Pharmaceutical outsourcing has been transformed from being a small incremental part of the typical pharmaceutical manufacturer’s business to one that is integral to almost every market segment. There are number of significant challenges within the pharmaceutical industry to better manage and outsourcing from both a strategic and operational perspective.

The pharmaceutical companies are constantly revising their business strategy to address multiple challenges faced by them and to compete in the dynamic pharmaceutical market. Some strategies adopted by companies are in-licensing, out-sourcing, reducing the cost of drug discovery, development, manufacturing and sales and marketing.

Pharmaceutical companies are outsourcing their manufacturing operations without making any large capital investment. This allows companies to invest and focus their resources on their core competencies to generate more value. In this article we have tried to highlight various approaches that drive the depth and breadth of contract manufacturing in pharmaceutical company.

External Collaborations

Outsource – Adopted in the manufacturing business function where either part or complete manufacturing operations are outsourced to vendor on contract manufacturing. E.g. manufacturing, clinical research, clinical trial management, marketing, etc.

In-license – The ownership to develop and/or manufacture products of the company is transferred to another company. Companies adopt in-licensing strategy to close the gaps existing in their capabilities and requirements. Due to this, the companies leverage their core competency to develop products in short duration.

Out-license – The ownership to develop and/or manufacture the products of the company is sold to another company.

Manufacturing Strategies

Pharmaceutical companies adopt different manufacturing strategies for manufacturing outsourcing based on the stage of drug development as the objective and business needs (volume, cost, time) are different in different stages of drug development. Various other factors for outsourcing decisions are products related risks, internal competencies, cost of operations, etc. The key manufacturing strategies considered are as follow:

Complete In-house Manufacturing – Drug is completely manufactured internally which can be for commercial purpose.

Complete Contract Manufacturing – All the manufacturing functions are outsourced to the vendor.

Part In-house and Part Outsourced (Hybrid Approach) – A combination of In-house and outsourced manufacturing is used to meet the organizations requirement.

Partnership Operating

Assembling a database of potential partners and deciding which should be selected for further evaluation is a difficult and time-consuming task. Resources such as trade show directories, industry journals, portals and preferred provider lists are good to begin the search. But, they rarely provide the specific information needed to determine which suppliers are most qualified for a specific project. Successful outsourcing partnerships are characterized by mutual trust and respect, open communication, shared risks and rewards, commitment to one another’s success and the ability to deal with differences in a constructive fashion.

The top five vendor-selection criteria, according to a study conducted by The Outsourcing Institute are – Price 85%, Commitment to Quality 51%, Flexible Contract Terms 39%, Reputation 34% and Scope of Resources 28%.

Challenges in Outsourcing

Pharmaceutical companies are likely to outsource a wide range of manufacturing related activities including – primary and secondary packaging, formulation, active ingredient manufacturing, labeling, clinical supplies, sterilization, manufacturing of chemical intermediates, etc.

The challenges and risks in the decision to outsource are –

• Contract manufacturing organization’s (CMO) failure to deliver supplies of the drug on time as per the requirement.
• Risk of non-compliance of regulatory requirements by CMO.
• Reduction in in-house manufacturing expertise in terms of resources and process knowledge.
• Customers are required to invest resources in finding an outsourcing partner and managing the relationship.
• Confidentiality of customer’s proprietary information including intellectual property can be breached.
• Risk of pilferage and quality compliance.

As contract manufacturing market is maturing and different methods are employed to manage risks. There is tremendous improvement in regulations related to IP protections in low cost countries and outsourcing process, which includes process for managing the vendors to ensure the product quality and compliance to regulatory needs.

Site Audits and Supplier Confirmation – Verify outsourcing partners best practices and standards for good manufacturing. Having validated systems and processes, well trained and experienced staff falls directly on the sponsoring manufacturer.

Outsourcing Checklist – The list of key considerations that should be reviewed while evaluating a potential outsourcing partner to develop a relationship that is clearly structured, productive and mutually beneficial.

1. Capability

• Experience
• Expertise
• Speed
• Track Record.

2. Capacity

• Do they have the right resources (equipment and personnel)?
• Will they be able to respond quickly to changing requirements?

3. Quality

• Quality control procedures
• Processes and continuous monitoring

4. Regulatory Compliance

• Understanding of applicable regulations and archiving system.
• Is quality assurance plan in place?

5. Financial Considerations

• Financial stability
• Long-term viability and cost of service

6. Culture

• Ability to build lasting, mutually profitable relationships with sponsor companies

Conclusion

Pharmaceutical companies are increasingly deploying outsourcing strategies to increase revenues through faster and cost effective drug development. The cost of drug development has increased which is forcing pharmaceutical companies to adopt new approaches towards drug discovery and delivery. Recognize the need for maximum flexibility and value the ability to base outsourcing decisions on ability to deliver the highest quality service. Providers that specialize in a well-defined niche are generally perceived as more qualified and more proactive.

References

• Mahesh Sawant, “Contract Research and Manufacturing”, 2006.
• Pratik Kadakia, Jeffry Jacob and Ankur Singhai, “Emerging Opportunities in Pharmaceutical Contract Manufacturing”.
• Yvon R. Tessier, “Pharmaceutical Contract Manufacturing Challenges”, ISPE Central Canada Chapter Annual Meeting, 2006.
• Global Contract Manufacturing Companies: Pharmaceutical and Biotechnology Special Report, November 2011.
• “Challenges in Contract Strategy and Operations for Pharmaceutical Manufacturers”, Pharmaceutical Commerce, 2006.
• Christopher Bowe, “Primary Challenges in the Pharmaceutical Industry”.