Stay ADvised: What’s New This Week, November 4 – Lexology

FTC and FDA Warn (yet another) CBD Company Over Deceptive Marketing

The Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) issued a joint letter to a company selling cannabidiol (CBD) products, warning that its marketing and labeling tactics may be violating the FTC Act and the Federal Food, Drug and Cosmetic (FD&C) Act.

Florida-based Rooted Apothecary is one of many companies attempting to capitalize on the hot market for CBD-infused products, by claiming to provide myriad health benefits. Rooted Apothecary sells products with exotic names like “Teeth/TMJ – Essential Oil + CBD Infusion” and “Ears – Essential Oil + CBD Infusion,” as well as “Hemp Capsules,” “Hemp Body Butter,” and “Hemp Oil.” The company markets the products’ health benefits on its website and social media.

The joint FTC and FDA warning letter concerns marketing claims made by the company touting the extensive health benefits of its products, including how the products may help with neurological conditions such as Parkinson’s and Alzheimer’s and other health claims such as:

“Increasing evidence suggests that CBD oil is a powerful option for pain . . . anxiety … and autism . . . It seems like an attractive and safe option for children.”

“[P]ossible uses for CBD include helping with skin problems such as acne, autism, ADHD, and even cancer. It’s often used in conjunction with traditional treatments to provide extra help. Children can use high amounts of CBD safely and without any risk.”

The agencies expressed concern that these claims are not “substantiated by competent and reliable scientific evidence,” in violation of the FTC Act. The letter urges the company to take action to amend these problematic representations.

Of greater importance was the FDA’s concern with the claims for these products, which the agency claimed are mislabeled, unapproved, and misbranded new drugs in violation of the FD&C Act.

First, the FDA asserts the products violate the FD&C Act because they are sold as “unapproved drug products” in that the company markets the products as “intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease.” The agency noted that the company markets its products’ ability to help cure health ailments, by for example, making claims about their “antidepressant properties” and claims that “CBD may reduce the risk of cancer or help cancer treatment” and “may reduce the risk of diabetes.” Because the products are “not generally recognized as safe and effective” for those advertised uses, they are considered “new drugs.” New drugs “may not be legally introduced or delivered for introduction into interstate commerce without prior approval from the FDA.” This renders the products “unapproved drugs,” in violation of the FD&C Act.

The second problem is that the company wrongly calls the products “dietary supplements,” which directly conflicts with the FDA excluding CBD-containing products from that definition. Moreover, the FDA notes the company’s products are misbranded because they do not contain adequate directions for use.

The letter demands that Rooted Apothecary respond to the agencies’ letter within 15-days, outlining the action it will take to remedy their concerns. If it fails to comply within such time, it risks facing legal action.

Key Takeaways 

As previously reported here, the volume of warning letters issued by the FTC and FDA have matched the explosive growth of the CBD-infused product market. These actions largely target companies seeking to capitalize on the growing demand for CBD by making aggressive and potentially unsupported health claims. Key here, the FTC continues to pursue companies making health claims about CBD with presumably no scientific substantiation. Even more troubling, the FDA continues to pursue companies making claims that cause their products to be deemed unapproved new drugs. Additionally, the FDA notes in its warning letter that although there are potential health benefits and opportunities to develop those benefits from CBD, this potential does not trump current public health concerns.

Reckitt Benckiser Settlement Over Allegedly Deceptive Marketing for Opioid Finalized for $700 Million

New York and five other states have agreed on a $700 million settlement with Reckitt Benckiser Group over allegations of deceptive marketing tactics stemming from the company’s sale of the opioid drug Suboxone. The settlement resolves allegations that Indivior, the business giant’s pharmaceutical division, improperly marketed Suboxone and deceived doctors about the drug’s safety as a treatment for opioid addiction. The underlying complaint also alleged that the company’s misrepresentations contributed to the improper use of Medicaid funds.

Suboxone is approved for use in the treatment of opioid addiction, but it also contains the active ingredient buprenorphine, itself an addictive opioid. Allegations that it used deceptive marketing tactics to promote the drug have haunted the company for years. The settlement, announced by New York Attorney General Letitia James, settles claims that the company improperly and fraudulently marketed the drug by minimizing safety concerns and its addictive potential.

