INSIDER Law
DOJ Announces Wide-Ranging Non-Prosecution Agreement With GNC

DOJ Announces Wide-Ranging Non-Prosecution Agreement With GNC

As part of a non-prosecution agreement with the DOJ, GNC has agreed to pay US$2.25 million to the federal government, cooperate with dietary supplement probes that the government conducts, and reform its practices.

GNC Holdings Inc. (GNC), the retailer of dietary supplements, has entered a wide-ranging agreement to reform its practices and pursue voluntary initiatives as part of an effort to keep unlawful supplements off the market and improve the quality and purity of products, the U.S. Department of Justice (DOJ) announced Wednesday.

As part of a non-prosecution agreement with the DOJ, GNC has agreed to pay US$2.25 million to the federal government and cooperate with dietary supplement probes that the government conducts.

GNC acknowledged in the agreement that it neglected to verify (through additional testing or certifications) representations made by USPlabs LLC that ingredients contained in its OxyElite Pro Advanced Formula complied with the law, the DOJ said in a news release. Texas-based USPlabs, whose supplement was sold at GNC locations nationwide, was indicted in November 2015 on criminal charges and is awaiting trial.

Under the pact with the DOJ, GNC will take immediate action to suspend the sale of any supplement if the company discovers FDA issued a public written notice indicating the product or ingredient contained in the purported supplement is not legal or safe. GNC also agreed to establish a “restricted list" of ingredients not to be used in supplements, and a “positive list" containing substances that are approved for sale, the DOJ said.

Third, under an agreement to significantly modify its internal approach to dealing with its vendors, GNC will require more explicit guarantees that supplements exclude ingredients on the “restricted list" and comply with federal law. Fourth, the retailer will voluntarily work to develop an industry-wide quality seal program, and when the seal is adopted, GNC has agreed to stop paying its salespeople retail bonus commissions, or “promotional money," to refer customers to supplements in its stores that don’t carry the seal, the DOJ news release said.

Finally, GNC will update its adverse event reporting policy to verify its employees understand the proper procedures to follow if a customer reports injuries associated with a product.

“Today’s resolution is a significant step forward in reforming an industry rife with alarming practices," said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of DOJ’s Civil Division, in a statement. “Companies like GNC need to do more to ensure that they are not selling products containing questionable and untested ingredients. The American public deserves better, and the Department of Justice appreciates GNC’s efforts in resolving its issues and moving forward in the best interests of American consumers."

The indictment against USPlabs alleges the company engaged in a conspiracy to import ingredients from China using false certificates of analysis (CoAs) and false labeling, and then misrepresented the source and nature of the ingredients after the supplement maker incorporated them in its products, the DOJ said. According to the indictment, the company advised some of its retailers and wholesalers that it used natural plant extracts in some of its products, but it was using synthetic stimulants made in a Chinese chemical factory.

GNC said it was pleased to reach the agreement with the DOJ.

“The DOJ and Food and Drug Administration (FDA) concluded in the agreement that GNC relied on the representations and written guarantees of USP Labs that it was in full compliance with the Food, Drug and Cosmetic Act (FDCA) and applicable state laws with respect to the ingredients contained in its products," the company said in a written statement. “Ultimately, the DOJ found sufficient evidence that USP Labs provided false assurances and information and fake documentation to third parties, including GNC. The DOJ and FDA also concluded that GNC was unaware of any information that the products manufactured by USP Labs violated the FDCA, while recognizing GNC's representation that it did not knowingly sell products that violated the FDCA."

USPlabs has denied the government’s allegations. As INSIDER reported last month, the case was set to go to trial in January 2017, but a federal judge has reset the trial for Oct. 10, 2017, in response to a joint request for a continuance. The parties said they anticipated the trial would involve dozens of witnesses and last for weeks.

In a motion filed in October requesting a continuance, the parties described the criminal case against USPlabs and other defendants as a “complex" one, “involving two corporations and six individuals and conduct stretching back years." The government has already produced hundreds of thousands of pages of discovery, the motion noted.

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