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    Features

    Avoiding Contract Manufacturing Pitfalls in the Dietary Supplement Market

    A recent product recall shines a spotlight on the marketer/manufacturer relationship.

    Avoiding Contract Manufacturing Pitfalls in the Dietary Supplement Market
    Brand owners are ultimately responsible for ensuring their products comply with the law.
    By Sean Moloughney, Editor, Nutraceuticals World03.02.20
    Following a consent decree of permanent injunction ordered by the U.S. District Court for the Eastern District of New York in December 2019, a contract manufacturer doing business as ABH Nature’s Products, ABH Pharma, and StockNutra.com was forced to issue a nationwide product recall that applied to all dietary supplements it manufactured and sold between January 2013 and November 2019.

    At the time of the announcement, the company made public an excel sheet that listed 859 “brands” or companies potentially affected. However, the accuracy of the list was soon called into question, as some companies never actually did business with ABH, noted Steve Mister, president and CEO of the Council for Responsible Nutrition (CRN).

    “We looked at that list and saw what we thought were some very reputable marketers. Upon further digging we discovered there were companies on that spreadsheet that have never done business with ABH. We reached out to FDA on this and FDA said the list was provided to them by the company. They too were finding there were companies on that list that had never bought a single supplement from ABH.”

    The list was later removed from the company’s announcement; as of press time the company was still working to revise its customer list.

    However, companies on the original list—some of which didn’t actually do business with ABH—were getting notifications from both brick-and-mortar and online retailers that their products were being removed from stock.

    While there were no reported illnesses or injuries related to products, the incident highlights potential pitfalls in the contract manufacturing industry, according to some experts.

    ABH had a long history of cGMP violations dating back to 2012. Daniel Fabricant, PhD, CEO and president of the Natural Products Association (NPA) said the case actually started when he was FDA’s director of dietary supplement programs. “We sent them a warning letter in 2012,” he said, calling FDA’s most recent action a “pretty aggressive move.”

    Generally speaking, Fabricant advised brands working with contract manufacturers that, “Just because you can get it for a cheaper price doesn’t mean you should.”

    Ultimately, brand owners are responsible for ensuring their products comply with the law.

    “The obligation is on the brand marketers,” said Mister. “Whether you chose to manufacture products yourself or outsource manufacturing, the company putting its name on the label is responsible. That’s true of adverse events, that’s true of GMPs.”

    It’s therefore incumbent on brands to ask manufacturing partners about their supply chain, third party certifications, and generally ensuring products adhere to GMPs, he added.

    Len Monheit, CEO, Trust Transparency Center, said it’s “truly unfortunate” that FDA waited so long after initial signs and infractions. He called the debacle a “black mark” against companies working with ABH and their choice of contract partner, and “it begins to unmask that black box (or hole) that often is contract manufacturing.”

    Evaluating the original list ABH provided, many of the companies seemed to be Internet-only or Internet-first brands, Monheit noted. “They may have little understanding of the regulations themselves, and they, in many cases, relied on their contract partner to shield them from this risk. As we know though, the brand carries ultimate responsibility for compliance. You cannot outsource that.”

    Asked about the potential impact on the industry at-large, Monheit said, “unfortunately, I am afraid it won’t have the impact it should. Brands will naively or deliberately seek out the lowest contractor, and there should be much more differentiation, value, and credibility to the ones doing things properly. This should be used as a lightning rod to educate brands on their risk; it should show FDA they need to act sooner and more aggressively, and it should be the start of more transparency at contract manufacturing. These would all be positive outcomes.”

    Scott Steinford, CEO of Health Wright Products, a contract manufacturer based in Clackamas, OR, said the ABH consent decree “is a realization that the FDA has limited power and resources to enforce action. This action appears to be a continuation of the last DOJ-initiated FDA enforcement which was against Confidence USA in May 2019.”

    A complaint in that case alleged the company repeatedly failed to verify the identity of each dietary ingredient used in the manufacturing of its supplements, and also failed to verify products met specifications for purity, strength, composition, and contamination limits.

    “It would be nice to believe the continuation of bad manufacturing practices are confined to a few ‘bad actors,’” said Steinford. “The reality is there are many more. I know of one contract manufacturer I looked at for a recent brand due-diligence request that was inspected by the FDA in 2013, 2014, 2015, and 2018. Only one 483 resulted from the inspections but a citation was repeatedly given on each of the inspections: ‘You did not verify that your finished batch of dietary supplement meets product specifications for identity, purity, strength, composition, and limits on contamination that may adulterate or that may lead to adulteration of the dietary supplement.’ This violation of cGMP is a critical component of product safety and integrity that has been repeatedly called out by the FDA. Unfortunately, the issue continues to exist based upon the numerous repeated violations.”

