Cases to Watch
James M. Beck, August T. Horvath, William M. Janssen, Ginger Pigott, Lynn Tyler & Anne K. Walsh
The top cases covered in this volume cover many controversial issues that touch on food and drug litigation. Most of them are not expected to be the final word on the subject, and some raise almost as many new questions as they answer. Our contributing authors expect appeals and further cases implicating many of these issues. As well, we considered several important cases that were not ripe for inclusion in this volume, but that seem ordained to establish important precedent in the food and drug areas. Here are a few cases to watch in the latter half of 2018 and into 2019.
Resolving the Catch-22 in Generic Drug Failure-to-Warn Claims
In the years following the U.S. Supreme Court’s 2011 holding that failure-to-warn claims against generic drug manufacturers are federally preempted,1 the various state courts have confronted the disquieting result that generic drug consumers may be left with no remedy at all for a pharmaceutical warning failure, even though fellow consumers, who were prescribed the brand version of the same medicine, could sue. Generic drug consumers then attempted to hold the brand manufacturers liable for their generic drug-induced injuries, contending that by preemptively controlling the generic drug label’s content, those brand manufacturers owed a tort duty to generic consumers. Most U.S. states to whom this argument was pitched rejected it; only Alabama and California permitted tort remedies for generic consumers against brand manufacturers. In March 2018, the Supreme Judicial Court of Massachusetts joined this minority twosome, albeit a bit more tepidly, in Rafferty v. Merck & Co., Inc.2 The Rafferty court attempted a tight-rope walk over this treacherous regulatory regime. Mindful of the staggering costs and uncertainties of innovator drug commercialization, the Hatch-Waxman objectives (less-expensive access coupled with appropriate pioneer exclusivity) and the financial havoc Hatch-Waxman wreaks on the pioneer’s post-patent-expiration revenues, and the states’ historic duty to provide meaningful relief to those tortiously injured by others, the Massachusetts court settled on a middle ground. Ordinary negligence claims by generic users against brand manufacturers will not be permitted in that state, but claims for recklessness will be allowed. The court explained that “recklessness” differs from ordinary negligence in two ways—the conduct of the defendant must have been intended and that conduct must pose a significantly greater risk to the victim. Thus, if a brand manufacturer intentionally fails to revise its brand drug label when it knows of an unreasonable risk of death or grave bodily injury (or knows of facts that would disclose such a risk), Massachusetts will now allow a generic drug user to hold the brand manufacturer accountable for consequential harms. The reverberating national effect of Massachusetts’ foray into this controversial domain will be closely watched in 2018.
Sorting Out the Patent Regime for Biosimilars
Congress’s “carefully calibrated” scheme for patent litigation related to biosimilars has once again led to litigation featuring numerous procedural issues. On October 6, 2017, two biotech giants, Amgen and Genentech, filed patent litigation against each other over Amgen’s proposed biosimilar, MVasi™, to Genentech’s Avastin® (bevacizumab), an antibody used to treat metastatic colorectal cancer.3 Amgen filed suit first in Los Angeles, seeking a declaratory judgment of non-infringement, invalidity, and/or unenforceability for 27 Genentech patents. Amgen argued that it was entitled to file a declaratory judgment action because it had given Genentech the statutorily-prescribed notice of commercial marketing. Genentech responded the same day by filing a Complaint against Amgen in Delaware for infringement of 24 patents. Genentech argued that Amgen failed to provide manufacturing information and to complete the exchange of lists of patents for litigation. On October 18, Genentech filed a second suit against Amgen, also in Delaware, for infringement of 25 patents, the original 24 plus one more. On February 2, the California court dismissed Amgen’s case and it appears Amgen has not appealed. As of April 9, both of Genentech’s cases are proceeding actively, with docket entries numbering in the low 80s.
Can Truthful Off-Label Statements Be Prohibited Constitutionally?
