Update on and Notice Regarding California Transparency in Supply Chains Act of 2010

On January 1, 2012, the California Transparency in Supply Chains Act of 2010 (SB 657) ("Act") went into effect in the State of California. The Act is an attempt to seek the elimination of slavery and human trafficking from product supply chains and requires that companies disclose their efforts to ensure that their supply chains are free from slavery and human trafficking. Nutraceutical opposes slavery and human trafficking in any form and urges governments and government agencies around the world to take measures to eradicate these activities by outlawing and prosecuting violators. We are committed to supporting these efforts as a small cap company in the United States if there are viable steps we can take. We describe our current practices below.

Overview of Natural Ingredient Sourcing

Nutraceutical currently sells over 7,000 SKUs of products which incorporate over 2,000 raw materials, with their ultimate sources likely including regions in virtually every country in the world. Many of these ingredients are planted and harvested using traditional techniques developed over centuries if not millennia, while others are harvested using modern techniques. The suppliers can range from large businesses to small, family-owned farms, co-ops and harvesting operations, where products are sometimes wild-crafted (i.e., harvested from the wild). In some traditional family operations, family members of all ages may participate together and support each other and in fact enjoy working together, just as many farming operations in the United States have done since the founding of this country. Since growing conditions can change from year to year and season to season, buyers who work for Nutraceutical and for the natural product suppliers we purchase from must source these materials from a wide variety of vendors, which can change from year to year or even season to season. All of these factors create a particularly challenging situation for any company of our size to make a meaningful contribution in this area.

Supply Chain Standards

Nutraceutical expects its suppliers to ensure that quality and safety standards are maintained throughout our supply chain by well-treated, fairly compensated workers in accordance with all applicable laws. Our current efforts include the following:

• Standards: Our contracts with our suppliers requires that they commit to us that they ensure that their activities and the activities of their suppliers comply with all applicable laws and regulations related to slavery and human trafficking as well as our Code of Ethics.
• Verification and Audits: On those occasions when our purchasing team members have the opportunity to visit suppliers, they are asked to take the opportunity to inspect storage, production and/or harvesting facilities and operations and ask appropriate questions. We do not normally engage third parties to do this.
• Certification: Our purchase terms contain a clause under which our direct suppliers certify to us that they comply with laws regarding slavery and human trafficking in the country or countries in which they do business.
• Internal Accountability: If we were to determine that an employee or contractor has violated a law regarding slavery and human trafficking, this would constitute grounds for termination of the employment or supply relationship.
• Training: Our purchasing personnel have been instructed to review these statements and our contracting terms and comply with them. Our Vice President over purchasing is responsible to ensure that existing employees and new hires are trained on these issues.

Update on "Dietary Supplement Safety Act of 2010" and Other Attacks on DSHEA

In 2010, Senator John McCain (R-AZ) and Senator Byron Dorgan (D-ND) proposed The Dietary Supplement Safety Act of 2010 (DSSA). As written, it would have had the effect of gutting key protections currently provided by the Dietary Supplement Health and Education Act (DSHEA). It would have also restored virtually unlimited control to the FDA to decide what supplements you can take and at what levels - within this agency are many individuals who have long tried to shut down the natural health industry. DSSA denies individuals the freedom to protect their own health. We were opposed to its passage.

After Washington D.C. was flooded with hundreds of thousands of phone calls and emails from concerned citizens, and after a phone call and public letter from Senator Hatch, Senator McCain withdrew his sponsorship for this bill. However, we should all remain vigilant to avoid any further erosion of the protections provided by DSHEA, no matter who is sponsoring the proposal and no matter what bill it is hidden in.

Here is some background:

• DSHEA - this law has provided the framework for regulation of dietary supplements by FDA since 1994. It treats supplements as foods and gives FDA authority to remove unsafe or adulterated products from the market. It was the result of a massive grassroots effort to protect supplements from a history of overly aggressive regulation from FDA. See the positive comments President Clinton made about it when he signed DSHEA into law. See an overview of the history of DSHEA from a former General Counsel of FDA, who reveals that FDA purposefully delayed its enforcement for over 10 years!


