Abbott succeeds in grey goods injunction request
Abbott Laboratories has successfully obtained an injunction against a number of US retailers selling ‘grey good’ strips for diabetics that had been manufactured in Ireland and later sold in the US at a lower price.
Abbott manufactures and sells Freestyle and Freestyle Lite strips to patients seeking to measure their blood-sugar levels.
The strips are manufactured in Ireland, but sold in the US with a National Drug Code (NDC) attached to the label.
An NDC label is scanned at a pharmacy and used by patients to claim a reimbursement from their health insurance company. The insurance company later retrieves a rebate from Abbott.
Because of this pricing structure, the drug is sold at a higher price compared to the same products distributed in Europe.
But several retailers had legally obtained the test strips intended for the EU market and sold them at a lower price in the US without the NDC code.
Such products are known as grey goods, which are defined as products legally purchased by a distributor outside a country and imported back into the jurisdiction.
The trademark owner is unable to halt the sale because at this point its rights over the products are exhausted.
But the products intended for distribution outside the US contained a number of important differences on the label.
The European labels on the products distributed by the defendants direct users to draw blood from seven parts of the body including from the back of the hand, forearm, calf and thigh. However, the US Food and Drug Administration (FDA) said these four parts of the body provided “insufficiently accurate” results, and instructed Abbot to remove this advice.
Also, the European labels contain a telephone number to advisory centres in Europe, not the US, and some of the product labels are not printed in Spanish or English.
Abbott sued the distributors Adelphia Supply USA, Yudah Neuman, Save Rite, H&H, as well as others, at the US District Court for the Eastern District of New York on October 9.
The differences between the product labels led Judge Carol Bagely Amon to conclude that the items were “materially different”, despite being grey goods.
Under US law, a product not intended for the US market, but identical to one targeted for overseas distribution, is considered “materially different”, and it therefore means a party can be liable for tradema rk infringement.
Amon granted Abbott’s request for a preliminary injunction on November 6, stating there was evidence of harm to the company’s reputation.
She said: “Consumers are likely to find it relevant that their test strips’ packaging contains unexplained and unfamiliar symbols, atypical warnings, international units of measurements, and different languages.
“And most glaringly, consumers would certainly find it relevant that their insert instructs them to test from four sites on their bodies that the FDA specifically rejected as insufficiently reliable,” Amon added.
Amon agreed that the sale of the srips may harm Abbott’s reputation and an injunction would not harm the public interest.
Geoffrey Potter, partner at law firm Patterson Belknap Webb & Tyler and representing Abbott, said the size of the distribution scheme was “breath taking”.
“It is also an unusual area of the law because you are talking about confusion of your own product with your product, because typically your rights end once you sell the product,” he said.
“But in this particular circumstance, there was a material difference between the overseas product and the domestic product. There are not a lot of these other cases, but this is probably the strongest case brought [regarding grey goods],” Potter added.
