Amicus Brief — Inwood Laboratories, Inc. v. Ives Laboratories, Inc.

Office - Supreme Courl, U.S,

FILED

nov 80 1961

Nos. 80-2182, 81-11

n ALEXANDER lL. STEVAS

In CLERK

DARBY DRUG CO., Inc., INWOOD LABORATORIES

INCORPORATED, MD PHARMACEUTICAL COM-

PANY, Inc., PREMO PHARMACEUTICAL LABOR-

ATORIES, Inc., RUGBY LABORATORIES, Inc.,

and SHERRY PHARMACEUTICAL CO., Inc.,

Petitioners,

against

IVES LABORATORIES, Inc.,

Respondent.

Brief Amicus Curiae of the Attorney General of the

State of New York

Rosert Aprams

Attorney General of the State of New

York, Amicus Curiae

The Capitol

Albany, NY 12224

(518) 474-7233

Suiraiey Apetson Smce.

Solicitor General

Perer G. Crary

Assistant Attorney General

Of Counsel

zy

Table of Contents.

Page

SEE OG NEED Ci REdd do cdvcccccccoetedee i

Interest of Amicus Curiae New York State ........ l

Summary of Argument...........cecccccscceees 3

ARGUMENT. Preventing the use of generic drugs

of the same color to which consumers were

accustomed in their prior use of the brand

name product interferes with a valid State

policy, expressed not only in New York but

by the Legislatures of 48 states............. 4

ESAS AS TUES RE A DD 7

TEC 65.2 GR vas babs ccc > ob sees eenbere la

TABLE OF AUTHORITIES.

CASES:

Darby Drug Co., Inc. v Ives Laboratories, Inc., 488

F Supp 394 (E.D.N.Y., 1980) ............ 3,4,5

Darby Drug Co., Inc. v Ives Laboratories, Inc., 638

aC UR UL A hah bee beuededhetees 4

Ives Laboratories, Inc. v Darby Drug Co., 638 F2d

ls ig Re TEBE, Re RR Kits cantare 5

Pharmaceutical Society of the State of New York v

Lefkowitz, 586 F2d 953 .........cccceeees 2

ii.

FEDERAL STATUTES:

SERIE EE piccipsdevccpcconsd¥ecuesesnave

Bey SOUP CDi risin¥ so vcovccvcetobbecesonce’

PERE POP Rs setrvoccesvevccdactdccsonears

NEW YORK STATUTES:

PE REPTAMUUT TM aa ee sce cvecrccisdveetensees

New York Education Law, § 6815(2) ..........0.

MISCELLANEOUS:

Competition in the Drug Industry: Hearings Before

the Subcom. on Oversight & Investigations

SEUMEE so aa h's sc anevedeawereb as vente

Drug Product Selection, Staff Report to the Federal

Trade Commission (1979) ..........0e000-

New York State 1977 Legislative Annual ..........

De WO REFIT ciccccceccctccdsaedren es

Warner, Consumer Protection and Prescription

Drugs: The Generic Drug Substitution Laws,

67 Ky. L.J. 384 (1978-9) ..... cece eee eees

Page

Nos. 80-2182, 81-11

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1981.

DARBY DRUG CO., Inc., INWOOD LABORATORIES IN-

CORPORATED, MD PHARMACEUTICAL COMPANY 9

Inc., PREMO PHARMACEUTICAL LABORATORIES, Inc.,

RUGBY LABORATORIES, Inc., and SHERRY PHAR-

MACEUTICAL CoO., Inc.,

Petitioners,

against

IVES LABORATORIES, Inc.,

Respondent.

Brief Amicus Curiae of the Attorney General of the State

of New York.

Interest of Amicus Curiae New York State.

The Attorney General of the State of New York submits

this amicus curiae brief pursuant to Rule 36(4) of the Rules

of this Court, since the holding of the Court of Appeals

for the Second Circuit may adversely affect an important

legislative policy of the State of New York.

