Swift Enforcement Against COVID Fraudsters

May 1, 2020By Anne K. Walsh & Charles D. Snow* —

Since HHS declared a public health emergency caused by COVID-19 in February 2020, there has been an overwhelming response to develop and market products to treat or mitigate the effects of the virus.  Unfortunately, bad apples still are out there preying upon consumer fears and peddling products that claim to prevent COVID-19 (not to mention charging exorbitant prices for these fraudulent goods – stay tuned for our forthcoming post on price gouging activities).  The federal government has used a variety of tools to quickly shut down these bad actors, from issuing Warning Letters, seeking temporary restraining orders, suing for damages, and bringing criminal charges.  The U.S. Food and Drug Administration (FDA) and the Federal Trade Commission (FTC), in conjunction with the Department of Justice (DOJ), have spearheaded these actions to stop companies from making unsupported claims about COVID for their FDA-regulated products.

Warning Letters

Since March 6 to the date of this blog post, FDA and FTC have issued 38 Warning Letters (WLs) to address myriad unapproved products marketed for the treatment and/or prevention of COVID-19.  These violative claims render the products unapproved new drugs as well as misbranded drugs under the Federal Food, Drug, and Cosmetic Act (FDC Act).  Representative claims include:

  • “Essential Oils to Protect Against Coronavirus . . . There are a wide range of essential oils that have been clinically proven to possess antiviral properties.” WL to Quinessence Aromatherapy LTD (Mar. 6, 2020).
  • “The most powerful anti-virus essential oils to provide defence (sic) against coronavirus include: Basil ● Bergamot ● Cajuput ● Cedarwood Virginian ● Cinnamon ● Clove Bud . . . .” Id.
  • “Coronavirus (COVID-19, SARS-CoV-2) pandemic has no medical treatment. Natural antiviral herbs boost immunity & decrease virus virulence to achieve herd immunity.”  WL to Carahealth (Mar. 26, 2020).
  • “Corona-Cure Antiseptic Nasal Defense kills viruses of the Coronaviridaefamily including the 2019 Novel Coronavirus and SARS at their point of entry into your body.”  WL to Corona-cure.com (Mar. 26, 2020).
  • “Arsenicum album 30 could be taken as prophylactic medicine against Corona virus infections.” WL to Homeomart Indibuy (Apr. 1, 2020).

It is notable that there has been a disproportionate number of WLs issued to companies touting silver-containing products, such as toothpaste, colloidal mixtures, and essential oils.  The cited claims include:

  • “[T]he patented Nano Silver we have, the Pentagon has come out and documented, and homeland security have said this stuff kills the whole SARS corona family, at point blank range. Well of course it does, it kills every virus.” WL to Free Speech Sys. LLC d/b/a Infowars.com (Apr. 9, 2020).
  • “Boost Your Immune system . . . Colloidal silver is the key to protecting yourself from the corona virus. . . . [I]f you begin to show symptoms of the virus, up your doses to 5 times a day. In a medical system that is failing . . . there is no other solution to protecting yourself from the corona virus.”  WL to Gaia’s Whole Healing Essentials, LLC (Apr. 1, 2020).
  • “Colloidal Silver in a Nebulizer, the type that is commonly prescribed by medical professionals for asthmatics and those with chronic lung problems . . . provides a real prevention regimen for a number of maladies – including the Corona Virus.” WL to JRB Enter. Grp. Inc. (Apr. 1, 2020).
  • “[I]t’s actually widely acknowledged in both science and the medical industry that ionic silver kills coronaviruses. And it’s now known that the Chinese are employing ionic silver in their fight against the spread of the coronavirus.”  WL to Colloidal Vitality LLC (Mar. 6, 2020).
  • “Even though there are no vaccines available to combat these coronaviruses, there is a home remedy of Colloidal Silver 100 ppm that has worked effectively on coronaviruses successfully for the last 123 years.” WL to Xephyr, LLC (Mar. 6, 2020).
  • “Silver Solution has been proven . . . to kill every pathogen it has ever been tested on . . . and it can kill any of these known viruses[.]” WL to The Jim Bakker Show (Mar. 6, 2020).

These WLs require the targeted companies to respond by email within 48 hours with the specific steps they will take to address FDA’s and FTC’s concerns, and threaten legal action if the target does not immediately correct the violations cited in the letter.

