Federal Trade Commission v. Quincy Bioscience Holding Company Inc.
Why It Made the List
Efficacy claims for dietary supplements, such as those claims that state or suggest that a dietary supplement will have an effect on health (e.g., “X ingredient supports a healthy brain” or “Y product can support heart health”) must be supported by competent and reliable scientific evidence; however, there is often disagreement among regulators and regulated companies as to what is considered appropriate competent and reliable scientific evidence to support a claim. The Federal Trade Commission (FTC) is the principal regulatory agency overseeing dietary supplement efficacy claims made in advertising.1 Since the FTC released guidance in 2001, articulating that competent and reliable scientific evidence was necessary to support these types of claims, companies have grappled with what this standard requires. This latest litigation continues to shape the FTC’s ability to impose specific substantiation requirements through the competent and reliable scientific evidence standard and the burden the FTC must meet to demonstrate violations of substantiation requirements.
FTC v. Quincy Bioscience Holding Co.2 could affect two issues important to dietary supplement companies – the substantiation standard for dietary supplement efficacy claims and the burden the FTC must meet to bring a complaint against dietary supplement companies for alleged false and deceptive advertising.
The FTC has long held that, before disseminating an advertisement, advertisers must have a reasonable basis to support all express and implied claims made in the ad. In 2001, the FTC released guidance for dietary supplements that articulated what is generally considered a reasonable basis for dietary supplement efficacy claims.3 Specifically, the FTC indicated that companies should have “competent and reliable scientific evidence” (CRSE) to support claims, which the FTC defined as “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”4
The FTC’s guidance goes on to state that the standard is “a flexible one that depends on many factors” and that the “FTC’s standard for evaluating substantiation is sufficiently flexible to ensure that consumers have access to information about emerging areas of science.”5 Unless an advertisement refers to a specific level of support (e.g., “a clinical study conducted by [name of university] shows”; “clinically proven”; “numerous clinical studies demonstrate”), there is no fixed formula for the number or type of studies, sample size, study duration, or other parameter requirements. FTC, however, has long considered well-controlled human clinical studies to be the most reliable form of evidence, with randomized, double-blind, placebo controlled clinical trials (RCTs) serving as the gold standard of substantiation.
Despite the FTC’s statements that the CRSE standard is a flexible standard, the FTC, since developing this guidance, has sought to impose specific standards on certain types of dietary supplement claims. These have included requiring companies, through consent orders settling FTC advertising enforcement investigations, to possess two RCTs for a variety of claims, such as weight-loss claims, immunity strengthening claims, and certain disease claims.6 When such standards have been litigated, however, some courts have rejected FTC’s efforts to create more rigid substantiation standards than the 2001 guidance suggests is necessary, particularly where claims are about general health and nutrition, as opposed to claims that a product will have an effect on a disease.7
Also at issue in FTC v. Quincy is the standard that the FTC’s complaint must meet to survive a motion to dismiss. To survive a motion to dismiss under Federal Rules of Civil Procedure Rule 12(b)(6), a complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.”8 The standard developed first under Bell Atlantic Corp. v. Twombly and further developed under Ashcroft v. Iqbal goes on to articulate that (1) a complaint must do more than plead facts that are merely consistent with a defendant’s liability; (2) “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions”; and (3) a complaint must make a “showing, rather than a blanket assertion, of entitlement to relief” supported by sufficient “factual allegation[s].”9
Facts of Quincy
The FTC, in conjunction with the New York Attorney General’s office, brought a complaint alleging that the defendant, Quincy Bioscience Holding Company, Inc.,10 had violated federal and state deceptive advertising laws for cognitive health claims made about Prevagen—a dietary supplement product that the defendant manufactured.
According to the FTC’s complaint,11 claims at issue included cognitive health claims, such as the following type of claims:
- Prevagen improves memory;
- Prevagen improves memory within 90 days;
- Prevagen reduces memory problems associated with aging;
- Prevagen provides other cognitive benefits; and
- That all of these benefits are clinically proven.
To support these claims, Quincy provided a randomized, double-blind, placebo-controlled study known as the Madison Memory study. During the study, a variety of cognitive skills were assessed. The court noted that “[n]o statistically significant results were observed for the study population as a whole”; however, certain subgroups within the trial showed statistically significant improvements over participants who received placebo on some of the cognitive tasks that were measured by the study. The defendant indicated that the subgroups in which statistically significant results were demonstrated were those subgroups within the study that are most relevant to the healthy, adult population at which sales of the supplement are targeted.
