Personal Liability and the Marketing of Dietary Supplements

Personal Liability and the Marketing of Dietary Supplements
by Marc S. Ullman, Esq.

Over the past several years, the paucity of serious enforcement activities bythe Food and Drug Administration (FDA) has created the belief among an alarmingnumber of participants in the natural products industry that no matter howpoorly manufactured or recklessly formulated the products they place onto themarket may be, the worst thing that can happen is that they would receive aWarning Letter giving them 15 days to correct the error of their ways. Thisbelief has fostered an atmosphere that has led to decisions to market"dietary supplement" products containing ingredients such as gammabutyrolactone (commonly referred to as GBL, and a precursor to the date rapedrug), products "spiked" with synthetic drugs to enhance their effectsin the body, or human growth hormone.

The Federal Food, Drug and Cosmetic Act (FDCA) prohibits the marketing of anyproduct for human consumption that is either adulterated (contains somethingthat is potentially deleterious to human health) or misbranded (does not containprecisely what it purports to contain). Under normal circumstances, the sale ofany product that is either adulterated or misbranded will result in FDA issuingwhat is known as a Warning Letter, requiring that the offending company takecorrective measures within 15 days of receipt of the Letter, and formally advisethe agency of the nature of those measures. What many people fail to realize,however, is that section 303(a) of the FDCA provides that:

(1) Any person who violates a provision of section 301 shall be imprisonedfor not more than one year or fined not more than $1,000, or both.

(2) Notwithstanding the provisions of paragraph (1) of this section, ifany person commits such a violation after a conviction of him under this sectionhas become final, or commits such a violation with the intent to defraud ormislead, such person shall be imprisoned for not more than three years or finednot more than $10,000, or both.

The violations covered by this section include the sale of any misbranded oradulterated food, drug, cosmetic or dietary supplement. Referring any suchviolation to the United States Attorneys' Office for prosecution rests solelywithin the discretion of the FDA.

During a presentation at the 1999 Food and Drug Law Institute Annual Meeting,FDA Deputy Chief Counsel Eric Blumberg made several pointed comments thatclearly raise the specter of future FDA-related criminal prosecutions. He notedthat such actions would reinforce the core policy of the FDCA that there is"a positive duty" on an individual conducting business in an areaaffecting public health not only "to seek out and remedy violations whenthey occur, but also, and primarily, a duty to implement measures that willensure that violations do not occur." Personal liability for violations isa real possibility in situations where FDA determines that individuals withmanagement responsibility "either actively participated in unlawfulconduct, allowed it to happen by passively tolerating violations, or failed totake steps to learn that violations were occurring."

The serious nature of this warning should be apparent from a series of FDAenforcement actions against the marketers of Laetrile and "vitaminB17" in late 2000, and FDA's ongoing enforcement efforts against theproducers of GBL. In both situations, FDA enforcement activities commenced withthe agency issuing Warning Letters demanding that these products be immediatelyremoved from the marketplace. When such remedial action was not immediatelyforthcoming, the agency instituted a series of court cases seeking injunctionsthat would permanently bar the named defendants from continuing to sell productscontaining Laetril, B17 or GBL. Each of these matters resulted in the issuanceof preliminary injunctions barring the named defendants from offering theirproducts for sale pending the conclusion of litigation. At the same time, FDAcommenced additional enforcement actions through its Office of CriminalInvestigations (OCI). To date, OCI's activities have resulted in the filing ofat least five criminal cases against marketers of GBL, and a sixth against aLaetrile marketer.

Companies that market any of the growing number of "natural" orhomeopathic products containing human growth hormone (hGH) should take specialnote of OCI's activities. This is because the sale of such products is expresslybarred by the FDCA. Thus, section 303(f) of the Act states:

Except as provided in paragraph (2), whoever knowingly distributes, orpossesses with intent to distribute, human growth hormone for any use in humansother than the treatment of a disease or other recognized medical condition,where such use has been authorized by the Secretary of Health and Human Servicesunder section 505 and pursuant to the order of a physician, is guilty of anoffense punishable by not more than five years in prison, such fines as areauthorized by title 18, or both.

Thus, the only legal sale of a product containing hGH may be made if theproduct in question is an approved new drug, and the sale is made pursuant to anorder of a physician--in other words, with a prescription. With theseconstraints specifically set forth in the FDCA, it is virtually impossible toimagine any circumstances under which a dietary supplement or over-the-counterhomeopathic drug product can be sold legally. Serious potential problems existeven in the event that any such homeopathic drug does not contain detectableamounts of hGH, as the manufacturers of such products would almost certainlypossess sufficient quantities of hGH for sale in the absence of a prescription.At the present time, investigations of the illegal distribution of hGH by theFDA's OCI and the U.S. Drug Enforcement Administration (DEA) have targetedphysicians who improperly supply distributors of these products withprescriptions for bulk quantities of hGH.

In addition to the risk of criminal prosecution, which may seem quite remote,companies that fail to exercise proper care in developing, manufacturing ormarketing their products risk financial ruin in the form of punitive damages inpersonal injury cases brought on behalf of consumers harmed by seriously flawedproducts. In addition, punitive damages may not be covered by an insurancepolicy. Such damages can arise from combining contraindicated substances, suchas yohimbe and ephedra in the same product or, as several companies havediscovered, from adding synthetic substances to "all natural products"in order to increase product performance. The most recent example of the lattersituation occurred in early February as a jury in the Alaska State Court awarded$12 million in damages to a woman who suffered a stroke following the use of aproduct touted as "all natural" when it actually contained ephedra"spiked" with synthetic ephedrine. Most significantly, the juryspecifically assessed punitive damages in the amount of $6.8 million against thecompany's founder and the developer of the product, $1.8 million against thecompany's president, and $3.9 million against the company itself.

Each of these situations should make it abundantly clear that companies thatfail to exercise reasonable caution and comply with the laws governing themarketing of dietary supplements may run the risk of confronting situations farmore serious than a "simple" Warning Letter. As FDA and the personalinjury bar focus more attention on the natural products industry, companies andindividuals who flout the FDCA and regard Warning Letters as a mereinconvenience may very well find themselves embroiled in situations where therisk of personal liability is no longer a hypothetical situation.

Marc S. Ullman, Esq. is a partner in New York City's Ullman, Shapiro &Ullman, LLP. His practice includes the counseling of clients in all areasrelating to the marketing of natural products. He can be reached at [email protected]or (212) 571-0068.