Stay ADvised: What's New This Week, May 24
In This Issue:
- Judge Puts Infant Pain Reliever False Ad Suit to Bed With FDCA Preemption
- Massachusetts AG Seeks to Make Ad Agency "Pay" Over Alleged Role in Opioid Epidemic
- Cannabis Company Pays $500k Settlement Over Unsupported Health Claims
- FTC Captures Settlement With Photo App Developer Over Misuse of Facial Recognition
Judge Puts Infant Pain Reliever False Ad Suit to Bed With FDCA Preemption
A putative class action lawsuit alleging that drug-maker Topco falsely marketed its more expensive infant pain reliever has been dismissed on the grounds that the Federal Food, Drug and Cosmetic Act (FDCA) preempts plaintiff's claims.
Plaintiff contended that she was misled into purchasing Topco's "Infants' Pain Reliever," believing it was specifically formulated for infants, when she could simply have purchased Topco Children's Pain Reliever—which has the same formulation and concentration of active ingredient, but is less expensive per ounce.
Plaintiff filed a putative class action lawsuit for false advertising under the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law, and for unjust enrichment. She alleged that Topco's marketing deceptively sends buyers the message that the Children's product is unsafe for infants, causing them to pay more money for the infant product than they otherwise would have.
Plaintiff argued that Topco's marketing failed to include material disclosures, including that the Infants' and Children's product formulations were the same. At issue was whether the FDCA preempts state law claims "because they seek to enforce new labeling requirement," as Topco argued in its motion to dismiss. In response, Plaintiff argued that the suit was actually consistent with the FDCA based, as plaintiff claims it is, on a theory that Topco's claims were false and misleading, and the FDCA forbids false and misleading claims.
The court cut down this line of reasoning, however, adopting Topco's preemption argument and stating that Plaintiff's argument would require Topco to change the labels on the pain reliever. Accordingly, the court sided with Topco and concluded that the suit was grounded in the product labeling. The court further noted that the Coronavirus Aid, Relief and Economic Security Act (CARES Act) had provided finality to the relevant Tentative Final Monograph (TFM).
Bottom line, said the court, Harris sought to change the labeling of Topco's "Children's" and "Infant's" pain relievers so as to provide "clear disclosures that there is no pharmacological distinction between 'Infant's Product' and 'Children's Product' and that the two …can be used interchangeably." This type of labeling was simply not required anywhere in the FDCA's TFM labeling requirements for OTC medications, per the court, so Harris' claims were preempted.
In the past, a number of these allegedly deceptive "differential pricing" cases have settled without decision by the courts. The court's reasoning that case law since the CARES Act deems TFMs to have the full force of law, makes it easier for defendants to argue that the FDCA preempts at least certain state law claims relating to OTC medications.
Massachusetts AG Seeks to Make Ad Agency "Pay" Over Alleged Role in Opioid Epidemic
Casting an ever-wider net, recent litigation aims to take an advertising agency to task over its alleged role in creating and feeding the opioid epidemic. Massachusetts Attorney General Maura Healey has filed a lawsuit accusing the agency of knowingly and willfully contributing to the addiction and death of the opioid epidemic that continues to ravage the state.
Filed earlier this month in Massachusetts Superior Court, the lawsuit claims that although Publicis neither sold nor manufactured the drugs, it bears responsibility for devising and overseeing marketing campaigns to sell Purdue Pharma's opioid drugs—including OxyContin—which the suit maintains unlawfully deceived doctors, patients, and the public to benefit the ad agency's bottom line. At the heart of the suit is the contention that in order to obtain sales for its client Purdue Pharma, the ad agency "devised and deployed unfair and deceptive marketing campaigns designed to push doctors to prescribe opioid to more patients, in higher doses, for longer periods of time."
The complaint further contends that the ad agency acted as Purdue's "number one marketing partner," building campaigns that deliberately deceived and sought to downplay the known dangers of the drug to doctors, patients, and the public. For its part, the ad agency maintains that its work was lawful and limited to "implementing Purdue's advertising plan and buying media space."
