Download Regulatory Policies Germane to FTC Oversight of Healthcare

Regulatory Policies Germane to
FTC Oversight of Healthcare
Product Advertising and Promotion
By Philipp Novales-Li, DMedSc, PhD, DPhil (Oxford), RAC (US, EU, CA)
T
he Food and Drug Administration
(FDA) and Federal Trade Commission
(FTC) have a symbiotic relationship in
overseeing US healthcare product advertising
and promotion. As a general rule, FTC regulates
advertising for foods, over-the-counter drugs,
dietary supplements, medical devices and
cosmetics. FDA regulates the labeling for these
products, as well as advertising and labeling for
prescription drugs and restricted devices. This
article focuses on advertising and promotional
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issues that are within FTC’s jurisdiction.
In brief, the Federal Trade Commission Act
(FTC Act) requires that advertising claims:
• be truthful and not deceptive
• are able to be substantiated
• cannot be unfair
In determining whether a claim is deceptive,
FTC looks at whether the advertisement is likely
to mislead consumers when they act reasonably
under normal circumstances, as well as if the
claim was material in the consumer’s decision
to use or buy the product. However, even if an
advertisement’s claims are true and not deceptive,
the company sponsoring the advertisement
must also have a reasonable basis (i.e., objective
evidence) for substantiating the claims. Healthcare product claims of safety and efficacy must be
substantiated by competent and reliable scientific
data, such as lab tests, user studies, etc. Finally,
FTC deems an advertisement to be unfair if it
causes or is likely to cause substantial injury to
the consumer, and claims are not outweighed by
benefits to consumers.
Specific advertising and promotional issues
relevant to medical device and pharmaceutical
companies are further described below.
Comparative Advertising
As a practical matter, FTC allows comparative
brand advertising that makes mention of or
reference to competitors. The commission
supports this kind of promotional activity
since it believes brand comparisons provide
important information to end users that assist
them in making purchasing decisions. Moreover,
comparative advertising may result in competitive
product pricing and product improvement
and innovation by encouraging a company to
incorporate additional features and benefits in its
product to keep up in the competitive landscape.
Comparative advertising must not only be
truthful and accurate, but it must also display
clarity of message, and if necessary, also include
disclosures to preclude consumer deception.1
Some industry codes may prohibit
such practices as disparaging or discrediting
competitors, which may restrict comparative
advertising. Despite this, FTC holds the view that
“disparaging” advertising is permissible as long as
the content is truthful and not deceptive. Similarly,
some industry codes or self-regulating entities may
require a higher standard of substantiation for
comparative advertising claims. As far as FTC is
concerned, such higher standards of substantiation
are inappropriate since it applies the same
substantiation standards to comparative advertising
as it does to other promotional practices.
Bait and Switch Advertising
This is a tactic where a seller lures a customer by
advertising products and services at a low price;
then, once the customer contacts the seller, he or
she is told that the product/service of interest is out
of stock or of inferior quality. The seller then tries
to persuade the customer to purchase a better, more
expensive available substitute. In short, the seller had
no intention of selling the advertised item.
As a matter of policy, FTC prohibits bait
advertising. It is illegal to advertise a product
when the offer is not a bona fide effort to sell
it. The commission takes the following factors
into consideration in determining whether the
advertisement is a bona fide offer to sell:
• refusal to sell the product under the
terms of the offer
• disparagement of the advertised product
• failure to have a sufficient stock of the
advertised product to meet reasonably
anticipated demands
• refusal to take orders for the advertised
product
• product demonstrations using a
defective or unusable product
• sale or commission plan that discourages
selling the advertised product2
Endorsements and Testimonials
Endorsements and testimonial advertising refer to
a promotional tool that uses positive testimony
from an individual who has tried a product and
been satisfied with it. The endorsement may
be in the form of a statement or letter, and the
individual may be a celebrity, subject matter
expert or satisfied customer appearing as an
impartial “person in the street.” Testimonial
advertising is intended to encourage prospective
customers to try a product that has been endorsed
by an impartial consumer, a celebrity or an expert
whom the consumer may wish to emulate.3
FTC allows endorsements and testimonials
as promotional practices as long as they reflect
the endorser’s honest opinions, findings, beliefs or
experience. Other general considerations for this
type of advertising are:
• representations should not be deceptive
• endorsement must be substantiated if
made directly by the advertiser
• the endorsed message may be
paraphrased, but must neither be
presented out of context nor reworded
to distort the endorser’s opinion
• the endorsement may continue to be
used in advertising so long as the sponsor
has good reason to believe the endorser
remains a bona fide user of the product
Since the endorser can be a consumer, subject
matter expert, organization or celebrity, additional
requirements are relevant to each party. These are
elaborated as follows:
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33
Consumer Endorsements
Lay endorsements of drug or device efficacy must
be consistent with claims approved or cleared
by FDA, and the advertiser must be able to
scientifically substantiate such claims.
