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Healthy, Wealthy, But Wise?

Matthew Heller's last article for the magazine was about the proliferation of "spam" e-mails and their effect on Internet marketers.

The federal government banned herbal supplements containing ephedra just four weeks ago, but for America’s $16-billion nutritional supplement industry, the good times--those go-go years of unchecked growth and relative freedom from regulation--may have ended much sooner.

On Oct. 30, 2001, armed U.S. marshals traveling in a convoy drove to an industrial park on the outskirts of the sleepy, southwestern Utah community of St. George. They stopped outside the sparkling corporate headquarters of E’Ola International, a marketer of dietary and weight-loss supplements and the highest-profile member of a cluster of supplement companies in St. George. Such firms have cropped up in communities all over the country, but the concentration of companies in St. George, a city of 49,000 about 400 miles northeast of Los Angeles, has turned it into a veritable herbal hotbed. E’Ola held conventions in town for its independent distributors and sponsored such local events as the St. George Marathon and the Utah Senior Games. The company even tried to acquire the naming rights to the new convention center, a 47,500-square-foot space that can seat 6,000 people for concerts and sporting events. As Enron was to Houston, you could say E’Ola was to this small town of historic Victorian mansions and cookie-cutter subdivisions, of retirees and young professionals attracted by the area’s mild climate and recreational opportunities.

None of E’Ola’s products were drugs, per se. As supplements, they fell into the category of food rather than pharmaceuticals, leaving their makers free to sell them on the basis of anecdote and testimonial rather than hard scientific evidence. But the Food and Drug Administration had asked the marshals to seize an over-the-counter diet product called AMP II Pro Drops. Squeezed into the mouth from a bottle, the drops stimulated the metabolism, appealing to would-be weight-losers. And they contained a potent synthetic drug--ephedrine hydrochloride. By the time the marshals finished their tour of E’Ola, they had emerged with 140,000 bottles of AMP II Pro Drops valued at $2.8 million.

The federal raid was an ill-timed blow to the company. A few months earlier, an Alaska jury had ordered E’Ola to pay $13 million in damages to a woman who claimed she had suffered a stroke as a result of using the same drops. E’Ola was unable to show that it had satisfactorily warned consumers of the product’s risks. The verdict stunned St. George, as did the raid; it was a show of force normally associated with a bust of an illegal narcotics ring. Says Marge Gillespie, who owns Dixie Nutrition, the largest health-food store in town: “Things like that just don’t happen here.”

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Nor are things like that supposed to happen in an industry that promotes its importance to America’s health, and which has marketed its products into just about every grocery store, high school gym and pro sports locker room in the country. The pills, potions and drops produced and aggressively marketed by supplement firms have fed an almost insatiable thirst for “safe” self-improvement, a prescription-free panacea available to everyone from pro athletes seeking that priceless competitive edge to couch potatoes hoping to quickly shed a few pounds.

In the supplement industry, where a libertarian streak runs deep, you could dismiss the E’Ola bust as an arbitrary and unnecessary exercise of government power. “We will have to be forgiven for feeling singled out,” E’Ola protested in a news release immediately after the raid. “It appears at this point that the FDA has chosen to make some sort of statement at our expense.”

But in early December, E’Ola, where sales apparently dropped as a result of the company’s various legal problems, filed a Chapter 7 bankruptcy petition, halting all its operations. It joined several other major supplement companies that have recently resorted to the bankruptcy courts, including Twinlab, the maker of MetaboLift, and Nutraquest, which is best known for its Xenadrine weight-loss product. The E’Ola filing preceded by just weeks the FDA’s outright ban of ephedra, which the agency claims has been linked to more than 16,000 “adverse incident reports,” some of which involved heart attacks, strokes and death. Barring delays, the ban is scheduled to take effect around March 1. Other efforts to essentially dismantle the 1994 legislation that created the supplement boom already are underway.

Rather than being some isolated event, what the FDA did in St. George signaled a growing public concern that transcends the problems associated with a single product and that could jeopardize the future of the entire nutritional supplements industry. It also has a lot of people in the little town of St. George worried.

