On October 14, 2010, the Department of Justice announced it had reached a settlement with CVS Pharmacy, Inc. (“CVS”) for unlawful sales of pseudoephedrine, a key product in the manufacture and production of methamphetamine. As part of the settlement agreement, CVS, the largest operator of retail pharmacies in the United States, has agreed to pay $75 million in civil penalties, the largest civil penalty ever paid under the Controlled Substances Act.

The violations stem from CVSs failure to comply with the Combat Methamphetamine Epidemic Act of 2005 (“CMEA”), which, among other things, limited the amount of pseudoephedrine that a customer can purchase in one day. The CMEA was passed to combat “smurfing”, a practice where methamphetamine manufacturers make multiple purchases of small amounts of pseudoephedrine with the intent to aggregate the purchases for use in the illegal production of meth.

Department of Justice investigations revealed that, while CVS had implemented an electronic records system to record individual pseudoephedrine sale, this system did not prevent multiple purchases by the same customer in the same day. The US Attorney alleged that between 2007 and 2008 CVS committed thousands of violations of the CMEA in 25 states by failing to prevent customers from purchasing pseudoephedrine in amounts in excess of the law.

The total settlement will cost CVS $77.6 million, $75 million in civil penalties and CVS has agreed to forfeit $2.6 million in profits earned as a result of the unlawful conduct. CVS has agreed to pay the $75 million in civil penalties by October 15, 2010 and forfeit the $2.6 million in profits earned within 30 days. The settlement also requires CVS to implement a new compliance and ethics program over the next three years. Additionally, CVS has entered into a separate 5 year compliance program with the Drug Enforcement Agency.

For more information on pharmaceutical regulations, and acceptable pharmaceutical marketing practices please contact us at contact@fidjlaw.com.

POM Wonderful LLC (“POM”) filed a Complaint against the Federal Trade Commission (“FTC”) on September 13, 2010. POM alleges that the FTC has adopted a “new standard” for substantiation that it is applying against food and dietary supplement companies. The “new standard” is reflected in two recently published consent orders against Nestle USA and Iovate Health Sciences, Inc., in which the FTC prohibits future claims by the companies unless the claims are supported by two well-controlled human clinical studies. The “new standard,” if POM is correct, marks a drastic change in FTC policy regarding substantial of claims.

According to the Complaint, FTC specifically referred POM to the Nestle and Iovate Consent Orders and asserted that the requirements contained in those consent orders constituted the “new standard” that FTC was applying with legal force and effect. POM alleges that the FTC is no longer interpreting present standards or rules by adopting the “new standard” for substantiation, but instead, the FTC has engaged in formal rulemaking without adhering to the process of notice and comment as required by the Administrative Procedures Act.

Furthermore, POM also alleges that the FTC is requiring advertisers to obtain prior Food and Drug Administration (FDA) approval before making certain disease claims about food, beverages, and dietary supplements. Disease claims are health related claims in which a product represents that it treats, mitigates, or prevents disease. According to POM, the FTC is requiring prior FDA approval for disease claims regardless of whether or not the claims are true or supported by competent, reliable scientific evidence. In addition, the FTC is requiring advertisers to conduct two well-controlled clinical studies for non-disease claims. If POMs allegations accurately reflect current FTC policy, these requirements may constitute a violation of the advertisers First Amendment rights and go beyond the authority of the FTC.

For more information on FTC regulations and substantiation requirements, please contact us at contact@fidjlaw.com.

When speaking of deceptive claims the Federal Trade Commission (FTC) comes to mind.  When discussing a dietary supplement the Food and Drug Administration (FDA) rolls off the tongue.  But who regulates the regulators?  The U.S. Government Accountability Office (GAO) does.  The GAO is an independent, nonpartisan agency that acts as Congress? ?watchdog" by investigating how tax dollars are spent.  Last week the GAO released its 28 page report on Deceptive or Questionable Marketing Practices and Potentially Dangerous Advice of Herbal Supplements.

Recent studies have noted a significant increase in the use of herbal dietary supplements by baby boomers.  These studies prompted the GAO to investigate dietary supplement selling practices, and whether the herbals, namely chamomile, echinacea, garlic, ginkgo biloba, and ginseng, contain contaminated or harmful substances.  Representatives of the GAO posed as aging customers seeking products that would provide them with certain health benefits.  The ?secret shoppers? questioned staff at both brick-and-mortar and mail order retailers about the potential health benefits of herbal dietary supplements and the possible interactions with over-the-counter (OTC) and prescription drugs.  (Excerpts of phone calls can be heard here.)  Additionally, they examined marketing claims from several dietary supplement websites and tested forty herbal supplements for hazardous contaminants such as lead, arsenic, mercury, cadmium, organichlorine pesticides, and organophosphorous pesticides.

