By Michael E. Miller
By Allie Conti
By Keegan Hamilton and Francisco Alvarado
By Jake Rossen
By Allie Conti
By Kyle Swenson
By Chris Joseph
By Michael E. Miller
In an interview after the Holiday Inn meeting, Gold acknowledged that a big portion of his company's sales are to distributors. "Yeah, the distributors buy products and consume them themselves, absolutely. That is a large proportion of the products that are sold."
But Carol Walters, an RSI spokesperson, notes that, in keeping with the FTC's anti-pyramid guidelines, the company offers distributors a 90 percent refund on all unsold products and requires them to certify that 70percent of what they bought has been sold to others before they can order a new shipment. The company's compensation plan brochure, however, makes no mention of the government's requirement that 70percent of sales must be to retail customers who are not distributors. RSI refused to provide New Times with records of distributor compliance with these rules, on the grounds that these verification reports are proprietary information.
Told of the distributors' statements that their main emphasis is on recruiting rather than retail sales, Lyons, of the Florida Attorney General's Office, said: "That's very troubling. If they are focused on recruiting rather than retailing, they are operating their own personal businesses probably as a pyramid. We would expect the company to crack down. If it is a pyramid instead of a bona fide MLM, either it will collapse on its own, or we or some other regulator will shut it down."
Cohen and the other doctors who have signed up with Rexall Showcase do not want to hear criticism from the AMA, the FTC, or anyone else about their new business enterprise. They complain bitterly that the steady pressure applied by managed care insurers is squeezing their incomes. "For the AMA to say doctors shouldn't make a profit, what's the point of that?" Cohen asks incredulously.
Most Americans would laugh at these doctors' financial complaints. Last year net income for nonsurgical physicians like Cohen rose 1.4 percent, to a median of $144,000 nationally, according to Medical Economics magazine. Surgical specialists like Leonard reported a drop of 3.8 percent in net income last year, but still enjoyed a median income of $207,000.
Still, Cohen admits that he feels uncomfortable selling RSI products out of his office. So he refers patients to his wife. She sells the products to them at cost, hoping they'll reorder at the higher retail price and possibly become distributors. The AMA ethics policy, however, notes that there is no difference between selling products in a doctor's office and recommending them for purchase elsewhere if the doctor benefits financially either way. An even bigger ethical concern is that several of his patients have become downline distributors for his wife. The AMA's Rakatansky called the practice of doctors recruiting patients as distributors a clear form of "exploitation."
Dr.Leonard, who didn't believe in dietary supplements before signing up with Rexall, justifies the high prices of RSI supplements by explaining that the company offers the best combination of vitamins and minerals on the market. Unlike with other manufacturers, she says, patients can be confident that "what Rexall says on the box is what you're getting."
Actually, consumers have to trust Rexall's word on that. RSI's distributors and promotional audiotapes repeatedly claim that the company's products are "regulated" by the U.S. Food and Drug Administration. But the 1994 Diet Supplements Health and Education Act essentially deregulated supplements. So it's a buyer-beware market.
Last year the Los Angeles Times commissioned an independent lab to test ten brands of Saint-John's-wort, a popular and expensive herbal remedy for depression. The Times reported that Rexall Sundown's product had about 20percent of the labeled potency, while two other brands each had less than 50percent. When Rexall protested that the results were false and misleading, the newspaper hired a second lab, which confirmed the results.
"That was a healthy wake-up call for the industry," says Mark Lange, science director of the Institute For Nutraceutical Advancement in Denver, which is developing standardized testing procedures for the supplement producers.
The lack of government testing of RSI products came as a surprise to Flip Lechner, who takes several Rexall supplements at Dr.Leonard's urging. "I didn't know the FDA doesn't regulate these products," she said. "How could they sell these things if the FDA doesn't evaluate them?" But then she reconsidered. "I remember my parents buying Rexall products years and years ago. If it was good stuff then, it must be good stuff now."
Dr.Leonard isn't fazed by the lack of FDA testing. "It's only our modern era that came up with double-blind studies and FDA regulations, but people have always used nutritional supplements with good results," she said. "Nothing in the products can hurt me, and if it can help me, why not take it?"
"That's an attitude left over from the Dark Ages," replies Dr.Angell, of the New England Journal of Medicine. "No person can tell for himself whether a drug is good for him or harmful. That's why we have the FDA."
Leonard's statement that dietary supplements have no potential for harm is flat-out wrong, says Broward General's Colodny. Products advertised as "natural" can be as powerful and potentially dangerous as prescription drugs. The FDA estimates that 10 percent of people who try herbal remedies experience harmful side effects. Even seemingly innocuous garlic pills can have side effects or interact dangerously with other medications. Most doctors, she notes from experience, are just as ignorant about supplements as their patients are.