Dick Greenberg and I were introduced by my insurance agent, Richard Hammerman, a nice guy who sold me my first life insurance policy and also brought to my little advertising agency its first client.
Actually, the timing was pretty good. I had been fired from my $100 a week job with a big time Ad agency and its client the Toni Home Permanent Company. I needed income. As it turned out, my insurance friend came from a wealthy Chicago family who owned a company that manufactured Fad nylon stockings. He convinced his father that they needed an advertising agency here in Los Angeles to promote their west coast business. So “Geoffrey M. Nathanson and Associates” opened its shop with with Fad as its first client.
My friend, Burt Harris offered me a daytime only desk in one of the offices in his little three room suite on the second floor above a lingerie shop in Beverly Hills. Burt rented my office from five o’clock on to a couple of TV comedy writers who worked nights. Nevertheless, I was in business.
Well one client doesn’t quite a real advertising agency make, so I looked for other sources of income wherever I could find it. I worked evenings for an uncle who owned several concessions in a discount chain, which is another story. I also helped Burt sell old movies and short subjects to TV stations, and together we started a magazine for FM radio listeners.
Dick Greenberg, who my kids called “Uncle Dickie”, came into my life at a time when I had a lot on my plate but very little in the bank. By then I had two kids, a third on the way, a mortgage and still catch-as-you-can sources of income. “Uncle Dickie” and his partner, Alan Newman, had a new mail order product, a pill they called Halsion, that was supposed to cure acne and pimples. Dick and Richard Hammerman had been fraternity brothers and, like his friend Dick, also came from a well-to-do Chicago family. Before moving to California he was a vice president and marketing director of his family’s successful rug manufacturing company. He left the company with a nice bankroll shortly after it was sold to Burlington Industries.
Dick and Alan had formed Alan Drug Corporation, the owner of Halsion. Hammerman convinced Dick and Alan that because of my “vast experience” in the health and beauty aid business with Toni, I was just the man to take Halsion to market. We made a deal. I would work for nothing in exchange for a stock option to buy 15% of their company. No money again, but a chance to “make millions”.
Though I was just a neophyte in the magazine business, I had learned the hard way that every advertisement in a magazine is not necessarily sold at its published rate. In fact publishers are often faced with unsold advertising space before they go to press. An editor can always fill the space with a photo, a cartoon, or a public service ad, or he can sell the space to a cut rate ad buyer for whatever the traffic will bear. Come to think of it in the early years of our FM magazine, there were times when I was stuck and often wound up swapping unsold space for whatever I could get in the way of goods or services.
I created a hard-hitting mail order ad for the pimple pills, which I offered to every cheap movie and romance magazine to use as filler for which I would pay them a substantially reduced rate. In other words if the published ad rate for a third of a page was listed at $500 I would offer them $100 or maybe $200 which they usually accepted as better than nothing.
Our mail order ad featured photos of two handsome teenagers, a boy and a girl. The headline read “Acne Pimples Gone”. The copy implied that “two pills a day” would “take their pimples away”. It was a winner. The orders started pouring in and just about every ad more than paid for itself.
The Halsion capsules themselves were essentially vitamin A with several other ingredients thrown in. They were formulated by Alan Newman’s father who was a pharmacist. At that time vitamin A was recommended by some dermatologists for the treatment of complexion problems. However, it was difficult to sell Vitamin A or any other vitamin as a cure-all for any specific medical condition, let alone expect the customers to pay a premium for such a product. Convincing kids that a simple vitamin could be the answer to their acne woes would have been very difficult. Newman’s father’s idea was to put it in a bottle, add a few other harmless ingredients, give it a name and imply it was an almost sure cure.
A 30 day supply of the pills cost the boys less than $1.00 bottled, labeled and mailed. The pills sold for $3.95. What with advertising, handling and refunds we just about broke even. So how did we make any money? The profit came in the re-orders, or what the mail order trade refers to as “bounce backs”. For $6.95 the customer could get a 90 day supply which cost the boys about 50 cents more. But it didn’t stop there.
