Consumers of varying demographics are focused on wellness, which includes a diet full of natural, whole foods, as well as functional, value-added products like nutritional beverages and dietary supplements. Clean labels with simple ingredient lists and clear messaging continue to offer broad appeal.
The supplement industry still faces criticism regarding product and supply chain integrity. However, responsible companies have started on a path toward greater transparency, as evidenced by the dietary supplement product registry, or Online Wellness Library (OWL). For self-regulatory efforts like this to make an impact, it’s imperative for companies throughout the industry to participate.
There’s still uncertainty surrounding the new draft guidance on New Dietary Ingredient (NDI) Notifications, which could hurt companies if implemented in its current form. While FDA was active in 2016 it remains to be seen what level of regulatory oversight will take place under a new Congress in the years ahead. Still, with a new Office of Dietary Supplements at FDA, industry should not be complacent.
—Sean Moloughney, Editor, Nutraceuticals World
Reflecting on the past year, and looking forward to next, I see a few positive reoccurring trends as well as some emerging opportunities. Fifteen years ago, when my interest and career shifted from the pharmaceutical industry’s perspective on nutrition to dietary supplements, the nutraceuticals industry had been riding the wave from the Dietary Supplement Health and Education Act (DSHEA) for a few years. Under this more favorable regulatory environment, new products were hitting the shelves at a near frenzied pace. Third-party literature of all sorts substantiated some quite liberal structure-function claims. Pharma companies took notice of this growth and with their generous R&D budgets and mainstream market distribution muscle saw the opportunity to add value. Supplement companies were being acquired at aggressive multiples; life was good for all. Forgoing the details we know too well, market dynamics brought the industry back to reality. Since then we’ve experienced modest albeit steady growth with a few hurdles along the way.
Looking forward, what lessons did we learn from these market cycles and what can we expect in the year to come? From my perspective, four trends stand out: clinical substantiation, “clinical nutrition” products, nutraceuticals in healthcare institutions and some interesting demographic shifts.
Facilitated by FDA scrutiny, the level of clinical substantiation for nutraceuticals has increased quite significantly. This is not to say that previously launched functional ingredients and products were not supported by good science, yet some were clearly not. Many relied on third-party literature for individual ingredients to support claims on complex final formulations. Today, more ingredients and finished products are tested for safety and efficacy in well-designed clinical trials. These changes have been driven by the need to address FDA requirements as well as demands of a more educated consumer and healthcare professional. This in turn builds trust in our products.
An increasing number of well-researched “clinical nutrition” products were launched in the past year, mostly classified as medical foods for the “management” of a specific disease or medical condition. Not unlike dietary supplements, medical foods do not require FDA pre-market approval; however, they do require ongoing patient management by a physician (or other qualified healthcare professional) and other standards set forth by the FDA (5(b) Orphan Drug Act (21 U.S.C. 360ee (b) (3))). Many of the recent launches were from traditional dietary supplement companies and distributed through the health practitioner channel. Typically, physicians expect a higher level of clinical substantiation than consumers; plus the FDA requires all ingredients in medical foods to obtain Generally Recognized As Safe (GRAS) status. Thus, clinical nutrition products exhibit a level of quality and safety not typically seen in nutraceutical products, continuing to raise product standards.
As addressed in my column “Challenges for Nutritional Products in Healthcare Facilities” (November 2016, Nutraceuticals World), the demand for nutritional products in healthcare facilities is growing at a rapid pace. There are numerous unmet patient needs in hospitals, nursing homes (and the “home care” setting) that can be addressed through aggressive nutritional intervention. Institutional applications range from wound care and pressure sores in acute care to helping prevent C. difficile infections in long-term care. Where demonstrated efficacious and cost effective, nutritional products offer significant benefits to a wide range of patients in healthcare facilities.
Finally, the rapid demographic shift of Baby Boomers moving to the mature phase of their lives provides numerous opportunities. Top nutrition related needs include mental acuity, glycemic index control, muscle maintenance, cardiovascular health, sensory (e.g., hearing, vision, smell), dental health and weight control. Segments of this cohort have the resources, knowledge and desire to address such health issues through nutritional means whenever possible.