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Settled by Mormon pioneers in 1851, St. George was little more than a remote desert outpost for the first century of its existence, its population never exceeding 10,000. Then came two developments--the invention of air-conditioning and the construction in the mid-1960s of Interstate 15, which links the city to Salt Lake City and Las Vegas. Since 1960, it has grown at an annual rate of 6.4%. During the 1990s, with the supplement industry creating wlecome jobs, the population mushroomed by 75%.

Nestled beneath towering buttes of vermilion sandstone, St. George now is the bustling hub of Washington County and a popular gateway to nearby Zion National Park. Traffic piles up at freeway interchanges cluttered with fast-food restaurants, and, east of 1-15, subdivisions are sprouting up on what used to be alfalfa fields.

According to Scott Hirschi, director of the Washington County Economic Development Council, the supplement firms are “a good-sized employer” in town. “I think they’re good for [St. George]. They’re clean and they bring a certain amount of recognition to the community.”

St. George, in fact, has staked part of its economy on the willingness of American consumers to minister to themselves with untested substances. Every facet of the supplement industry is represented --manufacturing, wholesale distribution and retail sales--and supplement-related businesses are spread all over town.

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The supplement trade also matters a lot to Utah as a whole. It’s the state’s third-largest industry, after tourism and computer software development, with $3 billion in sales. To hear Scott Pullan, former head of distributor relations at E’Ola, tell it, E’Ola’s array of diet drops, herbal chews and protein mixes had deep cultural roots and owed a debt to “the pioneer spirit, the Mormon pioneer heritage.” Those hardy settlers, he explains, had “to rely on their natural surroundings for medicines. There wasn’t a doctor on every corner.”

These days, the industry’s major political champion is a Mormon, Utah’s very own Sen. Orrin Hatch. The Republican senator is an avid consumer of supplements--and the industry’s dollars. During the past decade, he has received nearly $137,000 in campaign contributions, according to the Center for Responsive Politics. Although Hatch has received more from pharmaceutical companies, the supplement industry also has paid almost $2 million in fees to his lobbyist son. And it was Hatch who drafted the key legislation that classified herbal products as foods rather than drugs, sparking the supplement boom.

The senator gathered support from those who saw FDA regulation as antithetical to the free market and the freedom to choose your own path to health. Says Sidney Wolfe, director of the health research arm of the Public Citizen’s Health Research Group, a Washington, D.C.,-based consumer advocacy organization: “The bill was a dream for libertarians.”

The Dietary Supplement Health and Education Act (DSHEA), enacted in 1994, exempted companies that make supplements from the arduous and costly process of seeking FDA approval before going to market. Just to get things going, for example, a pharmaceutical company must conduct animal and laboratory studies to show a product classified as a “drug” is reasonably safe for human consumption. Only then can it move on to extensive safety studies on humans. The FDA often bombards the applicant with requests for additional information, and the process can take years.

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The 1994 legislation, by contrast, put the burden on overworked regulators to prove that a “supplement” is unsafe. Since then, supplement sales have doubled. An estimated 40% of adult Americans now use herbal remedies, and more than 80% take vitamin and mineral supplements. The dietary-supplement industry has diversified into a cornucopia of ginseng and guarana, blue-green algae and bee pollen, horny goat weed and shark cartilage--well beyond what most would consider normal dietary needs.

But critics say the supplement industry’s success has come at the expense of public health, and that profit has been untethered from social responsibility. With no need to substantiate the benefits of their products through scientific research, unscrupulous operators can make fortunes by taking advantage of a gullible and weight-obsessed public. The now-banned ephedrine is an alkaloid of ephedra, a plant found in many varieties such as Ma Huang in China and the desert plant Mormon Tea. As a staple ingredient of weight-loss products, it has contributed to one of the most lucrative segments of the supplement business. Often combined with caffeine, it increases the rate of metabolism and stimulates the central nervous system. But consumers don’t always know what they’re getting, or how the various ingredients will react with their body when they swallow a supplement.

“It’s an herbal roulette,” says Richard E. Vollertsen, the Anchorage, Alaska, attorney who represented the stroke victim in the lawsuit against E’Ola. The company did not disclose on the label that AMP II contained ephedrine hydrochloride.

