Contributed By Proskauer Rose LLP
There are multiple laws, governmental agencies and self-regulatory bodies that govern or make recommendations concerning the advertising of medicines in the United States. The principal laws that apply to the labelling, advertising and promotion of medicines include the Food, Drug and Cosmetic Act (FDC Act), the Federal Trade Commission Act (FTC Act) and the Lanham Act. In addition, various state consumer protection laws and other federal and state criminal and civil laws apply to certain aspects of drug labelling, advertising and promotion. Among these statutes are the federal Anti-Kickback Statute, the Stark Act, the False Claims Act and the federal Sunshine law. There are also state law equivalents for some of these laws.
The entities primarily responsible for regulating drug advertising, labelling and marketing are two agencies of the US government: the FDA and the FTC. Also responsible are the federal Department of Health and Human Services (HHS), which among other things oversees the federal Medicare and Medicaid health insurance statutes, and the federal Department of Justice (the “Justice Department”), which is responsible for acting for the FDA and HHS to prosecute federal criminal violations of the FDC Act and certain other federal and criminal statutes relating to healthcare.
US federal courts also hear and decide false advertising lawsuits brought against drug manufacturers by their competitors under the Lanham Act. Similarly, federal and state courts decide false advertising lawsuits brought by consumers against pharmaceutical companies under state false advertising and unfair competition laws. In addition, the advertising industry self-regulatory body known as the National Advertising Division of the Council of Better Business Bureaus (NAD) hears, in a non-judicial setting, challenges to drug advertising brought by competitors and consumers (and sometimes by the NAD itself, as part of NAD’s monitoring function). Finally, the ethical codes of the Pharmaceutical Research and Manufacturers of America (the “PhRMA Code”) and the American Medical Association (the “AMA Code”) also address the propriety of certain pharmaceutical advertising and promotional practices.
The FDC Act and the FDA
The FDC Act, a federal statute enacted in 1938, regulates the labelling of drugs that require a doctor’s prescription (“prescription drugs”) and drugs that consumers can purchase over-the-counter without a prescription (OTC drugs). Under the FDC Act, the FDA is also responsible for regulating prescription drug advertising and promotion (for example, television and radio advertising, print advertising and internet advertising). In contrast, the FDA, although responsible for OTC drug labelling, is not primarily responsible for the regulation of non-label advertising of OTC drugs. Primary responsibility for that rests with the FTC.
FDA regulation of prescription drug labeling
The FDC Act defines a drug “label” as “a display of written, printed or graphic matter upon the immediate container of any article” and drug “labelling” as “all labels and other written, printed, or graphic matter (1) upon any article or any of its containers or wrappers, or (2) accompanying such article”.
In a recent draft guidance, the FDA explained that it generally recognises two types of prescription drug labelling: FDA-required labelling and promotional labelling. FDA-required labelling is labelling that is necessary to meet the minimum labelling requirements of the FDC Act and FDA regulations. For prescription drugs, the FDA reviews and approves all FDA-required labelling as part of the new drug application (NDA) or abbreviated new drug application (ANDA). Promotional labelling is “generally any labelling, other than the FDA-required labelling, that is devised for promotion of the product.”
An NDA (or in the case of a generic drug, an ANDA) is the formal step a pharmaceutical manufacturer must undertake before the FDA permits it to market a new drug in the United States. The NDA is intended to provide the FDA with sufficient information to allow the FDA to answer the following:
In considering an NDA, the FDA closely scrutinises proposed labelling for compliance with 21 CFR §201.56, which requires that labelling:
The FDC Act also grants the FDA regulatory authority over advertising for prescription drugs. Under the FDC Act, prescription drugs are defined as any drug that “because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, is not safe for use except under the supervision of a practitioner licensed by law to administer such drug.” Although FDA regulations do not define the term “advertisement”, they do provide a non-exclusive list of what constitutes an advertisement. Such items include materials “in published journals, magazines, other periodicals and newspapers; and advertisements broadcast through media such as radio, television and telephone communication systems.” As explained later in this guide, FDA regulations prohibit materially misleading advertising.
FDA regulations pertaining to and FTC oversight of OTC drugs
The regulatory regime for OTC drugs is not the same as for prescription drugs. Although, just as with prescription drugs, the FDA has regulatory authority over OTC drug labelling, the FTC has authority over OTC advertising other than labelling under the FTC Act. Due to the concurrent jurisdiction of the FDA and FTC over OTC drugs, the split of oversight and responsibility has been memorialised in a Memorandum of Understanding (MOU) between the two federal agencies.
The MOU recognises the two agencies’ separate spheres of influence in regulating OTC drug labelling and promotion, and recognises that if the public interest requires, the FDA and FTC may institute separate regulatory proceedings involving the same parties and subject matter. It also recognises that inter-agency collaboration may be required in certain circumstances.
Although some OTC drugs come to market only after FDA formal review and approval of an NDA, others are marketed without FDA pre-approval as “Monograph” drugs. To be eligible to be marketed without pre-approval under a Monograph, an OTC drug first must be “generally recognised as safe and effective” (GRASE). To be considered GRASE, an OTC drug’s safety and efficacy must be established in adequate and well-controlled clinical trials that are published in available scientific literature, qualified experts must generally agree that the studies demonstrate safety and efficacy for a drug’s intended use and the drug must have been widely used for a material amount of time.
The FDA’s Monograph process has involved the examination and analysis of the safety and efficacy of hundreds of active ingredients in a wide array of product categories. Each FDA Monograph sets forth the particular circumstances in which an active ingredient or ingredients can be used to treat a certain disease or condition. When a Monograph (or in certain cases a draft Monograph) is issued for the use of a particular active ingredient or ingredients to treat a particular disease or condition, other products using the specific active ingredient(s) identified in the Monograph to treat the specific disease or condition specified by the Monograph can, under specified circumstances, be marketed without pre-approval by the FDA.
In order to market an OTC drug under a Monograph, the drug must identify the active ingredients in the Drug Facts box on the drug package and cannot list or contain any active ingredients not listed in the applicable Monograph. Otherwise, the product is considered to be an unapproved new drug and thus “misbranded” in violation of the FDC Act and FDA regulations. Similarly, OTC drugs marketed under Monographs must include such mandatory label statements as indications for use, limitations on permissible product claims, dosage and directions for use, means of administration and warnings. The Monograph may be amended by the FDA, either sua sponte or by petition/application by a member of the public.
If a drug manufacturer wishes to market a new OTC drug for which there is no appropriate Monograph, it must utilise the conventional pathway of pre-market approval via an NDA. In addition to establishing, as is required for prescription drug NDAs, that the drug is safe and effective for its intended use, NDAs for OTC drugs also must establish that patients can safely self-administer and self-manage without professional guidance.
As noted, the FTC has regulatory authority over all OTC drug advertising other than labelling. When the FTC concludes that OTC drug advertising is false or misleading, it may elect to file suit in federal court for violation of the FTC Act or communicate with the advertiser to reach a voluntary resolution.
FDA regulations pertaining to and FTC oversight of dietary supplements and homeopathic medicines
The FDA also regulates dietary supplements and homeopathic drugs. Generally speaking, dietary supplements are considered a category of food and thus are outside the scope of this book. However, if a dietary supplement meets the statutory definition of a drug, it is regulated as a drug. The FDC Act (codified as 21 USC §321(g)(1)) defines a drug as: (i) articles recognised in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States or official National Formulary, or any supplement to any of them; (ii) articles intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in man or other animals; (iii) articles (other than food) intended to affect the structure or any function of the body of man or other animals; and (iv) articles intended for use as a component of any article specified in clause (i), (ii) or (iii).
Generally, a dietary supplement can be marketed without pre-approval by the FDA and therefore no showing of safety or efficacy is required before a dietary supplement comes to market. However, a dietary supplement manufacturer or marketer cannot make claims that the supplement is intended to treat, diagnose, cure or alleviate the effects of diseases without FDA approval. Jurisdiction over dietary supplement advertising rests with the FTC, although the FDA has certain safety monitoring responsibilities once a dietary supplement is marketed and has taken enforcement action against companies that promote supplements in a manner similar to drugs.
Homeopathy, sometimes referred to as homeopathic medicine, is an alternative form of medicine developed centuries ago in Germany. Homeopathy is based on two theories, both of which the National Institutes of Health (NIH), an arm of the HHS, refers to as “unconventional”. Those theories are “like cures like”, the notion that “a disease can be cured by a substance that produces similar symptoms in healthy people” and the “law of minimum dose,” the notion that “the lower the dose of the medication, the greater its effectiveness.”
Under the FDC Act, homeopathic medicines are those that are set forth in the Homeopathic Pharmacopeia of the United States and its supplements. Homeopathic medicines are regulated as drugs, either prescription or OTC depending on the medicine. Homeopathic medicines intended solely for self-limiting disease conditions amenable to self-diagnosis and treatment may be marketed OTC; however, products offered for conditions not amenable to OTC use must be marketed by prescription. A critical distinction between homeopathic and other drugs is that the FDA does not evaluate homeopathic remedies for safety or efficacy.
The FTC regulates the advertising of OTC homeopathic products and has recently clarified that it intends to hold OTC homeopathic drugs to the same standard for substantiating advertising claims as it applies to non-homeopathic drugs. The FTC generally requires that to substantiate health, safety, or efficacy claims, drug advertisers possess “competent and reliable scientific evidence” and that the absence of such evidence will result in the FTC finding that the advertisement is likely misleading in violation of the FTC Act. The FTC’s recent guidance recommends that advertisers of homeopathic OTC drugs provide disclaimer language indicating that there is no scientific evidence the product works and that the product’s claims are based on theories of homeopathy from the 1700s that are not accepted by most modern medical experts.
The Lanham Act
The Lanham Act (15 USC §1125(a)), although generally thought of as the federal trademark infringement statute, also includes a cause of action for false or misleading advertising. Standing to bring a Lanham Act false advertising lawsuit is limited to the advertiser’s competitors and to other entities that have suffered or are likely to suffer an injury to their business as a result of the false advertising. Consumers do not have standing to sue under the Lanham Act.
Prescription and OTC drug manufacturers can be subject to liability under the Lanham Act. Remedies can include injunctive and monetary relief. The latter can be in the form of the plaintiff’s lost profits or other quantifiable injury caused by the false advertising. In some circumstances, typically when a court or jury has found that the advertiser intentionally engaged in false or misleading advertising, disgorgement of the advertiser’s profits resulting from the false advertising and payment of those profits to the plaintiff is also an available remedy, as are treble damages and reimbursement of the plaintiff’s legal fees.
State law consumer class action false advertising suits
The Lanham Act is not the only statute that permits civil lawsuits to enjoin, and to recover damages resulting from, false or misleading advertising. Most states have false advertising and unfair competition statutes that, unlike the Lanham Act, permit suits by consumers. Typically, consumer suits brought under state false advertising laws proceed as “class actions,” in which one or more individual plaintiffs act as supposed representatives of a class of similarly situated victims of the allegedly false advertising. Whether a particular suit ultimately proceeds as a class action is determined by the judge in the case prior to trial.
Consumer class action false advertising suits can be brought against makers of prescription and OTC drugs. However, consumer class actions successfully challenging prescription drug advertising are relatively uncommon, due at least in part to the doctrine of federal pre-emption. The pre-emption doctrine is grounded in the Supremacy Clause of the US Constitution, Article VI, clause 2, which makes federal law the supreme law of the United States. There are multiple ways a state law class action suit alleging drug product false advertising can be pre-empted by provisions of the FDC Act or by FDA regulation of prescription or OTC drugs.
Pre-emption can be required by federal statute (in other words, a statutory provision expressly barring, entirely or in certain circumstances, state regulation of a particular subject of federal law). The FDC Act contains a pre-emption provision applicable to OTC drugs, which states that, except under certain specified circumstances, “no state or political subdivision of a state may establish or continue in effect any requirement (i) that relates to the regulation of a drug that is [not a prescription drug]; and (ii) that is different from or in addition to, or that is otherwise not identical with, a requirement” of the FDC Act or two related statutes. Pre-emption can also result even in circumstances in which there is no applicable federal pre-emption statute. The most common circumstance where this occurs is when there is a direct conflict between state and federal law, such that a party that complies with federal law would be violating state law or a party complying with state law would be violating federal law.
A classic example of this type of pre-emption (known as conflict pre-emption) occurred in PLIVA Inc. v Mensing, 564 US 604 (2011), a US Supreme Court case involving prescription drug labelling. There, a user of a prescription drug brought a state law tort suit against a generic drug manufacturer alleging that the manufacturer should have placed additional safety warnings on the drug label. However, the defendant argued that the language it used on its label was mandated by the FDC Act and related FDA regulations. Although the FDC Act does not contain a pre-emption provision applicable to prescription drugs, the Supreme Court held that there was an irreconcilable conflict between plaintiff’s theory of state law and FDA labelling requirements, and therefore plaintiff’s suit was pre-empted.
In addition to lawsuits brought under federal and state law, the NAD, an advertising industry self-regulatory body, also hears, in a non-judicial setting, challenges to advertising disputes brought by competitors, consumers and the NAD itself, as part of its advertising monitoring function. The NAD has become a widely used venue for resolving advertising disputes. This is due to various factors, including (i) that its staff attorneys are highly experienced in the legal, scientific, marketing and consumer perception aspects of advertising claim substantiation; (ii) the relative speed of an NAD proceeding (typically only three to five months from the initiation of an NAD challenge to the issuance of its detailed written decision resolving that challenge, compared to one or two years or more from the filing of a Lanham Act complaint until trial); and (iii) the enormous cost savings of NAD challenges compared to Lanham Act litigations (legal fees for bringing or defending an NAD challenge can be as little as 5% to 10% of the fees incurred in a Lanham Act litigation, or even less). An NAD proceeding generally consists of two written submissions by each side (similar to legal briefs but less formal) followed by separate meetings between each side and NAD staff attorneys; there is no discovery, no motion practice and no trial.
Because the NAD is a self-regulatory body, its decisions are not binding on either party and do not constitute a finding that any law has been violated. Rather, when the NAD recommends that an advertiser modify or cease disseminating a particular advertisement, the advertiser can choose whether to comply voluntarily with the NAD’s decision or to appeal the decision to the National Advertising Review Board (NARB). However, unless appealing to the NARB, if the advertiser does not comply with the NAD’s recommendations, the NAD typically refers the advertiser to the appropriate government agency (most frequently the FTC, but in a prescription drug case, to the FDA). Unlike courts, the NAD has no power to issue injunctive relief, award monetary damages or attorney’s fees or hold a party in contempt. Thus, despite the NAD’s efficiency, technical expertise and experience, and the substantial cost-savings produced by an NAD proceeding compared to a court case, it is not an appropriate venue for a challenger that believes it needs a binding injunction (particularly an emergency injunction such as a Temporary Restraining Order or Preliminary Injunction at the outset of a case) or monetary relief to remedy injury resulting from false or misleading advertising.
