A Medical Device Daily

Two marketers of the alleged pain relief product Biotape, Smart Inventions (Paramount, California) and its founder/CEO Jon Nokes, are expected to cough up about $2.5 million in consumer refunds according to a settlement agreement with the Federal Trade Commission (FTC).

In addition, a federal district court ruled that a third defendant, Darrell Stoddard – the inventor of Biotape who appeared in the product’s nationally televised infomercial – violated federal law and must give up the $86,000 he received from infomercial sales. The FTC had charged that all three defendants deceptively claimed that Biotape – an adhesive tape – provided significant, permanent relief from severe pain and that it was superior to other pain-relief products. The product infomercial claimed that Biotape was “a space age conductive mylar that connects the broken circuits that cause ... pain.” The FTC said it would contact consumers regarding refunds.

The FTC’s settlement with Smart Inventions and Nokes bars the company from claiming that Biotape, or any other substantially similar purported pain-relief product, produces significant or permanent relief from severe pain or is superior to other products and treatments in eliminating or relieving severe pain. The order also prohibits Smart Inventions and Nokes from making claims about the health benefits, performance, efficacy, or safety of certain products, including any drug or device, unless the claim is true and backed up by credible scientific evidence, the agency said. The order additionally prohibits the defendants from claiming that a patent proves the efficacy or safety of those products.

The defendants must also either recall or repackage and re-label all of the products already in the marketplace that violate the order, the FTC said.

In other legalities:

Two providers of consumers’ medical profiles used in determining eligibility for life and health insurance have agreed to settle FTC charges that, as consumer reporting agencies (CRAs), the agencies failed to provide insurance companies with the Notice to Users of Consumer Reports required by the Fair Credit Reporting Act (FCRA).

Ingenix (Eden Prairie, Minnesota) and Milliman (Seattle) provide individual medical profiles, including prescription drug purchase histories of insurance policy applicants, to insurance companies that use them in making underwriting decisions. With applicants’ consent, Ingenix and Milliman obtain five-year prescription drug histories from Pharmacy Benefit Mangers and create prescription medical profiles. Based on their analysis of the information, they report potential medical conditions that may be present.

According to the FTC, the medical profiles are consumer reports because they include information that bears on an individual’s personal characteristics and are used to determine their eligibility for insurance. Ingenix and Milliman are CRAs because they assemble and evaluate consumer report information for the purpose of furnishing it to third parties, the FTC said.

Ingenix and Milliman agreed to provide companies with the Notice to Users and continue to follow procedures that ensure that consumer reports are furnished only to those with a permissible purpose, that reports are accurate, that accuracy disputes are handled appropriately, and that consumer records are disposed of properly, all in compliance with the FCRA.

* The FTC said it sent 10 warning letters to prescribers of contact lenses for allegedly failing to release prescription information to their patients, requiring their patients to buy contact lenses from them, or imposing additional fees on their patients before releasing the prescriptions. The agency said it sent the letters on Aug. 15, in response to consumer complaints.

In other legalities, another law firm – Alfred G. Yates, Jr. – has filed a class action lawsuit in federal court on behalf of LCA-Vision (Cincinnati) investors who bought stock between Feb. 12 and July 30.

LCA provides laser vision correction services under the LasikPlus brand.

The complaint charges LCA with violations of the Securities Exchange Act of 1934. It alleges that between Feb. 12 and July 30, LCA issued misleading statements about its business and financial results, including EPS guidance of $2.05 to $2.15 for 2007. As a result, LCA stock traded at artificially inflated prices during that time, according to the complaint, reaching a high of $50.56 a share in July.

On July 31 the company reported its financial and operational results for the three months and six months ended June 30, and retracted its statements through the first seven months of the year that it would earn $2.05 to $2.15 for the year, lowering its EPS guidance for 2007 to $1.90 to $2, according to the complaint. LCA’s stock collapsed to close at $35.51 a share, a decline of 17%, on 3.5 million shares.

Earlier this week Coughlin Stoia Geller Rudman & Robbins reported filing a similar class action lawsuit against LCA with the same allegations (Medical Device Daily, Sept. 17, 2007).

* Nix, Patterson & Roach, a national plaintiffs’ law firm representing Arkansas residents in a number of nursing home neglect cases, reported a jury verdict of $2,287,891 in a lawsuit filed against Beverly Healthcare (Fort Smith, Arkansas). The case was filed on behalf of the estate of Herman Johnson, a resident who died on April 1, 2005, while living at Beverly Healthcare of Camden. At the time of his death, Herman was found to have been suffering from pressure sores, malnutrition, and a number of other symptoms typical of elderly abuse.

On Friday, the jury rendered a verdict finding that Beverly was negligent and awarded Herman’s family about $1.4 million in compensatory damages. On Monday, the jury returned and awarded the plaintiffs an additional $875,000 in punitive damages.

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