United States District Court, D. Oregon
For Plaintiff: S. Amanda Marshall, United States Attorney, Ronald K. Silver, Assistant United States Attorney, United States Attorney's Office, District of Oregon, Portland, OR ; Joyce R. Branda, Acting Assistant Attorney General, Jonathan F. Olin, Deputy Assistant Attorney General, Michael S. Blume, Director, Consumer Protection Branch, Jeffrey I. Steger , Assistant Director, Consumer Protection Branch, and Ann F. Entwistle, Trial Attorney, Consumer Protection Branch, United States Department of Justice, Washington, D.C.
For Defendants: John J.E. Markham, II, Markham & Read, One Commercial Wharf West, Boston, MA; Krista Shipsey, Law Office of Krista M. Shipsey, Portland, OR.
OPINION AND ORDER
Michael H. Simon, United States District Judge.
The Government brings claims against Defendants (" Maxam" or " JGCI" ) under the Federal Food, Drug, and Cosmetic Act (" FDCA" ). The gravamen of the Government's claims is that Defendants distribute in interstate commerce certain articles that are both unapproved new drugs and adulterated dietary supplements. The products are new drugs, the Government argues, because they are distributed with the intent that they be used to treat diseases, including Alzheimer's, HIV, and autism. And they are adulterated dietary supplements, according to the Government, because Maxam lacks the controls over its manufacturing processes mandated by the FDA's Current Good Manufacturing Practice (" cGMP" ) regulations for dietary supplements. The Government seeks summary judgment and a permanent injunction against Defendants to prevent further violations of the FDCA. For the reasons below, the Government's motion is granted.
A party is entitled to summary judgment if the " movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although " [c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge," the " mere existence of a scintilla of evidence in support of the [non-movant's] position [is] insufficient" to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). " Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).
On October 12, 2010, the FDA sent Defendants a letter warning them that their websites were making " disease claims" --claims that their products could be used to diagnose, cure, mitigate, treat, or prevent a disease. By making such claims, the FDA warned, Maxam was selling unapproved new drugs. Some (but not all) of the claims being made were in the form of testimonials from consumers. For example:
● " Try our oral chelation therapy called clathration for autism, Alzheimers, allergies, heavy metal detox and more." Ex. D-3 at 1 (non-testimonial).
● " Shown effective against latent residual viruses from old inoculations, measles, mumps, small pox, as well as HPV, EBV, CMV, HIV, etc." Ex. D-3 at 3 (non-testimonial).
● " I am happy to report that after only ten days of being on your product, I am seeing changes in the amount of facial paralysis." Ex. D-3 at 4 (testimonial).
On November 2, 2010, Defendants responded that they had believed that third-party testimonials were not proscribed disease claims, but that they had now removed all disease claims from their website.
In March 2012, the FDA inspected Maxam's manufacturing facility for compliance with cGMP regulations. The FDA discovered not only several cGMP violations, but also that Defendants continued to make several disease claims on their websites. The twleve cGMP-related findings were provided to Defendants at the end of the inspection in an FDA Inspectional Observations Form 483 (" Form 483" ), and the disease claims were pointed out in person during the inspection. On April 19, 2012, Defendants responded to the FDA's findings, assuring the FDA that all disease claims had been removed from their websites and outlining the steps that they would take to come into cGMP compliance.
On September 28, 2012, the FDA sent Defendants another letter warning them that the steps they had proposed were inadequate to bring them into cGMP compliance and that failure to come into compliance could result in an enforcement action. Defendant Cole responded personally on October 19, 2012, asserting with little explanation that Defendants' manufacturing processes had been brought into complete compliance.
From the end of January through early February 2013, the FDA again inspected Defendants' facility. This time, the FDA found sixteen violations of cGMP regulations, as well as, again, several websites making disease claims. Indeed, one such website had been taken offline after the previous inspection and then reinstated with the same disease claims after only a few months. After this inspection, Defendant Cole once again represented that all disease claims would be taken down and that the manufacturing processes would be brought into cGMP compliance.
As of August 19, 2014, however--almost a year after the Government filed this action in September 2013--Maxam's Facebook page still contained the claim that one of Defendants' products was effective to treat " environmentally induced cases of Alzheimer's, Autism, Fibromyalgia, and more." Ex. D-7 at 7. Indeed, as late as November 19, 2014, after Defendants filed their brief in opposition to this motion for summary judgment, their website contained claims that their products could " eliminate the toxins produced by unhealthy bacteria" and " counteract even overdose of otherwise lethal drugs." Dkt. 36 Ex. A. And the depositions of Defendants Cole and Graves, taken in early 2014, revealed that Maxam's manufacturing still had not been brought into cGMP compliance.