Over the past year, the variety, quality and safety of dietary supplements has continued to increase. More than ever, healthcare practitioners are realizing the benefits of therapeutic and preventive nutrition, and the needs for nutritional products for aging adults is increasing at a rapid pace. Companies that think strategically to develop platforms factoring these and other market dynamics should be well positioned to address such emerging healthcare needs.
—Greg Stephens, President, Windrose Partners
My sister is leery of the supplement industry and I understand why. Of course it is foolhardy to try and say anything accurate and all-encompassing about “the industry” because it is not a monolith. It has the variation of a botanical, not the general clean certainty of an isolated constituent.
There is a metaphor here: is the industry better characterized as Pinocchio or the real boy that a talking piece of wood finally became? We’ve heard analogies of the industry before (the Wild West...a new sheriff in town) and they suggested where things were and where they could go. We deserve to know where our raw materials come from, how they are manufactured into ingredients, and to have faith in the integrity of finished goods. Our Pinocchio becomes a real boy when there can be no question that we have this requisite knowledge.
The story of Pinocchio began long before the 1940 Disney film. It was first told in serial form in 1881 and 1882 and completed as a children’s book in 1883. The very next year the Association of Official Agricultural Chemists (now AOAC International) was established so that the results of analytical testing on fertilizer could be trusted. This is worth mentioning because today AOAC works with industry to publish Official Methods of Analysis applicable to herbal materials. It seems to me that the supplement industry is largely disengaged from this opportunity.
Pinocchio was more than a wooden marionette whose nose grew when he told a lie. That was a minor part of the story about a disrespectful puppet who avoided responsibility and got into all sorts of mischief. The metaphor can only go so far, but industry needs to look itself in the mirror and see who’s looking back, Pinocchio or a real boy (or girl)?
We’ve seen an amazing, disturbing focus on DNA testing when in fact the current state of that testing for widespread plant identity testing is undoubtedly a work in progress—it’s a Pinocchio instead of a real boy. The same can be said about the lack of standards used to identify botanical ingredients. Official standards for herbs of commerce have been around since 1820 with the establishment of the United States Pharmacopeial Convention (USP).
Herbal drugs faded from public view by the late 1950s but a cultural resurgence in the 1960s started a movement that brought botanical materials back in popularity. USP now develops monographs that serve as quality standards for the gamut, covering food, supplements and drugs. Again here, the supplement industry appears to be largely disengaged.
The focus on cGMP auditing and product testing is great. But it doesn’t address the foundations that support product manufacturing and proof of quality. Those basic pillars include monographs, scientifically valid testing, certified reference materials, and competent laboratories. We are all stakeholders in these activities and need to be engaged in order to build an industry about which it cannot be said there are too many Pinocchios and not enough real boys.
There is a caveat here too. Methods, standards and results satisfy the specifications-results-certificates of analysis triad, but quality is more than what can be tested for. Quality can’t be tested in. Quality results from the complete processes within the supply chain and how raw materials are created. Good Agricultural and Collection Practices must precede GMPs.
Authenticity and true herbal integrity also extend beyond testing and agriculture. You’ve found it when the communities that produce the materials are also included. The circle of people and plants, which after all is the story of herbal use, is connected when the people and the general ecology from the production region are taken into account and fostered. The path for Pinocchio to become a real boy required study and sacrifice. What mattered most was what he wanted to become, not how difficult it was to get there.
—Steven Dentali, PhD, Botanical Industry Consultant
The concept of “you are known by the company you keep” is as old as Aesop and King Solomon. In 2016, and going forward, it may be said the dietary supplement industry can be known by the companies that are not kept. Industry mergers and acquisitions were active in 2016 and the outlook on the horizon in 2017 indicates the trend is expected to continue. Investment in the dietary supplement industry has come from both strategic and private equity sources. Swander Pace constructed a strategic initiative atypical for private equity by purchasing the complementary organizations of Swanson Health Vitamins and the soft gel contract manufacturer Captek in Cerritos, CA. The combination of the two entities is considered a significant increase of value for each organization based on the synergies each provides the other.
