Healthcare Product Ads Falsified Studies; $11 Million Awarded for Corrective Advertising

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

GE Healthcare has been barred from falsifying scientific study results in advertisements for its Visipaque x-ray contrast medium product. The federal district in Trenton, New Jersey entered a permanent injunction and ordered GE to pay over $11.3 million to a competitor (Bracco Diagnostics) for corrective advertising. The court issued a 175-page opinion after a 39-day bench trial.

The crux of Bracco’s case was that GE violated the Lanham Act by falsely advertising Visipaque as superior to Bracco’s product, Isovue. GE Healthcare advertised establishment claims asserting that studies showed Visipaque to be superior in several ways, including renal and cardiovascular safety, lower costs, and less discomfort.

Literal Falsity, Injunction

In late 2002 and early 2003, GE focused its ad claims on a study published in the New England Journal of Medicine in early 2003 (the NEPHRIC study). Visipaque sales spiked following publication of the study.

The study concluded that renal damage may be less likely in high-risk patients when iodoxanol (the scientific name for Visipaque) is used rather than a “low-osmolar, nonionic contrast medium” (LOCM). The study was based on a head-to-head comparison of Visipaque with Omnipaque, an older GE Healthcare product. Both Omnipaque and Bracco’s Isovue are LOCMs.

While the greater number of GE’s advertisements were true, the court ruled that GE’s advertising of Visipaque as proven superior to all LOCMs was literally false. Based on the NEPHRIC study and other studies presented at trial, the court enjoined GE’s literally false claims of renal and cardiovascular safety, lower costs, and less discomfort.

Commercial Advertising and Promotion

While scientific articles are not commercial speech subject to regulation, secondary dissemination of the NEPHRIC article in GE’s advertisements did constitute commercial speech, the court held.

Oral statements made by GE Healthcare sales representatives, as evidenced by sales call notes, constituted commercial advertising or promotion. The sales call notes, albeit limited in number, were part of a full-scale marketing plan by GE to claim the benefits of Visipaque over LOCM alternatives through sales calls, websites, print marketing materials, and more, according to the court.

Lost Profits

Bracco’s request that GE Healthcare be required to disgorge its profits was declined. GE’s actions were not willful or deliberate, the court found. The creation of confusion and deception among customers due to GE’s advertising campaign was based on scientific studies and articles that had limited applicability. No scientific studies had explicitly found the converse of GE’s advertisements, the court noted.

Bracco failed to prove that it failed to win bids from large accounts as a result of GE’s conduct. Bracco also failed to carry its burden of showing that there was any causal connection between GE’s advertisements and the increasing sales of Visipaque to individual doctors and hospitals.

Corrective Advertising

Bracco did succeed in recovering over $11.3 million in costs incurred for corrective advertising. Damages could be presumed from the literally false ad claims, and GE failed to substantiate a claim that there was no connection between Bracco’s corrective advertising and GE’s false advertising. Bracco was not entitled to clinical study expenses allegedly incurred to refute GE’s false claims because such studies were undertaken as a regular cost of business in the healthcare industry, according to the court.

Future Disputes

The court ordered that any dispute between the parties arising from GE’s future advertising be submitted for resolution to a neutral panel or individual of the parties’ choice, such as the National Advertising Division (“NAD”), a division of the Council of Better Business Bureau.

The March 25, 2009 opinion in Bracco Diagnostics, Inc. v. Amersham Health, Inc. will be reported at CCH Advertising Law Guide ¶63,347.