WASHINGTON Industry lobbyists last week weighed in on a Ninth Circuit ruling that allowed for a class action lawsuit to proceed against Matrixx Initiatives because that company failed to disclose adverse event reports to its shareholders.
Both the Consumer Healthcare Products Association and the Council for Responsible Nutrition — and separately, the Natural Products Association — filed supporting briefs to the U.S. Supreme Court arguing that the mere nondisclosure of adverse event reports should not give rise to liability under federal securities laws without applying a statistical significance standard. The Supreme Court had agreed to place the case on its docket in June.
The statements were in regard to Matrixx Initiatives vs. James Siracusano and NECA-IBEW Pension Fund.
“The statistical significance standard recognized by most courts of appeals appropriately recognizes that adverse event reports, standing alone, are not ‘material’ for purposes of federal securities laws,” CHPA/CRN wrote in its amicus curiae. “The statistical significance standard addresses the quality of the evidence of a relationship between an adverse event and a product, and therefore it is not the kind of ‘bright-line’ rule that [the Supreme] Court rejected in Basic Inc. vs. Levinson, 485 U.S. 224 (1988).”
"The practical consequence of the Ninth Circuit's decision, if it is not reversed, is that manufacturers … very likely will be forced to disclose all AERs, however insignificant, in order to avoid meritless — but expensive — strike suits against the supplement industry," said Jonathan Cohn, who authored NPA’s separate amicus curiae.
CHPA/CRN also argued that the indiscriminate disclosure by public companies of all adverse event reports potentially associated with their products before being actually scientifically vetted may negatively impact consumer selection in one of two ways: Either a consumer will buy wholeheartedly into the alleged link between the use of a particular product and potential harm, and choose not to medicate or supplement with a product that could improve his or her health, or, conversely, a consumer may become so inundated with reports of AERs that he or she becomes numb to the announcements.
“The Food and Drug Administration has recognized that ‘overwarning’ has the effect of not warning at all, because the reader stops paying attention to excess warnings,” CHPA/CRN wrote in their brief.
"The [Ninth Circuit] decision is wrong because evaluation of safety signals is a scientific judgment ultimately made by the FDA,” stated John Gay, executive director and CEO of the NPA in a press release issued Friday. “Companies cannot possibly guess in advance what will be deemed adequate disclosure years later in collateral litigation," added Scott Bass, a partner at Sidley Austin, which is counsel for NPA. "The [Dietary Supplement and Nonprescription Drug Consumer Protection Act] explicitly states that AERs are not proof of causation."
Gay added, "The Ninth Circuit's action is not good for manufacturers, not good for consumers and just is not good law. We hope the Supreme Court will agree."