Dietary Supplements and China: Supply-Chain Woes

March 25, 2011

Dietary Supplements and China: Supply-Chain Woes. Who's to Blame?

Over the years, China has been the focus of ongoing quality and safety issues, across a variety of industries. The highest-profile case was, of course, the melamine incident involving dairy producers. This incident highlighted the need for more-robust regulatory measures for the expanding global food and dietary supplement supply chain.

Because many of today’s processed foods and dietary supplements contain ingredients from China, the spotlight is squarely placed on China’s shoulders as being the culprit of today’s supply-chain woes. Ongoing pressure from the U.S. government, industry, and consumers has resulted in tighter controls over quality assurance. These include FDA’s establishment of current good manufacturing practices (cGMPs) for dietary supplements in 2007, strengthening certificates of analysis, requiring vendor verification, as well as issuing warning letters, fines, and legal action for U.S. companies that are not in compliance.

These remedies are all government-generated measures attempting to safeguard U.S. consumers. However, there are other pieces to this quality and safety puzzle that need to bear their share of the responsibility. Three distinct groups are involved, all assuming varying levels of accountability: government (legal), industry (ethical), and consumers (logical). Let’s take a closer look at these three groups.
 

Government

Now that cGMPs are mandatory for all U.S. companies that manufacture, package, or hold dietary supplements or ingredients, we can rest assured that there are regulations in place that can rectify issues or levy criminal penalties for those not in compliance. However, this compliance has not come free of charge.

In order to meet the requirements of the new U.S. FDA cGMPs for dietary supplements, U.S. manufacturers have had to invest sizeable amounts of money to ensure they conform to these new regulations. This is a necessary expense and creates one layer of protection for consumers. Investing in quality systems and safety measures is never an ill-advised operating expense. Together with the Dietary Supplement Health and Education Act and newly established Adverse Event Reporting for dietary supplements, cGMPs have built a solid regulatory platform for U.S. manufacturers and further strengthened the safety of U.S. products. However, since China supplies U.S. manufacturers most of their ingredients, it’s essential that we know what regulatory procedures China must follow.

China’s Administration of Quality Supervision Inspection and Quarantine (AQSIQ) is in charge of imports and exports. Chinese ingredient suppliers must apply for an export certification (license) from AQSIQ in order to export. The requirements vary from ingredient to ingredient, but the agency mandates heavy-metal, pesticide, and microbiological testing on each batch for safety. This is done at the supplier’s expense, which is passed on to the buyer and eventually absorbed by the consumer.

China also requires companies producing dietary supplement ingredients to be cGMP-certified by China’s State Food and Drug Administration. In order to gain stronger management of increasing Chinese exports to the United States, the U.S. FDA set up offices in China back in 2008, allowing the agency to offer technical assistance, ensure that export-related regulations meet U.S. standards, and conduct facility audits when necessary. Furthermore, AQSIQ and U.S. FDA have signed a variety of agreements that stipulate that food products being exported to the United States must meet U.S. standards. So, if Chinese suppliers have more regulatory hurdles than U.S. manufacturers, and, to top it off, they have U.S. FDA set up in their backyard, is China to blame?

As mentioned earlier, regulations are only part of this equation. Let’s take a closer look at the responsibility of the industry and how business decisions can alter the path of safety and quality.
 

Industry

China is now the primary destination for sourcing ingredients for two main reasons: wide variety and low costs. China’s long history with traditional Chinese medicine has allowed it to accumulate data on thousands of botanical ingredients, many of which are used in the dietary supplement industry, such as ginseng, goji berry, and cordyceps, to name a few. Moreover, China’s ability to produce ingredients at prices far below its competitors’ and, in many cases, with state support/guidance has enabled it to control much of the world’s ingredient supply chain.

At this stage of the supply chain, it is very important that manufacturers shopping for ingredients in China conduct due diligence on potential suppliers to ensure they produce safe and high-quality products. One of the best ways to start this process is by checking out the companies’ credentials. Are they cGMP certified in China, as well as certified by a well-known third-party to be in compliance with U.S. FDA regulations? Chinese suppliers are well aware of China’s global reputation of being a low-cost but sometimes unsafe place to buy ingredients and products. In order to offset this image, many reputable suppliers have invested in U.S. third-party cGMP certifications.

In this area, NSF International is the global leader in offering U.S. FDA cGMP third-party certifications, ingredient testing, verification services, and education. Much like the U.S. FDA’s move into China, NSF also realized it had to set up shop at the source. Since 2005, NSF has been operating in China, with offices in Shanghai and Shenzhen. A growing number of Chinese suppliers are investing in NSF’s cGMP certification program because they see it as a necessary step in protecting and growing their export business. Having this well-known certification mark certainly sets these suppliers apart from their competition and shows they are willing to invest in the quality of their products and companies.

NSF also offers a free supplier guide on its website, www.nsf.org, which is a great resource to use when searching for reputable suppliers. Later this year, the company will open its new testing facility in Shanghai, which will be fully equipped to test ingredients for heavy metals, pesticides, and melamine prior to export to the United States. NSF’s services and programs are a valuable layer of protection and confirmation for industry that ingredients and products are safe.

