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    Features

    Contract Manufacturing: Ensuring A Quality Future

    Federal regulations are reshaping the manufacturing sector while ensuring nutraceuticals meet consumer expectations.

    Sean Moloughney, Editor03.01.13
    With the implementation of federal Good Manufacturing Practice (GMP) regulations (21 CFR Part 111), the U.S. dietary supplement industry has entered a new chapter, which will feature fewer bad actors as FDA enforces the law more actively. In this developing narrative, quality is non-negotiable.

    “The nutraceutical industry has been moving in a direction focused on providing safe, effective, high-value products to the consumer,” said Steve Holtby, president and CEO, Soft Gel Technologies, Inc. (SGTI), Los Angeles, CA. “In addition to the continued presence of internationally-recognized certification groups such as NSF International and the Natural Products Association, the FDA has taken a much stronger stance on controlling quality with GMPs. As manufacturers and marketers of these health products, it is our duty, as an industry, to provide them with the best possible supplements to enhance their health and quality of life.”

    In an effort to maximize return on capital and other resources, many nutraceutical companies are turning to audited, GMP-certified contract manufacturing firms, which have invested heavily in state-of-the-art facilities and quality infrastructure to ensure compliance. “We’ve been able to invest a massive amount of money in our analytical and quality infrastructure—probably levels of investment that would cripple smaller players,” said Kenn Israel, vice president of marketing, Robinson Pharma Inc. (RPI), Costa Mesa, CA.

    The last five years have been “a perfect, positive storm for the contract manufacturing side of the business,” he said. “One major force in the market of course was the recession, and this gave value-focused, lower-cost players a real leg up, specifically in private brands. It drove a lot of consumers to the private brand market.” At the same time, federal GMP regulations led to a new focus on quality, causing companies to either comply or exit the market. “A lot of people decided to leave, and will continue to leave, the industry. I look at that as a very good thing.”

    Ephi Eyal, president and CEO of IFP, Inc. (Innovative Food Processors), Faribault, MN, agreed, adding that more pharmaceutical companies are beginning to enter the supplement arena, which now has similar GMP requirements, as well as obvious market opportunities. “We see pharmaceutical entities jumping in that are willing to invest heavily into supplements, and in the process are changing our space, changing what contract manufacturing looks like for nutraceuticals, because they bring their own practices, their own marketing, their own approach into our market segment.”

    It’s often a challenge, Mr. Eyal added, to bring the entrepreneurial companies that sometimes question the necessity of specific tests and practices in line with the mindset of a pharmaceutical company. “Their views are different. Large pharmaceutical companies expect the same quality systems and practices for supplements as they do for OTC (over-the-counter) drugs. They want every process, every practice and every test validated.”

    Outsourcing Advantages
    Tom Miskowski, president, Century Foods International, Sparta, WI, called the implementation of 21 CFR Part 111 GMP regulations a “game changer” that is “leveling the playing field and forcing those that previously cut corners to either exit the business or comply.”

    Working with a contract manufacturer offers two primary advantages, he added. “One is access to capital in the form of equipment and facilities, and two, their manufacturing expertise. By using a contract manufacturer, a marketing company can focus attention and capital on growing its brands while leaving the cumbersome manufacturing details to someone else.”

    The core competencies of contract manufacturers are vastly different than those of supplement companies, according to Charles Lundstrom, director of business development, ProTab Laboratories, Inc., Rancho Santa Margarita, CA. “Full service contract manufacturers like ProTab Labs have the scientists and the R&D capabilities to engineer formulations from an efficacy and cost standpoint, while maintaining strict compliance to the growing number of compliance agencies (NFS, for example).”

    Most successful nutritional supplement companies are masters of marketing, Mr. Lundstrom continued. “Their focus is getting the information to the consumer via traditional media, direct-to-consumer digital content or multi-level marketing approaches. This is why some companies have sold their manufacturing divisions to focus on being a pure marketing machine.”

    RPI’s Mr. Israel said that focusing strictly on manufacturing allows his company, which specializes in soft gel production, to optimize resources as well. “Most companies don’t have the business volume to justify soft gel production in-house. Even looking at other dose forms—we also do tablets and capsules—all we do is manufacture; we’re not a brand marketer, we’re not a distribution company. So when you cut away those other functionalities, it allows us to really optimize our resources and develop competitive advantages in that manufacturing and packaging competence. Other companies free their resources to do the marketing, distribution, innovation, and not have to worry about all the competencies of manufacturing.”

    Cost is also a major reason companies turn to contract manufacturers, according to Tim Bray, vice president, Pharmachem Laboratories Inc., Kearny, NJ. “The sheer cost of creating an on-site, physical manufacturing plant with attendant laboratories for testing as well as the necessity of being GMP-certified is prohibitive, and often unattainable. Therefore, working with a contract manufacturer is the sole choice for such marketers to realize their visions of occupying shelf (and e-cart) spaces.”

