Competitor Advertising Challenges: Considerations for FDA-Regulated Companies

With the exception of prescription drugs and a narrow category of medical devices (known as “restricted devices”), the FDA has primary jurisdiction over product labeling¹ and the Federal Trade Commission (FTC) has primary jurisdiction over product advertising.² While FDA-regulated companies have long been aware of the need to comply with FDA and FTC promotional requirements, a number of developments have converged in recent years that make it increasingly important for companies to assess exposure to private party advertising challenges while concurrently considering “self-help” to challenge competitor advertising.

For FDA-regulated consumer products (e.g., food, dietary supplements, and cosmetics), the vast majority of product claims are not FDA-approved or authorized. Particularly in the absence of FDA approval or authorization, claims disseminated by consumer product companies are frequently subject to class action lawsuits and challenges by competitors in federal court pursuant to section 43(a) of the Lanham Act or before the National Advertising Division of Better Business Bureau National Programs (NAD).

For prescription drugs and restricted devices, even though certain claims are approved by the FDA, a notable development in recent years has been the increasing prevalence of competitor advertising challenges, including challenges under section 43(a) of the Lanham Act. Based upon the 2014 POM Wonderful LLC v. Coca-Cola Co. U.S. Supreme Court decision,³ decreased FDA advertising enforcement, and recent FDA guidance documents, prescription drug companies (and companies selling restricted devices) are increasingly susceptible to competitor advertising challenges.

These developments suggest we are in a new era where private enforcement targeting prescription drug (and restricted device) advertising is likely to proliferate, while consumer product challenges continue to flourish. This article summarizes recent key developments and identifies claims susceptible to competitor challenge pursuant to section 43(a) of the Lanham Act, before the NAD, and in class action lawsuits. Finally, we provide advice on developing substantiated and non-misleading advertising claims capable of surviving legal challenge. This includes the use of consumer surveys, which can be used to rebut allegations that a claim is misleading or to challenge competitor advertising.

Lanham Act Challenges

Section 43(a) of the Lanham Act creates a private cause of action for false advertising.⁴ No government agency directly enforces section 43(a); rather, private lawsuits are brought between competitors.⁵ Because no private right of action exists under either the Federal Food, Drug, and Cosmetic Act (FDCA) or the Federal Trade Commission Act (FTCA), and enforcement authority under those statutes is solely vested in the FDA and FTC, respectively, the Lanham Act provides an important pathway for FDA-regulated companies to challenge objectionable marketing practices by their competitors.

Private suits under the Lanham Act are increasingly replacing agency action as a method of challenging false or misleading advertising of FDA-regulated products. This shift has been driven by several factors. The Supreme Court’s 2014 decision in POM Wonderful⁶ made it clear that the FDA’s regulatory authority does not preclude competitors from bringing suit under the Lanham Act. In parallel, manufacturers have secured favorable decisions in several cases challenging the FDA’s ability to regulate certain advertising practices on First Amendment grounds. Partly as a result of those cases, the FDA is pursuing far fewer advertising enforcement actions than it has in the past. This has contributed to manufacturers becoming more aggressive with Lanham Act challenges as they adjust to reduced FDA enforcement and oversight in a highly competitive environment.

The POM Wonderful Case

The jurisdictional overlap between the FDCA and the Lanham Act was squarely raised in the 2014 case POM Wonderful, where the Supreme Court concluded that the private right of action under the Lanham Act was not precluded by FDA regulations governing labeling of the contested product.⁷ In POM Wonderful, defendant Coca-Cola had introduced a new juice product marketed with a label describing the juice as “pomegranate blueberry.” Plaintiff POM—a competing distributor of pomegranate juice products—took exception to Coca-Cola’s labeling and brought a Lanham Act suit.

