Editorial: How High Must the Walls Be?

By Len Monheit
[email protected]

The refrain 'No Barriers to Entry' is often heard on tradeshow floors from those wanting freedom of access to an expansive variety of natural health products and dietary supplements. This voice is as loud, if not louder, than those blaming any industry growth stall on the very same issue – “until we have some ‘barriers to entry’, companies won't invest in new products and in research.” Both parties may want the same outcome - numerous, high quality, efficacious products, supported by strong science - yet at many levels, these approaches are totally opposed.

Industry executives, especially those dealing with shareholders or financial backers, often find that industry's lack of barriers to entry is not a good thing. Without barriers, it's easy for competitors to catch up to you, and it means that new entries have only a little investment they need to make to play 'the game'. They need make a small commitment, in time or money, and their terms of reference can be so short term - a matter of months in an infomercial, until they can exit the industry, with millions of dollars in their pockets. Consumers get confused, sku's multiply, science gets borrowed, safety falls behind in the race to market, and as importantly, so too do responsible business systems that allow, among other things, effective product recall and risk management.

On the flip side, too rigorous a barrier restricts product availability and competition, and will eventually stifle new product introduction. It can lead to a marketplace controlled by a few large players, and an agenda that may not necessarily be in the best interests of consumers, general health, and in fact, maximum healthcare impact (economic benefit).

Barriers can take many forms. They can be administrative (sheer weight of paperwork or administration required to operate and compete), regulatory (compliance issues, nationally and internationally, registrations etc), risk-based (liability, insurance), legal (intellectual property including patents and trademarks), science-based (a research and clinical trial prerequisite to entry or participation), they can be market-based (the need for branding, value chain communication, third-party certification, trade association participation, network) or they can be economic (inventory and other investment required, event participation).

All discussions regarding cost of compliance, whether it involves GMP's, AER's (Adverse Event Reporting) or pre-market approval have an impact on this issue. All discussions regarding the use of borrowed science are related. The expense and value of third-party certification and trade association membership are involved. Everything related to the cost of new product introduction is central. What do you really need to do to bring a product to market? What is the absolute minimum a company can 'get away with'? Can they get product sales by paying for marketing alone? Some of the Internet-based product sales for enhancement products attest to the fact that, despite being illegal, that's all a company really has to do.

Many of the factors noted above build barriers to entry. GMP enforcement will certainly help. An AER obligation is another barrier step. Retailer and consumer education at multiple levels on what to look for and perhaps more importantly, what questions to ask is absolutely critical. Do consumers know to ask about what third party quality assurance steps companies take? Do retailers know to ask what trade associations their vendors belong to? Is the difference in value between a Certificate of Analysis and Certificate of Compliance firmly established?

Organizations such as Consumerlab.com and NSF International are trying to provide tools for both retailer and consumer differentiation of products and companies - and the value of their respective 'seals' goes up as what they stand for (in retailer and consumer minds) becomes better established. Trade associations expect companies to follow a code of ethics and in most cases, have membership criteria. Companies do successfully invest in research and clinical trials and an intellectual property portfolio. They do invest in events where you can meet them face to face - if you need to. Many have Quality Assurance programs that exceed regulatory requirements. For instance, NSF's program to certify supplements with the NFL Players Association requires that manufacturers, in any of their facilities, not use banned substances, and perhaps other programs might require similar guarantees by either manufacturers or even their suppliers. The responsibility (and some risk) is pushed up the value chain.

Can transparency help?

It's challenging to assign value to any program or membership. And until it has an accepted value, the program or practice is not a barrier to entry. On the way to developing value and getting the right set of questions asked and answered, perhaps what we need is a bit more transparency? Perhaps it’s important to post supplier selection criteria and note this frequently in communications. Perhaps trade association membership should be promoted much stronger. Perhaps education to both retailers and consumers, at a certain level, should focus as much on specific product benefits as it should on what to look for, what to ask, and what it means. (I realize that this begs the question "who will do this?") It may be that this transparency and process would be good for the industry as a whole.

Let's face it, many parts of the industry are not very transparent. In some cases, there are legitimate reasons for this (protecting source in most cases).

Perhaps we should consider though, what is the minimal amount of investment a company should make, and the information it must be prepared to disclose, in order to participate in a responsible business environment. After all, we want consumers to get access to a wide variety of safe, efficacious, scientifically substantiated products produced and brought to market by professional, responsible, companies.

Just what do each of these terms really mean?

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