OTHER AGENCIES & CONSIDERATIONS

August HorvathFoley Hoag LLP

Michael SmithMichael F. Smith Law, PLLC

Agenda• Federal Trade Commission (FTC) Authority

– FTC Regulation of Advertising for OTC Drugs and Devices– Substantiation– Guides on Endorsements & Testimonials

• National Advertising Division (NAD) of the Better Business Bureau– Case Examples – OTC & Restricted Devices

• Lanham Act

• State Actions and Consumer Class Actions

• Interactions with Securities and Exchange Commission (SEC)

• False Claims Act (qui tam cases) & the Anti-Kickback Statute

• Industry Codes– PhRMA Code on Interactions with Healthcare Professionals– AdvaMed Code of Ethics

FTC Authority• FTC regulates advertising under the Federal Trade Commission

Act (15 U.S.C. 45)– FTC/FDA Memo of Understanding (1971)1

• FTC – advertising for FDA-regulated products (except prescription drugs)• FDA – labeling for FDA-related products & advertising for prescription drugs

• Competent & reliable scientific evidence standard– Required for Health & Safety Claims– “tests, analyses, research, studies, or other evidence based upon the expertise of professionals in the

relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results”

– Sliding scale based on the nature of the claim and the type of data experts in a field would rely on to determine whether a claim is unfair and deceptive

– Different from the substantial evidence standard under the FDCA

1 https://www.ftc.gov/policy/cooperation-agreements/memorandum-understanding-between-federal-trade-commission-food-drug

FTC Authority

FTC Guides Concerning the Use of Testimonials and Endorsements in Advertising2

• Endorsements must reflect true experience

• Cannot state or imply claims the advertiser could not make itself

• Must disclose material connections – for details, see “Dot.ComDisclosures” FTC Publication

• Provides specific guidance for endorsements by consumers, experts and organizations

2 16 CFR Part 255

FTC Enforcement• FTC challenged memory claims for Prevagen®

dietary supplement• Relied on a single, double-blind, placebo-

controlled study (n=218)• Also made MOA claims implying efficacy based

on the protein’s ability to cross the blood-brain barrier

• Initially dismissed (9/29/2017), reversed on appeal (2/21/2019), second motion to dismiss denied (7/24/2019)

• Parties are still litigating, nearing close of expert discovery

FTC v. Quincy Bioscience3

3 FTC v. Quincy Bioscience, No. 1:17-cv-00124 (S.D.N.Y.)

NAD• Program of Better Business Bureau (BBB)

– Advertising industry’s process of voluntary self-regulation

• Forum for challenging competitor claims– Alternative to litigation evaluating truth and accuracy of claims

– All parties given an opportunity to submit arguments and evidence

– Panel of experts review advertising claims and substantiation

– Written decisions with precedential value within NAD proceedings

– Parties may seek appellate review by BBB’s National Advertising Review Board (NARB)

– Complex cases: 4-6 months; single-issue Fast-Track SWIFT cases: 1 month

• Parties may choose whether to comply with the NAD/NARB ruling– NAD may refer parties that do not reply to FTC or FDA

– Referrals from NAD likely to get higher priority within agencies

NAD and Medical Devices

NAD’s Questions about Medical Devices:1. Are you advertising?

2. Is your advertising limited to its FDA clearance and, if not, have you supported all express and implied messaged reasonably communicated?

3. Do you possess competent and reliable scientific evidence that fits your claim?

• For NAD’s detailed answers, see https://bbbprograms.org/media-center/blog-details/insights/2021/07/29/avoid-misleading-messages-when-advertising-medical-devices

NADAlcon challenged several claims for J&J’s IOC5

Examples• J&J stated Alcon IOLs “exhibit glistenings that ‘cause light

scatter’ and ‘result in a reduction of image contrast’”– NAD: evidence that Alcon IOL glistening produces a statistically

significant effect on image contrast inconsistent– J&J to discontinue or modify claim to not imply Alcon IOL’s

glistenings affect vision

• J&J stated for its IOLs, “92% of light [is] transmitted across the range of vision” (energy distribution claim)

– NAD: expert reports demonstrate energy distribution can be calculated or measured

– J&J must disclose the claim is based on a specific method for calculating energy distribution

v.

