Will Supreme Court Side with Supplement Industry on AER Case?

August 31, 2010

A case currently before the U.S. Supreme Court involving the maker of the popular over-the-counter (OTC) cold remedy Zicam could have potentially significant ramifications for the dietary supplement industry. That's why industry trade associations have been busy filing amicus briefs related to the case, Matrixx Initiatives v. Siracusano, which could lead to mandatory reporting of all adverse event reports (AERs)—serious or not. Should this happen, the U.S.Food and Drug Administration (FDA) could be buried in "an avalanche of trivial information" that would seriously hinder its ability to protect consumers, according to the Council for Responsible Nutrition (CRN).

Here's the background on the case. In April 2004, Matrixx shareholders filed a class action lawsuit against the company, alleging that Matrixx failed to disclose material information by not making the customer complaints and AERs linked to Zicam known to shareholders. The district court agreed to dismiss the case because it found that the plaintiffs failed to prove that the alleged AER omissions were statistically significant. Then in October of last year, the Ninth Circuit Court of Appeals reversed the district court, and the Supreme Court decided earlier this summer that it would take up the case.

In its decision, the Ninth Circuit argued that the district court was wrong in relying on the statistical significance standard in the reporting of adverse events. In making this argument, the Ninth Circuit effectively set a new standard for AER reporting that would require mandatory reporting of all AERs. This, say many supplement experts, would flood the FDA, consumers and the investment community with meaningless information. Undifferentiated disclosure of adverse events would also, of course, increase the regulatory burden on supplement companies and expose them, at least the publicly traded ones, to potential securities litigation.

According to the brief filed jointly by CRN and the Consumer Healthcare Products Association, FDA received 600,000 adverse event reports in 2009. The vast majority of these carry no causal relationship between the adverse event and the product in question, but this requires statistical analysis and context to definitively determine if that is the case. The Natural Products Association (NPA) filed its own amicus brief with the Supreme Court on August 27. "While the case involves an over-the-counter product, there are clear implications for the supplement industry, especially as the reporting requirements for OTCs and supplements were enacted in the same piece of legislation," said NPA Executive Director John Gay. "In this brief, we were able to focus on our industry's perspective, and bring to bear NPA's experience with the legislative history of the law that created the AER system."

In an interview with NutraIngredients-USA.com, Steve Mister, president and CEO of CRN, said: "If companies are forced to report every AER, it has the potential to send the wrong signals, because one-off AERs could be caused by a range of factors. You need to be able to see the trends. To report everything could have a greater distorting effect than any kind of non-reporting."

NBJ bottom line: In submitting its amicus briefs, the dietary supplement industry's trade associations are hoping to help convince the Supreme Court that it is right to protect supplement manufacturers from what the NPA says is "an overreaching and potentially damaging decision from the Ninth Circuit Court of Appeals." Although one might assume the Supreme Court took on this case to overturn the Ninth Circuit, no guarantee exists that this is the case.

Supplement AER regulations took effect in December 2007, requiring the supplement manufacturers to notify the FDA of serious adverse events. Since that time, further guidance from the FDA has clarified that these are safety reports and are in no way indicative of a causal relationship between product and side effect. What remains to be seen is exactly how onerous a burden exhaustive reporting of AERs might be for the industry; how confusing that information would be to consumers and investors; how accurately the media could report these hundreds of thousands of outcomes; and how vulnerable public supplement companies would ultimately become to lawsuits similar to those facing Matrixx.

As for Matrixx itself, other problems associated with Zicam have plagued the company. In June 2009, the FDA issued a warning about Zicam after receiving complaints that the product was linked to a loss of smell in some consumers who used the homeopathic remedy. The company pulled the product from shelves later that month. Matrixx recently agreed to settle a growing cadre of class-action lawsuits related to Zicam, while acknowledging no wrongdoing. As the company moves on and decides if and when to reenter the marketplace with additional label warnings, the rest of the supplement industry will have to pay close attention to the Supreme Court outcome this fall.

Related NBJ links:

After the McCain Bill: What's Coming Up Next for U.S. Supplement Firms

FDA Steps Up Enforcement Under Obama Administration

The More We Understand the Health Benefits of Food, The Greater the Scrutiny Industry Must Endure

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