In the plan announced yesterday, GNC has agreed to put in place a series of voluntary initiatives to better track the compliance of suppliers. GNC will also pay a $2.25 million fine, which together with the new surveillance plan will resolve the company’s outstanding liability for having sold supplements manufactured by USP Labs, a company that is currently under indictment. GNC also has agreed to cooperate in future investigations conducted by the government.
Insufficient oversight
According to the Justice Department, an investigation found that the company’s practices as they relate to the legality of products on its shelves were lacking. The specific case involved the sale of OxyElite Pro, a product manufactured by USP Labs, that was sold nationwide by GNC stores in 2013. The Justice Department alleges that GNC did not do enough to ensure that the ingredients in the product were safe and legal, and took the supplier’s representations about the product at face value.
“The statement of facts notes that GNC sold the product based on representations from USP Labs that ingredients contained in the product complied with the law. It further notes that GNC did not undertake additional testing or require additional certifications to confirm such representations or to verify that the ingredients in the product were as represented,” the Justice Department said in a statement.
“Unlawful dietary supplements are an important enforcement priority for the department,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Today’s resolution is a significant step forward in reforming an industry rife with alarming practices. Companies like GNC need to do more to ensure that they are not selling products containing questionable and untested ingredients.”
GNC said in a statement that the agreement with the Justice Department acknowledges that USP Labs made false assurances and provided fake documentation to investigators as well as to GNC. From GNC’s point of view the agreement further acknowledges that GNC did not knowingly sell non-compliant products. But the company said it was glad to put the matter into the past that concerns products that have not been sold for years.
“Under the agreement, GNC will take a number of actions to broaden industry-wide knowledge of prohibited ingredients and improve compliance by vendors of third party products. These actions are in keeping with the leadership role GNC has always taken in setting industry quality and compliance standards. GNC remains committed to maintaining robust compliance policies and procedures and holding third party vendors and suppliers accountable for those standards,” the company’s statement said.
Details of the case
The USP Labs indictment handed down in November of last year was part of a nationwide crackdown on products making illegal claims and containing illegal ingredients. The USPLabs indictment alleged the company falsified documents in an effort to camouflage the sale of products containing illegal and unsafe ingredients. The indictment named USPLabs, executives Jacobo Geissler, Jonathan Doyle, Matthew Herbert and Kenneth Miles and also cited contract manufacturing partner S.K. Laboratories and its executives Sitesh Patel and Cyril Willison (aka Eric White). The indictment relates to the products Jack3d, OxyElite Pro and OxyElite Pro New Formula. The trial has yet to begin.
The indictment alleges, among other things, that USP Labs engaged in a conspiracy to import ingredients from China using false certificates of analysis and false labeling, and then lied about the source and nature of those ingredients after it put them in its products. According to the indictment, USP Labs told some of its retailers and wholesalers (including GNC) that it used natural plant extracts from in some of its products, when in fact it was using a synthetic stimulant (DMAA) manufactured in a Chinese chemical factory.
DMAA was wholly synthetic, the indictment alleges, but was passed off as an extract of geranium. The company also allegedly imported other chemicals from China under false labels to test them for possible use in supplements. Among these was aegeline, a synthetic version of an Indian botanical extract derived from a tree. USPLabs allegedly instructed its Chinese suppliers to call the chemical “green coffee” on labels.
The indictment also alleges that USPLabs used an ingredient the company strongly suspected could cause liver damage. The ingredient was a Chinese herb called Cynanchum auriculatum, believed by USPLabs to have weight loss potential. The company opted for a powdered form of the root of the plant as opposed to an extract believing that this would prevent any liver problems, but had done no testing to verify this assumption, the indictment said.
Specifics of the plan
Under the agreement with the Justice Department, GNC has agreed to put the following five-part procedure into place:
- First, GNC has agreed that, upon learning that the FDA has issued a public written notice indicating that a purported dietary supplement or an ingredient contained in a purported dietary supplement is not legal and/or not safe, GNC will take immediate action to suspend the sale of such a product or products.
- Second, GNC will establish two lists—a “restricted list” containing ingredients that are not to be used in dietary supplements and a “positive list” containing ingredients that are approved for sale. Although GNC has agreed that the lists it creates will not have the force of law, GNC will use these lists to guide the company in determining what products it will approve for sale. Products containing novel ingredients that do not appear on either list will, GNC agreed, require further internal action and approval before being offered for sale.
- Third, GNC will substantially revise its internal approach to dealing with the vendors whose products GNC sells, including requiring more explicit guarantees from its vendors that their products do not contain ingredients on the “restricted list” and that their products comply with federal law.
- Fourth, GNC will voluntarily work to develop an industry-wide quality seal program. When this quality seal is implemented, GNC has agreed to stop paying its retail salespeople bonus commissions, or “promotional money,” to direct customers to products in its stores not carrying the seal.
- Finally, GNC will update its adverse event reporting policy to ensure that its employees understand the proper procedures to employ if a customer complains of injuries associated with a dietary supplement bought at GNC.
New level of cooperation
The agreement marks a continuing shift in GNC’s stance toward regulators. Under previous management the company in the past has taken an aggressive stance toward enforcement actions. During the controversy that started to swirl around DMAA in mid-2012 the company said FDA’s ruling that DMAA was not a legal dietary ingredient was “factually and legally unfounded.” GNC continued to sell DMAA-containing products for almost another full year until its remaining stock of USP Labs products was seized from by FDA from a warehouse in Pennsylvania. GNC continued to sell products manufactured by USP Labs until late 2015.
But GNC has come under increasing pressure in recent years. The company, once a reliable growth engine, has stumbled through a number of flat to negative earnings quarters and is on its third CEO in a little more than two years. And the company was targeted by New York Attorney General Eric Schneiderman in a high profile investigation for allegedly selling herbal products that contained little to none of the stated botanicals. While the DNA methodology used in that investigation has been discredited and GNC did not admit any wrongdoing, the company did see fit to come to agreement with Schneiderman to put more rigorous supply chain management and testing protocols into place that will include more DNA testing as appropriate.