Consumer Law & Policy Blog

A debate on off-label drug promotion, the limits of FDA regulation, and the First Amendment

Is off-label drug promotion--promotion of drugs for uses other than those approved by the FDA -- good, bad, or something in between? What can the FDA do to curb off-label promotion by drug sellers consistent with the First Amendment? Law professors Stephanie Greene and Lars Noah have recently debated the issue in writing in Off-Label Drug Promotion and the First Amendment published in the University of Pennsylvania Law Revew.

The Greene-Noah debate was spurred by the Second Circuit's December 2012 decision in United States of America v. Caronia, which held, 2-1, that a drug-industry sales representative who promoted a drug's off-label use (and was criminally convicted under federal law) "was convicted for his speech." That, the court majority said, violated the First Amendment, and so the court reversed the conviction. The majority stressed that the off-label use itself was lawful.

We have covered the Caronia decision here, here, here, and here.

Here is the abstract of the Greene-Noah debate:

Off-label promotion — pharmaceutical manufacturers’ marketing of FDA-approved drugs for unapproved uses — is considered a First Amendment right by some, a threat to the safety and effectiveness of pharmaceutical drugs by others. Although off-label prescription is legal and often beneficial, the Federal Food, Drug, and Cosmetic Act (FDCA) and corresponding FDA regulations effectively prohibit off-label promotion. The FDA can look to statements by pharmaceutical representatives as evidence of a drug’s intended use, thereby placing manufacturers that promote off-label in a Catch-22: the drug will be subject to the FDCA’s misbranding provisions if manufacturers add labeling instructions for that intend- ed use, but also if they fail to add those instructions. To legally promote a new intended use, pharmaceutical companies must satisfy the FDA’s rigorous approval process. In United States v. Caronia, the Second Circuit Court of Appeals ruled that the FDCA could not be interpreted to prohibit truthful, off-label promotion.

Professors Stephanie Greene and Lars Noah debate the constitutionality of the FDA’s prohibitions in light of Caronia and the Supreme Court’s increased deference to commercial speakers’ First Amendment rights. Professor Greene argues that Caronia was wrongly decided because the court failed to scrutinize the nature of off-label promotion. Greene contends that the truthfulness of off- label information is "speculative, unknown, or inaccessible," and that the FDA’s restrictions on off-label promotion serve two substantial interests: ensuring that both doctors and consumers receive accurate, scientifically based information, and assuring that drugs have been proven safe and effective. Professor Noah questions Greene’s assumption that promotion of off-label drug uses is pre- sumptively untruthful or misleading. He argues that Supreme Court precedent cuts against Greene’s position, and that the FDA’s restrictions on off-label promotion are unconstitutionally broad because they prevent drug manufacturers from disseminating even truthful and nonmisleading information, and because the FDA could accomplish its goals through less-speech-restrictive means.

Hartzog & Solove on the FTC and Data Protection

Woodrow Hartzog of Samford's Cumberland School of Law and Stanford's Center for Internet and Society and Daniel J. Solove of George Washington have written The Scope and Potential of FTC Data Protection, 83 George Washington Law Review (2015, Forthcoming).  Here is the abstract:

For more than fifteen years, the Federal Trade Commission (FTC) has regulated privacy and data security through its authority to police deceptive and unfair trade practices as well as through powers conferred by specific statutes and international agreements.  Recently, the FTC’s powers for data protection have been challenged by Wyndham Worldwide Corporation and LabMD.  These recent cases raise a fundamental issue, and one that has surprisingly not been well explored: How broad are the FTC’s privacy and data security regulatory powers?  How broad should they be?

In this article, we address the issue of the scope of FTC authority over privacy and data security, which together we will refer to as "data protection"  We  argue that the FTC not only has the authority to regulate data protection to the extent it has been doing, but it also has the authority to expand its reach much more.  Normatively, we argue that the FTC’s current scope of data protection authority is essential to the United States data protection regime and should be fully embraced to respond to the privacy harms unaddressed by existing torts, contracts, and statutes.  For example, the FTC can regulate with a much different and more flexible understanding of harm that one focused on monetary or physical injury. 

