Healthcare Workers a ‘Catch’ for Multilevel Marketing Companies

Healthcare Workers a ‘Catch’ for Multilevel Marketing Companies

June 22, 2022 0 By Jennifer Walker

The LinkedIn message from a palliative care provider in Connecticut seemed innocent enough, thought Caroline Regan, NP.

“Hi Caroline, You popped up as a suggested connection. I see we have a common connection and that you share an interest in wellness. Let’s connect!”

The woman was also an NP and had gone to the same nursing school as Regan. She’d been practicing for 20 years, and shared some professional interests. The two DM’ed about a nutrition webinar and decided to chat further on a Zoom call.

“At first it was a very natural conversation,” Regan recalled. “I really felt like she cared about what I wanted to do with my career.” But a few minutes in, Regan realized what she thought was a networking opportunity was actually about selling supplements.

The NP didn’t hide the fact that she was working for a multilevel marketing (MLM) company. In this case, the company was Amare, which on its Facebook page describes its products as “Award-winning, sustainably sourced, all-natural supplements that literally transform lives.”

“She even said, ‘If you told me 10 years ago I would be doing multilevel marketing, I wouldn’t believe you, but these products just changed my life. I really think you should try them, and then you can see for yourself, and maybe you can start your own practice too,'” Regan recalled.

Regan was alarmed, but politely brought the conversation to an end. “The second I heard her say, ‘and then I found these products,’ I was like, ‘Oh, okay, this is a sales pitch,'” Regan said. “This is not to network at all.”

Being pitched on MLM programs is a familiar experience for many healthcare workers, especially as companies have eyed an opportunity in the midst of a pandemic that has wrought emotional and financial exhaustion. Medical professionals have long been an ideal target for certain companies — but now, even the Federal Trade Commission (FTC) has sanctioned some of them for their COVID-19 initiatives that went too far.

What Are MLMs?

In the FTC’s view, legal MLM is a form of “direct selling” — not an illegal pyramid scheme. Direct selling, in its most basic form, means selling from one person to another outside of a retail setting: think door-to-door encyclopedias.

A pyramid scheme, on the other hand, fuels itself only from the money one might earn from recruiting additional members, while largely ignoring or eliminating the sale of a product, according to the FTC. People who buy into the pyramid later on inevitably lose money when they cannot recruit more members. According to FTC business guidance, an “unlawful MLM structure” charges participants for both the right to sell a product, and the right to earn recruiting rewards that are unrelated to sales to “ultimate product users.”

In MLM models, there’s ostensibly more emphasis on an actual product, though the seller may make a portion of their money from what their recruits bring in.

Still, there’s not a clearly defined standard to identify when an MLM becomes a pyramid scheme, making them hard to regulate. Under some legal precedents, MLM participants must make more money off the retail sales of a product than what they make from recruits and everyone below — what’s known as a downline.

That’s according to Stacie Bosley, PhD, an economist and associate professor of economics at Hamline University in St. Paul, Minnesota. Bosley said the problem is that the line between buying and selling can start to blur. Participants may be incentivized to keep a large product inventory, which they may or may not use themselves.

“The firm will say, ‘Well, the distributors are their own best customers, of course, they love the product. So we’re going to treat purchases that they make as customer sales,'” Bosley said. “So then the word ‘purchase’ and ‘sale’ starts to become the same, and those are two fundamentally different things.”

Although reliable data on MLMs are hard to come by, it’s generally accepted that the vast majority of those who sign up to sell MLM products — from essential oils to weight-loss supplements — lose money. One study found that only 11% of MLM reps reported making a profit of more than $5,000. A 2018 AARP study found that 74.3% of MLM participants surveyed lost money or broke even during their time selling, but experts told MedPage Today that the actual percentage is probably much higher.

Feds Pursue MLMs

In 2020 and 2021, the FTC made a push to prevent misleading messaging from businesses, including MLMs. The agency sent out three rounds of letters to several MLM companies and others as part of what it describes as “ongoing efforts to protect consumers from COVID-19 scams.” Many had invoked the pandemic in their appeals to potential customers, taking advantage of an air of instability.

One letter was to Isagenix, the company behind numerous weight-loss products, supplements, and shakes. Someone in a social media post had claimed Isagenix products could “boost your immunity 500%!” and mentioned pandemic hardship: “The last 1 1/2 months of this covid-19 pandemic has made me even more GRATEFUL …” one started. The next asked, “Will you get a stimulus check? … [W]ould a [sic] extra $4,100 change your family’s lifestyle? Well my firm is offering that and more…”

Another letter went to Family First Life, a life insurance company, for making false earnings claims. One post cited in the letter claimed its creator was earning “your WEEKLY salary in ONE DAY” and another rep said they made $46,000 in a month. Both salespeople, as it happened, mentioned they had been working in healthcare before — one at a hospital, the other as a nurse.

To Robert FitzPatrick, an MLM expert and author of the book Ponzinomics, this comes as no surprise.

“I hear constant COVID-related stories of beleaguered and devalued nurses saying they are leaving the profession due to pressure, insults, etc.,” FitzPatrick told MedPage Today in an email. “We all know the job market is difficult, so it is likely many will fall into MLMs, which promise so much.”

The state of the medical workforce suggests he’s right. Nurses have left staff positions in droves for better-paying travel positions. By some estimates, physician pay hasn’t kept pace with inflation. Meanwhile, the debt burden for medical school graduates has skyrocketed in recent decades. While the “side hustle” isn’t unique to those in medicine, many healthcare professionals are in search of outside income sources.