    Steinford said he hopes these kinds of regulatory crackdowns would send a signal to stakeholders at all levels of the supply chain that shortcuts to quality are unacceptable.

    Steve Holtby, president & CEO, Soft Gel Technologies, Inc. (SGTI) said the ABH incident is a good case study for promoting the importance of being in compliance with cGMP regulations. “It also underscores the necessity of supplement brands to qualify their potential contract manufacturer, which includes auditing that facility,” he said.

    “It is vital that contract manufacturers develop their own protocol for testing and qualifying individual batches of raw materials, as they carry a good chunk of end product responsibility,” Holtby added. “Given the increasing globalization of the multi-layered and complex supply chain, the importance of frequent and thorough checkpoints as an integral part of supplier qualification cannot be overstated. Manufacturers are left with the formidable challenge of identifying safe and pure ingredients that they can reliably utilize in their products.”

    Breaking Through Opacity
    Brands often don’t want to lock themselves into a single contractor, according to Monheit, and may not want to admit they’ve gone to the lowest-cost provider. “Margins can be so tight in the space, this relationship is often really transactional, which is ironic and unfortunate,” he said. “It’s a huge risk and liability to have the wrong partner. We’d like to see more brands identify their contract manufacturers and partner with them in a value-added relationship based on more than the transaction. We’d like brands to identify what they looked for and got in their partners. In order to do that, the manufacturers have to better differentiate and articulate their unique value propositions. That value equation and decision needs to change.”

    According to Adel Villalobos, CEO and founder of Lief Labs, a cGMP-certified contract manufacturer based in Los Angeles, CA, there are several reasons why brands have not traditionally disclosed their CMO to the public. “Many of the early industry brands built their brands’ existence on the premise that they were the actual manufacturer when it was not truly the case. Also, many times the brands felt their formulations would be utilized by competitors if they found out who their CMO was and they used the same CMO.”

    Manufacturers have also been historically secretive with the brands they service, rarely disclosing formula details, he continued. “This poor transparency culture is changing in a positive direction. Today’s brand owners are changing things, led by millennials. And a new breed of CMOs are emerging that are much more collaborative and partnership-driven with the brands they service.”

    Transparency is a two-way street, Villalobos continued. “Lief was started in 2008 on a platform of transparency. This culture is part of our DNA. So, we attract like-minded brands. The recipe is the following: if you are not a brand or CMO with this mindset or value, then change it and partner with a brand or CMO that has the same values. You can’t force transparency. It must be a built-in value. And unfortunately, values can take time to change. The good news is that it can change, and the industry is becoming more transparent.”

    According to Steinford, the current model often treats the dietary supplement CMO in the same manner as any other manufacturing partner in most other industries. “The difference becomes important when it is realized we are dealing with consumables and not widgets. The dietary supplement CMO should be held to a higher standard of accountability and responsibility. The model of secrecy currently applied by brands regarding their CMO does not serve the customer at all.”

    The only potential benefit to the confidentiality of the contract manufacturer’s involvement in the production of the product is the ability to lower the price, Steinford continued.

    “This accommodation of a commoditization of the contract manufacturer provides incentive and opportunity to cut critical processes to reduce costs,” he said. “What many brands don’t realize is the contract manufacturer can make mistakes or omissions, but the brand ultimately pays the price. In the ABH issue, the brands are having to issue recall notices which erodes the faith and trust from the consumer. Historically, the contract manufacturer executives change the name of the company and/or just start something new and continue with the same business model of opaqueness.”

    David Trosin, managing director, Health Sciences Certification, NSF International, said transparency isn’t inherently difficult, but it requires a conscious decision. “I think it’s a matter of the good players consistently and publicly stating what they’re doing to implement and measure best practices in their organization. They publicize their certifications, discuss the ongoing training they’re conducting, and invite their customers to visit their facilities.”

    Anytime the spotlight shines on a bad player, “those committed to quality and best practices will review and refortify their efforts to consistently implement best practices,” Trosin said. “Likewise, those committed to cutting corners and prioritize maximizing profits over investing in quality will do their best to slip back under the regulatory radar and get back to business as usual.”