• DSSA will Overturn DSHEA the passage of DSSA would effectively eliminate the supplement protections contained in DSHEA. It not only eliminates these protections, but actually grants the FDA unprecedented and arbitrary authority over what products you can take. View the article on The Alliance For Natural Health website or the article on the Natural Products Association website to see a discussion of this issue. The likely result of its passage? A consolidation of the supplement industry into a few big companies selling many fewer supplements and ingredients at much lower doses. And far fewer new products.


• DSSA is an Effort to Divert Attention - DSSA appears to originate at least in part from major league sports teams who are trying to divert attention from illegal steroid use and their own failure to enforce anti-doping rules. One of the primary driving forces appears to be the US Anti-Doping Agency (USADA), which is funded by major league sports teams including baseball, football and others. Baseball commissioner Bud Selig has urged the adoption of DSSA. In his comments announcing the bill, Senator McCain cited six NFL players recently suspended for testing positive for banned substances who were allegedly exposed to these substances through "dietary supplements." These parties are all missing the point: they should be focused on bringing an end to the underground and illegal conspiracy of suppliers, trainers and athletes who work together to find new ways of hiding and taking steroids and other performance enhancing drugs, which they might occasionally disguise as supplements. All of this has nothing to do with the traditional dietary supplement industry. These performance enhancing products and activities are or should be illegal and should be shut down by FDA. Unfortunately, FDA has a well-known history of failing to take illegal products off the market (see the Natural Products Insider article).


• DSSA Doesn't Solve Any Problems - DSSA is unnecessary and harmful. The FDA already has complete authority to remove illegal steroids from the market and to regulate dietary supplements. DSSA won't stop irresponsible companies or criminals from breaking the law and will only hurt responsible companies. Athletes who want to take illegal products will still be able to find them. Criminals who want to supply these athletes will still find ways to do it. DSSA is not the solution to the problems faced by major league sports. The solution to that problem involves a major shift in sports culture and practices, which cannot be resolved by a bill that punishes vitamin manufacturers! Sports leagues are pushing a proposal that unfairly punishes everyone instead of simply cleaning up their own house.


• Who Else is Opposed? The Natural Products Association and the Alliance for Natural Health have spoken out against this proposal (see below). We should all be vigilant to make sure someone doesn't attempt to come up with a compromise bill. Senator McCain's proposal and any compromise should be resisted at all costs.


• Resources and Links -- Consumers, retailers, natural care practitioners and others who are interested in opposing this proposal may wish to visit the following resources and links:
  
  Alliance for Natural Health (www.anh-usa.org):
  
  • Their Take Action Now campaign
  
  

Update on Red Yeast Rice Products

Some customers have contacted us regarding negative publicity about red yeast rice products marketed under our Solaray®, Natural Balance® and VegLife® brands. This publicity originated with a ConsumerLab review.

We want to reassure you that our manufacturing and testing processes are designed to ensure that our products meet applicable safety standards in the United States. We believe that our products are safe when used as directed. The ConsumerLab review should not be construed as evidence that our products are unsafe.

REGULATORY BACKGROUND ON RED YEAST RICE

We sell traditional red yeast rice which is produced from the natural fermentation of the yeast, Monascus purpureus, on rice. Red yeast rice traditionally contains trace amounts of lovastatin - however, due to the regulatory status of red yeast rice, we focus our efforts on sourcing red yeast rice that has been manufactured according to traditional methods, which is the only kind of red yeast rice that meets FDA's regulatory requirements. Traditional red yeast rice has been consumed for centuries.

