Nutraceutical Companies, Do They Exist, and Where Are They Going?
Nutraceuticals International, June 2002, Vol3, No6
There are as yet no nutraceutical companies, just nutrition companies,
according to Steven DeFelice, chairman of the Foundation for Innovation
in Medicine, and it is nutraceutical companies which will fit into the new
health care paradigm. The major players in the health care market only need
to look at current trends to see that there is little risk in the nutraceutical
business, he told those attending a FIM-sponsored conference on the nutraceutical
revolution and its impact on the food and drug industries.
Clinical data is driving this revolution, and mass media is communicating
this information to the consumer, another key factor fueling the growth
of the industry. The nutrition market is advertising-driven, he noted, while
the nutraceutical market will be data and research driven, he said. In 10
years, over-the-counter medicine companies will dominate the nutraceutical
market in which there will not be the proliferation of similar products
that now exist. Companies will hook trademarks to clinical research to produce
nutraceuticals that are distinguishable one from the other. High-gram dosages
and combination products will be needed for the prevention of disease, Dr.
DeFelice said, which will require patented technologies. Patented water-soluble
products, using taste-masking, will be the wave of the future, he predicted.
There is no need for legislation for this industry, he added, since good
data will drive out bad products. The line between food companies and drug
companies will blur by 2010, he said, because both nutraceutical companies
and drug firms are competing for the same customers. To get Congress interested
in these products, the link between them and a reduction in health-care
costs must be made, he said, adding that there is no industry group lobbying
the Congress on this or any other nutraceutical-related issue.
Products need to "fit legal pigeonholes"
To succeed in the nutraceutical and dietary supplement market, companies
need to fit their products into a legal pigeonhole to avoid being classed
as a drug by the US Food and Drug Administration, said Stephen McNamara,
of Hyman, Phelps & McNamara, who added that good scientific data is
needed to leverage arguments on a claim strategy that will dodge the drug
bullet. The FDA's most efficient and usual way of dealing with a product
in this category that it does not like is to call it a drug, he noted. Each
of the six pigeonholes has its positives and negatives, he noted, and they
- health claims under the Nutrition Labeling Education Act - an opportunity
with a lot of baggage since it does not allow an explicit claim. The FDA
prefers claims that deal with a substance that is a nutrient in the diet
which may help reduce the risk of a disease;
- nutrient content claims. While a content claim such as "high in
--" applies only to substances that have Recommended Daily Intakes,
he pointed out that a statement giving the amount of a non-RDI ingredient
contained in the product can be included on the label and then linked to
a health claim. This semantic gamesmanship is allowed under the FDA rules,
- medical foods. The fact that the FDA has not taken any regulatory action
in this growing category is a good sign, he said' suggesting that if a
product can be marketed as medical food to be used under medical supervision,
do it. And he noted that these products do not have to be sold only in
- dietary supplements and statements of nutritional support. Companies
need to be creative about the law and how it applies, especially in the
interpretation of benefits relating to chemical deficiency diseases, he
suggested' noting that this term can be broadened through research. On
claims for a food other than a dietary supplement about its impact on structure
and function of the body, there is good case law that as long as the product
is a food, statements can be made about the physiological effect of the
- Products for special dietary uses.
The bottom line is not to be discouraged, he said, though companies may
need to play games to get the message out about the health-related benefits
of a product. However, he noted that one cannot always assume a commonality
of views among the participants in this industry, and not all may be in
favor of doing research.
Need for dialogue with Congress
The blurry line between a food and a drug will reach a critical point
within five years, according to attorney Tony Martinez, who noted that industry
must get involved in the dialogue with Congress. The latter respects the
fact that this is a sensitive issue with huge public interest. Research
is a win-win situation, but incentivizing is needed to get companies to
do the required research.