5 NAD Release, BBB National Programs National Advertising Division Recommends Johnson & Johnson Surgical Vision Modify or Discontinue Certain Challenged Claims for Intraocular Lenses, Finds Certain Claims Supported (February 24, 2020)

NAD – Capillus Laser Cap• NAD reviewed claims for Capillus82

laser hair growth cap• Cap was marketed based on 510(k) as

substantially equivalent to a predicate device, the HairMax Laser Comb

• NAD found that clinical studies on a different device did not support Capillus hair growth claims

• After unsatisfactory response from advertiser, NAD referred case to FTC

• FTC issued a no-enforcement closing letter (6/16/2020)

NAD – Zero Gravity Perfectio• NAD, on its own, challenged claims for

LED facial rejuvenator ($1,500)• Claims included ““The safest and most

effective, advanced Anti-aging product today,” “Scientifically proven” and “Within a period of seven weeks, dramatic visible improvement was reported by 100% of the subjects [in a clinical trial], with 32% improvement measured in the overall appearance of their skin in regards to all key signs of aging.”

• Advertiser failed to respond. Case file referred to FTC and FDA

NAD – Gravity Defyer Shoes• NAD, on its own,

challenged knee, ankle, back, and foot pain reduction claims

• Advertiser declined to participate

• Case referred to FTC and FDA (9/14/2021)

Lanham Act §43(a) (15 USC 1125(a))

• Provides a private right of action for unfair competition based on false or misleading claims in labeling or advertising– However, the Food, Drug and Cosmetic Act (FDCA) grants FDA

exclusive authority to enforce the FDCA (no private right of action)– Courts have rejected use of the Lanham Act to enforce the FDCA

• Requires:– A false or misleading statement of fact, likely to deceive a reasonable

consumer– The complaint is not based on a violation of FDA regulations– The complaint does not require interpretation of FDA regulations– The complaint does not seek relief that can only be complied with by

violating FDA regulations

Lanham Act (15 USC ch. 22)• POM challenged Minute Maid Pomegranate Blueberry Juice Blend,

along with three other juice products in different suits.

• Minute Maid labeled according to FDA regulations allowing for naming specific juices even if the juice is not predominant in the blend as a percentage of volume

• Supreme Court held:– FDCA does not preempt Lanham Act claims– Although FDA regulations may permit a statement in labeling, it is not

a ceiling to regulation of food & beverage labeling

• Caveat for drug labeling – the court distinguished FDA pre-approval of prescription drug labeling versus FDA’s after-the-fact enforcement authority for food and beverage labeling

v.

7 POM Wonderful LLC v. Coca-Cola, 573 U.S. 102 (2014)

Counterclaims in Lanham Act Cases• Two of the other companies POM suied (Welch’s

and Ocean Spray) counterclaimed, alleging POM

false advertising of health benefits.

14

This led to the

Complete Saga

16suit/claimappeal

consumer classes

State Actions & Consumer Class Actions• Tension between state tort law and labeling controlled by FDCA

– “Learned Intermediary Doctrine” – duty to warn patients is fulfilled by communication with prescriber (FDA-regulated labeling)

– Sufficiency of warnings in FDA-regulated product labeling raises preemption issues

• Impossibility preemption narrowly construed by the Supreme Court– Wyeth v. Levine and Merck v. Albrecht establish that manufacturers must show “clear

evidence” that FDA fully considered and rejected a warning to preempt state tort law9

• Opioid MDL illustrates threat of class action litigation for manufacturers from other, novel theories of liability10

9 Wyeth v. Levine, 555 U.S. 555 (2009); Merck v. Albrecht, 139 S. Ct. 1668 (2019)10 In re National Prescription Opiate Litigation, Docket No. 1:17-md-02804

Fasciablaster Class Actions• Elson v. Ashley Black, class action filed in

Cal. state court, removed to N.D. Cal. and consolidated with other actions in S.D. Tex. as No. 20-cv-2125

• Product claims to reduce cellulite, spot-reduce fat, relieve pain, improve blood flow by smoothing “fascia”

• Suit challenged claims and also alleged various injuries from product

• Class cert. denied, Apr. 2021 (individualized reliance); case dismissed, June 2021; currently under appeal

