Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—C.D. Cal.: Claims that Costco did not include country-of-origin labels on prescription drugs failed, (Nov 17, 2014)

By Edward L. Puzzo, J.D.

Claims that Costco violated California unfair trade practice laws by selling a foreign-manufactured generic prescription drug without a country-of-origin label failed because the plaintiff lacked an economic injury to provide standing, his fraud claims lacked particularity, and he failed to specify the alleged violation of importation laws, the federal district court in Los Angeles has ruled (Joseph v. Costco Wholesale Corp., November 13, 2014, Wilson, S.).

Joel Joseph had been accustomed to purchasing prescription drug Lipitor from Costco. After atorvastatin—a generic version of Lipitor manufactured by Apotex Corporation—became available in 2012, Costco filled Joseph’s prescription with the Apotex’ generic. Finding no country-of-origin label on the product, and believing that medications manufactured outside the United States required such a label, Joseph concluded that the medication was manufactured in the United States. It was not; it was manufactured in India. Joseph then filed claims, which he labeled a “private attorney general action,” against Costco and Apotex, alleging violations of the California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA). The defendants moved to dismiss, and the court granted defendants’ motion.

Standing. A plaintiff has standing to bring a claim under the UCL or FAL only if he suffered an injury-in-fact and lost money or property as a result of the complained-of conduct, the court explained. Joseph asserted that “the general public” did not know that Apotex’ atorvastatin was foreign-made and therefore paid higher retail prices than they otherwise would have. But given that atorvastatin is a prescription drug, the court stated, it was more than plausible that Joseph paid a copayment rather than the retail price. If so, then the price that Joseph paid would not be affected by the alleged misrepresentation. Thus, Joseph failed to plead an economic injury.

Second, his “fraud on the market” theory that the alleged misrepresentation inflated Apotex atorvastatin’s market price, cannot apply to the prescription drug market, where there is no open market and the amount a consumer must pay as a co-pay is determined by his health insurance and not the market. Thus any causal connection between the defendants’ conduct and harm to Joseph was too attenuated to be plausible, the court concluded. This deprived him of standing to pursue his UCL and FAL claims. However, even if standing were not an issue, Joseph failed to state a claim under the UCL, the court stated.

Fraudulent practices. In a claim of fraudulent business practices in violation of the UCL, a business practice must be shown to be unlawful, unfair, or fraudulent. Since it is a fraud allegation, it must also satisfy the particularity requirements of Federal Rule of Civil Procedure 9(b).

Joseph alleged that the defendants’ failure to place a country-of-origin label on the atorvastatin container sold to him was fraudulent. However, he did not specify the date on which he purchased the container, the Costco location he purchased it at, or whether it was Costco or Apotex that produced and labeled the container. The allegations failed to satisfy the particularity requirements for fraud, the court stated.

Tariff Act and UCL. The Tariff Act of 1930 generally requires that imported items be marked with their country of origin, the court explained. Under the implementing regulations, the marking requirements for imported drugs differ depending on whether they are imported in a container intended to reach the ultimate purchaser, or are imported with the intention to be repacked by the importer or someone other than the importer.

Joseph failed to allege who imported the atorvastatin in question; whether it was imported in containers intended to be sold to the ultimate purchaser or whether it was intended to be repacked; or whether the container he saw was the container in which the atorvastatin was imported or a different container in which it was repacked. In short, the court continued, he failed to allege sufficient facts to even establish which federal regulation applies to the atorvastatin at issue—let alone that either defendant violated the Tariff Act and its implementing regulations. Thus, his UCL claim based on a violation of the Tariff Act was not established.

The case is Civil Action No. 2:14-cv-06899-SVW (MANx).

Attorneys: Joel D. Joseph, pro se. Jonathan L. Koenig (Arnold and Porter LLP) for Costco Wholesale Corporation. Harrison Maxwell Brown (Blank Rome LLP) for Apotex Corporation.

Companies: Costco Wholesale Corp.; Apotex Corp.

Cases: StateUnfairTradePractices CaliforniaNews