G&W Labs., Inc. v. Laser Pharms., LLC

• Decision Date: 19 June 2018
• Docket Number: Civil Action No. 3:17-cv-3974-BRM-DEA
• Parties: G&W LABORATORIES, INC., Plaintiff, v. LASER PHARMACEUTICALS, LLC and ADITYA LABS INC., N/K/A INVADERM CORPORATION., Defendants.
• Court: U.S. District Court — District of New Jersey

G&W LABORATORIES, INC., Plaintiff,
v.
LASER PHARMACEUTICALS, LLC
and ADITYA LABS INC., N/K/A INVADERM CORPORATION., Defendants.

Civil Action No. 3:17-cv-3974-BRM-DEA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

June 19, 2018

NOT FOR PUBLICATION

OPINION

MARTINOTTI, DISTRICT JUDGE

Before this Court are: (1) Defendant Aditya Labs Inc.'s¹ ("InvaDerm") Motion to Dismiss (ECF No. 29); and (2) Defendant Laser Pharmaceuticals, LLC's ("Laser") Motion to Dismiss (ECF No. 30). Plaintiff G&W Laboratories, Inc. ("G&W") opposes the motions. (ECF Nos. 33, 34.) Pursuant to Federal Rule of Civil Procedure 78(a), the Court heard Oral Argument on April 11, 2018. For the reasons set forth below, the motions are GRANTED in part and DENIED in part.

I. BACKGROUND

A. Factual Background

For the purposes of the motion to dismiss, the Court accepts the factual allegations in the Complaint as true and draws all inferences in the light most favorable to Plaintiff. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Further, the Court considers any "document integral to or explicitly relied upon in the complaint." In re Burlington Coat Factory Sec. Litig.,

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114 F.3d 1410, 1426 (3d Cir. 1997). The central dispute in this matter is whether G&W's allegation that Laser falsely advertised Hemmorex is precluded by the Federal Food, Drug, and Cosmetic Act ("FDCA") and/or is within the Food and Drug Administration's ("FDA") primary jurisdiction.

1. G&W and Anucort

G&W markets Anucort-HC™ Hydrocortisone Acetate Suppositories, 25 mg ("Anucort"), a prescription drug sold to the public for use in treatment of hemorrhoids. (Am. Compl. (ECF No. 9) ¶¶ 8-9.) G&W "carefully formulates each Anucort suppository to deliver 25 mg of the active ingredient hydrocortisone acetate USP." (Id. ¶ 11.) G&W has also "validated through 'dissolution' testing that Anucort releases the labeled 25 mg dose in a reasonable amount of time."² (Id. ¶ 12.) Anucort is not FDA approved, and G&W has been "actively working" with the FDA to obtain an approved New Drug Application ("NDA") for Anucort.³ (Id. at ¶ 14.) In support of Anucort's NDA, G&W submitted an Investigational New Drug ("IND") application,⁴ spending "millions of dollars conducting clinical studies of the safety and efficacy of Anucort for treating symptomatic internal hemorrhoids." (Id.)

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Despite not being FDA approved, Anucort has been on the market for approximately thirty years because, "[p]ending NDA approval, G&W markets Anucort pursuant to the government's enforcement discretion." (Id. at ¶¶ 9, 14.) Enforcement discretion means the FDA weighs priorities and resources and ultimately makes a discretionary decision about the enforcement actions it will take against unapproved prescription drugs. CPG Sec. 440.100 Marketed New Drugs Without Approved NDAs and ANDAs, Compliance Policy Guide, https://www.fda.gov/iceci/compliancemanuals/compliancepolicyguidancemanual/ucm074382.htm ("CPG Sec. 440.100"). The FDA:

[r]ecognizing that [it is] unable to take action immediately against all . . . illegally marketed products and that [it] need[s] to make the best use of scarce Agency resources, [has] had to prioritize [its] enforcement efforts and exercise enforcement discretion with regard to products that remain on the market.

In general, in recent years, FDA has employed a risk-based enforcement approach with respect to marketed unapproved drugs. This approach includes efforts to identify illegally marketed drugs, prioritization of those drugs according to potential public health concerns or other impacts on the public health, and subsequent regulatory follow-up. Some of the specific actions the Agency has taken have been precipitated by evidence of safety or effectiveness problems that has either come to our attention during inspections or been brought to our attention by outside sources.

Id. Essentially, the FDA evaluates "on a case-by-case basis whether justification exists to exercise enforcement discretion to allow continued marketing for some period of time after FDA determines that a product is being marketed illegally." (Id.) In determining whether to extend such a grace period, the FDA considers the following factors:

(1) the effects on the public health of proceeding immediately to remove the illegal products from the market (including whether the product is medically necessary and, if so, the ability of legally marketed products to meet the needs of patients taking the drug); (2) the difficulty associated with conducting any required studies, preparing and submitting applications, and

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obtaining approval of an application; (3) the burden on affected parties of immediately removing the products from the market; (4) the Agency's available enforcement resources; and (5) any special circumstances relevant to the particular case under consideration.