Thus far, the FTC has been quite modest in its enforcement, focusing on the most egregious offenders and enforcing the most widespread industry norms.  The FTC should push the development of the norms a little more (though not in an extreme or aggressive way).  We also discuss steps the FTC should take to change the way it exercises its power, such as greater transparency and more nuanced sanctioning and auditing.

More From Mullenix on Aggregate Litigation

On Monday, Brian posted a link to Linda Mullenix's article, Ending Class Actions as We Know Them.  But Professor Mullenix has more thoughts on aggregate litigation, appearing in Reflections of a Recovering Aggregationist, 15 U. Nev. L. Rev., (2014 Forthcoming).  Here's the abstract:

The past fifty years have experienced a radical reformation of civil litigation in American federal courts, with the judiciary and the rulemakers constantly attempting to conform civil procedure to the changing landscape of modern technological society. Beginning with the landmark rule revision package of 1966, which amended the entire array of joinder rules, federal civil procedure since then has been in a constant state of revision, amendment, and doctrinal elaboration. Many of the federal civil rules have been modified in some fashion; with some rules undergoing wholesale rewriting, while others have experienced tinkering at the edges. Moreover, throughout this period the courts have continued to amplify (or obfuscate) doctrines of personal and subject matter jurisdiction, pleading, and applicable law, with each new elaboration raising public policy debates surrounding access to justice.

Perhaps one of the most significant developments in the past fifty years has been the advent and domination of the litigation arena by large scale aggregate litigation. Spurred on by the 1966 amendment to the class action Rule 23 and the enactment of a multidistrict litigation statute in 1968, the litigation landscape in the 1970s experienced the first rush of public law and institutional reform litigation. This was followed swiftly by onslaught of mass tort litigation, which cases dominated public policy debates of the 1980s and 1990s. By the turn of the twenty-first century, the mass tort class action gave way to second and third generation aggregate litigation, with multidistrict litigation and aggregate settlement procedures prevailing as a preferred mechanism for resolving large-scale complex litigation.

Champions of the twenty-first century aggregate dispute resolution mechanisms largely base their policy arguments on rhetoric similar to that first advocated during the heyday of mass tort litigation in the 1980s. Advocates of current MDL procedures, settlement classes, non-class settlements, and the quasi-class action have imported rationales that were used to justify novel class action techniques during the 1980s. Ironically, however, proponents of the new aggregate litigation techniques point to the failure of the class action rule as a primary justification for the deployment of non-class aggregate techniques to resolve multiple claims.

This article questions the wisdom of engrafting the rhetoric and rationales that justified the mass tort litigation movement of the 1980s to support novel aggregate litigation mechanisms in 2015. It concludes that the current twenty-first century aggregation movement, with its roots in the 1980s mass tort litigation crisis, has devolved into problematic mass claims settlement mechanisms of dubious fairness and troubling process concerns.

Servicing of federal student loans

Professors Eric Fink and Roland Zullo have written Federal Student Loan Servicing: Contract Problems and Public Solutions

Here is the abstract:

One consequence of the 2007-2008 financial crisis was an abrupt shift from bank-based to direct federal student loans. This momentous change required the Department of Education to rapidly establish the capacity to service loans, which was achieved by outsourcing this responsibility to four large for-profit firms and a group of smaller regional entities. Loan servicing involves routine payment processing, account management and borrower communication, as well as the non-routine yet more labor intensive role of assisting borrowers that face hardship with debt repayment. Borrowers have expressed dissatisfaction with the present system. Complaints jumped significantly in the first two years of the loan servicing contracts and remain at historic highs. Problems with loan servicers have been a significant factor in these complaints. Both the Education Department and the Consumer Finance Protection Bureau have identified questionable practices regarding how servicers process and credit loan payments, and their failure to provide adequate advice and assistance for borrowers with delinquent and distressed loans. To understand why the system is underperforming, we examine the public-private contracting system for student loan servicing, and conclude that the contract terms establish incentives to reduce operational costs that far outweigh the incentives to be responsive to the needs of borrowers. This case illustrates the inherent limitations of performance-based contracts as an administrative tool. Regardless of design, contractors will strive to minimize operational commitment to any labor-intensive task, in this instance attending to the personal needs of borrowers. We identify two remedies improving the efficiency and responsiveness of student loan servicing. The first is more robust contract monitoring and contractor performance oversight by the office of Federal Student Aid (FSA). The second is the establishment of a public loan-servicing unit that would raise standards by competing against the private loan-servicing agents. While these two options are not mutually exclusive, we view the latter as having the greatest potential to improve the student loan servicing system. The concept of loan servicing as a government function is not novel. The Department of Agriculture, for instance, successfully issues and services farm loans. A similar function can be established within a federal agency for student loans. The loan servicing function could be added to FSA's existing role under the Direct Loan program, or assigned to another federal agency, such as the Treasury Department or the Internal Revenue Service. We identify some particular advantages in assigning this function to the United States Postal Service, which has a history of providing financial services, manages an accessible retail network, and enjoys a favorable image among the public.

