The Outsourcing Process for Manufacturing Solid-Dose Nutraceuticals
Author: Matt Wolf, CEO, Contract Pharmacal Corp.
As the nutraceutical industry continues to mature, it will face a constant stream of opportunities and challenges. Contract manufacturers can help nutraceutical companies overcome the challenges, leverage the opportunities—and achieve business success. The key is knowing how to choose the right one for your company. This article examines the top five things nutraceutical companies should look for in a contract manufacturer before signing on the dotted line.
Consumer demand for nutraceuticals is stronger than ever, and it remains on a steady growth path. The market opportunities for brand owners are tremendous across both demographic lines and product categories. Gen-Yers, Gen-Xers, Baby Boomers. All want to stay healthy. They want to keep their children healthy. And millions of them are turning to a wide range of nutraceutical products to achieve this goal—from weight loss and heart health supplements to allergy and diabetes aids. The proof is in the numbers.
The global market for nutraceutical supplements is expected to reach nearly $50 billion in 2013, according to a recent technical market research report from Wellesley, Mass.-based BCC Research. That’s up from $39 billion in 2007. Still, the nutraceutical industry as a whole—which includes supplements, functional foods and beverages—represents only about 6 percent of the total food industry today, leaving ample room for significant growth.
Lastly, but importantly, countless industry sources indicate that consumer use is up. This is due to a combined set of forces: the ongoing pursuit of health, a growing lack of insurance to cover prescription drugs and increasing encouragement from the medical community. In fact, approximately 80 percent of U.S. physicians and nurses recommend dietary supplements to their patients, according to a recent Healthcare Professionals Impact Study. These figures are expected to increase with the number of clinical trials of dietary supplements.
Every worthwhile opportunity brings challenges
This is particularly true for the nutraceuticals industry. From new regulations and fluctuating costs to the integrity of materials and the quality of products, nutraceutical companies must tackle a steady stream of challenges to succeed in an increasingly competitive space.
They must achieve economies of scale by identifying cost advantages in sourcing ingredients and manufacturing supplements. They must execute creative branding and marketing strategies to compete with the growing number of companies offering similar products. And they must offer a wide range of product categories—because consumers will continue to demand it.
The right contract manufacturer can help nutraceutical companies accomplish all of the above by:
- Maintaining a global network of raw material suppliers to keep sourcing costs down and ingredient quality high
- Eliminating the need to purchase manufacturing equipment or production facilities, reducing capital expenditures
- Allowing companies to focus on their core business, product categories and the marketing and sales of their products
So how do you know which contract manufacturer is right for you? Here are the top five things you should look for in every provider.
Quality
I know what you’re thinking. To suggest that you seek quality in a business partner seems rather obvious. But there are many factors that contribute to the quality of a dietary supplement—and you need to look behind the scenes at contract manufacturers to find the provider with the caliber of people and processes that will ensure you receive the highest-quality products and services.
What to look for
- Sophisticated equipment – see that the provider uses the finest equipment the industry has to offer. Some of the best names include Gemco and Patterson Kelly 'V' blenders, Fette tablet presses, Glatt fluid-bed processors and high-shear granulators, Uhlmann blister machines and Bosch and IMA capsule-filling machines.
- Maintenance programs – if your contract manufacturer’s equipment doesn’t run well, your business won’t run well. While it is mandatory to run maintenance annually, we maintain ours on a regular basis. Make sure your contract manufacturer runs maintenance at least monthly—and confirm that it performs IQ/OQ/PQ (Installation Qualification/Operation Qualification/Performance Qualification) on the equipment.
- Knowledgeable teams – a company’s team is its greatest asset. When you’re partnering with a contract manufacturer, its team is your greatest asset too. Make sure the company maintains rigorous training programs and employs strong research and development, Quality Assurance and scale-up teams, ensuring that they can take you from the earliest stages of development to the commercialization of your products—successfully.
- Superior products – make sure the company’s product formulations are robust and the products it develops and manufactures will stand the test of time.
- Quality Assurance – of course, you should confirm that your contract manufacturer operates according to meticulous Standard Operating Procedures (SOPs) in strict compliance with current Good Manufacturing Practices (cGMPs). Also, investigate the company’s commitment to QA. For example, we employ approximately 90 employees dedicated solely to Quality Assurance and Quality Control.
What to do
You can learn all of this and more from a Quality Assurance audit. Nutraceutical companies can conduct audits internally, or they can outsource to a reputable consulting firm with experience in this area.
