By Jennifer M. Thomas –
As we indicated in our post last week, the District Court’s opinion in United States v. Bayer, unsealed on October 1, 2015, reads as a serious loss for the government. It is certainly a clear victory for Bayer. The Court’s opinion also has the potential to affect the industry as a whole, although perhaps not as much as it might seem at first blush. We will discuss the case’s likely effects. But first, a brief summary:
Bayer’s Consent Decree with the FTC and DOJ, issued by the United States District Court for the District of New Jersey in 2007, prohibits the company from representing that any of its products “can or will cure, treat, or prevent any disease; or have any effect on the structure or function of the human body” or making any representation, express or implied “about the benefits, performance, or efficacy of any dietary supplement it markets or sells,” unless, at the time the representation is made, Bayer “possesses and relies upon competent and reliable scientific evidence that substantiates the representation.” United States v. Bayer Corp., No. 0701, slip op. at 3 (D.N.J. Sept. 24, 2015) (citing Consent Decree §§ III.A-B, ECF No. 2).
In 2011, the FTC began investigating whether Bayer had violated the Consent Decree in advertising for its Phillip’s Colon Health (PCH) probiotic dietary supplement that contained claims relating to constipation, diarrhea, gas, and bloating. After receiving a significant volume of substantiating evidence from Bayer in 2011 and 2012, including (1) the results of a literature search and a medical Point of View memorandum, and (2) nearly 100 studies on the species of bacteria contained in PCH, the FTC nevertheless referred the case to DOJ. In September 2014, the government moved for an Order to Show Cause why Bayer should not be held in civil contempt for violating the 2007 Consent Decree.
The government argued that, based on the opinion of its expert, Dr. Loren Laine, Bayer needed one or more randomized controlled trials (RCTs) on the specific product at issue to satisfy the Consent Decree’s “competent and reliable scientific evidence” standard for the claims at issue. Because the company did not possess or rely on such data, the government contended that Bayer had failed to meet the substantiation standard set out in the Consent Decree.
However, Bayer put forth two reputable experts in the probiotics field to contradict Dr. Laine’s interpretation of the FTC’s “competent and reliable scientific evidence” substantiation standard. Those two experts (who had actually read the FTC’s substantiation guidance, unlike Dr. Laine) opined that Bayer’s evidence was more than sufficient to support its claims.
The Court overwhelming accepted the arguments asserted by Bayer, and rejected those of the government.
First, the Court determined that Bayer’s claims for PCH (namely, “To Promote Overall Digestive Health,” and “Helps Defend Against Occasional Constipation, Diarrhea, Gas and Bloating”) were not “disease” claims, a determination that found support in the testimony of the government’s own investigator. See Bayer,slip op. at 9, 26. The Court relied on the fact that Bayer characterized the claims as structure-function claims and included the Dietary Supplement Health and Education Act of 1994 (DSHEA) disclaimer (disclaiming any intent to treat, cure, or prevent disease). The Court also flatly rejected the government’s suggestion that Bayer’s advertisements contained implied claims to treat, cure, or prevent disease, since (1) the government had failed to present clear and convincing evidence (in the form of consumer surveys, for example) that Bayer’s advertising implied disease prevention or treatment, and (2) the FTC had made no agency findings of implied claims. The Court indicated the government’s argument that Bayer made implied disease claims was based on nothing more than “arguments of counsel.” Bayer, slip op. at 11.
Second, the Court discounted the opinions of the government’s expert as to what level of substantiation was necessary under the “competent and reliable scientific evidence” standard. The Court noted specifically that Dr. Laine’s opinion made no distinction between the level of substantiation that would be required for a drug, versus a dietary supplement, and indicated that such a distinction was necessary in light of DSHEA, as well as recent court rulings in Garden of Life and Basic Research. To that point, the Court noted that Dr. Laine had no knowledge of the FTC’s guidance regarding claim substantiation for dietary supplements, or of the DSHEA statutory framework. The Court was so dismissive of Dr. Laine’s opinions that we feel compelled to note that Dr. Laine did, in fact, survive a motion to exclude his testimony in this case. In contrast, the Court recognized that Bayer’s experts, Drs. Merenstein and Fennerty, had specialized experience in the area of probiotics research, and credited their arguments that most experts in the field would disagree with Dr. Laine’s conclusion that RCTs were required.
The Court also rejected the government’s argument that Bayer did not have adequate substantiation for its claims because it had not printed out the studies it had relied on. The Court ruled that the “Consent Decree does not require Bayer to make records or copy studies,” but could instead rely on studies that were otherwise in the public domain. Bayer, slip op. at 35-37.
