The long-term viability of Scottsdale-based Matrixx Initiatives could be in doubt as company officials work to mitigate consumer fears about the safety of its Zicam homeopathic cold remedies in the wake of an FDA warning letter that the company received on June 16. In the letter addressed to Acting President, CFO and COO William J. Hemelt, the FDA identified two products, Zicam Cold Remedy Nasal Gel and Zicam Cold Remedy Swabs, as potentially harmful products that could cause the temporary or permanent loss of smell, a condition also known as anosmia. The company has voluntarily taken both products off the market based on the warning from the FDA.

The full implications of the product withdrawal are still unclear, as Matrixx scrambles to address the concerns of consumers, media, FDA and now the Securities and Exchange Commission (SEC), which has launched an informal inquiry into the product withdrawal. Company officials, while insisting that the FDA’s actions are unwarranted, have initially estimated the costs of a recall to be around $10 million, Hemelt said on a June 18 media conference call. However, those costs could rise significantly if retailers refuse to carry Matrixx Initiatives’ other products. The combined sales of the two products in question represent 40% of the company’s 2009 net sales, according to company financial releases. In addition, the FDA will require the company to file a New Drug Application (NDA) for approval on its zinc gluconicum products, which is a process that requires significant funding. The immediate costs the company faces don’t factor in potential losses due to brand damage or pending litigation, both of which could ultimately contribute to the company’s demise.

Matrixx paid $12 million in 2006 to settle 340 lawsuits brought by consumers who complained of smell problems after using Zicam products. In addition, the FDA claims that the company had knowledge of 800 additional cases of consumer adverse events that were not reported to the FDA. The company claims it did not feel the number of complaints were more than would be expected of the general population and acted on the advice of counsel in not reporting the events.

“The key issue is who knew what and when,” Loren Israelsen, executive director of the United Natural Products Alliance (UNPA), told NBJ. “What is a serious adverse event, and in this case, is the loss of smell a serious adverse event? As I read the statute, I would say it is. The intriguing question is: What did Zicam’s counsel advise them?” In a conference call with reporters on June 17, Hemelt classified the company’s product liability insurance as being “very limited.”

In addition to the up-front costs associated with a potential product recall and the down-the-road costs associated with litigation, the company’s biggest challenge will be to control the scope of the damage to the brand. “Consumers tend to assume the worst and that the rest of the product line suffers from the same consumer perceptions,” Israelsen told NBJ. The company is bracing for a downturn in sales. It had initially forecasted revenue growth of 5% for its fiscal 2010 year, but those projections have been withdrawn.

It is still too early in the case to draw any broad conclusions on how firms can work to prevent disruptions in business such as this; however, companies should be vigilant and err on the side of caution when it comes to adverse event reporting. “Companies should be investigating, getting advice and making some tough decisions as to whether they ought to act on these things,” Israelsen said.

Matrixx maintains it has done nothing wrong and will work with the FDA to reach a favorable outcome in the case. “Matrixx Initiatives stands behind the science of its products and its belief that there is no causal link between its Zicam Cold Remedy intranasal gel products and anosmia,” said Hemelt in a company release. Matrixx’s price per share has fallen 73% in 7 days, with a trading price hovering slightly above $5 on June 22. U.S. consumers spent $795 million on homeopathic remedies in 2008, according to NBJ estimates.

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How Worrisome is the Hydroxycut Recall for the Dietary Supplement Industry?

A study published June 16 in the Annals of Internal Medicine showing the cholesterol-lowering benefits of red yeast rice triggered a cascade of news stories in the popular press—a welcome change from all of the negative headlines published over the last month about dietary supplements being unregulated, ineffective and, in some cases, dangerous.

In the study, researchers followed 62 patients who had tried taking prescription statins to lower their cholesterol but had to stop because the medications caused severe muscle pain, a common side effect of statins. All of the patients received nutrition and exercise counseling and half also received 1,800 mg of red yeast rice supplements every day. After 12 weeks, those taking the supplements saw their LDL or “bad cholesterol” drop by a significant 27%. Those who did not take the red yeast rice supplements experienced a 6% drop in LDL.

