Food and Drug Cases to Watch in 2019
JAMES M. BECK, RENE BEFURT, AUGUST T. HORVATH, RACHAEL E. HUNT WILLIAM E. JANSSEN, REBECCA KIRK FAIR, MEGAN OLSEN & ANNE K. WALSH**
American philosopher Yogi Berra said, “It’s tough to make predictions, especially about the future.” There’s no way to be sure whether the cases that look like cases to watch in the rest of 2019 will turn out to be so. Litigation has a way of surprising us, whether it’s apparently momentousa cases that disappear with a whimper, or cases that seem to come out of nowhere and turn out to be significant. That said, we polled our Top Cases chapter authors for their prognostications on which litigations currently in process have the potential to change the food and drug landscape.
Azar v. Allina Health Services
It has been estimated that Medicare is responsible for paying for 20% of all healthcare provided in the United States (a total of nearly $700 billion in 2017). Citing this and other statistics, the American Medical Association offered the understated truism that “Medicare represents an important source of income” for healthcare providers. Awash in the byzantine world of Medicare reimbursement regulations, the Allina Health Services case was argued before the U.S. Supreme Court in mid-January 2019. The appeal challenges whether the U.S. Department of Health and Human Services (HHS) is obliged to follow notice-and-comment procedures before determining how it and its contractors will calculate the “Medicare fraction” – an important component in the computation of Medicare reimbursement benefits due to hospitals when they “serve a significantly disproportionate number of low-income patients.” The district court ruled that notice-and-comment was not required. The D.C. Circuit Court of Appeals (Kavanaugh, J.) reversed. At the Supreme Court, HHS contends that the procedure used to set the “Medicare fraction” qualifies as an “interpretive rule,” excused from notice-and-comment obligations (thankfully, argues HHS, because holding otherwise would “cripple” the effective administration of the Medicare program, given the enormous costs in time and resources required by such notice-and-comment procedures). The respondent hospitals argue that setting the “Medicare fraction” is a “substantive legal standard,” which statutorily compels notice-and-comment procedures (and which is especially significant here, where HHS’s computation formula would reduce billions of dollars in payments to hospitals). The Allina Health Services case portends serious ramifications in Medicare reimbursement practice specifically, and to federal administrative law generally.
U.S. ex rel. Ruckh v. Salus Rehabilitation, LLC
The district court decision in Ruckh v. Salus reaffirmed the heightened standard for establishing materiality under the False Claims Act (FCA), which the Supreme Court clearly articulated in Universal Health Services, Inc. v. United States ex rel. Escobar. Judge Steven Merryday of the Middle District of Florida dismissed a $350 million judgment against the defendants, owners, and operators of specialized nursing facilities, noting that a claim under the FCA cannot be based on a “minor or unsubstantial” or “garden-variety” regulatory violation. Judge Merryday explained that allowing FCA liability to stem from regulatory violations would result in a system of “government traps, zaps, and zingers” that permits the government to retain the benefit of a “substantially conforming” good or service, and to recover under the FCA damages (up to treble times) due to immaterial regulatory non-compliance. Not surprisingly, given the high dollar value at stake, the plaintiff appealed in the Eleventh Circuit in February 2018 and briefing was submitted at the end of 2018. The court has scheduled oral arguments for June 10, 2019. The Ruckh case adds more fodder to the circuit split on whether inaction by FDA or continued reimbursement by CMS, despite knowledge of regulatory violations, can foreclose an FCA case. The Eleventh Circuit ruling may create enough of a split as to warrant review by the Supreme Court.
Burrell v. Bayer Corp.
