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Vitamins Inc. Cartel
by Jonathan Collin, MD

Reprinted with permission from the December 1999 issue of the Townsend Letter for Doctors & Patients. Also read our columnist's commentary on this editorial, and Collins' response.

In the last ten days of May the US Justice Department disclosed and fined a European vitamin cartel composed of 3 of the biggest pharmaceutical companies. It is no surprise that Switzerland's Roche, Germany's BASF and France's Rhone-Poulenc manufacture the lion's share of ascorbic acid, tocopherol and beta-carotene. These raw material vitamins are only manufactured by several concerns, then distributed to the world markets for middleman distribution to privately owned small vitamin companies primarily in the US. What is surprising is that this so-called Vitamins Inc. blatantly set up pricing for the raw materials to the nearest penny, allocating specific quotas to the different firms as to their market share of sales, even providing for repurchasing between cartel members when one company sold more than its agreed upon allotment. The US justice department's Joel Klein, head of the anti-trust division, who has been especially visible in Microsoft's anti-trust litigation, apparently has had time and resources to expose what has been called a textbook conspiracy of vitamin manufacturing. In its action in May two of the largest manufacturers have accepted record fines, Roche and BASF agreeing to $500m and $225m respectively. Rhone-Poulenc escaped monetary punishment by supplying US prosecutors with evidence to expose the cartel's workings.

While we consumers and physicians may applaud the workings of the Department of Justice in discovering and punishing the players of Vitamin Inc., we are left wondering about the legitimacy and ethics of the vitamin industry as a whole. At the top end it is clear that ascorbic acid is being produced by pharmaceutical giants primarily in Europe. Other world-wide manufacturers do exist, (for example, in China) who are not members of such a cartel, but the majority of US vitamin raw materials appears to come from Europe. Jobbers sell batch supplies of ascorbic acid in barrel shipments to dozens of proprietary companies primarily in the US. These companies either tablet, encapsulate, or repackage the ascorbic acid with other ingredients and excipients under their own label or label for some other party. The pricing for the new product is based first on the raw material charge which has now been established to have been set by a cartel. However, the proprietary company pricing is then set individually dependent on cost of ingredients and tableting. One often hears the cry at vitamin manufacturer expositions and physician conventions that vitamins are natural and therefore should have limited regulation by government. In fact, this entire episode demonstrates quite nicely that for one, all ascorbic acid vitamin supplements are synthetic, and two, the pricing of these products falls entirely upon the typical day-to-day business arrangements of large and small manufacturers. This is an industry which is primarily centered on the bottom line, all the way from the top where a cartel of big players set the costs, to the middle where a number of smaller but otherwise well-compensated individuals tablet a proprietary product, to the health-food store/physician or pharmacy dispensary/multi-level distributor system which handsomely increases pricing on the cost of these products.

Consumers are led to believe that because the vitamin products contain vitamin constituents natural to the body that the products themselves are natural. In fact, any ascorbic acid, vitamin E or beta-carotene contained within the supplement is synthetic and is being manufactured and tableted like any pharmaceutical drug for profit. The screams that we hear from various parties that regulations will hurt the little operators are ridiculous; the little operators purchase their vitamin C from the same place as the big players - Roche and BASF. When we run to Congress to ask that labelling requirements on vitamin products should be given free reign, understand that we are asking for the freedom to publicize a product made synthetically which was originally manufactured by a pharmaceutical giant. The argument that if the FDA regulates vitamins, that vitamins will then be produced by drug companies, available only by prescription, is an exposition in confusion. The vitamins are now being manufactured by drug companies; this is not something new. The fact that a smaller concern has a pretty label on the side does not offset the fact that pharmaceutical companies are producing the ascorbic acid and other ingredients found within the vitamin bottle. Just like aspirin and cold medicine, one does not need a prescription to purchase a drug-company manufactured vitamin supplement. Of course, there are many products being sold which contain proprietary formulas, some of which are labelled as food-produced. So if I take a juice product and mix it with ascorbic acid, I now have a supplement of juice made by one of the large food conglomerates mixed with ascorbic acid from a drug manufacturer. Hello: this is still a synthetic vitamin mixed with a food. Adding foods to supplements does not make the supplement natural.

Finally we are now seeing the production of a variety of so-called immune supporting agents which are touted as being natural because they derived from various animals, plants, minerals. It is clear that these products are being extracted and purified, again by large manufacturing or pharmaceutical concerns, leaving a synthetic animal or plant or mineral derivative which is then peddled as "natural." Let's be clear: there are no strictly natural supplements, all supplements are derived from constituents produced by pharmaceutical houses, and everyone involved wishes no regulations to intefere with their own personal bottom line.

While one prefers no regulations in the US vitamin industry, it is clear that we have a burgeoning industry composed of differing players, all sharing one basic motive: profit. Just like in any other industry, if there is no regulation, the unscrupulous will move in and begin to produce shoddy or fraudulent products. The Vitamins Inc. cartel spells out that the raw materials all come from essentially the same source at the same price. Although it is unlikely that US proprietary companies have their own cartel(s), it is not impossible to think that such agreements do exist among certain parties. Finally, certain mail order houses offer vitamin products at ridiculously low pricing. If these products are being manufactured with adulterated vitamins at prices below the Vitamins Inc. cartel, there appears to be a need for regulation in the vitamin industry.

Reprinted with permission from:
Townsend Letter for Doctors & Patients
911 Tyler Street, Port Townsend WA 98368-6541
360-385-6021 voice
360-385-0699 fax
tldp@olympus.net end-of-story


next page When Three Apples Are Rotten, Do We Throw Out The Whole Bunch? Editorial by Ed Fry. Reading the Townsend Letter editorial "Vitamins Inc. Cartel" was like reading Jonathan Swift's "modest proposal" to eat our young as a means of resolving human population pressures. The editorial, however, lacked Swift's irony and wit, and certainly didn't read like satire. In lieu of a trip to Lilliput, the Townsend editor might consider traveling to Germany to observe the kind of regulatory environment he seems to invite . . .



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(c) Copyright 1999-2003 Dietary Supplement Quality Initiative. For permission to reprint, please contact our editor.