The NAD has jurisdiction to hear challenges to prescription and OTC drug advertising, although, historically, OTC drug advertising has been challenged at the NAD much more frequently than prescription drug advertising.
Besides the NAD, the principal self-regulatory codes applicable to drug advertising and promotion are the PhRMA Code and the AMA Code. The PhRMA Code addresses interactions between pharmaceutical companies and health professionals. The AMA Code is the code of medical ethics for physicians.
Compliance with the PhRMA code is voluntary. However, in 2003, the Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers recognised that compliance with the PhRMA Code could “substantially reduce the risk of fraud and abuse and help demonstrate a good faith effort to comply with the applicable federal healthcare programme requirements.” Subsequently, a few states mandated that pharmaceutical companies operating within the state comply with the PhRMA Code.
The AMA Code imposes several “civic and professional obligation[s]” on “medical societies,” including: (i) reporting “to the appropriate governmental body or state board of medical examiners credible evidence” of alleged criminal conduct, (ii) initiating “disciplinary action” against physicians alleged to have engaged in misconduct, notwithstanding “the outcome of any civil or criminal proceeding” and (iii) imposing penalties “up to and including expulsion from membership” for violation of the prescribed “ethical standards.” The medical boards of each state are empowered to investigate and penalise violations of the AMA code.
There is no single definition of the term 'advertising'. Jurisdiction over drug advertising rests, in different but related respects, with the FDA, the FTC, the NAD and with courts hearing cases brought under the Lanham Act, state consumer protection statutes and (in more limited circumstances) the False Claims Act and federal and state criminal statutes. The scope of these entities’ jurisdiction over drug advertising, and over the related terms drug 'labelling' and drug 'promotion', is addressed in the FDC Act, the FTC Act, federal court decisions construing the reach of the Lanham Act, state false advertising and unfair competition statutes, the False Claims Act and miscellaneous criminal statutes, as well as the NAD Policies and Procedures promulgated by the Advertising Self-Regulatory Council (ASRC).
Advertising and promotion under the FDC Act
In 1.1 Laws and Self-regulatory Codes, it was noted that the FDC Act distinguishes between labelling and advertising. In the context of prescription drugs, the FDA also distinguishes between “required” labelling and “promotional” labelling. The former - which also is referred to as “prescribing information”, “product information”, “product labelling” or the “package insert” - is submitted to the FDA by a drug company and then approved by the FDA, as part of the NDA submission and approval process. This information, in FDA parlance, “travels with the drug” as it moves from the drug company to pharmacists and physicians, and includes the “details and directions healthcare providers need to prescribe the drug properly.”
“Promotional labelling,” on the other hand, consists of promotional materials used by a drug company after an NDA has been approved to help sell prescription drugs. Of course, prescription drug 'advertising' is also used to sell prescription drugs. So what, then, is the difference between promotional labelling and advertising? According to the FDA, the difference is simply “in the way [the communication] is distributed.” Thus, in the FDA’s view, advertising is “usually broadcast on TV or radio, or [is] published in newspapers or magazines,” whereas “promotional labelling” encompasses “additional types of materials and ways to get them to the consumer,” including brochures and booklets; mailed materials, including letters to patients; videotapes; and “giveaways” bearing a drug company’s name.
The above-listed media and modes of communication are not the only ones that can be used to disseminate advertising or promotional labelling and, generally speaking, the distinction between advertising and promotional labelling in the context of prescription drugs is of little practical significance. As discussed more fully in 7.1 Regulation of Advertising on the Internet for Medicinal Products, the FDA has made clear in recent years that it will apply to the advertising and promotion of prescription drugs on the internet and social media the same principles it uses in regulating prescription drug advertising and promotion in conventional media.
In the context of OTC drugs, however, the difference between labelling and advertising is of greater significance because, as noted in 1 Regulatory Framework, the FDA retains primary jurisdiction over OTC drug labelling, whereas the FTC has primary jurisdiction over OTC drug advertising.
How Lanham Act cases define advertising
The Lanham Act’s proscription against false and misleading advertising does not apply to all false or misleading statements. Instead, it is limited to false or misleading statements that appear in “commercial advertising or promotion.” Although there is no uniform standard applicable to all federal courts for determining what is “commercial advertising or promotion,” the key factors typically are (i) whether the statement constitutes commercial speech for the purpose of influencing consumers to buy, use, recommend or prescribe the defendant’s goods or services and (ii) whether the statement is disseminated sufficiently to the relevant purchasing public to constitute 'advertising' or 'promotion' within that industry. Classical advertising campaigns such as television commercials and print advertisements, and, today, internet advertising clearly fall into the category of “commercial advertising or promotion”. So does labelling. Other modes of communication also have been found to fall within the definition and therefore are subject to suit under the Lanham Act.
One appellate court has defined advertising as “a form of promotion to anonymous recipients, as distinguished from face-to-face communication” and “a subset of persuasion [that] refers to dissemination of prefabricated promotional material.” But other courts have recognised that the Lanham Act covers “commercial advertising” and “promotion,” with “the distinction between advertising and promotion [lying] in the form of the representation. Although advertising is generally understood to consist of widespread communication through print or broadcast media, ‘promotion’ may take other forms of publicity used in the relevant industry, such as displays at trade shows and sales presentations to buyers.”
In the pharmaceutical context, courts have held that statements made to physicians by drug company sales representatives can constitute advertising or promotion, even when made in a one-on-one context, given that these meetings — sometimes called “detailings” — are a prominent means of marketing in the pharmaceutical industry and are often part of a broader, management-driven marketing scheme.
NAD and FTC jurisdiction over advertising
The NAD’s jurisdiction is limited solely to “national advertising,” which the NAD’s Procedures define as “any paid commercial message, in any medium (including labelling), if it has the purpose of inducing a sale or other commercial transaction or persuading the audience of the value or usefulness of a company, product or service; if it is disseminated nationally or to a substantial portion of the United States, or is test market advertising prepared for national campaigns; and if the content is controlled by the advertiser.” The NAD exercises jurisdiction over advertising on network and cable television and radio, in magazines or newspapers, on the internet or commercial online services, or provided direct to the home or office. Any person or legal entity, including the NAD itself as part of its monitoring responsibility, may initiate challenges regarding national advertising, regardless of whether the advertisement is addressed to consumers, professionals or business entities. In the pharmaceutical arena, the NAD examines advertising claims for OTC and prescription drugs. For reasons having more to do with the venue choices of the companies that initiate NAD challenges than any other factor, the NAD hears more challenges to OTC advertising than prescription advertising.
The FTC’s jurisdiction extends broadly to unfair competitive practices, in the fields of antitrust law (or competition law, in European terms) and deceptive advertising. The FTC derives its authority to regulate all forms of advertising and marketing, including non-prescription drug advertising, from §§5 and 12 of the FTC Act, which prohibit unfair or deceptive acts or practices in or affecting commerce and the dissemination of false advertisements that are intended to or are likely to induce the purchase of, among other things, OTC drugs. An advertisement is deemed “false” if it is “misleading in any material respect.” A drug advertisement will not be deemed false under the FTC Act if it is “disseminated only to members of the medical profession, contains no false representation of a material fact and includes, or is accompanied in each instance by truthful disclosure of, the formula showing quantitatively each ingredient of such drug.”
Among the factors the FTC considers in deciding whether to bring a case are the geographic scope of the advertising campaign (the FTC usually “concentrates on national advertising” and “refers local matters to state, county, or city agencies”; the extent to which “an ad represents a pattern of deception, rather than an individual dispute”; and the amount of injury — “to consumers’ health, safety, or wallets” — that could occur if consumers rely on the claim. Internet advertisements are subject to the same standards as traditional forms of advertisements. The FTC’s scope of inquiry and investigation of deceptive advertising extends to all types of media in which advertising communications are or can be made, including commercials, print ads, mailed ads and online. The FTC is particularly active in the area of investigating health and safety claims in advertising that consumers would have trouble evaluating for themselves.
NAD and FTC jurisdiction over social media advertising
In addition to hearing claims made in print ads, television commercials and commercial websites, the NAD also hears claims involving social media advertising. Recent cases illustrate general principles drug manufacturers should be aware of when using social media to promote their products. For example, when advertisers share or re-tweet social media posts by customers, those posts may be considered to be “product claims” by the advertiser. Similarly, the NAD has held that advertisers are responsible for messages directly conveyed by third parties, such as in consumer social media posts or shared videos, when the consumer’s actions are part of or result from an advertiser’s viral marketing campaign.
Further, advertisers that induce social media posts by consumers touting the advertiser’s product need to ensure that these 'endorsers' know in advance that they must disclose any incentive they received for their endorsement, no matter how small, in their social media post. The FTC has written extensive guidance on the topic of social media endorsements and disclosures where there are “material connections between advertisers and endorsers.” The NAD reviews challenges to endorsement claims according to the FTC guidance and has found “material” connections even where the undisclosed inducement to the endorser is very small. Clarifying disclosures about consumer experience with the performance of an advertiser’s product are also required where the advertiser maintains a social media platform in which consumers are encouraged to share their product experiences.
The distinction between advertising, on one hand, and the dissemination of information that is not regulated as advertising on the other hand is relevant only to the extent a communication concerns subject matter that would or could violate FDA regulations if construed as advertising or promotion. In general, content that identifies and explicitly or implicitly makes claims about or promotes a specific prescription drug is likely to be viewed by the FDA as advertising or promotion. By contrast, information such as a disease awareness campaign that does not identify a particular drug and otherwise is set up in a manner that avoids even implicit promotion of a particular drug is unlikely to receive FDA scrutiny.
Until recently, a 2004 FDA draft guidance addressed FDA’s position regarding disease awareness communications in certain specific contexts. However, for reasons that are unclear, the FDA revoked that draft guidance in 2015, creating a degree of uncertainty as to how the FDA views drug manufacturers’ disease awareness communications, at least in circumstances in which those communications are in close proximity in a particular publication to other communications by the manufacturer that are promotional in nature.
FDA regulation of drug product press releases
There is no provision in the FDC Act or FDA regulations that prohibits press releases. However, the FDA has asserted regulatory authority over written press releases and oral statements by drug company representatives on the theory that, at least in certain circumstances, both fall into the category of promotional labelling or advertising. It has been suggested in a journal article that FDA enforcement actions based solely on the content of written or oral press releases have virtually ceased due to First Amendment concerns. But subsequent to the publication of that article, there has been at least one criminal conviction for wire fraud, confirmed on appeal by the US Court of Appeals for the Ninth Circuit in California, stemming from a prescription drug company press release deemed to be fraudulent. A report on that story concludes with the authors’ conclusion that the appellate court decision “makes it clear that press releases can provide fertile ground for enforcement actions under the right facts. Pharmaceutical companies should take care to review all releases carefully and to assure they are not used for promotional purposes unless FDA’s promotional regulations are met.”
Lanham Act regulation of drug company press releases
The Lanham Act does not contain any, per se, prohibition against press releases by pharmaceutical companies (or any other company). Unless a press release is deemed to constitute “commercial advertising or promotion,” it is not subject to regulation under the Lanham Act’s false advertising prohibition. Stated differently, a press release is within the scope of the Lanham Act only if its purpose or effect was to influence consumers to buy, use, recommend or prescribe the press release issuer’s drug.
Just as with any form of “commercial advertising or promotion,” a press release would violate the Lanham Act only if the plaintiff proves by a preponderance of the evidence that the press release is (i) either literally or impliedly false, (ii) material, (iii) placed in interstate commerce and (iv) the cause of actual or likely injury to the plaintiff. Whether a press release constitutes commercial advertising or promotion is a question of fact that depends, in each case, on evidence about the press release’s purpose, content, audience and actual or likely impact. In Lanham Act jurisprudence there are numerous cases finding that a press release constitutes advertising and other cases finding that it is not advertising.
NAD regulation of press releases
As with US courts, the NAD does not prohibit press releases by drug companies or entities and instead would look at the purpose, context and reasonable messages communicated by the press release to determine whether they fall within the NAD’s jurisdiction and, if so, whether they contain any claims that are not adequately substantiated or that are otherwise false or misleading.
The PhRMA Code
The PhRMA Code does not specifically mention press releases. However, to the extent that press releases may under some circumstances be considered promotional materials, the PhRMA Code limits their use as follows: “Promotional materials provided to healthcare professionals by or on behalf of a company should: (a) be accurate and not misleading; (b) make claims about a product only when properly substantiated; (c) reflect the balance between risks and benefits; and (d) be consistent with all other [FDA] requirements governing such communications.”
FDA regulation of comparative drug advertising
It is a common misconception that the FDA prohibits comparative advertising of prescription drugs. No such blanket prohibition exists, although, as another commentator has put it, the FDA does “intensely scrutinise” comparative drug claims.
Comparative claims about drug performance or safety must be supported by substantial evidence, typically in the form of a well-designed clinical study in which the advertiser’s drug and the competitor’s drug were tested under materially identical conditions, the study population was appropriate, the study employed an appropriate statistical design and the study showed statistically significant differences between the tested products as to the feature or features being tested.In addition, there must be an appropriate “fit” between the study’s design and results, and the claim being made. Advertisements that make or imply comparative safety or efficacy claims without the support of a robust comparative study showing statistically significant product differences generally would be found to violate the FDC Act.
Comparative drug advertising under the Lanham Act
Neither the language of the Lanham Act nor any judicial decision contains any prohibition against truthful, non-misleading comparative advertising. Advertising that is neither false nor misleading is permissible under the Lanham Act regardless of whether the advertising claim is comparative or non-comparative and regardless of product category or industry. Conversely, just as is the case with other industries, a misleading false or misleading comparative advertising claim by the maker of a prescription or OTC drug violates the Lanham Act and exposes the advertiser to injunctive relief and monetary damages.
Just as under the Lanham Act, comparative advertisements are not per se prohibited under state false advertising statutes, FTC case law or in NAD challenges. Instead, under state law, the primary issue will be whether a particular comparative advertisement is false or misleading to a reasonable consumer, and at the FTC or the NAD, whether the comparative claim is adequately substantiated, an inquiry that first involves review of the message or messages reasonably communicated by the comparative claim, followed by an inquiry into the adequacy of the substantiation for each of those messages.
A prescription drug is one that, “because of its toxicity or other potentiality for harmful effect, or the method of its use, or the collateral measures necessary to its use, is not safe for use except under the supervision of a practitioner licensed by law to administer such drug.” New prescription drugs require FDA approval before they can be marketed. Approval is contingent, among other things, on the FDA’s determination that the drug is safe and effective for a particular intended use or uses. Unauthorised medicines are drugs that require FDA approval but have not been approved by the FDA for any intended use. Unauthorised indications, more commonly known as “off-label” uses, refer to uses of an FDA-approved drug other than the use(s) for which the drug was approved.