Case in point
One of the world’s largest pharmaceutical and healthcare companies came to us for help with the formulation development of a complex multi-ingredient product. The product offered considerable challenges due to compatibility issues and the hygroscopic nature of the materials, making them more difficult to handle. We conducted numerous binary and excipient compatibility studies and designed an intricate instruction set and formulation to meet the customer’s requirements. We also performed stability studies to confirm the lifespan of the product and completed the validation of all processes and methods. The result: a robust formulation that continues to be a large-volume product for the customer and for us.
Dependable Delivery
They say timing is everything. And they are right. If you experience significant delivery delays from your contract manufacturer, you will lose sales—and your business will suffer. But if your products are delivered as promised, you can maintain better control of your inventory and improve cash flow.
Of course, external forces can impact delivery for any contract manufacturer. For example, the skyrocketing oil prices over the last year have driven transportation costs across all industries, though we are seeing some relief due to the more recent drop in oil prices. However, you should seek a partner who effectively manages obstacles like this to ensure that your deliveries will come on time, as promised. In this case, you should expect your contract manufacturer to maintain clear, consistent communications with you about the potential impact of oil prices on shipping costs and delivery times, so you always know what to expect and can plan accordingly.
What to look for
- High-speed manufacturing equipment – your contract manufacturer should use state-of-the-art processing equipment monitored by industry veterans. This will help ensure not only on-time delivery, but consistent batch results as well.
- Tight production controls – check that your contract manufacturer closely monitors inventory to ensure that the necessary raw materials are available for on-time production.
- Efficient scheduling process – you should be an integral part of the scheduling process and should expect ongoing communications throughout the life of your project to effectively manage expectations and results.
What to do
Always establish a supply agreement with your contract manufacturer. This document will clearly outline each party’s responsibilities and expectations—and will help you avoid quality issues, raw material shortages, cost fluctuations and delivery delays.
Case in point
A major retailer partnered with us to launch a new dietary supplement that required production of high volumes to be delivered to 5,000 stores in less than two months. To provide the highest-quality product within the customer’s timeframe, we assembled a dedicated team of resources to optimize a new dietary supplement meeting all customer aesthetic and analytical requirements. We procured materials for the 24-ingredient product from 12 suppliers located in 5 countries—and we produced 10.8 million tablets and packaged more than 120,000 bottles in under 2 weeks. The result: the customer’s tight deadline was met, and the product became the single most profitable product in that retailer’s 107-year history.
Competitive Pricing
One of the keys to competitive pricing is proper sourcing of raw materials. Consequently, the contract manufacturers in the best position to offer you the most competitive pricing are those with a strong network of high-quality raw material suppliers around the globe.
That said, the state of the world economy plays a significant role in pricing. For example, over the last year, we have seen fluctuations in raw material costs that we haven’t seen in more than 15 years. The costs have tripled, and in some cases, quadrupled.
Many factors have contributed to the recent cost surges, including new environmental regulations imposed on raw material manufacturers in China, factory closings to accommodate the Olympics in China and natural disasters, such as earthquakes. Another factor is simply supply and demand; certain starting materials are in short supply today.
The fact remains that a dietary supplement is only as good as its raw materials—but legislation changes, stricter regulations and the general increase in quality awareness have changed the sourcing landscape. You must find a contract manufacturer who can navigate these changes and access the highest-quality raw materials to ensure the integrity of your product.
What to look for
- Global network of suppliers – gone are the days when manufacturers simply purchased the lowest-priced material. Find a partner with a large global network of trusted suppliers to help maintain both costs and quality.
- Thorough evaluation processes – vendor evaluation and raw material certification processes are key to the selection of the most qualified suppliers. Review your contract manufacturer’s criteria and procedures.
- Raw material testing – learn about the battery of tests the company performs on raw materials to ensure optimum quality.
What to do
Maintain clear, consistent communications with your contract manufacturer. Because this industry is commodity-based, managing cost fluctuations has always been part of the process. Your contract manufacturer should work closely with you to help manage the impact of these cost fluctuations, giving you advance notice when possible of any price increases driven by higher raw material costs.
Case in point
We have employees based in China and India to ensure constant access to the highest-quality materials at competitive prices. This also enables us to closely monitor raw material suppliers in those countries, as well as the integrity of the ingredients themselves. Our auditing teams routinely visit facilities and conduct lengthy due diligence. The result: assurance that every raw material supplier we work with adheres to cGMPs as required in a U.S. facility and that all raw materials we source are of the highest quality.
