Exela Pharma Scis., LLC v. Sandoz, Inc., CIVIL CASE NO. 1:19-cv-00318-MR

Citation486 F.Supp.3d 1001
Decision Date15 September 2020
Docket NumberCIVIL CASE NO. 1:19-cv-00318-MR
CourtU.S. District Court — Western District of North Carolina
Parties EXELA PHARMA SCIENCES, LLC, Plaintiff, v. SANDOZ, INC., Defendant.

Christina D. Brown-Marshall, Pro Hac Vice, Corrin Nicole Drakulich, Pro Hac Vice, Fish & Richardson P.C., Atlanta, GA, David M. Wilkerson, Larry S. McDevitt, The Van Winkle Law Firm, Asheville, NC, for Plaintiff.

Bridget A. Blinn-Spears, Nexsen Pruet, PLLC, Raleigh, NC, David J. Horowitz, Pro Hac Vice, Susan Cook, Pro Hac Vice, Hogan Lovells, Washington, DC, Marguerite S. Willis, Nikole Setzler Mergo, Nexsen, Pruet, Jacobs & Pollard, LLC, Columbia, SC, Mark W. Bakker, Nexsen Pruet, LLC, Greenville, SC, William W. Wilkins, Pro Hac Vice, Nexsen Pruet, LLC, Greeneville, SC, for Defendant.


Martin Reidinger, Chief United States District Judge THIS MATTER comes before the Court upon the Plaintiff's Motion for Ex Parte Temporary Restraining Order and Preliminary Injunction [Doc. 3], and the Defendant's Motion to Dismiss the Complaint or, in the Alternative, Stay the Case Pending Referral to FDA [Doc. 29].


On November 6, 2019, Exela Pharma Sciences, LLC, (the "Plaintiff"), initiated this action against Sandoz, Inc., (the "Defendant"), asserting claims for unfair and deceptive trade practices in violation of N.C. Gen. Stat. 75-1.1, et seq. ("Chapter 75"); tortious interference with prospective business advantage in violation of North Carolina common law; and false advertising and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a). [Doc. 1]. Along with the Complaint, the Plaintiff filed a motion seeking the immediate issuance of a temporary restraining order and a preliminary injunction requiring the Defendant to recall and take all necessary steps to recover, remove from interstate commerce, and cease the sale of all the Defendant's L-Cysteine product. [Doc. 3]. In support of its motion, the Plaintiff relies upon the allegations of its Complaint, as verified by the Plaintiff's manager, Phanesh Koneru,1 as well as several exhibits.

The Court held a hearing on the Plaintiff's request for a temporary restraining order on November 7, 2019. On November 12, 2019, the Court issued an Order denying the Plaintiff's request for a temporary restraining order, finding that the Plaintiff failed to show "its entitlement to such relief." [Doc. 16 at 9]. Nevertheless, the Court held the Plaintiff's request for a preliminary injunction in abeyance pending further presentation of evidence and briefing by the parties. [Id. at 13].

On December 6, 2019, the Defendant filed a Response in Opposition to Plaintiff's Motion for Preliminary Injunction [Doc. 31] and a Motion to Dismiss the Complaint or, in the Alternative, Stay the Case Pending Referral to FDA [Doc. 29]. On December 13, 2019, the Plaintiff filed a Reply in Support of Plaintiff's Motion for Preliminary Injunction [Doc. 33]. On December 23, 2019, the Plaintiff filed a Response in Opposition to Defendant's Motion to Dismiss. [Doc. 38].

Having been fully briefed, this matter is ripe for disposition.


The Plaintiff's Verified Complaint presents the following facts.2

The Plaintiff is a North Carolina limited liability company with its principal place of business in Lenoir, North Carolina.3 [Doc. 1 at ¶ 14]. The Plaintiff develops, manufactures, and markets injectable pharmaceutical products, including an L-Cysteine injection product that is now approved by the FDA. [Id. at ¶¶ 14, 42-43].

L-Cysteine is an amino acid that is administered by parenteral administration

(i.e., injection or intravenous infusion) to high-risk patients, such as preterm or low-weight newborns and patients with severe liver disease, as part of a nutritional supplement regimen (also known as "total parenteral nutrition" or "TPN"). [Id. at ¶ 26]. Aluminum is a known contaminant of TPN solutions, and aluminum toxicity can cause serious health problems including dementia and impaired neurologic development among others. [Id. at ¶ 27]. High-risk infants who receive TPN are particularly susceptible to harm from excessive, toxic amounts of aluminum, as they have immature kidneys, which impairs the removal of aluminum from the body. [Id. at ¶ 28]. The Defendant manufactures an L-Cysteine product in Canada with a label stating that it contains as much as 5,000 mcg/L of aluminum. [Id. at ¶ 5]. The Defendant's L-Cysteine product is not approved by the FDA. [Id. at ¶ 1].

