Industry Experts Address Contract Manufacturing Issues 28220

To retain a competitive edge, many businesses are choosing to focus on core competencies while contracting external operations for projects requiring supplemental production capacity and/or expertise. For many marketing and manufacturing companies in the dietary supplement industry, contract manufacturers offer advantages over in-house manufacturing including lower costs, flexibility, access to outside proficiencies and reduced capital. However, for expectations to be fully realized, companies must understand what key factors make a contract manufacturing relationship work, as well as what pitfalls to avoid to ensure the intended value is gained from the relationship.

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.: Contractors are generally steeped in industry experience that rubs off to benefit new market-entry brands. For wise marketers, especially when creativity is their strong suit, letting the contractor do the heavy lifting for equipment capitalization makes sense.

Ron Udell, president, Soft Gel Technologies Inc., Los Angeles: Customers want the benefits of having a manufacturing operation without the headache. By choosing a contract manufacturer to perform the necessary steps to produce a finished product, a customer can focus on other aspects of their business, including the branding, marketing and selling of the finished goods. Contract manufacturers allow companies to conceptualize innovative products, and utilize the skill and expertise of outside vendors to manufacture those products. Its a mutually-beneficial partnership.

Robin C. Koon, senior vice president, Best Formulations, City of Industry, Calif.: There are several reasons why a company would choose to use a contract manufacturer. The customer may not manufacture any products at all, such as a marketing company, or may require a specialty service or specific expertisesuch as R&D, softgels or teabags, for example. It is also possible a customer would need help with additional overflow capacity. Finally, using a contract manufacturer allows companies to avoid the financial cost and issues of operating their own plant.

Michael Schaeffer, president, Pacific Nutritional Inc., Vancouver, Wash.: The primary reason for using a contract manufacturer to produce dietary supplements is having a fixed inventory cost and/or price for a wholesale/distribution/marketing company. Contract manufacturers absorb a products variable costs related to material sampling, formulation overages, production loss and laboratory tests.

Bob Olson, director of national accounts, Century Foods International, Sparta, Wis.: Contract manufacturers specialize in production. They can decrease time to market and lower costs, and the learning curve for training staff is often much faster. Offering full service manufacturing including research and development, engineering expertise, formulating, testing, blending and packaging in one location improves speed and effectiveness of the supply chain. Predictability allows purchasing to contract better pricing on raw materials, which allows production to become more efficient and lowers the risk of obsolete or outdated materials.

INSIDER: What are some of the key considerations in selecting a contract manufacturer and ensuring a successful partnership?

Lucy MacLoughlin, chief operating officer, Rhema Industries Inc., Bellingham, Wash.: The customer and manufacturer need to have a clear understanding and agreement on product specifications.

Mutual communication and attention to detail is extremely important to ensure that objectives (e.g., taste, appearance, appropriate packaging format, price targets, etc.) are met. Often, customers may not be familiar with manufacturing and may expect that a higher dose of actives can be delivered in a single capsule or tablet than can realistically be accommodated. Additionally, they may not allow sufficient time for product development. It takes good communication and a mutual sharing of information between manufacturer and customer to make sure everyone has achievable expectations. As close as possible to the initial contact, the scope and specifications of the project should be determined. Factors such as product development needs, price points, specialized material needs that could impact lead time and many others need to be discussed, agreed upon and formalized by way of raw material and finished product specifications and business agreements.

Kenn Israel, vice president of marketing, Robinson Pharma, Santa Ana, Calif.: Customers should be concerned with the quality of the product they will receive and the integrity of the organization they select to manufacture their product. It is important to not minimize the impact on their reputation that these factors can have. Simply put, the contract manufacturer must be able to get the formula produced correctly and on time. While price is often the first concern, it needs to be balanced with getting the job right. To assure the above, a customer should be very clear and specific about what he wants to manufacture, and direct and upfront in his expectations and needs.

Lucy Ackerman, director of sales, Indigo Labs, Vista, Calif.: A contract manufacturer should be able to assist with formulation and other manufacturing issues. The company should have a host of resources if they know how to use them. We like to talk at length with our clients to first find out what they want to create and when they need it. What is their product? What timelines are already in place? Can we work within those timelines? We also are very clear about our capabilities and create a production schedule based on the product, quantities, required labeling, ingredients, etc.

