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Neutraceuticals on Trial: FTC v. Acai

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If you've logged onto the Internet at any point during the past few years, you're likely familiar with a "miracle" drug/food/gift from the gods called acai.

"Almost everything about these sites is fake," David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement regarding a court action brought against two Minnesota acai sellers accused of deceiving consumers. "The weight-loss results, the so-called investigations, the reporters, the consumer testimonials, and the attempt to portray an objective journalistic endeavor."

Acai has been on the receiving end of quite a bit of bad publicity as of late, the most recent being a scathing piece by John Colapinto in this week's New Yorker.

Writes Colapinto:

Embraced as a “superfruit”—a potent mix of cholesterol-reducing fats and anti-aging antioxidants—açaí became one of the fastest-growing foods in history. Supermarkets have become filled with açaí-laced products. Lately, however, studies have questioned the extravagant health claims for açaí, and online vendors selling diluted products have raised the question of whether açaí is a fraud. Early boosters like Oprah Winfrey and Dr. Mehmet Oz sued to remove their names from the marketing, and the Federal Trade Commission shut down the operations of a major Internet açaí seller.

The consensus among professionals seems to be that, while acai is certainly not harmful, it is as much a "miracle" as a carrot -- it won't hurt you, but it won't heal the sick.

However, neutraceuticals do work wonders for some -- the people selling them.

"We're going through a revolution in food," Thomas Pirko, president of Bevmark consulting, whose clients include Coke (KO), Kraft (KFT), and Nestlé, told Forbes last year. "It's a whole new consciousness -- every product has to be adding to your health or preventing you from getting sick." If you find the perfect additive, he said, "you get rich."

Exhibit A: Lynda Resnick.

Resnick, who, with her husband Stewart, owns Pomegranate juice producers POM Wonderful, believe their product “adds to peoples’ health” and “prevents them from getting sick.”

In 2005, Lynda said, “Two years ago, nobody in America knew what a pomegranate was. Now, we're in Walmart (WMT) for God's sake, we're in Costco (COST), we're in 7-Eleven. I want POM Wonderful to be within arm's reach of everyone who wants it. That is the biggest service I can do.”

The FTC wholeheartedly disagreed, issuing an administrative complaint this past September, charging the Resnicks with “making false and unsubstantiated claims that their products will prevent or treat heart disease, prostate cancer, and erectile dysfunction.”

As it turns out, POM hasn’t been proven to do any of these things, which the Resnicks -- who also own Fiji Water -- of course, dispute.

Dr. Elizabeth Whelan, founder and president of the American Council on Science and Health, told me that the makers of products like POM have been exploiting loopholes available to the health food industry that the mainstream food industry does not enjoy.

“What’s we’re seeing here is really a double standard,” Whelan said. “They are basically immune from FDA action because of the special protection given to supplements [and functional foods], which exist in a special non-food, non-drug space. If you can get people to view food as medicine, you’ve got a willing, vulnerable audience. Did you ever wonder why so much of the nutritional supplement industry is based in Utah? You can trace much of it back to Senator Orrin Hatch.”

Utah? Orrin Hatch? Huh?

"He is by far our greatest advocate”, said Loren Israelson, executive director of the Utah Natural Products Alliance (now called the United Natural Products Alliance), which is an association of dietary supplement and functional food companies that form an alliance to challenge the FDA’s 'aggressive and inappropriate enforcement actions'... "No one rises to the issue the way Senator Hatch does. He's a true believer in natural health.”

Israelson says 70% of Utah residents are Mormons, and many Mormons believe Mormon scripture instructs followers to use “God’s medicine” or herbs, for their well-being.

As such, many Utah supplement companies are owned or operated by Mormons. According to Time Magazine, “Early Mormon writings praised the ‘plants and roots, which God had prepared to remove the cause of diseases.’ In the 1940s, Mormon herbalist John Christopher preached about natural healing. A few decades later, three Utah companies -- Nature's Herbs, Nature's Way and Nature's Sunshine -- began selling his formulas.”

In 2003, the Los Angeles Times exposed the fact that “that the supplements industry has not only showered the senator with campaign money but also paid almost $2 million in lobbying fees to firms that employed his son Scott.”

