How to Pick a Dietary Supplement Contract Manufacturer

March 3, 2014

What questions should you ask?

Anyone who’s tried online dating understands that some relationships are just too important to leave to chance. Having the opportunity to vet a potential paramour’s profile and weed out the duds is so much more efficient-and more civilized-than trying to guess if that person at the end of the bar is Mr. or Ms. Right.

Which is why today’s harried supplement marketer might be wondering when someone’s going to launch an OkCupid for the contract manufacturing set. After all, with increasing costs, accelerated competition, and changing regulations upping the value of a competent, reliable co-manufacturer, now’s no time for blind dates.

But don’t expect a computer algorithm to do the matchmaking for you-yet. Until one does, supplement marketers will have to find true love the old-fashioned way: getting out there, meeting the suitors, and asking all the right questions. With patience and persistence, you and your co-man may wind up happily ever after.

 

Contract Manufacturing: The New Normal

Co-manufacturing has become so standard in the supplement industry that it’s hard to remember a time when companies made and marketed products without outside help. “Contract manufacturers are definitely playing a major role,” says Tim Bray, vice president, key accounts, Pharmachem Laboratories Inc. (Kearny, NJ). “Based on the added costs of new regulations and the complexity of products entering the marketplace, we see a heightened demand for the role of the contract manufacturer.”

Some of that ascendance owes to the strength of the industry itself. Consumers have “shifted gears” in how they manage their health, notes Olivia London, senior operations manager, National Enzyme Co. (NEC; Forsyth, MO), steering toward supplements as a cost-saving, more “holistic” alternative to pharmaceuticals. “This has created a greater demand for dietary supplements,” she says, “and contract manufacturers are rising to the challenge.”

More significant, though, has been the implementation, beginning in 2007, of FDA dietary supplement current good manufacturing practices (GMPs). In requiring proper controls during manufacturing, packaging, labeling, and holding operations, as well as extensive testing, validation, and recordkeeping for compliance, they pile more onto industry’s already heaping plate.

But, in the end, says Shabbir Akand, vice president, sales and marketing, NHK Laboratories Inc. (Santa Fe Springs, CA), GMPs are “definitely a move in the right direction.” Prior to their enactment, “a CM could technically just sprout up and start doing business with minimal oversight,” he says. No longer. And while “compliance has been a journey,” he adds, it’s also “been an opportunity to enhance internal processes and yield higher-quality products.”

 

Trimming the Fat

Opportunities have costs, of course, and in this case, those costs amount to increased investments in equipment, analytics, and personnel, among other expenses, all of which can be “time-consuming and financially difficult for companies interested in bringing products to market,” says James McNeal, quality-control supervisor at NEC. “This is where a quality contract manufacturer can be invaluable. Their familiarity with these requirements and established procedures can greatly enhance the assurance that a company’s product is safe, effective, consistent, and compliant.”

Just consider equipment. Whether you’re making tablets, capsules, soft gels, or other formats, “there is no one piece of equipment that can do all things,” Bray says. “There are many types of granulators, and many pieces of milling equipment that would break the bank of many companies if they tried to invest in all phases of production.” By taking on these capital-intensive purchases upfront, the contract manufacturer shoulders costs that would be “untenable for the customer to handle alone and still be competitive in the marketplace,” he says.

A similar cost sharing occurs with respect to analytics-also emphasized in the new GMPs-as well as raw-materials sourcing, quality control, even labor. Eugene Ung, CEO, Best Formulations (City of Industry, CA), notes the added expense of workers’ compensation and health insurance, as well as additional hiring to help implement GMP reforms. “CMs can trim the fat by investing to become more operationally efficient,” he says, adding that their inside knowledge of the industry lets them extract efficiencies from the supply chain itself.

