Supplements Take a Hit

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In what is sure to sadden late-night television commercial aficionados, on Friday the leaders of the supplement producer best known for the "smiling Bob" television ads were found guilty of various charges including fraud.

As reported by the Associated Press, the conviction of the mother and son team that led the company responsible for producing Enzyte and other supposedly beneficial supplements and nutraceuticals could land them behind bars for "more than 20 years" as a result of what prosecutors described as deceptive advertising, bank fraud, and other transgressions.

The producers of Enzyte, Ohio-based Berkeley Premium Nutraceuticals, reportedly took in a hundred million dollars as a result of marketing a less-than-extraordinary set of ingredients as various supplements like Enzyte. It was allowed to do this because the FDA takes the opposite approach to supplement producers that it does for pharmaceutical drugmakers.

Many dietary supplements and other compounds that go by the gimmicky name of "nutraceuticals" are permitted to be sold by the FDA without having to prove their benefits or safety as long as they are not actively marketed as a treatment for a particular indication and use ordinary ingredients. Unlike pharmaceuticals, which have to be proven by drugmakers to have a benefit and be relatively safe before they can be sold, the FDA has the burden of proof to show a supplement is unsafe before it is allowed to take a supplement off the market.

Supplements are much harder to regulate for the FDA because their ingredients are often found in everyday foods. Even more confounding, it's often difficult for the average consumer to separate the sometimes useful supplements, like the vitamins and minerals doctors often prescribe for pregnant women, apart from the bad (or at least money-wasting) ones like Enzyte. According to the FDA, almost 50% of Americans regularly consume vitamins, herbs, or minerals partly in the hopes of avoiding "the excessive costs of traditional medical services."

Publicly traded companies like American Oriental Bioengineering (NYSE: AOB), Nutraceutical International (NYSE: NUTR), and NBTY (NYSE: NTY) sell nutritional supplements in different places around the world. No matter what you think about them, there's big money in selling these compounds, with the size of the dietary supplement industry estimated as high as more than $22 billion. Even a few convictions of one particularly egregious supplement maker in the case of the "Smiling Bob" marketer isn't likely to have much of an effect on such a large industry.