Axcan Scandipharm Inc. v. Ethex Corp.

• Decision Date: 19 October 2007
• Docket Number: No. 07-2556 (RHK/JSM).,07-2556 (RHK/JSM).
• Citation: 585 F.Supp.2d 1067
• Parties: AXCAN SCANDIPHARM INC., Plaintiff, v. ETHEX CORPORATION, KV Pharmaceutical Company, Global Pharmaceuticals, and Impax Laboratories, Inc., Defendants.
• Court: U.S. District Court — District of Minnesota

585 F.Supp.2d 1067

AXCAN SCANDIPHARM INC., Plaintiff, v. ETHEX CORPORATION, KV Pharmaceutical Company, Global Pharmaceuticals, and Impax Laboratories, Inc., Defendants.

No. 07-2556 (RHK/JSM).

United States District Court, D. Minnesota.

October 19, 2007.

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Ronn B. Kreps, Andre T. Hanson, Minneapolis, MN, Saul H. Perloff, San Antonio, TX, Marc B. Collier, Fulbright & Jaworski LLP, Austin, TX, for Plaintiff.

William Z. Pentelovitch, Martin S. Fallon, Haley N. Schaffer, Maslon Edelman Borman & Brand LLP, Minneapolis, MN, Thomas C. Morrison, Robert W. Lehrburger, John C. Knapp, Patterson Belknap Webb & Tyler LLP, New York, NY, for Defendants Ethex Corporation and KV Pharmaceutical Company.

John B. Lunseth, Briggs and Morgan, P.A., Minneapolis, MN, Claude M. Stern, Scott B. Kidman, Quinn Emanuel Urquhart Oliver & Hedges, LLP, Los Angeles, CA, for Defendants Impax Laboratories, Inc. and Global Pharmaceuticals.

MEMORANDUM OPINION AND ORDER

RICHARD H. KYLE, United States District Judge.

INTRODUCTION

The Plaintiff in this Lanham-Act action, Axcan Scandipharm, Inc. ("Axcan"), manufactures and markets the "Ultrase" line of pancreatic-enzyme-supplement drugs. Defendants Ethex Corporation ("Ethex") and KV Pharmaceutical Company ("KV") manufacture and sell a "generic" line of Ultrase called "Pangestyme." Similarly, Defendants Impax Laboratories, Inc. ("Impax") and Global Pharmaceuticals ("Global") manufacture and sell a different "generic" line of Ultrase called "Lipram." In this action, Axcan alleges that Ethex, KV, Impax, and Global have engaged in false advertising and unfair competition under the Lanham Act, 15 U.S.C. § 1051 et seq., and Minnesota law because neither Pangestyme nor Lipram is truly a "generic equivalent" version of Ultrase. Ethex and KV now move for judgment on the pleadings, while Impax and Global move to dismiss. For the reasons set forth below, the Motions will be granted in part and denied in part.

BACKGROUND

Since the early 1990's, Axcan has manufactured and marketed its Ultrase line of pancreatic-enzyme drugs. (Compl. ¶ 1.) These drugs help patients with pancreatic insufficiencies—such as those suffering from cystic fibrosis or chronic pancreatitis—who are unable to produce the enzymes necessary to break down and digest fats, proteins, and carbohydrates in the foods they eat. (Id. ¶¶ 18-26.) Ultrase contains those needed enzymes and comes in three formulations—Ultrase MT12, Ultrase MT18, and Ultrase MT20—which correspond to the amount of a certain pancreatic enzyme (lipase) contained in each. (Id. ¶ 27.)

In addition to Ultrase, there are two other major brand-name lines of pancreatic-enzyme supplements: "Creon," which is sold by Solvay Pharmaceuticals ("Solvay"), and "Pancrease," which is sold by Ortho-McNeil. Creon and Pancrease also come in different formulations, based on the amount of lipase they contain.¹

In August 2000, KV began to manufacture, and Ethex began to sell, Pangestyme, an allegedly "generic equivalent" version of Ultrase, in three formulations: Pangestyme-UL12, Pangestyme-UL18, and Pangestyme-UL20. (Id. ¶ 35.) Likewise, in April 1999, Global and Impax began to manufacture and sell their own "generic equivalent" version of Ultrase—Lipram—in three similar formulations. (Id. ¶ 44.)² Axcan alleges that the Defendants advertise their pancreatic-enzyme drugs as being "identical in formulation to Ultrase" even though they contain different amounts of lipase and other pancreatic enzymes from Ultrase. (Id. ¶¶ 32, 46.) Axcan further alleges that the Defendants invite pharmacists and others to compare the labeled ingredients in their drugs with Ultrase, and thereby imply that those drugs are "generic equivalent substitute[s] for Ultrase," when in fact they contain different formulations. (Id. ¶¶ 38, 47.) Accordingly, Axcan alleges that Ethex KV, Impax, and Global have engaged in false advertising and unfair competition, leading "pharmacists in Minnesota and across the country ... into believing that Lipram—UL and Pangestyme—UL are generic equivalents to Ultrase and [to] substitute[] Pangestyme-UL and Lipram-UL for Ultrase as a result." (Id. ¶ 61.)