Adding fuel to the fire, weight-loss and metabolism-enhancing products containing the natural, more benign form of ephedrine have been blamed for the deaths of several college and professional athletes. Most recently, Baltimore Orioles pitcher Steve Bechler collapsed and died during last year’s spring training after allegedly taking Nutraquest’s Xenadrine RFA-1 to slim down. The supplement, now reformulated, was packed with ephedrine and caffeine. Bechler’s widow has filed a $600-million lawsuit against Nutraquest.

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In St. George--more than two years after the E’Ola raid--there’s a feeling of fear and uncertainty about the supplement industry’s future. You can sense it at Dixie Nutrition, where a sales assistant discusses the Bechler tragedy with a customer; it’s there in the pensive expression of Zona Jackson, a grandmother and self-made herbal products entrepreneur. Jackson has seen her liability insurance premiums skyrocket since the ephedrine scare erupted--even though she doesn’t use ephedrine in her “Gifts of Nature” formulas. “I wouldn’t touch [it] with a 10-foot pole,” she insists.

Casey Foster, who recently started a business in St. George that sells products containing Noni juice, an extract from a fruit tree found only in Polynesia, is watching developments anxiously, too. He says, “I want this industry to have the credibility it deserves because there are so many of these gifts of nature that work.”

Deseret Laboratories was one of the first supplement firms to set up shop in St. George. The Gubler brothers were pursuing other careers--Mark was a health-care administrator, Scott an attorney--when they inherited a gypsum mine in St. George and spotted an opportunity for processing the talc-like powder for use as a filler in pills and tablets, a common use of the mineral. They founded Standard Gypsum Products in 1983, processing the mineral with a used granulator. From there, they added a tablet press and a machine for coating tablets.

In 1991, the Gublers renamed their company Deseret Laboratories and moved from their small St. George warehouse to the nearby, new Fort Pierce Industrial Park, where they were the first tenant. They built the first phase of their factory, incorporating equipment for every stage of the pill-making process from granulation to packaging. With the 1994 passing of DSHEA, their timing proved ideal.

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Mark Gubler, a square-headed, soft-spoken man, shows a visitor around what, after several expansions, now is a state-of-the-art, 120,000-square-foot manufacturing facility. Workers in white lab coats and shower caps scurry along the spotless hallways, while others hunch over microscopes or at computers in their laboratories. Gubler stops at one lab where technicians verify the potency and purity of every raw supplement ingredient; in another, technicians test for contamination by bacteria such as salmonella. Deseret Labs even uses a simulated gastric solution to test that a product will dissolve properly in the body.

The company produces 350 million tablets and 120 million capsules a month. It doesn’t identify the companies for which it produces supplements, but Deseret sells 80% of its production to Utah-based distributors and marketers. “We’ve invested a lot of money and infrastructure into this,” Gubler says.

His company is one of many to have done so, which helps explain the sudden shadow over St. George and Utah’s vast supplement industry. In Congress, Sen. Richard Durbin (D-Ill.) has introduced the Dietary Supplement Safety Act, a pending bill that would require sellers of dietary supplements containing stimulants to prove their safety before sale. And last October, California became the third state, after New York and Illinois, to ban any dietary supplement containing ephedrine-group alkaloids--a ban that took effect Jan. 1. “We’ve been trying to rein in the supplement industry,” says Robert Herrell, an aide to state Sen. Jackie Speier (D-Hillsborough), who proposed the legislation.

But the FDA trumped the California ban. On Dec. 30, Tommy G. Thompson, secretary of Health and Human Services, announced the federal ban during a Washington, D.C., news conference, calling ephedra “simply too risky to be used.” It was the first time the government has banned a dietary supplement ingredient under DSHEA, and the ban should take effect within the next few months, though most observers expect the companies that make ephedrine products to challenge the ban in court.

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At Deseret Labs, Gubler says product safety is a primary concern. “If we don’t think it’s safe, we won’t do it,” he insists. His company won’t touch “any product that contains ephedrine. We just see it as [something] we want to avoid.”

