Protect against liability lawsuits, warns top attorney
product liability lawsuits in the aftermath of ephedra, according
to law firm Banowsky and Levine, and companies need to protect
themselves against litigation.
Speaking at a VendorWorks presentation at SupplySide West yesterday, Scott Levine, who has represented Metabolife in lawsuits over ephedra, warned that dietary supplement lawsuits have "dramatically increased" in the last two to three years - and these figures are not just due to ephedra.
Rather, the supplements industry has captured the attention of plantiffs' attorneys, who are "on a mission to separate you from your money," he told attendees.
"Historically, this is an issue the pharmaceutical industry has had to deal with. It is now becoming relevant for the supplements industry too.".
Tort reform has meant that there are caps in place on plaintiffs' attorneys' traditional sources of revenue. It is no longer lucrative for them to go after medical malpractice or asbestos suits, for example.
Moreover, they are aware of the success of many supplement companies, and this is attractive, explained Levine.
Typically, cases are constructed around responses to advertisements, asking anyone who has developed a health condition after using a product to conduct them.
Levine noted that although the most ephedra products were in 1997-8, the first product liability lawsuits did not surface until 2001 - when the plaintiff's bar first became involved. At this point, around 500 lawsuits emerged.
"It is not a one-time issue over ephedra. Plaintiffs' attorneys have found a place that they like."
Levine told Nutraingredients-USA.com that he anticipates St John's Wort and synephedrine being the next targets.
In this climate, Levine said that there are a number of steps that a company should take in order to minimise the risk of litigation.
One of the most important is to have someone who is aware of all the regulatory issues and who monitors any changes.
"It is inexpensive to hire a lawyer to advise on regulations or to employ an in-house lawyer, but this is often the last thing that companies think of," he told Nutraingredients-USA.com.
"Often, the first thing they know about the regulations is when they receive a cease and desist letter, and then they have to re-do all their labeling."
He urged companies to look closely at their liability insurance - something they often do not do until they need to make a claim. Are they covered for attorney's fees? Will they have to cover the first part of liability themselves? Does the insurer have the right to pick an attorney, even though they may not know the business? Will the insurer refuse the re-write the insurance for the year following claims?
Labeling is also fundamental and can be the difference between winning and losing a case. A company should not leave it to the manufacturer to decide the labeling, but ensure that it contains information on who can take the product and who should not.
In particular, labels should carry a caution to consumers to consult a physician. A product may not be harmful if it is taken in accordance with instructions - but those instructions must be there in the first place.
Although there is no need for clinical studies before a product is brought to market, it is still important to do some pre-market analysis rather than launching a product simply because one's competitors are.
Levine suggests carrying out a search on published literature on the ingredient and putting it on file, so as not to appear irresponsible if asked about the measures it took to ascertain safety.
Likewise, post-market surveillance is important. The problem is that the 1-800 consumer help-lines given on many products are not set up to record health issues. Often, the call will be taken by an entry-level employee who will advise the consumer to contact a physician, and put a record of the call on file.
"If you are going to collect data, you need to know what you have got," said Levine. He said that there should be someone on staff to assess the health issues and decide what the company will do, rather than ignoring them as they build up.
When it comes to advertising, the marketing department may come up with the advertisements, but the CEO must watch over it. This is an issue that affects all industries, not just dietary supplements, since it is the CEO that will be called to account if any unsubstantiated claims are made.
Even internal systems, such as email, may come under scrutiny in a liability lawsuit. Levine advised that companies have a joke-free email policy, as plaintiffs' attorneys ask for email records and one flippant remark about a customer or a health issue could be presented as evidence that the company does not take such problems seriously.
With product liability, there is a trickle down effect through all the parties who play a part in supplying it - from the raw material supplier right through to the retailer. For this reason, companies should be sure they know their business partners, and be confident that they are bona fide and reputable.
Unlike with pharmaceutical products, where there is a prescription to prove that a product was supplied, in many cases involving supplements the consumer is unable to provide proof of purchase. But for its part, a company should be sure to retain as much information as possible on when the product left its hands, and what condition it was in when it did.
Finally, if a lawsuit is filed, companies should keep the bigger picture in mind. "If you have one lawsuit, treat it like it is a hundred and develop a strategy," said Levine. "All it takes is one stupid comment in an early case, and it will add value for every subsequent case."
Levine noted that the companies involved in ephedra lawsuits that have filed for bankruptcy protection have done so not because of lack of sales, but because of the costs of litigation.
"Many of the companies we have done business with have either been put out of business by ephedra, or been devastated."
"I would like you to be around," he told delegates, "and not have to deal with what has turned into an injustice."
