FDA Regulatory Update: What Does “Natural” Mean? Courts Divided on Whether to Seek FDA’s Input

As we previously reported here, here, and here, consumer litigation challenging “natural” and Genetically Modified Organisms (“GMOs”) advertising and labeling claims has steadily been on the rise. In recent months, a number of class action lawsuits against major food corporations have alleged that the companies misled consumers by labeling products containing GMOs as “natural.” These cases highlight the confusion regarding the definition of the term “natural,” and raise questions about whether courts, in reviewing allegations for mislabeling and deception, should defer to the FDA”s specialized knowledge or expertise.

Regulatory Background: FDA”s Description of “Natural”

For the purposes of food labeling, the term “natural” has not been formally defined by any FDA statute or regulation. The FDA has made reference to “natural” labeling but has not offered a concrete definition of when the term may be used to describe a food product. In a non-binding guidance document, the FDA  described the term to mean that “nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.” When pushed by industry and consumers for information regarding whether or not bioengineered ingredients or GMOs fit within the description above, the FDA failed to offer any useful clarification. Instead, the FDA responded by stating that it “does not require special labeling of bioengineered foods” because it is “not aware of any data or other information that would form a basis for concluding that the fact that a food or its ingredients was produced using bioengineering is a material fact that must be disclosed on food labels.” (To read the full text of the FDA”s guidance document, please click here.)

Primary Jurisdiction

Several of the consumer class action cases pending before district courts allege that a food product”s label is false, misleading and deceptive where the product is labeled as “Natural” or “All Natural” or “100% Natural” but also contains ingredients that are GMO. In order to persuade the courts to dismiss or stay the proceedings pending a referral of the issue to the FDA, the defendant food companies have invoked the doctrine of primary jurisdiction. Generally, the primary jurisdiction doctrine permits courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency. When deciding whether to invoke the primary jurisdiction doctrine, a court weighs several factors, including the need to resolve the issue, whether the issue has been delegated by Congress to an administrative body, and whether the issue requires expertise or uniformity in administration.

A recent string of decisions suggest that district courts disagree on the issue of whether courts should refer the task of defining what constitutes “natural” to the FDA. In Cox v. Gruma, the plaintiffs alleged that the labels on Gruma”s food products stating that the products are “all natural” were false and misleading because the products contain GMOs. Judge Rogers in the United States District Court for the Northern District of California issued an Order which stayed the proceedings for six months and referred to the FDA the question of whether and under what circumstances food products containing GMOs may or may not be labeled “Natural,” “All Natural,” or “100% Natural.” The Order stated that “deference to the FDA”s regulatory authority is the appropriate course” because doing otherwise would risk “usurp[ing] the FDA”s interpretive authority” and “undermining, through private litigation, the FDA”s considered judgments.” (For more coverage on the Cox v. Gruma case, please click here and here.)

One week later, Magistrate Judge Watanabe of the United States District Court for the District of Colorado issued an Order in a similar case, Van Atta v. General Mills. The Order recommended that the case be stayed pursuant to the primary jurisdiction doctrine “pending action by the FDA with respect to the referral made by Judge Rogers in Cox v. Gruma.” The Order explained that the “issues of fact in this matter are not within the conventional experience of judges” because the FDA has regulatory authority to oversee food labeling. (For more coverage on the Van Atta v. General Mills case, please click here.)

Next, in Parker v. JM Smucker Co., the plaintiffs alleged that the labeling of multiple Crisco products is false and misleading because the products are made with bioengineered corn and are highly processed. (To read additional coverage about Parking v. JM Smucker, please click here.) The presiding judge, Judge Conti, was not convinced that the court should defer to the FDA”s expertise and regulatory authority. In his Order, Judge Conti reasoned that the primary jurisdiction argument was unpersuasive because “various parties have repeatedly asked the FDA to rule on “natural” labeling, and the FDA has declined to do so because of its limited resources and preference to focus on other priorities.” Therefore, he concluded, “referring the matter to the FDA would do little more than protract matters.”

Six days later, a federal judge in New York presiding over a multi-district lawsuit against Frito-Lay North America, Inc. (“Frito-Lay”) reached the same conclusion as Judge Conti. (To read additional coverage regarding In re Frito Lay North America, Inc., please click here.) Interestingly, Judge Mauskopf”s Order frames the case as “far less about science than it is about whether a label is misleading.” In the Order, she explains that Frito-Lay”s reasons for invoking the primary jurisdiction doctrine were unpersuasive because “the reasonable-consumer inquiry upon which some of the claims in this case depends is one to which courts are eminently well suited, even well versed.” The Order acknowledged that the Cox and Gruma Courts recently agreed to stay cases involving similar labeling concerns, but ultimately concluded that the judiciary”s undertaking of this decision-making process “would not “risk usurping the FDA”s interpretive authority” or undermine its “considered judgments.”” Furthermore, Judge Mauskopf reasoned that her rejection of Frito-Lay”s arguments was proper, to the extent that “numerous district courts have declined to invoke primary jurisdiction in state-law consumer protection cases so that the FDA may pass on whether a food may properly be labeled “natural.””

In addition to the reasons for denying Frito-Lay”s primary jurisdiction argument, Judge Mauskopf was not persuaded that FDA”s defining of the term “natural” would resolve the issues presented in similar consumer protection cases. She explained that the “FDA is unlikely to respond in a timely manner to any referral from this Court,” and offered, as an example, the fact that the FDA took nine years to define the requirements for “gluten-free” labeling. For these reasons, she stated that “[t]here is no telling, if it even chose to respond with any directive to the Court”s referral, how the FDA would define the term, and whether its definition would shed any further light on whether a reasonable consumer is deceived by the “All Natural” food label when it contains bioengineered ingredients.”

The Uncertain Future of “Natural” Labeling

Even though industry and consumers continue to pressure the FDA to provide guidance regarding “natural” and GMO labeling, it remains unclear whether the FDA will actually accept the courts” invitations to clarify the term”s definition and use. However, given the FDA”s funding and staffing constraints, we doubt that FDA will offer any new, helpful information to help courts decide the issues in these consumer cases. As a result, it seems probable that consumers will continue to challenge the use of ill-defined terms, like “natural,” on food product labeling.

In light of the courts” inconsistent decisions regarding the application of the primary jurisdiction doctrine, it is difficult to speculate how these consumer lawsuits will unfold. If courts ultimately decide in favor of consumers, the issue of “natural” labeling could have a considerable impact on the future of the food industry”s marketing strategies and revenues. Therefore, in the absence of a uniform definition for the term or clear parameters regarding the term”s use, industry should be aware of the risks associated with the continued use of “natural” labeling and be prepared for the possibility of litigation.

Fuerst Ittleman David & Joseph, PL will continue to monitor any developments in the regulation of “natural” and GMO food product labeling. Our attorneys are knowledgeable and experienced in handling issues related to the regulation of foods. For additional information or any questions, please contact us by email at contact@fidjlaw.com or by telephone at (305) 350-5690.

