Schering-Plough Healthcare, owner of the MiraLAX brand — the top-selling OTC oral laxative ($360 Million in OTC sales since launching in February 2007) — has pulled out all of the available stops and then some, in a pre-Thanksgiving Day federal district court action brought in the District of Delaware, asserting a variety of intellectual property and unfair competition claims under both federal and state law. Bloomberg.com’s report on the case from yesterday is here. In addition, here is a link to the Complaint, with Exhibits A, B, and C.
As is typical when the manufacturer of a national brand wants to stop what it perceives as unfair retail store brand competition, Schering-Plough brought suit not against either of its retail customers Kroger or CVS — despite both being mentioned in the complaint — instead, it sued Perrigo the private label manufacturer who provided the competitive products bearing those retailers’ well-known, if not famous store brand names.
Perrigo says it is "the world’s largest manufacturer of OTC pharmaceutical products for the store brand market." Here is how Perrigo describes its business model:
The Perrigo Company manufactures products that compare to national brand products such as Tylenol®, Advil® or ONE-A-DAY®. For example, Tylenol® has acetaminophen as an active ingredient and is available in a store’s analgesic (pain relief) section. Store brand acetaminophen is located right next to the national brand acetaminophen, offering the same active ingredient (acetaminophen) and the same relief.
Store brands and national brand products are both manufactured to meet or exceed quality standards set by the Food and Drug Administration (FDA). Store brand products are sold by retail stores under their own labels and compete with nationally advertised brands. All Perrigo products meet or exceed quality standards set by the Food and Drug Administration (FDA). Store brand OTC and nutritional products have saved consumers many millions of dollars in health-care costs over the past six years.
Although the national brand owner’s strategy of not suing its retail customer directly may be attractive from a business relations perspective, unless the case is promptly resolved on an amicable basis, it will be hard to avoid having representatives of Kroger, CVS, and other retail customers of Schering-Plough, put on the "hot seat" in discovery depositions to determine who created, controlled, and/or approved the "look and feel" of the store brand packaging. It remains to be seen how this strategy will play out here for Schering-Plough.