Now anyone familiar with pimples and acne, knows that the condition is really never the same from one week to the next or even one day to the next for that matter. Ideally if the kids woke up in the morning and their condition had improved Halsion got the credit.
Though there is some genetic predisposition to complexion problems and their severity, which can vary from one adolescent to another, even in the same family, there is no question that pimples and acne symptoms are exacerbated by poor hygiene, diet and emotional stress.
Included with every bottle was a brochure outlining what we called the “Halsion Plan for Complexion Care”. It dealt with the importance of avoiding greasy foods, chocolate and other candies. In addition, it emphasized the necessity that customers keep their hands off their pimples, and wash their faces several times a day with a good soap followed by an astringent. Because there is some correlation between dandruff and complexion problems, we recommended the use of a dermatological shampoo, a cream rinse and of course an oatmeal soap.
For the customer’s convenience the re-order form also included the opportunity to purchase Halsion soap, Halsion astringent, Halsion shampoo, Halsion scalp conditioner and a special Halsion complexion care wash cloth. All of these additional items were produced for us by outside suppliers on a private label basis. Thanks to the addition of our Halsion Plan product line, our “bounce backs” reorders averaged over $12.00.
We never really conducted an in-depth study on the effectiveness of the various additional Halsion Plan items and the personal hygiene instructions included in the program. On the other hand, no dermatologist will ever dispute the importance of a diet and a hygiene regimen similar to what we suggested in our literature.
Needless to say, Dick and Alan were very excited, and so was I. Halsion worked. Whether it was the pills themselves or the plan was not important at that stage of the game. I talked about brand building; about perhaps becoming an acquisition candidate for one of the major pharmaceutical companies like Pfizer, Bayer or Merck.
I felt that the Halsion story would make a great TV campaign, and that the product might even have retail potential. I couldn’t resist suggesting that perhaps we should give it a test. The boys were very skeptical. As happens however, I had some exposure to test market procedures when I worked for the Toni Company. I participated in a limited way in the test of a new Toni product, a cream rinse called “Tame”, in Fresno, California. In Fresno Toni placed the product in drug stores and supported it with a TV advertising campaign, which ran for three months. The extent of my participation however, was to fly up to Fresno every week or so to check sales and inventory and collect feedback from buyers and store managers.
The proof of a successful test depends on whether the initial volume of advertising and the costs related thereto were sufficient enough to stimulate sales and hopefully encourage repeat purchases and referrals, the best measures of customer satisfaction. The test in Fresno and wherever else Tame was tested must have been satisfactory, because Toni expanded its distribution of the product throughout California and the Eleven Western States and ultimately nationwide.
I shared that “Cinderella story” with my partners and suggested we try something similar ourselves with Halsion. As it happens Harriscope, the company I was associated with at the time, owned a television station in Casper, Wyoming. In fact, ours was the only television station in Casper. I assured the boys that their costs for such a test in Casper would be minimal.
Dick and I flew to Denver, Colorado where we called on Republic Drugs, at the time a major distributor in the Rocky Mountain States. We met with the health and beauty aid buyer and his boss, and explained what we proposed to accomplish with our test in Casper. We suggested that Republic consign the Halsion products to Walgreens, the only sizable drug store in Casper. Consignment means that Walgreens would pay only for the merchandise sold, and we would take back all the unsold Halsion product at the end of the test.
I promised Republic and of course Walgreens that we would support the sale with a major TV advertising campaign in Casper on the assumption that if it was a winner in Casper we would hope to expand the test to the Denver market where we would agree to work on the same guaranteed sale basis. If the Denver campaign was successful we would hope to introduce the Halsion line in the Eleven Western States.
Were we dreaming? Sure. But then again, we had enough product for the Casper test and we were conducting our advertising campaign on the only tv station in town at virtually no cost. I wrote and produced a TV commercial featuring an actor friend of mine, Charley Irving, who played a judge on a daytime TV soap opera. He turned out to be a very good pitchman and as a favor did the job for me for only $300.
