1 COOLEY GODW ARD KRONISH LLP MICHAEL G. RHODES ...

Case 2:09-cv-05700-PA-RZ Document 49-2 Filed 09/11/2009 Page 1 of 39

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COOLEY GODW ARD KRONISH LLP MICHAEL G. RHODES (CALIFORNIA BAR NO. 116127) (RHODESMG COOLEY. COM) JOHN . KYL CALIFORNIA BAR NO. 199196) (JKYLE@COOL Y.COM) 4401 Eastgate Mall San Diego, CA 92121-1909 Telephone: (858) 550-6000 FacsImile: (858) 550-6420

PETER J. WILLSEY (PRO HAC VICE) (PWILLSEY COOLEY.COM) NISHAN KO TAHA HCHI CALIFORNIA BAR NO. 221612) (NKOTTAHACHCHI COOLEY.COM) BRENDAN J. HUG PRO HAC VICE) (BHUGHES@COOLEY. OM) 177 6th Street N.W., Suite 1100 Washington, DC 20001-3703 Telephone: (202) 842-7800 FacsImile: (202) 842-7899

VALLE & ASSOCIATES JEFFREY B. VALLE (CALIFORNIA BAR NO. 110060) (JV ALLE V ALLEA8S0CIATES.COM) THOMAS . FRIEDMAN CALIFORNIA BAR NO. 205407) (TFRIEDMAN@VALLEA SOCIATES.COM) 11911 San Vicente Blvd., Suite 324 Los Angeles, CA 90049 Telephone: (310) 476-0300 FacsImile: (310) 476-0333

Attorneys for Plaintiffs MUTUAL PHARMACEUTICAL COMPANY, INC., AR

. SCIENTIFIC, INC., and AR HOLDING COMPANY, INC.

: . '. UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA

MUTUAL PHARMACEUTICAL 22 COMPANY, INC., et aI.,

Case No. CV 09-05700 PA (RZx) Related to: CV 09-05761 PA (RZx) Honorable Percy Anderson 23 Plaintiffs,

24 v.

25 WATSON PHARMACEUTICALS, INC., et aI.,

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Defendants.

COOLEY GODWARD 1. KRONISH LLP 99387 vll1DC

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF

PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION ATTORNEYS AT LAW

WASHINGTON


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5 I. INTRODUCTION

Time: 1 :30 p.m. Date: October 5, 2009 Courtroom No. 15

6 Plaintiffs Mutual Pharmaceutical Company, Inc. ("Mutual"), AR Scientific, Inc.,

7 and AR Holding Company, Inc. (collectively, "Plaintiffs") are the only lawful

8 providers of a drug product containing colchicine as the single active

9 pharmaceutical ingredient ("API") that has been approved by the Food and Drug

10 Administration ("FDA"). I After investing the millions of dollars necessary to

11 develop and obtain FDA approval for a colchicine product that is safe and effective,

12 the FDA approved the sale of Plaintiffs' COLCRYSTM colchicine product for the

13 treatment of gout flares and Familial Mediterranean Fever ("FMF"). In light of

14 Mutual's investment, the FDA awarded Mutual a 3-year exclusivity period to

15 market COLCRYSTM for gout flares and a 7-year period of exclusivity to market

16 COLCRYSTM for FMF under the Orphan Drug Act ("ODA").

17 Despite the FDA's grant of market exclusivity to Plaintiffs and the fact that

18 selling . unapproved drugs is illegal, Defendants Watson Pharmaceuticals, Inc., West-

19 ward Pharmaceutic~l Corp., Vision Ph(irma, LLC, and Excellilim Pharmaceutical, Illc.

20 (collectively, "Defendarits") continue to sell unapproved colchicine products? To

21 compound the problem, and giving rise to the present lawsuit, Defendants use false and

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1 The FDA has approved another drug product containing probenecid and colchicine in a fixed combination, but Mutual is the only company with FDA approval for a drug containing colchicine as the sole active ingredient. For purposes of convenience, the term "colchicine products" as used herein shall refer only to drug products containing colchicine as the sole active ingredient. 2 Plaintiffs filed a related action in this Court on August 6, 2009 (Case No. CV 09-05761 PA (RZx)) against several defendants who provide the API or finished drug product to the Defendants in the present action and who are thus secondarily and contributorily liable for the unfair competition and false advertising committed by Defendants.

2. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF

PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION


1 misleading advertising and representations about their products that (a) create false

2 impressions and confusion regarding the safety, efficacy, and FDA-approval status

3 of their colchicine products and, concomitantly, Plaintiffs' COLCRYSTM product

4 and (b) cause pharmacists, physicians, buyers, and patients to mistakenly conclude

5 that Defendants' products are either interchangeable or substitutable with Plaintiffs'

6 FDA-approved COLCRYSTM product or that Defendants' products are safer than

7 Plaintiffs' FDA-approved COLCRYSTM product-whereas the opposite is true.

8 Defendants' acts of unfair competition and false advertising include the

9 distribution of false and misleading information about their unapproved colchicine

10 products through a variety of channels, including (a) clinical and pricing drug

11 information databases known as "Price Lists" (the "Price Lists") which are

12 integrated in pharmacy computer systems, (b) drug product ordering systems

13 provided by wholesalers (the "Wholesaler Ordering Systems"), and (c) computer

14 systems used by retail drugstore chains to order and dispense drug products.

15 Further, Defendants make false and misleading representations and omissions about

16 their unapproved products in the accompanying labels and product inserts.

17 Plaintiffs seek an injunction prohibiting Defendants from engaging in such acts of

18 "false and misleading advertising, which not only cause significant and irreparable harm

19" to PI~intiffs but also pose grave"risks to consumers.

20 II. SUMMARY OF ARGUMENT

21 Plaintiffs are entitled to preliminary injunctive relief because: (1) Plaintiffs

22 have demonstrated that Defendants' false and misleading advertising confuses

23 relevant consumers and thus Plaintiffs are likely to succeed on the merits of their

24 claims; (2) Defendants' false and misleading advertising irreparably harms

25 Plaintiffs' COLCRYSTM brand and significantly impairs Plaintiffs' ability to fully

26 benefit from its hard-earned FDA-granted exclusivity period; (3) Defendants will

27 not suffer any hardship because the requested injunction will simply prevent

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1 Defendants from committing acts prohibited by federal law; and (4) an injunction

2 will protect the public from unwittingly purchasing potentially dangerous drugs.

3 Defendants' false and misleading advertising regarding the safety, efficacy,

4 and FDA-approval status of their unapproved (and Plaintiffs' approved) colchicine

5 products constitute false advertising and unfair competition under Section 43(a) of

6 the Lanham Act, 15 U.S.C. § 1125(a), as well as California and Business

7 Professions Code §§ 17200 and 17500. Survey evidence submitted in support of

8 this motion demonstrates that Defendants' use of Price Lists and Wholesaler

9 Ordering Systems confuses a significant percentage of relevant consumers in

10 material ways that affect purchasing decisions. In addition, the labels and product

11 inserts for Defendants' illegal products fail to mention many of the drug-drug

12 interactions, food interactions, and contraindications required by the FDA; thus,

13 when Defendants' labels and product inserts for their unapproved colchicine

14 products are compared to Plaintiffs' labels and product inserts for COLCRYSTM,

15 Defendants' products appear safer and more effective than Plaintiffs' product.

16 Unless Defendants' illegal activities are enjoined, Plaintiffs will continue to

17 suffer irreparable harm to their ability to exclusively and lawfully market their

18· FDA-approved COLCRYSTM product for the treatment gout flares and FMF. As a

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result of Defendarits·'a·ctioris,· Plaintiffs are not only losirtg sales· and the

opportunity to establish and strengthen their COLCRYSTM brand, but are being

denied the full benefit of the FDA-granted exclusivity period which Mutual alone

invested extensive resources to secure. In addition, Defendants' actions irreparably

harm Plaintiffs' reputations by falsely implying that Defendants' unapproved

colchicine products are safer than COLCRYSTM.

The balance of hardships also tips in Plaintiffs' favor. Whereas the denial of

an injunction would continue to subject Plaintiffs and the public to false advertising

and unfair competition and irreparably harm Plaintiffs' reputation and goodwill,

granting an injunction merely prevents Defendants from using misleading 4. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 advertising tactics to sell products they are not lawfully entitled to sell and from

2 making false and misleading statements about those products.

3 Finally, it is in the public interest to enjoin Defendants from marketing their

4 unapproved colchicine products through marketing channels that will confuse

5 relevant consumers and from using false, misleading, and incomplete labels and

6 product inserts. An injunction would protect patients from dangerous

7 misinformation regarding colchicine3, as well as ensure that COLCRYSTM alone,

8 the only colchicine drug product subject to the FDA's rigorous manufacturing

9 standards, is available on the market.

10 For these reasons, Plaintiffs request a preliminary injunction reqUIrIng

11 Defendants to cease and desist from the unlawful acts detailed herein. If the Court

12 does not grant an injunction, Plaintiffs respectfully request that the Court set this

13 matter for an expedited trial no later than December 10, 2009 so that the irreparable

14 harm to Plaintiffs and the public are addressed at the earliest possible date.

15 III. STATEMENT OF FACTS

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A. Plaintiffs Are the Only Lawful Providers of Colchicine

Products.

18 Mutual committed significant resources to obtaining FDA approval for

19 . colchicine products for the tr.eatqlentof gout flares' a~d FMF.. See Declaratio~ ot

20 Robert Dettery ("Dettery Decl.") ~~ 7-8, 12. Gout is one of the most common

21 forms of inflammatory arthritis, which frequently results in significant short-term

22 disability, occupational limitations, and utilization of medical services. See

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Declaration of Bruce Rothschild ("Rothschild Decl.") ~ 4. It is estimated that 3 to 5

3 Former FDA Commissioner Andrew von Eschenbach has commented that "unapproved drugs represent a public health threat because consumers wrongly assume that these widely marketed and available drugs are approved and have been found to be safe and effective by the FDA," despite their having "bypassed the [FDA] process through which FDA ensures, based on reliable scientific data, that marketed drugs are safe, effective, properly manufactured, and accurately labeled." See "FDA Acts to Improve Drug Safety and Quality," www.fda.gov/bbs/topicsINEWS/2006INEW01384.html (June 8, 2006).




1 million individuals in the United States experience acute gout attacks and/or suffer

2 from chronic gout. ld. FMF, an inherited inflammatory disorder, affects fewer than

3 200,000 persons in the United States. ld. ~ 3. FMF therefore qualifies as a "rare

4 disease or condition" under the ODA.

5 Mutual has demonstrated that, when taken properly, colchicine is effective for

6 treating gout flares and FMF. If not administered properly, however, drugs

7 containing colchicine can have serious health and safety risks, including

8 gastrointestinal adverse events, diarrhea, vomiting, nausea, acute renal failure,

9 thrombocytopenia, leucopenia, and even death. ld. ~ 8.

10 Obtaining FDA approval was a complex and expensive process. Plaintiffs

11 incurred costs associated with conducting several clinical trials which comprise,

12 among other things, performing pharmacokinetic and clinical studies and reporting

13 clinical data to the FDA, as well as regulatory, legal, and manufacturing costs. See

14 Dettery Decl. ~~ 8, 12, 15, 17, 18. Plaintiffs are the only companies that committed

15 the time and money necessary to obtain FDA approval to market colchicine in the

16 United States for the treatment of gout flares and FMF. ld. ~ 6.

17 At the conclusion of the approval process, the FDA granted Mutual a 3-year

18 period to exclusively market COLCRYSTM for the treatment of gout flares. ·ld. ~ 9.

·19· The FDA ·also awarded MutualahOrpha~ Drug Designation ·forits COLCRYSTM

20 product for the treatment of FMF, thus granting Mutual a 7 -year period to

21 exclusively market COLCRYSTM for FMF under the ODA. ld. ~ 10. Plaintiffs are

22 therefore the only lawful providers of colchicine products to treat acute gout

23 through July 30,2012 and to treat FMF through July 29,2016. ld. ~~ 9-10.