FTC Regulatory Update: FTC Settles with Marketers of Bed Bug and Head Lice Treatments; Highlights Confusing Interplay Between FTC and FDA

On July 16, 2013, the Federal Trade Commission (“FTC”) announced that it entered into settlement agreements with Chemical Free Solutions LLC and Dave Glassel (collectively “Cedarcide Defendants”), the marketers of bed bug and head lice products. The parties agreed to these settlements after nearly a year of litigation regarding allegedly false and unsubstantiated claims about the ability of the product, BEST Yet!, to stop and prevent head lice and bed bug infestations. (To read more about the FTC’s 2012 complaint, please click here.) The settlements prohibit the use of allegedly deceptive claims and require pre-approval from the U.S. Food and Drug Administration (“FDA”) prior to making any treatment claims.

Settlement Orders

The settlement orders prohibit the Cedarcide Defendants from claiming that their BEST Yet! products by themselves are effective in stopping or preventing bed bug infestations, more effective than other products or services at stopping and preventing bed bug infestations, or any other representation about the product’s performance or efficacy without “competent and reliable scientific evidence” to support the claim. (To read the full text of the settlement orders, click here and here.) Furthermore, the Cedarcide Defendants are also barred from claiming that the product is effective in treating head lice infestations unless the claims are non-misleading and they obtain FDA’s approval of a new drug application or the product properly conforms to an existing over-the-counter (“OTC”) drug monograph. The settlement orders also prohibit the Cedarcide Defendants from marketing, promoting, or misrepresenting, either expressly or by implication, that the BEST Yet! product is endorsed or approved by a government entity or third-party organization. The agreed-upon settlement orders impose a $4.6 million judgment against Glassel, who is facing bankruptcy, and an $185,206 judgment against Chemical Free Solutions, LLC, which will be suspended due to the party’s inability to pay. By agreeing to the Stipulated Orders for Permanent Injunction and Monetary Judgment, the Cedarcide Defendants are legally obligated to abide by the terms contained therein, and the penalties associated with violating such orders can be severe.

FTC Commissioners’ Statements

At present, the FTC is headed by four Commissioners, who act as the final decision makers in FTC enforcement actions. These Commissioners review and vote on all cases prior to filing suit in federal court or taking any action in an administrative proceeding. After reviewing the case against the Cedarcide Defendants, the Commissioners voted 3-1 to approve the proposed settlements described above. The Commissioners released statements explaining their individual decisions on this matter. In their statements, the Commissioners primarily focused on the provisions in the Stipulated Order requiring FDA pre-approval, and for that reason alone the statements are worthy of further examination.

FTC Chairwoman Edith Ramirez and Commissioner Julie Brill entered a joint statement in support of requiring the Cedarcide Defendants to obtain FDA pre-approval prior to making any representations that the product can stop, prevent, or treat bed bug or head lice infestations. (To read the full text of the Ramirez and Brill joint statement, please click here.) The joint statement supports the FTC’s decision, “notwithstanding the Commission’s recent decision in POM Wonderful, LLC (“POM Wonderful”) in which [the FTC] declined to impose an FDA pre-approval requirement for the food products in question.” The joint statement clarifies that head lice infestation, or “pediculosis,” is a medical condition; therefore, any product that claims to treat it is subject to FDA regulations and the federal Food, Drug, and Cosmetics Act (“FDCA”). The joint statement goes on to explain that “requiring the defendants to have FDA pre-approval as substantiation for future claims is particularly appropriate as it harmonizes their obligations under the FDCA and the FTC Act.” Accordingly, Chairwoman Ramirez and Commissioner Brill’s joint statement asserts that the defendants “should not be permitted to skirt a well-established regulatory scheme for demonstrating the efficacy and safety of head lice treatments,” especially when the cost of complying with the FDA regulatory scheme is not prohibitive for companies seeking to market such treatments.

In a separate opinion, Commissioner Joshua D. Wright wrote that “[a]s a general matter, I believe that FDA pre-approval provisions should play a very limited role in FTC orders and that the conditions under which they are appropriate are fairly narrow.” Nevertheless, Commissioner Wright voted in support of the FTC’s decision to require FDA pre-approval in this settlement. (To read the full text of Commissioner Wright’s statement, please click here.)

Commissioner Maureen K. Ohlhausen issued a dissenting statement that raises thoughtful questions about the boundaries of inter-agency cooperation and each agency’s standards for substantiation. In her dissent, Commissioner Ohlhausen stated that she voted against the settlements in this case because:

the requirement that defendants obtain FDA preapproval prior to making head lice treatment claims is inconsistent with Commission precedent and that imposing such a high bar for these types of claims in general may ultimately prevent useful information from reaching consumers in the marketplace.

(To read the full text of Commissioner Ohlhausen’s statement, please click here.) These settlements, she argued, are a departure from the FTC’s two most recent decisions regarding deceptive health claims, wherein the FTC determined that requiring FDA pre-approval was unnecessary because the FTC’s standard of requiring competent and reliable scientific evidence was sufficient to substantiate that a representation is true.

In a footnote, Commissioner Ohlhausen pointedly explained why she believes requiring FDA pre-approval is at odds with FTC’s policies. An important distinction between the FDA and FTC’s substantiation policies is that the FDA views safety and efficacy as “fundamentally linked” for the purpose of drug approval, meaning that the FDA’s approval standards are “more stringent than FTC substantiation standards.” More specifically:

Under the FTC Act, it is not our mission to police drug safety or efficacy directly. Advertisers are liable to substantiate material claims that products are safe, just as they are liable to substantiate material claims that products are efficacious. But they are not liable to substantiate claims that they do not make or imply. If an advertiser makes an efficacy claim, but not a safety claim, there are two related reasons why FDA approval standards would be more stringent than FTC substantiation standards. First, FDA approval requires testing two properties (efficacy and safety). Second, FDA approval requires sufficient testing to consider each of these two properties in view of the other.

Commissioner Ohlhausen reasoned that requiring defendants to undergo FDA’s review process is unnecessary because the FTC has the capability to “impose directly by order the type of substantiation that experts in the field believe is reasonable.”

In her dissent, Commissioner Ohlhausen also expressed her concern that industry would interpret these settlements as the FTC adopting or aligning with the FDA’s substantiation standard, which would send “the wrong signal to parties trying to ascertain the level of substantiation required to make health-related claims.”  Such an interpretation could have a significant impact on regulated industry, as it could “potentially chill health-related claims and deprive consumers of useful information.” Furthermore, her statement emphasized that she dissented from the majority decision because the FTC’s responsibility is “limited to requiring adequate substantiation based on [the FTC’s] enabling statute and relevant precedent” and not to ensure that advertisers comply with their obligations under the FDCA.

