Concordia Flush With Cash After Bowel Drug Ad Damages Tripled

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By Dana A. Elfin

Concordia Pharmaceuticals Inc. is feeling flush after a judge tripled its damages award in a false advertising suit over irritable bowel syndrome treatments ( Concordia Pharm., Inc. v. Method Pharm., LLC , 2017 BL 64838, W.D. Va., No. 3:14 CV 00016, 3/2/17 ).

The specialty pharmaceutical company will now get $2.2 million instead of $730,000 in damages after Judge Glen E. Conrad of the U.S. District Court for the Western District of Virginia ruled Concordia’s award should be increased.

Concordia’s enhanced damages award is unusual, an attorney with extensive experience handling false advertising disputes told Bloomberg BNA March 3.

Trebled, Enhanced Damages ‘Rare.’

The federal Lanham Act “prohibits the use of false or misleading statements or representations of fact in commercial advertising, and establishes a private remedy for any violation thereof.”

“It is a rare thing for judges to enhance or treble damages under the [Lanham Act] statute,” Chris Colvin, an attorney with Colvin IP PC in Brooklyn, N.Y., said.

“In my experience, judges are generally uncomfortable awarding substantial damages in cases where it’s difficult to pin down the precise harm, the causation for that harm or a connection between liability and the harm incurred,” Colvin said.

Bloomberg BNA contacted Concordia and Method for comment on the enhanced damages award but neither company responded.

Jury Award in 2016

In April 2016, a jury found Method and its owner, Matthew Scott Tucker, liable for falsely advertising its drug products as a generic substitute for Concordia’s IBS drug Donnatal, in violation of the Lanham Act. It awarded Concordia actual and compensatory damages of $733,200.

After the jury trial concluded, Concordia asked the court to increase the damages award and for an award of prejudgment interest and attorneys’ fees.

Conrad found the award needed to be increased to compensate Concordia for the adverse effects of the misconduct but he didn’t award prejudgment interest or attorneys’ fees.

Irritable Bowel Syndrome Drugs Involved

Donnatal treats IBS, a condition in which patients experience abdominal pain, bloating, and irregular diarrhea or constipation, and acute enterocolitis, a digestive tract infection.

Concordia distributes and markets Donnatal in two formulations, an immediate-release tablet and a fast-acting oral elixir.

Donnatal was the only prescription phenobarbital and belladonna alkaloid (PBA) product on the market from 2011 to 2014.

Pharmaceutical Database Listings

In 2014, Method Pharmaceuticals LLC, an Arlington, Texas-based drug distributor, started to advertise two products, Me-PB-Hyos Oral tablets and Me-PB-Hyos Oral Elixir, as cheaper substitutes for Donnatal.

Method falsely listed the products on pharmaceutical databases such as Medi-Span, First Databank and Daily Med as bioequivalent to Concordia’s Donnatal products; falsely claimed the products were approved by the Food and Drug Administration; and listed them at a lower price than Donnatal.

Health-care professionals consult pharmaceutical databases for drug pricing information and to determine if there are bioequivalent products—cheaper, generic alternatives—that can be substituted for brand-name products.

Concordia claimed the listing of the Method products caused it to lose $29.4 million in Donnatal sales.

Concordia Paid to Mitigate Problem

Concordia spent $885,000 on a coupon program for Donnatal to clear up confusion in the marketplace over Method’s listings and limit their negative impact.

Although enhanced damages and treble damages awards in such cases are infrequent, courts do have a lot of discretion in this area, Colvin said.

Courts Have Discretion

“Fairness comes into it,” he said. In this case, it’s likely the court found relevant the amount the jury awarded Concordia to compensate for Method’s false advertising was less than the $885,000 Concordia spent on the coupon program to combat the misconduct, he said.

Another factor in the enhanced and tripled award in the case is Method’s products, which it listed as already available in the drug databases, hadn’t actually been produced.

"[T]he court finds that the defendants, at a minimum, acted with indifference to whether their affirmative representations regarding the existence and availability of Me-pB-Hyos were false or misleading,” Conrad said in the opinion.

No Attorneys’ Fees

But Concordia didn’t win its bids for either prejudgment interest or attorneys’ fees.

The judge said prejudgment interest wasn’t necessary to compensate Concordia. The triple damages award sufficiently compensated Concordia, the judge said, and an award of prejudgment interest could be viewed as punitive. Punitive damages are prohibited under the Lanham Act.

Conrad also said attorneys’ fees weren’t warranted because the case didn’t rise to the exceptional standard the U.S. Supreme Court set out in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) .

Concordia, based in Ontario, Canada, is a subsidiary of Concordia Healthcare Corp.

In addition to Method and Tucker, Winder, Ga.-based Winder Laboratories LLC, which was to be the manufacturer of Method’s Me-PB-Hyos products, and Steven Pressman, a Winder manager, are also named defendants in the case.

Buchanan, Ingersoll & Rooney, P.C. in Alexandria, Va., Washington and Pittsburgh represented Concordia.

Hyman Phelps & McNamara PC in Washington and Michie Hamlett Lowry Rasmussen & Tweel P.C. in Charlottesville, Va., represented defendants Method and Tucker.

Venable LLP in Washington represented defendants Winder Laboratories LLC and Steven Pressman.

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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The opinion is at http://src.bna.com/mGm.

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