IP Topics
By
Charles A. Weiss and Matt Berkowitz
- November 17, 2009
NDA holder’s claim under the Lanham Act that “Rx only” designation on generic labels was false or misleading because brand product had switched to OTC dismissed without prejudice pending FDA’s completion of its review
Generics had been prevented by three-year “new product” exclusivity under Hatch-Waxman Act from switching approved ANDAs to OTC when branded product made that switch
A recent decision in a false advertising case illustrates the intersection of the Lanham Act, the Food Drug and Cosmetic Act, and the Hatch-Waxman Act. In connection with a proposed switch from prescription to over-the-counter status, the NDA holder conducted clinical trials to establish the safety of the drug as an OTC product. As a result, it was awarded three years of exclusivity under the Hatch-Waxman Act. This exclusivity prevented the existing holders of approved ANDAs for generic formulations from also switching their products from Rx to OTC status. But the FD&C Act generally prohibits selling the same drug as both Rx and OTC, so the FDA proposed rescinding the generics’ approvals until they were permitted to switch to OTC status. Before the FDA took final action, the NDA holder sued the generics for false advertising under the Lanham Act, contending that the “Rx only” designation on the generic products’ labels was false and misleading because an equivalent product, i.e., the brand product, was not an Rx product and was instead available over the counter.
The drug at issue, MiraLAX®, is a polyethylene glycol (PEG) laxative. It was approved as an Rx product in 1999. Several generics were approved in the first half of 2006, also as Rx products. In October 2006, MiraLAX was switched from Rx to OTC, and its label was changed to include a warning to “use no more than 7 days.” Because clinical trials were required to support the switch to OTC status, the OTC product was awarded three years of “new product” exclusivity under the Hatch-Waxman Act, which prevented approval of OTC generics during the exclusivity period.
Under the Durham-Humphrey Amendments to the FD&C Act, a product cannot generally exist as both Rx and OTC. 21 U.S.C. § 355(b)(4). Accordingly, the FDA began proceedings to determine if the generic products were misbranded.
Meanwhile, the NDA holder (Schering-Plough) sued several of the generics in district court under the Lanham Act, contending that the “Rx only” designation on the labels of the generic products (which was required by FDA regulations because those products were Rx only) was false or misleading because the same product (MiraLAX) was not Rx only. The district court dismissed the case without prejudice based on the pending FDA action and absence of a final agency determination of the labeling issue.
The NDA holder appealed, arguing that the terms “Rx only” and “a prescription only laxative” on the generics’ labels were literally false. The Seventh Circuit disagreed, holding that where the labeling requirements of the FD&C Act potentially conflict with the Lanham Act, the FDA should be given a chance to weigh-in on the proper labeling before a court is compelled to decide the issue under the Lanham Act.[1]
In an opinion written by Judge Posner, the Seventh Circuit emphasized that the “literal falsity” doctrine found in Lanham Act jurisprudence is a shortcut to evaluate clear instances of false advertising in which the complained-of statements would undoubtedly mislead consumers, not a mechanism to proscribe statements that—even though literally false in one sense or another—would not necessarily be understood by consumers in a deceptive manner:
The purpose of the false-advertising provisions of the Lanham Act is to protect sellers from having their customers lured away from them by deceptive ads (or labels, or other promotional materials). Many literally false statements are not deceptive. When the Soviet Union in the 1930s declared that “2+2=5,” it was not deceiving anyone; it was announcing a slogan designed to spur workers to complete the Five-Year Plan in four years. If one opened the New York Times “literally” at random one might find an ad that calls Graff Diamonds “The Most Fabulous Jewels in the World.” That is literally false because the jewels sold by Graff are no more fabulous than, say, the Crown Jewels of England, or the Hope Diamond. But no one is deceived, so there is no injury, and a suit by a competitor of Graff would fail. The cases that reject liability do so in the name of “puffery”—meaningless superlatives—but the principle cuts deeper; if no one is or could be fooled, no one is or could be hurt. (internal citations omitted)
It concluded that “[t]he proper domain of ‘literal falsity’ as a doctrine that dispenses with proof that anyone was misled or likely to be misled is the patently false statement that means what it says to any linguistically competent person.” On this issue, the court noted with respect to the complained-of “Rx only” legend on the generics’ labels that the generic products were prescription only, and concluded that the implication that every other PEG laxative was similarly prescription did not clearly follow from the statement on the generic labels.
The court of appeals also determined that a decision by the FDA was required to determine if alleged falsity of the “Rx only” statement on the generics’ labels could be cured by a disclaimer. In response to the NDA holder’s contention that the FD&C Act did not forbid the generics from adding a disclaimer to the labels, the court reasoned that the content and wording of such a disclaimer may be of concern to the FDA and subject to FDA-administered labeling requirements. It explained that unlike some situations that do not implicate the FDA’s regulatory expertise—such as stating that a container contains 727 grams of drug when it only has 527 grams—it was “unclear how the ‘Rx only’ representations on the containers are understood by consumers and how a disclaimer, if any, should be worded to improve that understanding.” Accordingly, because the FDA had still not reached a final determination, the court of appeals affirmed the district court’s decision to dismiss the case without prejudice.
It remains to be seen if the FDA will in fact ultimately resolve the labeling issue. Because the three-year New Product exclusivity for MiraLAX as an OTC product expired in October 2009, and a number of generic PEG laxatives have since been approved for OTC sale, the FDA may conclude that the dispute about the Rx labeling is moot.
Schering-Plough Healthcare Prods., Inc. v. Schwarz Pharma, Inc., Nos. 09-1438, 1462, 1601 (7th Cir. Oct. 29, 2009)
[1] Because there is no private right of action for alleged violations of the FD&C Act, the brand company could not sue the generics directly under the FD&C Act.