What This Means

The FTC’s settlements with the Cedarcide Defendants highlight certain issues that can arise as a result of the relationship between the FTC and the FDA. Commissioner Ohlhausen’s dissent offers insight into how the FTC’s regulation of any advertising and promotion of FDA-regulated products can create a complex and oftentimes confusing regulatory framework for industry. Here, it is especially interesting that the FTC required FDA pre-approval for purported head lice and bed bug treatments, when it did not require such a high standard for purported treatments involving cancer or heart disease in its decision in POM Wonderful. (To read our coverage regarding the FTC’s decision in POM Wonderful, please click here, here, here, and here.) From the industry’s perspective, the FTC’s settlement agreements with the Cedarcide Defendants further blurs the line between the FTC and FDA’s substantiation standards. Without clearer guidance regarding the application and interpretation of the FTC and FDA’s separate substantiation standards, industry is forced to guess how its products will be regulated and which standards it must meet to be compliant with federal laws and regulations.

The attorneys at Fuerst Ittleman David & Joseph, PL have extensive experience working with regulated industry to ensure that products are marketed and advertised in compliance with all FTC and FDA laws and regulations. If you have any questions, please contact us by email at contact@fidjlaw.com or telephone at (305) 350-5690.

Food Safety Regulatory Update: Court Imposes Deadlines on FDA to Promulgate and Implement FSMA Rules by 2015

On June 21, 2013, the United States District Court for the Northern District of California issued an order requiring the U.S. Food and Drug Administration (“FDA”) to publish regulations under the Food Safety Modernization Act (“FSMA”) by June 30, 2015. (To read the full text of the June 21, 2013 order, please click here. For additional news coverage by Food Safety News, please read their article here.) As we previously reported here and here, the FSMA contains various sweeping provisions that significantly expanded the FDA’s authority to regulate the conditions under which food products are produced, manufactured, transported, imported, and marketed in the United States. In enacting the FSMA in January 2011, Congress set specific deadlines by which the FDA was expected to promulgate all of its food safety rules, with some deadlines as early as 180 days after FSMA’s enactment and others as late as two years thereafter. Although the FDA has made some progress in promulgating and implementing the FSMA, it has also missed several mandatory deadlines.

In August 2012, the Center for Food Safety and Center for Environmental Health (“Plaintiffs”) filed a complaint against FDA Commissioner Margaret Hamburg seeking declaratory and injunctive relief regarding the FDA’s failure to promulgate final regulations by the mandatory deadlines contained in the FSMA. (For additional news coverage, please read Food Safety News’s article here.) On April 22, 2013, the Court issued an order granting Plaintiffs’ motion for summary judgment and request for a judicial declaration that the FDA had violated the FSMA by failing to promulgate the required regulations in accordance with the deadlines mandated by Congress. (For more information, please read Bloomberg’s coverage here.) Moreover, the Court found that the Plaintiffs were entitled to injunctive relief, but requested the parties to submit a joint statement setting forth agreed proposed deadlines. The parties were unable to reach an agreement and submitted competing proposals for the court’s review.

The Plaintiffs submitted a schedule of proposed deadlines, which would have required the FDA to publish all final rules in the Federal Register by May 1, 2014. The Court rejected the Plaintiffs’ proposed schedule as “overly restrictive in light of the FDA’s showing of the complexity of the task” and the FDA’s “showing of diligence in attempting to discharge its statutory duty to promulgate regulations.” The FDA countered with proposed target timelines of 2015 through 2016 for the publishing of all final rules, which the Court also rejected as “an inadequate response to the request that the parties submit a proposal regarding deadlines that can form the basis of an injunction.” Instead, the Court imposed its own deadlines on the FDA, emphasizing the need for adequate time for public comment and review by the Office of Management and Budget (“OMB”). The Court’s order requires the FDA to publish all proposed regulations by November 30, 2013 and to close all comment periods no later than March 31, 2014. Additionally, the order requires the FDA to publish all final regulations in the Federal Register no later than June 30, 2015.

Even though the Court imposed firm deadlines on the FDA, it acknowledged that the FDA “has limited resources” to carry out the complex and difficult task of promulgating the FSMA. Moreover, while the Court’s decision seems intended to prevent the FDA from any further delay in implementing the FSMA, the timing of the Court’s deadlines, which provide a compromise between the proposals submitted by both parties, suggests that the Court was also reluctant to force the FDA to rush the procedural processes required to promulgate and implement the FSMA.

Fuerst Ittleman David & Joseph will continue to monitor the FSMA as it is implemented by the FDA. For more information, please feel free to contact us via email at contact@fidjlaw.com or by phone at (305) 350-5690.

FDA Tobacco Regulation Update: FDA announces first substantial equivalence decisions for tobacco products

On June 25, 2013, the FDA announced that for the first time since the passage of the Family Smoking Prevention and Tobacco Control Act, which granted the agency the authority to regulate cigarettes and other tobacco products, the agency has authorized the marketing of two new tobacco products and denied the marketing of four others through the substantial equivalence pathway. A copy of the FDA’s press release can be read here.

While the FDA does not “approve” tobacco products as it would drugs, it does regulate which products may be marketed through the Tobacco Control Act. If FDA determines a new tobacco product meets the relevant legal requirements, FDA will issue a written notification permitting the marketing of the new tobacco product. Under the Tobacco Control Act, tobacco manufacturers may use one of three pathways when seeking to market “new tobacco products.” [A “new tobacco product” is a product that was not sold in the United States prior to February 15, 2007. Also any modification made to tobacco products which were in existence as of February 15, 2007 reclassifies the product as a “new tobacco product.”] These pathways are: 1) premarket review and approval; 2) substantial equivalence; or 3) exemption from substantial equivalence regulation. An overview of these pathways can be read on the FDA’s website here.

Generally speaking, pursuant to section 910 of the Food, Drug, and Cosmetic Act, prior to marketing a new tobacco product a manufacturer must submit a premarket tobacco product application and receive an order authorizing marketing from the FDA. The FDA’s traditional “safe and effective” standard for evaluating drugs does not apply to tobacco. Rather, premarket approval requires the applicant to demonstrate that the FDA permitting the marketing of the new tobacco product would be “appropriate for the protection of the public health.” The statute provides that the basis for this finding shall be determined with respect to the risks and benefits to the population as a whole, including users and nonusers of the tobacco product, and taking into account: 1) the increased or decreased likelihood that existing users of tobacco products will stop using such products; and 2) the increased or decreased likelihood that those who do not use tobacco products will start using such products.

Premarket approval is required unless pursuant to section 905(j), 1) the manufacturer submits a report (known as a “905(j)” report) and is granted an order finding that its product is substantially equivalent to a tobacco product marketed in the U.S. prior to February 15, 2007; or 2) the tobacco product is exempt from the requirements of section 905(j) pursuant to a regulation issued under 905(j)(3). A new tobacco product is “substantially equivalent” to a predict tobacco product if the FDA has found that the new product:

  • Has the same characteristics as the predicate product; (“characteristics” means the materials, ingredients, design, composition, heating source, or other features of a tobacco product), or
  • Has different characteristics and the information submitted contains information, including clinical data if deemed necessary by the Secretary, that demonstrates that it is not appropriate to regulate the product under section 910 because the product does not raise different questions of public health.

