Cosmeceuticals: Misconceptions & Market Opportunities

The cosmetic and over-the counter (OTC) drug industries are buzzing with talk of great market potential in the new “cosmeceutical” category. Cosmeceuticals—cosmetic products intended to have therapeutic effects on the body—are widely reported to be the fastest growing sector of the cosmetic industry with a market value forecast of $5 billion by 2007.

Even as companies rush to develop products to capture a piece of this market, there is great confusion over what types of products and what kinds of claims are possible. Indeed, many are under the misconception that cosmeceuticals are analogous to dietary supplements, and thus may use the same range of claims about therapeutic impacts.

This, however, is not the case. The cosmeceutical category is not recognized by FDA and therefore exists in a regulatory “limbo” between cosmetics and drugs. While the presence of dietary supplements has indirectly impacted the range of claims possible for cosmeceuticals, there are important limitations that must be observed. Further, as cosmeceutical products are developed, it is critical to keep safety, claims and substantiation issues in mind.

Cosmeceuticals are not Dietary Supplements
Examples of currently marketed cosmeceuticals include skin lotions with botanicals added to counter the effects of aging and creams containing antioxidants to fight environmental damage.

Because these products offer therapeutic benefits to the body, many look at them as being analogous to dietary supplements and assume that the same kinds of product claims can be used for both categories. However, this is not correct. In the first place, FDA does not recognize cosmeceuticals as a distinct category. Moreover, FDA regulates dietary supplements and cosmetics as distinct types of products subject to entirely different regulatory frameworks. Ultimately, while dietary supplements labels may contain a broad range of claims about the impact of the product/ingredient on the structure or function of the human body (so-called “structure/function claims”), cosmetics—and by default, cosmeceuticals—may not.

In order to avoid the potential for FDA enforcement attention, it is important to learn to navigate these regulatory differences in a productive way.

Dietary Supplement. Congress specifically created a regulatory category for dietary supplements as a subset of foods in 1994 (under the Dietary Supplement Health and Education Act or DSHEA). DSHEA added new statutory sections on safety and claims uniquely applicable to dietary supplements to the existing Federal Food Drug and Cosmetic Act (FFDCA).

The net result of the law is to allow dietary supplements to bear structure/function claims—whereas previously FDA had characterized such statements as “drug” claims that could not be used for any type of food.

Such claims are only available for dietary supplements, which are defined as products “intended to supplement the diet” and that contain one or more of:

vitamins or minerals;
herbs or botanicals;
amino acids;
dietary substances for use to supplement the diet by increasing the
total dietary intake;
or a concentrate, metabolite, constituent, extract or combination of any
of the above.

Importantly, only products that are ingested may be dietary supplements and are subject to structure/function claims provisions. FDA has made clear that products such as creams, sprays, and sub-lingual dosage forms are not subject to the provisions in DSHEA.

Cosmeceutical. The “cosmeceutical” category is not recognized by FDA or the FFDCA. Instead, FDA regulates products positioned as cosmeceuticals either as cosmetics or as drugs, depending on the “intended use” of the product as revealed by claims made on labels, in accompanying materials and in product advertisements.

If the product claims fit within the FFDCA definition of cosmetic (articles “intended to be rubbed, poured, sprinkled or sprayed on, introduced into, or otherwise applied to the human body . . . for cleansing, beautifying, promoting attractiveness, or altering the appearance”), the products will be regulated as cosmetics. As such, there is no preapproval requirement. Instead, companies having adequate safety data for these products may proceed directly to market.

Alternatively, if the products make drug claims (related to “diagnosis, cure, mitigation, treatment, or prevention of disease . . . [or] intended to affect the structure or any function of the body of man or other animals”), the product will be regulated as a drug. A product that, for example, prevents or heals acne, would be deemed to be a drug. Drug products are subject to premarket testing and review provisions, which often take years to complete, or alternatively to the parameters of a relevant over-the-counter (OTC) monograph.

Most companies marketing cosmeceutical products are not interested in engaging in the long process of obtaining approval for these products as new drugs or fitting with an OTC monograph. As a result, it is important to position cosmeceutical products carefully so that they may take full advantage of the statutory and regulatory provisions applicable to cosmetics without triggering drug regulations.

In this regard, a careful review of both product safety and intended claims is strongly advised. Further, in order to avoid potential inquiry by the Federal Trade Commission (FTC), all statements used on labeling or in advertising must be substantiated.