POM argued that the label was misleading under section 43(a) because the product was promoted as containing pomegranate and blueberry juice, when it in fact contained less than half a percent of either juice (the relevant FDA regulations did not require Coca-Cola to disclose how much pomegranate or blueberry juice the product contained). In response, Coca-Cola contended that POM’s private ability to sue under the Lanham Act was precluded by the FDCA’s grant of regulatory authority over food labeling to the FDA. Coca-Cola argued that because its label was fully compliant with the FDCA and FDA regulations, competitors should not be able to bring challenges to the label because doing so would effectively nullify the FDCA and usurp the FDA’s authority to regulate labeling.

Finding in POM’s favor, the Supreme Court held that the Lanham Act and the FDCA had wholly distinct scopes and that the FDA labeling regime would not preclude private Lanham Act claims. The Court based its holding on the divergent purposes of the statutes and differences in institutional competencies, reasoning that the FDCA was designed to promote public health and safety and that the FDA had the necessary scientific expertise to enforce its detailed provisions in furtherance of those aims. Conversely, the Lanham Act was created to “protect[] commercial interests against unfair competition.”⁸ The Court found that the FDA lacked the “perspective or expertise in assessing market dynamics that day-to-day competitors possess” and was not the appropriate party to enforce the Lanham Act.⁹ The Court therefore held that FDA labeling regulations would not necessarily preclude a private party from suing under section 43(a), because the FDA lacked the institutional capacity to pass judgment on the commercial interests protected by the Lanham Act.

It is important to note that the scope of this holding does not necessarily extend to the dissemination of FDA-approved claims for prescription drugs or restricted medical devices. In the case of those products, the FDCA grants the FDA regulatory authority over labeling and advertising claims, which are generally subject to FDA approval and therefore may be precluded from Lanham Act challenge in certain circumstances. Indeed, the Supreme Court in POM Wonderful drew a distinction between food and beverage labels at issue in the case and “other types of labels regulated by the FDA, such as drug labels” that are preapproved by the FDA, but did not opine on the viability of Lanham Act challenges for prescription drug or restricted medical device product claims.¹⁰

Limited FDA/FTC Enforcement of Prescription Drug Advertising Claims

The number of FDA warning letters challenging advertising has declined in recent years. This trend has become especially clear in the case of prescription drugs. Although the FDA Office of Prescription Drug Promotion (OPDP), responsible for regulating prescription drug labeling and advertising, routinely issued more than 100 warning letters per year in the late 1990s, only four were issued in 2020 and two in 2021.

This decrease in FDA oversight is likely driven in part by a series of court decisions invalidating the FDA’s attempts to regulate off-label promotion of prescription drugs and restricted devices in certain circumstances. While the FDA preapproves claims before these products are first marketed, companies sometimes promote their products in ways that the FDA finds to be beyond the scope of the initial approval. Courts have generally distinguished off-label promotion from misbranding¹¹ and have found that while the FDA can certainly pursue enforcement against labeling that contains false or misleading information, truthful commercial speech promoting a drug for uses beyond the FDA-approved label may be protected by the First Amendment in certain circumstances.¹² While these decisions ostensibly appear to acknowledge that FDA regulations prohibiting false or misleading claims (or claims promoting a new “intended use”) are still viable, in practice the FDA has become far more circumspect in enforcing against advertising claims and off-label promotion, focusing primarily on claims that raise serious health and safety issues.

The decline in governmental oversight and enforcement means there is a greater need for self-policing among manufacturers of FDA-regulated products, and companies have increasingly turned toward Lanham Act suits to protect themselves from false or misleading claims by competitors.

FDA Guidance Allowing Drug and Device Promotion “Consistent with the FDA-Required Labeling”

In a key 2018 guidance document, the FDA acknowledged that prescription drug and restricted medical device companies can disseminate claims beyond the exact language approved in a product’s label.¹³ The guidance allows companies to make claims “consistent with the FDA-required labeling” (generally claims consistent with the FDA-authorized “intended use” of the drug or device), which includes information about approved or cleared uses of a product. For example, information comparing the safety and efficacy of a product to a competing product approved for the same indication may qualify as consistent with FDA labeling. Information about long-term safety and efficacy, side effects, or the use of the product in specific subgroups may also qualify in certain cases.

