Border Control

What started this spring with concerns about family pets dying of liver failure has blossomed into national concern over the safety of imported ingredients and consumer goods from overseasparticularly from China. And while the dietary supplement industry has not come directly into the spotlight, the increased concern over ingredient quality may provide the industry with just the impetus it needs to clean house.

The melamine contamination was widely covered in the consumer press, and the scope of the stories and situation broadened as Chinese-manufactured toothpaste containing diethylene glycol (DEG), a solvent used in antifreeze, and contaminated seafood were subjected to U.S. import restrictions. In the wake of the melamine contamination, FDA issued a letter to registered food manufacturers, reminding them: Manufacturers are responsible for taking their own measures to ensure the safety of their products. Manufacturers should not wait for possible FDA testing of their materials, as manufacturers bear the responsibility of ensuring only safe products are put on the market.

Probably sound advice, as FDA estimated it will inspect less than 1 percent of the estimated 16.3 million shipments of products scheduled to enter America from 230 countries worldwide in 2007. That situation has raised hackles on Capitol Hill. Sen. Dick Durbin (D-Ill.) and Rep. Rose DeLauro (D-Conn.) asked the U.S. trade representative to provide assurances about food safety standards included in free trade agreements and what recourse is taken when imports threaten public health. And Sen. Evan Bayh (D-Ind.) sent a letter to FDA in mid-May asking the agency to restrict the import of food and medicine ingredients from China until the safety of such ingredients can be proven.

In the United States, ChemNutra took a major hit as the primary importer of the melamine-contaminated wheat gluten. Steve Miller, president, testified before Congress about the situation, noting the company had never had an issue with its Chinese manufacturers until this incident. During March and April, the company quarantined and ceased all shipping, sales and marketing of wheat gluten, from all sources, and started communications with its supplier, XuZhou Anying Biologic Technology Development Co. Miller testified he suspects XuZhou added melamine to the wheat gluten as an economic adulteration, though the company had not thought to test for that contaminant.

In talking with INSIDER, Miller noted XuZhou had been recommended to ChemNutra by another of his long-standing trade partners, a standard operating procedure to develop new suppliers. In the past, we were just a trader, he said. We never saw the materials, we just drop shipped them from the manufacturer in China to the U.S. customer in the same packaging. Importers like us hadnt typically done any testing.

In the future, the company plans to implement procedures to more thoroughly audit suppliers operations and test imported materials. We intend to have procedures in place to ensure third-party audits of every manufacturer, he said. In addition, we want to visit every supplier to have a personal relationship and knowledge about their operations. Were also implementing testing in the United States and finalizing a database to help us track chain of custody and compliance in ownership.

The Red Herring

Unfortunately, questions about the quality of imported materials and their production arent new. Alex Schauss, Ph.D., FACN, director of natural and medicinal products research, AIBMR Life Sciences, noted hes been doing business in China for 25 years. This is not an unusual situation, he said. Companies go to China because they want a low price, and they give a company specs and pricing and make the purchase through intermediaries without ever visiting the suppliers. That order may be placed with a big company in China, but that company goes to 18 different producers scattered all over the country. You have no idea whos producing your material.

Melamine also raised the specter of deliberate contamination. Someone was intentionally trying to mask a substandard product, said Steven Mister, president/CEO, Council for Responsible Nutrition (CRN). Unfortunately, it made manufacturers realize they may have to think: What are the ways a company might fool me? If I run just a simple assay, knowing what I know about the business environment, am I really being committed to my consumer? If I know there is something that easily masks this test, should I run a larger assay? Should I develop a more complicated method to validate my ingredient than one simple test, if I know its easily fooled?

While the spotlight has remained fairly focused on China, industry members noted its certainly not an isolated case. While it may be convenient to bash China or blame China, its a distraction from the real problem, said Loren Israelsen, executive director, United Natural Products Association (UNPA). This is a global issue that demands global solutions. The days of locally grown and produced goods and services are gone for the moment. We are willing buyers, and they are selling us what we want to buy. Stop looking at China as a cheap date; its a discrete, layered market with some very high quality folks and gradations as far down as you want to go.

