In a way, the company has been a victim of its own success in building up a reputable brand focused on the practitioner channel, said company general counsel Stephen Carruthers. Designs for Health markets a line of more than 350 dietary supplement brands for practitioners, many of which feature branded ingredients.
Carruthers said the company has noticed a disturbing trend in recent years in which unauthorized resellers would obtain products through various channels by various means and then resell them online at a discount.
“It’s really amazing the lengths people will go to get a hold of our supplements,” Carruthers told NutraIngredients-USA. “In the past one and a half years we have been trying to shut these people down.”
Dirty big secret
This has been a problem for other dietary supplement marketers, not just for Designs for Health. Some major brands in the industry have been reluctant to address the issue publicly, however, preferring to deal with the problem behind closed doors.
“If they’re trying to keep it a secret, it’s not a very well kept secret,” Carruthers said. “It has been a problem for so long.”
Carruthers said many of these transactions have take place on Amazon. Unauthorized resellers have also set up their own web portals to resell products, he said. Carruthers said DFH has tried to deal with this problem unofficially itself.
“I wrote a letter to Amazon about this a number of years ago. I felt it was like knocking your head against a wall. We believe there is a safety issue here,” he said.
Carruthers said the safety issue arises because unauthorized resellers will often remove expiration dates, barcodes and other critical information from product labels. This makes proper adverse event reporting and an efficient product recall, should one be necessary, all but impossible.
Taking it to court
DSH decided more recently, then, that legal action was necessary, Carruthers said. The company has had a few wins recently on that score.
Earlier this summer, the United States District Court for the Southern District of Florida entered a consent judgment permanently enjoining Fruitful Longevity, Inc. d/b/a Health Powerhouse and several other defendants from dealing in DFH products (Civil Action No. 17-23898).
DFH filed suit in October 2017 when it discovered that Health Powerhouse was removing bar codes and expiration dates from DFH products it was selling on its Amazon.com storefront. In the course of the litigation, DFH uncovered a nationwide ring of perpetrators who opened accounts for DFH products and supplied them to Health Powerhouse. In settling the case, the defendants also agreed to pay DFH $220,000 in damages.
Attorneys for the defendants did not respond in time for publication for a request for additional comment.
Also, in December of last year, DFH won a major settlement against a defendant who was accused of impersonating a pulmonologist to open a practitioner account with the company and then reselling products on a website set up for the purpose called vitadocs.com. The company and the pulmonologist both filed suit and won a $27 million default judgement against the reseller, who was located in Las Vegas.
Carruthers said DFH has learned a few things along the way about how to more rapidly spot unauthorized resellers.
“I don’t want to tip our hand, but we have developed a number of strategies that deal with the way the order comes in so that it could get flagged as having the characteristics of an unauthorized online internet seller,” he said.
Living with Amazon
Carruthers said DFH has had to amend its business practices to take into account the preferences of today’s consumers. Rather than forbidding any sales of its products on Amazon and trying to whack all of the moles that appear on that platform, the company has sought a third way to make this possible while not undercutting its practitioner customers.
“Today’s consumer wants to be able to get access to products on Amazon and don’t want to have to go back to the doctor’s office every time they want another bottle,” Carruthers said. “We embarked on a strategy where we essentially consume that space.
“Our practitioner customers would ask, why should they buy our products and recommend them to their patients and then have them walk out of their offices and order them at a discount on Amazon? We have to have a strategy that works with Amazon, so our products are available there, but we charge a premium over the retail price,” he said.