From 1998 to 2001, Scott Hatch worked for Parry and Romani Associates, a lobbying firm run by Tom Parry, a former senior aide to Senator Hatch, with clients in the supplements industry who paid the company almost $2 million. More than $1 million came from companies seeking help in blocking increased regulation of ephedra, a natural amphetamine-like stimulant, which had been named as a possible cause in 80 deaths nationwide.

The FDA backed down after Hatch, along with Iowa Senator Tom Harkin (who believes bee pollen cured his allergies) protested the “incomplete nature of some of the incident reports, which came from users, doctors and other sources.”

Strangely enough, the kind of information Hatch and Harkin were insisting on was exactly the type of detailed data the two legislators exempted supplement makers from collecting -- the results of premarket tests and clinical trials required of prescription medications -- when they introduced the Dietary Supplement Health and Education Act (DSHEA) in 1994. DSHEA was signed into law by President Bill Clinton, and eliminated any power the FDA had to review, test, or regulate dietary supplements, as long as the now-familiar disclaimer was displayed on the packaging: “This product is not intended to diagnose, treat, cure, or prevent any disease."

(At the time, Hatch happened to own nearly 72,000 shares of Pharmics, Inc., a Utah company that sold prenatal vitamins and vitamin C additives, and whose president, Walter J. Plumb III, is Hatch’s former law partner.)

Fresh off the ephedra victory, Hatch’s son Scott opened his own lobbying firm, Walker, Martin & Hatch, representing, among others, clients in the supplements sector, some of whom followed him from Parry and Romani.

Senator Hatch told the Los Angeles Times that he saw “no conflict of interest in championing issues that benefit his son's clients.”

"I would have no qualms talking to Scott," about his clients, Hatch said. "I wouldn't do anything for him that wasn't right.

“Right” in the eyes of the law is sometimes a bit different from “right” in ethical terms.

It turns out that Jack Martin, the “Martin” in Walker, Martin & Hatch, was a staff aide to Senator Hatch for six years, and the “Walker” on the firm’s shingle is H. Laird Walker, a close associate -- and generous campaign donor -- of Senator Hatch.

“This is typical revolving door influence peddling that major businesses exploit to the nth degree,” Craig Holman, legislative representative for Public Citizen, a Washington, D.C. consumer advocacy organization, told me. “The best way to protect a business’s own interest is to employ former staff members of a politician who has direct influence over that industry. There’s really no more effective way to get a senator on your side than to abuse the revolving door."

But as they say on late-night television, WAIT! THERE'S MORE!

Remember Loren Israelson’s United Natural Products Alliance?

Well, the Alliance hires lobbyists, too.

One of the lobbying firms is called Knight Capitol Consultants, and is run by a woman named Patricia Knight.

Ms. Knight also happens to be on the board of the UNPA, as a Senior Political Advisor. Here’s her bio, as seen on the UNPA website:

Patricia Knight left three decades of government service in 2007 to found a small Washington, D.C.-based consulting business providing strategic advice on a range of health-care issues, with an emphasis on those that are FDA-related. Trisha has had a long association with health care policy and legislation, particularly that involving dietary supplements. She served as Health Policy Director and later Chief of Staff to Senator Orrin G. Hatch (R-UT) for 15 years. In that position, she was responsible for directing all aspects of the Senator’s office, including policy, legislative development, staffing and administration.

The UNPA retains a second lobbying outfit, called Reinecke Strategic Solutions, Inc., which is run by a fellow named Peter Reinecke.

He also happens to be a UNPA board member, as a Senior Political Advisor, as well. Reinecke’s bio, as seen on the UNPA website, reads as follows:

Peter Reinecke, principal of Reinecke Strategic Solutions, Inc., serves as Senior Advisor to UNPA. For 25 years, Peter has been a leader in health and nutrition policy having spent over 20 years working for the U.S. Congress. As staff to the Senate Health, Education, Labor and Pensions Committee and as Legislative Director and Chief of Staff to Senator Tom Harkin, he helped write many key pieces of health legislation, including the establishment of the National Center for Complementary and Alternative Medicine at NIH and the Dietary Supplement Health and Education Act (DSHEA).

In any case, one might actually see the pounds melt away while drinking pomegranate juice, or acai, or any of the other "superfoods" out there -- as long as you happen to be enjoying it in the gym.
POSITION:  No positions in stocks mentioned.