Alfasigma USA, Inc. v. First Databank, Inc.

• Citation: 398 F.Supp.3d 578
• Decision Date: 02 August 2019
• Docket Number: Case No. 18-cv-06924-HSG
• Court: U.S. District Court — Northern District of California
• Parties: ALFASIGMA USA, INC., Plaintiff, v. FIRST DATABANK, INC., Defendant.

398 F.Supp.3d 578

ALFASIGMA USA, INC., Plaintiff,

v.FIRST DATABANK, INC., Defendant.

Case No. 18-cv-06924-HSG

United States District Court, N.D. California.

Signed August 2, 2019

Saul H. Perloff, Norton Rose Fulbright US LLP, San Antonio, TX, for Plaintiff.

Ravi Sitwala, Sarah Sohyun Park, Nathaniel Scott Boyer, The Hearst Corporation Office of General Counsel, New York, NY, Thomas R. Burke, Davis Wright Tremaine LLP, San Francisco, CA, for Defendant.

ORDER DENYING SPECIAL MOTION TO STRIKE AND MOTION TO STRIKE; GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

Re: Dkt. No. 18

HAYWOOD S. GILLIAM, JR., United States District Judge

Medical food

manufacturer Alfasigma USA, Inc., brought Lanham Act and state law false advertising claims against First Databank, Inc., after it re-classified Alfasigma Products from Class F (prescription) to Class O (over-the-counter) in its widely-used MedKnowledge database. See generally Compl., Dkt. No. 1. First Databank moved to strike under California's anti-SLAPP statute and to dismiss under Federal Rule of Civil Procedure 12(b)(6). See Dkt. No. 18 ("Mot."). For the following reasons, the Court DENIES First Databank's special motion to strike but GRANTS IN PART and DENIES IN PART its motion to dismiss.¹

I. BACKGROUND

A. Factual Allegations

i. Medical Foods

Are Initially Placed In Class F

Alfasigma USA, Inc. ("Alfasigma" or "Plaintiff") is a pharmaceutical company that develops, manufactures, sells, and distributes medical foods

. See Compl. ¶ 6. These medical foods include CerefolinNAC®, Deplin®, and Metanx® (collectively, the "Alfasigma Products" or "Products"), all of which contain the key ingredient L-methylfolate, an "essential human vitamin of the B complex that plays a key role in central metabolic pathways." Id. ¶¶ 6, 14. Federal law defines a medical food as "a food which is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation." See id. ¶ 17 (emphasis omitted) (quoting 21 U.S.C. § 360ee(b)(3) ). Because medical foods "must be used under the supervision of [a] physician," Alfasigma markets them "directly to physicians." Compl. ¶ 19.

First Databank, Inc. ("First Databank" or "FDB") "operates, markets, and sells pharmaceutical information database products, including MedKnowledge." Id. ¶ 7. Drug databases or compendia are "a critical channel through which pharmaceutical companies, like Alfasigma, promote products to their customers." Id. ¶ 23. Customers "rely on the information drug databases provide to make decisions about which products to prescribe, purchase, dispense, and reimburse." Id. MedKnowledge is the largest and most widely used drug compendia, id. ¶ 24, and insurers rely on it to decide which products to cover, id. ¶ 32.

One of the "primary fields" in FDB's MedKnowledge database is the product's "Class." Id. ¶ 36. This "Class field currently contains one of two possible codes: O or F." Id. First Databank "has represented to its subscribers over many years" that an O-Class product is "Over-the-counter" ("OTC"), meaning that a "prescription is not required per the product labeling." Id. (emphasis omitted). Subscribers "universally understand[ ] that a product designated ‘O’ is an OTC drug, available over-the-counter and without physician supervision." Id. ¶ 37. By contrast, an F-Class product is a "prescription product." Id. ¶ 36.

Before introducing the Products, Alfasigma submitted information to First Databank so that the Products would be included in the MedKnowledge database. Id. ¶ 38. The Alfasigma Products were "historically and correctly" designated as F-Class. Id. ¶ 35. Because the Products were designated as requiring a prescription, "their cost was often covered by insurance plans that limit coverage to prescription products," which "assisted patients to purchase the Alfasigma Products prescribed by their physicians, and thus to be compliant in taking them." Id. ¶ 39.

ii. Medical Foods

Are Moved to Class O

Between February 29 and April 26, 2016, First Databank reclassified the Alfasigma Products to Class O. Id. ¶¶ 40–41. In doing so, FDB was "falsely representing that these products are available OTC, when in fact they are available by prescription, and should not be taken by a patient without physician supervision." Id. ¶ 40. The federal Food and Drug Administration ("FDA") defines OTC drugs as "drugs that are safe and effective for use by the general public without seeking treatment by a health professional." Id. ¶ 42. But the "Alfasigma Products are not OTC drugs"—rather, they are medical foods

that "are to be used only with physician supervision." Id. ¶ 42–43. Thus, moving the Alfasigma Products to Class O was "false and misleading." Id. ¶ 42.

