No one can sell a new drug without prior approval from the FDA. That rule is codified in the federal Food, Drug, and Cosmetic Act and is not controversial (or at least should not be controversial). Less clear is whether a seller of an FDA-approved drug can sue a competitor under state unfair competition laws for selling unapproved versions of that same product.
The Fifth Circuit has held that an approved drug’s seller can bring such a state-law claim, reversing a lower court’s decision that federal law and the FDA’s enforcement power preempted state-law claims based on the sale of an allegedly unapproved drug. In Zyla Life Sciences, L.L.C. v. Wells Pharma, No 23.20533, 2025 U.S. App. LEXIS (5th Cir. Apr. 10, 2025) (to be published), the plaintiff drug manufacturer was the exclusive seller of FDA-approved indomethacin suppositories. The dispute arose when a compounding pharmacy started selling indomethacin suppositories without FDA approval, thus competing with the plaintiff’s approved product.
Compounding pharmacies are unique animals. Compounding pharmacies are allowed to prepare and sell drugs, without FDA pre-approval, usually to meet the needs of individually identified patients. A patient, for example, might be allergic to an inactive ingredient in a commercial drug or might need a customized dose. Compounders can mix and sell that bespoke drug. As the Fifth Circuit observed, “The goal of compounding is to provide ‘medication tailored to the needs of an individual patient.’” Id. at *5.
Sometimes compounders stray from this mission and produce and sell drugs in direct competition with FDA-approved products, which is not allowed except under particular circumstances. That was the plaintiff drug manufacturer’s beef in Zyla Life Sciences: Because the defendant compounder was selling a competing indomethacin suppository, the plaintiff sued under the unfair competition laws of the six states with laws mirroring the federal prohibition on selling new drugs without the FDA’s pre-approval.
We have no idea whether this particular compounder violated any law, but we do know that there is no private right of action under the FDCA and that the federal government has the exclusive authority to enforce the statute. 21 U.S.C. § 337(a). We also know that Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), held that federal law impliedly preempts private efforts to enforce the FDCA.
How then is this private plaintiff allowed to maintain a lawsuit alleging the sale of a new drug without FDA approval? We are talking here about implied conflict preemption, and more particularly the version of implied conflict preemption known as obstacles-and-purposes preemption. That is to say, if state law stands as an obstacle “to the accomplishment and execution of the full purposes and objectives of Congress,” state law has to give way. Zyla Life Sciences, at *2.
The key for the Fifth Circuit was that these six states enacted drug laws identical to federal law. As a result, “there was ‘no conflict in terms, and no possibility of such conflict, for the state statute ma[de] federal law its own.’” Id. at *9 (quoting California v. Zook, 336 U.S. 725, 735 (1949)). The court also found that accepting preemption would raise a host of problems. To start, states may have an interest in punishing or providing redress for wrongs, even if federal law already does so. In addition, the Fifth Circuit concluded that applying preemption here would undermine legitimate state enforcement of criminal and tort laws. We see the Fifth Circuit’s point, but the court slipping into hyperbole when making it. According to the court, because federal law touches “nearly every facet of human existence,” preempting this lawsuit would deprive states “of just about any power to regulate any conduct at all.” Zyla Life Sciences, at *16. Federal preemption is of course more nuanced than that.
The court further reasoned that states may generally regulate the same conduct as federal law, especially when state standards mimic federal ones, and that the mere possibility that federal enforcement priorities might be upset is not sufficient to support federal preemption. Moreover, the court observed that it is fine when state law supplements the FDCA’s remedial scheme, especially in light of Wyeth v. Levine, which permits state-law regulation of drug safety concurrently with the FDA. Id. at *17-*18.
Finally, the Fifth Circuit distinguished Buckman, which did not involve state law that mirrored federal requirements, but instead applied preemption to ordinary fraud. The problem in Buckman was that the alleged fraud was against a federal agency—fraud on the FDA, which inherently conflicts with federal law by saying a state can ignore the FDA action at issue as “fraudulent.” Here, the defendant compounder was not competing against the FDA, and the plaintiff was not policing any relationship between the compounder and the FDA. As a result, there is no threat that this lawsuit will interfere with any federal program.
This drug manufacturer’s unfair competition lawsuit therefore can proceed. We don’t know the outcome, but if the defendant compounding pharmacy is illegally selling drugs, that should stop. It is not only against the law, but as a long-retired and much-admired former mentor used to say, it also violates the “you can’t do that” rule.
From our product liability perspective, the key point is that the state laws in Zyla Life Sciences mirrored the FDA’s approval, and nothing else, so no chance of conflict existed. That is completely unlike product liability litigation, where plaintiffs almost always are challenging, as unsafe, something that the FDA has permitted.