Pediamed Pharmaceuticals v. Breckenridge Pharm.

• Decision Date: 06 March 2006
• Docket Number: No. Civ.A. DKC 2003-3443.,Civ.A. DKC 2003-3443.
• Parties: PEDIAMED PHARMACEUTICALS, INC. v. BRECKENRIDGE PHARMACEUTICAL, INC., et al.
• Court: U.S. District Court — District of Maryland

Page 715

419 F.Supp.2d 715

PEDIAMED PHARMACEUTICALS, INC. v. BRECKENRIDGE PHARMACEUTICAL, INC., et al.

No. Civ.A. DKC 2003-3443.

United States District Court, D. Maryland.

March 6, 2006.

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Matthew H. Kirtland, Saul Howard Perloff, Fulbright and Jaworski LLP, Washington, DC, for Pediamed Pharmaceuticals, Inc.

Geoffrey R. Myers, Hall Myers Vande Sande and Pequignot LLP, Potomac, MD, L.A. Perkins, Joseph D. Garrity, Robert Edward Pershes, Buckingham Doolittle and Burroughs LLP, Boca Raton, FL, Allen V. Farber, Rebecca A. Hirselj, Gardner Carton and Douglas LLP, Washington, DC, for Breckenridge Pharmaceutical, Inc., et al.

MEMORANDUM OPINION

CHASANOW, District Judge.

Presently pending and ready for resolution in this Lanham Act unfair competition case are: a motion by Plaintiff for partial summary judgment (paper 72); a motion by Defendants for summary judgment on all counts (paper 100); two motions by Plaintiff to seal exhibits (papers 73, 109); five motions by Defendants to seal exhibits (papers 79, 93, 99, 101, 112); a motion by Plaintiff for leave to supplement and to strike (paper 115); and a motion by Defendants for leave to file a surreply (paper 124). The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, the court will deny Plaintiffs motion for partial summary judgment; deny Defendants' motion for summary judgment; deny Plaintiff's and Defendants' motions to seal exhibits; deny as moot Plaintiff's motion to supplement and to strike; and deny as moot Defendants' motion to file a surreply. Finally, the court will require Plaintiff to show cause why Count 5 should not be dismissed because the count involves claims against individuals who are not parties to this suit.

I. Background

A. Factual Background

1. The Parties

The following facts are undisputed unless noted. Plaintiff, PediaMed Pharmaceuticals, Inc., whose principal place of business is Florence, Kentucky, is a pharmaceutical company that focuses on developing medicines for children. In 2001, Plaintiff contracted with Kiel Laboratories to manufacture Viravan-S ("Viravan").¹ Kiel produces Viravan using Tannate Conversion Technology ("TCT process"), a patented process that combines the active ingredients with tannic acid, which results in a prolonged release of the active ingredients and an improved ability to mask the taste. The process also results in fewer impurities in the finished product.² Designed for children, Viravan has a grape flavor that Plaintiff asserts gives the medicine a pleasing texture, smell, and flavor. One of Viravan's benefits is that it is administered only twice per day rather than four times per day. Plaintiff spends millions of dollars building awareness of Viravan. Plaintiff markets Viravan directly to doctors, and has distributed hundreds of thousands of samples to doctors.

Defendant Breckenridge Pharmaceutical, Inc. ("Breckenridge"), whose principal place of business is Boca Raton, Florida, is a privately held pharmaceutical company specializing in marketing, research, and development. Breckenridge considers itself to be one of the "leading generic pharmaceutical drug companies in the United States." (Paper 72, ex. 8, Lapila dep. I, 43). At some point, Breckenridge decided to produce and market a generic version of Viravan, and in mid-2003, Breckenridge contracted with co-Defendant Scientific Laboratories, Inc. ("SLI"), whose principal place of business is Lanham, Maryland, to manufacture V-Tann.³ Breckenridge began selling V-Tann in September 2003. V-Tann's advertising materials expressly identify Viravan as the comparable brand and state: "Compare the active ingredients in Viravan-S." (Paper 72, ex. 27). Breckenridge markets its products primarily to drug wholesalers, distributors, chain drugstores, and pharmacists.⁴ Breckenridge and SLI (collectively, "Defendants") do not dispute Plaintiff's assertion that they market V-Tann by comparing it to Viravan.