Now that there is overt FDA acknowledgment that “consistent with the label” claims are permissible in some circumstances, drug and device companies are confidently utilizing more of them in their marketing materials. However, the guidance also notes that information may be consistent with FDA-required labeling but still be misleading. For example, product communications that promote the approved or cleared use of a product, and are therefore consistent with the label, may be considered misleading if they overstate study findings or fail to disclose material study limitations. If the FDA does not enforce against claims purportedly “consistent with the label,” competitors may need to rely on “self-help” in the form of a private lawsuit to challenge false or misleading claims.¹⁴

Trends in Lanham Act Challenges Targeting FDA-Regulated Products

Since the POM Wonderful decision in 2014, Lanham Act challenges involving FDA-regulated products have proliferated. There are more than two dozen public court opinions, and these constitute only a small subset of recent Lanham Act litigation due to out-of-court settlements or nonpublic opinions. These cases demonstrate the increasing adoption of the Lanham Act as a tool for companies to rein in false and misleading competitor claims.

Recent false advertising Lanham Act court decisions encompass a range of FDA-regulated product categories and include challenges to claims made for drugs, medical devices, food, dietary supplements, and animal food. Below are some of the common types of claims litigants have alleged are false or misleading (many Lanham Act complaints cite more than one competitor claim):

• false express or implied assertions of FDA approval of drugs and medical devices;¹⁵
• superiority to an FDA-cleared device (when the competitor’s device did not possess FDA clearance);¹⁶
• false claims of equivalence of a generic to a brand-name drug;¹⁷
• false claims of compliance with United States Pharmacopeia (USP) standards;¹⁸
• false assertions related to pet food ingredients;¹⁹
• failure to disclose a dietary supplement’s health effects;²⁰ and
• claims that a dietary supplement is “natural” despite containing a schedule 3 steroid.²¹

The number of false advertising Lanham Act cases involving prescription drugs and medical devices in recent years is notable. Published prescription drug Lanham Act cases include:

• Par Sterile Products (then known as JHP Pharmaceuticals), manufacturer of FDA-approved injectable epinephrine products, brought a case against a number of companies selling unapproved injectable epinephrine, alleging that they misleadingly represented their products to be FDA-approved.²² The judge applied POM Wonderful and held that the lawsuit was not precluded by the FDCA, and the parties settled.
• Acella Pharmaceuticals challenged Westminster Pharmaceuticals for falsely marketing its thyroid tablets as USP-compliant, and the court held that the claims were not precluded by the FDCA.²³ The case was subsequently settled.
• Genus Lifesciences brought a case against Lannett Company, alleging that consumers were misled into believing that Lannett’s unapproved cocaine hydrochloride solution was approved.²⁴ The court allowed the claims to move forward, and the parties settled.

Published medical device false advertising Lanham Act cases include:

• Guardant Health accused Foundation Medicine of misleading advertising for its cancer diagnostic assays. Foundation filed counterclaims, and the case was settled.²⁵
• Kurin challenged a competitor, Magnolia Medical Technologies, alleging that it falsely implied that its blood collection device was FDA-approved or cleared and that it misrepresented product performance data by selecting only the most favorable results.²⁶ The court ruled in favor of Magnolia, and the ruling was affirmed by the Ninth Circuit.²⁷
• SmileDirectClub was challenged for misleading consumers into believing its orthodontic aligners were cleared or approved by the FDA. The case survived a motion to dismiss and is ongoing.²⁸

Lower courts have generally interpreted POM Wonderful to establish a presumption against the preclusion of Lanham Act claims by the FDCA. They acknowledge that this presumption is not absolute, however, and that it may not apply where the grounds for a plaintiff’s Lanham Act claim “conflict with an affirmative policy judgment by the FDA,”²⁹ or where agency expertise is needed to resolve an underlying issue in the dispute.³⁰ However, even with these limits, courts have generally favored plaintiffs’ ability to bring Lanham Act claims, and many lawsuits survive the motion to dismiss stage.

