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In the 'post-regulatory age,' will supplement makers succumb to the dark side?In the 'post-regulatory age,' will supplement makers succumb to the dark side?

The Trump administration has indicated a mission to eliminate regulations, but public safety concerns could stall deregulation at the FDA.

Rick Polito

March 15, 2017

12 Min Read
In the 'post-regulatory age,' will supplement makers succumb to the dark side?

When you hear the words “there’s a new sheriff in town,” it typically implies that this new sheriff is tougher, more vigilant, feared by criminals and beloved by the townsfolk who walk onto the street without worrying about gunslingers and cattle rustlers.

But what if the new sheriff is half blind and hires the town drunk as his deputy? What if that half-blind sheriff is “business friendly?”

That’s the obvious interpretation of the new Trump administration’s approach to regulatory enforcement. When a new sheriff declares a freeze on new regulations, and announces that when the freeze thaws it means two other regulations get pulled off the books for every new regulation issued, it starts to sound like every black hat on the prairie has been handed a stack of Get Out of Jail Free cards.

And the supplement industry has never lacked for black hats.

The question is what the people in the industry who care about those townsfolk are going to do. And what will they do about the people who look so comfortable in those black hats? Excusing the mixed metaphor of dragging the Old West to a galaxy far, far away, can the supplement makers resist the lure of the dark side?

The question is answered with a shrug by most.

United Natural Products Alliance Executive Director Loren Israelsen describes himself as “cautiously pessimistic.” “Given the history of the industry, we have struggled to restrain ourselves,” Israelsen says. The bar may go lower than it’s ever been, but the stakes are as high as ever. Grabbing one of those Get Out of Jail Free cards is too big a gambit, Israelsen contends. The half blind sheriff may be looking the other way, but responsibility and liability never sleep. “If you are in the lawn chair and wiffle ball business, maybe you can let your guard down, but I think it is just fundamentally unwise to believe there are any days off in the food safety business,” Israelsen says.

How free the reins will become is not yet apparent, but the new president has made his position clear, says Susan Winckler, chief risk management officer at Leavitt Parners, a health industry consultancy with offices in Utah, Chicago and Washington. Winckler was an FDA chief of staff under the Bush and Obama administrations. She knows the signs. President Trump believes the FDA is stalling innovation, she says. Indeed, one of the president’s possible picks for FDA commissioner, Jim O’Neil, has said that drugs could be marketed without proving efficacy. “The president has a visceral concern with the FDA,” Winckler says. That attitude seemingly applies to a wide spectrum of industries and presents a “legitimate existential threat” to the government’s authority to regulate commercial speech, she says. That could embolden brands to push the boundaries on claims, but claims are only part of the changing regulatory picture.

The parts that don’t change, or simply stall, offer equal uncertainty, and temptation. The New Dietary Ingredient (NDI) draft guidance that had industry insiders wringing their hands through the second half of 2016? It will almost certainly be delayed, maybe indefinitely.

The president’s hiring freeze could also mean fewer desks in the FDA offices and fewer bodies in the field. Budget cuts shrink the reach even further. The Trump administration’s budget will reveal more about the priorities than any tweets or press conferences. “Follow the money. That is really going to tell you what they are going to do,” says Jeff Nedelman, public relations specialist at Strategic Communications.

Beyond that, the unknowns vastly outnumber the knowns. Nedelman has worked in Washington since 1972.  All previous models are useless, he says. “FDA commissioners come and go, but this is chaos driven by a chaotic White House which is driven by a chaotic president.”

Going dark

The fundamental question is what supplement makers with scofflaw instincts even under pro-regulation administrations will do if the handcuffs come off completely. It’s a step-up-or-fall-back moment. In the two years since New York attorney general Eric Schneiderman’s investigation into herbal supplements rocked the industry, trade associations and high-minded CEOs have moved to build transparency into the business model. The momentum has been headed to the high road and there are many who want to keep it there.