In United States v. Facteau,4 a criminal case involving alleged off-label promotion, on July 20, 2016, the defendants were acquitted of all felony charges, but were convicted of misdemeanor claims that did not require proof of falsity as an element of the crime. Thus, this case raises the fraught issue of whether the FDCA can, consistently with the First Amendment’s guarantee of free speech, prohibit truthful off-label statements by sponsors of regulated products. The pharmaceutical-industry-supported Medical Information Working Group has recognized the importance of this case, and filed a First Amendment amicus brief in support of the defendants in September, 2016. Nothing of significance happened in 2017, but a decision on the defendants’ motions for acquittal will almost certainly occur in 2018, thereby prompting a First-Amendment-related appeal on the off-label promotion issue. FDA Commissioner Gottlieb has suggested that the FDA needs to revisit its prohibition in light of evolving First Amendment precedent, so Facteau could provide the acid test of whether such a revisiting will, in fact, occur.
The Fosamax case,5 has, not surprisingly, been appealed to the United States Supreme Court.6 The petition for certiorari remains pending. In a development suggesting that the Supreme Court is giving the Fosamax petition serious consideration, on December 4, 2017, the Court invited the Solicitor General to file an amicus curiae brief stating the federal government’s—and thus FDA’s—view on whether the issues raised warrant grant of the petition. Should the Supreme Court elect to hear the Fosamax appeal, the eventual decision would certainly rank among the most important drug/medical device preemption decisions of this decade.
Further Cases on Class-Action Damages Estimation
Many consumer class actions alleging price premium damages stemming from alleged deceptive marketing and other activities are under way, and some will no doubt produce published opinions in the coming months. Of the cases we discussed, Zakaria v. Gerber Products Co.7 is under appeal before the Ninth Circuit Court of Appeals, with a decision likely in late 2018. This decision may address the question of whether a conjoint analysis, not directly triangulated or collaborated by an additional study such as a hedonic regression, adequately estimates the price premium actually paid by consumers as a result of allegedly being deceived about a product attribute for purposes of satisfying the Rule 23(b)(3) predominance requirement under Comcast. Another of the cases we discussed, Kurtz v. Kimberly-Clark Corp.,8 is under interlocutory appeal before the Second Circuit Court of Appeals, which should furnish guidance on the viability of a hedonic regression analysis used alone.
Two other cases that we discussed in connection with this topic in which interlocutory appeals of class certification rulings were denied, Hughes v. The Ester C Company9 and In re Dial Complete Marketing and Sales Practices Litigation,10 continue in litigation before their District Courts, with the parties that did not prevail on class certification presumably awaiting their opportunities to appeal the rulings as of right. Unless these cases settle, they also may tee up further appellate review of the price premium damages models required by Comcast.
The Supreme Court Ponders Class Action Limitations Tolling
Since 1974, the U.S. Supreme Court has recognized that statutes of limitation may be deemed equitably tolled for class members during the time that their class action is pending.11 The logic behind this tolling is that members of the class may have refrained from filing their own, individual lawsuits in reliance on the pending class action, and if class treatment is ultimately refused by the court, those class members should not lose out on their ability to litigate individually merely because it took the court so long to determine that class treatment was not appropriate. On March 26, 2018, the U.S. Supreme Court heard oral argument in China Agritech, Inc. v. Resh,12 a case that proposes a notable broadening of this tolling principle. The plaintiffs there invoked equitable tolling to file—outside the applicable limitations period—a subsequent class action after certification of their first two classes were denied. The defendant convinced the trial court to dismiss the new class action as time-barred, arguing that the equitable tolling principle was designed only to rescue a class member’s right to bring a post-dismissal individual claim, not to preserve the ability to try repeatedly for class treatment. The Ninth Circuit reversed the dismissal. Certiorari was granted to examine this proposed extension of the class action equitable tolling principle. Although the claim on appeal involves securities fraud, the Court’s decision in China Agritech will meaningfully impact the availability of class treatment in every federal litigation sector, including drug and device cases.