Beginning in 2014, there was a shortage of L-Cysteine in the United States.4 [Docs. 1-15, 31-2 at 2]. This led the FDA to approach the Defendant about importing and selling its unapproved L-Cysteine product in the United States under the FDA's "shortage program" without requiring the drug to obtain FDA approval. [Id.; Doc. 1 at ¶¶ 6, 38]. Pursuant to the shortage program and the Defendant's request, the FDA ultimately gave the Defendant a "Memorandum of Discretion" on April 12, 2016 [Doc. 31-2 at 38-39], which stated that the FDA would not bring an enforcement action against the Defendant for importing and selling its L-Cysteine product for 6 months if the Defendant followed certain conditions. [Id. at ¶ 40, 44; see also Doc. 31-2 at 6, 13-16, 38-39, 41-59].5 One such condition was that the Defendant had to distribute a "Dear Healthcare Provider" letter alongside its L-Cysteine product that explained the product, the drug shortage, and the lack of other similar FDA-approved products. [Doc. 1 at ¶ 41; Doc. 1-17; Doc. 1-18; see also Doc. 31-2 at 41-59]. The contents of the letters were pre-approved by the FDA and those letters had to be reviewed by the FDA before distribution. [Doc. 31-2 at 41-50].

The Defendant sought several extensions of the Memorandum of Discretion and the FDA granted each of the Defendant's requests, with each renewal providing the Defendant with six additional months to import and distribute its unapproved product. [Doc. 1 at ¶ 40]. The FDA approved the last Dear Healthcare Provider letter on June 21, 2019, instructing the Defendant to ensure that the "previously reviewed Dear Healthcare Provider letter continues to accompany [the Defendant's] L-Cysteine in distribution" in shipments thereafter. [Doc. 31-2 at 50]. Every version of the letter stated that "there are currently no FDA-approved L-Cysteine Hydrochloride Injection products in the United States." [Doc. 1 at ¶ 41; Doc. 1-18; see also Doc. 31-2 at 41-59].

Beginning in 2017, the Plaintiff undertook extensive efforts to tackle the aluminum problem in TPN solutions and develop an L-Cysteine product with low aluminum levels. [Doc. 1 at ¶ 31]. In May 2017, the Plaintiff filed a New Drug Application (NDA) with the FDA for an L-Cysteine product that contained a maximum of 1,400 mcg/L of aluminum. [Id. ]. In July 2017, however, the FDA informed the Plaintiff that this proposed level of aluminum was unacceptably high, and that the product should have less than or equal to 145 mcg/L of aluminum in order to gain permanent approval. [Id. at ¶ 32]. The Plaintiff ultimately succeeded in reducing the aluminum levels in its L-Cysteine product to less than 120 mcg/L and submitted its new data to the FDA for its redeveloped product in July 2018. [Id. at ¶ 33]. On April 16, 2019, the FDA approved the Plaintiff's NDA under Fast Track designation and Priority Review. [Id. ]. The Plaintiff branded its L-Cysteine product ELCYS. [Id. ].

After ELCYS received FDA approval, the Plaintiff's marketing and sales teams began communicating with health systems regarding its availability. [Id. at ¶ 34]. By late May 2019, the Plaintiff had manufactured sufficient inventory to meet the entire market demand for L-Cysteine.6 [Id. ].

In late May 2019, the Defendant's executives reached out to the Plaintiff's executives to inquire whether the Plaintiff would be willing to license its "recently approved products," including ELCYS, to the Defendant. [Id. at ¶ 43]. The Plaintiff declined the Defendant's offer. [Id. ].

After the FDA approved the Plaintiff's product, the Plaintiff made numerous efforts to get the Defendant to stop selling its unapproved product. Starting in May 2019, the Plaintiff repeatedly asked the FDA to remove L-Cysteine hydrochloride injection from its drug shortage list and prohibit any further importation and distribution of the Defendant's unapproved product. [Doc. 1 at ¶ 49; Doc. 1-23]. Receiving no relief from the FDA, the Plaintiff sent letters to the CEO and Chairman of the Board of Defendant Sandoz's parent company, Novartis, A.G., on August 20, 2019. [Doc. 1-24]. Copying the FDA on the letter, the Plaintiff told Novartis about the allegedly improper and unethical conduct and asked that Novartis immediately stop importation and distribution of the L-Cysteine product. [Doc. 1 at ¶ 50; Doc. 1-24].

On September 3, 2019, the FDA declared an end to the L-Cysteine drug shortage. [Id. at ¶ 50; Doc. 1-25]. Around the same time, the FDA asked the Defendant to stop importing its L-Cysteine product. [Doc. 1-21]. The Defendant's stopped importing its L-Cysteine product in response to the FDA's request. [Doc. 1 at ¶ 45]. On September 25, 2019, the Plaintiff sent a letter to its customers stating that although "there is now an FDA approved L-Cysteine available in the US market[,]" the "FDA is allowing Sandoz to continue distributing its existing inventory ...." [Doc. 1-21 at 2].

On September 24, 2019, the Defendant responded to the Plaintiff's August 20 letter, acknowledging that the Plaintiff's ELCYS product had been approved by the FDA and that "the drug shortage has abated." [Doc. 1 at ¶ 51; Doc. 1-15]. The Defendant nevertheless confirmed that it had the FDA's permission to sell the product that it had already imported and expressed its intention to do so. [Id. ]. The Plaintiff's marketing team claims to have observed customers buying or committing to buy up to a year's supply of the Defendant's product...

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