Antitrust Law Daily Wrap Up, ADVERTISING—Del. Sup. Ct.: Self-inflicted injury dooms health insurers’ Nexium false ad claims, (Apr 13, 2016)

By Greg Hammond, J.D.

A group of New York-based third-party payor health insurers (TPPs) failed to demonstrate that they were harmed by AstraZeneca’s advertisements of prescription drug Nexium as superior to the less-expensive generic drug Prilosec. In affirming the lower court’s dismissal order, the Supreme Court of Delaware concluded that the TPPs elected to continue covering Nexium, fully aware of the supposed false advertising claims, rendering their alleged injury self-inflicted (Teamsters Local 237 Welfare Fund v. AstraZeneca Pharmaceuticals LP, April 12, 2016, Seitz, C.).

AstraZeneca Pharmaceuticals LP patented the chemical compound Omeprazole—used to treat heartburn and erosion of the esophagus—and named the drug Prilosec. The TPPs claim that, in facing a looming patent expiration deadline for Prilosec, AstraZeneca introduced Nexium, a drug therapy that was identical to omeprazole but contained twice the amount of active ingredient. AstraZeneca allegedly marketed Nexium as superior to Prilosec in the hope that it would displace Prilosec in the market. The TPPs filed suit, alleging that AstraZeneca falsely advertised Nexium as superior to the less expensive generic drug Prilosec, causing the TPPs to overpay for Nexium when generic Prilosec would have sufficed to treat their conditions.

The Superior Court determined that New York law controlled the TPPs’ claims and held that the TPPs failed to state a claim under New York’s consumer fraud statute for failure to allege legally sufficient causation. The TPPs appealed.

On appeal, the TPPs focused on the Superior Court’s choice of law analysis, claiming that Delaware law—not New York law—should govern their claims. In addition, the TPPs argued that the Superior Court erred in its causation analysis. The Delaware Supreme Court, however, determined that it did not need to decide whether the Superior Court correctly analyzed the choice of law issue because under either state’s consumer fraud statute, the TPPs cannot recover damages as a matter of law.

In particular, the court noted that both Delaware and New York law require that TPPs must be a victim of, or be injured by reason of or as a result of, the alleged false advertising. The TPPs in this action, however, cannot meet this standard of causation because any injury they suffered was self-inflicted, the court concluded. The TPPs were aware of the false advertising claims they brought in the litigation, but nevertheless continued to list Nexium on their formularies and continued to reimburse members for Nexium prescriptions during the course of the litigation. Neither statute would recognize a consumer fraud claim to recover damages where a party claiming to be injured caused its own injury, the court decided. The Superior Court’s order dismissing the amended complaint with prejudice was therefore affirmed.

The case is No. 415, 2015.

Attorneys: Uriel Rabinovitz (Lowey Dannenberg Cohen & Hart, PC), Pamela S. Tikellis (Chimicles & Tikellis LLP) and Ellen Meriwether (Cafferty Clobes Meriwether & Sprengel LLP) for Teamsters Local 237 Welfare Fund. Michael P. Kelly (McCarter & English LLP) and Jack B. Jacobs (Sidley Austin LLP) for Astrazeneca Pharmaceuticals LP and Zeneca, Inc.

Companies: Teamsters Local 237 Welfare Fund; Astrazeneca Pharmaceuticals LP; Zeneca, Inc.

Cases: Advertising DelawareNews