Contract Manufacturers Aim to Raise Quality Bar, Partner for Innovation
The dietary supplement industry is facing a host of changes in the new year, many in the form of new regulations from the federal government overseeing manufacturing operations. Coupled with a desire to increase quality for consumers while delivering innovative products in new delivery forms, this is driving major change in the contract manufacturing portion of the industry. INSIDER conducted a question and answer session with a range of companies working in the segment to determine how they are addressing the changes in the industry and where supplement manufacturing is headed.
What are the most common reasons your customers choose to work with a contract manufacturer?
John Blanco, sales/marketing director, AnMar International Ltd.:
First is lack of capacity in their facility. Theyre often unable to do the type of work necessary, because they do not have the right type of equipment. Others are looking for speed of turn around or simply require the expertise of a contract manufacturer.
Robin Koon, vice president sales/marketing, Best Formulations:
Usually for one of two reasons. First, the customer does not manufacture any products at all (i.e. marketing company), and therefore needs a manufacturer. And second, because we offer a specialty service (e.g., softgels, teabags, etc.) that an existing manufacturer does not have. Other reasons may also include our having an experienced research and development (R&D) department and full lab services on premises.
Jay Kaufman, president, Paragon Laboratories: First, they want expertise and the ability to convert suggested ingredients into a dosage form. Also, contract manufacturers should look to consult with customers to offer suggestions as to what could be added to the dosage form in order to enhance its potential value to consumers. Its a tremendous economic investment to manufacture tablets, capsules or powders. It doesnt make sense for firms that are doing less than $100 million in post-sale product cost to bring that in house.
Eric Barber, national sales manager, Valentine Enterprises: The primary reason is cost. The costs associated with building, maintaining and supporting a manufacturing facility are too expensive for our customers, and we can offer a much more cost-effective alternative in producing their products. Another important reason is our expertise in the powder industry. Our customers know they will benefit from our more than 32 years experience in product development, blending, packaging and agglomeration.
Greg Williford, vice president client services, VitaTech International: First thing, it cuts out a distributor or middle man. Basically, theyre looking for expertise in manufacturing and formulation, and in nutrient selection. Theyre looking for expertise in quality control (QC) and the reality is that manufacturing is very expensive, particularly in light of the new GMPs (good manufacturing practices) and an ever more stringent regulatory environment. It is becoming very expensive to do manufacturingtablet machines are $300,000, coating machines are $200,000. Instead, these clients can tap into our expertise and dont have to make the capital investment.
What are the primary issues involved in working with a contract manufacturer?
Greg St. Clair, vice president sales/marketing, and Edward Fredericks, production/formulation, Arizona Nutritional Supplements: The biggest issue in our industry is trust. Our customers work hard to create quality products and provide them to the consumer. They need to have faith in the manufacturing of their products to ensure continued success. We encourage our customers to visit where their products are made and learn about the process so they can grow to expect more from their manufacturers.
Koon: The first issue is trustdeveloping a great working and responsive relationship. Second, confidentialityknowing that your competitors will not know where your products are manufactured, and that your formulas remain yours. Next, quality. Receiving a well-made product that is also consistent. And finally, lead times, because you want to have short lead times and receive products on time as scheduled.
John Huber, marketing director, Soft Gel Technologies Inc./OptiPure: Many companies approach us early in the product launch cycle. In fact, most companies before introducing the product come to us to finalize the soft gel formulation. We can take the client from concept to fully realized product better than most manufacturers. We wont lead any clients down the wrong path. Communication at every step of the way; being clear on goals and expectations is critical. The R&D team should be prepared to work closely with customers to create new formulations or help to expand existing product lines.
Donald J. Cox, Ph.D., business development manager for food and ingredients, SiberHegner North America: Contract manufacturers need to have a strong commitment to customer service, GMP production methods and food safety issues. The customer must be convinced the contract manufacturer will produce the final product to the same specifications as the customers own production processes.
What are the primary misconceptions you encounter regarding the capabilities of contract manufacturers?