Indeed, marketers can aid this extraction by forecasting their production needs so their contract manufacturer can “work strategically” with vendors to keep required materials in the inventory, Akand says. “This helps hold costs down by locking in high-quality materials at a more competitive cost.” It also averts production gaps, reduces downtime, allows for larger-volume runs, and more-all of which put marketers’ focus and capital back where they belong: on their brands.

But perhaps most importantly, contract manufacturers guide their customers through today’s uncharted regulatory terrain. “Gone are the days when you could formulate a product on day one and have it ready to ship on day five,” Ung says. “GMPs are continuing to evolve, and we’re continuing to adapt and inform our customers of the changes as they occur.”

 

Question Time

What supplement marketer wouldn’t want that? But finding such a partner and forming a mutually productive relationship takes work. And it doesn’t benefit from bargain hunting. “Price should not be an initial part of the conversation,” Bray says. Only after signing a joint confidentiality agreement and conducting what he calls “a frank discussion” should the parties “put pencil to paper and review the ultimate price of the program. If we go in with the cheapest price being the only determinant, then we might find out that it costs more in the end.”

Beyond that, the trick to making that coveted co-manufacturing love match boils down to asking the right questions, London says, to “determine not only the best contract manufacturer for the needs, but also to determine if a particular contract manufacturer is worth their salt, so to speak.”

Among the questions she suggests: Do you offer in-house lab testing? What certifications do you hold? Is your staff knowledgeable, with extensive contract-manufacturing backgrounds? What’s your regulatory process, and how will you help me stay compliant? What’s your QC process? What type of audits do you perform: Internal? External? And how often?

Shaheen Majeed, marketing director, Sabinsa Corp. (East Windsor, NJ), adds that a marketer should inquire about the manufacturer’s organizational structure and capacity to grow, “particularly if you have an SKU that you see doing well in the marketplace.” And don’t neglect the value of experience. Ask how long your suitor has been in the business; supplier relationships built over time can pay off in cost savings. “And you might not think to ask something this basic,” Majeed says, “but ask if they’ve manufactured similar dietary supplements before.” The more familiar they are with your product, the better able they’ll be to produce it.

Even questions about “greenliness,” as you might call it, are fair game. Bray finds that the topic of sustainability comes up often. “We have discussions on which solvents are used, and how we test for residual solvents in finished product,” he says. “Our staff is always in discussions with our suppliers for the best alternatives. And the new methods of analyzing for nanoparticles requires us to be constantly updating our analytical ability.”

If the candidate balks at any of this, be wary. “The CM should be open to answering questions,” Ung says. And try to get references, while you’re at it. While nondisclosure agreements may bind contract manufacturers from providing access to current clients, raw-material suppliers are “a good place to check for recommendations, as well as other industry-related parties,” Ung says.

Certifiable

Oftentimes, those other industry-related parties grant certifications that can open a window onto a co-manufacturer’s competency. As Ung explains, “Because the industry was somewhat unregulated for such a long time, several industry-based certifications came about. Even after the GMPs were established in 2007, the importance of these third-party GMP certifications is still quite strong.”

For example, finding a manufacturer with a facility licensed to produce pharmaceuticals is a “very good start” in demonstrating a contract manufacturer’s bona fides, Ung says-and, it so happens, Best Formulations has a California Drug license, along with GMP certifications from both the Natural Products Association (NPA) and NSF International.

Akand notes that NHK was among the first companies to obtain NPA GMP certification in 2001. And Bray points out that Pharmachem is aligned with Oregon Tilth for organic certification, while it looks to independent auditors like NSF and USP “to certify those overseas plants that our own auditors cannot review.”

As for NEC’s certification roster, it includes NSF GMP certification and certification from the Therapeutic Goods Administration of Australia and New Zealand, both of whose certifications “are very rigorous and help NEC to ensure compliance for its clients,” McNeal says.

