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Life sciences companies aggrieved by competitor activity believed to be in violation of the Federal, Food, Drug, and Cosmetic Act (FDCA) have been consistently unsuccessful in challenging these activities in court – this power belongs solely to the federal government under 21 U.S.C. § 337(a) ("all such proceedings for the enforcement, or to restrain violations, of this chapter shall be by and in the name of the United States").
However, a recent case from the United States Court of Appeals for the Fifth Circuit, Zyla Life Sciences, LLC v. Wells Pharma of Houston, LLC (No. 23-20533, filed 04/10/2025), may provide an option for parties wishing to pursue FDCA-like claims in states with laws that mirror the FDCA.
Key Takeaways
- Companies may have a new private right of action under state law to sue others who commit FDCA violations
- There could be a rise in consumer class actions where the plaintiffs allege violations of the FDCA
Factual Background
Zyla Life Sciences (Zyla) has FDA approval to market indomethacin suppositories. Wells Pharma (Wells) is a registered outsourcing facility that sells a compounded version of indomethacin suppositories.
Zyla sued Wells in the United States District Court for the Southern District of Texas1 under the unfair competition laws of six states (California, Colorado, Connecticut, Florida, South Carolina, and Tennessee), arguing that Wells' sales violated state laws that mirror the FDA's premarket approval requirement under the FDCA.
At the district court, Wells filed a motion to dismiss under Rule 12(b)(6), i.e., failure to state a claim allowing relief, arguing that the state laws mirroring the FDCA were preempted by federal law. The district court agreed and dismissed Zyla's claims, holding that indeed preemption did apply. The District Court reasoned that allowing the suit would interfere with the FDA's exclusive enforcement authority.
Upon appeal at the Fifth Circuit, the circuit court reversed the district court's dismissal, holding that state laws that mirror federal law are not preempted by the FDCA. The court relied on California v. Zook, 336 U.S. 725 (1949), which held that state statutes incorporating federal law do not create a conflict between laws and are not preempted. The court distinguished the Zyla case from Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341 (2001), which involved fraud-on-the-FDA claims — a uniquely federal concern. Here, the state laws did not conflict with federal law but mirrored it, and thus did not interfere with federal enforcement discretion. The court emphasized that states retain the right to regulate health and safety, especially when their laws track federal standards, and remanded the case for further proceedings.
Discussion
While the Zyla case continues to play out on remand to the district court, the Fifth Circuit's decision could dramatically impact the continued legal tug-of-war between compounders and traditional drug manufacturers, such as the ongoing high-stakes proceedings involving compounded copies of commercially available GLP-1 weight loss drugs.
With the remanded civil suit now permitted to move forward at the trial court level, Wells must now presumably justify it is properly relying on the exceptions afforded to compounders under section 503B of the FDCA (21 U.S.C. § 353b) and state law. FDA generally considers the compounding of "essentially copies" of commercially available drug products as improper and thus not afforded the exceptions to certain new drug requirements.
It remains to be seen what the extent and applicability of this ruling will be. Notably, the Fifth Circuit's jurisdiction (Louisiana, Mississippi, and Texas) does not cover any of the six states included in the suit that have laws mirroring the FDCA (jurisdiction in the Zyla case was appropriate because Wells has a presence in Texas). And, importantly, a recent First Circuit case (DiCroce v. McNeil Industries, 82 F. 4th 35 (1st Cir. 2023), cert. denied) held that state consumer protection law claims based on FDCA violations were preempted by federal law, so the extent the state law separately mirrors the FDCA may prove to be critically important.
Similarly, because FDA regulation expands far beyond drug products, there is the potential to affect other FDA-regulated areas, especially where there is a conflict with federal law and individual states have passed even stricter laws than the federal government. Examples include the regulation of hemp/CBD, organic certification, and antibiotics in animal feed.
What does all this mean?
The implications of this case for companies operating in FDA-regulated industries cannot be overstated. A company may no longer simply point to compliance with the FDCA to escape liability under relevant state laws. Nor do they only have to contend with FDA enforcement when evaluating regulatory compliance. A significant rise in causes of action brought by product competitors under state law is possible. Complaints that allege violations of state laws that rest on violations of the FDCA are alive and well now and enforcement by litigation could become the new normal in the Fifth Circuit and any jurisdictions that follow suit. This marks a significant change in how companies assess regulatory risk.
Taking pharmaceuticals as an example, a pharmaceutical company may now be able to sue a competitor under an applicable state consumer protection or unfair competition law if the competitor misbrands or adulterates their product. Traditionally, that type of regulatory policing was left to the sole jurisdiction and authority of the FDA. Companies now need to be much more cognizant of state laws that govern the manufacturing, supply and distribution, and advertising of their products. Failure to stay educated on such local regulatory schemes could land them in federal or even state court facing civil exposure and costly litigation expenses.
While the extent of the fallout from the Zyla decision remains unknown, companies performing activities regulated under the FDCA will continue to face a heightened risk of civil exposure from private parties, especially those brought in the Fifth Circuit (Louisiana, Mississippi, Texas). Companies should evaluate their compliance activities and those of their competitors to evaluate opportunities or exposure through this new lens.
Footnote
1. Zyla Life Scis., LLC v. Wells Pharma of Hous., LLC, No. 4:22-CV-04400, 2023 WL 6301651 (S.D. Tex. Sept. 27, 2023)
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