Koon: Our industry has a range of quality in contract manufacturers. The quality offered by some is excellent and others not so much. As such, some people do think that we (as a group) generally have poor quality, a lack of capacity, and a lack of expertise. None of these points are true for us. It is unfortunate that some competitors tend to badmouth each other. Sometimes their utterances may be true and many times not, but it is all done in an effort to gain business. It is unprofessional conduct and does not help improve our image.
Huber: In our business of manufacturing soft gels, the most common misconception we come up against is that anything can be encapsulated into a soft gelatin capsule. The fact of the matter is that some things are just not doable in a soft gel format. Our job as a manufacturer is to do research and advise our clients on whether a soft gel is the right delivery method for their product. Another common misconception is that because a product may look the same and come from the same facility that it is in fact an equal product. The truth is that the added value of manufacturing something special with novel ingredients and/or delivery systems can overcome shortcomings that a client may not see in a commodity product.
Jerry Raymond, vice president sales/marketing, P.A.L. Laboratories: Their biggest concern is whether we assure their confidentiality, including formulation, marketing and sales and also technical issues. Clients also underestimate our industry knowledge, our clinical and technical abilities, and our manufacturing capabilities Barber: We live in an age of specializationmany customers think that because you are known as a quality producer of powders that you automatically can make bars or tablets/capsules. Few contract manufacturers are equipped to do all of these well.
Williford: The first misconception that comes to mind is that were able to make a very small amount of product. Small is relative, but it is amazing how some people dont know requesting 40 cases of a specialty formulation is not viable business. Second, its the time involved. As a custom manufacturer, I dont know the marketing portion of their business. Similarly, they dont know what is involved in doing a manufacturing job correctlytaking the time for QC, inprocess inspections, micros on the incoming materials. Some customers really believe you can just crank from scratch a custom formula in two or three weeks. But if you follow GMPs and do it by the book, you just cant do that.
How have you addressed the upcoming federal GMPs and the bioterrorism regulations?
St. Clair and Fredericks: ANS has been very active with regard to the regulatory issues in the industry. For the proposed GMPs, we attended meetings across the country with the Food and Drug Administration (FDA) and numerous trade groups to discuss our concerns and how they would impact our industry. We were a part of the group that worked together to shape the National Nutritional Foods Associations (NNFA) comments to the proposal and sent our own comments to FDA, as well. With respect to the Bioterrorism Act, we registered as soon as it was possible and worked to ensure all of our vendors took the proper steps as well. It will have a great impact on all imports in this country, but we are working hard with our vendors in order to minimize the effects on our customers.
JoAnn Peterson, director of quality assurance, National Enzyme Co.: To date, we have not changed any of our laboratory or manufacturing procedures as a result of the most recently published GMPs. We are, however, continually working to develop and/or validate laboratory tests and procedures in anticipation of increased testing demands. The areas of emphasis will be determined once the GMPs are published in their final form. We have completed FDA registration as mandated by the Bioterrorism Act. We do not import ingredients directly, but have worked closely with all our raw material suppliers to communicate the new regulations and procedures. As most contract manufacturers are currently doing, we are asking for some type of verification of compliance, either planned or implemented.
Huber: The biggest hurdle we have run into in light of the increased homeland security measures is sometimes clearing raw materials through customs. Many times, what used to take days now sometimes will take weeks, and that increases the challenge to deliver finished goods in a timely manner. We are one of the first companies to apply to become a participant in the C-TPAT (Customs Trade Partnership Against Terrorism). Through C-TPAT, customs is establishing close cooperation with the trade community to heighten security efforts of the global supply chain, specifically commercial shipments imported into the United States against terrorist infiltration.
As for the GMP regulations, we are GMP certified and have been since our plant opened in 1995. I think the impending FDA GMPs have better leveled the playing field as well as raising the bar for all participants in our industry by establishing minimums that all companies will be required to operate by. Likewise, it will challenge us to stay one step ahead of the competition because we already abide by the pending FDA GMPs and look forward to improving our quality systems and processes even further.