The FDA does not permit drug companies to communicate information about off-label uses directly to consumers. Moreover, with limited exceptions, the FDA generally prohibits drug manufacturers from engaging in off-label promotion even to healthcare professionals; the FDA treats off-label promotion as the promotion of an unapproved new drug and thus as constituting misbranding in violation of the FDC Act.
The principal exception to the FDA’s prohibition on off-label promotion is when a drug manufacturer’s dissemination of scientific information about off-label use of an FDA-approved drug is in response to an unsolicited request for information from a medical professional, the information disseminated is truthful and not misleading, and the dissemination is in a manner consistent with FDA guidance.
The FDA has recognised the difficulty in drawing the line between, on the one hand, the need for a truthful scientific exchange between drug companies and healthcare providers about off-label uses of approved drugs to improve patient care and save lives, and, on the other hand, the need to protect the public against the dangers that might arise from the prescription of unapproved drugs. With that in mind, the FDA has issued various guidances relating to drug company communications to healthcare professionals about off-label uses. In 2014, the FDA issued its Revised Draft Guidance for Industry:Distributing Scientific and Medical Publications for Unapproved New Uses – Recommended Practices (February 2014) (the “2014 Revised Draft Guidance”).
The 2014 Revised Draft Guidance addresses pharmaceutical company distribution of scientific materials containing information on off-label uses of medical products and devices. Although many of these suggestions are not legally binding or enforceable, the 2014 Revised Draft Guidance provides insight into the FDA’s views on off-label information and its current recommendations on the subject.
This guidance specifically deals with the issue of drug and device manufacturers, and their representatives, providing to healthcare professionals or healthcare entities scientific or medical journal articles, reference texts or clinical practice guidelines (CPGs) that discuss unapproved new uses for approved drugs. The 2014 Revised Draft Guidance takes the position that although there is value in providing “truthful and non-misleading scientific medical publications on unapproved new uses,” this information is no substitute for “the FDA pre-market review process, which allows FDA to be proactive, rather than reactive, in protecting the public from unsafe or ineffective medical products.”
The 2014 Revised Draft Guidance divides its recommended practices into three sections: scientific or medical journal articles, scientific or medical reference texts and CPGs. As to scientific or medical journal articles, the draft guidance recommends that manufacturers should only use articles that “have been published by an organisation that has an editorial board that uses experts who have demonstrated expertise in the subject of the article.” These experts should be independent of the organisation and “the organisation should adhere to a publicly stated policy of full disclosure of any conflict of interest or biases.” Additionally, these articles should come from a peer-reviewed publication, be distributed in an unabridged format and contain information from “well-controlled clinical investigations.”
Moreover, the articles should be disseminated “with the approved labelling for the indications in the product’s cleared indications for use statement” and with any representative publications (if they exist) that reach different conclusions, and they should be delivered separately from “information that is promotional in nature.” The draft guidance further observes that the articles must not be false or misleading (a legally enforceable requirement under the FDC Act, applicable to all the materials discussed in this draft guidance) and must not contain any recommended uses of a product that would be “dangerous to health when used in the manner suggested.”The draft guidance also recommends that these publications should be widely available to the public through independent distribution channels; should not be extensively marked, highlighted, edited or summarised by the manufacturer; and should not be in the form of a special supplement or publication that has been “funded, in whole or in part, by one or more of the manufacturers of the product that is the subject of the article.”
Finally, other recommendations of the draft guidance include affixing “prominently displayed” statements regarding the disseminating company’s interest in the products discussed in the article, the fact that the claims are not FDA-approved, the financial interests of the authors, the sources of funding for the study and the risks or safety concerns related to the unauthorised use.
The draft guidance’s recommendations are similar for medical reference texts. The main difference is that the FDA emphasises that these texts should “be based on a systematic review of the existing evidence,” be the most current version and should be authored/edited by experts “who have demonstrated expertise in the subject area.” If the manufacturer wishes to distribute a single chapter of a text, it should only distribute an unabridged, unaltered version.
Regarding CPGs, the draft guidance’s main focus is establishing standards of trustworthiness, which “ensure that CPGs are informed by a systematic review of evidence and an assessment of the benefits and harms of alternative care options.” If a CPG is deemed trustworthy (ie, based on a systematic review of evidence, developed by a knowledgeable group of experts, considers important patient subgroups and preferences, is based on an explicit and transparent process, provides clear explanations and recommendations, and is reconsidered and revised when new evidence warrants modifications) then the drug manufacturer may distribute it, so long as it is the most current version, it is delivered separately from other promotional materials and it states the manufacturer’s interests. As always, the materials should be unaltered and unabridged.
Although the 2014 Revised Draft Guidance is a relatively recent document, “off-label information” is an area of drug regulation that the FDA is reviewing and FDA regulations and/or guidance on this subject could change in the near future. As part of its comprehensive review of its regulations and policies on off-label information, the FDA held a public hearing on 9-10 November 2016 on the topic of drug company communications about unapproved uses of approved medical products. The comment period following this hearing was extended until 19 April 2017.
As with prescription drugs, there is a general prohibition against labelling an OTC drug in a manner that is outside the scope of the indications established in the drug’s Monograph or approved uses. Labelling or advertising materials containing an unauthorised indication could cause a drug to be rendered misbranded and/or an unapproved new drug.
Judicial decisions regarding the constitutionality of prohibitions on truthful communications about off-label use
The US Supreme Court has held that “speech in aid of pharmaceutical marketing” is a form of speech protected under the freedom of speech provision of the First Amendment to the US Constitution. More recently, in United States v Caronia, 703 F.3d 149 (2d Cir. 2012), the US Court of Appeals for the Second Circuit – which covers the states of New York, Connecticut and Vermont – specifically considered whether truthful, non-misleading off-label promotions of a pharmaceutical product are protected under the First Amendment. In that case, a pharmaceutical sales representative who had promoted off-label uses of an FDA-approved prescription drug was convicted of criminal misdemeanour violations of the FDC Act, specifically conspiracy to misbrand a drug and conspiracy to introduce a misbranded drug into interstate commerce.
The Second Circuit reversed the conviction, holding that “the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDC Act for speech promoting the lawful, off-label use of an FDA-approved drug.” The Court held that the FDC Act’s misbranding provisions could not be construed to criminalise truthful promotion of an off-label use, as that would “run afoul of the First Amendment.” The Second Circuit noted, however, that “off-label promotion that is false or misleading is not entitled to First Amendment protection.”
Following the Caronia decision, a federal district court judge in New York granted a preliminary injunction sought by a manufacturer of an FDA-approved prescription drug that, over the FDA’s objections, wished to make truthful statements to doctors about an off-label use of the drug derived largely from an FDA-approved study and from writings by the FDA itself. In Amarin Pharma, Inc. v FDA, 119 F. Supp. 3d 196 (S.D.N.Y. 2015), the manufacturer argued that, like the statements in Caronia, the statements it sought to make were truthful and non-misleading. The district court agreed with the manufacturer, holding that the FDA could not bring a misbranding action “based on truthful promotional speech alone, consistent with the First Amendment.” The court further rejected the FDA’s argument that Caronia applied only to requests for information solicited by a healthcare professional and instead held that Caronia applies “across the board to alltruthful and non-misleading promotional speech [emphasis in original]."
Caronia, on which the Amarin decision rests, is binding only on courts in the Second Circuit. In other circuits, it is less clear whether a pharmaceutical company’s truthful off-label promotion to healthcare professionals is constitutionally protected. In the Ninth Circuit, covering California and other western states, the Court of Appeals has not spoken directly on that subject and the district courts are divided.
Similarly, neither the US Court of Appeals for the First Circuit (covering Massachusetts, New Hampshire and Maine) nor the Court of Appeals for the Third Circuit (covering New Jersey, Pennsylvania and Delaware) has ruled on whether truthful, non-misleading off-label promotion of an FDA-approved drug is considered constitutionally protected free speech. In short, at least until a clarifying decision of the US Supreme Court, it appears that in the Second Circuit, the validity of any FDA or Justice Department restrictions, warnings, prosecutions or other action to stop or restrict truthful, non-misleading promotion of off-label usage of FDA-approved drugs is of dubious legality. How appellate courts in other circuits will address this issue is uncertain.
Nothing in any of the above cases insulates a pharmaceutical company from criminal or civil liability when the company’s statements about off-label use are false or misleading, even when those statements initially are presented at scientific conferences or other non-promotional settings.
For example, a federal district judge in New Jersey held that a drug company press release and promotional materials that selectively used information first presented in an article in the New England Journal of Medicine constituted commercial speech that was properly the subject of a Lanham Act suit, even though the article could not form the basis of a suit. Similarly, a Massachusetts federal district court found that a press release reporting the results of scientific research regarding competing drug therapies, released on one manufacturer’s website and distributed to organisations relied upon by patients seeking such drug therapies, was “commercial advertising” subject to suit under the Lanham Act, even though the initial presentation of the scientific information at a conference was not.
The extent to which information on unapproved drugs or off-label use of FDA-approved drugs can be provided during a scientific conference directed at healthcare professionals is the subject of an FDA guidance entitled Guidance for Industry, Industry-Supported Scientific and Educational Activities (1997). This guidance indicates that the FDA does not intend to regulate industry-supported scientific and educational activities that are independent of the influence of the supporting company. The FDA considers the following non-exclusive factors in evaluating the independence of industry-sponsored programming:
Similarly, the PhRMA Code contains standards concerning pharmaceutical support for Continuing Medical Education (CME). These standards include that drug companies should:
Unlike the practice that is understood to be the case in certain EU countries, neither the FDA, any of the self-regulatory codes, nor any judicial decisions state or imply that providing information to healthcare organisations about unapproved drugs or off-label use of approved drugs for purposes of budget preparation is exempted from the prohibitions or restrictions applicable to promotion of unapproved drugs or off-label usage. For a discussion of the standards applicable to providing price information to healthcare institutions concerning approved usage of drugs, see5.1 Restrictions on Information Contained in Advertising Directed at Healthcare Professionals.
FDA regulation of prescription drug advertising
The FDA regulates prescription drug advertising in the form of drug labelling and in promotional materials such as television, radio and internet advertisements. Fundamental to FDA regulation of prescription and OTC drug labelling and to other forms of prescription drug advertising is the principle that all such communications must be truthful and non-misleading.
The FDA’s regulation of prescription drug labelling was addressed in 1.1 Laws and Self-regulatory Codes and 2.1 Definition of Advertising. As for other forms of prescription drug advertising, the FDA requires that such advertising provide the consumer with, at a minimum, the brand and generic name of the drug, at least one approved use for the drug and the most significant risks associated with use of the drug. If the advertisement is a broadcast advertisement (eg, television or radio), it must also include a “major statement” of the drug’s most important risks, as well as information identifying all side effects, contraindications, warnings and precautions or providing a variety of sources to enable viewers/listeners to find the drug’s prescribing information.
Companies promoting their products to consumers must ensure that their promotional materials use “consumer friendly” language appropriate for their intended audience. The statement “You are encouraged to report negative side effects of prescription drugs to the FDA. Visit www.FDA.gov/medwatch, or call 1-800-FDA-1088” must be included.
Prescription drug advertisements directed to consumers have been the subject of multiple FDA draft guidances, including a 2015 draft Guidance for Industry:Brief Summary and Adequate Directions for Use: Disclosing Risk Information in Consumer-Directed Print Advertisements and Promotional Labeling for Prescription Drugs(the “2015 Draft Guidance”). The 2015 Draft Guidance concerns print advertising and promotional labelling. The 2015 Draft Guidance recommends that print advertising and promotional labelling contain a “consumer brief summary” in a format similar to a drug fact box found on OTC drug packaging or in a question and answer format to convey critical fact information in an understandable yet sufficiently comprehensive manner. The summary should include:
The FDA has also issued a guidance concerning direct-to-consumer broadcast advertisements, entitled Guidance for Industry, Consumer-Directed Broadcast Advertisements: Questions and Answers (1999). This Guidance begins with the presumption that all television commercials for prescription drugs will (i) not be false or misleading in any respect (and will include a communication that the “advertised product is available only by prescription and that only a prescribing healthcare professional can decide whether the product is appropriate for a patient”); (ii) present a fair balance between information about effectiveness and information about risk; (iii) include a thorough major statement “conveying all the product’s most important risk information in consumer-friendly language”; and (iv) communicate all information relevant to the product’s indication (including use limitations) in consumer-friendly language.
In addition, the Guidance recognises that some viewers will not have internet access or will be uncomfortable actively requesting, or identifying themselves in their search for, product information. To that end, the Guidance recommends a four-component method for providing consumers with sufficient information to enable them to obtain important prescribing information about the advertised prescription drug. The four parts are: (i) a toll-free number consumers can call to obtain a copy of, or to have read to them, the prescribing information; (ii) an alternative means to obtain prescribing information for those who do not have access to technology, such as a currently available magazine advertisement; (iii) a website address that has the prescribing information; and (iv) a direction that an appropriate healthcare provider may have additional information.
The FDA has broad jurisdiction to require drug companies to submit certain prescription drug television commercials to the FDA for review at least 45 days prior to airing. However, in a 2012 Draft Guidance, the FDA has advised that it intends this pre-submission requirement to apply only in the following scenarios:
In addition, the FDA has special regulations for “reminder materials”, which call attention to the name of the drug product but do not include indications or dosage recommendations or any representations about the product or suggestions that it be used. There are certain regulatory exemptions for such materials, such as the waiver of the requirement to include fair balance, full prescribing information or a brief summary.
FTC regulation of OTC drug advertising
The basics ofFTC regulation of OTC drug advertising are discussed in 2.1 Definition of Advertising.In addition, the FTC has published multiple policy statements that address deceptive advertising. We discuss three of those statements here, each of which applies to the advertising of OTC drugs and one of which is explicitly about OTC drugs and dietary supplements.
In 1983, the FTC published a policy statement on deceptive advertising, in the form of a letter to the chair of a committee of the US House of Representatives. This policy statement, which is still in effect, outlines and explains the most important principles of general applicability that the FTC applies in determining whether an advertisement constitutes or contains “deceptive ads or practices” that are “material in any meaningful respect”. The FTC characterised this policy statement as a means of clarifying the FTC’s view about “the meaning of deception,” in recognition of the fact that until the time of this policy statement, the FTC had not issued “a single definitive statement of the [FTC’s] view of its authority.”
