This is the author's Supplement Law Blog and includes his opinion.
Last month, a Dallas paper broke the news that USPlabs is under criminal investigation by federal authorities. USPlabs is the supplement manufacturer whose entanglements with FDA date back years, most recently in 2013 when an outbreak of hepatitis was linked to its OxyElite Pro supplement. The outbreak may have affected nearly 100 people in more than a dozen states.
The U.S. Attorney’s Office in Texas confirmed last month that no charges have been filed against USPlabs. The company isn’t out of the woods yet. The federal government is notorious for taking years to initiate criminal prosecutions in cases of foodborne illness. For instance, the executives of a peanut plant (Peanut Corporation of America or PCA) that was tied to a 2008-2009 national outbreak of Salmonella weren’t indicted until early 2013. (In September, a jury found three PCA executives guilty of several criminal counts).
“In my experience, FDA does not bring a case until they really believe that the case is appropriate, the Justice Department as well," said a well-respected supplement lawyer who is not involved with the USPlabs investigation but agreed to speak about it on background. “They don’t bring cases for publicity. They don’t bring cases to move things along in a regulatory context. They bring these kinds of cases when they believe there is criminal fault."
The Dallas Morning News first reported on the USPlabs criminal probe. The investigation actually dates back to late 2013. According to court records, FDA suspected that USPlabs and its owners Jacob Geissler, Jon Doyle and Matt Hebert violated the Federal Food, Drug & Cosmetic Act (FDCA) by causing the introduction of adulterated food into interstate commerce and conspiring to do so. Federal authorities with a warrant later raided USPlabs’ facilities—snatching mountains of business records ranging from OxyElite Pro sales records to product complaints—and seized nearly $1.1 million from a JPMorgan Chase Bank account, court records show.
USPlabs has retained a high-powered lawyer, Peter Barton Hutt of Covington & Burling LLP, the law firm specializing in food and drug law. Hutt is one of the nation’s most experienced food and drug lawyers, having served as FDA’s Chief Counsel in the 1970s.
It is money well spent on attorneys’ fees because USPlabs’ executives face the prospect of federal prison if they are charged with violating the FDCA and later convicted by a jury or plead guilty. Commission of a “prohibited act" under the FDCA is a misdemeanor, punishable by up to one year behind bars for each violation even if the executives didn’t intend to do anything wrong. If a judge or jury found the men acted with intent to defraud, they would be convicted as felons and face up to three years in prison for each violation.
Criminal convictions could result in an unraveling of USPlabs’ lucrative business, which according to court records sold more than $50 million of OxyElite Pro in 2012 and 2013.
Hutt has got his work cut out for him.
USPlabs has been on FDA’s radar for years, starting in 2010 when consumers as young as adolescents began lodging complaints that they were suffering adverse reactions from USPlabs’ products.
In the summer of 2010, following an inspection of USPlabs’ facility in Dallas, FDA cited the company for failing to comply with regulations, court records state. USPlabs promised during and after the inspection to make the necessary charges, “but ultimately failed to provide evidence of adequate compliance with FDA manufacturing requirements for dietary supplements, such as adequate raw material and finished product specifications," according to a Nov. 6, 2013 affidavit signed by John Hover, special agent with FDA’s Office of Criminal Investigations.
FDA was back for another inspection in 2012 following a report that a 21-year-old who had used USPlabs’ products suffered cardiac arrest and died, according to court records. The records may refer to the death of Michael Sparling, a 22-year-old soldier who had ingested Jack3d, a supplement that contained the controversial stimulant known as dimethylamylamine or DMAA. Sparling collapsed on June 1, 2011, while training with his unit at the military base in Fort Bliss, Texas.
His parents have sued USPlabs, blaming Jack3d for his death. Others also have attributed fatalities to USPlabs’ supplements. A complaint filed by Sylvia Ogbonna claims her late daughter Demekia Cola ingested USPlabs supplements that caused her to suffer liver failure and other complications, leading to her death on Dec. 13, 2011.
In the spring of 2012, FDA demanded in a warning letter that USPlabs remove DMAA from the market. The letter essentially claimed there was no history of use showing the substance was safe or that it was otherwise being legally marketed.
“Failure to immediately cease distribution of your products Oxy Elite Pro and Jack3D and any other products you market that contain dimethylamylamine could result in enforcement action by FDA without further notice," an FDA compliance official, Michael Roosevelt, warned in the April 24, 2012 letter.