It should be noted that a new tobacco product may not be found to be substantially equivalent to a predicate tobacco product that has been removed from the market at the initiative of the Secretary or that has been determined by a judicial order to be misbranded or adulterated. The FDA has published additional guidance on 905(j) reports which can be read here. While similar to the scheme established for approval of medical devices there are some slight differences. The most glaring difference between tobacco product and medical device substantial equivalence determinations is that tobacco products may only rely on one predicate product whereas a medical device is free to use more than one predicate device to establish substantial equivalence.

The final pathway to marketing tobacco products is through the granting of an exemption from substantial equivalence by the FDA. Pursuant to 21 C.F.R. § 1107.1, the FDA may exempt  products that are modified by adding or deleting a tobacco additive, or increasing or decreasing the quantity of an existing tobacco additive if: 1) such modification would be a minor modification of a legally marketed tobacco product; 2) a 905(j) report is not necessary to ensure that permitting marketing would be appropriate for the protection of the public health; and 3) an exemption is otherwise appropriate.

While the FDA now plays an increased role in the regulation of tobacco products, it is important to note that tobacco product regulation in the United States also involves the U.S. Customs and Border Protection (CBP) and the U.S. Department of the Treasury, Alcohol, Tobacco, Tax and Trade Bureau (TTB). Additionally, the Department of Justice, Office of Consumer Protection Litigation (OCPL) regulates Cigarette labeling and advertising, and the Bureau of Alcohol, Tobacco, and Firearms (ATF) investigates and enforces interstate trafficking of contraband cigarettes. State laws may also be implicated.

If you have questions pertaining to the FDCA or the Tobacco Act or how to ensure that your business maintains regulatory compliance at both the state and federal levels, contact Fuerst Ittleman David & Joseph PL at contact@fidjlaw.com.

Compound Pharmacy Regulatory Update: Senate to Vote on Proposed Legislation Granting FDA Broad Authority to Regulate Compounding Pharmacies

On May 22, 2013, the United States Senate Health, Energy, Labor and Pensions (HELP) Committee approved the Pharmaceutical Compounding Quality and Accountability Act (“Senate Bill 959”), which, if passed, would significantly change the regulatory framework for compounding pharmacies. (To read the HELP Committee’s summary of Senate Bill 959, please click here.) Senate Bill 959 was drafted in response to the recent illnesses and deaths linked to contaminated drugs produced by a compounding pharmacy in New England, which we previously reported on here and here. The Senate is expected to vote on Senate Bill 959 within the next two weeks. (For information related to Senate Bill 959, please read news coverage by Reuters here and The Washington Post here.)

Changes to the Regulation of Traditional Compounders and Compounding Manufacturers

Under the current regulatory framework, all pharmacies, including compounding pharmacies, are regulated by state boards of pharmacies. Consequently, drugs produced by compounding pharmacies are not subject to premarket review by the FDA or any other regulatory body, unless state laws so require. Therefore, although the FDA has explicit jurisdiction to regulate the manufacture of drugs under the FDCA, the agency’s current jurisdiction over compounding drugs and compounding pharmacies is much less clear. (We previously reported on issues related to FDA’s jurisdiction over compounding pharmacies here and here.) Senate Bill 959 aims to clarify the oversight responsibilities of state and federal authorities.

If passed, Senate Bill 959 would establish a clear boundary between “traditional compounders” and “compounding manufacturers”. “Traditional compounders” are defined as any entity wherein a drug is compounded by a pharmacist or physician licensed under state law upon receipt of a prescription. The draft legislation creates a new category for “compounding manufacturers,” which are defined as any “entity that compounds a sterile drug prior to or without receiving a prescription and introduces such drug into interstate commerce.” Under Senate Bill 959, intrastate distribution of compound drugs and interstate shipment of drugs within a hospital system would not fall within the definition of compound manufacturing.

Furthermore, Senate Bill 959 defines the FDA’s role in overseeing the compounding industry. The bill authorizes the FDA to create and enforce a national, uniform set of rules for compounding manufacturers, but reserves primary regulatory authority over traditional compounders to state boards of pharmacy. The proposed provisions require every compounding manufacturer to register with the FDA, list any products it makes, and pay a registration fee. Moreover, compounding manufacturers will be required to make products under a pharmacist’s supervision and in compliance with good manufacturing practices. Compounding manufacturers would also be subject to labeling regulations and adverse event reporting requirements. Furthermore, section two of Senate Bill 959 grants the FDA clear authority to regulate compounded drugs as new drugs under the FDCA:

(a) Clarification of new drug status – For purposes of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), the term “new drug” (as defined in section 201(p) of such Act) shall include a compounded human drug.

Although Senate Bill 959 reserves jurisdiction over traditional compounders to state boards of pharmacy, the draft legislation significantly diminishes their regulatory authority. The draft legislation prohibits traditional compounders from compounding certain drug products, including any drugs that the FDA deems “demonstrably difficult to compound” (e.g., complex dosage forms and biologics), any FDA-approved drugs on the market that are not in shortage, variations of marketed FDA-approved drugs unless they fulfill a specific patient need, and products subject to certain risk evaluation and management strategies. Additionally, traditional compounders would be prohibited from engaging in wholesale distribution of compounded products. Thus, even though Senate Bill 959 purports to reserve jurisdiction over traditional compounders to state boards of pharmacy, the proposed legislation would actually give the FDA expanded jurisdiction to regulate and restrict the range of drugs that compounding pharmacies can and cannot produce.

Senate Bill 959’s Impact on the Production and Regulation of Biologics

Members of industry are particularly alarmed by the provision of Senate Bill 959 that prohibits traditional compounders from compounding “a drug or category of drugs that presents demonstrable difficulties for compounding, which may include a complex dosage form or a biological product, as designated by the Secretary.” As it is written, the proposed bill gives the FDA wide discretion to define the meaning of “difficult for compounding” and determine which drugs or category of drugs fall within that definition. In the absence of precise guidance outlining how the FDA must show that a drug is difficult to compound, this provision has the potential to substantially affect the biologics industry. Under this regulatory framework, if the FDA determines that all biologic products are too complex or difficult to compound, producers of biologics could be required to submit their products to the FDA for formal approval. Senate Bill 959 thus gives the FDA explicit authority to restrict the compounding of biologics products and also has the potential to completely transform the future of biologics regulation.

