Today, almost every pharmacy and store carries medical devices, cosmetic products, dietary supplements, and disinfectants under private labels (PL). 

There are many reasons why a private label is rapidly gaining momentum:

• PL allows for preserving and multiplying investments in marketing without risking that the invested time, effort, and money might be lost in the future.
• PL provides broad opportunities for price and revenue management.
• PL alters relationships with manufacturers, allowing for additional leverage in negotiations and reducing dependence on partner decisions.
• PL enables quick expansion or modification of assortments, experimentation, and independent decision-making.

At first glance, the process of manufacturing and marketing such PL products seems simple and straightforward: find a supplier, request a change in packaging, add your own brand – and you have your PL product.

There are two ways to implement PL, with or without changing the manufacturer:

1. In the first case, the manufacturer applies the customer’s brand to the product, leaving everything else unchanged. 
2. In the second case, the brand owner becomes a virtual manufacturer, and the original manufacturer acts as a contractor. 

Each option has its advantages and peculiarities, but since creating a virtual manufacturer is more common, this article is dedicated to that format, known as OBL-OEM. 

Production under a trademark license

This PL format is simpler and faster compared to OEM-OBL since it does not involve changes in the manufacturer or documentation, except for the trade name on labeling and some documents. Legally, this mechanism is implemented through a licensing agreement, whereby the company owning the trademark temporarily grants its non-exclusive use to the manufacturer for production under its own orders. The trademark owner typically explicitly prohibits the sale of the products to other parties and retains the right to revoke the license at any time.

Usually, the ordering party for production under PL becomes an Authorized Representative of the manufacturer and may specify its name on the labeling as the exclusive distributor.

From a regulatory perspective, the manufacturer must make minor changes to documentation and undergo a new conformity assessment or expand existing compliance documents for the products under the provided trademark. Despite its simplicity and speed, this format has several significant drawbacks.

It is essential to remember that according to legislation, it is the manufacturer who manages all matters related to conformity assessment, certification support, making changes, introducing medical devices into circulation, withdrawal, etc. Therefore, the final decision on many issues remains with the manufacturer.

Additionally, this format does not allow for the consolidation of manufacturers under the umbrella of a single certificate, nor does it provide the ability to save on conformity assessment or quickly change manufacturers, which are undeniable advantages of the OBL-OEM format. 

Accordingly, such a collaboration format is less controlled and less flexible, putting the trademark owner at the mercy of specific manufacturer actions or inactions.

However, some manufacturers of innovative medical products only agree to this collaboration format because it allows them to better control confidential data, separate sales, certification issues, and storage of technical documentation.

The OBL-OEM scheme for the production of medical devices with a private label

Due to increased competition, an obvious lack of specialized technical personnel, streamlined product development processes, and the need to shorten the time to market for new medical products, as well as price pressure, companies are forced to outsource development and production. Consequently, the OBL-OEM scheme has emerged and gained significant traction.

Who is the OBL manufacturer, and who is the OEM manufacturer?

The “Own Brand Labeler” (OBL) or “Private Brand Labelling” is the owner of the private label (hereinafter referred to as the OBL manufacturer) and is considered the legal manufacturer of the final product.

The “Original Equipment Manufacturer” (OEM) or “Original Equipment Supplier” (OES) is the factory manufacturer (hereinafter referred to as the OEM manufacturer) that provides services for the complete production of products, but is not the legal manufacturer of such products.

OBL-OEM significantly simplifies and reduces the cost of conformity assessment procedures for medical products since legalizing the production of only a OBL manufacturer is much more economically advantageous than legalizing production for each OEM manufacturer, especially when dealing with several factories involved in the production of medical products.

Outsourcing production allows the OBL manufacturer, who initially is only the brand owner, to move towards their own design and production of medical products after gaining valuable experience in quality management systems, legal requirements, and the specifics of ensuring safety and control of medical products.

Normative peculiarities in the OBL-OEM production scheme

The manufacturer – a legal entity or individual entrepreneur responsible for the development, manufacture, packaging, and labeling of a medical device before placing it on the market under its own name, regardless of whether these actions are taken by this person or another person authorized to act on their behalf.

