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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 32 May 2008 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: Regulatory Focus 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 34 May 2008 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 Regulatory Focus 35 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. 36 May 2008