Judge Carville Collins: But they have warning labels now, right?

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GNC Q & A

Judge Carville Collins: I’m not sure that I understand if there’s really that much of a financial benefit for us pulling these [five ephedrine containing products] off the shelf. I mean where’s the consumer’s responsibility to know what [doses] they ought to be taking and what they are not supposed to be taking?
Jason: It is the consumer’s responsibility. However, you are still liable in distributing these products and selling these products.
Judge Carville Collins: Why is our company liable for the distribution? We didn’t make it.
Jason: Because you are providing it; you are selling it. That is segregated. There are settlements going against the manufacture of some of these products and different producers of these products, and you still are liable because you are distributing the products. And in most cases that are pending right now, there are no warning

labels displayed on the bottles.


Judge Carville Collins: But they have warning labels now, right?
Jason: No, not all of them have them now.
Judge Carville Collins: Why don’t we just put warning labels on. How many people are really getting hurt on this? What percentage? 1? ½ [of all consumers]?
Jason: It’s hard to say exactly what percent, one out of ten, one out of fifteen. We don’t know. Millions and millions of consumers use these products each year.
Judge Carville Collins: And only a hundred have died?
Jason: Over a hundred have died.
Judge Carville Collins: Can you prove it directly that it was our product?
Jason: They [the courts] have done that. Correct.
Judge Phil Davis: How do those statistics differ from other products on the market? What’s an acceptable rate of injury or death, if you will, from a product? And how do our products compare with the market? Do you know?

Jason: [The acceptable] rate of death from your products [that] we feel your company [should accept] ethically is none. If any products you are supplying the consumer causes death, causes them to lose their life, we feel that is unacceptable.

Judge Phil Davis: Well, then how do you justify…If you use that standard, then it’s hard to imagine what company that produces any product would survive. What about cigarettes and what about the makers of alcohol? Don’t their products ultimately…don’t they ultimately cause death? And why shouldn’t they take their products off the market?
Lauren: I think that’s a really good question and the reason being is that alcohol and cigarette companies don’t have a mission statement that says “live well.” Those companies aren’t trying to promote health.
Judge Phil Davis: Isn’t that what their advertising is all about? Living well, having fun. Regardless of whether they come out and say it. They are kind of promoting it if you think about it this kind of lifestyle enhancement that our products do. I’m struggling with why not just wait until they are prohibited and let the buyer beware? I agree with my fellow judge [Carville Collins]. Why not just increase our warnings to every single step we can take, make sure that it’s ultimately the consumer’s choice? Aren’t we actually providing a service to a sector of the population that really needs weight loss assistance?
Lauren: Considering alcohol companies are promoting fun, they’re not really promoting health as you are, so I think that would be the number one difference. The other thing is if you were to wait until you were prohibited, that would ultimately mislead all your consumers in thinking that you are telling them something and then in turn that the law is going to come and take that back. You want their trust.
Judge Alan Roper: That’s speculation. You all have stated that your sources at the FDA have said 8 milligrams or less would be the allowable amount. What’s your tangible hard evidence that’s actually going to happen?

Jason: There’s no tangible hard evidence that is going to happen. They are speculating that that will happen. Going back to what you asked, you offer a variety of supplements that do not have ephedrine in them and that have not been proven harmful or have caused any deaths but are increasing revenues and are going up in your sales. Sales are falling. It’s plain and simple. Sales are falling because consumers are now scared because any time you turn on the news each night, there is some story or there’s a commercial on about some sort of supplement. All of your commercials promote products that are ephedrine free because people now know that ephedrine causes death and causes bodily harm. If the question is never promoting healthy living then why shouldn’t we promote these products, if for no reason then financially, you are losing a significant amount of money depending on any one of those cases. You paid out $22.8 million to one gentleman’s [family] who died of a heart attack.

Judge David French: Aren’t there risk mitigation factors that are available to us? Doesn’t insurance cover a lot?


Jason: That’s a very good question. When I spoke with your parent company I asked them about that because on your ballot sheets it says you have paid out these amounts yourself. There are two things that I thought. More unlikely, it’s cheaper for you to pay it off in bigger premiums. What I guessed was that there was a statement or a clause in your contracts basically with your insurance company that prohibited them from covering you on these products whether it be because there were no warning labels or whether it was you just weren’t covered in that part of your policy, I have no idea.
Judge Lani DeBenedictis: You’re saying that we have products out there that are basically anti ephedrine and we have all these pro ones and only because of the fear of ephedrine, that’s what has been driving the sales down?
Jason: Yes, the fear, one. And two, people knowing the results. Yes, people do lose weight with these products, but is there a risk? Yes, there’s a significant risk: death and very serious health problems. So I think people might actually [think] whether it is more important for me to lose the weight fast using this product or should I go over to this product where I may not lose it as much, I might have to exercise a little bit more, but [not have to] risk having serious health problems.
Judge David French: Yes, but you are asking us to make that choice for them.
Jason: We are. We’re asking you to make a choice for them and not supply them with those products any more. If they want those products, let them go to a different company then. Let the liability be put on a different company. Your company is doing tremendous right now. The only thing that will cause your downfall in the next five years that I’m forecasting are these products, or the continued sales of these products.