There is no agreement as to what is the most successful route in developing
nutraceuticals, according to Rhonda Witwer, currently a business development
manager at Monsanto. Drawing on research she did in preparing a soon-to-be-published
Decision Resources report called Roadmap to the Future, she noted that a
variety of market strategies are being used that combine existing products,
line extensions, new brands and new ventures with dietary and nutrition
products, individual wholefoods, specific ingredient combinations and individual
ingredients. It is too early to tell which will be the most successful route,
The factors considered by companies to be the most important in determining
success are (in descending order): research/clinical trials, consumer awareness
of health benefits, media attention, FDA approval of health claims, a proprietary
position, and proprietary technology. Some 70% of respondents to the survey
said they are working to create proprietary positions, she said, and of
those responding affirmatively, 75% are developing processes, more than
60% are working on developing unique substances and 60% are looking at existing
In looking for a partner, the ability most sought (in descending order)
is marketing expertise, research on health benefits, raw materials, regulatory
expertise and manufacturing expertise. To succeed in marketing nutraceuticals,
a combination of expertise in the areas of food products, health, communications
and regulatory affairs is needed, she said, noting that it is therefore
not surprising that a lot of creative partnerships are being formed. Combination
products will be important in developing proprietary products, she said,
and public relations strategies will be important in getting the product
message out. Other key factors for success include appropriate distribution
channels and proper product placement, she advised, and bioactive ingredients
may prevail over balanced nutrition.
When functional foods begin to enter the mainstream marketplace, the
first categories will be bars, beverages and soups, according to Thomas
Aarts, executive editor of Nutrition Business Journal, who told those attending
the conference that the major food companies are trying to figure out where
the trend in marketing nutraceuticals is heading. Consumers do not want
to go too far with these products yet, he added. Food and pharmaceutical
companies will be less aggressive in moving information on these products
to the mass media, which is the key to transmitting information to the consumer,
he noted. Mr. Aarts foresees an increasing emphasis on high-quality products,
scientific validation, and more funded research on botanicals. There will
be more coverage of these products by insurance providers, which are carefully
following this market. There will also be an emphasis on the phytopharmaceutical
model, with more regulations, he added.
The growth of the market depends on how quickly the industry will conduct
needed scientific trials, how willing the FDA will be to accept these studies
and approve new products, and how willing the consumer will be to accept
these new products and pay higher prices for them.
The growth of the nutraceuticals industry lies with its integration into
the standard therapeutic market as complementary care, according to Nancy
Childs, professor of food marketing at St. Joseph's University in Pennsylvania,
who noted that 30%-40% of the US population, mostly female, is disenchanted
with the current health care protocol.
The public is already using alternative medicine to treat disease, she
said, and among those trying to mitigate the effects of Alzheimer's, 35%
are using vitamin E, 25% anti-inflammatories, 14% gingko and 9% herbal medicine.
Of those with high cholesterol, 5% are using alternative therapy and 4%
are taking herbal medicines, she noted, and in the asthma market, 7% are
using alternative therapies and 4% are taking herbal remedies. The large
number of moderate-form asthmatics is a huge pool of people who would be
prone to use OTC drugs to treat their condition, and who would be receptive
to a nutraceutical approach, she feels. Migraine sufferers, of whom 17%
already take alternative therapies and 7% use herbals, would also be another
good potential market for these products.
Some 94% of pharmacists responding to a survey felt that nutraceuticals
were beneficial to health, 84% felt pharmacies should capture more of this
market, and 60% felt more science was needed. Pharmacists will ask hard
questions, she added, noting they are most informed about herbals and least
informed about nutraceuticals. Issues of concern to pharmacists about nutraceuticals
include dosages, interactions, adverse reactions, adulteration and standardization,
she said. Additionally, 56% of pharmacists said they are questioned about
nutraceuticals, 100% get questions on herbals and 85% get questions on homeopathic
Some supermarkets are conducting studies on how best to combine these
products with the store pharmacy and the produce section, she noted, indicating
they are looking for a larger role and a larger share of this market. Some
doctors are moving into selling dietary supplements, she said, and opportunities
lie with cardiologists, those dealing with immune function and gerontologists.
Insurers are aware that ethnicity is an important factor, she said, with
some ethnic groups more disposed to this class of product.
Cost will drive HMOs and insurers to look to nutraceuticals as a way
of saving money, she said, and some HMOs have already begin to move into
self-providing these products to assure quality, standardization and efficacy.
More states are requiring that HMOs cover nutraceuticals if doctors recommend
this therapy, she noted, and consumers are demanding insurers cover these
products, even if they do not already use them.