PHARMANEX VICTORIOUS IN FIGHT OVER SUPPLEMENT.

Byline: Ben Sullivan Daily News Staff Writer

In a major win for the nutritional supplements industry, a federal judge has ruled in favor of supplements maker Pharmanex Inc. in its two-year legal battle with the U.S. Food and Drug Administration.

The Pharmanex case centered on whether a cholesterol-lowering substance that the Simi Valley company markets under the name Cholestin is a drug or a dietary supplement. Because it contains the same active ingredient as a prescription medicine sold by drug giant Merck & Co., the FDA argued it is a drug, subject to strict government approval and regulation guidelines.

But Pharmanex attorneys argued that because the substance is naturally occurring - Cholestin is harvested from a red yeast found on certain kinds of rice - it is merely a supplement, a product category virtually unregulated by the FDA under the 1994 Dietary Supplement Health and Education Act.

In his ruling late Tuesday, U.S. District Court Judge Dale Kimball agreed with Pharmanex, permanently lifting a ban ordered by the FDA last May on Pharmanex imports of Cholestin ingredients from its Chinese supplier. Kimball said Cholestin clearly meets the dietary-supplement definition as a product other than tobacco intended to supplement the diet.

The judge's ruling allows Pharmanex to continue importing the red yeast rice to its Farmington, Utah, factory where it produces 90,000 capsules of Cholestin a day. Pharmanex was purchased last October by Nu Skin Enterprises, based in Provo, Utah, one of the nation's largest direct marketers of health and beauty aids.

Analysts said the case will have broad implications for the $5 billion-per-year nutritional supplements industry, which increasingly markets products to consumers for conditions, ranging from high cholesterol to impotence, previously considered the sole domain of prescription medicines.

``This is highly significant because it reconfirms that naturally occurring substances sold off the shelf are not drugs,'' said analyst Patricia Negron at Adams, Harkness & Hill Inc. ``Companies like Merck and other large pharmaceutical entities with longstanding relationships with the FDA are threatened by these kinds of products and have used their muscle to prevent them being sold. This is a very important milestone for the (supplements) industry.''

Negron predicted the ruling will further motivate drug companies to establish their own supplement lines to augment their prescription drug business.

Pharmanex President Bill McGlashin said the company was pleased with the judge's ruling, adding that intense study by Pharmanex or another dietary supplements maker, to identify the key ingredient of a naturally occurring product, does not ``transform (the product) into a drug.''