Twenty-five years since the Dietary Supplement Health and Education Act (DSHEA) established the current regulatory framework for supplements, the industry has grown tenfold.

Companies in today’s modern marketplace are challenged to meet current Good Manufacturing Practices (cGMPs), high sourcing standards, and a host of regulatory mandates while simultaneously developing and pursuing sales and marketing efforts. The trend of outsourcing manufacturing operations to dedicated contractors (CMOs) has proliferated in recent years as well.

“Some of the world’s most successful brands partner with CMOs because of the expertise, buying power, and flexibility they bring to the table,” said Dave Wood, CEO, Captek Softgel International. “This allows a branded company to do what they do best: promote their brands and ideate products their customers need.”

Outsourcing manufacturing allows supplement companies to focus on sales and marketing “rather than deal with complexity of the manufacturing operations and supply chain,” according to Adam Ishaq, sales manager at GMP Labs.

Essentially, contract manufacturers support companies that do not have the resources or infrastructure to manufacture dietary supplements themselves, said Jeff Della Valle, business development manager, Lonza Consumer Health & Nutrition. 

“Some customers come to us because they do not have access to specialized equipment that will enable them to create products that meet more challenging or unique customer requirements,” he said. “They may, for instance, have the capacity to powder-fill capsules, but may not have the equipment or knowledge to create a liquid-filled solution, so they engage with organizations like Lonza to support their requirements. There are also companies that do not manufacture their products, and therefore need assistance with the operational expertise and infrastructure required to get their products to market.”

Ultimately, outsourcing enables product stakeholders to do what they do best, he added. “Companies may be proficient at marketing their businesses or selling their products, but may need to rely on solution providers like Lonza to source raw materials and provide support in product development. As an expert in R&D, product development and production, our role is to help companies deliver high-quality products that are safe and effective, while also delivering a service that helps to optimize customer experience and product performance.”

The biggest benefit to brands is an overall reduced cost structure, suggested Justin Bath, president of Biovation Labs. “Often in a company, there is a conflict where they are proficient at marketing, but not manufacturing or other operations. By allowing a partner with expertise in contract manufacturing to manage and move their products through the supply chain, they can focus on marketing and aligning messaging with their goals.” The contract manufacturer will help ensure the product is produced to the highest quality possible, he noted.

When brands hire a contract manufacturer, they hire an expert in a specific segment. “Brands can glean unanticipated benefits such as insights in trends and regulations that they wouldn’t on their own,” said Bath. “They can also help the brand walk the fine balance of quality and price. Contract manufacturers have processes in place to ensure quality. They also strive every day to drive manufacturing costs down to meet the quality and pricing dynamic that is required.”

In the current dietary supplement environment, many companies are concerned about integrating cGMPs into their operation, said Justin Kalafat, scientific business development manager for ACG North America, LLC. “They are faced with the difficult decision to invest internally to get up to par with cGMPs or outsource their products to a CMO. A considerable amount of companies are turning to CMOs due to the prohibitive costs and time associated with becoming a cGMP facility.”

Larger dietary supplement manufacturers can also take advantage of CMOs for smaller production runs or capabilities they may not have within their own operations, he added. “For instance, smaller batches might be inefficient for large production equipment due to the time of setup and cleaning. If blister packaging is necessary and only bottling is available, one might send this product to a CMO for the packaging as opposed to purchasing equipment. The same can be said for many other options that a company does not have available internally when they are considering expanding their portfolio.”

Shaun Ahuja, CEO of Nutracode, which focuses exclusively on two niche delivery systems (liquid capsules and beadlets), said CMOs often excel at one or two specific areas compared to their competitors. “Find out what those are and retain that CMO for those projects,” he said. “We possess extensive knowledge of beadlet technologies and invest a great deal of resources in understanding how to serve our customers better in these specialized areas. Focus on what you excel at. Nutraceutical brands simply aren’t designed to manufacture their own products, unless they are at a specific size where resources allow for it.”