24 In obtaining FDA approval, Mutual committed to making continued

25 investments in ensuring the safety of its COLCRYSTM product, including

26 conducting studies to assess the carcinogenicity potential of colchicine. ld. ~ 15.

27 Mutual's post-marketing responsibilities could well cost it millions of dollars. ld.




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B. Defendants Use Price Lists and Wholesaler Ordering

Systems to Deceptively Market Their Unapproved

3 Colchicine Products.

4 Defendants use a variety of commercial channels to distribute and market

5 their unapproved colchicine products throughout the United States, including

6 national drugstore pharmacy chains, independent pharmacies, wholesale drug

7 product buyers, and widely accessible services that list drugs. Decl. of James

8 O'Donnell ("O'Donnell Decl.") ~ 5; Declaration of Gregory K. Hayer ("Hayer

9 Decl.") ~ 4. For example, Defendants disseminate information about their

10 unapproved colchicine products through widely-used Price Lists, including First

11 Databank, Medi-Span, Gold Standard, and Redbook, and through Wholesaler

12 Ordering Systems, including McKesson Corporation, Cardinal Health, Inc.,

13 AmerisourceBergen Corporation ("ABC"), Anda, Inc., and Kinray, Inc., which are

14 accessible and available nationwide. O'Donnell Decl. ~ 5; Hayer Decl. ~ 5.

15 The only way that information regarding a particular drug is included in the

16 Price Lists and Wholesaler Ordering Systems is if the drug manufacturer takes

17 affirmative steps to provide clinical and pricing information about the drug to the

18· Price Lists and Wholesaler Ordering Systems for incorporation into their databases.

19 ·O'Dohrtell Decl. ·~~6, IS. Defendants' marketing and distdbution ·of their

20 unapproved colchicine products through the Price Lists and Wholesaler Ordering

21 Systems is particularly detrimental to Plaintiffs because the Price Lists and

22 Wholesaler Ordering Systems are the primary channels of trade used to advertise,

23 market, and sell drug products to consumers across the United States. See id.

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1. Price Lists

Price Lists do far more than simply list prices. They are often integrated with

other computerized information systems, such as pharmacy computer systems, so as

to allow physicians, pharmacists, and buyers to quickly obtain drug-related clinical




1 information critical to decisions regarding the prescription, dispensing, and

2 purchase of drugs, and also to provide patients with the information they need to

3 ensure the safe and proper use of prescription drugs. Id.,-r 7. Pharmacists rely on

4 Price Lists when determining whether a prescribed medication may cause fatal or

5 other injurious interactions with other drugs; to avoid dispensing the wrong drug or

6 dosage to the patient; and to make sure drugs are dispensed with appropriate

7 cautionary labels and other important patient information. Id. ,-r 8.

8 In order for Defendants' unapproved and illegal colchicine products to be

9 displayed on the Price Lists, Defendants must have requested their inclusion and

10 supplied clinical and FDA-approval information to the Price Lists. Id.,-r 10. For

11 example, First Databank, one of the largest Price Lists, requires that drug

12 manufacturers complete a form that calls for the submission of an FDA letter of

13 approval, if applicable, whenever manufacturers request the listing of a new

14 prescription drug on First Databank. Id.

15 2. Wholesaler Ordering Systems

16 Wholesaler Ordering Systems allow pharmacists to select and purchase drug

17 products that they intend to dispense in their pharmacies. Id.,-r 11. After a

18 pharmacist selects and purchases a drug listed on a Wholesaler Ordering System, the

19· wholesaler delivers the productdjJectiy to the pharmacy or arty other location spec~fied .

20 by the pharmacist or hislher headquarters. Id. As with the Price Lists, Defendants

21 must specifically request that wholesalers include their unapproved colchicine drug

22 products on the wholesalers' respective ordering systems. Id.,-r 12. For example,

23 ABC requests that manufacturers complete a product information form when

24 requesting to add new products, which prompts manufacturers for the FDA Orange

25 Book Rating and Brand Name Equivalent for their drugs. Id.

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1 C. Survey Evidence Confirms Consumer Confusion Regarding

2 Defendants' Use of Price Lists, Pharmacy Computer Systems, and

3 Wholesaler Ordering Systems.

4 A recent survey of pharmacists confirms the obvious-by listing their

5 colchicine products on the Price Lists (and, by extension, pharmacy computer

6 systems incorporating information from the Price Lists) and Wholesaler Ordering

7 Systems, Defendants deceive a significant percentage of pharmacists into believing

8 that their colchicine products are FDA-approved. See Declaration of Joseph A.

9 Matijow ("Matijow Decl.") ~~ 7-8.

10 Plaintiffs' survey evidence revealed the following: (1) approximately 99% of

11 pharmacists use a pharmacy computer system to determine the clinical and pricing

12 information for prescription drugs; (2) approximately 95% of pharmacists believe

13 that when they dispense a prescription drug listed on their pharmacy computer

14 systems, the prescription drug is approved by the FDA; and (3) approximately 93%

15 of pharmacists believe that if colchicine products are listed on their pharmacy

16 computer systems, those products are approved by the FDA. fd. ~ 8. Further,

17 approximately 41 % of the surveyed pharmacists identified either First Databank,

18 Medi-Span, Goid Standard, or Redbook as the source of the clinical and pricing

19 . information integrated irt theirpharinacy computer systems.fd.

20 Likewise, Plaintiffs' survey evidence revealed the following about the

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confusion caused by the inclusion of Defendants' colchicine products in Wholesaler

Ordering Systems: (1) approximately 86% of pharmacists purchase prescription

drugs for their pharmacy using an online ordering system; (2) approximately 94%

of pharmacists believe that when they purchase a prescription drug listed on their

online ordering system, the prescription drug is approved by the FDA; (3)

approximately 93% of pharmacists believe that if colchicine products are listed on

their online ordering system, those products are approved by the FDA; and (4)

100% of pharmacists, if they had the choice, would choose to purchase a 9. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 prescription drug for their pharmacy that was approved by the FDA, rather than a

2 prescription drug that was not approved by the FDA. Id.

3 Of the pharmacists surveyed, approximately 90% stated that a drug product

4 wholesaler provides the online ordering systems used by their pharmacy. Id.

5 Further, approximately 83% of those pharmacists identified either McKesson

6 Corporation, Cardinal Health, Inc., or ABC as a wholesaler that provides the online

7 ordering systems used by their pharmacy. Id.

8 In short, the very act of listing Defendants' colchicine products on Price

9 Lists, which are integrated in pharmacy computer systems, and Wholesaler

10 Ordering Systems is confusing consumers into mistakenly believing that such

11 products are FDA-approved.

12 D. Defendants Provide Misleading Information in the Labels and

13 Product Inserts For Their Unapproved Colchicine Products.

14 Colchicine is not an innocuous drug, as it has a narrow therapeutic index with

15 significant risk for adverse reactions from drug exposure or drug-drug interactions.

16 See Rothschild Dec!. ,-r 7. If incorrectly administered, colchicine can pose serious

17 health risks-including the risk of death. Id.,-r 8. The risks of colchicine are

18 appropriately managed only through proper administrative approval and labeling

19 according to'FDA regulations:, Id.,-r 9. "

20 As a result of Mutual's extensive work obtaining FDA approval for its

21 COLCRYSTM product, the product insert for COLCRYSTM lists and warns of

22 numerous important drug-drug interactions, food interactions, and

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contraindications. See Dettery Dec!. ,-r 11. Given the seriousness of the potential

health risks that could arise if colchicine is incorrectly administered, the FDA also

required Mutual to implement a Risk Evaluation and Mitigation Strategy ("REMS")

program and an FDA-approved Medication Guide. Id. ,-r 12. The Medication Guide

alerts patients to the potential for serious drug-drug interactions (e.g. ketoconazole

and nefazodone) and food interactions (e.g. grapefruit and grapefruit juice) with 10. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 colchicine, and includes warnmgs regarding increased susceptibility to severe

2 colchicine toxicity for patients with renal or hepatic impairment. Id.

3 None of the critical safety information discussed above appears on the

4 labeling and product inserts for Defendants' unapproved colchicine products. See

5 Rothschild Decl. '11'11 6, 11, 14-18. F or example, the incomplete contraindication

6 warnings on Defendants' product labels and inserts fail to mention that patients

7 with renal or hepatic impairment should not be given colchicine in conjunction with

8 P-gp or strong CYP3A4 inhibitors since these patients face life-threatening and

9 fatal colchicine toxicity even when taken in therapeutic doses. Id. '1118. Moreover,

10 Defendants are not required to have a REMS program or Medication Guide for their

11 products because they are not FDA-approved. The incomplete and misleading

12 labels and product inserts used by Defendants are likely to lead to confusion

13 regarding the quality of, and risks associated with, Defendants' unapproved

14 colchicine products; pose a serious risk to the public; and will make Plaintiffs'

15 COLCRYSTM product appear to be more dangerous than Defendants' unapproved

16 colchicine products. I d. '11'11 11, 14-21.

17 IV. ARGUMENT

18 "The Ninth Circuit has provided varying description~ ... for what is required

19 to obtain a·preliminary injunction." Mutual Phatm. Co. v:. Jvax Pharm.,lnc~, 459 F.·

20 Supp. 2d 925, 932 (C.D. Cal. 2006) (citing Regents of University of California v.

21 American Broadcasting Co., Inc., 747 F. 2d 511, 515 (9th Cir. 1984)). In some

22 instances, the Ninth Circuit has required a moving party to prove: (1) a likelihood

23 of success on the merits; (2) irreparable injury if the injunction is denied; (3) that

24 the balance of potential harm favors the movant; and (4) whether the public interest

25 favors granting an injunction. See Int'l Jensen, Inc. v. Metrosound US.A., Inc., 4

26 F.3d 819, 822 (9th Cir. 1993). In other instances, the Ninth Circuit has used a

27 condensed "alternative standard" requiring a moving party to demonstrate either:

28 "( 1) a combination of probable success on the merits and the possibility of 11. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 irreparable injury, or (2) that senous questions are raised and the balance of

2 hardships tips sharply in favor of the moving party." Stuhlbarg Int'l Sales Co. Inc.

3 v. John D. Brush and Co., Inc., 240 F.3d 832,839-40 (9th Cir. 2001). This Court

4 employed the condensed "alternative standard" in Mutual Pharmaceutical

5 Company, Inc. v. Ivax Pharmaceutical, Inc. (hereinafter referred to as "Mutual v.

6 Ivax") , a case markedly similar to this action. 459 F.Supp. 2d 925. Under either

7 standard, Plaintiffs meet the burden for a preliminary injunction.

8 A. Plaintiffs Are Likely to Succeed on the Merits of Their Claims

9 Under the Lanham Act.

10 Under Section 43(a) of the Lanham Act, a party may be held to be liable ifit

11 places in interstate commerce a "false or misleading description of fact, or false or

12 misleading representation of fact" concerning "the nature, characteristics, qualities,

13 or geographic origin of his or her or another person's goods, services, or

14 commercial activities." 15 U.S.C. §1125(a); see Mutual, 459 F. Supp. 2d at 932.

15 To prevail on a false advertising claim under Section 43(a), the Ninth Circuit

16 requires a plaintiff to demonstrate that: "( 1) the defendant made a false statement

17 either about the plaintiff's or its own product; (2) the statement was made in a

18 commercial advertisement or promotion; (3) the statement actually deceived or had

19 the tendency. to deceive a substantial segment of its' audience; (4) the deception is

20 material; (5) the defendant caused its false statement to enter interstate c6mmerce;

21 and (6) the plaintiff has been or is likely to be injured as a result of the false

22 statement, either by direct diversion of sales from itself to the defendant, or by a

23 lessening of goodwill associated with the plaintiffs product. ,,4 Newcal Indus., Inc.

24 v. Ikon Office Solution, 513 F.3d 1038, 1052 (9th Cir. 2008) (quoting Jarrow

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4 In Rice v. Fox Broadcasting Company, the Ninth Circuit articulated a slightly different fifth element, requiring demonstration that "defendant caused its falsely advertised goods to enter interstate commerce." 330 F.3d 1170, 1180 (9th Cir. 2003) (emphasis added). Since Defendants' action satisfy this element as well, the discrepancy is immaterial for purposes of this motion.