SEC• Publicly traded companies have an obligation to disclose material

information to investors

• FDA typically does not scrutinize communications that are truly investor-focused (SEC filings, investor communications)

– However, in 2004, FDA established a cooperative procedure with the SEC to permit FDA referral of potentially false and misleading statements regarding matters with FDA’s jurisdiction to the SEC (e.g., progress of FDA’s premarket review)6

• Materiality and disclosures can get complicated when pipeline information (unapproved products or unapproved uses of approved products) is material to the company’s performance

– FDA has taken enforcement actions related to product-specific press releases companies might consider “investor communications” (press releases; investor-focused broadcast TV)

– Stick to the material facts relevant to the disclosure and avoid conclusory statements regarding safety and effectiveness

– Prominently identify unapproved products as “investigational”

6 FDA News No. P04-15 (February 5, 2004)

False Claims Act

• False Claims Act (FCA) – 31 USC §§ 3729-3733– Theory – violations of the FDCA and Anti-Kickback Statute

(AKS) induce HCPs or patients to knowingly submit false claims to federal healthcare programs

– Qui Tam provisions – allows relators to (1) file cases on behalf of the federal government and (2) collect a share of the recovery

– Settlements typically include 5-year Corporate Integrity Agreement (CIA) with OIG

Anti-Kickback Statute & Beneficiary Inducement CMP

• Anti-Kickback Statute – 42 U.S.C. §§ 1320a–7b(b)– Prohibits knowingly and willfully offering, soliciting, paying or receiving anything of value in

return for referring, recommending or purchasing, leasing, or ordering, any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program

– Courts have applied the “one purpose” test – if one purpose of an arrangement violates the AKS, no amount of other legitimate and lawful purposes can save it

– The AKS and implementing regulations8 identify safe harbors for specific types of arrangements, including discounts and personal services

• Beneficiary Inducement Civil Monetary Penalties (CMP) – 42 U.S.C. § 1320a–7a(a)(5)

– Penalties against any person who offers or transfers remuneration [to a beneficiary] that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of an item or service [reimbursed] by Medicare or a State health care program

8 42 CFR § 1001.952.

Enforcement Trend –Charitable Foundations

• In recent years, DOJ and OIG have focused on manufacturer contributions to charitable foundations that support patient access to treatments– Charitable foundations provide co-pay assistance to patients who cannot

afford the cost sharing associated with treatments under their health insurance plans

– Government programs, like Medicare and Medicaid, prohibit manufacturers from offer direct subsidies of cost sharing obligations like co-pay cards

– Enforcement focused on manufacturers’ control over directing how charitable contributions are distributed to support access to particular products

– More than 9 companies have settled cases involving settlement payments totaling over $700 million and many other cases are ongoing

– Most settlements have included a Corporate Integrity Agreement (CIA)

Industry Codes – PhRMA & AdvaMed• Voluntary industry codes that establish common standards for interactions

between manufacturers and customers– PhRMA Code of Interactions with Healthcare Professionals (pharma and biotech)– AdvaMed Code of Ethics (medical device, med tech and diagnostics)

• Address broad range of topics related to relationships with decision makers– Standards for promotional materials and interactions– Limitations on meals, travel & meeting venues– Prohibitions on gifts, entertainment & recreation– Consulting arrangements, including speaker programs – Grants, CME support & charitable programs– Use of prescriber data (PhRMA Code)– Demonstration/evaluation/consigned products & company representatives’ technical support

in the clinical setting (AdvaMed Code)

• Compliance with Codes required under some state laws

PhRMA Code Update –Speaker Programs

• PhRMA announced an update to the Code in August 2021, effective January 1, 2022, primarily addressing Promotional Speaker Programs– Follows OIG Special Fraud Alert of November 2020

• Updated Speaker Program Guidance– Reiterates modest meals should be incidental business courtesy relative to the

educational purpose of programs– Venues should be modest, not main attraction – no luxury resorts, high-end

restaurants or recreational venues– Repeat attendance by HCPs at substantively similar programs is discouraged– Speakers should not attend programs on topics they also speak about– “Companies should not pay for or provide alcohol in connection with the

speaker program”– Speaker selection and utilization should be carefully managed