Exeltis USA Inc. v. First Databank, Inc.

Background

Exeltis USA Inc., a prenatal-vitamin manufacturer, challenged First Databank’s planned changes to the coding system for Exeltis’s products in First Databank’s MedKnowledge pharmaceutical database. Payors, including pharmacy benefit managers and insurance providers, license and use the database in processing claims and deciding whether to reimburse particular products.

Under the older system, the database’s “class value” field used “F” for products whose labels indicated that a prescription or physician supervision was required, including prescription prenatal vitamins. First Databank later proposed using “O” for products with no federal legal prescription requirement and eventually created a “Q” category for products that were neither drugs nor medical devices, including prenatal vitamins. Exeltis alleged that these changes falsely characterized its products and could cause patients to lose insurance coverage.

Exeltis asserted five claims: false advertising under the Lanham Act; violations of California’s Unfair Competition Law; false advertising under California law; intentional interference with prospective economic advantage; and trade libel. First Databank moved for summary judgment on all claims after discovery.

Lanham Act, False Advertising, and Unfair Competition Claims

The court held that the MedKnowledge database was not commercial speech as a matter of law. It reasoned that the database was not a traditional advertisement, was not directed or generally available to patients or health-care providers, and provided information about third-party products rather than First Databank’s own products. Although First Databank had an incentive to sell database licenses and its customers used the information in commercial transactions, the court found that those facts did not show that First Databank was itself involved in the reimbursement transactions or had an adequate economic motive for the challenged coding decisions.

Because the database was not commercial speech, the court held that Exeltis’s Lanham Act, California false-advertising, and California Unfair Competition Law claims failed on that basis. The court also held independently that the Lanham Act claim failed because the database was not issued to influence consumers to buy First Databank’s goods or services. The database listed other companies’ products, and Exeltis offered no evidence of an agency relationship or other financial stake in specific product sales.

Intentional Interference and Trade Libel Claims

The court applied an “actual malice” standard, which required clear and convincing evidence that First Databank knew its statements were false or seriously doubted their truth. Exeltis argued that First Databank knew the coding changes would cause confusion and that one First Databank executive showed hostility toward prescription prenatal-vitamin manufacturers.

The court concluded that this evidence did not create a genuine factual dispute about actual malice. It found no evidence that First Databank believed the coding system was false generally or false as applied to Exeltis’s products. The court therefore held that the intentional-interference and trade-libel claims failed.

Disposition

Judge Haywood S. Gilliam, Jr. granted First Databank’s motion for summary judgment. The clerk was directed to enter judgment in favor of First Databank and close the case.