The outcome of the investigation revealed that the retailers and websites reviewed repeatedly represented that a product could treat, cure or prevent diseases such as diabetes, cancer, Alzheimer?s and cardiovascular disease amongst others.  Claims that expressly state or infer the improvement of a disease state violate the Dietary Supplement Health Education Act of 1994 (DSHEA).  Moreover, some of the herbal supplement sellers made affirmative statements that a supplement can replace a prescription medication or that it was completely safe to take an herbal supplement with an OTC or prescription drug.  For example, at least one sales clerk indicated it was safe for a person taking aspirin as part of a blood-thinning regimen to also ingest ginko biloba to boost their memory.  However, the FDA has emphatically stated that a combination of ginko biloba and aspirin poses a risk of increased bleeding.  The GAO has turned over the details of its investigation to the FDA and the FTC for further action against the merchants for violating the statues and regulations promulgated by the respective agencies.  As to the product testing, 37 out of the 40 products contained a trace amount of at least one hazardous contaminant.  However, the levels did not rise to a level that would cause a health concern.

The impact of this report reaches far beyond dietary supplement industry; it resonates throughout the marketing and merchandising world.  The actions by the GAO demonstrate that inappropriate claims for any product or service could come under regulatory scrutiny regardless of venue, corporate size or revenue.  Marketers, merchants and web retailers should seek legal advice and training for all personnel to ensure compliance with the regulations and guidelines of the FTC and if necessary, other applicable regulatory agencies or governing bodies.  After all, that little old lady, mother pushing a baby in a stroller or the business executive who seems in a hurry may actually be a regulator in disguise. 

Fuerst Ittleman, PL has decades of experience in evaluating product claims, assisting in compiling product substantiation files as well as successfully litigating against the FDA and FTC.  We also work closely with marketers to review advertising materials and train personnel on regulatory compliance.  Please feel free to contact us at contact@fidjlaw.com  to discover how we can help your company with advertising advice, marketing review, to set up a personnel training program tailored to your company and its product, provide legal defense for an action involving deceptive trade practice.

On April 30, 2010 Judge Marcia S. Krieger, United States District Judge,
District of Colorado dismissed 23 guilty counts against Thomas Bader, a
compounding pharmacist and owner of College Pharmacy in Denver Colorado,
while affirming eight counts and $4.8 million in forfeiture.

The case illustrates many of the nuanced risks involved with compounding
pharmacies, importing and exporting of active pharmaceutical ingredients
(API), compounding and selling high profile drugs such as human growth
hormone (HGH) and anabolic steroids, understanding the subtle distinction
between compounding and manufacturing, and the tenuous interplay between
state compounding laws and the Federal Food, Drug and Cosmetic Act (FDCA).

The case stems back to 2007 when Mr. Bader was charged with illegal
distribution, mail fraud, and conspiracy to facilitate the sale of smuggled
goods. Mr. Bader was importing HGH from China and compounding the API into
finished drug products. As Colorado’s compounding statute is very expansive,
he believed his practice to be protected under state law, and outside the
purview of FDCA.

The federal smuggling charges focused on the fact that imported HGH was from
a non-FDA registered facility and the compounded products thus involved new,
unapproved drugs requiring an NDA under FDCA. Mr. Bader was further charged
with illegal distribution of HGH and testosterone cypionate (a controlled
substance) as both products involved promotion for unapproved uses, illegal
under federal law.

On February 2, 2010 a federal jury found Mr. Bader guilty of 31 counts
including illegal distribution of HGH and controlled substances and unlawful
importation (i.e. smuggling) of HGH. Mr. Bader and counsel then moved to
acquit, or alternatively seek a new trial based on a number of legal
propositions including entrapment by estoppel, violation of due process
rights, erroneous juror instructions, failure to establish a criminal
purpose or intent, and insufficient evidence to support the findings.

Ultimately, on April 29, 2010 Judge Krieger dismissed 23 counts involving
illegal distribution of HGH. The Judge acknowledged a number of Mr. Bader’s
sales were for approved uses of HGH, including some even written for
children. Additionally, Mr. Bader had no way of knowing if the
prescriptions were for permissible uses and thus his actions were protected.

Still, the ruling upheld eight guilty counts. Two smuggling charges were
upheld, as importation of HGH from a non-FDA registered facility was seen as
“contrary to law,” and thus illegal. Simple repackaging or relabeling of a
product may be lawful under state compounding laws; however this
“compounding defense” could not shield Mr. Bader from further provisions of
the FDCA.

Five illegal distribution counts involving HGH were upheld as the use of HGH
as an anti-aging drug is unauthorized and illegal. The lone distribution
charge involving controlled-substances was also upheld, as selling and
promoting testosterone cypionate for muscle building and ant-aging is
illegal. Lastly, the judge affirmed $4.8 million forfeiture in assets based
on the nature of the guilty counts. Sentencing in this matter is scheduled
for June 10, 2010.

In sum, compounding pharmacies may be fully compliant with state law, but be
at great risk under federal law. Pharmacies and suppliers of API should
always consult an attorney and be aware of the risks involved. Fuerst
Ittleman, PL has experience with FDA import and export, pharmacy
compounding, and FDCA matters. Please feel free to contact us at
contact@fidjlaw.com to see how we can help you maintain complete
regulatory compliance with applicable state and federal law.