Secret memo reveals Fonterra alarm

By Deborah Hill Cone

Friday 1st November 2002

A secret memo is the smoking-gun document in A2's just-filed High Court claim alleging Fonterra Co-operative Group has been negligent and acted misleadlingly over health risks associated with some milk proteins.

Excerpts from the October 8, 2000 briefing paper reveal that the Dairy Board (now Fonterra) was warned of the serious health risks of A1 milk, including a link to mental disorders, two years ago but kept quiet about it.

The internal document, which summarised the research on A1 milk's link to diabetes, coronary heart disease and autism, suggests Fonterra:

* was petrified about how the public would react should the full information about the dangers of A1 milk leak out;

* kept confidential the finding that an infant formula made from Fonterra's milk, Pregestimil, contained a high amount of the potentially dangerous peptide BCM-7;

* knew there was "a relationship between the consumption of A1 and deaths due to mental disorders" and had filed a patent application based on that link; and

* had applied for approval to carry out its own research by feeding autistic people A1 and A2 milk.

The memo also shows Fonterra was told by its scientists it would be relatively easy for it to go ahead and produce A1-free milk it could even distribute it separately from "normal" milk but so far it never has.

The case comes amid a battle between A2 and Fonterra over claims of health benefits from non-A1 milk. Fonterra has a conflict of interest on the one hand it owns half the patent linking A1 milk with diabetes, but to capitalise on that asset it risks damaging its core business of producing A1 milk.

Meanwhile, A2 Corporation is trying to push ahead to get A2 milk on the market. It advertised last week for farmers willing to supply A2 milk and said it hoped to have its product on supermarket shelves in the new year.

A2 Corporation says there is a "huge potential win" to reposition milk as a health product. There is growing awareness of issues of food safety internationally, with consumers becoming aware of new research on dairy intolerance.

"There is growing evidence, but yet unproven, that peptides released from milk may be related to occurrence of some mental disorders," Dr Jeremy Hill wrote in Fonterra's internal briefing paper, prepared at the request of senior executives of the Dairy Board.

The peptide Dr Hill is referring to is beta-casomorphin-7 (BCM-7), at first thought to be produced on digestion of any kind of cow's milk but later shown by both German and New Zealand researchers to be released only by "A1 type variants and not A2 type variants," Dr Hill wrote.

BCM-7 is at the centre of research showing links between dairy products and health risks.

Research by University of Florida scientist Dr Robert Cade in 1999 found that children diagnosed with autism or schizophrenia had grossly elevated levels of morphine-like compounds, exorphins, in their urine. These are derived from undigested BCM-7.

In a complementary study Dr Cade's team also showed that lab rats with a similar inability to digest BCM-7 accumulated high levels of exorphins in areas of the brain involved in autism and schizophrenia in humans.

The rats showed autistic behaviour such as being oblivious when bells were ringing next to them.

BCM-7 is also the common denominator in concerns over infant formula Pregestimil. The October memo says Fonterra research has shown that Pregestimil, a hypoallergenic formula, was shown to produce a high level of diabetes in rats in the Food and Diabetes Trial carried out by Professor Bob Elliott.

"[Fonterra] has since shown that Pregestimil contains a high amount of BCM-7. This result is not known outside of the New Zealand dairy industry and forms the basis of a confidential NZDRI [New Zealand Dairy Research Institute, since renamed Fonterra Research Centre] report," Dr Hill wrote in the memo.

Pregestimil is made by Mead & Johnston, a subsidiary of Bristol-Myers Squibb, using milk protein supplied by Fonterra.

"If the media (or A2 Corporation) were ever able to assemble the information shown in this paper they could put an alarmist spin on the whole area of milk consumption or alternatively leap to conclusions about A1 vs A2 effects before a case is proven either way," reads the memo, from Fonterra research scientist Dr Jeremy Hill.

A2 has been at loggerheads with Fonterra over the significance of the research and the owner of the rights to it as well as whether New Zealand's herd, three-quarters of which produces A1 milk, should be tested and re-engineered as a result.

Fonterra may have backed itself into a corner. After dismissing or downplaying research showing links between A1 milk and health problems it will face an embarrassing and expensive climbdown if it is forced to change its position.

Fonterra maintains the research so far has not been conclusive as the studies show only a correlation between A1 milk and health risks, not a cause and effect and does not justify warning anyone or making changes.

But the lawsuit risks inflicting huge damage to New Zealand's international reputation and foreign earnings as Fonterra accounts for $14 billion worth of exports, 20% of the country's total offshore receipts.

Industry sources said Fonterra had the chance two years ago to swiftly take the research on board and make changes to its three million-strong herd, by working out which ones were A1 and which were A2, but instead chose to adopt a "fortress mentality."

They said Fonterra has too much on its plate with fallout from last year's merger and had been distracted from the science-led developments in the area of A1 versus A2 milk.

Just last month Fonterra was "strenuously rejecting" the suggestion it might face a legal minefield in the US as a result of research showing a link between childhood diabetes and the A1 protein in cow's milk.

But now it faces this potentially highly damaging court action in its own backyard.

A2 Corporation has asked the court under the Fair Trading Act to order Fonterra to put health warnings on its A1 milk setting out the risks of Type 1 diabetes, heart disease, autism and schizophrenia.

A2 also wants the court to force Fonterra to publicly disclose all the information it has about the links between A1 milk and health risks.

Barrister Julian Miles QC for A2 will argue Fonterra has been negligent in not warning the public about the research suggesting A1 milk is unsafe for some people.

A2 claims Fonterra has been "materially influenced" by its commercial objective of continuing to sell A1 milk and consumers of A1 milk are continuing to suffer from the diabetes, heart disease, autism and schizophrenia as a result.

Its chairman Jim Guthrie said it had taken the legal action because it believed Fonterra, as part-owner in the original A1 patent, was acting contrary to the objectives of the patent to develop milk free from diabetic harm and thus denying A2 a commercial benefit from joint ownership of the patent.

"The directors of A2 Corporation are alarmed and dismayed by the lack of action by the Dairy Board and Fonterra in the face of a rising tide of scientific information in relation to the epidemic of diabetes in New Zealand," Mr Guthrie said.

A2 says Fonterra ignored "reputable scientific evidence" indicating the likelihood of a connection between A1 milk and various health problems.

It is expected A2 will call international dietary experts and scientists to file affidavits to support its case.

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