What does FTC’s final order in the Nestle health claims case mean for industry?

The Federal Trade Commission (FTC), after issuing a settlement order in May 2010, has released its final consent order settling charges that a Nestle subsidiary made deceptive health claims on its children’s health drink BOOST Kid Essentials. The subsidiary, Nestle HealthCare Nutrition, has been ordered to stop making claims that BOOST can reduce the risk of cold and flu, unless claims are pre-approved by the U.S. Food and Drug Administration (FDA). Nestle Healthcare Nutrition must also stop making claims that BOOST will reduce children’s sick-day absences and duration of diarrhea, unless claims are backed by two clinical human trials.

The settlement order—as well as a similar order issued against supplement company Iovate Health Sciences—sent shockwaves through the nutrition industry last summer, stirring up fears that all new health claims on products would require FDA pre-approval and two human clinical trials going forward.

The final order, issued on January 12, 2011, following a public comment period, is identical to the May settlement order, save for a broadened definition of “essentially equivalent product.” The issue of functional equivalency arises when a marketer must show that an active ingredient in a finished product is unaffected by any secondary, inactive or even other active ingredients.

Attorney John Villafranco—who was lead counsel for Iovate in its FTC negotiations and whose Washington DC-based law firm, Kelley Drye & Warren, represented Nestle in its settlement—asserts that this final order does nothing to change the settlement reached this summer. However, it serves as a reminder to manufacturers and marketers that FTC’s language is becoming more specific when it comes to claims substantiation. “Companies with a conservative approach to marketing should consider these consent orders before taking a product to market,” Villafranco told Nutrition Business Journal.

Similarly, attorney Ivan Wasserman, of Washington DC-based firm Manatt, Phelps & Phillips, told NBJ that the “two clinical trials model is becoming the gold standard that FTC may demand in order to settle cases going forward.” Given the new language in the consent orders confirming two trials as a basis for reliable scientific evidence, “if FTC investigates your company and decides your substantiation is inadequate, expect FTC to demand such language in a consent order as a condition of settlement,” Wasserman said.