George Pontiakos, president/CEO, BI Nutraceuticals, agreed, adding: If you think about it, the Chinese have been doing business far longer than we havetheyve been traders to the world forever. The Chinese understand the entrepreneurial situation, and if their customers demand a high level of quality, theyll provide it.

In fact, Cal Bewicke, president, Ethical Naturals, noted China is a key supplier to Europe, meeting some of the highest quality manufacturing standards in the world. Like any business, Chinese manufacturers make what their customers ask for, he said. What American buyers have asked for is lower prices and, as long as [the product] passes a few basic tests, thats fine. If we in the United States want top quality ingredients from China, all we have to do is demand them. Its time we stopped making Chinese manufacturers the scapegoat for our quality problems, and own up to the fact that this is a problem our industry creates and perpetuates every day through purchasing policies.

Ultimately, Mister said, This is not about any particular country or country of origin. Its about manufacturers being responsible for the products they put on the market for consumers. Its about being good stewards for consumers and being willing to stand behind their products when they go on store shelves.

Importing Quality, Delivering Value

The nutraceutical industry increasingly relies on ingredients from foreign soil to meet customer demands for innovative dietary supplements and functional ingredients. Pontiakos estimated 60 percent of BIs raw materials come from other countries, with approximately 40 percent of that originating in China.

There are also definite regulations governing the food and supplement industry. Ingredients coming into the country are supposed to be unadulterated and not misbranded, said Anthony Young, partner, Kleinfeld, Kaplan and Becker LLP. The importer is the one who receives the materials and bears some responsibility in assuring they are what they say they are. The degree to which they do so is mixed across the industry. We have importers/distributors that bring in a lot of ingredients from suppliers in China or India, and they have a responsibility to ensure the ingredients are not adulterated or misbranded.

Marc Ullman, partner, Ullman, Shapiro & Ullman, put it bluntly: The Food Drug & Cosmetic Act is clearthou shalt not sell an adulterated or misbranded product. And if you do, youre potentially subject to criminal prosecution under the principles of strict liability. So if you sell products in interstate commerce, its your responsibility to ensure those products are neither adulterated nor misbranded.

However, it seems the more hands involved in the chain of custody, the greater the possibility of abuse, even as the willingness to be accountable dissipates. This is a diverse, fragmented industry with a lot of players not based in the United States, a lot of brokering, a lot of hands in the mix, and a lot of people doing their own little part of the bigger job, Israelsen said.

Another fundamental issue is that raw materials rejected by one company for quality dont necessarily end up on the compost pile. If my company rejects a lot and sends it back to the supplier, that supplier usually doesnt send it back to China or India or wherever, Young said. They put it back on the shelf and sell it to some other company that isnt as particular. The only way we can impact the quality and pricing is to push those goods all the way back to the original supplier.

This doesnt mean there arent solutions availableshould a company be willing to make a commitment. No one is absolved by pointing upstream or downstream and saying not my fault or not my problem, Mister said. Manufacturers have an obligation with regard to every raw ingredient they bring into their facility to put into a finished product. Companies can quarantine every lot of material as it comes in. They can establish long-standing relationships with vendors and audit their suppliers. They should be actively testing materials.

Effective communication of expectations is one initial step manufacturers can take in establishing working partnerships. If youre not receiving all the information you need on what youre sourcing, thats a problem, said Daniel Fabricant, Ph.D., vice president of scientific and regulatory affairs, Natural Products Association (NPA). Would you buy a car if it didnt have the sticker on the window telling you everything about it? Fabricant encouraged companies to use the new Standardized Information on Dietary Ingredients (SIDI) protocol to simplify the communications process and standardize the language used among vendors. SIDI standardized offerings include a Product Information Data Sheet, a Site Quality Overview to evaluate suppliers fundamental site-specific manufacturing practices, and a Supply Chain Security Overview.

Some suppliers and importers are taking other steps to ensure the quality of their materials. BI, for example, implemented a vendor surveillance program, both in the United States and offshore, with chain of custody processes and on-site surveillance, as well as extensive testing procedures. The methodology to identify a spike or an adulterated product has been there for quite some time, Pontiakos said. Its a question of whether the provider wants to make the sizeable investment in an in-house laboratory staffed with professionals who are experts in their field.