“I was pleasantly surprised with the degree of LDL lowering,” Daniel Rader, MD, a lipid specialist at the University of Pennsylvania School of Medicine and an author of the study told ABC News. “I have to confess, I did not expect this degree of LDL lowering. And there were many fewer side effects than expected.”

The news was not all positive for the supplement industry, however. In nearly every story that was published about the red yeast rice study, reporters erroneously stated that supplements are not regulated. Several stories also used the research to talk about the quality problems that have surfaced for red yeast rice and to issue warnings about supplement use. As a case in point, here’s what CNN reported:

In 2008, the supplement-industry watchdog group ConsumerLab.com analyzed 10 brands of capsules whose labels advertised 600 milligrams of red yeast rice. When the products were tested in a lab, however, they were found to contain wildly different amounts of lovastatin and other compounds. “There was a 100-fold difference from the lowest to the highest,” says ConsumerLab.com president Tod Cooperman. An unexpectedly large dose of lovastatin could cause serious side effects and could interact with other drugs.

The uncertain lovastatin content of red yeast rice products have led to a long-running dispute between the manufacturers of the pills and the federal government. A decade ago, the FDA successfully sought to regulate a red yeast rice extract known as Cholestin, claiming that the lovastatin it contained made it an unapproved statin rather than a supplement.

Any red yeast product containing more than trace amounts of lovastatin can also be regulated (and effectively banned) by the FDA, but red yeast rice products containing monacolin K have remained on the market. And though the FDA does continues to monitor the industry—in 2007, the agency warned three manufacturers that their red yeast rice products were unapproved drugs—the woolly marketplace for supplements should make consumers wary.

“I would never, under any circumstances, suggest that someone take red yeast rice,” says Dr. [Paul[ Phillips [a cardiologist who runs a clinic for statin-related muscle complications at Scripps Mercy Hospital in San Diego]. “It’s not controlled, it’s not safe, and it hasn’t been approved by the FDA in such a way that it’s formulated to be consistent.”

Such a statement is just one more reason why supplement quality and adherence to the FDA’s supplement GMPs (which go into effect for mid-size companies next week) are of the upmost importance. As Keri Marshall, medical director for Gaia Herbs, told Nutrition Business Journal recently: “GMPs will make the good companies stand out and will identify the outliers that are putting bad products on the market. They are also a great example of how the supplement industry is, in fact, regulated.”

According to NBJ research, U.S. consumer sales of red yeast rice grew 6% to $20 million in 2008. More than half of sales—$11 million—were rung up in natural & specialty retailers.

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In a May 18 Sports Illustrated cover feature titled “Supplements: The Dangerous Obsession with Improved Performance,” David Epstein and George Dohrmann do their best to deliver a knock-out punch to the sports supplement industry and the Dietary Supplement Health and Education Act (DSHEA), which the writers say is the basic reason the sports supplement industry has become “a Pandora’s Box of false claims, untested products and bogus science.”

The piece brings up numerous examples of professional players being punished for using supplements spiked with banned substances, delves into the recent Hydroxycut recall and rehashes the dark days of ephedra. It also features several sports supplement retailers and product developers who reap riches from selling and concocting stimulant-filled products that can be sold “with no proof of effectiveness or safety, and without approval from the FDA.” The story goes on to talk about about how GNC salespeople are paid commission by sports supplement manufacturers to push their products on “unsuspecting customers” who “are sometimes steered to a supplement that is inappropriate for their needs.” It ends with discussion of sports supplement companies manipulating the findings from clinical research or rigging the studies altogether. Taken as a whole, the articles paints a grim portrait of a rogue sports supplement industry that the writers say Nutrition Business Journal research estimates generated nearly $20 billion in U.S. sales in 2007.

The trouble is, the writers use carefully chosen examples to tell only one side of the story—and they misleadingly cite NBJ research to create a picture of an industry that appears much larger than it actually is. In 2007, U.S. sales of sports supplement products totaled $2.5 billion, while the entire U.S. sports nutrition & weight-loss (SNWL) sector—which includes sports supplements, weight-loss pills, meal-replacement supplements, low-carb foods, nutrition bars, and sports & energy drinks—generated just under $20 billion in sales in 2007. Yes, sales of sports supplements have been growing but they still constitute a relatively small piece of the overall SNWL market—and this certainly was not made clear in the way Sports Illustrated cited our research.

