The pharmaceutical industry is undergoing a transition that is marked by evolving product demand, generic-drug incursion, a greater emphasis on specialty products, and an intensification in product development for biologic-based drugs. Industry growth patterns are shifting not only on a product basis, but on a geographic basis as well. Pharmaceutical companies are seeking to meet rising demand in emerging markets and face a more global and complex supply chain, both on an ingredient basis and on a finished-product level. John Kelly, vice-president of strategy and transitioning sites for Pfizer Global Supply (PGS), recently discussed these trends and Pfizer’s manufacturing and supply strategy to address the changing marketplace.
“Our mission is to have an integrated internal and external supply network to provide a competitive advantage for Pfizer by offering fast, flexible, and innovative supply solutions,” says Kelly. That task involves aligning the company’s supply network, consisting of both external and internal partners, with changing product demand, as well as integrating the former Wyeth network with Pfizer’s supply network following Pfizer’s $68-billion acquisition of Wyeth in 2009.
Pfizer has 87 manufacturing sites across all business sectors—pharmaceuticals, consumer healthcare, and animal-health care. This supply network includes 188 logistics centers, more than 500 supply partners, and more than 30,000 employees. On a geographic basis, the company has 30 sites in North America, 20 in Europe, seven in China, 17 in the rest of Asia, and seven in Latin America. On the pharmaceutical side, the company operates six small-molecule manufacturing sites, six biologic-based drug sites (five for drug substances and one for packaging), eight solid-dosage facilities, and four sterile-manufacturing sites. Additionally, the company operates six manufacturing sites for its consumer-healthcare business and 23 for its animal-health business.
Kelly explains that the company’s supply network is focused on four main strategies: to optimize its supply network, optimize its network performance, increase commercial value, and enhance core process excellence. In building a cohesive strategy, Kelly points out that PGS has developed a co-manufacturing approach by combining and consolidating global operations, not only through its most recent acquisition of Wyeth in 2009, but through earlier large-scale acquisitions, namely Warner-Lambert in 2000 and Pharmacia in 2003, as well as through bolt-on acquisitions, with some recent examples being the animal-health care company Synbiotics in 2010, the specialty pharmaceutical company King Pharmaceuticals in 2011, and the consumer-healthcare business of Ferrosan, which the company announced earlier this year that it will acquire.
With respect to its goal of optimizing its supply network, Kelly emphasizes that PGS’s strategy is to optimize internal and external partnerships in sourcing, capacity, capital allocation, costs, and asset utilization. Pfizer uses external partners for approximately 30% of its production on a cost-of-goods-sold basis, which includes API manufacturing and finished-product manufacturing. “External manufacturing is of increasing importance as we look at different ways to supply products,” says Kelly.
In its goal of optimizing network performance and enhancing process excellence, the company measures and seeks continuous improvement in its manufacturing operations and supply-chain activities. The company recently adopted a balanced-scorecard approach for evaluating and improving the performance of its manufacturing network. The metrics from the balanced scorecard are applied on a site-specific basis and divisional level to assess PGS’s performance on processes, quality, and environmental, health, and safety compliance. PGS rolled out the balanced-scorecard approach in part in 2010, and this year is rolling it out fully across its network.
“It helps us understand the progress we are making and how we are improving in several areas, such as how we serve our customers, how we meet our financial commitments, how we engage our colleagues, and how we improve our processes,” says Kelly.
As part of its strategy to increase commercial value, the company focuses on developing and maintaining partnerships with the company’s business units to support innovation across the product life cycle, drive revenue creation and enhancement, and optimize supply-chain security. From an organizational perspective, PGS operates nine operating units, seven that support Pfizer business units and two that are responsible for managing external supply and transitioning sites. The PGS operating units support business units in specialty care, primary care, oncology, emerging markets, established products, animal health, consumer healthcare, and nutrition. The functions of these units and PGS operating units that focus on external supply and transitioning sites are supported by global logistics and supply activities, quality operations, global manufacturing services, and network-enabling functions, such as finance, human resources, legal, and procurement.
