Schering-Plough Healthcare Prod. v. Schwarz Pharma

• Citation: 586 F.3d 500
• Decision Date: 29 October 2009
• Docket Number: No. 09-1462.,No. 09-1601.,No. 09-1438.,09-1438.,09-1462.,09-1601.
• Parties: SCHERING-PLOUGH HEALTHCARE PRODUCTS, INC., Plaintiff-Appellant/Cross-Appellee, v. SCHWARZ PHARMA, INC. and Kremers Urban, LLC, Defendants-Appellees, Breckenridge Pharmaceuticals, Inc. and Paddock Laboratories, Inc., Defendants-Appellees/Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

586 F.3d 500

SCHERING-PLOUGH HEALTHCARE PRODUCTS, INC., Plaintiff-Appellant/Cross-Appellee, v. SCHWARZ PHARMA, INC. and Kremers Urban, LLC, Defendants-Appellees Breckenridge Pharmaceuticals, Inc. and Paddock Laboratories, Inc., Defendants-Appellees/Cross-Appellants.

No. 09-1438.

No. 09-1462.

No. 09-1601.

United States Court of Appeals, Seventh Circuit.

Argued September 15, 2009.

Decided October 29, 2009.

Brian D. Baird, Borgelt, Powell, Peterson, & Frauen, Milwaukee, WI, Emily Johnson Henn (argued), Covington & Burling, Washington, DC, for Plaintiff-Appellant.

Anthony S. Baish, Godfrey & Kahn, Milwaukee, WI, James P. Ellison, Hyman, Phelps & McNamara, Washington, DC, Lisa M. Arent, Whyte Hirschboeck Dudek, Milwaukee, WI, C. Randolph Ross, Breckenridge Pharmaceuticals, Inc., Berlin, CT, Robert P. Charrow, Greenberg Traurig, LLP, Washington, DC, Richard A. Edlin (argued), Greenberg Traurig, New York, NY, for Defendants-Appellees.

Before POSNER, FLAUM, and ROVNER, Circuit Judges.

POSNER, Circuit Judge.

The parties to this Lanham Act suit are manufacturers of an oral laxative the chemical name of which is polyethylene glycol 3350. Schering, the plaintiff, sells its version under the trade name "MiraLAX." MiraLAX is an over-the-counter drug. The four defendants sell the generic version of the drug under its chemical name (except that defendants Kremers and Schwarz also use the name "GlycoLax"), but their version may be sold only if it is prescribed.

MiraLAX was originally a prescription drug too. After the patent on it expired, the Food and Drug Administration approved defendants' ANDAs (Abbreviated New Drug Applications), which authorized them to sell a generic version of the drug. Later the FDA approved an over-the-counter version of MiraLAX but required that the label contain a warning to "use [for] no more than 7 days." Constipation that lasts longer than that may be symptomatic of a serious medical condition, so a consumer who wants to use a laxative longer should do so under a doctor's supervision.

The Food, Drug, and Cosmetic Act requires that the labeling of the generic drug be the same (with immaterial exceptions) as that of the original drug—the "pioneer" drug, as it is called, which in this case was the prescription-only version of MiraLAX. 21 U.S.C. § 355(j)(2)(A)(v); 21 C.F.R. § 314.127(a)(7). And if the generic drug is approved for use as a prescription drug, the label of the generic drug must "bear, at a minimum, the symbol `Rx only.'" 21 U.S.C. § 353(b)(4)(A). The labels of the defendants' generic versions of MiraLAX do bear that symbol. The generic drug must also (though again with immaterial exceptions) be bioequivalent to the pioneer drug and have the same active ingredients, route of administration, dosage form, and strength. 21 U.S.C. § 355(j)(2)(A); see Eli Lilly & Co. v. Medtronic, Inc., 496 U.S. 661, 676, 110 S.Ct. 2683, 110 L.Ed.2d 605 (1990); Andrx Pharmaceuticals, Inc. v. Elan Corp., 421 F.3d 1227, 1230-31 (11th Cir.2005). There is no contention that the defendants' drugs fail to satisfy these requirements.

Section 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), under which this suit was brought, forbids the use of any "false or misleading description of fact, or false or misleading representation of fact, which in commercial advertising or promotion, misrepresents the nature, characteristics, [or] qualities ... of [the seller's] or another person's goods...." There is no exemption for labels.

Schering argues that the labels, shown below, on the containers for the polyethylene glycol 3350 sold by the two principal defendants, Breckenridge and Paddock, are false. (The labels of the other two defendants' generics are similar, but the briefs focus on Breckenridge and Paddock.) The labels say that polyethylene glycol 3350 is sold only by prescription, whereas in fact, since over-the-counter MiraLAX by definition does not require a prescription, not all polyethylene glycol 3350 may be sold only by prescription. The statement in the label is repeated in the patient information that is included in the container in which the product is sold (the "package insert," which is deemed a part of the labeling of the product).