Qualification Tips
There’s a litany of considerations when qualifying CMOs, according to David Trosin, global business development director, Health Sciences, NSF International. “While price is on the list, it can carry too much weight over quality compliance. Companies seeking to partner with a contractor should make the effort to have a qualified person from your team visit the facility and review their quality systems.”

Another approach is to consider if the company has been evaluated by a credible, independent, accredited certification body like NSF International. “If so, can they share a current and dated certificate? Communication is the key,” Trosin cautioned. “A good contract manufacturer will want to provide the necessary information to differentiate themselves from those that are not doing the right thing.”

In the case of NSF International, the process for certifying a manufacturing facility as GMP compliant starts with an initial audit. “We go to the facility and conduct a full audit that is based on the operations of the manufacturer,” Trosin explained. “Once this is complete, a full audit report and corrective actions report is provided to the manufacturer. Once they have satisfactorily responded we issue their GMP certificate and list them on the NSF International website.”

NSF International returns to the facility six months after the initial audit to re-audit the facility and review the corrective actions, he added. This process repeats itself every year the manufacturer wants to remain “NSF International GMP Registered.”

Third-party GMP certifications can give brands confidence that the manufacturer has procedures and policies that comply with the FDA’s GMP requirements, said Bath. “Don’t hesitate to do an on-site audit as part of the due diligence process. This will help ensure that the facility is clean and capable of meeting the client’s goals of price, quality, and scalability. It also gives the company seeking a contract manufacturer real insight into how the manufacturer operates and runs its facilities.”

Gauging the appetite for risk and innovation is an important consideration as well, Bath added. “If the contract manufacturer is dealing with highly innovative companies that are pushing the limits a bit, but the brand is not looking to push the envelope on product development (or vice versa), conflicts may arise. If you are a cutting-edge brand seeking cutting-edge manufacturing techniques, it is important to find a manufacturer that aligns with your philosophy.”

An important part of the decision-making process for companies looking to outsource to a contract manufacturer should be to validate the quality and credibility of a vendor, said Della Valle. “For that reason, we encourage companies to carry out an on-site audit; ask questions relevant to their business, and make sure the contract manufacturer offers the equipment and services that they need to develop products that are safe, consistent, and meet quality standards and industry regulations. Looking for vendors that follow cGMP regulations is a great starting point, as that provides a reasonable indication that the manufacturer has procedures in place to minimize risk, control raw materials, and help to ensure the safety and integrity of the manufacturing process.”

Alongside timeliness, delivering on specification, and quality controls, relationships are a big part of doing business with CMOs, according to Ahuja. “It’s important to feel comfortable with the people you are working with, whether they are vendors or clients. You should have a sense that you are building something exciting and of value together versus a very dry, ‘numbers-only’ type relationship. Do you enjoy speaking with your CMO? Do they inspire life into you and your brand?”

According to Wood, when looking for a qualified CMO, companies should look for specific traits, including: quality (i.e., transparency, compliance, documentation, regulatory support); capacity (i.e., surge capacity for launches, capacity to grow as the brand builds demand); technical expertise (i.e., the ability to solve formulation issues, look for ways to control cost without cutting corners, create novel alternatives); and ownership (i.e., do they have a good reputation within the industry).

“Look for a contract manufacturer that offers personalized service and experience with complex formulations,” Ishaq suggested. “Manufacturing commodity products like vitamin C is easy; formulating multi-ingredient finished products requires experience and knowledge.”

Jennifer Cusick, director of sales operations, Trividia Manufacturing Solutions said it’s important for companies to fully understand their product needs. “Is your product an OTC, cosmetic, dietary supplement, or homeopathic product? How do you know what claims you are making? If the CMO develops the product, who will ‘own’ the formula? If you chose to move to a new CMO, is the formula available to you?”

In terms of cGMPs, “what would FDA require of you in an inspection? Are you able to acquire those documents from your CMO?” Companies should also pay attention to certifications and standards that are important to the brand, she added. For example, “do you need your product made in an allergen free environment?”

Cusick also suggested companies consider the technical capabilities and expertise they need. “Are you looking for formulary work, or product development? Will you provide raw materials and components or do you need the CMO to source those for you? Are you looking for a complete ‘turn-key’ service?” Challenging processes require more sophisticated equipment, so the type of dosage formats and volume matter as well (e.g., capsules, tablets, softgels, etc.)

