September 1, 1997

New Bottles Old Whine -- On the Internet the Product and the Message Not the Medium Are Still the Key to Avoiding Government Regulation

8 min

This article can also be found in Electronic Retailing Magazine's July/August 1997 issue.

The Internet offers a theoretically limitless range of information to users savvy enough to master a few relevant computer skills and determined enough to persevere in their search. And, businesses have quickly grasped the enormous market potential of promoting and selling product through Internet web sites. In past columns we have written in detail about potential regulatory issues that face Internet marketers of health-related products, especially dietary supplements and OTC and prescription drugs. As government and industry have struggled to come up to speed on the broad and varied implications of this developing technology, an emerging consensus is that for most of what the Internet is, and does, existing legal rules and regulatory frameworks will be adequate to address the vast majority of issues that are likely to arise. As FDA's point-person on Internet promotional activities, Ilisa Bernstein, notes in the June 1997 issue of Regulatory Affairs Focus, "At this point FDA believes that most Internet promotional issues can be addressed by interpreting existing provisions, regulations and policies. . . .Until a final guidance has been issued, companies should take a reasonable and rational approach to applying existing regulations and policies concerning promotion in traditional media, to the Internet." Thus, health-related marketers venturing into cyberspace should be aware of, and may generally rely upon, the broad elements of the existing FDA and FTC regulatory schemes for their particular products, subject to some additional regulatory nuances that may be necessitated by the unique properties of the Internet.

A caveat is in order, however, and that is although existing FDA and FTC frameworks will apply to health-related products on the Internet, it is still not entirely clear at this stage which agency will ultimately regulate Internet promotions for several major categories of products. Although FTC has taken the position that essentially all Internet-based promotion falls within its jurisdiction, this remains a quasi-open issue as a result of the concurrent jurisdiction between the two agencies, and the distinction between the legal terms of art "labeling" and "advertising." For most products directly marketed on the Internet -- including foods, cosmetics, dietary supplements, and Over-The Counter (OTC) drugs, FDA will regulate claims that appear in "labeling" whereas FTC will regulate claims which appear in "advertising." Thus, the question of whether the Internet (or any particular use of the Internet) constitutes labeling or advertising will have an obvious impact not only upon which agency's rules and regulations apply, but also on what types of enforcement remedies a company might face if its Internet activities run afoul of the law. With that in mind, we explore some of the areas where FTC and FDA oversight and enforcement differ in ways that might influence a marketer's risk assessment for particular Internet promotional activities.

Prescription Drugs

Promotion of prescription drugs is one of the most highly regulated activities under federal law, and is one area in which FTC does not play any role. That is because the laws governing prescription drugs operate to confer in FDA the exclusive authority to regulate their labeling and advertising. FDA requirements include, for example, that labeling for prescription drugs must include not only patient-directed labeling (the Patient Package Insert) but also more detailed physician-oriented instructions. Prescription drug print advertising must include a "brief summary" of the drug's benefits and risks, and that summary must contain a "fair balance" of both risk and benefit information. Thus, as national news-magazine readers have no doubt noticed, print ads for prescription drugs contain an adjacent section, sometimes the entire back page of the ad, which in fine print lays out detailed information on the risks and benefits of the drug. However, since ad space in magazines and newspapers is limited and costly, but the Internet has no practical space or cost limitation for presenting additional information, the labeling/advertising debate for prescription drugs is not likely to have significant long-term impact, especially since pharmaceutical web site sponsors are leaning strongly toward over-inclusion of information, out of product liability concerns if nothing more.

One issue of nearly constant FDA focus, however, is the promotion of approved drugs for so-called "off label" uses -- i.e. those not approved by the agency. Off-label uses for approved drugs in many instances may be ones that are widely accepted by practicing physicians -- who can prescribe any drug for any use they see fit -- but which for one or more reasons has never, or not yet, had a formal new drug application submitted and approved by FDA for that use. An example of a well-known off-label use involved the acne cream Retin-A, which was found to reduce wrinkles, and which was widely prescribed by doctors for that use, even though FDA had not approved it as a wrinkle treatment. In many instances, in FDA's view, drug manufacturers' simply seek to shortcut the drug approval process by gaining approval for one indication and then subtly (or blatantly) promoting it for additional, often more profitable uses. The Internet's vast scope, and capacity to link multiple unrelated sites, has given rise to concerns about ever more creative ways that marketers will develop to promote off-label uses for drugs online. The existing law still prohibits such activity, but the Internet will make the enforcement significantly more difficult.

