Fed. Trade Comm'n v. Quincy Bioscience Holding Co., 17 Civ. 124 (LLS)

272 F.Supp.3d 547

FEDERAL TRADE COMMISSION and The People of the State of New York, by Eric T. Schneiderman, Attorney General of the State of New York, Plaintiffs,

v.QUINCY BIOSCIENCE HOLDING COMPANY, INC., a corporation; Quincy Bioscience, LLC, a limited liability company; Prevagen, Inc., a corporation d/b/a/ Sugar River Supplements; Quincy Bioscience Manufacturing, LLC, a limited liability company; Mark Underwood, individually and as an officer of Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, and Prevagen, Inc.; and Michael Beaman, individually and as an officer of Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, and Prevagen, Inc., Defendants.

17 Civ. 124 (LLS)

United States District Court, S.D. New York.

Signed September 28, 2017

DAVID C. SHONKA, Acting General Counsel, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Mail Drop CC-10528, Washington, DC 20580, ATTORNEYS FOR PLAINTIFF FEDERAL TRADE COMMISSION, By: MICHELLE RUSK, ANNETTE SOBERATS

ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, 120 Broadway, New York, New York 10271, ATTORNEYS FOR PLAINTIFF THE PEOPLE OF THE STATE OF NEW YORK, by ERIC T. SCHNEIDERMAN, Attorney General of the State of New York, By: JANEM.AZIA, Bureau Chief, KATE MATUSCHAK, Assistant Attorney General, STEPHEN MINDELL, Special Assistant Attorney General, Consumer Frauds and Protection Bureau

KELLEY DRYE & WARREN LLP, 10 1 Park Avenue, New York, New York 101 78, ATTORNEYS FOR DEFENDANTS QUINCY BIOSCIENCE HOLDING COMPANY, INC., QUINCY BIOSCIENCE, LLC, PREVAGEN, INC. dibia SUGAR RIVER, SUPPLEMENTS and QUINCY BIOSCIENCE MANUFACTURING, LLC, By: John E. Villafranco, Jeffrey S. Jacobson, Glenn T. Graham, Genna S. Steinberg

COZEN O'CONNOR, 45 Broadway, New York, New York 10006, ATTORNEYS FOR DEFENDANTS MARK UNDERWOOD and MICHAEL BEAMAN, By: Michael de Leeuw, Tarnar S. Wise, Matthew Elkin, and JB Kelly (pro hac vice), Bryan Mosca (pro hac vice), 1200 19'h Street, NW, Washington, DC 20036

OPINION & ORDER

LOUIS L. STANTON, U.S.D.J.

Plaintiffs Federal Trade Commission ("FTC") and the People of the State of New York, by Eric T. Schneiderman, Attorney General of the State of New York, seek injunctive and other equitable relief for alleged violations of federal and state deceptive advertising laws. All defendants move to dismiss the complaint for failure to state a claim upon which relief can be granted. The two individual defendants, Mark Underwood and Michael Beaman, also move to dismiss for lack of personal jurisdiction.

BACKGROUND

Defendant Quincy Bioscience Holding Company, Inc. ("Quincy") is a Wisconsin based corporation. Compl. (Dkt. No. 1) ¶ 9. Defendants Quincy Bioscience, LLC, Prevagen, Inc., and Quincy Bioscience Manufacturing, LLC, also Wisconsin based companies, are wholly owned subsidiaries of Quincy. Id. ¶¶ 10–12. Quincy and its subsidiaries operated as a common enterprise in engaging in the conduct alleged in the complaint. Id. ¶ 17.

Underwood and Beaman are Quincy's co-founders and its two largest shareholders; Underwood owns 33% and Beaman owns 22% of its stock. Id. ¶¶ 13, 15. Underwood is Quincy's president and Beaman is its chief executive officer and former president. Id. Each is also a director of Quincy Bioscience, LLC, Prevagen, Inc., and Quincy Bioscience Manufacturing, LLC, and an officer of Quincy Bioscience, LLC and Prevagen, Inc. Id. The complaint alleges that "acting alone or in concert with others," Underwood and Beaman "formulated, directed, controlled, had the authority to control, or participated in the acts and practices of Quincy Bioscience Holding Company, Inc., Quincy Bioscience, LLC, and Prevagen, Inc., including the acts and practices set forth in this Complaint." Id. ¶¶ 14, 16.

Defendants manufacture and sell a dietary supplement known as Prevagen. Id. ¶ 21. Prevagen's active ingredient, apoaequorin (pronounced: a-poe-e-kwôr-in), is a dietary protein originally derived from the jellyfish Aequorea victoria. Id. ¶ 19. Prevagen is sold in Regular Strength, Extra Strength, and Prevagen Professional, containing respectively 10, 20, or 40 milligrams of apoaequorin. Id. Prevagen is sold directly to consumers through defendants' websites, and indirectly through a host of pharmacies and retail establishments. Id. ¶ 21. Between 2007 and mid–2015, sales of Prevagen in the United States totaled $165 million. Id.

