Strengths and Weaknesses of Our Laws

Stephen Barrett, M.D.
August 15, 2001

Most people overestimate the extent to which laws can protect our society against quackery and health frauds. The amount of wrongdoing in our society vastly exceeds the resources of our law enforcement agencies and courts.

Food and Drug Administration (FDA)

The FDA oversees the safety, effectiveness, and marketing of foods, drugs, cosmetics, and medical devices. It operates under powerful laws but lacks sufficient resources to handle the enormous number of violations it encounters. In addition, a recent campaign by the health-food industry and its allies has decreased the agency’s ability to regulate claims for dietary supplements and herbs.

The FDA’s roots date back to the turn of this century, when consumers needed all the protection they could get. Patent medicines, which were worthless but not always harmless, were widely promoted with cure-all claims. The country was plagued by unsanitary conditions in meat-packing plants. Harmful chemicals were being added to foods, and labels rarely told what their products contained.

The Pure Food and Drug Act, passed in 1906, has been strengthened by many amendments and related acts. Together, these various laws are intended to assure the safety and effectiveness of all products intended for use in the diagnosis, prevention, and treatment of disease. The 1938 Food, Drug, and Cosmetic Act bans false and misleading statements from the labeling of foods, drugs, medical devices, and cosmetics. Drugs must have their active ingredients listed and be proven safe before marketing. The Kefauver-Harris Drug Amendments, passed in 1962 in the wake of the Thalidomide tragedy, require that drugs must also be proven effective before marketing. Other amendments extend this requirement to devices. In 1981, the FDA Consumer published a series of articles about the development of the food and drug laws.

Under the law, “labeling” is not limited to what is on a product’s container. It also includes claims made by any written or graphic matter which explains a product’s use and is physically or contextually connected with its sale. Thus promotional material used to sell a product or to explain its use can be construed as labeling whether it is used before or after a sale. The FDA’s jurisdiction covers all intended uses of a product, whether they are contained in labeling or not. Section 502(f)(1) of the Food, Drug and Cosmetic Act requires that all drugs and devices bear adequate directions for all intended uses, whether promotion is done by oral claims, advertising, or otherwise.

If an investigation shows that a product is a “new drug,” it must have FDA approval for movement in interstate commerce. Violation of this provision can lead to seizure of the product and a court injunction against its sale. To be classified as a “new drug,” a product does not actually have to be new; it can also be a familiar substance proposed for a therapeutic use that is “not generally recognized by experts as safe and effective.” For example, a claim that wheat germ oil “prevents heart stress” would make the oil a new drug with respect to that claim. The oil would also be misbranded because—since the product doesn’t work—it is impossible to provide adequate directions to achieve the intended effect. (A product is misbranded if its labeling lacks required information or contains false or misleading information.)

It is a criminal offense to market a drug or device that is unapproved or is misbranded. A first offender may be imprisoned for up to one year. Any offense committed after a first conviction is a felony punishable by up to three years in prison. Because misbranding and marketing an unapproved new product are separate offenses, a repeat offender could be sentenced to as much as six years in jail. The 1984 Criminal Fines Enhancement Act amended all federal criminal laws to allow fines of up to $100,000 (or $250,000 if death results) per offense for up to two offenses. To obtain a conviction, intent to mislead need not be proven. Even a single shipment of one product is sufficient grounds for conviction.

When products are marketed improperly, the FDA may issue a warning letter specifying the violations and demanding to know how the problem will be corrected. If a warning is ignored, or if the FDA decides to begin with more forceful action, the agency can initiate court proceedings for a seizure, injunction, or criminal prosecution. If an injunction is violated, the court has considerable discretion in determining the punishment and can order imprisonment or a large fine. The FDA has concentrated its efforts against health frauds on products that are inherently unsafe or are illegally marketed for the treatment of serious diseases. Worthless yet harmless articles promoted to improve health, athletic ability, or appearance—which the agency classifies as “economic frauds”—have been given little regulatory attention.

Examples of FDA regulatory actions are reported in the weekly FDA Enforcement Report and the monthly magazine FDA Consumer, both of which are available by subscription and posted to the agency’s web site. Warning letters issued since November 1996 are now posted on the FDA’s web site. FDA Talk papers are also available.

