Former supplier can sue supplement maker for falsely implying FDA approval & making claims based on old ingredients

In re Elysium Health-Chromadex Litig., 2018 WL 4907590,
No. 17 Civ. 7394 (CM) (S.D.N.Y. Sept. 27, 2018)
  
Elysium, which makes dietary supplements, sued Chromadex, a
former supplier, for false advertising under the Lanham Act, trade libel,
deceptive business practices under New York General Business Law § 349, and
tortious interference with prospective economic relations.  Chromadex argued that entertaining Elysium’s
lawsuit would violate the Noerr-Pennington doctrine, which protects a party’s
right to petition the government for redress, and filed a mirror image
complaint.
Elysium’s Basis is sold as an anti-aging product, and has
two main ingredients: nicotinamide riboside (NR) and pterostilbene (PT). Chromadex
sold these as Niagen and pTeroPure, respectively. In 2017, after the parties’
relationship soured, Chromadex filed a citizen petition with the FDA. A citizen
petition is “a means afforded by the FDA for raising concerns about products
the FDA reviews; any individual may file such a petition concerning scientific
or legal issues before or while the product is on the market.” Chromadex
asserted that it was the only NR supplier in the US, and that Niagen was sold
under a New Dietary Ingredient Notification (NDIN) filed with the FDA and has
obtained generally recognized as safe (GRAS) status. The petition further
alleged that Elysium was using a new, unknown supplier “for which no [NDIN] has
been filed with the FDA and which does not have GRAS status.” Chromadex claimed
that it had analyzed samples of the new Basis and found the solvent toluene in
them, but not in old Basis; this (and the lack of NDIN) made the new source of
NR “adulterated” in contravention of the law. The FDA hasn’t set any allowed
levels of toluene, but a CDC publication states that “Single exposures to
toluene or repeated exposures over a few weeks can cause headaches and
sleepiness, and can impair your ability to think clearly.”
Elysium’s suit alleged that the petition was false and
misleading and that it was filed for the sole purpose of harming Elysium,
rather than bringing any genuine concerns about Basis’ safety to the FDA’s
attention. In particular, Chromadex allegedly knew (or, as a regulatory consultant,
should have known) that the FDA does not grant citizen petitions like this one seeking
the commencement of enforcement actions. In addition, Elysium alleged that
Chromadex’s own Certificates of Analysis showed that its pTeroPure contains
similar levels of toluene, so Chromadex could not actually have believed that
Basis was unsafe. Further, the levels of toluene allegedly found in Basis were “far below the allowable
levels” accepted by the FDA. Finally, Elysium alleged a coordinated effort
to distribute claims in the citizen petition via an investor alert listserv
available on Chromadex’s website. 
The court declined to dismiss the complaint under Noerr-Pennington or under New York’s
anti-SLAPP law or litigation privilege. At this point, the court couldn’t
reject the sham exception: petitioning activity that is objectively baseless
and is a “mere sham to cover an attempt to interfere directly with the business
relationships of a competitor.” Chromadex itself, in its exhibits attached to
its motion to dismiss, submitted evidence in the form of a letter from the FDA that
it knew that the action it sought in its petition—a seizure order/injunction
against distributors—couldn’t be had through a petition; the letter was dated
well before the petition. Other courts have ruled that a petition is
objectively baseless when the petitioned agency lacks authority to take the
action requested or has a policy against doing so.
Chromadex argued that its petition could be granted in part,
by getting some other order or action from the FDA.  Elysium argued that a motivation to inform
the FDA of a potential health issue could have been carried out by a
(nonpublic) trade complaint; again, Chromadex’s filings demonstrated its
awareness of this possibility. That wasn’t enough to make the petition a sham.
But more “damning” was the allegation that pTeroPure contained comparable
levels of toluene, which if true would be good evidence of objective
baselessness.  The court wanted that
question resolved on summary judgment; otherwise there was enough for the complaint
to proceed under the sham exception to Noerr-Pennington
immunity.
Chromadex alleged false advertising by Elysium about the
scientific research, chemical composition, clinical testing, purported health
benefits, and FDA approval of Basis.  To
