Hope Med. Enters. v. Fagron Compounding Servs.
| Decision Date | 26 October 2021 |
| Docket Number | 2:19-cv-07748-CAS(PLAx) |
| Parties | HOPE MEDICAL ENTERPRISES INC., Plaintiff, v. FAGRON COMPOUNDING SERVICES, LLC ET AL., Defendant. |
| Court | U.S. District Court — Central District of California |
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This case was tried to the Court on August 24, 2021, August 25 2021, August 26, 2021, August 27, 2021, and September 2, 2021. Attorneys Joseph Akrotirianakis and Aaron Craig of King & Spalding LLP appeared on behalf of plaintiff Hope Medical Enterprises, Inc. (“Hope”). Attorneys Ellen Robbins and Lawrence Silverman of Akerman LLP and Sherylle Francis of Sherylle Francis PA appeared on behalf of defendants Fagron Compounding Services, LLC (“Fagron”), JCB Laboratories, LLC (“JCB”), AnazaoHealth Corporation (“Anazao”), and Coast Quality Pharmacy, LLC (“Coast”) (collectively, “defendants”). Based on the evidence and testimony presented at trial, the Court makes the following findings of fact and conclusions of law. To the extent any finding of fact is better characterized as a conclusion of law, or vice versa, it shall be so characterized.
1. Hope filed this action against defendants Fagron, JCB, Anazao, and Coast on September 6, 2019. Dkt. 1. Fagron and JCB are hereinafter sometimes referred to as “the 503B defendants.” Defendants are all owned either directly or indirectly by Fagron BV, a company registered in Belgium, or its affiliate, Fagron NV, a company registered and headquartered in the Netherlands. Dkt. 47 ¶ 13. The gravamen of Hope's claims is that defendants' drug compounding practices constitute unfair competition in violation of several states' unfair trade practice and consumer protection laws.
2. Hope and defendants sell competing drugs containing sodium thiosulfate as an active pharmaceutical ingredient (“API”). Sodium thiosulfate is hereinafter sometimes referred to as “STS”. Defendants have been producing and selling their drug since 2011. Exhs. 540, 540A. Hope began selling its sodium thiosulfate drug in 2012, after the drug received FDA approval as a treatment for acute cyanide poisoning. Trial Testimony of Dr. Sherman. Defendants have not received FDA approval for their sodium thiosulfate drugs. Defendants' sodium thiosulfate drugs differ from Hope's sodium thiosulfate drugs, because unlike Hope's drugs, defendants' drugs are compounded and do not contain potassium. See Dkt. 387 (“Final Pretrial Conf. Order”) at 2:17-18. Defendants have produced their sodium thiosulfate drugs by two means: through compounding at pharmacies, referred to as 503A facilities, and through compounding at outsourcing facilities, referred to as 503B facilities, as described in greater detail below.
3. On November 12, 2019, Hope filed its operative amended complaint. Dkt. No. 47 (“FAC”). Hope asserted five claims, under (1) California's Unfair Competition Law (“UCL”), (2) Florida's Deceptive and Unfair Trade Practices Act (“FDUTPA”), (3) Tennessee's Consumer Protection Act (“TCPA”), (4) South Carolina's Unfair Trade Practices Act (“SCUTPA”), and (5) Connecticut's Unfair Trade Practices Act (“CUTPA”). Id. at ¶¶ 97-137. California, Florida, Tennessee, South Carolina, and Connecticut are hereinafter sometimes referred to as the “five states”.
4. On June 1, 2020, Hope filed a motion for a preliminary injunction. Dkt. 105. Hope's motion was based in part on defendants' alleged production and sale of their sodium thiosulfate drugs without prescriber determinations required to exempt the drugs from premarket drug approval laws. Id. Defendants opposed the motion by arguing, among other grounds, that the Federal Food, Drug and Cosmetic Act (“FDCA”) preempts Hope's claims. Dkt. 113. The FDCA requires compounded drugs to be approved by the FDA before they can be sold with two limited statutory exceptions: Section 503A, which permits the sale of drugs compounded at pharmacies subject to specific limitations, and Section 503B, which permits the sale of drugs compounded at outsourcing facilities subject to specific limitations, as described in greater detail below.
