Early, comprehensive legal review cuts costs, saves downstream problems, experts say

Companies looking to cut costs naturally cast a jaundiced eye toward the services of professionals who charge hundreds of dollars an hour. The common tendency is to keep these interactions at a minimum to keep the investment to a reasonable level. While a well-run company certainly has to have a budget and stick to it, devoting too little capital to legal consultation can be a question of being penny-wise but pound-foolish.

Money up front is well spent

Ivan Wasserman, head of the Washington DC office of the Chicago-based law firm Amin Talati Upadhye, said an early and thorough consultation with a lawyer can help head many problems off at the pass. It can also help prevent a company from making mistakes that are expensive to unwind, such as spending time and money sourcing an ingredient that, from a regulatory standpoint, might be more trouble than it is worth.

“​You can waste a lot of time and money if you go far down a road that is not doable from a regulatory perspective or because of patent or trademark issues. An early tweak or two in the project, whether adding or removing an ingredient, modifying certain claims, or something else can get you on the right track from the outset.​ ​Also, it is always more expensive for us to get a company out of trouble than it is to keep them out of trouble in the first instance,​” ​Wasserman told NutraIngredients-USA.

Minimum checklist

Justin Prochnow, a shareholder in the firm Greenberg Traurig, said the scope of the interaction is driven by the customer. You can’t sell someone something they don’t want to buy, but on the other hand, he said he doesn’t let clients get out the door without at least showing them what kind of things they should be thinking about to make sure they are protected.

“​Sometimes we get companies that come in and say ​‘​just look at the label.​’​  ​But if they are new to the industry, they don​’​t know that they don​’​t know. We are trying to get better about having a checklist for those people of things they really ought to be aware of, and we tell them if they want want more information​ on those topics​, whether it​’​s GMP compliance, or quality agreements with their contract manufacturers or other things, we can provide it,​” he said.

“​Some want the bare minimum but we have a certain standard where I​’​m not going to let you leave without at least telling you some things you should know. I​’​m not charging them to provide that checklist, but I​’​ve found that most people wind up wishing they​’​d had more information,​”​ he said.

Prochnow said providing that checklist-type service helps prevent stick conversations down the road, ones that might focus on why an answer wasn’t provided to a question that wasn’t asked.

“​Companies that subsequently might get into trouble might say things like, ​‘​I wish I had known this earlier."​  

Prochnow said the complexity (and cost) of the interaction with the client is to some degree determined by the company is trying to do. A me-too multivitamin would make for an easier review than a product claiming a complex effect based on cutting-edge science.

“​First I​’​d look at if it is a disease claim or not. Then does it match the type of claims you can make for the kind of product you are marketing. Then, if it is a permissible claim, do you have the science to back it up?​”​ Prochnow said.

Entrants to business tend to be ill prepared

All too often companies come in for such reviews are ill prepared, Prochnow said. To get full value from the interaction, for those companies relying on the state of research in given area, it’s best to have researched the literature either on your own or with the help of a consultant beforehand.

“​We can find the science for them, too, but they probably don​’​t want to pay our rates for us to do that,​”​Prochnow said.

One trend Prochnow has seen is the increasing penetration of contract manufacturers into the business, servicing a small-firm, start-up entrepreneurial culture.  While that’s all find and good, it does bring in a cadre of business owners who as a class tend to be unsophisticated when it comes to their regulatory responsibilities.

“​A lot of companies that come to me to consult on labels are private label owners.  Recent FDA warning letters will show that those regulatory responsibilities are an area where a lot of private label owners are ignorant. It is still incumbent on you as a private label owner to make sure you have the quality agreements in place to ensure that you are in GMP compliance,​”​he said.

Trusted partner

Wasserman said that forming a sold relationship with your consulting law firm can help inform business strategy as well as avoid regulatory pitfalls.

“​ Don​’​t just ask us your legal questions. Tell us your overall business objectives.​ ​Do you want this to be your flagship product?​ ​Do you ultimately want to also sell it in other countries?​  ​Who are your target consumers? ​ ​Who are your biggest competitors? ​ ​There may be legal issues or marketing strategies that you are not even thinking about and that we won​’​t know to tell you if we do not know the big picture,​”​he said.

“​Overall, think of us as trusted advisor, not just lawyers. We are have deep industry knowledge and connections, and want to help companies succeed,​”​ Wasserman said.

Part of a series

This is the second of a series of articles that looks at how companies can best work with their contractors. The first examined the public relations function​, while the third article in the series will look at working with outside labs.