NAD Challenges

Companies seeking a cost-effective, relatively efficient forum to challenge competitor claims increasingly turn to the NAD, a self-regulating body that offers a dispute resolution process for advertisers. At a company’s request, the NAD may review the disputed claims and related substantiation, consider the arguments of both parties, and issue a decision on whether the advertising claims at issue are appropriate as currently formulated or should be modified or discontinued. Although participation in the process is voluntary, the NAD may refer cases to the FTC (or FDA) for review if a company chooses not to participate or comply with an NAD recommendation.

The NAD tends to be a challenger-friendly forum when compared to traditional lawsuits. The high percentage of cases decided in favor of companies challenging competitor claims reflects the fact that the NAD places the burden of proving claims are substantiated on the advertiser rather than the challenger.

A large percentage of NAD cases decided in 2021 involved FDA-regulated products, including dietary supplements,³¹ cosmetics, foods, over-the-counter drugs, and medical devices. The types of claims challenged varied from case to case but included efficacy claims, claims comparing a product favorably to a competitor product or disparaging a competitor product, “#1” claims (e.g., “#1 dermatologist recommended), and establishment claims (i.e., a claim that evidence or proof of a product benefit exists). For foods, challenged claims included those related to nutrition levels, environmental benefit, and “natural” claims. A number of cases involved products and claims specifically related to the COVID-19 pandemic (e.g., claims for hand sanitizers and air purifiers).

Class Action Lawsuits

FDA-regulated companies may also find their claims subject to challenge by private parties through class action lawsuits. The number of class action lawsuits targeting FDA-regulated industries has trended upward over the last decade. The majority of these cases are filed in California or New York, two states with strong, consumer-friendly unfair and deceptive acts and practices laws. The U.S. District Court for the Northern District of California is the most frequent forum.

Class actions targeting allegedly false or misleading claims for consumer products (e.g., food, dietary supplements, and cosmetics) are common, and the number of lawsuits has generally increased across categories in recent years. The trend is likely to continue, and claims at issue may be similar to those challenged in recent years, including: (1) health benefit claims, (2) “natural” claims,³² (3) environmental and sustainability claims,³³ (4) “Made in the USA” claims, and (5) “nontoxic” claims.³⁴ Prescription drug and restricted device companies are also not immune from class action challenges.

Developing Claims and Using Consumer Surveys to Survive Competitor Challenges

Companies are advised to consider possible competitor challenges when developing marketing materials for FDA-regulated products. The adage “the best offense is a good defense” applies here: companies should consider proactively developing substantiation dossiers to support claims that may later be subject to challenge.

The 2018 FDA guidance on drug and device claims “consistent with the label” provides a useful framework for developing a robust substantiation dossier.³⁵ The guidance includes the FDA’s thoughts on the level of evidentiary support required for promotional communications, as well as further recommendations for ensuring that audiences are not misled. While this guidance is reflective of the FDA’s regulatory analysis rather than that of a court considering a section 43(a) challenge, many of the principles are universal (and of course, compliance may protect the company from FDA enforcement).

In the guidance, the FDA asserts that for a claim to be truthful and not misleading, it must be “grounded in fact and science and presented with appropriate context,”³⁶ though the amount and type of substantiating evidence necessary will depend on the specific claim. As a general rule of thumb, companies should be prepared to produce “tests, analyses, research, studies, or other evidence based upon the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”³⁷

The guidance also advises that product communications should not overstate the findings or conclusions that can be drawn from studies or analyses, or fail to disclose their material limitations. One way to reduce risk is through the use of disclaimers. Effective disclaimers should use clear language in an easy-to-read font, be prominently located near the claim they are related to, and be consistent with other aspects of the promotion.