Though it may have seemed to my partners and the other participants in the test that I knew what I was doing; believe me, I was just winging it. Actually I ran enough TV commercials in little Casper to support a campaign in Los Angeles. The Casper TV audience was saturated with pimple pill spots. Walgreens sold out and reordered from Republic. The kids were even buying the soap and shampoo along with the $6.95 economy size jar of Halsion tablets. Discounting the distorted cost-to-sales efficiency of the TV campaign, we had a winner. What with the numbers, especially the repeat sales results, the test was a smash. Our next move was to meet with Republic and the Walgreens buyers and discuss expanding the test to Denver.
The problem we faced in Denver was that there were three TV stations serving the metro area which was 35 times the size of Casper. Obviously the economics were substantially higher. We would need at least 35 times the amount of Halsion inventory to service the Denver market, and when you factor in the cost of TV advertising in Denver which, in Casper had come to us gratis, we figured that the Denver test could cost us at least $200,000.
My partners decided that for the purpose of the Denver test we would initially stock only the pimple pills in the stores. This made sense in that the TV commercial made no reference to the rest of the Halsion line anyway. We had no problem selling that decision to our distributor, because the stores were not crazy about giving up additional shelf space in their health and beauty aid departments for what was only a test.
As for the television stations, I saved some money by negotiating an arrangement similar to my magazine deals whereby they would run our commercials whenever and wherever they had an unsold TV spot available. It’s called “run of station time”, the cost of which was as low as 25% of their published rates. We used to say that, unsold TV slots like unfilled magazine space is as valuable to a TV station as yesterday’s wilted lettuce is to a supermarket… Zip!
No sooner did we stock the stores than I got a call from Dick. Was I free? There was a man in his office named Dickerman who said he worked for the U.S. Department of Health Education and Welfare. He was asking questions about Halsion. I ran right over to Dick’s office expecting the worst. As it turned out I had good reason to dread that meeting.
Dickerman was a little man in an ill-fitting suit with an attitude. I thought to myself, “This guy is representing the United States government?” As I remember him today, he looked a lot like Dustin Hoffman in the current play “Death of a Salesman”.
“Mr. Greenberg has informed me that THIS is the Alan Drug Corporation. Is that correct?” he asked waving his arm around the room disdainfully. “THIS is it?” he asked again.
I tried to explain that this was only our shipping location, that our products are formulated to our specifications, packaged and supplied to us by reputable independent manufacturers under our private label.
“You make some broad claims about your product. How do you propose to back them up?” he asked with a sneer.
“The proof is in our customer satisfaction,” I answered. “The re-orders speak for themselves. In addition we have received hundreds of letters from people thanking us for introducing them to Halsion. Some say the Halsion Plan has changed their lives.” I went on to say that in addition, we offer our customers a money back guarantee should they not be fully satisfied with their purchase of any product in the Halsion line.
“Nevertheless,” responded Dickerman, “from the government’s standpoint your pill is nothing but vitamin A, given another name and marketed as a cure for acne. The government has it on authority that acne is caused as a result of a hormone imbalance, not a vitamin deficiency, and you are making claims on your packaging and in your advertising that science simply will not back up.”
With that last statement, Dickerman walked out and two weeks later agents from the Federal Food and Drug Administration descended on Dick’s little office on Sherwood Avenue, and physically seized all of the Halsion tablets in our inventory. They paid a visit to the Pasadena Company that manufactured Halsion a few days later and confiscated all product, packaged as well as unpackaged. They did the same thing in Denver.
For all intents and purposes we were out of business. Our letters to our customers contained refund checks along with a short explanation that Alan Drug was temporarily unable to fill their orders at that time, that we were sorry about the delay and promised to notify them when we were prepared to resume shipment.
Needless to say we were devastated. Why us? We had played by the rules. Halsion worked; it wasn’t some kind of a scam. Obviously we needed legal advice. Dick called Frank Gettleman, a lawyer friend in Chicago who advised that because the government had officially initiated the seizure in Denver it was recommended that we retain a Denver law firm to challenge the government. We hired the firm of Kelley, Inman, Flynn & Coffee. One of the firm’s partners, Bob Innman, agreed to take on our case and challenge the government on the grounds of “illegal seizure”.