The Court was presented with a clear legal issue; namely, did the 2007 Consent Decree provide adequate prior notice to Bayer that the company was legally required to have RCTs in order to meet the Consent Decree’s “competent and reliable scientific evidence” standard? As an initial matter, the Court ruled that to be found in civil contempt of court, an entity must be shown to have violated a clear and unambiguous provision of the Consent Decree, and that the requirements must be set forth in the four corners of the Consent Decree. It was undisputed that the Consent Decree did not explicitly require RCTs. The Court noted that FTC hadimposed such a requirement in Orders issued to other advertisers, but failed to do so with respect to Bayer. Thus, instead of citing clear wording in the Consent Decree itself, the government relied on Dr. Laine for the proposition that the dietary supplement claims at issue required RCTs under the Consent Decree. The Court concluded that the government failed to demonstrate that Bayer had any notice that its claims would require substantiation in the form of RCTs, stating that the “[g]overnment cannot seek contempt on the basis of a lone expert who proposes a standard that was not disclosed to industry until the day the government filed its contempt motion.” Bayer, slip op. at 28.
In sum, the contest between the government and Bayer was largely the battle of experts that we expected. While the government’s case failed in several respects, perhaps the most important of those failings was with respect to the selection and preparation of the government’s expert, Dr. Loren Laine (whose name may be forever linked with “Laine-Level substantiation,” the shorthand phrase used liberally by the District Court). And Bayer’s success was largely attributable to its own experts – both its two consulting experts, and its internal medical staff who testified about the data in Bayer’s possession at the time it began making the claims for PCH.
So what can industry take away from this case? While it is a significant victory for Bayer, this decision is not necessarily a significant (1) set-back for the FTC, or (2) boon to the dietary supplement industry, for a few key reasons.
First, it is important to note that the government can still appeal this decision within 60 days. If appealed, it is far from certain that the Third Circuit would uphold the District Court’s decision on appeal. After all, the government succeeded in its appeal of Lane Labs before the Third Circuit in 2010. In that case, another District Court Judge in New Jersey refused to find Lane Labs in contempt of court for its dietary supplement claims, finding that Lane Labs was in substantial compliance with a prior court injunction. The Third Circuit reversed, holding that the District Court failed to provide adequate findings and had misapplied the “substantial compliance” standard for holding someone in contempt of court. However, the lower court’s findings in Bayer are very different from those in Lane Labs: The Bayer Court did not conclude broadly that the company was in substantial compliance, but instead found other legal and factual errors in the government’s position.
Second, as the District Court correctly points out, the government knows how to impose a more specific substantiation standard in a consent decree or litigated order. See our series of posts on POM Wonderful LLC v. FTC; see also In the Matter of Nestlé HealthCare Nutrition, Inc., (No. 92-3087), 2010 WL 2811203 (F.T.C. July 14, 2010); Stipulated Final J. and Order for Permanent Inj. And Other Equitable Relief, FTC v. Iovate Health Sciences USA, Inc., (W.D.N.Y. July 29, 2010) (No. 10-cv-587); Consent Decree, United States v. Jason Pharms, Inc., (D.C. Cir. 2012) (No. 12-1476), ECF No. 3. Thus, in response to the Bayer decision (following the Garden of Life, POM Wonderful, and Basic Research decisions we’ve blogged about here, here, and here), the FTC could be expected to simply (1) pursue specific substantiation provisions regarding RCTs even more doggedly in Consent Order negotiations and litigated orders, and/or (2) revise its substantiation guidance to explicitly require “Laine-Level” substantiation as “competent and reliable evidence” for certain categories of claims (thereby putting industry on notice of the requirement).
Third, Bayer did ultimately produce a large quantity of data and significant analysis in support of its structure function claims – undoubtedly at significant expense to the company. If this level of substantiation is viewed by the government in the future as a “floor” for “competent and reliable scientific evidence” to support structure function claims, it is still a relatively high bar.
One lesson for all companies regulated by FDA and the FTC is the Court’s analysis of Bayer’s good faith efforts to comply with the Consent Decree. The Court noted that Bayer sought to ensure its compliance with the Consent Decree by following an extensive process that Bayer called its “Legal, Medical, Regulatory (LMR) review.” Bayer,slip op. at 11. That review and approval was required for every single piece of promotional material leaving Bayer. Id. Other companies would be well advised to establish and/or continue to have such reviews whether or not they are under a Consent Decree.