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Successfully Choosing and Maintaining a Contract Manufacturing Partnership

In this INSIDER Q&A, experts in contract manufacturing discuss aspects a brand owner should evaluate, what should be outlined in an agreement and what ongoing QA checks to conduct during the partnership.

Best practices in navigating the relationship between supplement brand owners and their third-party manufacturer include self-examination and diligent research. In this INSIDER Q&A, experts in contract manufacturing discuss the aspects a brand owner should evaluate in a potential contract manufacturer, what should be outlined in an agreement and what ongoing quality assurance (QA) checks a brand owner should conduct during the partnership.

INSIDER: What aspects of a brand owner’s business must its executives understand/determine before it starts a search for a contract manufacturer?

Jennifer Cusick, director, sales operations, Trividia Manufacturing Solutions: From a high-level perspective, the brand owners should self-identify what they require in four aspects of their business needs: experience, culture, service and solutions. The brand should set its expectations for customer service. Defining what “service” means up front can prevent difficult discussion later in the relationship. Brand owners should have full knowledge of the regulatory class and testing requirements for the specific cGMPs (current good manufacturing practices) for their product class.

Heather N. D. Fairman, independent contractor, EAS Consulting Group LLC: The leadership of the own-brand company and its decision-makers need to understand the regulations that govern the industry their product category is in. They are then able to intentionally invest meaningful time considering their “brand equity” and brand integrity prior to selecting and partnering with a contract manufacturer. Brand value and consumer trust are key factors that should drive brand owners to ensure contract manufacturers are properly equipped and qualified to provide and maintain the quality, compliance and safety of their products.

Shabbir Akand, vice president, sales and marketing, NHK Laboratories Inc.: A brand owner’s executives should have a complete understanding of the social message they want to portray. The Millennials, the largest demographic group, particularly demand transparency and a “clean label” from a supplement brand. A contract manufacturer should have the skills and mindset to facilitate in these matters. Transparency requires a contract manufacturer to disclose test results of all ingredients going into a product, in-process testing during manufacturing and finished product test results.

Stan Glab, manager of product development formulations, Capsugel-Lonza: When selecting a contract manufacturer for dosage form delivery of a product, a brand should first understand the kind of product it is developing and then look for a contract manufacturer that can address some of these needs and specific challenges for delivery.

INSIDER: Which aspects of a contract manufacturer must a brand owner examine before choosing a partner?

Mark A. LeDoux, founder, chairman and chief executive officer, Natural Alternatives International Inc. (NAI): Does the proposed manufacturing partner have a clear understanding of its role, and does it have the capacity both intellectually as well as physically to perform the duties indicated by the purchasing entity? If the facility has a laboratory onsite, an audit of the facility should be conducted, and reviews of prior production, testing and rejection criteria should be thoroughly discussed, and the testing equipment listed and functions clearly understood.

Michael Finamore, CEO, Gemini Pharmaceuticals: Understanding the core competency of the manufacturer and its experience with the type of products offered by the brand owner is a good way to determine whether the brand owner is subsidizing the manufacturer’s learning curve on these items, or whether the manufacturer brings an inherent value to the relationship.

Aaron Secrist, director of quality and research & development, NOW Foods (at Capsugel-Lonza's quality summit in August 2017): Brands would be wise to craft and follow a strict program of vendor selection and management for manufacturers. A general outline of that process is: Determine and define needs, create ethics and rules for engagement, search and send out bids for vendors, select vendors, define contract terms and time frames, monitor relationships and performance, and determine renewals or cancellation of contracts.

Jay Kaufman, president, Paragon Labs: The brand owner should consider years in the industry, GMP compliance through a review of warning letters, reputation within the industry and third-party certifications.

INSIDER: What outside resources are available to help brand owners evaluate a potential contract manufacturer?

Kaufman: NSF International’s website (nsf.org) and UL’s website (ul.com) offer information and contacts about GMP-inspected companies. Brands can also find good information on the Natural Products INSIDER website; and trade organizations such as the Council for Responsible Nutrition (CRN), the American Herbal Products Association (AHPA) and the Natural Products Association (NPA). And finally, brand executives should attend tradeshows and industry conferences, such as SupplySide West and East, and the Natural Products Expos.

