Paul Altaffer & Grant Washington-Smith10.01.10
In the continuing series on new product development (NPD) from around the world, this column examines the critical role of regulatory preparedness when developing new products. This is especially important when a company is considering exporting into markets beyond the U.S. Understanding the interplay among the stakeholders—technical, regulatory and marketing—is also crucial.
One of the easiest oversights a manager can make in the product development process is to underestimate or entirely miss the major regulatory considerations involving new products and how they will be marketed. Further, regulations that may seem complex in the U.S. can become exponentially more so once product marketers decide to sell their products around the world. As a result, product developers and marketers would be wise to allocate time and resources to understanding the necessary regulations as they begin the new product development process.
Where to Begin?
During the new product development process, there is a dynamic tension between three key stakeholder groups: technical, regulatory and marketing. This presumes that marketing has already engaged in earlier and parallel feasibility discussions with stakeholders and production, procurement and finance to determine that a new product or ingredient can actually be built at a reasonable cost.
The science provides the basis for making specific marketing claims associated with the new product (i.e., what is true and factual about the new product) and the regulatory framework further shapes those claims into language that is acceptable under the regulatory constraints of each market. In most markets around the world, manufacturers are often forbidden from claiming what they can prove about their products. Instead they can only state what they can prove within the language prescribed by the regulatory framework.
In preparation for this process, it is important to the success of the venture that a balanced project team is assembled. This will consist of a technical group that clearly understands the product functionality, the regulatory specialists who have deep knowledge of the regulatory framework and the marketer who brings a detailed understanding of the customer. Between the three stakeholders in this process, a brand position will be developed for a product that is compliant for the particular market being pursued.
Understand the Playing Field
In those regulatory frameworks—like the U.S. for dietary supplements—where only structure/function claims can be made, a significant responsibility rests on the shoulders of marketing. The issue with structure/function claims is that they tend to offer very little point of claim differentiation, from the best in class to the worst in class. And despite the extensive scientific and clinical data that might underpin the product, the regulatory affairs specialist will often remind the project team that even the best product is limited to either the structure/function claim framework or a pre-approved health claim.
A project team might then consider opportunities where broader claims can be made (if they are substantiated). In a comparison between Australia and New Zealand, for example, it was shown that dietary supplement usage among Australian consumers was higher than that of New Zealand—this despite the New Zealand consumer having much greater choice due to a less regulated market. While no definitive reason has been given for the big difference in these two markets, it has been postulated that this is due to Australian consumers having higher confidence in the product being manufactured because of the strict regulatory framework.
Summary of Differences
As a business development professional you might be forgiven for thinking that the role of opening up new markets is the domain of the commercialization and marketing team, but within the nutraceutical and functional food industry it is more likely that the regulatory affairs team will hold the balance of power in entering new markets. They are the assault pioneers of the new market, blazing a trail for the expeditionary forces to follow. A misstep in the regulatory process can set a company back significantly in both time and resources.
The U.S. market’s regulatory framework is unique in that it has established a specific regulatory designation for dietary supplements. The system closest to the U.S. model would likely be the Japanese framework of FOSHU (Food for Specified Health Use). This type of designation was originally developed by the Japanese for foods with a known health benefit. The point of establishing FOSHU was to encourage consumers to take these products and therefore to remain healthy as the population was aging. While the FOSHU designation was originally geared toward healthy “foods,” eventually this requirement was dropped and extended to tablets and capsules, etc. Major markets with no specific designation for dietary supplements include the European Union and Australia. These markets view complementary medicines as either traditional or novel foods. Health Canada has taken a slightly more clinical approach, assigning almost quasi-drug status to complementary medicines. But regardless of either the food or drug designation, the outcome is similar. Both Australia and Canada provide for a low-level health claim to be made if the manufacturer can substantiate it through good clinical science.
Hypothetically Speaking…
Let’s say you have a very successful digestive health product in the U.S. and your market research suggests that the British too would benefit from this digestive health product. The only problem is the term “dietary supplement” is not recognized in the U.K. and the ingredients as well as the finished product will need to be reviewed for compliance. But that is the least of your worries; one of the key ingredients in the U.S. version of the product might be considered a “novel food” ingredient within the EU, but no one in your company is exactly sure. Unfortunately, if you submit an application for “traditional use” in the U.K. and it is rejected, it will set a precedent for the entire EU. So what should you do? Find another member country within the EU that might be more predisposed to your application and therefore set a positive precedent for the EU? Reformulate without your star ingredient? Find a good regulatory attorney? Suddenly, the idea of working with your new European distributor and having an early European tradeshow launch looks a long way off. This case study hints at some of the many regulatory obstacles one can encounter, especially when the company ventures to other corners of the world.
Discouraged, No—Prepared, Yes!
Despite the enthusiasm for the growth trends in functional foods and nutraceuticals, it’s the regulatory landscape that has had a significant impact on evolving new market opportunities. This is true for nutraceutical and functional food manufacturers and ingredient producers alike, and this trend will likely continue in the years to come.
But in spite of the issues associated with regulatory compliance in new markets, there are clear benefits to marketing internationally. It has been suggested that entering a new market with an existing product is a far more profitable business development strategy than developing a new product for an existing market. However, without the requisite regulatory planning and preparation, new market development can be an expensive and difficult exercise.
