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Healthy, Wealthy, But Wise?

Cover Story

How the Dietary-Supplement Trade Became Utah's Third-Largest Industry, and Why That May Not Have Been Such a Great Idea

February 01, 2004|Matthew Heller | 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."

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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