Put expectations of suppliers' GMP compliance culture into writing as part of contract, experts advise

By Hank Schultz contact

- Last updated on GMT

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Related tags: Dietary supplement, Supply chain, Supply chain management

Beefing up supply chain management has been a mantra in dietary supplement industry meetings over recent months.  For that to be most effective, it needs to include a consideration of supply partners’ business practices, experts say.

Starting with the first actions of New York Attorney General Eric Schneiderman back in February, the industry’s supply chain practices have come under unprecedented scrutiny. Are the ingredients listed on the labels really in the bottles? And are there some things in there that ought not to be? 

Some industry arrangements long taken for granted are now suddenly becoming matters of concern. How can a company best reassure itself that its suppliers are doing what they should? Some have questioned how far a contract can go. If the supplier has produced goods that meet spec, is that enough to satisfy the contract?

GMP compliance as part of contract

Jason Sapsin, an attorney in the firm Faegre Baker Daniels, believes that companies should go beyond mere specifications and delivery schedules to cover themselves when dealing with suppliers. It makes good sense in this era of a fringe of companies, some of them-well known names, that do many millions of dollars in business and have multiple run-ins with regulators and are nevertheless still are in business.

“I think a good contract and a good supply chain audit program actually includes business practices,” ​Sapsin told NutraIngredients-USA. “You don’t have to have a morality clause, per se. But with respect to the obligations that are part and parcel of being an above-board dietary supplement manufacturer, you should have a clause that specifies that the company comply with GMPs, or soon now in the case of a raw material suppliers, that your supplier has in place hazard analysis and preventive controls [under new rules of the Food Safety Modernization Act, or Part 117].”

Sticking by a big seller, good or bad

Some major retailers in the dietary supplement business have chosen to stick by certain suppliers of finished products long after after it became apparent that those companies had a more in-your-face attitude toward regulatory authorities than many companies in the industry. Any number of companies in the dietary supplement business have had serious and sometimes negative dealings with FDA.  Having received a number of 483s, even having gone through the bad day experience of receiving a warning letter, doesn’t automatically put a company into rogue territory. What happens next is the important thing, and some companies have chosen to draw out that process through court proceedings, injunctions and seizures before deciding to start the process complying with the same federal regulations that the rest of the industry does. Nevertheless, in a number of these cases, companies whose products continue to sell well have continued to be attractive to certain brick and mortar and online retailers, regardless of how labyrinthine their dealings with regulatory authorities might be. Getting shelf space at major retailers is a matter of demonstrating sales potential and supporting those sales with marketing. Do that, make the parent company a chunk of money, and a host of regulatory transgressions can be overlooked.

Deals with the devil?

To Sapsin, this point of view is shortsighted and ultimately risky. Whether the point comes up in quarterly earnings calls with analysts or not, retailers are on the hook for what they sell. Having something on the shelf in a store implies that someone connected with the retailer approved that product, however retailers might twist and squirm after the fact citing wiggle clauses in supply contracts. 

“If a company has a history of enforcement actions and administrative notices from FDA, those things suggest that one or more things at the company is not in compliance and that company is not meeting its contractual obligations,”​ Sapsin said.

“Whenever a company has a history of violations or a history of adverse interactions with the agency, then its customers should be asking themselves, are these one-off incidents,  or do they represent a pattern of noncompliance? Is this a commercial partner on whom we should rely?” ​Sapsin said.

Retailers’ responsibility

Alan Lewis, communications director for the vitamin retailer and health food store chain Natural Grocers by Vitamin Cottage, said his company takes as deep a dive as is financially possible into the operations of the companies that make the products it sells. 

“We visit manufacturing facilities on a regular basis. I know for a fact that we will remove brands when we see suspect ingredients on the labels. Retailers need to be vigilant that they are getting the best a vendor has to offer, and not just taking what is given to them,”​ Lewis said.

“On the retail end of the industry we have a responsibility to ensure that we are not selling products that may be manufactured by the occasional bad actor. As an industry we need to support those investments to comply with GMPs that are represented by the best companies in the business, such as our supplier NOW Foods,”​ he said.

Lewis said despite the recent months-long storm of bad publicity, he actually sees cause for hope. Enforcement is ramping up, which can only be good news for those companies spending the money to do things right.

“It’s pretty clear to me that the days of rogue ingredients are coming to an end in terms of making their way into the industry in any significant quantity. The regulatory pressure on the industry is palpable now. As quickly as possible regulators are cleaning that up,”​ Lewis said.

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