Source: Nutrition Business Journal (www.nutritionbusiness.com)

The nutraceutical industry is growing. According to Nutrition Business Journal, sales reached almost $54 billion in 2006. Sales are estimated to increase to over $77 billion by 2013. Nutrition Business Journal states that these sales figures reflect only the sales of supplements and functional foods, not the full range of nutraceuticals referred to in Dr. DeFelices’s definition.

Nutraceuticals are regulated based on the Dietary Supplement Health and Education Act of 1994 (DSHEA). It specifically states that nutraceuticals are to be regulated as foods and not as drugs. This means that clinical trials are not required to back up any claims of effectiveness and that consistency of ingredients is limited to what is required for a standard food product. Just as with other foods, nutraceuticals are subject to Federal Trade Commission (FTC) oversight with respect to truth in advertising.

To better understand the coverage concerns, consider this example:

Ephedra sinica is a common evergreen shrub found in China and India. The active ingredient in ephredra is ephedrine. Ephedrine is used in pharmaceuticals and is regulated as a drug. However, it was also used as a nutraceutical. The nutraceutical products that contained ephedrine were advertised as weight loss aids, energy boosters and performance enhancers. These products were very popular and their use became widespread. Then reports of adverse reactions began rolling in, deaths resulting from use of some of the products were alleged and a high profile death that occurred in 2003 resulted in the FDA banning the use of the ephredine as a dietary supplement. However, it was approved to continue being used in pharmaceuticals and some herbal remedies. Although the FDA ban was challenged as too wide-sweeping, it was upheld and all nutraceutical products containing ephedrine were removed from the market. A number of civil law suits continue against many in the nutraceutical industry.

One product should not define an industry but ephedra has had a decidedly negative effect on the ability of the nutraceutical industry to obtain insurance coverage. John Gaskill, senior vice president of MarketScout, states that coverage for nutraceuticals is available primarily through nonadmitted carriers. Denise Pepin, of CRC Insurance Services who has earned the endorsements from The American Herbal Products Association, the Natural Products Association and the United Natural Products says that product coverage is available only on a claims-made basis.

Mr. Gaskill states that, “Underwriters underwrite the ingredients.” Ms Pepin states, “Coverage for products with ephedra was very difficult to place and is no longer available so companies continue to add ephedra exclusions to their policies. Companies have been unwilling to remove the ephedra exclusion even on discontinued products policies.” But ephedra is not the only ingredient causing concern. Cole Palmer at General Star Management Company suggests that all agents should, “pay careful attention to designated product exclusions contained in the policy they are offering to assure that their clients are getting the coverage they need.”

Ms. Pepin points out that weight loss and sports nutrition are still considered tough classes to place because they are the ones from which a majority of claims evolve. She says, “Some companies will not consider businesses if sales are high for bitter orange. Bitter orange speeds the body’s metabolism but not to the extent of ephedra. A few companies offer a buy-back of the exclusion, depending on the dosage of bitter orange in the product, the percentage of the company’s overall sales composed of weight loss products, the manufacturer’s loss history and the distribution method. Also, products that contain thermagenic formula or muscle enhancement are more difficult to place with only a limited number of markets willing to write them.”

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