ENDO PHARMACEUTICALS INC. v. ACTAVIS INC. et al

Filing 64

OPINION. Signed by Judge Kevin McNulty on 03/21/2016. (JB, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ENDO PHARMACEUTICALS, INC.,
Civ. No. 12-cv-7591 (KM)

Plaintiff,
V.

MEMORANDUM OPINION

ACTAVIS, INC. and ACTAVIS SOUTH
ATLANTIC LLC,
Defendants.

KEVIN MCNULTY, U.S.D.J.:
Plaintiff, Endo Pharmaceuticals, Inc. (“Endo”) brought this action against
Defendants Actavis, Inc. and Actavis South Atlantic LLC (collectively, “Actavis”)
alleging that Actavis falsely marketed a generic form of oxymorphone
hydrochloride extended-release tablets. Endo has asserted violations of the
Lanham Act, 15 U.S.C.

§ 1125(a); the New Jersey Fair Trade Act, N.J. Stat.

Ann. 56:4-1 et seq.; and the New Jersey Consumer Fraud Act, N.J. Stat. Ann.
56:8-1 et seq. Now before the Court is Actavis’s renewed motion to dismiss the
complaint on the grounds that it fails to state a claim under Fed. R. Civ. P.
12(b)(6). (Dkt. No. 44)
Because I write for the parties, I write briefly and assume familiarity with
the case. For the reasons set forth below, the motion is denied as to claims
under the Lanham Act and the New Jersey Fair Trade Act, although the
theories will require narrowing. Dismissal is granted as to the claim under the
New Jersey Consumer Fraud Act.

BACKGROUND
Endo is a pharmaceutical company which researches, develops, sells and
markets prescription pharmaceuticals used to treat and manage pain. (Dkt. No.
1

1 (“Compi.”)

¶

10) Endo obtained approval from the FDA on June 22, 2006, for

an extended release oxymorphone hydrochloride pain reliever under the brand
name Opana® ER. (Id.
(Id.

¶

¶

26) Endo began selling Opana® ER in July of 2006.

27)
Actavis manufactures and sells generic drugs. (Id.

¶

11) In February of

2008, Actavis sought approval to produce a generic form of the original, thencurrent formulation of Opana® ER. (Id.

¶

52) The FDA approved Actavis’s

application in December 2010. (Certification of Samuel Spital in Support of
Motion to Dismiss, dated March 31, 2015, Dkt. No. 45 (“Spital Cert.”), Ex. B p.
2) Actavis’ generic is AB rated to the drug known as Opana® ER, meaning that
the product is therapeutically equivalent to Opana® ER. Actavis began selling
generic tablets in July 2011. (Id.)
Concerned about the potential for abuse of the drug, including the
possibility that persons would crush the pills and snort or inject the powder,
Endo developed a crush-resistant version of Opana® ER. (Id.

¶

33) Endo

submitted this new formulation to the FDA for approval on July 7, 2010, and
was granted approval on December 9, 2011. (Id. ¶j 35, 40)
Endo ceased manufacturing the old formulation, but did not recall the
tablets that had already been produced and distributed. (Id.

¶J

4 1-42) Instead,

Endo sought to bring the new formulation to market as quickly as possible
while allowing the supply of the old formulation to work its way through the
distribution pipeline. (Id.
February 2012. (Id.

¶

¶

42) Endo began shipping the new formulation in

43) This new crush-resistant formulation was

bioequivalent to the original formulation of Opana® ER and was sold by Endo
under the same brand name. Endo sought to distinguish it in the consumer’s
mind, however, by referring to it as “Opana® ER with Intac.” Actavis does not
have approval for a generic version of that new, crush-resistant formulation of
Opana® ER. (Id.

¶

51)

(For simplicity, I will from now on refer to the two formulations as “Old
Opana® ER” and “Opana® ER with Intac”.)