2

In 1977, New York State joined a nationwide trend

when it enacted its ‘‘Generic Drug Substitution Act’’ (L

1977, ch 776), which permits prescribing physicians to

authorize pharmacists to substitute therapeutically

equivalent generic drugs for their more expensive brand

name counterparts.* As stated by Governor Hugh Carey

in his memorandum approving this statute, its purpose is

‘*to reduce health care costs without sacrificing quality”’

(New York State 1977 Legislative Annual, pp 258-9). The

importance of this legislative object was recognized by the

Court of Appeals for the Second Circuit in affirming

denial of an injunction against implementation of the New

York law:

‘** * * the local benefit is the potential saving to

New York patient-consumers based on the price

differentials between brand name drugs and lower-

priced generic equivalents, which represents a

legitimate interest. See Virginia State Board of

Pharmacy v. Virginia Citizens Consumer Council,

425 U.S. 748, 763-64, 96 S. Ct. 1817, 48 L.Ed. 2d

346 (1976).”’

Pharmaceutical Society of the State of New York v

Lefkowitz, 586 F2d 953, 957 (2d Cir, 1978).

*Prior to 1972, virtually every state had a drug “‘anti-

substitution”’ law which prevented pharmacists from deviating from

the face of a prescription, despite the availability of less expensive

generic alternatives (Drug Product Selection, Staff Report to the

Federal Trade Commission [1979], p 150). In light of heightened

Federal regulatory control over drug efficacy (see, 21 USC § 355{d],

[e]), the 1970s saw a rapidly accelerating repeal of these laws and their

replacement with statutes permitting drug substitution. Forty-eight

states, the District of Columbia and Puerto Rico have now enacted

such laws (see, Appendix A; see also, ‘‘Competition in the Drug In-

dustry: Hearings Before the Subcom. on Oversight & Investigations,”’

House Comm. on Energy & Commerce 13, 91st Cong, Ist Sess.

(3/10/81); Warner, ‘‘Consumer Protection and Prescription Drugs:

The Generic Drug Substitution Laws,”’ 67 Ky. L.J. 384 (1978-9).

3

This state purpose, embodied in legislation throughout

the country, is hindered by the holding of the Court of Ap-

peals for the Second Circuit in the instant case. That Court

has held that Ives Laboratories can bar generic phar-

maceutical manufacturers and distributors from using the

colors of its promoted brand drug, ‘‘Cyclospasmol.”’ As

found by the District Court in this matter (488 F Supp 394,

399-400 [EDNY, 1980]), this inability by generic manufac-

turers to use a brand name drug’s accustomed color tends

to confuse patients as to the content and effect of generic

drugs substitutable under New York’s ‘‘Generic Drug

Substitution Act.”’ This confusion increases, without any

scientific basis, patient resistance to drug substitution,

thus undermining the State policy seeking to promote

greater use of approved substitutes to reduce drug costs.

Moreover, the resultant increased sale of more expensive

drugs means increased costs to the State for Medicaid

payments to eligible recipients.

Summary of Argument.

The State of New York has, through its ‘‘Generic Drug

Substitution Act’’ (L 1977, ch 776), expressed a clear

policy of promoting the substitution of less expensive

generic drugs which are therapeutically equivalent to

brand name ‘“‘reference’’ drugs. The Court of Appeals for

the Second Circuit has inhibited this policy by holding that

generic drugs cannot be marketed in the same color as

their brand name counterparts. Confusion caused by the

marketing of equivalent drugs with different colors in-

creases patient resistance to the drug substitution sought

to be encouraged in New York State.

Moreover, the Court of Appeals for the Second Circuit

erred in basing its determination in part upon judicial

notice of indictments alleging illegal drug substitution and

mislabelling in New York City. These indictments do not

4

support that Court’s holding, but indicate instead a

vigorous and effective State enforcement program to pro-

tect the very interests asserted by the respondent, Ives

Laboratories, Inc., in this matter.

ARGUMENT.

Preventing the use of generic drugs of the same color to

which consumers were accustomed in their prior use of the

brand name product interferes with a valid State policy,

expressed not only in New York but by the Legislatures of

48 states.

After the trial, the District Court made the following

factual findings relevant to the State’s interest as described

above (488 F Supp 394 [E.D.N.Y. 1980)):

1. Ives offered no proof that the generics involved had

a therapeutic effect differing from that of the Ives

Laboratories promoted brand, ‘‘Cyclospasmol’’ (id. at

396).

2. Under New York law, the pharmacist may properly

but need not substitute the particular drug involved (id. at

397; see to the same effect, 638 F2d at 541, n 5).

3. Nine of ten pharmacists who used the ‘‘Cyclo-

spasmol’’ name when dispensing a generic told the pa-

tients about it and only one charged a higher ‘‘brand’’

price (488 F Supp at 397).

