Hi, everyone. This is Michael H. Cohen, founder of the Cohen Healthcare Law Group.
Today, I would like to talk to you about health and wellness products and the serious legal consequences that can ensue if you don’t mind the rules.
The Russian Roulette
Let me start by telling you about two games. One is a horrible game called Russian roulette. As you probably know, that’s where you, the person, the subject, picks up the revolver and then there’s a bullet in it, and they go click, and if they happen to click and the bullet is in the chamber, then they’re dead. Russian roulette has become a metaphor for things that are seriously dangerous, crazy, and stupid.
Starting a healthcare company that disseminates products without having prior FDA legal and regulatory review is a kind of Russian roulette. This may seem really obvious to you, but let me tell you two versions of the story. One is a client that came to us and put some healthcare products on the market. They might have been dietary supplements. They might have been cosmetics.
At any rate, the client made all sorts of claims. They came to us completely exposed, with over 100 products on the market that people were buying, over a million dollars in revenues, and they said to us: “Do I need to worry about this? What’s the worst that can happen? FDA will just give me a warning letter, and it’ll be a slap on the wrist, and I’ll move on.”
Well, that is seriously unrealistic.
Just today, a client came to us, and similarly, they put a product out on the market. I’m not going to tell you what the product was. It could have been a dietary supplement. It could have been a medical device. It could have been a cosmetic. The important thing to note is that FDA takes regulatory classification really seriously, and if you don’t do your homework and you don’t know how your product will be classified by FDA, you’re in seriously, serious jeopardy.
What makes this case especially unfortunate for the mom-and-pop that started this business is, not only did they not get any kind of FDA legal or regulatory review prior to putting their products out on the market, they also came under attack not by FDA, that might come later, but first they came under attack from a class action plaintiff.
If you have a dietary supplement or any product for that matter, be sure you have substantiation for your claims. Complying with substantiation legal rules is part of dietary supplement / FDA and […]
A dangerous game called Atilla the Hun
That brings me to the second game that accompanies Russian roulette. I call this game Attila the Hun. Why? Because this involves going around from village to village, burning, pillaging, destroying, and having a great, good time at other people’s expense, disseminating misery everywhere.
The class action lawyers might disagree and say that they’re doing a terrific service to the market as well as to the plaintiffs that have been harmed by deceptive advertising. I grant that that may be true from their perspective, and it might be a good argument. At the same time, it is a travesty for the mom-and-pop company owners who created a product, put it on the market with no thought as to the potential liabilities and consequences, and now find themselves faced with a demand letter from a law firm alleging all sorts of claims and potential theories of recovery.
We could recite this particular statute that was cited in the demand letter. We could cite, “That statute under this state law it’s this. Under California law it might meet Business and Professions Code 17200.” In this particular case, the class action plaintiffs’ law firm was alleging that every violation cost upwards of $1,000 in actual damages, that the statute allows compensation for actual damages, and they had hundreds, if not thousands, of people’s rights were violated. If you do the math, this results in a very substantial potential financial penalty to our mom-and-pop company that put these products out on the market, again, without getting a shred of FDA advice.
What they might have done might be very large. Then again, it might be relatively small. It might involve the claims that they made about their product. It might involve some language tweaks that could have easily been reviewed ahead of time by legal counsel. For example, in other blog posts, we’ve talked a lot about how a claim for a dietary supplement cosmetic can be a disease claim, and it can be very subtle, nuanced language choice that makes a disease claim, and now FDA classifies the product as a drug, not as a supplement or cosmetic. This is one of those, and the demand letter went on and on about how this particular claim and that particular claim violated the laws of different states where the products were being sold, and the demand, as you can imagine, was in the millions.
FTC false advertising legal traps can hurt any business, small or established. Here’s how to walk the compliant side of marketing healthcare products.
What can I do?
What kind of legal advice can you give a company at this stage?
What kind of advice can you give someone when they’re mortally in peril?
It’s one thing to teach somebody martial arts. It’s another thing to administer emergency medicine to them after they’ve been lanced by a spear. If you use the martial arts movies as a metaphor, it’s all well and good when the hero wards off six people at a time, and they’re all getting injured and piling up in the corner of hay and the hero’s unscathed, but there are stories where the hero dies. It’s very unfortunate that when things get to this level, they really can spiral out of control. It’s very hard to get out of the crosshairs of this kind of litigation once it starts, not without paying a substantial bounty or settlement fee to the plaintiffs’ law firm.
As well, the client has incurred the wrath of multiple agencies. FDA, possibly district attorney, possibly the Attorney General for healthcare fraud, possibly the Federal Trade Commission for false advertising, so in addition to the financial ruin that’s going to come from the plaintiff side, there is also enforcement on the agency side and possibly even criminal investigation and enforcement.
Why am I telling you all these things? Well, lawyers in this modern age have gotten used to writing good marketing copy that says something like, “Such-and-such is very legally dangerous. If you have a so-and-so problem, contact us. We’re your XYZ lawyers to resolve ABC.” That’s a familiar formula in any kind of marketing, and it’s your basic call to action. The reality is that there is an underlying reality, and a deep truth, and a clear reality behind that kind of messaging. Every day, our healthcare and FDA lawyers see people, companies, businesses, mom-and-pops, even sophisticated, multimillion-dollar businesses, that simply have not done their due diligence, have not done their homework about their potential exposure with respect to the advertising and marketing that they do for their health claims.
Advertising and marketing health claims is an area of huge legal peril, and the enforcement and the liabilities can be not only damaging, but also catastrophic. It really pays to know the lay of the land. It really pays to get advice ahead of time, and also, prevention is worth a pound of cure. I believe that statement is grossly understated. An ounce of prevention could be worth thousands, if not tens of thousands, if not millions of pounds, or kilograms, of cure.
Advertising health products online? Check FTC endorsements guides on testimonials and endorsements, as FTC enforcement action can come with huge penalties.
If you plan to put any kind of healthcare product on the market, be sure to consult an experienced FDA and healthcare attorney who knows the lay of the land, who understands the possible lines of attack, who can spot-check the danger zones, who can give you advice. If you’re investing in marketing, you’re investing in business advice, you’re investing in accounting, you’re investing in your corporate law approaches and your company, entity filings and your corporate law basics, invest in regulatory advice.
I used to say, “Don’t roll the dice. Get legal advice.” More than anywhere, or perhaps as much as anywhere, it’s true in healthcare law. Healthcare services and healthcare products are two completely different categories. If you have a health and wellness product, even if you’re a holistic kind of person, you believe in whole health, and you’re passionate and mission-oriented, get the facts.
Get some advice. Get the work done ahead of time. That’s going to save you a lot of financial pain, and a lot of emotional pain in the long run, and that will position you to know whether you can truly ride the regulatory tiger straight out to market and beyond.