Pennsylvania Employees Ben. Trust v. Zeneca, No. 05-5340.

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Writing for the CourtSmith
Citation499 F.3d 239
PartiesPENNSYLVANIA EMPLOYEES BENEFIT TRUST FUND on behalf of itself and all others similarly situated; Joseph Macken; Commissioner Linda A. Watters, Appellants v. ZENECA INC; AstraZeneca Pharmaceuticals LP.
Decision Date17 August 2007
Docket NumberNo. 05-5340.
499 F.3d 239
PENNSYLVANIA EMPLOYEES BENEFIT TRUST FUND on behalf of itself and all others similarly situated; Joseph Macken; Commissioner Linda A. Watters, Appellants
v.
ZENECA INC; AstraZeneca Pharmaceuticals LP.
No. 05-5340.
United States Court of Appeals, Third Circuit.
Argued June 5, 2007.
Filed: August 17, 2007.

[499 F.3d 240]

Pamela S. Tikellis, A. Zachary Naylor, Chimicles & Tikellis, Wilmington, DE; Barbara J. Hart, Christopher McDonald, Labaton, Sucharow & Rudoff, New York, NY; Theodore M. Lieverman, Jeffrey L. Kodroff, Spector, Roseman & Kodroff, Philadelphia, PA; Steve W. Berman, Craig R. Spiegel (Argued), Hagens Berman Sobol Shapiro, Seattle, WA, Counsel for Appellants.

Jack B. Blumenfeld, Rudolph J. Scaggs, Jr., Lisa K. Whittaker, Morris, Nichols, Arsht & Tunnell, Wilmington, DE; Mark E. Haddad (Argued), Sidley Austin, Los Angeles, CA, Counsel for Appellee.

Before: SMITH, COWEN, and SILER, Circuit Judges.*

OPINION OF THE COURT

SMITH, Circuit Judge.


The Pennsylvania Employees Benefit Trust Fund, Joseph Macken, and Linda Watters ("plaintiffs") sued Zeneca, Inc. and AstraZeneca Pharmaceuticals, L.P. (collectively referred to as "Zeneca") in the United States District Court for the District of Delaware, asserting that Zeneca engaged in deceptive conduct in the advertising of its new drug Nexium. Claim One alleged unlawful advertising under the Delaware Consumer Fraud Act ("DCFA"). The second claim alleged violations of the consumer protection statutes of the 50 states for false, misleading, and deceptive

499 F.3d 241

advertising. Claim Three alleged unjust enrichment, and stated claims under Delaware common law for restitution, disgorgement, and constructive trust. The fourth claim was for negligent misrepresentation, and it alleged that the company released misleading advertisements for the prescription drug Nexium. The District Court dismissed the complaint with prejudice.

This appeal presents two principal questions: (1) whether the DCFA exemption for advertising regulated by the Federal Trade Commission applies to the facts of this case; and (2) whether federal law preempts the plaintiffs' state consumer protection claims. The plaintiffs also assert that primary jurisdiction was an improper basis for dismissal, that their unjust enrichment claim was improperly dismissed on the ground that they had not pled individual reliance, and that they should have been allowed to amend their complaint. We will affirm the judgment of the District Court.1

I.

On February 11, 2005, the plaintiffs2 filed a putative class action against Zeneca, alleging that Zeneca's marketing campaign for Nexium3 was deceptive because it misleadingly advertised Nexium as an improvement on Prilosec. Nexium and Prilosec are both proton-pump inhibitors, drugs that treat gastroesophageal reflux disease ("GERD") and erosive esophagitis, conditions that are commonly known as acid reflux disease and frequent heartburn. Prilosec was a profitable drug for Zeneca, and had sales of $6 billion in 2000. The patent for Prilosec was due to expire in 2001, at which point it would be available for sale as the generic drug omeprazole. On February 14, 2001, Zeneca obtained approval from the Food and Drug Administration ("FDA") for final labeling on Nexium for healing of erosive esophagitis, maintenance of healing of erosive esophagitis, and treatment of symptomatic GERD (i.e., heartburn).

One published clinical study of Nexium compared both 20 mg and 40 mg doses of Nexium to the approved 20 mg dose of Prilosec. The data from this study showed that 40 mg of Nexium had a statistically significant healing rate over 20 mg of omeprazole. This study was among those used to obtain FDA approval of Zeneca's new drug application for Nexium. The FDA later determined that Nexium should be approved at recommended dosages of 20 mg or 40 mg once daily, for four to eight weeks, for the healing of erosive esophagitis, and at 20 mg for both maintenance of healing of erosive esophagitis and symptomatic GERD.

