Rules of the road: Keeping profits amid regulatory change
Author Robert C. Gallagher once observed that “Change is inevitable—except from a vending machine.” The same can be said about the global (and U.S.) regulatory landscape. U.S. brand owners are often intimidated and bypass global opportunities because the regulatory challenge is daunting.
Well, it is possible to keep the change and profit.
A few rules of the road:
1. Be prepared for Alphabet soup. TGA, SFDA, KFDA, MHRA, CE etc. are all quite real and must be understood. Don’t start the global effort without knowing the fundamentals.
2. There are rules and then there are RULES. Be prepared to disclose some things but hold tight on others. In particular, expect challenges with disclosing product formulations and allowable marketing claims. Provide ranges, not exact formulas. Be ready with clinicals. Be flexible with what can be said on the package — it will probably be pared back from U.S. text.
3) The United States is LIBERAL when it comes to Marketing Claims and packaging text. Understand that the US regulatory world allows more to be said; domestic packaging can include the disclaimer, "This statement has not been evaluated by the FDA. This product is not intended to diagnose, treat, cure, or prevent any disease." This regulatory flexibility, permitted under the Dietary Supplement Health and Education Act of 1994 is especially important in the supplement world. It doesn’t exist anywhere else.
4. Know true International costs of goods sold and product allocation strategy. Going global will not be popular with parts of the domestic organization. Count on increased operational complexity and a battle over limited resources. The allocation of Administrative Overheads, establishing Product Priority and paying for Marketing launches will cause conflict. Global expansion will increase forecasting error; it’s a new business. What happens when (inevitably) WMT and Boots both expect product and it’s not immediately available? On the operational side one “favorite” costing mistake is charging the international changeover costs both startup and shutdown solely to export. Better forecasting and more flexible lead times will become a prized capability. The bottleneck usually occurs with the packaging machinery. Production management is hard pressed to be both cost efficient and nimble at the same time. It’s usually one or the other.
5. Create country clusters if/when possible. This includes grouping required languages, creating an international formulation acceptable across several jurisdictions and, when possible, the equivalent of a consumer safety 800-number serving an entire geographic cluster.
6. Expect bumps in the road. Some ingredients — actives and/or inactives — may be prohibited later on. Over time certain ingredients have come under fire while still allowed in the US. Parabens and Petrolatum come to mind immediately. Be prepared to have the entire production ecosystem scrutinized. This will include Plant inspections and ingredient source traceability. For China, be prepared for the issue of Animal testing. In Canada, Health Canada is serious about French and English content being equal. Also, every container coming into Canada is inspected. Budget for it.
7. Lead Countries can help predict the speed bumps. There are certain countries like Sweden or France that seem to serve as leading indicators of future challenges. The Paraben issue was raised there long before it became a more global issue. Likewise, when predicting Switch activity, New Zealand has been a good bell-weather.
A solid regulatory approach must accompany global expansion. And “keeping the change” can mean big bucks.
Ed Rowland is a Drug Store News contributing editor covering global issues. As the principal of Rowland Global, he believes in the promise of global business and supports companies in their strategy, tactics and execution of international growth initiatives.