Medical Tourism Model can raise FDA and FTC Legal Issues

Jane’s International Herbal Medicine Treatment Center

Jane’s Herbal Healthcare Startup is an ambitious collaboration with overseas physicians who use herbal medicine to treat certain diseases, based on some theory from another, indigenous system of medicine.

Jane happens to be a licensed MD in one of the U.S. states who wants to create a Joint Venture with these international doctors, and also roll in some outbound medical tourism from the U.S. to the overseas site for herbal treatment.

In Jane’s proposed business model, website development will occur overseas as will banking and certain business transactions.

U.S. patients will pay a bundled fee which includes flights and transportation to the overseas medical center, plus the overseas treatment.  Jane will advertise within the U.S.

FDA’s Long Arm of Jurisdiction

Like many other healthcare companies, Jane wonders whether she can avoid the long arm of FDA and FTC simply by doing so many things overseas, and Jane seeks legal advice on ways to outrun this long legal reach of U.S. enforcement agencies.

The legal landscape is complicated here, so we will recap some of it in short form.

There are two big concepts: subject matter jurisdiction (which has to do with the subject matter itself—here, advertising) and personal jurisdiction (which has to do with whether the local court can subject a certain person to its authority).

In terms of subject matter jurisdiction, there are international treaties which can grant a U.S. court subject-matter jurisdiction over a company like Jane’s, even if the advertising occurs principally overseas.  This is called, “extraterritorial” jurisdiction.  Where the customer is a U.S. citizen who has suffered harm from the international medical practice, and has no remedy in the country where the international medical practice or center is located, courts could grant a remedy based on the fact that the MD involved in the project—or even Jane’s company—is licensed (or registered, respectively) in a U.S. state.

Remember that U.S. federal agencies often cooperate, not only with each other, but also with many other international enforcement agencies.

For example, the Federal Trade Commission (FTC) exercises enforcement against online scams (including pyramid schemes) that take place over the Internet and implicate persons abroad, as well as in the U.S.

In such cases, enforcement action can be coordinated across countries.

In terms of personal jurisdiction, early cases checked to see whether the person’s online use was “passive” or not.  Over time, this distinction has eroded as more and more commerce is done online.  Given that Jane’s company probably does a lot of business online with customers from many states, and seeks to provide medical tourism for them overseas, courts would likely not have a hard time finding personal jurisdiction over the company.

Clients like Jane sometimes have the notion that they are shielded from U.S. enforcement simply because the website is created, or perhaps hosted, overseas.  This is wishful thinking.  Again, U.S. enforcement has a “long arm.”  We can invent all sorts of ideas as to why enforcement should have a diminished reach in a given situation, but this will not help if FDA or FTC in fact decides to take enforcement action.

FTC’s Requirement of Truthful & Non-Misleading Advertising Steps In

As we know, FTC requires that:

• advertising must be truthful and non-deceptive;
• advertisers must have evidence to back up their claims; and
• advertisements cannot be unfair.

According to the FTCA an ad is deceptive if it contains a statement, or omits information, that:

• is likely to mislead consumers acting reasonably under the circumstances; and
• is “material” – that is, important to a consumer’s decision to buy or use the product.

An ad or business practice is unfair if:

• it causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid; and
• it is not outweighed by the benefit to consumers.

FTC looks at the ad from the point of view of the “reasonable consumer,” which means the typical person looking at the ad. Rather than focusing on certain words, the FTC looks at the ad in context—words, phrases, and pictures—to determine what the ad conveys to consumers.

FTC also requires that all claims be substantiated.  This requirement severely limits the claims that can be made.

FTC applies a two-step process: (1) identify all express and implied claims that the ad conveys to consumers; and (2) assess the scientific evidence to see whether it is adequate to support the claims that are being made.

In assessing the implied claims, the FTC looks to the “net impression” conveyed by all elements of an ad, including the text, product name and depictions.  FTC also requires that disclosure of any necessary qualifying information be presented clearly and prominently so that it is actually noticed and understood by consumers.

Claims related to health must be capable of substantiation by “competent and reliable scientific evidence.”  This is a very high standard.

In addition, FTC dedicates a number of resource materials to addressing products that claim to CURE conditions.  In these situations, FTC is particularly on the lookout for claims that could mislead or deceive the product.

One of the issues Jane faces with her project is that she will probably want to make claims about cures from the herbal treatments, if these appear to be successful overseas; yet, the evidence behind these claims would likely be inadequate under FTC standards, and therefore subject Jane’s company to potential FTC exposure, as well as mirror claims from state agencies and/or private plaintiffs.

Relevant FTC enforcement actions have included banning “repeat offender” foreign marketers from selling herbal supplements who claimed their product could treat or cure diseases targeting the U.S. market in with ads in English, Vietnamese and Chinese.  FTC found that the claim of a cure, and various references to studies, in fact misrepresented the existence, results, validity or conclusions of the scientific studies. Likewise, FTC, working with government agencies in Mexico and Canada, acted against internet sales of products claiming a cure or treatment for diabetes launching a campaign against 24 companies.  FTC, FTC and FDA Act Against Internet Vendors of Fraudulent Diabetes Cures and Treatment.

In addition, the promise to “cure” normally makes any claim about a dietary supplement or device, a drug claim or medical device claim, respectively, in the eyes of FDA.

