Opinion
Civil No. 03-2836 (JRT/FLN)
March 30, 2004
John B. Gordon, Peter J. Goss, FAEGRE BENSON LLP, Fargo Center, Minneapolis, MN, for plaintiff
Saul H. Perloff, AKIN GUMP STRAUSS HAUER FELD, LLP, San Antonio, for plaintiff
William Z. Pentelovitch, MASLON EDELMAN BORMAN BRAND, LLP, Minneapolis, MN, for defendants
Thomas C. Morrison, Robert W. Lehrburger, PATTERSON BELKNAP WEBB TYLER LLP, Avenue of the Americas, New York, NY, for defendants
C. David Kinder, Akin Gump Strauss Hauer Feld, San Antonio, TX for Plaintiff Solvay Pharmaceuticals, INC.
Fred I. Williams, Akin Gump Strauss Hauer Feld, San Antonio, TX, for Plaintiff Solvay Pharmaceuticals, INC.
Joseph Sorkin, Akin Gump Strauss Hauer Feld, San Antonio, TX, for Plaintiff Solvay Pharmaceuticals, INC.
Pamela St. John, Akin Gump Strauss, Hauer Feld San Antonio, TX, for Plaintiff Solvay Pharmaceuticals, INC.
Saul H. Perloff, Fulbright Jaworski — San Antonio, San Antonio, TX, for Plaintiff Solvay Pharmaceuticals, INC.
Christopher Y. Miller, Patterson Belknap Webb Tyler, New York, NY, for Defendant Ethex Corporation
Robert W. Lehrburger, Patterson Belknap Webb Tyler, New York, NY, for Defendant Ethex Corporation
Thomas C. Morrison, Patterson Belknap Webb Tyler, New York, NY, for Defendant Ethex Corporation
Christopher Y. Miller, Maslon Edelman Borman Brand, MN, for KV Pharmaceutical Company
Robert W. Lehrburger, Maslon Edelman Borman Brand, MN, for KV Pharmaceutical Company
Thomas C. Morrison, Maslon Edelman Borman Brand, MN, for KV Pharmaceutical Company
William Z. Pentelovitch, Maslon Edelman Borman Brand, MN, for KV Pharmaceutical Company
ORDER
Pursuant to Fed.R.Civ.P. 60(a), the Court amends the following portion on page 7 of its Memonrandum Opinion and Order, dated March 30, 2004 [Docket No. 39]. The Court strikes:
Thus, the Fourth Circuit permitted a Lanham Act claim asserting that defendant Vick's advertising statements that its drug was bioequivalent to Mylan's product was literally false. Mylan, 7 F.3d at 1138. Whether the tests cited by Vicks were falsified, unreliable, or non-existent and thus insufficient to support a claim of "bioequivalence" was a factual issue properly considered by the court
and replaces it with the following language:
Thus, the Fourth Circuit permitted a Lanham Act claim asserting that defendant Matkari's advertising statements that its drug was bioequivalent to Mylan's product was literally false. Mylan, 7 F.3d at 1138. Whether the tests cited by Matkari were falsified, unreliable, or non-existent and thus insufficient to support a claim of "bioequivalence" was a factual issue properly considered by the court
In all other respects, the Memorandum Opinion and Order is unchanged.
