Rexall Settles Federal LawsuitMar 12, 2003 | The Palm Beach Post Vitamin maker Rexall Sundown Inc. agreed Tuesday to settle a federal suit that accused it of making exaggerated claims about Cellasene, a product the company said substantially reduced cellulite.
Boca Raton-based Rexall, a leading manufacturer of vitamins and dietary supplements, agreed to pay as much as $12 million to settle the civil charges, which were brought by the Federal Trade Commission about three years ago.
"Hundreds of thousands of consumers were misled by claims for this product," said Howard Beales, director of the FTC's Bureau of Consumer Protection.
Rexall launched Cellasene in the late 1990s with an elaborate and expensive national public relations and marketing campaign. The pills did not eliminate or substantially reduce cellulite as Rexall claimed, the FTC charged.
According to the the FTC, more than $40 million worth of Cellasene was sold. Rexall stopped selling it shortly after the federal suit was filed.
"We maintain that we adhered to the applicable standard in the promotion and sale of Cellasene," said company spokeswoman Carol Walters, adding that Tuesday's settlement agreement is in no way an admission of wrongdoing on the part of Rexall Sundown.
"We just wished to move forward and start looking to the future," she said.
But Rexall Sundown's future is looking increasingly difficult. Lawsuits are beginning to be be filed against companies such as Rexall that sell ephedra, after a medical ruling that the weight-loss supplement contributed to the death of Baltimore Orioles pitcher Steve Bechler in February.
"You can expect to see a wave of lawsuits against makers of ephedra-based products," said Jim Wagner, editor of Nutritional Outlook, a supplements industry newsletter.
The first salvo was fired Monday when a group of California prosecutors banded together to file civil charges against Manasquan, N.J.-based Cytodyne Technologies, the maker of an ephedra supplement that Bechler is believed to have taken before his death.
Rexall is among the leading sellers of ephedra through its Metab-O-LITE weight loss supplement and its sports drink Thermo-S-25. Sales of Metab-O-LITE plunged by 38 percent last year last year to $26 million, according to Chicago-based Information Resources.
"The problem in the industry is that liability insurance for ephedra is getting very expensive," said Wagner.
Sources at Rexall say the cost of liability insurance is a growing issue at the company. They say insurance premiums skyrocketed last year and are set to do so again when policies come up for renewal in several months.
Ephedra product liability risk is another thorn in the side of Rexall parent Royal Numico of the Netherlands, which has been trying to sell Rexall since the fall. Analysts say Royal Numico might be able get $450 million for Rexall, a fraction of the $1.8 billion the Dutch baby food concern paid just a few years ago.