Marketing Pitfalls to Avoid: Deceptive Advertising—the Other Kind of “False Claims”

We all know that marketing activity is a breeding ground for potential lab liability. But while most labs are sensitive to the risks posed by the Antikickback Statute, Stark Law and False Claims Act, federal false advertising laws may fly under the radar. Here’s a quick overview of one of the key false advertising laws and a recent case illustrating how its principles play out in real life lab company disputes.

 The Lanham Act

In some ways, the federal Lanham Act is to lab test advertising what the False Claims Act is to lab test billing. It bans labs from making a false statement in a commercial advertisement about their own or another lab’s product. To be found guilty under the Act, at least three things must be proven:

The statement made in the advertisement is false;

  • The statement actually deceived or had the tendency to deceive a substantial segment of its audience; and
  • The deception is material, i.e., likely to influence the purchase decision.

 The Quidel v. Siemens Case

These rules have been the focal point of a long-running legal battle between two major labs that offer competing blood tests to detect Graves’ disease by measuring thyroid stimulating immunoglobins. Such tests come in two basic varieties:

  •  TSH receptor antibody (TRAb) assays that detect both stimulating and blocking thyroid immunoglobins (TSI and TBI); and
  • TSI tests that detect only stimulating immunoglobins.

Siemens produces Thyretain TSI Reporter BioAssay (Thyretain), a test cleared by the FDA in 2009 as “TSI only.” In 2012, Quidel began offering a competing test called IMMULITE. Unlike Thyretain, which is a bioassay, IMMULITE is an immunoassay capable of depicting the concentration of TSI in a sample, rather than just a binary “qualitative” result.

 What Happened

 The trouble began when Siemens ran advertisements referring to IMMULITE as a “TSI only” product. Quidel took immediate umbrage, insisting that IMMULITE detects both TSI and TBI. Although Siemens eventually dropped the claim, Quidel sued it for false advertising under the Lanham Act. Both sides asked the southern California federal district court to rule in its favor without a trial. After three years of litigation, the court made a ruling dismissing some but not all of the claims without a trial. In so doing, it relied on the three key Lanham Act criteria.

  1. Did Siemens Make False Claims about IMMULITE?

The first thing Quidel had to prove to show false advertising is that what Siemens said in its ads about IMMULITE being a “TSI only” assay was false. Naturally, both sides introduced expert opinions supporting their position on the issue. After weighing all the evidence, the court found the evidence inconclusive. That finding would have spelled doom for Quidel had this been an actual trial. But at this point in the proceedings (known as “summary judgment”), the court’s job was not to decide if Quidel’s Lanham Act was right but whether it deserved to go to trial in the first place. And because the evidence was split, a trial would be necessary to sort out the facts.

  1. Did Siemens’ Claim Deceive the Market?

Quidel also had to show that people were actually deceived by what Siemens said about IMMULITE in its advertising. But while this issue would be crucial to the ultimate decision, it wasn’t a factor for summary judgment since if Quidel could prove the claims were false, the court would automatically infer that at least some part of the market was deceived.

  1. Was the Deception Material?

At this point, Siemens still had a chance to win summary judgment and get the court to dismiss the claim without a trial by showing that even if the claims of IMMULITE being a “TSI only” test were false and people were deceived, the falsity wasn’t “material” since it didn’t affect customers’ decision to choose Thyretain over IMMULITE. In determining materiality, the court looked at two segments of the market:

(a) Labs

As even Siemens acknowledged, two major labs, LabCorp and Sonic/CPL, did switch from IMMULITE to Thyretain. But Siemens insisted that its ads had no influence on that decision. The court agreed citing the testimony of officials of both LabCorp and CPL that the decision to use Thyretain rather than IMMULITE was the product of months of rigorous internal study and deliberation (including a validation study by CPL) about which product performed better and had nothing at all to do with Siemens’ ads or press releases. The LabCorp official went so far as to decry the lawsuit as “frivolous” because it assumes that the company doesn’t “do a very, very rigorous job of vetting our assays and that we can be swayed by marketing.”

(b) Physicians

Quidel wasn’t finished and insisted that the market included not just labs but also ordering physicians. The court neither agreed nor disagreed; instead, it found that the issue of whether physicians should be included in the relevant market for the assays was a question of fact that the jury would have to decide.

Bottom Line

Each side ultimately got part but not all of what it wanted. Siemens won dismissal of all claims related to false advertising to labs; Quidel secured the chance to go to trial and prove its claims for false advertising to physicians.

Quidel Corp. v. Siemens Med. Sols. USA, Inc., 2019 U.S. Dist. LEXIS 181831

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