We think it is important to note that FDA has historically pursued regulatory action against manufacturers and products that have moderate to high levels of lovastatin or make claims about the presence of lovastatin on their labels. See for example these warning letters:

http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2007/ucm076465.htm

http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2007/ucm076464.htm

http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/2008/ucm1048419.htm

Consumers should be cautious about purchasing products that are manufactured using techniques that increase or concentrate the amount of lovastatin above what is found in traditional red yeast rice. Some manufacturers may even be adding lovastatin. In either case, FDA would take the position that such products should not be sold or purchased as they violate the law in numerous respects, including lack of assurance of safety.

CONSUMERLAB REVIEW

The ConsumerLab review contains some errors. One of the primary errors is its failure to note that among health food store brands tested by ConsumerLab, only Solaray®, Natural Balance® and VegLife® products contained levels of lovastatin within the range that FDA considers naturally occurring and safe. In fact, the ConsumerLab review suggests that consumers may wish to consider purchasing products with moderate to high levels of lovastatin - the very products that could be and have been subject to regulatory action and that FDA considers to be unacceptable and unsafe for dietary supplements.

We have made some suggestions to ConsumerLab regarding its approach to creating and publishing standards and some improvements to its business model. Here is a copy of our letter to them.

CITRININ SCREENING

We screen our red yeast rice using UPLC-MS (ultra performance liquid chromatography-mass spectrophotometer detection). Current detection capabilities are down to 1 ppm.

CITRININ SAFETY

ConsumerLab acknowledged in its review that there is no scientific basis to determine whether or not the levels of citrinin that ConsumerLab claimed to have found in our products and other products has any adverse health effects. We have consulted an independent toxicologist who has confirmed to us that the levels referenced in the ConsumerLab report do not raise a safety issue. Nevertheless, in order to continue to assure the highest level of quality for our products, we have expanded our screening program tests for citrinin in all red yeast rice raw material down to 1 ppm.

CONCLUSION

Nutraceutical has built its reputation as a superior quality supplement manufacturer by providing ingredients with guaranteed purity and potency. We are noted for having among the most stringent testing and quality control standards in the industry and are audited by an external auditor. Routine tests are performed for aluminum, lead and other heavy metals, more than 500 pesticides, herbicides and fungicides, microbial contaminants such as E. coli and salmonella, disintegration time and, of course, potency.

You can be confident that Nutraceutical products meet their stated label claims by being manufactured under strict quality control procedures, by being thoroughly screened for suspected contaminants and by using high quality ingredients.

FDA Re-evaluates Health Claims

On December 21, 2007, FDA announced that it intended to re-evaluate certain previously approved health claims and qualified health claims involving soy proteins, antioxidant vitamins and selenium. Read a copy of Nutraceutical's submission to FDA.

Kelp Products

A case report from the University of California - Davis reported that detectable levels of arsenic were found in kelp dietary supplement products and that an individual's adverse health symptoms may have resulted from the consumption of a kelp supplement. Subsequently, there were news and media reports on this case report and retailers and consumers expressed concerns regarding the consumption of kelp due to its potential arsenic content.

Below is some background information on this case report as well as arsenic generally, including its presence in food and the environment. This information is intended to help retailers and customers understand that Nutraceutical stands behind the safety of its dietary supplement products, including its kelp products, and uses laboratory testing guided by scientific expert input to help assure that its products are safe.

Clarification of Case Report

The case report involves a single individual's experience with a kelp supplement consumed in quantities that are apparently at least up to four times the recommended daily amount. There are a number of inaccuracies in the case report. They include the following:

• The case report incorrectly implies that dietary supplements are not required by law to be safe. In fact, strict federal and state laws establish safety requirements for all dietary supplements, as is appropriate, and anyone who violates these requirements is subject to potential civil and criminal penalties.
• Contrary to the implications of the case report, dietary supplements have been widely consumed in the U.S for decades with a remarkable history of safety- in fact, the case report acknowledges that "only one case study has previously documented arsenic toxicity related to consumption of herbal kelp supplements."
• The case report fails to distinguish between organic and inorganic arsenic. Organic arsenic is less problematic than inorganic.
• The case report fails to acknowledge that arsenic is ubiquitous in our food and water and that safe levels of consumption were established long ago for vegetables, fish and herbs.
• Finally, there is no basis for the report's assertion that there is a growing number of reports of adverse effects from heavy metals in herbal supplements.