MEMORANDUM OPINION AND ORDER
Plaintiff Solvay Pharmaceuticals, Inc. ("Solvay") is a Georgia corporation with its principal place of business in Marietta, Georgia. Solvay has a manufacturing and packaging facility in Baudette, Minnesota. Defendants Ethex Corporation and KV Pharmaceutical Company (together "Ethex") are a Delaware corporation and a Missouri corporation, respectively, both having their principal places of business in St. Louis, Missouri. Both Solvay and Ethex produce and market competing prescription pancreatic enzyme supplements used in the treatment of cystic fibrosis. Solvay's products are marketed under the trademark Creon, while Ethex's products are marketed under the trademark Pangestyme. Specifically at issue in this case are Creon 10 and 20 and Pagnestyme CN-10 and CN-20.Solvay contends that Ethex has falsely and misleadingly promoted and advertised Pangestyme CN-10 and CN-20 as substitutes for Creon 10 and 20. According to Solvay, Ethex markets the Pangestyme products either expressly or by implication as "equivalent," "comparable," and "generic" versions of Creon, despite the fact that the two products are not, in fact, equivalent. Such false and misleading advertising and promotion has allegedly harmed Creon's sales and reputation, and puts cystic fibrosis patients at risk of receiving different treatment than that prescribed by their doctors. Solvay alleges seven causes of action: (1) false advertising in violation of § 43(a) of the Lanham Act; (2) unfair competition in violation of § 43(a) of the Lanham Act; (3) violation of the Minnesota Unfair Trade Practices Act, Minn. Stat. § 325D.13; (4) violation of the Minnesota Uniform Deceptive Trade Practices Act, Minn. Stat. § 325D.44; (5) violation of the Minnesota False Advertising Act, Minn. Stat. § 325 F.67; (6) violation of the Minnesota Consumer Fraud Act, Minn. Stat. § 325 F.69; and (7) a request for declaratory judgment pursuant to 28 U.S.C. § 2201 and 2202 that Pangestyme CN-10 and CN-20 may not be lawfully substituted for Creon.
Ethex has filed a motion to dismiss all seven claims. Ethex objects that counts one through six are impermissible attempts to enforce the Federal Drug and Cosmetic Act ("FDCA"), which is only enforceable by the federal government. Ethex asserts that count seven should be dismissed because it requests relief against persons not party to the lawsuit, namely pharmacists and pharmacy boards who control substitution of drugs at the state level. Solvay responds that their claims are entirely based in advertising, and that any references to the Food and Drug Administration ("FDA") or FDCA are merely illustrative. Solvay also argues that the injunctive relief requested concerns Ethex's representations that ultimately lead to substitutions at the state level.
Solvay filed a nearly identical complaint against another drug company, which was assigned to and heard by United States District Judge Donovan W. Frank. The defendants' motion to dismiss in that case was granted in part and denied in part on January 9, 2004. See Solvay Pharmaceutical, Inc. v. Global Pharmaceutical, __ F. Supp.2d __, 2004 WL 62718 (D. Minn. 2004).
Ethex has also filed a motion to transfer to the Eastern District of Missouri. Ethex contends that Solvay has very little connection to Minnesota, is trying to avoid an unfavorable forum, and would be no more inconvenienced by litigating in Missouri than they are by litigating in Minnesota. Conversely, Ethex claims to be very inconvenienced by litigating in Minnesota, and better able to handle the costs and inconvenience of litigation if this action were in Missouri.
DISCUSSION
I. STANDARD OF REVIEWIn a motion to dismiss, the Court construes the complaint in the light most favorable to the plaintiff and presumes all facts alleged in the complaint to be true. Hishon v. King Spalding, 467 U.S. 69, 73 (1984); Schmedding v. Tnemec Co. Inc., 187 F.3d 862, 864 (8th Cir. 1999). The Court may dismiss a claim only where the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Schmedding, 187 F.3d at 864. The Court may grant a motion to dismiss on the basis of a dispositive issue of law, and may dismiss a claim founded upon a legal theory that is "close but ultimately unavailing." Neitzke v. Williams, 490 U.S. 319, 326-27 (1989).
II. PREEMPTION OF CLAIMS 1-6
Ethex contends that Solvay's Lanham Act and state law claims concerning Ethex's marketing of Pangestyme as "equivalent," "substitutable," "generic," "comparable," or "alternative" to Creon imply that Ethex is improperly representing that Pangestyme is equivalent, as the FDA uses the term, to Creon. According to Ethex, whether the two drugs are equivalent is a matter properly left to the FDA, and it cannot be raised in a private right of action. Solvay maintains that it is alleging in this case that Creon and Pangestyme are factually not "equivalent," "substitutable," "generic," "comparable," and "alternative," and that Ethex's representations are therefore factually false. Solvay has specifically disclaimed any FDA related allegation.
