Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Ark.Sup.Ct.: Deceptive trade practices claims against drug manufacturer remanded due to admission of hearsay evidence, (Mar 21, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by the state attorney general against a pharmaceutical manufacturer, the state circuit court abused its discretion by admitting an advisory letter from the Food and Drug Administration into evidence on which the state relied to prove its deceptive trade practices claims made in promotional materials disseminated by the drug manufacturer, the Arkansas Supreme Court has ruled (Ortho-McNeil-Janssen Pharmaceuticals, Inc. v. State of Arkansas, March 20, 2014, Baker, K.). Accordingly, the circuit court order awarding judgment against the drug manufacturer was reversed and remanded.

Pharmaceutical company Ortho-McNeil-Janssen Pharmaceuticals, Inc. (Janssen) developed and manufactured a second-generation antipsychotic medication sold under the brand name “Risperdal” used in treating schizophrenia patients. In 2003, the Food and Drug Administration (FDA) notified the drug manufacturers of second-generation antipsychotics to add a class warning to the drug labels about the risk of diabetes associated with the drug and required them to send letters (known as a “Dear Doctor Letter” or “DDL”) to health care providers nationwide to advise of the label change. Janssen disagreed with the FDA assessment and responded with a modification of its label. Subsequently, Janssen sent its DDL. In 2004, the FDA issued a warning letter to Janssen, directing the company to cease disseminating any promotional materials containing information from its DDL as false and misleading. Janssen issued a corrective DDL and the FDA closed the matter.

In 2007, the State of Arkansas filed suit against Janssen, alleging that in its distribution of the DDL to state health care providers, Janssen made false, deceptive, or unconscionable statements in its promotional letter, in violation of the Arkansas Deceptive Trade Practices Act (DTPA). After a trial, a jury found that Janssen violated the DTPA. The trial court entered judgment and Janssen appealed.

The trial court erred in admitting into evidence the 2004 warning letter from the FDA as prohibited hearsay and prejudicial. The Arkansas Rule of Evidence 803(8) defines hearsay as a statement, made by one other than the declarant during testimony, offered in evidence to prove the truth of the matter asserted. According to the court, a warning letter is described by the FDA as informal and advisory, and part of a special investigation of particular complaint, case, or incident. The court noted that the warning letter stemmed from the FDA investigation into Janssen’s 2003 DDL and the particular information contained in that promotional letter. The letter was sent in response to a special investigation regarding the 2003 DDL and the investigation was not part of routine recordkeeping that would be admissible under Rule 803(8), the court determined.

Additionally, the warning letter was more prejudicial than probative. In the case, the letter was referred to repeatedly throughout the trial and mentioned numerous times in closing arguments. The warning letter was highly prejudicial since reports issued by governmental agencies due to their official nature may “carry inordinate weight in the minds of jurors,” the court concluded.

The case is No. CV-12-1058.

Attorneys: Charles C. Lifland (O’Melveny & Myers, LLP), Thomas F. Campion (Drinker Biddle & Reath), and James M. Simpson (Friday, Eldredge & Clark, LLP) for Ortho-McNeil-Janssen Pharmaceuticals, Inc. Dustin McDaniel, Arkansas Attorney General, and Fletcher V. Trammell (Bailey Perrin Bailey PLLC) for State of Arkansas

Companies: Ortho-McNeil-Janssen Pharmaceuticals, Inc.

Cases: StateUnfairTradePractices ArkansasNews