Unapproved Drug Claims – The Continuing Saga for Cosmetic Brands

Unapproved “drug” claims – a continuing saga.

In prior posts we have discussed the importance of cosmetic brands to avoid “drug” claims, and have discussed court rulings on the topic. Unfortunately, such marketing claims continue to be boasted by big and small brands alike, so it is no surprise we have seen an increase in class action complaints against cosmetic companies involving implied drug claims and misbranded drugs that allegedly violate the Federal Food, Drug and Cosmetics Act (“FDCA”), 21 U.S.C. § 301.

The typical gist of such “unapproved drug” complaints is that marketing claims found on a product’s packaging or website imply the product is “intended to affect the structure or any function of the body,” making it a “drug” under the FDCA.  As we have written about previously, a product cannot be marketed as a “drug” without pre-approval from the FDA through the New Drug Application (“NDA“) process unless the product conforms to an OTC monograph identifying the product’s ingredients as safe and effective for the intended use.  In the demand letters and lawsuits, Plaintiffs in these “unapproved drug” cases allege that because defendants’ products do not conform to an FDA monograph, and no NDA was submitted to the FDA, the sale of the product was unlawful, and the plaintiff and putative class are entitled to monetary and injunctive relief under California’s Unfair Competition Law (“UCL”), and California’s Food, Drug and Cosmetics statute, the Sherman Law.

This past year, in two such cases, federal district courts in California, Franz v. Beiersdorf (S.D. Cal. Case No.14cv2241) and Borchenko v. L’Oreal (C.D. Cal. Case No. 2:19-cv-01427), issued rulings on motions to dismiss that could have lasting repercussions for such cases going forward:

Franz v. Beiersdorf.  In Franz, Judge Burns of the Southern District of California entered a ruling that may lead to more cases filed on products that had long been considered “cosmetics,” and not “drugs” for purposes of the FDCA.  The Franz plaintiff alleged the sale of the defendant manufacturer’s “Skin Firming Hydration Body Lotion” product was “unlawful” because the claims the product resulted in firming of skin was a representation it altered the structure of the body, making the product a drug that required FDA approval that had not been obtained.  In response, the defendant pointed to FDA guidance documents stating that claims about changes in skin simply as a result of moisturizing were cosmetic, not drug claims, and that moisturizing was the only basis on which the product caused skin firming.

In denying the defendant’s motion to dismiss, the court held that whether a product that represents it changes the appearance of skin through moisturizing is a “drug” for purposes of the FDCA is a factual question that could not be decided without evidentiary showing (something that is not allowed at the motion to dismiss stage).  The court explained that FDA statements found in guidance materials, e.g., opinion letters, are not regulations but instead are only indications of the agency’s “current thinking,” were not binding on the agency, and lacked the force of law.  Consequently, the defendant could not rely upon them as legal justification for not having pursued an NDA for the product. The court went on to explain that it was not ruling that the product was a “drug” that required prior FDA approval, but rather that the issue would have to be addressed as a contested factual question, likely on a motion for summary judgment.  The court gave no indication, however, what kind of evidence would be dispositive of the issue.

Many skin care products seek to improve appearance through hydration. The Franz ruling may encourage plaintiffs to pursue similar allegations that the marketing claims made for those products amount to representations that the products are “drugs” that alter the structure of skin and require FDA approval. Although the Franz ruling will not be binding on other district courts, plaintiffs will certainly cite Franz in an attempt to get past motions to dismiss.  We expect the Franz defendant will pursue summary judgment as the court suggested, and the type of evidence the defendant offers and how the court responds will likely also be significant for subsequent actions.

Borchenko v. L’Oreal.  In a more encouraging ruling for cosmetic marketers, Judge Klausner of the Central District of California entered a ruling in Borchenko that, if affirmed on appeal, could be a death blow for many of the “unapproved drug” cases filed in California federal courts. Similar to Franz, the plaintiff in Borchenko alleged that various products marketed as skin “firming” should have been approved through an NDA because they made “skin structural representations,” and were consequently “drugs” under the FDCA. As the FDCA does not provide for its enforcement through private actions, the plaintiff brought her claims for the “unlawful” sale of unapproved drugs under California’s UCL and Sherman Law.

The defendant manufacturer moved to dismiss on the grounds that the state law claims were preempted by the FDCA. Agreeing with the defendant, the court noted that under Supreme Court and Ninth Circuit case law, claims regarding conduct that violates the FDCA are not necessarily preempted, but claims seeking relief because conduct violates the FDCA are subject to preemption.  The Borchenko plaintiff argued her claims were not preempted as they sought relief based on violation of the Sherman Law, and thus were not seeking to enforce the FDCA. In rejecting the plaintiff’s argument, the court ruled the Sherman law expressly made violation of the FDCA’s “drug” approval requirements a prohibited act. The court further noted that the Plaintiff was seeking an injunction requiring compliance with the FDCA.  As Plaintiff’s claims required that the Court apply the FDCA, they were preempted by the FDCA’s provisions giving enforcement authority to the FDA.

Not surprisingly, the Borchenko plaintiff has appealed the preemption ruling to the Ninth Circuit. We should have the decision on that appeal sometime in the coming year.  If the ruling is upheld, it will increase the pleading burden of plaintiffs seeking to pursue unapproved “drug” claims in California federal courts and may drive such cases to other circuits with more lenient preemption standards. In the interim, marketers facing newly filed unapproved “drug” class actions in federal court should be careful to raise a preemption in an initial motion to dismiss and may be able to get such cases stayed pending the Ninth Circuit’s ruling. In addition, when faced with such class actions in California state court, marketers should quickly determine whether grounds for removal under the Class Action Fairness Act exist, and if so, timely remove to federal court, as California state courts will not be bound by a Ninth Circuit ruling affirming the Borchenko decision.

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