5. This Court granted Hope's motion in part on July 7, 2020. Dkt. 141 ( ). The Court ordered as follows:
a. Defendants and their officers, agents, servants, employees, attorneys and all those acting in concert with them, shall be preliminarily enjoined from directly or indirectly dispensing or distributing any compounded sodium thiosulfate product from a 503A facility into California, Connecticut, Florida, South Carolina, or Tennessee unless: (i) defendants are provided a valid prescription or order form for the product; (ii) the prescription or order form includes an attestation specifically indicating that defendants' compounded product, which does not contain potassium, will produce a significant difference for the intended patient; (iii) the attestation specifies that defendants' compounded product, rather than the comparable commercially available drug product, is “medically necessary” for the intended patient; and (iv) the attestation indicates that the attestation is made or approved by the intended patient's prescribing practitioner. b. Defendants and their officers, agents, servants, employees, attorneys and all those acting in concert with them, shall be preliminarily enjoined from directly or indirectly dispensing or distributing any compounded sodium thiosulfate product from a 503B facility into California, Connecticut, Florida, South Carolina, or Tennessee unless: (i) defendants are provided an order form for the product; (ii) the order form includes an attestation specifically indicating that defendants' compounded product, which does not contain potassium, will produce a clinical difference; (iii) the attestation specifies that defendants' compounded product, rather than the comparable commercially available drug product, is "medically necessary" for the patients to whom defendants' drug will be distributed or dispensed; and (iv) the attestation indicates that the attestation is made or approved by a prescribing practitioner. Prelim. Inj. at 38-39.
6. On November 2, 2020, Hope moved for summary judgment. Dkt. 151. On the same day, Hope also moved for an order holding defendants in contempt for violating the preliminary injunction. Dkt. 153. Defendants opposed Hope's motion for contempt and asked the Court to reconsider the preliminary injunction, again arguing that the FDCA preempts Hope's claims. Dkt. 173 at 14-17. Defendants also moved for summary judgment. Dkt. 178.
7. On January 25, 2021, this Court denied both parties' summary judgment motions. Dkt. 226 at 43. The Court reserved judgment on Hope's motion for contempt. Id. at 41. The Court denied defendants' motion for reconsideration of the preliminary injunction under Local Rule 7-18. Id. at 43.
8. Defendants filed a notice of appeal from the order denying their motion for reconsideration of the preliminary injunction. Dkt. 238. This appeal remains pending in the Ninth Circuit. Id. Defendants also moved the Court to certify for interlocutory appeal the order denying their motion for reconsideration. Dkt. 227. On March 15, 2021, this Court denied that motion. Dkt. 255.
9. On April 21, 2020, Hope served defendants with a declaration by Craig Sherman, Hope's co-founder and President, which stated that Hope waived all claims for damages. Dkt. 341-3. On June 28, 2021, Hope moved to strike defendants' jury demand. Dkt. 341. On July 12, 2021, this Court granted Hope's motion to strike the jury demand, finding that as a result of Hope's waiver of all claims for damages, neither the claims alleged nor the defenses raised give rise to a Seventh Amendment right to a jury trial. Dkt. 353.
10. On August 12, 2021, the parties submitted their Amended Proposed Final Pretrial Conference Order which included various stipulated facts to which all parties agreed. Final Pretrial Conf. Order at 2:5-5:1. This Court adopts all such stipulated facts as findings of facts whether or not restated herein.
11. On August 24, 2021, this matter came before the Court for a five-day bench trial. The parties called as witnesses Kalah Auchincloss, Jason McGuire, Suzanne Heinemann, and Dennis David. Dkt. 413. Additionally, the Court received into evidence deposition testimony of Dr. George Aronoff, Dr. Jeffrey Hymes, Timothy Bresnahan, Tamekka Grant, Chris Kirkes, Keiola Peterson, Phu Pham, Shawn Trull, and Carl Woetzel. Dkts. 302, 322. The witnesses who were called at trial, the depositions of the foregoing witnesses, and the exhibits that were offered, admitted into evidence, and considered by the Court are identified in the witness and exhibit lists filed on September 2, 2021. Dkt. 413.
12. At issue in this case are defendants' sales of their compounded sodium thiosulfate drugs. “Drug compounding is a process by which a pharmacist or doctor combines, mixes, or alters ingredients to create a medication tailored to the needs of an individual patient.” Thompson v. W. States Med. Ctr., 535 U.S. 357, 360-61 (2002). “Compounding is typically used to prepare medications that are not commercially available, such as medication for a patient who is allergic to an ingredient in a mass-produced product.” Id. 13. In 1938, Congress enacted the FDCA “to regulate drug manufacturing, marketing, and distribution.” Med. Ctr. Pharmacy v. Mukasey, 536 F.3d 383, 388 (5th Cir. 2008). The FDCA provides that “[n]o person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application . . . is effective with respect to such drug.” 21 U.S.C. § 355(a).
14. The FDCA defines “new drug” as “[a]ny new drug...
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