Nutraceuticals: Designing While
Avoiding Regulatory Pitfalls
February 1995 -- Design Elements

By: Andrea Horwich Allen
Contributing Editor

  Major players still haven't decided what to call it. Estimates for its potential market size vary widely. Nonetheless, it's an industry that is commanding a growing share of time and money at conferences, in R&D labs at food companies of every size, and in the trade and consumer media. And, thanks to new legislation that may open some doors previously assumed to be forever closed, now may be the ideal time for food designers to assess the rewards versus the risks.  The subject is nutraceuticals, or functional foods. Both terms have gained equal acceptance.  The reward: is a share of a market estimated at anywhere from $27 billion (according to a new Find/SVP report, "The Market for Nutraceutical Foods and Beverages") to $250 billion (according to Stephen DeFelice, M.D., chairman of The Foundation for Innovation in Medicine, Cranford, NJ).  The risk is a regulatory environment in flux, where the manufacturer will be navigating uncharted territory in trying to communicate product benefits to the consumer.Claim conundrum  Under the U.S. Food and Drug Administration's nutritional labeling guidelines, which went into effect in May 1994, only eight health claims are permitted for foods. What's more, these can be used only for foods that meet other applicable FDA requirements, such as the definitions for "low" in the case of undesirable nutrients like fat, cholesterol and sodium, or the definitions for "good source" in the case of desirable nutrients like calcium, dietary fiber and vitamins.  FDA has based its approval of the eight health claims on its acceptance of the available research into the respective role that the nutrient plays in either causing or preventing a disease. Currently, manufacturers can make health claims based on the following relationships:the role of calcium in preventing osteoporosis;the role of fat in increasing the risk of cancer;the roles of both saturated fat and dietary cholesterol in causing coronary heart disease;the role of sodium as a cause of hypertension;the role of folic acid taken by pregnant women in preventing neural tube detects in babies;the role of foods that are good sources of dietary fiber -- fruits, vegetables and grains -- in preventing coronary heart disease; andthe role of fruits and vegetables that are good sources of vitamins A or C in preventing cancer.  The fact that health claims are permitted only for foods containing these antioxidant vitamins, but not for the vitamins themselves, has been a sore point over the past year among food designers and marketers. Despite mounting evidence that the antioxidant vitamins -- C, E and beta carotene, the precursor of vitamin A -- can help prevent certain types of cancer and even coronary heart disease, the agency so far has decided that the "significant scientific agreement" it requires to approve a claim is still lacking.  The agency seeks "significant scientific agreement based on the totality of evidence," according to Jurriaan Strobos, M.D., director of FDA's office of policy research. As he pointed out at a December 1994 conference on nutraceuticals conducted by Global Business Research, New York, the key word in that phrase is "evidence." The agency's decisions, he explained, are "not a consensus opinion, not a poll. They are based on evidence."Supplemental assistance  Even without making a health claim for antioxidants, supplement manufacturers -- and, by extension, food companies -- may be able to get their point across a little more clearly because of the new Dietary Supplement Health and Education Act of 1994 (DSHEA). The new law, which was passed in late November, enables dietary supplement manufacturers to make "truthful and non misleading claims that describe the role of a nutrient in supporting wellness," according to the Council for Responsible Nutrition (CRN), a trade association representing the supplement industry.  At first glance, these "structure/function" claims, as they are called, seem to be just another type of health claim. The subtle -- but crucial -- difference is that they do not link the nutrient to a disease; rather, they refer only to a general state of health. In the case of antioxidant vitamins, for instance, a manufacturer might claim that "antioxidants have been shown to promote healthy cells by neutralizing free radicals," but not that "antioxidants have been shown to help prevent certain types of cancers."  The new law does not give supplement manufacturers more leeway with health claims than food companies; both are still restricted to the same eight health claims when it comes to linking a particular nutrient with a disease. For supplements, the only two claims that apply are those referring to calcium's role in preventing osteoporosis and to folic acid's role in preventing birth defects.  This seemingly innocuous structure/function provision of the DSHEA opens the door for food designers to create food-based dietary supplements that could be marketed with the same sort of claim. The law defines a dietary supplement as any product containing one or more dietary ingredients such as vitamins, minerals, herbs or other botanicals, amino acids, or any other ingredients used to supplement the diet.  