Industry Experts Address Contract Manufacturing Issues 27720

With many businesses facing high-start up costs and limited resources, companies often turn to contract manufacturing to save money and time, and to improve product quality. But customers can expect a much broader range of benefits from a full-service contract manufacturer, including competency, quality, responsiveness, federal compliancy and the international connections. Fostering a successful relationship hinges on companies establishing clear expectations upfront, as well as understanding the full range of services offered by the contract manufacturer.

INSIDER: What are the most common reasons your customers choose to work with a contract manufacturer?

Thomas T. Tierney, president and chief executive officer (CEO), VitaTech International Inc., Tustin, Calif.: Market differentiation is the golden chalice of custom formulation and laboratory sciences. Contract manufacturers normally do not compete with their clients in the same market; they offer safety and confidentiality and innovation.

Kirk Neal, president, vice president of operations, Arizona Nutritional Supplements (ANS), Chandler, Ariz.: By using a quality contract manufacturer, our customers can focus all their attention and financial resources on the science behind their products, marketing and sales. They avoid the huge investment involved in starting up the manufacturing process. Companies dedicated to quality and efficacy can buy products produced by a true cGMP (good manufacturing practice) company at a fraction of the cost it would take to produce the product themselves.

Kenn Israel, senior vice president of marketing, Robinson Pharma Inc., Santa Ana, Calif.: Capability, speed, economy and efficiency are the primary reasons customers choose to work with contract manufacturers.

Brendan Gaughran, director of sales and marketing, Nature’s Products Inc. (NPI), Sunrise, Fla.: Our customers are from all walks of the industry—from large and mid-sized retailers interested in private label to national, well-known supplement companies. Their core competencies are creating strong brands that are supported by consumer marketing in a rapidly changing industry. They rely on us and smartly leverage our efficiencies of scale and capabilities to manufacture their most trusted brands. This partnership allows them to focus and adapt to their consumers in a timely manner.

INSIDER: What are the primary misconceptions you encounter regarding the capabilities of contract manufacturers?

Lucy Ackerman, vice president of sales and marketing, Indigo Labs, Vista, Calif.: Many companies don’t realize that in order to quote a product, we must have the full formula. They give us the broad strokes of what they want, but forget that with a liquid, there are other things to consider—what kind of base do they want? What kind of sweetener? What kind of flavor? All of those are critical to establishing a manufacturing cost. Something else we continually run up against is being realistic about the time it takes to take a product from the idea stage to production. Creating a product takes time; rushing to production is generally a huge mistake.

Robin C. Koon, senior vice president of sales and marketing, and Eugene Ung, director of marketing, Best Formulations, City of Industry, Calif.: There are several misconceptions regarding contract manufacturers. These can include: a lack of trust or confidentiality; competency; quality; responsiveness; etc. From a formulation perspective, some companies don’t understand that you can’t put everything in one single pill. Aside from the physical space, there are chemical reactions that may occur, stability issues, etc., that are important in formulating a good, shelf-stable product. Sometimes we get products to quote or match that just don’t seem right, meaning the label claim doesn’t necessarily match what’s actually in the product. Because testing is not mandatory in our industry, some companies will cheat or not manufacture.

Jeff Stallings, president, MeriCal Inc., Anaheim, Calif.: Most clients believe that they have to bring an existing product concept and we “just make it.” This is not true. While some of our customers simply need this type of toll service, we are delighted when we get a chance to help create a product and package with them. We have a combined experience of more than 100 years of expertise in the supplement formulation and packaging industry and are glad to use it.

Fawn Wright, director of sales and business development, TRC Nutritional Laboratories, Tulsa, Okla.: Most do not realize the range of services that are available and that most manufacturers can also formulate.

INSIDER: How do you establish clear expectations on both sides regarding capabilities, timing, product development, etc.?

Ron Udell, president, Soft Gel Technologies Inc. (SGTI), Los Angeles: Effective communication is the biggest factor in developing a successful working relationship with our customers. More specifically, clearly articulating requests is important to a successful partnership. It is imperative for a customer shopping for a contract manufacturer to establish clear priorities up front that meet the company’s needs. While many customers discuss product integrity (effective quantities of safe, clinically proven and ethically obtained ingredients), other factors, such as product price, delivery timelines and batch sizes, can be more critical. The information requested by the customer at the beginning of discussions should be answered clearly by the manufacturer. Communication is key. At SGTI, we strive to understand what issues are most important to a prospective customer from which we build our business proposal to encompass these key motivating factors. One advantage of having a skilled and experienced sales team is that it promotes clarity and understanding of a customer’s expectations.

Michael Esperas, general manager of sales, VeriPak, Santa Ana, Calif.: Our account managers are well trained to be upfront with customers regarding expectations. We have sales workshops to refresh procedures with our representatives.