    Mary Lolich, senior business development manager, Amerilab Technologies, Plymouth, MN, cited significant cost savings from expenses associated with operating a manufacturing facility, including qualified staff, maintenance, insurance and “access to lower cost of manufacturing overhead due to offsets realized by contract manufacturers being able to fully utilize and maximize efficiencies on the manufacturing line.”

    Contract manufacturers also have the expertise to ensure formulations are viable in the desired dosage forms and that products meet specifications while complying with GMPs, giving companies time to develop compelling marketing and sales campaigns, said Mr. Bray.

    Tim Gamble, president and CEO, Nutraceutix, Redmond, WA, said that dedicated contract manufacturers are able to improve their craft by focusing on one specialty. “We are able to continually research, develop and improve relevant processes, technologies, expertise and certifications that would, for a brand with an in-house manufacturing operation, have to compete for possibly constrained corporate resources. The growth in contract manufacturing reflects the realization by many brands that specialized manufacturers can often do things better, and more flexibly, than in-house operations. Allowing a contract manufacturer to deal with formulation challenges, regulatory issues and GMPs alleviates a lot of complexities, delays and overhead from the host of challenges a brand faces in bringing products to shelves in a competitive marketplace.”

    Shaheen Majeed, marketing director, Sabinsa Corp., East Windsor, NJ, said companies should understand their own limitations. “We’re a raw material supplier and at the same time a contract manufacturer. With respect to doing everything in-house, we know the limitations, and frankly, the struggles the company can face internally. We have a number of areas of expertise, but we’re not built to handle certain processes—where other companies were designed to handle those processes, as it is their business and what they know best. Just because a manufacturer can afford the equipment doesn’t necessarily mean they have the expertise to run it. Therefore, the company has to decide what’s the best long-term investment and in some cases, have someone else do the work, and check-off on their quality, timing, price, etc., and be satisfied with the resources you saved in doing so.”

    Jeff Wuagneux, president and CEO of RFI Ingredients, Blauvelt, NY, said the vertical integration of his company offers something unique to the contract manufacturing world. “Most contract manufacturers go out and get business from companies with existing formulas, and perhaps help source ingredients occasionally. But RFI creates finished formulas for clients, often using 50-70% of ingredients that we control because we are vertically integrated. The advantage for companies to use a company like RFI to manufacture their formulas includes a reduced lead time, because most ingredients are found in-house, and reduced cost, because there is no middle man.”

    The Quality Path
    Mr. Israel said one in eight employees at RPI are involved strictly in quality control/quality assurance. “We have a lot to lose if we get it wrong. So we’re constantly pushing clients on doing stability programming, release testing of all active ingredients, being aware of ingredients that have a high incidence of adulteration.”

    The focus on quality is an important step in the industry’s maturation, noted Mr. Gamble of Nutraceutix. “Overall, we’re pleased to see a real emphasis developing on quality and potency, and an increasing desire for brands and formulators to consider how best to deliver active ingredients to the body—something that has not always been the priority in the dietary supplement space.”

    SGTI’s Mr. Holtby stressed that companies should perform quality checks through regular audits of their contract manufacturer. “Look at the batch records, raw material certificates of analysis, and most importantly, make sure they are doing all the testing required by the GMPs. A lot of money can be saved if a manufacturer is not doing all the required testing. If a quotation looks too good to be true, there is probably a reason.”

    Contract manufacturers are challenged to grow their the business while keeping up with regulatory issues, he added. “In order to anticipate the future needs of customers, contractors need to be proactive. With the advent of the new FDA GMPs for dietary supplements, contract manufacturers must advise customers of the implications of the new regulations. It is important to have formal training programs in place to ensure that personnel have a thorough knowledge of GMPs and SOPs (Standard Operating Procedures) and follow them. Record keeping and documentation are crucial components to ensure GMP compliance and continued certification. Complete and detailed batch records need to be maintained for traceability purposes.”

    While FDA GMPs are designed to regulate manufacturing, Shabbir Akand, vice president of sales and marketing, NHK Laboratories, Inc., Santa Fe Springs, CA, said one of his biggest challenges involves ensuring that suppliers are offering quality materials. “It is ultimately our duty to regulate these suppliers by qualifying their material, qualifying the vendors. This way we can assure the quality of the starting materials we’re using for the finished product. Our products are only as good as the material we are sourcing, or using to make these products. The biggest challenge is the testing requirements of the raw materials of our products, which is a main focal point of GMPs.” Mr. Akand said qualifying vendors may involve physical site audits, evaluation of SOPs and understanding how suppliers test and quality their materials before they are sold.