However, U.S. FDA cGMP compliance is not required by law for Chinese suppliers, so participation in certification programs is strictly voluntary. This is where things can get dicey. The old adage “You get what you pay for” is certainly applicable here.
 

You Want Cheap, You’ll Get Cheap

Living in China for a number of years has given me another perspective on the issue of supply-chain safety. It is well-known among Chinese ingredient suppliers that some foreign manufacturers shop on price alone, and not on quality. This is where we have to differentiate between safety and quality and play a bit with semantics.

For example, a manufacturer could receive a shipment that is unsafe, meaning that it is adulterated with foreign materials or exceeds the acceptable levels of heavy metals, pesticide residues, or microorganisms. Or, a manufacturer could also receive another shipment that is of poor quality, meaning that its proclaimed levels of active ingredients are lacking or the manufacturer received a less-expensive form of the ingredient it agreed to pay for. The product could, in fact, still be safe to consume, and just be poor quality. Safety has nothing to do with quality in this sense.

The before-mentioned government side of the matter does little in the way of stopping this type of adulteration from happening. AQSIQ export licenses are only testing for safety, and cGMP regulations only lay down the blueprints for standard operating procedures (SOPs) and other related manufacturing processes, which are directed at safety, consistency, and recordkeeping. Nothing from the government side is going to prevent a company from deliberately adulterating a product for economic gain, so it is up to manufacturers to ensure they are working with reliable and trustworthy suppliers.

If a manufacturer is shopping solely on price, it will most likely get what it pays for-poor quality and potentially unsafe materials. Pushing suppliers down on price opens the door to economic adulteration and gives unscrupulous suppliers an area of opportunity. This ethical business decision lies solely in the hands of the manufacturer.

One of the biggest complaints I receive from Chinese suppliers is that because there are manufacturers willing to shop based on price alone, it creates competition that a reputable supplier could never compete with.

I recently spoke with Dasherb, a German-Chinese joint-venture botanical supplier in Shenyang, Lioaning Province, on the issue of shopping on price and not knowing your supplier. Mr. Shi, the company’s general manager, told me that there are suppliers in China producing 100 kilos of herbal extract from 100 kilos of raw material. It’s obviously impossible to create an extract that weighs the same as the material you started with. Thus, he added, some companies will add useless plant material to add bulk. In this case, while it may not be harmful to health, the manufacturer is still left with a poor-quality extract, which will yield a substandard finished product with little to no efficacy.

Mr. Shi went on to say that manufacturers that buy from suppliers like this are shopping for the cheapest price-and if you want cheap, you’ll get it. “We don’t do business like that,” he said. “In fact, Dasherb is one of the leading botanical extract companies that is now offering certified-organic extracts. We welcome all our customers and potential customers to visit us in Shenyang to see the quality firsthand.”

In this, he makes a good point. Visiting suppliers is a good idea for two reasons. First, it will satisfy cGMP regulations for verifying suppliers. Second, it helps to develop a closer relationship with your supplier.
 

China-Free?

Recently, an industry blog hosted a robust and sometimes aggressive dialogue on manufacturing products, with the aim to do it “China-free.” Certain products could undoubtedly be produced without importing from China, but the reality is that to create most dietary supplements, there is no way to go China-free. Some of the most basic ingredients, such as vitamin C (ascorbic acid), are only produced in China.

Furthermore, by saying you are producing a “China-free” product, you may cause consumers to think that other products sourced from China could be harmful, which isn’t the case. I have to say, it is a pretty slick marketing angle, but one that would end up hurting the entire industry.

There are plenty of good suppliers in China. Manufacturers just have to do their part by verifying their vendors, ensuring their suppliers are cGMP-certified, shopping for quality and not price alone, and most importantly, getting to know their suppliers by paying them a visit. It is also a good idea to support and work through trusted organizations on the ground in China such as NSF International and the U.S.–China Health Products Association. These organizations are not only on the ground but are also well connected to U.S. and Chinese authorities as well as industry, which of course is a valuable resource to have when doing business in China.
 

Consumers

We are all consumers. That includes the people who make the regulations for dietary supplements and those who manufacture the finished products. It is our responsibility to make informed decisions about what we feed our families, including dietary supplements. Although most consumers can’t possibly know all the details and intricacies of the dietary supplement supply chain or know what cGMP, SOP, and ISO stand for, they can make some important decisions about the products they’re considering to purchase.

The U.S. FDA has made it clear it is cracking down on fraudulent companies that are selling products that do not comply with current law. For example, the three categories FDA is honing in on are sports-nutrition, weight-loss, and sexual-enhancement products. These categories are ripe with fly-by-night companies and illegally imported products making unapproved claims and/or containing unapproved ingredients. I, for one, would never buy a product from a company I’ve never heard of-especially off the Internet, where many of these companies market their products. We as consumers need to do our own due diligence and find out more about the companies we buy from, which is easily accomplished by doing some basic Internet searches. U.S. FDA’s website has some sound advice: “If it sounds too good to be true, it probably is.”

This is a cyclical relationship between the supplier, manufacturer, and consumer, based on balancing safety, quality, and demand. If consumers demand low-cost products, there will be manufacturers willing to deliver and a supplier willing to provide cheap, potentially unsafe materials. In the end, who’s responsible for safeguarding the dietary supplement industry? We all are.