The FTC alleged that the researchers arrived at their results by conducting “more than 30 post hoc analyses” and that this subgroup analysis “greatly increases the probability that the statistically significant improvements shown are by chance alone.” Thus, according to the FTC, “the few positive findings on isolated tasks for small subgroups of the study population do not provide reliable evidence of a treatment effect.”12
The FTC also alleged that the claims were based on a theory that the main ingredient in the Prevagen product—apoaequorin—enters the human brain to supplement proteins that are lost during the natural aging processes. The FTC’s complaint alleges, however, that the defendants did not possess studies demonstrating that this orally-administered ingredient crosses the human blood-brain barrier and, in fact, certain studies showed that the ingredient is rapidly digested, causing it to act like any other dietary protein. Based on these allegations, the FTC argued that the defendant’s cognitive health claims were false and misleading or “not substantiated at the time . . . [they] were made” in violation of Sections 5(a) and 12 of the Federal Trade Commission Act (FTC Act).13
According to the defendants, the FTC’s complaint failed because (1) it did not meet the Twombly/Iqbal standard and (2) the FTC sought to impose liability based on a new and different substantiation standard than the competent and reliable scientific evidence standard. Specifically, the defendant argued that the FTC’s complaint failed to meet this standard because “it relies entirely on conclusory allegations that materials referenced in and attached to the Complaint contradict, and also because Plaintiffs fail to allege that Quincy violated the FTC’s own standard for false or misleading advertising.”14
District Court Decision
On September 28, 2017, U.S. District Court for the Southern District of New York Judge Louis L. Stanton dismissed all the claims in the lawsuit without prejudice. 15 To establish a violation of the FTC Act, the FTC is required to show three elements: (1) identify a representation, omission, or practice, that (2) is likely to mislead consumers acting reasonably under the circumstances; and (3) the representation, omission, or practice is material. The district court’s decision analyzed the second element of this test and whether the FTC’s complaint alleged facts from which it can be reasonably inferred that the representations at issue are false or unsubstantiated. The court found that the Madison Memory study followed well-accepted procedures, confining the FTC’s challenge of Quincy’s substantiation to the analysis that Quincy conducted on the study subgroups. This is where, according to the district court, the FTC’s complaint failed because it did nothing more than point to possible sources of error and did not allege that any actual errors occurred.
The court criticized the FTC’s complaint on a number of grounds, including that (1) the challenge never proceeded beyond the theoretical; (2) the FTC criticized what they alleged were “post hoc exploratory analysis” by arguing that these types of analyses increase the risk of false positives and the probability of results altered by chance alone, but the FTC complaint did not explain the nature of such risks nor show that the risks affected the subgroup performance or created false positives; and (3) the FTC failed to provide any reason that the alleged risks are so large that they prevent any use of subgroup analysis.
Based on these deficiencies, the court found that the complaint failed to show that Quincy’s reliance on subgroup data to support its memory and cognitive health claims “is likely to mislead consumers acting reasonably under the circumstances,” as is required for the FTC to state a proper claim. The court went on to note that the FTC’s lack of clarity in its complaint as to why Quincy’s substantiation does not support its claims and the FTC’s reliance on theoretical possibilities “stops short of the line between possibility and plausibility of ‘entitlement to relief.’”16 In other words, the court found that “the complaint does not allege facts from which it can be reasonably inferred that the representations at issue are false or unsubstantiated.”17
The Quincy decision has an important impact on the standards that the FTC, and potentially other regulators, must meet when bringing a complaint regarding dietary supplement claim substantiation, as well as the level of substantiation that companies are required to provide for dietary supplement claims. In arriving at this ruling, the court accepted that subgroup analysis (or “post hoc” analysis, as described by the FTC and the court) could be an acceptable method to substantiate the types of claims at issue in the FTC’s complaint. Beyond specifics of scientific analysis, however, such as whether “post hoc” or subgroup analysis, in particular, is acceptable, the court’s decision continues to demonstrate that courts are wary of allowing the FTC to apply rigid substantiation standards for dietary supplement substantiation, in light of the FTC’s own statements that the CRSE standard is meant to be flexible and allow for different types of scientific evidence to support these claims. This action also continues to represent courts’ unwillingness to accept, on its face, FTC blanket statements that certain types of substantiation are not appropriate to support health-related efficacy claims.