Additional critiques of the case report have been offered by both AHPA (the American Herbal Products Association)
and NPA (the Natural Products Association).

Dietary Sources of Arsenic

Arsenic is naturally occurring in the environment and is widely distributed throughout the earth's soil and oceans. Since arsenic is present in the environment, there are many dietary sources of arsenic, with seafood being the highest dietary source of arsenic. This means that arsenic is a naturally-occurring constituent in many foods, particularly those from the sea. Plants such as kelp absorb nutrients and minerals present in the environment during growth.

Arsenic is also present in drinking water. In 2002, the U.S. EPA established a federal drinking water standard of 10 ppb, which is equivalent to an ingestion of approximately 20 mcg/day from water alone. By comparison, the amount of arsenic per day that would be expected from a kelp supplement that is manufactured using appropriate controls would be approximately 0.1 mcg/day for a 45 mg kelp supplement.

Nutraceutical's Testing Procedures

Nutraceutical has one of the best product testing facilities in the industry, which includes the use of high-pressure liquid chromatographs (HPLC), gas chromatographs (GC), inductively-coupled plasma instruments (ICP), mass spectrometers (MS), ultraviolet visible spectrophotometers, infrared FTIR/NIR and other analytical instrumentation. In addition to its testing facilities, Nutraceutical also works with independent toxicology experts from time to time to assist with its product testing procedures for items such as pesticides, fungicides and heavy metals. Testing assistance is also provided by third-party laboratories. Nutraceutical's testing facilities are audited by an independent auditor and Nutraceutical has consistently received the highest compliance rating.

Kelp in Nutraceutical Products

The genus and species for the kelp used in Nutraceutical products include Laminaria digitata and Ascophyllum nodosum, which are both species of true kelp traditionally used as sources of iodine and other nutrients. Most of the kelp Nutraceutical purchases is sourced from the pristine seas around Iceland. The kelp is washed, chopped, dried, ground and screened before being made into tablets. Dried kelp has been used as a source of iodine since at least the beginning of the 19th century. Because kelp is a natural product, it absorbs nutrients and minerals present in the environment during its growth. These nutrients and minerals include iodine and may include other minerals, including very minute trace levels of arsenic absorbed from the environment.

Nutraceutical regularly tests and screens its kelp ingredients for arsenic content to assure safe levels when products are consumed according to label directions, and has had analyses performed by independent labs as well. Since kelp is a natural product, the arsenic content can vary from batch to batch but Nutraceutical has established its own testing standards and limits and rejects material that exceeds these limits. It is important in any such analysis to differentiate between inorganic and organic arsenic because organic arsenic is less toxic. Nutraceutical also periodically reviews alternative kelp suppliers to help ensure it is purchasing kelp with the lowest available arsenic levels.

The subject of the UC Davis case report has acknowledged taking significantly more than the recommended serving of kelp - up to four times the daily recommended amount. Eating too much of any type of food that contains naturally occurring arsenic could be a problem.

California and Proposition 65

To the extent there are minute levels of arsenic in kelp, Nutraceutical believes it is naturally occurring - meaning that it comes from the natural environment and not from man-made sources. The State of California has adopted a law known as Proposition 65 that requires warnings in certain circumstances, but does not require a warning for naturally occurring chemicals. However, in an over-abundance of caution and to make sure consumers are aware of the situation, Nutraceutical provides the Proposition 65 warning for all its kelp products to customers and retailers through notices on the product labeling, in product brochures (distributed by the retailers) and on its website at www.nutraceutical.com/notices.

Adverse Event Reporting

On December 6, 2006 Congress passed the Dietary Supplement and Nonprescription Drug Consumer Protection Act that will treat supplements like drugs for adverse event reporting.