But like many others, he is worried about regulatory “overkill,” that, in reacting to concerns over ephedrine, lawmakers will impose cost-prohibitive controls on the industry as a whole. “My concern is they’ll make it so that nutritional products are no longer economically feasible to make,” Gubler says. At a minimum, navigating the FDA approval process costs about $500,000 per product--out of reach for many supplement companies.

Deseret Labs has a hedge against any major fallout in the supplement business because its high-grade machinery also can manufacture pharmaceutical products. “We have seen [a crackdown on supplements] coming for some time,” Gubler says. “That’s why we’ve got all this equipment in place.” But for supplement start-ups in St. George that don’t have the luxury of a fallback position, these are troubling times.

Howard Ruff, author of “How to Prosper During the Coming Bad Years” and publisher of the investment newsletter “The Ruff Times,” greets a visitor at his home in one of St. George’s new housing tracts. The subdivision is so new that most of the lots are still empty, and Ruff’s view of the Virgin River Valley is obstructed by construction equipment. He’s a youthful 72-year-old with blue eyes, gray hair and a mellifluous voice that would be the envy of a televangelist. In his office, God has met Gossip--the Book of Mormon lies on a chair and “The Drudge Report” is on the laptop computer.

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Without much prompting, Ruff can regale you with tales of his days as a prophet of economic doom linked by the media to the survivalist movement. The focus today is on the product to which he attributes his youthful vigor and which he is busy developing as a mail-order business. “I’m smarter than the average 30-year-old,” he boasts.

The product is Hi-Q Brain Food, a combination of 53 natural ingredients designed to “restore your mental energy, emotional stability, concentration and mental sharpness.” Ruff was once a distributor for NeoLife, a sports nutrition supplement marketer, and during that time, he says, developed an “obsessive interest” in how nutrition could affect brain performance. Determined to avoid mental deterioration in old age, he devised Hi-Q with the help of a former product-development specialist at Weider Nutrition, a leading Utah supplement manufacturer founded by bodybuilding legend and magazine publisher Joe Weider.

Under federal rules, Ruff can’t claim that his product cures anything. But he does say it is preventive. “We have anecdotal evidence that it [prevents] cognitive deterioration. The major benefit is what doesn’t happen to you.”

There’s no specific study on Hi-Q. Instead, Ruff cites research on some of its ingredients--from chromium and copper to ginseng and ginkgo biloba, though no ephedrine. Of course, it might be a bit much to expect the average consumer to plow through dozens of articles from the American Journal of Clinical Nutrition, Human Psychopharmacology and other academic publications to learn about those ingredients. Attorney Vollertsen certainly is skeptical. “You can’t just say, ‘My product is safe because of a Danish study in 1970,’ ” he argues. “You should still have to show safety and effectiveness, that the risk/benefit [trade-off] makes sense.”

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But Ruff is convinced that the free market “really works” in the supplement business. “Anybody out there that sells something that hurts somebody is going to be destroyed by the marketplace,” he insists. And besides, he asks, “Do we trust the government that much to say, ‘If the government hasn’t approved this, it can’t be good?’ ”

Ruff’s argument avoids another question: Do we still trust supplement companies enough to believe that a product they say is good is really good? Before too long, Ruff is railing against regulators. The ephedrine situation, he protests, has “given the FDA a hook to beat up on the industry.” Regulatory reform would put him out of business. “Fine, I’d move onto something else. But to me, philosophically, there’s a huge amount at stake.”

Noni juice entrepreneur Casey Foster of Natural Styles Inc. doesn’t go as far as Ruff in expressing libertarian, anti-regulatory views. But he, too, has a lot at stake and fears what regulators might do to the supplement industry. “As soon as they can control it, I think it would be [its] demise,” he predicts. Natural Styles, he says, is a “perfect example” of a company that could not cope with an FDA approval process. “Small companies like us would be out of business.”

Natural Styles, which Foster founded three years ago, occupies a modest warehouse in downtown St. George, where the Noni entrepreneur stores supplies of his product from Hawaii, Tahiti and Samoa. His office is decorated with large aerial photos of tropical islands and other mementos of business trips to the South Pacific. The indigenous peoples for centuries have treated themselves with the acrid-tasting citrus juice from the Noni, which resembles a breadfruit and is about the size of a potato. Foster, a slim, fit-looking man whose goatee is flecked with gray, discovered Noni while recovering from a car accident. “It got me off morphine in two weeks,” he recalls, though he’s vague on how it did so.

