Tuesday, July 14, 2015
Sunday, July 12, 2015
FTC SAYS SUPPLEMENT MARKETERS TO PAY $1.4 MILLION IN SETTLEMENT OF ALLEGED DECEPTIVE ADVERTISING CASE
FROM: U.S. FEDERAL TRADE COMMISSION
Supplement Marketers Will Relinquish $1.4 Million to Settle FTC Deceptive Advertising Charges
Ads Claimed Procera AVH Would Restore 10 to 15 Years of Memory Loss
Under the terms of the settlements, the defendants will pay $1 million to the FTC, and another $400,000 to satisfy a judgment in a case brought by local California law enforcement officials. They also will be barred from making similar deceptive claims in the future and from misrepresenting the existence, results, or conclusions of any scientific study.
“The defendants in this case couldn’t back up their claims that Procera AVH would reverse age-related mental decline and memory loss," said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Be skeptical of ads promising quick and easy cures.”
According to the FTC’s complaint, the defendants marketed and sold Procera AVH as a “solution” to memory loss and cognitive decline, including as associated with aging. The defendants advertised the product using infomercials, direct mail flyers, newspapers, and the Internet.
In one newspaper ad for the product the headline stated: “Memory Pill Helps the Brain Like Prescription Glasses Help the Eyes … Remarkable changes observed, helps users match the memory power of others 15 years younger in as little as 30 days!”
The cover of a multi-page direct mail ad was called a “Special Edition” of the “Physician’s Mind and Memory Alert.” Inside the text stated: “The thought of being a prisoner in one’s own home, or being unable to recall who you are, where you live, or to whom you are related is sending forgetful baby boomers and retirees scrambling for a solution.” The ad then promoted Procera AVH as “the memory pill preferred by many doctors.”
Procera AVH typically cost $79 per bottle, or $119 for three bottles for consumers who signed up for the continuity purchase plan and agreed to get automatic refills.
The complaint names KeyView Labs LLC, Brain Research Labs, LLC, George Reynolds (a/k/a Josh Reynolds), John Arnold, and three related companies.
The Commission’s complaint alleges that efficacy claims for Procera AVH were false, misleading, or unsubstantiated and that the defendants falsely claimed that a scientific study proved the products efficacy. The complaint also charges Reynolds, the founder and chief science officer of Brain Research Labs, with making deceptive expert endorsements for Procera AVH.
The two proposed settlement orders against the defendants impose a $61 million judgment against KeyView and a $91 million judgment against the remaining defendants.
The judgments direct the defendants to pay $1 million to the FTC, and an additional $400,000 to satisfy a judgment obtained by local law enforcement in Santa Cruz, California against Brain Research Labs and Reynolds. If the $400,000 is not paid to satisfy the Santa Cruz judgment, it is immediately due to the Commission. Once the $1.4 million is paid, the judgments will be suspended.
The Commission votes approving the complaint and two proposed stipulated final orders were each 5-0. The orders are subject to court approval. The FTC filed the complaint and proposed orders in the U.S. District Court for the Central District of California.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.
The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Council’s goal of increasing the number of Americans who are healthy at every stage of life. These cases are part of the FTC’s ongoing effects to protect consumers from misleading advertising.
Wednesday, July 8, 2015
ASTRAZENECA AND CEPHALON TO PAY MILLIONS FOR ALLEGED UNDERPAYMENT OF REBATES OWED MEDICAID DRUG REBATE PROGRAM
FROM: U.S. JUSTICE DEPARTMENT
Monday, July 6, 2015
AstraZeneca and Cephalon to Pay $46.5 Million and $7.5 Million, Respectively, for Allegedly Underpaying Rebates Owed Under Medicaid Drug Rebate Program
In a separate settlement arising out of the same case, Cephalon Inc. has agreed to pay the United States and participating states a total of $7.5 million, plus interest, to resolve similar allegations. Of that amount, Cephalon will pay roughly $4.3 million, plus interest, to the United States, and the remainder to states participating in the settlement.
“The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division. “These settlements demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”
“We will continue to police the pharmaceutical industry when the Medicaid program overpays for drugs,” said First Assistant U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania. “As these settlements demonstrate, it is critical for pharmaceutical manufacturers to comply with requirements of programs such as the Medicaid Drug Rebate Program to ensure that the government and the taxpayers are treated fairly in the reimbursement process.”
Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs. The quarterly rebates are based, in part, on the Average Manufacturer Prices (AMPs) that the manufacturers report to the government for each of their covered drugs. Generally, the higher the reported AMP for a drug, the greater the rebate the manufacturer pays to state Medicaid programs for the drug. These settlements resolve allegations that AstraZeneca and Cephalon underreported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers. As a result, the government contends that AstraZeneca and Cephalon underpaid quarterly rebates owed to the states and caused the United States to be overcharged for its payments to the states for the Medicaid program.
The two settlements partially resolve a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The amounts to be received by the whistleblower in this suit, Ronald J. Streck, a pharmacist, have not yet been determined.
These settlements illustrate the government’s emphasis on combating health care fraud and mark another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24.8 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.
The settlements with AstraZeneca LP and Cephalon Inc. were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Pennsylvania and the Department of Health and Human Services-Office of Inspector General.
FTC SETTLES WITH APP DEVELOPER ACCUSED OF HIJACKING PHONES TO MINE CRYPTOCURRENCY
FROM: U.S. FEDERAL TRADE COMMISSION
App Developer Settles FTC and New Jersey Charges It Hijacked Consumers’ Phones to Mine Cryptocurrency
Defendants’ App Installed Malware that Left Phones With Drained Batteries, Depleted Data Plans
A smartphone app developer has agreed to settle charges by the Federal Trade Commission and the New Jersey Attorney General that it lured consumers into downloading its “rewards” app, saying it would be free of malware, when the app’s main purpose was actually to load the consumers’ mobile phones with malicious software to mine virtual currencies for the developer.
The Ohio-based defendants behind the app, called “Prized,” agreed to a settlement that will permanently ban them from creating and distributing malicious software.
“Hijacking consumers’ mobile devices with malware to mine virtual currency isn’t just deplorable; it’s also illegal,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These scammers are now prohibited from trying such a scheme again.”
The defendants, Equiliv Investments and Ryan Ramminger, began marketing the Prized app around February 2014, making it available in the Google Play Store, Amazon App Store and others. Thousands of consumers downloaded the app believing they could earn points for playing games or downloading affiliated apps and then spend those points on rewards such as clothes, gift cards and other items. Consumers were promised that the downloaded app would be free from malicious software – malware – or viruses, according to the complaint.
What consumers got instead, according to the complaint, was an app that contained malware that took control of the device’s computing resources to “mine” for virtual currencies like DogeCoin, LiteCoin and QuarkCoin.
Virtual currencies are created by solving complex mathematical equations, and the complaint alleges that the app attempted to harness the power of many users’ devices to solve the equations more quickly, thus generating virtual currency for the defendants. The use of that power caused the device’s battery to drain faster and recharge more slowly, and to burn through consumers’ monthly data plans.
“Consumers downloaded this app thinking that at the very worst it would not be as useful or entertaining as advertised,” said Acting New Jersey Attorney General John J. Hoffman. “Instead, the app allegedly turned out to be a Trojan horse for intrusive, invasive malware that was potentially damaging to expensive smartphones and other mobile devices.”
The complaint in the case alleges that the defendants violated both the FTC Act and the New Jersey Consumer Fraud Act. In addition to the ban on creating and distributing malicious software, the court order also requires the defendants to destroy all information about consumers that they collected through the marketing and distribution of the app.
The settlement also includes a $50,000 monetary judgment against the defendants payable to the state of New Jersey, of which $44,800 is suspended upon payment of $5,200 and compliance with the injunctive provisions of the stipulated order.
This case is part of the FTC’s ongoing work to protect consumers taking advantage of new and emerging financial technology, also known as FinTech. As technological advances expand the ways consumers can store, share, and spend money, the FTC is working to keep consumers protected while encouraging innovation for consumers’ benefit.
The Commission vote authorizing the staff to file the complaint and approving the proposed stipulated court order was 5-0. The FTC and state of New Jersey filed the complaint and order in the U.S. District Court for the District of New Jersey.
Thursday, July 2, 2015
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