    Mr. Israel noted that about 70% of all dietary supplement manufacturers audited by FDA for their compliance with 21 CFR Part 111 received a 483, or a significant failure, in their establishment inspection report (EIR). “That’s unacceptable,” he said. “The FDA, to date, has really only been looking at facility acceptability and manufacturing practices. They really haven’t drilled into product yet. FDA is not coming and testing products to say, ‘is this meeting label claim, is the expiration date valid? Show us your methods, show us the test.’”

    However, that time will come, he added, urging industry to police itself and be more careful about the products it markets. “We need to do this ourselves or someone is going to come in and do it for us,” he said, suggesting Congress could enact stricter regulations.

    IFP’s Mr. Eyal also said he expects FDA will ask more difficult questions in the future, which will push the industry to perform at a higher level, and continue consolidation. “We’ve invested heavily and we’re continuing to invest, mainly in personnel and the facility, to accommodate that. We’re banking on the fact that it’s going to get more stringent. We need to offer the marketplace more than just a facility to produce their products. We have to bring ideas to our customers, we need to gleam consumer insights, and we need to be a bridge between the various industries we’re in. We think that’s critical to our success.”

    Speaking of regulations, the New Dietary Ingredient (NDI) notification process could have significant implications for product development and innovation in the U.S. FDA withdrew its draft for the regulation in 2012 and is expected to release a revised guidance this year.

    “The NDI regulations are slowing the influx of genuinely new products on the market,” said SGTI’s Mr. Holtby. “It is more difficult to introduce innovative new products because dietary supplement companies have to submit safety information on any new dietary ingredient placed into products after 1994.”

    Mr. Israel applauded FDA for taking a step back from the proposed NDI regulation, listening to industry and redrafting the process. “We don’t know what we have yet, but I like what I see in the process. I hope that industry can be practical and reasonable on our side of the table so that we can collaborate toward a good solution.”

    Sabinsa’s Mr. Majeed noted a simplification of formulations on the market over the last two years. “Much of the innovation has seemed to disappear, and this is unfortunate to both the growth of the industry and also to the consumers we serve. Hopefully, things will change as the economy strengthens, but let this be a calling to those who want to make a difference. The time is now. We certainly understand the FDA’s NDI final rules may question innovative ingredients, but there are ingredients and solutions to work well within these existing guidelines that can bring great products to the marketplace.”

    Innovation & Product Trends
    Industry experts pointed to many product opportunities. “I think we’re at the dawn of a fantastic era in human nutrition and science,” said RPI’s Mr. Israel, pointing specifically to probiotics as a category poised for innovation. “This is a real exciting space and has almost limitless potential and possibilities. And people are getting really smart about strain selection and about delivery system and the interplay between these key parts of a probiotic solution.”

    Sabinsa’s Mr. Majeed agreed that the popularity of probiotics will continue to grow. “Several formulations include our branded LactoSpore, a probiotic that is stable at room-temperatures and also resistant to high heat, which is a great viable option not only for capsules and tablets, but also from frozen yogurt to bread.” Alongside traditional formats, he predicted probiotics will appear in coffee, tea and other beverages.

    The vast majority of the probiotic formula requests that Mr. Gamble of Nutraceutix receives are now being specified with advanced delivery technologies that improve shelf-stability and proper delivery to optimal sites in the intestinal tract. “Part of this increased popularity in probiotic manufacturing is the rise in consumer and brand awareness of the merits of probiotics,” he said, “but is also, for Nutraceutix, a result of our unique expertise and unparalleled collection of patented processes and delivery technologies related to producing truly effective probiotic supplements.”

    Challenges in working with probiotics include getting the highest possible dose in the most bioavailable form, said Pharmachem’s Mr. Bray. “Probiotics as live cells have to fight past the enzymes in the mouth, which seek to destroy them. If they make it into the stomach they have to endure the low pH of the gastric juices. Unless they have a coating to protect them, most, if any, will not make it into the lower intestine where they would do the most good.”

    Pharmachem has introduced coated forms of several probiotics in the U.S. market. “We can manufacture blends for many applications that would have enhanced bioavailability over other probiotic forms,” Mr. Bray added. “We are getting great response for this item. In addition, we for many years have worked with our accounts to assist in making their tablet formulations smaller. Higher dosage formulations for glucosamine/chondroitin tablets, for instance, employ a large tablet dose. We can work with formulators to decrease excipients in order to decrease tablet size. Our motto should be ‘bring us your problems.’ If everything was easy, we would be out of business.”

