In Nexus Pharmaceuticals, Inc. v. Central Admixture Pharmacy Services, Inc., 48 F.4th 1040, 1041 (9th Cir. 2022), the Ninth Circuit recently held that the implied preemption doctrine barred state law claims because they were contrary to the Food, Drug, and Cosmetic Act’s (“FDCA”) exclusive enforcement provision prohibiting private enforcement of the law.

In that case, Nexus Pharmaceuticals (“Nexus”) asserted competitor claims against Central Admixture Pharmacy Services (“Central Admixture”) for failure to obtain FDA-approval of its generic product, which was essentially a copy of Nexus’s FDA-approved product. Id. at 1042. Nexus did not assert a claim for violation of the FDCA because the FDCA prohibits private enforcement. Id. at 1044. Instead, Nexus argued that Central Admixture violated the statutory consumer protection laws of several states¹ where it sells the product, all of which “prohibit the sale of drugs not approved by the FDA.” Id. at 1044. The district court dismissed Nexus’s claims under Rule 12(b)(6) on the basis of implied preemption.  It noted that private enforcement of the FDCA is prohibited by express statutory language. In affirming the dismissal, the Ninth Circuit discussed case law on preemption and noted that a common theme of the cases that had allowed state law claims over FDA-regulated products was reliance on traditional common law tort theories of liability, rather than noncompliance with FDA requirements.

The Ninth Circuit found that Nexus did not rely on any traditional state tort law theory, but rather on “state laws that incorporate federal law,” and that “a necessary element of Nexus’s claim is the alleged violation of the FDCA.” Id. at 1048. That is, the court determined that Nexus’s state law claims existed by virtue of FDCA requirements, not traditional state tort law. The Ninth Circuit pointed to precedent protective of the FDA’s statutory monopoly on enforcement authority and issues that may arise if state law exercised enforcement authority: “If state law facilitates enforcement beyond what the FDA has deemed appropriate, then state law claims may indeed ‘stand as an obstacle’ to FDA's enforcement discretion by enabling what the FDA regards as over-enforcement.” Id. at 1048. Indeed, allowing a private action based on other laws “would require litigation of the alleged underlying FDCA violation in a circumstance where the FDA has not itself concluded that there was such a violation.” Id. at 1049 (internal citation omitted).

The Ninth Circuit’s decision stands in contrast to an earlier case decided by the Federal Circuit, which purported to apply Ninth Circuit law. See Allergan v. Athena Cosmetics, 738 F.3d 1350 (Fed. Cir. 2013). In Allergan, the plaintiff, a manufacturer of an FDA-approved product, asserted a claim against Athena Cosmetics for sale of a competing product not approved by the FDA for violating California’s unfair competition law and patent infringement. The Federal Circuit held that the claims were not impliedly preempted, even though California law merely incorporated FDCA requirements.

In Nexus, the Ninth Circuit found that Allergan was wrongly decided and “misinterprets [the] case law regarding the bar on private enforcement.” Id. at 1049. The court criticized the Allergan decision because it “did not address the FDCA’s prohibition of private enforcement” and noted that had it done so, it “would have required a contrary result.” Id. at 1050.

In addition to directly affecting pharmaceutical companies’ litigation strategies in competitor cases, the Ninth Circuit’s decision has meaningful implications for consumer class actions. Notably, numerous class actions have been filed asserting statutory claims against drug manufacturers and pharmacies for allegedly selling drugs not approved by the FDA.

In light of the Nexus decision, plaintiffs in the Ninth Circuit should heed caution in alleging state law statutory claims based on an FDCA-violation as opposed to a common law tort theory. Similarly, defendants in the Ninth Circuit should consider raising implied preemption arguments early in litigation when the asserted state law claims rely on a violation of the FDCA.

*On September 27, 2022, Nexus filed a petition for rehearing en banc, which has not been decided.

FOOTNOTES

¹ California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17001, 17200; Florida’s Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.202(2); Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, 73 Penn. Stat. § 201-3; Arizona’s Unfair Competition Law, AZ Rev Stat § 44-1522; Connecticut’s Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110b.