Other third parties offering certification include U.S. Pharmacopeial Convention (USP), ISO 9001:2008, California Certified Organic Farmers (CCOF), and Quality Assurance International (QAI) Organic, among others. And while “no certification or registration is a guarantee that a CM is competent,” McNeal says, “it’s certainly a helpful tool when making decisions about which CM to use.”

 

Wraparound Services

So, too, is a willingness to perform wraparound services beyond the manufacturing basics. Providing such amenities has been a growing trend recently, says Melony Fuller, director of marketing at NEC. “Customers want ease of business, and we’re always looking for innovative and creative ways to provide them with customized solutions to help them succeed.”

For example, she and her colleagues “collaborate from concept to consumer,” offering everything from R&D and regulatory support to packaging, labeling, and marketing support, including advertising. NEC has put social media to use in improving communications with customers, Fuller adds. My NEC Connection is the company’s recently launched customer portal, which serves as “an easily accessible and private tool for complete visibility to order status, shipping, and many other actions,” she says. “It lets them access all pertinent information and stay updated 24/7.”

Indeed, an ability to provide fulfillment services is a real plus, notes Majeed, as it allows large retailers to create an ordering system where the contract manufacturer serves as the hub, typically through online purchase orders, he says.

And as more consumers elect to supplement via functional foods and beverages, Bray notes the importance of finding a contract manufacturer that can help with custom formulation. “We can meet with you and design a blend or granulation specifically for your product specification,” he says. “We can also help you develop either powdered drink mixes or liquid formulations and then package them in one of our certified facilities either in bottles, jars, jugs, or cans with your label on them,” he says.

 

Highly Analytical

Bray also notes that in an era of increased informational transparency, supplement companies “cannot hope to compete without new products that have clinical studies to back them up.” And though some manufacturers will conduct these studies for you, more often, Ung says, the brand marketer takes the lead in selecting which studies to undertake, while the contract manufacturer sticks to “manufacturing products for the study, helping to review the scientific validity of the study-if the CM possesses such capable individuals-and helping perform stability studies, as well,” he says.

Those stability studies have become standard procedure with supplements, as FDA now requires that any direct or indirect reference to a shelf-life date be substantiated with data. It’s part and parcel of an analytical emphasis that’s gone into overdrive with the new GMPs. As a result, contract manufacturers are offering services covering everything from those stability tests to raw-materials identification and organoleptic evaluations to quantitative assays of potency, composition, and heavy-metal and microbial content, including total plate count, absence of pathogens, and related tests.

Indeed, McNeal thinks that “quality control should begin as soon as your ingredients hit the dock.” His company starts taking samples for analysis in both the micro and chem labs. “Each raw material undergoes intense scrutiny to ensure its quality,” he continues. “This includes a gamut of microbiological testing, chemical identification, and potency testing.” They also put the manufacturing process “under the microscope,” he says. “A program of environmental swabbing is carried out through our micro lab to continually monitor the effectiveness of our sanitation procedures.” And they screen all finished products a final time for microbiological contamination before they leave the facility.

Test results should be summarized on the certificates of analysis (CofA) for both the starting ingredients and finished products, Akand says, “both which should be available to the customer.” As for vetting all of this legally, supplement marketers should “definitely expect regulatory guidance” from their manufacturers regarding FDA GMP compliance, California’s Proposition 65 compliance-if applicable-and “any other assistance pertaining to the quality of the product,” he says.

But don’t expect your contract manufacturer to take legal or regulatory responsibility for an opinion. “When all is said and done,” Bray says, “it’s the marketer’s name that’s on the side of the box, and they’re responsible for the label.”

 

Audits on the Upswing

With audits on the upswing thanks to GMPs, that’s no small matter. And as FDA heightens its scrutiny, it’s finding more infractions than it-or industry-would like. No doubt, the specter of an FDA Form 483 citation-“issued to firm management at the conclusion of an inspection when an investigator(s) has observed any conditions that in their judgement may constitute violations of the Food Drug and Cosmetic (FD&C) Act and related Acts,” per FDA’s website-keeps supplement marketers and manufacturers up nights.