This is not the first time that such allegations have been levied against the Defendants. In 2003, Solvay filed lawsuits in this Court against Ethex and KV (Solvay Pharm. v. Ethex Corp., Civil No. 03-2836, 2004 WL 742033 (D.Minn. March 30, 2004) (Tunheim, J.) ("Solvay I")) and Impax and Global (Solvay Pharm. v. Global Pharm., 298 F.Supp.2d 880 (D.Minn.2004) (Frank, J.) ("Solvay II")) alleging nearly identical claims to those asserted by Axcan here.³ Impax and Global settled Solvay II; after almost four years of litigation, Solvay I resulted in a defense verdict following a six-week jury trial.⁴

Ethex and KV now move for judgment on the pleadings, while Impax and Global move to dismiss. In their Motion, Ethex and KV argue that (1) the Food and Drug Administration ("FDA") has "primary jurisdiction" over Axcan's claims; (2) Axcan's claims are beyond the applicable statutes of limitations; (3) Axcan's claims are barred by res judicata; and (4) Axcan's claims are barred by laches. Impax and Global make similar arguments in their Motion, and also assert that (1) marketing one drug as an "alternative" to another, or asking consumers to "compare" two drugs, cannot be "false advertising" as a matter of law, and (2) Axcan's claims are not pleaded with sufficient particularity under Federal. Rule of Civil Procedure 9(b). In addition, Ethex and KV have adopted as their own the arguments raised by Impax and Global, and vice versa.⁵

STANDARD OF REVIEW

Ethex's and KV's Motion for Judgment on the Pleadings is reviewed under the same standard as Impax's and Global's Motion to Dismiss. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), however, the Supreme Court recently altered the legal landscape for evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).⁶

To avoid dismissal under Rule 12(b)(6), a complaint must include "enough facts to state a claim to relief that is plausible on its face." Id. at 1974. While Rule 8 of the Federal Rules of Civil Procedure does not require the pleading of "detailed factual allegations," a plaintiff nevertheless must plead sufficient facts "to provide the `grounds' of his `entitle[ment] to relief,' [which] requires more than labels and conclusions, and [for which] a formulaic recitation of the elements of a cause of action will not do." Id. at 1964-65 (citation omitted). Thus, a complaint cannot simply "le[ave] open the possibility that a plaintiff might later establish some `set of undisclosed facts' to support recovery." Id. at 1968 (citation omitted). Rather, the facts set forth in the complaint must be sufficient to "nudge the[ ] claims across the line from conceivable to plausible." Id. at 1974.

When reviewing a motion to dismiss, the complaint must be liberally construed, assuming the facts alleged therein as true and drawing all reasonable inferences from those facts in the plaintiff's favor. Id. at 1964-65. A complaint should not be dismissed simply because the court is doubtful that the plaintiff will be able to prove all of the factual allegations contained therein. Id. Accordingly, a well-pleaded complaint will survive a motion to dismiss "`even if it appears that a recovery is very remote and unlikely.'" Id. at 1965 (citation omitted).

ANALYSIS

I. The Court enjoys subject-matter jurisdiction over Axcan's claims.

The Court begins its analysis with the Defendants' arguments concerning subject-matter jurisdiction. See Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946) ("Whether the complaint states a cause of action on which relief could be granted is a question of law [that] must be decided after and not before the court has assumed jurisdiction over the controversy."); Ramming v. United States, 281 F.3d 158, 161 (5th Cir.2001) (a district court "should consider [a] jurisdictional attack before addressing any attack on the merits"). The Defendants argue that the Court lacks jurisdiction over Axcan's claims because the FDA has primary responsibility for regulating pancreatic-enzyme-drug marketing.⁷ This argument was rejected in both Solvay I and Solvay II. Rather than painting on a blank pallet, the Court will quote extensively from Judge Tunheim's succinct recitation of the controlling legal framework in Solvay I:

A. The FDCA and FDA

The primary regulatory system covering prescription drugs was created by the Food, Drug and Cosmetic Act ("FDCA"). 21 U.S.C. § 301-92. The FDCA requires. FDA approval, through a "new drug application" ("NDA"), before a new drug may be put on the market. Id. at §§ 331(d), 355(a). A product similar to an NDA approved drug may be approved and marketed based on an "abbreviated new drug application" ("ANDA"). Id. at § 355(j). An ANDA requires the manufacturer of the similar drug to demonstrate that the two drugs are therapeutically equivalent, that is pharmaceutically equivalent and bioequivalent. Id. at § 355(j)(2)(A)(i)-(viii).⁸ Each year the FDA publishes Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the "Orange Book," listing all NDA approved drugs along with therapeutic equivalence determinations. Enforcement of the FDCA is permitted exclusively "by and in the name of the United States" or, in certain circumstances, by a state. 21 U.S.C. § 337; see Sandoz Pharms. Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 231 (3rd Cir.1990) (FDA and FTC share exclusive jurisdiction over regulation of drug marketing requiring original interpretation of FDA or FTC acts or regulations).

Prescription pancreatic enzyme supplements are, like any other drug, subject to FDA regulation. In 1995 the FDA declared that all pancreatic enzyme drugs would require NDA or...