New GMPs financial impact looms

Implementation is expected to hit smaller firms

United States Ten months after the Food and Drug Administration published its final rule on Current Good Manufacturing Practices, how has the regulation fiscally impacted the industry?

Mandating inspection standards in dietary supplements manufacturing, the GMPs statute was widely hailed as the 'missing link' to effective governance of the industry. Still, despite widespread support, even its biggest advocates knew it came with a cost. The FDA went so far as to give it a dollar figure.

In the final rule, the FDA estimated compliance would have a 'significant economic effect' on small businesses, with an annual cost of $46,000 for firms with fewer than 20 employees and $184,000 for firms with 20-499 employees. The cost for all businesses in the first year would be $16 million, $120 million the second year and $190 million the third year. After three years, the annual costs were projected to be $164,000 million.

It seems only logical that such costs would ultimately put some firms out of business, and drive up consumer prices.

It may still be too early to tell, but fortunately, such gloomy predictions have not yet come to pass. "So far, we haven't heard of any businesses closing," said Michael McGuffin, president of the American Herbal Products Association, which has become stop No. 1 for companies with compliance questions.

"Whether it will ultimately cost companies $46,000 or $184,000 or $120 million, we can only know that later, and companies will have to make the decision whether or not they want to pay for that. But I think many companies already made that decision back in 2003, when the proposed rule was first issued. I know quite a few companies who made it their business in 2003 to move in the direction that the 'draft' would become a 'final rule.'"

McGuffin questions the accuracy of the FDA's projections, or any projection of how much compliance will cost, because it's a figure too complex to really measure.

As an example, he cites one part of the GMP that requires companies to have what is called a 'master manufacturing record,' which is basically a recipe of their product, as well as written batch records.

"I was in the manufacturing business from 1980-1998 and even back in 1980 I had those things," McGuffin said. "I didn't call it a 'master manufacturing record' but I had one. It is obvious to the maker of any product that you write it down. If the FDA assumed companies wouldn't have those records, they would assess a dollar figure to developing them — but I believe that most companies were already in compliance with that to begin with."

Whatever the financial costs, the GMPs still garner widespread support. In a random sampling of 10 ingredients suppliers, Fi found that all of them still enthusiastically embrace the new regulations. As Doug Klaiber, chief operating officer of Decas Botanical Synergies, put it, "GMPs will only help the industry and lend credibility. It will become a filter for low quality and 'snake oil' type products."

All 10 companies reported that they began preparing for the stricter rules the moment the proposal came out.

It is too early to tell what kind of scrutiny these or any company might face in the future. No one has been subject to an FDA inspection yet; those begin for 500-plus employee companies this June. The smallest firms won't be subject for inspection until 2010. "We will really see the surge in compliance come over the next 2.5 years," McGuffin said.

So, in other words, stay tuned.

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