There's nothing in the law to prevent designers from creating a conventional food product, such as a cereal or cookie, that could be marketed as a dietary supplement. If the company wants to make structure/ function claims as part of its marketing strategy, under the new law, "the company decides whether there's significant scientific agreement, and the burden of proof is on FDA," says DeFelice.  Even if the nutrient being touted for its health benefit is a naturally occurring food component, such as fiber, what counts is how the manufacturer is marketing the product. In regulatory lingo, it's the "intended use" that differentiates a food product from a dietary supplement, or a supplement from a drug.  Within some segments of the industry, food designers are pondering whether the DSHEA reopens the issue of structure/function claims even for a conventionally marketed food product, assuming that it meets FDA's requirements as a "good source" of the nutrient in question. After all, supplement manufacturers and food companies have always had enough leeway to make claims such as "calcium builds strong bones" or "dietary fiber helps promote regularity" without incurring FDA's wrath.  What about other, less ubiquitous structure/function claims? Supplement manufacturers could be making more such statements than they have been, contends Annette Dickinson, Ph.D., director of scientific and regulatory affairs for CRN. "I think that's true of food companies as well," she adds. "I think companies have been free to say a lot of things all along without making a health claim."  Without a specific health claim, though, both supplement and food manufacturers who are trying to communicate product benefits are depending on the consumer to make the connection. For instance, using the antioxidant example, manufacturers would not be able to link the vitamins to a preventive effect on certain cancers. However, they would be able to claim that the vitamins could help promote healthy cells by neutralizing free radicals. But, unless the consumer reading the package is familiar with the relationship between cancer and free-radical damage to the cells, such a claim would be meaningless.The consumer tie-in  For food designers considering whether to develop functional food products, the question is whether the public -- or at least the target consumer -- is educated enough to warrant the research and development investment.  The answer, according to those who are studying the market, is yes. The latest figures from Health Focus Inc., a Des Moines, IA, market research company, show a marked interest in healthful shopping. Company president Linda Gilbert says that almost 2,000 shoppers were interviewed and that health concerns were second only to freshness, which was cited by 72% of the respondents.  Specifically, she said, 62% of the respondents shopped for low-fat foods; 61%, fat-free; 52%, cholesterol-free; 45%, high-fiber, and 43%, low-sodium. For anyone considering the nutraceutical market, there's a welcome surprise: 38% of the Health Focus respondents said they shopped for foods containing antioxidants. And, while many of the respondents -- 49% -- reported skepticism about health claims on foods, a core group of 11% said they did believe their food choices could influence their health.  DeFelice maintains that about 50% of all food purchases are made for health or medicinal reasons -- hence his projection of a $250-billion market, roughly half the $503 billion that Americans spent on food in 1992.  Consumers don't always shop the way they say they do, of course. But trend-watchers are confident that the public is getting the message that we are, indeed, what we eat. Especially when it comes to antioxidants, the popular media are reporting on research results almost as quickly as they're being released. According to Elizabeth Sloan, Ph.D., consumers are learning of these studies almost as fast as the research and medical communities, just as they did about the dietary fat connection.  Sloan, who is president of A.E. Sloan & Associates Inc., North Palm Beach, FL, claims that besides being highly informed on nutrition in general, consumers are now seeking a more targeted approach to their own nutritional needs. She points to CRN statistics indicating that while multivitamin sales are flattening, single vitamin sales are growing. In the first three quarters of 1994, according to CRN, multi-vitamin sales were down 12% from the same period in 1993; vitamin C sales were up 6%, vitamin E sales were up 4%, B complex sales were up 3%, and beta carotene sales were up 7%.  This does not leave food designers out of the loop, however. According to the Center for Science in the Public Interest, the Washington, D.C.-based advocacy group, three out of four consumers still prefer to obtain their vitamins from food sources.Regulatory uncertainties  For supplement manufacturers or food designers to capitalize on this heightened awareness with a structure/function claim, they must make sure the claim is backed by a body of research that FDA would find acceptable. True, structure/function claims under the new DSHEA do not require the agency's pre-approval, as health claims do, but the manufacturer must be able to substantiate the claim and must notify FDA 30 days before marketing the product.  