“It’s no time for the industry to act like kids whose parents have gone away for the weekend,” says Rend Al-Mondhiry, legal counsel at the Council for Responsible Nutrition. Al-Mondhiry points to the CRN Online Wellness Library voluntary product registry and the American Herbal Products Association work on good manufacturing processes for botanical ingredients as evidence of the right decisions and the right direction. The trade associations are collaborating and sharing strategies, she says. “That’s one story I am going to be telling the state AGs as I meet with them this year.” Big brands and big retailers invested in transparency and quality assurance. “I don’t see any of them backing down from what they have already invested.”

Not everyone is impressed by good intentions, however, and some dismiss the steps taken by the industry as window dressing in some cases. It’s a feel-good gestures lacking “teeth,” they would say. And the industry’s reaction to the new political reality does not suggest that following the rules-for-rules-sake is part of the plan for that reality. At a UNPA seminar in early February, a live survey asked the attendees what they planned to do in reaction to the New Dietary Ingredient (NDI) guidance. The same question had been asked at a similar seminar in September. At that time, a third of the respondents indicated they planned to begin filling NDI notifications. In the February survey, the number of respondents with such intentions was zero.

“We’ve never had zero before,” Israelsen notes.

Call it the “Trump Effect.”

The historical record is not encouraging. Every insider has tales of the “Wild West,” often pointing to the years immediately after DSHEA was passed as the zenith of bad behavior. But it’s not as though the recent years have been entirely a story of boy scouts and choir boys helping little old ladies across the street. The BMPEA and DMBA scandals all broke after the New York attorney general put the industry on notice. Search the FDA’s “electronic reading room” for  “dietary supplements” and you’ll find 1,328 warning letters in the 738 days since Schneiderman announced his investigation.

Transparency has become both a buzzword and a real and robust practice at some companies, but the truth is few consumers know what’s in their supplements, much less what they should look for. And the number of brands in that real-and-robust club is undoubtedly outnumbered by brands winking and nodding their way up and down the supply chain. The dark side is just a few feet, or a few inches of shelf space away.

With whatever bright lights shined on the industry dimming (at best), it’s all but assured the darkness will get deeper. The sketchier brands will push the claims, and the mid-sized companies will be tempted to respond by testing the boundaries in an attempt to get noticed in the noise.

At that point, the race to the bottom becomes a survival strategy.

Darker still

Of course, the path to the dark side runs through peril. The most dangerous of those perils have offices in all 50 states. If the FDA lessens its grip, the state attorneys general could see opportunity. The FDA doesn’t need to fire up the base. State prosecutors have to get votes. “The big states, the Californias, the New Yorks, the activist bellweather states on big issues of public health and safety, they are going to fill the gap,” Nedelman says.

The politics of partisanship complicate the dynamic even more. Enforcement can make state attorneys general look even better when they can call out a president from the opposing party for lacking concern for public health. “I’ve had some discussions with the democrat AGs,” says Al-Mondhiry. “They fully intend to keep the president in check,” she says.

Some say the industry could end up longing for a stronger hand at the federal level. Dealing with one agency is very different from playing whack-a-mole with 50 different offices.

It doesn’t end there, if the state AGs are a strike force, plaintiff’s attorneys are an army. Less federal enforcement could mean more dark players and thus more easy targets. Class action attorneys could then play themselves as crusaders, riding to the rescue as federal regulators hold back.

Supplement lawyer Ashish Talati puts it simply: “You are at risk even if the FDA is not coming at you.”

Don’t be afraid of the dark

There is more than a glimmer of opportunity in the darkness. For supplement makers who resist the urge to take chances, bold statements of transparency may provide an even starker line of differentiation than before. It’s not just individual companies of course. The trade groups could highlight efforts and demand new levels of transparency as a condition of membership. “If we show well during a period of less regulatory oversight, that can and should reassure our consumers of our desire, intention and ability to really carry on and stay the course,” says Israelsen.

It’s not an easy story to tell consumers. The supplement trade and the science of ingredient transparency are anything but simple. But because the story has never really been told well doesn’t mean it can’t be.

Science and regulatory consultant Risa Schulman at Tap Root believes part of that story can be told in the science, and a loosening of the regulatory stranglehold that the proposed NDI guidance represented could free up money for new innovation based on better research. Schulman saw solid scientific efforts put on hold while companies geared up to contend with NDI notifications. Those projects are proceeding now, she says.