The policy statement clarified that there were three elements that are central in all deception cases brought by the FTC. First, “there must be a representation, omission or practice that is likely to mislead the consumer.” The FTC noted that deceptive representations could, among other things, be oral or written and could involve a wide variety of practices and subject matter. Second, the FTC explained that it examined allegedly deceptive practices or advertising “from the perspective of a consumer acting reasonably under the circumstances” and that if a representation or practice is directed principally to a particular group, the FTC would examine reasonableness from the perspective of that group. Third, the policy statement clarified that for a representation or practice to be deemed deceptive, it must be “material”; in other words, that it was “likely to affect the consumer’s conduct or decision with regard to a product or service.”
To summarise, the policy statement clarified that the FTC will find deception “if there is a representation, omission or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.”
Also in 1983, the FTC published a policy statement on advertising substantiation. This policy statement reaffirmed the FTC’s commitment to what it characterised as “the underlying legal requirement of advertising substantiation,” namely that advertisers “have a reasonable basis” for advertising claims before they are disseminated. The FTC stated that it intends to continue “vigorous enforcement of this existing legal requirement,” which the policy statement clarified applied to express and implied claims that make “objective assertions” about the item or service being advertised.
For businesses that market OTC drugs and other health-related products, the substantiation requirements are even stricter. As described in the FTC’s guide for advertisements of dietary supplements, when “evaluating claims about the efficacy and safety of foods, dietary supplements and drugs, the FTC has typically applied a substantiation standard of competent and reliable scientific evidence.” The FTC has defined “competent and reliable scientific evidence” as “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have 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.”
With regard to health and safety claims, there is no set rule on the number of studies an OTC drug advertiser needs to satisfy the “competent and reliable scientific evidence” standard, but the FTC has sometimes insisted on an advertiser proffering more than one study to support an OTC drug efficacy claim.
Restrictions on drug advertising under the Lanham Act
Elements of a Lanham Act false advertising claim
A Lanham Act false advertising claim requires plaintiffs to “establish that the challenged message is (1) either literally or impliedly false, (2) material, (3) placed in interstate commerce and (4) the cause of actual or likely injury to the plaintiff.” Literal falsity can be demonstrated by showing that the advertisement “makes an express statement that is false or a statement that is ‘false by necessary implication’, meaning that the advertisement’s ‘words or images, considered in context, necessarily and unambiguously imply a false message.’ ”
To be literally false, a statement must be unambiguous. However, statements can be impliedly false – in other words, misleading – notwithstanding that they are ambiguous or even literally true. To prove that an advertising claim is impliedly false, the plaintiff typically has to offer extrinsic evidence, almost always in the form of a properly executed consumer survey, establishing that a significant percentage of consumers who view the advertisement understand it to communicate the implied false message. In at least some federal appellate courts, consumer surveys are not required to prove implied falsity when the evidence establishes that the advertiser intentionally intended to communicate the impliedly false message alleged by the plaintiff.
The second prong, materiality, requires that the false message misrepresent “an inherent quality or characteristic of the product.” Proof of materiality also requires a showing that the deception is “likely to influence [consumer] purchasing decisions.” “While the materiality of the falsity and the likelihood of injury to the plaintiff resulting from the defendant's falsity are separate essential elements, in many cases the evidence and the findings by the court that a plaintiff has been injured or is likely to suffer injury will satisfy the materiality standard — especially where the defendant and plaintiff are competitors in the same market and the falsity of the defendant's advertising is likely to lead consumers to prefer the defendant's product over the plaintiff's.”
The third prong, that the false message was introduced into interstate commerce, is typically satisfied by showing that a message was distributed to a subset of the public, even if the advertising communication never travelled outside the state. But there is authority for the proposition that advertising that is limited to a single state is not actionable under the Lanham Act.
The fourth prong, that the false message causes actual or likely injury, can be satisfied even though a party fails to establish a specific amount of loss and a plaintiff without proof of a specific quantum of lost profits or other monetary injury can still be entitled to injunctive relief. However, to recover monetary damages in the form of lost profits or other economic injury, proof of actual injury is required. In addition, a plaintiff may under some circumstances be entitled to a disgorgement award; in other words, the profits the advertiser earned as a result of its false advertising. In some jurisdictions, disgorgement is available only on a finding that the advertiser intentionally engaged in false advertising.
Lanham Act cases involving prescription and OTC drugs
The standards described above are applicable to all Lanham Act cases and thus govern Lanham Act suits involving prescription and OTC drug advertising. Historically, however, many Lanham Act drug cases have involved the added element of how the plaintiff’s allegations of fact and theories of liability comport with FDA or FTC regulations, pronouncements, actions or the absence of actions by those agencies. Prior to 2014, there were multiple cases in which courts refrained from deciding Lanham Act cases involving FDA-regulated drugs because the cases involved issues that were within the FDA’s scope of regulation that the FDA had not yet addressed or deferred to FDA findings or decisions.
However, in 2014, the US Supreme Court issued a landmark decision, POM Wonderful v Coca-Cola, 134 S Ct 2228 (2014), which largely resolved judicial uncertainty and confusion concerning the interplay between the Lanham Act and the FDC Act. That decision, which was unanimous, makes clear that judges and juries deciding Lanham Act cases involving advertising for FDA-regulated products are not bound by FDA determinations or other policy-making, even where the FDA’s findings or conclusions are directly contrary to the position advocated by a Lanham Act plaintiff.
The POM Wonderful case concerned advertising for juice beverages, another product category the FDA heavily regulates. The plaintiff was the leading manufacturer of 100% pomegranate juice beverages and it objected to the defendant’s label for a competing juice beverage, which featured a picture of a pomegranate along with other fruit and called the drink a “pomegranate blueberry flavored blend of 5 juices”, with “pomegranate blueberry” in large capital letters. Because the drink contained less than 1% pomegranate juice, plaintiff alleged that defendant’s label was misleading in violation of the Lanham Act because it greatly exaggerated the juice’s pomegranate content.
Plaintiff’s problem was that the FDA had adopted beverage regulations applicable to all juice beverages marketed in the United States and defendant’s labelling was consistent with FDA regulations. That being the case, the district court dismissed the lawsuit and the US Court of Appeals for the Ninth Circuit affirmed, holding that the FDA’s comprehensive regulation of juice beverages precluded plaintiff’s suit.
The Supreme Court agreed to hear plaintiff’s appeal and the US Department of Justice (DOJ) intervened, urging the Court to take an intermediate position, namely that FDA decision-making precludes Lanham Act suits only when it “requires or authorises” the advertising messages the Lanham Act plaintiff alleges are false. The Supreme Court unanimously reversed the Ninth Circuit decision and rejected the DOJ’s position.
The Supreme Court viewed this case as governed by traditional rules of statutory interpretation. It first concluded that nothing in the language or legislative history of the FDC Act or the Lanham Act evidences any intent that forbids or limits Lanham Act claims concerning FDA-regulated products and that since both statutes have co-existed for nearly 70 years, the absence of any congressional action to give primacy to the FDC Act strongly indicated an absence of congressional intention for such primacy to take place. The Court also took into account that the two statutes have separate purposes, with Congress enacting the FDC Act to protect consumer health and safety, and the Lanham Act to protect businesses engaged in competition against unfair competition. It recognised, therefore, that a ruling precluding Lanham Act claims involving products heavily regulated by the FDA could interfere with Congress’s intention to protect competitors against unfair competition, especially in light of the fact that protecting competitors was not the focus of the FDA.
Although the POM Wonderful case involved juice beverages, the Court’s analysis was not limited to that category of FDA regulation and was equally applicable to other FDA-regulated categories, including medical devices and drugs. Subsequently, the US Court of Appeals for the Second Circuit was confronted with whether the Supreme Court’s decision also applied to Lanham Act cases involving claims of false advertising by a maker of FDA-regulated medical devices. In Church & Dwight v SPD Swiss Precision Diagnostics,2016 WL 7131177 (2d Cir 9 September 2016), as amended, 5 December 2016, a unanimous three-judge panel concluded that the Supreme Court’s POM Wonderful decision fully applied to medical devices, that FDA clearance of the labelling of a device package did not preclude a competitor’s claims that the defendant’s labelling or related advertising was false and misleading, and affirmed a district court ruling, after trial, that the defendant’s advertising was false and misleading in violation of the Lanham Act. The defendant petitioned for a rehearing before all the active judges of the Second Circuit and that petition was denied without recorded dissent.
NAD cases involving drug advertising
As befitting a self-regulatory body, the NAD is more deferential to FDA and FTC decision-making than are federal courts hearing Lanham Act cases. NAD procedures prohibit it from reviewing the truth and accuracy of specific language in an advertisement when that language is mandated or expressly approved by federal regulation. For OTC and prescription drugs, the NAD seeks to “harmonise its efforts and decisions” with the FDA, recognising that the regulatory agency is charged with oversight authority for prescription drug advertising, see MedImmune (Synagis), NAD Report #3864(August 2001); see also Cosmederm Biosciences (TriCalm), NAD Report #5835 (June 2015) (noting “as a general rule, NAD accords great weight to FDA regulations [and] has no authority to determine whether or not a product is “misbranded” as defined by FDA’s regulation”). The NAD departs from FDA guidance in decisions in which the guidance is inapplicable, underscoring its commitment to synchronising with the FDA where appropriate. However, where advertising departs from claims that the FDA has approved, the NAD has not hesitated to examine them on their merits. The NAD will review all messages reasonably conveyed by a challenged advertisement and determine whether they are adequately substantiated.
FDA requirements and prohibitions concerning prescription drug advertising
The FDA requires that all advertising that makes claims about a prescription drug must identify: (i) at least one approved use of the drug; (ii) the generic name of the drug; and (iii) all the risks of using the drug (although in some circumstances, only the most important risks need be disclosed). In addition, the FDA requires that advertisements contain fair and balanced information that would allow a recipient of the advertisement to make properly informed decisions about care. As such, companies must present information regarding benefits and risks in a balanced fashion. Ensuring adequate disclosure of risks is essential for compliance with the FDC Act. Furthermore, including product claims without substantial evidence to support the claims is considered misleading in violation of the FDC Act.
The FDA has provided many examples of ways an advertisement may violate the law. They include:
Pricing information is not required in prescription drug advertisements, nor is it prohibited, so long as it is compliant with 21 CFR §200.200, which governs prescription drug reminder advertisements and reminder labelling. In short, this FDA regulation permits prescription drug price information to be disclosed to consumers via reminder advertising and reminder labelling so long as the only purpose of the reminder advertisement or reminder labelling is to provide consumers with price information for a particular drug, without any representation or suggestion about the drug's safety, effectiveness or indications for use and certain other requirements are met.
FTC oversight of OTC drug advertising
The FTC’s oversight of OTC drug advertising is discussed in 1.1 Laws and Self-regulatory Codes and 2.1 Definition of Advertising. Unlike the FDA’s oversight of prescription drug advertising, the FTC does not have any regulations requiring or prohibiting specific content in OTC drug advertising, whether related to product performance claims or pricing. Instead, the FTC brings claims for deceptive OTC drug advertising on a case-by-case basis when it concludes that a particular advertisement, when viewed in context, is likely to deceive or mislead a reasonable consumer viewing the advertisement in a way that would likely impact the consumer’s purchasing decisions.
Lanham Act oversight of drug advertising
As is the case with the FTC Act, the Lanham Act does not have any provisions requiring or prohibiting specific content in drug advertising. Instead, courts hearing Lanham Act lawsuits alleging false or misleading drug advertising assess whether the plaintiff has established each of the elements of a false advertising claim set forth in 4.1 Main Restrictions on Advertising to the General Public. The following are a few examples of drug product performance claims that courts hearing Lanham Act false advertising lawsuits have permanently or temporarily prohibited:
There are no laws or self-regulatory codes of which the authors are aware that impose specific restrictions on interactions between patients or patient organisations and industry. FDA restrictions concerning direct-to-consumer advertising are discussed in 4.1 Main Restrictions on Advertising to the General Public and FTC restrictions on endorsements and testimonials in advertising, discussed in 4.4 Restrictions on Endorsements by Healthcare Professionals, apply to consumer endorsements in drug advertising.
As part of its statutory authority to regulate unfair competition and unfair or deceptive acts and practices in advertising, the FTC in 2009 promulgated Revised Guides Concerning Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”). The FTC is empowered to regulate advertising by healthcare professionals. The Endorsement Guides apply generally to healthcare professionals and several examples in the Endorsement Guides explicitly apply to physician endorsement.
Section 255.1(a) of the Endorsement Guides sets forth the principle that “endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser” and “may not convey any express or implied representation that would be deceptive if made directly by the advertiser.” The same section provides that “endorsers also may be liable [for deceptive advertising in violation of the FTC Act] for statements made in the course of their endorsements.” The Endorsement Guides provide an example of liability for a physician.
Example 3: An ad for an acne treatment features a dermatologist who claims that the product is “clinically proven” to work. Before giving the endorsement, she received a write-up of the clinical study in question, which indicates flaws in the design and conduct of the study that are so serious that they preclude any conclusions about the efficacy of the product. The dermatologist is subject to liability for the false statements she made in the advertisement. The advertiser is also liable for misrepresentations made through the endorsement.
When the endorser is explicitly or implicitly presented as an expert with regard to the endorsement message, the Endorsement Guides make clear that the expert must have the qualifications the expert is represented as having in the advertisement containing the endorsement. For instance, the endorser’s evaluation of the drug being advertised “must have included an examination or testing of the product at least as extensive as someone with the same degree of expertise would normally need to conduct in order to support the conclusions presented in the endorsement.” If the product implies the endorsement was based on a comparison or a superiority finding of the endorser, “such comparison must have been included in the expert’s evaluation” and “the expert must in fact have found such superiority.” The Endorsement Guides provide two examples that bear on physician conduct in this regard (id §255.1).
Example 2: An endorser of a hearing aid is simply referred to as “doctor” during the course of an advertisement. The ad likely implies that the endorser is a medical doctor with substantial experience in the area of hearing. If the endorser is not a medical doctor with substantial experience in audiology, the endorsement would likely be deceptive. A non-medical doctor (eg, an individual with a PhD in exercise physiology) or a physician without substantial experience in the area of hearing can endorse the product, but if the endorser is referred to as doctor, the advertisement must make clear the nature and limits of the endorser’s expertise.
Example 6: A medical doctor states in an advertisement for a drug that the product will safely allow consumers to lower their cholesterol by 50 points. If the materials the doctor reviewed were merely letters from satisfied consumers or the results of a rodent study, the endorsement would likely be deceptive because those materials are not what others with the same degree of expertise would consider adequate to support this conclusion about the product’s safety and efficacy.
Finally, the Endorsement Guides also require disclosures of any material connections between the endorser and the advertiser that might affect the weight or credibility of the endorsement. This may require “clearly and conspicuously disclosing either the payment or promise of compensation prior to and in exchange for the endorsement or the fact that the endorser knew or had reason to know or believe that if the endorsement favoured the advertised product some benefit, such as appearing on television, would be extended to the endorser.”
