Personal Liability and the Marketing of Dietary Supplements
by Marc S. Ullman, Esq.
Over the past several years, the paucity of serious enforcement activities by the Food and Drug Administration (FDA) has created the belief among an alarming number of participants in the natural products industry that no matter how poorly manufactured or recklessly formulated the products they place onto the market may be, the worst thing that can happen is that they would receive a Warning Letter giving them 15 days to correct the error of their ways. This belief has fostered an atmosphere that has led to decisions to market "dietary supplement" products containing ingredients such as gamma butyrolactone (commonly referred to as GBL, and a precursor to the date rape drug), products "spiked" with synthetic drugs to enhance their effects in the body, or human growth hormone.
The Federal Food, Drug and Cosmetic Act (FDCA) prohibits the marketing of any product for human consumption that is either adulterated (contains something that is potentially deleterious to human health) or misbranded (does not contain precisely what it purports to contain). Under normal circumstances, the sale of any product that is either adulterated or misbranded will result in FDA issuing what is known as a Warning Letter, requiring that the offending company take corrective measures within 15 days of receipt of the Letter, and formally advise the agency of the nature of those measures. What many people fail to realize, however, is that section 303(a) of the FDCA provides that:
(1) Any person who violates a provision of section 301 shall be imprisoned for not more than one year or fined not more than $1,000, or both.
(2) Notwithstanding the provisions of paragraph (1) of this section, if any person commits such a violation after a conviction of him under this section has become final, or commits such a violation with the intent to defraud or mislead, such person shall be imprisoned for not more than three years or fined not more than $10,000, or both.
The violations covered by this section include the sale of any misbranded or adulterated food, drug, cosmetic or dietary supplement. Referring any such violation to the United States Attorneys' Office for prosecution rests solely within the discretion of the FDA.
During a presentation at the 1999 Food and Drug Law Institute Annual Meeting, FDA Deputy Chief Counsel Eric Blumberg made several pointed comments that clearly raise the specter of future FDA-related criminal prosecutions. He noted that such actions would reinforce the core policy of the FDCA that there is "a positive duty" on an individual conducting business in an area affecting public health not only "to seek out and remedy violations when they occur, but also, and primarily, a duty to implement measures that will ensure that violations do not occur." Personal liability for violations is a real possibility in situations where FDA determines that individuals with management responsibility "either actively participated in unlawful conduct, allowed it to happen by passively tolerating violations, or failed to take steps to learn that violations were occurring."
The serious nature of this warning should be apparent from a series of FDA enforcement actions against the marketers of Laetrile and "vitamin B17" in late 2000, and FDA's ongoing enforcement efforts against the producers of GBL. In both situations, FDA enforcement activities commenced with the agency issuing Warning Letters demanding that these products be immediately removed from the marketplace. When such remedial action was not immediately forthcoming, the agency instituted a series of court cases seeking injunctions that would permanently bar the named defendants from continuing to sell products containing Laetril, B17 or GBL. Each of these matters resulted in the issuance of preliminary injunctions barring the named defendants from offering their products for sale pending the conclusion of litigation. At the same time, FDA commenced additional enforcement actions through its Office of Criminal Investigations (OCI). To date, OCI's activities have resulted in the filing of at least five criminal cases against marketers of GBL, and a sixth against a Laetrile marketer.
Companies that market any of the growing number of "natural" or homeopathic products containing human growth hormone (hGH) should take special note of OCI's activities. This is because the sale of such products is expressly barred by the FDCA. Thus, section 303(f) of the Act states:
Except as provided in paragraph (2), whoever knowingly distributes, or possesses with intent to distribute, human growth hormone for any use in humans other than the treatment of a disease or other recognized medical condition, where such use has been authorized by the Secretary of Health and Human Services under section 505 and pursuant to the order of a physician, is guilty of an offense punishable by not more than five years in prison, such fines as are authorized by title 18, or both.
Thus, the only legal sale of a product containing hGH may be made if the product in question is an approved new drug, and the sale is made pursuant to an order of a physician--in other words, with a prescription. With these constraints specifically set forth in the FDCA, it is virtually impossible to imagine any circumstances under which a dietary supplement or over-the-counter homeopathic drug product can be sold legally. Serious potential problems exist even in the event that any such homeopathic drug does not contain detectable amounts of hGH, as the manufacturers of such products would almost certainly possess sufficient quantities of hGH for sale in the absence of a prescription. At the present time, investigations of the illegal distribution of hGH by the FDA's OCI and the U.S. Drug Enforcement Administration (DEA) have targeted physicians who improperly supply distributors of these products with prescriptions for bulk quantities of hGH.
In addition to the risk of criminal prosecution, which may seem quite remote, companies that fail to exercise proper care in developing, manufacturing or marketing their products risk financial ruin in the form of punitive damages in personal injury cases brought on behalf of consumers harmed by seriously flawed products. In addition, punitive damages may not be covered by an insurance policy. Such damages can arise from combining contraindicated substances, such as yohimbe and ephedra in the same product or, as several companies have discovered, from adding synthetic substances to "all natural products" in order to increase product performance. The most recent example of the latter situation occurred in early February as a jury in the Alaska State Court awarded $12 million in damages to a woman who suffered a stroke following the use of a product touted as "all natural" when it actually contained ephedra "spiked" with synthetic ephedrine. Most significantly, the jury specifically assessed punitive damages in the amount of $6.8 million against the company's founder and the developer of the product, $1.8 million against the company's president, and $3.9 million against the company itself.
Each of these situations should make it abundantly clear that companies that fail to exercise reasonable caution and comply with the laws governing the marketing of dietary supplements may run the risk of confronting situations far more serious than a "simple" Warning Letter. As FDA and the personal injury bar focus more attention on the natural products industry, companies and individuals who flout the FDCA and regard Warning Letters as a mere inconvenience may very well find themselves embroiled in situations where the risk of personal liability is no longer a hypothetical situation.
Marc S. Ullman, Esq. is a partner in New York City's Ullman, Shapiro & Ullman, LLP. His practice includes the counseling of clients in all areas relating to the marketing of natural products. He can be reached at msu@usulaw.com or (212) 571-0068.
