Last week in New York City, dietary supplement industry regulatory and legal experts gathered to learn more about and discuss current industry issues. The 3^rd Annual Dietary Supplement Legal, Regulatory and Compliance Forum was hosted by the American Conference Institute (ACI) in partnership with the Council for Responsible Nutrition (CRN). The sessions covered a broad range of legal and regulatory topics, including the political climate in state and federal governments; trends in class-action lawsuits; challenges with GMPs (good manufacturing practices) and quality compliance; potential impacts of key FTC cases on claims substantiation; details on the looming influence of FSMA (Food Safety Modernization Act) on ingredient suppliers; and the ever-changing legal landscape of California’s Proposition 65 regulations.

Forum Co-Chair Diane McEnroe, a partner in New York at international law firm Sidley Austin LLP, called the event an opportunity to “get ahead of some issues" instead of just “constantly putting out fires." She said it has been difficult for regulatory and legal experts to counsel supplement companies because of the shifting regulatory climate.

Her co-chair, CRN President and CEO Steve Mister, described the supplement industry as being in a precarious position: “We are somewhat wounded right now, and some [critics] may want to pile on." Mister was referring to the recent debacle surrounding the New York Attorney General’s (NY AG) investigation of herbal dietary supplements, which seemingly has given energy to industry adversaries in Congress (e.g., Democratic Sens. Dick Durbin of Illinois and Richard Blumenthal of Connecticut) and a stampede of class-action lawsuits, not to mention media outlets intent on covering half the story of supplement regulation and safety (here’s looking at you HBO “Real Sports"!) Mister also cited intentional adulteration as a prime contributor to this vulnerable moment in the industry.

Lasting Effects of NY AG Case

CRN’s Regulatory Counsel Rend Al-Mondhiry detailed the NY AG case that has dominated industry discussions of late, and she touched on the key points including lack of transparency around the actual testing data, how the AG’s action moved beyond the applicability of DNA testing for extracts, and why GNC’s agreement with the AG was bad for industry (hint: think “unnecessary" and “redundant.")

The AG case’s alarming outcome is a reminder that class action might be a scarier notion than FTC action, as Al-Mondhiry noted more than 70 virtually identical actions were filed in several states based on the AG investigation. She said there are efforts to consolidate some of these cases as multidistrict litigation (MDL) for quicker resolution. Last month, 35 proposed class-action lawsuits filed against Walgreen Co., Wal-Mart Stores, Inc., GNC Holdings, Inc. and Target Corp. were consolidated and transferred to a federal judge in Illinois. 

Testing and Quality Control

John Travis, senior research scientist at NSF International, said the spotlight the AG investigation put on DNA testing and the scope of the GNC agreement will certainly impact lab testing  by driving the further development and implementation of the testing technology. Using DNA barcoding appropriately on botanicals will require continued development of DNA databases and methods, improved expertise in performing careful DNA sequencing, and top-notch quality control to ensure accurate results. He noted while the AOAC and numerous supplement companies have been working on DNA methods and database development, a lot of work still needs to be done before DNA testing can realize its full potential as a complement in the supplement GMP testing toolbox. “Science takes longer than marketing," he quipped.

In discussing how companies should choose the best test, whether genetic or chemical, for the purpose at hand, Amway Chromatography Sciences Group Manager Amit Chandra, Ph.D., suggested companies pay attention to regulatory responsibilities in the increasingly complicated supply chain. “GNC should be focused on chain of custody instead of agreeing to DNA testing," he remarked.

Justin Prochnow, a shareholder in Denver at the international law firm Greenberg Traurig LLP, said the days of handshake agreements are over, and brand owners need to carefully create quality agreements with contractors, including manufacturers, packagers and labs. “[Brand owners] cannot contract out responsibility under GMPs," he reminded. “If your name is on the label, the FDA is likely going to look at you for assurances of compliance."  He noted in the past two years FDA has sent warning letters to 29 own label distributors (OLDs) for GMP non-compliance.

Nicky Jacobs, founder of Jacobs Compliance Services, said chain of custody and the potential legal ramifications are bigger issues than DNA testing. “OLDs have an overwhelming need to get consumer confidence and keep it," she said. A lot of supplement companies are struggling with GMP requirements for testing the identity, purity, strength and composition of ingredients and finished products, so Jacobs provided some advice on setting specifications. Many companies have specs but can’t control them on the production line, according to JacobsShe urged companies to avoid creating too many specs, to consider setting “characteristics" instead of specs, and to challenge very old specs.

David Morrison, vice president of scientific and regulatory affairs at Vitamin Shoppe, offered up his company’s use of a Compliance Triumvirate including regular auditing, product testing and contracts with outside labs. The company generates a scorecard of key compliance areas to find what may need improvement. He recommended agreements with contract manufacturers should allow OLDs access to, not necessarily permanent possession of, batch and manufacturing records crucial to ensuring GMP compliance.

Discussions between panelists and the audience highlighted the chain of custody challenges proprietary blends and premixed ingredients pose to contract manufacturers, which need to test under GMPs. All in attendance agreed this issue needs more attention and better solutions for both OLDs and contractors.