The Government's primary claims are that Maxam has introduced into interstate commerce unapproved new drugs, adulterated dietary supplements, and misbranded drugs. See 21 U.S.C. § § 331(d) & 355(a) (unapproved new drugs); § 331(a) (adulterated dietary supplements and misbranded drugs). Defendants do not contest that they have introduced their products into interstate commerce. The remainder of this Opinion addresses each claim in turn before addressing the Government's request for permanent injunctive relief.
A. Unapproved New Drugs
A product is a " drug" if it is " intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals." 21 U.S.C. § 321(g)(1)(B). " The vendor's intent is the key element in this statutory definition." United States v. Storage Spaces Designated Nos. 8 & 49 Located at 277 E. Douglas, Visalia, Cal., 777 F.2d 1363, 1366 (9th Cir. 1985). The vendor's intent can be evinced by " labeling claims, advertising matter, or oral or written statements by such persons or their representatives" or other " circumstances surrounding the distribution of the article." 21 C.F.R. § 201.128. In general, express or implied claims that a product can be used to diagnose, cure, mitigate, treat, or prevent a disease are evidence of a vendor's intent that the product be used for such purposes.
A drug is a " new drug" if it " is not generally recognized . . . as safe and effective for use." 21 U.S.C. § 321(p)(1). A new drug may not be introduced into interstate commerce without the approval of the FDA. § § 331(d), 355(a). Defendants do not argue that their products have been approved by the FDA or are eligible for any exception to FDA approval. See, e.g., § 321(p)(1). Therefore, if Defendants' products are drugs, they are unapproved new drugs.
Consistent with the Government's evidence, Defendants concede that they have in the past made claims that a product can be used to diagnose or treat a disease. Additionally, however, Defendants have marketed their products using " monographs" and " testimonials." " Monographs" list the ingredients purportedly contained in a Maxam product and then republish abstracts of studies claiming that those ingredients might be effective to treat certain conditions. " Testimonials" are allegedly sincere claims from customers that a product successfully treated some condition. Defendants now argue that monographs are permitted under a statutory safe harbor, that testimonials are protected speech under the First Amendment, and that they no longer make any other sort of disease claim.
Defendants argue that their monographs are permitted under 21 U.S.C. § 343(r)(6) as statements that " describe the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, [or] characterize the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function." § 343(r)(6)(A). Such statements, known as " structure--function claims," do not by themselves convert a product into a drug. See § 321(g)(1)(D).
Section 343(r)(6), however, establishes three additional requirements that a structure--function claim must meet to qualify for its safe harbor. First, " the manufacturer of the dietary supplement [must have] substantiation that such statement is truthful and not misleading," § 343(r)(6)(B); second, a form disclaimer must be prominently displayed with the statement, § 343(r)(6)(C); and third, the manufacturer must notify the FDA within 30 days of first marketing a supplement with such a statement, § 343(r)(6). Defendants rely on having supplied the required disclaimer. But the Government asserts that the required notification was not made, and Defendants do not dispute this assertion. That fact alone disqualifies Defendants' monographs from the safe harbor of § 343(r)(6).
Moreover, § 343(r)(6) contains its own overriding requirement that " [a] statement under this subparagraph may not claim to diagnose, mitigate, treat, cure, or prevent a specific disease or class of diseases." Thus, even a statement that otherwise meets the requirements of § 343(r)(6) is disqualified from the safe harbor if it makes a disease claim. Defendants argue that their monographs " do not make disease claims," but merely " provide identification of studies and resources to further research the ingredients" in their products.
Even if they do not make the claim explicitly, however, Defendants' monographs strongly suggest that the product they describe can treat a disease. See, e.g., Ex. C-4 (listing, inter alia, phosphatidylserine as an ingredient of the Maxam product " Neurogen" and republishing claims that phosphatidylserine could treat dementia and Alzheimer's disease). A disease claim made with a wink and a nudge is still a disease claim. To hold otherwise would create an " obviously wide loophole" that would defeat the " high purpose of the Act to protect consumers." See Kordel v. United States, 335 U.S. 345, 349, 69 S.Ct. 106, 93 L.Ed. 52 (1948). Accordingly, because Defendants' monographs contain disease claims and because Defendants did not timely supply the required notification to the FDA, Defendants' monographs cannot qualify for the safe harbor of § 343(r)(6).
Under the commercial-speech doctrine, speech that proposes a commercial transaction--commercial advertising--receives diminished First Amendment protection. Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66-68, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983). False and misleading commercial speech, as well as commercial speech concerning unlawful activities, can be punished or proscribed without violating the First Amendment. Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n, 447 U.S. 557, 563-64, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Commercial speech that falls outside of these categories is subject to intermediate scrutiny: the restriction must (1) be justified by a substantial government interest; (2) directly advance that interest; and (3) be no more extensive than necessary to serve that interest. Id. at 564.
