Nutritional Supplements

A Bitter Pill

A probe of the nutritional supplement industry may be costly for insurers as well as brand reputations.
By: | August 31, 2015 • 7 min read
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In February, New York Attorney General Eric T. Schneiderman asked GNC, Target, Walmart, and Walgreens to stop selling a variety of store-brand nutritional supplements after DNA tests indicated that only 21 percent of the products contained the plant species listed on the labels, and more than a third contained plant species not on the labels.


Now, a multistate coalition of attorneys general pursuing an expanded probe of the nutritional supplement industry is asking Congress to launch a comprehensive inquiry and to consider a more robust oversight role for the Food and Drug Administration (FDA).

The Council for Responsible Nutrition (CRN), a supplement industry trade group, is questioning the validity of the New York attorney general’s DNA tests.

CRN says the tests have been “roundly criticized by botanical scientists who question whether DNA barcoding technology is an appropriate or validated test for determining the presence of herbal ingredients in finished botanical products.”

According to CRN, DNA can be damaged or removed during the manufacturing process. And since DNA barcoding does not indicate the amounts of ingredients found in the products, any contaminants found may be within “well-established legal thresholds that allow for trace amounts of some ingredients.”

VIDEO: CBS reports on the claims by the New York attorney general that some store brand supplements could “significantly endanger” consumers.

Jim Walters, managing director of Aon’s life sciences industry practice group, said the controversy is “a lot to do about nothing.”

But more than a dozen lawsuits have already been filed in connection with Schneiderman’s findings.

The most immediate exposure could be product liability if there is evidence of bodily harm — for instance, an allergic reaction to one of the unlabeled ingredients.

Phil Walls, chief clinical and compliance officer at myMatrixx, thinks such liability would be relatively narrow and potentially hard to prove.

“The repercussions would be proportional to the harm done. So if the product caused death, that’s going to be severe. But if it simply didn’t do what it was supposed to do, then I would think that the class action would be much smaller,” Walls said.

Walters agreed that any litigation would likely focus on bodily injury.

“In order for their product liability carriers to have a claim, there needs to be bodily injury, there needs to be a problem that’s not just something like they wouldn’t have bought it if they had known this and they seek reimbursement. That’s outside the scope of insurance,” Walters said.

“Think of the billions of dollars a year spent on supplements for people trying to drive better health results.” — Mark Ware, senior vice president and managing director, technology and life sciences industry practice, IMA Financial Group

Others, including Mark Ware, senior vice president and managing director of the technology and life sciences industry practice at IMA Financial Group, said allegations of harm could focus on health benefits denied to consumers who took a product that was missing the labeled active ingredient.

“Think of the billions of dollars a year spent on supplements for people trying to drive better health results.

“If they’re not driving those health results and they feel they’ve been injured, there’s going to be people banging on the door claiming all types of bodily injury because they haven’t been getting the benefits of the … supplements that have been touted as a benefit to them,” Ware said.

Ware sees broader liability issues, as well.

“This is going to trigger more than just potential product liability claims,” he said.

Companies that are publicly traded could see shareholder values impacted, potentially affecting directors and officers coverage, he said. There could also be allegations of false advertisement that could impact general liability policies.

“There are a lot of ways these claims could come about,” Ware said.


The manufacturers would likely be primary targets, but retailers may be exposed as well.

According to Ware, retailers are generally contractually indemnified and held harmless in the event of any claim or litigation due to a fault in a product.

But he pointed out, “As a retailer selling that product in your store, you will still have defense costs and could incur indemnification if [these manufacturers] don’t have the wherewithal to withstand the kind of class action suits that are coming their way.”

If the manufacturers are overseas, that may also make the retailers more attractive to plaintiff’s attorneys.

Insurers Pay

Either way, the party ultimately on the hook may be the manufacturer’s or retailer’s insurer. If the labeling discrepancies were due to outright fraud, as opposed to human error or equipment failure, that would trigger exclusions to coverage.

But such fraud may not be easy to prove.

“A court of law would have to judge that there was truly a fraudulent act and that they did it intentionally,” said Ware.

“Until fraud is proven, I don’t think these carriers are going to be able to walk away from it.”

Jim Walters, managing director, Aon life sciences industry practice group

Jim Walters, managing director, Aon life sciences industry practice group

Walters agreed.

“In any major litigation, carriers will point to exclusions to reserve their rights. So could you envision a situation where someone is reserving their right based on that? Yes. But I think that’s a stretch and I think they would have a hard time upholding that exclusion.”