Lastly, everyone has their own expectations for good customer service, Cusick said. “Know what you are looking for and be sure to screen for it.”

Ensuring proper setup to maintain cGMP compliance, adequate quality systems, and readily available capacity are keys when qualifying a new CMO, according to Kalafat. 

“Flexibility is imperative and multifunctional across different platforms dealing with several dosage forms, lead times, ability to accommodate changes in scheduling, and turn-key solutions,” he said. “Value can be added if CMOs have the capability and proven expertise in multiple dosages forms and packaging options. Selections from the production of capsules, tablets, liquid-filled hard capsules, softgels, stick packs, gummies, bottling, blistering, and cartoning add more for customers to choose and can increase purchasing power.”

Additionally, some customers seek turn-key solutions, where the CMO is responsible for the procurement of the entire supply chain. “Others like to maintain this control, so if a CMO can accommodate business in both ways, they can be setup for success with different customer styles,” said Kalafat.

Challenges for CMOs
The cost of production is rising due to political factors and increased regulatory oversight, according to Ahuja. “This can be positive but also costly to all parties involved. A lot of start-up or mid-size customers seek to launch new products with very low minimums, which can put a strain on resources.”

CMOs face many challenges in today’s global economy, according to Wood, including increasing labor costs due to inflationary pressure and a limited labor market; changing/increasing quality standards like the Food Safety Modernization Act (FSMA); a globalized market and international regulations; and increasing demand for documentation and certification.

“Excess capacity in certain modalities drives margins down, which encourages cutting corners, he added, “and there’s pressure to have the newest fad-like modality that may or may not stick in the market after significant capital expenditure.”

Additionally, Wood said better harmonization of standards around raw materials documentation would help improve efficiencies. “The many different formats, special requests, and different levels in quality of documents increases the cost, time, and complexity to support customer needs for a full product dossier.” 

Ishaq also noted the supply chain for the dietary supplement industry is global, both for ingredients and finished goods. “Restrictions on trade from any government adds unnecessary costs and complexity.”

One of the most difficult challenges is hitting the moving target of compliance, according to Bath. “Regulations are constantly changing and becoming increasingly rigorous. As such, a contract manufacturer has to stay on top of not only what the FDA requirements actually are, but they also have to know how the letter of the law is being interpreted by the FDA and other regulators on a day-by-day basis.”

Contract manufacturers receive constant pressure from the market and from brands, he added. “They must provide cost-beneficial solutions for clients while providing the highest possible quality at the lowest price. Price often conflicts with quality and quality often conflicts with price. This balance may tempt contract manufacturers to compromise on the quality of ingredients. A good contract manufacturer will not compromise when quality is involved.”

Another pressing challenge is the rising costs of employee compensation. “Current employees and potential hires can be lured away with higher hourly rates, which many U.S. manufacturers are witnessing,” Bath noted. “This can reduce the availability of adequate staffing. However, this move may actually spur the advent of more automation. As contract manufacturers are competing with others for a finite labor pool, the more progressive of them are going to invest in automation. Those that do not will feel pain as the competition overtakes them in quality, speed, and price.”

Ultimately, the future of contract manufacturing is automation, Bath continued. “It is the path that manufacturers will take to grow profitably and reduce costs. Efficiency is highly valued and manufacturers are taking complex processes and automating them to new levels of efficiency. They are also integrating these processes with new technologies beyond automation such as artificial intelligence to achieve outcomes that were simply not possible for previous generations.”

According to Della Valle, raw material sourcing can be a particular challenge for contract manufacturers for several reasons. “Finding suppliers that can demonstrate good quality standards, for instance, is important for ensuring consistency of product performance. In addition, as the demand for naturally-derived products continues to increase, contract manufacturers are also facing the growing challenge of having to source a continuous supply of plant-based raw materials. With some materials only grown and harvested at certain times of the year, it can be particularly difficult to ensure that there is enough supply to cover production requirements year-round. The trend for vegan/vegetarian products also shows no signs of slowing down, so it is essential that the industry is able to adapt to meet this demand.”