Exposés such as the Sports Illustrated article are, unfortunately, not new for the dietary supplement industry, and they will continue as long as there are examples of products containing banned substances, of researching being manipulated, of false or misleading claims, or of people becoming sick after using a supplement—even if these instances do not reflect the overall nature of the supplement industry at large.

The good news is that now the supplement industry has good manufacturing practices (GMPs) and the serious adverse event reporting (SAER) system to ensure supplement product quality and demonstrate the safety of dietary supplements. We also have organizations such as the Council for Responsible Nutrition, the Natural Products Association and NSF International to ably communicate the positive, responsible side of the supplement industry and help ensure the safety and quality of supplement products. But, in this day and age, the industry is likely to need more than that if it wants to protect its reputation and current regulatory structure. To weather the current media storm, all supplement companies are going to need to help defend the industry by strictly adhering to GMPs and DSHEA, by speaking out against potentially damaging products and companies, and by only doing business with those companies whose practices and ideals they support.

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The FDA is bracing for an onslaught of dietary supplements and other products making false or misleading claims for the H1N1, or swine flu, virus. A quick Internet search found that a number of U.S. companies are currently touting products they say can prevent or cure the H1N1 virus. In an effort to get out in front of what could be a public relations nightmare and provide fuel for tighter supplement regulation in the future, a coalition of supplement industry trade associations issued a statement today urging supplement manufacturers and retailers to “refuse to stock or sell any supplements that are presented as treating or curing swine flu” and to “refrain from promoting any dietary supplement as a cure or treatment for swine flu.”

The groups backing the statement are the American Herbal Products Association, the Consumer Healthcare Products Association, the Council for Responsible Nutrition and the Natural Products Association. In their statement, the groups also noted that “federal law does not allow dietary supplements to claim to treat any diseases, including swine flu” and that they are “unaware of any scientific data supporting the use of dietary supplements to treat swine flu.”

The statement did note that “there are dietary supplements that have much to offer in terms of enhancing general immune function. However, therapies for the treatment of swine flu should only be recommended by qualified healthcare professionals or public health authorities.”

Given mounting public anxiety in the United States and beyond over the fast-spreading H1N1 virus, the associations’ action is an important step in encouraging the supplement industry to act responsibly and legally in the face of a potential health crisis. Let’s just hope companies heed their warning rather than put the industry in jeopardy by attempting to milk profits from public fear.

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The Federal Trade Commission (FTC) has charged a group of Delaware-based supplement suppliers with making false and deceptive claims surrounding the sale of hoodia gordonii, or in some cases, an adulterated hoodia product. The complaint names four individuals who were employed by Nutraceuticals International or Stella Labs as being the parties liable for the charges.

The individuals allegedly provided customers with documents touting the following false claims: that it would enable consumers to lose weight and suppress appetites; that it was scientifically proven to suppress appetite, resulting in weight loss; that it was clinically proven to reduce caloric intake by 1,000 to 2,000 calories per day; that it was derived from South African Hoodia gordonii; and that hoodia was an effective treatment for obesity. The FTC hopes to permanently bar the defendants from deceptively advertising hoodia and a forfeiture of the profits obtained from sales of their hoodia products.

While this appears to be an isolated incident, the case underscores the concerns that remain about the dietary supplement industry’s ability to police itself, both at a supply and finished goods level. Cases like this where the FTC is forced to get involved only serve to tarnish the reputation of the entire industry. In NBJ’s upcoming Direct Selling in the Nutrition Industry issue, we will take an in-depth look at the claims being made by supplement manufacturers and marketers on the internet, and the difficulties the FTC faces in trying to regulate the disparate e-commerce markets. To download a free sample issue of Nutrition Business Journal, including content from the 2008 Direct Selling issue, please visit our subscriber page.

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