In their complaint, plaintiffs alleged that the large-scale promotional campaign for Nexium, which included both physician-directed marketing and direct-to-consumer advertising, was misleading because it incorrectly represented that Nexium was superior to Prilosec. The plaintiffs asserted

499 F.3d 242

that a dose of 40 mg is not needed in most patients and a fair comparison of 20 mg of Nexium to 20 mg of Prilosec would not have proven Nexium to be superior. The plaintiffs also contended that Zeneca initially sold Nexium at a price below Prilosec in order to establish brand loyalty, but "then raised the price of Nexium while the price of Prilosec dropped. [Nexium] now sells for $4.09 per pill versus $0.67 per pill or less for Prilosec." On November 8, 2005, the District Court granted Zeneca's motion to dismiss for failure to state a claim.

We review the grant of a motion to dismiss de novo, accepting all well-pleaded allegations as true and drawing all reasonable inferences in favor of the plaintiffs. In re Adams Golf, Inc. Sec. Litig., 381 F.3d 267, 273 (3d Cir.2004); In re Alpharma Sec. Litig., 372 F.3d 137, 146 (3d Cir.2004). Review of the denial of leave to amend is for abuse of discretion. Hill v. City of Scranton, 411 F.3d 118, 134 (3d Cir.2005).

II.

The Application of the DCFA Exemption

The first issue raised on appeal is whether FDA approval of prescription drug labeling and regulation of advertising brings the plaintiffs' claims within the DCFA exemption of "any advertising or merchandising practice" that is compliant with Federal Trade Commission regulations. The purpose of the DCFA is "to protect consumers and legitimate business enterprises from unfair or deceptive merchandising practices in the conduct of any trade or commerce in part or wholly within this State." 6 DEL. CODE ANN. § 2512. The DCFA proscribes

The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale, lease or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby. . . .

6 DEL. CODE ANN. § 2513(a). The exemption language in the DCFA at issue states that "[t]his section shall not apply . . . [t]o any advertisement or merchandising practice which is subject to and complies with the rules and regulations, of and the statutes administered by, the Federal Trade Commission. . . ." 6 DEL. CODE ANN. § 2513(b)(2). The District Court concluded that all of the advertising materials cited by the plaintiffs in their complaint "are related to the safety and efficacy of Nexium, are consistent with the FDA-approved labeling and, therefore, are not actionable under the DCFA pursuant to 6 Del. C. § 2513(b)(2)."

Plaintiffs argue that the exemption should be read more narrowly than the District Court read it, and that, properly construed, the exemption did not protect Zeneca's conduct. In particular, plaintiffs assert that (1) the exemption is limited to conduct expressly approved by the FTC; (2) the FDA did not explicitly approve Zeneca's marketing campaign; and (3) Zeneca's marketing deviated from statements approved by the FDA for Nexium's label. Zeneca points to the broad prohibitions in 15 U.S.C. §§ 45 and 52, which declare unlawful unfair methods of competition and the dissemination of false advertisements, as proof that prescription drug advertising is subject to the statutes administered by the FTC.

As a preliminary matter, we decline to read the DCFA exemption to require that an advertisement or merchandising practice must be expressly approved by the

499 F.3d 243

FTC in order to qualify for the exclusion. The plain language of § 2513(b)(2) requires only that the conduct be subject to and compliant with rules and regulations created by the FTC and the statutes administered by that agency. Accordingly, the lack of express FTC approval of the Nexium marketing campaign is not a basis for declaring the statutory exemption inapplicable.