Healthcare Professionals: The Ultimate Catch

FitzPatrick has been researching MLM companies for years. He said healthcare professionals are among the most valuable MLM sellers.

“If you’re a nurse, you would be targeted for two reasons,” FitzPatrick said. “One is, you’re a member of a close-knit profession. You’re going to have a lot of colleagues. You’re bound together and you get to know each other and you have to trust each other. If you’re going to use that trust and relationship to market, you’ve got an advantage right there.”

The second, he said, is to legitimize what are usually pseudo-scientific “wellness” products — the best selling category of MLMs. Companies like Amare and Isagenix deal in herbal and nutritional products, which aren’t regulated like medical devices or drugs, but are instead classified as dietary supplements.

“It can’t even legally be called medical, but if it’s sold by a nurse, that lends credibility to it,” said FitzPatrick.

Accurate data on healthcare providers involved with MLMs are hard to come by, mostly because MLM companies and their trade group, the Direct Selling Association (DSA), are among the only ones who gather demographic information on salespeople. But even DSA President Joe Mariano told MedPage Today in an email that he didn’t think the group had information on healthcare professionals.

On Reddit, however, accounts of doctors and nurses pushing MLMs on coworkers are plentiful, especially on the subreddit r/nursing. One popular post invoked nurses specifically: “What is up with nurses and MLM companies/pyramid schemes?” One self-identified registered nurse in a neonatal intensive care unit responded: “Easy pickings. With all the sentiment of burn out in nursing, many looking for an exit plan fall prey.”

In r/medicine, an older post was titled, “Anyone else notice a disturbing number of medical professionals participating in MLMs?” It had 284 comments, many of which complained about coworkers pushing them to buy products or become reps themselves.

One employee at a Midwest health system spoke to MedPage Today on the condition of anonymity because she was concerned it would affect her employment. She said a colleague in her department started selling Isagenix, which deals mostly in “wellness” products, and was among the companies that received an FTC warning in 2020 for earnings and health claims.

“She kind of convinced, or brainwashed, my manager,” the employee said, noting the manager, who is a nurse, “sells the product or the memberships to many, many, many people — like hundreds of people within our hospital system.”

“I’m in a very awkward position because she’s my manager,” she continued, “and I know it’s wrong to sell or even do something like this at your workplace.”

“I keep on waiting for it to go away,” the employee said, “but it doesn’t seem to ever be going away.”

FitzPatrick said he’s had “nurses and doctors contact me and tell me, ‘It has destroyed our department. My supervisors are pressuring us, and our trust is down and there’s rancor, and what do I do?'”

“It’s like somebody selling drugs in your office or something,” he added.

Pitching Healthcare

Some MLM companies take an even more direct route. Young Living, an essential oil company, offers a “professional account” option to those working in specific settings. Those in “wellness and nutrition” and “healthcare” — among other professionals — may qualify for a 40% discount on products.

Optavia, an MLM meal replacement program that sends prepackaged food to customers, once held a virtual webinar specifically for healthcare professionals. Its founder and three “coaches” talked about how the product had improved their lives. Two of the coaches were registered nurses, and the other was a physical therapist. The physical therapist, Mark Blankespoor, was charged the following year (in a case unrelated to Optavia) with defrauding investors of millions of dollars in what a U.S. attorney called a “Ponzi-like scheme.”

There are even guidebooks sold on Amazon titled, candidly, How to Recruit Doctors into your MLM or Network Marketing Team. Another, called Recruit Doctors into your NETWORK MARKETING BUSINESS: STEP-BY-STEP FGXPRESS SYSTEM, explains why physicians are particularly valuable.

“All network marketers in every MLM company have tried recruiting doctors and medical professionals onto their teams since they can be very profitable,” the guide reads. Why? “Doctors and medical professionals see many, many patients every day. Doctors and medical professionals have instant credibility and respect.”

The book promises a system “for recruiting doctors and medical professionals that is easy to follow and implement while creating a massive, very lucrative downline,” prompting sales reps to dress in scrubs, and to appeal to a doctor’s ego by suggesting that they could be featured in a newsletter.

Karl Nadolsky, DO, an endocrinologist at Spectrum Health in Michigan, is no stranger to pitches from wellness product companies, among them MLMs. But he’s cautious about the idea of selling any kind of product out of his office, even as his peers endorse the practice.

“There are physicians who do it — I just know there are,” Nadolsky said. “It’s not just online, I meet them at conferences and stuff, and the different companies market to the doctors, and you hear them talking about it and talking about how it’s extra revenue for their clinics.”

As recently as 2018, Optavia was indeed one of the “sponsors and exhibitors” at the Obesity Medicine Association’s biannual medical conference. In older training and marketing materials, Optavia’s parent company, Medifast, had stated its plans and products were “recommended by more than 20,000 Doctors” since its founding — a claim that has since been tweaked, according to an update on its website, to “recommended by thousands of healthcare providers.”

Amare, Isagenix, Optavia, and Young Living did not respond to multiple requests for comment by MedPage Today.

If online complaints are anything to go by, many healthcare providers like Nadolsky are against MLMs — not just morally, but because they understand that with an MLM, financial success is unlikely, if not nearly impossible.

When hospice NP Regan looked back on the video chat she’d had, getting pulled into an MLM didn’t seem all that far-fetched, though. People are burned out, and looking for alternatives, Regan thought: “I almost see how people fall into this.”

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    Sophie Putka is an enterprise and investigative writer for MedPage Today. Her work has appeared in the Wall Street Journal, Discover, Business Insider, Inverse, Cannabis Wire, and more. She joined MedPage Today in August of 2021. Follow