Health Law Daily $40 million sanctions order against weight loss supplement manufacturer upheld
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Thursday, September 19, 2019

$40 million sanctions order against weight loss supplement manufacturer upheld

By Rebecca Mayo, J.D.

An appeals court found weight loss supplements manufacturer violated an injunction banning them from making efficacy claims without supporting competent and reliable scientific evidence.

An appeals court held that a concerns or objections to the ambiguity of an injunction must be raised before or at the time of entry of the order and not after the party has been held in contempt for violating the order. The appeals court upheld a district court ruling that Hi-Tech Pharmaceuticals violated an injunction by promoting the efficacy of its weight loss products without having competent and reliable scientific evidence that support the claims of efficacy (FTC v. National Urological Group, Inc., September 18, 2019, Per Curiam Opinion).

False advertising. The manufacturer of dietary supplements, advertised that its Thermalean product would help consumers lose "as much as 30 pounds in two months" and its Lipodrene product was "clinically proven to enable users to lose up to 42% of total body fat." The FTC charged the manufacturer with falsely advertising those products. The district court granted summary judgement for the FTC finding that claims about about safety and efficacy of dietary supplements must be substantiated with competent and reliable scientific evidence. The court agreed with the FTC expert that randomized clinical trials (RCTs) must be conducted on the advertised products in order to satisfy the FTC’s advertising guide definition of competent and reliable scientific evidence, and found that the manufacturer had not satisfied this requirement.

Injunction. The FTC proposed an injunction which banned the manufacturer from "making any representation about the safety, efficacy, or health or weight-loss benefits of dietary supplements unless at the time the representation is made, they possess and rely upon competent and reliable scientific evidence that substantiates the representation." The injunction adopted the FTC’s advertising guide definition of "competent and reliable scientific evidence." The manufacturer objected on several grounds, but did not object to the use or definition of the phrase "competent and reliable scientific evidence." The court overruled the objections and entered the permanent injunction against them. The manufacturer appealed, and the appeals court affirmed the district court ruling.

Contempt. The manufacturer then launched a new marketing campaign for Lipodrene, Fastin, Benzedrine, and Stimerex-ES that boasted that these products were extreme fat burners, and would melt away the pounds. The FTC moved for an order to show cause why the manufacturer should not be held in contempt for violating the injunction. The manufacturer asserted that RCTs were not required and they offered other forms of evidence that their claims were substantiated. The court held that the manufacturer failed to present evidence of RCTs and therefore violated the injunction. The court ordered them to pay $40 million in sanctions, which reflected the gross receipts from the sales of the four products.

The manufacturer appealed. The appeals court found that the district court erred in applying the doctrine of collateral estoppel to hold that the competent and reliable scientific evidence standard automatically required RCTs and remanded the case back to the district court to determine whether any evidence of substantiation satisfied the standard. The district court determined that the manufacturer lacked competent and reliable scientific evidence to substantiate their claims and reimposed the sanctions. The manufacturer again appealed.

Decision. The court found that the manufacturer’s argument on appeal that the injunction was too ambiguous to be enforced was forceclosed because the issue had been waived. The court looked to Supreme Court precedent that held a defendant cannot defeat an injunction by staying silent about the purported ambiguities and then deliberately engaging in activities that risk violating the injunction and then claiming ignorance after those activities are found to be in violation of the injunction. The manufacturer here was given ample opportunity to raise concerns or objections to the draft injunction before it was entered. They could have asked the court for a modification, clarification, or construction of the order, but instead they made their own determination of what the injunction meant and in doing so, knowingly acted at their peril.

The appeals court further held that the district court did not clearly err in finding that the manufacturer lacked competent and reliable scientific evidence to substantiate the claims at issue. The appeals court noted that the district court detailed its extensive reasoning as to why the evidence was inadequate and why protections offered by tests like RCTs would be necessary for the claims at issue. The district court considered the qualifications of the FTC’s experts and the credentials of the manufacturer’s experts and found distributing facts about the credibility of some of the manufacturer’s experts. It also considered the beneficial characteristics of RCTs and explained why not having those beneficial properties could cause a study to be less reliable. The district court looked for evidence from the manufacturer that was as reliable and as competent as results derived from RCTs, but found the evidence lacking. Therefore, the district court’s findings were supported by the evidence.

The case is No. 17-15695.

Attorneys: Leslie Rice Melman for the FTC. David M. Barnes (Miller & Martin, PLLC) and Russell Edward Blythe (King & Spalding, LLP) for Hi-Tech Pharmaceuticals, Inc. E. Vaughn Dunnigan (E. Vaughn Dunnigan, PC) and Bruce Steven Harvey (Law Office of Bruce Harvey) for National Urological Group, Inc. d/b/a Warner Laboratories.

Companies: Hi-Tech Pharmaceuticals, Inc.; National Urological Group, Inc. d/b/a Warner Laboratories

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