It should be noted, however, that Senate Bill 959 provides exceptions for the compounding of biologics. Under the bill, a drug that is a biological product may be compounded if it is compounded from a licensed biological product and the compounding does not involve combining or mixing the biological product with a bulk drug substance. Similarly, a biological drug may not be combined or mixed with certain approved or conditionally approved drugs, unless the compounding is limited to combining, mixing, or diluting licensed allergenic products. Additionally, traditional compounders and compounding manufacturers may, upon the receipt of an authorized prescription from a physician or medical order from a hospital, compound a biological product if the compounded biological product is an allergenic product or produces a clinical difference between the compounded drug and the licensed biological product, as determined by a prescribing practitioner or licensed practitioner of a hospital.

Opposition by Industry

Although members of the compounding industry support certain changes to the current regulatory framework, many members strongly oppose Senate Bill 959 because it gives too much power to the federal government to regulate drug compounding. The International Academy of Compounding Pharmacists (“IACP”) stated that the proposed legislation is “too far-reaching in its scope” and constitutes “micromanagement of practitioner decisions.” (For more information, please read the IACP’s press release here.)

Industry members are particularly concerned with Senate Bill 959’s explicit grant of authority to the FDA to disallow entire categories of compounding drugs. (For more information from industry groups, please read statements from MyMedsMatter here and the Alliance for National Health USA here.) Even though these provisions would give the FDA broad power to ban the production of drugs that it believes can harm consumers, it also gives the FDA authority to ban the compounding of drugs that have been effective in patient treatments but are not otherwise available in a standard drug form. For this reason, the IACP argues that the draft legislation fails to “contain any provisions that speak directly to standards aimed at raising the quality of compounded medications,” despite lawmakers’ insistence that Senate Bill 959 will protect the public from unsafe compounded products. (For more information regarding IACP’s position on this issue, please read the IACP’s summary here.) Members of industry do not seem to outright oppose federal oversight of the compounding industry; however, they generally agree that Senate Bill 959 goes too far in stripping state boards of pharmacy of control.

What This Means

The enactment of Senate Bill 959 could have significant, widespread impacts on the compounding industry and the public’s access to compounded drugs. In granting the FDA broad authority to regulate compounding manufacturers and, indirectly, traditional compounders, this legislation could unnecessarily hamper the compounding industry’s ability to provide customizable medications for patients’ medical care. At present, it remains unclear whether increasing the scope of the FDA’s regulatory authority will actually help to achieve the goal of improving the safety of compounded drugs.

It is worth noting that Senate Bill 959 is not the first attempt by lawmakers to increase the federal government’s oversight of the compounding industry. As we previously reported here, lawmakers have been open to legislation that tightens regulations governing the compounding industry but have, up to this point, been unable to agree on how to address the gaps in the present regulatory scheme. Fuerst Ittleman David & Joseph, PL will continue to monitor any developments in the regulation of compounding pharmacies. For more information, please feel free to contact our offices by email at contact@fidjlaw.com or by phone at (305) 350-5690.

FDA Regulatory Update: FDA Commissioner Suggests that New LDT Regulations are Forthcoming; Laboratory Industry Challenges FDA’s Authority to Regulate LDTs

On June 2, 2013, U.S. Food and Drug Administration (“FDA”) Commissioner Margaret Hamburg delivered a speech at the American Society of Clinical Oncology’s annual meeting, in which she explained that the FDA is in the process of changing the regulations governing laboratory-developed tests (“LDTs”). (To read the full text of Commissioner Hamburg’s speech, please click here.) In her speech, Commissioner Hamburg stated that the FDA is developing a risk-based framework that is intended to “make sure that the accuracy and clinical validity of high-risk tests are established before they come to the market” and “provide for safe and effective diagnostics while promoting innovation and patient access.” Although the FDA has not formally announced any changes to the regulation of LDTs, Commissioner Hamburg’s comments suggest that the FDA is closer to finalizing the modified regulatory framework for LDTs. (To read our previous coverage of the FDA’s regulation of LDTs, please click here.)

Background 

The FDA defines LDTs as “a class of in vitro diagnostics that are manufactured, including being developed and validated, and offered, within a single laboratory.” (To read the full text of the Federal Register notice requesting comments for the Oversight of Laboratory Developed Tests published on June 17, 2010, please click here.) Common examples of LDTs are genetic tests, emerging diagnostic tests, and tests for rare conditions. The FDA claims authority to regulate LDTs under the federal Food, Drug, and Cosmetics Act but has not drafted applicable regulations with respect to LDTs. Therefore, the primary federal regulation of laboratories and LDTs has been under the Clinical Laboratory Amendments of 1988 (“CLIA”).

Since 1992, the FDA has consistently maintained its position that it will not enforce regulations regarding LDTs. The most notable departure came on June 10, 2010, when the FDA issued five Untitled Letters to companies stating that their tests did not qualify as LDTs because they were “not developed by and used in a single laboratory.” (To read the FDA’s Untitled Letters to Industry, please click here, here, here, here, and here.) In those instances, the FDA determined that it would regulate those tests as medical devices and require premarket approval. In June 2010, the FDA stated that increased regulation of LDTs may be necessary due to the changing nature of LDTs from “generally relatively simple, well-understood pathology tests” to tests that “are often used to assess high-risk but relatively common diseases and conditions and to inform critical treatment decisions.” (To read the full text of the Federal Register notice regarding federal oversight of LDTs, please click here.)

One week after the FDA issued the Untitled Letters described above, the FDA announced that it would hold a public meeting because the “agency believe[d] it [was] time to reconsider its policy of enforcement discretion over LDTs.” (To read the full text of the Federal Register notice requesting comments for the Oversight of Laboratory Developed Tests published on June 17, 2010, please click here.) In the Federal Register notice announcing that public meeting, the FDA stated that LDTs were originally intended to be used by doctors and pathologists within a single facility or institution where both the doctor and pathologist were actively involved in the patient’s care. According to the FDA, the nature of LDTs had changed significantly over the last two decades. The FDA indicated in the Federal Register notice that modern LDTs are often used to diagnose “high-risk” diseases and conditions and to guide “critical treatment decisions.” Furthermore, the FDA explained that modern LDTs have departed from traditional LDTs because modern tests are “often performed in geographically distant commercial laboratories instead of within the patient’s health care setting under the supervision of the patient’s pathologist and treating physician.”

On July 19-20, 2010, the FDA held the public meeting to discuss the state of regulations governing LDTs. In that meeting, the FDA reiterated that laws for regulating LDTs were already in effect and that the agency had merely exercised enforcement discretion with respect to LDTs. The FDA also claimed that it could implement a new regulatory framework at any time through the issuance of guidance. With the exception of the FDA’s issuance of Untitled Letters in June 2010, the FDA has not taken any formal steps to exercise its enforcement authority. (For more information about the FDA’s public meeting, please click here.)