Defendants argue that the testimonials they publish are true and non-misleading and that prohibiting such testimonials is more extensive than necessary to advance any government interest. Defendants' argument fails for two reasons. First, the FDCA does not prohibit disease claims as such; it prohibits the sale of products with a particular intent, and disease claims are merely probative evidence of that intent. See 21 U.S.C. § 321(g)(1)(B); 21 C.F.R. § 201.128. The First Amendment " does not prohibit the evidentiary use of speech . . . to prove motive or intent." Wisconsin v. Mitchell, 508 U.S. 476, 489, 113 S.Ct. 2194, 124 L.Ed.2d 436 (1993). When Defendants incorporate a customer testimonial into advertising material, they endorse and adopt the disease claims made in the testimonial; therefore, the testimonial is evidence of their intent that the product be used to treat disease.
Moreover, commercial speech concerning illegal activity enjoys no First Amendment protection. See Cent. Hudson, 447 U.S. at 563-64. Defendants' speech concerns an illegal activity--the introduction into interstate commerce of unapproved new drugs. See 21 U.S.C. § § 331(d), 355(a). Therefore, both because Defendants' speech is being used as evidence of their intent and because it concerns illegal activity, the First Amendment is not violated.
Defendants' past use of disease claims--long after the initial warning letter from the FDA in 2010--and their continued use of testimonials and monographs well into this litigation is ample evidence that Defendants intended that their products be used to diagnose, cure, mitigate, treat, or prevent disease. Defendants' products are therefore drugs, and their introduction into interstate commerce violated the FDCA. See 21 U.S.C. § § 331(d), 355(a).
B. Adulterated Dietary Supplements
The term " dietary supplement" is defined in 21 U.S.C. § 321(ff). For purposes of this action, a dietary supplement is a food that is " intended to supplement the diet" with vitamins, minerals, herbs, amino acids, and so on. § 321(ff). A dietary supplement is deemed to be " adulterated" if " it has been prepared, packed, or held under conditions that do not meet current good manufacturing practice [cGMP] regulations." § 342(g)(1). The Government need not show that a supplement deemed adulterated is actually dangerous or contaminated. See John D. Copanos & Sons, Inc. v. Food & Drug Admin., 854 F.2d 510, 514, 272 U.S.App.D.C. 101 (D.C. Cir. 1988). An adulterated dietary supplement may not be introduced into interstate commerce. § 331(a).
The FDA's cGMP regulations aim to ensure that a dietary supplement is what it says it is--that it has the identity, purity, strength, and composition it is represented to have. Rather than scrutinize finished products, however, the regulations are directed toward controlling production processes. Of relevance here, manufacturers must: (1) establish precise specifications for the identity, strength, purity, and composition of each component, 21 C.F.R. § 111.70(b); (2) test each incoming shipment of components to ensure it conforms to that specification, 21 C.F.R. § 111.75(a);  (3) for each product, detail each step of the manufacturing process ex ante in a formal Master Manufacturing Record (" MMR" ) document, 21 C.F.R. § § 111.205, 111.210; and (4) each time a batch is produced, document the execution of (and any deviations from) the MMR in a Batch Production Record (" BPR" ), 21 C.F.R. § § 111.255, 111.260.
The Government alleges and has presented evidence that Maxam's manufacturing processes violated each of these requirements. In particular, the Government has shown that Defendants have failed to establish a specification for the identity of each component; failed to verify, using an appropriate and scientifically valid test, the identity of each dietary ingredient; and, depending on the product, either provided incomplete MMRs and BPRs or failed to have MMRs and BPRs entirely.
The outlines of Maxam's manufacturing process are uncontested: (1) Maxam ships raw materials to one Dan West in Rockport, Massachusetts; (2) West combines the ingredients, ferments them, and returns to Maxam a dehydrated powder product; and (3) Maxam then hydrates that powder, packages it, and distributes it in spray bottles.
Defendants claim to " know each ingredient included in the fermentation process for each Maxam product, they keep that information as required in their records and they have provided that information to the FDA." In the next sentence, however, Defendants admit that the " exact measurements" for each ingredient are kept by West and can be obtained from him " if required." This is borne out by evidence submitted by both parties: the MMR for Defendants' " AFX" product, for example, supplies a list of ingredients, but no measurements of any sort. Ex. B-1 (Dkt. 24-1) at 7-8. The ingredient list for Defendants' " PCA" product is similarly deficient. Cole Ex. G (Dkt. 33-7) at 7-8. This alone is a violation of 21 C.F.R. § 111.210(c), which requires that an MMR include an " accurate statement of the weight or measure of each component to be used."
Defendants also advance a conception of their manufacturing process limited to the hydration phase, in which their ingredients are not the materials they send West, but the powders they receive from him. Defendants' MMRs do include measurements for West's powders. But Defendants have neither established the required specifications for those powders ...