Finamore: Brands have several ways to determine or vet the suitability of a contract manufacturer, including trade references, searches of FDA or other government databases, consultants and memberships in prominent quality organizations established for industry (such as the Global Retail Marketing Association [GRMA]) and/or certifications from accredited audit bodies. While not all encompassing, these offer a good starting point to understand the basic character of the organization.

Fairman: Brand owners that do not have experienced and/or qualified in-house quality personnel capable of handling the evaluation process to partner with a contract manufacturer should consider hiring a consulting firm capable of providing this expertise. Other available resources include trade association information, meetings, seminars (e.g., SupplySide West education and Natural Products Expos), credible industry articles and online audit lists. However, there is no substitute for qualified and experienced help.

Arthur Radcliffe, consumer health & nutrition business development manager, Capsugel-Lonza: A brand should request references from a manufacturer’s other customers to determine if it has the level of expertise necessary in the marketplace in which the brand is working. For example, if a brand is creating a product for distribution in the mass-market channel, does the manufacturer know the regulations for such things as labeling and shelf life? The contract manufacturer needs to understand the rules of the game.

INSIDER: What should be outlined in a contract with a contract manufacturer?

Finamore: These contracts establish responsibilities, but need the flexibility to grow and be modified as the relationship changes. While basic GMP requirements remain static, as a business relationship matures and, as regulations/industry practices are modified, all agreements must be designed to grow with the relationship so they do not become forgotten or obsolete to the detriment of both parties.

LeDoux: Contracts should be of sufficient length and value to ensure the contract manufacturer is permitted to recoup capital costs associated with creating processes specific to the brand owner’s needs. Of course, failure to meet the requirements of a contract should also be clear. Continued breaches should be addressed, and mechanisms for voiding the contract should also be listed, along with competent jurisdictional oversight or binding arbitration requirements.

Fairman: A key to a successful contract manufacturing partnership involves having a well-written, mutually understood and executed quality agreement and a contract of business. The latter should focus on the terms of payment, delivery, expiry of service and any other major business transactions that are legally binding between the two parties. The quality agreement should clearly reflect the regulatory responsibilities of both parties in detail of the applicable cGMPs.

Akand: A manufacturing supplement agreement should cover the general business terms and conditions. A supply agreement details what the contract manufacturer agrees to provide. A quality agreement with a contract manufacturer is one of the many things an FDA inspector is looking for. Whereas the supply agreement covers the basics of commerce, the quality agreement details responsibilities of the contract manufacturer and supplement brand owner for GMP compliance.

INSIDER: What checks or QA procedures should a brand owner conduct throughout a relationship with its contract manufacturer?

Akand: Brand owners need to invest in personnel and quality management systems to supervise and audit the supply chain. Brand owners should frequently and randomly audit their suppliers for GMP compliance. Moreover, brand owners should also conduct thorough batch record reviews of each lot, and use third-party analytical laboratories to ensure product identity, purity, potency and composition.

Cusick: A plant tour should occur prior to engaging a contract manufacturer, as well as meetings in person once per year. It is a great way to build a solid foundation for a long-term relationship with the team players.

LeDoux: Trust but verify seems to be the course of prudence. A healthy relationship is based on honesty and transparency, and involves constant communication that is direct and unfettered. QA procedures should be centered on evidence of appropriate product testing at all process points that could be considered hazard analysis and critical control points (HACCP) and a positive release system needs to be followed. A recall procedure needs to agreed upon clearly identifying appropriate steps to protect human health.

Fairman: Both the brand owner and contract manufacturer should initially determine and agree upon the frequency of onsite visits/audits to be conducted. During these checks, a general cGMP sanitary inspection of the facility and grounds should be performed, and subsequently, a review of current standard operating procedures (SOPs), test methods and specifications relative to the brand owner’s products. It is strongly recommended that a mutually open communication and transparency policy is established early in the partnership.

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