Schering-Plough Healthcare Products Inc v. Schwarz Pharma Inc et al

Filing 122

ORDER signed by Judge J P Stadtmueller on 1/22/09 granting 98 plaintiff's Motion to Alter Judgment; Count I of the complaint is hereby DISMISSED without prejudice. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN
__________________________________________________ S C H E R IN G -P L O U G H HEALTHCARE PRODUCTS, INC., P l a i n t if f , v. S C H W A R Z PHARMA, INC., KREMERS URBAN, LLC, BRECKENRIDGE PHARMACEUTICALS, INC., and P A D D O C K LABORATORIES, INC., D e fe n d a n ts . __________________________________________________ C a s e No. 07-CV-642

ORDER
T h is case comes before the court on plaintiff Schering-Plough Healthcare P ro d u c ts , Inc.'s ("Schering-Plough") motion, filed pursuant to Federal Rule of Civil P r o c e d u re 59(e), which seeks relief in the form of an amendment to the judgment e a rlie r entered by the court. Schering-Plough originally filed suit against defendants S c h w a rz Pharma, Inc., Kremers Urban, LLC, Breckenridge Pharmaceuticals, Inc., a n d Paddock Laboratories, Inc. (collectively, "the defendants"), alleging claims p u rs u a n t to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and W is c o n s in state law. In its suit, Schering-Plough claimed that the defendants made fa ls e and misleading statements regarding Polyethylene Glycol 3350 Powder for O ra l Solution laxative drugs ("Polyethylene Glycol 3350"), a drug marketed and sold b y the defendants. The defendants filed motions to dismiss, which the court granted in February 2008. Specifically, the court dismissed Count I of Schering-Plough's

c o m p la in t, false advertising under the Lanham Act, with prejudice, and dismissed C o u n ts II-IV, the remaining state law claims, without prejudice. The court's dismissal with prejudice of Schering-Plough's false advertising c la im is the subject of the instant motion to alter or amend judgment. ScheringP lo u g h requests amendment "only insofar as it dismisses the Lanham Act claim with p re ju d ic e ." (emphasis in original) (Pl.'s Mot. Alter J., p. 1). For the reasons

d is c u s s e d below, the court will grant Schering-Plough's motion to alter or amend the ju d g m e n t to reflect dismissal of the Lanham Act claim without prejudice. BACKGROUND S c h e rin g - P lo u g h markets an over-the-counter Polyethylene Glycol 3350 p r o d u c t called MiraLAX. Schering-Plough received the exclusive right to market o v e r-th e - c o u n te r Polyethylene Glycol 3350 from Braintree Laboratories, Inc. ("B r a in tre e "). Prior to granting this right to Schering-Plough, Braintree submitted a N e w Drug Application ("NDA") to the United States Food and Drug Administration ("F D A " ) to market Polyethylene Glycol 3350. The FDA initially granted approval for B r a in tre e to market Polyethylene Glycol 3350 as a prescription-only drug in 1999. In 2006, the FDA granted approval for Braintree to market Polyethylene Glycol 3350 a s an over-the-counter drug. Braintree received three-year exclusivity to market P o lye th yle n e Glycol 3350 over-the-counter; an exclusive right which Braintree then g ra n te d to Schering-Plough.

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T h e FDA granted approval of Polyethylene Glycol 3350 pursuant to a c o m p re h e n s iv e drug approval and regulatory scheme under the Federal Food, Drug, a n d Cosmetic Act (FDCA), 21 U.S.C. §§ 301-399. Under the statute, new drugs m u s t be approved by the FDA before they can be sold. This approval may be o b ta in e d in one of two ways: 1) through a New Drug Application (NDA); or 2) through a n Abbreviated New Drug Application (ANDA). A "generic" product similar to an N D A - a p p ro v e d "pioneer" drug may be approved and marketed based on an ANDA. S e e 21 U.S.C. § 355(j). An ANDA requires the manufacturer of the similar "generic" d r u g to demonstrate that the two drugs are therapeutically equivalent, that is, p h a rm a c e u ti c a lly equivalent and bioequivalent. Id. at § 355(j)(2)(A)(i)-(viii). More im p o r ta n tly for purposes of the plaintiff's suit, an ANDA also requires the "generic" d ru g to have the same label as the one approved for the "pioneer" drug. Id. at § 355(j)(2)(A)(v). D e fe n d a n ts are all companies that market and sell "generic" Polyethylene G lyc o l 3350 products based on FDA-approved ANDA's. However, the time line of th e FDA's approval of the ANDA's is relevant to the instant motion. Defendants filed A N D A 's with the agency after the FDA's approval for Braintree to market P o lye th yle n e Glycol 3350 as a prescription-only drug, but prior to the FDA's approval fo r Braintree to market the drug over-the-counter. The FDA approved the ANDA's, p e rm ittin g the defendants to market Polyethylene Glycol 3350 as a prescription-only d ru g . The defendants proceeded to market and sell their Polyethylene Glycol 3350

