United States: Parallel Claims – The Government's Position Revealed İn Allergan v Athena

Last Updated: June 10 2015
Article by Michael A. Walsh

A Clarion call for an industry poised to win the battle but lose the war?

We said it before and it bears repeating: there is something inherently troubling when a prescription drug manufacturer wants a jury to decide a product claim under state law that should be decided by the Food and Drug Administration (FDA) under federal law. Not enough has been written about this case but, with the Supreme Court poised to decide what is almost certain to be a landmark case, all eyes should be on Allergan et al. v Athena, No. 2013-1286, 2013 U.S. App. LEXIS 25746 (Fed. Cir. Dec. 30, 2013) (here).

Why is this case so bad for the industry?

Manufacturers of FDA regulated products have generally enjoyed a decade of favorable rulings on the issue of federal preemption and the primacy of jurisdiction of the FDA, but the political climate and emerging new approaches by the Courts threaten to reshape the litigation landscape. The FDA itself has flip-flopped from its prior view favoring preemption to its position that now assists private litigants in pursuing private tort and Lanham Act "labeling" claims under the Food Drug and Cosmetic Act (FDCA). However, unlike many parallel claim cases where an individual litigates against a manufacturer—and human outcomes and injuries tend to factor into the court's search for a remedy—here, a manufacturer has sued a manufacturer. For a detailed discussion of the underlying case please see our prior post ( here).

The issue in Allergan is whether the FDA has exclusive authority to determine a product's regulatory classification. Determining a product's regulatory status is a difficult and complex matter. Even those well versed in the complexities of FDA practice often wrangle with the FDA over whether a product is a food, supplement, cosmetic, device, drug or combination product. There is no clearer example of the complexity of the process than in the June 8, 2015 letter that FDA served and filed in Amarin v FDA wherein FDA details the complexity of the analysis FDA employs when considering whether a claim rises to the level of requiring new drug approval and that the analysis differs whether the product is a drug or a product not requiring FDA approval, such as a dietary supplement or cosmetic. See Amarin v FDA 1:15-cv-03588, Doc. # 24 (SDNY). Leaving the classification decision to the ipse dixit of state court juries is an invitation for litigation chaos.

First things first: Does Allergan v. Athena involve a "Parallel Claim"?[1]

The definition of a "drug" under the California FDCA mirrors that of the FDCA, i.e., whether a substance is a drug is determined by the manufacturer's "intended use." "Intended use," however, is a term defined under FDA regulations, not California state law. Under those regulations, the FDA determines a manufacturer's intended use of its product "by such persons' expressions or may be shown by the circumstances surrounding the distribution of the article . . . including labeling claims, advertising matter, or oral or written statements by such persons or their representatives." 28 CFR 201.128. A product is an unapproved new drug if the FDA determines that the manufacturer intended the product to be used for a purpose that constitutes a "drug" under the FDCA. The FDA regulation on "intended use" does not have a "parallel" under California state law. To reach its conclusion, the Federal Circuit borrowed the FDA regulation to allow Allergan's claims to proceed. In Allergan, the FDA never determined whether Athena intended to market a cosmetic or a new drug and, thus, the Federal Circuit Court stood in the shoes of the FDA to apply 28 CFR 201.128 and determine Athena intended its cosmetic to be used as a drug.

In Allergan the "new drug" issue relates to an unfair business practice where a less expensive product—which was not subject to FDA approval—can compete with a prescription drug by making the same product claims as the approved drug. In all material respects, California law mirrors federal law but both are silent on who decides the threshold issue of whether the product at issue is a cosmetic, not subject to FDA approval, or a drug which is subject to approval by the FDA. There is no suggestion that drug approval could have been granted by the State of California, but the trial court broke new ground and concluded: "RevitaLash Advanced was a new drug that required approval under California law based on, among other facts, petitioner's marketing claims about eyelash growth and petitioner's strategy of promoting its various formulations of RevitaLash through comparison of the product to Latisse." See Gov't Brief at 6.

