Contract Manufacturing and Innovation

February 8, 2012
Marie Redding

Faced with regulatory, budgetary, and other challenges, contract manufacturers are making it work.

Contract manufacturers today face numerous challenges. Dietary supplement GMP regulations, rising costs, and overseas competition are just a few of the burdens that contractors now bear.

In many ways, manufacturers have met these challenges-and surpassed them. Upgrades to production lines, facilities, and testing procedures, coupled with additional services companies now offer, have all lent to a contract manufacturer model that offers dietary supplement marketers more than ever before.

Challenges

The cost of GMP compliance, price hikes, and other factors means that contract manufacturers have had to evaluate the impact of rising costs on their production lines in order to remain profitable and competitive.

Steve Holtby, president and CEO of contract manufacturer Soft Gel Technologies (Los Angeles), says that customers can often underestimate a contract manufacturer’s costs. Production costs are up, and raw material costs are rising, he says.

“Price increases are announced globally on a frequent basis-almost weekly,” says Holtby. “And there is tight supply of some of the starting raw materials. Vitamins are showing sharp increases, and we’ve recently had to inform our customers of the natural vitamin E shortage,” he explains.

According to Holtby, other specific contributors to rising costs are increased corn and sugar prices; higher petrochemical costs; minimum-wage increases in China; extreme power shortages in China due to rising coal costs; and increased demands for environmental protection efforts worldwide.

Not surprisingly, U.S. contractors will continue to face more competition from countries where operations are a fraction of the cost. The fact that many foreign facilities are also aligning themselves with GMP requirements and now competing on that front as well adds fuel to the fire.

“Emerging countries like India and China are starting to provide low-cost products that meet GMPs,” says Holtby. “As these countries rapidly improve their facilities and become GMP compliant, more manufacturers will relocate their operations to these regions.”

GMP compliance can also slow production time. Explaining to customers that lead times will be longer is an issue contractors say they are faced with all too often.

NHK Laboratories (Santa Fe Springs, CA), which provides contract manufacturing, private label, packaging, fulfillment, and distribution services, says this has been one of its challenges lately.

“The extensive testing and strict requirements now [necessitate] longer lead times for everything,” explains Shabbir Akand, NHK’s director of sales and marketing.

Holtby agrees and says that many of Soft Gel’s customers don’t understand why an order may take longer to fulfill now. The company is doing its best, however, to communicate enough information about the manufacturing process to customers so that they will, hopefully, understand. Also, to help increase project efficiency, he says, “We hope to encourage our customers to make better formula and delivery system decisions for future projects.”

Shaheen Majeed, marketing director for Sabinsa Corp., comments similarly on the need to help customers achieve both efficiency and efficacy. The company, which does custom manufacturing and developing of both ingredients and dietary supplements, has an R&D facility near Princeton, NJ, and five manufacturing facilities in and around Bangalore, India.

“Ingredient properties for dietary supplements can vary widely, which can pose processing challenges,” he says.

With this in mind, the company can recommend ingredients that will ensure smooth processing-including ingredients the company itself offers, which have already been vetted to ensure consistent quality.

Investing in Quality

For the sake of GMP compliance, many manufacturers have also had to make recent upgrades to testing procedures, equipment, and facilities. 

NHK Laboratories’ Akand says the company made significant recent investments in its testing methods. It now has several sets of new equipment to accommodate the new requirements.

“It has been a challenge,” he says, “as we need to balance the new equipment with more technicians and chemists to administer and interpret the different tests.”

Soft Gel Technologies has also made improvements in the last two years. Many of its inspection and packaging processes are automated with new, state-of-the-art equipment, including metal detection. “Although costly, the new equipment makes our processes more efficient and improves our overall product quality,” says Holtby.

Philip Vigeant, president of Reliance Private Label Supplements (Edison, NJ), says, “The increasing number of visible incidents-highlighted by FDA action-of misbranded or adulterated products reinforces the need for responsible manufacturers to up the ante on quality.”

He says his company has made numerous improvements especially for private-label manufacturers. For instance, it recently purchased a Kodak “Nexpress” printer, which is typically used by commercial printers. “We can use this for labels, marketing materials, and sales collateral to make sure that our store-brand labels don’t look ‘homemade,’” explains Vigeant. He predicts investing in the private-label sector will pay off. “There has been a renewed interest from natural product retailers in growing their own store brands.”

According to Vigeant, other recent and ongoing improvements include moving into a state-of-the-art, eco-friendly 90,000-sq-ft facility with new powder-filling lines and tableting and encapsulation equipment, and advancing in-house testing capabilities. Gas chromatography and inductively coupled plasma mass spectrometry (ICP-MS) will be installed in the next few months.

Nutricap Labs (Farmingdale, NY), which provides certified GMP contract manufacturing, packaging, labeling, graphic design, and order-fulfillment services, has also made some upgrades.

“We continually update our technology to streamline our processes and procedures to better serve our customers as well as to stay ahead of both our competitors and the FDA/NSF,” explains president and founder Jason Provenzano. The company has created a new Customer Relationship Management interface that links fulfillment and inventory management systems, “which means that all the information we need about a customer’s order is only a few clicks away,” he says.