Further, an individual’s or consumer group’s
experience must reflect what the advertised
product is expected to achieve, even when
used in actual (but variable) conditions. If the
endorsement does not depict a product’s generally
expected performance, the advertiser needs to
clearly and conspicuously disclose the fact that the
testimonial is based upon the endorser’s limited
experience. Disclosures such as “Not all consumers
will get these results” or “results may vary” are not
sufficient since these do not conform to acceptable
disclosure and disclaimer policies. Finally, if actors
are used in lieu of actual consumers, this fact
should be disclosed in the advertisement.
Expert Endorsements
A subject matter expert endorser’s qualifications
must be sufficient and consistent with a field
related to the product. For example, although a
software engineer is, by profession, an “engineer,”
this qualification would not be sufficient to
endorse an IVD image analysis system for
which a biomedical engineer would be more
appropriate. Further, expert endorsements must
be substantiated by an actual product evaluation,
examination or test that other experts in the
field normally would conduct to support the
endorsement’s findings.
Celebrity Endorsements
These must reflect a celebrity’s actual experience
or opinion. If the celebrity claims to use the
product, he or she must actually do so. The
advertiser is also responsible for ensuring that
the advertisement is current, i.e., the celebrity
endorser continues to support the experience or
opinion. (Note: Any payment made to or any
material connections with the celebrity endorser
need not be disclosed in the advertisement, as
long as the advertiser does not claim that the
endorsement was given without compensation.)
Organization Endorsements
This endorsement typically is the view of a
collective group of experts, whose experience
exceeds that of any individual member. Since
an organization’s endorsement is deemed to
be objective, it must reflects its collective
judgment and be supported by an evaluation
conducted by an expert (or experts) recognized
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by the organization or through compliance with
acknowledged standards.
Free Claims and Rebate Offers
Free claims are promotional offers such as:
“Free,” “Buy One, Get One Free,” “2-for-1 Sale”
or “50% Off With Purchase of Two.” Rebates,
on the other hand, refer to payments made
back to the purchaser; they are also referred to
as allowances and incentives. Offering a “free”
product (or offering it at a lower cost) must be
based upon the product’s regular price, and must
indicate that the consumer is paying no more
than the regular price for the product, while
paying nothing to purchase another product
tied to the offer. The advertisement should also
clearly and conspicuously disclose the offer’s
salient terms and conditions. So as not to dilute
the impact of this type of promotion, “free” offers
should not be advertised in a trade area for more
than six months in a given 12-month period. At
least 30 days should elapse before a similar offer
is promoted in the same trade area, and no more
than three such offers should be made in the
same area in any 12-month period.
Rebate promotion advertisements should
prominently disclose the before-rebate costs, as
well as the rebate amount. Rebate promotions
should also disclose the offer’s full terms and
conditions, such as purchase requirements,
additional fees and when consumers can expect to
receive rebates.4
Country-of-Origin Claims
Disclosing a product’s country of origin can be a
useful promotional strategy, since some consumers
may be wary of the safety and/or efficacy of
products made outside the US and prefer to buy
American-made products. In addition, most
government contracts require country-of-origin
disclosures and may limit foreign-origin purchases
to a percentage of the total.
In brief, a US-origin claim means the
advertised product is “all” or “virtually all” made in
the US. Ordinarily, this means that all significant
parts and processing of a product are of US origin,
or that the product contains negligible foreign
content. Further, the product’s final assembly or
processing must take place in the US. (Note: FTC
also considers other factors, such as proportion
of US manufacturing costs and remoteness of
foreign content when determining whether
country-of-origin claims are truthful and can be
substantiated.) In addition to standard country-oforigin language, such as “Made in USA” or “Our
products are American-made, an advertiser may
make qualified claims, such as: “Made in USA of
US and imported parts” or “Manufactured in US
with Chinese components.”5
“New” Product Claims
A company may advertise a healthcare product
as new, a claim that is sometimes presented in
promotional materials or indicated in package
labeling. Although FTC does not have a policy
on the allowable time period for continuing to
using this promotional claim, one FTC advisory
committee suggested a six-month limit on its use
when advertising the introduction of a “new”
product not previously on the market.
