Sunday, September 28, 2008

Shining light on false advertising allegations

Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 2008 WL 4367554 (S.D. Ind.)

Anodyne has the rights to an infrared lamp that is supposed to relieve pain and improve circulation—light-emitting diodes are placed in direct contact with a patient’s skin. (Comment: I find this freaky in the extreme, but then I dislike sunlight.) Anodyne made a professional model, the 480, marketed to health-care providers such as doctors and nursing homes, as well as a home model, the 120. The 120 had fewer LED-containing pads, a lower energy level than the 480, and non-adjustable power levels. Anodyne marketed the 120 indirectly, through health-care providers who used the 480.

The lamp is a Class III medical device and thus required premarket approval from the FDA, which it received “for relief of minor muscle and joint pain and improvement of superficial circulation” in 1994. Sometime after the turn of the century, Anodyne began marketing the device as a treatment for peripheral neuropathy and other conditions, including wound care. Peripheral neuropathy is a painful condition involving decreased circulation.

In 2004, Nightingale bought four 480 lamps. Anodyne’s statements are in dispute, but at least it represented that the lamp treated peripheral neuropathy; that the lamp was FDA-approved; and that Anodyne was working on getting Medicare to reimburse for the device. Nightingale actively marketed and promoted the lamp to its patients and the general public, and had good experiences with using the lamp to treat peripheral neuropathy, so it bought more units.

Then the FDA sent a warning letter to Anodyne about its marketing, noting that the lamp was only approved for minor conditions and that Anodyne’s promotion for unapproved uses rendered the device “adulterated.” Anodyne revised its marketing, but didn’t tell Nightingale, instead running a special promotion to sell more lamps. Nightingale didn’t find out (from another source) until it had bought 4 or 5 more lamps. Then Medicare ruled that the lamp wouldn’t be covered; Anodyne had to change its marketing materials, which included statements that Medicare reimbursement codes had been assigned, that some reimbursements had been made, and that Anodyne was actively working towards coverage.

Nightingale sued, arguing that Anodyne’s misrepresentations left it stuck with a number of machines for which it could never receive reimbursement.

Anodyne argued that Nightingale lacks standing, because it’s a consumer and not a competitor. Nightingale responded that it and Anodyne compete for the same dollars for treatment of peripheral neuropathy; every sale of a 120 to an individual costs Nightingale sales of its more comprehensive in-home services for treatment of peripheral neuropathy. Anodyne countered that Nightingale promoted Anodyne’s lamp and could still use it to treat peripheral neuropathy even though it legally couldn’t be promoted for that purpose.

The court noted that Anodyne didn’t provide statistics or studies on lost sales, and it seemed likely that such an impact would be small, but its basic argument was reasonable and the Lanham Act doesn’t seem to have a threshold for the amount of competitive injury. Thus, Nightingale had standing.

However, Nightingale couldn’t show a false statement of fact. It focused on two alleged statements: (1) that the lamp treats peripheral neuropathy, and (2) that the FDA approved the device for such treatment. First, statement (2) wasn’t made in commercial advertising, only in a statement from Anodyne’s sales rep to Nightingale. (Case law suggests that a consistent practice of sales reps of saying this would indeed count as “advertising or promotion,” but it doesn’t seem like the lawyers in this case spent a lot of time citing Lanham Act precedents.) Second, statement (1) is not false, according to the court. Nightingale’s falsity argument depended on the fact that the lamp isn’t FDA-approved to treat peripheral neuropathy and that it provides only symptomatic relief, rather than treatment or cure.

The court found that Nightingale misunderstood the role of FDA premarket approval for Class III devices. Premarket approval requires a statement of the disease or condition at which the device is aimed and the patient population for which it is intended; approval will be denied if there’s no showing that the device is safe and effective under the proposed conditions of use. Premarket clearance, therefore, covers only the indications declared by the applicant. Here, the lamp’s approval was limited to “relief of minor muscle and joint pain and improvement of superficial circulation,” which set the boundaries of permissible marketing for the lamp. But that doesn’t mean that the lamp is ineffective or dangerous for treating peripheral neuropathy. Anodyne violated FDA rules on promoting its device, but health care providers can prescribe or administer any legally marketed device to any patient without violating FDA rules. There’s simply no evidence that the lamp was not safe and effective for peripheral neuropathy. And “treatment” can include mere symptomatic relief, so it might be the case that the lamp "treats" peripheral neuropathy.

Comment: here, the court’s relative lack of reliance on Lanham Act precedent served it quite well. Courts often get tangled up in hair-splitting and pin-dancing about preemption, when the question of the relationship between the FDCA and the Lanham Act can be better navigated by asking whether failure to comply with the FDCA or FDA rules means that an ad claim is false, without more evidence, or whether the plaintiff ought to be required to submit independent evidence of falsity.

For similar reasons, Nightingale’s breach of contract claim largely failed, though its allegation of breach of warranty that the lamps were FDA-approved to treat peripheral neuropathy proceeded. Nightingale’s fraudulent misrepresentation claims regarding what Anodyne said about Medicare reimbursement also survived because of factual disputes.

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