The eyes of Texas were upon them – and FDA – United Sciences of America Inc
The Eyes of Texas (and FDA) Were Upon Them
King of the Texas cowboys, Pecos Bill, was just a toddlin’ babe when he whupped his first panther. At age 2, Bill joined a pack of coyotes, giving each a good lickin’ to establish he was boss. Claims grow far beyond fact in tall tales about Texans, but the exaggerations are fun and harmless.
When it comes to real-life foods, drugs, and the public health, however, Texas doesn’t take kindly to exaggerated claims. Neither does the Food and Drug Administration. United Sciences of America, Inc., of Carrollton, Texas, found that out while promoting its dietary supplements with far-fetched health claims about dozens of conditions as diverse as colds, cancer, colitis, and kidney stones. Last December, FDA ordered the firm to stop. And in January, the attorneys general for not only Texas but California and New York as well followed with simultaneous lawsuits. Eventually, USA., Inc., exaggerated itself right out of business.
FDA’s initial encounter with USA, Inc., in December 1985, was at a temporary location in California where the company had been operating for about four months. The founder of the firm was Dallas businessman Robert Adler II, whose wealth came from a computer invention. An FDA investigator inspecting the operation pointed out that two of the dietary supplements had hypoallergenic claims. Company officials said future labels would be printed without those claims.
At that time, the product line consisted of a protein and fiber powder, a vitamin-mineral tablet, and a fish-oil capsule. A fiber “energy’ bar was to be added soon.
Then, early in 1986, as USA, Inc., got its promotional program into full swing, FDA’s Dallas district office began getting calls from people nationwide: consumers, reporters, distributors of other products, and potential USA, Inc., investors. They wanted to know whether the claims being made were true and whether FDA had approved the supplements. So, the Dallas office sent an investigator to the firm for another look– actually, several looks between May 20 and June 23.
At first, USA, Inc., cooperated with FDA. The investigator freely obtained samples of the products, newsletters, labeling, sales-training materials, and promotional videotapes (all but one narrated by actor William Shatner, Captain Kirk of Star Trek). Cooperation dwindled, though, as the investigator asked more and more questions about claims the company was making for its products and about complaint files, product specifications, manufacturing records, and so-called clinical tests. Finally, the firm’s management refused to answer, stating that questions must thereafter be submitted in writing, in advance. The investigator wasn’t authorized to do that, so the inspection ended.
FDA tested the product samples for nutritional content and sent the analysis to the agency’s Center for Food Safety and Applied Nutrition for evaluation. That center and the FDA Center for Drugs and Biologics began reviewing product labeling and promotional materials for medical claims. More questions arose. To find answers, FDA officials met on Aug. 12 with Jerris Leonard, the USA, Inc., president and lawyer (and a former U.S. assistant attorney general), and Jeffrey Fisher, M.D., the firm’s medical director.
Leonard and Fisher contended the videotapes were meant to provide correct information about the products so that salespeople wouldn’t make medical claims for them. Indeed, they said, anyone making such claims would be fired. But the FDA representatives said the tapes and literature depicted USA, Inc., products as having drug benefits, that FDA’s centers were reviewing the materials, and that written comments would be sent to the firm. Leonard said FDA needed more information about his company and vowed cooperation to help FDA better understand the operation.
What FDA soon did understand about USA, Inc., was that it as a multi-level marketing operation known as a “pyramid scheme.’ In that type of sales plan, the salespeople, or distributors, are expected to recruit additional people and are rewarded for doing so with payments not exclusively related to retail sales profits. Pyramid schemes are illegal because the primary incentive is to recruit more and more distributors, not to sell products.
USA, Inc., called its distributors “independent associates’ and claimed to have 140,000 across the United States. To become an associate, a person paid $24.50 for a starter kit, which was essentially a training book. Associates also were required to pay at least $100 a month for the wholesale purchase of a kit of the four supplements. They then sold the kit for $135. Rebates were promised to any associate who enlisted at least 39 additional distributors, all of whom also had to pay $100 a month. For one such group, the firm would receive $4,000 a month. At less than a year old, USA, Inc., was taking in $5 million a month.
The training book assured associates that “no technical knowledge is needed to get started.’ Instead, USA, Inc., recruited physicians across the country for its clinical advisory board to advise associates and to monitor patients taking the supplements.
In fact, what was significantly different about this multi-level firm was that it was surrounded by reputable health professionals.