A large chunk of the settlement—$400 million—will go Medicaid programs. New York State will receive over $39 million dollars of the settlement money. New York’s Medicaid will get $72 million dollars.

The company has denied all wrongdoing but maintains that the settlement is in the best interests of the company’s shareholders as it will bring closure to an ongoing litigation with an uncertain outcome. The state settlement comes on the heels of a $1.4 billion settlement—one of the largest ever—with the Department of Justice (DOJ) earlier this year that ended a federal lawsuit based on the same alleged wrongdoing. At the same time, Reckitt Benckiser entered into a separate nonprosecution agreement to settle criminal charges stemming from the marketing of Suboxone.

In a statement, Attorney General James said “pharmaceutical companies have a basic duty to ensure that they are properly disclosing and marketing powerful drugs.” She added that the company “misled the public about the real impacts of Suboxone and encouraged physicians to wrongly prescribe it, while cheating New York out of tens of millions of dollars in the process. No company is above the law and we will continue to take on anyone who takes advantage of the opioid crisis to increase their bottom line.”

The other states involved in the deal are California, Indiana, Ohio, Virginia and Washington.

Key Takeaways

Reckitt Benckiser has fought hard to protect its highly profitable drug. This settlement brings Reckitt Benckiser’s payments over allegations of deceptive marketing of Suboxone to over $2 billion this year. The $1.4 billion dollar settlement with the DOJ in July 2019 also resolved criminal charges over the company’s marketing of Suboxone as a safer and less addictive alternative to other opioid addiction drugs. The program was intended as a resource for opioid-addicted patients, but the government alleged the company used it as a pretense to connect patients to doctors who would prescribe the drug.

Oregon Attorney General Follows Washington in Suit Against Proli ic Robocaller

Oregon Attorney General Ellen Rosenblum has filed suit against a Washington State air duct company, accusing it of robocalling millions of consumers across the Pacific Northwest. The lawsuit comes on the heels of a similar action recently taken by Washington State against the same company and its owners.

The Oregon complaint charges U.S. Air Ducts, also doing business in Oregon as The Ducts Tigers, with violating Oregon’s Unlawful Trade Practices Act (UTPA) by engaging in a host of deceptive marketing tactics and false advertising.

Oregon filed the action after it received multiple complaints about the company making automated calls and its deceptive print advertisements. The complaint charges that from 2014 through 2019, U.S. Air Ducts placed over 11 million robocalls to Oregon residents alone, violating state and federal do not call and general telemarketing regulations. Consumers were unable to stop the company from calling them, even when the company gave the impression they could request at any time that the calls stop. For example, despite the “availability” to stop the calls by “pressing 2” on their keypad, taking this action had no effect and consumers continued to receive unwanted calls and were not removed from the company’s call list. Further, U.S. Air Ducts also made live telemarketing calls to individuals on the Do Not Call registry.

According to the allegations in the suit, U.S. Air Ducts also made false advertising claims on over 46 million individual print advertisements sent to consumers. These ads, claims the state, offered special seasonal or “whole house” discounts that turned out to be false. Instead of granting discounts, consumers always paid the “regular price,” if not more, largely due to an alleged bait and switch campaign executed by technicians working on commission. When these technicians arrived at the residence of the customer to fix their air duct, they did not charge the advertised price but instead sold additional and more expensive services.

“These calls and mailers were incredibly deceptive—not to mention obnoxious,” said Attorney General Rosenblum. “No business that operates in Oregon should be able to get away with making that many robocalls, or using these types of high-pressure tactics to prey on consumers.” “The sole purpose of the deceptive advertising is to get commissioned salesmen into consumers’ homes so [d]efendants can engage in misleading and high pressure sales tactics,” notes the complaint.

Oregon’s suit seeks to enjoin the company from engaging in further unlawful trade practices, imposition of a civil fine and restitution for those affected by the scam.

Key Takeaways 

This action signals not just the stepped-up pursuit of robocallers on the state level by Attorney General Rosenblum and Washington state Attorney General Bob Ferguson, but is part of a larger attempt to buoy enforcement of federal legislation passed in mid-2019 that aims to stem the tide of what some have characterized as a losing fight against automated marketing calls. As noted in the press release announcing the filing of the matter, Attorney General Rosenblum and dozens of other attorneys general supported the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED), which adds a layer of criminal liability to the toolbox of anti-robocall enforcement.