OTC Drugs, Foods, Cosmetics and Dietary Supplements

As noted above, regulation of most other categories of health-related products is shared between FDA and FTC, with the turf theoretically divided by the labeling/advertising line of demarcation. Nevertheless, the regulatory approaches, and differences for OTC drugs, cosmetics, traditional foods, and dietary supplements differ in some interesting ways that are made all the more interesting by the Internet labeling/advertising debate.

FDA regulation of over-the-counter drugs is quite different than prescription drugs, in that most OTC products are marketed under an FDA monograph and without explicit pre-approval by FDA. And, unlike prescription drugs, the FTC does exercise jurisdiction over advertising. Issues that frequently arise in FTC enforcement actions include misleading efficacy claims, mischaracterization of study results, and improper or unsubstantiated comparative claims against competitors. An unusual recent FTC enforcement action involved an OTC pain relief manufacturer and the question of whether statements about the non-profit Arthritis Foundation, an endorser of the product, misleadingly implied that the foundation helped to actually develop the pain reliever product.

Traditional foods are becoming more and more specialized as more is learned about the health-preserving, and health-degrading effects of certain nutrients. Thus, for example, FDA has approved health claims for oat bran foods that essentially promote the products to reduce the risk of heart disease. Although FDA would have a hard time preventing food advertising from making similar but unapproved health claims, FTC could rather easily take enforcement against such claims, using as evidence the fact that FDA had not approved the claim, which therefore should be considered false and/or misleading.

A similar scenario exists with respect to cosmetics, where the category of "cosmeceuticals" is emerging. These are products such as alpha-hydroxy acids and so-called "cellulite creams" which can be regulated by FDA as cosmetics, or drugs, or both, but again, only with respect to their labeling. But since most of the more explicit claims for such products are likely to be made in advertising, it will typically fall upon FTC to monitor and enforce against unsubstantiated claims.

Dietary supplements are subject to a peculiar combination of dual FDA/FTC regulation, primarily because of the 1994 enactment of the Dietary Supplement Health and Education Act (DSHEA), in which Congress explicitly attacked FDA's past regulatory actions against dietary supplements and created new "safe harbors" allowing more explicit health-related claims -- called "statements of nutritional support" or "structure/function claims" for dietary supplements. As a result, FDA has been virtually paralyzed from taking formal enforcement actions in this field. FTC, on the other hand, has brought a number of cases against dietary supplement advertisers in the last few years, including several against weight loss supplements containing chromium piccolinate. However, FTC has seen the sting inflicted by Congress on FDA, and the Commission has begun to evaluate its position with respect to dietary supplement regulation.

The practical consequence of all this is that a violation of the FDCA is often likely to be an independent violation of the advertising laws administered by FTC, so the really interesting issue with respect to agency jurisdiction becomes one of enforcement remedies. For advertising violations, FTC can use its administrative procedures to procure a Commission order broadly prohibiting the advertiser from using the same or similar types of claims, as well as any other false or misleading claims in future advertising (the so-called "fencing in" provision). This alone can have a strong chilling effect on future advertising strategies, but the fact the FTC can also levy substantial civil fines for advertising violations is also an important consideration.

However, if the same claims or statements that could result in FTC enforcement occur instead in the context of "labeling," FDA will have jurisdiction to take action, and FTC will not. The difference is not that such activities are legal under the Food, Drug, and Cosmetic Act (FDCA) -- as already discussed they are not -- it is that FDA does not have the power to levy fines for drug, food, cosmetic, or dietary supplement labeling violations, and unless it successfully brings an action in federal court (a much more cumbersome and much less frequently used enforcement tactic than FTC administrative proceedings), FDA cannot secure an injunctive order against such activities. On the other hand, any violation of the FDCA can be prosecuted as a criminal violation -- with a possibility of prison time and criminal fines for individual defendants.

Thus, for FDA-regulated products, the technical differences between labeling and advertising could make a substantial difference in the outcome of potential government regulatory enforcement actions. However, for the time being, prudent marketers of health-related products should design their Internet promotional materials with an eye toward complying with both the FTC's and the FDA's regulatory requirements.