A. The FDCA and FDA
The primary regulatory system covering prescription drugs was created by the Food, Drug and Cosmetic Act ("FDCA"). 21 U.S.C. § 301-92 (1982). The FDCA requires FDA approval, through a "new drug application" ("NDA"), before a new drug may be put on the market. Id. at §§ 331(d), 355(a). A product similar to an NDA approved drug may be approved and marketed based on an "abbreviated new drug application" ("ANDA"). Id. at § 355(j). An ANDA requires the manufacturer of the similar drug to demonstrate that the two drugs are therapeutically equivalent, that is pharmaceutically equivalent and bioequivalent. Id. at § 355(j)(2)(A)(i)-(viii). Each year the FDA publishes Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the "Orange Book," listing all NDA approved drugs along with therapeutic equivalence determinations. Enforcement of the FDCA is permitted exclusively "by and in the name of the United States" or, in certain circumstances by a state. 21 U.S.C. § 337; see Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 231 (3rd Cir. 1990) (FDA and FTC share exclusive jurisdiction over regulation of drug marketing requiring original interpretation of FDA or FTC acts or regulations).
The FDA requires therapeutically equivalent products to be pharmaceutically equivalent and bioequivalent. See Introduction to Approved Drug Products with Therapeutic Equivalence Evaluations available at www.fda.gov/cder/ob.
Two drugs sharing the same active ingredients, strength, and dosage are considered "pharmaceutically equivalent." 21 C.F.R. § 320. 1(c); Introduction to Approved Drug Products with Therapeutic Equivalence Evaluations available at www.fda.gov/cder/ob.
Two drugs that do not have significantly different rates and extent of absorption in the body are considered "bioequivalent." 21 U.S.C. § 355(j)(8)(B); 21 C.F.R. § 320.1(f); Introduction to Approved Drug Products with Therapeutic Equivalence Evaluations available at www.fda.gov/cder/ob.
Prescription pancreatic enzyme supplements are, like any other drug, subject to FDA regulation. In 1995 the FDA declared that all pancreatic enzyme drugs would require NDA or ANDA approval, but permitted such drugs to remain on the market while the FDA fleshed out the approval process. Thus, neither Creon nor Pangestyme has been tested, approved, compared or otherwise passed on by the FDA, and neither is listed in the Orange Book.
According to Ethex, the FDA may address the approval process for prescription pancreatic supplements this year.
B. The Lanham Act
The Lanham Act provides a private remedy to a plaintiff who has been harmed by "commercial advertising or promotion" that "misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities." 15 U.S.C. § 1125(a)(1)(B). The Act primarily protects commercial interests of individuals. Sandoz, 902 F.2d at 230. In contrast to the FDCA, the Lanham Act expressly establishes a private right of action. See 15 U.S.C. § 1125(a). Ethex markets Pangestyme to doctors, pharmacists, drug wholesalers, and drug retailers.
C. Overlap
The FDCA and the Lanham Act overlap to the extent that both regulate drug products in the marketplace. Courts have recognized the potential conflict between the two Acts and have struggled to define the proper scope of each law. Courts have come to the general conclusion that the FDA's enforcement of the FDCA is primarily concerned with the safety and efficacy of new drugs, while the Lanham Act is focused on the truth or falsity of advertising claims. See, e.g., Sandoz, 902 F.2d at 230. More specifically, where a claim requires interpretation of a matter that is exclusively within the jurisdiction and expertise of the FDA and FDCA, plaintiffs cannot use the Lanham Act as a backdoor to private enforcement. Id. at 231; Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993). However, "false statements are actionable under the Lanham Act, even if their truth may be generally within the purview of the FDA," where the truth or falsity of the statements in question can be resolved through reference to standards other than those of the FDA. Summit Technology, Inc. v. High-Line Medical Instruments, 933 F. Supp. 918, 933 (C.D. Cal. 1996).