The appeal in Burrell v. Bayer Corp. was decided March 14, 2019, by the Fourth Circuit Court of Appeals. The case concerned whether plaintiffs’ state law claims that Bayer’s Essure sterilization device was defective and caused physical injuries, including a stillbirth. Plaintiffs sued in North Carolina state court, but Bayer sought to remove the case to federal court, contending that federal question jurisdiction under 28 U.S.C. § 1331 was conferred by the case’s implications for Bayer’s compliance with federal regulations. The District court in North Carolina accepted the case and thereafter dismissed it on preemption and other grounds, but on appeal, the Fourth Circuit ruled that the plaintiffs’ claims were not sufficiently “parallel” to federal regulatory requirements, even though such requirements were cited multiple times in the complaint. The appellate court held that this case did not fit in the “slim category” of state law claims that qualify for federal jurisdiction because “the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law.” In this case, the Fourth Circuit held, the plaintiffs could establish all necessary elements of their claims entirely independently of federal law. It remains to be seen whether Bayer will appeal this ruling to the Supreme Court, but if it does, the case could become an important case in establishing the proper forum for consumer lawsuits relating to products covered by the Food, Drug & Cosmetics Act and its regulations.
Maze v. Bayer Health Care Pharms.
A potentially important preemption decision was delivered by the District Court for the Eastern District of Tennessee in March in one of the cases in the long-running litigation around Bayer’s Yaz birth-control pill. In Maze v. Bayer Health Care Pharms., plaintiffs alleged failure-to-warn that the product increased the risk of stroke. Evidence attached to Bayer’s motion to dismiss, which the court admitted for purposes of the motion, indicated that the product’s FDA-approved label had contained multiple warnings related to stroke. Further, the court held, the complaint in the suit introduced no new risk information or analysis of prior submitted data. Bayer won its motion on preemption grounds. The court held that “even assuming the science marshaled by Maze is newly acquired and says anything at all about the risk of stroke (as stated above, it is and does not), nothing indicates that the risk is any higher than what is reflected in the Yaz label that the FDA approved in 2012.” The plaintiffs have not yet filed a notice of appeal. If they do, this case could be an interesting contribution to the case law on FDA preemption.
Hilsley v. Ocean Spray Cranberries, Inc.
The Hilsley case was discussed as a top case of 2018 in the main part of this book, but depending on the litigants’ decisions for the future conduct of the case, it may also be an important case to watch for 2019. To recap from the earlier chapter, Hilsley v. Ocean Spray Cranberries is an example of a “natural” claims case. Under the precedent established by Comcast, the damages model must be consistent with the plaintiff’s theory of liability and be able to calculate class-wide damages, and in order to do so, the surveys used in these models must comply with survey best practices. In Hilsley, the plaintiff’s expert relied on a Contingent Valuation (CV) survey to determine the price premium paid by consumers due to the allegedly misleading “No . . . artificial flavors” claim. The defendants argued that CV was an inappropriate method to have used in Hilsley, claiming that “conjoint analysis is applied to actual, separate attributes of the same product to arrive at the value of that attribute. [ . . . ] Contingent valuation is an entirely different methodology, that measures a ‘hypothetical scenario.’ [ . . . ] In other words, instead of comparing real world attributes of the actual Ocean Spray products, [the plaintiff’s expert] made up an imaginary ‘hypothetical’ product with the label element ‘artificially flavored,’ a product that does not exist in real stores.” The court sided with the plaintiff’s expert and, in late March 2019, the plaintiff filed a motion for partial summary judgment, restating their positions and arguing that the defendants’ affirmative defenses were insufficient. As of April 2019, the motion has not been decided and the parties have not reached a settlement. Unless this case settles, the court could play a pivotal role in not only keeping with the recent rise in artificially flavored “natural” claims cases, but also the much debated acceptance of CV surveys in determining the price premium paid by consumers due to allegedly misleading claims and damages calculations.
