A Zicam class action lawsuit filed by shareholders will be brought before the Supreme Court by Matrixx Initiatives, who claims it did not need to share reports with shareholders about loss of smell with Zicam, which eventually led to a recall of some variations of the cold remedy.
On Monday, the U.S. Supreme Court said it would hear Matrixx Initiatives’ Zicam appeal (pdf), which seeks to challenge an appellate court ruling that reinstated a 2004 shareholder lawsuit. Plaintiffs in the Zicam lawsuit allege that Matrixx Initiatives withheld reports that users of Zicam nasal sprays and gels were losing their sense of smell, a condition known as anosmia, artificially boosting the value of Matrixx Initiatives stocks. Last year, the Zicam nasal spray and gel products were recalled after the FDA recommended that consumers stop using them..
On June 15, 2009, the FDA indicated that it had identified at least 120 reports of loss of smell with Zicam Cold Remedy Nasal Gel, Zicam Cold Remedy Nasal Swabs and Zicam Cold Remedy Swabs Kids Size. Within hours of the warning, Matrixx Initiatives issued a Zicam recall.
Zicam’s manufacturers maintain that at the time the shareholder lawsuit was filed, the company had received only about a dozen reports, which was statistically insignificant. They also argue that a requirement to tell shareholders of every adverse event report would negatively impact the pharmaceutical industry.
In the aftermath of the recall, FDA inspectors discovered 800 reports of Zicam problems that Matrixx Initiatives failed to forward to the agency, in violation of federal regulations. It is unclear how many of those reports came after the 2004 shareholder class action lawsuit, or whether their existence contradicts Matrixx’s claim that there were only a dozen or so reports at the time.
Originally, the shareholder Zicam lawsuit was dismissed by the U.S. District Court for the District of Arizona in 2006. However, the lawsuit was reinstated by the U.S. Court of Appeals for the 9th Circuit in California.
Matrixx Initiatives has insisted that the FDA was in error in concluding that their products caused loss of smell. Some experts, however, say that it is well known that zinc can damage olfactory senses, and the nasal sprays and gels were zinc-based products. Matrixx Initiatives has attempted to get FDA to change its mind on its Zicam warning, but the agency has refused.
Matrixx Initiatives also faces a number of more recent Zicam class action lawsuits and Zicam loss of smell lawsuits that allege the company knew the products were dangerous and continued to market them anyway. Following the recall, the SEC is also investigating the company’s actions.
In October, the U.S. Judicial Panel on Multidistrict Litigation consolidated the federal Zicam litigation for pretrial proceedings in the District of Arizona. All of the lawsuits over Zicam contain similar allegations that zinc gluconate, the single active ingredient in nasal Zicam cold remedies, is toxic to the tissue inside the nose and can cause damage to a user’s ability to smell, detect odors or taste.