    This is why NSF is pushing to work with manufacturers, brands, retailers, trade groups, and regulators to underscore the importance of accredited third-party auditing and certification. “It’s essential for companies to take an honest look at their operations and their commitment to quality, and then partner with reputable organizations to make improvements where they are needed to reinforce where they’re succeeding,” said Trosin. “Ultimately, there needs to be enough humility to acknowledge where change is needed coupled with a desire to improve.”

    Verification Tips
    Experts contacted for this story strongly recommended conducting an onsite audit of potential manufacturing partners.

    “Audit and visit well before making a decision,” said Monheit. “Insist on talking to other non-competing past clients. Check out previous inspections and 483s. Look at the company culture, especially around trouble-shooting and unexpected events. That will tell you a lot.”

    According to Villalobos, an onsite audit to assess cGMPs is the most important step a brand can take. “These guidelines can be downloaded from FDA’s website or from 21 CFR part 111. If you do not have the experience auditing, hire an experienced auditor.”  

    Steinford suggested asking questions as if the contract manufacturer were a part of the brand’s organization. “There should be zero secrets between the CMO and the brand as it relates to the brand. Questions about process should be asked and questions about transparency of information should be tested. Ask to inspect batch records and master manufacturing records and ask questions about inconsistencies. The FDA cGMPs require the brand owner to be as responsible for the manufacturing of the product if it is in house or outsourced and provides no dispensation of liability to
    the latter.”

    Holtby echoed that, stating, “It is the responsibility of dietary supplement manufacturers to ensure that their products contain the intended ingredients and are absent of contaminants. This is achieved through a combination of extensive testing, thorough supplier qualification, and ingredient traceability. Traceability should be important to everyone as consumers of dietary supplements. Transparency varies depending on the contract manufacturer in question. Some are not very transparent. This also holds true for raw material suppliers and marketing companies.”

    As for the third-party certification process for GMP compliance, Trosin said, in the case of NSF International it starts with an initial audit. “We go to the facility and conduct a full audit that is based on the operations of the manufacturer. During this audit, we review the operation from incoming raw materials through the finished product leaving the facility and every aspect in between. We look at the applicable regulatory requirements as well as agreed upon industry best practices. Once this is complete, a full audit report and corrective actions report is provided to the manufacturer. After they have satisfactorily responded we issue their GMP certificate and list them on the NSF International website. Depending on their performance NSF International returns to the facility 6-12 months after the initial audit to re-audit the facility and review the corrective actions. This process repeats itself every year the manufacturer desires to remain NSF International GMP Registered.”

    Realizing Benefits
    Done properly, outsourcing manufacturing to a specialized expert offers “institutional knowledge, a lot of expertise, and a true extension to your team,” said Monheit. “Many companies don’t want to invest in capital-intense infrastructure and that’s why they outsource—so they don’t have to tie up capital and can focus on marketing. In some cases, they will save inventory carrying costs, and provide quality, testing, and regulatory support.”

    The primary benefits to outsourcing manufacturing are cost and expertise, according to Steinford. “Several brands have tried to create their own manufacturing with varying degrees of success. The economies of scale favor the CMO for most brands. Additionally, the cost of manufacturing is often underestimated, and the cost of experience is more often undervalued.”

    A good CMO partner can provide expertise and support with the complexity of regulations/laws required to conduct business in the dietary supplement industry,” said Villalobos. “There are so many laws that go beyond the Code of Federal Regulations Chapter 21 Part 111 that help guide cGMPs such as DSHEA (Dietary Supplement Health and Education Act), the FD&C (Food Drug & Cosmetic Act), FSMA (Food Safety Modernization Act) and label laws from CFR Part 101, and the list goes on.”

    Villalobos added that if brands find a strong CMO with a proven audit track record, then expect costs to be higher than a CMO that does not have strong regulatory systems. “Be vigilant and audit to help mitigate the risk of partnering with predatory CMOs looking to take advantage of brands that are not fully versed on cGMPs.”

    Contract manufacturers can provide instant expertise and infrastructure to allow companies to expand their product offerings very quickly without massive capital outlay, said Holtby.

    “Global economic forces also affect today’s business climate; many companies have to compete for an increasingly competitive market share,” he added. “Contract companies that are able to take a lot of the technical load are attractive, because it allows brand owners to completely focus on making sales, advertising, and marketing the product. By outsourcing production, there is no need to purchase or rent production facilities, buy equipment, qualify and purchase raw materials, or hire and train employees to produce the goods. There are also no headaches from dealing with employees who fail to report to work, equipment that breaks down, or any of the other minor details that any manufacturing company must face daily. The biggest concern is dealing with a trustworthy, cGMP compliant facility, and performing an audit of them.” 
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