GNC is the largest and most talked about upcoming opportunity with management openly marketing the company. Current estimates on the value of GNC is $4 billion. In October, the Wall Street Journal reported GNC officials met with several Chinese investors who have been actively interested in the vitamin industry. Chinese investors are very interested in U.S. supplement brands as a result of a loss of confidence by their domestic consumers. Chinese pharmaceutical and milk scandals have made the “Made in the USA” label a valuable asset for vitamins in China and elsewhere. HKTDC Research in China reported the Chinese market for vitamins is approximately $15 billion and expected to continue to increase at double-digit annual rates. As the world’s attention to health increases, the likelihood of continued acquisitions of vitamin companies increases likewise.
—Scott Steinford, President & CEO, CoQ10 Association and NAXA
As an ingredient supplier, 2016 has been the year of the “supplier survey.” Everyone is tightening down any loose ends of their cGMPs with pages and pages of questionnaires regarding quality assurance, origin, production, warehousing and handling. I think this speaks well for our industry that is so often accused of “not being regulated” in the mainstream media. Manufacturers are asking the deeper questions such as “where did this come from?” and “how did it get here?” Prices should eventually reflect this demand for identification and quality control, but competition is fierce and the added costs may just get absorbed as the price of doing business.
Regulation continues to be a big concern and the wrangling over the proposed New Dietary Ingredient (NDI) notification process is a head scratcher. Let’s all hope common sense plays some role in the NDI situation and we can keep evaluating new ingredients for consumer safety, period. The idea of evaluating every possible combination is the beginning of the end and it will kill proprietary product development, a key driver of growth.
The mood was upbeat at the fall trade shows, but the Food, Drug and Mass Market companies are still very cautious about launching new products. Heart health, pain management, bone health and circulation are doing well in terms of growth categories and new product launches. Probiotics are still going strong and we continue to believe algae-based products will be future growth drivers, as soon as we “work the bugs out.”
The U.S. dollar remained strong into 2016 as did the Japanese Yen. Non-U.S. companies selling into the U.S. are helped by this, but those buying in dollars are probably getting squeezed a bit. The U.S. economy continued to get better albeit at a very slow pace. With a newly elected Republican President and Congress, it will be interesting to see if the growth continues into economic prosperity. There will be no excuses for gridlock.
—Dan Murray, Vice President of Business Development, Xsto Solutions, LLC
The coming year is going to provide huge growth opportunities for certain fermentable fibers that have evidence of health benefits. Scientific data continues to show that the microbiota in the large intestines are critical to health, and that the foods we eat can significantly change the microbiota, impacting every aspect of health and metabolism. While an immediate focus is on digestive health and function, the bigger prize is on improved metabolism resulting from changes in gene expression from the microbiota fermenting specific fibers.
For example, the U.S. FDA is expected to issue its ruling in 2017 on a qualified health claim petition from 2015 that resistant starch, an insoluble fermentable fiber, helps to reduce the risk of type 2 diabetes. Numerous clinical studies show that plant-based resistant starch significantly improves insulin sensitivity, the major biomarker for type 2 diabetes. The most responsive groups were the ones who need it the most: people who had reduced insulin sensitivity (also called insulin resistance) and/or classified as “prediabetic.” When this group added 15-30 grams of resistant starch/day to their diet, they saw improvements in insulin sensitivity of 30-70%. To ask the FDA to issue this ruling, sign the Change.org petition at https://goo.gl/msmOT8.
According to the American Diabetes Association, one out of three American adults has reduced insulin sensitivity and is “prediabetic.” Without intervention, half of these 86 million Americans will develop type 2 diabetes within 10 years. Consequently, reversing prediabetes is becoming a big business. The resistant starch-diabetes ruling promises to be significant news and strong validation that the microbiota has a real impact on metabolism.
—Rhonda Witwer, Vice President, International Agriculture Group
The U.S. supplement market is dealing with the aftermath of scrutiny brought on by the attorneys general of New York and other states. The industry has responded with a proposed label registration system, which has been well received by regulators. The proof of its success will be what actually changes in the market during the next couple of years. In addition, the latest New Dietary Ingredient (NDI) guidance is causing concern in the U.S. and around the world. If the final ruling on this guidance stands as written today, it could cost the industry billions of dollars to comply.
Growth continues at a positive rate, with the U.S. poised to increase 4-6% in 2016 and close in on $30 billion. As consumers demand more from their products, companies must answer the call by continuously pushing the envelope of development and refusing to settle for the status quo.