The FTC has appealed the district court ruling to the U.S. Court of Appeals for the Second Circuit. The appeal will continue to shape the FTC’s substantiation doctrine, particularly around how flexible the CRSE standard is in practice. If the district court’s decision is upheld on appeal, it could mean that the FTC and state regulators with statutes similar to the FTC Act will face additional scrutiny when bringing complaints alleging that an advertiser’s claims are false or unsubstantiated. Private plaintiffs have often faced such scrutiny over their pleadings and cases are regularly dismissed based on findings of implausibility, but regulators have not faced the same scrutiny over allegations they put forth. Should the district court’s decision be upheld, this action could temper FTC enforcement actions against companies for using substantiation that the FTC considers as novel or where experts disagree as to how the scientific research should be interpreted.
Megan Olsen is Assistant General Counsel at the Council for Responsible Nutrition (CRN) where she advises on legislation, regulatory compliance and advocacy, and international policy development. In addition, she works with CRN’s science department to prepare challenges to dietary supplement advertising through CRN’s Advertising Review Program with the National Advertising Division (NAD). Prior to joining CRN, Ms. Olsen held the position of special counsel for Wiley Rein LLP in Washington, D.C.
- The Food and Drug Administration (FDA) and state attorneys general also play an important role in regulating dietary supplement efficacy claims. FDA and FTC operate under an agreement, through which the FTC possesses primary enforcement responsibility for claims made in advertising, while FDA has primary enforcement responsibility for claims made on a product label or material accompanying the label. See Memorandum of Understanding between the FTC and FDA, MOU 225-71-8003 (Apr. 1971), https://www.fda.gov/AboutFDA/PartnershipsCollaborations/MemorandaofUnderstandingMOUs/DomesticMOUs/ucm115791.htm.
- Case No. 1:17-cv-00124-LLS (S.D.N.Y. Sept. 28, 2017).
- Federal Trade Commission, Dietary Supplements: An Advertising Guide (April 2001), https://www.ftc.gov/system/files/documents/plain-language/bus09-dietary-supplements-advertising-guide-industry.pdf.
- Id. at p. 9.
- Id. at pp. 3 and 8.
- See e.g., FTC v. Iovate Health Sciences USA, Inc., Case No. 10-CV-587 (W.D.N.Y July 29, 2010) (Stipulated Final Judgment); Nestle HealthCare Nutrition Inc., FTC File No. 092-3087, Agreement Containing consent Order (July 14, 2010).
- See e.g., U.S. v. Bayer, Case No. 23:07-cv-00001-JLL-JAD (D. NJ Sept. 24, 2015) (Opinion) (finding that “placebo-controlled, double-blind testing is not a legal requirement for consumer products” and that “something less may do”); POM Wonderful, LLC v. FTC, Case No. 13-1060 (DC Cir. 2015) (making clear that studies that do not meet the RCT standard may still have value in substantiating health-related, dietary supplement efficacy claims).
- Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 n. 3 (2007).
- Other defendants included subsidiaries of Quincy Biosciences and individual officers of these companies.
- Quincy Bioscience Holding Co., Case No. 1:17-cv-00124-LLS (Complaint for Permanent Injunction and Other Equitable Relief Jan. 9, 2017).
- The complaint also alleges that Quincy’s actions violated Sections 349 and 350 of New York General Business Law and Section 63(12) of the New York Executive Law; however, as the New York allegations were dismissed for non-substantive reasons, this article only focuses on the court’s treatment of the alleged violations under the FTC Act. Once the district court dismissed the FTC’s complaint brought under federal law, the court found that there was no basis to exercise supplemental jurisdiction over the state law claims. Thus, the court declined to rule on the merit of the New York state law claims, finding that this decision would be better decided by New York state courts.
- Quincy Bioscience Holding Co., Inc., Case No. 1:17-cv-00124-LLS (Memorandum of Law in Support of Defendants’ Motion to Dismiss Apr. 6, 2017).
- Quincy Bioscience Holding Co., Inc., Case No. 1:17-cv-00124-LLS (Opinion and Order Sept. 28, 2017).
- Id. at 12 quoting Iqbal, 556 U.S. at 678.
- Id. at 10.