However, the first 15 months of the Trump Administration has actually seen an uptick on the federal level, as well as in the states and with class action attorneys. Thus, companies must manage their risk tolerance in an appropriate manner even more today.
When assessing risk, companies should first realize that the dietary supplement industry is far from a risk-free category, as regulators and plaintiff attorneys are always willing to challenge a company if they believe the company is being deceptive, using unapproved ingredients, or otherwise not complying with laws.
When faced with a challenge, a company must decide to either make revisions or settle a potential case regardless of whether the challenge has merit. Thus, a company may decide to settle a case irrespective of its legitimacy in order to simply put the challenge behind it. With that said, having a strong risk assessment policy may save a company a lot of time, energy, and legal expense down the road.
Managing risk is not an invitation to violate the law. Rather, in the area of dietary supplements and foods, there is a significant amount of grey area and reasonable minds can differ; it is for this reason that a company should have—and understand how to properly use—a risk assessment policy.
The risk of a particular business practice is dependent on several factors, including where a company is in the supply chain, its marketing channel, the aggressiveness of its business practices, and whether a certain practice is defensible. For instance, with a marketing claim, the risk is whether the claim is a permissible structure/function claim as well as substantiation.
Other risks include whether an ingredient is an appropriate dietary ingredient or requires a new dietary ingredient notification. The risk of consequences vary depending on whether it’s related to the FDA, FTC, a state attorney general, or class action attorney. With the FDA, the consequences are generally limited to a warning letter unless there is a significant safety issue. With the other groups, the risk could be significant consumer redress, potential penalties, attorney fees, and an injunction against the particular practice.
In evaluating the risk, a company must understand the current regulatory environment. In this regard, a company should pay particular attention to recent FDA and FTC letters and actions, recent National Advertising Division of the Council of Better Business Bureaus (NAD) and Electronic Retailing Self-Regulation Program (ERSP) decisions, state actions, and class action lawsuits.
While not always the case, the FDA risk is generally more manageable and will often only require a change in language or making appropriate adjustments in the manufacturing process. The FTC and advertising risk is generally more significant, because merely changing the language is not likely to satisfy the FTC or a state AG once it has opened an investigation; and class action attorneys simply do not care, even though they will ask for changes in marketing practices.
A company’s FDA risk profile will largely depend on whether the company is a private label distributor, manufacturer, ingredient supplier, or any combination thereof. The private label distributor is primarily a concern as to whether a particular structure/function claim is permissible. Even with FDA’s guidance, this may be the trickiest risk to manage; one simple rule to avoid an issue is to make a claim that is positive (e.g., “helps support a healthy heart”) rather than negative (e.g., “helps improve heart health by supporting normal cholesterol levels”).
For a manufacturer, one risk is the quality of the inspector, or whether its processes are up-to-date. Indeed, the agency has been known to take issue when GMPs are not the latest and greatest. Maybe 2.0 is fine but 5.0 is better, so a manufacturer should always be updating and improving the processes and systems it has within its facility to avoid issues when inspected.
All companies should be concerned about the safety of the ingredients and formulations that are being manufactured and marketed, as FDA will hold everyone responsible in the supply chain if a particular ingredient or formula causes death or significant harm to consumers.
Another risk includes importing a product. From an FDA perspective, it is significantly easier to stop a product at port than it is to deal with a grey area structure/function claim domestically. In this regard, there has been a significant increase in FDA oversight at the border and to keep products out of the country that do not comply with the law.
To help manage the FDA risk, companies should review FDA warning letters, courtesy letters, untitled letters, 483s, enforcement actions, guidance documents, proposed rules, speeches made at conferences, press releases, and engage in informal conversations with the agency to assess FDA’s current thinking on a given topic.
Assessing the advertising risk, a company must understand all the direct and reasonable inferences a particular claim imparts to the consumer. Once the company understands the claim it is making, it must understand the strength and weaknesses of the scientific support for the claim and ensure support is consistent with claims. By its nature, this is a judgment call and reasonable minds may differ; however, the more aggressive the claim, the riskier the claim is to make regardless of whether the claim can be substantiated.
For instance, simple structure/function claims (e.g., “supports a healthy digestive system”) are less likely to be challenged than more aggressive claims (e.g., “helps eliminate years of toxic sludge from your colon”). The former is one most likely supportable by the science. The latter carries a much higher risk of being challenged and is more difficult to substantiate. Thus, properly managing a company’s risk profile requires a balance of marketing copy in light of the company’s scientific substantiation.
Similarly, targeting vulnerable audiences increases the likelihood of a challenge. The more vulnerable the target audience (e.g., the elderly, infants and children, pregnant or nursing women), the more likely the claim will draw regulatory scrutiny. Likewise, the more serious the condition, the more likely the claim will draw regulatory scrutiny. When a company couples a vulnerable audience with serious health consequences, the likelihood of challenge goes up significantly. Thus, it’s important to avoid serious health consequences and make sure the claim being made is supported by the scientific evidence in a particular group.
To help minimize the advertising risk, consider the state of science in support of a claim (e.g., emerging versus well-founded, or animal study versus a human study), as well as the frequency of FTC and state enforcement action, as well as class action lawsuits. Quite simply, do not make claims that are not supportable, and understand that not everything is puffery. Simply put, understated is always better than overstated. Learn to be good marketers rather than going to the lowest common denominator (i.e., scaring people into action). The more reasonable the claim, the less likely an issue will materialize.
To conclude, all businesses need to manage risk, and managing risk does not mean that any company should engage in unlawful practices. Rather, managing risk properly allows a company to compete effectively in a manner that is consistent with the law. This article only touched on a few points as there are many other considerations when developing a good risk management policy.
Todd Harrison is partner with Venable, which is located in Washington, D.C. He advises food and drug companies on a variety of FDA and FTC matters, with an emphasis on dietary supplement, functional food, biotech, legislative, adulteration, labeling and advertising issues. He can be reached at 575 7th St. NW, Washington, D.C. 20004, Tel: 202-344-4724; E-mail: firstname.lastname@example.org.