You Can Run, but You Can't Hide: What to Do When a State Attorney General Comes Calling
New HopeJohn Troost, Douglas F. Gansler
The dietary supplements industry has grown tremendously over the past few decades. More than half of all adults in the United States now take dietary supplements, and the industry generates more than $37 billion in annual sales. While that growth has been a boon for consumers and businesses alike, it has also caught the eye of state regulators. Add in the fact that the supplements industry is a consumer-centric industry, and it should not come as a surprise that the consumer protection divisions in state attorneys general offices have taken notice.
Many state attorneys general believe that the supplements industry is not well-regulated by the federal government. Furthermore, even among those who do understand that there are federal regulations, they tend to view those federal requirements as a floor and not a ceiling. Thus, state attorneys general may have your company on their radar even if it is fully complying with all federal Current Good Manufacturing Practices and it has never received a complaint from the Food and Drug Administration or the Federal Trade Commission. This dynamic makes state attorney general investigations a significant risk for the industry.
New York’s attorney general reveals magnitude of the risk to the supplements industry
The gravity of this risk burst into full view in February 2015, when New York Attorney General Eric T. Schneiderman issued cease-and-desist orders to four prominent supplements retailers: Walgreens, Walmart, General Nutrition Centers and Target. Schneiderman announced his allegations at a packed press conference, claiming that DNA barcode testing had revealed that most of the supplement products sold by the retailers did not contain the advertised ingredients. He also alleged that his testing had found that the products contained many substances not listed on the label, including known allergens.
The reputational damage to the supplements industry was done the moment Schneiderman finished the press conference. Press reports of Schneiderman’s allegations made the front pages, and GNC’s stock dropped by as much as 5 percent during the day. What was not reported as widely was the industry perspective that Schneiderman had used the wrong tests for what he was trying to show. DNA barcode testing does not work for processed products, because DNA is too easily damaged during processing to be identified by a test. As the FDA later acknowledged in a March 2015 letter to Senators Martin Heinrich and Orrin Hatch, the agency does not use “DNA-sequencing-based identification methods for botanical materials.” Schneiderman’s office instead should have verified the product ingredients with a more appropriate test for plant extracts, such as liquid chromatography or mass spectrometry. GNC ended up settling the allegations against it without an admission of wrongdoing, but the allegations against the three other retailers are still outstanding.