Unigen Pharmaceuticals took a different tactic, turning to vertical integration to maintain control over its supply channel from seed to final supply. When you receive large quantities of raw materials from the open market youre often just taking the quality on faith, said Doug Lynch, vice president of sales and marketing, Unigen. Many companies just go by a certificate of analysis and do virtually no other confirmation that product is as it bills itself to be. We believe we have to control the process to ultimately guarantee the quality.

Another avenue is partnering to test materials to ensure their quality before they leave the country of origin. NSF International and AIBMR have organized services for importers on the ground in foreign countries. Historically, so much emphasis has been placed on doing some form of testing in the United States, said Tom Chestnut, vice president, Supply Chain Food Safety and Quality Programs, NSF. That is a much more difficult process, because if you look at the supply chain overall, if you test in the United States and find something not in compliance, odds are you have another half dozen containers on the water following it that likely have the same problem. If youre testing materials in China, you can remove the lag time when conducting tests when materials arrive and you can hold lower inventory levels because you know the product that comes in can be counted on. There are huge economic benefits to moving testing overseas.

The Economic Equation

Of course, economic benefits are what most industry members are looking for. The wording changes, but the message is the same: If the price seems too good to be true, it is. There is a tendency in this industry to shop price and price only, but the bottom line is, if its cheaper than it should be, it probably isnt what it claims to be. Ullman said.

Part of the dilemma comes down to ingredient buyers filling orders under price constraints from management, or QC folks who know that raising the red flag isnt going to win any awards for team play. Instead of rating procurement people in this industry on purchase price variance, rate them on the total cost of quality and how that impacted the factory, Pontiakos said. Sure, you can buy something at 50 cents less a kilo, but if that material is rejected, suddenly that material is $4 or $5 more a kilo because the production line is shut down, customers are impacted, paperwork piles up, shipping costs are incurred. Were investing in QC and lab services and personnel, so our products have a premium price. But when a customer comes to us, theyre buying peace of mind and confidence that when the product arrives at the dock, they can schedule their factory efficiently.

Israelsen commented the entire supply chain appears underpriced in the nutraceutical industry. We have a model where everybody wants pharma level science and quality at food prices, which is fundamentally incompatible, he said. We have a false economy that makes it really hard for the industry to grow by deepening roots and building infrastructure because the money isnt there. The good companies that have been making high quality products and investing in it have been upset about this for a long time. Many have gone out of business or decided you cant make an honest dollar in our industry.

Perhaps the worst part of the lack of value in the equation is that its the consumers who end up losing. For certain kinds of hard goods, consumers can readily tell the quality of the product theyre getting, Mister said. If I buy a $10 cooler and it falls apart after I use it four times, I got my moneys worth. But with supplements, consumers cant do that. Theyre buying wellness and prevention, and there is a huge bond of trust between the consumer and the brand because they cant see the quality in a pill. Manufacturers therefore jeopardize the relationship of trust and could lose the consumer if they dont take a stand.

Israelsen added the industry may be facing a perfect storm of issues that could force changes throughout the supply chain. Among the issues are a serious incident in a sister industry raising awareness of the issue of safety of imported goods, greater consumer and retailer awareness of quality assurance, credible regulatory enforcement (i.e., GMPs, mandatory adverse event reporting), and industrys willingness to stand up and be counted. We have all the right elements of human nature at work here to cause fundamental change, to really realign the supply chain and boot out those who dont get the message, he said. If the market shifts in a synchronized fashion because there is a major external force that causes that, you hit the reset button and you really can kind of start all over again. But its almost impossible to do on a bit by bit basis. The market tends to settle to the lowest common denominator, so the status quo is not acceptable any more. Our fundamental duty is to our consumer, to make sure they have safe, quality products that meet their expectations.

Editors Note: INSIDER will be exploring different aspects of quality controlfrom ingredient testing to purchasing protocolsthrough its new bi-monthly series. If you have suggestions on topics or would like to participate, contact Heather Granato, Group Editor, [email protected].

The Quality Control section is sponsored by Ethical Naturals; however, the company does not review or approve editorial content.