Accordingly, there are two conditions: the person must manufacture (or commission the manufacture of) and introduce the medical device into circulation under their own name or trademark. Therefore, if a medical device is sold under the name or trademark of a specific person, that person is considered the manufacturer. Thus, a person who introduces a medical device under their own name or trademark bears full responsibility for the quality of the medical device and compliance with applicable legal requirements.

The manufacturer’s duties may be assigned to other persons in other situations. For example, the duties of the manufacturer may be assigned to any person who assembles, packages, completely reconfigures, and/or labels finished medical devices and introduces them into circulation under their own name or trademark.

Another example is when a person modifies or reconfigures a medical device (thus creating a new medical device) for the purpose of placing it on the market or putting it into service, such a person is considered the manufacturer of the product.

Therefore, the manufacturer may independently design and manufacture the medical device. Alternatively, they may commission the design, manufacture, assembly, packaging, processing, or labeling of the medical device for the purpose of introducing it into the market under their own name or trademark. In this case, the legal manufacturer will be the brand owner, i.e., the OBL manufacturer, and it will be they who indicate their name or trademark on the medical devices.

In the OBL-OEM scheme, all processes related to design and production outsourcing are carried out by the OEM manufacturer.

An essential condition for the OBL manufacturer is not to modify the product from the OEM manufacturer.

Who bears responsibility?

According to Ukrainian legislation, the manufacturer bears full responsibility for the conformity of medical devices with applicable requirements, regardless of whether they designed and manufactured the product themselves, as long as the medical device was placed on the market under their name or trademark.

When engaging subcontractors, suppliers, including OEM manufacturers, the manufacturer is obliged to exercise overall control over the medical devices and ensure that they receive all the information necessary to fulfill their obligations as a manufacturer in accordance with the requirements of technical regulations. Thus, by engaging subcontractors in the entire production process, the manufacturer (i.e., OBL) cannot under any circumstances exempt themselves from their obligations and transfer them, for example, to the OEM manufacturer, distributor, user, or any other subcontractor.

The OBL manufacturer is responsible for the design and manufacture of medical devices, guarantees their compliance with the requirements according to the basic requirements established in Annex 1 of one of the Technical Regulations for medical devices (Cabinet of Ministers Resolution No. 753, Cabinet of Ministers Resolution No. 754, and Cabinet of Ministers Resolution No. 755), and also ensures the conduct of conformity assessment procedures according to the specific annex of the relevant Technical Regulation.

If a medical device falls under the scope of several technical regulations, then the OBL manufacturer assumes responsibility for compliance with all applicable requirements of the medical devices. Accordingly, they carry out conformity assessment procedures for each technical regulation, if such a procedure is provided for. Additional technical regulations that are commonly applied to medical devices include the Technical Regulation on the restriction of the use of certain hazardous substances in electrical and electronic equipment (Cabinet of Ministers Resolution No. 139) and the Technical Regulation on radio equipment (Cabinet of Ministers Resolution No. 355).

Furthermore, the OBL manufacturer must possess all documents, declarations of conformity, certificates necessary to confirm the conformity of the medical device with requirements, and these technical documents do not always have to be issued in their name.

Assessment of OEM manufacturer

Quality assurance is the most critical issue in outsourcing. The selection of an OEM manufacturer should be done very carefully and at every stage of product design and manufacturing. Strict requirements are applied to ensure quality, and OEM manufacturers must adhere to complex documentation requirements to guarantee compliance with regulatory standards for the final product.

When choosing an OEM manufacturer, clear criteria should be established and everything should be thoroughly checked. In particular, the capacities of the OEM manufacturer, product pricing, quality, availability of necessary resources, standards, and compliance with norms and requirements should be evaluated. Careful analysis and assessment of each parameter will help avoid errors and discrepancies, or at least minimize them.

An OBL manufacturer may have multiple OEM manufacturers to ensure uninterrupted supply and sale of the product, especially when the OEM manufacturer cannot produce or deliver products due to a failure or other issues. Thus, the supply of products from multiple OEM manufacturers is a strategy to avoid losses associated with capacity shortages, insufficient resources, or even an epidemic at a solo OEM manufacturer.

