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Industry Forecast: Navigating Uncertain Seas in 2017

Industry Forecast Industry Forecast
Phase 2

With sweeping changes in the U.S. political landscape ushered in by the 2016 elections, the natural products industry must navigate uncertain seas as it looks forward to 2017.

The participants are:

• Darrin Duber-Smith, Senior Lecturer, Department of Marketing, College of Business, Metropolitan State University of Denver, CO

• Jonathan Emord, Esq., President, Emord & Associates, Washington, DC

• Daniel Fabricant, PhD, Executive Director and CEO, Natural Products Association (NPA), Washington, DC

• Michael McGuffin, President, American Herbal Products Association (AHPA), Silver Spring, MD

• Steve Mister, Esq., President and CEO, Council for Responsible Nutrition (CRN), Washington, DC

• Joseph Weiss, President, Nutrition 21, Purchase, NY

With a backdrop of sweeping changes in the U.S. political landscape ushered in by the 2016 elections—from state legislatures to Congress to the presidency—the natural products industry has to navigate an uncertain sea marked by: a new commissioner of the U.S. Food and Drug Administration (FDA); a new acting director of the FDA’s Office of Dietary Supplement Programs; continued questions regarding the term “natural” on food products; renewed efforts to limit use of dietary supplements for military members; a newly re-issued new dietary ingredient (NDI) guidance; threats to continued sale of vinpocetine given FDA’s recent posture regarding its identity and regulatory status; passage of the federal GMO (genetically modified organism) labeling bill; various state and territorial challenges to dietary supplements (such as Puerto Rico’s draconian Administrative Order 346, which was shelved for now; and more. Nutrition Industry Executive (NIE) asked a panel of experts to weigh in on what we might expect, as an industry, in the year ahead.

NIE: What were the biggest industry surprises of 2016, and why?

McGuffin: The presidential election came as a surprise to many in the industry. The impact of the incoming Trump administration on the industry remains to be seen, but Trump’s anti-regulatory stance will likely provide new opportunities, and challenges to the industry. It will be important for the industry to stay actively engaged with the incoming administration to identify and take advantage of the opportunities and address emerging challenges.

The Drug Enforcement Agency (DEA)’s proposal to essentially ban kratom also came as a surprise, but the well-organized response by kratom supporters that resulted in the DEA delaying the ban to do a more thorough review of the plant was even more surprising. AHPA has expressed concern about the DEA using its scheduling authority to essentially ban a plant that is currently in the market because naturally occurring constituents of the plant are scheduled under the Controlled Substances Act.

Emord: Perhaps some were surprised by the FDA’s NDI guidance or its actions against select ingredients. All of that appeared to me to be part of a logical and misguided expansion of an unaccountable regulatory state. FDA has long been largely impervious to the actions of the courts and Congress and the will of the American people. The biggest industry surprises are likely to come in 2017, when the Trump administration implements a deregulatory agenda that may have spillover effects for FDA. Now that would be a change from the political agenda of the agency over the last eight years.

Fabricant: FDA’s administrative proceeding on vinpocetine to ban it as a dietary ingredient. Why? Because it was acknowledged by FDA without comment five times. There are no safety issues identified in the almost 20 years it has been lawfully marketed. These are also some very important arguments against FDA’s position. It does fit under 201(ff)(1) of the Act as a dietary ingredient.

Duber-Smith: To this 25-year industry observer, the biggest surprise each year continues to be the sustained growth of the supplement sector despite the myriad issues the industry continues to face. When is the last time you saw a positive report about supplements in the mainstream media, for example? Why does this industry seem to be immune to the effects of bad publicity? The answer almost certainly lies in deeply held consumer attitudes toward managing their own health care. This phenomenon continues to fascinate me.

NIE: What trends, segments and kinds of products are going to take off in 2017, and what has set the stage for this?

Fabricant: Probiotics. I think FDA’s recent attempts to regulate probiotics and their specific mentioning in the NDI guidance to notify all strains to the agency is a foreshadowing of what we will see on probiotics. Everyone seems to be doing colon health studies to substantiate their claims and that is a good sign of a responsible industry. I think the sky is the limit on probiotics.

Mister: CRN’s 2016 Consumer Survey on Dietary Supplements revealed some interesting findings about our current consumer. For instance, supplement usage among U.S. adults is increasing, with 71 percent of Americans taking dietary supplements—that’s more than 170 million Americans. Also, energy has become the No. 2 reason why dietary supplement users are taking dietary supplements, following the No. 1 reason, which is “for overall health and wellness benefits.” It’s too early to deem these shifts as trends, but they are definitely shifts the industry should keep an eye on. Industry should also be aware that the Millennials are becoming avid users of many supplements, and this segment is worth some attention as they are the future of the industry.