The Government's Jagged Parallel Line

On May 26, 2015, at the invitation of the Supreme Court, the Solicitor General expressed the views of the government in Allergan on whether the FDA or state court juries decide the regulatory status of FDA-regulated products. The government's position breaks new ground, by allowing state courts to decide a product's drug status and may significantly blur the lines between state law claims and claims seeking to enforce the FDCA.

It is important to note that in Allergan there was no FDA action, no record of communications between the manufacturer and the FDA, nor any determination regarding a classification by the FDA. Moreover, the government does not state whether the analysis would be the same (i.e. allowing a parallel state law claim to proceed) had the FDA reviewed the matter and not taken regulatory action for failure to file a new drug application. The government does, at least, nod in approval for preemption when the FDA was aware of the new use/off-label use. See Gov't Brief at 20 citing Perez v. Nidek, 711 F.3d 1109 (9th Cir. 2013). Oddly, the government suggests that if the state were attempting to impose criminal sanctions, that circumstance "might alter the preemption calculus." See Gov't Brief at fn5, page 15.

In the view of the government, the absence of an FDA determination of whether a product is a drug subject to FDA approval leaves the states free to decide the regulatory classification as they see fit. In this regard, the government cites Wyeth v Levine, 555 U.S. 555 (2009) stating:

This Court has concluded, however, that "Congress did not intend FDA oversight to be the exclusive means of ensuring drug safety and effectiveness, and that FDA has "traditionally regarded state law as a complementary form of drug regulation," Indeed, Congress specified, when enacting the modern drug pre-approval regime, that the FDCA does not "invalidat[e] any provision of State law which would be valid in the absence of such amendments unless there is a direct and positive conflict between such amendments and such provision of State law." Id. at 575, 578-79

Despite the FDA's $1.3 billion dollar budget and 15,000 employees, the government states that allowing state juries to decide the regulatory status of FDA-regulated products does not compromise FDA's objectives because

While FDA is well-equipped to decide the adequacy of pre-market submissions actually filed with the agency, this Court has noted FDA's "limited resources to monitor" the thousands of drugs on the market after they have been approved. The agency's capacity to police the vast marketplace of consumer products that have never been submitted to FDA for pre-market review is even more constrained. Moreover, both the FDCA and California's Sherman Law make it the manufacturer's burden, not FDA's, to establish through a rigorous vetting process that any new drug is safe and effective for its intended use. (citations omitted) Brief at 13-14.

The purported "tort of off-label promotion" posits that a manufacturer that promotes a drug for a "new use" is promoting an unapproved new drug and until or unless the FDA approves the new use and labeling, there is no sufficient warning for the new use/new drug, thereby subjecting the manufacturer to tort liability. If the Court agrees with the government in this case, it will no longer be for the FDA alone to decide whether the product's intended use is that of a drug, and there is no limit to the claims that will be allowable for products—whether approved by the FDA or not—where the claimant alleges a use that renders it subject to approval in another classification.

The government's position in this case is important not merely because of its permissive view of allowing state law to establish product classification for drugs, but because there is little, if any, principled basis for distinguishing this case from any other off-label drug or device promotion case. What may be an unintended consequence of Allergan is what is at issue in the emerging case law concerning off-label promotion, i.e., is the product a "new drug" or "new device" requiring FDA approval or clearance, and who decides?

It remains to be seen where the Court will land in the event it decides this case. However, no matter how the Court rules, this could well be a landmark Supreme Court ruling for those defending purported "new drug" claims, particularly those on the frontier of the tort of off-label promotion. Affirmance could be viewed as a good day for tort lawyers but a landmark mistake for industry.


[1] For further discussion of what are parallel claims and where they came from, see our blog: The Preemption Pendulum: The Supreme Court Punts Stengel v. Medtronic

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Michael A. Walsh
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