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p r o d u c ts as "Rx only" or "prescription only" laxatives. The defendants' use of such la b e lin g gave rise to Schering-Plough's claims of false advertising in violation of the L a n h a m Act. Schering-Plough asserted in its action that the "prescription only" s ta te m e n ts on defendants' labels were false because Polyethylene Glycol 3350 is a va ila b le from Schering-Plough as an over-the-counter product. In response to Schering-Plough's claims, the defendants filed motions to d is m is s arguing that the "prescription only" labels are required by the FDA and the F D C A . The defendants reasoned that because their ANDA's were based upon the e a r lie r -a p p r o v e d NDA, which allowed marketing of Polyethylene Glycol 3350 as a p re s c rip tio n -o n ly drug, the products' labels must indicate "prescription only." E m p lo yin g this argument, the defendants each filed a motion to dismiss for failure to state a claim. Schering-Plough also filed its own dispositive motion; a motion for p a rtia l summary judgment as to liability on Count I of its complaint. By an order d a te d February 29, 2008, this court granted the defendants' motions to dismiss and d e n ie d Schering-Plough's motion for partial summary judgment. Schering-Plough n o w requests a limited amendment of the judgment. AN AL Y S IS A party may move the court to alter or amend its judgment under Federal Rule o f Civil Procedure 59(e). However, the petitioner must demonstrate either a

m a n ife s t error of law or present newly discovered evidence. Obriecht v. Raemisch, 5 1 7 F.3d 489, 494 (7th Cir. 2008) (citing Sigsworth v. City of Aurora, 487 F.3d 506,

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5 1 1 -1 2 (7th Cir. 2007)). The decision whether to grant a Rule 59(e) motion to alter o r amend "is entrusted to the sound judgment of the district court." In re Prince, 85 F .3 d 314, 324 (7th Cir. 1996) (citing LB Credit Corp. v. Resolution Trust Corp., 49 F .3d 1263, 1267 (7th Cir. 1995)). S c h e rin g -P lo u g h moves this court to amend its judgment to dismiss ScheringP lo u g h 's Lanham Act claim without prejudice, rather than dismissing the claim with p re ju d ice . Schering-Plough argues that the court did not decide the claim on its m e rits but, rather, determined that the plaintiff's claim was premature, or "unripe." S c h e rin g -P lo u g h asserts that the appropriate method for addressing unripe claims is dismissal without prejudice. Therefore, the court's dismissal with prejudice

c o n s titu te s a "manifest error of law" and the court should amend its judgment to d is m is s a l without prejudice. Such an amendment, Schering-Plough argues, would p e rm it it to re-file the Lanham Act claim if and when the FDA determines that the d e fe n d a n ts ' products are misbranded. In response, the defendants argue that the court did decide Schering-Plough's c la im on the merits. Therefore, the court properly dismissed the claim with

p re ju d ic e . To support their argument, defendants assert that the FDA approved and re q u ire d the labeling that appears on their products. Thus, no private right of action e xis ts under the Lanham Act and challenges to defendants' labeling can only be a d d re s s e d by the agency. Finally, the defendants argue that a dismissal for failure

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to state a claim does constitute an adjudication on the merits because Rule 41(b)1 a p p lie s to Rule 12(b)(6) dismissals. The dispute between Schering-Plough and the defendants is primarily one of in te rp re ta tio n . Under the arguments posited by the parties, the court's decision d is m is s in g Schering-Plough's Lanham Act claim is either: a) a decision on the m e rits appropriately dismissed with prejudice; or b) a decision that the claim is u n rip e , which warrants only dismissal without prejudice. The court's resolution of the iss u e is dispositive of whether the court should appropriately amend its judgment. T h e re fo re , the court clarifies that its dismissal of Schering-Plough's Lanham A c t claim was not an adjudication on the merits. Instead, the court deemed