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Although many prescription drugs are sold to the consumer in a plastic vial or other container supplied and relabeled by the pharmacist, polyethylene glycol 3350, whether sold by Schering or by the defendants, is sold to the consumer in its original container. This means that no one will see the labels on the defendants' product unless a physician has written a prescription for it, although one might see the label in an advertisement for the product. And should the patient's condition change, so that he didn't need to use a laxative for more than seven days, he might be unaware that he could switch to an over-the-counter version of the laxative that had been prescribed for him.

The FDA is conducting a proceeding to determine whether the defendants' drugs are misbranded now that there is an over-the-counter version of the drug. And because the Food, Drug, and Cosmetic Act does not permit both by-prescription-only and over-the-counter versions of the same drug to be sold at the same time, 21 U.S.C. § 355(b)(4); "Opportunity for Hearing on a Proposal to Withdraw Approval of Prescription Polyethylene Glycol 3350 Abbreviated New Drug Applications," 73 Fed. Reg. 63491, 63491-92 (FDA Oct. 24, 2008), the proceeding encompasses the issue of whether there is a "meaningful difference" between the pioneer drug and the generic drug or whether they are really "the same" drug. "Advance Notice of Proposed Rulemaking, Circumstances Under Which an Active Ingredient May Be Simultaneously Marketed in Both a Prescription Drug Product and an Over-the-Counter Drug Product," 70 Fed.Reg. 52050, 52051 (FDA Sep. 1, 2005). The defendants argue that they are different drugs because their version is not subject to the 7-day warning.

If the FDA determines that they are "the same," the result will be that the generic drug can no longer be sold, but even if it determines that they are different, it may decide that the labeling of the generics has to be changed. A drug is misbranded within the meaning of the Food, Drug, and Cosmetic Act "if its labeling is false or misleading in any particular," 21 U.S.C. § 352(a), and Schering argues that the defendants' labels occlude, in the mind of the consumer, the existence of its over-the-counter version of the drug. But maybe the FDA doesn't care whether the labeling of the generic products obscures the existence of an over-the-counter equivalent; maybe all it cares about is that the labeling leads consumers to use the product safely, an objective that conceivably can be achieved just by making sure that doctors and pharmacists are accurately informed about the drug that they are prescribing, which of course is not the over-the-counter version. It is not obvious that the goal of protecting consumers is furthered by making sure that they are aware of the existence of an over-the-counter equivalent, and, if it is not, there would be no conflict between the FD & C Act and the Lanham Act. But we do not know, and see no need to guess while the misbranding proceeding is wending its way through the FDA.

The Director of the Office of Generic Drugs in the FDA's Center for Drug Evaluation and Research wrote the defendants that their products are misbranded because the label says "Rx only" even though polyethylene glycol 3350 can also be sold without a prescription—thus MiraLAX. The letters are not final agency action. To rescind approval of the sale of a drug because of misbranding, the FDA must provide the manufacturer with "due notice and opportunity for hearing to the applicant." 21 U.S.C. § 355(e). The agency is proceeding on that path, but no hearing has yet been scheduled, nor has the agency even decided whether a hearing will be necessary—it has as yet merely provided the participants with an opportunity to request a hearing. "Opportunity for Hearing on a Proposal to Withdraw Approval of Prescription Polyethylene Glycol 3350 Abbreviated New Drug Applications," supra.

The district court dismissed the suit without prejudice, suggesting that Schering could refile it if and when the FDA decided that the defendants' drugs were indeed misbranded. Schering has appealed, arguing that no reasonable trier of fact could fail to conclude that the terms "Rx only" and "a prescription only laxative," which appear on the labels of the defendants' drugs, are "literally false" and therefore violate the Lanham Act irrespective of the FD & C Act. And so it asks us to enter judgment in its favor rather than remand the case for evidentiary proceedings. The defendants have cross-appealed, contending that the suit should be dismissed with prejudice because Schering has no possible claim under the Lanham Act. They argue that a finding by the FDA that their products are not misbranded will mean that they are not falsely advertised, while if the agency finds that the product is misbranded they will of course change the labeling to whatever the agency orders. This is an argument about mootness rather than about the merits, and not a good one, since it is merely speculation concerning what the defendants would do in response to a finding by the FDA of misbranding.

The defendants further suggest that the fact that the suit was dismissed without prejudice deprives us of appellate jurisdiction. The suggestion is made rather halfheartedly because they are strong for their cross-appeal, which argues that the dismissal should have been with prejudice. Making a dismissal without prejudice can be challenged by the winner (the defendant) because a litigant has a significant interest in the preclusive effect of a judgment in its favor. Disher v. Information Resources, Inc., 873 F.2d 136, 138-39 (7th Cir.1989); ...