And litigation could be quite costly.

“There’s a lot of ways these claims could come about, but I think in order to prove this, it’s going to take a little bit of time and a lot of litigation costs,” Ware said.

“I would imagine that the number of expert witnesses that are going be called in to testify for both sides would be lengthy, and it is simply a matter of who has the best experts. It’s just not an easy question to answer,” said myMatrixx’s Walls.

Ironically, if it comes down to a battle of expert testimony, the extensive resources that make the retail chains attractive targets for litigation would make them particularly formidable legal opponents as well.

Reputational Risk

The largest impact of the controversy could have to do with consumer perceptions of individual brands and the industry as a whole.

Walls, a former retail pharmacist, noted that, “If the company has a good reputation, you stock their products. If they don’t, you avoid them.

“People would always ask me the same question: ‘Which brand of supplements should I buy?’ And it always came down to nothing more than trust,” Walls said.

Even if retailers find different manufacturers for their store brands, any loss of consumer trust would likely be directed at the store-brand name on the front of the bottle rather than the manufacturer listed on the back.

GNC has already moved to mitigate any loss of trust by agreeing to implement a new national testing regimen that exceeds current FDA requirements — and uses some of the same testing methods criticized by CRN.

“People would always ask me the same question: ‘Which brand of supplements should I buy?’ And it always came down to nothing more than trust.” — Phil Walls, chief clinical and compliance officer, myMatrixx

Its agreement with the New York attorney general’s office stipulates that “GNC will perform DNA barcoding on the ‘active’ plant ingredients used in its products [and] implement testing for contamination with allergens.”

“It puts them in a better defensive position,” Ware said, “unless they don’t follow through with their own guidelines.”

Without that follow-through, the move could be a double edged sword.

“If they had had [a testing regimen] in place and this had still happened, I would think that would increase liability,” said Walls.

The controversy may also affect the supplement industry’s regulatory framework, largely defined by the Dietary Supplement Health and Education Act of 1994 and Good Manufacturing Practices established by the FDA in 2007.

Some, like Walls, think current oversight is too lax.

“With supplements, there are no regulations at the manufacturer level, no regulations at the distributor level, no regulations at the retail level.

“Only at the point of the consumer do the regulations come into play. … The only restriction on supplement manufacturers is that they cannot make false claims, and no one knows if they have made false claims until that product hits the market,” he said.

And while “false claims” might refer to claims of benefit or efficacy, they “could also refer to what the products actually are, and could trigger the FDA’s involvement.”


Walters disagreed.

“The regulatory oversight is, I think, stronger than what common knowledge in the consumer world knows. FDA is strongly regulating.”

But, he added, most supplement manufacturers “believe very strongly in their reputations and their quality of manufacturing and ingredients, so to some degree I think many would welcome additional oversight.”

As for any negative impact on those insuring the supplement industry, Walters is unconcerned.

“We believe adamantly that this should not affect rates, pricing or availability of coverage.

“This is something that should not be a big issue for the insurance underwriting community that underwrites this sort of business.”

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]
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2015 Most Dangerous Emerging Risks

Vaping: Smoking Gun

As e-cigarette usage rises, danger lies in the lack of regulations and unknown long-term health effects.
By: | April 8, 2015 • 7 min read

SCENARIO: It’s 2040, and there were not quite as many attendees of the 25-year high school reunion party as expected. Gossip begins to circulate just as it did around the cafeteria and corridors a couple of decades earlier.

“Is John coming tonight?” one man asked an ex-classmate.


“No, didn’t you hear? He’s in the middle of chemo treatments right now,” she responded solemnly. “Esophageal cancer.”

“Hey Kelly!” another alumnus shouted. “I don’t think I’ve seen you since Nationals senior year. How are you? Still running?”

Kelly was a standout miler on her high school and university track teams, known for her strong finishing kick.

“No,” she responded, exhaling a cloud of raspberry-flavored vapor as she lowered her still-glowing e-cigarette.

“I haven’t been able to run much lately, not without an inhaler, anyway. Developed asthma a few years ago.”

In 2015, when this group was graduating, “vaping” was the latest and greatest trend. It delivered the soothing effects of nicotine without the carcinogens of tobacco smoke, tasted much better, and there were no age restriction laws.

The litigants claim their health issues stem directly from the dubious concoction of chemicals in the e-liquid his company imported from China and sold in their branded vape pens.

