition is not a tort with specific elements; it describes a general category of
torts which courts recognize for the protection of commercial interests” including
“product disparagement,” “tortious interference with contractual interests and improper
use of trade secrets.” Zimmerman Grp., Inc. v. Fairmont Foods of Minn., Inc.,
882 F. Supp. 892, 895 (D. Minn. 1994) (internal quotation marks omitted). “[T]o remain
viable, a common law unfair competition claim ‘must identify the underlying tort which
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is the basis for the claim.’” LensCrafters, Inc., 943 F. Supp. at 1490 (D. Minn. 1996)
(alteration and citation omitted). In addition, where an unfair competition claim is
duplicative of another claim, the unfair competition claim should be dismissed. See
Zimmerman Grp., Inc., 882 F. Supp. at 895.
Plaintiff argues that, despite some common underlying factual allegations, its
unfair competition claim is not duplicative of its false advertising claims under the
Lanham Act and Minnesota law. Specifically, Plaintiff argues that the nature of alleged
injury extends not only to Plaintiff’s use of false advertising, but also impacts Plaintiff’s
reputation insofar as the advertising sows confusion in the market and impacts the
market’s perception of Plaintiff’s own products. (Compl. ¶ 58.) Plaintiff submits,
therefore, that Defendant’s tortious conduct caused injury beyond lost sales in the form of
reputational damage. However, Plaintiff has not identified a tort separate from the false
advertising claims upon which it bases the unfair competition claim. The Court
determines that the claim is properly dismissed without prejudice.
CONCLUSION
Accepting the facts alleged in the Complaint as true, Plaintiff has stated a claim
that Defendant is liable under the Lanham Act and Minnesota law for making false and
misleading statements about the approval, rating, and generic equivalence of its Product.
With the exception of Plaintiff’s common law unfair competition claim, Defendant’s
motion to dismiss is properly denied.
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ORDER
Based on the files, records, and proceedings herein, and for the reasons stated
above, IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss (Doc. No. [14])
is GRANTED IN PART and DENIED IN PART as follows: Count III is DISMISSED
WITHOUT PREJUDICE.
Dated: August 2, 2018
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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