USPlabs did not immediately capitulate to FDA. In fact, USPlabs continued to market the products and it wasn’t until a full year later that the company announced plans to reformulate its supplements without DMAA. In a press release at the time, USPlabs asserted its position that DMAA is legal and safe as a dietary supplement. It cited business reasons for its decision to reformulate its products.
Later that summer, USPlabs destroyed more than $8 million in products containing DMAA. That was only after FDA administratively detained them and moved for additional relief in the federal courts. Daniel Fabricant, then FDA’s top supplement official, noted in a blog that DMAA had been linked to more than 100 illnesses including six deaths.
With DMAA finally off the market, it seemed that FDA—at least—would lay off USPlabs. But it was not to be.
On Sept. 25, 2013, court documents reveal, the Hawaii Department of Health and Centers for Disease Control and Prevention (CDC) contacted FDA. Health officials were facing a serious problem: an outbreak of hepatitis that was quite possibly linked to supplements manufactured by USPlabs.
At the time FDA requested a warrant on Nov. 1, 2013 to search USPlabs’ facilities in Texas, the hepatitis outbreak was connected to 18 hospitalizations, one death, one liver transplant, and two other individuals were awaiting liver transplants. And by March of 2014, CDC had reported 97 cases and one death in 16 states possibly connected to the outbreak.
Of the 97 individuals diagnosed with acute non-viral hepatitis, 72 reported exposure to a branded OxyElite Pro product, according to FDA. The agency said at least 47 individuals were hospitalized while at least three people received a liver transplant.
A number of factors pointed to USPlabs as the culprit. The victims were young, had no documented history of liver problems and their liver enzyme levels began to return to normal when they discontinued use of the products, said Chad Medaris, a special agent with FDA’s Office of Criminal Investigation, in an affidavit filed with a U.S. District Court.
Following the outbreak, FDA declared in a letter to USPlabs that a substance known as aegeline was not proven to be safe and constituted an "adulterated" substance. In the Oct. 11, 2013 letter, FDA suggested "a causal connection" between reported illnesses and OxyElite Pro.
USPlabs denied aegeline is unsafe and refuted FDA's contention that the substance is a new dietary ingredient (NDI) that necessitated a notification to the agency. Kenneth Miles, USPlabs chief compliance officer, said the substance has been present in the food supply and has not been chemically altered.
Hutt said in an interview with the Dallas Morning News that USPlabs “strongly believes" the precise cause of the Hawaii outbreak has not been identified.
“As with DMAA, the company marketed aegeline only after animal and human testing demonstrated that it was safe," he told the newspaper.
I contacted Hutt to discuss the status of the investigation. He didn’t make himself available for a phone interview but followed up by email, confirming that his statements to the Dallas Morning News were accurate.
USPlabs hasn’t just had to contend with the feds. The company is facing more than two dozen civil lawsuits pending in state and federal courts around the United States, a lawyer who represented USPlabs said in an Aug. 4, 2014 court filing.
In December, the U.S. Judicial Panel on Multidistrict Litigation denied a request by USPlabs to centralize 16 personal injury lawsuits filed against the company and other co-defendants including GNC. The panel pointed out that only five lawsuits are pending outside the District of Hawaii. Other than Hawaii, lawsuits are also pending in California, Pennsylvania, Texas and Florida.
The panel also noted some of the lawsuits outside Hawaii pertain to USPlabs’ DMAA products while the majority of all the complaints relate to USPlabs’ aegeline supplements.
Contract Manufacturer Entangled in Probe
Court documents reflect that USPLabs paid a contract manufacturer, SK Labs in Anaheim, California, to manufacture supplements including OxyElite Pro and Versa-1 from raw materials.
Since June 2012, USPlabs imported at least 20 shipments of aegeline from Siwadaka Chemical Company in Beijing, China, according to court records. A third-party shipping and warehousing company shipped the aegeline to SK Labs, Medaris, the FDA special agent, wrote in an affidavit. SK Labs formulated the aegeline-containing supplements according to instructions that USPlabs Geissler and SK Labs’ vice president Sitesh Patel agreed upon, Medaris said.
“SK Labs encapsulated and bottled the finished product, labeled the product with labels provided by USP and indicating USP’s brand and product name, and then shipped the product to USP Labs facility in Dallas, Texas for further distribution to consumers," Medaris said in his affidavit.
Whether federal authorities will initiate enforcement action against SK Labs is an open question. Misdemeanor criminal liability extends to third-party contract manufacturers, but FDA may be unlikely to bring a charge unless SK Labs had knowledge of wrongdoing, said the supplement lawyer who agreed to speak on background.
SK Labs did not respond to repeated requests for comment. FDA declined to comment on the USPlabs criminal investigation beyond the public filings.