Federal Judge Narrows Eli Lilly Mochi Health Lawsuit: California UCL Claims Advance

• A federal judge partially dismissed Eli Lilly's lawsuit against telehealth company Mochi Health and its supplier Aequita.
• Claims under the Lanham Act for false advertising were dismissed against both Mochi Health and Aequita.
• However, claims against Aequita Pharmacy and Aequita Corporation under California's Unfair Competition Law were allowed to proceed.
• The court found plausible allegations that Aequita defendants participated in a conspiracy to violate the UCL through the corporate practice of medicine, which is prohibited in California.
• Eli Lilly alleged Mochi Health altered compounded drug doses for business reasons and that Aequita had financial incentives to participate in the scheme.

The court found plausible allegations that Aequita defendants participated in a conspiracy to violate California's Unfair Competition Law through the corporate practice of medicine.

A federal judge has partially narrowed a significant lawsuit brought by pharmaceutical giant Eli Lilly and Co. against Mochi Health, a telehealth provider specializing in compounded versions of tirzepatide drugs like Zepbound and Mounjaro, and its pharmaceutical supplier, Aequita. U.S. District Judge Jacqueline Scott Corley recently issued a ruling that dismissed certain claims while allowing others to proceed, marking a key development in the ongoing Mochi Health Aequita lawsuit.

Eli Lilly's initial complaint alleged that Mochi Health and its supplier conspired to sell altered, compounded weight-loss drugs, misleading consumers and engaging in unfair competition. The court's decision, however, differentiated between the various legal theories presented. While claims under the Lanham Act, which typically addresses false advertising, were dismissed against both Mochi Health and Aequita, allegations against Aequita Pharmacy and its parent company, Aequita Corporation, under California's Unfair Competition Law (UCL) were permitted to advance.

The core of the surviving claims revolves around the alleged violation of California's Unfair Competition Law, specifically through a conspiracy to engage in the corporate practice of medicine. In California, the corporate practice of medicine doctrine prohibits business entities without a medical license from making medical decisions, particularly when motivated by profit rather than patient care. Eli Lilly contended that Mochi Health, through its medical entities known as Mochi Medical, engaged in this prohibited practice by hiring and advertising for physicians, providing diagnostic protocols for obesity medicine, and unilaterally altering compounded medication doses for business reasons rather than medical necessity.

The court found plausible allegations that the Aequita defendants participated in this scheme. Eli Lilly asserted that Aequita's corporate entities, controlled by Abraham Chaibi (the husband of Mochi Health CEO Myra Ahmad), had a significant financial incentive to support Mochi Health's unlawful practices. Furthermore, Lilly accused Aequita Pharmacy of disregarding identical prescriptions it was compounding and complying with Ahmad's directives to reduce costs. Judge Corley concluded that there there was sufficient evidence to reasonably infer Aequita's knowledge of the alleged conspiracy, citing Ahmad's substantial control over Aequita's procedures and methods for filling prescriptions, as well as the significant financial motivation for Aequita to participate. The judge noted that Aequita plausibly followed Ahmad's directives to fill prescriptions and implement practices aimed at maximizing profits, thereby advancing Mochi Health's corporate practice of medicine.

Despite the advancement of the California UCL claims, Eli Lilly's allegations of false advertising under the Lanham Act did not survive the motion to dismiss. The court determined that Lilly failed to plausibly demonstrate that Mochi Health and Aequita conspired to commit false advertising. Judge Corley specifically stated that Lilly's assertion of collusion between Mochi Health and Mochi Medical to increase revenue from their tirzepatide drugs was insufficient to establish a claim for false advertising.

The ruling highlighted that Eli Lilly did not provide enough factual support to infer that the conduct of the Mochi Medical defendants advanced the aim of false advertising. Similarly, the court found that Lilly had not adequately shown how Aequita contributed to any alleged false advertising. This distinction underscores the specific requirements for pleading different types of unfair competition claims, particularly when dealing with compounded weight-loss drugs litigation, which often involves complex issues of product representation and regulatory oversight. It is important to note that compounded versions of popular weight-loss drugs do not require approval from the Food and Drug Administration and are not subjected to the same rigorous testing for safety, efficacy, and quality as FDA-approved medications.

This ruling carries significant implications for telehealth companies and pharmacies involved in the compounding of medications, particularly within the context of the Eli Lilly Mochi Health California UCL claims. It underscores the legal risks associated with operational structures that may blur the lines between medical practice and business interests, especially in states with strict corporate practice of medicine doctrines like California. The court's decision to advance claims based on inferred knowledge and financial motivation serves as a cautionary tale for entities with intertwined ownership and operational control.

Legal professionals advising clients in this space should scrutinize financial incentives and the degree of operational control exercised by non-medical entities over medical practices. The distinction drawn between the successful UCL claims and the dismissed Lanham Act claims also highlights the importance of precise pleading and robust factual allegations when challenging business practices. This Zepbound Mounjaro legal dispute reinforces that while compounded drugs offer alternatives, their distribution and marketing remain subject to stringent state and federal regulations, particularly concerning unfair competition and the integrity of medical practice.

This ruling highlights the legal risks for telehealth companies and pharmacies involved in compounding medications, particularly concerning adherence to state-specific corporate practice of medicine doctrines and potential liability under unfair competition laws like California's UCL. Lawyers should advise clients on scrutinizing financial incentives and operational control to mitigate exposure.

Source: Original reporting via Courthouse News Service