VitaTech International Inc. (Tustin, CA), a pharmaceutically licensed manufacturer of nutritional supplements, supplies original formulas, tablets, and powders. It also provides services such as capsule-banding and enteric coating for soft gels. Its recent QA/QC expansion addressed in-house heavy metals testing and online metal detection. President and CEO Thomas T. Tierney adds that the firm’s “first-tier” capital investments in 2012 will include the addition of a new facility for packaging and fulfillment.

ABCO Laboratories (Fairfield, CA), which provides custom manufacturing and private-label services, says it “works with premier analytical laboratories around the world” to develop reliable testing methods. Round-robin testing and educational symposiums conducted by the National Institute of Standards and Technology (NIST) play a part in this development, says vice president David Baron.

In terms of other investments, Baron says the company has also added state-of-the-art nutritional powder-blending and manufacturing equipment, as well as purchased a new building and added an additional 110,000-sq-ft extension to its 125,000-sq-ft facility. “We welcome customers to tour our new facilities,” he says.

Leveraging Know-How

Leveraging expertise in a specific manufacturing area is also obviously a key advantage for a contractor. 

Best Formulations (City of Industry, CA) is a contract manufacturer of prescription, OTC, vitamin, and nutraceutical soft gels, tablets, capsules, powders, and teas. CEO Eugene Ung says the company continually looks for ways in which different types of delivery systems and combination formulations can enhance a product’s efficacy.

“Developing unique and effective formulations is one way to offer our customers something that certainly differentiates us from competitors,” he adds.

Reliance Private Label Supplements touts its ability to handle products like probiotics that require low-moisture environments, in the company’s Class 10000 cleanrooms, which exceed industry standards for air quality and moisture control. “Probiotics are a sensitive product so we invested in the best-in-industry dust-collection and climate-control systems,” says Vigeant.

Soft Gel’s Holtby says that soft gels are a specialty delivery format whose challenges many customers may not fully understand-which is when the company can provide expertise. Importantly, he says, the company can advise customers when soft gels are not an optimal format. “There may be space limitations for the formula or interactions between raw materials,” Holtby says.

“In addition,” he says, “formulas with multiple ingredients may not blend correctly to provide a homogenous fill.” The company’s R&D department can help customers address such challenges by determining the best combination of oils and powders, along with suspending agents.

Holtby provides one example of how Soft Gel developed formulation expertise when dealing with a particular product-in this case, CoQ10. When developing its Crystal Free line of CoQ10 products, he says, “We found that d-limonene, a natural solvent, can actually break down the CoQ10 crystals, thus making the formula a solution rather than a suspension of powder in oil.”

Sabinsa’s Majeed says that some ingredient combinations pose issues in a traditional dosage form. A new solution the company proposes is its bi-layer, multi-release tablets, called Integrated Nutritional Composites (INC).

“Although there are several such combination tablets in the pharma sector, no other supplement manufacturer offers this type of innovation,” says Majeed.

He cites an example of when this bi-layer technology can solve problems: “In some instances, analgesic and anti-inflammatory components require different release profiles.” A tablet’s bi-layer construction can help with this, he says.

Customers can work with Sabinsa staff to tweak existing formulas or develop new formulas. Or, customers can launch existing turnkey products from the company’s offerings that include: 1) Blood Sugar Support INC Actives, consisting of Silbinol (pterostilbene 5%, 30%, or 90%), cinnamon extract, zinc monomethionine, and BioPerine (black pepper extract), 2) Weight Management INC Actives, which include ForsLean (Coleus forskohlii), GarCitrin (Garcinol, Garcinia cambogia), and BioPerine, and 3) Heart Health INC Actives with policosanol and niacin.

And although contract manufacturers can suggest solutions, it’s ultimately up to the marketer to decide, Soft Gel’s Holtby says.

“Since we have extensive experience in product development, we often work with our customers to help choose the most appropriate delivery system. We feel it is our responsibility to inform the customer if we see possible issues with a formula. We often give suggestions or advice on improving a formulation, should the customer request our opinion; however, we do have to keep in mind that a custom formulation is the customer’s own and they have often performed their own research in creating the formulation.”

Improving Customer Service

As contract manufacturers’ capabilities advance, so will demands from their clients.

Tierney says VitaTech’s customers are expecting more lately-well beyond the services that a typical contractor would provide, including ingredient research, ad agency referrals, providing comments on advertising and label copy for attorney review, referrals for regulatory guidance, and advice on international regulations. The company has made sure it can deliver such services, he says.

NHK Laboratories’ services now include market analysis and trend reports to highlight new categories gaining traction with consumers. “Additionally, we offer international product registrations, making it easier for our customers to export their supplements,” says Akand. 

Best Formulations’ Ung says he believes in developing long-term relationships with marketers who are focused on quality and who understand what goes on behind the manufacturing process-not those who are just interested in selling a product. In the world of contract manufacturing, that is the definition of a true partnership.