This case is noteworthy because it addresses the issue of potential, independent, agency liability. Although, as the complaint points out, lawsuits have led to successful settlements against companies that allegedly facilitated Purdue's sale of opioids, including not only consultants McKinsey & Company but also medical records company Practice Fusion, those were not advertising agencies or advertising claims, so it will be interesting (and telling) to see how this case plays out.
Cannabis Company Pays $500k Settlement Over Unsupported Health Claims
CannaCraft, a California purveyor of cannabis products, has agreed to settle claims it falsely advertised the health benefits of its products. The suit was filed by Sonoma County District Attorney Jill Ravitch, together with eight other state prosecutors who make up the California Food, Drug, and Medical Device Task Force, which is charged with prosecuting misleading advertising claims made about cannabis products as well as food, drugs, and medical devices in the state.
According to the April 2021 complaint, CannaCraft claimed its Care by Design line of cannabis products could treat a plethora of health problems, ranging from Alzheimer's disease to cancer, arthritis, "antibiotic-resistant infections," PTSD, sleep disorders, diabetes, alcoholism, heart disease, and more. As an example, CannaCraft allegedly claimed that "Cannabidiol can change gene expression and remove beta amyloid plaque, the hallmark of Alzheimer's, from brain cells."
The settlement enjoins CannaCraft from representing that its products can treat or cure any disease, unless those claims are backed by "competent and reliable scientific evidence." CannaCraft is also enjoined from violating provisions of California law prohibiting health-related claims that "create a misleading impression as to the effects on health of cannabis consumption." CannaCraft further agreed to pay a $500,000 penalty, which will be halved if the company stands by the agreed-upon payment schedule.
This is not the first time CannaCraft has found itself in hot water over its sale of cannabis products. In 2016, following the legalization of cannabis in California, federal and local law enforcement raided the company over concerns about its cannabis processing operation. Then in 2018, as a result of another action brought be the Sonoma County District Attorney, it agreed to pay more than $500,000 to settle charges it improperly stored hazardous materials.
This matter is illustrative of the concerns many state regulators and cannabis operators have about cannabis advertising, in a landscape where state laws regulating such advertising are new or developing, and where those states can sometimes take that regulation of advertising in different directions. California permits cannabis ads, but it is illegal for companies to make misleading statements about their products in those ads.
As we have covered on Stay ADvised, Colorado forbids cannabis advertising. Now Idaho is also floating legislation banning cannabis advertising, even though the substance is not yet legal in the state, in an effort to stem advertising for cannabis from across the border in Oregon and likely also to stymie efforts to legalize cannabis there. Advertisers would be well served to make sure they understand how advertising is regulated from state to state, and to stay up to date on any changes to the law or the enforcement climate in a given jurisdiction.
FTC Captures Settlement with Photo App Developer Over Misuse of Facial Recognition
The Federal Trade Commission (FTC) has finalized a settlement with a photo app developer accused of deceiving customers about how it would use their uploaded photographs and videos. This enforcement action followed the agency's recent informal guidance to businesses that use artificial intelligence tools and algorithms.
The January 2021 complaint alleged that Everalbum, Inc., the developers of the now defunct "Ever" photo storage and organization app, misled consumers by telling them that it would not use photo recognition without their express consent. In fact, Everalbum automatically enabled facial recognition on the phones of many of its users, without their knowledge or consent.
Everalbum also failed to delete data uploaded by users who deactivated their accounts, despite an express promise to do so. The complaint alleged that Everalbum then used this wealth of data to develop its own facial recognition technology.
The final settlement does not contain a monetary component. However, it does obligate Everalbum to change course. The company must receive express consent before using facial recognition technology. It must also delete the accounts of users who deactivated their accounts.
Perhaps most impactfully, Everalbum must delete not only the data it obtained without consent, but any models and algorithms it developed using unauthorized consumer photos and videos.
As described at greater depth in DWT's Artificial Intelligence Law Advisor, focus on the obligation to delete data obtained without express authorization, as well as any models and algorithms based on that data, is a relatively new FTC enforcement tool. Developers should carefully consider the representations they have made to consumers and the provenance of their data.