Abbott Labs recently obtained a preliminary injunction prohibiting numerous pharmacies, wholesalers, and other distributors from importing or otherwise using in the U.S. Abbott’s FreeStyle® blood glucose test strips that are intended for sale internationally. Chief Judge Amon of the Eastern District of New York found that Abbott is likely to succeed on the merits of its Lanham Act claim that consumers will likely be confused by the sale of “gray market” FreeStyle test strips in the U.S.
According to Abbott’s complaint, millions of diabetics use Abbott’s FreeStyle® branded test strips on a daily basis to monitor their blood glucose levels and help control their diabetes. Due to the differences between U.S. and international insurance, reimbursement, and rebate practices, Abbott sells FreeStyle test strips outside the United States at markedly lower list prices. Unlike the diverted international test strips, the domestic FreeStyle test strips are eligible for reimbursement from insurers. Thus, by selling the international test strips in the U.S., Abbott alleges, the defendants are able to pass the unapproved test strips off to unsuspecting U.S. consumers thereby capitalizing on the pricing differences and receiving undeserved reimbursement payments from insurers. Abbott, in turn, pays rebates to insurers for those undeserved reimbursement payments – resulting in the wrongful payout of millions of dollars in rebates.
In its complaint to halt these unauthorized sales, Abbott asserts several claims including trademark infringement, fraud, racketeering, and unfair competition. While functionally the same as FreeStyle test strips packaged and cleared for sale in the U.S., strips intended for international sale are not packaged and labeled to meet the requirements of the Food and Drug Administration (“FDA”). Included among the packaging differences are:
- Unlike diverted international test strips, packaging of FreeStyle test strips intended for retail sale in the U.S. bears a specific National Drug Code (“NDC”) number, which is required for reimbursement;
- As a result of FDA clearance the instructional inserts for U.S. FreeStyle test strips and international FreeStyle test strips provide conflicting instructions as to where on the body a blood sample can be taken to perform a blood glucose test;
- Unlike diverted international test strips, every box of U.S. FreeStyle test strips provides a U.S. toll-free customer care phone number;
- U.S. FreeStyle test strips are accompanied by instructions written in English and Spanish;
- The handling and use instructions for diverted international FreeStyle test strips utilize units of measurement that are not used in the U.S. instructions;
- The range of temperatures in which FreeStyle test strips can be stored are stated in Fahrenheit on U.S. packaging and Centigrade on diverted international packaging;
- Packaging for diverted international FreeStyle test strips contain symbols that are unfamiliar to U.S. consumers and are prohibited by the FDA for use on in-home consumer-use packaging; and
- The outer package label of U.S. FreeStyle test strips provides several FDA-required written warnings and instructions, which are not present on the outer package label of international FreeStyle test strips.
In issuing the preliminary injunction, Chief Judge Amon focused her analysis on Abbott’s Lanham Act trademark infringement claim. The court concluded that Abbott is likely to succeed on the merits of its claim given the likelihood of confusion that may result to unsuspecting U.S. consumers who are purchasing diverted international FreeStyle test strips. Though often subtle, the court found the differences in packaging and labeling to be material, noting that U.S. consumers are likely to find it relevant that their test strips’ packaging contains, for instance, unexplained and unfamiliar symbols, atypical warnings, international units of measurement, different languages, and a lack of a toll-free number.
The court further concluded that such confusion to consumers will likely result in irreparable harm to Abbott in the form of damage to Abbott’s goodwill and reputation that cannot be quantified or recovered. On this point Judge Amon noted that the differences in packaging and labeling are precisely the type likely to frustrate consumers resulting in damage to Abbott’s goodwill and reputation. Moreover, the court noted that Abbott’s trademark protects not only its reputation, but its ability to control that reputation through quality-control procedures. The domestic sales of international test strips interfere with Abbott’s ability to effectuate its quality-control procedures.