FDA enforcement would be much more effective if it emphasized criminal cases rather than civil ones. If this were done, wrongdoers might hesitate to commit acts that could land them in jail. Within the past five years, the FDA has created an Office of Criminal Investigations and increased the number of agents doing undercover criminal investigation. However, it is not apparent how much priority the new program is giving to quackery-related products.

Civil action, which carries no financial penalty, stops some schemes but does not usually prevent them from being profitable. This problem could be solved by a law enabling the FDA to generate civil penalties in the same manner as the FTC. A few years years ago, when Congress began considering such legislation, the health-food industry reacted with great alarm and campaigned vigorously to stop its passage.

FDA officials have said that their agency has been hampered by unwillingness of the Justice Department to handle criminal prosecutions. If this is true, the law should be changed so that FDA attorneys can prosecute in federal court when the Justice Department won’t do so.

David Kessler, M.D., J.D., who served as FDA Commissioner from 1990 through 1997, was by far the most effective leader the FDA has had in modern times. Under his direction, agency function was streamlined and enforcement activities increased greatly. However, the health-food industry became very alarmed about this and spearheaded passage of the Dietary Supplement Health and Education Act of 1994, which greatly hampers the FDA’s ability to regulate the marketing of vitamins, minerals, amino acids, herbs, and any other products the industry calls “dietary supplements.”

Federal Trade Commission (FTC)

The Federal Trade Commission, among its many functions—has primary jurisdiction over the advertising of foods, nonprescription drugs, cosmetics, devices, and services that are marketed in interstate commerce. It administers a powerful law and has been enforcing it vigorously during the past few years. In fact, it has addressed more health-related frauds since 1996 than in all previous years combined.

Under the law—as outlined in the FTC’s advertising guide for small businesses:

  • Advertising must be truthful and non-deceptive.
  • Advertisers must have evidence to back up their claims.
  • Advertisements cannot be unfair.

The FTC has broad powers to investigate complaints. If it concludes that the law has been violated, it may attempt to obtain voluntary compliance by entering into a consent order with the violator. Signers of a consent order need not admit that they have violated the law, but they must agree to stop the practices described in an accompanying complaint. If a consent agreement cannot be reached, the FTC may issue an administrative complaint that leads to an adjudication by an FTC Administrative Law Judge. If a problem is considered serious enough, the FTC can seek a federal court order (injunction) to stop the improper practices. In egregious fraud cases, it can ask the Justice Department to file criminal actions.

Cease-and-desist orders obtained by the FTC usually remain in effect for 20 years. The penalties for violating them can include prison sentences, corrective advertising, and fines of up to $11,000 per day. FTC actions can also result in restitution to consumers and/or a disgorgement of profits. In cases where the offending party is willing to settle without a fight, the settlement is negotiated and the consent agreement and complaint may be announced simultaneously. In Fiscal year 1997, the FTC Consumer Protection Bureau announced 46 consent agreements, of which 31 were related to health claims.

The FTC’s activities are reported in the weekly FTC News Notes and an annual report, both of which are available free of charge to interested parties. Annual (fiscal year) reports [1997, 1998], news releases, consent agreements, policy statements, consumer advisories, and many other important documents are posted to the agency’s web site, which receives about 100,000 hits per day on its home page. The most efficient way to search for a specific topic is to go directly to the search page. The Commission Actions page offers an efficient way to browse through monthly lists of case reports.

During the 1980s, the FTC averaged about five health-related cases per year. After Bill Clinton took office, the number increased sharply. In June 1997, at a health fraud conference cosponsored by the FTC, a staff attorney indicated that the agency’s consumer protection bureau had adopted a new strategies for targeted enforcement actions, public education, and warnings to entrepreneurs. Much of this activity involves the Internet. The FTC operates Consumer Sentinel, a computerized consumer fraud database that provides secure online access to consumer complaints for over 150 law enforcement organizations across the United States and Canada. The complaints concern telemarketing and direct mail problems, as well as Internet fraud. The database contains over 200,000 complaints and is growing rapidly. In June 1998, the FTC announced that it had brought 35 Internet-related enforcement actions. Anyone can file a complaint online.

The FTC has actively sought Internet companies and trade groups to join as partners in disseminating consumer protection information to consumers online. As a result, the Interactive Services Association, a leading online trade association, and companies such as AT&T, NetCom, America Online, Circuit City, Compaq, Micron, Borders, and American Express have helped circulate public service announcements over the Internet, cautioning consumers to avoid particular scams and “hot linking” consumers to the Commission’s web site where they can find “Cybershopping” guides, “safe surfing” tips, and other helpful information.