Judge Phil Davis: So your point to us is simply: you’re losing money, so discontinue it.

Jason: You’re losing money…not directly, but you’re killing people. You’re providing a good to someone that’s killing them. Over a hundred people have died buying products from your company.
Judge David French: Are there no other alternatives? Are you suggesting that the only alternative is to pull it and not to reduce the dosage? There’s not a median here or we can say that the product itself is [not inherently bad] even the FDA says at a certain level we might have to…But the fact is that the dosage should be re-evaluated which doesn’t require re-engineering. It just requires a reassessment of how it’s being disbursed and how it’s being recommended.
Olga: If you were to minimize the dosage to what the FDA recommends, then the products wouldn’t be providing anything for the customer.
Judge David French: It’s not necessarily what the FDA recommends, but a lower dosage in total. Maybe not four pills, but two pills. Have you thought about that impact?
Olga: Well, when you start the first week, you begin with one pill, to two pills. As you move onto the second week and the third week your body becomes immune to the product. In the first week you realize that you get effects because I’ve taken the product before. In the first week, you feel the effects like you drank ten cups of coffee and you’re just like go, go, go. The second week, you’re more immune to it so you need to take more in order for your metabolism to keep working. If you were to lower the dosage, it’s going to stop working at one point. So it’s better for you to take ephedrine free products because at one point they are going to be at the same level as the ones with the ephedrine in them.
Judge David French: Does it stop working or do you stop feeling the effect?

Olga: It stops working. You need to take more of the product. You need to take the product for a certain amount of time. There are people that continuously take the product and it stops working after three to four months. You need to keep adding supplements in order to get the effect you want.

Judge Lani DeBenedictis: That is education right there. Wouldn’t that be powerful in the hands of the consumer that they could make that decision themselves if they’re looking for a short term weight loss versus people who are looking for something more long term. I look at it as a perfect example of a consumer choice. I think what you’ve brought to us… I didn’t realize there were that many people having difficulty and that there is the fear associated with the chemical. I think that if our competitors aren’t reacting the same way and we have a government agency that’s not responding, I think wouldn’t our responsibility be education?

Olga: Education is important. You go to GNC and they say they do educate the employees. I went last week to one of the stores and I saw they had [the ephedrine containing products behind] glass casings. You have to ask an employee to get it [out of the cases]. When I asked her to get a product, she asked me what size, she didn’t ask me any questions, she handed it to me and sold it to me. Later I asked her why the glass casing. The only reason why is that product is stolen a lot. The education, whether your employees are supposed to be educated it’s not happening. Steps need to happen in order to either educate your employees more and enforce that education, or you need to pull the products.

Judge Phil Davis: Why would just..[pause in Q&A] boy it must really be a desired product [if people are stealing it]. [I guess] people want it.


Jason: Younger people want it.
Judge Carville Collins: Why are the sales going down on your product?
Jason: The sales are going down like I said because of a fear of the product. The product’s on the news every night. Why are people still using the products? I can speculate. You can speculate, but maybe they want it. They are the more expensive products you offer. The NFL as we said has banned these products. Actually all sporting associations -- NHL, NBA, Major League Baseball-- have banned these products because of hallucinations. I myself have talked to football players whom I used to play with and I, myself, have taken one of your drugs. I took it once. I took three pills. I passed out and landed in the hospital for three days. Three of my teammates also took it and had hallucinations. That shows it’s a real life example. It’s happened to me. It’s happened to a whole lot of people. And I turn people off to the product.

Judge Phil Davis: If sales are declining, then why wouldn’t we just let the market take over here? If they get to the point where it is economically unfeasible to maintain this product, regardless of the ethics issue, why don’t we just leave it to our management to make that decision based on financial [data]? That’s question number one. Question number two. Why don’t we come up with a process where we increase the labeling and ask customers to sign a waiver or acknowledge that they understand the risks and then sell it? Is there a way to make a fair choice?