Doug Gillespie, vice president, Pro-Form Laboratories, Orinda, Calif.: At the onset we always explain the lead-times involved in our various phases of developing a product and bringing it to the marketplace.

Gaughran:

This is clearly a challenge for anyone in the ser vice industr y and as such we spend much of our time communicating the process with our customers. We see ourselves more as industry consultants who can also implement the solutions we create. Customers don’t need to know every detail to feel more comfortable with the process, though they certainly appreciate it when we remove the mystery of manufacturing.

INSIDER: Is your operation now compliant with the federal GMPs? What steps did you have to take to ensure compliance?

Stallings: MeriCal has actually worked very hard to stay ahead of the requirements of the new federal GMPs. We purchased an FTIR (infra red) instrument more than a year and a half ago to begin building a library of standards for inbound raw material identity testing which is now mandated by the new GMPs. In addition to self audits and client audits, MeriCal employs an in-house consultant who serves as committee member of the USP board and has worked with us for the past year to ensure our GMPs, standard operating procedures (SOPs), training, cleaning and maintenance principles comply with the new GMP requirements.

Koon and Ung: We are already FDA drug-licensed and TGA licensed. We also make a few prescription drugs, as well as new investigation drugs for the National Institutes of Health (NIH). Our drug license already requires us to have a higher GMP than most of the incoming nutritional GMPs. But despite this, there is still a lot of work to be done regarding the testing of raw materials and finished products.

Ackerman: We are GMP compliant, but not certified yet. We expect to have our certification in place well before the mandated timeline for a small manufacturer. We have established SOPs in place as well as personnel charged with overseeing those procedures. Our chief of operations regularly reviews them to insure guidelines are being followed. We also make sure that our entire staff from the top to the bottom understands the importance of being in compliance.

Neal: Our organization has spent countless hours mapping out what is exactly required by FDA. As is common with any FDA regulation, there is often much room for interpretation. Outside consultants, seminars and in-house expertise have been instrumental in this interpretation. ANS believes it will be fully compliant by June 2008, which is the date for large companies to comply. By law, ANS has until June 2009, due to its size, but wants to be compliant right along with other industry leaders. The last pieces of lab equipment have been ordered, extra lab personnel are being hired and procedures are being modified to meet regulations.

Tierney: Yes, our operation is compliant. Outside consultants with genuine pharmaceutical experience and proven track record have inspected, critiqued and provided written compliance advice. After accomplishment, yet other consultants were brought in for systems, facility and training critiques. Lots of eyeballs went looking for gremlins.

INSIDER: What certifications do you hold (i.e., kosher, organic, NSF/USP GMP) and how have they helped you position your company with current and potential clients?

Udell: We have obtained GMP registration through NSF’s Dietary Supplement Certification program and the Natural Products Association (NPA). We are also certified through NSF’s Athletic Banned Substances program, also known as GMP for Sport™. These internationally-recognized GMP certifications help assure our customers that the products we manufacture are up to the standards they demand in ensuring their purity, potency and quality.

Israel: Robinson Pharma has been granted a drug manufacturing license by the state of California. In December, 2007, we passed a GMP audit by Shuster Labs. Our clients appreciate and respect the standards to which we comply.

Wright: We hold NSF certification and it has been increasingly important in attracting new clients and providing reassurance to our long time customers.

Esperas: We are GMP, FDA Food, FDA Pet and California Certified Organic Farmers (CCOF) certified organic.

INSIDER: What are your current QA/QC initiatives, and how important is it to have established quality parameters?

Koon and Ung: We are always expanding our quality systems. Our current initiatives include adding more lab equipment and personnel, reviewing a number of SOPs, adding more QA inspectors, and some further facility changes. The pursuit of quality never stops; it is a continuous process.

Tierney: What you can measure you can achieve. In a like manner, the absence of measurement is the absence of control. All VitaTech’s equipment and processes, including data management systems, have been pharmaceutically validated. A complete in-house laboratory is on our premises and is staffed by professionals. In some cases we do use designated third-party analytical labs for heavy metals and in those cases where a client design a test he mas an honest broker for quality validation.

Gaughran: Quality has always been the cornerstone to NPI’s success. Case in point, our initiative to be GMP compliant well before we are required. We maintain a skilled staff charged with inspecting every lot at each interval of the manufacturing process. Our performance is tracked and we use TQM techniques for continuous improvements. By creating a “university” responsible for mandatory training programs we are able to communicate our quality standards to every NPI employee. The leadership at NPI has always believed that we will be rewarded in making quality a priority and with the new FDA regulations leveling the playing field, it is a welcomed change.

INSIDER: Do you offer comprehensive manufacturing services (i.e., formulation, sourcing, blending, processing, tableting/encapsulation, bottling, labeling), or do you focus on one or more areas? Is there a benefit to outsourcing part of that process?