1 Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829 (9th Cir. 2002)).

2 A false advertising claim under Section 43(a) "requires neither proof of

3 literal or obvious falsehoods, nor of intent to deceive." Mutual, 459 F. Supp. 2d at

4 932-33 (quoting Proctor & Gamble Co. v. Chesebrough-Pond's, Inc., 747 F.2d

5 114, 118-19 (2d Cir. 1984)). A plaintiff may establish the falsity of a statement

6 "either by showing that, in context, the statement 'was literally false, either on its

7 face or by necessary implication,' or by showing that although the statement was

8 'literally true' it was nonetheless 'likely to mislead or confuse consumers' as

9 evidenced by consumer surveys." Mutual, 459 F. Supp. 2d at 932 (citing Southland

10 Sad Farms v. Stover Seed Co., 108 F.3d 1134, 1139-40 (9th Cir. 1997)). Where a

11 statement is "literally false, a violation may be established without evidence of

12 consumer deception." Id. at 933 (quoting Scotts Co. v. United Indus. Corp., 315

13 F.3d 264, 273 (4th Cir. 2002). On the other hand, if a claim is based on "implied

14 falsehood, a plaintiff must demonstrate, by extrinsic evidence, that the challenged

15 [advertisements] tend to mislead or confuse consumers." Id.

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1. Defendants' Use of Price Lists and Wholesaler Ordering Systems

to Market Unapproved Colchicine Products Violates Section 43(a)

of the Lanham Act.

Plaintiffs have shown that well over 90% of pharmacists are· confused by

Defendants' false advertising on the Price Lists, which are integrated in pharmacy

computer systems, and Wholesaler Ordering Systems. See Matijow Decl. ,-r 8.

This Court faced nearly identical questions of law and fact in Mutual v. Ivax.

In that case, Mutual obtained FDA approval for quinine sulfate for the treatment of

certain types of malaria, and the defendants sold unapproved quinine sulfate

through a variety of means including the Price Lists. After considering survey

evidence, the Court found that Mutual demonstrated a likelihood of success on its

false advertising claims based upon confusion arising from defendants' use of Price




1 Lists to market their unapproved products. The Court therefore enjoined the

2 defendants from placing information regarding unapproved quinine sulfate products

3 on any Price Lists in the United States and ordered defendants to remove any such

4 information. Mutual, 459 F. Supp. 2d. at 946.

5 In reaching its decision, the Court in Mutual v. Ivax noted, "[i]t is not the

6 simple act of defendants marketing a non-approved drug that Mutual seeks to

7 combat, but the particular form that marketing has taken; a form that Mutual

8 contends carries certain implicit false suggestions in the minds of the consumer that

9 defendants' drug is FDA-approved." Id. at 940. The Court found that the "use of

10 such a marketing mechanism could create an implicit false impression of FDA-

11 approval." Id.

12 Defendants' use of the Price Lists to market unapproved colchicine products

13 causes extensive confusion. As discussed above, Plaintiffs' survey evidence

14 demonstrates that an astounding 95% of pharmacists mistakenly believe that all

15 prescription drugs on their pharmacy computer systems, which provide pharmacists

16 with clinical and pricing information directly from the Price Lists, are FDA-

17 approved. See Matijow Decl. ~ 8; O'Donnell Decl. ~ 21. Plaintiffs' survey further . . . .

18 established that 93% of pharma~ists believe that all colchicine drugs on their

19 pharmacy computer systems are FDA-approved, which is of COurse false with

20 respect to Defendants' products. Matijow Decl. ~ 8.

21 Plaintiffs' survey evidence also shows that confusion anses from

22 Defendants' use of Wholesaler Ordering Systems. Approximately 94% of

23 pharmacists who purchase prescription drugs using an online ordering system

24 mistakenly believe that all such drugs are approved by the FDA. Id. Further, 93%

25 of the pharmacists surveyed mistakenly believe that all colchicine drugs on the

26 Wholesaler Ordering Systems are FDA-approved, which again is false with respect

27 to Defendants' products. Id.




1 In Mutual v. Ivax, this Court pointed to Mutual's consumer surveys as

2 substantiation for Mutual's claim that defendants' use of the Price Lists conveyed

3 misleading information about FDA approval of defendants' drugs. Mutual, 459 F.

4 Supp. 2d. at 942 ("Defendants are using a specialized marketing channel to sell its

5 quinine sulfate that, through its use, conveys the false implication its drug is

6 approved by the FDA. In support of this contention Mutual has submitted market

7 surveys demonstrating that the relevant consumer group, pharmacists and retail

8 pharmacy chains, consider use of this particular marketing mechanism as implicitly

9 informing them that the product is FDA-approved ... "). Similarly here, Plaintiffs

10 have submitted a consumer survey that demonstrates Defendants' use of the Price

11 Lists and Wholesaler Ordering Systems confuses and misleads consumers about the

12 nature of defendants' unapproved colchicine products. Such confusion is the

13 touchstone of a Lanham Act violation. See Summit Tech., Inc. v. High-Line

14 Medical Instruments, Co., 933 F. Supp. 918, 935-42 (C.D. Cal. 1996); accord

15 Alpharma, Inc. v. Pennfield Oil Co., 411 F .3d 934 (8th Cir. 2005).

16 Moreover, Defendants' submission of inaccurate and incomplete information

17 to the Price Lists and Wholesaler Ordering Systems, or failure to correct

. 18 information as circumstances change, compounds confusion in the· marketplace.

19 . O'Donnell Decl. ~ 15. For example, in order to have th~ir unapproved colChicine·

20 products listed on First Databank, which requires the submission of an FDA

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approval letter if applicable, Defendants Watson, West-ward, Vision, and

Excellium either misrepresented to First Databank that their unapproved colchicine

products were FDA-approved or that their unapproved colchicine products did not

need to be approved by the FDA in order to be sold lawfully, and/or failed to

correct misinformation on the Price Lists and Wholesaler Ordering Systems after

the FDA approved COLCRYSTM and granted Plaintiffs' market exclusivity. Id.

Further, Defendants' failure to remove their colchicine product listings from

the Price Lists and Wholesaler Ordering Systems, or to have those listings marked 15. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 as "obsolete," after the FDA's approval of COLCRYSTM perpetuates the confusion

2 regarding the safety, efficacy, and FDA approval status of their products and

3 misleads consumers into believing they are interchangeable with COLCRYSTM. Id.

4 ~~ 16. As an example of the high potential for confusion, a recent search for

5 "COLCRYS" in ABC's Wholesaler Ordering System resulted in the display of all

6 of Defendants' unapproved colchicine products as generic equivalents of

7 COLCRYSTM. See id. ~ 13-14.

8 The appearance of false and misleading codes and other information

9 concerning Defendants' unapproved colchicine products on the Price Lists and the

10 Wholesaler Ordering Systems serves to further confuse consumers about the safety,

11 efficacy, and FDA-approval status of their products. See id. ~ 17.

12 Defendants' use of specialized marketing channels such as the Price Lists and

13 Wholesaler Ordering Systems to market their unapproved colchicine products

14 results in misleading representations about Defendants' products that are material to

15 drug purchasing decisions-the essence of false advertising. See Warren Corp. v.

16 Goldwert Textile Sales, Inc., 581 F. Supp. 897, 900 (S.D.N.Y. 1984) ("Invoices,

17 price lists, display cards, and packages are part of the advertising realm");

18 Healthpoint, Ltd. v. Stratus Pharm., Inc:, 273 F. Supp. 2d 769, 792 (W.D. Tex.

19 . 2001); Sirius Labs~, Inc., 2004 U.S. Dist.LEXIS 96, at *8-9.· Unless Defendants'

20 unapproved colchicine products are removed from, or listed as obsolete in, the Price

21 Lists and Wholesaler Ordering Systems, pharmacists are likely to substitute

22 Defendants' products (which are priced lower) for COLCRYSTM even if a

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prescription for COLCRYSTM is presented, and are likely to order Defendants'

products instead of COLCRYSTM under the mistaken belief that the drugs are

interchangeable. See O'Donnell Decl. ~~ 13-14, 16, 21. As Plaintiffs' survey

revealed, 100% of pharmacists would choose to purchase a prescription drug for

their pharmacy that was approved by the FDA, rather than a prescription drug that

was not approved by the FDA. Matijow Decl. ~ 8. 16. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



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2. Defendants' False and Misleading Representations and Omissions

in Their Unapproved Colchicine Product Labels and Inserts

Violates Section 43(a) of the Lanham Act.

4 The false and misleading representations and omissions in the labels and

5 product inserts for Defendant's colchicine products, as detailed in Section IILC

6 above, establish Defendants' liability under Section 43(a) of the Lanham Act. See

7 Rothschild Decl. ~~ 11, 14-21. Defendants' deficient labels not only pose a serious

8 risk to the public, but also make Defendants' unapproved and illegal colchicine

9 products appear to be FDA-approved, safer and more effective than Plaintiffs'

10 COLCRYSTM product. Id.; see O'Donnell Decl. ~~ 18-20.

11 This is not a case where the FDA has yet to construe the FDCA to determine

12 what constitutes safe and appropriate information for colchicine drug product labels

13 and inserts. The FDA has specifically determined what conditions COLCRYSTM

14 may be indicated for, as well as the dosing information, drug-drug interactions,

15 food interactions, contraindications, and other safety information that must be

16 included in the labels and product inserts for Plaintiffs' product. Rothschild Decl.

17 ~~ 10,12,13,16-18.

18 . The FDA has issued press releases no·ting that "oral colchicine has been used

19· for many years as art unapproved drug with· no FDA-approved prescribing

20 information, dosage recommendations, drug interaction warnings," and highlighting

21 the important safety information required for the labels and product inserts for

22 Plaintiffs' COLCRYSTM product. See Dettery Decl. ~ 13. Defendants' labels and

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product inserts for their unapproved colchicine products are therefore misleading on

their face and grossly misrepresent the nature of the products because they simply

fail to include much of the important safety information required by the FDA. See

Rothschild Decl. ~~ 10-11, 14-21.

Defendants' labels and product inserts also include misleading statements

and designations that create the false impression that their unapproved colchicine 17. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



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products are FDA-approved. For example, all of the Defendants' labels and

product inserts display the "Rx" prescription symbol. O'Donnell Decl. ,-r 18.

Moreover, Defendant West-ward's and Excellium's product labels and inserts state

that their products are "indicated for the treatment of gout." Id. These statements

are false and misleading because: (1) only Plaintiffs' COLCRYSTM product is

FDA-approved; and (2) all prescription (i.e., "Rx") drugs are regulated by the FDA,

whereas Defendants' colchicine products are not. Id.,-r 19. Moreover, the "look

and feel" of the labels and product inserts for Defendants' unapproved colchicine

products are similar to those having FDA approval, further creating the

misimpression that their products are FDA-approved. Id. ,-r 20.

In addition, the broad statement "for the treatment of gout" wrongly implies

that Defendant West-ward's and Excellium's colchicine products prevent and

alleviate symptoms of all types of gout, despite the fact that the FDA has not

approved colchicine for the treatment of chronic gout. Id.,-r 19. Defendant

Watson's and Vision Pharma's labels and product inserts contain similar false

statements such as colchicine "is recommended for regular use between attacks as a

prophylactic measure ... ", when in fact the FDA has not approved colchicine for

use as a prophylactic measure. Id,-r 20.

All of the foregoing constitute false and misleading statements and omissions

by Defendants in interstate commerce about products made available in interstate

commerce. As such, Defendants' statements are more than sufficient to establish

their liability for false advertising and unfair competition under the Lanham Act.

See Southland Sod Farms, 108 F.3d at 1139.

3. Defendants' Marketing of Unapproved Drugs During Mutual's

Exclusivity Period Violates the Lanham Act.