What many people didn't realize in considering this bill is that there was already an adverse event reporting system for dietary supplements. See how you can already report adverse events to the FDA. We remain concerned that this new system that treats supplements like drugs - and supplement manufacturers like drug manufacturers - will not help consumers. Nutraceutical led the fight to protect the rights of consumers and health food stores to continue to sell safe and effective dietary supplements. For more information, click on any of the links below.

Brochures and Information

• Adverse Reactions to Foods and Dietary Supplements: Answers to Common Questions. In the Fall of 2005, we printed and continue to distribute 1,000,000 copies of this brochure to health food stores and health food store customers around the country!
• Legislative Update. In May 2006, we distributed this brochure to health food stores around the country
• Letter to A Private Label Manufacturer. We recently sent this letter to a private label manufacturer to point out errors in a letter they had sent to their retail customers about the legislation. The name and address of the recipient has been removed.
• A recent memo and three alternative approaches we have proposed: a 1-800 number, adding foods or fixing significant problems with the legislation as written.
• Concerns and issues we raised about an earlier version with trade associations and numerous senators and congressmen.
• A letter we sent to members of the House Energy & Commerce Committee.
• An informative "Legal Tips" article appearing in the September 2006 issue of Whole Foods Magazine (reprinted with permission of Scott Tips and Whole Foods Magazine).

Expert Opinions

• A letter from a product liability defense lawyer, Dan Gerber, analyzing the potential effects of the Act.
• A letter from a well-known FDA lawyer, Jonathan Emord, analyzing the potential effects of the Act.
• The cost estimate of this legislation prepared by Congress.

 

The Ephedra Decision: The Real Story

On April 14th, 2005, a Federal District Court in Utah ruled against FDA's ban on low-dose ephedra products. The plaintiffs were Nutraceutical Corporation and its subsidiary Solaray. We sued not just to protect our ephedra product, but to protect your access to other supplements. The FDA subsequently appealed the decision to the 10th Circuit Court of Appeals and on August 17th, 2006, the 10th Circuit Court of Appeals reversed and remanded. Nutraceutical subsequently petitioned for a rehearing but its petition was denied. Nutraceutical subsequently filed a petition for a writ of certiorari to the U.S. Supreme Court. On May 14, 2007, Nutraceutical's petition was denied.

In the meantime, Nutraceutical filed a motion for summary judgment with the Federal District Court in Utah, and FDA responded with a cross-motion for summary judgment. On March 16th, 2007, the Federal District Court in Utah ruled in favor of FDA. However, in its decision, the District Court held that the risk-benefit test announced in FDA's decision only applied to dietary supplements containing ephedrine alkaloids. Neither Nutraceutical nor FDA appealed this decision.

• Read the District Court Ruling
• Read the 10th Circuit Ruling
• See Our Petition for Rehearing
• See the 10th Circuit's Denial of Our Petition
• See Our Petition for a Writ of Certiori to the U.S. Supreme Court
• See our Motion for Summary Judgment Filed with the District Court
• See FDA's Cross-Motion for Summary Judgment Filed with the District Court
• See our Reply in Support of Our Motion for Summary Judgment and in Opposition to FDA's Cross-Motion for Summary Judgment Filed with the District Court
• Defendants' Reply to Plaintiffs' Opposition to Defendants' Cross-Motion for Summary Judgment
• Read the District Court's Subsequent Ruling
• See the U.S. Government's Opposition Brief to Nutraceutical's Petition for a Writ of Certiorari
• See NNFA's Amicus Curiae Brief in Support of Nutraceutical's Petition for a Writ of Certiorari
• See Our Reply Brief Before the U.S. Supreme Court

See the Food and Drug Administration's Responses to Questions about Codex and Dietary Supplements

See the Council for Responsible Nutrition's Myths and Facts on Codex and WTO

See the National Nutritional Foods Association Position Paper as well as its Codex Alimentarius Resource Center.