Can Paying Attention to These Common FDA Mistakes Save Your Healthcare Company from a Plaintiffs’ Lawsuit?

TRANSCRIPT

Hello. This is Michael H. Cohen, president and founding attorney of The Cohen Healthcare Law Group.

Unsubstantiated health claims

Let’s talk about exposure for FDA and FTC liability, and let’s also talk about the class action private plaintiff liability that can similarly occur when there are obvious advertising, marketing and FDA and FTC violations. Previously, we talked about a husband and wife business. What they had done is rely on the manufacturer for their claims. They had copied claims from the manufacturer, and because the manufacturer had made the claims for the products that the husband and wife business was selling, the husband and wife assumed that they were legally safe and that they would have no issue from FDA.

Also, tragically, as I mentioned, they transgressed, because they had no prior FDA attorney review of their business before launching a health and wellness product on the market. What they did is, they simply took a class online about how to sell dietary supplement products. They followed the instructions on this class, and they made a lot of money for about five years. The husband and wife happened to live overseas, and for this they also thought that they would be untouched. And this was another recommendation that was brilliantly made to them in this online course about how to makes lots and lots of money.

It’s easy to make lots and lots of money if you’re willing to break the rules and incur significant liability.

You can make lots of money, and you could lose everything.

That’s what the classes don’t tell you. These courses typically don’t tell you how to comply with FDA, how to comply with FTC. They don’t tell you that your exposure could be to FDA, to FTC, to the state attorney general, to the state district attorney, and to a plethora of federal and state agencies, all of whom govern your conduct in the health and wellness industry.

They don’t tell you that you could lose your shirt, that you might make the most astonishing dietary supplements in the world, but you’ll never consume them again. In fact, your diet will be limited to peanut butter and jelly or possibly ramen noodles. I hope nobody is getting a flashback here to college, because I’m certainly remembering how fond I was of ramen noodles and other horrific meals that I prepared, such as the time that I mixed macaroni and cheese and chili and thought that was cooking. I was wrong, just as the mom and pop business was wrong for not doing due diligence and for failing or neglecting to investigate their FDA, FTC, and other federal and state law obligations with respect to advertising and marketing health and wellness products.

There’s a saying that we learn in first year criminal law, and it goes like this: “Ignorance of the law is no excuse.” I will never forget my dear professor, dear Professor McCloud. He had this name, McCloud. It sounds like a John Wayne movie or someone with a cowboy hat, your typical western hero, McCloud, and I can vividly remember, even from my early 20s, Professor McCloud saying, “Ignorance of the law is no excuse.” Ignorance of the law is no excuse.

Guess What? About 19 years ago, and I still remember this, I made a left-hand turn into a shopping mall, and guess what? There was a police officer on a motorcycle waiting for me, and that police officer was happily writing tickets all day. And I did not see that there was no left-hand turn there. In fact, even when the police officer showed it to me, I refused to see it, because I hadn’t seen it, therefore it didn’t exist. I was very nice to the police officer. I did pay a fairly hefty fine, and the saving grace was, I could hear Professor McCloud’s voice in my ear, whispering, “Ignorance of the law is no excuse.”

Well, I didn’t see the “no left turn” sign that was posted, and the husband and wife did not see the “do not violate federal law regarding advertising” sign that was clearly conspicuously posted … but not clearly and conspicuously posted in the online class that promised them riches. So they got rich, and now it’s ramen noodles.

Here comes the consequences

What’s the worst that can happen? A LOT. We talked about it. Civil penalties, seizure of the product, a warning letter, if FDA decides to be nice. But they could go much further. There could even be criminal penalties for willful violation. Will the federal and state authorities let you off the hook as a business that has manufactured and marketed healthcare products illegally, simply because quote-unquote, “All we did was repeat the claims the manufacturer made”? Will the regulatory authorities let you off the hook because “Everybody’s doing it” or because “Someone else is doing it” or because “Uber’s doing it”? I don’t know if Uber’s in this particular product line, but the point is, “Uber’s doing it” is not an excuse.

When clients are selling illegally, we can be creative. Sure, we can brainstorm. We can tell them how to clean up their claims and become compliant, and to the extent that they are marketing products that are not compliant, there can be only one recommendation, which is to stop sales immediately. You don’t want the violations to go on one more day. You don’t want the violations to go on one more minute. You want to show good faith, you want to engage an attorney.