E-cigarette advocates predicted that vaping would dramatically decrease the rates of lung cancer and other smoking-related diseases. But 25 years later, the effects of the e-liquid’s various chemicals and concentrated nicotine are clear. Rates of lung cancer, which had been decreasing steadily in the U.S., are rising again, along with heart disease and other types of cancer.

That same night, the CEO of a national e-cigarette distributor is staring at a subpoena. His company is being sued by the families of a few hundred of his most loyal customers who have developed respiratory and heart problems.

In fact, a recent longitudinal study of “vapers” by the Centers for Disease Control and Prevention found strong positive correlations between high use of e-cigarettes and incidence of heart disease and cancers of the respiratory system.

The litigants claim their health issues stem directly from the dubious concoction of chemicals in the e-liquid his company imported from China and sold in their branded vape pens.

Tests of several batches of the liquid by the FDA revealed inconsistent concentrations of nicotine, propylene glycol, and other flavor additives and preservatives. The levels of nicotine found in the vapor were also inconsistent with the label.

The class-action litigants were seeking punitive damages totaling $20 billion, half of which would be used to create a medical treatment fund. The number is staggering, but not out of line with some of the lawsuits that emerged against “Big Tobacco” companies in the late 1990s, the highest of which sought damages of $23.6 billion. Other smaller distributors had already been knocked out by smaller settlements, still in the millions.

The CEO had already talked to his broker. The contractual protection they had in place pinned product liability to the manufacturer, based in Shanghai, but did not address risks of long-term health effects. That liability was all theirs.

ANALYSIS: In 2015, the retail vaping industry is forecast to reach $3.5 billion, more than twice the $1.7 billion estimated for 2013, according a Wells Fargo Securities report on tobacco trends in the U.S.


E-cigarettes, which deliver a nicotine hit without tobacco combustion — and the carcinogens that come with it — attract customers from the traditional cigarette market looking for a healthier or safer alternative to their smoking habit, and from the youth market, drawn to the sleek styling and fun flavors of vaporizers, as well as the claim that they are far less dangerous than combustible cigs.

According to the CDC’s National Youth Tobacco Survey, “the number of never-smoking youth who used e-cigarettes increased from 79,000 in 2011 to more than 263,000 in 2013.”

According to “Monitoring the Future,” a study from the University of Michigan analyzing drug and tobacco trends among teens, there were twice as many e-cig users than smokers of combustible cigarettes among eighth, 10th and 12th graders. Sixty-two percent of eighth graders surveyed said that cigarettes are very harmful to health, while only 15 percent reported feeling that way about e-cigarettes.

And there is basis for these beliefs. Studies of e-vapors show that the amounts of toxic chemicals they contain are negligible, compared to traditional cigarettes, and their concentrations are nearly equal to those already present in the air we breathe. Many public health advocates laud e-cigs as a long-term tool to reduce smoking rates and the respiratory illnesses that come with it.

“There’s no question that e-cigarettes are much safer,” said Michael Siegel, a professor at Boston University’s School of Public Health.

Mark Wood President and CEO of LifeScienceRisk

Mark Wood
President and CEO of LifeScienceRisk

“The risks are minimal, compared to tobacco smoking.”

But the danger in any new product lies in the unknown. Vapors produced from e-liquids may not be as harmful as smoke, but the composition of those liquids varies widely.

“A lot of these devices are made in countries that struggle with quality issues in the manufacturing process,” said Mark Wood, president and CEO of LifeScienceRisk, a subsidiary of RSG Underwriting Managers.

“When using foreign contract manufacturers, you don’t always know who exactly is making the product.”

Inconsistent manufacturing leads to variability in nicotine levels. Byproducts of the manufacturing process, flavoring and other preservatives also potentially introduce other carcinogens into the mix. But the final composition is largely unknown.

Adverse health effects of those unknown chemical mixtures could range from allergic reactions to cancer.

The heating element of e-cigarettes also poses a threat. If it gets too hot, it can “trigger a thermal breakdown” of the materials used to make the e-cig, creating carbonyls like formaldehyde and acetaldehyde. These compounds are delivered in nano-sized particles directly into the airways, where they trigger inflammation that can lead to the development of chronic conditions.

Little clinical research has been conducted on the safety of these vapors, and the long-term health effects may not be seen for another 20-30 years.

“From the FDA’s point of view, they’re waiting to see if e-cigarettes can reduce the number of smoking deaths. They want to see the whole picture before they take a firm stance on the issue,” said Markus Kalin, head of casualty risk engineering at XL Group.

