Dietary Supplements

1
Dietary SupplementsFDA Regulation

• Vanessa Ireland
• Public Finance Econ 4353
• Dr. Cynthia Rogers

2
Dietary Supplements

• A dietary supplement is defined by the FDA as a
  product taken by mouth that contains a dietary
  ingredient intended to supplement the diet. (FDA
  Website, 2003)
• The "dietary ingredients" in these products may
  include vitamins, minerals, herbs or other
  botanicals, amino acids, and substances such as
  enzymes, organ tissues, glandulars, and
  metabolites.

3
Dietary Supplements

• Dietary supplements are placed in the category of
  foods, not drugs, and requires that every
  supplement be labeled a dietary supplement.
• Dietary supplements are not required to undergo
  scientific testing and do not have to seek
  approval from the FDA prior to marketing
  products.

Food and Drug Administration Center for Food
Safety and Applied Nutrition. An Overview of
Dietary Supplements On-Line. Available
http//www.cfsan.fda.gov/dms/ds-oview.htmlwhat.
Accessed November 1, 2003.
4
Dietary Supplement Health Education Act (DSHEA)
of 1994

• Does not require that dietary supplements be
  shown to be safe or effective before they are
  marketed
• The agency is permitted to restrict a substance
  if it poses a significant and unreasonable risk
  under the conditions of use on the label or as
  commonly consumed.

5
Current Regulation Under DSHEA

• Dietary supplements should not make health claims
  without evidence and without FDA approval.
• Should not make disease or health claims.
• Dietary supplements can make claims that
  supplement affects the structure or function of
  the body.

6
DSHEA Policy Justification

• This policy preserves the consumers freedom to
  choose dietary supplements without a prescription
  and at a reasonable cost.

Dietary Supplements. Center for Food Safety and
Applied Nutrition. Food and Drug Administration
On-line. Available http//www.cfsan.fda.gov/dm
s/supplment.html. Accessed October 25,2003.
7
Economic Aspects

• Market Efficiency
• Private Decision Rule
• Rent Seeking
• PACs and Special Interest Groups
• Externalities
• Efficiency Rule

8
Externalities of Dietary Supplements

• Fraud
• Contamination
• Health risks such as heart attacks, strokes, and
  even death

Cohen, M. (2003). Complementary and Integrative
Medical Therapies, the FDA, and the NIH
Definitions and Regulation. Dermatologic Therapy,
16 (2), 77-84.
9
Market Efficiency

• MBP MCP
• MCP P E(Risk)
• MCPTrue P True Risk
• True Risk E(Risk)
• Mislabeling
• Ignorance
• False claims by manufacturers

10
Implication of Risk Assessment

• MCPTRUE MCP
• MBP

11
Special Interest Groups

• PACs such as The National Nutritional Foods
  Association (NNFA) represents the interests of
  manufacturers and retailers of a wide variety of
  natural products including sports nutrition
  products and vitamins, herbs and other dietary
  supplements.

NNFA. The National Nutritional Foods association.
On-line Available http//www.nnfa.org/index.htm
. Accessed Nov. 23, 2003.
12
Welfare Costs of Rent Seeking

• Rent seekers compete to get the government to
  minimize regulations to avoid increased prices.
• PACs such as the NNFA will use resources to gain
  the benefit of minimum regulation and increase
  the total welfare cost to society.

13
Externality of Dietary Supplements
Private Decision Rule
14
Proposed Labeling and Manufacturing Standards

• Recently the FDA has come under increasing
  pressure to establish new standards to help
  reduce risks associated with dietary supplements
  by imposing industry wide standards to ensure
  that dietary supplements are manufactured
  consistently as to identity, purity, quality,
  strength, and composition.

15
Criteria

• Minimum Standards would include
• Requirements on the design and construction of
  physical plants for quality control procedures
  and product testing to prevent super or sub
  potency, wrong ingredients, contaminants,
  improper packaging, and mislabeling.

• The proposed regulations would apply to both
  domestic firms and foreign firms that
  manufacture, package, or hold dietary ingredients
  and dietary supplements for distribution into the
  U.S.

FDA. FDA Proposes Labeling and Manufacturing
Standards Dietary Supplements On-line.
Available http//www.fda.gov/bbs/topics/NEWS/diet
arysupp/factsheet.html. Accessed Nov. 26, 2003.
16
Proposed Standards Acting as a Corrective Tax
17
Explanation of Corrective Tax

• The proposed standards by the FDA forces the
  manufacturers to undertake the extra effort or
  care that matches the customers desire to avoid
  the risk of harm.
• These proposed standards will act as a corrective
  tax by internalizing externalities.
• E(Risk) True Risk

18
Recommendations

• In addition to the FDA implementing the proposed
  standards, the FDA could also
• Assess fines to manufacturers who violate quality
  control regulations.
• Use tax revenue to fund scientific testing on
  supplements that have adverse effects.
• Give a tax deduction to manufacturers who do
  their own unbiased scientific testing and receive
  approval from the FDA prior to marketing products.

19
Conclusion

• By implementing the recommendations
• Uncertainty regarding the risk of dietary
  supplements will decrease.
• Quality and safety of dietary supplements will
  increase and total welfare cost to society will
  decrease.
• Welfare cost of rent seeking will decrease.