Merck Sharp & Dohme Corp. v. Albrecht
The Supreme Court is poised to decide several important questions concerning the scope of prescription drug preemption of state-law tort litigation. Since that standard was created in Wyeth v. Levine, 555 U.S. 555 (2009), courts have reached no consensus on either the substantive import or procedural application of this test. The Court could decide: (1) whether the “clear evidence” standard even applies to situations where the FDA has, in fact, considered the warning at issue; (2) whether a drug manufacturer defendant must prove its entitlement to preemption by “clear and convincing” evidence; and (3) whether assessment of what the FDA might have done with different information is a question of law for the court or a question of fact for the jury. The Third Circuit had answered those questions, “yes,” “yes,” and “the jury.” A reversal could prompt a resurgence in preemption in prescription drug cases, while an affirmance could make preemption virtually impossible, since if actual FDA rejection of a warning about the information the plaintiffs are advocating is insufficient, it is difficult to see what would support preemption. The FDA, represented by the Solicitor General’s office, appeared as amicus curiae and advocated a finding of preemption and, thus, reversal.
Chavez v. Church & Dwight Co. and Palmer v. Whole Foods Market
FDA regulations for dietary supplement products require that nutrients, such as vitamins, minerals, protein, and dietary fiber, must contain a minimum of 100 percent of the amount claimed on the product label throughout shelf-life. Variabilities such as the type of ingredient being used, processing, shipping, storage, and other handling practices may subject certain ingredients to deterioration. Additionally, heat, moisture, acidic conditions, light, and oxygen can initiate chemical reactions that ultimately impact ingredient stability. To accommodate losses in nutrients, manufacturers often add more of an ingredient to a product during manufacture than is declared on the label. In accordance with dietary supplement good manufacturing practices (GMPs), companies must note in manufacturing records any intentional overages, ensure the overages are limited to reasonable amounts to meet label claims, and document that overages amounts used are safe for consumers.
Two recent class-action lawsuits, however, highlight an emerging risk that dietary supplement companies may face when making ingredient formulation decisions. These class actions allege that overages found in products were misleading and in violation of consumer protection laws, imply that overages are “indicative of a lack of quality control,” and argue that overages may pose a safety risk for consumers. Chavez v. Church & Dwight concerns a vitamin supplement in which the defendant allegedly included more folic acid than the NIH recommends ingesting; Palmer v. Whole Foods Market alleges excessive vitamin B12 content in vitamin B supplements. In Chavez, the court refused to dismiss the complaint on preemption grounds determining that the court could not concluded that the allegedly misleading overage claim was preempted by the Food, Drug and Cosmetic Act (FDCA). During a time in which class action litigation continues to be a challenge for the food and dietary supplement industries, these will be important class actions to watch as they could set important precedent about FDCA preemption and effect the manner in which supplement companies formulate and label their products.
** 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.
 See Azar v. Allina Health Servs., No. 17-1484,.Brief of Amici Curiae AMA, at 3.
 Azar v. Allina Health Servs., No. 17-1484.
 42 U.S.C. § 1395ww(d)(5)(F)(i)(I).
 United States ex rel. Ruckh v. Salus Rehabilitation, Case No. 8:11-cv-1303-T-23TBM (M.D. Fla.).
 136 S. Ct. 1989 (2016).
 No. 18-10500 (11th Cir.)
 No. 17-1715, 2019 WL 1186722 (4th Cir. March 14, 2019).
 Id., slip op. at 10, citing Franchise Tax Bd. Of Cal. V. Constr. Laborers Vacation Trust, 463 U.S. 1, 28 (1983).
 No. 4:18-cv-21-TAV-CHS, 2019 WL 1062387 (E.D. Tenn. March 6, 2019).
 Merck Sharp & Dohme Corp. v. Albrecht, No. 17-290 (U.S.)
 21 CFR §101.9(g) and 21 CFR §101.36(f).
 21 CFR §111.
 See Chavez v. Church & Dwight Co., 1:17-cv-01948 (N.D. Ill. May 16, 2018) and Palmer v. Whole Foods Market, BC 713378 (Sup. Ct. Cal. LA 2018).
Top Food and Drug Cases, 2018
& Cases to Watch, 2019