4. The similarity of color is functional in that many

elderly patients associate the appearance of their medica-

tion with its therapeutic effect, and others commingle

drugs in a single container and rely on appearance to

follow their doctors’ instructions; color is also useful to

5

doctors and hospital emergency rooms in identifying over-

doses of drugs (id. at 399-400).

5. There is no reason to suppose that drug color has ac-

quired a secondary meaning, since patients, as distinct

from physicians, do not associate ‘‘Cyclospasmol’”’ with a

particular manufacturer (id. at 400), nor was there any

evidence that physicians were deceived by color identity.

These findings were supported by the record, as noted

by Judge Mulligan, in his dissent in the Court of Appeals

(Ives Laboratories, Inc. v. Darby Drug Co., 638 F2d 538,

547 [2d Cir, 1981]). Nonetheless, the majority in the Court

of Appeals found a lack of concrete evidence for the

District Court’s explanation that mislabelling occurs

because of confusion rather than as a result of inducement

(id. p 544).

The State of New York believes that the District Court

was correct in hoiding that any benefit accruing from pa-

tient ease in detecting an improper drug substitution is far

outweighed by the State’s legitimate interest in fostering

the use of generic substitutes. As noted by that Court ‘‘[t]o

require different capsule colors might to some extent deter

a wrongdoer but it would also severely inhibit legal

substitution which the legislature deems to be in the public

interest’ (488 F Supp at p 401). The Court of Appeals

erred in failing to take this vital public interest into ac-

count.

Moreover, the Court went on to take judicial notice of

indictments handed down in the New York City area al-

leging illegal substitution and mislabelling of generic

cyclandelate in prescriptions requiring cyclospasmol, and

to hold that these indictments are inconsistent with the

contention that mislabelling is rare or unintentional. The

6

fact is that the indictments are simply a mark of the effec-

tive Medicaid fraud enforcement program which is carried

on in New York.*

New York State has adopted a systematic effort to

police implementation of the drug substitution and

Medicaid programs. As part of this effort, the State seeks

to see that consumers obtain the benefits of the drug

substitution law, including knowledge of when substitu-

tion occurs and the benefit of any lower price. This effort

includes enforcement of the State’s ban on misbranding

and the requirement that the correct proprietary names of

material prescribed be shown on labels (New York Educa-

tion Law, §6815[2]). The State effort includes both recep-

tion of complaints of alleged violations and also sample

purchases.

As already noted, the clear State policy of promoting

substitution of equivalent generics is undermined by the

holding of the Court of Appeals. But beyond that it would

be extremely ironic if this Federal intrusion were justified

in part by the very success of a State enforcement program

designed to protect the interest asserted by Ives in the in-

stant matter.

As a result of the State’s effort, indictments have been

obtained in numerous cases, some of which were cited by

the’Court of Appeals, as noted above, in support of its

conclusion that a ban on similarity of colors of promoted

and generic cyclandelate was necessary to prevent

misbranding in violation of section 32 of the Lanham

Trade-Mark Act, 15 USC, §1114. The conclusion of the

Court of Appeals is based on the assumption that New

*The State’s effective cost containment and Medicaid fraud en-

forcement programs have earned Federal recognition in the form of

forgiveness of otherwise applicable Federal funding reductions (see

New York Times, 11/81, p 6B).

7

York State’s program is ineffective, for which no support

in the record is cited.

There is no statutory indication that Congress author-

ized the Federal courts to intrude and undermine State

policy in the manner mandated by the Court of Appeals,

especially when, as here, Ives deliberately chose to bypass

available State remedies and instead to pursue exclusively

its efforts to get the Federal courts to grant it a color

monopoly.

Even if a section 32 violation had been properly found,

the remedy imposed by the Court of Appeals is excessive

and unduly infringes on State interests. Certainly, there

are less intrusive alternative remedies available to prevent

deception. For example, a requirement of a logo or im-

print in a contrasting color, so as to be readily visible even

on the small capsule, was never considered by the Court of

Appeals.

CONCLUSION.

The decision of the Court of Appeals should be re-

versed, and that of the District Court reinstated.