We are left, then, with the thornier question presented by plaintiffs' assertion that the exemption's reach does not extend to matters subject to FDA oversight. By congressional decree, the FTC and the FDA originally shared jurisdiction over prescription drug advertising. See Pub. L. No. 87-781, 76 Stat. 791-92 (1962) (codified as amended at 21 U.S.C. § 352(n)); see also 15 U.S.C. §§ 45 and 52; 21 U.S.C. § 352(n) (removing any "advertisement of a prescription drug, published after the effective date of regulations issued under this paragraph applicable to advertisements of prescription drugs," from the purview of the provisions of 15 U.S.C. §§ 52-57); 21 U.S.C. § 393(b)(1) ("The [FDA] shall . . . promote the public health by . . . taking appropriate action on the marketing of regulated products in a timely manner"). Because Congress gave the agencies concurrent jurisdiction with respect to regulating prescription drug advertising until the FDA promulgated regulations, the FDA and FTC established their own interim division of responsibilities.4 In the Working Agreement Between FTC and Food and Drug Administration, 36 Fed.Reg. 18,539 (Sept. 16, 1971), the two agencies agreed that "[t]he Food and Drug Administration has primary responsibility with respect to the regulation of the truth or falsity of prescription drug advertising." This statement does not preclude FTC regulation of prescription drug advertising, but rather notes the agencies' mutual understanding that the FDA will take the lead in regulating such activities, subject to the concurrent jurisdiction of both agencies. The statement explicitly limits the FDA's primary responsibility to determining the veracity of the advertising claims; it does not suggest that regulating technically true, but...

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25 practice notes
  • O'Neal v. Smithkline Beecham Corp., No. CIV S-06-1063 FCD/DAD.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • January 30, 2008
    ...intent required. Geier, 529 U.S. at 884, 120 S.Ct. 1913; see also Pennsylvania Employees Benefit Trust Fund v. Zeneca, Page 1004 Inc., 499 F.3d 239, 246-47 (3rd Cir.2007) (recognizing that conflict preemption arises absent an "express congressional command"). Thus, consideration of the pree......
  • Facenda v. N.F.L. Films, Inc., No. 07-3269.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • September 9, 2008
    ...when, without `express congressional command,' state law conflicts with federal law." Pa. Employees Benefit Trust Fund v. Zeneca Inc., 499 F.3d 239, 247 (3d Cir.2007) (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)). As one copyright treat......
  • Farina v. Nokia, Civil Action No. 06-724.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • September 2, 2008
    ...v. Wisconsin, 228 U.S. 115, 131-32, 33 S.Ct. 431, 57 L.Ed. 754 (1913); see also Pennsylvania Employees Ben. Trust Fund v. Zeneca Inc., 499 F.3d 239, 247 (3d Cir.2007) (implied conflict preemption renders state law "without effect" when, without "express congressional command," state law con......
  • Knipe v. Smithkline Beecham, Civil Action No. 06-3024.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • August 28, 2008
    ...stake were uniquely federal in nature and were not traditionally regulated by states); Pennsylvania Employees Ben. Trust Fund v. Zeneca, 499 F.3d 239, 251 (3d Cir.2007) (finding preemption of state law fraud claims in context of prescription drug Two recent Third Circuit cases have attempte......
  • Request a trial to view additional results
25 cases
  • O'Neal v. Smithkline Beecham Corp., No. CIV S-06-1063 FCD/DAD.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • January 30, 2008
    ...intent required. Geier, 529 U.S. at 884, 120 S.Ct. 1913; see also Pennsylvania Employees Benefit Trust Fund v. Zeneca, Page 1004 Inc., 499 F.3d 239, 246-47 (3rd Cir.2007) (recognizing that conflict preemption arises absent an "express congressional command"). Thus, consideration of the pree......
  • Facenda v. N.F.L. Films, Inc., No. 07-3269.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • September 9, 2008
    ...when, without `express congressional command,' state law conflicts with federal law." Pa. Employees Benefit Trust Fund v. Zeneca Inc., 499 F.3d 239, 247 (3d Cir.2007) (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)). As one copyright treat......
  • Farina v. Nokia, Civil Action No. 06-724.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • September 2, 2008
    ...v. Wisconsin, 228 U.S. 115, 131-32, 33 S.Ct. 431, 57 L.Ed. 754 (1913); see also Pennsylvania Employees Ben. Trust Fund v. Zeneca Inc., 499 F.3d 239, 247 (3d Cir.2007) (implied conflict preemption renders state law "without effect" when, without "express congressional command," state law con......
  • Knipe v. Smithkline Beecham, Civil Action No. 06-3024.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • August 28, 2008
    ...stake were uniquely federal in nature and were not traditionally regulated by states); Pennsylvania Employees Ben. Trust Fund v. Zeneca, 499 F.3d 239, 251 (3d Cir.2007) (finding preemption of state law fraud claims in context of prescription drug Two recent Third Circuit cases have attempte......
  • Request a trial to view additional results

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