2

In August of 2012, Endo filed a Citizen Petition with the FDA, seeking to
have the FDA (1) determine that the old formulation of Opana® ER was
discontinued for reasons of safety, (2) refuse to approve any pending generic
approvals for the old formulation, and (3) suspend and withdraw approval for
generic versions of the old formulation. (Spital Cert. Ex. B p. 1) Several months
later, before the FDA could address the petition, Endo filed suit against the
FDA in the United States District Court for the District of Columbia seeking to
compel immediate action on its petition.
On December 11, 2012, Endo filed this action against Actavis. (Dkt. No.
1) Endo alleges that Actavis’s marketing of “Generic Oxymorphone ER Tablets”
as “AB Rated to Opana® ER”’ became misleading after May 2012, once Endo
had stopped selling Old Opana® ER in favor of Opana® ER with Intac. (Id.

¶

58)
Endo moved to dismiss the complaint on January 22, 2013. (Dkt. No. 8)
This Court (the action was then assigned to District Judge Dennis M.
Cavanaugh, since retired) dismissed the complaint. (Dkt. No. 33) Judge
Cavanaugh’s decision cited the primary jurisdiction doctrine. The issues
surrounding Actavis’s generic, he reasoned, were properly the subject of
pending proceedings before the FDA. Endo appealed Judge Cavanaugh’s
dismissal to the Third Circuit.
Meanwhile, on May 10, 2013, the FDA denied—I do not say crushed—
Endo’s Petition. The FDA determined that Old Opana® ER would not be
withdrawn from sale for safety or effectiveness reasons, because the data did
not support the claim that Opana® ER with Intac was superior; ruled that the
agency would not stop approving generic applications for the old formulation so
long as they met all necessary requirements; and ruled that it would not
suspend or withdraw its approval of generic versions of Old Opana® ER. (Spital
Cert., Ex. B) Once the FDA had made its decision, the basis of Judge
Cavanaugh’s decision (deferral to the FDA under the primary jurisdiction

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doctrine) became moot. The Third Circuit therefore vacated Judge Cavanaugh’s
order and remanded to this Court for further proceedings.
On March 31, 2015, Actavis moved to dismiss the now-restored
complaint, citing the same grounds it had asserted originally. (Dkt. No. 44) On
April 10, 2015, the case was reassigned to me. (Dkt. No. 47) Endo filed its
opposition to Actavis’s motion May 18, 2015. (Dkt. No. 52) Actavis filed a reply
on June 1, 2015. (Dkt. No. 55) Endo was granted leave to file a surreply, which
it did on February 12, 2016. (Dkt. No. 62) Actavis was granted leave to file an
opposition to that surreply, which it did on February 22, 2016. (Dkt. No. 63)

LEGAL STANDARD
Actavis has moved to dismiss the Complaint for failure to state a claim,
pursuant to Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) provides for the dismissal of a
complaint, in whole or in part, if it fails to state a claim upon which relief can
be granted. The defendant, as the moving party, bears the burden of showing
that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d
Cir. 2005). In deciding a Rule 12(b)(6) motion, a court must take the allegations
of the complaint as true and draw reasonable inferences in the light most
favorable to the plaintiff. Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d
Cir. 2008) (traditional “reasonable inferences” principle not undermined by
Twombly, see infra).
Federal Rule of Civil Procedure 8(a) does not require that a complaint
contain detailed factual allegations. Nevertheless, “a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the
complaint’s factual allegations must be sufficient to raise a plaintiff’s right to
relief above a speculative level, so that a claim is “plausible on its face.” Id. at
570; see also Umland v. PLANCO Fin. Sen.’., Inc., 542 F.3d 59, 64 (3d Cir. 2008).
That facial-plausibility standard is met “when the plaintiff pleads factual

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content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 556). While “[tjhe plausibility standard
is not akin to a ‘probability requirement’.

.

.

it asks for more than a sheer

possibility.” Iqbal, 556 U.S. at 678.