The U.S. consumer is increasingly demanding the removal of ingredients that he or she deems to be “unnatural.” Capsugel has answered this call by continuing to offer industry breakthroughs that deliver on the promise of a cleaner label. DRcaps capsules have become the norm for suppliers of probiotics. They can be used in place of enteric coatings, which contain several objectionable ingredients that consumers are trying to stay away from. Furthermore, Capsugel uses food products—like spirulina and sweet potato—to color capsules in a label-friendly way.
Capsugel is also taking technologies that have previously only been used in pharma and applying them to supplements. For example, our Lipid-Multiparticulates (LMP) technology, previously used only in Rx for taste-masking, controlled-release and bio-enhancement, has made it possible for us to offer an enhanced consumer experience for drink mixes. In a typical powder drink mix, most ingredients are either dissolved immediately or sink to the bottom. With this technology, we are able to offer controlled buoyancy and taste-masking of bitter ingredients. This solution also has the side benefit of the brand owner being able to reduce sugar and flavors in the product.
Finally, consumer demand for a USDA-certified organic capsule has never been higher. This capsule, made of pullulan, will soon be available. This polymer is a product of fermentation of organic tapioca starch and offers improved oxygen permeability compared to any other polymer. It is already used in powder products but will soon be available for liquids as well.
—Peter Zambetti, Director, Global Business Development, Capsugel
It’s a difficult time to make predictions given that the unlikely and unthinkable can happen, but it’s safe to say regulation will be deemphasized when the next president takes office and the new Congress convenes. We don’t know who will ultimately call the shots, Congress or the President, but if campaign pledges on international trade deals are kept, we’re going to see impact on the global supply chain.
With less funding for FDA anticipated, appropriate and effective industry self-policing is essential, because our critics aren’t going anywhere, and the pendulum will swing back in the mid-term elections. Such programs must be inclusive of the needs and practices of small herbal companies utilizing raw herbs, and not just reflect large companies working with powdered ingredients. The progress the industry has made with better testing and more branded ingredient use should be continued. This is a good time to amend the Food Drug and Cosmetic Act, fixing some of the problems with DSHEA. With the Affordable Care Act in the crosshairs, there is opportunity to bring supplement benefits into the healthcare conversation.
Bizarre and deeply divisive as this election has been in the U.S., consider the global context. Some political historians are likening these times of Brexit, Trump, demonetization in India, Russia’s interference in the U.S. election and ISIS to past times when separate events have coalesced into massive disruption on the scale of the fall of Rome, the Black Death and World Wars l and ll. Dark and horrible times to go through, but times of innovation, progress and opportunity followed for survivors.
—Suzanne Shelton, Managing Partner, Strategic Communications, The Shelton Group
The dietary supplement industry would be wise to look at four of the key factors that led to the widely unexpected presidential election results to get an idea about what the future might hold for us:
1. The election: Only 53% of eligible voters participated.
The industry: It appears that much of the industry does not yet adequately understand the implications of FDA’s onerous 2016 NDI Guidance.
2. The election: The media and political pundits missed voter anger and angst that drove the outcome.
The industry: It’s too early to tell how the NDI process will play out, but a review of the agency’s statements in the guidance regarding a limited ODI list, manufacturing changes, combination products and synthetic botanicals make it pretty clear where FDA stands on its enforcement objectives. Anyone that doesn’t take very seriously FDA’s discomfort with DSHEA and its stance on NDI triggers does so at their own risk.
3. The election: Nobody is sure how President-Elect Trump will proceed once he’s in office—bombastic Trump or a more nuanced, thoughtful leader?
The industry: Uncertainty is the only certainty for now, and commerce does not function well in uncertain environments.
4. The election: Through his continuous use of social media, Mr. Trump was able to harness consumer skepticism and distrust against the media to his advantage.
The industry: What if, due to cost or the hope that a lack of resources at FDA will mean little or no NDI enforcement, industry chooses to not file required NDIs, providing the agency, Congress and the media with ample ammunition to create consumer confusion and doubt about our products.
Think it couldn’t happen to us?