Our case was heard by a United States Federal Court Judge named Olin Chilson Hatfield, a hard-nosed no-nonsense man who seemed to reject every argument raised by our attorneys.
For instance, we had compiled a long list of Denver area Halsion customers who had been reordering the mail order version of our products on a regular basis. We met with about 20 young people, selecting 5 to offer as witnesses, who would be testifying to Halsion’s effectiveness and the important role it had played in their lives. One maintained that he could not stand to look at himself in the mirror before Halsion. Another was going to testify that thanks to Halsion she finally had her first date. Another claimed that before Halsion she was contemplating suicide. Parents too were prepared to testify that they believed that Halsion had “saved” their teenagers’ lives.
Their stories were so meaningful that whatever skepticism Dick and I felt about the efficacy of our product was gone. Yes, we had received hundreds of letters from satisfied customers but we had never met them face to face. How could any government deprive these and other kids of a product that was changing, even saving, their lives? We asked ourselves, “Why would any government seize such a product?” Had Dickerman and his lawyers ever talked to our customers? Had any of our customers ever complained to the government? “Wait till these kids get on that stand.” we said to each other.
Well we will never know, because they never got a chance. Not only did the judge refuse to allow them to testify, he wouldn’t even allow us to enter that portion of our legal briefs dealing with endorsements and case histories. He did however accept testimony from our dermatologists and hygienists relative to their endorsement of the Halsion ingredients and vitamin A in particular for the treatment of acne and pimples.
He also listened to the government’s doctors who claimed that vitamins, such as vitamin A, had no measurable effect on the treatment of acne. Rather they maintained, like Dickerman, that teenage acne was the result of a hormone imbalance, a theory by the way, that was dis-proven in later years.
The trial lasted three days. It was a terrible time for Dick and Allen and me. The government was killing us. At the end of every day’s court session we headed straight for a local bar. It seemed that the judge was smacking down our lawyers every time they got up to speak.
On the final day of the trial the judge called the attorneys for both sides up to his bench and after a long detailed explanation loaded with a lot of legalese we didn’t understand, ruled that subject to certain changes in our claims and advertising, Halsion was free to resume sales, and the government was thereby ordered to return all our seized merchandise.
In other words, after the shock of his decision sunk in we realized that we had won. If we make the changes ordered by the judge we were back in business. All he asked was that we tone down our sales pitch, that we take out such claims in our printed material as “the pills represent a scientific breakthrough,” or that they “guaranteed lasting relief”. We had to state that the pills were primarily a vitamin formula that constituted only one part of the Halsion plan, and that it had proven effective in treating certain “mild” forms of acne and pimples.
We felt that we could live with all of these changes and representations in our labeling, advertising and sales materials. We truly believed that we had a product that, even though we couldn’t make the claim, really did change lives.
Our lawyers congratulated themselves and we flew back to Los Angeles to edit our labels and sales materials to meet the judge’s requirement. We made plans to resume production and start taking orders. We decided that we would postpone our test in Denver until such time as our mail order business could be brought back in line.
Screw Dickerman and the FDC; this time the law was on the side of the little guy… or so we thought. Our euphoria was short lived however. It’s still too painful to go into the details, but we hadn’t been home for more than a week or two when the other shoe dropped. The government took their case to the Federal Court of Appeal. They refused to release our merchandise and advised our suppliers to cease production. For all intents and purposes we were out of the business once again, before we even had a chance to re-start it.
The United States Tenth Circuit Court like the District Court is also located in Denver. Our case was heard before three judges named Murrah, Pichett and Seth. I never asked Dick where the money came from to rehire our lawyers, but both Bob Innman and Frank Gettleman were there to defend the first judge’s decision.
At the appeal trial, the government presented some of the same arguments they did at the first trial; that our advertising and labeling, even with the changes imposed by the first judge, were still misleading teenagers and making claims that “science simply could not back up”.