Nevertheless, notes Ung, “Many of the warning letters FDA is issuing regarding dietary-supplement audits are for very basic deficiencies, such as the lack of batch records, lack of standard operating procedures, poor sanitation.” On-the-ball companies will, upon request, supply their customers with copies of CofAs for ingredients used and finished products, master manufacturing records (MMRs), and batch production records (BPRs) as reassurance, along with test results required for GMP compliance, Akand says.

And beware if a CM quails at the prospect of you conducting your own audit. In so doing, “the brand owner can witness firsthand if all requirements of 21 CFR 111”-the part of the Code of Federal Regulations governing GMPs-“are being adhered to,” Akand says. “They can also evaluate the overall facility for cleanliness and GMP compliance. The supplement marketer should make sure the CM has a fully staffed and well equipped in-house lab to perform most, if not all, quantitative and qualitative testing to ensure product identity, purity, potency, composition, and so on.”

They should kick the tires, too, metaphorically speaking. Look for signs of wear and tear in the line, Majeed says. “Look for how well maintained the equipment is and note the condition of the room that equipment is in.” Ask about calibration, when it last took place, and how often it occurs, he adds.

A solid co-man will spill the beans on all of this. According to McNeal-who notes that NEC has never “had the misfortune of a 483 citation from FDA”-the company tries “to foster a positive, transparent atmosphere with all our auditors,” customer, government, or otherwise. “Our goal is to never hide problems but instead to improve our processes to make a better product for our customers. We find that this atmosphere makes all the difference in whether an audit is ‘painful’ or ‘helpful.’ Ultimately, every audit is a chance for us to be better, and we welcome that opportunity.”

 

No One’s a Small Fry

They also welcome the opportunity to strengthen their bonds with their customers.

“Listening is fundamental to successful relationships,” says Demetrius Bledsoe, director of sales at NEC. And technology helps get the discussion started. “Social media, websites, and customer-service avenues make communicating with customers more efficient and faster,” he says. “Customers should have the expectation that a CM will work to meet their needs, not vice versa. Every customer and project that our team works on is viewed as important.”

Majeed agrees: there’s no such thing as small fry. “Don’t forget the little guys!” he emphasizes. “Smaller runs are always favorable in almost any economy, particularly for startups.”

While “we don’t expect you to be our number-one manufacturing client overnight,” he says, “we would like to help and support you to become that someday.”

 

Sidebar:

Contract Manufacturing in a Global Age

These days, neither supplement marketers nor manufacturers can afford isolationism. We operate in a global market where brokers and buyers, suppliers, and sources are all rather far flung. But as Eugene Ung, CEO, Best Formulations (City of Industry, CA), says, “Manufacturing in international markets can be tricky.” Learning to speak the language, as it were, “starts with setting the appropriate expectations,” he says.

Looking overseas is inevitable in part because global sourcing is “the only way to get the majority of nutritional ingredients, as several raw materials are simply not made or available in the United States,” Ung says. But contract manufacturers are not always expert at navigating international supply chains, he notes, “so it’s important to work with reputable and established raw-materials suppliers who understand the importance of proper documentation and compliance.” Don’t be afraid to ask details about the ingredient’s original source. And get references. “The industry is very small, and people know each other” he says, “so ask around and a picture will emerge.”

If you’re manufacturing for foreign markets, bear in mind that contract manufacturers without a direct presence in those markets themselves may not fully grasp “the ever-changing regulatory requirements of different countries,” Ung continues-in which case “the customer needs to be the quarterback to understand the international requirements and communicate those to the CM,” he says.

Many of his company’s domestic customers’ largest growth markets are outside the United States, he says, “so understanding these international markets does help our customers. It can be slow and difficult in the beginning to understand international supply chains and requirements, but in the end, it can be a rewarding, mutually beneficial opportunity.”

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