Exeltis U.S. Inc. v. First Databank, Inc.
| Decision Date | 21 December 2017 |
| Docket Number | Case No. 17-cv-04810-HSG |
| Parties | EXELTIS USA INC., Plaintiff, v. FIRST DATABANK, INC., Defendant. |
| Court | U.S. District Court — Northern District of California |
Pending before the Court is Plaintiff Exeltis USA Inc.'s motion for a preliminary injunction, Dkt. No. 3, and Defendant First Databank Inc.'s related motion to strike and motion to dismiss, Dkt. No. 26. For the reasons detailed below, the Court DENIES Plaintiff's motion for a preliminary injunction, DENIES Defendant's motion to strike, and DENIES Defendant's motion to dismiss.
At the heart of this case is a regulatory question about the prescription status of prenatal vitamins under federal law. Plaintiff manufactures and sells prenatal vitamins. See Dkt. No. 1 ¶¶ 3, 9 ("Compl."). According to Plaintiff, its products, which contain 1 mg of folic acid, are not available without a prescription and are labeled and sold "by prescription only." Id. ¶¶ 3, 40. Defendant publishes a database of information about pharmaceutical products, includingPlaintiff's prenatal vitamins. Id. ¶¶ 2, 10. Medicaid and insurance providers ("payors") purchase and use Defendant's database to make reimbursement decisions. Id. ¶¶ 2, 10, 46-47.
Defendant announced in May 2017 that it was revising its coding for dietary supplements and medical foods. See id. ¶ 1; see also Dkt. No. 26-1, Ex. E. Historically, the "class value" field in Defendant's database signified whether manufacturers identified their products as prescription-only. Dkt. No. 26-1, Ex. B at 2368. It used code "F" where "[p]roduct labeling indicates prescription or physician supervision required for use" and code "O" where the "[p]roduct has no labeling indicating dispensing limitations." Id. Then in 2016, following guidance by the Food and Drug Administration ("FDA") that medical foods cannot be properly labeled "prescription only," see Dkt. No. 26-1, Ex. A,2 Defendant amended the "class value" field to "identif[y] a product's prescription status" under federal law. See Compl. ¶¶ 49-50; Dkt. No. 1-2, Ex. B at 379-80, 2506; Dkt. No. 26-1, Ex. C at 2504. Under this revised field, code "F" signifies "[d]rugs that are prohibited by federal law from being dispensed without a prescription" and code "O" signifies "[p]roducts with no federal legal prescription requirement, including medical foods, dietary supplements, non-prescription medical devices, and over-the-counter drugs." Dkt. No. 1-2, Ex. B at 379-80, 2506; Dkt. No. 26-1, Ex. C at 2504. However, code "F" still explicitly included "prenatal vitamins labeled as prescription." Dkt. No. 26-1, Ex. C at 2504. Now, Defendant intends to remove the reference under "F" to prenatal vitamins and change its coding for all dietary supplements and medical foods — including Plaintiff's prescription prenatal vitamins — to "O." Compl. ¶ 58; see also 26-1, Ex. D at 2529 & Ex. E. Absent Court intervention, these proposed changes are set to go into effect on February 28, 2018. See Dkt. No. 53.
Plaintiff contends that Defendant's coding decision, categorizing all prenatal vitamins as "O" instead of "F," is false and misleading. Compl. ¶¶ 59, 79, 88, 99, 107, 115. Relatedly, because this coding is false, Plaintiff contends that Defendant's statements that its database is"robust, reliable, and [offers] effective medication decision support solution[s]" are also false. See Dkt. No. 3 at 18. Plaintiff further urges that Defendant's new coding "will lead to widespread denial of Medicaid and insurance coverage for [prenatal vitamins]." Compl. ¶ 4. Plaintiff states that as a consequence, women will have more limited access to these vitamins, which help prevent serious birth defects such as anencephaly and spina bifida. Id. ¶¶ 5-7, 15-16, 24-25, 67. It may also "destroy" Plaintiff's business model, in which only 6% of its prenatal vitamins are paid for out-of-pocket. Id. ¶¶ 8, 76.