DISCUSSION
A. Lanham Act and New Jersey Fair Trade Act
The parties do not differ as to the essential elements of a Lanham Act
claim, and I do not repeat them here. See Groupe SEB United States, Inc. v.
Euro-Pro Operating LLC, 774 F.3d 192, 198 (3d Cir. 2014). An advertisement
may be literally false, in which case the plaintiff does not have to prove actual
consumer deception. Or the advertisement may be literally true but misleading
to the consumer, in which case the plaintiff must prove actual deception of the
consumer by a preponderance of the evidence. See Castrol Inc. v. Pennzoil Co.,
987 F.2d 939, 943 (3d Cir. 1993). (Here, the “consumer” may be a prescribing
physician, and an “advertisement” may include many forms of communication.)
Endo claims literal falsity, but also states that its complaint is broad enough to
encompass a claim of misleading.
Actavis continues to urge that the Complaint must be dismissed, not
only because Endo’s claim raised matters committed to the FDA, but because
the FDA has now rejected Endo’s position. It is true (not at the time of the
Complaint, but now) that the FDA has declined to revoke its approval of
Actavis’s generic drug as AB rated to Old Opana® ER, and has rejected the
safety/abuse claims of Endo. Actavis may believe that Endo, in effect, is asking
the Court to contradict that ruling, or to rule that generic equivalents of Old
Opana® ER should no longer be marketed. Or Actavis may believe that Endo is
asking the Court to find that Actavis’s generic is not AB rated to Opana® ER
with Intac (a claim that Actavis does not make, and that the FDA has not ruled

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on). Any of these would allegedly entangle the court in the administrative
process.

Endo, citing Porn Wonderful LLC v. Coca-Cola Co., 134 S. Ct. 2228 (2014),
replies that there is room for a Lanham Act claim that does not implicate FDA
decision making. And perhaps there is—just. Endo accepts, as it must, the
premise that Actavis’s drug was AB rated to Old Opana® ER. What is
misleading about Actavis’s advertising, says Endo, is that the consumer could

now mistakenly infer (as the consumer could not have before) that Actavis’s
drug is AB rated to Opana® ER with Intac.
The claim poses interpretive, even philosophical, difficulties about the
relation between the name and the thing.’ Actavis’s contentions put in play the
notion that a brand name manufacturer, by its own post-generic-approval
branding decisions (or even, I suppose, a change of brand name), may render
the generic manufacturer’s true advertising misleading and then sue on that
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basis. Actavis also notes that Endo itself simultaneously marketed the two
versions of the drug for some months, but of course does not accuse itself of

One is reminded of the conundrums, if not the legal issues, posed by that old
law school chestnut, the contracts case of Raffles v. Wichelhaus, EWHC Exch. J19,
(1864) 2 Hurl. & C. 906. There, the parties contracted (or attempted to contract) for
shipment of goods by a ship ironically named the Peerless. There turned out to be two
ships of that name, sailing from Bombay to Liverpool at different times, and the court
seemingly could find no basis for reconciling the parties’ accounts of which one they
meant.
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Here, the advertisement states that Actavis’s generic is AB rated to Opana® ER.
On its face, the statement appears unambiguous; Actavis is asserting that the FDA
had approved its generic drug as therapeutically equivalent to the brand name drug
Opana® ER. That is correct, and it has now been reaffirmed in response to Endo’s
petition. That FDA approval was for a generic version of something called—called by
plairztffEndo—Opana® ER But since then, says Endo, there has been another
formulation of Opana® ER. They have the same name (sort of; it seems that Endo
refers to the later formulation publicly as “Opana® ER with Intac”); it follows that
“Opana® ER” may signify two different things (but not too different; that would have
jeopardized FDA approval for the crush-resistant version). Because Endo has stopped
manufacturing one of them, it says, “Opana® ER” would now be taken to mean only
the newer, “with Intac” version.
2