Kaufman: We have already registered under the bioterrorism regulations, and with regard to federal GMPs, we are proactively moving ahead with our systems and our internal QC and quality assurance (QA) systems to take on whatever the federal government may require of the industry. We are GMP certified by the NNFA, which is a great foundation. I served on the NNFA GMP committee, which went through the proposed rule and spent several hours a week in discussion. Were all for better quality regulation in the industry.
Williford: As far as the bioterrorism requirements, were already registered and have our registration number. There are a lot of tangential issues associated that were also dealing with. Weve looked over the cGMPs and identified areas where we feel we need to improve and weve started doing that. My feeling is if companies were not already manufacturing to almost pharmaceutical levels, theyll have a very difficult time in complying. Were almost there, so were going to meet the additional requirements and be in line. Its very strict and tough, and a lot of manufacturers wont be able to do it. Were going point by point down the cGMPs seeing where we comply and where we might need to make adjustments. Weve also hired consultants to ensure we dont overlook anything.
What certifications do you hold and how have they helped you position your company with current and potential clients?
Blanco: Currently, we are certified kosher, FCC/USP and GMP compliant. These are all essential for dealing with customer requirements and requests. Some of these are what you need to have before you are able to do work for the customer.
Isaac Gilinski, president, Osmopharm USA LLC: We are FDAregistered and -approved, certified to produce kosher products, and use USP methodologies for testing products. We are pharmaceutical contract manufacturers for Wyeth, formerly known as American Home Products. Wyeth (with $15 billion in sales) is one of the largest manufacturers and distributors of pharmaceuticals and consumer health care products in the world. They own brands such as Advil and Centrum.
Raymond: We hold kosher certification and are an FDA-approved packaging facility. We are also building a new facility that will be FDAcompliant up to and including manufacturing of over-the-counter (OTC) drug products.
Barber: We are NNFA GMP certified, hold a Certificate of Good Standing from the state health department, and are in the process of receiving certification from the American Institute of Baking (AIB) in the first quarter of 2004. We also have kosher (OU) certification for specific products produced at VEI on a product-by-product basis. VEI also has a strict HACCP (hazard analysis critical control points) program in place. These certifications and programs are seen by top-tier clients as desirable to have in place and are familiar to their QC/QA personnel.
How closely do you work with customers to develop new products and determine the best delivery form for their products?
Koon: We work constantly and closely with our customers. Because we manufacture such a diverse range of products (softgels, tablets, capsules, powders, teabags and some liquids), we see a large variety of materials and formulations. We are often one of the first to see new delivery systems or unique raw materials. Whenever possible, we share this information with our customers. We are often asked to help R&D or offer new concepts on our customers products or ideas.
John Davidson, product development manager, National Enzyme Co.: Form follows function! Its a concept that can be applied when selecting the best delivery form for a particular product. Knowing the products intended use and market positioning can help guide the selection process. Tablets, capsules, powders and liquid formseach has inherent advantages and disadvantages. The materials must be compatible with the processing conditions and equipment required to produce a particular dosage form. Regulatory constraints can be a determining factor, especially internationally. Sometimes the choice is obvious, but then sometimes the obvious is not the best choice. To innovate or not to innovate, that is the question!
Gilinski: We work very closely with our customers, and are continuously innovating and creating new products. It is important to realize the best delivery form is one that lasts the longest, is the most effective and has the least side effects, which is what we deliver with our time-release products in pellets.
Raymond: We work closely with the client to review market needs and patient categories based on data from various sources and then a determination is made as to dose, delivery system, flavoring, size, etc. We work through Confidentiality Agreements to allow free exchange of vital information and ideas to develop the optimum product and maximize sales for our clients.
Williford: We work very closely. Other manufacturers may have their own line in addition to doing custom manufacturing for other people, so they can fall back on those lines. We do not. We strictly do custom manufacturing for our clients, so obviously we have to listen very carefully to what they want and what they say. Were very flexible. We sit down one on one, they tell us what they want, we give some options and talk ideas and review pricing. We do not do every form of packaging or marketing, so if we dont do it in-house, well put them in touch with someone who can do that.
What are the hottest market trends in dietary supplements?
