Nexium Advertising Did Not Violate State Unfair Trade Practice Laws

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

After deciding that the laws of the home state of each plaintiff applied to consumer protection claims filed by health care benefit plans, plan members, and third party payors against the manufacturer of acid-reflux prescription drug Nexium, the federal district court in Wilmington, Delaware dismissed each claim.

Massive Advertising Campaign

The employee trust funds and other public interest groups alleged that the manufacturer engaged in a massive advertising campaign to boost the sales of Nexium, while misleadingly suppressing or omitting information demonstrating that Nexium was not more effective at equivalent doses than Prilosec, which had become available as the generic drug omeprazole.

By the year 200, Prilosec—the "purple pill" for treatment of heartburn and gastroesophageal reflux disease—had become the most widely prescribed drug in world. The trust funds asserted that the Nexium advertising campaign resulted in billions of dollars of unnecessary drug expenditures for third-party payors.

Choice-of-Law

The Delaware choice-of-law rules required the court to compare the laws of the competing jurisdictions to determine whether the laws actually conflict on a relevant point and then which state had the most significant relationship to the claims.

Looking at the consumer protection laws of the home states of the plaintiffs—Pennsylvania, New York, and Michigan—the court found a conflict existed between each of those laws and the Delaware Consumer Fraud Act. After applying the most significant relationship test, the court determined that the law of the home state of each plaintiff would apply to that plaintiff’s claim.

Pennsylvania

A plaintiff asserting a cause of action under the Pennsylvania Unfair Trade Practices and Consumer Protection Law must prove justifiable reliance on the unlawful conduct and not merely that the unlawful conduct occurred.

In this case, the complaint did not even present evidence that the plaintiffs had seen the advertising in question. Thus, the claim was dismissed.

New York

Although justifiable or reasonable reliance need not be shown in order to establish a New York General Business Law claim, a party must allege some awareness of a defendant’s misrepresentations prior to purchasing the product in order to establish the element of causation.

The complaint lacked evidence that the purchaser bought Nexium in response to the manufacturer’s representations concerning the quality of Nexium in relation to Prilosec.

Michigan

In order to state a Michigan Consumer Protection Act (CPA) claim, a payor was required to show that it was a consumer that purchased the prescription drug for personal use. To determine whether a purchase is for business or personal use for purposes of the MCPA, the focus is on the use to which the goods would be put, rather than the characterization of the ultimate purchaser as a consumer.

The complaint lacked any explanation of the role that the payor played as a purchaser of Nexium.

The decision is Pennsylvania Employee Benefit Trust Fund v. Zeneca, Inc. CCH State Unfair Trade Practices Law ¶32,057.