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confusing physicians. Also relevant may be the extent to which Endo has been
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scrupulous about distinguishing between the two versions (e.g., by referring to
the second as “Opana® ER with Intac” or otherwise marking the distinction).
There may be answers to these contentions, but they implicate issues of fact
unsuitable for disposition on a motion to dismiss.
The Third Circuit observed rightly that this Court (then Judge
Cavanaugh, now me) “would be interested in the continued effectiveness of an
AB rating to the original, discontinued Opana ER®.... Before considering
whether Actavis engaged in false advertising by marketing its generic as AB
rated to Opana ER®, the District Court sensibly wanted to know whether
approval for Actavis’s generic would be withdrawn as a result of Endo’s petition
to the FDA. This has some bearing on whether Actavis can fairly describe its
drug as AB rated to Opana ER®.” Endo Pharmaceuticals Inc., v. Actavis Inc., No.
13-4096, slip op. at 5 (3d Cir. Dec. 5, 2014).
I do consider the FDA’s rulings. While not absolutely dispositive of a
Lanham Act claim, they do, as the Third Circuit suggested, bear on Endo’s
Lanham Act theory. Endo’s complaint of Course did not cite the FDA’s rejection
of its Petition, which then lay in the future. Rather, the Complaint alleges that
Actavis’s statements that its drug is “AB rated to Opana® ER” are false,
because its drug is not so rated to the current version “with Intac.” That, says
The theory of the complaint appears to be that a physician will now be falsely
told, or at least misled into thinking, that there is just one version of the drug on the
market, whereas there are actually two: one crush resistant and one not. Such issues
must ordinarily be explored with a factual context. See Novartis Consumer Health, Inc.
u. Johnson & Johnson-Merck Consumer Pharmaceuticals Co., 290 F.3d 578, 588 (3d
Cir. 2002). Part of that factual context must include of Endo’s own conduct. According
to the complaint, Endo did not recall the Old Opana® ER on December 9, 2011, when
it received FDA approval for the new formulation; rather, Endo let that supply of the
old formulation dwindle while it ramped up production of the new formulation.
(Compl. ¶J 40-44) Endo began shipping the new formulation in February of 2012, but
it was not until after May 31, 2012, that the old inventory cleared the pipeline, and
Endo ceased marketing Old Opana® ER. By Endo’s own pleading, from February
through May it was simultaneously selling both the old and the new formulations. The
FDA apparently found this highly significant in rejecting Endo’s petition. And Endo in
this action will face the question of how it could keep the two drugs straight in
physicians’ minds then, but can no longer do so now.
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Endo, is not a challenge to regulatory rulings of the FDA, but an allegation that
Actavis is making false statements about those regulatory rulings. In so
claiming, Endo is threading the needle under Porn Wonderful. But the FDA has
said a lot of things since the Complaint was filed.
Among those things are rulings that there were not safety concerns about
Old Opana® ER, and that generic versions of Old Opana® ER may validly
remain on the market. To the extent Endo was alleging falsity with respect to
these regulatory matters, current or anticipated, its theory cannot survive.
Indeed, the FDA’s rulings tend to undercut even the materiality of the alleged
misleading statements. The Complaint alleges, for example, that Actavis has
implicitly “acknowledged the dangers” of its version of the drug by virtue of
having submitted a new ANDA (No. 20390) seeking approval for a generic
crush-resistant version. But the FDA has now explicitly rejected those safety
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concerns. Safety as such, or whether doctors should be prescribing the more
crushable version of Opana® ER, is not a Lanham Act issue. And such issues
are properly directed to the FDA.
Other issues, factual in nature, loom.
For example, Actavis suggests that it no longer advertises that its
product is AB rated to Opana® ER. Endo’s complaint provides two examples of
Actavis’s advertisements, both of which date from 2011. (Compi.

¶

56, Exs. A,

B) The Complaint alleges more generally that Actavis “continues to market” its
generic as AB rated to Opana® ER, and that consumers “are likely to rely on
and have relied on Actavis’s misrepresentations in distributing, prescribing,
dispensing and purchasing” Actavis’s generic. Actavis denies this, and that
poses a factual issue. In an action which seeks injunctive relief, however, it is
The FDA ruled that the data did not support Endo’s claim that Opana® ER with
Intac had any safety advantage over Old Opana® ER. (Spital Cert., Ex. B p. 6) It
rejected Endo’s contention that it had safety advantages similar to those of
reformulated OxyContin. (Id. at 8) The FDA continued to list, and declined to withdraw
approval of, generic versions of Old Opana® ER. In short, Endo’s safety concerns
about Old Opana® ER (which seemed to have crested shortly after it sold off the last of
its inventory) have not been borne out. So the claim that any misleading advertising
has a regulatory dimension has become very problematic.
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an issue (potentially jurisdictional, but relevant even if not) that should be
addressed, and soon.
To take another example, it has been suggested that Actavis is or was
seeking approval for a generic version of crush-resistant Opana® ER. The
status of that ANDA is unknown to the Court, and is not discernible from the
face of the Complaint. But that fact, too, may bear on the viability of claims
(and may change during the pendency of this action).
I have taken the trouble to speak of these issues in an attempt to guide
further litigation of this case. All of the above factors radically change the
environment in which Endo’s claims are asserted, and require that, if they are
to go forward, they must be carefully defined and limited to remain within the
scope of what is actionable under the Lanham Act. The more I analyze them,
the more I find myself needing to perform surgery on the complaint to conform
it to subsequent developments.
Nevertheless I cannot, within the four corners of the complaint, find that
a Lanham Act claim is ruled out as a matter of law. False or misleading
advertising has a consumer focus, not a regulatory focus. It deals with false
statements about matters the consumer is likely to care about in making a
purchasing choice.
I will therefore deny the motion to dismiss the Lanham Act claim. The
elements of unfair competition under the New Jersey Fair Trade Act, N.J. Stat.
Ann.