Thus, the Fourth Circuit permitted a Lanham Act claim asserting that defendant Matkari's advertising statements that its drug was bioequivalent to Mylan's product was literally false. Mylan, 1 F.3d at 1138. Whether the tests cited by Matkari were falsified, unreliable, or non-existent and thus insufficient to support a claim of "bioequivalence" was a factual issue properly considered by the court. Similarly, in Sandoz Pharmaceuticals Corp. v. Richardson-Vicks, Inc., the court would have allowed a properly supported claim alleging that statements in an advertisement regarding a cough syrup's effectiveness were literally false or actually misleading to consumers. 902 F.2d 222, 227-29. In Grove Fresh Distributors, Inc. v. Flavor Fresh Foods, Inc., the existence of FDA regulations establishing a specific definition of the term "orange juice from concentrate" and prohibiting misbranding of food did not require dismissal of the Grove Fresh's claim that Flavor Fresh falsely described and misrepresented its product as "100% orange juice from concentrate." 720 F. Supp. 714, 715-16 (N.D. Ill. 1989).
In contrast, the Mylan plaintiff's claim that defendant Vicks improperly implied FDA approval of its product was not permitted under the Lanham Act because finding that the mere act of placing a drug on the market implied that the drug had been properly approved by the FDA would necessarily intrude on the FDA's exclusive right to grant, deny, or otherwise regulate such approval. Id. at 1139. The court in Sandoz declined to consider a Lanham Act false labeling claim that an ingredient listed as `inactive' was required, under FDA standards, to be listed as `active' because to do so would "require [the court] to usurp [the FDA's] responsibility for interpreting and enforcing potentially ambiguous regulations." Sandoz, at 231.
In Ethex Corporation v. First Horizon Pharmaceutical Corporation, on which Ethex relies, First Horizon alleged, in a counterclaim, that Ethex had violated the Lanham Act by marketing its prescription prenatal vitamins as a generic version of First Horizon's brand-name prescription prenatal vitamins. 228 F. Supp.2d 1048 (E.D. Mo. 2002). First Horizon asserted that such a representation necessarily implied that the vitamins were therapeutically equivalent under the FDA standards. The Missouri court noted that "the touchstone of [First Horizon's] argument focuses on the fact that the word `generic' implies FDA endorsement and certain FDA-defined concepts." The court dismissed the counterclaim because "the express language of [the] counterclaim" invoked FDA standards, and establishing those standards would therefore be impossible without FDA involvement.
Ethex contends that First Horizon is "virtually identical" to this case. The Court disagrees. Unlike the defendant/counter-plaintiff in First Horizon, Solvay is not relying on either explicit or implicit FDA endorsement or terms that only the FDA can define. Solvay alleges that any statement or representation that Pangestyme is "equivalent," "substitutable," "generic," "comparable," and "alternative" to Creon is literally false. Similar to the plaintiff in Grove Fresh, Solvay may use the FDA regulations listing definitions of bioequivalence, pharmaceutical equivalence, and therapeutic equivalence to establish the appropriate standard by which to judge the literal falsity of Ethex's advertisements. See Grove Fresh, 720 F. Supp. at 716 (nothing prohibits a plaintiff from "rel[ying] on the FDA regulation merely to establish the standard or duty which defendants allegedly failed to meet."). However, "[e]ven without the FDA regulation . . . [plaintiff] could attempt to establish a violation of section 43(a). . . . [by] provid[ing] other evidence establishing the proper market definition" of generic, equivalent, comparable, or substitutable. Id. As Ethex acknowledges, an FDA determination is not necessarily required in order for two drugs to be properly considered equivalent.
The Court is thus satisfied that Solvay could, based on the allegations in the complaint, prove that Pangestyme and Creon are not substitutable, alternatives, equivalent, or comparable, and that any advertisement to the contrary is literally false. Such a claim does not require the Court to determine anything within the particular jurisdiction of the FDA and is within the purview of the Lanham Act. Plaintiff's claims will therefore not be dismissed on this basis.