The AMA Code does not prohibit endorsements by physicians and states that there “are no restrictions on advertising by physicians.” However, the AMA Code recognises the applicability of the FTC Act to medical advertising and therefore the applicability of the Endorsement Guides.
As with consumer-centric advertisements, under Section 502(n) of the FDC Act, prescription drug advertisements to healthcare professionals must include the generic name of the drug, the brand name (if any), the formulation (including quantitative information for ingredients) and information, in brief summary, that discusses side effects, contraindications and effectiveness. In addition, the order of listing of ingredients and associated quantities in the formulation must match the product’s label. Furthermore, the advertisement must feature at least one specific dosage form. Advertisements pertaining to product claims must also provide at least one approved use for the drug.
Much like direct-to-consumer prescription drug advertising, the FDA generally requires that prescription drug advertisements targeted to healthcare professionals (including promotional labelling) contain substantiated claims and fair and balanced information that would allow a healthcare professional to make fully informed decisions about whether to use the drug as part of his/her treatment plan for patients. Accordingly, manufacturers must ensure that claims in promotional labelling and/or advertising are not considered false or misleading. Claims may be found by the FDA to be false or misleading if they are not supported by substantial evidence, such as comprehensive clinical studies conducted by qualified experts. A leading commentator has suggested that in practice, the FDA requires two adequate and well-controlled studies to support prescription drug claims. In addition, promotional labelling and advertising must reveal material facts about the product being promoted, including facts about the consequences that can result from use of the product as suggested in the promotional item.
It is critical that companies must present information regarding benefits and risks in a balanced fashion. This “fair balance” of benefits and risks has been heavily discussed in a draft guidance document, issued in 2009, directed towards prescription drug advertisements and promotional labelling regardless of whether the intended audience consists of consumers or healthcare professionals. The FDA considers the presentation of risk and benefit information holistically; accordingly, manufacturers should refrain from focusing on individual claims and aspects of the information, but on whether the promotional piece, as a whole, achieves a proper risk/benefit balance. The FDA has identified several considerations critical to ensuring proper communication of the benefit/risk balance: (i) consistent use of language appropriate for the target audience; (ii) use of signals (such as headlines and subheadings) to enhance clarity and understandability; (iii) proper framing of risk information to avoid, for example, using language that tends to minimise risk; and (iv) hierarchy of risk information, with the most important risks listed first.
The Risk Guidance advises that the FDA evaluates the adequacy of the content of risk presentations in prescription drug advertising and promotional materials by reference to the quantity of information conveyed and its materiality and comprehensiveness. As part of this analysis, the FDA considers the number of statements about benefits and risks; the completeness and depth of detail given about benefits and risks; the amount of time (in the audio and visual portions) devoted to benefits and risks in a video, audio or broadcast communication; the amount of space devoted to benefits and risks in a print communication; and the use of audio or visual components that enhance or distract from the presentation of risk or benefit information.
The Risk Guidance makes clear, additionally, that a promotional piece omitting material information about a product’s risks could be considered misleading even if the piece devotes similar space or time to risk and effectiveness presentations. In addition, the Risk Guidance provides formatting recommendations to help ensure promotional materials are not false or misleading. Generally speaking, risk and benefit information should be comparably noticeable or conspicuous and equally legible/understandable. Furthermore, the information should appear integrally with the piece; as such, risks should not be relegated to a small section of an attachment to the advertisement or brief summary.
As many of these requirements are challenging to include in broadcast advertisements, the FDA allows companies to provide “adequate provision” of risk information in lieu of full disclosure in that medium. Whereas promotional labelling and print advertisements would include all risk information in the brief summary, creators of broadcast ads may provide sources for finding a drug’s prescribing information. As noted, the Risk Guidance applies to direct-to-consumer prescription drug advertising as well as to prescription drug ads directed to healthcare providers. Where prescription drug advertising and promotional labelling is not directed at the lay public, manufacturers may choose to use more technical language in its discussion of risks than would be suitable for the general public.
Finally, advertisements that make so-called pharmacoeconomic claims, relating to the cost or economic value of prescription drugs, can be made to pharmacies and other healthcare formularies (but not to consumers or prescribers). These claims are subject to a “competent and reliable evidence” standard, which although undefined in the FDC Act, is recognised to be a less-difficult-to-satisfy standard than the “substantial evidence” standard applicable to prescription drug efficacy and safety claims.
As noted in 1.1 Laws and Self-regulatory Codes, OTC drug advertising is regulated by the FTC. The FTC’s chief concern is that advertisements not be false or misleading; there is no “fair balance” requirement, nor are there FTC guidances about “dos and don’ts” specific to OTC drug advertising. However, the FDA regulates OTC labelling and has published about that subject and the two pathways to market OTC drugs: an NDA or a drug Monograph. As mentioned, the FDA’s Risk Guidance does not apply to OTC labelling; instead, pursuant to 21 CFR 201.66, OTC drugs labels, whether marketed under a Monograph or via NDA approval, must contain the following information in the following order:
The Summary of Product Characteristics is known in FDA parlance as “Prescribing Information”. Prescribing Information is considered and approved by the FDA as part of its process for approving a prescription drug to be marketed for an intended use. See 1.1 Laws and Self-regulatory Codes.
The Prescribing Information that a prescription drug manufacturer submits to the FDA in connection with the manufacturer’s submission for approval must include clinical studies that facilitate an understanding of how the drug may be used safely and effectively. The FDA Guidance entitled Clinical Studies Section of Labelling for Human Prescription Drug and Biological Products – Content and Format identifies types of clinical studies that should and should not be submitted. The clinical studies that should be submitted are those that (i) provide primary support for the drug’s effectiveness for its intended use, (ii) provide other important information about the drug’s effectiveness for its intended use and (iii) prospectively evaluate an important safety endpoint. Among the studies the Guidance instructs should not to be submitted are those that “imply effectiveness for an unapproved indication or use.”
To that end, if a prescription drug manufacturer includes in advertising a clinical study that was not included in the Prescribing Information because it concerned an off-label use, the advertising could be viewed by the FDA as violating the FDC Act’s prohibitions on misbranding and marketing an unapproved drug. For a further discussion of the FDA’s position on off-label marketing, see 3 Advertising for Unauthorised Medicines or Unauthorised Indications.
If, on the other hand, the clinical study is a post-approval study or otherwise offers further support for the safety or efficacy of the drug for its intended use or support for a comparative performance claim regarding the drug’s intended use, the fact that the study was not in the Prescribing Information should not cause an advertisement citing the study to be false or misleading in violation of the FDC Act, provided that the study (individually or in combination with another study) constitutes “substantial evidence” supporting the advertising claim for which the study is cited. In other words, whether a study is substantial evidence supporting a prescription drug advertising claim regarding the drug’s intended use depends on the quality of the study, not whether the study is in the Prescribing Information.
As the FDC Act states, “substantial evidence” means “adequate and well-controlled investigations, including clinical investigations, by experts qualified by scientific training and experience to evaluate the effectiveness of the drug involved, on the basis of which it could fairly and responsibly be concluded... that the drug will have the effect it... is represented to have under the conditions of use prescribed... in the labelling or proposed labelling thereof.”
A new draft guidance issued in January 2017 attempts to provide perspective on how the FDA evaluates drug company advertising and promotional labelling that present information (such as clinical studies) not contained in FDA-required labelling, including Prescribing Information.
The 2017 Guidance states that the FDA considers the following three factors in determining whether statements in drug company communications are consistent with FDA-required labelling:
The 2017 Guidance indicates that the FDA does not view communications that include or are based on clinical studies or data that are not contained in FDA-required labelling but are consistent with that labelling as providing evidence of a new intended use. However, the 2017 Guidance recognises that if such communications lack appropriate evidentiary support, they still may cause patient harm and are likely to be deemed false or misleading. As such, any data, studies or analyses not included in the Prescribing Information but relied on in promoting the drug must be scientifically appropriate and statistically sound to support the representations or implications of the communication. And, if a communication relies on an inadequate study to support its representations, disclosure of the inadequacies is not enough to correct the communication’s misleading message.
Section 3.1Restrictions on Provision of Information on Unauthorised Medicines or Indications covers FDA guidance on drug company dissemination of journal articles to healthcare professionals regarding approved uses of prescription drugs. In addition, the FDA published a guidance in 2009 outlining best practices for the distribution of medical journal articles and medical or scientific reference publications that pertain to unapproved new uses of approved drugs. In the 2009 Guidance, the FDA recommended the characteristics that the disseminated article and the publication in which the article published should have for the dissemination not to be considered evidence of the manufacturer’s intent to promote a drug for an unapproved new use. Those characteristics include:
The 2009 Guidance also specified that the publication in which the article is contained should not be:
Finally, the 2009 Guidance notes that the information contained in such article must not be false or misleading, nor can it pose a significant risk to public health. The Guidance also states that the communication disseminating the article should:
In February 2014, the FDA issued a revised draft guidance document to clarify the agency’s position on manufacturer dissemination of scientific or medical publications that include information on unapproved new uses of the manufacturer’s products. To this end, the FDA included explanatory language outlining what the FDA defined as Scientific or Medical Journal Articles, Scientific or Medical Reference Texts and Clinical Practice Guidelines.
The FDA has specified that scientific or medical reference texts, distributed in their entirety by a pharmaceutical manufacturer, should:
This guidance addresses Clinical Practice Guidelines, statements that include recommendations for clinicians making decisions for individual patient care. To be deemed as trustworthy, at minimum, Clinical Practice Guidelines should:
Finally, in June 2014, the FDA issued a (currently) draft guidance document concerning dissemination of new risk information and studies related to approved uses of a drug. In sum, the FDA’s perspective is that such information may be disseminated if it comes from a scientifically sound approach. As such, the FDA expects that distributors will consider the quality of the data source of the risk information by ensuring that it meets accepted integrity standards, gives appropriate weight to all relevant information and if the new information is intended to rebut a prior determination, reflected in the approved labelling, that there is a basis to believe there is a causal relationship between the drug and the occurrence of an adverse event or to otherwise mitigate an identified risk, the new data disclosed should be at least as persuasive as the data sources on which the approved labelling was based.
Furthermore, the new information should be published in an independent, peer-reviewed publication. Also, the new information distributed should be accompanied by a cover sheet that clearly and prominently discloses: (i) the study design, critical findings and significant limitations of the study being distributed that may limit the study’s persuasiveness or scope of findings, as well as additional background information that provides an objective perspective on the findings of the study; (ii) that, if applicable, the information is not consistent with certain specified risk information in the approved labelling; and (iii) that the FDA has not reviewed the data. Furthermore, the information should be accompanied by the approved labelling for the drug and be distributed separate from promotional material.
Generally, advertisements for prescription drugs and promotional labelling are not required to be submitted to the FDA for approval prior to dissemination. Instead, they must be submitted to the FDA for notification purposes at the time the advertisement or element of promotional labelling is first put into use. As part of this submission, the promotional materials and current product labelling must be included.
There are, however, some instances when submission of promotional materials prior to first use is required. For example, if the drug has been approved via the “Subpart H” accelerated approval pathway for certain new drug products designed to treat serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments, promotional materials must be submitted to the FDA at least 30 days prior to the intended time of first dissemination. Similarly, accelerated approval of a drug may be granted by the Secretary of Health and Human Services on the condition, among others, that the sponsor submits copies of all promotional materials related to the product during the pre-approval review period and for such period thereafter as the secretary determines to be appropriate, at least 30 days prior to dissemination of the materials.
Additionally, amendments in 2007 to the FDC Act authorise the FDA to “require the submission of any television advertisement for a drug… not later than 45 days before dissemination of the television advertisement.” To that end, in 2012, the FDA issued a draft guidance that explains to drug companies the FDA’s plans for implementing a requirement for pre-dissemination review of direct-to-consumer television ads for certain prescription drugs. According to this, there are six categories of TV advertisements that would be subject to pre-dissemination review. These categories are each set forth in 4.1 Main Restrictions on Advertising to the General Public.
There is no requirement in the FTC Act or any FTC regulation for pre-approval or pre-notification of OTC drug advertising.
FDA regulations on current good manufacturing practices (CGMP) typically prescribe requirements for adaptation of standard operating procedures and employment of specific personnel. With respect to promotional labelling, 21 CFR §211.125 establishes good manufacturing practices for the issuance of labelling, in part, as follows:
In short, this regulation not only mandates various activities associated with labelling production, but also mandates the establishment of procedures to facilitate compliance with the regulation. This regulation applies to labelling for prescription and OTC drugs.
Also, although not specifically directed at labelling, Part 211 of 21 CFR has several provisions relating to the responsibility and qualifications of personnel. Specifically, “there shall be a quality control unit that shall have the responsibility and authority to approve or reject all components, drug product containers, closures, in-process materials, packaging material, labelling, and drug products, and the authority to review production records to assure that no errors have occurred or, if errors have occurred, that they have been fully investigated.” In addition, “each person engaged in the manufacture, processing, packing, or holding of a drug product shall have education, training, and experience, or any combination thereof, to enable that person to perform the assigned functions.”
FDA regulation of internet advertising for drugs
Although the internet is a powerful tool for advertising, the FDA has been slow specifically to address internet and social media advertising of pharmaceuticals. In general, the FDA applies the same policies to drug promotional labelling and advertising on the internet as it does for promotional labelling and advertising in traditional media.
When the FDA believes that pharmaceutical advertising on the internet constitutes misbranding due to the misleading nature of the advertising, it has not hesitated to bring an enforcement action. For example, in a 2015 Untitled Letter, the FDA’s Office of Prescription Drug Promotion (OPDP) cited Actavis Laboratories’ webpage for the prescription drug RAPAFLO, a treatment for benign prostatic hyperplasia (BPH) that featured the claim “BPH symptom relief that works nights so he can work days” (emphasis in original), in conjunction with a picture of a man walking to the bathroom from the bed at night. The OPDP took the position that this claim was misleading, and therefore misbranding, because it falsely implied that RAPAFLO had been shown to improve sleep quality and work productivity in addition to relieving BPH symptoms, the indication for which the drug had been approved.
In 2014, the FDA finally issued two draft guidances relating to internet/social media advertising of prescription drugs. One was promulgated in recognition of the fact that the internet presents myriad opportunities for individuals having no relationship with a drug manufacturer or distributor to post misinformation about a prescription drug. This Draft Guidance recognises that because of the internet’s expanse, it may not be practical for drug companies to correct each instance of misinformation disseminated by unrelated third parties and therefore drug companies are under no obligation to make or attempt to make corrections to misinformation disseminated online by an unrelated third party.