—Frank Lampe, Vice President, Communications & Industry Relations, United Natural Products Alliance
As we approach the end of 2016, the state of the dietary supplement industry is strong. CRN’s annual consumer survey revealed an increase in usage, with 71% of Americans (more than 170 million) taking dietary supplements. Sales growth continues at a rate outpacing other consumer products, and categories like probiotics, protein and herbals are showing particularly strong growth.
When we look back, we’ll view 2016 as a year in which the industry took the initiative to improve its accountability and increase its transparency. CRN played a major role in this evolution with development of the Supplement OWL, the online dietary supplement product registry. This potentially transformative project demonstrates the eagerness of companies to give regulators, retailers and consumers the information and tools they need to identify and evaluate products, labels and ingredients. Other initiatives, like the American Herbal Products Association (AHPA)-led botanical raw materials GMPs and the Global Retailer and Manufacturer Alliance (GRMA) common standard for GMP inspections, also illustrate that supplement manufacturers want to reassure their customers about the quality of their products. Even from a regulatory standpoint, this year has been one of forward movement. Creation of the new Office of Dietary Supplements at FDA assures more attention and higher priority for supplement issues at the agency. The FDA’s revised NDI draft guidance, though far from perfect, furthers the dialogue. Progress has been made. As we look ahead to 2017, uncertainty about the regulatory environment exists, but our accomplishments in 2016 place us in a stronger position to address those challenges.
—Steve Mister, President & CEO, Council for Responsible Nutrition (CRN)
This past year has been one of great impact. We learned the dietary supplement industry is a major economic engine. We saw increased usage with more than 170 million Americans taking dietary supplements each year. We experienced progress with the release of the NDI draft guidance, and a step toward increased trust and transparency with the development of the industry’s new product registry, the Supplement OWL. These milestones were not achieved overnight. They were gradual accomplishments of a collaborative process, one that must continue into 2017. This requires ambition.
When I started as chair of CRN’s Board of Directors two years ago, there was great ambition at CRN to build consensus and momentum, and as I wrap up my tenure, the ambition remains. Through its work with regulators in the states and overseas, relationships with the media, engagement with the scientific community and beyond, CRN is part of the great impact being made for the good of the industry as a whole. I am proud to have been part of the momentum and encourage responsible companies to join the efforts that CRN leads to uphold and solidify the integrity of our industry in 2017 and beyond.
—Harvey Kamil, CRN Chairman, and NBTY Vice Chairman
We expected 2016 to be one of the industry’s most exciting and challenging years, and it delivered in more ways than we could have imagined. The industry was slammed with three hot button issues within weeks of each other from the Food and Drug Administration. FDA released its New Dietary Ingredients (NDI) guidance re-draft, a finalized GRAS rule, and its unprecedented steps to reclassify and ban the five-time acknowledged dietary ingredient vinpocetine, an act many consider as an attempt to enforce a guidance document.
Despite these challenges, the state of our industry remains strong, with steady sales and the majority of Americans continuing to have the confidence and trust in our products to use them on a daily basis.
As an industry, we’ve experienced real growth in the past year, allowing the Natural Products Association to take an active role in educating consumers and policymakers in Washington and across the country about our serious commitment to manufacturing and selling high-quality, safe, natural products.
The NDI draft guidance is one of the areas where we have to work with the FDA to ensure an outcome that benefits consumers and the industry. We need to ensure the development and access to novel ingredients as well as ones that have been lawfully marketed. We need to carefully monitor and potentially challenge the enforcement strategy that will emerge from a finalized NDI guidance document that we expect to emerge sooner than later. At this point in time, we need further clarification and transparency from FDA because of the economic impact it could levy on manufacturers and suppliers, and costs that will ultimately be passed onto consumers.
As an industry, we acknowledge the FDA as the established experts on food safety and the enforcers of food law tasked with protecting public health. However, there are some issues where we need to work together and take an even more forward and active role to improve policies that protect consumers and ensure access to safe affordable products is not restricted.
The case of vinpocetine is a prime example of the need for clarification on FDA’s new re-draft of the NDI guidance. We must work directly with the regulators of our industry to explain the precedent that could be set if this rule were allowed to move forward as written. NPA gave the agency a clear path as to how vinpocetine fits under the Federal Food, Drug, and Cosmetic Act in our comments, but the industry needs reassurance from FDA that it won’t try to ban an acknowledged ingredient again. We need to understand its enforcement strategy over NDIs. Clarification and eliminating uncertainty in knowing when to file an NDI is critical to improving the dietary supplement industry’s future over NDIs. Hard work and continued dialogue with the agency can only net positives in our areas of contention. Strong engagement between the industry and FDA is vital to make changes in helping to bring new, innovative dietary ingredients to the market safely.
