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Zicam Addicts (and Shareholders) Were Ripped-Off

When the Food and Drug Administration warned consumers to stop using Zicam nasal products last June, the company's stock price plunged from $19 per share to less than $6 in a single day. Millions of avowed Zicam "addicts" were told to return the cold remedy to their pharmacy or dump it in the trash. Zicam's parent company, Matrixx Initiatives, "voluntarily" took the product off the market.

Los Angeles lawyer C. Dana Hobart, who had been using Zicam for years, was skeptical about the reported dangers. The FDA had said that it had received 130 reports that the products could cause a loss of smell, but gave few other details when warning consumers against using it.

Hobart speculated that if the claims were credible, they'd likely lead to lawsuits. He decided to dig up the suits to see what evidence backed the ban on his favorite cold product. He wasn't amused by what he found. The FDA's warning that Zicam could lead to a loss of smell was based on "junk science" claims that were thrown out of court 10 times, he said.

In a story published in the National Law Journal, Hobart said that seven of the cases based their scientific evidence on the testimony of one witness, who had flip-flopped on whether or not the nose's "smell receptors" could be even reached by Zicam's nasal pump. In each case, the judges determined that this witness' testimony was not credible enough to present to a jury. Experts in other cases also failed the credibility test, Hobart said. Zicam's parent company, Matrixx, has never lost a product liability case. In fact, only one of these cases even made it to trial, and the makers of Zicam prevailed before a jury.

The FDA also claimed that "scientific literature" indicated that zinc salts can damage your sense of smell. But this literature was based on 1930s experiments and examined a different substance--zinc sulfate, not zinc gluconate, which is the active ingredient in Zicam, said Hobart, a partner at the Los Angeles law firm of Hennigan Bennett & Dorman.

So what was the FDA thinking? Spokeswoman Siobhan DeLancey said this was "not a ban or a recall." It was an "early consumer warning." These warnings don't have the same level of proof as a law suit, she said.

DeLancey then sent a series of links including a transcript of a media call where Deb Autor, FDA Director of the Office of Compliance for Drug Evaluation and Research, told journalists that the agency "sent a warning letter" to Matrixx telling them "to stop marketing Zicam intranasal zinc products." In addition, Autor said on the call that "Matrixx must provide the FDA with a plan for how it will remove existing inventory from the marketplace."

This may be a semantic battle, but that sounds like a ban to me.

When I pressed DeLancey about the scientific research justifying the ban, she said the FDA had done a report, but it was not available to the public. I have asked them to reconsider and provide this scientific evidence so we can know why this popular product was pulled from the market. Stay tuned.

Meanwhile, the brouhaha has created a nagging problem for Matrixx shareholders, who continue to see their share prices languish in the $4 range. Matrixx recently reported that second quarter profits were off 38% from this time last year, largely as the result of losing the ability to market the nasal products that had accounted for more than half of the company's sales a year ago.

The company is now facing litigation from its shareholders, who contend they shouldn't have been blindsided by the FDA move. Hobart opines that the real frustration is that Matrixx shareholders can't sue the FDA, which is shielded from most consumer litigation by virtue of its role as a government entity.

The FDA should be a vigilant watchdog of public safety, said Hobart, who has no connection to Matrixx other than using its products. But it shouldn't scare consumers or ban a product until it has done its homework. Here, Hobart said, the agency pulled a product based on what one judge called "the never-never land of conjecture and wishful thinking."

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