§ 56:4, are the same as those under Section 4 3(a) of the Lanham Act,

saving the jurisdictional interstate commerce element. See SK & F Co.

V.

Premo

Pharm. Laboratories, Inc., 625 F.2d 1055, 1066 (3d Cir. 1980). Accordingly, my
ruling as to unfair competition under the New Jersey Fair Trade Act is the
same.
This matter may be well suited for targeted discovery and an early
motion for summary judgment, however. I will permit contention
interrogatories so that Endo may redefine or narrow its theory in light of the
intervening rulings of the FDA. Endo may also wish to move to amend its
complaint. I will permit interrogatories, and further discovery if appropriate, as
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to what advertising by Actavis, if any, is current or threatened in a way that
makes it an appropriate target of injunctive relief. Counsel shall confer with
each other and with the Magistrate Judge, as necessary, to work out a
discovery plan.

B. NJ Consumer Fraud Act
Endo asserts an additional cause of action under the New Jersey
Consumer Fraud Act. Although it is not specifically addressed in this round of
briefing, Actavis originally moved to dismiss that claim as well. Although it was
not necessary for Judge Cavanaugh to address this particular issue, I believe it
is appropriately addressed on remand.
The New Jersey Consumer Fraud Act (“NJCFA”), N.J. Stat. Ann. 56:8-1 et
seq., proscribes as an “unlawful practice”
[tjhe act, use or employment by any person of any unconscionable
commercial practice, deception, fraud, false pretense, false promise,
misrepresentation, or the knowing concealment, suppression, or
omission of any material fact with intent that others rely upon such
concealment, suppression or omission, in connection with the sale or
advertisement of any merchandise.
N.J. Stat. Ann.

§ 56:8-2. The NJCFA authorizes a private cause of action for

“[a]ny person who suffers any ascertainable loss of moneys or property, real or
personal, as a result” of a violation of the NJCFA. Id. at 56:8-19. Although
broadly stated, the NJCFA “is not intended to cover every transaction that
occurs in the marketplace” but is rather limited to “consumer transactions.”
Trans USA Prods., Inc. u. Howard Berger Co., Inc., 2008 WL 3154753, at *6
(D.N.J. Aug. 4, 2008) (citing Arc Networks, Inc. v. Gold Phone Card Co., 756
A.2d 636, 638 (N.J. Super. Ct. Law Div. 2000)). Thus, to have standing to
pursue a claim under the NJCFA, the plaintiff must be a “consumer.” Id. (“[T]he
NJCFA is not intended to protect competitors... that do not suffer a consumer
like injury.”)

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Endo is not a consumer of Actavis’s product, but a competitor of Actavis.
Accordingly, Enclo cannot bring a claim under the NLJCFA. As to the NJCFA
claim, the motion to dismiss is granted.
CONCLUSION
For the reasons set forth above, Defendant Actavis’s motion to dismiss
the complaint is denied as to claims under the Lanham Act and the New Jersey
Fair Trade Act. It is granted as to the claim under the NJCFA.

Dated: March 21, 2016

‘ /€

K VINMCNULTY
United States District Judge

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