Emord: Targeted nutrition continues to be a fascination within the scientific community and among dietary supplement companies. The somewhat elusive goal of identifying the right peculiar mix of nutrients to complement individual body types appears closer to realization now than in years past, although I suspect there is a bit of a way to go before the one-size-fits-all supplementation approach gives way to targeted recipes.

Weiss: With all the mergers and acquisitions in the sports nutrition space, we will see more aggressive growth in the fitness and senior sub-markets of sports nutrition. Specifically, there are great opportunities for manufacturers and marketers to support new line extensions and new product launches targeting weekend warriors and soccer moms, as well as active Baby Boomers. In 2017, we will also see continued growth with brands that primarily serve the bodybuilding market. Attention to ingredients that support mental agility will also gain momentum in 2017.

McGuffin: Consumer interest in high-quality, sustainably produced products from socially responsible companies continues to grow. It isn’t a new trend, but companies that effectively demonstrate these qualities to customers will likely continue to thrive. Younger generations are also increasingly interested in maintaining health and well-being using supplements. The industry can expect continued growth as these younger generations mature and the benefits and safety of dietary supplements are increasingly documented.

Duber-Smith: I don’t think that a large, fairly mature industry usually does much to foster innovation. The supplement category continues to be driven by need-based health categories such as anti-aging, fitness and self-care health maintenance. This really hasn’t changed much in the 25 years that I have been observing the sector. After all, consumers tend to buy benefits, not features. Tell them that something meets a need, and they are fairly likely to buy it regardless of what the particular supplement is. Indeed, new botanicals and specialty supplements that address a variety of important health-related issues will emerge, but who knows which of these will become the next hot nutraceutical? Most of these “newbies” will enjoy short bursts of popularity and then fade into relative obscurity when the next big thing that addresses the need comes along. True innovation in this sector is rare.

NIE: Product registries are gaining traction, both self-regulatory ones and the regulatory groundwork for them via NDI master filings of Christmas future. Is this good? Are we moving too far down a pre-market approval and Health Canada-esque path?

Duber-Smith: The industry has not done a very good job at self-regulation. This is a difficult fact for industry members to accept, but this has been the case since DSHEA (the Dietary Supplement Health and Education Act of 1994) was enacted. Bad actors continue to dominate the landscape, media attention is almost always negative and the spattering of industry groups appear to be primarily interested in making their varied cases for why a particular study is bogus or why the media is wrong, rather than admitting it may have a problem.

The industry should work with the FDA to welcome more regulation, but on its own terms. If they do not do this, the kind of regulation they get in the future might not be very palatable. The FDA and other agencies have very limited resources, and so it does not really want to regulate the industry. It has better things to do and would much rather that we set our own guidelines and self-regulate. This is the way the agency approaches most industries.

But, in light of our track record, I believe that increased regulation is imminent, and the industry needs to do much more through its trade groups to demonstrate that it is serious about product integrity.

Mister: The Supplement OWL (online wellness library) is an industry-sponsored product registry that will allow for self-regulation in lieu of having mandates from the FDA. By being a voluntary registry, it demonstrates both the accountability and transparency of the industry as a counter balance to government-imposed regulation. Industry stakeholders—regulators, retailers and consumers—want a better understanding of the size and breadth of the marketplace, and the industry-run registry is a great way to answer those questions.

Fabricant: NPA has held a product registry for the industry since the 1990s in TruLabel. It is a registration database as well as a testing post-market surveillance program. Self-regulatory programs are the sign of a mature industry and that is healthy for the future, regarding NDIs and NDI master files. That is the statistic to file. You don’t have to file in all cases and that is where our industry needs databases like NPA’s soon-to-be-released Safe Harbor database of pre-DSHEA ingredients. They need to know what is old and what is a new dietary ingredient. This is also not to say NPA was silent on the NDI guidance. You will find that NPA has clearly been the leading critic of the NDI revised draft guidance. We responded with an unprecedented 98 pages of comments in our brief, essentially asking them to rewrite it.

McGuffin: AHPA was the first trade association to encourage the industry to register products with the National Institutes of Health Office of Dietary Supplements Label Database. The success of and newly developing label registration programs will ultimately depend on the benefits outweighing the costs. Consumers and the industry will continue to support this system if it doesn’t limit consumer choice by placing an unnecessary burden on the industry and if it provides additional accurate and useful information to consumers.

Emord: FDA’s move to deem any change in manufacturing technology or delivery system for a supplement and synthetic forms of new dietary ingredients are acts beyond the limits of the agency’s statutory authority and bode ill for innovation that can enhance effectiveness, reduce risks, and improve the quality of life. Once again FDA is on the wrong side of progress.

NIE: That being said, the NDI Draft Guidance Part Deux has been released. Scuttlebutt suggests some wins, re-grandfathered lists, etc., but does it point to an unwieldy, pre-approval-laden leviathan that will stifle innovation and cripple companies, or not so much?