Olga: If you were to do that, your main consumer right now is from [the] ages [of] 15 to 25. They are young adults. You’re going to have young adults coming in and signing these waivers and there are going to be lawsuits saying they are a minor, [and reasons associated with being too young to legally sign away one’s rights].
Judge Phil Davis: Then let’s implement an R rated system. You can’t sell [to underage customers], that’s hard.
Olga: There [currently] is that system and then people won’t buy the product if there’s a waiver. In a few months, you‘ll have all the supplies and you’re going to lose a lot of money.
Judge Phil Davis: Then won’t the market take over and won’t the sales decline? I’ve got another concern about whether or not pulling these products off the market might have actually the opposite impact on our image than you might suggest. If we pull these products off the market, doesn’t that send a message to the public that we have a tendency to market products that are unsafe, so therefore, the remainder of the products on our shelves are unsafe. Won’t that tank us?
Lauren: In answer to the first question, I think it’s…When we’re talking about consumer’s trust, I think they’re going to see that you’ve researched the product further and they feel that you’re actually taking action when you realize that what you’re distributing isn’t going along with what you are promoting which is good health. I don’t think your consumer’s trust is actually going to decline.

Jason: In response to the admission of liability, if I pull these products off your shelves and say we have now realized that there is a dangerous chemical in these products and it is causing death, we’re not saying that you’re liable. You are saying you are selling the product and possibly it is causing death. We’re no longer going to provide this product because [of how] we feel the dangers, the hazards, to you the consumer.

Judge Phil Davis: Did we have that information when we were marketing the products?

Jason: You had the information, you knew what ephedrine was, but you did not know how severe the side effects and the bodily harm would be.
Judge Carville Collins: I’m kind of wondering…I like the idea of letting the market take care of itself. I think that we would be increasing the fear by putting all that labeling on there. I’m even worrying about [this plan of full disclosure] because why are we doing that? I say put them up for sale. [We should] get some money back from the inventory. Then it will be gone. Then we won’t do it anymore. We keep a real low key. It’s not like Tylenol where people have focused on them. I haven’t seen them in the nightly news. I watch the news. Yes, I think rather than making a big to do of it…ethics aside…
Judge Phil Davis: Let me ask you another question. What would your recommendations be or how would your recommendations be different and articulated differently if this is a money maker?
Jason: If this was a money maker? That’s a difficult question. Ultimately, it would be up to your management. If I was senior management, I’d look at the company and look at how much it would hurt us if we pulled this product financially weighed against how much will our consumer’s trust be hurt. Will consumers trust us more if we pull these products? Will our sales increase on the other side in our other products that we offer? It’s a hard call. It’s a hard call.
Judge David French: If it was a money maker, you may suggest holding onto it. You made a conclusion that it’s losing money because of this. May I ask how you know that that’s exactly why it’s losing money?

Jason: There are two areas it’s losing money. The first area you are losing money is people aren’t buying it as much. As we speculated, some people are just scared of the products. It’s not working to take these products any more. They know people are dying. Word of mouth spreads. Have you talked to certain people who are taking your products? Those who have such as myself may say to someone, “Oh, I took that. I’ll never take it again.” The other area you’re losing money in is that it’s costing your company a lot of money [because of] these lawsuits that are being settled in which the clients are winning. Two areas that you’re losing money.

Judge David French: So there’s still no other alternative in your opinion. We identified a second alternative. Has there not been a third? Maybe there is that…I’m not as averse to some sort of way of modification I’m not so averse to maybe looking at this product again. I’m still confused as to why exactly I have to pull this product. I’m not convinced there’s a concrete connection to even my sales loss. If my sales loss is only from a few lawsuits, I don’t necessarily see that to be a potential.
Jason: The first case that was reported, a wrongful death, was the first quarter of last year, 2001. Since then, [and] until then sales had increased by roughly 2 to 3 percent per quarter for those five products. Since that case has been reported in the last six months, another 100 of them were brought forward; your sales have gone down 3% per quarter. It’s black and white. Obviously, these cases are causing fear and also causing downfall service.
Judge Lani DeBenedictis: Anybody here take it?
Jason: Would you?
Judge Lani DeBenedictis: I don’t think I would take it, but I think that’s part of my responsibility as a consumer. Is there anything that our competitors are doing that is pushing this, putting pressure on the agencies to make a decision on this product? What can we be doing differently to make us look a little more socially responsible?
Jason: Two local chains we have personally researched, one called Mass Muscle and one called Fitness Deluxe. They are two chains. They’re roughly 3% of total sales. However, none of them offer these products anymore. They’ve been pulled off the shelf in October of last year and December of last year.
Judge Phil Davis: Does anybody else but us offer them?

