Alfasigma USA, Inc. v. First Databank, Inc.

Background

Alfasigma USA, Inc. develops, manufactures, sells, and distributes medical foods. First Databank, Inc. sells subscriptions to MedKnowledge, a pharmaceutical database used by prescribers, pharmacists, pharmacy benefit managers, insurers, and others.

The database historically used a class value of “F” for products whose labels indicated that a prescription was required and “O” for products whose labels contained no dispensing limitations. First Databank changed the class value for Alfasigma’s products from “F” to “O” between February and April 2016. Alfasigma alleged that this falsely represented its medical foods as available over the counter without physician supervision. Alfasigma also challenged First Databank’s announced “Q” classification for products that are neither drugs nor devices, including medical foods.

Alfasigma further alleged that First Databank falsely represented in brochures, on its website, and in communications with customers that information in MedKnowledge came from the Food and Drug Administration and product manufacturers, including Alfasigma.

Alfasigma’s amended complaint asserted six causes of action: false advertising and contributory false advertising under the Lanham Act; unfair competition and false description under the Lanham Act; false advertising under California’s False Advertising Law; unlawful trade practices under California’s Unfair Competition Law; and common-law unfair competition.

First Databank moved to strike the state-law claims under California’s anti-SLAPP statute, a law allowing certain claims targeting speech on public issues to be struck unless the plaintiff shows a probability of success. First Databank also moved to dismiss the remaining claims under Federal Rule of Civil Procedure 12(b)(6), which applies when a complaint does not plausibly state a legally recognizable claim.

Database Allegations

The court held that the database allegations could not support the challenged claims because Alfasigma had not adequately alleged that the database was commercial speech. Applying the factors identified by the Supreme Court and the Ninth Circuit, the court noted that the database was not a traditional advertisement, even though it referred to many specific products. The court found that Alfasigma’s allegations showed that third parties used the database to make their own prescribing, dispensing, purchasing, and reimbursement decisions; they did not show that First Databank itself made those decisions.

The court acknowledged that First Databank had an economic incentive to sell database subscriptions and to provide information its customers wanted. But it held that this ordinary profit motive did not by itself make the database’s editorial and informational content commercial speech. The court also found that Alfasigma had not alleged a direct or indirect financial benefit to First Databank from changing the product codes beyond selling database licenses.

The court separately held that, even if the database were commercial speech, Alfasigma had not plausibly alleged that First Databank’s representations were made for the purpose of influencing consumers to buy First Databank’s own goods or services, as required for a Lanham Act false-advertising claim. The database was itself First Databank’s product, and the complaint did not allege that First Databank had an agency relationship with manufacturers or a financial stake in sales of their products.

The contributory false-advertising claim also failed because Alfasigma did not allege that First Databank knowingly or intentionally induced, or materially participated in, subscribers’ alleged false advertising. The court did not decide whether the coding changes themselves were false or misleading because it resolved the claims on other grounds.

Source Allegations

The court determined that Alfasigma’s source allegations were based on alleged fraud, even though the amended complaint did not expressly label the conduct as fraud. The complaint alleged that First Databank coordinated with certain subscribers to publish false statements, acted in bad faith, and knew that its product classifications were false and misleading. Because the claims were based on alleged fraudulent conduct, Federal Rule of Civil Procedure 9(b) required Alfasigma to plead the circumstances with particularity, including who made the statements, what was said, when and where it was said, and how it was false or misleading.

The court found that the complaint did not provide enough detail about when and where the alleged source misrepresentations were made. General references to commercial communications, marketing materials, brochures, the website, and customer communications were insufficient under Rule 9(b). The court therefore dismissed the remaining causes of action on that basis.

Disposition

The court granted the motion to strike Alfasigma’s state-law claims premised on the database allegations. It also granted the motion to dismiss as to the remaining causes of action. The court allowed Alfasigma to file an amended complaint by March 26, 2021, if it believed it could cure the deficiencies identified in the source allegations. The opinion does not state that either ruling was with or without prejudice.