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March, 2013

The Pros and Cons of Private Labeling Dietary Supplements

By Christopher Oswald, DC, CNS

You have a successful practice, things are going great and you have been considering your own private label supplement line. This is an exciting step to take, but have you fully considered all of the pros and cons to this undertaking? While it is fairly easy to imagine the positive aspects to doing this, there are some important things to consider up front, rather than waiting for a problem to bring the concern to your attention.

The Pros

Let's start with some of the positives. When you make the decision to private label your own supplements, it allows you to expose many more people to your brand. This is a great way to subtlety represent your practice in many of your patient's households. When they have family and friends over, someone might pick up a bottle with a label and ask where it came from — as they have likely never seen that brand. It gives your happy and loyal patient a chance to tell their inquisitive friend a bit about you and your practice, and next thing you know, you have a couple new patients walk through your door. Along with the branding aspect is the feeling of exclusivity. If you pick the right formulas and patients are happy with them, they will tell all of their friends about this great new supplement formula they got from their chiropractor. The best thing about that is, as more people want your latest and greatest supplement, there is only one place to go — your office — and again, the potential for more new patients.

A perception of professionalism and competence also goes along with having your private label. When a new patient walks through the door and sees the supplements in your dispensary are all carrying your practice name on the label, the first thing they probably think is, "this doctor must be very good with nutrition and supplements." Honestly, if you were not well versed with dietary supplements and its application to improving the health of your patients, you would likely never consider having a private label in the first place.

The benefit that I appreciate the most is the ability to create highly customizable formulations. In your practice, you may have a very specific focus on one condition and probably have to use several different products to achieve the combination of nutrients that you would like to provide your patients. With private labeling comes the ability to have the products tailored to your specific needs. This allows you to put the specific nutrient mix that you desire into fewer products and to customize the delivery form you prefer. This creates a more simplified plan for your patients to follow.

The Cons

With all of the potential benefits, there are also great risks. You can browse the FDA warning letters and find examples of people who have chosen to private label their supplements. Peter Arhangelsky, Esq., from Emord & Associates, stated in regards to private labeling, "From a legal perspective, this business model can involve complex licensing agreements and federal regulatory concerns. We frequently see situations where a licensee buys into the product only to discover that the manufacturer included an unapproved ingredient in their formulation. That scenario can be costly from a business and regulatory standpoint." The problems that do come with receiving an FDA warning can be costly enough and severe enough to have a significant impact on your business, if not cause it to be closed entirely.

Clearly, private labeling may be a great addition to your practice, but there are some significant challenges to also consider. Private labeling supplements carries with it significant regulatory responsibilities, which are very well laid out in the code of federal regulations. The Food and Drug Administration's 21 CFR, Part 111 discusses the responsibilities and regulations regarding "cGMP in Manufacturing, Packaging, Labeling, or Holding Operations for Dietary Supplements." This is a document that you should have a full understanding of to ensure the successful implementation of your new private label. Since your name is on the label, you are 100% responsible for the contents of that bottle.

It does not matter that someone else made it for you and you just "slapped" your name on the product. This responsibility entails making sure that all of the manufacturing processes, packaging, holding and labeling must be cGMP compliant. What does cGMP stand for? It stands for current Good Manufacturing Practices and this applies to the entire supply chain, from raw material sourcing through the time that your patient purchases the product off of your shelf. As a doctor selling supplements, you are not responsible for any of this, but if you decide to brand your own line, you need to ensure quality and compliance in handouts, on your website and anywhere else you discuss the products. The responsibilities surrounding cGMP compliance are very expansive — far too much for this article — but you should have an excellent understanding of the requirements or have a good lawyer that you trust to manage this task.

There are other concerns outside of federal regulations. When you are purchasing your dietary supplements from a distributor or direct from the manufacturer, the only waiting time that you have is the length of time that it takes to ship the products to your office. When you are manufacturing your own line of products you now have to consider lead times. You may have to let your private label manufacturer know 30 to 60, or even 90 days, in advance of when you will need more product. This will require you to have a very solid understanding on your inventory and accurate projections of how long it will last. It will be no fun to tell your patients that they have to wait another six weeks for their supplements if you don't get this planning right.

Along with having to manage much longer lead times, you will also now have to deal with much larger order minimums. This can vary between manufacturers, but be prepared to have more inventory than you have become accustomed to. This can actually be seen as a pro and con because with having the larger order minimums your cost per unit is likely to be lower than before, but you will have to buy a lot more of it. That is a lot of your cash on the shelf and down the drain if your product expires. Usually any products that you decide to private label are non-returnable.

Private labeling can be a very exciting and profitable venture for your practice, but this is only the case if you do your due diligence and explore all the positive and negative aspects that come along with this business enterprise. Although this list is not exhaustive, it does cover several of the major factors that must be considered before taking this large step in the development of you practice.

Dr. Christopher Oswald,a graduate of Northwestern Health Sciences University, is a chiropractor and certified nutrition specialist. He practices in Wisconsin, focusing on whole-body care for those suffering from head and neck pain. Dr. Oswald is an advisory board member of Nordic Naturals and the National Association of Nutrition Professionals. He can be reached at .

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