The incoming Donald Trump Administration presents significant opportunities for the industry, especially if we step up politically, utilize our grassroots capabilities and increase our PAC fundraising. As the saying goes, the more things change, the more they stay the same, and in turn, we anticipate another busy year for the natural products industry in 2017.
—Daniel Fabricant, Executive Director and CEO, Natural Products Association (NPA)
“If you do not change direction, you may end up where you are heading.” —Lao Tzu
In 2016, the dietary supplement industry woke up a bit, exchanging the old story that media, regulators and legislators just get it wrong, for a more honest assessment that acknowledges change provides opportunity to be better. Lessons learned have generated new testing standards, voluntary registration of products and a renewed conversation about what effective regulation could actually look like in the future. That said, there is much work to be done, and it is work that must reflect consumer concerns.
Consumer confidence in the industry has fallen to dangerously low levels. The really great supplement companies are taking bold action relating to quality and transparency, educating consumers on their GMPs, conducting robust testing, and managing their supply chain to protect the integrity of the products they put on shelves. Consumer education is a priority in these companies and today’s customers just can’t get enough information on how products work, what the manufacturing process looks like, and where the ingredients come from. (Imagine “Portlandia” doing an episode tracing a bottle of supplements, instead of a chicken named Colin, back to its origin). Ours, an industry that delights in the fashionable trend of the day, must not mistake transparency as a trend. We are watching supply chain and marketing challenges transform the food industry. Lest we forget, dietary supplements are the most regulated of foods, so we should be more than prepared for scrutiny.
The industry is poised to dramatically impact the nation’s health and wellness. Consumer awareness of the adverse impact of nutrient deficiency, coupled with a desire to consume superfoods as nutrient-dense ingredients in dosage form, presents opportunity to fully meet public expectations. Let’s all head in that direction.
—Karen Howard, CEO and Executive Director, Organic & Natural Health Association
On the regulatory front, China’s market for health food products (dietary supplements) hasn’t changed much from 2016. Although the Food Safety Law was put into effect on Oct. 1, 2015, many of the implementation regulations for health food were not released until 2016. In fact, the industry is still waiting for a few documents to be released by China’s FDA, which will finalize the new recording system for health food products. There is a list of 22 approved vitamins and minerals that can be used to create products eligible for China’s new recording system. If the ingredients are not on the list then the product will need to go through registration procedures, which takes approximately three years and more than $100,000 (U.S.) to complete, whereas the recording process is expected to take 6-10 months and approximately $10,000 to gain China’s approval.
Cross border E-commerce has been growing exponentially since 2014. Many foreign brands have entered the market through this “direct-to-consumer” approach that allows foreign brands to side-step China FDA registration procedures because these are considered “personal shipments” that originated outside of China. It’s similar to a consumer going abroad and purchasing products, then bringing them back to their home country.
April 2016 saw the government crack down on health products that were using the cross border channel and shipping to consumers from any of China’s Free Trade Zones. The government move excluded health products from a list of approved products that can use the cross border channel via Free Trade Zone. This was later retracted by the government, which then gave the industry a one-year grace period until May 2017 to find alternative market strategies.
Also new to the cross border model is a new tax system and cap on sales. The new tax system taxes all incoming direct-to-consumer shipments at 15% if being shipped from overseas. If shipped from one of China’s Free Trade Zones, the tax rate is 11.9%.
The cap on sales is CNY 2,000 per order and CNY 20,000 per year for each person. This of course is going to cause issues with some people who are ordering from overseas and then reselling in China.
To sum up the current and near future of China’s health product industry, I would say that cross-border is going to continue to enjoy popularity among consumers looking for international supplement brands. Once the health product registration and recording system is finalized, it will begin to gain momentum after the process becomes clearer to both domestic and international players.
—Jeff Crowther, Executive Director, U.S.-China Health Products Association (USCHPA)