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Building a Health App? Part 4: Avoiding an FTC Enforcement Action

The market for apps designed to improve health and wellness or even to diagnose and treat medical conditions continues to grow.  Last week, the U.S. Food and Drug Administration (“FDA”)  approved a new smartphone-based "carbon monoxide breath sensor system" that measures carbon monoxide levels on a user's breath. The sensor, which is intended to help users quit smoking, tracks the real time effects of a user's smoking behavior.  And just a few weeks ago, the FDA gave its approval to a cognitive behavioral therapy app to be used in outpatient therapy for substance use disorders related to alcohol, cocaine, marijuana and stimulants. In the previous post in our series, we discussed how to determine whether a health app will be regulated as a medical device by the FDA. Coordination between medical device claims made as part of FDA’s regulatory medical device pathway and the Federal Trade Commission’s (“FTC”) requirements for substantiation in consumer product advertising can be challenging.  However, app developers must have sufficient substantiation for the claims they make regarding performance, efficacy and outcomes.  In this fourth installment, we focus on the FTC’s enforcement efforts in connection with false or misleading claims about a health app’s safety or performance and ways to minimize the risk of an FTC enforcement action.

Unfair and Deceptive Trade Practices

The FTC Act broadly prohibits “unfair and deceptive acts or practices” in or affecting commerce. Misrepresentations or omissions of material facts constitute such prohibited deceptive acts or practices.  The FTC Act also prohibits dissemination of any false advertisements for the purpose of inducing the purchase of food, drugs, devices, services or cosmetics. All advertising must be truthful and not misleading and advertisers must have evidence to back up their claims. Companies developing and marketing health apps are subject to these laws; the FTC has been aggressively pursuing companies that it believes are making false or misleading claims about an app’s safety or efficacy, or that are not supported by scientific evidence.

In 2015, the FTC settled with three companies that made claims that their mobile apps could detect symptoms of melanoma, even in its early stages. According to the complaints filed by the FTC, each of the apps instructed users to photograph a mole with a smartphone camera and input other information about the mole. The apps used a mathematical algorithm to determine the mole’s melanoma risk (low, medium, or high). The complaints alleged that there was not adequate scientific evidence to support claims that the apps accurately analyzed melanoma risk or that they could assess such risk in early stages. The settlements required the companies to repay any monies they received and substantiate any future melanoma detection claims with clinical testing.

At the end of 2016, the FTC entered into a settlement agreement with the developer of an instant blood pressure app that uses mathematical algorithms, mobile device measurements, and consumer inputs to measure a user’s blood pressure. To use the app, users put their finger over the phone’s lens and hold the base of the phone over their heart. The health app was marketed as being as accurate as a traditional blood pressure cuff. The FTC claimed, however, that the blood pressure readings reported by the app were significantly less accurate than those taken with a traditional cuff.  The settlement prohibits the company from making any claims about the health benefits of any product or device without the scientific evidence to support the claims. The FTC also assessed a penalty of almost $600,000, which was waived based on the company’s inability to pay.

Last month, the FTC entered into a settlement with a company based on its failure to clearly and conspicuously disclose the financial terms associated with its health app. Users of the app made a “pact” to exercise a certain number of times per week or meet certain dietary goals. Users were automatically charged an amount, ranging from $5 to $50 for a missed activity or if they did not complete their pacts. Those who met their weekly goals were able to receive a share of the money collected from those consumers who did not. In its complaint, the FTC alleged that consumers were charged the monetary penalty even when they met their goals or after they cancelled the service. Under the terms of the settlement, the company is prohibited from charging consumers unless the material terms of the transaction, including the method to stop recurring charges, are clearly and conspicuously disclosed before obtaining the consumers’ billing information. The company is also required to return $940,000 to consumers.

If it is too good to be true…

At the earliest stages of development, companies should be planning their advertising and marketing strategies to ensure that the health claims made (both express and implied) are firmly supported by competent and reliable scientific evidence.  Developers should keep in mind that the FTC considers consumer endorsements and testimonials to be advertising and, as such, these should be scrutinized carefully to be sure that they do not include any claims that cannot be substantiated.   The FTC website has a number of good resources for developers of health apps, including its Mobile Health Apps Interactive Tool. The FTC has also provided tips and advice for marketing a mobile app as well as best practices that addresses the collection of data and security issues. We will address privacy and security issues later in this series.

Stay tuned for the next post in our series that will explore the contractual and business-related issues that can help build a foundation for creating value for your health app.

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Ellen provides strategic advice to health care providers, investors, and start-ups on telehealth initiatives as well as the traditional practice of medicine across multiple states.