(Id.) Only unapproved drugs that were introduced in the market prior to September 19, 2011, can apply for such grace period. (Id.)

Anucort has allegedly been "a leading prescription product for the treatment of hemorrhoid conditions." (ECF No. 9 ¶ 14.) Doctors and prescribers have chosen Anucort as part of their patient's treatment regime by prescribing hydrocortisone acetate 25 mg suppository. (Id. ¶ 15.) Thereafter, these prescriptions are filled by pharmacists with Anucort. (Id.) Anucort has produced sales of approximately one million units each year. (Id.)

2. Laser's False Advertising of Hemmorex

Laser is a privately held pharmaceutical company that "markets, promotes, advertises, offers for sale, sells, and distributes a prescription hydrocortisone acetate suppository known as Hemmorex-HC™ ("Hemmorex"). (Id. ¶ 4.) Laser contracted with InvaDerm to produce Hemmorex for Laser. (Id. ¶ 19.) Laser advertises itself as offering "affordable, high quality generic" drug products "to meet the diverse needs of patients." (Id. ¶ 17.) G&W alleges Laser began distributing, marketing, and selling Hemmorex by no later than April 2016.⁵ (Id. ¶ 18.) "To capture sales that G&W would otherwise enjoy, Laser labels and advertises Hemmorex as also providing 25 mg of hydrocortisone acetate in suppository form." (Id. ¶ 19.) The dosing information included in Laser's Hemmorex label and other promotional materials states that a patient using Hemmorex will receive 25 mg of hydrocortisone acetate. (Id. ¶ 20.) However, G&W alleges

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Hemmorex does not provide that amount of active ingredient. (Id. ¶ 21.) Instead, "[l]aboratory testing shows that Hemmorex releases less than 20%—that is, less than 5 mg—of the 25 mg labeled amount of hydrocortisone acetate active ingredient into a two-hour period." (Id.)

Nevertheless, Laser markets Hemmorex to generic buyers at drug wholesalers and retailers, as an "equivalent to and substitute for Anucort." (Id. ¶ 25.) "Laser seeks to take sales away from G&W by encouraging these customers to purchase and stock Hemmorex in place of Anucort, and thereafter for pharmacists to dispense Hemmorex to customers when filling prescriptions for Anucort." (Id.) Laser represents Hemmorex provides the same active ingredient and in the identical amounts as Anucort through advertising, such as labels, product inserts, and sell sheets. (Id. ¶ 26.) Laser also uses drug databases as a marketing channel for advertising Hemmorex by submitting to databases that Hemmorex is equivalent to Anucort and requesting that the databases link Hemmorex to Anucort. (Id. ¶ 27.) Drug databases link equivalent products to one another, and the link communicates to database subscribers that the products are equivalent and may be substituted for each other. (Id.)

Many drug wholesalers, retailers, and pharmaceutical chains purchase, stock, and dispense, only one brand of hydrocortisone acetate 25 mg suppository. (Id. ¶ 28.) In making their purchasing and stocking decision, they choose a product from a database, relying on the linkage and other advertising to conclude the products are equivalent. (Id.) Customers generally base their purchasing decisions on price. (Id.)

G&W alleges prior to launching Hemmorex, neither Laser nor InvaDerm spent time or resources to ensure it was "as effective and well-made" or "equivalent to Anucort." (Id. ¶ 30.) "In particular, neither Laser nor InvaDerm ensured that Hemmorex's rate of drug release will provide a patient with the labeled levels of hydrocortisone acetate from each dose." (Id.) Because G&W's

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dissolution testing determined Hemmorex does not have the same performance characteristics as Anucort in terms of the time it takes to release its labeled active ingredient to the patient, G&W argues Hemmorex is not equivalent to or substitutable for Anucort, and Laser's advertising of Hemmorex as an equivalent or substitute is "literally false and misleading." (Id. ¶¶ 33-34.)

Laser also advertises "that the FDA allows Hemmorex to be marketed and sold as a 'DESI drug' - that is, a drug covered by an ongoing Drug Efficacy Study Implementation ('DESI') program."⁶ (Id. ¶ 35.) However, G&W alleges Hemmorex is not a DESI drug. (Id. ¶ 37.) Laser also promotes that it has submitted a Pre-IND application to the FDA for Hemmorex, and that it is the only manufacture of a 25 mg hydrocortisone acetate suppository to have done so. (Id. ¶ 36.) G&W asserts "Laser has not participated in a Pre-IND meeting with the FDA, nor has it submitted an IND application to the FDA for Hemmorex, nor has it done any predicate clinical toxicology or animal testing." (Id. ¶ 38.) G&W is also currently working with the FDA to obtain NDA approval and submitted an IND application. (Id. ¶ 39.)

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3. InvaDerm

InvaDerm "is a manufacturer and distributor of over-the-counter and generic prescription suppositories, creams, ointments, liquids and gels." (Id. ¶ 4.) InvaDerm manufactures Hemmorex for Laser. (Id. ¶ 19.) As Hemmorex's manufacturer, G&W alleges InvaDerm "is well aware that Laser advertises and promotes Hemmorex as providing 25 mg...