Other Promotional Practices
Additional FTC policies on activities related to
the promotion of healthcare products include:
Contests and Sweepstakes
In addition to FTC, the US Postal Service and
Federal Communications Commission regulate
contests and sweepstakes promotions. Likewise,
each state may have its own laws requiring
advertisers to make disclosures, obtain a license or
post a bond for such promotional activities. As a
general rule, contests and sweepstakes promotions
that require a purchase by participants are illegal
in the US.
Guarantees or Warranties
If an advertisement makes claims such as
“satisfaction guaranteed” or “money-back
guarantee,” the advertiser must be willing to
give full refunds for any reason, and must also
disclose the full terms of the offer. If a warranty
is advertised, the advertiser must be able to
provide a copy of the warranty to the consumer
before the sale. Conditions or limits of
guarantees and warranties must also be disclosed
in the advertisement.
Internet Advertising
When the Internet is used as an advertising
medium by employing banner advertisements,
pop-up windows, hyperlinks, etc., many of the
same traditional advertising rules apply. To wit,
the advertisement must be truthful and not
mislead customers, and the claims must be fair, not
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deceptive and substantiated.6
Children’s Advertising
Since the pediatric population is more vulnerable
to certain types of deception, FTC scrutinizes
advertisements that target children. As a practical
matter, the truth-in-advertising standard (i.e.,
advertisement must be truthful and not deceptive)
when applied to developing claims in children’s
advertisements must be evaluated from a child’s
point of view, not an adult’s perspective.
Subliminal Advertising
This refers to advertisements that have appeal to
consumers’ unconscious awareness to influence
them to buy a product. Subliminal advertisements
allegedly work by flashing barely perceptible
messages to audiences between frames of an
advertisement or other visual program. FTC
considers this advertising technique deceptive.
Conclusion
Advertisements and promotional activities are
highly effective marketing tools to disseminate
product awareness, build a brand name and
establish market share. For healthcare products,
not only FDA but also FTC has jurisdiction over
these activities. Under FTC’s purview, running
a false or deceptive advertisement can lead to
adverse consequences, such as civil penalties,
monetary remedies, consumer redress, corrective
remedies and/or cease and desist orders imposed
against a company. Some factors FTC may
take into consideration when pursuing violative
advertisements include jurisdiction, geographic
scope, pattern of deception and consumer injury.
Similarly, FDA has the misbranding provision
as its enforcement tool for advertising and
promotional violations. As a proactive stance
to preempt noncompliance issues, regulatory
professionals must work with their sales and
marketing colleagues to ensure all stakeholders
within their companies are aware of relevant
policies impacting advertising activities. Keeping
up-to-date with current regulations at not
only FDA but also FTC is a prudent step.
Finally, regulatory professionals should take the
initiative to set up best practices and guidelines
to streamline compliance of their companies’
advertising and promotional activities. F
REFERENCE
1. Federal Trade Commission. Statement of Policy Regarding
Comparative Advertising. (www.ftc.gov/bcp/policystmt/
ad-compare.htm).
2. Federal Trade Commission. Guides Against Bait
Advertising. (www.ftc.gov/bcp/guides/baitads-gd.htm).
3. Federal Trade Commission. FTC Guides Concerning Use
of Endorsements and Testimonials in Advertising. (www.
ftc.gov/bcp/guides/endorse.htm).
4. Federal Trade Commission. FTC Guide Concerning Use
of the Word “Free” and Similar Representations. (www.ftc.
gov/bcp/guides/free.htm).
5. Federal Trade Commission. Enforcement Policy Statement
on US Origin Claims. (www.ftc.gov/os/1997/12/
epsmadeusa.htm).
6. Federal Trade Commission. Advertising and Marketing
on the Internet: Rules of the Road. (www.ftc.gov/bcp/
conline/pubs/buspubs/ruleroad.shtm).
AUTHOR
Philipp Novales-Li, DMedSc, PhD, DPhil (Oxford), RAC
(US, EU, CA), is Manager of Regulatory Affairs at Abbott
Diabetes Care Inc. He can be reached via email at
[email protected].
Disclaimer
The views and opinions expressed herein are of the author and in
no way represent the views and policies of the author’s past and
present affiliations.
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