It is against the law to market, distribute and/or sell any colchicine product

that is not FDA-approved because of the proven public health concerns for drug

safety and efficacy. See 21 U.S.C. § 301 et seq. By marketing colchicine to 18. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 consumers, Defendants falsely imply that they have the lawful right to do so. In at

2 least one federal court decision, a manufacturer's continued sale of an unapproved

3 drug in spite of an exclusivity period was enough for the court to enjoin the

4 marketing and sale under Section 43(a). See Lyphomed, Inc. v. Professional

5 Compounding Centers of America, Inc., Civ. No. H-89-1792, slip op., (S.D. Tex.

6 May 26, 1989) (See Exh. A).5 Lyphomed stands for the proposition that the

7 marketing of an unapproved drug alone, even without any express statements,

8 misleadingly implies that a company has FDA approval to sell the drug, in violation

9 of the Lanham Act.

10 Defendants' marketing of unapproved colchicine products causes consumer

11 confusion as to the advertised attributes of the product, i. e., that Defendants'

12 products are FDA-approved for the treatment of gout flares and FMF. See

13 O'Donnell Decl. ~~ 19-20. Under Lyphomed, by creating confusion as to the

14 attributes of their unapproved colchicine products, Defendants' marketing and sale

15 of unapproved colchicine necessarily violates Section 43(a) of the Lanham Act.

16 B. Plaintiffs Are Likely to Succeed on their State Law Claims.

17 Cal. Bus. & Prof. Code § 17200 (the "UCL") prohibits: (1) an "unlawful ...

18 business act or practice;" (2) an "unfair .. ; business act or practice;" (3) a

19 "fraudulent business act or practice;" (4) "unfair, deceptive, orlintrue or misleading

20 advertising;" and (5) "any act prohibited by [Bus. & Prof. Code §§ 17500-

21 17577.5]." Cal. Bus. & Prof. Code § 17200. Plaintiffs have established that

22 Defendants' commercial practices relating to their unapproved colchicine products

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5 The plaintiff in Lyphomed, which had FDA approval for an AIDS-related drug, alleged that the defendant's marketing of a competing product impliedly and wrongfully represented that it had the lawful right and FDA approval to do so, thus violating Section 43(a) of the Lanham Act. The defendant's "false statement [which ultimately supported a permanent injunction] was the act of doing business in violation of the FDCA." See Thomas J. McGrew and Donald O. Beers, "When the FDA Takes No Action Against Violations of the Federal Food, Drug and Cosmetic Act, Can a Private Cause of Action Be Brought Under Section 43(a) of the Lanham Act?" 47 Food & Drug LJ. 1, 5 (1992).




1 constitute false advertising in direct violation of the Lanham Act, meaning that

2 Plaintiffs will also succeed on their UCL claim. See Conversive, Inc. v.

3 Conversagent, Inc., 433 F. Supp. 2d 1079, 1093-94 (C.D. Cal. 2006) (holding that a

4 violation of the Lanham Act warrants finding that the UCL has also been violated).

5 Defendants' false and misleading statements about their colchicine products

6 violate California's false advertising statute, which prohibits the dissemination of

7 any untrue or misleading statement in connection with the sale of goods. Cal.

8 Bus.& Prof. Code § 17500. See Rothschild Decl. ~~ 10-11, 14-21. To sustain a

9 claim under California's false advertising statute, Plaintiffs need only show that

10 "members of the public are likely to be deceived" by Defendants' representations.

11 See Pom Wonderful LLC v. Purely Juice, Inc., 2008 U.S. Dist. LEXIS 55426, *28-

12 33 (C.D. Cal. 2008). Plaintiffs need not allege "actual deception, reasonable

13 reliance, [or] damage." Id. The false and misleading statements prohibited by the

14 Lanham Act, discussed infra, are similarly prohibited under California's false

15 advertising statute. See Summit Tech., 933 F. Supp. at 943.6

16 C. Plaintiffs' Claims are Not Preempted by the FDCA.

17 Should Defendants seek to oppose this motion by arguing that Plaintiffs'

18 claims are preempted by the Food Drug and Cosmetic Act ("FDCA"), such

19 arguments have been routinely rejected by the courts and should be rejected here.

20 In Mutual v. Ivax, this Court noted, "courts have allowed Lanham Act claims

21 to proceed when the alleged false statement was that the product has FDA approval

22 because a court can test the truth of the statement ... without any need to interpret

23 FDA regulations; the question will simply be whether the FDA official conferred

24 approval or not." Mutual, 459 F. Supp. 2d at 935. This Court went on to say, "if

25 the allegedly false or misleading nature of a statement can be easily verified, then

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27 6 Plaintiffs will also succeed on their common law unfair competition claim, as there is no difference between statutory unfair competition and common law unfair competition

28 under California law. Id. 20. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 the fact that the determination of the truth of that statement was made by the FDA

2 is immaterial so long as the party can also show the other requirements for

3 establishing a Lanham Act claim, that is, that the false or misleading statement is

4 likely to deceive consumers." Id.

5 This Court recently addressed the issue of preemption in Pom Wonderful

6 LLC v. Ocean Spray Cranberries, Inc. 2009 U.S. Dist. LEXIS 64108 (C.D. Cal.

7 2009). In that case, this Court held that the plaintiff s false advertising claim under

8 the Lanham Act was not preempted by the FDCA because "courts allow false

9 advertising claims to proceed where the plaintiff alleges the defendant has

10 affirmatively misrepresented compliance with FDA regulations, or where the court

11 only needs to verify whether defendants' [specific] label [or conduct] conforms to

12 what the FDA has already determined is required." Id. at *2. This Court further

13 stated, "[p]ut differently, the key issue in the line of cases dealing with FFDCA or

14 FDA regulation preclusion of Lanham Act claims is whether the false advertising

15 involves a fact that can be easily verified without requiring the truth of the fact to

16 be determined by the FDA." Id.

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D. Absent an Injunction, Plaintiffs Will Continue to Suffer

Irreparable Harm.

Plaintiffs will continue to suffer irreparable harm ifthis·Court does not enjoih

Defendants from deceptively marketing unapproved colchicine products. The harm

to Plaintiffs is more than monetary and an injunction is the only effective way to

protect both Plaintiffs and the public. As described earlier, Defendants' use of the

Price Lists and Wholesaler Ordering Systems and incomplete listing of drug-drug

interactions, food interactions, and contraindications for its unapproved colchicine

products may lead consumers to conclude that Defendants' products are safer than

and substitutable for Plaintiffs' COLCRYSTM product, when precisely the opposite

is true. See Rothschild Decl. ~~ 10-11, 15-21. If Defendants are permitted to

continue marketing, distributing and selling their unapproved colchicine products, 21. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 Plaintiffs will have to invest valuable time, effort, and resources to correct these

2 misimpressions. Hayer Decl. ,-r 6. Even then, Plaintiffs may never successfully

3 eliminate the confusion caused by Defendants' incomplete and misleading

4 statements about their products. Id.,-r 7. Enjoining Defendants' unlawful activities

5 is the only remedy capable of curtailing the irreparable harm to Plaintiffs.

6 In Mutual v. Ivax, this Court noted that "[Mutual] has submitted survey

7 reports documenting that anywhere from a third to nearly ninety percent of

8 pharmacists view defendants' quinine sulfate as being FDA-approved because it is

9 marketed on the clinical/price lists". Mutual Pharm. Co., 459 F. Supp. 2d. at 946.

10 Based on those survey results, this Court found that "a significant portion of the

11 relevant consumer market are getting the misleading impression that defendants'

12 quinine sulfate is approved by the FDA" and that "[t]he false impression imparted

13 by defendants' marketing activities would make their quinine sulfate appear more

14 favorable than it otherwise would be in the eyes of the consumers and induce those

15 consumers to dispense the quinine sulfate when presented with a prescription for

16 the drug." Id. Thus, this Court held that "[ s ]uch a result would thereby cause

17 Mutual to suffer irreparable harm." Id.

18 Deft;mdants' use of the Price Lists significantly impairs Plaintiffs' ability to

19' establish its COLCRYSTM brand and to recoup the investment it made in obtaining

20 exclusive rights to market colchicine products.7 Hayer Decl. ,-r 8. Furthermore,

21 Defendants' failure to include the proper health and safety information in their

22 advertising and labeling may cause real physical harm to consumers, thus creating

23 the impression among the consuming public that colchicine is more dangerous than

24 it actually is when used properly. See Rothschild Decl. ,-r,-r 19-21. Plaintiffs will

25 thus face the difficult and costly task of trying to differentiate its FDA-approved

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27 7 First Databank and Medi-Span, in particular, are "the nation's two principal vendors of integratable drug information databases." See In re First Databank Antitrust Litigation,

28 209 F. Supp. 2d 96 (D.D.C. 2002). 22. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



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COLCRYSTM product from the unapproved products that may have injured

consumers or failed to perform up to consumer expectations. Hayer Decl. ,-r 12. If

Defendants continue to sell their unapproved products, Plaintiffs may ultimately

lose any control they have over consumer views of the safety and effectiveness of

COLCRYSTM. Id.,-r 9. Such loss of control "constitutes immediate and irreparable

harm." See Quantum Fitness Corp. v. Quantum Lifestyle Ctrs., 83 F. Supp. 2d. 810,

831 (S.D. Tex. 1999); Pro Hardware, Inc. v. Home Centers of Am., Inc., 607 F.

Supp. 146, 154 (S.D. Tex. 1984).

Any problems with colchicine III general, regardless of the source, may

become associated with Plaintiffs among companies that know Plaintiffs are the

only FDA-approved source of the product. Hayer Decl. ,-r 10. The negative

pUblicity could well result in a loss of prestige and goodwill for Plaintiffs in the

medical community and among consumers, with the irreparable harm extending

beyond COLCRYSTM and into Plaintiffs' general business reputation. Id. ,-r II.

Finally, the exclusivity period awarded to Plaintiffs for gout flares runs

through July 30, 2012. See Dettery Decl. ,-r 9. Each day Defendants are permitted

to violate the law renders Plaintiffs less able to recoup their investment and to

exploit their exclusivity in the manner intended by Congress. ' See Pharmacia &

Upjohn Co., v. RanbaxyPharm., Inc., 85 Fed. Appx. 205, 214~15 (Fed.Cir. 2003)

(finding irreparable harm was likely in part due to the "loss of the remaining

relatively short life of the patent .... ").

E. The Balance of the Hardships Favors Plaintiffs.

The balance of hardships supports the issuance of an injunction because the

requested injunction would merely bar Defendants from using misleading

marketing and distribution tactics to sell products they are not lawfully entitled to

sell and from making false, misleading, and potentially dangerous statements about

products which have not been proven as safe or effective for any use. Any income

lost by Defendants as a result scarcely constitutes a hardship when Defendants 23. MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF



1 cannot lawfully sell the unapproved colchicine products in the first place. See CSC

2 Holdings, Inc. v. Greenleaf Elec., Inc., 2000 U.S. Dist. LEXIS 7675, *26 (N.D. Ill.

3 2000) ("A balancing of the parties' respective hardships reveals that the injunction

4 means only that Defendants will be enjoined from conducting a business that is

5 prohibited by federal law. Such illegal activities are not worthy of any protection. ");

6 see also Storer Communications, Inc. v. Mogel, 625 F. Supp. 1194, 1203 (S.D. Fla.

7 1985) (" ... the defendants have no vested right to earn money by violating the law.

8 Defendants will suffer no harm if an injunction is issued which simply requires

9 them to obey the law. ")

10 Unlike Defendants, Plaintiffs invested considerable amounts of time and

11 money in obtaining FDA approval of their COLCRYSTM product. See Dettery

12 Decl.,-r,-r 7-8. Plaintiffs have also undertaken ongoing regulatory obligations in

13 connection with the marketing of COLCRYSTM that Defendants can avoid. Id.

14 ,-r,-r12, 14, 15, 18. Plaintiffs' continuing obligations to the FDA will cost millions of

15 dollars to satisfy. Id.,-r,-r 12, 15. Thus, the harm Plaintiffs will suffer if an

16 injunction is denied far outweighs any hardship that Defendants might suffer from

17 an injunction that only prohibits them from continuing to violate the law.