However, the Draft Guidance recommends how a drug company should address such third-party misrepresentations if it chooses. Specifically, it recommends that the correction:
The FDA further noted that a drug company alternatively may identify a reputable source from which to obtain the correct information (including firm contact information). The FDA acknowledged that a manufacturer cannot control whether a third party will act properly on the corrective information and stated that it will not hold the manufacturer accountable for the third party’s subsequent actions, or lack thereof.
The other internet and social media-related 2014 FDA draft guidance concerned the FDA’s requirements for post-marketing submissions of interactive prescription drug promotional marketing and advertising materials.
This Draft Guidance concerns how drug companies can comply with their post-marketing submission requirements for interactive media such as blogs, social networking sites, online communities and live podcasts that have user generated content (UGC). The Draft Guidance does not address drug company-controlled static promotional materials, such as a company or product webpage that does not allow real-time communications. For static promotional materials, the traditional post-marketing submission requirements will continue to apply, including that such materials be supplied to the FDA at the time of initial dissemination. But the FDA recognised that for interactive promotional materials, submission at the time of initial dissemination could pose problems.
To that end, this Draft Guidance recognises that drug companies (i) are responsible for promotional communications on sites they own, control, create, influence or operate or cause to be operated; (ii) under certain circumstances are responsible for promotion on third-party sites, namely when the drug company has any control or influence over that site; and (iii) are responsible for content generated by an employee or agent acting on behalf of a drug company to promote the company’s drug.
As for the above interactive sites that contain UGC, the Draft Guidance recommends, among other things, that a company should identify all such sites at the time of initial display of promotional material on such sites and then once every month submit an updated listing of such sites. There is no requirement that the drug company provides the FDA with screenshots or other visual representations of actual interactive or real-time communications, unless access to a site is restricted (in other words, password-protected or subscription-only). In situations of restrictive access, the drug company should submit all content related to any interactive discussion of the drug company’s promotional material.
FTC regulation of OTC drug internet advertising
The FTC does not have any special rules or guidance on internet advertising of OTC drugs. Nor does it have any special rules or guidance for internet advertising generally. Instead, as the FTC succinctly noted in its publication Advertising and Marketing on the Internet: Rules of the Road, the FTC rules “that apply to other forms of advertising apply to online marketing, too.”
Lanham Act and NAD regulation of internet drug advertising
Similarly, nothing in the language of the Lanham Act or in the case law singles out online advertising, let alone online advertising by pharmaceutical companies. As previously noted, prescription and OTC drug advertising can be the subject of Lanham Act lawsuits and plaintiff’s burden of proof and the advertiser’s defences are the same for online advertisements as for advertising in traditional media. Multiple Lanham Act decisions concern online advertising by drug companies. In addition to statements on the drug manufacturer’s website, the use of third-party internet retailers may expose the manufacturer to Lanham Act liability when there is proof the defendant knew of false statements being made on the third-party website.
In a similar vein, the NAD also exercises jurisdiction over internet and social media advertising under the same procedures for advertising in traditional media.
The FDA permits advertising for prescription drugs on social media platforms and in 2014 issued a specific draft guidance on the subject, entitled Draft Guidance for Industry: Internet/Social Media Platforms with Character Space Limitations – Presenting Risk and Benefit Information for Prescription Drugs and Medical Devices.
Although the FDA has not imposed any special restrictions that pertain directly to social media platforms, this Draft Guidance evidences the FDA’s concern about the character limitations imposed by such platforms as Twitter. As a result, the Draft Guidance illustrates the FDA’s thinking on factors that are relevant to the communication of benefit and risk information in the context of Internet/social media platforms with character limitations. The Draft Guidance advises prescription drug companies communicating benefit information on platforms with character space limitations to consider the following points:
Furthermore, the Draft Guidance advises that in communicating risk information, the most serious risk associated with the product as well as a mechanism, such as a hyperlink to a destination exclusively devoted to risk information, should be provided within each character space-limited communication. The Draft Guidance further notes that the prominence of risk information should be comparable to the benefit information within each individual character space-limited communication, taking into consideration the formatting capabilities of the platform.
Maintaining compliance with the FDC Act and FDA regulations, and providing an effective advertisement may prove challenging on a platform with character space limitations, as the FDC Act requires that an advertisement include the generic name of the drug in addition to its trade or brand name, as well as at least one specific dosage form, and balanced benefit/risk information. Thus, the FDA has issued Warning Letters to companies when their paid spokespersons have promoted the benefits of a prescription drug on social media without including risk information associated with its uses.
There is no requirement to include access restrictions on websites containing advertising or other information intended for healthcare professionals. However, as noted in 7.1 Regulation of Advertising on the Internet for Medicinal Products, drug companies may have enhanced post-approval submission disclosure requirements to the FDA for interactive websites that contain access restrictions.
Bribery is a crime and bribery by pharmaceutical companies of healthcare professionals or organisations violates many healthcare-specific and general statutes.
Healthcare-specific statutes that (i) provide criminal penalties for bribery by drug companies of healthcare professionals or organisations, (ii) regulate interactions between drug companies and healthcare professionals or organisations that might be considered bribery, or (iii) provide civil remedies for instances of bribery include: the Federal Anti-Kickback Statute (42 USC §1320a-7b), the Physician Self-Referral Law (generally referred to as the Stark Law) (42 USC §1395nn), the civil False Claims Act (31 USC §§1329-33), the criminal False Claims Act (18 USC §287), the Exclusion Act (42 USC §1320a-7) and the Physicians Payment Sunshine Act (the “Sunshine Act”) (42 USC §1320a-7h). There are relevant state laws as well, although they are beyond the scope of this guide.
Federal Anti-Kickback Statute
The Anti-Kickback Statute prohibits the knowing and wilful solicitation, receipt, offer or payment of any “remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind” in return for referrals, or purchasing or recommending the purchase of “any good, facility, service, or item for which payment may be made in whole or in part under a federal healthcare program.” Violations of this provision are punishable as a felony and a fine of not more than USD25,000 or imprisonment for five years, or both. In addition to these criminal penalties, civil monetary penalties in the range of USD10,000 to USD50,000 for each violation of the Anti-Kickback Statute (and for other acts) are available under a related federal statute, the Civil Monetary Penalties Law (42 USC §1320a-7a).
Courts have found that conduct amounting to bribery violates the Anti-Kickback Statute. See, eg, US v Vernon, 723 F.3d 1234, 1256 (11th Cir 2013) (affirming criminal convictions for violating the Anti-Kickback Statute of executives of a specialty pharmacy company that filled prescriptions for haemophilia medication, where the executives caused sizeable payments to be made to individuals and businesses who referred patients to the company for prescription filling).
The Stark Law
The Stark Law prohibits physicians from referring Medicare patients to an entity for “certain designated health services”, including outpatient prescription drugs and inpatient and outpatient hospital services, with which the referring physician has a non-exempt “financial relationship.” The Stark Law further prohibits an entity from billing Medicare for services furnished pursuant to a prohibited referral. A financial relationship includes ownership/investment interests and compensation agreements. There are several exemptions in the statute, but if those exemptions do not apply, the statute is one of strict liability; no proof of an intent to violate the law is required. Civil penalties and exclusion from participation in federal healthcare programs covered by the Stark Law are available remedies for violations. Conduct amounting to bribery, such as payments by a drug supplier to a physician or hospital in exchange for prescribing the supplier’s drugs to Medicare or Medicaid, may violate the Stark Act.
The False Claims Acts
As noted above, there are two False Claims Acts, one civil and the other criminal. As relates to the subject matter of this guide, the False Claims Act makes it illegal to submit claims for payment to Medicare or Medicaid that the submitting party knows or should know are false or fraudulent. The submission of claims related to prescription drugs where there is a kickback or other illicit relationship between a drug company and the prescribing physician or healthcare facility likely would fall within the reach of the False Claims Act. Indeed, pursuant to 42 USC §1320(a)-7b(g), a claim that includes items or services that violate the Anti-Kickback Statute is a false or fraudulent claim under the False Claims Act.
The civil False Claims Act provides for fines of up to three times the amount the government programme lost as a result of the illicit submission, plus penalties that recently were upwardly adjusted to USD10,781.40 to USD21,562.80 per claim filed. The criminal act is similar in scope, as it applies to any person who makes or presents to any agency of the United States — including the Department of Health and Human Services, (HHS), which administers the Medicare and Medicaid programmes — a claim that the presenter knows to be false, fictitious or fraudulent. The penalty for violating the criminal False Claims Act is imprisonment for not more than five years, plus a fine. As the HHS Office of Inspector General points out in a publication directed to new physicians, doctors “have gone to prison for submitting false health claims.”
The Exclusion Statute
This federal law requires the Office of Inspector General to exclude from involvement in all federal healthcare programmes any person or entity convicted of certain criminal offences, including Medicare or Medicaid fraud or felony convictions for other healthcare-related fraud, theft or other financial misconduct. Not all unlawful kickback schemes result in a felony conviction, but even if the conviction is for a misdemeanour, the Exclusion Statute enables the Office of Inspector General, in its discretion, to exclude persons or entities from participation in all federal healthcare programs.
The Sunshine Act
The Sunshine Act lays out reporting requirements for “applicable manufacturers”, defined as “a manufacturer of a covered drug, device, biological, or medical supply which is operating in the United States, or in a territory, possession, or commonwealth of the United States” that confers some value to “covered recipients”, meaning physicians or teaching hospitals. The statute thus applies to benefits that drug companies provide to healthcare professionals and some healthcare organisations.
When there is a payment or transfer of value, the statute requires manufacturers to submit to the Secretary of Health and Human Services transparency reports that include, inter alia, the recipient’s name, business address, and specialty and National Provider Identifier, if applicable, the amount of the payment or transfer of value, descriptions of the form and nature of the payment and relevant dates. The transparency reports also must include the name of the covered drug, device, or biological or medical supply, if the payment is related to marketing, education or research specific to that product.
The statute also provides for submission of transparency reports where there is any physician ownership, other than in a publicly traded security and mutual fund, of an applicable manufacturer or group purchasing organisation, defined as one that purchases, arranges for or negotiates the purchase of a covered drug, device, biological or medical supply that is operating in the United States or in a territory, possession or commonwealth of the United States. There are civil monetary penalties for non-compliance. Transfer of value less than USD10 is excluded from the reporting requirements, unless several minimal transfers exceed USD100 in the aggregate. Also excluded from the statutory requirements is information concerning product samples, educational materials, temporary loans of devices, in-kind items for charity care, items provided under contractual warranty and discounts.
General anti-bribery laws
Bribery is also a predicate act of other federal criminal statutes that are not healthcare-specific, but could be used to prosecute bribery by a pharmaceutical company. These statutes include the Racketeer Influenced and Corrupt Organizations Act (RICO) (18 USC §§1962-1964), the Travel Act (18 USC §1952(a)-(b)), the Mail Fraud Act (18 USC §1341), the Wire Fraud Act (18 USC §1343) and the Foreign Corrupt Practices Act (15 USC §78dd-1, et seq).
Bribery is an enumerated predicate act for a criminal or civil violation of the RICO Act. A RICO claim requires proof of (i) conduct, (ii) of an enterprise, (iii) through a pattern, (iv) racketeering activity.
Bribery may also violate the Travel Act. To establish a Travel Act violation, it must be shown that defendant “used any facility in interstate or foreign commerce, including the mail, with intent to... carry on... bribery... in violation of the laws... of the United States.” This statute has also been used to prosecute a pharmaceutical supplier.
Wire and Mail Fraud Act
Bribery schemes that use the US Postal Service or involve fraud using phone lines or electronic communications may be violations of the Wire Fraud Act or Mail Fraud Act, respectively. “Mail and wire fraud are analytically identical save for the method of execution. Both offences require that a person (1) intentionally participates in a scheme or artifice to defraud another of money or property and (2) uses or ‘causes’ the use of the mails or wires for the purpose of executing the scheme or artifice.” These statutes as well have been used to prosecute fraudulent schemes involving doctors and pharmaceutical suppliers.
Foreign Corrupt Practices Act
Bribery by drug companies may also violate the Foreign Corrupt Practices Act (FCPA). Under the FCPA, US companies, individuals and issuers, regardless of location, are prohibited from bribing foreign government officials by means of direct or indirect payments, gifts or providing “anything of value” to such officials. A “foreign official” includes not only government officials but also employees of state-owned or controlled entities, including hospitals and other healthcare entities.
For example, on 30 September 2016, the US Securities and Exchange Commission (SEC) issued a cease and desist order against GlaxoSmithKline (GSK) for providing “things of value to foreign officials, including healthcare professionals (HCPs), in order to improperly influence them and increase sales of GSK products in China.” In its order, the SEC found that GSK’s payments “were made to increase sales through increased prescriptions by individual [healthcare providers] and purchases by hospital administrative staff responsible for product selection or purchase” and that the “corrupt payments took varied forms, including gifts, improper travel and entertainment with no or little educational purpose, shopping excursions, family and home visits, and cash.” The SEC ordered GSK to pay USD20 million as a civil penalty.
With regard to federal law, this subject was addressed in 8.1 General Anti-bribery Rules. In addition to federal law, there is legislation concerning the offering of benefits or other inducements to prescribe at the state level. For example, in Massachusetts, pharmaceutical manufacturers are required to disclose certain transactions, including economic benefits with a value of at least USD50, with anyone who prescribes, dispenses or purchases prescription drugs in the Commonwealth. Similarly, the California Health and Safety Code requires pharmaceutical companies to adopt Comprehensive Compliance Programmes that limit incentives provided to healthcare professionals and include policies for compliance with the PhRMA Code. In certain circumstances, state law in this area may be pre-empted by federal statutes; accordingly, review of the interplay between state and federal statutes in a state of interest is advised.
The PhRMA Code also addresses inducements to prescribe by recommending limits or prohibitions on various types of financial support from drug companies to healthcare providers, including in the areas of informational presentations, entertainment, CME, consulting arrangements, speaker programmes and training meetings, and some non-educational and practice-related items, including:
While not making an outright prohibition against receipt of benefits or inducements to prescribe, the AMA Code also prohibits recommending medical products as a result of commercial pressure. Section 9.6.6 of the AMA Code states that physicians should remain objective about advertised tests, drugs, treatments or devices, resist commercially induced pressure to prescribe and report advertising that promotes false expectations to the appropriate consumer authorities.
The PhRMA Code, as stated in greater detail in the preceding section, provides several restrictions on benefits that pharmaceutical companies may offer healthcare professionals. The Code also discusses restrictions on the provision of items for healthcare professionals that do not advance disease or treatment education because of concerns that such provision may foster misconceptions that company interactions with healthcare professionals are not based on informing them about medical and scientific issues.
