Score one for the dietary supplement industry. Hi-Tech Pharmaceuticals recently won its appeal of a $40 million judgment ordered by a federal district judge in Atlanta, Georgia on the grounds that the company violated a 2008 court order requiring the company to have double-blind placebo tests in place to substantiate their advertising claims. The $40 million judgment, one of the largest ever obtained by the FTC against a supplement manufacturer, until the Eleventh Circuit’s decision, caused great concern in the supplement industry that the FTC was trying to force its double-blind placebo clinical trial standard on the entire industry. According to some in the supplement industry, the FTC has been trying to change the law through consent decrees and threats of massive judgments of 100% of revenue if a firm like Hi-Tech challenges them in court. They contend this type of punitive sanction is not for consumer redress, but rather for padding the government’s coffers.
The Eleventh Circuit’s decision held that the federal judge presiding over the case erred by estopping Hi-Tech from presenting the evidence it had to support its weight loss claims. The evidence Hi-Tech sought to introduce included “several expert declaration that the representations were substantiated by ‘competent and reliable scientific evidence,'” according to the Eleventh Circuit. The lower federal judge ruled early on in the litigation that Hi-Tech did not have double-blind, placebo trials, which are estimated at more than $200 million for a weight loss product, to substantiate its advertising claims. However, the Eleventh Circuit disagreed, finding that the doctrine of collateral estoppel had been incorrectly applied and rejecting the FTC’s requirement that Hi-Tech employee double-blind, placebo trials to support its advertising claims.
The Eleventh Circuit’s decision in the Hi-Tech comes on the heels of the D.C. Circuit Court of Appeal’s opinion in the POM Wonderful matter. In that case, the D.C. Circuit affirmed the FTC’s decision that POM Wonderful had deceptively advertised that their products could treat, prevent, or reduce the risk of certain serious diseases without having performed the necessary clinical trials to substantiate those claims. While the D.C. Circuit ultimately upheld the FTC’s decision, it didn’t fully endorse the FTC’s requirement of two randomized clinical trials. In actuality the court’s opinion provides little, if any, support for the FTC’s recent assertions that food and dietary supplement manufacturers are largely barred from including health-related claims on product labels unless their claims are supported by randomized and controlled human clinical trials.
The Hi-Tech decision represents a tremendous victory for the dietary supplement industry. The FTC’s requirement of double-blind, placebo trials has been rejected by at least the Eleventh Circuit who seems to have accepted the well-established “competent and reliable scientific evidence” standard. To be sure, this fight is far from over, and other dietary supplement companies will undoubtedly challenge the FTC’s substantiation requirements in the wake of the Hi-Tech and POM Wonderful decisions.