D. State law claims
The Minnesota Unfair Trade Practices Act, Uniform Deceptive Trade Practices Act, False Advertising Act, and Consumer Fraud Act are all designed to, among other things, protect individuals from false and misleading advertising. See Minn. Stat. § 325D.13 ("No person shall, in connection with the sale of merchandise, knowingly misrepresent, directly or indirectly, the true quality, ingredients or origin of such merchandise."); Minn. Stat. § 325D.44 ("A person engages in a deceptive trade practice when, in the course of business . . . the person . . . engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding."); Minn. Stat. § 325 F.67 ("Any person, firm, corporation, or association who, with intent to sell or in anywise dispose of merchandise, . . . makes, publishes, disseminates, circulates, or places before the public an advertisement of any sort . . ., which advertisement contains any material assertion, representation, or statement of fact which is untrue, deceptive, or misleading, shall . . . be guilty of a misdemeanor."); Minn. Stat. § 325 F.69 ("The act, use, or employment by any person of any fraud, false pretense, false promise, misrepresentation, misleading statement or deceptive practice, with the intent that others rely thereon in connection with the sale of any merchandise . . . is enjoinable.") Each permits an individual right of action Minn. Stat. § 8.31, subd. 3a ("any person injured by a violation of [sections 325D.09 to 325D.16, other laws against false or fraudulent advertising, or sections 325F.68 to 325 F.70] may bring a civil action. . . ."). Ethex asserts that Solvay's state law claims, like its Lanham Act claims, are improper attempts to privately enforce the FDCA. In light of the above analysis and discussion, the Court finds that Solvay's state law claims would not require the Court to infringe the FDA's authority and are therefore not improper.
III. STANDING — COUNTS 6 AND 7
A. Minnesota Consumer Fraud Act
The Minnesota Consumer Fraud Act, which prohibits the use of fraud, misrepresentation, or deceptive trade practices in connection with the sale of merchandise, was enacted to curb deceptive practices, including false or deceptive statements, in consumer transactions. Minn. Stat. § 325 F.69, subd. 1; Ly v. Nystrom, 615 N.W.2d 302, 308 (Minn. 2000) (emphasis added). As the manufacturer of a competing product, Solvay cannot be considered a consumer of Ethex's products and thus is not entitled to protection under the Minnesota Consumer Fraud Act. See Kovatovich v. K-Mart Corp., 88 F. Supp.2d 975, 985 n. 4 (D. Minn. 1999) (citations omitted). Solvay's Consumer Fraud Act claim is therefore dismissed.
B. Declaratory Relief
Whether one drug may be lawfully substituted for another is determined on a state-by-state basis. States fall into three general categories: those that permit substitution of prescription drugs based on an Orange Book determination of therapeutic equivalence, those that permit substitution based on any determination of therapeutic equivalence, and those that permit substitution based on a determination of pharmaceutical equivalence. Different states permit different entities — including individual pharmacists and boards of pharmacists — to determine which drugs meet the applicable state standard. Solvay requests a declaration from the Court that Pangestyme may not be substituted for Creon in Orange Book, Therapeutic Equivalence, or Pharmaceutical Equivalence states because Pangestyme is not listed in the Orange Book, is not therapeutically equivalent to Creon, and is not pharmaceutically equivalent to Creon. Solvay attempts to cast the claim as one directed at Ethex's marketing behavior. In other words, Solvay asserts that the requested injunction is necessary to prevent Ethex from continuing to market Pangestyme in such a way that pharmacists and pharmacist boards are led to believe that Pangestyme and Creon are essentially interchangeable.
The language of the Complaint, however, does not support Solvay's interpretation. If the requested injunction were to issue, and an individual pharmacist were nevertheless to substitute Pangestyme in filling a customer's prescription for Creon, that individual pharmacist, could be held responsible for the wrongful substitution. Ethex may or may not be implicated in any way. The requested injunction thus clearly reaches individual pharmacists and pharmacist boards, none of who are parties to this case. The Court is not empowered to issue relief against persons not party to the proceeding, who have had no opportunity to participate in the decision. Further, such an injunction would conflict with the laws of states permitting substitution based on independent judgments of therapeutic or pharmaceutical equivalence, raising serious federalism concerns. Finally, if Solvay is able ultimately to prove that Pangestyme and Creon are not, in fact, "generic," "comparable," "substitutable" or "equivalent," Ethex will, effectively, not be able to market Pangestyme as any of those things. That outcome is essentially the relief that Solvay claims to seek. For all of these reasons, the Court will dismiss the claim for declaratory judgment in count 7.