The PhRMA Code specifies that items intended for the personal benefit of healthcare professionals (such as floral arrangements, artwork, music CDs or sports tickets) should not be offered by pharmaceutical manufacturers. Furthermore, “payments in cash or cash equivalents (such as gift certificates) should not be offered to healthcare professionals either directly or indirectly, except as compensation for bona fide services."
Similarly, the AMA Code recommends that physicians should:
In addition to the self-regulatory codes discussed above, there are laws that impact gifts to healthcare professionals. These statutes, including the Anti-Kickback Statute, were discussed in 8.1 General Anti-bribery Rules, but additional specifics are provided here.
Although the Sunshine Act does not prohibit gifts to covered recipients, it regulates them by requiring disclosure of the fact and nature of the gift. Applicable manufacturers must annually disclose all transfers of value, the name and address of the recipient, the value of the transfer, the dates on which the transfer was made, a description of the form of payment (ie, cash, in-kind, stock), a description of the nature of the payment (ie, consulting fee, compensation, honoraria, gift, entertainment, travel, food, research, etc) and whether the transfer of value was made upon request.
However, the Sunshine Act exempts certain transfers from disclosure, including:
Notably, the Sunshine Act does not require disclosure with respect to every healthcare professional with authority to prescribe, but only for “covered entities” — physicians and teaching hospitals. For example, nurse practitioners have independent authority to prescribe in New York, but are not a covered entity under the Sunshine Act. Similarly, in California, physician-assistants may prescribe when given authority by the supervising doctor, but are not a covered entity.
Examples of State Sunshine Laws
The California Health and Safety Code provides for limitations on benefits provided to “medical or health professionals.” The statute requires pharmaceutical companies to establish “Comprehensive Compliance Programmes”, ie, policies that should include “a specific dollar limit on gifts, promotional materials, or items or activities that the pharmaceutical company may give or otherwise provide to an individual medical or healthcare professional.”
Massachusetts requires every pharmaceutical manufacturer to disclose to the Massachusetts Department of Public Health “the value, nature, purpose, and particular recipient of any fee, payment, subsidy or other economic benefit with a value of at least $50, which the company provides... to any physician, hospital, nursing home, pharmacist, health plan benefit administrator, healthcare practitioner or other person in the commonwealth authorised to prescribe, dispense, or purchase prescription drugs or medical devices.”
The PhRMA Code explicitly allows for pharmaceutical manufacturers to provide product samples for patient use in accordance with the Prescription Drug Marketing Act of 1987 (the “1987 Act”). Of particular relevance, the 1987 Act limits the persons or entities entitled to receive such product samples to “practitioners licensed to prescribe such drugs and, at the practitioner’s request, to pharmacies of hospitals or other healthcare facilities” and mandates that these samples can be provided only upon “a written request” by the practitioner in a form compliant with the 1987 Act’s provisions. However, the provision of free samples as an inducement to purchase or prescribe a product nonetheless can give rise to liability under the Anti-Kickback Statute and the False Claims Act.
From an FDA perspective, pharmaceutical companies are allowed to sponsor scientific meetings or congresses, but with several restrictions. A 1997 FDA guidance states that the FDA has not regulated, and does not intend to regulate, industry-supported scientific and educational activities that are independent of the influence of the supporting company. This guidance further advises that the FDA considers the following non-exclusive factors in evaluating the independence of industry-sponsored programming:
Although the Guidance does not explicitly discuss sponsorship of attendance of healthcare professionals, given that one of the FDA’s chief concerns is ensuring that the activities are free from the influence of the supporting company, sponsoring attendance of healthcare professionals is likely to be of concern to the Agency and could potentially violate the Anti-Kickback Statute and the False Claims Act.
In addition, the PhRMA Code places restrictions on the support pharmaceutical companies can provide for third-party scientific meetings or congresses. While finding that financial support of such meetings and congresses by drug companies is appropriate, the Code deems the giving of any subsidy directly to a healthcare professional by a company as improper, as it may be viewed as an inappropriate cash gift. It recommends that any financial support should be given to the conference’s sponsor, which, in turn, can use the support for purposes such as reducing the conference registration fees for all attendees.
The PhRMA Code also specifies that “financial support should not be offered for the costs of travel, lodging, or other personal expenses of non-faculty healthcare professionals” to such conferences or meetings, “either directly to the individuals attending the conference or indirectly to the conference’s sponsor.” Similarly, funding should not be offered to compensate healthcare professionals for their time attending a conference.
As stated in previous sections, the PhRMA Code also provides instruction on the proper pharmaceutical manufacturer support for CME. Similarly, the AMA Code states that physicians should “decline any subsidy offered by a commercial entity other than the physician’s employer to compensate the physician for time spent or expenses of participating in a CME activity.” The Code also states that, “when possible, CME should be provided without such support or the participation of individuals who have financial interests in the educational subject matter,” but does not prohibit such support, as it recognises it may lead to appropriate and high-quality content. To that end, the Code states that strenuous efforts must be made to maintain the independence and integrity of CME, including full transparency about financial relationships that could potentially influence the content of CME.
In general, as discussed, the PhRMA Code bans pharmaceutical companies from providing any entertainment or recreational items, such as tickets to the theatre or sporting events, sporting equipment, or leisure or vacation trips, to any healthcare professional who is not a salaried employee of the company. Such activity is also viewed as suspect under the Anti-Kickback Statute and has been the subject of actions under the False Claims Act.
As discussed in detail in 9.1 Gifts to Healthcare Professionals, the Anti-Kickback Statute generally prohibits the knowing and wilful solicitation and reception of any “remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind” in return for referrals, or purchasing or recommending the purchase of “any good, facility, service or item for which payment may be made in whole or in part under a federal healthcare programme.”
Grants provided by pharmaceutical companies to healthcare providers may raise concerns under the Anti-Kickback Statute, as they could be viewed as inducements to use the manufacturer’s product. The Department of Health and Human Services Office of Inspector General (OIG) published a compliance guide for pharmaceutical manufacturers that provides suggestions for how manufacturers can reduce such risks when giving grants.
In general, the OIG suggests that manufacturers should “separate their grant-making functions from their sales and marketing functions.” With respect to educational grants, the OIG advises that “effective separation of these functions will help ensure that grant funding is not inappropriately influenced by sales or marketing motivations and that the educational purposes of the grant are legitimate.” Moreover, manufacturers “should establish objective criteria for making grants that do not take into account the volume or value of purchases made by, or anticipated from, the grant recipient and that serve to ensure that the funded activities are bona fide.” Manufacturers should also have no control over the “speaker or content of the educational presentation” and should monitor these procedures regularly to guarantee proper separation. The OIG expressed similar concerns regarding research grants that are linked, directly or indirectly, to the purchase of the manufacturer’s drugs.As to other types of grants or remuneration, anything that is “expressly or impliedly related to a sale potentially implicates” the Anti-Kickback Statute and “should be carefully reviewed.”
Donations raise the same general concerns under the Anti-Kickback Statute, ie, that they might not be bona fide donations but rather a means of inducing the purchase or use of the manufacturer’s drugs. The Anti-Kickback Statute provides one safe harbour related to donations, namely “any remuneration between a health centre entity... and any individual that is pursuant to a contract, lease, grant, loan, or other agreement, if such agreement contributes to the ability of the health centre entity to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population served by the health centre entity."
According to the OIG, there is “no substantive difference between remuneration from a pharmaceutical manufacturer or from a durable medical equipment or other supplier — if the remuneration is intended to generate any federal healthcare business, it potentially violates the Anti-Kickback Statute.” Where possible, manufacturers and physicians or healthcare institutions should “structure relationships... to fit in an available safe harbour”.
Reporting requirements under the Sunshine Act apply to “charitable contributions” and grants. The Act’s specific requirements are discussed in more detail in 9.1 Gifts to Healthcare Professionals.
Although the PhRMA Code contains no explicit prohibition against offering rebates and discounts, it does state that no “grants,” “subsidies” or “support” should be provided or offered by a pharmaceutical company in exchange for prescribing products or for a commitment to continue prescribing products. The Code holds that “nothing should be offered or provided in a manner or on conditions that would interfere with the independence of a healthcare professional’s prescribing practices.”
In general, the Anti-Kickback Statute prohibits knowing and wilful solicitation and reception of any “remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind” in return for referrals, or for purchasing or recommending the purchase of “any good, facility, service or item for which payment may be made in whole or in part under a federal healthcare programme.” However, there are two safe harbour provisions that allow discounts in limited circumstances: first, a “discount or other reduction in price obtained by a provider of services or other entity under a federal healthcare programme if the reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider or entity under a federal healthcare programme” and second, “a discount in the price of an applicable drug... of a manufacturer that is furnished to an applicable beneficiary... under the Medicare coverage gap discount programme.”
It is possible (and legal) for a pharmaceutical company to pay healthcare professionals for services provided to the company, subject to certain restrictions. First, payments to healthcare professionals are subject to the reporting requirements of the Sunshine Act, 42 USC §1320a-7h, discussed in more detail in 9.1 Gifts to Healthcare Professionals. Second, the Anti-Kickback Statute and the Stark Law circumscribe the type and character of payments to healthcare professionals that are permissible.
Under the Anti-Kickback Statute, impermissible remunerations include “transfers of items or services for free or for other than fair market value [emphasis added]." Some of the key safe harbour exceptions to the Anti-Kickback Statute — such as personal services and management contracts — require that the arrangement be consistent with fair market value. In addition, some courts have held that compliance with the Anti-Kickback Statute requires that “a provider pay fair market value to a physician for his services.” There have been a number of significant enforcement actions involving sham consulting arrangements with physicians.
The Stark Law, as described in 8.1 General Anti-bribery Rules, prohibits physicians from referring Medicare patients to entities for designed health services if the physician has a non-exempt financial relationship with the entity. There are some general exceptions to these compensation arrangement prohibitions, including physicians’ services “provided personally by (or under the supervision of) another physician in the same group practice”, “in-office ancillary services” and “prepaid plans.”
Compensation arrangements between the physician and an outside entity that are consistent with fair market value are also exceptions to this general prohibition. The law defines “fair market value” as the value in arm's-length transactions. There are a number of specific exceptions, such as those for bona fide employment relationships and personal service arrangements, that are not considered “compensation arrangements” for purposes of the law that are satisfied if the arrangement is consistent with “fair market value” and meets other applicable conditions.
There are no statutory or regulatory pre-approval or notification requirements in order for a payment by a drug company to a healthcare provider to be permissible under the Anti-Kickback Statute or Stark Law, although, of course, there could be contracts between a physician and her employer (for example, a hospital, a medical practice or a university) that could require the employer’s pre-approval of a financial arrangement between a doctor and a pharmaceutical company. In addition, if a drug company or healthcare provider were interested in entering into an arrangement for payment for services and were concerned that the arrangement might violate the law, there is a procedure in which one or both could request an advisory opinion from the OIG of the Department of Health and Human Services, in accordance with §1128(D)(b) of the Social Security Act (42 USC §1320a-7d(b)) (the “Act”) and 42 CFR §1008.
These advisory opinions are legally binding upon and may only be relied upon by the requestor — not third parties — as each opinion will apply the legal standards to the specific facts presented by the requestor. Permissible requests for advisory opinions include the applicability of the Anti-Kickback Statute, the Exclusion Statute, the Civil Monetary Penalty Statute and the safe harbours provided by the Anti-Kickback Statute. However, the OIG will not opine on the fair market value of a service or whether an individual is a bona fide employee, which can be central to whether particular conduct falls within an exception to the Anti-Kickback Statute.
In the United States, all transfers of value by pharmaceutical companies to covered individuals – defined as physicians and teaching hospitals – must be disclosed under the Sunshine Act. Specifically, all transfers of value, the name and address of the recipient, the value of the transfer, the dates on which the transfer was made, a description of the form of payment (ie, cash, in-kind, stock), a description of the nature of the payment (ie, consulting fee, compensation, honoraria, gift, entertainment, travel, food, research, etc) and whether the transfer of value was made upon request must be disclosed. Physicians must also disclose ownership or investment interests held, including the dollar amount, the value of the terms of the interest and all information aforementioned.
Companies should also be mindful that state laws may obligate them to disclose transfers of value to healthcare professional or institutions. For example, Massachusetts state law requires manufacturers of pharmaceuticals to disclose transactions with medical professionals, where a transfer of value of more than USD50 occurred (105 Mass. Code Regs. 970.009). However, because state laws can in some circumstances be pre-empted by federal statutes, a close review of the interplay between state and federal law in this area is advisable.
The Sunshine Act applies to foreign entities under certain conditions. The Act requires disclosure with respect to “applicable manufacturers,” which under the implementing regulations are limited to entities that are “operating in the United States” (including in a territory, possession or commonwealth thereof) and that either are “engaged in the production, preparation, propagation, compounding or conversion” of a drug or share common ownership with and provide assistance and support to such an entity in the production, etc, of a drug or in its marketing, promotion, sale or distribution.
The key language is “operating in the United States," which would include foreign-incorporated drug manufacturers that operate directly in the USA or provide one or more of the abovementioned types of assistance and support to affiliates operating in the US. The Centers for Medicare and Medicaid Services — part of the Department of Health and Human Services — has made clear that it does not intend to enforce the Sunshine Act against foreign entities with no business presence in the United States. The same guidance clarifies that covered foreign entities that do have a business presence in the USA do not escape the disclosure requirement “by making payments to covered recipients indirectly through a foreign entity that has no operations in the United States.”
As discussed in previous sections, the FDA has primary regulatory responsibility for enforcement of the rules on labelling for prescription and OTC drugs. The FDA also has primary regulatory responsibility for non-label advertising of prescription drugs, but the FTC has primary regulatory responsibility for non-label advertising of OTC drugs.
With regard to payments and other conduct by a pharmaceutical company to induce healthcare providers to prescribe or purchase the pharma company’s drugs, this also has been discussed in detail in 8 Inducement/Anti-bribery General and will be discussed further in 11.3 Penalties for Violating Advertising Rules and Rules on Inducements to Prescribe.
As discussed in 1.1 Laws and Self-regulatory Codes, competitors can bring false advertising suits under the Lanham Act for false or misleading prescription drug or OTC drug advertising. As noted, the definition of advertising under Lanham Act case law encompasses drug labels as well as promotional efforts in the form of television and radio commercials, print ads, in-store materials, internet advertising and social media. Standing to bring Lanham Act suits is discussed in 1.1 Laws and Self-regulatory Codes and the elements of a Lanham Act cause of action, each of which it is plaintiff’s burden to establish, are discussed in 4.1 Main Restrictions on Advertising to the General Public.
In addition to the Lanham Act, a competitor also can initiate a challenge against false or misleading prescription or OTC drug advertising before the NAD. In contrast to the Lanham Act, in an NAD challenge it is the advertiser’s burden to substantiate any reasonable interpretation of a challenged advertising statement. Proceedings before the NAD are discussed in further detail in 1.1 Laws and Self-regulatory Codes.