State and Federal Agency Issues

Regulatory compliance is crucial for minimizing legal exposure to both government agencies and plaintiffs’ lawyers. Where FDA has been increasingly focused on quality issues, FTC has undertaken some landmark claims substantiation court cases. In its case against POM Wonderful over misleading advertising claims, the agency won most of its arguments, but the court ruled the agency cannot impose a blanket requirement of two RCTs (randomized controlled trials) to prove claims substantiation. Paul Rubin, a partner in Washington at the international law firm Ropes & Gray LLP, noted under First Amendment protection, companies can make truthful and non-misleading claims without meeting RCT substantiation requirements. “If POM had used effective qualifying language and disclaimers, FTC would have considered it," he said. “FTC admitted such."

Miriam Guggenheim, a partner in Washington at the international law firm Covington & Burling LLP, thoroughly outlined the FTC case against Bayer over whether the company meets the “competent and reliable scientific evidence" standard for claims made on a probiotic dietary supplement. She noted this standard has been touted by the agency as being flexible and requiring no fixed formula for the number and types of studies for substantiation. This could allow companies to survey the literature and use bridging evidence to substantiate claims, but it could also open the door for FTC to secure an expert witness who only marginally fits the broad area of expertise in the case—such as any gastroenterologist for a probiotic claim even if the expert knows nothing about probiotics and supplements.

Guggenheim explained the agency’s expert in the Bayer case may set a new standard that requires human clinical trials on the specific product bearing the claim—in this case, benefits of one strain of probiotic cannot be extrapolated to another strain in the same species. Further, the trials would have to be conducted on populations targeted by the structure-function claim. Guggenheim noted this creates a conundrum as structure-function claims cannot be made to impaired populations or FDA will consider the product an unapproved drug. Further, this gastroenterology expert’s standard would apply to all supplements generally, not just gastrointestinal-related products/claims. She questioned whether this standard would go against DHSEA (Dietary Supplement Health and Education Act) by holding supplements to a drug standard.

Another federal agency issue detailed during the forum concerned pending FSMA requirements. Marc Ullman, a partner at the New York-based law firm Ullman, Shapiro & Ullman LLP, outlined the GMP and hazard analysis preventive control final rules that are due out by October 2015 [GH2] and would apply not only to foods but also to dietary supplement ingredient suppliers. “It applies to all ingredient suppliers not subject to dietary supplement GMPs," he warned. “It’s going to fundamentally change the way you do business."

One key aspect of FSMA is the responsibility for imported foods and ingredients. Ullman noted the assignment of responsibility for imports starts with whichever U.S.-based party owns the imported food/ingredients but would go to the U.S. consignee (if there is no owner) and then any U.S.-based agent/rep for the foreign supplier (if there is no consignee). As part of FSMA’s Foreign Supplier Verification Program (FSVP) for importers of food for humans and animals, importers would be responsible for ensuring the imported food meets U.S. safety standards, with verification based on risk—written procedures must be established for this risk assessment. A Voluntary Qualified Importer Program could ease importing of foods.

On a state level, AG actions are heating up, but the biggest state-level pain for dietary supplement companies still may be California’s Proposition 65, which has been a haven for bounty hunter lawyers to draw companies into costly settlements. Prop 65 mandates warning labels for consumer products that contain carcinogens or reproductive toxins above a certain level determined by the State of California and its Office of Environmental Health Hazard Assessment (OEHHA). Many industry experts have argued the levels pertaining to dietary supplements—lead is the primary culprit—are unjustifiably too low, even compared to federal limits, yet OEHHA and state officials are currently trying to change the regulations and lower some of these limits, according to a meticulous presentation by Trent Norris, a senior partner in San Francisco at the international law firm Arnold & Porter LLP.

Norris alarmingly noted there have been about 25,000 claims made by plaintiffs’ lawyers (on behalf of California citizens), but only 10 cases have gone to trial; most have settled. Of the cases in trial, some key methods of defense are being challenged. In the case involving Beech Nut, there is a battle over the method of determining average exposure to a Prop 65 toxin. Plaintiffs and the state prefer to average just one day’s max exposure, while defendants and industries have argued this should cover more than one day and more than one product or even lot. There is also a debate on whether the arithmetic or geometric mean should be used, as there can be a big difference in result between the two.

One big question with Prop 65 is whether consumers are generally weary of all the warnings, including signs in well-respected businesses. Norris outlined the case against Starbucks over acrylamide, which is generated when coffee beans are roasted. Starbucks argued its stack of epidemiological evidence shows coffee does not cause cancer, making any Prop 65 warning compelled false speech. A decision in the case, which closed arguments in April 2015, is due soon but had not yet been rendered at the time of the forum. However, Norris noted Starbucks preemptively put up Prop 65 warning signs a while back, although the signs do not appear to have deterred its loyal customers.

Norris further expressed concern that while Naturally Occurring Allowances (NOAs) for many chemicals were established back in 2009, OEHHA has never explained how NOAs can be established, and there have been many Prop 65 settlements without NOAs.

Drawing Positives

In the sea of all these challenges and negatives, Mister pointed out a few positives for the supplement industry. He said dietary supplement use is up among Americans, even with the negative media surrounding the NY AG case, and there is renewed interest in Congress for altering the Flex Spending Account (FSA) rules to allow for the purchase of dietary supplements. Congress also recently passed the Designer Anabolic Steroid Act (DASCA) in December 2014, which allows the Department of Justice to more quickly schedule and act against new steroids and analogs that often adulterate products marketed as dietary supplements and hurt the industry’s reputation. Also, the tough loss of departing congressional champions Sens. Tom Harkin (D-Iowa) (last year) and Orrin Hatch (R-Utah) (in 2016) will be mitigated by a number of members of Congress who might not come to the industry’s defense on each issue but generally support dietary supplements legislatively.