Free Speech Bullying by Ubervita

Ars Technica reported recently that Chief Judge Marsha Pechman of the Western District of Washington had ordered the identification ("unmasking") of hundreds of Amazon users who posted comments critical of the "nutritional supplements" sold by the company “Ubervita.”  The article was completely accurate but the headline was somewhat overstated – Judge Pechman had only authorized early discovery through subpoenas to Amazon and Craigslist, which presumably could have been subject to motions to quash if the anonymous defendants were able to retain counsel.   We were concerned, however, because the early discovery had been authorized even though the motion was exceptionally bareboned, without any showing of legal and evidentiary merit, as required by the Dendrite rule, and because Ubervita’s moving papers, and Judge Pechman’s early discovery order, had been maddeningly unspecific about which critical comments were the subject of Ubervita’s claims of product disparagement and unfair competition.  The complaint itself cited a couple of adverse comments but went on to allege that there were many other criticisms, unspecified, whose authors were Doe defendants.  This unspecificity violated the prong of the Dendrite test that requires the precise actionable words to be spelled out.  

Even worse, Ubervita had started invoking Judge Pechman’s decision to post responses to critical comments, including comments made AFTER the lawsuit was filed which therefore could not have been alleged in the lawsuit to be false and defamatory, warning that Ubervita was suing its critics and inviting commenters to conduct a Google search to learn about the case – presumably, directing them to the Ars Technica article that warned of the supposed “unmasking” order.  (I have linked above to PDF's of the threatening comments, not to the comments on Amazon's site, because Amazon has been removing them).

In response to a request for representation by one of Ubervita’s anonymous critics, we decided to ask Judge Pechman to reconsider her blanket grant of leave to take early discovery of the identity of every Ubervita critic.  In response to my request to meet and confer about this discovery motion, Ubervita’s lawyer, Mike Atkins, explained that his client’s main objective was to identify the individuals, believed to be connected with a competitor, who had placed phony bulk orders of his client’s product on Amazon, causing the product to be shown as out of stock, and who had placed a phony ad on Craigslist, purporting to be from his client, offering to pay for positive Amazon reviews, and then posted a commentary on Amazon pointing to that ad immediately after it appeared.   To avoid our motion for reconsideration, Atkins agreed to limit his subpoena to Amazon to those issues, thus protecting the larger group of Ubervita critics.

CFPB proposes adding narratives to complaint database

The CFPB’s Consumer Complaint Database is a publicly accessible, online database of consumer financial complaints. It includes anonymous information about the complaints received, including the date of submission, the consumer’s zip code, the relevant company, the product type, the issue the consumer is complaining about, and the company’s response. Although when a consumer enters information he or she may provide a narrative, to date, the publicly accessible database has not included narratives.

Yesterday, the CFPB issued a proposal to add consumers’ narrative descriptions to the public database. The proposal would also allow the company about which the consumer is complaining to submit a narrative response that would appear next to the consumer's narrative.

The CFPB explained: “Publishing consumer narratives would provide important context to the complaint, help the public to detect specific trends in the market, aid consumer decision-making, and drive improved consumer service.”

Industry representatives have in the past opposed including narratives in the database (although they have also opposed from the start including any specific information at all).

