Dietary supplements are facing more scrutiny from U.S. regulators, as two states, Puerto Rico and New York join together in a probe of the $33 billion-industry after tests showed that some products didn’t appear to contain key ingredients as shown in the ads.
Attorneys general in Connecticut and Indiana and the Puerto Rico Consumer Affairs Department will investigate industry practices as to whether claims of authenticity and purity are valid, New York Attorney General Eric Schneiderman said Tuesday in a statement.
Pittsburgh-based GNC Holdings Inc.’s stock price fell as much as 7 percent Tuesday following news of the expanded probe. Herbal supplements make up about 8 percent of the nutritional retailers’ sales, according to analysts from Jefferies LLC.
Earlier, a researcher hired by New York found evidence that store-brand products from GNC, Wal-Mart Stores Inc., Walgreens and Target Corp. purportedly containing supplements such as echinacea and ginkgo biloba lacked those signature ingredients or contained substances not found on the label, the state said. GNC has disputed the findings and called the testing “incomplete and unreliable.”
GNC “fully complied” with inquiries about the products from Mr. Schneiderman and “took the additional step of commissioning independent, third-party tests to verify the quality of our products,” Ellen Davis, a spokeswoman for GNC with Sard Verbinnen & Co., said Tuesday in a statement.
The additional tests and the company’s own procedures, “confirm in no uncertain terms that our products are safe, pure, properly labeled and in full compliance with all regulatory requirements,” according to the statement.
Based on the work at Ontario’s University of Guelph, the DNA bar-coding testing method in Mr. Schneiderman’s probe identifies organisms using a small amount of genetic material.
Minneapolis-based Target and Deerfield, Ill.-based Walgreens Boots Alliance Inc. have pulled products flagged by Mr. Schneiderman’s results from store shelves nationwide. GNC and Wal-Mart said they are going to remove some supplements from stores in New York.
“We are taking these issues very seriously, we continue to review this matter as well and intend to continue cooperating,” Emily Hartwig, a spokeswoman for Walgreens, said Tuesday in a statement.
On the other hand, Brian Nick, a spokesman for Bentonville, Ark.-based Wal-Mart, said in a statement that, “products referenced by Mr. Schneiderman have been tested by manufacturers using scientifically validated, widely used protocols and contain accurately labeled ingredients and are safe. “We hold our suppliers to high standards and are committed to providing our customers the quality products they deserve to get,” Mr. Nick added.
Evan Lapiska, a spokesman for Target, declined to comment on the states’ actions.
The U.S. Food and Drug Administration requires supplement sellers to verify if the products they are selling are safe and properly labeled. Supplements don’t undergo the same strict evaluation process as drugs.
“One problem for the industry as the probe expands is consumer perception of supplements,” Jefferies analysts Mark Wiltamuth, Christopher Mandeville and Clayton Meyers said in a note to investors Tuesday. “The timing of the probe is unfortunate as companies begin to shake off the effects of scrutiny of such products as fish oil and multivitamins,” they said.
Ted Craig, a Miami lawyer who has defended companies in regulatory disputes and class actions, said, “other states may see Mr. Schneiderman’s investigation as “low-hanging fruit” and seek to “jump on this bandwagon” by joining it.”
Mr. Schneiderman said in his released statement that the industry contributes $61 billion to the U.S. economy. According to the Nutrition Business Journal, a trade publication, supplement companies had sales of $32.5 billion in 2012.