    While probiotics seem well positioned in the U.S., restrictive regulations recently handed down from the European Food Safety Authority (EFSA) related to marketing claims in the EU could negatively impact the industry and innovation. How companies and brand managers will adapt remains to be seen.

    IFP’s Mr. Eyal noted a growing demand for product efficacy in general. “We see a heightened emphasis on product performance. These days products need to be soluble, they need to be stable, they need to taste great and claims need to be substantiated.”

    ProTab Labs’ Mr. Lundstrom noted a trend toward condition-specific formulas, as opposed to “dream catcher formulas,” marketed for a broad range of issues. “Many of these condition-focused products are tied to the Baby Boomer demographic shift. As this group approaches retirement age, we are producing more formulas for cholesterol control, joint health, vision support and energy. Sports nutrition is also a growth area for us.”

    RFI’s Mr. Wuagneux said his company’s Blueprints for Health platform is a product development and formulation service providing expertise to help customers develop turn-key, condition-specific formulas. “As a collaborative partner, Blueprints for Health will integrate raw material sourcing, product development, claim substantiation, marketing and manufacturing to provide a seamless transition from initial concept to off-the-shelf packaging.

    RFI has also been working with many greens formulas, including ingredients such as cereal grasses, spirulina and chlorella. “Our spirulina (organic and conventional) has been through the FDA-GRAS (Generally Recognized As Safe) notification process, which brings us a lot of business for doing powdered beverage mixes,” said Mr. Wuagneux. “We are also seeing increases in greens products containing fermented ingredients, as one of our facilities has fermentation processing as well as bottling in the same location, which makes it very cost effective to make such products because the ingredients and the final packaging are done in same facility. “

    Pharmachem’s Mr. Bray noted a marked increase in herbal extracts replacing powders in formulations. “This is probably due to customer awareness of purity and bioavailability of extracts versus the powders.” He also acknowledged increased demand for food-based nutrients in supplements.

    “Both of these concepts add a degree of difficulty for tablet manufacturers, he added. “Compression of the tablets is difficult enough with multi-ingredient formulations, but when you add the complexity of extracts and food-based nutrients, it is time to call in the expertise of a contract manufacturer who has experience in making these granulations work.”

    Mr. Majeed noted the RTD (ready-to-drink) and RTM (ready-to-mix) markets are exploding worldwide. “Many of the extracts, ingredients—both natural and even synthetic—are being dispersed in the ever-popular water market, and beyond.”

    He added that coconut water in particular has become an extremely popular beverage, and there has been growing interest in his company’s patented powdered coconut water, Cococin. “Joint care supplements continue to be the top category for Sabinsa in the manufacturing realm, particularly due to its Curcumin C3 Complex.

    SGTI’s Mr. Holtby said Kaneka Corporation’s reduced form of CoQ10, ubiquinol, shows great promise for specific groups of people who are older and/or may be experiencing oxidative stress. “There is great potential for this active antioxidant form of CoQ10. Our reduced CoQ10 formulation (CoQH-CF) is also clinically studied, also showing high absorption. This version, in conjunction with several studies conducted by Kaneka Corporation, has reinvigorated the CoQ10 supplement market. Using Soft Gel’s crystal-free (CF) technology, CoQH-CF was created. This unique soft gel delivery system with Kaneka QH allows individuals who are unable to process CoQ10 effectively on their own (primarily Baby Boomers and those with disorders of elevated oxidative stress) to increase plasma levels of CoQ10 in its reduced form. Ubiquinol from the supplement is readily available to enter the energy production process. This solution protects the Kaneka QH material from oxidation and crystallization.”

    On the Horizon
    As more and more consumers take control of their health through preventative measures, “they are eagerly turning to dietary supplements to help them achieve a lifestyle of wellness and active vitality,” said Pharmachem’s Mr. Bray. “In tandem, industry research and technological innovations in areas such as bioavailability, controlled release, etc., are driving product launches and ‘new and improved’ formulations.”

    ProTab Labs’ Mr. Lundstrom agreed, saying that engagement with consumers has led to a thriving supplement and private label industry. “Natural retailers like Whole Food’s, Sprouts, Trader Joe’s, Mother’s Market and others have done a good job of educating consumers about the benefits of supplementing their diets with natural remedies. At ProTab Labs, we have recently added staff, and will be tripling our capacity in April as we move into a new facility. This is a direct result of the optimism of our company leadership in the future of the nutritional supplement industry, and the growing acceptance of natural remedies among consumers.”

    As the industry continues to develop, product launches will be the lifeblood, added Mr. Bray. “Often, the products available for consumers are a win-win partnership between brand marketers and their contract manufacturers. Due diligence, ethical adherence to regulations and the commitment to long-term presence in the market are shared attributes to ensure industry health and longevity.” 
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