the extent the claims were based on toluene content, the court seemed to
decline to exercise jurisdiction because it wasn’t in a position to judge, and
the FDA could weigh in on, the precise acceptable level of toluene in a dietary
supplement. That alone doesn’t seem like a good enough reason to not resolve
the claim before the court in the absence of preemption/preclusion; courts
judge scientific matters like this all the time.
Other statements did survive the motion to dismiss, though
not a statement that Basis was now “even purer” and “consistently white”
instead of having color variations, which was made in response to a consumer
email inquiry and then posted to a Yahoo! message board by an anonymous poster.
That wasn’t enough to constitute advertising or promotion.
Chromadex alleged that Elysium misrepresented its FDA
approval. Elysium’s “Our Mission” page on its website says that all its
products go through various steps, including the “FDA NDI Submission” stage: “We
conduct rigorous safety studies for new dietary ingredient (NDI) submissions to
the FDA. The Federal Food, Drug, and Cosmetic Act (FD&C) requires that we
submit studies to demonstrate the safety of “new dietary ingredients.” It then
goes on to describe the “Safety Testing” stage (“Typically characterized as a
‘Phase 1’ clinical trial, this stage determines the safety and pharmacokinetics
of the compound in healthy individuals,”) and the “Efficacy Testing” phase
(“Typically characterized as a ‘Phase 2’ clinical trial, this human study looks
at the safety and efficacy of a given molecule.”). Chromadex argued that these
statements were misleading because they indicated that Basis – Elysium’s only
consumer product – has received FDA approval. The court agreed: “Statements
relating to the government approval process of nutritional supplements, coupled
with the fact that Elysium only sells one consumer product, gives rise to the
plausible conclusion that Elysium’s sole consumer product has undergone that
process.”
Chromadex also challenged statements touting the scientific
support for Basis, including a report of an Elysium-sponsored banner ad on
Facebook celebrating Basis as “the world’s first cellular health product
informed by genomics” and an interview with one of Elysium’s founders published
by Allure magazine quoting him: “With regard to Basis, the pill seems simple,
but the amount of science behind it is quite extensive…. [The science behind
Basis] began almost 30 years ago. The research progressed from studying aging
in yeast to the discovery of a family of proteins called sirtuins that control
aging. That led to the identification of two compounds, [PT] and [NR], that
activate sirtuins…. [Those sirtuin-stimulating compounds are the main
ingredients in Basis].”
Elysium argued that statements in news articles aren’t
commercial speech, but that’s not always true. 
Specific factual statements might still be actionable, and here the
statements “give rise to a plausible inference that they were part of a broader
advertising campaign intended to mislead consumers into believing that Elysium
developed the science behind a one-of-a-kind product.” Elysium’s statements on
its website celebrating the work of its Scientific Advisory Board and its
“Research Partnerships” could also create “an implied endorsement” about the
research undergirding Basis.
Similarly, Chromadex alleged that statements on Elysium’s
website about clinical trials conducted on Basis were misleading because the
only clinical trials were conducted while Basis was being produced with Chromadex’s
NR and PT products. This too supported a plausible inference that Elysium
misrepresented the clinical testing of the actual product it was now selling.
The court also found that competitive injury was plausibly
pled—so statements made by a former customer can now provide Lanham Act
standing, under appropriate circumstances. Chromadex could also bring a NY GBL
§ 349 claim for the same sets of statements. However, its § 350 claim failed
because that required the plaintiff to show actual reliance, which Chromadex
didn’t and couldn’t plausibly plead.
Tortious interference: Elysium allegedly interfered with Chromadex
prospective economic relationships by negotiating and enforcing an exclusivity
provision in the parties’ supply agreement, only to then “sabotage” Chromadex
by “refusing to pay for extraordinarily large orders of NR and conspiring” with
Chromadex employees.  But that wasn’t
enough: Chromadex needed to plead that Elysium “direct[ed] some activities
toward[ ] [a] third party and convince[d] the third party not to enter into a
business relationship” with Chromadex.

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