Roughly two years after the FDA’s public meeting, President Obama signed into law the Food and Drug Administration Safety and Innovation Act (“FDASIA”), which requires the FDA to notify Congress at least 60 days prior to issuing a draft or final guidance on the regulation of LDTs. (For the full text of FDASIA, please click here.) The legislative history is silent as to Congress’s rationale for requiring the FDA to provide notice prior to issuing new guidance; however, some have interpreted this provision to suggest that Congress views LDTs as an important issue that warrants close monitoring. At a minimum, the notification requirement contained in FDASIA effectively acts as a warning to industry to prepare for new changes to the regulation of LDTs before they take effect.

Resistance to FDA’s Regulation of LDTs

The FDA’s push for increased regulation over LDTs has been met with resistance by the laboratory industry. On June 6, 2013, the American Clinical Laboratory Association (“ACLA”) submitted a Citizen Petition requesting the FDA to confirm that LDTs are not devices under the FDCA. (For more information about ACLA’s Citizen Petition, please click here. To read the full text of ACLA’s Citizen Petition, click here.) In its Citizen Petition, the ACLA argued that the Center for Medicare and Medicaid Services (“CMS”) has authority to regulate LDTs under the CLIA and, therefore, LDTs are beyond FDA’s jurisdiction. This Citizen Petition is not the first of its kind to suggest that the FDA does not have authority to regulate LDTs. In fact, the FDA has addressed and denied similar Citizen Petitions in the past.  (For example, Genentech submitted a Citizen Petition regarding LDTs in 2008, which is available here.)

Moving Forward

Commissioner Hamburg’s speech at the American Society of Clinical Oncology meeting is the most recent public FDA activity in the area of LDT regulation since it issued Untitled Letters to industry in 2010. However, it is important to recognize that the FDA could move forward at any time and issue new guidance modifying how LDTs are regulated. Members of the laboratory industry should be prepared to comment on any proposed guidance or regulation that the FDA may announce in the Federal Register. Additionally, it would be prudent for physicians and laboratories  using or creating such tests to take notice of whether their tests satisfy the criteria for LDTs or whether the tests could otherwise qualify for regulation as medical devices.

Fuerst Ittleman David & Joseph, PL will continue to monitor any developments in the regulation of LDTs. For more information, please contact us via email at contact@fidjlaw.com or via phone at (305) 350-5690.

FDA Regulatory Update: Laboratory-Developed Tests Once Again Come Under FDA’s Microscope and Laboratory Industry Opposes

Laboratory-developed tests (“LDTs”) appear to be under FDA’s microscope once again. These tests, which include genetic tests, companion diagnostics, and genetic tests, are developed and performed by a laboratory and have been the source of years of strife between the laboratory industry and FDA. FDA has historically stated that it exercises enforcement discretion when it comes to LDTs. However, on June 2, Margaret Hamburg, commissioner of FDA, stated during an American Society of Clinical Oncology meeting that FDA is considering taking some sort of action with regard to its regulation of LDTs. That sentiment reflects FDA’s position from a June 17, 2010 Federal Register notice stating that more regulation of LDTs may be necessary due to FDA’s observations that the nature of LDTs was changing from “generally relatively simple, well-understood pathology tests” to tests that “are often used to assess high-risk but relatively common diseases and conditions and to inform critical treatment decisions and are often performed in geographically distant commercial laboratories instead of within the patient’s health care setting under the supervision of a patient’s pathologist and treating physician, or may be marketed directly to consumers.” A copy of that Federal Register notice is available here.

To complicate matters, the Food and Drug Administration Safety and Innovation Act (“FDASIA”), enacted last year, requires that FDA notify Congress with the details of any anticipated action at least 60 days before issuing any draft or final guidance on the regulation of LDTs. Not surprisingly, the laboratory industry strenuously opposes FDA regulation. As evidenced by a Citizen Petition submitted by the American Clinical Laboratory Association (“ACLA”) to FDA requesting that FDA confirm that LDTs are not devices under the Federal Food, Drug, and Cosmetic Act (“FDCA”), ACLA argues that LDTs are beyond FDA’s jurisdiction because the Center for Medicare and Medicaid Services has authority to regulate LDTs under the Clinical Laboratory Improvements Amendments of 1988 (“CLIA”). FDA has addressed and denied such Citizen Petitions in the past.

As FDA may move forward with regulating LDTs as medical devices, members of the laboratory industry should be aware of the potential controversial change in FDA policy and should be prepared to comment on any proposed guidance or regulation that the agency may produce on LDT policy or regulation. Additionally, physicians and laboratories developing and using LDTs should be aware of whether their tests meet the recognized criteria of LDTs or whether their tests could qualify as medical devices subject to FDA regulation.

Fuerst, Ittleman, David & Joseph, PL will continue to track and report on FDA’s position related to laboratory developed tests. For more information, please contact us via e-mail at contact@fidjlaw.com or via telephone at (305) 350-5690.

Announcing the FIDJ Mini-Blog

This week, Fuerst Ittleman David & Joseph is launching a Mini Blog, which will be submitted to its readers on a weekly basis. Unlike its usual Blog, which will continue to be updated here, the Mini Blog will allow FIDJ to communicate with its readers in a short and to-the-point style, delivering critical news updates with just enough commentary to explain why the updates are critical. We believe that this Mini Blog will be a valuable resource for our readers, and will allow subscribers to stay up to date on issues affecting all of our practice areas, including Tax & Tax Litigation, Food Drug & Cosmetic Law, Complex Litigation, Customs Import & Trade Law, White Collar Criminal Defense, Anti-Money Laundering, Healthcare Law, and Wealth & Estate Planning. Additionally, subscribers may sign up to receive only the content relevant to their interests on a subject-by-subject basis. As always, please feel free to reach out to us with comments regarding our content or suggestions regarding how we may better keep you up to date.

Click here to sign up.

Here is a sampling of what you can expect to receive in our Mini Blog:

Food and Drug:

On May 28, 2013, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued guidelines for voluntary “serving facts statements” that alcoholic beverage manufacturers may include on their packaging. A copy of TTB’s press release can be read here. The serving facts statements are similar to the nutrition panels currently found on non-alcoholic foods and beverages. According to the rule, serving facts statements will include: 1) the serving size; 2) the number of servings per container; 3) the number of calories; and 4) the number of grams of carbohydrates, protein, and fat preserving. In addition, serving fact statements may also include the percentage of alcohol by volume and a statement of the fluid ounces of pure ethyl alcohol per serving. TTB is providing the interim guidance on the use of voluntary serving facts statements on labels and in advertisements pending the completion of rulemaking on the matter. A copy of the TTB Ruling can be read here.

Healthcare:

A new bill in the U.S. House of Representatives, the Medicare Audit Improvement Act of 2013, seeks to amend title XVIII of the Social Security Act to improve operations of recovery auditors under the Medicare integrity program and to increase transparency and accuracy in audits conducted by contractors. A few proposals include limiting the amount of additional document requests, imposing financial penalties on auditors whose payment denials are overturned on appeal and publishing auditor denials and appeals outcomes.

