Blog

July 17, 2022

The Wild West of Nutraceuticals

By Tal Bitton, VP Fraud & Risk

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What exactly is a nutraceutical? It can be an especially difficult question to answer, especially because U.S. law has no definition for the term. In fact, depending on its ingredients and corresponding marketing claims, a nutraceutical can be regulated as a drug, dietary supplement, food ingredient or food. Marketed at the intersection of nutrition and pharmaceuticals, nutraceuticals may claim to promote health, prevent and even treat diseases. 

The largely undefined and highly unregulated industry has created a breeding ground for both quality issues and health fraud scams — especially with the rise of e-commerce shopping trends — leaving consumers, payment organizations and online marketplaces increasingly vulnerable to counterfeiting, diluted quantities and fake, poor quality or even dangerous products.

Despite its murky definition, the nutraceutical industry is growing rapidly. The 2022 U.S. nutraceutical market is estimated at $112.6 billion, and the global market is expected to reach $441.7 billion by 2026. Created as alternatives to traditional pharmaceuticals, nutraceuticals often claim physiological benefits without having to offer proof. Marketing labels such as “guaranteed cure,” “miracle results'' or even “all-natural” are liberally used on health products due to lack of regulation.

Elaborate marketing and anecdotal evidence have led to the rise in nutraceuticals popularity — even if it is often misleading or simply untrue. In fact, there is no guaranteed way to know whether these products are effective, let alone safe. The promise of a "quick fix" or "do-it-all" product can hook people into purchasing, only to discover that they've been scammed.

Navigating Health Fraud Scams

Why are health fraud scams so rampant in the nutraceutical world? The combination of an unregulated industry, the rise of digital shoppers and the popular trend for wellness and nutrition has created an environment that is especially susceptible to misrepresentation, deceit and dangerous products. 

According to the Food and Drug Administration (FDA), a health product is fraudulent if it is deceptively promoted as being effective against a disease or health condition, but not scientifically proven safe and effective for that purpose. Health fraud scams prey on people’s desires for easy solutions to difficult health problems — including Alzheimer’s disease, arthritis, cancer, COVID-19, diabetes, influenza, infectious diseases, memory loss, sexual performance and weight loss. 

Customers and merchants should be aware of several nutraceutical fraud types/tactics:

  • Dilution fraud occurs when a claimed active ingredient is not present in the declared product. Sometimes, the intended ingredients are replaced with cheaper ingredients that do not have the same functional properties. 
  • Counterfeiting is another growing risk in the nutraceutical industry — product duplication by another entity that passes it off as legitimate. Often produced in unlicensed facilities and/or unhygienic conditions, counterfeited supplements may contain less of the functional ingredients than the authentic product, or none at all.

Until there are stricter regulations on products in the industry, merchant sites should be wary of allowing people to sell nutraceuticals and other supplements on their platform or risk their customers getting scammed. 

To learn more about the risks involved with nutraceuticals, or for more information on what consumers should know, reach out to us at knowledge@everc.com.