Defendants advertise Prevagen on their websites, through infomercials, short-form television commercials, social media, newspapers, and magazines. Id. ¶ 22. Their advertising includes representations that "Prevagen improves memory," that it "has been clinically shown to improve memory," that "A landmark double-blind and placebo controlled trial demonstrated Prevagen improved short-term memory, learning, and delayed recall over 90 days," that Prevagen "Helps with memory problems associated with aging," that "Prevagen is clinically shown to help with mild memory problems associated with aging," and that Prevagen can support "healthier brain function, a sharper mind and clearer thinking." Id. ¶ 27, Exs. A–F

Those representations rely primarily on the results of the Madison Memory Study. Id. ¶ 28. "The Madison Memory Study was a randomized, double-blind, placebo-controlled study designed to examine the effect of apoaequorin on cognitive function in older adults." Graham Decl. (Dkt. No. 35) Ex. 1 at 2; see Compl. ¶ 28. The study involved 218 adults between the ages of 40 and 91. Graham Decl. Ex. 1 at 4; see Compl. ¶ 28. "The primary objective of the Madison Memory Study was to determine whether Prevagen® with apoaequorin (10 mg) improves quantitative measures of cognitive function in community dwelling, older adults." Graham Decl. Ex. 1 at 1.

Because Prevagen is intended for healthy, non-demented individuals, its examiners used the AD8 screening tool¹ to differentiate between adults facing normal cognitive aging and those with early signs of dementia. Id. at 2. Participants were assigned AD8 scores of 0 through 8, with an AD8 score of 2 used to differentiate between those who are cognitively normal or very mildly impaired (with scores of 0–2) and those with higher levels of impairment (with scores of 3–8). Id. According to the examiners, "results from the AD8 0–1 and AD8 0–2 subgroups are the most relevant to the efficacy of the product." Id.

Participants were divided into two groups: the experimental group received Prevagen, and the control group received a placebo. Id.; see Compl. ¶ 28. Both groups were instructed to take one capsule per day. Graham Decl. Ex. 1 at 2. At various intervals during the trial (days 0, 8, 30, 60, and 90), participants were assessed on a variety of cognitive skills using nine quantitative computerized cognitive tasks.² Id. at 2–4; see Compl. ¶ 28. No statistically significant results were observed for the study population as a whole on any of the cognitive tasks. Graham Decl. Ex. 1 at 5; Compl. ¶ 28. However, statistically significant results were observed between the experimental and control groups among the AD8 0–1 and AD8 0–2 subgroups. Graham Decl. Ex. 1 at 5–9; see Compl. ¶ 29. Participants in the AD8 0–1 subgroup who received Prevagen showed statistically significant improvements over those who received the placebo in three of the nine tasks (measuring memory, psychomotor function, and visual learning), and showed a trend toward significance in two more tasks (measuring verbal learning and executive function). Graham Decl. Ex. 1 at 6–9. Participants in the AD8 0–2 subgroup who received Prevagen showed statistically significant improvements over those who received the placebo in three of the nine tasks (measuring executive function, attention, and visual learning), and showed a trend toward significance in one more task (measuring memory).Id. Based on those findings, the study concluded that "Prevagen demonstrated the ability to improve aspects of cognitive function in older participants with either normal cognitive aging or very mild impairment, as determined by AD8 screening." Id. at 9.

Plaintiffs take issue with the study's conclusion. They allege that "the researchers conducted more than 30 post hoc analyses of the results looking at data broken down by several variations of smaller subgroups for each of the nine computerized cognitive tasks," and that post hoc subgroup analysis "greatly increases the probability that the statistically significant improvements shown are by chance alone." Compl. ¶ 29. They conclude that "Given the sheer number of comparisons run and the fact that they were post hoc, the few positive findings on isolated tasks for small subgroups of the study population do not provide reliable evidence of a treatment effect." Id.

Plaintiffs also allege that defendants' marketing campaign, and their claims that Prevagen improves memory and cognition, rely on the theory that apoaequorin enters the human brain to supplement endogenous proteins that are lost during the natural process of aging. Id. ¶ 31. The complaint says that defendants have no studies showing that orally-administered apoaequorin can cross the human blood-brain barrier. Id. According to the complaint, studies conducted by defendants show that orally-administered apoaequorin is rapidly digested in the stomach and broken down into amino acids and small peptides like any other dietary protein. Id. ³

Plaintiffs allege that the representations that Prevagen improves memory, improves memory within 90 days, reduces memory problems associated with aging, and provides other cognitive benefits, including but not limited to healthy brain function, a sharper mind, and cleared thinking, "are false or misleading, or were not substantiated at the time the representations were made," id. ¶¶ 36–37, and representations that Prevagen is clinically shown to improve memory, to do so within 90 days, to reduce memory problems associated with aging, and to provide other cognitive benefits, including but not limited to,...