Cusick also noted raw material changes or shortages from vendors can be challenging for CMOs, along with on-time delivery of raw materials, testing costs, timeliness (or lack of) for outside testing services, costs, labor shortages, and more.

CMOs are faced with the same pressures as any other manufacturer when dealing with price, lead times, on-time delivery, and other key measurable success factors, said Kalafat. “There are some differences with the overall CMO business setup that can potentially be problematic for their customers. One of the main challenges from the customer’s point-of-view of a CMO is the protection of their formulations. This can come up in two different ways, where the CMO is manufacturing its own products in addition to serving as a CMO, or if a customer is concerned other clients of the CMO gain access to their formulations.”

Increasing Transparency
Transparency throughout the supply chain, from raw material sourcing through to the development of the end product, is essential to ensure quality and consumer satisfaction, according to Della Valle. “Making sure that documentation about raw materials and finished products, for instance, is shared and accessible to companies is one way that contract manufacturers can deliver transparency more effectively. Contract manufacturers could also facilitate greater communication between raw material suppliers and companies where necessary, and invite customers for an up-close view of raw material sourcing, manufacturing and the procedures that are in place to ensure the production process meets high quality standards.”

With this information, companies can also increase transparency, particularly with respect to product labeling, Della Valle added. “Ensuring that labels clearly communicate the ingredients used in products can enable companies to elevate their quality positioning, while also building consumer trust.”

Transparency is all about the supply chain, according to Ahuja. “Vendor and ingredient qualification certainly go a long way. Number one is always having your paperwork in place. There shouldn’t be a major disconnect between any link in the supply chain when it comes to transparency. A brand may not want to see every single document for their product; but when they need it, the CMO should have it, no questions asked. In the end, you create more value by staying organized and working on increasing further visibility into your ever-growing supply chain.”

Wood said companies have a responsibility to keep consumer safety a priority. “Transparency is a key part of that responsibility and can be handled industry-wide in a number of ways, for instance: increasing the availability of chain-of-custody documents, greater raw material vendor qualification to verify manufacturing techniques and social compliance regulations, greater standardization of analytical test methods, and aligned specifications to avoid too much technical jargon.”

Consumers are scrutinizing labels, driving demand for transparency down the supply chain, said Ishaq. “Gone are the days where a marketer can use ‘Proprietary Formula’ and not disclose all of the active ingredients.”

Overall, the natural products industry is raising its standards, according to Bath. Visibility and transparency are becoming high priorities because “the benefits of building trust by sharing certain information with partners and consumers far outweigh any other considerations. Consumers are demanding and, frankly, have a right to know what comprises the products (ingredients) they are ingesting as well as the data that supports the claims the brands are making.”

More transparency means following a higher standard when it comes to labeling. Research and testing information that will back up marketing claims is also important to disclose, Bath said.

“The pressure from consumers and regulators is driving some fundamental change when it comes to transparency, but most of it is happening because responsible companies feel the need to focus on quality,” he added. “Transparency is a quality issue. It is critically important to share any and all information that impacts the formulation and manufacturing of the product. Brands and their contract manufacturer need to exercise the open sharing of documentation. This includes certificates of analysis, certificates of origin, GMO statements, allergen statements, and so on. Knowing that this documentation is there allows both the contract manufacturer and the brand to be open and honest with their communication with regulators and consumers. This builds trust between manufacturers and brands, and that trust can be naturally transferred to consumers.”

Communication between partners, including routine and regular conference calls and in-person meetings will help build trust and transparency, according to Cusick.

In addition to open quality inspections, certifications, and other credentials, inviting customers inside manufacturing facilities could send a strong message, said Kalafat. “This helps build comfort and adds to the overall business relationship.”