18 F. An IIijunctio'n Serves the Public Iilterest.

19 Enjoining Defendants' continued illegal sale of unapproved colchicine

20 product clearly serves the public interest because it will prevent further consumer

21 confusion about the proper use of, and risks associated with, colchicine. See

22 Promateklndus., Ltd. v. Equitrac Corp., 300 F.3d 808,813-14 (7th Cir. 2002). Not

23 surprisingly, courts have held that false advertising in the context of drugs is

24 particularly deleterious to the public interest. See Upjohn Co. v. Schwartz, 246

25 F.2d 254, 262 (2nd Cir. 1957) ("In ordinary commercial affairs, 'substitution by

26 deception' is wrongful, but, when in the healing art there is 'substitution by

27 deception,' greed may reach the grade of malice.").




1 The significant danger posed by Defendants' unapproved products is

2 unquestionable. The FDA publicly noted in a recent press release that (i) during its

3 review of Mutual's NDA for COLCRYSTM,two previously uncharacterized safety

4 concerns were identified, and (ii) the FDA's analysis of safety data "found 169

5 deaths associated with the use of [unapproved] oral colchicine." See Dettery Dec!.,

6 Ex. D. An injunction ensuring that consumers receive complete, truthful, and FDA-

7 approved information about COLCRYSTM, which is manufactured in FDA-

8 approved facilities using FDA-approved processes, as opposed to misleading and

9 incomplete information about Defendants' untested and unapproved drugs, clearly

10 protects the public interest.

1 1 v. CONCLUSION

12 For the foregoing reasons, Plaintiffs respectfully request that this Court issue

13 a preliminary injunction requiring Defendants to cease and desist from the illegal

14 acts detailed herein and to take certain actions to immediately curtail the confusion

15 among consumers, as set forth in detail in the accompanying Proposed Order.

16 Dated: September 11, 2009 COOLEY GODW ARD KRONISH LLP

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. . .

MICHAEL G. RHODES (CALIFORNIA BAR NO. 116127) . . PETER J . WILLSEY (Pro Hac Vice) .'. .'. JOHN S. KYLE (CALIFORNIA BAR NO. 199196) NISHAN KOTTAHACHCHI (CALIFORNIA BAR NO. 221612) BRENDAN J. HVGHES (Pro Hac Vice)

Attorneys for Plaintiffs

MUTUAL PHARMACEUTICAL COMPANY, INC., AR SCIENTIFIC, INC., and AR HOLDING COMPANY, INC.




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I.

II.

III.

IV.

T ABLE OF CONTENTS

PAGE

INTRODUCTION .............................................................................................................. 2

SUMMARY OF ARGUMENT .......................................................................................... 3

STATEMENT OF FACTS ................................................................................................. 5

A.

B.

C.

D.

Plaintiffs Are the Only Lawful Providers of Colchicine Products .......................... 5

Defendants Use Price Lists and Wholesaler Ordering Systems to Deceptively Market Their Unapproved Colchicine Products ................................. 7

1.

2.

Price Lists .................................................................................................... 7

Wholesaler Ordering Systems ..................................................................... 8

Survey Evidence Confirms Consumer Confusion Regarding Defendants' Use of Price Lists, Pharmacy Computer Systems, and Wholesaler Ordering Systems ................................................................................................................... 9

Defendants Provide Misleading Information in the Labels and Product Inserts For Their Unapproved Colchicine Products .............................................. 10

ARGUMENT .................................................................................................................... 11

A.

B.

C.

D.

E.

F.

Plaintiffs Are Likely to Succeed on the Merits of Their Claims Under the Lanham Act ........................................................................................................... 12

1.

2.

Defendants' Use of Price Lists and Wholesaler Ordering Systems to Market Unapproved Colchicine Products Violates Section 43(a) of the Lanham Act ...................................................................................... '" 13

Defendants' False and Misleading Representations and Omissions in Their Unapproved Colchicine Product Labels and Inserts Violates Section 43(a) of the Lanham Act.. ................. ~ ............................ 17

3.. .. Defendants" Marketing of Unapproved Drugs During Mutual's Exclusivity Period Violates the Lanham Act.. ................. '" ...................... 18

Plaintiffs Are Likely to Succeed on their State Law Claims ................................ 19

Plaintiffs' Claims are Not Preempted by the FDCA ............................................. 20

Absent an Injunction, Plaintiffs Will Continue to Suffer Irreparable Harm ......... 21

The Balance of the Hardships Favors Plaintiffs .................................................... 23

An Injunction Serves the Public Interest ............................................................... 24

V. CONCLUSION ................................................................................................................. 25

-1-

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF PLAINTIFFS'

MOTION FOR PRELIMINARY INJUNCTION


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28 COOLEY GODWARD

KRONISHLLP ATTORNEYS AT LAW

SAN FRANCISCO

T ABLE OF AUTHORITIES

Cases PAGE

Alpil1F~3Jn934\Cthnc!!r~110~f) ~~ ......................................................................... 15

Conversive, Inc. v. Conversagent, Inc. 433 F. Supp. 2d 1079 (C.D. Cal. 2006) ............................................................ 20

CSC Holdi~gs, Inc. v. Greenleaf Elec., Inc. 2000 U.S. Dist. LEXIS 7675, *26 (N.D. Ill. 2000) ........................................... 24

Healthpyint, Ltd. v. Stratus Pharm., Inc. 273 F. Supp. 2d 769,792 (W.D. Tex. 2001) .................................................... 16

Int'l Jensen, Inc. v. Metrosound USA., Inc. 4 F.3d 819 (9th Cir. 1993) ................................................................................ 11

Jarrow Formulas, Inc. v. Nutrition Now, Inc. 304 F.3d 829 (9th Cir. 2002) ............................................................................ 13

Lyphf!med, Inc. v. Profess~onal Compounding Centers of America, Inc. CIV. No. H-89-1792, slIp op., (S.D. Tex. May 26,1989) ................................. 19

Mutual Pharm. Co. v. Ivax Pharm., Inc. 459 F. Supp. 2d 925 (C.D. Cal. 2006) ..................... 11, 12,13,14, 15,20,21,22

Ne513113~t6i8c(9~hI~i;. ~6B8).~~~~~~~~ ............................................................ 12

Pharmacia & Upjohn Co., v. Ranbaxy Pharm., Inc. 85 Fed. Appx. 205 (Fed. Cir. 2003) ................................................................. 23

Pom Wonderful LLC v. Ocean Spray Cranberries, Inc. 2009 U.S. Dist. LEXIS 64108 (C.D. Cal. 2009) ............................................... 21

Pom Wonderful,LLC v. Purely Juice, Inc. 2008 U.S. DISt. LEXIS 55426, *28-33 (C.D. Cal. 2008} .. ~ ............................... 20

Pro Hardware, Inc. v. Home Centers of Am., Inc.' .. . .. .607 F. Supp. 146 (S.D. Tex. 1984) ................................. ~ ........... : ........ ; .............. 23 Proctor & Gamble Co. v. Chesebrough-Pond's, Inc.

747 F.2d 114 (2d Cir. 1984) ............................................................................. 13

Pro30(/F~{d~Of!/ (~i~' ci!.10g2)~.~~~~: ................................................................ 24

QU83tF~ lu~~~2d~81K (S.g~T~~~l J9~)~?:~~.~t~~ .................................................. 23

Reet4jsF~~~111?~7h r&;al/f84).~~ .~ ... ~.~.~~~~~.~. ~~~~~~~~~~~~ .~~:' .. ~~~' ................ 11

SCOjt{ 5 Ct.·3d 2~rg(416~~~ 2~82f." ........................................................................... 13

Sirius Labs., Inc. 2004 U.S. Dist. LEXIS 96, at *8-9 ................................................................... 16

Southland Sod Farms v. Stover Seed Co. 108 F.3d 1134 (9th Cir. 1997) .................................................................... 13, 18




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28 COOLEY GODWARD

KRONISHLLP ATTORNEYS AT LAW

SAN FRANCISCO

T ABLE OF AUTHORITIES

(CONTINUED)

Storer Communications, Inc. v. Mogel PAGE 625 F. Supp. 1194 (S.D. Fla. 1985) .................................................................. 24

Stu~~of!:ld~~~(~h ~ir.I2o(1)!.~~~.~· .. ~~.~~~.~~~.~~::.~~~: ................................ 12

Summit Tech., Inc. v. High-Line Medical Instruments, Co. 933 F. Supp. 918 (C.D. Cal. 1996) ............................................................. 15, 20

Upjohn Co. v. Schwartz 246 F.2d 254,262 (2nd Cir. 1957) ................................................................... 24

Warren Corp. v. Goldwert Textile Sal~s, Inc. 581 F. Supp. 897 (S.D.N.Y. 1984) ................................................................... 16

Statutes

15 U.S.C. § 1125(a) .......................................................................................................... 12

21 U.S.C. § 301 et seq ...................................................................................................... 18

Cal. Bus. & Prof. Code § 17200 ............................................................................................................ 19

Cal. Bus.& Prof. Code § 17500 ............................................................................................................ 20

Other Authorities

"FDA Acts to Improve Drug ~afety and Quality," www.fda.gov/bbs/topics/NEWS/2006/NEWOI384.html (June 8, 2006) ................................................................................ : ..... ; ............................. 5

Thomas J. McGrew and Donald O. Beers, "When the FDA Takes No Action Against Violations of the Federal

~~g~' f/[fnd;dSC;~li';;~3 taY~fih~ L::;~~~eA~f?u~41FAo~~o& trug L.J. f, 5 (1992) ................................................................................................. 19




EXHIBIT A


UNt'l?E~ STA~ESDIS'RIC!l' CO.QR'l' sOUTHERN tltS.Ct' Q1 'r~XAS

KOUST{)N·· Dlvrsl.On

. LYPHOMEO I INC.,

Pla-intiff, .. VS • CIVIL AC~lON NO. H-$9-1192

. PROFESSIONAL COkpOUNDtNG CENTERS OF AMElUC~, INC.,

~t a1. ,

O~fendants '.

·It'I. S'upt:io.t"t.of this. pri!tl ifuinary injunction the dOU,ttflrtdS:

A. L.yphomed, !n-o'1 has a substarttial UJice:lih-ood of .t:n:l'C~e$:S

atte"~ a full- trJ,al on the mli!X itg. Lyph'otfie:d wia·~g.raf-tt.e~ an

~¢lU$iv:¢ti9ht to dts-tir!l?u.ta p~nt~rn.ttU:tle, and PWA. hs

in,r:r;i~9'.tn'9. on 1tb,atS't'aot\. ..

B. L~h'Omedttnc., w:i11 gut fer trl,~p:a:rable -indQrywithlij;ut thl;~'

ilnj u·nctio:n. .!nfd~<jelnento"1: Lypliomel:lJ s exc!LUsive g~ant

~oul~ da:maq~ th~ market for pentamidirte in a W4¥ that

oaru'tot be quantified.

C. TM inoonVe'l1iGlloa. to P'COA ia outweighe.d by the potentJal

. ha::rtn to typh6ttted. l'C<;A' (; annual $ales o.{· piei1tamidine is

l~,s$ than $60,000 and PCCA has only S4 grams in lnv~nt.'Ory.

D. The i.njuhotion wiH not d:J:s:s:erve the public inte:res~. The

$upply of pentamidlne to treat patie.n'ts· is not in petit '.

Signed on May . ~

Exhibit A 26 .. ' . e


..

UNI~~O' STATES OISTRICT COURT SOtJ'l'RSRN DIS'.NttCT OF 'rEXAS

HOUSTON OIVISIO~

LYPHOt-mO, INC. 1

llla:\.ntiff,

§ §

9 §

va.

PROFUS·:iiON:lt.L COMP'OUNO!Nti QENW$~S O'F~Rt.CA, INC' r

§ § § § § § §

. t,t ~l. t

Befen<ian'Cs.