Another creative activity is the posting of “teaser sites” that mimic pyramid schemes, scholarship scams, deceptive travel programs, false weight-loss claims, and fraudulent vending opportunities—typical frauds that have been practiced on consumers through direct mail, telemarketing, and other means. The teaser sites are registered with major search engines so that they may be encountered by consumers about to become ensnared by plausible but untrue come-on. Instead of being swindled, of course, visitors are warned about the deceptive nature of the scams.

Since December 1996, the FTC has conducted nine “Surf Days” aimed at providing information to entrepreneurs who may be violating the law. For the first, staff attorneys and investigators were joined by scores of others from federal, state and local agencies. Over a three hour period, this ad hoc task force located over 500 web sites or newsgroup messages promoting apparent pyramid schemes. The FTC staff e-mailed a warning message to the individuals or companies that had posted these solicitations, explaining that pyramid schemes violate federal and state law and providing a link back to the FTC Web site for more information. A month later, the investigative staff checked and found that a substantial number had disappeared or been improved.

In November 1997, the FTC conducted North American Health Claim Surf Day with help from other federal agencies, 18 state Attorney General’s office, many nonprofit health organizations and consumer protection and information agencies from the United States, Canada, and Mexico. The participants surfed the Internet for potentially false or deceptive advertising claims related to preventing or treating heart disease, cancer, AIDS, diabetes, arthritis, and multiple sclerosis, and sent hundreds of e-mail messages to Web site advertisers pointing out that they must have evidence to back up their claims. In November 1998, the process was repeated by an international coalition of 80 government and private agencies and organizations from 25 countries whose participants issued more than 1,200 warnings.

Although the FTC has a very effective law, the agency can prosecute only a small percentage of the violations it detects. The situation could be greatly improved if Congress passed a law enabling state attorneys general to enter federal court so that the results of their regulatory actions would apply nationwide.

U.S. Postal Service (USPS)

The Postal Service has jurisdiction over situations where the mail is used to transfer money for products or services. It administers a powerful law but has insufficient resources to deal with the vast number of frauds it encounters.

Most mail-order health schemes attempt to exploit people’s fear of being unattractive. Their promoters are usually “hit-and-run” artists who hope to make a profit before the Postal Service stops their false ads. Common products include “miracle weight-loss” plans, fitness and bodybuilding products, spot-reducing devices (claimed to reduce specific parts of the body), anti-aging products, and supposed sex aids. When a scheme is detected, postal inspectors can file a complaint or seek an agreement with the perpetrator. When a complaint is contested, a hearing is held by an administrative law judge. If the evidence is sufficient, this judge will issue a False Representation Order (FRO) enabling the Postal Service to block and return money sent through the mail in response to the misleading ads. Although the order can be appealed to the courts, very few companies do this. Each voluntary agreement and FRO is accompanied by a cease-and-desist order that forbids both the challenged acts and similar acts. Under the Mail Order Consumer Protection Amendments of 1983, if this order is violated, the agency can seek a civil penalty in federal court of up to $11,000 per day for each violation.

The Postal Service does not usually assert jurisdiction when companies solicit only credit card orders by telephone and deliver through private carriers such as United Parcel Service. However, the Justice Department may seek an injunction.

Full-text copies of administrative decisions made since 1957 are available online. Unfortunately, the Postal Service has not initiated a case releated to a fraudulent mail-order health product since 1991. The number of cases it handled each year between 1957 and 1991 was not large, but exact figures are not available. Nearly all were settled handled with voluntary agreements or FROs, which impose no financial penalty. The agency’s effectiveness would be greatly increased by passage of a law enabling it to generate financial penalties larger than the amount of money collected by the perpetrator of a fraudulent scheme. It would also help if laws were passed to make it simple for the Postal Service to initiate criminal prosecution in cases where health products are involved. Current mail-fraud laws require that intent to deceive be proven, which is difficult to do if a perpetrator professes a sincere belief in his product. The Food, Drug, and Cosmetic Act has no such requirement.

During the early 1990s, postal officials told me that their agency had been hampered by unwillingness on the part of the Justice Department to handle more of their cases. If so, the law should be changed so that Postal Service attorneys can pursue cases in federal court when the Justice Department refuses.