This time however, they cited some 1936 Federal statute that would classify Halsion as a “new drug” which prior to its release to the public would require federal approval. Suddenly in the government’s eyes we were no longer a vitamin for which we had no right to make claims. Now we were a “drug” which had been illegally released to the innocent public with no prior FDA approval, something which would of course take years to obtain. As for our claims which we had agreed to change in accordance with Judge Hatfield’s demands; the FDA maintained that they too were subject to Federal approval.
Our attorneys contacted their counterparts representing some of the big U.S. drug manufacturers, such as Pfizer and Bayer and Merck, inviting their participation on the assumption that an unfavorable decision against Halsion at the appellate level would open the door for the FDA to step in and make onerous demands whenever any drug manufacturer proposes to put a new product on the market. They were sympathetic towards our side of the case and even sent legal representation to sit in at the appellate trial. However at no time did they ever offer to step in as “friends of the court” or even offer to help fund our legal expenses.
Despite the fact that the industry had left us to fight our own battles, our team fought hard, claiming that the government was bringing their case on new grounds, that there had been no legitimate precedent, and that they had selected Halsion because they knew that the size of our little company made us particularly vulnerable.
We tried once again to ask the court’s permission to hear our customers as witnesses and give us an opportunity to back up our claims, but we were refused on basically the same grounds as ruled by the trial court judge. The question was called; the appellate court judges took the matter under advisement and several days later two of the three judges decided to override the lower court’s decision which had required only a change in labeling and advertising. The third judge disagreed and wrote an opinion in our favor. However he was in the minority. We had lost two to one and this time we were really out of business. Taking our case higher, to the Supreme Court, was out of the question.
There were rumors afterward that the big drug companies had virtually sold us down the river, making some kind of a side deal with the government. The story was that the Feds needed a win at the time, and Halsion was a weak and expendable target. In any case the momentum and certainly the money were gone. Halsion simply disappeared. Dermatologists continued to recommend vitamin A as a treatment for acne, and several years later a prescription-only topically administered product called Retin-A was introduced specifically for the relief of acne and related complexion problems.
From time to time I look back at those satisfied customer testimonials and the interviews we conducted with those kids in Denver. Whether it was the “pills” or the “plan” or both, Halsion worked. I can’t help but think that we really had something. Like Marlon Brando said in the movie “On the Warerfront”: we “could-a-been a contender”.
I lost track of Alan Newman, but Dick Greenberg and I have remained good friends over the years. Bitten by the entrepreneurial bug, Dick experimented with several other consumer products with mixed results. He found his niche however in real estate when he began using our old mail order advertising formula to sell mini ranch land on the Colorado River. He met his partner-to-be, an eccentric old man, in a Palm Beach, Florida coffee shop. This man’s name was John D. MacArthur, who at that time just happened to be one of the richest men in America.
MacArthur made his money in the insurance business, Bankers Life and Casualty Company, and invested it in real estate. When Dick met him, sitting alone in that motel coffee shop, MacArthur was the largest land holder in Florida and also happened to own a million acres bordering the Colorado River. Dick and his new partner made a deal. They would subdivide the Colorado River land into 5 acre parcels to sell as mini ranch properties. Dick would absorb all sales and advertising costs and they would split the profits 50/50. Dick used his Halsion acquired magazine advertising skills to sell thousands of mini ranches on the Colorado River for $500 each, $15 down and $5 a month interest free. Sounds unusual? Not really, MacArthur got his start as a young man selling term life insurance policies during the Depression for $2 a month.
According to Dick, MacArthur was an ultra-conservative who would turn over in his grave if he knew that his money was funding the John D. and Catherine C. MacArthur Charitable Foundation, one of the country’s most generous supporters of Public Television and many liberal causes.
Later, having developed a taste for real estate, Dick partnered with a contractor/developer friend in Fresno, California, and together they have built and own 450 apartment units, and at this writing they have another 150 currently under construction.
Dick and his wife Sally live happily today in Pacific Palisades, California and vacation often at their villa in Puerto Vallarta, Mexico.