Jason: You can order them directly from the manufacture. There’s Twin Lab online. You can no longer order them from your website. They pulled them off. I personally don’t know.

Olga: You can only purchase them from the manufacturer. And that should be an example for you. If you’re the only company that’s providing this product and your sales are still going down, then there’s a problem. And I think you should follow the other companies.
Judge Carville Collins: Why is the manufacturer still manufacturing it if they believe that their product is contributing to that?
Olga: Then let it be the liability of the manufacturer to make that choice. You should make the decision. The most ethical thing is you need to care about the consumers. Although education is important, you need to realize there are many other products that you sell, so you don’t need these products.
Jason: Why is Twin Lab and other manufacturers still manufacturing the product? They are also under litigation. They are also paying out tremendous amounts of money because Mr. Seagrest, for example, had a separate case as a result of [inaudible]. Your company is a lot more profitable than a lot of these smaller manufacturers and you might see these manufacturers go under and file for bankruptcy because of loss from these products. Then it won’t be your decision anymore. You won’t be able to get the drugs from the manufactures any more. Over 80 percent of the manufacturing in these companies has switched to ephedrine free drugs. All are now offering ephedrine free.
Judge Carville Collins: I think you’ve done a good job of educating us. I think we’re fortunate that we haven’t had a big problem yet. I’m not sure why the settlements came about that way. How soon did the guy [Mr. Seagrest] die that took this stuff?

Jason: The gentlemen, Mr. Seagrest, took 16 pills the first day, took 16 pills the 2nd day. He had heart trouble. The third day he took 16 more pills and he collapsed of a heart attack. He was taken to the hospital and died 45 minutes later.

Judge Carville Collins: This was his responsibility. He was supposed to have taken a few pills a day and built up to it so why are we taking the full responsibility?
Jason: Because you sold him the product.
Judge Phil Davis: Didn’t we warn him?
Jason: He bought a bottle at a store. It had absolutely no warning label, no side effects label, not even an ingredients label.
Judge Lani DeBenedictis: It didn’t tell him how many to take?
Jason: No. Your [product] did not tell him how many to take.
Judge Lani DeBenedictis: Then we should add that to the label – to all five of your products.
Judge David French: Why isn’t that the solution for this product if indeed this poor man took more than he should have, knew he had heart trouble. Why isn’t it enough? We struggle with this.

Why aren’t labels enough?


Judge Phil Davis: Two things. If indeed there was no recommended dosage on the label and there was no warning label, and it hasn’t been banned by the FDA, I’m just struggling as to why our solution here shouldn’t be to make sure we put a warning label, make sure we make the dosage more accurate, and maybe go so far as to restricting the age of the purchaser and making sure we hand out other information with every purchase. Why aren’t those fixes in this kind of an environment where it’s not regulated, it’s not banned, why isn’t that the ethical solution here to let the consumer make the choice?
Olga: The FDA now requires that we do have warning labels on your products. Some of your bottles that you sell do and half of them don’t. The one I bought does not have a warning label.
Judge Phil Davis: It’s not regulated by the FDA. How can the FDA require that?
Olga: Why are you selling partially….Half of them have recommendations and half of them do not.

Judge Phil Davis: Let’s put the warnings out there. Maybe we’re writing up inventory that is pre warning label. Let’s fix that. Let’s slap a sticker on every single bottle. Why isn’t that enough?

Jason: That was the first alternative when I looked at your company. The courts decided in a settlement that a warning label alone and a recommended dosage would still not have been enough. Your company would still have been liable.
Judge Phil Davis: I don’t get that.
Jason: The court won’t. There’s pretrial, of course, and you settle with Mr. Seagrest. And your company is saying we had warning labels on the bottles. Theirs did not. Mr. Suri said he addressed six other deaths that he is now trying [inaudible] that did have warning labels on the bottle and the recommended dosage on the bottle and your company is still settling those cases because they are still liable.
Judge Phil Davis: They’re afraid.
Jason: Most likely. One, it would be costly. Your sales are declining 12% a year, 3% a quarter. You are now offering products that are much more popular and ephedrine free. Ethically these products are killing people with the program that we were talking about all you’re doing more is probably scaring consumers more.
Judge Carville Collins: And costing a lot of money.

Jason: Realistically if I was in your shoes, as management, as a Board of Directors, I would end these products. It makes you look a lot better to the consumers and shows you care about their health first and also in the long run, it will save you a lot of money.


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