Ethics
In today’s environment, it has never been more critical to align with business partners who perform both effectively and ethically. While you should find a contract manufacturer with a strong reputation, you also should follow your gut instincts. Your contract manufacturer will play an integral role in the development, manufacture and packaging of your products. Consequently, you need to select a partner you believe you will like working with—and one you feel you can trust.
What to look for
- Management – get to know the senior management team of your contract manufacturer, and know it well. Make sure the team has significant industry experience, and maintain a relationship with key executives to ensure an ongoing, trusting partnership.
- History – make sure your contract manufacturer is a reputable provider. By fully understanding its background, you will have a clearer picture of who the company is today and where it may be headed in the future.
- Process – you should understand not only the company you are working with, but also the details about the contract manufacturing process itself to ensure a successful partnership.
What to do
Stay current on the company. Regularly check its website and conduct your own research to uncover the latest news about your contract manufacturer’s company and management, as well as new solutions that may benefit your business. Also, keep the lines of communication open. Hold regular calls and meetings with your contract manufacturer. You also should consider performing an annual audit.
Case in point
Transparency builds trust. That’s the foundation upon which we have built our company—and a loyal, global customer base—over the last 40 years. Everything we do is transparent to the customer, and we are honest at every turn. If we need to reject raw materials due to lack of quality, or if a product fails stability testing, we advise the customer promptly—knowing full well it will delay commercialization.
Getting out in front of this kind of news not only helps customers make decisions in the best interest of their business, but it builds a trusting relationship between brand owner and contract manufacturer. If your contract manufacturer isn’t transparent with you, it may not be transparent with the FDA either. In recent years, we have seen contract manufacturers shut down for this very reason—further incentive for you to find a partner who is transparent and trustworthy.
Experience
Seemingly, another no-brainer. However, as I stated earlier in this article, new regulations rank among the most significant challenges facing the nutraceutical industry today—and experienced contract manufacturers are in the best position to help brand owners navigate these changes and achieve success with their products.
Over the last year, all supplement manufacturers have been required to follow cGMPs—federal regulations typically associated only with the manufacture of drug products. While this is a major shift, contract manufacturers with experience in the development, manufacture and commercialization of drug products will be well positioned to meet these new requirements.
The other benefit of rich industry experience is simple: when a contract manufacturer has been in business for many years, it is intimately familiar with the most common mistakes nutraceutical companies can make—and it avoids them. An experienced contract manufacturer likely has invested significant time and resources perfecting its processes, products and services. The team understands the nuances that surround the development and manufacture of a dietary supplement, from robust product formulation to the effective sourcing and handling of raw materials to manufacturing and packaging solutions that best fit each individual customer’s requirements.
What to look for
- Background – check the company’s experience in the development and manufacture of prescription drug products.
- Compliance – make sure the contract manufacturer regularly monitors FDA regulations to ensure strict compliance with cGMPs now required of dietary supplement manufacturers.
- Longevity – find out how long the company has been in business and how long its senior management has been in the industry.
What to do
Check the contract manufacturer’s track record. In addition to the above, find out how many products the company has commercialized and whether it has reported any adverse events or product recalls.
Case in point
A relatively new federal regulation requires dietary supplement manufacturers to test active ingredients in multi-active products more rigorously. In the past, supplement manufacturers only were required to test certain ingredients, or “markers,” in such products.
In the end, more thorough testing ensures the highest-quality product for the consumer. When you consider that some dietary supplements have as many as 30 or 40 active ingredients, this requirement does present certain challenges for the industry overall. However, for the last 40 years, we have performed full stability testing and process validation on prescription drugs—experience that positions us to meet these new requirements on behalf of all our nutraceutical customers.
Conclusion
The nutraceutical industry is in the midst of significant growth and change, with no sign of a slowdown. Contract manufacturers can help nutraceutical companies seize tremendous market opportunities while clearing the growing number of hurdles along the way. The key is finding the right partner.
The bottom line is, contract manufacturers and nutraceutical companies should collaborate closely to develop and manufacture high-quality products that meet consumer demand while maximizing profits. With that in mind, do you have the right contract manufacturing partner for your business?
Matt Wolf is CEO of Contract Pharmacal Corp., a contract manufacturer that has been developing, manufacturing and packaging dietary supplements, prescription pharmaceuticals and over-the-counter drugs since 1971. Mr. Wolf has been with CPC for 15 years. He received a Bachelor of Arts degree from the University of Michigan.