Injunction Actions

To confront recidivist or particularly suspect actors, FDA can go straight to legal action without first issuing a WL.  On April 27, 2020, FDA filed a Complaint in Utah against Gordon Pedersen and two of his companies, My Doctor Suggests LLC and GP Silver LLC, alleging that the defendants fraudulently promoted their silver products for the treatment and prevention of COVID-19.  According to the government, the defendants began in February 2020 making claims through YouTube videos, podcasts, and websites that suggested that their silver products could destroy coronavirus and remove it from the body.  Specifically, defendants allegedly made claims that silver in the bloodstream could “usher” the virus out of the body, and that “it has been proven that Alkaline Structured Silver will destroy all forms of viruses, it will protect people from the Coronavirus.”  Complaint at 5.  The government also objected to defendant Pedersen purporting to be a medical doctor, appearing in a white coat with a stethoscope on the website, even though he does not hold a Doctor of Medicine degree and is not licensed as a medical provider in the State of Utah.

Interestingly, the government pointed to an admission from the defendant that “[w]e are not a cure for the coronavirus–there is none,” as evidence of reckless behavior, not as a disclaimer about the effectiveness of the products.  Id. at 9.  Also, the government charged the defendants with engaging in mail and wire fraud under 18 U.S.C. §§ 1341 and 1343, and not the base violation of marketing an unapproved or misbranded drug under the FDC Act.

Simultaneous with the filing of the Complaint, the government filed an ex parte motion seeking a temporary restraining order (TRO) “to a prevent continuing and substantial injury to the” victims of the fraud.  TRO at 8.  The government referenced the fact that defendant Pedersen had been fired in 2011 for making unsubstantiated promotional claims, and that he had been ordered to cease and desist from holding himself out as a “naturopathic doctor.”  Id. at 3-4.  The district court in Utah issued the TRO requiring defendants to immediately remove their sales listings for silver products on their own websites and on third-party sites like Amazon, and to file with the court documentation of their proceeds from the sale of these products since January 30, 2020.  A hearing is set for May 12 to address whether the court should enter a preliminary injunction against defendants.

FTC Settlements

And FTC also has used its independent authority to take action to stop fraudulent COVID claims.  On April 29, 2020, the U.S. District Court for the Central District of California issued a stipulated preliminary injunction against

Whole Leaf Organics, a California company marketing a supplement containing vitamin C and herbal extracts for the treatment, prevention, and cure of COVID-19.  According to FTC, the company made claims advertising that its product could “strengthen your immunity against . . . the coronavirus” and “combat . . . the coronavirus.”  Complaint at 6.  The company further represented that such COVID-19-related benefits were clinically or scientifically proven.  Id. at 5.  The making, dissemination, and advertising of such false representations constitute a deceptive act or practice in violation of FTC Act §§ 5(a) and 12.  Id. at 14, 15.

The stipulated preliminary injunction prohibits the company, as well as its agents, employees, and attorneys, from making either express or implied representations that its product can “treat, prevent[], or reduce[] the risk of COVID-19” or claiming substantiation of such claims without the proper “competent and reliable scientific evidence” (i.e., human clinical testing).  Stipulated Prelim. Inj. at 5-7.  The injunction will be in place until the Commission either dismisses the administrative complaint, an appeals court overturns the injunction, or the Commission issues a final order.

Notably, this same company received a WL from FDA and FTC in November 2019, before the COVID-19 crisis, for marketing its CBD-containing products as dietary supplements.  According to FTC, the company did not stop making these claims, which is likely why this is the first CBD company that FTC targeted for litigation.

Criminal Charges

In an undercover operation, FDA’s criminal investigators caught a naturopathic physician selling products for $140 that he claimed could “stop” coronavirus.  Defendant Richard Marshall was charged on April 30, 2020, with a felony count of introducing a misbranded drug into interstate commerce.  The Criminal Complaint alleges Marschall, who has been convicted twice before for distributing misbranded drugs, billed himself as a “Health Coach” and promoted a “Dynamic Duo” of products that boost the immune system and “kills the virus.”  The U.S. Attorney’s Office COVID-19 Fraud Coordinator worked in conjunction with FDA’s Office of Criminal Investigations to bring this case against Marschall, who is required to make an initial appearance in the U.S. District Court for the Western District of Washington on May 12, 2020.

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We expect to see continued aggressive enforcement by the government to stop companies from taking advantage of desperate consumers during the COVID-19 pandemic.  We recommend companies in receipt of a Warning Letter act quickly to address those issues before they escalate to litigation, as there is little justification for these claims to avoid the severe penalties that can be levied by FDA and FTC.

* Law Clerk