Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ill.: Pharmacy moves forward with Lanham Act, unfair practices claims, (Jan 13, 2015)

By Patricia K. Ruiz, J.D.

The federal district court in Chicago granted in part and denied in part a motion to dismiss by My Script, LLC in a suit brought by Medscript Pharmacy, LLC alleging—in part—false advertising, deceptive trade practices under both Illinois and Florida law, and common law unfair competition. In its decision, the court largely found that Medscript had made sufficient allegations as to the claims in its amended complaint (Medscript Pharmacy, LLC v. My Script, LLC, January 12, 2015, Gettleman, R.).

Background. Illinois-based Medscript is certified by the Professional Compounding Centers of America (PCCA) as a compounding pharmacy. My Script is a Michigan-based compounding pharmacy. Patel Khader, LLC (Khader LLC), Ziad Khader, Neil Patel, Nikhil Patel, and Daniel Leben (collectively, the non-pharmacy parties), former owners and members of Medscript, sold their interests in Medscript to Maryam Alrazzaq. Pursuant to the sale, Medscript provided the non-pharmacy parties with a list of patients that contained protected health information (PHI). The non-pharmacy parties gave the patient list to My Script for marketing use to induce prescribers to fill prescriptions with My Script rather than Medscript.

Medscript sued My Script and the non-pharmacy parties, alleging that the use violated the Health Insurance Portability and Accountability Act (HIPAA). Medscript asserted that, in its marketing, My Script called the patients on the list and told them one of two false statements: (1) Medscript was out of business and My Script was taking over for it; and (2) Medscript had changed its name to My Script. Medscript alleged that My Script also falsely advertised itself to be a PCCA certified pharmacy and used the list to fill prescriptions in Illinois, where it was not licensed to do so. Medscript further alleged that My Script sold ownership interests to physicians in Florida, creating a kickback scheme in which physicians would receive rewards for referring patients to My Script.

Lanham Act, IUDTPA. My Script and the non-pharmacy parties argued that, as to Medscript’s Lanham Act claim, Medscript’s allegations did not amount to commercial advertising or promotion. However, the court noted that, for a communication to be within the Lanham Act’s scope, it did not need to be made to the general public—only to a significant portion of the relevant industry. Based on the complaint, construed liberally, the court held that it was plausible that the patients contacted represented a significant portion of the compounding pharmacy industry and, thus, denied the motion to dismiss. Using the same reasoning, the court also denied the motion to dismiss as to the Illinois Uniform Deceptive Trade Practices Act (IUDTPA) claim. The common law unfair competition claim was deemed not duplicative of the Lanham Act and IUDTPA claims.

FDUTPA. My Script argued that it qualified for exceptions under the Florida Deceptive and Unfair Trade Practices Act (FDUPA) usually restricting the referral by physicians of patients to health care service providers in which they are investors. Furthermore, My Script argued that Medscript did not have standing to bring a claim under the FDUTPA, which only allows claims by consumers. However, the court noted that amendments to the law authorized persons or entities who suffered a loss as a result of an unfair or deceptive trade practice to bring a suit for damages.

Fraud, heightened pleading standard. In its motion to dismiss, My Script argued that Medscript failed to meet the heightened pleading standard for claims based on fraud, which require allegations of “the who, what, when, where, and how” of the fraudulent conduct. My Script claimed that Medscript did not plead what was said, to whom the representations were made, who engaged in the conduct, what conduct actually occurred, or how the fraud was accomplished. However, the court determined that the allegations regarding the false statements made to customers were sufficient. The court also determined that Medscript was permitted to make these allegations based on information and belief, as it did not have access to the names of the patients My Script called. The court thus allowed Medscript’s fraud claims to survive.

The case number is 14 C 0469.

Attorneys: Mark Daniel Roth (Orum & Roth, LLC) for Medscript Pharmacy, LLC. Thadford A. Felton (Greensfelder, Hemker & Gale, PC) for My Script, LLC, Khader David Pharmacy Services, LLC.

Companies: Medscript Pharmacy, LLC; My Script, LLC; Khader David Pharmacy Services, LLC

Cases: Advertising StateUnfairTradePractices IllinoisNews