In related news, the Department of Health and Human Services c/o the Centers for Medicare and Medicaid Services  (“CMS”) is proposing to increase the maximum reward for reporting Medicare fraud from “10 percent of the overpayments recovered in the case or $1,000, whichever is less, to 15 percent of the final amount collected applied to the first $66,000,000”¦” In case you don’t have a calculator handy, that’s a change from $1,000 to a potential maximum windfall of $9,900,000. It’s safe to assume that the number of whistleblower reports of alleged Medicare fraud are going to skyrocket. As the saying goes, you miss 100% of the shots you don’t take.

As decided by the United States Court of Appeals for the Eleventh Circuit, HIPAA preempts Florida’s broad medical records disclosure law pertaining to a decedent’s medical records. In Opis Management Resources, LLC v. Secretary of Florida Agency for Health Care Administration, No. 12-12593 (11th Cir. Apr. l 9, 2013), the 11th Circuit Court of Appeals ruled that Florida’s broad medical records disclosure law did not sufficiently protect the privacy of a decedent’s medical records. The Court noted that Florida allows for “sweeping disclosures, making a deceased resident’s protected health information available to a spouse or other enumerated party upon request, without any need for authorization, for any conceivable reason, and without regard to the authority of the individual making the request to act in a deceased resident’s stead.” In contrast, HIPAA only permits the disclosure of a decedent’s protected health information to a “personal representative” or other identified persons “who were involved in the individual’s care or payment for health care prior to the individual’s death” to the extent the disclosed information is “relevant to such person’s involvement”.

Tax:

On May 29, 2013, the New York Times reported that the Swiss Government will allow Swiss Banks to provide information to the U.S. Government in exchange for assurances that Swiss banks would only be subject to fines and not be indicted in an American criminal case. Per the New York Times,

The New York Times article reports that: But [Ms. Widemer-Schlumpf (Switzerland’s finance minister)] said the Swiss government would not make any payments as part of the agreement. Sources briefed on the matter say the total fines could eventually total $7 billion to $10 billion, and that to ease any financial pressure on the banks, the Swiss government might advance the sums and then seek reimbursement”¦. Ms. Widmer-Schlumpf said the government would work with Parliament to quickly pass a new law that would allow Swiss banks to accept the terms of the United States offer, but said the onus would be on individual banks to decide whether to participate.

This appears to be the beginning of the end of Swiss bank secrecy. If the Swiss relent to the U.S., the European Union will be next in line to obtain the same concession.

Anti-Money Laundering:

Our thoughts on the United States government’s attack on Mt. Gox can be read here, and Bitcoin continues to remain a hot topic all across the internet; see here, here, and here. Another virtual currency, Liberty Reserve, has also made a splash since being shut down by the Feds last week in what many have described as the largest money laundering scheme of all time; see here for details of the takedown, as well as the following articles describing the initial bits of fallout from the Liberty Reserve takedown: online anonymity, anti-money laundering compliance,Barclays Bank involvement, and the not guilty pleas entered by Liberty Reserve’s proprietors on Thursday. We will keep our eyes on these two cases as the fallout continues.

Update: FDA Regulation of Marijuana “Medibles” Presents Challenges and Uncertainty for Marijuana-based Food Manufacturers and Distributors

As we recently reported, federal regulators have continued to take measures aimed at stymieing the growth of the marijuana industry. Medical marijuana is now legal in over 18 states and, in November 2012, voters in Colorado and Washington legalized the sale of recreational marijuana to adults age 21 or older. However, possessing, cultivating, and distributing marijuana remains illegal under federal law, despite state laws to the contrary, and the federal government has aggressively pursued medical marijuana dispensaries for violating federal laws. (For more information about the federal government’s crackdown on medical marijuana dispensaries, please read our previous posts  here, here, and here.). As Colorado and Washington’s marijuana laws go into effect, the federal government is faced with new questions regarding the manufacture and sale of “medibles,” food and beverages infused with marijuana. Of particular concern for medibles manufacturers is how, if at all, edible marijuana products implicate regulation by the U.S. Food and Drug Administration (“FDA”). (For more coverage regarding edible marijuana products, please read NBC’s article here.)

The FDA, the federal agency primarily responsible for the safety of the nation’s food supply, has specific regulations regarding the manufacture, quality, and labeling of food products. Under 21 U.S.C. § 321(f) of the federal Food, Drug, and Cosmetics Act (“FDCA”), a “food” is loosely defined as “an article used for food or drink.” Products that are intended to be consumed as foods or are otherwise labeled or represented as food products must comport with the FDA’s regulations. Pursuant to the FDA’s regulations, food manufacturers must register their establishments with the FDA and operate in accordance with current good manufacturing practices (“cGMPs”). (Generally speaking, cGMPs are a series of regulations, found at 21 C.F.R. Part 110, designed to ensure that food products are prepared, packaged, and stored in sanitary conditions.).

In addition, food manufacturers must also ensure that food products do not contain any unapproved substances or additives and that the ingredients contained in food products are generally recognized as safe (“GRAS”). As described by the FDA:

GRAS is an acronym for the phrase Generally Recognized As Safe. Under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act (the Act), any substance that is intentionally added to food is a food additive, that is subject to premarket review and approval by FDA, unless the substance is generally recognized, among qualified experts, as having been adequately shown to be safe under the conditions of its intended use, or unless the use of the substance is otherwise excluded from the definition of a food additive.

More information on GRAS requirements can be found on the FDA’s website here.

Moreover, food products must bear correct food labeling, including a Nutrition Facts panel and appropriate food claims. Manufacturers that fail to meet cGMPs or use ingredients that are not GRAS in their food products could be subject to enforcement action under the misbranding or adulterated food provisions of the FDCA.

With marijuana legalization, commercial retailers in Colorado and Washington have started developing various “medible” products. However, as of now these manufacturers have been operating in a void of regulations because marijuana remains illegal under federal law. As a result, FDA has not developed GRAS regulations for marijuana and has not publicly commented on the applicability of cGMPs to medible manufacturers.

Although the FDA has not released an official position on whether or how it intends to regulate medible products, medibles likely could trigger heightened FDA scrutiny. An initial question which must be evaluated by the FDA is whether medibles qualify as foods at all, or whether their intended uses would qualify these products as drugs under the FDCA. (21 U.S.C. § 321(g) defines the term “drug” in part to mean “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals.”).

If the FDA deems medibles to be foods, medibles would then be required to be manufactured using good manufacturing practices and product labeling compliant with FDCA regulation of foods. However, even if cGMPs and labeling requirements are satisfied, manufacturers, distributors, and sellers of marijuana medibles could still face liability under the FDCA because the FDA has not approved marijuana as a food ingredient or food additive and has not deemed marijuana to be GRAS. Generally speaking, products which contain food additives and ingredients that are not GRAS are considered adulterated under the FDCA. Thus, if the FDA were to assert jurisdiction and begin regulating medibles as foods, under the current regulatory regime FDA would likely allege that medibles are adulterated.