Marketing Cosmeceuticals, Minimizing Risk
Safety. Ensuring the safety of any cosmeceutical brought to market is critical. The bulk of FDA’s enforcement activities in the cosmetics arena are directed at products that pose a risk to human health. In addition, of course, there are product liability ramifications that attach to marketing an unsafe product. Thus, even before considering product positioning and claims, it is important to ensure that there are no questions regarding the product’s safety.

FDA’s regulatory standards for cosmetics do not articulate a specific safety standard that must be met (except for color additives). Instead, the regulations say that it is the responsibility of the manufacturer and distributor to “assure the safety of each ingredient and finished product.” Without substantiation of safety, the FDA regulations require that the product carry the following warning on the label: “Warning: The safety of this product has not been determined."

In the past, FDA has taken steps to alert consumers to safety issues associated with certain cosmetic ingredients. For example, in 2002, the agency published a draft guidance describing how cosmetic manufacturers could alert consumers to increased sensitivity to the sun following use of cosmetics containing alpha-hydroxy acids (AHAs).

In general, the best approach for ensuring the safety of a new cosmeceutical product is to maintain an in-house safety substantiation file where all data and published articles demonstrating the safety of ingredients and product are kept. If the product involves new ingredients, or new uses for existing ingredients, it is advisable to obtain a written opinion on the safety of the product from an outside expert.

Claims. Strictly speaking, claims for products in the cosmetic category are limited to those relating to a product being “rubbed, poured, sprinkled or sprayed on, introduced into, or otherwise applied to the human body . . . for cleansing, beautifying, promoting attractiveness, or altering the appearance.” The FFDCA definition does not appear to allow much room for cosmetic products intended for therapeutic uses.

That said, the wide availability of structure/function claims for dietary supplements has expanded the breadth of potential cosmetic claims tolerated by FDA. Although all claims should be vetted by FDA experts, those describing a mechanism of action or falling within well-accepted structure/function claim categories should be acceptable.

“Red flag” claims that should be avoided include those mentioning specific disease states (e.g., cancer) and those claiming unsubstantiated weight loss benefits. It is worth noting that FDA’s most recent Warning Letter in the cosmetics category targeted a company making collagen-reduction, appetite suppression and fat burning claims. In its letter, FDA identified the following claims, among others, as “objectionable”:

Reduces deep wrinkles from within the skin's surface....
Helps boost collagen production
Stimulates the beta receptors in cells to release stored fat; and
Fat Burning Formula

In the past, the agency has also targeted products claiming to reverse the aging process or heal damaged skin.

Substantiation of Advertising. FTC has primary responsibility for ensuring that all consumer product advertising is truthful and not misleading. The basic law guiding FTC states that: “unfair methods of competition in commerce and unfair or deceptive acts or practices in or affecting commerce” are prohibited (Federal Trade Commission Act, Section 5).

Under this law, an advertiser is required to have a “reasonable basis” for all product claims before the claims are made. FTC’s interpretation of this standard is somewhat flexible but generally requires that any claims made in advertising be backed by sound scientific evidence (often referred to as “competent and reliable scientific evidence”).

Competent and Reliable Scientific Evidence Standard. In general, the “competent and reliable scientific evidence” standard consists of tests, studies or other scientific evidence that has been conducted and evaluated according to standards that experts in the field accept as accurate and reliable. Importantly, any study results relied on must be relevant to the claims being made.

Studies should test the same ingredients at substantially the same dosage level as that contained in the product, and the test population should be similar to that targeted in advertising claims. FTC does not consider anecdotal reports, articles in popular magazines, opinions or inadequately controlled open label studies to be adequate substantiation, and as a result, these kinds of materials cannot be used as substitutes for scientific support.

In practical terms, adequate substantiation is a subjective quantity, depending on the overall impression of the ad, including language used and pictorial or other representations. The more disease-related the claim, the greater the level of substantiation required—and greater the likelihood that the advertising will draw FTC’s attention.

When a claim is explicit about the amount of support, FTC generally expects the advertiser to have evidence to substantiate the claim. For example, FTC has explained that statements such as “university studies prove” or “90% of cardiologists regularly take the product” which make express claims must actually have that level of support. Thus, the advertiser would be responsible for substantiating the claim to the level stated, e.g., if making the claim, the advertiser should have evidence on file showing that 90% of all cardiologists actually do take the product.

About the authors
Scott Bass is a partner in the law offices of Sidley Austin Brown & Wood, LLP, and Emily Marden is an associate. They can be reached at 212-839-5615 (Emily New York); 202-736-8684 (Scott Washington) and 212-839-5613 (Scott New York); Fax: 212-839-5599; E-mail: [email protected], [email protected]; Website:

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