Duber-Smith: Not so much. The industry has been given much rope, and it’s about time that it recognizes its shortcomings and takes affirmative action to fix them. Unfortunately, the industry has been unable to adequately address important issues such as adulteration, truth in labeling, and the overbearing influence that the relatively small sports nutrition segment has had on its reputation—so it needs a regulatory assist in this regard. Checks and balances at this stage of the game would probably be a good thing.

Fabricant: The way it stands now, the [NDI] guidance could actually result in more bad actors skirting the law entirely, which is the opposite of what a sensible regulatory regime should be. This economic burden to industry could harm small businesses and create a chilling effect on innovation, and lead to fewer submissions from legitimate firms, while encouraging fly-by-night companies to operate through NDI “piggybacking” until they are caught. It becomes FDA whack-a-mole all over again. NPA submitted a 98-page comment brief recently, which underscores the need for significant changes to the current guidance in the best interest of public health.

McGuffin: AHPA has communicated to FDA that the latest version of this guidance is unlikely to achieve the agency’s stated goals of improving the rate of compliance with the NDI notification requirement and the quality of notifications. AHPA has also expressed concern that the 2016 revision of draft guidance is contrary to the intent of the law in numerous areas and would unnecessarily burden the industry.

Despite the fact that FDA’s guidance needs improvement, responsible companies can still navigate NDI requirements successfully—as several AHPA members have done—in order to continue to meet consumer demand for innovative products.

Mister: There are some potential problems with the NDI draft guidance and significant issues of dispute that have not gone away, but there are some parts where it is clear that the FDA has listened to the comments it received after it issued its first draft of the guidance five years ago. No, the industry did not get everything it wanted, but it did see positive changes in the latest draft of the guidance that show FDA’s willingness to collaborate with the industry.

Emord: The guidance is a perfect example of over-regulation, supplanting private choice with regulatory fiat in areas largely void of any quantifiable public health risk. Treating dietary supplements like food additives reduces their availability generally in place of case-by-case adjudication against those that truly pose risk, decreases product availability and increases consumer cost. With any luck, the new FDA commissioner will withdraw the guidance.

NIE: What specific steps should the industry take in 2017 to join forces for transparency and ingredient quality?

Duber-Smith: This is the most difficult question faced by contemporary industry leaders. Clearly the various trade associations must unite to become more integrated and more effective as a unified voice. A good self-regulatory move would be for the largest group, the NPA, as an example, to truly push its ‘natural’ certification system and to develop a similar system for nutritional supplements. Pre-market certification, random testing and other industry concessions, would be funded by the supply chain itself, a group of well-meaning folks who have made quite a bit of money trying to do the right thing, rather than taxpayers. I remember industry legend Loren Isralesen, in an Expo West speech about 10 years ago on DSHEA, [he made] a Wizard of Oz reference where he said that, ‘We aren’t bad people; we have just been very bad wizards.’ This is just as true today.

Emord: By and large, the trend in the industry has been in that direction. Ironically, one of the greatest impediments to more improvement is FDA censorship of health information. If a supplement company cannot compete with others based on a description of how ingredient kind and quality brings about more reliable or achievable health benefits in reducing or preventing disease, consumers remain in the dark and are disabled in their ability to discern why one product is superior to another. Only in a wide open and robust commercial marketplace in which the FDA comes to be restrained by the First Amendment will consumer interest in safety and efficacy of all products (foods and supplements) be maximized. Censorship always dumbs down; transparency depends on a competitive market in ideas and information, along with product offerings.

NIE: What do we expect from the FDA on vinpocetine in 2017?

Mister: FDA’s tentative conclusion for vinpocetine is unsettling and disrupts the certainty and predictability of the marketplace. We, along with the other trade associations, are urging FDA to reevaluate its decision and have asked our friends in Congress to express their concerns with the agency. We’re not saying FDA can never change its mind if the science has evolved or new safety concerns emerge, but that’s not the case here. The review of vinpocetine appears to be politically motivated.

McGuffin: AHPA has recommended the secretary of health and human services (HHS) consider initiating a rule declaring vinpocetine to be a lawful dietary ingredient. In addition, AHPA encouraged FDA to clarify that if vinpocetine is either found to be currently in the market as a food ingredient or comes to be included as a food ingredient in the future, the ingredient would therefore qualify as a dietary ingredient.

Fabricant: As NPA noted in its recent comments filed with the FDA, under a provision in the Code of Federal Regulations and promulgated and reinforced in FDA’s draft NDI guidance, it would appear vinpocetine’s active moiety is identified to the active moiety of a botanical constituent in four plants. Therefore, it fits as a dietary ingredient under the statute.

Essentially, NPA developed the pathway to market for vinpocetine, which is a synthetic ingredient for the entire industry. However, the active moiety of vinpocetine shares the same exact structure as the active moiety of a constituent compound of a botanical.