In turn, OEM manufacturers may also have several suppliers, purchasing materials or components from at least two suppliers to get a better price and reduce dependency on a single supplier. Thus, a multilevel reliability in procurement is applied in the entire cycle of obtaining the finished product.

This optimal procurement strategy is a fundamental factor for the survival and competitiveness of a company, as well as the safety, efficiency, and reliability of the business. The profit of both the OEM manufacturer and the OBL manufacturer depends on the level of reliability.

At the same time, an optimal procurement strategy requires proper selection of suppliers. In the field of medical devices, supplier evaluation is conducted in accordance with ISO 13485, which establishes norms for effective quality management system functioning.

Innovations in Medical Devices

Innovations are a key factor for any company in a competitive and global environment to achieve success and contribute to economic development with the aim of increasing prosperity. Innovation is perhaps the primary concern of the OBL-OEM scheme, as OEM manufacturers do not always have a connection to the market, do not understand needs, and do not seek new solutions in manufacturing or design. However, OEM manufacturers are increasingly exploring innovation opportunities to support the competitiveness of their proposed products. Innovation is mostly achieved by using the “difference” principle. Therefore, both OEM manufacturers and OBL manufacturers strive for innovation. In this regard, new provisions of the EU MDR and IVDR also help.

The process of innovation in medical devices is a complex task. This painstaking process extends the time from idea to offering new medical devices to OBL manufacturers by OEM manufacturers. Also, when it comes to conducting clinical evaluations as part of conformity assessment, manufacturers must involve end users to collect statistical data. Of course, this also depends on the type of medical device and the associated risk level.

The development of a medical device as the primary step in innovation is one of the most challenging stages, as it requires an effective quality management system and the creation of technical documentation for a new medical device.

Collaboration between OBL and OEM manufacturers

The relationship between OBL and OEM manufacturers primarily depends on how the parties negotiate and how they solidify such agreements in contracts.

As known, an OEM manufacturer has the potential to produce its own products and provide them under its own name or brand. Thus, it can place its products with its own brand even in the same market where the product manufactured by it is located, but with a different brand and manufacturer (where the manufacturer is OBL).

Therefore, an OEM manufacturer can be a competitor to an OBL manufacturer. At the same time, they can achieve mutually beneficial results, as the OBL manufacturer, as a market competitor, provides additional incentives for the OEM manufacturer to improve the quality of the products, thus maintaining market share and competitiveness.

Also, an OEM manufacturer may strategically decide not to distribute its medical products independently, but only offer its products to OBL manufacturers. Moreover, an OEM manufacturer can collaborate with multiple OBL manufacturers as well as with one exclusive one.

Building partnership relations depends on the business decisions made, and the agreements reached between the parties.

Implementation of the OBL-OEM Scheme

When introducing medical devices into circulation, the manufacturer must take all necessary measures to ensure that the medical products meet the established requirements, including:

1. Implement a Quality Management System (QMS). 

The creation of a virtual manufacturer begins with the development of a quality system, according to which all processes take place, including supplier evaluation, which includes the OEM manufacturer, development of quality documentation and technical documentation, etc.

A Quality Management System (QMS) is a set of prescribed and approved requirements and rules governing production processes. The virtual manufacturer transfers the process of developing, manufacturing, packaging, and labeling the medical product to the OEM manufacturer, but all other processes remain with the virtual manufacturer – supplier assessment and selection, documentation development and support, quality control, handling complaints, etc.

The quality system of the OBL manufacturer must comply with the requirements of ISO 13485 standard, the requirements of the Technical Regulation on medical devices, as well as other regulatory acts applicable to medical devices.

All manufacturers of medical devices must have a QMS implemented, but its certification is only necessary for higher risk classes of medical devices, including: Is, Im, IIa, IIb, III, in vitro diagnostic medical devices from Lists A, B, self-testing devices, and active implantable medical devices.

The OBL manufacturer must select the OEM manufacturer in such a way that the latter has an implemented and effective quality management system and its certification (if necessary) to confirm compliance with regulatory requirements.

Thus, the OEM manufacturer, while ensuring the production of medical devices, must also control the quality and compliance of the production processes with the ISO 13485 standard.