Manufacturers and distributors of marijuana medibles face the possibility of several FDCA violations should marijuana medibles be considered adulterated food products. These include: 1) the adulteration of a food product in interstate commerce; 2) introduction or delivery for introduction into interstate commerce of an adulterated food product; and 3) the receipt in interstate commerce of any food that is adulterated, and the delivery or proffered delivery thereof for pay or otherwise. See 21 U.S.C. § 331 (a), (c). The penalties and punishments associated with these crimes are governed by 21 U.S.C. § 333 and depend on whether the government charges the defendant with committing a violation “with the intent to defraud or mislead.” Each of these penalties is available regardless of whether marijuana is legal under State law.

Regardless of how FDA regulates medibles, the federal government has made clear that marijuana is still classified as a Schedule I drug under the Controlled Substances Act (“CSA”). Accordingly, distributors face the risk of additional criminal penalties beyond those prescribed within the FDCA.  21 U.S.C. § 841 prohibits the manufacture and distribution of a controlled substance expect as permitted under the CSA. Unlike the FDCA where first offenders convicted of adulteration violations face a maximum of three years imprisonment, first time offenders under the CSA face a minimum of five with a possibility of a maximum of forty years imprisonment. Because the production of medibles is not permitted under the CSA, criminal indictments under this separate regulatory regime are still possible.  Such indictments would be similar to those of three medicinal marijuana dispensary operators late in 2012. (More information on those indictments can be read in our previous report here.).

Due to the federal government’s apparently unwavering position on marijuana products, some Congressional lawmakers have introduced legislation that restricts federal involvement in regulating the sale and use of marijuana. On March 7, 2013, Representative Dana Rohrabacher proposed a new bill to Congress entitled the “Respect State Marijuana Laws Act of 2013” (H.R. 1523). The proposed bill protects both marijuana businesses and individual marijuana users from federal or criminal prosecution so long as their acts comply with existing state laws. Specifically, the Respect State Marijuana Laws Act of 2013 proposes to add the following language to the Controlled Substances Act (21 USC 801 et seq.): “Notwithstanding any other provision of law, the provisions of this subchapter related to marihuana shall not apply to any person acting in compliance with State laws relating to the production, possession, distribution, dispensation, administration, or delivery of marihuana.” Congress has yet to vote on this bill.

Unless and until the federal government begins to respect state laws governing marijuana, marijuana growers and commercial manufacturers should be aware of the potential issues that will continually arise due to the conflict between state and federal law.

The attorneys at Fuerst Ittleman David & Joseph, PL have extensive experience in the areas of administrative law, constitutional law, regulatory compliance, white collar criminal defense and litigating against the U.S. Department of Justice. You can reach an attorney by emailing us at contact@fidjlaw.com or by calling us at 305.350.5690.

Energy Drink Regulatory Update: Monster Sues City of San Francisco in Federal Court, City Fires Back in California State Court

As we reported here last week, the FDA announced that it is conducting an investigation into the use of caffeine in foods and beverages. Since the FDA’s announcement, the energy drink industry has continued to receive significant media attention. On May 6, 2013, the San Francisco City Attorney’s office announced that City Attorney Dennis Herrera, on behalf of the people of the state of California, filed a lawsuit in San Francisco Superior Court against Monster Beverage Corp. (“Monster”) for allegedly engaging in unfair, deceptive and unlawful business practices in violation of California laws. (To read the full press release, please click here.) This lawsuit comes just days after Monster filed a complaint against Dennis Herrera in the U.S. District Court for the Central District of California, alleging that Mr. Herrera’s attempts to regulate energy drinks are preempted by the federal Food, Drug, and Cosmetic Act (“FDCA”) and impinge on Monster’s constitutionally protected speech. By “singl[ing] out” Monster, despite the similarity between its advertising strategy and advertising for other energy drinks on the market, Monster argues that Mr. Herrera “appears to be motivated by publicity rather than science.” (To read the full text of the complaint filed in Monster Beverage Corporation v. Dennis Herrera, please click here.)

Mr. Herrera’s complaint alleges that Monster, the nation’s largest energy drink manufacturer, “promotes consumption of its drinks in an excessive and unsafe manner” and “has failed to adequately warn consumers of the dangers of consuming Monster Energy Drinks.” (To read the full complaint for People of the State of California ex rel. Dennis Herrera v. Monster Beverage Corporation, please click here.) The complaint states that Monster “promotes excessive consumption of its drinks” with statements such as: “bigger is always better,” “chug it down,” “throw [it] back,” a “smooth flavor you can really pound down,” and “the biggest chugger friendly wide mouth we could make.” Furthermore, in describing Monster’s “targeted advertising” toward children and adolescents, Mr. Herrera explicitly refers to Monster’s various social media pages, including Facebook, Twitter, YouTube, and a “Monster Army” social networking site. Mr. Herrera also alleges that Monster advertises to teenage boys by creating a “lifestyle” featuring “extreme sports, music, gaming, military themes, and the scantily-clad ”˜Monster Girls.'” (For more information regarding the litigation between Monster and San Francisco City Attorney Herrera, please read the Los Angeles Times article here.)

To support its allegations that Monster is unsafe for consumption by children and adolescents, Mr. Herrera relies heavily on scientific research that claims there is “a strong correlation between consumption of caffeine at levels found in Monster’s products and adverse health and safety consequences.” The scientific research Mr. Herrera refers to throughout the complaint is the same information contained in a letter from health law experts to the FDA sent in March of this year, which we discussed previously here. The complaint goes on to allege that the despite this scientific evidence, Monster “aggressively markets its products to children and teenagers,” and that its targeted advertising efforts are responsible for the product’s popularity with and frequent consumption by youth.

The complaint against Monster also alleges that Monster’s energy drink products are misbranded and adulterated foods under California law. Although Mr. Herrera acknowledges Monster’s move earlier this year to label its products as conventional beverages instead of dietary supplements, he nevertheless alleges that Monster’s products are misbranded because “Monster’s packaging, labeling, serving size, recommended conditions of use, and advertising statements demonstrate that Monster Energy Drinks are, and have long been, conventional beverages.” Further, the complaint states that Monster’s product are adulterated because they contain levels of added caffeine that “do not satisfy the GRAS [generally recognized as safe] standard because there is no scientific consensus concerning the safety of the caffeine levels in [its] products.”

If this lawsuit is successful, Monster Energy could be enjoined from continuing to engage in conduct the state deems harmful to consumers and competitors, and forced to pay significant civil penalties and restitution. The outcome of this lawsuit could have major repercussions for the energy drink industry, not only in California but across the country.

Fuerst Ittleman David & Joseph, PL will continue to track the progress of this lawsuit and any other developments in the regulation of energy drink products. For more information, please contact us via email at contact@fidjlaw.com or via telephone at (305) 350-5690.