I returned to work from a nice holiday weekend yesterday to find a press release from the U.S. Department of Justice proving that some people are, well, just plain stupid.
The person in question is Tony T. Pham, owner of the dietary supplement company Techmedica Health Inc. in Grand Rapids, Michigan. The press release was announcing that Pham had pleaded guilty in federal court on July 6 to fraudulently marketing supplements via the Internet with illegal claims that the products could prevent, treat or cure diabetes, irritable bowel syndrome and a handful of other diseases. In addition to forfeiting to the government the nearly $12 million he made from selling the supplements in 2005 and 2006, Pham could end up in federal prison for 25 years without parole and be forced to pay another $500,000 in fines.
As part of his guilty plea, Pham admitted that he participated in a conspiracy to buy and sell unapproved new drugs and misbranded drugs over the Internet. The products involved were marketed as Diabeticine (later renamed Diamaxol, and also known as Glucolex), Digestrol (also known as Digesticine), Uricinex (also known as Uricaid), Cholestasys Rx (later renamed Cholestasys), Hyperexol and Prolipamy.
But Pham didn’t only make illegal claims. He also used stock photographs to create fraudulent customer identities to tout the effectiveness of Techmedica’s supplement products via its Websites. A fictitious doctor and nurse were also conjured up—both using the same picture on different Websites—to promote and endorse the products.
Such actions were sure to draw the attention of the U.S. Food and Drug Administration (FDA), but Techmedica attempted to prevent that from happening through the use of what is called mirror image technology. According to the Department of Justice press release, this technology assured that when each of [Techmedica’s] Websites was accessed from an FDA network computer, they displayed a “sanitized” version of the Website containing medical claims that attempted to comply with the federal Food, Drug and Cosmetic Act. However, when each of these Websites was accessed from a computer whose IP address could not be traced to the FDA, they displayed claims that the dietary supplements could cure, mitigate, treat and prevent diseases.
A sentencing hearing for Pham will be scheduled after the completion of a pre-sentence investigation by the United States Probation Office. In addition to the conspiracy, Pham pleaded guilty to one count of wire fraud related to payments in the form of a wire transfers to a bank account.
By all accounts, Pham and his company could certainly be described as one of the most rotten apples threatening to spoil the entire U.S. dietary supplement industry. Also, it looks as if this guy did just about everything necessary to ensure that the government would prosecute him for his actions. Still, his current dilemma should serve as a cautionary tale for other supplement companies that think they will never be caught by the FDA when they make illegal claims to sell their supplement products or do something else to cross the legal line. As Loren Israelsen, executive director of the United Natural Products Alliance, told Nutrition Business Journal earlier this year, the likelihood of such companies being caught is, thank goodness, rising. “Over the past 15 years, the people in our industry have been used to an eviscerated FDA that had lost funding, money, prestige and had just been gutted out. Those days are over,” Israelsen said. “This is the new FDA. They have money, manpower and mandate.”
NBJ subscribers can read more about supplement regulation in our 2009 U.S. Nutrition Industry Overview issue, which publishes this month. To order a copy of the issue, subscribe to NBJ or download a free 32-page sample issue, go to www.nutritionbusinessjournal.com.