Richard Kaufman, executive vice president, Paragon Laboratories, Torrance, Calif.: The primary issues include the area of expertise that the contract manufacturer specializes in (i.e.

tablets, two-piece capsules, softgels, liquids, powders), level of quality assurance/quality control (QA/QC) applied to the manufacturing process, lead time and pricing. There are often misconceptions about the amount of preparation it takes to manufacture a new product in terms of formulation development, document creation and necessary lead time to source, receive and process the ingredients into the finished product. Having clear expectations established is a function of how experienced the contract manufacturer is and whether the sales person has clearly conveyed to the customer what to expect in all phases of the formulation and manufacturing processes.

Tierney: Business runs on experience, capacity, attitude, talent and cash flow. These are all compromised if the customer is under-funded or the contractor over-promises. Mutual trustand verificationmakes sense. Capability misconceptions include the assumption of having a federal manufacturing license, complying with real cGMPs, being well-funded, having relevant technical staff expertise, and being willing to face up to quality challenges without a ton of excuses.

INSIDER: How closely do you work with your customers to develop new products or determine the most efficacious delivery form?

Udell: We work very closely with the customer to develop custom turnkey formulas, and protect the integrity and confidentiality of those turnkey formulas so they maintain their marketing and sales edge over competitors. As far as delivery, the best delivery form for a product is one that will ensure customer compliance. We believe soft gelatin capsules are ideal because consumers prefer soft gelatin capsules over other dosage forms in terms of ease of swallowing, speed of delivery, masking of unpleasant odors and tastes, and product differentiation and appearance. Soft gelatin capsules are also favorable to health-conscious consumers who try to avoid artificial excipients used in the tableting process.

Schaeffer: We work very closely with our clients, as coordination and communication is essential for the success of new product launches. The primary factor in determining the best delivery form is based upon the function of the product and utilization by the consumer. In addition, manufacturing considerations are always a part of product development.

Kaufman: The level of interaction really varies from customer to customer. Some have a very good sense of exactly what the formulation should contain, and others are looking for a greater level of assistance from us in the development of a formulation. It is up to the customer on how much they would like us to assist them, and we gladly provide that assistance.

Ackerman: We want to partner with our clients in their product creation. Because were constantly in touch with manufacturers of everything from bottles and caps to raw ingredients, were always learning about new products, new looks and new ways of doing things. Our clients dont see all of the different delivery methods and products that we do, so were their pipeline into that knowledge, and we love passing on these ideas. Because of the tremendous increase in bioavailability of liquids, we are seeing more liquid products. The trick is to make them taste good, and our formulators have been very successful in doing just that.

INSIDER: Concerns about quality continue to pervade the industry. What has your company done to ensure highest quality in production?

Tierney: We have stayed current with the latest wave of GMP (good manufacturing practice) rumors and selected those requirements that peer groups, such as the trade associations, feel will be implemented. Implement now, not later, is our mantra. So at this point, we have cGMP industry certification and are members of trade associations. Further, extensively documented QA/QC is part of VitaTechs DNA. As a pharmaceutical sciences manufacturer, complete facility and equipment validation is evident throughout our operations. QA/QC visibility and accountability is indispensable; it is a performance fence that holds in quality.

Udell: SGTI follows GMP standards for foods and has also been certified GMP compliant by the Natural Products Association. These types of certifications assure our clients that the products we make are of the highest standard in purity, quality, potency and safety. Our QC/QA teams undergo rigorous audits by our customers and third-party regulatory agencies. With the feedback we receive, we update our procedures and make the necessary changes that will help us meet the higher standards of the expected GMPs. We have also made use of expert consultants to audit our systems and prepare us for the coming regulations. SGTI further maintains a leadership position on product standards and product quality. With representation and active participation in many of the industrys leading quality-focused organizations, SGTI has been active in setting the standards for quality in the industry.

Olson: The new federal GMPs for dietary supplements are expected soon, and should help ensure a safe quality product. There will be many new requirements some manufacturers will not be able to meet, and some may be forced out of business. Quality and quality control measures should be high priorities. Businesses need to determine any certifications their products may require and make sure that those assurances are offered by the contract manufacturer. Make at least one visit to the contract manufacturers facilities. From there you can determine comfort levels with its operations and staff.

MacLoughlin: As a manufacturer headquartered in Canada, we comply with GMPs governed and enforced by Health Canada; we are also Australian TGA certified. Canadas quality requirements for the manufacture of vitamins and minerals, and many products that are classified as dietary supplements in the United States, have been equivalent for many years to the GMPs required for over-the-counter (OTC) pharmaceuticals. Therefore, we are confident in our ability to meet the current and forthcoming quality requirements of the U.S. market.

