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Puerto Rico Dietary Supplement Order a Money Grab

<p>A new administrative order approved by Puerto Rico would charge manufacturers, marketers and retailers to sell supplements on the island, as well as adhere to new inspection and registration requirements.</p>

Puerto Rico’s desperation for income might have reared its ugly head against the dietary supplement industry. An administrative order signed in February this year by the commonwealth’s secretary of health, Ana Ruis Armendariz, M.D., laid out new fees for distributing, marketing and retailing natural products, including dietary supplements, on the island, in addition to new registration and inspection requirements. The Natural Products Association (NPA), which represents tons of dietary supplement retailers and suppliers, is not taking this move lightly.

“This rule is arbitrary, unnecessary and potentially damaging to consumers and economic growth in Puerto Rico," said Daniel Fabricant, Ph.D., CEO and executive director of NPA.

Registration and Fee Requirements

Under the order, there must be a natural product registration for each such product intended for sale in Puerto Rico. The fee to register a natural product for sale in Puerto Rico is US$25 for “for each and every size of the product to be registered." Each registration must also include quality control data (certificates of analysis [CoAs]); label sample; promotional/advertising materials; warnings; info on the process used to obtain the product; and lab CoAs, including name, address and contact info for the manufacturer, and FDA registration number. In addition:

  • Manufacturers must file an application and pay an additional $500 fee every two years.
  • Wholesale distributors must also register and pay an additional $100 fee every two years.
  • Retail distributors must register and pay $50 every two years.
  • Facilities are subject to inspection, the fee for which is $50.
  • Drug stores and pharmacies holding licenses from the DOH are exempt from the registration and fees in this order.

Fabricant noted the registration requirements in the new order mirror what is already required by FDA.

Also at issue is the use of the term “natural products" in the order. The order cites an FDA definition of the term that includes foods (including dietary supplements), drugs and cosmetics and notes the definition of “natural product" for purposes of the requirements will depend on intended use, which can be established by labeling, marketing/advertising and distribution. However, it also states:

For the purposes of this administrative order, the term ‘natural product’ shall refer to products that include herbal substances or plant material (complete, fragmented or cut up), algae, fungi or any combination thereof, normally in dry form but sometimes fresh. Furthermore, the definition of ‘natural products’ includes nutritional supplements and dietary supplements.

In its posted talking points, NPA noted the claim that FDA has defined "natural product" is incorrect, noting FDA only has a working definition for “natural," but is in the early stages of reviewing this definition.

Fighting Back with Congressional Sovereignty

As a territory of the United States—part of the Treaty of Paris that ended the Spanish-American War—Puerto Rico and its 3.5 million inhabitants are under the rule of the U.S. Congress.  While Congress allowed Puerto Rico to create its own constitution in 1950 (approved by island voters and ratified by Congress in 1952), the United States still maintains sovereignty over the commonwealth (see current Supreme Court case that could rule on Puerto Rico’s sovereignty.) This gives Congress power over all laws on the island, an authority that NPA and the supplement industry is asking members of the U.S. House of Representatives to exercise over this new Administrative Order No. 346.

“Congress reverses orders here in the U.S. all the time," Fabricant said. “Products are shipped from continental U.S. to Puerto Rico, so it’s part of interstate commerce."

NPA met with key House members, encouraging them to attach a provision to a debt relief package being considered to help Puerto Rico with its $70 billion debt crisis. Many NPA retailer and manufacturer members conduct business in Puerto Rico. “About 2 million people on the island take supplements," Fabricant estimated, based on previously reported usage pattern in the United States. Thus, NPA encouraged its members to visit the Puerto Rico section of its saveoursupplements.org site to view key talking points and contact members of Congress to request they strike the order and save the industry from burdensome taxes and requirements.

During a May 25 bill markup session in the House Committee on Natural Resources, Rep. Ryan Zinke (R-Montana) successfully placed a provision into the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA, HR 5278), which was approved and cleared from committee the same day.  

PROMESA would create a seven-member fiscal oversight board comprised of financial and economic experts to be chosen by President Obama from various lists submitted by  the majority and minority leaders of both chambers, as well as House Speaker Paul Ryan (R-Wisconsin), who has backed the bill. The bipartisan bill also has support from the White House, but it faces challenges in both the House and Senate. However, given it does not provide Puerto Rico a widely unpopular bailout at the expense of taxpayers, the bill is expected to pass both chambers of Congress.

The latest draft of PROMESA also includes a bicameral, bipartisan Congressional Task Force, which would make economic growth recommendations. This is where the Zinke provision comes in. The provision fell short of an outright appeal of Administrative Order 346, but it put the dietary supplement-focused order on the list of requirements the Task Force must address in its first report to Congress, due by Dec. 31, 2016. The task force must report on “the economic effect of Administrative Order No. 346 of the Department of Health of the Commonwealth of Puerto Rico (relating to natural products, natural supplements and dietary supplements) or any successor or substantially similar order, rule or guidance of the Commonwealth of Puerto Rico."

“Ideally, we would’ve liked to have gotten it wiped out," Fabricant said, referring to the provision. “There still might be a chance, as the bill hasn’t hit the floor yet." He emphasized despite getting the provision onto PROMESA, it is still important for people to send emails to the House and Senate to pass PROMESA with the provision intact. “This bill is really the only vehicle we have to address this issue," he stated. “If Congress isn’t going to stand up to it now and wipe it off the books, at what point would they do it?"

The order came about due to financial problems the island is facing, according to Fabricant, so the bill to address the economic crisis is the perfect vehicle for a provision to remove the order. “This [order] has nothing to do with safety or regulation; they just wanted money to keep that particular part of the [Puerto Rican] Health Department in business," he said. “That is the reality of the situation."

It is important for industry to not be apathetic, Fabricant urged, noting the precedent this order could set. “If you are saying a U.S. territory can tax the industry at will, certainly states could follow suit," he warned.  “If people in the industry aren’t paying attention to this, it is troubling, because it is effectively a tax on industry with damaging consequences."

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