In the wake of last week’s webinar that we DDL bloggers presented on the best and worst cases of 2024, we received many kind notes from clients and colleagues. The webinar was apparently a painless and – dare we say it? – even fun way to earn 1.5 CLE credits. But we also heard from some in-house lawyers that they do not all subsist on a diet of straight product liability. Company legal departments harbor lawyers who work on a variety of matters, including intellectual property, commercial disputes, and sundry other areas. Their point was that drug and device in-house attorneys also like to hear about those other legal issues.
We take their point. Accordingly, today we will discuss Nexus Pharmaceuticals, LLC v. Long Grove Pharmaceuticals, LLC, 2025 U.S. Dist. LEXIS 6058, 2025 WL 81877 (D. Mass. Jan. 13, 2025), a lawsuit brought under the Lanham Act, 15 U.S.C. section 1125(a). The claim was false advertising. There was no personal injury alleged in the case. Instead, the alleged injury was to sales. It was a dispute between two pharmaceutical companies. (Truth be told, we are tempted to remain mute when we see such a dispute. We do not want to stumble into client conflicts or hostilities. But this case implicates interesting issues such as a misbegotten effort at private FDCA enforcement, so here we go.) The parties were competitors. Both sold a drug product used to enable diagnostic imaging. Go to the opinion (which is quite short) if you want to learn the details, but the key chronology in the case goes like this:
April 2023 – the FDA identified a shortage of the drug product.
June 2023 – the defendant bought the NDA for the product and any remaining stock from a bankrupt company. Because of the drug shortage, the FDA permitted the defendant to sell the old stock. In accordance with an FDA guidance, the defendant sent out a Dear Healthcare Provider letter that it would distribute the drug product to “address this critical drug shortage.” That same language showed up on the defendant’s website.
September 2023 – the plaintiff obtained FDA approval to market a generic version of the drug product.
December 2023 – the FDA declared that the shortage was “resolved.”
But – and here’s the rub – even after the FDA’s declaration that the shortage was resolved, the defendant continued to distribute the drug product and continued to state on its website that the shortage still existed. The plaintiff asked the defendant to stop selling the product because the shortage had ended. The defendant refused, maintaining “that it had permission from the FDA, pursuant to its drug shortage authority, to continue selling” the product.
Then the plaintiff filed this lawsuit, alleging that the defendant’s continuing statements about the drug shortage misled customers into believing that the plaintiff’s product was not available and that only the defendant could provide the product. As a result, so the complaint alleges, the plaintiff lost customers to the defendant. The complaint also stated that the defendant was able to undercut on price because it was selling product from a bankrupt company that had stored the product in conditions unknown to the plaintiff or the public.
The lawsuit was based on the Lanham Act and alleged unfair competition and false advertising. It sought a declaratory judgment against the defendant, plus actual damages. The complaint referenced one actual customer who had switched to the defendant’s product.
The defendant moved to dismiss the complaint on several grounds, including that the plaintiff was essentially challenging the defendant’s compliance with FDA regulations, and that “the Lanham Act cannot supply a basis for relief from a statement that FDA expressly mandated a manufacturer to make.” Those are interesting assertions and there’s a whiff of preemption, though displacement of one federal legal or regulatory regime by another does not really constitute preemption.
But the Nexus court dodged these interesting assertions by deciding the much simpler issue of whether the claim was sound under the Lanham Act. It was not, because
the Lanham Act requires that the alleged misrepresentation be about the products at issue. To prove a Lanham Act claim for unfair competition and false advertising, the plaintiff must demonstrate that:
1. The defendant made a false or misleading description of fact in a commercial advertisement about his own or another’s product;
2. The misrepresentation was material in that it likely influenced a purchase decision;
3. The misrepresentation actually received had the tendency to deceive;
4. The defendant placed the deceptive statement into interstate commerce; and
5. The plaintiff was likely injured by either a direct diversion of sales or loss of goodwill.
Here, the plaintiff’s Lanham Act claim stumbled at the first hurdle. The allegedly false claim that there was a shortage did “not refer to any inherent quality or characteristic” of either the plaintiff’s or defendant’s product. Statements relating to the marketing method of a product are not related to product qualities or characteristics. (The Nexus court cited several other district court opinions that came out with similar holdings). The plaintiff did not allege that the defendant had made a false/misleading statement about the actual age of the product or its quality. It appears that such an allegation might have saved the Lanham Act claim, but we’ve already wandered far afield of our core knowledge, so we’ll leave that speculation to our readers who are smarter than we are either generally or merely with respect to the Lanham Act.