Another problem is the lack of age restrictions, coupled with flavorings like cherry vanilla and blue raspberry, which make these products highly appealing to those under 18.

In a customer base that has never or rarely smoked traditional cigarettes, long-term use of e-cigarettes could increase, rather than reduce, the likelihood of health issues.


“The purpose of e-cigarettes is to get people off smoking in a safer way. They are not absolutely safe,” Siegel said.

Current high-school vapers could be in their 40s or 50s before any ill effects emerge. It may not be lung cancer or emphysema, but perhaps higher rates of asthma, bronchitis, cystic fibrosis or other inflammatory pulmonary diseases.

And distributors of vaping products could be held liable, in much the same way tobacco companies faced massive lawsuits after smoking was definitively linked to lung cancer.

The fact that most e-cigarette manufacturers are based in China also “puts distributors and retailers in the U.S. at higher risk,” said Randy Nornes, executive vice president at Aon Risk Solutions.


“If you’re the only link between a non-U.S. manufacturer and the customer, you’re an obvious target for plaintiffs.”

Wood said that distributors “can subrogate that claim against a contract manufacturer or supplier, but it’s more difficult to do that against an entity in a different country subject to different laws.”

Given the huge settlements with tobacco companies, plaintiffs’ attorneys will be more than willing to take on the e-cigarette industry.

“They look for market opportunities,” Nornes said, “anything that potentially has harm in it and involves a lot of people.”

Vaping distributors could face product liability suits for improper labeling of e-liquid cartridges or false advertising concerning its health benefits. Kalin of XL Group said parents of e-cigarette users could pursue advertising litigation against distributors for failure to protect young people.

“But the next stage will be, if you start to see health issues emerge and more studies trickling out, and younger people developing diseases like lung cancer, that will be the catalyst for mass tort,” Nornes said.

E-cigarette distributors and retailers need proactive risk management, experts said.

“You really have to understand your supply chain,” said Aaron Ammar, risk manager at XL Group. “Make sure you have appropriate age restrictions and proper labeling about potential health effects. Where are the component parts coming from? Do you understand it?”

“I’m sure they’re all doing contractual risk management, to make sure risk stays with the manufacturer,” Nornes said.

“The second issue is making sure the manufacturer has adequate levels of insurance in the event you get sued for distributing someone else’s product. That’s where issues will creep in, because you’re relying on a third party’s insurance.”


Complete coverage of 2015’s Most Dangerous Emerging Risks:

Corporate Privacy: Nowhere to Hide. Rapid advances in technology are ushering in an era of hyper-transparency.

04012015_04B_implant_devices_150px_mainImplantable Devices: Medical Devices Open to Cyber Threats. The threat of hacking implantable defibrillators and other devices is growing.

04012015_03_concussions_150px_mainAthletic Head Injuries: An Increasing Liability. Liability for brain injury and disease isn’t limited to professional sports organizations.

04012015_04_vaping_150px_mainVaping: Smoking Gun. As e-cigarette usage rises, danger lies in the lack of regulations and unknown long-term health effects.


Aquifer: Nothing in the Bank. Once we deplete our aquifers, there is nothing helping us get through extended droughts.


Most Dangerous Emerging Risks: A Look Back. Each year since 2011, we identified and reported on the Most Dangerous Emerging Risks. Here’s how we did on some of them.

Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]
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Sponsored Content by CorVel

Telehealth: The Wait is Over

Telehealth delivers access to the work comp industry.
By: | November 2, 2015 • 5 min read


From Early Intervention To Immediate Intervention

Reducing medical lag times and initiating early intervention are some of the cornerstones to a successful claims management program. A key element in refining those metrics is improving access to appropriate care.

Telehealth is the use of electronic communications to facilitate interaction between a patient and a physician. With today’s technology and mass presence of mobile devices, injured workers can be connected to providers instantaneously via virtual visits. Early intervention offers time and cost saving benefits, and emerging technology presents the capability for immediate intervention.

Telehealth creates an opportunity to reduce overall claim duration by putting an injured worker in touch with a doctor including a prescription or referral to physical therapy when needed. On demand, secure and cost efficient, telehealth offers significant benefits to both payors and patients.

The Doctor Will See You Now

Major healthcare players like Aetna and Blue Cross Blue Shield are adding telehealth as part of their program standards. This comes as no surprise as multiple studies have found a correlation between improved outcomes and patients taking responsibility for their treatment with communications outside of the doctor’s office. CorVel has launched the new technology within the workers’ compensation industry as part of their service offering.