Israel: Robinson Pharma operates in compliance with federal cGMPs for drug manufacturers and is awaiting the final audit of its tablet and capsule facility for its drug license. We also maintain NSF certification as a contract manufacturer. Our softgel plant was rebuilt this past year to exceed facility standards for pharma, and our standard operating procedures (SOPs) are in compliance. Also, Robinson Pharma is building a new laboratory facility and expanding our QA and QC staff significantly. Our clients appreciate and respect the standards to which we comply, and while we currently comply with established standards, we know that leadership in this area is critical for our future growth.

Koon: We are already a drug-licensed manufacturer with the Food and Drug Administration (FDA), which requires us to have a higher quality level GMP than most of the incoming dietary supplement GMPs. We also hold an FDA cosmetic license, California Drug Manufacturing License, California Food Manufacturing License, cGMP registration with the Natural Products Association, and kosher, halal and organic certifications. We are continually upgrading our QA/QC functions to constantly improve these areas.

Ackerman: We are GMP compliant, FDA registered and in the process of obtaining organic certification. With the focus on quality and organic products, this will give us a unique edge in the liquid market. Our established SOPs cover all manufacturing processes from cleaning and sanitization to production, product inspection and shipping, and many things in between. This gives us accountability and the ability to check our work for quality and accuracy.

Schaeffer: All organizational documents and SOPs have been reviewed and edited to comply with the upcoming GMP regulations, and we have allowed third party review and audits to demonstrate compliance with the proposed GMPs. In addition, our kosher certification and GMP certification from the Natural Products Association assist in demonstrating our commitment toward quality. We place a very high importance on having established quality parameters, with QA/QC initiatives including qualification of all raw material vendors for GMP compliance; formalizing all manufacturing process instructions; implementing a formal training program for all employees and conducting audits of all third party laboratories.

Kaufman: Paragon has drafted and implemented SOPs, has GMP certifications from NSF and the Natural Products Association and is certified organic through Quality Assurance International (QAI). All of this instills a greater level of confidence in our capabilities from the customers perspective. Manufacturers of quality supplements seek out contract manufacturers with these qualifications to assure a level of quality and consistency in their products.

INSIDER: How integrated is laboratory testing in the quality procedures in your company?

Udell: In our well equipped, state-of-the-art chemical analytical laboratory, highly-trained chemists and technicians create an environment of product integrity with complete confidentiality and full compliance with state and federal regulations. All work performed in our lab facility is in accordance with current Good Laboratory Practices (cGLPs). Using FTIR, ultra violet spectrophotometry, high-pressure liquid and gas chromatography and atomic absorption, QC can conduct many different kinds of tests, including analysis of raw materials. The lab and our staff provide us with one of our strongest company attributes, as we are committed to delivering quality products. Quality is constantly monitored during every step of the manufacturing process to achieve the highest level of technical excellence. All raw materials are assayed upon their arrival at the facility to verify their purity and potency; even the purified water used in our process must meet the current USP requirements. Room and equipment inspection and testing continues throughout the encapsulation process, and we conduct finished product sample analysis from the production line and continue testing even after manufacturing is completed, as retained samples are kept a year past the expiration date.

Israel: Robinson Pharma maintains a full-service, in-house analytical and microbiological laboratory. Our analytical capability includes HPLC, GC, FTIR, UVvis, ICPMS, as well as microscopy and particle size analysis. We use third-party labs for specific analysis outside the scope of our in-house capabilities and for specific customer requests.

Kaufman: We have a fully functional in-house laboratory staffed with degreed chemists and equipped with the latest instrumentation to support the manufacture of quality supplements. These tools are utilized to analyze incoming raw materials, in-process and finished product goods both from a microbiological standpoint as well as other qualitative and quantitative testing.

INSIDER: What are the hot trends in the dietary supplement and functional food/beverage market?

Mac Loughlin: Condition-specific products continue to be popular, especially those dealing with the concerns of aging boomers. And the functional food segment is definitely expanding. Were seeing ingredients that formerly were the exclusive territory of dietary supplements migrate into food products. To help our customers maximize the possibilities, Rhema offers flavoring expertise and custom beverage formulation in the form of powder drink mixes.

Israel: Enhanced absorption delivery systems and novel forms of ingredients are continually attracting attention from customers. Taste and appearance are becoming more important, and this favors elegant delivery systems such as softgels, effervescent wafers and quick-melt tablets. Robinson Pharma has been producing innovative delivery systems for many of our customers.

Koon: The key areas are disease-specific products (anti-aging, cholesterol, joints, prostate, etc.) and weight management, with greater interest in powder drink formulations. These can be tricky to make, since flavoring is everything. If it does not taste good, customers will not repurchase the product.