Recently, a former employee of a competitor filed a False Claims Act action alleging that a pharmaceutical company made false claims to federal and state healthcare programs. Although the court dismissed the complaint for failure to satisfy the heightened federal standard needed for complaints alleging fraud, it did not question that the competitor’s former employee had standing to bring this suit.
A competitor cannot sue for violation of the FDC Act or the FTC Act, as neither statute confers standing to sue on any party other than the relevant agency itself and, under the FDC Act, the US government. However, anyone – including a drug company’s competitors – has the right to communicate with the FDA and the FTC, including the right to inquire about, protest or bring to the agency’s attention advertising to which the competitor objects. Such communications are not uncommon and on occasion, communications of that nature spur the agency to initiate an investigation of the advertising at issue or take action against the advertiser.
Penalties and measures imposed by the FDA for violating advertising rules
Upon a finding of a violation or likely violation of the FDC Act or FDA regulations, the FDA typically first seeks to cause a drug manufacturer to correct the error voluntarily. In the case of violations relating to drug labelling or advertising, the FDA regularly uses Warning Letters and Untitled Letters to notify the manufacturer of a violation and demand correction of the violation. Warning Letters are an FDA response to significant violations likely to lead to enforcement action if not promptly and adequately corrected. Untitled Letters address less significant violations. Unlike Warning Letters, Untitled Letters do not include a statement that failure promptly to correct a violation may lead to an enforcement action.
Although it is the FDA’s general practice to give regulated entities, including pharmaceutical companies, an opportunity to take voluntary and prompt corrective advertising before the FDA initiates an enforcement proceeding, there is no legal requirement in the pharmaceutical sector to provide prior warning before seeking enforcement. Among the circumstances that may cause the FDA to initiate enforcement action without a Warning Letter are a history of repeated, substantially similar violations; an intentional or flagrant violation; or a violation causing a reasonable possibility of injury or death.
FDA administrative enforcement actions may take a variety of forms, including recalls of drugs found in violation of the FDC Act or FDA regulations, withdrawal of drug approvals, licence revocations and disqualification of clinical investigators. The FDA may also initiate judicial action, seeking civil remedies such as seizures of violative products, injunctive relief of various types and monetary penalties, and also, in tandem with the Department of Justice, criminal prosecutions for criminal violations of the FDC Act. Among the violations of the FDC Act that subject an entity to criminal prosecution are various acts related to adulterating or misbranding a drug and introducing into interstate commerce an adulterated or misbranded drug. Criminal penalties for misdemeanour violations of §331 include a fine of up to USD1,000 and up to one year's imprisonment. Felony violations of this provision include a fine of up to USD10,000 and up to three years' imprisonment.
Penalties and measures imposed by the FTC for violating advertising rules
The FTC has investigative and enforcement authority over OTC drug advertising it believes is or may be false or misleading. Under Section 20 of the FTC Act (15 USC §57b-1), the FTC’s Bureau of Consumer Protection may use a device called a civil investigative demand (CID) to investigate possible “unfair or deceptive acts and practices,” including deceptive advertising. The FTC can use CIDs to obtain documents and oral testimony, and to compel an advertiser to file written reports or answers to the FTC’s questions. In the event of non-compliance, the FTC may petition a federal court to enforce the CID.
If the FTC concludes that OTC drug advertising (or any other type of advertising under the FTC’s jurisdiction) constitutes an unfair or deceptive act or practice under §5(b) of the FTC Act, the FTC has two enforcement options: Administrative Enforcement and Judicial Enforcement. The Administrative Enforcement process begins with an FTC determination that there is “reason to believe” that a §5(b) violation has occurred. After making that determination, the FTC issues a complaint against the advertiser. Often, the advertiser then agrees to settle the charges against it and signs a consent agreement (typically without any admission of liability) that, among other things, consents to entry of a binding final order agreeing permanently to cease and desist from making the challenged advertising claims, and waives any right to judicial review of the consent agreement or final order. Upon the FTC’s agreement to the proposed consent settlement, the order is made public (generally for a 30-day period) for public comment before the order is made final.
If the advertiser disputes the FTC’s charges, the FTC’s Administrative complaint is heard and determined by an Administrative Law Judge (ALJ) of the FTC in what the FTC refers to as a “trial-type proceeding” conducted according to the FTC’s Rules of Practice. Following the hearing, the ALJ issues an initial decision, all or part of which can be appealed to the full Commission by the FTC’s “complaint counsel” (who represents the FTC in the proceeding) or the advertiser. The full Commission consists of five commissioners, each of whom is nominated by the President of the United States and confirmed by the US Senate for a seven-year term. No more than three of the commissioners may be of the same political party. The Commission’s final decision and order may be appealed by the party against whom the order is issued to the US Court of Appeals for the jurisdiction in which the party resides or carries on business, or where the challenged practice was employed. The party losing in the Court of Appeals may petition the US Supreme Court for certiorari.
Until the 1980s, Administrative Enforcement was the primary vehicle used by the FTC in cases of deceptive advertising, but in recent decades, the FTC far more typically dispenses with Administrative adjudications and instead brings complaints for false advertising in federal district court. The reason it does so is to seek preliminary injunctive relief and the assessment of monetary penalties against the advertiser; remedies that are available in federal court proceedings but not in FTC administrative proceedings. Still, the Administrative Enforcement process continues to be used by the FTC in some cases.
Penalties and measures imposed under the Lanham Act for false advertising
Under the Lanham Act, the plaintiff has the burden of showing that the challenged advertisement was placed in interstate commerce, that it is false or misleading, that it is material and that the plaintiff has suffered an injury to its business or is likely to suffer such an injury as a result of the defendant’s false advertising. If a plaintiff meets this burden, the court, in its discretion, can award injunctive and monetary remedies.
At an early stage of the case, the court has the right in extraordinary cases to grant a temporary restraining order and/or a preliminary injunction prohibiting the challenged advertising from being disseminated during the pendency of the case. That remedy is reserved for cases in which the court finds that there is a likelihood that the plaintiff will succeed on the merits at trial in establishing false advertising, that there is a likelihood that if interim injunctive relief is not awarded, the plaintiff will incur irreparable harm that cannot be remedied by money damages, that hardship suffered by the plaintiff if interim injunctive relief is not issued outweighs the hardship suffered by the defendant if interim injunctive relief is issued, and the public interest favours an injunction.
Following a decision at trial in favour of the plaintiff, a court can award permanent injunctive relief and has great discretion in the shaping of that relief. In addition to barring permanently the advertising found to be false or misleading, as well as substantially similar advertising, the court can, in an appropriate case, order the recall of product packaging (if the false advertising includes false labelling) and corrective advertising by the defendant.
The plaintiff can also recover money damages upon a showing that it suffered actual injury as a result of the false advertisement. Typically, monetary relief is to enable plaintiff to recover its lost profits resulting from the false advertising or as a consequence of other monetary injury it suffered, such as a loss of goodwill due to the false advertising or to reimburse plaintiff for the cost of corrective advertising or other measures the plaintiff adopted to combat the false advertising in the marketplace.
In addition, in extraordinary cases, a plaintiff may be awarded (i) the defendant’s profits attributable to the false advertising (often referred to as a disgorgement of profits remedy), (ii) an award of “treble damages,” in other words, an enhancement of plaintiff’s monetary loss and/or defendant’s monetary gain by a factor of up to three times and (iii) an award to plaintiff of all or some of its attorney’s fees expended in the litigation. Plaintiff can recover its monetary losses caused by the defendant’s false advertising regardless of the defendant’s good faith in disseminating the false advertisements. However, in some but not all US jurisdictions, disgorgement of profits, treble damages and an award of attorney’s fees require a predicate finding that defendant’s advertising was knowingly false.
Penalties and measures resulting from violating criminal statutes prohibiting illicit inducements to prescribe
The federal Anti-Kickback Statute
The Anti-Kickback Statute is enforced by civil and criminal penalties. On the criminal side, conviction for a violation under the Anti-Kickback Statute may result in a fine of up to USD25,000 and imprisonment for up to five years. On the civil side, under the Civil Monetary Penalties Law, in addition to mandatory exclusion from participation in federal healthcare programs, each violation could result in treble damages, a USD50,000 fine and other monetary penalties.
The Sunshine Act
The Sunshine Act is enforced by civil penalties. These include:
The False Claims Acts
The civil False Claims Act is enforced by civil penalties, ranging between USD10,781.40 and USD21,562.80 for each false claim submitted, plus treble the amount of the damages incurred by the government as a result of the false claims. Violation of the civil False Claims Act requires actual knowledge that a claim submitted for payment by a government entity is false, deliberate ignorance of the truth or falsity of the information, or reckless disregard of the truth or falsity of the information.
The criminal False Claims Act is similar in scope, as it applies to any person who makes or presents to any agency of the United States (including the Department of Health and Human Services, which administers the Medicare and Medicaid programs) a claim that the presenter knows to be false, fictitious or fraudulent. The penalty for violating the criminal False Claims Act is imprisonment for not more than five years, plus a fine.
The Stark Law
The Stark Law is enforced by civil monetary penalties and they can be severe, especially since, in contrast to the Anti-Kickback Statute and the False Claims Act, the Stark Law is a strict liability statute, with no intent requirement. In addition to denial of payment for services performed and reimbursement of payments already received for services violative of the Stark Law, monetary sanctions (which recently were upwardly adjusted) can be imposed in an amount of up to USD23,863 per violative service performed and up to USD159,089 for each contractual arrangement found to be in circumvention of the Stark Law. Also, penalties for violation of the Stark Law may be trebled under the Civil Monetary Penalties Act. It has been reported that multiple hospitals have incurred penalties in excess of USD25 million for Stark Law violations. Finally, at the discretion of the Secretary of the Department of Health and Human Services, violators of the Stark Law may be excluded from participation in federal healthcare programmes and, at the discretion of the appropriate state court agency, exclusion from participating in state healthcare programs.
Foreign Corrupt Practices Act
For each violation of the FCPA’s anti-bribery provisions, business entities are subject to a fine of up to USD2 million and individuals are subject to a fine of up to USD250,000, and imprisonment for up to five years. In addition, under a federal statute known as the Alternative Fines Act, 18 USC §3571(d), courts may impose what could be even higher fines – up to twice the benefit that the defendant obtained by making the corrupt payment, in appropriate cases. Fines imposed on individuals may not be paid by their employer or principal.
On the false advertising side, the only relationship is that the NAD will not hear a challenge if the claims complained of are “the subject of pending litigation or an order by a court.” Put simply, the NAD will not hear challenges if the advertising claims at issue are before or have already been decided by a court. Conversely, NAD decisions are not binding on any courts and typically are not even considered by courts, due to the sharp difference in the NAD’s procedures and burden of proof allocation compared to federal courts.
On the inducements to prescribe side, any actions taken pursuant to the PhRMA Code or the AMA Code do not bind courts hearing civil or criminal cases brought under the various statutes regulating and criminalising illicit inducements.
With regard to the FDA’s regulation of prescription drugs, the trend is not so much about what has happened recently, but rather what will happen in the coming years in light of the 2016 US presidential election. Although some recent FDA Warning Letters and Untitled Letters issued by the FDA Center for Drug Evaluation and Research’s office of Prescription Drug Promotion (PDP) addressed FDA concerns about direct-to-consumer and other traditional venue advertisements, other recent FDA Warning and Untitled Letters have begun to focus on issues concerning prescription drug promotion via website advertising, drug company YouTube videos and other social media. But despite the increase of PDP Warning and Untitled Letters about prescription drug promotion on newer media, the number of PDP Warning and Untitled Letters overall has waned in recent years: according to the FDA, in 2011-13, the annual number of those letters was between 24 and 31, but in 2014-16, the annual number was between 9 and 11.
The interesting question is what, if anything, will happen to this trend in the Trump administration. As of this writing, in February 2017, it is far too early to tell. One of the principal themes of candidate Trump was one of excessive federal regulations, but whether that will have an impact on FDA regulation of prescription drug safety and efficacy regulation remains to be seen.
At the FTC, there has been a major enforcement trend in initiating false advertising suits against OTC dietary supplement manufacturers. According to the FTC website, “over the last decade, the FTC has filed 120 cases challenging health claims made for supplements.” Many of these cases are premised on the FTC’s contention that the supplement manufacturer has insufficient substantiation of the material health benefit and efficacy claims at issue and, in particular, that the manufacturer lacks scientific evidence in the form of reliable clinical trials to support these statements.
But the FTC’s extremely intensified focus on dietary supplement advertising and promotional claims (and on certain types of claims for non-drug consumer products) has, with one exception, not carried over to OTC products marketed as drugs. That exception is homeopathic drugs. As noted in 1.1 Laws and Self-regulatory Codes, in late 2016, the FTC issued a new enforcement policy on OTC homeopathic drugs. In a nutshell, the FTC stated it intends to “hold efficacy and safety claims for OTC homeopathic drugs to the same standard” as other OTC drugs making similar claims. In other words, the FTC declared its intention that it would require homeopathic drug manufacturers to “have competent and reliable scientific evidence for health-related claims, including claims that a product can treat specific conditions.”
Finally, with regard to false advertising litigation in the courts, there are two interesting trends, but the extent to which they will impact litigation about drug advertising remains to be seen. One trend – or, more specifically, one case – is the Supreme Court’s unanimous POM Wonderful decision, discussed in detail in 4.1 Main Restrictions on Advertising to the General Public. In that case, the Supreme Court firmly and unequivocally rejected the notion, adopted by numerous lower courts, that courts faced with Lanham Act suits involving the advertising of products that the FDA closely regulates must defer to FDA determinations about those products, or about advertising of those products, or dismiss the Lanham Act suit altogether. Although POM Wonderful concerns advertising for FDA-regulated juice beverages, the Supreme Court’s language clearly indicated that the Court’s analysis applied fully to all FDA-regulated products and so other federal courts, including the US Court of Appeals for the Second Circuit, have held in post-POM Wonderful decisions. If, as seems highly likely, POM Wonderful is applied to cases concerning advertising for prescription and OTC drugs, it could result in more lawsuits by competitors challenging drug advertisements.
The second interesting trend has been the extraordinary increase over the last decade in the number of consumer class action false advertising suits brought by supposed “classes” of consumers against major advertisers. That trend has shown no sign of abating, but so far at least, drug manufacturers, and in particular prescription drug manufacturers, have not been the preferred targets of the plaintiff’s class action bar. Although the increase in class action cases has been met by an opposite trend – increased judicial and legislative scepticism about the bona fides and societal benefits about this influx of class action litigation – these cases continue to be brought and drug companies are at risk of being a more frequent target of these suits.