LabMD Appeals the FTC’s Finding on Data Security and Unfairness
The Eleventh Circuit Court of Appeals may finally resolve the long anticipated dispute between LabMD, a small lab that performed cancer-detection testing, and the FTC. Oral argument was heard before the Eleventh Circuit Court of Appeals on June 21, 2017 in LabMD, Inc. v. Federal Trade Commission.13 LabMD appealed a Final Order by the FTC which found LabMD’s data security policies an “unfair act of practice” within the meaning of Section 5 of the FTC Act. LabMD argued that the FTC’s Final Order was improper because (1) an intangible harm does not constitute a “substantial injury” under Section 5, and (2) LabMD had insufficient notice that its data security practices violated the FTC’s rules. The FTC countered that LabMD’s security practices were “unreasonable, lacking even basic precautions to protect the sensitive consumer information” in violation of Section 5. The FTC further argued that LabMD always knew that it should maintain “reasonable” data security practices. The Eleventh Circuit’s interpretation of Section 5 will affect the FTC’s ability to rely on the FTC Act to police the data security practices of businesses that handle consumers’ sensitive information.
Materiality Under the False Claims Act
The U.S. Supreme Court may provide more clarity in 2018 over the materiality standard to apply in False Claims Act cases. A petition for writ of certiorari has been teed up for the Supreme Court in Gilead Sciences, Inc. v. United States ex rel. Campie,14 the Ninth Circuit decision that was summarized in an earlier chapter.15 The question presented by Gilead is: “Whether an FCA allegation fails when the Government continued to approve and pay for products after learning of alleged regulatory infractions and the pleadings offer no basis for overcoming the strong inference of immateriality that arises from the Government’s response.” In its opposition, Relators argue that Gilead misrepresents the holding of the Ninth Circuit and assert that the holding “properly followed Escobar’s holistic approach to materiality.” They rely on the Ninth Circuit’s conclusion that the contested issues, including materiality, “are matters of proof, not legal grounds to dismiss relators’ complaint,” and claim the complaint satisfies the pleading requirements of Rule 12(b)(6). Several groups have filed amicus briefs, including the U.S. Chamber of Commerce, American Health Care Association, Pharmaceutical Research and Manufacturers of America, Biotechnology Innovation Organization, and the Washington Legal Foundation. The Supreme Court will make a determination on whether to grant certiorari, and potentially issue a decision later this year.
We extend extra thanks to these contributing authors to other chapters of this volume who also suggested and summarized cases to watch for this chapter.
- Pliva v. Mensing, 564 U.S. 604 (2011).
- 2018 WL 1354064 (Mass. 2018).
- Amgen, Inc. v. Genentech, Inc., Case No. 2:17-cv-07349-GW-AGR (C.D. Cal. Oct. 6, 2017); Genentech, Inc. v. Amgen, Inc., Case No. 1:17-cv-01407-GMS (D. Del. Oct. 6, 2017); and Genentech, Inc. v. Amgen, Inc., Case No. 1:17-cv-01471-GMS (D. Del. Oct. 18, 2017).
- No. 15-10076-ADB (D. Mass.).
- In re Fosamax (Alendronate Sodium) Products, 852 F.3d 268 (3d Cir. 2017).
- No. 17-290 (U.S.).
- No. 17-56509 (9th Cir.).
- No. 17-1856 (2d Cir.).
- No. 2:2012-CV-0041 (PKC) (E.D.N.Y.).
- MDL Case No. 11-md-2263-SM (D.N.H.).
- American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974).
- No. 17-432 (U.S.). Oral argument transcript, https://www.supremecourt.gov/oral_arguments/argument_transcripts/2017/17-432_mlho.pdf.
- No. 16-16270 (11th Cir.).
- No. 17-936 (Dec. 26, 2017)
- United States ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d 890 (9th Cir. 2017).