Despite industry opposition, FDA will likely stick with an approach to assessing a firm's size that would count some small or medium-sized dietary supplement firms as larger, significantly shortening their schedule to comply with dietary supplement good manufacturing practices, officials say.

If firms contract with larger companies to manufacture their products, or are subsidiaries of larger companies, the larger businesses' employee totals would be included in the smaller firms' head counts for the purpose of determining compliance deadlines, FDA officials said at a Food and Drug Law Institute conference in Washington on Feb. 20.

When a "tiny little distributor has a big company that is making products for it ... our current thinking is that we would count the employees of the contract manufacturer against the distributor," said Jennifer Thomas, compliance officer in the Office of Food Safety in FDA's Center for Food Safety and Applied Nutrition.

In addition, FDA's "inclination right now" is to count small subsidiaries of bigger manufacturers as a "large company" if the total head count of the subsidiary and its parent company exceeds 500 employees, said Office of Food Safety director Joseph Baca.

This reverses the position FDA outlined during a three-hour conference with industry in October 2007. During that call, FDA officials said a small subsidiary would not be held to its larger parent company's compliance date (¹ Also see "GMP Compliance Schedules Complicated By FDA Employee Counting System" - Pink Sheet, 5 November, 2007., p. 3).

However, Baca said FDA has "not made a final decision yet" about how it will determine a company's size related to GMP compliance deadlines.

If FDA goes with its current position, a 100-employee supplement firm that contracts with a manufacturer with 400 employees would have a total of 500 employees. As a result, the firm would need to meet a June 2008 compliance deadline.

The GMP ² final rule establishes a three-tier graduated compliance deadline for companies based on their size. Firms with 500 or more employees must comply by June 2008, firms with fewer than 500 employees must comply by June 2009 and firms with fewer than 20 employees must comply by June 2010 (³ Also see "Supplement GMPs Stress Responsibility, Put Firms In Driver’s Seat For Testing" - Pink Sheet, 25 June, 2007., p. 3).

Industry Opposes Counting Method

Industry stakeholders disagree with FDA's interpretation of how to determine a company's size.

The agency's intention to include the employee head count of contract manufacturers in a firm's workforce total for the purpose of determining its compliance deadline is particularly troubling to some.

The compliance schedule's "intention was to provide a window of compliance opportunity for smaller companies" that might need more time to comply, said Loren Israelsen, executive director of the United Natural Products Alliance.

It came as a "great shock to the industry" when "FDA began to say we will roll up the small companies into medium or larger status by making you adopt the head count of the companies that manufacture for you," Israelsen told "The Tan Sheet."

"There would have been vigorous opposition" if the industry knew when FDA proposed the rule that it would require a cumulative employee number, he added.

American Herbal Products Association President Michael McGuffin agreed that FDA's head count method does not serve the intention of the GMP regulation.

"We don't think that's what should be meant by it," McGuffin told "The Tan Sheet."

Rather, AHPA and other groups advocate that FDA use the Small Business Administration's rule to determine a company's size. This ⁴ rule says businesses should count the average number of all full-time, part-time and other basis employees, including those of current affiliates, but does not make reference to employees of firms that perform work under contract for a business.

If FDA sticks to its current plan to add employee counts of supplement firms and their contract manufacturers, it could change how companies do business, Israelsen said.

Small supplement firms may "try to put the burden [of compliance] on the contract manufacturers" to conduct tests, write procedures and meet a shorter deadline, he explained. Manufacturers then may be tempted to cancel contracts with small firms, or those firms may drop large manufacturers in favor of smaller operations in order to qualify for a 2009 or 2010 deadline, Israelsen said.

Baca said FDA likely will not combine company head counts if a small- or medium-sized company buys only ingredients, and not finished products from a larger company. In this situation, the smaller companies would still have until June 2009 or June 2010 to comply, he said.

FDA would also consider an independent company to be small or medium if it has fewer than 20 or 500 employees respectively and it only sells its products to a larger company, Baca said.

FDA's Indecision Frustrates Stakeholders

The agency's indecision, within three months of the first deadline, about how to determine and enforce the compliance dates is "unsettling" because some small companies may not "get the word on what these obligations are on time," Israelsen said.

"They could be working on a false assumption" that they have more time to comply.

To dispel confusion, FDA is "toying with whether to do a Q and A, but I don't know if there is a final decision on what to put out in regard to" written or interpretive guidance or when to publish it, Thomas said at the FDLI event.

She added FDA likely will not publish formal guidance. This means industry stakeholders would not have a chance to comment formally on FDA's interpretation.

FDA will likely forgo formal guidance because it would not be published until after the effective date, whereas the agency can quickly publish informal guidance, such as a Q and A document, Thomas said.

Thomas recommended that while waiting for informal guidance, small companies unclear about how their business relationships affect their compliance date "get [their] ducks in a row now," by the earliest possible compliance date, so that "it won't be an issue."

However, Israelsen said it is not possible for many small companies to be in full compliance by this June if they have been expecting two- or three-year compliance deadlines.

"Hiring new staff, getting qualified people ... is very tough," Israelsen said, adding that "the kind of equipment that you may need to buy [for compliance] may take months to order."

- Elizabeth Crawford (e.crawford@elsevier.com)

FDA Using GMP Head Count Method That May Shorten Compliance Schedules

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