Learn the consequences that follow for individuals and companies that fail to act prudently when pursuing a line of business not clearly defined by US law.
Case Study: Violating FDA Rules
A large vitamin and supplement manufacturer located in Dallas, Texas, achieved success with several products in such great demand that the company had a tough time keeping up with the supply. The company sourced its ingredients from China, claiming that they were safe and all-natural. A couple of the company’s most popular products led to health issues, which garnered the attention of the FDA.
The company was warned to cease and desist from manufacturing the products. Although the company agreed to comply with the FDA warning, they implemented only minor changes to the product formulation and labeling in order to circumvent the FDA’s order.
By the end of this case study, readers will be able to:
- Identify potential liabilities for violating Food and Drug Administration (FDA) rules.
- Understand the concept of guidance given by the FDA and its implications.
- Describe the best course of action for complying with government recommendations.
- Explain how failure to adhere to FDA guidelines can result in material consequences.
Food and Drug Administration (FDA), drug, supplement
Businesses are governed by laws subject to interpretation. Certain businesses, such as those involved in the supplements industry, operate in areas that more greatly expose them, and the individuals who work for them, to potential liability. Moreover, the rules and guidelines regarding these areas of law are constantly subject to revisions and modifications. It’s critical for companies to stay on top of changes in order to avoid serious consequences that may follow.
USP Labs manufactured several highly-popular workout and weight loss vitamins and supplements. The company generated approximately $400 million dollars in revenue from 2008 through 2013 alone, in the over $46 billion supplement market. Their products were highly popular with bodybuilders and general fitness buffs and sold everywhere from GNC stores to Amazon. The company’s highly effective marketing program included digital and print advertising. Their products were advertised online and in many fitness and weight loss magazines.
When USP Labs introduced its products to the bodybuilding world, it was touted as being the best natural, non-steroid, non-prohormone anabolic product money could buy. It was supposed to be revolutionary, in that without any banned substances or questionable ingredients, consumers could get the kind of results they never thought possible without taking steroids.
The trick that USP Labs claimed to have mastered was how to create a highly anabolic product without causing the body’s own production of testosterone to be suppressed. That’s important because once someone takes steroids or prohormones and then stops, the person needs to take something to bring the natural systems back online because what’s being taken actually shuts them down. According to in-house studies from USP Labs, users could expect to start feeling the results from the products around week three, when they would start hitting personal bests and feeling a difference in muscle strength and growth.
Competition in the industry led the company to perpetually search for the next miracle ingredient. That search focused heavily on ongoing research and development with Chinese manufacturers. When they found an ingredient that they believed was promising, they quickly rushed into production, without significantly or sufficiently testing the safety of the new product.
Problems began cropping up in 2013, as some users of USP Labs’ products began experiencing Liver issues. In fact, the CDC identified 97 people with acute non-viral hepatitis, suspected as related to the use of OxyElite, a top-selling USP Labs brand. Several patients died. The Food and Drug Administration warned USP Labs about the rise in reports of liver failure related to their products in 2012, but the company originally claimed they must have been caused by counterfeit versions of its supplements.
The FDA additionally warned the company that the FDA believed the company’s ingredients were synthetically derived and therefore a chemical, as opposed to an all-natural ingredient, as the company claimed.
The company eventually acknowledged that the problems were caused by products it manufactured and sold, after receiving a subsequent letter from the FDA in 2013. They agreed to take the problematic products off the market. USP Labs management, however, only made slight reformulations to their products and labeling in the hopes of lessening the risk of liver damage while retaining the products’ touted efficacy.
All prescription and non-prescription drugs sold in the United States are regulated by the FDA, but dietary supplements are treated more like special foods. Because supplements aren’t considered drugs, they aren’t put through the same strict safety and effectiveness requirements that drugs are. So, all the drugs–both prescription and over-the-counter–that consumers purchase, must be proven safe and effective. Dietary supplements, however, are not regulated. Supplements are considered safe until proven unsafe, under the Dietary Supplement Health and Education Act of 1994.
Supplement manufacturers are not required to test new ingredients or supplements in clinical trials, which would help identify risks and potential interactions with drugs or other substances. The same goes for side effects and interactions with other drugs. The FDA can only stop a company from making a dietary supplement once it proves that the product poses a significant risk to the health of Americans.
USP Labs essentially continued the sale of its products after it received two warnings from the FDA. A grand jury indicted the firm in 2015, a contract manufacturer with whom it had a relationship, and six executives of both companies on 11 counts for charges of criminal conspiracy, fraud, and other malfeasance. Federal agents raided the company’s offices, seizing computers, records, cell phones, luxury cars, investment real estate, and froze individual and corporate bank accounts.
USP Labs’ CEO and its president mounted a defense to the criminal charges for years. They both pleaded guilty in 2019 to conspiracy to introduce misbranded food into interstate commerce and were sentenced in October 2020. The defendants received prison sentences of five and two years, respectively. Several other sentences remain pending at the time of this Case Study and one person received a deferred prosecution in exchange for cooperation. The individuals and companies involved in the fraud paid over $60 million in fines and forfeitures.
Companies falling under the auspices of a government agency must exercise caution. There’s a fine interpretive line between something considered a chemical or a supplement. Fighting an unfavorable interpretation, whether civilly or criminally, can lead to high costs. How a company stays on top of and adheres to federal and guidelines can critically impact a company and the individuals working for the company.
It is good corporate practice for companies to prioritize product safety. USP Labs and its principals faced product liability and wrongful death lawsuits from cases brought by several private attorneys in addition to criminal sanctions. All too often, corporate executives are so highly focused on making money that they forget about the steps required to retain that money, let alone concern themselves with potential impairment in people’s lives. Quick action by USP Labs may have retarded corporate profits, and the principals likely now wish they had followed that course of action.
The FDA is paying closer attention than ever before to companies operating in the supplements industry. A 2019 article in Men’s Health pointed to a report in Journal of Adolescent Health, noting that roughly 1,000 people under the age of 25 reported medical issues linked to supplement use between 2005 and 2015. Food and Drug Administration records revealed that 40 percent of these patients experienced severe health events, such as hospital visits or disability with 166 hospitalizations and 22 deaths linked to supplements. And that’s only in young adults.
A separate study noted that injuries linked to supplements are rising fast, jumping from just 7 percent of all drug-induced liver injuries in 2004 to about 20 percent in 2014. As a result, the FDA is under pressure to take more forceful action, as evidenced by another recent case involving the manufacturer of Selective Androgen Receptor Modulators (SARMs) advertised on TV, designed to mimic the effects of testosterone and other anabolic steroids.