The Competent & Reliable Evidence Standard

As we’ve noted on this blog, FTC requires that advertisers have a “reasonable basis” for substantiating claims, and as noted, regarding health claims, requires “competent and reliable scientific evidence.”  FTC, Dietary Supplements: An Advertising Guide for Industry.

FTC defines “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.

FTC states that well-controlled clinical studies are the most reliable form of evidence, and that “replication of research results in an independently-conducted study adds to the weight of the evidence.”

FTC notes that anecdotal experiences are particularly unreliable as forms of substantiation: “The individual experiences are not adequate to substantiate the claim without confirming scientific research.”  In assessing the overall quality and quantity of evidence, the FTC examines “the internal validity of each piece of evidence.”

To determine whether such a reasonable basis exists, the FTC looks to several factors including:

• Type of product or service (services related to consumer health or safety require greater substantiation).
• Type of claim (claims that are harder for consumers to assess require more substantiation; this includes “health claims that may be subject to a placebo effect or technical claims that consumers cannot readily verify for themselves”).
• Benefits of a truthful claim.
• Cost/feasibility of developing substantiation for the claim.
• Consequences of a false claim (including physical injury if the consumer relies on an unsubstantiated claim of therapeutic benefit).
• Amount of substantiation that experts in the field believe is reasonable (the FTC looks to “accepted norms in the relevant fields of research” including those developed by a government or authoritative body).

Among other things, advertisements must ensure that necessary qualifying information is presented clearly and prominently (for example, disclosing whether subjects in a trial engaged in regular exercise and followed a restricted-calorie diet as part of the study regimen, and clarifying that users should follow the same to expect similar results).

Jane’s challenge here is that it is unlikely the studies will be available to substantiate all the claims she would want to make, in order to make her outbound medical tourism business appealing to potential customers.  She will have a lot of anecdotal evidence, but not necessarily “competent and reliable scientific evidence” for the really valuable claims.

AMA Guidance for Medical Tourism Businesses

AMA, knowing about the burgeoning medical tourism industry, has issued guiding principles for business that facilitate or promote medical care outside the United States.  The guiding principles indicate such business should adhere to the following:

 (a) Medical care outside the United States must be voluntary.

(b) Financial incentives to travel outside the United States for medical care should not limit the diagnostic and therapeutic alternatives that are offered to patients or restrict treatment or referral options.

(c) Patients should be referred for medical care only to institutions that have been accredited by recognized international accrediting bodies (such as the Joint Commission International or the International Society for Quality in Health Care);

(d) Before travel, local follow-up care should be coordinated, and financing should be arranged to ensure continuity of care when patients return from medical care outside the United States.

(e) Coverage for travel outside the United States for medical care must include the costs of necessary follow-up care upon return to the United States.

(f) Patients should be informed of their rights and legal recourse before agreeing to travel outside the United States for medical care.

(g) Access to physician licensing and outcome data, as well as facility accreditation and outcomes data, should be arranged for patients seeking medical care outside the United States.

(h) The transfer of patient medical records to and from facilities outside the United States should be consistent with Health Insurance Portability and Accountability Action (HIPAA) guidelines.

(i) Patients choosing to travel outside the United States for medical care should be provided with information about the potential risks of combining surgical procedures with long flights and vacation activities

Jane would do well to incorporate these guidelines into formal company policies and other documents.

To some extent, these principles will limit some of Jane’s marketing as well.

In addition, the AMA, and other organizations such as the Medical College of Surgeons, have recommended that U.S. patients receive specific information regarding medical care outside of the U.S. and advise patients of potential risks including:

• Variability in the training of medical and allied health professionals;
• Differences in the standards to which medical institutions are held;
• Potential difficulties associated with treatment far from family and friends;
• Differences in transparency surrounding patient discussions;
• The approach to interpretation of test results;
• The accuracy and completeness of medical records;
• The lack of support networks should longer-term care be needed;
• The lack of opportunity for follow-up care by treating physicians and surgeons;
• The exposure to endemic diseases prevalent in certain countries;
• The fact that language and cultural barriers may impair communication with physicians and other caregivers.
• That compensation for liability associated with injury may be difficult to obtain.

https://www.facs.org/about-acs/statements/65-surgical-tourism

The AMA has recently updated and adopted Ethical Guidance on Medical Tourism. In this document, the AMA indicates physicians should:

• Familiarize themselves with issues in medical tourism to help support informed consent
• Help patients understand the nature of risks and likelihood of benefits, especially when patients desire an unapproved therapy
• Advise patients who consult them in advance whether the physician is willing to provide follow up care
• Offer their best professional guidance, as they would for any care decision
• Respond compassionately to requests for follow-up care from returning patients who had not consulted the physician before seeking care abroad, and carefully consider the implications before declining to provide nonemergent follow-up care

So far, Jane has found that a quick legal dip into some of the regulatory landscape has uncovered a host of rules that she should be following.  And, as indicated, Jane will want to create internal Company policy documents that incorporate these various guidelines.  Along the way, Jane’s healthcare startup will have to decide which rules are an absolute “must strictly follow;” which should be adopted in modified form; and which are simply too onerous and restrictive, or potentially even ruinous in terms of profit.  Here Jane will have a business judgment to make yet should seek legal counsel before jettisoning some basic compliance plans.

Contact Cohen Healthcare Law Group, PC to schedule a consultation with an experienced healthcare compliance lawyer.