B~o<iUSe . o.f c·la irns mad'e $,1) this lawsuit firo.feS'$iolli:\l

C-ompou41d-ing Cente.'rs Of America., Inc. f has b~en. ¢.rd~l;'ed by Judg~

r.y'hn N. Hughe-s I (1) not tic sell ~e~tamidine ~t1t.i.l fu,)'."ther ho-tice;

'and (2) to n¢tify you not to disp~Me penta:mid:i.ne reoeived front

.F. c. C:. A. until fUJ;tl1e·r n:otlse.

It you have any questio.o, pleas:e oOMta~:ltJ

Dale Ed.w~rd K~n9~ Cll;f;ef~'X~o\,ttiv$ o;f·£1:Cl~'t' l~.qi'C •. ~·. P'. () .B.P* j~a

.. Su<1ar .Land, T$(Xa:s 17 4117 ;

Jesse E. Clark, Clerk. Uttitetll State~ Distriot Cotrrt

Exhibit A 27


When the FDA Takes .No Action Against Violations of the Federal Food, Drug, and Cosmetk' Act, Can a Private Cause

of Action be Brought Under Section 43(a) of the Lanham Act?

THOMAS J. MCGREw, EsQ.* DONALD O. BEERS, EsQ."

It frequently happens that a firm will conclude that one or more' of its competitors is violating the Federal Food, Drug, and Cosmetic Act (FDCA).l In some cases the competitor's activities in violation of the FOCA simply disadvantage the cOmplaining party in the marketplace. In otheI"$, the competitor's illegal operations also ",ave the effect of infringing 'a specific economic right (e.g., Orphan Drug Act exclusivity') that the firm claims under the FDCA. ,

InaU case,s (if an FDGA violation, ~heindicated first step is a complaint to the Food aI)d Drug Administl1ltion eFDA). It may be possible for a private party top.ersuadethe FDAtolllke actiQIl_ Not unrommonly, howtv,ct, the FJ)A's:.()w.~ ne&is atld p.'tldrid~s prev¢tlt it ftQm' doing 'Sge'len w,heJi'a: ~, !W.s: mer#.

When: the' FDA will npt tak~ actiol1} the~ traditionally has been no further recourse. The FONs 'decisions to take~r refuse to take-legal actiQn~e, disCretionary. and FDA action wit! not be or-de~ by '3, co~rt.1J In addition, it is reasonably wen established that pr.ivate parties have no right of action under the, FDCA .. It has fikewise been held ~hat a ri~t of action to enforce rights creat~ by' theFDOA cannot be implied under $tate li1.w.6 , '

. • Mr. McGrew ii':O Patuler In ,the law firm <If Afn9ld &. P()Jttr, Wasi!iugtOll, D.C . ... Mr. Been is a Pattn:ei' in tlie~w firtft of,A:riiOld& p(ji"tet',Wa:s.!iil\~~, O:C. , The authorSrqir=lited 1M pl4lntifiill L1Ph:ottstd v. Pro!essiottt;I60iI1JWl1!Uliijg Cfflt(fS of Ammwd,~ lI.m.lA- " , ,

I. Pub;L, No.1~1I1. 51 SI,Bt. l<i4a(1938), ;IS amended 2 \ U;S,(l, '§§ .361~393 (19M}. ? 21 U.s.~. §§ ,UIm"~' " ' 3. Stt Hetkler v. Clu1ney, 4'1() U.S. B,2l (1985). 4, Ste Griffin v. O'Nel1I, Jones ~dml1J'l, Ine., 6().4 F. Supp. 717, 718-20 (S.D. Ohio r985);

.N~Mnal W()Jl1en's.HffiihNetWir~ fne. v. A.H, ~'O<I., Inc., S<lS F. Supp. 117.7 .cD. Mass. r.982). In Memll DI!W Iiha:tmaoeutica\s, JIle. v. ThOlllproD, 475 U.s. 804 (1980), the pW/itiff

, brought a prWu~ li1ibt1ity suit against ~ dtug manuf3(:luI"q" alleging that the lMlIufacturer had vto. lale<! the FPCA. Claimh)8,tbll those al1~s,tellremd rederalJw:i~ction, the defend;mt sought n:IIlGV:il «I- federal.ten". The Supreme Court disagreed. In r<:a:ching ~ doci$ion, the CoUrt mfed that "

{!I)oth pani~:~ wid! th~ ~12rt.Qf~Jlpcab·m~l~ionthat,lhc,~ j$;lIQ.re4t;r.ai ~~se# ,allll\lll for '~:DCA. vtolall<ins. ~ot,pu~:.»f $r ~n.",,!e ,ari~ tliaI:'Il\~:i$,~ intcrprtiiluon of theFtjp~ • • • '. lit 'short, Con.8ttS! did no~ iiit!!llll 3 prlva(e, fCd.Cr<!1 ~llftily ro[' violalWns of the $i:I~U(e t)liU it.enacted. ' .

Id. ,at 81()..11. , . " ' , . , S. ~ I;.cgal ~cnse.Fut!4 v.F:rilviiniYtl\! ~,6Z6-F. $upp.,218. 283 (0. ,Mm),tilfd miin. t SOZ P;2d * (lSI Cir. t~6,. (A state; "c:atinOt ,(lOilftr otI private ,persons ihepGWeT (ci e1ir~ a

'.

1

Heinonlin& -~ 47 Food. 4 Drug L.J. l 19~2 . '

Exhibit A 28


2 rOOD .4ND DRUG LAW JOURNAL Vol. 47

However, there is often considerable private interest in redressing apparent FDCA violations which the FDA is unwilling to pursue. Large amounts of mQney frequently are at·stake, and substantial public interestS are to be vindicated. In the specifIc instance of Orphan Drug exclusivity. Congress created ex.clusivemarketing rights to persuade dru~ ma·nufactur· ers to expend their resources in developing orphan drugs. More limited, but sull valuable, "market exClusivity" is acrorded the h<:lIdeI'S of many new ci~g applktrtloij'S' also a5 an incenUve to invest ill the development of new drugs.' Because the value of exclusivity isdestf6yed when infringing marketing activities ate net halted! the manuf.acturer whose exclusive righls are violated has an obvious interest in pUf$uing the matter.1!

This artide will argue that, notwithstanding the case law barring any private right of action under· the FDCA, a prIvate remedy under section . 43(a) of the Lanham ActS may be available to- a .flrmlO whose competitor's marketing is. in violadon of the FDCA, even if the FDA is unwilling to take action. .

The pa-radigmatic case prtsenting this issue is Lyphomed. In-c. it. Pro~ ftssumal Compounding Centers of America, Inc. l1 The facts alleged in .

. Lyphome.d raised the central point. Aceording to H~ verified c()m~llUnt, Lyphomed manufactures- an important drug. pentamidine, that has been .shown to be effecitive in the prevention and treatment of a type of pneumonia associated with AIDS. Pentamidine is an "orphan drug" under the FDCA,11 such tnatLyphomed was granted a period of ex(liusivity d\1ring which n<) other dtu'g oortlpany <;Quid obtain a}!>proval tp market the prodil~. Lyphom~made business decisions based on the understanding th~!.t it wou14:'·havea mc:mQpol}r (If p.~n~$ii4ine sales, i.n the Uiji~ed Siate~.for a. ml:m~·Gty.ears; .

R~pmts', tame to t.yppom¢·sa.t:t~Ati()llthat pharma.ti-sts were com., poondlngpentamidiilefrom hUlk'dtugsstil'd to them by Pro.fessional.OomM

. pOtm4ing Centers of America (PCCA)~ It was a1so r·eported . that PCCA

fe.detal suiiutewh= wforttmtnl ~ left toJcde~1 ad~ii1ii5trativtage~cles."). &~ als~ N;. li~ WOO1en'i Health NelwOn., 545 f. Supp. 111'1.

6. OrPhan Drug Aa .e_xcl~iYity preveUtsFDA approVal {l\. any new (\rug appli"",uOIl for the same ({rug for tm; same indlailon [or a period·of ~. yean. The more limileda:durivlly available rorl}Oll~ il~ blOCks ~pproval. ~11y. (armY'« or: fi~ ye;u-s,: cif ~brtvWud new .drug applieaMns,r~ the·tame d~ (it. •. a.pp11<!;!!ibljs·.\h';Il do,.n-bt ooiitaiti.lhe IWle saietytltld etteetivtn<z'SS dilta ~~I'!g me :of ~ diu&).· ..

7. SU ·21 ·U;S.c.· t 3Ss(<:)(3X·O). (j)(4}(D). . 8. .SJiUl Mfg. Co~.I!1~ y. SlItiefe.n t"iilis. Jnc., 675 F. Su()p. 1199 (S.D.N.Y. 1987);·Upphn

·eo. v.lUlI.hom ~IW,~I. F.Supp. l209 (0: [)d. 19S!iJ. 9. l~ u.s,a $ ll~(a), .

U}'· WhUethe ~'. tIiis article. a\:ld~FDCA viulaliollS .that the F'Dk Chcmes not (~ ~ __ ai't-lUleast-a;$ impomnt u' consUmtl'$ M ·to.<mp.onrte ~ties. COI'I$Umer .IlIwslliis .. are riot ad~· hereiit ~u$C the $llllUlory remedy anal}'2ed is generally ~\(Ilo be aVJIilabte only 10 IiuslI!es$ rompcUton who are af£«ttd. by the alleged violation; (lOnSll11lcts have no slalldil18 Ilnder section ofXlt)· Su CuWgan v. Acttf\ties Chili, 44-ZF.2d 686 (U Gir. 1971).

II. Civ.No.·H·89.t792 (S.D. Ttx. May ~3, 1989). 12. Sel gnurally OrPhan Drug At!, Pub. L. No. 91-414, 96 Stat. ~()49 (1983); 56 fed. Reg.

3338 (Jan. 29, 1991). .. .

He.~nOn-1ine- .- 47.11.00d -I< 0);1,19" L •. v •. ;a :1;992

Exhibit-A 29


1992 LANHAM ACT

employees had advised certain pharmaCists that compounding pentamidine and selling it to patients was lawful.

The i~ues .of substantive fOQd and drug law setmed to hav.e been re- . s"Oived by the Seventh Circuit's decision in Uniied States v. 91 j Kg. Containers. More or Less, of an Article oj Drug for Veterinary Use. IS There, the defendant had shipped animal drugs in bulk for compounding by veterinari.ans to form new animal drugs. The court held that the supplier of bulk drugs had an obligation to assure itself that the products compounded from the bulk drugs would not be unapproved new animal drugs at-the time.of ultimate sale. In f.,yp/wmed also, the defendants were:selling bulk drugs for compounding. Under the logic of 911 Kg. Containe7'~.they should be under a sbnilar obligation to determine that their bulk drug is not being used to fonn an unl:tpproved new drug. The pharmaclst..com. po\1.nded perttamidiile waS, however. an unapprov.ednew drug,1"

It seemed <;kar that PCGA's shipment of pentamidine directly violated the FiJCA .. Although the FDA agreed to investigate, there is a long time ·period between inveStig:ation. even an active investig~tion, and a slJIt for tnj!Jnction. or ()th~r r¢gulatot-y action. Indeed, there was flO assutanee that the FDA would ever. take regulatory action. LyphOmed qoncluded that, gh'en the <:9mm~reial environment, it cOuld not· wait to see whether the FDA would eventu~Uy ~e 3;~i!(J.n.

There was d,iffibulty iit finding a l~~I ba,sis -for an actioJ1 by :Lyphomed. S:~use .rtoptivatenght cit actiQu exl$ts"· un4e.r the FDCA, "l';ypho~ed consideredse.vel'ala.1ternative· legal routes. Of· thesei Section 43(a)' or the Lanha:fuAct:J&·seem~rilost promls.mg-.16 S.edion 43(a) exp1ic~ ;itly prohibits the USe of <;a.ny. fm.se des~ptiqrior r.epres.entatia:i1"· hl ¢9n·neciion with .aproiluct sofd in interstate· commet'ce, whether ~f not die

13. S4~ F.id 113 (7th. Cit. 1988.). H. The~ is I1<l question .lhat pentamldim i; Ii new dn:g. A drtIg lila new drugup,der mestalute

If it n not generally recogriized. am<mg sdentirlC e>:peru M safe and el'f~ve on the basis Oflld~\Ute and well-mntrolled clinical investigations, ZI U.s.C. § 321{p}( 1), !m:speai~ of the actu.a1 age of the drug. United States v, Articles of Drug, 625 F.U at 670. Each sepantc manu(al:tUreF' version of a drug must be rewgni~ for that venian 1.0 =at'<!: new drug otatut. Ulli\e4 Stat.tS v. GCI1dlx Drug Corp •• "60 U.s. 453 (19&3), 'I'M pc!Itamidil1¢ rrmnufa"CluMby LyphQrlledi$~f a llt:W~. which il -why lI.reql1ifCd FDA.approvalof It ~.w ~ IIPPIIWiPnbe£oreit W# ii!arl\Cied; . .