Companies should consider conducting consumer surveys to assess express and implied claims, which can be invaluable for rebutting allegations that certain claims are misleading. The use of consumer perception studies and survey evidence in federal courts is governed by rules and standards governing expert testimony; the failure to meet those standards can impact the admissibility of survey evidence in federal court.

Because properly designed and conducted surveys have the greatest evidentiary value, surveys used in advertising disputes should typically follow best practices that—depending upon the situation—may include double-blinding, using control groups to control for participants’ preexisting beliefs, and employing “filters” to screen out individuals whose responses may distort the results.

A number of factors must be considered in assessing the admissibility and reliability of a consumer perception study or survey. A court must decide, for example, whether:

• the population was properly chosen and defined;
• the sample chosen was representative of that population;
• the questions asked were clear and not leading;
• the data gathered was accurately reported;
• the data was analyzed in accordance with accepted statistical principles;
• the survey was conducted by qualified persons following proper interview procedures; and
• the process was conducted so as to ensure objectivity (e.g., determine whether the survey was conducted in anticipation of litigation and by persons connected with the parties or counsel or by persons aware of its purpose in the litigation).

Conclusion

A number of developments have converged in recent years that make it increasingly important for FDA-regulated companies to assess exposure to private party advertising challenges while concurrently considering “self-help” to challenge competitor advertising. Consumer surveys can play an important role in protecting a company from legal challenge or supporting a challenge against competitor advertising. The law in this area is both complex and evolving,³⁸ and companies should consider retaining qualified experts to assess claim substantiation, coordinate consumer surveys, and help develop product claims.

Endnotes

1. “Labeling” is defined very broadly by the FDCA to include any material physically on or accompanying a product. 21 U.S.C. § 321(m).

2. Memorandum of Understanding between the Federal Trade Commission and the Food and Drug Administration, MOU 225-71-8003 (May 14, 1971), https://www.fda.gov/about-fda/domestic-mous/mou-225-71-8003; see also Memorandum of Understanding between Federal Trade Commission and the Food and Drug Administration, 36 Fed. Reg. 18,539 (Sept. 16, 1971).

3. 573 U.S. 102 (2014).

4. 15 U.S.C. § 1125(a).

5. While section 43(a) ostensibly creates a cause of action for “any person,” courts have determined that only market competitors have standing to sue under the Lanham Act.

6. 573 U.S. 102.

7. Id.

8. Id. at 115.

9. Id.

10. Id. at 116.

11. See, e.g., United States v. Caronia, 703 F.3d 149, 161 (2d Cir. 2012).

12. See, e.g., id.; Amarin Pharma, Inc. v. U.S. Food & Drug Admin., 119 F. Supp. 3d 196 (S.D.N.Y. 2015).

13. U.S. Food & Drug Admin., OMB Control No. 0910-0856, Medical Product Communications That Are Consistent with the FDA-Required Labeling—Questions and Answers: Guidance for Industry (2018) [hereinafter FDA Guidance], https://www.fda.gov/media/133619/download.

14. The Centers for Medicare and Medicaid Services (CMS) recently acknowledged the importance of private lawsuits under section 43(a) of the Lanham Act to regulate competitor claims. In a now abandoned 2018 proposed rule, CMS proposed suits under the Lanham Act as the mechanism for enforcing new requirements on prescription drug price disclosure. Though the proposed rule was ultimately abandoned (and regardless, CMS may have lacked authority to restrict prescription drug marketing), the proposal evidences governmental willingness to rely on private actors instead of regulatory agencies to police the marketing of FDA-regulated products.

15. Impact Applications, Inc. v. Concussion Mgmt., LLC, No. GJH-19-3108, 2021 WL 978823 (D. Md. Mar. 16, 2021); Belcher Pharms., LLC v. Hospira, Inc., No. 8:17-cv-2353-T-30JSS, 2018 WL 4643292 (M.D. Fla. Apr. 9, 2018); Innovative Health Sols., Inc. v. DyAnsys, Inc., No. 14-cv-05207-SI, 2015 WL 2398931 (N.D. Cal. May 19, 2015).