State Regulation

State efforts against health frauds and quackery are carried out under licensing and consumer protection laws. The grounds for disciplinary action and the effectiveness in policing the marketplace vary considerably from state to state and from one agency to another.

State licensing boards can take action against practitioners who appear to be unfit or who engage in various quack or unethical practices. Some physicians and dentists have been disciplined for departing from accepted standards of scientific care, but actions of this type are not common.

The situation is even worse where clinical standards are minimal or don’t exist. Most state boards that regulate chiropractors, acupuncturists, naturopaths, and homeopaths appear to be doing little or nothing to protect the public from unscientific and unethical practices. A study by the U.S. Office of the Inspector General concluded that in 1985, only 12 out of about 30,000 chiropractors were disciplined for matters involving clinical competence. As far as I know, no comparable evaluation has been made of the boards that regulate acupuncturists, naturopaths, or homeopaths—virtually all of whom claim to heal by manipulating the body’s “vital force.”

State attorneys general and local district attorneys may have jurisdiction in cases that involve false advertising, theft by deception, practicing without a license, marketing of unapproved drugs, and various other types of consumer fraud. Again, both the nature of the laws and the vigor with which they are enforced vary considerably from state to state.

In most cases where a state attorney general stops a dubious promotion, the action will not stop the promotion in other states. To address this problem, state attorneys general have begun to team up for multistate actions and their national organization has formed a health care task force that will deal with frauds. The FDA is helping to coordinate this effort.

Calilifornia has a unique consumer-protection law under which private parties or consumer-protection groups can obtain an injunction against wrongdoing and force the offender to make restitution.

The Role of the Court System

Courts play an important role in regulating quackery, because judges and sometimes juries must decide how to interpret the laws and penalize lawbreakers. Several types of situations undermine efforts to control quackery:

  • Court delays often work to the advantage of lawbreakers, especially in the appeals process. Companies under fire from the FDA, for example, may be permitted to continue selling bogus products until all appeals have been exhausted. Practitioners facing revocation of their license sometimes remain in practice for years while appealing their case through the courts.
  • In some cases, courts have ordered insurance companies to pay for unproven treatment. In others, courts have refused to order parents to see to it that their children receive proven treatment; several deaths have been reported among children with cancer whose parents discontinued or failed to utilize conventional treatment.
  • In quackery-related cases where criminal convictions are obtained, sentencing tends to be light.
Internet Regulation

Internet marketers can reach huge audiences huge audiences through web sites and email solicitations. State and federal agencies can attack Internet frauds with the regulatory tools available for fraudulent advertising through other channels. However, some solicitations are difficult to stop because they are posted anonymously. Congress can facilitate regulation by ordering Internet marketers to reveal their name (or the company president’s name), address, telephone number, and email address in all public solicitations.

More Accountability Would Help

Consumer protection would probably be improved if the FTC, FDA, the Postal Service, and state regulatory agencies were forced to be more accountable. As far as I know, none of them has ever revealed meaningful statistics about the number of health frauds they have detected and what percentage they have acted against. Statistics of this type would enable legislators and the public to see the scope of the problem and what might be done about it.

I believe that all agencies charged with protecting the public from health frauds and quackery should be required to make meaningful data available on what they are doing about them. This could be accomplished by maintaining a list of prosecutions, both in progress and completed, that is accessible year-round through each agency’s public information office and is published at least once a year in a report to Congress (or, in the case of state agencies, to the state legislature). The report should include tabulations of the number of health-related complaints received, the number judged valid, and the number subjected to regulatory action. Some data are now available on the Internet, but summary reports would make the information more meaningful.

The agencies should also be required to recommend improvements in the law that might enable them to work more effectively.

To encourage the reporting of health frauds, a share of any penalties assessed could be given to the complainant and/or nonprofit groups involved in fighting health frauds.

Public protection can also be increased if people who have been seriously victimized file civil suits against the wrongdoers. The National Council Against Health Fraud’s Task Force on Victim Redress can help victims of quackery obtain suitable legal advice.

Ultimately, your best protection will be your own good sense. If the majority of American physicians wouldn’t use a particular product or service or recommend it to their loved ones, you shouldn’t either. A reasonable level of caution plus guidance from reliable sources should protect you from being victimized.

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This article was updated on August 15, 2001.