A Manitoba entrepreneur is accusing the federal government of putting her family out of business — without justification — leaving them devastated by huge losses.
"For seven years, we've tried to get somebody to listen. There was a mistake made," said Cheryl Swarath, of Gonor, Man., who is suing the federal government over the ordeal.
"I got screwed by my own government. And I know that my government doesn't care."
The Swarath family company, NorthRegentRx, was licensed to import and sell a natural, non-prescription alternative to Viagra called Libidus. At its peak in 2005, annual sales were well over a million dollars and growing fast.
Libidus was the company's marquee product until the crackdown by Health Canada. (CBC)
"This was something we built from nothing and it meant everything to us," said Swarath, who stressed the product she imported was tested to meet the highest international standards.
"We were going to bring in only the best, highest, safest quality stuff that we could find on the market."
Sparked by U.S. action
Swarath said everything soured the following year, after the U.S. Food and Drug Administration cracked down on similar products sold online in that country.
She believes the sweep was sparked by complaints from the pharmaceutical industry, which didn't like shady operators moving in on its market share.
"The [natural products] industry does need regulation. There are a lot of basement bandits out there," said Swarath.
The FDA tested a product also marketed as "Libidus" that was sold online and found it was spiked with real Viagra, making it illegal to be sold as a natural supplement.
Health Canada's Winnipeg branch initiated recalls, despite not having definitive proof the product was tainted. (CBC)
Swarath said those products were cheap knock-offs — different coloured pills sold in different boxes — not from the Malaysian manufacturer she purchased from.
"We weren't putting junk out on the market. We take this stuff. My father-in-law was taking it at the time," said Swarath.
When the FDA told Health Canada about its crackdown, the regulator tested the product NorthRegentRX was selling.
Tests never proved contamination
Those tests found no trace of Viagra or similar pharmaceuticals, but because of other anomalies in the results, Health Canada wanted to do further testing.
It suspected a pharmaceutical was being masked, but documents show it never did prove that.
"It's like saying, 'I've got a white powder here — and it's cocaine.' And it could be baby powder," said Swarath.
Soon afterward, Health Canada asked Swarath to contact all 700 of her retail customers and tell them to remove the product from their shelves.
Swarath said she bent over backward to comply, but the results were devastating.
"Once Health Canada accuses you of being the bad guy nobody wants to touch you. Stores are not interested in purchasing from you," said Swarath.
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In the meantime, she said, months went by without Health Canada producing conclusive test results to justify its actions.
Sawarth switched to a Canadian manufacturer licensed by Health Canada, but still the agency wasn't satisfied with the product.
"We felt like that game at the fair, you know, 'Whack-a-Mole.' Every time you stuck your head up to do something you got whacked. And that's how we felt with Health Canada," she said.
"We didn't realize until we were a few years in that it was never going to get fixed," she said.
"You can't fight the government. They made a decision. They are sticking by it. They don't care if they were right or wrong."
Firm collapses under pressure
The company struggled with more bureaucratic delays, recalls and seized shipments. In 2010, crippled and out of money, NorthRegentRx closed its doors.
"We couldn't do it anymore. We were hemorrhaging money," said Swarath.
Swarath hired a former Health Canada chemist to test the products independently. He found no trace of pharmaceuticals and concluded Health Canada's testing was flawed. Another expert agreed.
"We called them on it and we followed up on it. We didn't just drop off the face of the planet like they figured we would," said Swarath.
Conservative MP James Bezan called the action taken against NorthRegentRx a 'serious injustice' and asked the prime minister to intervene. (CBC)
Manitoba Conservative MP James Bezan then wrote to the prime minister on the company's behalf, telling Stephen Harper, "there is irrefutable evidence errors were made."
Bezan then wrote, "I believe a serious injustice has been brought upon NorthRegentRx by Health Canada. I am requesting your assistance to immediately address this long outstanding issue."
Swarath said nothing came of that.
Government memo flags its mistakes
An internal government memo she has obtained since suggests Health Canada knew it made a number of mistakes.
"This investigation is likely to identify a number of weaknesses in the branch," wrote Julie Desrosiers in a 2007 email about the NorthRegentRx case.
"These weaknesses are impeding our ability to exercise the departmental principles of transparency and fairness, not to mention putting the branch at risk for litigation."
An internal email by a Health Canada official flags 'a number of weaknesses' in its handling of this case. (CBC)
NorthRegentRx is now suing the government for $102 million, which Swarath said represents the family's past and future losses.
That puts taxpayers potentially on the hook. Swarath said she simply wants a fair settlement.
"It's extremely expensive to take the government to task. I'm taking on a giant. They have endless resources. I've got one lawyer they've got what, 50?"
Bezan told Go Public he still supports the Swarath family and suggested he hopes they win.
"Cheryl and their family are good hard-working people. I believe in them explicitly and I would hope that they come to a good conclusion through the court case," said Bezan.
"I want to make sure that Health Canada does treat all companies and all individuals fairly."
Similar products still on shelves
Meanwhile, Go Public found very similar natural health products still for sale in Canada — with Health Canada's blessing — including one which was found to contain Cialis, a pharmaceutical product similar to Viagra.
"Durazest for Men" was recalled twice because of that, in 2010 and 2011, but its distributor is still in business.
"What makes [their product] safe and mine not safe, when [Health Canada] failed to prove that mine was actually contaminated?" said Swarath.
"Tests did prove these other guys were contaminated, but they allowed them to work through the process and get licensed anyway."
Go Public found a similar product, Durazest for Men, still for sale in Canada, with Health Canada's blessing. (CBC)
Go Public asked Health Canada to explain that and to give its position on this case. The department said it would reply, but never did.
"I have no doubt that there is stuff on the market that Health Canada has licensed that isn't safe," said Swarath.
"If part of [Health Canada's] mandate is to protect Canadians, who protects me? I am a Canadian. And nobody protected me from them."
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