“Telehealth is an exciting enhancement for the Workers’ Compensation industry and our program. By piloting this new technology with CorVel, we hope to impact our program by streamlining communication and facilitating injured worker care more efficiently,” said one of CorVel’s clients.

SponsoredContent_Corvel“We expect to add convenience for the injured worker while significantly reducing lag times from the injury to initiating treatment. The goal is to continue to merge the ecosystems of providers, injured workers and payors.”

— David Lupinsky, Vice President, Medical Review Services, CorVel Corporation

As with all new solutions, there are some questions about telehealth. Regarding privacy concerns, telehealth is held to the same standards of HIPAA and all similar rules and regulations regarding health information technology and patients’ personal information. Telehealth offers secure, one on one interactions between the doctor and the injured worker, maintaining patient confidentiality.

The integrity of the patient-physician relationship often fuels debates against technology in healthcare. Conversely, telehealth may facilitate the undivided attention patients seek. In office physicians’ actual facetime with patients is continually decreasing, citing an average of eight minutes per patient, according to a 2013 New York Times article. Telehealth may offer an alternative.

Virtual visits last about 10 to 15 minutes, offering more one on one time with physicians than a standard visit. Patients also can physically participate in the physician examination. When consulting with a telehealth physician, the patient can enter their vital signs like heart rate, blood pressure, and temperature and follow physical cues from the doctor to help determine the diagnosis. This gives patients an active role in their treatment.

Additionally, a 2010 BioMed Central Health Services Research Report is helping to dispel any questions regarding telehealth quality of care, stating “91% of health outcomes were as good or better via telehealth.”

Care: On Demand

By leveraging technology, claims professionals can enhance an already proactive claims model. Mobile phones and tablets provide access anywhere an injured worker may be and break previous barriers set by after hours injuries, incidents occurring in rural areas, or being out of a familiar place (i.e. employees in the transportation industry).

With telehealth, CorVel eliminates travel and wait times. The injured worker meets virtually with an in-network physician via his or her computer, smart phone or tablet device.

As most injuries reported in workers’ compensation are musculoskeletal injuries – soft tissue injuries that may not need escalation – the industry can benefit from telehealth since many times the initial physician visit ends with either a pharmacy or physical therapy script.

In CorVel’s model, because all communication is conducted electronically, the physician receives the patient’s information transmitted from the triage nurse via email and/or electronic data feeds. This saves time and eliminates the patient having to sit in a crowded waiting room trying to fill out a form with information they may not know.

Through electronic correspondence, the physician will also be alerted that the injured worker is a workers’ compensation patient with the goal of returning to work, helping to dictate treatment just as it would for an in office doctor.

In the scope of workers’ compensation, active participation in telehealth examinations, accompanied by convenience, is beneficial for payors. As the physician understands return to work goals, they can ensure follow up care like physical therapy is channeled within the network and can also help determine modified duty and other means to assist the patient to return to work quickly.


Convenience Costs Less

Today, convenience can often be synonymous with costly. While it may be believed that an on demand, physician’s visit would cost more than seeing your regular physician; perceptions can be deceiving. One of the goals of telehealth is to provide quality care with convenience and a fair cost.

Telehealth virtual visits cost on average 30% less than brick and mortar doctor’s office visits, according to California state fee schedule. In addition, “health plans and employers see telehealth as a significant cost savings since as many as 10% of virtual visits replace emergency room visits which cost hundreds, if not thousands, of dollars for relatively minor complaints” according to a study by American Well.

“Telehealth is an exciting enhancement for the Workers’ Compensation industry and our program. By piloting this new technology with CorVel, we hope to impact our program by streamlining communication and facilitating injured worker care more efficiently,” said one of CorVel’s clients.

Benefits For All

Substantial evidence supports that better outcomes are produced the sooner an injured worker seeks care. Layered into CorVel’s proactive claims and medical management model, telehealth can upgrade early intervention to immediate intervention and is crucial for program success.

“We expect to add convenience for the injured worker while significantly reducing lag times from the injury to initiating treatment,” said David Lupinsky, Vice President, Medical Review Services.

“The goal is to continue to merge the ecosystems of providers, injured workers and payors.”

With a people first philosophy and an emphasis on immediacy, CorVel’s telehealth services reduce lag time and connect patients to convenient, quality care. It’s a win-win.

This article was produced by CorVel Corporation and not the Risk & Insurance® editorial team.

CorVel is a national provider of risk management solutions for employers, third party administrators, insurance companies and government agencies seeking to control costs and promote positive outcomes.
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