Stark et al. Article on Reverse Mortgages

Debra Pogrund Stark of John Marshall, Jessica M. Choplin a DePaul psychologist, Joseph A. Mikels, also a DePaul psychologist, and Amber Schonbrun McDonnell have written Complex Decision-Making and Cognitive Aging Call for Enhanced Protection of Seniors Contemplating Reverse Mortgages, 46 Arizona State Law Journal (2014).  Here is the abstract:

This article explains what reverse mortgages are and how they work. It also analyzes who could potentially benefit from them, but why this type of loan is so problematic for many seniors. The article then considers steps that can be taken to improve the effectiveness of current federal rules and counseling protocols to enable seniors to make well-informed decisions keeping in mind cognitive barriers and the complicated nature of this loan product.

Because many seniors may not be noticing the high costs associated with federally insured reverse mortgages, many believe these loans are now the product of choice for “predatory lending.” 

House Hearing on Operation Choke Point

In March 2013, the Department of Justice revealed that it was working with banking regulators to prevent fraudsters from accessing consumer bank accounts by choking off their access to electronic payments. DOJ calls the program "Operation Choke Point." See prior blog posts here and here.

The Operation has come under attack from Republicans in Congress who accuse DOJ targeting disfavored businesses, such as credit repair services, payday lenders, and gun dealers. Yesterday, DOJ officials testified before a House Financial Service’s Subcommittee on Oversight and Investigations to explain and defend the program. While one House Member declared that the program “represented an attack on businesses engaged in lawful activity,” DOJ official countered: “Our policy is to investigate specific conduct, based on evidence that consumers are being defrauded—not to target whole industries or businesses acting lawfully, and to follow the facts wherever they lead us, in accordance with the law, regardless of the type of business involved. We think this endeavor demonstrates the importance of holding financial institutions accountable when they participate in fraudulent activities.”

The written testimony of the four witnesses—from DOJ, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency—is available on the Committee’s website, along with a webcast of the hearing. A related hearing held by the same House Committee later that day included 6 witnesses for banking institutions and 2 for consumer advocacy groups.

News coverage of the hearing and of operation Choke Point reflects vastly different perspectives. For example, the Huffington Post article on the hearing is entitled “Darrell Issa's Latest Circus Has Lawmakers Shocked That DOJ Fights Fraud.” In contrast, a blog post on The Hill is entitled “Congress needs to choke off Operation Choke Point.”

The Hill: House rebuffs bid to limit congressional review of CFPB

by Jeff Sovern

Here.  To see why it is important to keep the CFPB's budget out of the appropriations process (just as with the other bank regulators), here's an excerpt from one of our posts from 2011 (the more things change, . . . ):

To see why this matters, you have only to read New York Times reporter Gretchen Morgenson's book (written with Joshua Rosner), Reckless Endangerment (2011).  The authors explain, at pages 28-29, that when Congress created the Office of Federal Housing Enterprise Oversight (OFHEO) to regulate Fannie and Freddie in 1992, Fannie lobbied to have OFHEO subject to annual appropriations by Congress.  The authors state:

The overseer would have to beg for money to operate. . . . [That, together with other constraints,] allowed Fannie to shift the power of oversight to congressional subcommittees, run by members who could be easily swayed by the company's lobbying efforts and campaign contributions.  Once his company's oversight was in the hands of Congress, [Fannie chief executive James A.] Johnson knew that he could work behind the scenes to derail any restrictions on the company's activities that OFHEO might suggest.

We all know how that ended.  OFHEO's efforts to regulate Fannie Fannie and its fellow enterprise Freddie failed miserably.  Fannie and Freddie needed a bailout of something like $160 billion, and OFHEO has since been replaced by a new regulator.  So this is really an attempt to enable financial institutions to regulate their regulator, the CFPB, and prevent effective consumer protection.

Arbitration Clauses Let American Apparel Hide Misconduct

That's the title of this piece by Steven Davidoff Simon. The piece describes how the American Apparel company hid sexual harrasment through a pre-dispute mandatory arbitration clause that it forced on its employees. Hat tip to Paul Bland.