Again, going back to this particular couple, the manufacturer told them that the products were FDA-approved. By the way, dietary supplements do not get FDA approved. Drugs go through an approval process. Medical devices go through a clearance process in some cases, unless they’re exempt. At any rate, approval is the wrong concept. Dietary supplements never, never get approved. What you do is, you submit a notification to FDA no later than 30 days after the first marketing of your product.

This doesn’t mean that you can bypass attorney legal review of your healthcare claims before submitting the notification to FDA. FDA does not have the resources to enforce with respect to every single violation, and so you may or may not hear close to the time that you go to market, but any time you’re on the market, you have fair warning that you have to abide by FDA and FTC rules.

Let me tell you a little bit about the other side of the coin here, which is the hell of a demand letter that you can receive from a private plaintiff’s firm. Of course, these blog posts are all case studies. We never, ever want to provide any information that would compromise the client, and so I’m going to keep this fairly generic. So here’s something that the demand letter might say, and this demand letter goes on for 26 single-spaced pages, lots of footnotes. Here’s the kind of thing that it says. It starts out, “Dear …” And actually, your “Dear” meaning this is going to cost a lot of money to you, this is very dear. You know, “Dear you, we represent so-and-so,” you know, John, Harry, Martha, and Tina, “with respect to false, unlawful, and misleading labeling in marketing of … your healthcare products, in violation of state and federal law.”

And then it goes on to say, “These claims are unlawfully, misleadingly, and deceptively labeled in violation of … name your favorite state.” It could be New York, California, Texas, Virginia, Georgia, Alabama, Delaware. Wherever you sell, they can nail you. “Specifically,” and then there’s a bunch of dots, “you’re making illegal disease claims, you’re making illegal drug claims, you’re making claims about products that are not backed by evidence, that are not supported by evidence, that are not substantiated. Accordingly, this letter is to demand that, in accordance with the law, you,” you know, your name goes here, “immediately cease.” What does that mean? Stop, throw away your business, stop everything. “Cease the false and misleading labeling and advertising described herein. Refrain from using labels that do not comply with the law, and pay damages to consumers who purchased the products. If you do not do so within X days of receipt of this letter, our clients may bring claims for deceptive practices under …,” and then there’s a litany of statutes.

Then they’ll go on to say something, “Well, John purchased your products near his home on such-and-such neighborhood in the past so many months, based on, among other things, the claims that you made, which are disease claims, which you did not have reviewed by legal counsel prior to going on the market. Had you labeled your products accurately and in compliance with applicable law,” meaning had you gotten good legal advice, “you wouldn’t have done this, and our clients would not have been damaged.”

Okay, then it goes through a litany of the law:

“The US Food, Drug and Cosmetics Act defined drugs as including articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals.”

Okay, interesting, man or other animals? I suppose we’re an animal. Gee, that’s interesting from an evolutionary perspective, but what’s really interesting here is the definition of drug, which includes an article used in the diagnosis, cure, mitigation, treatment, or prevention of disease. This means that if you mentioned the “D word”, if you mention any disease, let’s say diabetes, let’s say cancer, let’s say hypertension, let’s say arthritis, in the context of your promoting a dietary supplement, you’ve made a disease claim.

Remember, importantly, that disease claims can be either express or implied, and that you cannot make a disease claim without getting the product approved as a drug. You don’t want to see your dietary supplement regulated as a drug; therefore, it’s important to have your claims reviewed; therefore, it’s critical to have attorney review of each and every statement that you make about your product so that you don’t get into this kind of 26-page-long, single-spaced demand letter, which goes on and on and on, and makes you look like a terrible human being, and is very scary and very threatening and alleges one legal violation after another. This is called being caught in the cross hairs, and when you’re in the cross hairs, it’s very hard to get out of it.

What to do?

What do you do with a demand letter like this? As they say, you have two choices: pay now or pay later. If you consult an attorney for regulatory review with respect to your health and wellness products, such as dietary supplements or cosmetics or general wellness products, before you put these products on the market, you will pay for limited attorney time to review your claims. Your attorney will help you tweak those claims. If your healthcare and FDA attorney is very smart and capable, they will titrate the level of assertiveness with respect to the marketing against a level of prudence with respect to compliance. Let me say that again. That point is very important. You don’t want an attorney that is a yes man or a yes woman. On the other hand, you don’t want an attorney whose favorite word is “no” all the time.

