GE Unit Ordered to Pay $11.3 Million Over False-Advertising Claims Against Competitor

Charles Toutant

New Jersey Law Journal

A federal judge in Trenton, N.J., has ordered that a General Electric Co. subsidiary pay $11.3 million for making false advertising claims about a competitor's X-ray contrast agent.

U.S. District Judge Freda Wolfson held on March 25 that Amersham Health Inc., a British company with U.S. offices in Princeton, N.J., that was bought by GE Healthcare in 2004, violated the Lanham Act with false and misleading claims that its contrast agent, used to improve X-ray quality, was superior to one made by Bracco Diagnostics Inc. of Princeton.

Wolfson held that Bracco was entitled to reimbursement of $8,326,500 for past "corrective" ads and $3,050,000 it planned to spend on future ones, and she entered an injunction against future Amersham ads making the same false claims.

However, she denied Bracco's request that Amersham disgorge $1 billion in profits from sales of its contrast agent, finding Amersham's acts were not willful and the false ads did not affect major buyers' purchasing decisions.

The suit claimed that Amersham's promotion of its contrast agent, Visipaque, misconstrued a 2003 clinical study in the New England Journal of Medicine. The study compared Visipaque with Omnipaque, another Amersham contrast agent, and found that Visipaque reduced the risk of nephropathy among certain patients with kidney problems. Visipaque is classified as an isotonic contrast agent, Omnipaque as a low osmolar contrast medium, or LOCM.

Bracco's product, Isovue, also an LOCM, was not included in the study but Amersham's brochures, Web sites and sales presentations extended the conclusions about Omnipaque to Isovue, and it claimed Visipaque caused fewer heart and kidney problems than Isovue.

Amersham disputed Bracco's characterization of the statements in its promotions as false. It said application of the study's conclusions about Omnipaque to Isovue was a valid extrapolation. But Wolfson, after hearing from seven medical experts during a 39-day bench trial, ruled that "it has not established by the weight of clinical evidence that Visipaque is superior to all LOCM as a group or to Isovue individually."

The Food and Drug Administration similarly stated, in a March 21, 2005, letter to Amersham, that the study's conclusions about Omnipaque should not be applied to Isovue or other LOCM agents, according to Wolfson.

Amersham also said Bracco's suit was barred by unclean hands, citing misleading statements Bracco disseminated about the safety of Amersham's products. Wolfson rejected that defense, saying any such action by Bracco was undertaken for defensive purposes and was limited in scope and duration.

Though Wolfson found that sales of Visipaque rose dramatically after the New England Journal of Medicine study was published, partly at the expense of Isovue, she concluded that disgorgement was not warranted, finding Amersham's conduct was not willful; the company relied on a scientific journal and the marketing communications at issue were reviewed by an internal committee to ensure consistency with clinical data.

"Although this Court finds some of the messages approved by this process were literally false, the fact that these materials were subject to extensive review militates against a finding of willfulness," she wrote.

Wolfson also found that sales were not diverted from Bracco to Amersham as a result of false advertising. She cited evidence that hospital chains, the government and other large buyers were drawn to Visipaque because of its distinction as an innovative product and because of dissatisfaction with Bracco's products and their higher prices.

Wolfson further found that other remedies, such as injunctive relief and compensatory damages for past and future advertising costs to clarify Amersham's claims, were adequate.

"Bracco is very happy with the $11.3 million. We still think it's a considerable amount of money," says the plaintiff's lawyer, Donald Rhoads of Kramer Levin Naftalis & Frankel in New York. Bracco also was represented by Christopher Colvin of Kramer Levin. Amersham's lawyers were Charles Weiss and Richard DeLucia of Kenyon & Kenyon in New York. Weiss referred a reporter's call to GE Healthcare spokesman Ryan Fitzgerald, who said no decision has been made whether to appeal.

Fitzgerald says the plaintiff's claims that Amersham manipulated data were not proven and only a minority of the defendant's ads were false.

The case is Bracco Diagnostics Inc. v. Amersham Health Inc.