Accordingly, Plaintiff brings claims against Defendant for violations of the Lanham Act, 15 U.S.C. § 1125(a)(1); California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200 et seq.; and California's False Advertising Law ("FAL"), Cal. Bus. & Prof. Code §§ 17500 et seq.; as well as claims under California common law for intentional interference with prospective economic advantage and trade libel. See Compl. ¶¶ 77-118.
Plaintiff's allegations implicate two statutory frameworks: the Federal Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. §§ 301 et seq., and the Medicaid Act, 42 U.S.C. §§ 1396 et seq. The Court briefly discusses both statutory frameworks as they inform the Court's subsequent analysis.
The FDCA is generally designed to protect the health and safety of the public. See 62 Cases of Jam v. United States, 340 U.S. 593, 596 (1951); 21 U.S.C. § 331 (). As relevant to the products in this case, the FDCA identifies three broad categories of pharmaceutical products: drugs, dietary supplements, and medical foods.
A "drug" includes, inter alia, "articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease." 21 U.S.C. § 321(g)(1)(B). A "dietary supplement" is "a product (other than tobacco) intended to supplement the diet" that contains one or more dietary ingredients, including a vitamin, mineral, herb or other botanical, or an amino acid, id.§ 321(ff)(1)(A)-(D), "is not represented for use as a conventional food or as a sole item of a meal or the diet," id. § 321(ff)(2)(B), and "is labeled as a dietary supplement," id. § 321(ff)(2)(C). A medical food is "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." Id. § 360ee(b)(3). These distinctions are significant as the FDCA regulates drugs and non-drug products differently. in particular, only certain drugs require a prescription under the FDCA. See id. § 353(b).
The FDA underscored the limited scope of the prescription requirement in May 2016, when it issued guidance on medical foods. See Dkt. No. 26-1, Ex. A.3 The FDA emphasized that medical foods — unlike drugs — do not require a prescription under federal law. Id.; see also 21 U.S.C. § 321(g). The agency cautioned that, as a consequence, medical foods may not bear labels with prescription-only language. See Dkt. No. 26-1, Ex. A at 8. Doing so, the guidance advised, would be false and misleading. Id.; see also 21 U.S.C. § 353(b)(4)(A)-(B). To date, the FDA has not issued similar guidance for dietary supplements.
Medicaid is a joint federal-state program that provides healthcare benefits, including prescription drugs, for low-income Americans. See 42 U.S.C. §§ 1396 et seq. Medicaid recipients can obtain certain drugs from their healthcare providers, which are then reimbursed by state Medicaid programs, which are in turn partly reimbursed by the federal government. See 42 U.S.C. §§ 1396a, 1396b. Reimbursement under Medicaid is, in most circumstances, permitted only for "covered outpatient drugs." See 42 U.S.C. § 1396b(i)(10); see also § 1396r-8. All drugs approved as safe and effective "prescription drug[s]" by the FDA since 1962 qualify as "covered outpatient drugs." See 42 U.S.C. § 1396r-8(k)(2)(A); see also § 1396r-8(k)(4) (). Moreover, Medicaid has mandated since 1993 that all state Medicaid programs cover "prescription prenatal vitamins." See 42 U.S.C. § 1396r-8(d)(2)(E) () (emphasis added); see also 81 Fed. Reg. 5170, 5188 (); 107 Stat. 312, Pub. L. 103-66, § 13602 (1993) (adding Medicaid rebate program).
A preliminary injunction is a matter of equitable discretion and is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). "A plaintiff seeking preliminary injunctive relief must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Id. at 20. Alternatively, an injunction may issue where "the likelihood of success is such that serious questions going to the merits were raised and the balance of hardships tips sharply in [plaintiff's] favor," provided that the plaintiff can also demonstrate the other two Winter factors. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-32 (9th Cir. 2011) (quotation omitted). Under either standard, Plaintiff bears the burden of making a clear showing that it is entitled to this extraordinary remedy. Earth Island Inst. v. Carlton, 626 F.3d 462, 469 (9th Cir. 2010).
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...
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