IV. ETHEX'S MOTION TO TRANSFER VENUE
Ethex also moves to transfer venue to Missouri under 28 U.S.C. § 1404(a). To determine whether to transfer a case, the Court must consider: (1) the convenience of the parties; (2) the convenience of the witnesses; and (3) the interests of justice. Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997); Commodities Specialists Co. v. Brummet, 2002 WL 31898166 (D. Minn. 2002). "The party seeking transfer bears the burden of proof to show that the balance of factors `strongly' favors the movant." Id. (citation omitted); see also Martin v. Wal-Mart Stores, Inc., 2000 WL 33915814 at *8 (N.D. Iowa October 9, 2000) (citing Kovatch v. Rockwood Sys. Corp., 666 F. Supp. 707, 708 (M.D. Pa. 1986) ("Normally, plaintiffs choice of forum will not be disturbed unless the movant for transfer demonstrates that the balance of convenience and justice weighs heavily in favor of transfer.")).
Ethex argues that it is a smaller company than Solvay, and would therefore be more inconvenienced by having to litigate in Minnesota while running their business in Missouri than Solvay would be by having to litigate in the state of Missouri. While it may be true that Ethex is smaller than Solvay, Ethex is hardly the sort of small operation that would be seriously harmed by being required to devote resources to out-of-state litigation. To the contrary, Ethex seems to efficiently conduct a multi-million dollar business around the country. Further, transferring this litigation to Missouri would require any of Solvay's employees who reside in Minnesota to travel to Missouri to testify. Merely transferring the inconvenience from one party to the other is not an appropriate reason to transfer venue. Graff v. Qwest Communications Corp., 33 F. Supp.2d 1117, 1121 (D. Minn. 1999).
Ethex also argues that more potential witnesses reside in Missouri than Minnesota. The sheer number of witnesses, however, is not necessarily dispositive. See In re Warwick, 70 F.3d 736, 741 (2nd Cir. 1995). Instead, the Court's analysis focuses on "whether the forum . . . is so inconvenient as to inhibit the access of one party or the other to necessary witnesses." Terra Int'l Inc. v. Mississippi Chem. Corp., 922 F. Supp. 1334, 1360 (N.D. Iowa 1996), aff'd, 119 F.3d 688 (8th Cir. 1997). Many of Ethex's potential witnesses are Ethex employees, and while traveling to Minnesota to testify may be somewhat inconvenient, the Court has little doubt that these witnesses will make themselves available. In addition, Ethex has offered no evidence of nonparty witnesses who are unwilling or unable to testify in Minnesota and has not argued that offering videotaped deposition testimony would be inadequate. There is no evidence before the Court that any nonparty witnesses would be beyond the reach of discovery.
In short, Ethex has failed to carry its burden of convincing the Court that transfer of venue is necessary and its motion is therefore denied.
V. ETHEX'S MOTION TO FILE SUPPLEMENTAL AUTHORITY
Ethex requested permission from the Court to file supplemental authority consisting of the unpublished district court opinion on summary judgment in Florida Breckenridge, Inc. v. Solvay Pharmaceuticals, Inc., 1998 U.S. Dist. LEXIS 14742 (S.D. Fla. March 18, 1998). Ethex had previously cited the Eleventh Circuit's later opinion in the same case. Solvay objected to Ethex's request, arguing that supplemental authority should be limited to new authority, and that any supporting argument should be kept to a minimum. While the Court generally agrees with these principles, they do not require striking Ethex's supplemental authority in this instance. The additional submission is minimal. Further, Solvay had the opportunity to respond to the submission and, in light of the above analysis and decision, was not prejudiced by any consideration the Court may have given it. For these reasons, the Court grants Ethex's motion.
ORDER
Based on the foregoing, all the records, files, and proceedings herein, IT IS HEREBY ORDERED that:
1. Defendants' Motion for Judgment on the Headings [Docket No. 25] is GRANTED in part and DENIED in part.
a. Defendants' motion is GRANTED as to counts 6 (Consumer Fraud Act) and 7 (declatory relief). Counts 6 and 7 of the Complaint [Docket No. 1] are DISMISSED with prejudice.
b. Defendants' motion is DENIED in all other respects.
2. Defendants' Motion to Transfer Venue [Docket No. 15] is DENIED.
3. Defendants' Motion for Leave to File Supplemental Authority [Docket No. 31] is GRANTED.