Product Development Trends
In terms of actual product trends, personalization is gaining significant traction in the dietary supplements industry, noted Della Valle. “With a growing awareness that nutritional needs and requirements vary from individual to individual, consumers are looking for products that offer a unique story and are customized to them—a one-size-fits-all solution is no longer accepted as the norm. As such, many contract manufacturers are receiving more and more requests from customers seeking smaller production batches that enable them to develop solutions that are tailored to individual consumer requirements.”

More broadly, demand for products that are natural, clean label, or vegan/vegetarian also continue to gain momentum, he added. “A survey of U.S. consumers, commissioned by Lonza and carried out by the Natural Marketing Institute (NMI), found that 54% of consumers say they prefer to buy dietary supplement products that are derived from natural sources. (NMI SORD, 2018).”

Sustainability is also at the forefront for many companies, Della Valle continued. “The NMI data also found that 55% of consumers say they are willing to pay more for a dietary supplement product if it was made from a sustainable source. Contract manufacturers can help companies elevate their brand trust and reputation by ensuring that sustainability remains a key driver throughout the manufacturing process.”

“Seeing results” may sound rudimentary but it is always important, said Ahuja. “Reviews are everywhere. Consumers want to take products which they can validate through ‘feeling’ their effect. Perhaps personalization and proper dosing per the individual is here to stay.” Clinical studies are always important too, he said, as brands and consumers seek validation for products.

Wood also noted that consumers want to feel a difference from the products they take. “This creates huge brand loyalty and a greater level of confidence that they are reaping a benefit in taking the product. Captek Softgel International’s brand partners are seeking greater bioavailability and efficacy that can support structure-function claims. In addition, clean label, organic, vegan, and pesticide-free tested products are all trending.”

As consumer needs evolve, more companies are looking to contract manufacturers to provide the expertise and resources they need to develop unique, market-leading products, said Della Valle. “This trend has resulted in greater collaboration throughout the industry, with companies increasingly partnering with one another to differentiate themselves in a competitive market and get innovative products to market faster. For instance, Lonza’s role as a founding member of the Clean Label Alliance, an initiative created in 2018 to help manufacturers develop or transition to clean labels, enables customers to deliver science-backed, unique solutions that meet evolving consumer trends.”

Companies are focusing on developing products in new dosage forms to differentiate from competitors as well, said Ishaq. “Customers are looking to create ready-to-drink, chewable, or powder formulations to appeal to consumers looking for new ways to take their supplements.”

Ultimately, consumers are seeking new ways to improve their quality of life at every stage, noted Bath. “The market is seeing a diversification in not only who is taking supplements, but also how they are consumed. People are not just taking tablets and capsules; in fact, there is a trend of pill fatigue. Consumers want the benefits of supplements without having to swallow a capsule or pill—and they want an easier, more enjoyable experience. As such, brands and contract manufacturers are partnering to develop new delivery methods such as powders, beverages, gummies, and more.”

Ahuja said Nutracode has seen growing demand for the company’s beadlet technologies, which allow for slower absorption and stabilization of targeted ingredients. “Beadlets increase bioavailability and reduce the active’s oxidation. Our core area is sustain-release beadlets and fast-absorbing liquid capsules, which are novel delivery systems designed to have complementary release points in the consumption of oils plus other actives, simultaneously.”

Increased awareness and acceptance of Traditional Chinese Medicine and Ayurvedic medicine is driving demand for botanical-based products, according to Wood, “along with the addition of botanicals to existing products for an enhanced or value-added effect.”

Demand for cleaner, more natural products has shifted some development to revamping formulas, as opposed to developing new ones, according to Kalafat. “The desired GMO-free label claim has facilitated a large industry shift from gelatin capsules to the HPMC vegetarian capsules in ACG’s portfolio, as our product carries that specific certification. Other activities are attempting to remove any titanium dioxide from formulations and only use non-synthetic dyes and colorants whenever possible.”

Novel dosage/delivery forms are also spurring product development, he added. “For example, combination filling of liquids into hard capsules can include beads, microtablets, capsule in a capsule, and other solutions. Delayed release capsules are also becoming more popular to prolong the disintegration of capsule shells until they pass through the stomach. This is a key for probiotic and other gut health products to ensure they reach the desired delivery target in the gastrointestinal tract.”