Judge Orders Mediation in Bayer/FTC Litigation, Private Plaintiffs Want Documents

<p>The supplement industry is concerned that a ruling in favor of the government agency could set a dangerous precedent, requiring companies selling natural products to substantiate their marketing claims with the same evidence that is required of the pharmaceutical industry.</p>

WASHINGTON—A dispute in New Jersey federal court that is being closely followed by the dietary supplement industry is moving deeper into litigation after a judge ordered the parties to file briefs in the case and mediate their quarrel.

The FTC has accused the German conglomerate Bayer Corp. of violating a consent decree by failing to substantiate, or essentially back up with “competent and reliable scientific evidence," its claims that a probiotic supplement known as Phillips’ Colon Health can defend against gas, bloating, constipation and diarrhea.

Citing an agreement between the parties and “good and sufficient cause," U.S. District Judge Jose Linares last month ordered Bayer to respond by Dec. 23, 2014 why it should not be held in civil contempt. The FTC must file its response by Feb. 17, 2015, and Bayer’s reply brief is due by March 17 ahead of a scheduled status conference a day later.

The supplement industry is concerned that a ruling in favor of the government agency could set a dangerous precedent, requiring companies selling natural products to substantiate their marketing claims with the same evidence that is required of the pharmaceutical industry: randomized, double blind human clinical trials.

“Two blind placebo controlled trials to substantiate a claim is a pharma standard," said Daniel Fabricant, executive director and CEO of the Natural Products Association (NPA), in a phone interview Monday.

To the extent FTC is seeking to change the obligations of the dietary supplement industry through consent decrees, “you are creating almost a common law like issue where suddenly a randomized clinical trial is going to become required for the whole range of supplements," said Richard Oparil, a principal of the law firm Porzio, Bromberg & Newman, in a phone interview Monday. “If you are going to take that kind of administration action, the appropriate way to do it is by notice and comment rulemaking under the [federal] Administrative Procedure Act rather than trying to engage in a piece by piece litigation strategy."

Porzio, Bromberg & Newman is representing NPA, which filed a friend-of-the-court brief in the case against Bayer. NPA and the Council for Responsible Nutrition (CRN) have been granted permission to appear as amicus curiae in the proceeding, so the judge will consider their arguments.

In granting CRN and NPA permission to intervene in the case, Linares cited the trade associations’ “strong interest" in the case’s outcome, “particularly as it relates to the federal regulatory and statutory scheme governing dietary supplements."

“Both trade associations have submitted thorough and informative briefs, which are of assistance to the Court, particularly in considering the implications of the ultimate outcome of this dispute on the entire dietary supplement industry," the judge added in an Oct. 23 order.

The case has not been set for trial. Absent an agreement between the parties, Linares’ decision on whether Bayer violated a 2007 consent decree could hinge, at least in part, on the opinions of experts such as the one retained by the government: Loren Laine, a board-certified gastroenterologist and professor at Yale University School of Medicine.

Laine asserted Bayer needed to conduct human clinical trials on the three specific strains of bacteria in Bayer’s probiotic product in order to meet the FTC’s substantiation standard of “competent and reliable scientific evidence." Bayer has countered that its probiotic claims are backed by several clinical trials on the species of bacteria in the product, in vitro and animal studies on the bacteria strains, and genomic tests that confirm the strains help protect against constipation, gas, bloating and diarrhea.

The 2007 settlement with FTC related to claims Bayer made in support of a different supplement, its WeightSmart line of One-A-Day vitamins. Government lawyers said Bayer agreed to pay a civil penalty of $3.2 million and consented to a permanent injunction that prohibited the company from making implied or express representation concerning “the benefits, performance or efficacy of any dietary supplement it markets or sells unless Bayer ‘possesses and relies upon competent and reliable scientific evidence that substantiates the representation’ at the time it makes the representation."

Earlier this month, Linares ordered Bayer and FTC to mediate their dispute through Dennis M. Cavanaugh, a retired U.S. District Judge. Cavanaugh will seek to facilitate a resolution but he has no power to issue a ruling or force an agreement.

The case has attracted the attention of lawyers who sued Bayer in a putative class-action lawsuit. The lawyers are seeking documents that were turned over to FTC by Bayer and requesting the opportunity to participate in the show cause hearing. A consolidated lawsuit accuses Bayer of making false and misleading statements in connection with Phillips’ Colon Health in violation of consumer protection statutes in California, Illinois and New Jersey.

Last month, lawyers for the private plaintiffs said Bayer has failed to produce documents that are referenced in the report of the FTC’s expert and “bear directly on whether Bayer has falsely represented the benefits of its products." In spite of producing more than 4,200 pages of documents in June 2013, the manufacturer of Phillips’ Colon Health (Wakunaga) failed to furnish a single document referencing a study it funded, according to James Cecchi of the law firm Carella, Byrne, Cecchi, Olstein, Brody & Agnello, P.C., co-counsel to the private plaintiffs. Cecchi said in court documents that the plaintiffs weren’t even aware of the clinical study by Canadian College of Naturopathic Medicine until they read about it in the FTC case.

“The bottom line is that all of the information produced by Bayer to the FTC is directly relevant to Plaintiffs’ claims in our parallel action and can be produced without any burden as it undoubtedly resides in electronic format on a disk produced to the FTC," Cecchi wrote.

Bayer has argued it shouldn’t have to turn over to the private plaintiffs the documents it shared with the government. Lawyers for the company noted discovery has been halted in the private litigation pending that court’s decision on Bayer’s motion to dismiss the lawsuit. Bayer also argued the private plaintiffs shouldn’t be able to intervene in the FTC case because they have “nothing to offer" on the main legal issues in the contempt proceeding.

In the private lawsuit, In re Bayer Phillips Colon Health Probiotic Sales Practices Litigation, a status conference is scheduled for Nov. 18 before U.S. Magistrate Judge Joseph Dickson in the District of New Jersey.

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