The Cost of GMP Compliance

In 2003, the National Nutritional Foods Association (NNFA, since renamed Natural Products Association, NPA) hosted a webcast and conference call to bring together industry members and FDA representatives in hopes of fostering a better understanding among all participants about not only the proposed GMP (good manufacturing practice) regulations, but what they might mean for industry's future. Carl Reynolds, then of EAS Consulting and now with FDA, said the proposed dietary supplement GMPs were likely to be more rigorous than industry had requested, calling them "analytically intensive." Scott Bass, of Sidley Austin Brown & Wood, predicted ingredient suppliers and private label manufacturers would be the most affected by the eventual supplement GMPs and advised companies to take immediate steps toward meeting the GMPs before the expected compliance date, which was thought to be three years away at the time.

Bass also tackled the touchy subject of costs, saying in its proposed rule, FDA likely underestimated the cost very small- and small companies (fewer than 500 employees) would face to achieve compliance. In its 2003 proposal, FDA estimated this cost to be about $100,000 per year, but many industry members disagreed, especially in the area of testing ingredients and finished products. In its final supplement GMP rule issued years later, FDA in fact amended its cost estimates to $46,000 per year for very small companies (fewer than 20 employees) and $184,000 per year for small companies (more than 20, fewer than 500 employees).

Another change FDA made in its cost analysis in the final rule was to amend its estimates for the average number of batches per year per company size category; industry heavily criticized FDA's 2003 estimates as too low in each category and illogical in estimating more batches for small companies (554 batches) than for large companies (309). FDA changed this to 444 for very small; 2,436 for small; and 1,164 for large firms. The reason for the persistent discrepancy between small and large estimates, according to FDA, was information from self-proclaimed small companies that said they produce more batches of smaller size than do large firms, due to differences in equipment capacity. This increase in batch estimates across the board is one reason why overall cost estimates rose, as testing batches is a primary cost in GMP compliance.

In amending its projections, FDA acknowledged numerous comments submitted by industry detailing the "burdensome" testing requirements and warning the GMPs, as proposed in 2003, would drive small companies out of business and push the price of supplements up possibly over the price of some drugs. In the final rule, the agency also noted compliance efforts may steal companies' resources from areas such as worker safety, product development, marketing and voluntary product testing. This is an often overlooked cost of becoming GMP compliant, especially for companies on tight and small budgets, which includes just about every company in this current economy.

"Our customers have been telling us they've come across other manufacturers who are no longer in business," said Shabbir Akand, vice president of sales and marketing at NHK Labs, a  private label and contract manufacturer. He said the situation might be a case of expectations verses true costs, and investments needed to reach GMP compliance. "Early on, before the final rule, we envisioned where the GMPs were going, and we were able to spread the cost of compliance over a number of years."

As for the more obvious financial burden of bringing a company into compliance, FDA recognized many companies will have to make capital investments in the physical facilities and equipment, as well as spend money, "to perform additional maintenance, establish written procedures, keep records, carry out tests, monitor production and process controls, or execute a variety of additional tasks that they may not have previously performed."

"The actual cost of compliance is greater than anticipated in many areas," said Jeff Wright, president of the Natural Products Association (NPA), who noted the cost of testing, as well as the related quality systems that are part of the testing, is greater than anticipated. "Additionally, the overall cost of developing and maintaining compliant processes and required GMP-related documentation is proving more resource-intensive that originally anticipated. There also is more clarity regarding the responsibilities of each link in the manufacturing chain, which is resulting in more GMP-related responsibilities for all parties involved, particularly in ensuring ingredients and products meet their specifications at each step of production and before shipping."

Several industry members who have had an FDA dietary supplement GMP inspection have highlighted testing as a primary area of cost concern. "In my opinion, the part of the GMPs that costs the most for compliance relates to finished product and shelf-life testing," said Michael Schaeffer, president of Pacific Nutritionals Inc. It is important to note the final rule does not require shelf-life dating, but if a company chooses to put expiration dating on the finished product label, shelf-life testing is required. Practically, many manufacturers feel market pressure to include shelf-life dating, making this testing a virtual requirement, or at least a likely cost to incur in GMP compliance.

However, the agency noted its final rule decreased the number of required tests from the proposed rule. Specifically, it listed the expected tests as: one identity test for each shipment lot of incoming dietary ingredients; tests of subsets of lots by suppliers to create certificates of analysis (CofA) for identity of other components; tests of lot subsets for other specifications in the CofA; tests of batch subsets for specifications as well as for microbial, chemical or physical contaminants; and tests for meeting requirements that water used to manufacture dietary supplements complies with federal, state and local requirements, and does not contaminate the dietary supplement.