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Unlike Ruff’s multi-ingredient product, Foster’s contains only pure Noni juice. A researcher at the University of Hawaii has isolated an alkaloid in the Noni fruit that the researcher believes has significant healing benefits, and the juice appears to act as a natural antibiotic and painkiller, and to enhance the immune system and stimulate the production of red blood cells. But Foster admits the science is less than complete.

“I can honestly tell you it works,” he says. “But I wish I could tell you why. I haven’t been sick in four years. Can I attribute that to Noni? Who knows?”

The supplement industry tolerates such ambiguity; it’s easier and cheaper, after all, to ask questions than to find answers, and those questions dovetail nicely with the public’s growing openness to alternative health care. But ambiguity is what concerns the industry’s critics. Without thorough product testing, can the public trust the companies that make and sell this stuff?

Six months after federal marshals raided its operation, E’Ola International signed a consent decree prohibiting it from distributing AMP II drops or any product containing ephedrine hydrochloride. It also settled the Alaska product-liability case for an undisclosed sum rather than proceed with its appeal. But when a reporter visited the company headquarters before the bankruptcy filing, E’Ola was still very much in the business of selling ephedrine products.

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On its Web site, E’Ola claimed that “more than 12 million Americans safely consume nearly 4 1/2-billion servings of Ephedra each year” and blasted the media for relying on “politically motivated agendas and unscientific speculation” in the coverage of the ephedrine controversy. “There’s absolutely no valid scientific evidence that there is any risk associated with taking ephedrine supplements,” Pullan, the former distributor relations chief, said during an interview before the bankruptcy. “I challenge you. Find one study.”

Pullan gamely put a positive spin on the company’s problems. “It is through challenges that all great companies are born,” he said. But last fall, E’Ola abandoned its use of home-based distributors in favor of direct sales. And even that didn’t stop the slide into extinction. “Unfortunately, the business climate for our company has changed radically in just the past few years,” officials said in announcing the company’s liquidation.

While it was still operating, E’Ola replaced AMP II with a weight-losing, energy-boosting line called Thermo Amp. It contained natural ephedrine as well as guarana, a caffeine-like stimulant that has much the same physiological effect as ephedrine. As with AMP II, the company did not need to establish that Thermo Amp was safe or effective before putting it on the market.

Consumer advocate Wolfe favors nothing short of DSHEA repeal. “Ephedra is not the problem,” he contends. “The problem is getting rid of the distinction [between supplements and drugs], the pretense that because it’s natural, it’s OK.”

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“We can’t turn a scientific blind eye to the fact that these products are stimulants,” says attorney Vollertsen. “They deserve a different type of regulation than a baloney sandwich.” He dismisses concerns that product-testing will force companies out of business. “There’s nothing in the Constitution that says, ‘You’re a small company so you get to make money by selling drugs without testing them.’ ”

Certainly the supplement industry is riddled with contradictions. You can say, for example, that a product promotes weight loss, but not that it treats obesity. At Gifts of Nature in St. George, Zona Jackson tells a visitor that she started developing her own herbal formulas because of her own serious health problems. But she can’t be any more specific than that.

“There are a lot of things you can’t say in this business,” she says. “You have to be so guarded.” But then she hands out a thick stack of glowing--and purely anecdotal--testimonials for her products from grateful customers. “People who come to us are desperate for some help they’re not getting from their doctors.”

At the Dixie Nutrition store in St. George, times have definitely changed. A few months ago, a prominent point-of-sale display promoted Xenadrine RFA-1, the same maximum-strength “Rapid Fat Loss Catalyst” supplement implicated in the death of pitcher Steve Bechler. But these days, even before the FDA ban takes effect, the store is no longer selling Xenadrine or any other ephedrine supplement. Dixie Nutrition’s suppliers, unable to afford the liability insurance premiums, simply stopped distributing them.

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But as the store’s manager, Raylene Smith, says: “It’s not that big a deal. There are other things out there.”


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