S c h e rin g -P lo u g h 's claim to be premature because the FDA had not yet addressed w h e th e r the defendants' "prescription only" drugs were misbranded based on the a g e n c y's approval for over-the-counter sales of the same drug. This court quotes its own language as evidence that it deemed Schering-Plough's claims unripe. The c o u rt expressly declined to reach the merits of the claim, stating that "a ruling on the m e rits ...w o u ld require the court to usurp the FDA's responsibility for interpreting and e n fo rc in g the agency's regulations." (Order, p. 13). The court further stated, "..the F D A has not yet taken any official position concerning the labeling of the defendants'

Federal Rule of Civil Procedure 41(b) states: "...Unless the dism is s a l order states otherwise, a d is m is s a l under this subdivision (b) and any dism is s a l not under this rule...operates as an adjudication on the m e r i ts . "

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p ro d u c ts to which the court can defer." Id. Finally, the order notes that the court c a n n o t properly decide the claim before the agency receives an opportunity to do so: A c c o rd in g ly, because the FDA has not yet made a final determination re g a rd in g these marketing and labeling issues, and because ScheringP lo u g h 's Lanham Act claim would require this court to "determine p re e m p tive ly how a federal agency will interpret and enforce its own re g u la tio n s ," the court is obliged to dismiss Schering-Plough's Lanham A c t claim. (e m p h a s is added) (Order, p. 16). These statements are wholly unnecessary if the c o u r t can never hear a Lanham Act claim on the issue, as the defendants assert. If the court can never hear such a claim under any circumstances, it would simply s tate this conclusion instead of referencing an agency position "to which the court c a n defer," or the fact that the FDA "has not yet made a final determination." In addition, the defendants' assertion assumes that half of the court's order is s u p e rflu o u s . The court spent nine pages of its order analyzing whether the

d e fen d a n t s ' labels constitute literally false statements under the Lanham Act before d e n yin g Schering-Plough's motion for partial summary judgment. These pages are a waste of ink if the court, in its very next paragraph, held that a court may never c o n s id e r a Lanham Act claim like the one brought by Schering-Plough. Instead, an F D A resolution of its seemingly contradictory approval of both the defendants' "p re s c rip tio n only" labels and the plaintiff's over-the-counter sales of the same drug w o u ld eliminate the danger of impermissible court interference in the agency's in te rp re ta tio n and enforcement of its regulations.

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F in a lly , the court need not address the merits of Schering-Plough's claim prior to determining that a dismissal should be "without prejudice." Defendants assert that th e court necessarily decided Schering-Plough's claim on the merits because a via b le Lanham Act claim cannot possibly arise. The defendants argue that, even if t h e FDA makes a determination regarding the misbranding of their products, S c h e rin g -P lo u g h cannot sustain a claim under either possible scenario. The

d e fe n d a n t argues the two scenarios as follows: 1) if the FDA declines to withdraw a p p ro va l of the generic drugs, then the defendants' products are not misbranded and n o claim can arise; or 2) if the FDA withdraws approval for the drug labels, the w ith d ra w a l will not apply retroactively to create a claim for false representation and th e defendants would immediately stop marketing the drugs, precluding any claim b y the plaintiff. However, the court need not evaluate the merit of a future suit before a llo w in g Schering-Plough the opportunity to bring such a suit by dismissing the claim w ith o u t prejudice. See Country Mut. Ins. Co. v. American Farm Bureau Federation, 8 7 6 F.2d 599, 601 (7th Cir. 1989) ("Because we agree with the district court that the [L a n h a m Act claim] is unripe, we need not pursue the subject, but it will come to the fore should the litigation resume.") T h e court held that it could not decide Schering-Plough's claim before an FDA d e te rm in a tio n that defendants' drugs were misbranded. Thus, the decision

c o n s titu te s a dismissal because the claim was unripe, not because the court can n e ve r hear such a claim or because the claim is inherently meritless. Therefore, the

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c o u rt will grant a limited amendment of the judgment to dismiss Count I of ScheringP lo u g h 's complaint without prejudice. A c c o rd in g ly, IT IS ORDERED that Schering-Plough's motion to alter judgment (Docket #98) b e and the same is hereby GRANTED; Count I of the complaint is hereby D IS M IS S E D without prejudice. D a te d at Milwaukee, W is c o n s in , this 22nd day of January, 2009. BY THE COURT:

J .P . Stadtmueller U .S . District Judge

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