The new legislation does not strip FDA's authority to remove a supplement product that the agency can prove to be a threat to public health. Supplement manufacturers do not have to obtain pre-market approval for new ingredients as food designers do under FDA's food-additive authority. But 75 days before marketing a new ingredient they must provide the agency "reasonable assurance that the ingredient does not present a significant or unreasonable risk of illness or injury."  The law doesn't indicate what form this data should take. Presumably, the same animal toxicity and human clinical studies that food companies use in applying for additive approval would suffice and, possibly, other sources such as existing literature would work, as well.  These regulations may be more lenient than the additive-approval regulations that food designers are accustomed to, but supplement manufacturers still must have their safety data in order -- and their efficacy data, if they intend to make a structure/function claim. And so must food designers who face creating a product to be marketed as a dietary supplement. In short, the DSHEA does not eliminate the entire expense that a manufacturer must incur to develop a new ingredient for a dietary supplement.  Food companies about to enter the functional food market are subject to the same regulatory conundrum as those introducing conventional food products. All the safety and efficacy data they must produce to satisfy FDA would immediately be available to their competitors. Naturally occurring ingredients can't be patented, and it's an expensive, risky proposition to seek a patent on a new additive that hasn't yet received FDA approval.  Peter Barton Hutt, a partner at the Washington, DC, law firm of Covington & Burling and a former FDA general counsel, says that rather than seeking a product patent, food companies would be wiser to seek a use patent, "if they can show the application to be novel, and not predicted from prior science."  Even so, Hutt predicts that the Commerce Department will be issuing few such patents to food and ingredient manufacturers. "It would require research in an area where it hasn't occurred to anyone," he explains.  Some in the R&D community are looking to the government to provide some degree of "intellectual property" protection to food companies -- even just a few months' lead time on the market. Beyond that, many hope the new DSHEA, not to mention the new Republican majority in Congress, will encourage FDA to exhibit some flexibility in its regulation of how new products are marketed, and to apply this flexibility to conventional food products.Education and beyond  Nancy Childs, Ph.D., a professor of food marketing at St. Joseph's University, Philadelphia, emphasizes that education is now among FDA's responsibilities, in addition to protecting public health. "For the first time, Congress has mandated FDA to look at public health education," she says, pointing not only to the DSHEA, but to the Nutrition Labeling and Education Act of 1990, which mandated the new food labeling regulations.  "This is an extremely significant factor for the long term," she adds. "You can't achieve it without claims and health-oriented information on the label."  Despite the regulatory uncertainties, a good share of the food industry is already investing in functional foods. In 1992, well before the DSHEA was enacted, Childs surveyed 96 food and pharmaceutical companies, with the food companies holding a slim majority. At that time, 55% of the food companies said they were investing in the category, as opposed to only 36% of the drug companies.  It will take perseverance on the part of food designers and a willingness to take calculated risks before the market reflects that level of investment. However, Childs says she has found that both food and drug companies tend not to envision themselves as marketing dietary supplements. Rather, "they stay on their own turf."  If neither takes advantage of consumer demand for functional foods, there may be others who are willing to step in. Chain drug stores, for instance, have been aggressively pursuing a private label strategy for over-the-counter drugs and for herbal products. With their built-in credibility advantage over smaller, lesser known manufacturers, and without the obstruction of slotting allowances, Childs sees the drug stores as potential players in the functional foods market, as well.  Frank Stebbins, president and chief executive officer of Nutraceutical Technology Inc., Chesterfield, MO, agrees that the time is right for food companies to invest in functional foods -- before regulatory policy is set in stone. "The food industry has an opportunity to handle this well," he says.  He notes that when the Food and Drugs Act was first enacted in 1906, its purpose was to shape up an uncontrolled patent-medicine industry that was a clear threat to the public health. By contrast, Stebbins argues, the food industry of today is "the best in the world."  "We have the best technology, the best-educated scientists," he says. "With all these resources available, why not be self-regulatory and stay one step ahead?"Back to top