Friday, October 12, 2018

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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