Integrator Adviser Speaks: Levin on the Impact of the FDA's cGMPs on the Dietary Supplement Industry

Summary: The natural products industry in the United States has a boatload of stories of businesses started in homes and garages that grew to become dominant players. The current Good Manufacturing Practices (cGMP) for dietary supplements recently issued by the FDA promises to significant change the terrain. What effect will it have on the industry? Integrator adviser Michael Levin addresses this topic in Part 2 of his analysis of the cGMPs. Levin also addresses questions regarding his first article which were raised by Michael McGuffin, executive director of the American Herbal Products Association.

Ralph Fucetola,

“We find that this final rule will have a significant economic impact on a substantial number of small entities.... Establishments with above average costs, and even establishments with average costs, could be hard pressed to continue to operate. Some of these may decide it is too costly and either change product lines or go out of business. …very small … and … small dietary supplement manufacturers … will be at risk of going out of business.... costs per establishment are proportionally higher for very small than for large establishments...The regulatory costs of this final rule will also discourage new small businesses from entering the industry.”

Michael Levin

As part of their obligation under Executive Order 12866, FDA performed and disclosed a detailed economic analysis of impact. The rule is this: if the impact is > $100 million on the US economy, detail the alternatives and quantify & disclose the detailed assumptions. The FDA complied. This section makes interesting reading. The last 60 pages or so are a bean-counters heaven. All the actuarial assumptions such as the estimated costs per test, economic value of a life, costs of a recall, etc etc. are disclosed.

On this Final Rule, FDA estimated that the number of companies that will be forced out of business due to compliance costs will be half that as from the 2003 proposed rule.

What's my take?

1) Economic impact for those who fully comply with the letter, spirit and intent of the law is much larger than FDA estimates. However, it is quite possible that few if any companies will do this. Example: What company will travel to China to verify that their supplier is using water compliant with US EPA drinking water standards? None. What are the EPA standards? They include 87 specifications for all sorts of contaminants including pesticides and herbicides that are illegal in the US but legal in China. Who's kidding who here?

2) Non-compliance and non-enforcement will both continue. There's little risk in selling a product which has a low level contaminant that doesn't make you sick today, but will undermine your future health. The sheriff isn't in town, and won't be, for a long time. From 2000-2005, there are a total of 75 recalls actions in the dietary supplement industry. These 75 recalls accounted for about 4 percent of the 1,937 food recall actions during this period. Not much enforcement. Lack of immediate symptoms + lack of people looking for contaminants = a low risk free market environment.

3) The rules may backfire. The really smart bad guys will see a window of opportunity through which to make money by selling substandard products in an unenforced market. Scary thought. Hope not. But is possible. (And its already happening in some areas: AZO dyes (types of synthetic, inorganic compounds) in bilberry, diethylene glycol (DEG) in glycerin, etc etc)

Bottom Line: There's no meaningful barrier to entry. The risk of future enforcement is low. Supplements are now roughly 10% the size of the Pharma industry. The vast majority of supplement companies are well-intentioned folks who try to profit doing a reasonable job on quality. Some are unsophisticated, naive or careless (as is the case in many industries). There's a small handful of predators who give this industry a bad reputation. None of this will change anytime soon. The high-minded small companies may fold their tents.

FDA reports 1,460 companies in their database, of which 1,300 are small (20-500 employees) or very small (< 20 employees). That's the universe where right-minded companies will be most significantly impacted.

A new certification industry will emerge, continuing the path of US Pharmacopoeia and NSF. Those folks stand to make money. Pretty interesting stuff ...

Michael McGuffin, executive director of the American Herbals Products Association (AHPA), sent notice that AHPA has compiled a useful resource for understanding the new cGMPs.  The resource is entitled AHPA’s Annotated Final Rule on Dietary Supplement cGMP. McGuffin provided this blurb:

"Understanding 21 CFR 111 — the newly-published final rule on current good manufacturing practice (cGMP) for dietary supplements — is easier with AHPA’s Annotated Final Rule on Dietary Supplement cGMP. This document links key points and comments found in FDA’s over-200 page preamble to the final rule to each specific section of 21 CFR 111 to which it applies."

Michael McGuffin

Levin's view was that the cGMPs, despite the highly politicized, 13-year wait for their issuance following passage of the Dietary supplement health and Education Act, are not likely to provide significantly better protection for the public.  McGuffin responds:

"I find Michael Levin’s pessimism about the final rule unfortunate. For example, there is no such thing as a 'GMP-compliant product that contains an illegal pesticide,' as Levin stated.

"This apparently overlooks new section 111.5 within the final rule (this section is titled, 'Do other statutory provisions and regulations apply?'), which specifically states: 'In addition to this part, you must comply with other applicable statutory provisions and regulations under the act related to dietary supplements.' Because 'illegal pesticides' are illegal, companies must already comply with this 'other applicable statutory provision.' This issue does not therefore, as [Levin] asserted, represent a flaw in the final rule.

"I appreciate [McGuffin's] correction re: illegal pesticides. He is right. While a product containing illegal pesticides would not be GMP compliant, a product containing legal pesticides (and herbicides, residual solvents, etc) could be truthfully labeled as being 'GMP-compliant.'

"FDA sent a very clear message: it is industry's responsibility to define product specifications. The rule provides flexibility. The question remains: will industry set the quality bar 'high enough' in order to protect and preserve the public health? Some companies will. Some won't. And the consumer won't know the difference."