The FDA .granttd·Liphimted !lPprova:! to marlict· pCtnamidlJ1¢ in f984 af'tr:r ~fdi,ll revitw of a ~~ drug aplil~lion. Set'·21 U.s.c.. l355(.~, ThaI a~ applitii·sdldy to peliWilIai~ manufac·tllrtd ·br· l;.ypboinCd in .~ce willi the itnCl ~i.itactUijng. cmIu:ob.1Ct ·out il\Lypb9il!td's neW drug apP.ti~IiO;n, .N~ ~ l*=i ~~~!li badFOA ap~atth $i!jl p,eilWiif&

n:1S:tJ.s.(:. §' J12~~>. t6. At the; time·tI\"e .*,iOP wa ~li4~ 4Xa) of the LtithamM.pi:ovi~

Annlenqn. IVIu> .haJi .•• J.I$C in ~~loii Wi·!h.~ gllOi:lsor~ii1Y:fa:l~. dewip\lOll or reprcsenl3tlOn. including words or othcrl}'IRbob Imdillg rWly .10 d~beor "'" prtSClIl thf; ~ a1Id iIIali cause such goo4lll' ~ to enter Into ~.~ .' • ~I .Il!: liablt 10- a clY.i1 aetfuil •• ,by ~1IY. ~n w.Ilo. ·bcli\M!s that· lie it Of' is t~dY"lo.be damagtd by w use ohny such false description or ~~o(l.

Th~ $latUtt: bas JiIlI1e!>em ani~ed by the Trademark Law Rmsion Aa of 1988, Pilb. 1., No. 100-667; 102 Slat. 3935 (1988). Tht cltanges made by ~I ZIIlaIdmtni haY(! Ill:> bearing OIl th~ anal)'li$ hmill.

!!e1nOnline - - 4'1 food &i I;Irug L. iJ. 3 199.2

Exhibit A 30

.. ~.~ .


4 fOOD AND DRUG LAW JOUltNAL Vo!' 47

falSe statement was intentionally made. n Lyphomed asseriedthat PCCA bad, by the act of marketing pentamidine, impliedly represented18 that it bad the legal right to do so.

On May 26, 1989, Judge Hughes entered a preliminary injunction requiring PCCA, among other things. t1) cease aU further sales of. pentamidine .. A ·pe.rmanent injunction to the same effect was entered by agreement of the parties on August 25, 1989. However, the .preoodential value of these. orders is somewhat ambiguousOOcause neither or<'!er adopted a clear legal theory. u .

The authors havefountl no other case where a violation .of the FDCA was relied on ,3$ the .hasis for a sectic:>n 43(a) cause of action"!!

The plaintiffs theory in. ~jph(1mtdmu.st be dbt}ng~ishC!d ftom ·.the fadaHy similar argument that mislabeling a druglll or misbranding a productU in violation of the FDCA is also a violation of section 43(a) of

.:the Lanham Act. In these cases, the standards of the tWo statutes Overlap in that both .proscribe false statements, and the allegedly false statement

17. No intent to dettive is required 10 embUsh a violation of !hc ~nha.m ACt.. S~e l'ro.H:l.rd. ware, Inc. Y •. Hllme C(ntei'$·of Am.. In!;,. 607F. SUfiP. 146 (D.C. Tex. 1~S+).

1 S. Lyphomed abo had evidcllllC lhat exprtss rep~t~tlons()tlegliliiy Iooi!)c(:n made to'sOme phannaciJ!s. Sl'l supra text accompanYing. \tOld 12~t3. But the pr9bable ranedy for fabe express ~la~<1JlS-l\n Injull(11on barring, ckretldan~ fr9M mliki.ng $w:h t.epraentation$ in .lhe {u. {uri.,....wouM !r«l'¢ l>etn uSJ:Ieu \.0 Lyplllfln¢ if i!le unlawful. mukeJi!l&: IXIiItinued. A¢lrdWgly, die comp;lriy·~to rely on·t~ brodcft!teory·tllllt, by ~~etl)igpcril~ldine,thc dH~ilt$ impliedly ~~tcii t!)at it woull! Iii: I~ to scUthe drugafler <=tpU~~!lg W ili~:Rhalll\a.:!$~i~fl~dl~ broad~r IhC!lr}'i ~1it!'·app!'Oprla!C:re;n!¢Y'~QUld.be·ji,!l.lnji:l~n~~t·~1i:Ymatkl:u'ilg(lfpeiit!ii)jldl~,

1'h~availa:t;;lItty Qj' ~jOll.3!a} d!!¢$.I'l<lt 111m GIl w~he,qlle f~ daiinwa$~~ ~(iillpUc;j.l! is·sctded thaI ~ion ~3(a) is. Violated. b.y ~Iho:r a f;Jbl:Cb)m,~mm\lilic:aicd~ t1id~·Qr.Ut.ailver· ti~t ().r Ii. f'IlIJeciWnilnplied by. l/.II.!1d~~!I~·~ .if llll!~~e.~Pllt;iIly,. A;!tl~~~ .~~~. Prods. P011?,v,J!Jhn.~!<: J"fi)1~n,.S1t!f.ad:1®(iZd'~it;· .,1!). "WeteJt.otb:erwl.@;::C:lever·use,of innuendo,· in~1#t itltl.m<Ui¢p$, allii ilnibigooll5 sQ~~n$ wuld snreld th~, adlletti_~t·fr\:!l1;l~· dny ~Iy when pr(jte(tl~ lIgalnSllUm .op/l~deat~.4ecepdl)t\ b·Il'IO'St~netl4ea.~ ,4. .. 01 165. $u al1P $;C. Jclinson & SP!i. I~y. Ca!1er.W .. lIa~, In!.!" <it4 F. Supp. m~. Ut9 (S;DJ~,Y. 1985), M~cilab, Int. v. Amtdc:ai1 Home 1'1'tlds. Colli., 5.01. f .. $lJpp. S1'1, 524-25 (S.DiN;" : I 98G};Amen •

. . t!lJI. Btandsi Inc. v.R.]. Reyn.olil,~To~«o.C9 .. 413F.Sup'p.l,3S2, llS6:,51 (S:\J;>~N)r, 19111) .. 19, One ~la ~~ t1i;n .tlit; ~ tha~ cait ~ Wda\ipti(LypD.~ed y.PCCA;as thal'~

t~lit~Ho'lhc dii;s1s:·orU!is,lir:tlcle, iHhat dR·case·Wu ~rough( on ~"tkoryllrtlwl~l.:J herund the pl:r.i:ntiff·wol1. Be¢aU5e the. final, injunr;U<)tI was entmd. by agreement of Iheparti('$. th= wa$ 11<1 nffi! ~o elucidate the t\ljlI1": {ni~ng on·thlspilhit. . . . 20; Tl\ea'utl\ots, Mwever,have~ 1ru:~r/(l¢dor·ih~t\\J\¥ liiigAli911diat·r:ditd 6rdliii; ihe6r.y. )luI whlch WM not br'Qught bcdI.u$e~· :aciMiy t<lmpWriM of Wl'.1 ttm)l~tl:d in resPOl)~to the thrtal. . .

2i:. In CoaPe.l" Anin1:i1 Healih, I~v. Atith6I1YProduCu Co" lllc,. Civ. Nil. ~Ql%-CV;,W~ (W .0; Mo. F~b. 22i 1988), iheplailitlff alleged that cltfen:dants' drug IiToduGt w:Ul'tIislabcled witllin the m(Ming of Ibe FOCA 3l\d therefore violated mtlon >13(3) of tM Lanham Aet. .

. 22- In Grove FrtShDiSlrlbut()~. Inc. Y. F1a~ F~ Foods, Inc;, 7ZO F. Supp. 714 (N.D. III. 1989), plaintiff clurgcd that dHmdant's labeling of lu product as "100% otan&: Juke frornConwl· Irate" viol,ned seaicm 43{iI) because lhat ptodutt contained added sugar and tnus did not meet the FDA's dermition of "Orange Juiee from Con«ntrate." . Dekndants moved IQ djwiS$ Uu: compJllinl WI Inl) gioulld that It was an allCtnpt 10 bring a pririte mien III tnfotce the FDCA. The co~ denied the motion, .saying, "AlthOugh \XlUr1$ have: held that Ihm Is 110 private taUt( of actilln under the FDOA. Grove f'rah has nOI brought suit directly under tbe ~EJCA or its ~nying rcg\IlJ.tiol)S. G~ Fmh ffiiel. on tlie FDA n:gulation merely (0

establiwh ihc $widard •.• whidJ cfcl'aidants a11~y failed w meet.'; 14. a1116. That is, Ihe. FO" ~Iioll ~ \l~ to ~Ibh tfR ~Ing of die ~ "orimg~ juke (tOn\ C!l!Itcntnlte." When rneuured ~a_imt thai ~ng, dcl'endanu'· claim \n$ fa~ ~Ild hence In vloJ~.1lon qf Se1:tion 4)(3,).

HeinOllline -- 41 .. ood « Drug L.J .• 4 1!!92 .

. Exh{bitA 31


1992 LANHAM ACT 5

violated each statute independently of its legal status under the other one. In Lyplwmed, the alleged false ((statement" was the act of doing business

. in violation of the FDCA. at

Simil~lYt LyphtYlned should be distinguished from cases like Rorer PIutYmact'UtUal Corp. v. The Procter & Gam~le Cli.," where the plaintiff invoked factual findings set out in an FDA monograph as evidence that a claiin made by the defendants was false and therefore in violation of section 4l(a). No violation of the FDCA' was at issue.

Outslde the food and drug area, the ca~ law is mixed on whether settion 43(a} may be invoked to enjoin the sale of goods or services in violation of law. In Entertainment & Sports Programming Network, Inc. v. Edinburg CMnmunity Boul,n the plaintiffs, Entertainment &:. Sports Programming Network, Inc. (ESPN) and lIome Box Office, Inc. (HBO), sued a hotel for the unauthorized use of their cable signals; The hotel used a satellite dish to receive the . plaintiffs' C():pyrighted. programs and piped these prOgrams into its ~eSt~~ room.s witho-uteoi7J;peQsating pl$ndrfs, The court stated. that "[d}efendartt has violated 15 U~S.C.112S(a) by falsely inferring and d.estIiqing that the enteitainIr!ent progran:tlJl1ng service5t:lfthe Plaitttiffs H1IO andESPN were paid for and lawfully qb. tained [and] that the Defencla:llt was auth~ri~d to receive and pr<lYide Plaintiffs' serViceS t9 their own customers . . . :'.8 A court in Florida reached the same result on nearly identical facts.!"

On the other hand. the court in Universal City Studws v. Sony Corporation of America~ iii dismissed a section 4.3(a) claim in an analogous shuw

arion. The owners of certain copyrighted program material sued Sony, a manufacturer of videocassette recorders (VPRs). Sony's advertis~meti~ noted the ability to ~rd booildeastfilmsand other prOgram .t:Uat-eriai among the features of itS VCR. Plaintiffs sued on the theory, among others, that the manufacturer's . advertising v.iolated the Lanham Act by iinpliedly~present1nifthat purchasers of vCils oouldreeord wpyrigii-ted btoackast material with¢ut violating the law.

