Nutrition Business Journal
What does FTCs final order in the Nestle health claims case mean for industry?

What does FTCs final order in the Nestle health claims case mean for industry?

The FTC has ordered Nestle HealthCare Nutrition to stop making claims that BOOST can reduce the risk of cold and flu, unless claims are pre-approved by the U.S. Food and Drug Administration (FDA).

The Federal Trade Commission (FTC), after issuing a settlement order in May 2010, has released its final consent order settling charges that a Nestle subsidiary made deceptive health claims on its children’s health drink BOOST Kid Essentials. The subsidiary, Nestle HealthCare Nutrition, has been ordered to stop making claims that BOOST can reduce the risk of cold and flu, unless claims are pre-approved by the U.S. Food and Drug Administration (FDA). Nestle Healthcare Nutrition must also stop making claims that BOOST will reduce children’s sick-day absences and duration of diarrhea, unless claims are backed by two clinical human trials.

The settlement order—as well as a similar order issued against supplement company Iovate Health Sciences—sent shockwaves through the nutrition industry last summer, stirring up fears that all new health claims on products would require FDA pre-approval and two human clinical trials going forward.

The final order, issued on January 12, 2011, following a public comment period, is identical to the May settlement order, save for a broadened definition of “essentially equivalent product.” The issue of functional equivalency arises when a marketer must show that an active ingredient in a finished product is unaffected by any secondary, inactive or even other active ingredients.

Attorney John Villafranco—who was lead counsel for Iovate in its FTC negotiations and whose Washington DC-based law firm, Kelley Drye & Warren, represented Nestle in its settlement—asserts that this final order does nothing to change the settlement reached this summer. However, it serves as a reminder to manufacturers and marketers that FTC’s language is becoming more specific when it comes to claims substantiation. “Companies with a conservative approach to marketing should consider these consent orders before taking a product to market,” Villafranco told Nutrition Business Journal.

Similarly, attorney Ivan Wasserman, of Washington DC-based firm Manatt, Phelps & Phillips, told NBJ that the “two clinical trials model is becoming the gold standard that FTC may demand in order to settle cases going forward.” Given the new language in the consent orders confirming two trials as a basis for reliable scientific evidence, “if FTC investigates your company and decides your substantiation is inadequate, expect FTC to demand such language in a consent order as a condition of settlement,” Wasserman said.

Consent decrees are company-specific, but they do set a tone

Both attorneys are quick to point out, however, that the Nestle and Iovate consent orders do not constitute a new law or industry-wide mandate. “FTC has been clear that these specific restrictions are only applicable to Nestle and Iovate; those who have signed these consent orders,” Wasserman said. Rather than trumpeting doom, these two cases essentially function to add further definition to FTC’s conception of what constitutes good science.

Villafranco asserts that it is important to look back at the case of LaneLabs vs. FTC, in which FTC took action against supplement manufacturer LaneLabs in 2007. FTC asserted that the company had violated a health claims-related consent order previously issued in 2000. In August 2009, in a rare moment of FTC vulnerability, a district court judge ruled that under FTC’s broad definition of reliable scientific evidence LaneLabs had provided enough substantiation for its product claims.

According to Villafranco, in light of theLaneLabs vs. FTC precedent, the settlement orders issued this past summer and this final Nestle order issued January 12 essentially give us “further insight into what FTC considers competent and reliable science.” Two randomized, double-blind, placebo-controlled, clinical human studies are not required for health claims substantiation on every finished product—once again, these consent orders are specific to Nestle and Iovate. But the FTC is certainly doing work to iron out a gold standard.

Villafranco offers a bit of advice for manufacturers and marketers targeted by FTC. An October 2010 article written by Villafranco and two other associates at Kelley Drye & Warren argues that, “post LaneLabs, regardless of the specifics of a particular case, all companies facing FTC action or at risk of enforcement should be aware of the policy reasons and precedent in favor of maintaining the broad and flexible competent and reliable scientific evidence standard.” Nestle can afford two human trials for its BOOST line, but not every company has Nestle’s resources. “Although a company may ultimately choose to accept certain, specific substantiation requirements as a part of an individual settlement,” the article concludes, “being aware of relevant policy considerations and law will improve the company’s bargaining power.”

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