Gillespie: We offer a complete array of services. Most of our clients rely on us as a turn-key supplier—one that develops, manufactures, packages, labels and delivers the finished product to them. Some clients also have us coordinate the printing of labels, film and display boxes.

Stallings: Yes, MeriCal offers complete manufacturing and packaging services for tablets, capsules and powder products. Unique manufacturing processes include agglomeration/ particle sizing technology, fluidized bed granulation, aqueous coating, high speed tableting and encapsulation technology, as well as a variety of high and low shear blending capabilities utilizing twin shell, extrusion and ribbon blending equipment. Our packaging capabilities include blister packs, stick packs, bottles, cans, pouches, packettes and secondary fulfillment which offers more than 20 individual services.

Neal: We offer a true turn-key solution for our customers. We have formulators who are experts at tablets, capsules, chewables, and flavored powders. We then offer blending, granulation, tableting, encapsulation, bottling, bulk powder filling, labeling, graphic artist, in-house label printing, and distribution services to our customers. Some specialty packaging is outsourced, but whenever possible, ANS controls all of its clients’ work in-house. This provides faster turn-around times and ensures the highest quality and best value.

INSIDER: How closely do you work with your customers to develop new products or new delivery forms?

Udell: We often work together with our customers to finalize formulations or offer suggestions for better formulas. Since we only handle soft gelatin encapsulation, we sometimes suggest different technologies that can be applied to soft gels.

Israel: Development of specialty products and delivery systems is central to our work with customers. The market demands differentiation and our broad plant capacities allow us to create tailored solutions to our customers needs. We follow a model of partnering with strategic vendors in developing deliver y systems and technologies that give our customers advantages in the market place.

Ackerman: Very closely—we have developed many products from the ground up for our clients. They may come to us with the broad outline of a formula or just an idea and we work together to create a great tasting product that will deliver what they’re looking for.

INSIDER: What are the “hot test ” market trends in dietary supplements?

Wright: Liquids (energy and VMS) as well as effervescent and powders seem to be most in demand.

Esperas: Organics is probably the hottest market trend in dietary supplements.

Neal: Joint products remain incredibly strong, omega-3s continue to increase in sales, and the hottest trend is organic products.

Gillespie: Powders and ready-to-drink (RTD) beverages.

Tierney: Omegas, probiotics and female hormonal support products dominate the list. Weight management and sugar issues are a close second.

Stallings: Portable nutrition or “stick packs” is the hottest market trend.

INSIDER: Are you seeing greater interest in functional foods/beverages, and do you offer production and /or formulation assistance in those areas?

Gaughran: Absolutely. Consumer interest in the relationship between diet and health has increased the demand for information about functional foods. We are very excited a bout this area of nutrition and welcome the opportunity to develop formulations and produce functional beverages to our customers.

Koon and Ung: Yes, we have seen an increase in requests for functional food—powder blends in our case. Since we do make a significant number and volume of powders, we do very much get involved in formulation. Taste is critical in functional foods; if it does not taste good, consumers will not continue to use the product.

INSIDER: What capabilities do you have that assist companies looking to expand their sales into international markets?

Israel: Robinson Pharma has a division specifically focused on international markets and currently exports to over a dozen countries on four continents. We have extensive experience and offer support in product registration, free sale certificates, letters of credit, and many other aspects of international trade.

Neal: ANS is able to offer guidance on getting products into many countries. Currently we have products that are shipped to over 17 countries around the globe. With our recent approval by Health Canada to produce products for that country, we have been able to offer many customers the ability to grow their business north of the border.

Gillespie: We have been manufacturing products that are exported for over 35 years and have broad experience in supplying support material and documentation to our clients who distribute to international market places. In this ever expanding global market we currently export product to over thirty different countries.

INSIDER:How extensive is your in-house laboratory testing operation? To what degree do you make use of third-party laboratories?

Koon and Ung: We have a full laboratory on site. We have knowledgeable personnel and equipment to perform most tests in-house that are needed in a manufacturing operation. We even have a fully staffed microbiology lab. Our testing is quite extensive and is continuing to expand, especially in light of the new impending GMPs. We do utilize outside labs when we require an occasional test that we are unable to perform (e.g. not having a method or piece of equipment) or need a verification of one of our own tests.

Udell: Our in-house laboratory currently handles approximately 70 percent of all testing per formed on our products, other than specialty tests and micro testing. We will be relying more and more upon third-party laboratories as our testing load increases.

Wright: To avoid perceived potential for conflict of interest, we do all of our analytical and microbiological testing with third-party laboratories. Of course our in-house label tests all incoming ingredients and does preliminary testing during the weighing and blending stages of production to confirm we are meeting our basic specifications, but all final testing is done at independent labs. The specific labs are often requested by the customer.