. The C{)urt· held fuat, even assuming that private recording of broadcast material would violate plaintiffs' copyrights, . plaintiffs had· not alleged a section 43(a) vtahitian. The court reasoned that, while defendanes advet~

HeinDnline -- 47 Food & DFU9 L.J. 5 1992

Exhibit A 32


(

6 FOOD AND DRUG LAW JOURNAL Vol. 47

tising had represented that its VCR could record broadcast films (which it could in fact do as a technical matter), there had been no exptess representation that such w.:otding would be, 'legal, so the advertising was, facially true. The question then was whether the advertisement demon,strating t~at purchasers of defen~ant's VCR tX>uld record copyrigltt~ flIms implied ,that su~ recording would be legal. Judge Ferguson h,cld ,that it did not. saying

It would be too easy under this rubric to confuse the issue of whether the public expects that most goods advertised and sold have a legal use, ate safe, and have been designed to last at least a reasonable length of time, with the question of whether such representations are implicit in the advertising statements made by defendants. '. Some inferences simply cannot be suppotted .... Here, the court simply cannot credit as reasonable the inference plaintiffS claim is implicit in defendantS' ads. To say that "this product is Clipable of copying televisions sh,ows" is simply not the sam!! as saying "when you use this product to copy tel¢vision shows you are acting legaUy. "il9

'this approach to section 4~(a) seems unduly restrictive. It is probably true that any suggestion that the use of a VCR to tape copyrighted, films is legal originates with public preconceptions rather- than the Sony advertisements.~o If SOl it is because the public expects that any product offered

29. Ill. a14Q9. J~ F~ alsO tej«lcdplaintllf., lIl'g1!,~1U lhat, even.iJ !hel\:dvcrt1rtl)'tC!l~ c:i:11l'!aincd 110 ilnplll1il~iG.li 'thal (!iliing"YlI$ I~I, S,onr ui\il a Lanham Act duty to;; di:lcl&!: Wtl ~ri$ copy~litccrrtlllleMls IS cmtawf)'.ct 11Ie ~'I\I!f(1: " "

, 'Nt}. i'efe:qiC;¢:co, OIQlmo.mi(;i'IiItlt#i!llll.tr or,olIU~tionlo _di~ ludl"jl$'!J round in'Oilier fedtratmluiel (~:g" IS u~c, l7i7i r"'pPears,pri seaioll «3(11)1. • .• ?>n,d i!i~d,itiWlt J~

,,:a~~ir~l~~~~~~~ftr~~~ld~, fill" no li.inll$ On ,Uie,CXt:ent .lil.al'.IQ; , , . "~~(jifier \id\uuMI'~'~:held,tfuit ~1ii>II'43(a) rlilposesl)O dulY iO' diSc!ose'f!UI,c~r'i}lfl'flUa-0011111 an aiiyertliSepitnf!1lal,~I,stK;h.ili5cl9j:u~ would"fiOl :coiltain.aI\y,elj:~ O~ imPlieina1~

. ·i:laiins. Alfred Dunhlil,Ltd. ~; fritmIB'te'Ciga,r Co.,lne, ~99 F.2d Z5i (2d'Cir. 1'914) (section 43(a}Is 1101 violated by selling tQbaa:o in Dunhill tins without disclonng ,that it may ha.-t .been wat~r dam'aged); International PiUnt Co., inC. '\t. Grow Grmip,'lne.. 648 F.Slipp. 729; 730<:31 (S;O,N.Y. 1986) (1\ dOts not viohtl~ secUon "3(3) to advertise a di«tieal prodltCt without disclosing a partirolitr .(;ti~ ingredient Ihat Ih(' Enrironmellla{ Protection Agenq (EPA) had not ttquird the fic'ln 10 discl~c)i Caro~1 Group, Inc. v. Tarnasna El1tet.l.Jd.. 82 CiY. 2331-CSH (3.V.N.Y. May 6, 1983}.(~il)l\ 43{a) is nol viclated by adVertising a household iterllnamed Ibe "Handy Su;an'" wl!hoo\ c;!iscloti'ng that !he product CO!lle$ tlt\aMl!lnbled); RagoId, Inc, v. Fem:ro, U.s.A. Inc., 506 F., Sup.p. 117, 128 (N.D. III. 19,BO) (i{ does nOl vlola!e $eCtion 43(a) 10 ad~ that "melt of Tic Tae have'to 'give up 'nothing''' wltboui dlsdosingtbat'''tlt~,i)Ql}$umptlon of i\Ipr mmlll cames:willi II CertalnCllf'cl:rJi~gtilii: (QnseqU~")i MeNtilab. 'InC. v. Ameritan' H= "rods. CorP .• 501 F. Supp. 517. S~~ modlflU on otlm' grounds, SOl' F. Supp. 540 {S.D.N.Y. 1980} (Section 43(a) doGnotrCquire,lI lirnllha, adver· \i~ a ptodo.m ~,toIltainllljl 'Ith~ pain rdievu dogors rtcommend f!IO$1" 10 disclose that ,the pain I'tfievtr in ques!i,on if IIp'/itl1. The Court M, "{Ai (:inUre' to iJUOtlll ~~: ,of ~il$, em!. $OD'IttIiiilg that they $/Jilu!d know, Is not ter Ita rilt~~tation aetionalile ullllerSetdon "3(a) of , the Lali1iai'n 4"); .

3fJ. Even tbf:' above statement Is by no ~s oenain, and the' court's decision lQ di$mlss the S¢C\toi1 .f3(a} claim without Iiwing evi<kncc on the inla:ptetalion of the Sony advmi~1$ is dim" tIlh to 4eftnd. Whn~ Judge FC1'glJ®Il wu penuaded thaI thl:$C ;4venbementS contained 00 irnpliea-

liei~lille -- 41 Food St, Drug L.J. ,6 1992

Exhibit A 33


1992 . l.ANHAM ACT 7

for sale may be lawfully owned and used. When people see a product advenisedt they infer that the produ~t may be lawfully used in the mannerdepicted, even if the advertisement contains no implication of legali~. That public expectation. however,· is both re~sonable and well groutidtd: the federal government or a state may han advertising of illegal goods and services':l1 and they do so in virtually aU cases. (Indeed, in cases where the legality issue arose-Lyph&mtd, Entertainment & Sp(Jrls, and Universal City-defendants did not assert a right to market an illegal product) but insisted, rather, that their product could be used lawfully.) In such an environmen~, any advertisement for goods or seMCC:S necessarily suggests that w.hat is offered is lawful. The fact that tile notion of lega'llty arises from the oonsumers' inference and not from an implication in the advertisement should be immaterial, asit'lng as tha~ i~ference is ~$()nable. From whatever source, thewnsumer e~PQsed· to the advertisement receives the message that use of the goods or serVic¢S;1dv~rtised is legal. When that message is false, section 43(a) shouid be avallable to an iriJuted cothpetitor. To hold otherwise is to deny section 4.3(a) the broad remedial capstruetion to which the bourts have held it is erttided.n

Section 43(a) of the Lanham Act has always been available. as an independent remedy in cases of false advertising or labeling, i8 even those that come within the FDA's j~risdlction. Lyphtlmed v. PCCA suggests a new possibility-~h~t section 43(a) also affords a remedy in cases where a. proauctor Service .is marketed in violation of tp-eFDCA. While fat fro.m setded law, this approach is supported by some existing declsioman~ by. a

don of k$aliIY. as.Jil4~4s~er p<nm<# OUlin MeN-mati. ill~.·"ITlhj!_~~ pW!! ~IJI) tj)~ advcrtl~~ts j} IiOtd~etiii~na:tlve, ••• "?O1 f. Supp, ¢otSZ5, At i nU:cjljluliil thcco.\Jit'dtotiltl.~ave perti1illcii plaintiffs. to offerevtdertce of, (l) ·the mcssage(s) SOny iJueruled tototnm.W1itllte with. Its IId>'miSl!ftlenw, U-Haul Int'l. lne .. Y. Jaman, lnc., 5Z2 f. Supp. 12311, 1254 (D. Ariz. 1981), afl'd, 68t F.2dtlS9 .('!thew, 19&1}; MCNeib;~, In"; 5Ul F. Silpp. at 530 <'.'£l'J~ that ~ advp'ii~ imc:ndt!d 10 (xim""unita~.a falSe- ormisll:a!littg tilIim.is cvilknoe that· tli-e: mim was·txittuntinlcatcd • . •• "); and/or (Z) the IfiC$Sllg.e that. pott\1t/al purdiascrs of the produCt took ~rom dios.e advttiiseJllenIS, American H.omcPr0d3; v. Johtl$()n & JOhrl$Oil. S17 Y:2d 1$0, t 65 (l~7a) ("(TJhe i:!lurt's reaction i3 at best nol detenninat;ve and at worn frrdevant.. TM <1lU.S1icn in fllch ~ts is ........ wl\al dots 1M ~rsrm /" wMWI Ilu actr/mistml1ll i:silali.rtUti! find W be t/I:t mlS.!(/g~?") (cinplWiSin origin3.!, qUOling. American Brands, IIl~ "413 F, Supp. at U56.057).

3L~Ii"iraIHutlS9!:l Ga, &E1~c.Ci>.·v. PublkServ. eomm'n.or New YO!'k. #1VJ). 5.5T (19'80).

3.2. Set ThOrn v.R~j~ Van U~ 7:}6 F,u 929, 9~2 (~. O\r. 19~) {noting ''ihe widely· held·mwtl~! .as·HQlledi~I;·~~iJte,:l~iim, ~3(~)1 ihOll/dbi:;!it/nill¥ tiOiistJ:l1~''li ~'.-¥g!8J1AP~. In<:. v. Lana Lobi!II;Ine.,.·2/4 ·F,2d:549~ 65i {51l tiir.)*S"~;.~n Bfal:lll~, ·"Ill? S\lpP;,at U55 (''the provisiOi\$:of Secti<m 4~(a). Of (h.t :Lall!\3m.Ti:#.!eJlru"·M.ii'CJim.ediiit.~ m· t<tbC!·jntUpm(d li.bmlly',; :"'rilI'$PUl)I1~IilI!S·:Co. v. Wiilker~Dl1* rubli~~~312 .F.: S.tiP"{t I .(B;p . .Pa:. 19.7"'). S~ atso Judge· Stlya's MoIarit cfucu!skltl iti~<r v; btiio, 571F. Supp.1{)$;.1~\)<i4 (D;RJ. 1983}" .and. m/fT aliil, Ballet, A Fedtr4i·/:AtJI II.! Unfair COm~litWn: W&4l SMUld JJe tht /lel.tda of $utimt 4Xa) of rht /AnM~ Act, 31 U.c.L.A. 1.. REV •. 611 (19.84)j Ge~, Unfair Trad~ P.rac/im Unlftr SraiDn 43(4) if till Lan.wm J\a: Y~'w .~ A Lowt. W~ BdhJ-T" Far, M4jblr, 49 IND. 1..J. 84 (1973); and ~, 'tAt 1't#tf".fijihYtarq/M1/liniikation oJtht LAnham TY#4marll Ad oj 194"6,62 TKADtMAltK REP. 393 (t1}V-Z). &e JeMTalll1A 1.. AI-TUMI. Cil:IJ.M.-..H ON UNfAIR CoMPETSTJO.N, TRADEllJAAKS AND MONOI'OJ.lJ!8 § ·5.04 (4th ed. 1981); 2 J. McCARTHY, TRAn.i!!MIIKSANl) UNFAllI Co/.!P£T1TJON§ :27:5 (1973).

~}. Set' WPT4 1lO1~ Zl·22.

HeinOnline -- 47 Food & Drug L.J. 7 1992

Exhibit A ,. 34


8 FOOl> AND nRUG LAW JOURNAL Vol. 47 .

reasonable interpretation of the statute. For firms advertising FDA-regulated products, it provides more motivation to avoid possible violations of the FDCA. For finns injured by their competitors' violations, this approach suggests that the Lanham Act may provide a pow.~ul remedy.

i!einOnli~e. -- 47 Food « Drug L.J. 8 19~:2

Exhibit A 35

1 COOLEY GODW ARD KRONISH LLP MICHAEL G. RHODES ...

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