The implemented quality management system is crucial for the success of any company, as it provides assurance and confirmation that both OBL and OEM manufacturers meet the requirements for medical products. An effective QMS ensures process consistency, technical support, customer service, and continuous improvement of the quality of medical devices. 

2. Compile technical documentation.

The OBL manufacturer may not develop its own technical documentation “from scratch” or conduct costly tests but use documents provided by the OEM manufacturer as a basis. The OBL manufacturer must refine the documentation, including, but not limited to, inserting itself as the manufacturer, conducting an assessment of the OEM subcontractor, updating the production process and related issues, administrative parts, etc. The updated documentation must clearly demonstrate the change of manufacturer and the relationship between OBL and OEM. Such documentation must comply with all requirements of the Technical Regulation, the chosen conformity assessment procedure, and be provided upon request by competent authorities.

Furthermore, the OEM manufacturer is obligated to inform the OBL manufacturer of any changes in technical documentation, serious incidents, recalls, etc., and provide updated documentation to the OBL manufacturer.

All relevant obligations and powers of the parties must be fully and properly agreed upon in the agreement between OBL and OEM manufacturers.

3. Conduct a conformity assessment procedure according to a specific annex of the Technical Regulation on medical devices and other technical regulations, if applicable. The conformity assessment procedure must be carried out by the manufacturer, i.e., the OBL.

Depending on the classification of the medical device, involvement of a conformity assessment body may be required for such a procedure. The conformity assessment body may also be involved in approving the quality management system.

In the case of involvement of a conformity assessment body, an audit is required, which is conducted directly at the location of the OBL manufacturer. Audits at the OEM manufacturer are usually not applied, but this issue is resolved by the conformity assessment body.

4. The OBL manufacturer must retain technical documentation and the declaration of conformity for medical devices for at least 5 years, and for implantable medical devices, for at least 15 years from the date of manufacture of the last medical device. On their part, the OEM manufacturer is obligated to keep the technical documentation up to date, systematically update it, and conduct an analysis of the experience gained after the medical devices have been placed on the market.
5. Provision of instructions for use and safety information for the medical device in Ukrainian. 

Instructions for use are not required for medical devices belonging to Class I, IIa, and for certain in vitro diagnostic medical devices if the devices can be used safely and correctly without them. 

The accompanying documentation should include the name and information of the OBL manufacturer and may not contain information about the OEM manufacturer. 

According to Ukrainian legislation, consumers must have access to information that allows them to identify the geographical origin of the medical device.

6. Compliance with product traceability requirements: clear identification of the product and manufacturer, indication of all necessary information provided by the technical regulation on labeling and other accompanying documentation.
7. Provision of all information and documentation by the OBL manufacturer to the competent authority upon reasoned request to confirm the conformity of the medical device to the established requirements. The OBL manufacturer collaborates with the competent authority to take any necessary measures to eliminate risks posed or that may pose by the medical devices introduced by them into circulation.

Conclusion

Manufacturing under a private label is widely adopted and effective for many companies in the medical devices industry. This approach allows the implementing company to focus on marketing, sales, brand development, reliability, and recognition, without investing significant time and resources into design and manufacturing management.

The main participants in the life cycle of a medical device are manufacturers, competent authorities, and users. Manufacturers typically aim to meet users’ needs by providing appropriate medical devices. However, medical devices will not be available on the market if they are not developed and manufactured in accordance with regulatory requirements and standards that ensure the safety and clinical effectiveness of medical devices. Thus, quality control and regulation are crucial for medical devices.

On the other hand, when using private labeling, there is dependence on suppliers and potential competition, requiring careful analysis, control, planning, and a strategic approach to achieve success and expected outcomes.

Viktoriia Moroz, Key Account Manager of Cratia

Maksym Bagrieiev, Managing Partner of Cratia 

Pavlo Kharchyk, President of the AMOMD Association

Daria Bondarenko, Executive Director of the AMOMD Association

[April 2024]

Welcome to the training webinar “Private Brand Label: Medical Devices, Cosmetics and Dietary Supplements production under own brand. How to make your own private label correctly?”. Details of the event.