The FDA’s public decisions on NAC have had a significant impact on the dietary supplement industry. This ingredient has been used in products for decades without any issues, and yet the FDA has “determined that NAC is excluded from the dietary supplement definition under the FD&C Act (Food, Drug, and Cosmetic Act) because NAC was approved as a new drug before it was marketed as a dietary supplement (or food).”

In August the FDA announced final guidance on its enforcement discretion for NAC in products labeled as dietary supplements.

Over the many years that NAC has been sold in or as a dietary supplement, there has been no evidence of health issues, fortifying its low risk for public consumption.

The Effects of FDA’s Position and Amazon’s Action

The FDA’s stance on N-acetyl cysteine quickly impacted sales for companies selling NAC or products with NAC in the formula. Amazon quickly took action on NAC products by removing them from its platform, dealing a financial blow to many businesses.

The FDA’s announcements coupled with Amazon’s actions towards NAC products has caused concern for many supplement companies and further raised questions with consumers.

Despite this situation, not much has been said about the insurability for businesses selling NAC, or whether that could positively impact the NAC product marketplace.

Insurance Basics

All supplement manufacturers carry a Commercial General Liability/Product Liability insurance policy. This purchase is going to involve an insurance broker (who represents your business) and an insurance company (which provides the policy).

Over the years, manufacturers of dietary supplements have more than likely reviewed their Liability Policy and its form titled “Ingredient Exclusions” or “Banned Substances.” With this review, you identify ingredients that are excluded from liability coverage and should be avoided when manufacturing certain products—unless there is an “Exception” to an ingredient exclusion, which gives coverage “Back” for that single ingredient (e.g., yohimbe).

The review of this form usually stops after doing a quick skim of the bullet point list of ingredients. However, there is often additional exclusionary language associated with this list, which we examine below. Note that the review here highlights actual policy language pulled from insurance companies—which are not named here—that will insure dietary supplements.

The Deep Dive

Insurance Company #1 Exclusion:

“This insurance does not apply to any damages, loss, cost or expense arising out of the actual, alleged or threatened hazardous properties of any goods or products:

    A. Declared unsafe by the applicable governmental or regulatory authority having jurisdiction on the basis of such hazardous properties, regardless of whether or not such goods or products were declared unsafe before or after

        1. The goods or products were disposed of, distributed, handled, manufactured or sold; or
        2. Such damages, loss, cost were incurred; or

    B. Disposed of, distributed, handled, manufactured or sold without approval by the applicable governmental or regulatory authority having jurisdiction.”

Insurance Company #2 Exclusion:

“Any other substance, ingredient or product, in any combination, that the US FDA has determined as of the inception date of this policy is not a dietary ingredient or a dietary supplement under DSHEA”

Insurance Company #3 Exclusion:

“… Furthermore, this policy excludes any liability arising from any product which breaches and/or is non-compliant with US Federal and or State Law and or DEA rules.”

Insurance Company #4 Exclusion:

“Any product, supplement, additive, substance, ingredient or compound manufactured, imported, formulated, sold or distributed by you or on your behalf by others in violation of any regulation or law.”

Analysis

As you can see from the exclusionary language above, NAC is not specifically called out as an ingredient, however, it will be captured by this language in the event of a claim, which would most likely bar coverage for the business.

Insurance companies and underwriters are not as well-versed on these recent developments and therefore have no urgency to address their policy language for NAC.

Unfortunately, many, if not all, companies selling NAC have been unknowingly un-insured for any claims tied back to an NAC product. To further that, new businesses looking to use this ingredient have often been told they have an “un-insurable” business because of this single ingredient.

A Solution

Over the past couple of months, we have worked closely with the Natural Products Association (NPA) and industry experts to develop a solution for this insurance problem—effectively giving back and specifically calling out that products with NAC will be covered, despite the exclusionary language.

Through our partnership with the NPA, we are able to provide its members with Liability Coverage when it comes to not only selling supplements, but also those containing NAC.

If you are selling, used to sell, or want to sell products containing NAC, please reach out to me for further information.

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About the Author: Chris Morey is Senior Vice President at Bolton & Company. He is a Certified Sports Nutritionist who focuses on the needs of clients within Bolton’s Dietary Supplement Practice Group. With the team’s 20 plus years of industry experience, Morey serves close to 200 of the nation’s supplement manufacturers and continuously is studying the insurance market to find the right insurance solutions for his clients. With a substantial focus on the supplement industry and all parts of the supply chain, he also strives to serve the hemp and CBD product space as the insurance industry continues to fluctuate and evolve. Prior to joining Bolton in 2015, Morey worked for Nutrishop USA selling sports nutrition products and studying the effects of various ingredients. He holds a Bachelors of Arts in Business Administration from Azusa Pacific University. He can be contacted at cmorey@boltonco.com.