And at the same time, you don’t want an attorney who’s going to say “Maybe, it depends,” over and over and over, or “It’s a gray area.” Once in a while, we will say it’s a gray area, which is a way to flag that there’s considerable ambiguity, and any lawyer worth their salt, as Professor McCloud used to say, will talk to you in detail about the shades of gray, the shades of ambiguity, the nuances, so that you can make an informed business decision. You don’t want an attorney who just says yes. You don’t want an attorney who just says no. You don’t want an attorney who just says gray, who wears a gray suit, who wears a gray tie, who has a gray face. You want an attorney who is not ashen, but is pumped and full of life and wants you to get to market, and wants to help protect you against these regulatory and liability hazards, and also has respect for the law. And that kind of attorney will titrate between aggressive marketing and prudent compliance and help you navigate between the two.

All right, I’m looking for other things that I can tell you, and I’m only on page nine. I get to this really big paragraph, violations of state and federal law again, the scary language.

“By engaging in the unlawful and misleading labeling practices described herein, you,” or your company name, “are committing multiple violations of the Food, Drug and Cosmetic Act as well as the laws of New York, Texas, California, Georgia, Illinois, Delaware,” name your favorite state. “Furthermore, as a relative result of this false, misleading, deceptive labeling, you sold the products to many thousands of consumers, generating substantial profits.”

I don’t know that this business generated profits. I said that they did, but every client is different. Some do, some don’t. Some are very, very small potatoes. But the point is, those profits are going to be sucked dry in defending the lawsuit. I was saying pay now or pay later, and I talked about what it means to pay now. It’s actually very modest compared to the total revenues that you might make from the product, and certainly modest compared to pay later, which is the cost of even drafting a response letter.

Imagine, now, the plaintiff’s lawyer has put out 26 single-spaced pages, alleging every conceivable violation of federal and state law. And now you have to pay an attorney to respond, and you’re not going to get out of this. Once the attorney responds, the question is, will the plaintiffs file a complaint or not? Ideally, you’d like to settle it before. That’s going to cost a bundle of money. Remember, they are saying that you made substantial profits unlawfully, and their goal is to wrestle those profits away from you, take all they can. Your goal is to stay alive, stay in business.

Once they file the complaint, then you have to answer the complaint, by law, within a certain period of time. If you fail to answer, then you default, which means they take all without you even being able to mount a fight. So once you answer, you’re in the litigation. Then comes discovery, which is a long and arduous process where the plaintiff bombards you with questions. You pay your attorney to bombard them with questions. However, you’re on the defensive, you’re smack in the middle of litigation, and it’s costing the plaintiffs for money to litigate. So now the plaintiff’s firm is not going to be satisfied with a meager offer, they’re going to want an even more substantial offer.

A microdose of protection is worth a megadose of cure, and the prudent, wise, informed business decision is to get attorney review of any healthcare product, any health and wellness product before you go to market. Go to market with your health and wellness product with confidence, with attorney review, with smart counsel, with informed business judgment. Treat it like you would, and as carefully as you would, any other business decision, perhaps even more so, because your entire business is at stake, your business is on the line.

Law for Healthy, Holistic, Healthcare Company and Lifestyle

By the way, we’ve described some of the potential liabilities and liability horrors that can ensue without proper FDA and FTC planning when marketing and advertising your health and wellness product. We are not fazed by those challenges. We love representing companies. We believe in holistic health. We like the dietary supplements industry, and I personally was involved as a lawyer in the early years of the dietary supplements industry. I take supplements. I live a healthy lifestyle. I work out and exercise and get fresh air, and I walk my talk. I believe in a healthy, holistic, environmentally sound lifestyle.

So we are here to cheer on those companies that are promoting health and wellness for the consumer. That is why we exist, and that is why we serve this particular industry. Do not be dissuaded by the legal liability and regulatory hurdles, if you are truly committed to putting a product to market that markets in a way that is wise and fair and non-deceptive and that plays by the rules. Cohen Healthcare Law Group is committed to helping you get there.

Contact us for a consultation regarding your health and wellness product and your FDA and FTC exposure today.