Dated: Albany, New York

November 23, 1981

Respectfully submitted,

ROBERT ABRAMS

Attorney General of the State of New

York, Amicus Curiae

SHIRLEY ADELSON SIEGEL

Solicitor General

PETER G. CRARY

Assistant Attorney General

of Counsel

la

APPENDIX ‘‘A,’’

State Statute Citations—Generic Substitution Acts*

1. Alabama Code §34-23-8 (1979)

2. Alaska Stat. §08.80.295 (1976)

3. Arizona Rev. Stat. Ann. §32-1963.01 (1979)

4. Arkansas Stat. Ann. §72-1049 (1976)

5. California (Business and Professions) Code

8§ 4047.6 and 4047.7 (1976)

6. Connecticut Gen. Stat. Ann. §§ 20-185a through

20-185f (1976)

7. Colorado Rev. Stat. §12-22-124 (1978)

8. Delaware Code Ann. Tit. 24, §2589 (1979)

9. Florida Stat. Ann. §465.025 (1976)

10. Georgia Code Ann. §§ 79A-408.1 through

79A-408.5 (1978)

11. Hawaii Drug Product Selection Act; Hawaii Rev.

Stat. Tit. 19, §§ 328-91 through 328-99 (1979)

12. Idaho Ann. §§ 18-479-446; 17-479-460 in acc. with

§37-2702(d), (1979) (see latest supplement)

13. Illinois Rev. Stat. ch 111, § 4033 (1977)

14. Indiana—none

15. lowa Stat. Ann. §155.37 (1976)

16. Kansas Stat. Ann. §65-1637a (1979)

17. Kentucky Rev. Stat. §217.822 (1978)

18. Louisiana Rev. Stat. Ann. §37-1225 (1979)

19, Maine Rev. Stat. Ann. Tit. 32, §2806 (1979)

*Year included is the year of passage. Reference is to the most re-

cent volume, supplement, or pocket part.

2a

20. Maryland (Health) Code Ann. §43-273A (1978)

21. Massachusetts Ann. Laws ch 112, §12D

(Hichie/Law Co-op) (1976)

22. Michigan M.C.L.A. §333.17755 (1978)

23. Minnesota Stat. Ann. §151.21 (1975)

24. Mississippi Code Ann. §§ 75-29-701 through

75-29-709 (1979)

25. Missouri Drug Product Selection Law Mo. Ann.

Stat. §338.056 (1979)

26. Montana Drug Product Selection Act; Mont. Rev.

Codes Ann. Tit. 37, ch 7, §§ 501-510 (1977)

27. Nebraska Drug Product Selection; Neb. Rev. Stat.

§§ 71-54.01 through 71-54.08 (1977) (found in 1980 Supp.)

28. Nevada Rev. Stat. §§ 639.2581 through 639.2599

(1979)

29. New Hampshire Rev. Stat. Ann. ch 146 §6-b (1973)

30. New Jersey Stat. Ann. §§ 24:6E-6 and 24:6E-7

(1977)

31. New Mexico Stat. Ann. §26-3-3 (1976)

32. New York—Chapter 776, Laws of 1976

33. North Carolina Gen. Stat. §90-76.1—76.6 (see 1980

Supp.) (Article 4—Pharmacy)

34, North Dakota Cent. Code §19-02.1—14.1 (1979)

35. Ohio Rev. Code Ann. §4729.38 (1978)

36. Oklahoma—none

37. Oregon Rev. Stat. §689.515 (1977)

38. Pennsylvania Stat. Ann. Tit. 35, §§ 960.1—960.7

(1976)

3a

39. Rhode Island—Gen. Laws §5-19-38 (1976)

40. South Carolina Drug Product Selection Act of 1978

Code §§ 39-24-10 through 39-24-40

41. South Dakota—Codified Laws Ann. §§ 36-11-46.1

through 36-11-46.4 (1978)

42. Tennessee—Substitution of Equivalent Drug Prod-

uct Act; Tenn. Code Ann. §39-2201 (1977)

43. Texas [Health] Code Ann. Tit. 4542, §12 (1978)

44, Utah—Generic Drug Substitution Act; Utah Code

Ann. §§ 58-17-29 through 58-17-35 (1977)

45. Vermont Stat. Ann. Tit. 18, §4605 (1977)

46. Virginia Code Tit. 32.1, §§ 79-88 (1976)

47. Washington Rev. Code Ann. §§ 69.41.100 through

69.41.180 (1977)

48. West Virginia—Code §30-5-12b (1978)

49. Wisconsin—Stat. Ann. §140.90 (1976)

50. Wyoming—Generic Drug Substitution Act; Wyo.

Stat. §§ 33-24-146 through 33-24-151 (1979)