Feds Preempt State in Pharma Ad-Fraud Case

Sep 12, 2007

Last week, the third circuit court of United States Court of Appeals ruled in favor of AstraZeneca in a battle over whether pharma companies could be sued for false advertising after FDA has approved the drug advertisement.

In the class action suit, the Pennsylvania Employees Benefit Trust Fund alleged that AstraZeneca engaged in deceptive marketing tactics by claiming that its acid reflux and heartburn medication Nexium was an improvement over its popular drug Prilosec, which is soon to be off patent. Both drugs are proton-pump inhibitors that treat gastroesophageal reflux disease (GERD) and erosive esophagitis.

The suit stated "Prilosec was a profitable drug for Zeneca and had sales of $6 billion in 2000. The patent for Prilosec was due to expire in 2001, at which point it would be available for sale as the generic drug omeprazole. On February 14, 2001, Zeneca obtained approval from the Food and Drug Administration for final labeling on Nexium."

The court, however, ruled that since the drug's ad campaign had already undergone vigorous examination by FDA, AstraZeneca should be considered in safe harbor and could not be sued by individual states.

According to John Brenner, partner at a partner at McCarter & English, there is a provision in the United States Constitution called the supremacy clause that states that if there is a conflict between state and federal law, the federal law preempts the state law.

"This win is of huge interest to the pharma industry, because it could spare companies from the varying laws of all 50 states," Brenner says. "For a lot of drug manufacturers, there is always a push to make FDA the end of the inquiry."

The benefit trust fund sued under the Delaware Consumer Fraud Act, which is similar to most consumer-protection statutes in the United States. "AstraZeneca felt so strongly that it was in the right that it took advantage of preemption, and it won," Brenner said.

While this particular case might not be part of a trend, pharma companies are looking to see if this is a signal that other courts will be deferential towards FDA and take a broader view of preemption.

"Preemption is like the brass ring for pharma companies that need to defend themselves against personal-injury action," Brenner says. "If preemption becomes law, it gives pharma companies big protection against misleading-label cases."

However, Brenner says there is still the possibility that the winds of change could shift if a Democratic party takes the White House. "The final chapter will most likely be written by the Supreme Court or Congress itself," he says.