St. Clair and Fredericks: Trends are not as common in our industry as they were several years ago where a popular product or ingredient such as MSM would be the buzz. Today were seeing more substantiation, support and studies being done to preserve and keep a material or product verified. As more studies are done on specific supplements, we find more customers looking for manufacturers they can trust to withstand the rigor of scientific review. As a result, we have seen an increase in specialty formulations influenced by the medical community, which has grown more receptive to nutritional supplementation. Those customers appreciate the QC processes and standards we implement, and inspire us to continually review our methods so that we can provide new and efficient solutions for their manufacturing needs.
Nena Dockery, director of technical services, National Enzyme Co.: In many ways, the market trends in dietary supplements reflect the current research and actions within the pharmaceutical and overthe- counter (OTC) markets. For example, there is continued interest and growth in menopausal support products in reaction to the negative research surrounding hormone replacement therapy. Likewise, there continues to be strong support for effective weight management products, especially those products that do not contain ephedra. With recent research indicating that the number of individuals being diagnosed with Type II diabetes is increasing dramatically, the demand for exercise programs, diets and supplements to aid in weight management will continue. Also, as the number of older individuals increases, there will continue to be a strong demand for products that help to maintain a healthy lifestyle well past middle age. Included in this area are antioxidant formulas, anti-inflammatories, products that support eye health and brain health, and cardiovascular support products. Finally, because of our stressful lifestyles, the number of individuals experiencing gastrointestinal problems is skyrocketing. The competition within the pharmaceutical industry for safe and effective products is tremendous, and the demand for supplements that aid in digestion and provide an alternative to these drugs will continue to grow.
Kaufman: The glucosamine/chondroitin market is still very active and represents a significant portion of our industry as a whole. More people are interested in essential fatty acid (EFA) formulations. There is more research being performed on botanicals and the herbal segment of our industry is a hot, growing segment. Green foods is another very hot segment. It is a significant portion of what were doing here.
Barber: The high-protein, low-carb trend is certainly influencing supplements in traditional and powdered forms. These can be found in meal replacement drinks and in mixes targeting the fitness industry.
What are some of the specific challenges in manufacturing with natural and whole food ingredients?
St. Clair and Fredericks: Due to the natural aspect of many of these products, variation can be expected. For instance, with herbals, crops can be harvested in different locations at different times of the year, resulting in minor differences in material. It is important to work with a manufacturer that is familiar with these products and has reliable sources that can provide consistency. Every ingredient received by ANS is tested in-house upon receipt so we can ensure the products we manufacture are what they are purported to be. In addition, with nutritional supplements, we see many more complex formulas with multiple ingredients. It is important to work with a manufacturer that is familiar with the different materials and how they might react with one another so that product integrity can be preserved. In some instances, it may be necessary to separate ingredients in a formula and create two separate dosage formsin others, additional processing may be necessary in order to create a single product that will meet specifications.
Raymond: There is the issue of consistent material supply as well as consistent quality of materials. Another issue is how to attain proper dosing in a reasonable dosage form.
Cox: Maintaining product form of a whole food ingredient requires specialized processing equipment and experience to accomplish proper mixing, pasteurization, and maintain product appearance. This is a primary reason why some customers work with contract manufacturers such as DKSH.
Is there increased interest in vegetarian options and, if so, how are you meeting that need?
Gilinski: We were the second in the world to manufacture vegetable capsules and the first to manufacture time-release herbal supplements.
Kaufman: I think that more people are looking to have vegetarian or vegetarian-source capsules in terms of hardshell capsules. Vegetarian is a significant portion of what were doing in two-piece hardshell work. Sales of vegetable capsules are on the rise and gelatin capsules are declining. There is a premium associated with vegetablesource capsules, depending on the segment of the market one is looking to address and the distribution channel one has. Some are, some arent. There are consumers who are very vegetarian oriented who like to stay away from animal-based products and prefer a vegetable-type capsule. Other segments of the market dont care one way or the other.
Davidson: The interest in vegetarian product options continues to increase. National Enzyme Co. has developed non-animal enzyme alternatives to animal derived enzymes. Vegetable capsules are available to make a completely vegetarian enzyme product in capsule form.