First Databank claimed that it moved the Alfasigma Products from the F-Class to the O-Class to be "in alignment with [ ] FDA standards." Id. ¶ 41 (brackets in original). But the "FDA has never advised FDB that it should change the listing or description of the Alfasigma Products in its MedKnowledge database." Id. ¶ 44. To the contrary, Andrea Lotze, the FDA's Medical Director for the Infant Formula and Medical Foods

Staff, told FDB that "[m]edical foods are not OTC drugs." Id. ¶ 45. Moreover, Director Lotze advised FDB that its "misinterpretation of FDA's position and policies on medical foods" was leading to patients losing insurance coverage because "their insurance providers belie[ve] that the [Alfasigma Products] are over-the-counter (OTC) drugs." Id. ¶ 45. Further, she explained that "the FD&C Act does not prohibit physicians from writing prescriptions for medical foods" and that a patient taking medical foods "should see the physician on a recurring basis for, among other things, instructions on the use of the medical food as part of the dietary management of a given disease or condition." Id.

First Databank's reclassification caused confusion in the marketplace, leading insurers to deny coverage for the Alfasigma Products. Id. ¶ 49. The change cost patients more in out-of-pocket expenses, caused physicians to stop prescribing Alfasigma Products, and led to pharmacies not stocking the Products. Id. ¶¶ 49–50.

iii. First Databank Announces Creation of Q-Class

In September 2018, First Databank announced that it was creating a new Q-Class for the MedKnowledge database, in order to "distinguish" medical foods

"from over-the-counter drugs and devices." Id. ¶ 54. FDB tentatively said that it would implement the Q-Class in February 2019 but has since delayed the rollout until at least July 2019. Id. ¶ 55. Class Q will include products "that are neither drugs nor devices, such as dietary supplements (including prenatal and other vitamins), medical foods, herbal preparations, and bulk flavorings or colorants." Id. ¶ 56. But Alfasigma points out that "[n]one of these products are regulated as medical foods, and none of them carry a federal requirement that they be used under physician supervision." Id. ¶ 57. Reclassifying the Alfasigma Products into the Q-Class "will cause further confusion among physicians and other prescribers, pharmaceutical wholesalers and distributors, pharmacies, pharmacists, and insurers, to Alfasigma's continuing injury." Id. ¶ 58.

B. Alfasigma's Lawsuit

Alfasigma filed its complaint on November 15, 2018, asserting six causes of action:

(1) false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) ; (2) contributory false advertising in violation of the Lanham Act, id. § 1125(a)(1)(B) ; (3) unfair competition and false description in violation of the Lanham Act, id. § 1125(a)(1)(A) ; (4) false advertising in violation of California Business & Professional Code § 17500 et seq. ; (5) unlawful trade practice in violation of California Business & Professional Code § 17200 et seq. ; and (6) common law unfair competition. See Compl.

C. First Databank's Motion

On December 21, 2018, First Databank moved to strike under California's anti-SLAPP statute or to dismiss under Federal Rule of Civil Procedure 12(b)(6). See "Mot." Alfasigma opposed on February 1, 2019. See Dkt. No. 26 ("Opp."). First Databank replied on February 22. See Dkt. No. 31 ("Reply"). The Court held a hearing on April 4. See Dkt. No. 36 (minute entry).

II. SPECIAL MOTION TO STRIKE

First Databank moved to strike Alfasigma's state law claims under California's anti-SLAPP statute. See Mot. at 9. The Court finds that Alfasigma has met its burden to show a reasonable probability of success and therefore DENIES the motion to strike.

A. Legal Standard

Under California's anti-SLAPP statute, "[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim." Cal. Civ. Proc. Code § 425.16(b)(1). The statute was enacted to curtail strategic lawsuits against public participation that were "brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for redress of grievances." Id. § 425.16(a). Because "it is in the public interest to encourage continued participation in matters of public significance, and [because] this participation should not be chilled through abuse of the judicial process," the anti-SLAPP statute is to be "construed broadly." Id.

California courts apply a two-step process when analyzing an anti-SLAPP motion. Hilton v. Hallmark Cards , 599 F.3d 894, 903 (9th Cir. 2010). Under the first prong, the moving party must make "a threshold showing ... that the act or acts of which the plaintiff complains...