16. Impact Applications, 2021 WL 978823.

17. Endo Pharms., Inc. v. Actavis, Inc., No. 12-cv-7591 (KM), 2016 WL 1090356 (D.N.J. Mar. 21, 2016).

18. Acella Pharms., LLC v. Westminster Pharms., LLC, No. 1:18-CV-247-CAP, 2018 WL 6588520 (N.D. Ga. Apr. 24, 2018).

19. Blue Buffalo Co. Ltd. v. Nestlé Purina Petcare Co., No. 4:15 CV 384 RWS, 2015 WL 3645262 (E.D. Mo. June 10, 2015).

20. Nutrition Distrib., LLC v. New Health Ventures, LLC, No. 16-cv-02338-BTM-MDD, 2017 WL 2547307 (S.D. Cal. June 13, 3017).

21. Hi-Tech Pharms., Inc. v. Hodges Consulting, Inc., 230 F. Supp. 3d 1323 (N.D. Ga. 2016).

22. JHP Pharms., LLC v. Hospira, Inc., 52 F. Supp. 3d 992 (C.D. Cal. 2014).

23. Acella Pharms., 2018 WL 6588520.

24. Genus Lifesciences Inc. v. Lannett Co., 378 F. Supp. 3d 823 (N.D. Cal. 2019).

25. Debevoise represented Foundation Medicine in this case.

26. Kurin, Inc. v. Magnolia Med. Techs., Inc., 473 F. Supp. 3d 1117 (S.D. Cal. 2020).

27. Kurin, Inc. v. Magnolia Med. Techs., Inc., No. 21-55025, 2021 WL 5823707 (9th Cir. Dec. 8, 2021).

28. Ciccio v. SmileDirectClub, LLC, No. 3:19-cv-00845, 2022 WL 843774 (M.D. Tenn. Mar. 21, 2022).

29. Frompovicz v. Niagara Bottling, LLC, 313 F. Supp. 3d 603, 616 (E.D. Pa. 2018).

30. JHP Pharms., LLC v. Hospira, Inc., 52 F. Supp. 3d 992, 999 (C.D. Cal. 2014).

31. Many of the dietary supplement cases were a part of the NAD’s initiative with the Council for Responsible Nutrition, a dietary supplement trade association, designed to expand NAD review of advertising claims for dietary supplements.

32. Megan K. Bannigan et al., The Nature of “Natural” Advertising Claims, Debevoise In Depth (July 21, 2021), https://www.debevoise.com/insights/publications/2021/07/the-nature-of-natural-advertising-claims.

33. Megan K. Bannigan et al., ESG for Consumer Product Brands: Whitewashing the Greenwash—Identifying and Reducing Greenwashing Risk, Debevoise In Depth (June 9, 2021), https://www.debevoise.com/insights/publications/2021/06/esg-for-consumer-product-brands.

34. Megan K. Bannigan et al., “Non-Toxic” Advertising Claims Can Lead to Toxic Litigation, Debevoise In Depth (Sept. 30, 2021), https://www.debevoise.com/insights/publications/2021/09/non-toxic-advertising-claims-can.

35. FDA Guidance, supra note 13.

36. Id. at 12.

37. E.g., Fed. Trade Comm’n, Advertising Substantiation Principles, https://www.ftc.gov/sites/default/files/attachments/training-materials/substantiation.pdf (last visited Aug. 18, 2022). While this standard was articulated by the FTC, it is also an appropriate framework for substantiating health claims.

38. For additional practical guidance in navigating the complex legal landscape associated with consumer surveys and advertising challenges pursuant to section 43(a) of the Lanham Act, see David Bernstein & Bruce Keller, The Law of Advertising, Marketing and Promotions (2019).