While others are relying on the secretary of HHS to save vinpocetine from being banned through FDA’s administrative proceedings, NPA believes this argument provides a clear pathway to market in the dietary supplement space and will lead FDA [to not] proceed with any ban on vinpocetine. FDA could still choose to require other manufacturers who have not submitted NDIs on vinpocetine to submit as per their statutory burden.

NIE: As to the FTC, a number of industry groups have pointed to the commission’s overreach and bad decisions this past year regarding supplements. Any efforts to get this agency back on an even keel?

Emord: Over the last eight years, commissioners who harbor a strong bias against free market activity have dominated FTC. Under their view, there has not as yet arisen a set of words that cannot be construed to be deceptive advertising, even in the absence of empirical proof. Perhaps the new administration will put at the helm individuals who will change the agency paradigm to compel proof of actual deception, not for a minority of individuals, but for a majority of them, and will otherwise rely on reasonable claim qualification to disabuse the public of provably misleading connotations. Only in instances of deception that result in provable injury (economic or physical) should FTC act. In a truly just world, we would do away with FTC and leave enforcement against criminal fraud to the Justice Department.

Duber-Smith: The FTC has been rather kind to the industry over the years in my opinion, and so if the agency is concerned about something (especially with its limited resources), there is probably a problem. The agency exists primarily to protect consumers from false and misleading advertising. This is a good thing. A larger threat looms, however, and that is the proliferation of non-profit watchdogs that have done what the FTC has been largely unwilling to do. There have been hundreds of private lawsuits against marketers using the word ‘natural’ to position their products and just about every one of them has resulted in a settlement on the part of the marketer. This has applied more to foods and personal care products than it has to supplements, but the idea is the same. If enough NGOs decide to go after supplement companies as they have natural, then look out! What is to prevent this from happening? Again it’s time to work with regulators and see them more as supervisors rather than external threats to business.

NIE: With a new presidential administration, a Republican-controlled House and more state legislatures in Republican control, what are your predictions as to what the impact might be on the natural products industry in 2017, and for the next several years?

McGuffin: President-elect Trump’s campaign rhetoric strongly suggests his preference for small federal government, which could mean less pressure on business and industry as a whole. The Republican-controlled Congress could reinforce this impulse. The Republican-controlled House and Senate may also create a favorable climate for fending off anti-supplement policy efforts by the industry’s few congressional detractors. The Trump administration and Republican Congress aversion to federal regulatory intervention may also present opportunities to enact improvements to the existing dietary supplement regulatory framework in 2017.

The dietary supplement industry’s self-regulatory initiatives may take on even greater importance if president-elect Trump and Republicans weaken federal regulations. All of this indicates the need for continued engagement by the industry to identify emerging threats and opportunities.

Mister: CRN is excited about the prospect of a Republican House and Senate for moving forward our legislative agenda, which will focus on including multivitamins in the Supplemental Nutrition Assistance Program (SNAP) and the Women, Infants and Children (WIC) nutrition program and allowing consumers to purchase supplements with their health care savings accounts and flexible spending accounts. However, if there is a vacuum in the enforcement of federal regulation of dietary supplements, state legislatures and state AGs will be eager to fill that void with their own requirements. So CRN will be working to assure adequate funding and enforcement of DSHEA by FDA, as well as close monitoring of the states for mischief.

Duber-Smith: This is also a huge wild card in 2017. Trump is not a traditional Republican, and indeed DSHEA was a bipartisan act. But the industry has already lost its Democrat champion in Harkin, and the primary Republican advocate for supplements is nearing retirement. When Mr. Hatch retires, will the repeal/modification of DSHEA be back on the table? A review of the research that has been done on the industry will reveal that it needs more regulation. How government will go about this imminent oversight is up for debate, but I think that more regulation is on the horizon—maybe a lot more. I think that this is a good possibility and one for which supplement makers should prepare, but industry can help mitigate the effects of this by adopting a much more concerted and objectives-driven effort at industry self-regulation. We must become better wizards.

Fabricant: The incoming administration presents significant opportunities for the industry, especially if we step up politically, utilize our grassroots capabilities and increase our fundraising. We are confident that we can form a productive and strong relationship to ensure the FDA enforces the rules it already has on the books, while ensuring that consumers have confidence in the products they take each and every day. The natural products industry is important not only to the health of millions of Americans, but also to the health of the United States economy, and we look forward to working with President-elect Trump’s administration on both of these fronts.

Emord: I suspect that the Trump administration will usher in a new era of deregulation that will constrain regulatory advance and reverse agency regulations that have, over the past eight years, been proven to retard economic growth in America. I believe we are on the verge of an unparalleled free-market renaissance where consumer choice, economic opportunity and prosperity are just around the corner. NIE

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