USA, Inc., promised thousands of dollars for scientific research as an incentive to join its scientific advisory board, described by the firm as “an illustrious group of scientists and medical experts . . . [who] . . . not only counsel USA, Inc., regarding product development, but play an active role in advising the company on a wide range of emerging nutritional studies and findings.’ But in the face of subsequent adverse criticism of USA, Inc., many board members resigned. A major critic was Frederick Stare, M.D., Ph.D., of the Harvard School of Public Health. “How unfortunate that reputable professors have allowed their names and the institutions where they work to be used for such shoddy commercial purposes,’ he wrote in the Oct. 9, 1986, New England Journal of Medicine. “Why? My guess: naivete and the hope of research funds.’
What’s more, USA, Inc., claimed the scientific board had developed its products and designed the firm’s nutrition plan. The products were promoted as being sponsored by or otherwise associated with a number of national health organizations. (The Texas lawsuit charged those claims were deceptive and untrue.)
Further boosting USA, Inc.’s appeal were quoted (and implied) endorsements from the scientists and from well-known athletes–not to mention the exaggerated medical claims made in the promotional literature and the sophisticated videotapes.
FDA’s evaluation of USA, Inc.’s products, labeling and promotional materials found many violations of the Federal Food, Drug, and Cosmetic Act. The agency spelled out the violations in a legal letter dated Dec. 12, 1986.
Exaggerations about Pecos Bill pale in comparison to USA, Inc.’s blatant drug claims. The “Master Formula,’ the firm alleged, protects against “cellular toxins and pollutants,’ eliminates “chronic degenerative diseases,’ reduces blood pressure, protects against cancer, lowers uric acid, helps “metabolize blood sugar,’ stimulates collagen production, has a poisonous effect on the rhinovirus cold germ, “shortens the duration and severity of colds,’ prevents AIDS, stimulates and strengthens the immune system, reduces the “frequency and severity of asthmatic attacks,’ helps colitis, reduces the “negative effects’ of estrogen, improves acne, reduces alcoholism, and reduces the risk of emphysema, rheumatoid arthritis, osteoarthritis, and kidney stone formation. And that’s just for one product.
Because of those and other medical claims, the four USA, Inc., products were classified as drugs, yet the firm hadn’t submitted scientific evidence to FDA showing that the drugs were safe and effective for uses claimed. (There were no medically documented injuries or illnesses attributed to use of the products, though there were complaints of flu-like symptoms.) And even if the drug claims were removed from the labeling and promotional materials so that the products were represented as foods, they would be violating four sections of FDA’s food regulations. The “Fiber Energy Bar,’ for instance, contained less protein than declared on the label. There were an additional 22 counts of less serious labeling violations.
On Jan. 28, 1987, Texas, California and New York filed lawsuits against USA, Inc., charging that the firm had made improper product claims and that their marketing plan was, in fact, an illegal pyramid scheme.
On Feb. 5, the District Court of Dallas County, Texas, issued a temporary injunction in which USA, Inc., agreed not to use a pyramid scheme for its marketing plan, not to market its current products without sending distributors–in advance–a correction letter approved by the attorney general, not to ship the products without an accompanying disclosure statement approved by the attorney general that the products were not for medical use, not to promote the products with medical claims, and not to make food products without registering as a manufacturer with the Texas Commissioner of Health. Also on that date, USA, Inc., delivered a letter to FDA stating it would stop distributing the videotapes and other promotional materials that referred to disease and would revise the product labeling and formulations as FDA required.
Within a few weeks, the firm had new owners. They filed a “Chapter 11′ bankruptcy to fend off creditors (who can’t sue under this type of bankruptcy) until they could reorganize, make arrangements about their debts and, they hoped, stay in business.
Investigators from FDA’s Dallas district and from the Texas Department of Health visited USA, Inc., on March 17 and found the firm all but closed down. They learned that the new owners had sent the associates a recall letter on March 5 with directions to discontinue using the promotional material, to destroy all printed advertising material, to destroy the videotapes or return them for credit toward a new tape (when available), and to avoid making statements that would violate the injunction on threat of being held in contempt of court. A copy of the injunction was attached.
In a follow-up inspection on April 8, FDA learned that the firm had filed “Chapter 7′ bankruptcy, which meant that USA, Inc., was now truly out of business. Since the firm was no longer in operation, a permanent injunction wasn’t signed and the firm didn’t come to trial. FDA considers the recall effective with the mailing of the recall letter and anticipates no further legal action.
Dr. Stephen Barrett, consultant to the American Council on Science and Health and well-known crusader against nutrition quackery, summed up the USA, Inc., story this way in the May/June 1987 ACSH News & Views: “The moral of this story is that vitamin product endorsements by doctors–no matter how prestigious they are–should be viewed with extreme caution. All I have seen so far have included claims that were unproven and also illegal . . .. Most scientists still believe the best way to obtain nutrients is from foods, not pills or potions.’
COPYRIGHT 1987 U.S. Government Printing Office
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