There may be more money for science, too, Schulman predicts. If promised tax breaks are realized, that money might be invested in innovation. “If there is more cash around, then some of it could flow to science.”

A light in the darkness

Ironically, the biggest opportunity of what some are calling “the post regulatory era,” could be new regulation.

The new administration presents itself as business friendly. That could mean getting rid of regulations. It could mean rewriting regulations. It could mean adding new regulations with more opportunities than restrictions.

That’s what Organic and Natural Health Association Executive Director Karen Howard sees as the smartest move the supplement industry could make. Supplement makers have long been reluctant to reopen the clockwork of DSHEA, seeing it as a once-in-a-lifetime opportunity realized, but many argue it’s time to tinker with the gears again.

A pro-business administration backed by a pro-business Congress could offer the ideal moment to dive back into DSHEA. The obvious place to start is reexamination of claims restrictions that many call cumbersome to the point of absurdity. A reasonable answer might be a system like Canadas, where science is reviewed and rewarded with the ability to present straightforward claims. New regulations could dictate the rigor and then allow brands to make OTC-like claims. And perhaps a government-run registry, not a pre-approval process but a simple, (and mandatory) registry, could raise the barrier to entry and keep the much-despised “bad players” out of the business.

“Why would we not utilize the opportunity?” Howard asks. “We might as well figure out how to make some political hay out of it.”

Such bold steps should be taken without delay. A new congress is only two years away. Four years from now, the pendulum could swing around and smack the industry where it hurts. Now is the time to move, Howard says. The odds will never be better. “Nothing ventured, nothing gained,” she says.

The politics of darkness

Of course, the pendulum may not have swung as far as some believe. The truth about Washington is that the leadership can change, but the same crews operate the machinery of state. That’s especially true in the FDA, where only a few of the thousands of employees are political appointees, and whatever bold intentions the next commissioner may bring to the office could easily get lost in the crises of circumstance. “In my experience, the FDA commissioner comes with an agenda they plan to pursue and then the agenda they get to pursue is very different,” Winckler says.

It might be something like the melamine scandal when, Winckler recalls, the FDA “did more inspections of pet food facilities than any other entity because pets were dying.” It might be something like the opioid crisis. It might be something that happens before a new commisisoner even moves into the office. Scandals and crises “don’t wait to emerge until the nomination process is done with,” she recalls.

Meanwhile, down the ranks in the various centers, work goes on. “Political leadership does not engage in product-specific decisions or enforcement actions. They simply don’t,” says Winckler. Budgets could cut the ranks. Stretched thinner, the remaining inspectors might go for the easiest cases, the black and whites, the boxes checked or not checked.

But the warning letters might not stop just because Donald Trump thinks rules are bad for business.

“To all those who say there won’t be any enforcement action in the next four years, I disagree,” says Winckler, “and particularly if there are safety problems.”

Dark thoughts

However the industry reacts, the truth is the challenges will be nothing new. There will be irresponsible players flirting with disaster for their brand and whole categories. There will be negative attention from the media. Sales will spike. Sales will slow, and sometimes slip.

There is so much that will not change with a new president. The truth is the pressure the FDA exerted was never the pain point that drove change in the industry. The boldest and most beneficial changes were a response to public concern and not the immediate impact of enforcement. Shoppers are looking for quality and transparency. They are reading reviews on their phones as they stand in the supplement aisle. They are not scrolling through warning letters.

The pressure, really the risk, also comes from within the industry, from the darker corners. People in the industry know where those corners are. If they can shine some collective light there—tipping off the state AG if the FDA doesn’t answer the phone,—that’s self-regulation that matters.

If the industry ignores the darkness, or steps into it, the all-bets-are-off disasters await.

“All it takes is one or two bad players,” Nedleman says, “and the industry is back to wringing its hands.”


From Nutrition Business Journal's 2017 Dark issue. Get the full issue in the NBJ store.

About the Author(s)

Rick Polito

Editor-in-chief, Nutrition Business Journal

As Nutrition Business Journal's editor-in-chief, Rick Polito writes about the trends, deals and developments in the natural nutrition industry, looking for the little companies coming up and the big money coming in. An award-winning journalist, Polito knows that facts and figures never give the complete context and that the story of this industry has always been about people.

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