2. Viravan and V-Tann

Viravan and V-Tann have two active ingredients: phenylephrine tannate, a nasal decongestant, and pyrilamine tannate, an antihistamine. The labels on both products claim to have 12.5 mg of phenylephrine tannate and 30 mg of pyrilamine tannate per 5 milliliters. Plaintiff asserts that Viravan and V-Tann are different in several ways. First, V-Tann was formulated to contain 15% more of both phenylephrine tannate and pyrilamine tannate than Viravan. Lane J. Brunner, an expert for Plaintiff, stated that for this reason the two products are not pharmaceutically equivalent. Second, SLI manufactures Tann with a broader range of acceptable variation for the active ingredients than the specification range used by Kiel. Plaintiff asserts that Kiel uses a specification range of 90%-110%, while the specification range for V-Tann is 80%-120%. Lamar Furr, an expert for Plaintiff, stated that an 80%-120% deviation from the label "would be unacceptable" and "demonstrates a poorly controlled manufacturing process" (paper 72, ex. 5, Furr rep., 2), and Dr. Brunner stated that because the two products have different specification ranges, the two products are not pharmaceutically equivalent.

Third, Viravan is made with United States Pharmacopeia/National Formulary ("USP") grade ingredients, while V-Tann contains non-USP grade active ingredients.⁵ Fourth, the TCT process used by Kiel is a different manufacturing process than the process used by SLI. Before launching V-Tann, SLI did not perform tests to determine whether V-Tann and Viravan are bioequivalent.⁶

3. Generic Equivalency and Substitution of Drugs

The substitution of a brand name drug with a generic drug is governed by state law. Certain states, including Maryland, mandate the use of the Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the "Orange Book," as the substitution standard.⁷ According to the Orange Book, which is compiled by the Food and Drug Administration ("FDA"), two products are pharmaceutically equivalent if they:

[C]ontain the same active ingredient(s), are of the same dosage form, route of administration and are identical in strength or concentration ... Pharmaceutically equivalent drug products are formulated to contain the same amount of active ingredient in the same dosage form and to meet the same or compendiial or other applicable standards (i.e. strength, quality, purity, and identity), but they may differ in characteristics such as shape, scoring configuration, release mechanisms, packaging, excipients (including colors, flavors, preservatives), expiration time, and, within certain limits, labeling.

Approved Drug Products with Therapeutic Equivalence Evaluations, vii (25^th ed.2005); see also 21 C.F.R. § 320.1(c) ("Pharmaceutical equivalents means drug products in identical dosage forms that contain identical amounts of the identical active drug ingredients ... and meet the identical compendial or other applicable standard of identity, strength, quality, and purity, including potency and, whenever applicable, content uniformity, disintegration times, and/or dissolution rates."). Norman Campbell, one of Plaintiff's experts, declared that in states that use the Orange Book as the reference standard, a pharmacist may not legally substitute a drug if it is not listed in the Orange Book.

Other states require a determination by the pharmacist of bioequivalence or pharmaceutical equivalence, and if a drug fails to meet this standard, the drug may not be substituted.⁸ Martin Manco, who appears to be a PediaMed executive, stated that drug manufacturers also attempt to influence the substitution decisions of pharmacists through direct advertising, such as faxes and e-mails, and through drug databases such as the First Data Bank and the Red Book.⁹

Neither Viravan nor V-Tann is listed in the Orange Book. From the papers, it appears that Viravan is not a "new drug," as defined by the FDCA.¹⁰ If the original or brand name drug (i.e., Viravan) is not a "new drug," the drug that claims to be generic or equivalent (i.e. V-Tann) does not undergo the "abbreviated new drug application" ("ANDA"), which requires a manufacturer to demonstrate that the two drugs are therapeutically equivalent, pharmaceutically equivalent, and bioequivalent.¹¹ See Solvay Pharms. v. Ethex Corp., No. 03-2836 JRTFLN, 2004 WL 742033, *2 (D.Minn. Mar.30, 2004). Going through the new drug application and ANDA process leads to inclusion in the Orange Book. Id. Defendants' packaging insert states that "[a]ll prescription substitutions using this product shall be pursuant to state statutes as applicable. This is not an Orange Book product." (Paper 72, ex. 26).

B. Procedural Background

Plaintiff's complaint, filed December 3, 2003, contains the following counts: (1) violation of Lanham Act § 43(a) for false advertising; (2) violation of Lanham Act § 43(A) unfair competition; (3) common law unfair competition; and (4) tortious interference with Plaintiff's business relationships with drug wholesalers, distributors, pharmacies, managed care organizations, pharmacists, physicians, pharmacy benefit managers, and similar medically related businesses and entities. In addition, in Count 5, Plaintiff requests a declaratory judgment pursuant to 28 U.S.C. §§ 2201 and 2202 that it is unlawful for pharmacists to substitute prescriptions written for Viravan with V-Tann.

Plaintiff has filed a motion for partial summary judgment on the Lanham Act claims. Plaintiff argues that it is entitled to summary judgment as a matter of law because Defendants' advertising materials are literally false and V-Tann is not equivalent to Viravan. Defendants oppose Plaintiff's motion for summary judgment, arguing: Plaintiff has come to court with unclean hands; V-Tann's label and advertising claims are true; Defendants' use of the "compare" statement is not literally false;...