Supreme Court Mulls Testimony About AERs in Zicam Case

Should drug and supplement companies be required to alert investors whenever any adverse-event report (AERs) over a product arises-in case an AER is predictive of a larger problem with the product that could devalue shareholder stocks? That’s the argument the Supreme Court is debating as it listened to testimony this week in the case of Matrixx Initiatives Inc. (the maker of Zicam zinc nasal spray) vs. James Siracusano.

Read a story about this case Nutritional Outlook editor Jennifer Kwok wrote in October.

As The New York Times reports, the Supreme Court justices are debating Matrixx’s argument that “ignorant or paranoid” consumers might overreact to product reports that may be unreliable or even false.

“All drug companies receive on an almost daily basis anecdotal hearsay reports about alleged adverse health events following the use of their products,” said Jonathan Hacker, a lawyer for Matrixx, the Times reports.

Yet, the Times said, “Matrixx did not appear to get much traction for its main argument - that a failure to disclose reports of adverse effects should give rise to securities fraud liability only if the reports were collectively statistically significant,” the paper says.

On the flip side, “…the justices appeared almost uniformly skeptical of imposing a requirement of statistical significance, particularly at the very outset of a case. Justice Elena Kagan said that the F.D.A. itself did not use that standard, and she added that she could imagine situations in which small numbers of reports of serious harm would meet the securities laws’ requirement of materiality.”