Kelly emphasizes that the company’s supply strategy is shaped by various factors affecting the industry. “The product mix is changing,” says Kelly. “We see shifts not only in small molecules versus large molecules, but see the need to address supply challenges caused by the changing blockbuster model and a move to smaller-volume products.”
As part of those changes in product demand, as well as part of it integration with Wyeth, Pfizer announced plans to exit 13 sites during the next several years. The timing of specific exits will depend upon the complexity of operations, the amount of time needed for product transfers, and other business requirements. Earlier this year, Pfizer sold its manufacturing plant at Dun Laoghaire, Ireland to Amgen. The 37,000-m2 aseptic operations facility has freeze-dried product and liquid vial-filling operations. Pfizer sold its bulk biologics facility in Shanbally, Ireland, to the biopharmaceutical company BioMarin. Pfizer also recently sold its consumer healthcare manufacturing facility in Richmond, Virginia, to Fareva, a pharmaceutical and consumer-products company, which will continue to supply Pfizer with product from the facility.
Pfizer's strategy includes plans to discontinue operations at three solid-dosage sites in Caguas, Puerto Rico; Loughbeg, Ireland; and Rouses Point, New York. Pfizer also announced plans to phase out pharmaceutical solid-dosage manufacturing in Guayama, Puerto Rico, but that site will expand its consumer-healthcare operations. Reductions are planned at two other solid-dosage facilities in Illertissen, Germany, and Newbridge, Ireland. Two aseptic facilities that make sterile injectable medicines were targeted for exit: Dublin, Ireland, (recently sold to Amgen), and Carolina, Puerto Rico.
Pfizer also announced changes to its biopharmaceutical-manufacturing network. The company said it planned to exit operations in Shanbally, Ireland (recently sold to BioMarin), and Pearl River, New York. The Pearl River site, however, will remain Pfizer's center of excellence for vaccine R&D. Biotechnology plants in Sanford, North Carolina, Andover, Massachusetts, and Havant, United Kingdom, are expected to see reductions. Pfizer reported plans to cease production of consumer-healthcare products at its plant in Richmond, Virginia (sale of the facility to Fareva was recently completed), but consumer healthcare R&D operations will continue in the downtown Richmond site.
Most recently, Pfizer announced plans to exit solid-dosage sites in St. Petersburg, Florida, and Bristol, Tennessee, as well as an animal-health diagnostic manufacturing site in Lyon, France.
In outlining the changes to its manufacturing network, Pfizer summarized how its transformed manufacturing network will look. Pfizer's solid-dosage network will include plants in Freiburg, Germany; Amboise, France; Vega Baja and Barceloneta, Puerto Rico; Ascoli, Italy; Newbridge, Ireland; and Illertissen, Germany. Its aseptic-manufacturing network will consist of plants in Puurs, Belgium; Perth, Australia; Catania, Italy; and Kalamazoo, Michigan. Its biotechnology-manufacturing network will consist of sites in Grange Castle, Ireland; Strangnas, Sweden; Algete, Spain; Havant, United Kingdom; Andover, Massachusetts; and Sanford, North Carolina. The consumer healthcare network will include plants in Guayama, Puerto Rico; Montreal, Canada; Albany, Georgia; Aprilia, Italy; Hsinchu, Taiwan; and Suzhou, Jiangsu, China.
Kelly explained that the changes underway at Pfizer reflect broader trends affecting the pharmaceutical industry. He points to the growing complexity of pharmaceutical companies’ product portfolios and the resulting need for increased flexibility, specialized capabilities, and technological complexity. He also points to a more dynamic market environment, which requires a need to develop and launch products quickly and to respond to pricing and supply changes as well as increased volatility in demand. These factors contribute to greater pressure on margins and a stronger need to reduce costs of goods sold and justify capital expenditures. As supply networks become more elaborate and costly to operate in light of these factors, Kelly says that “more value is placed on fungible assets for improved utilization and efficiency. All this must be done while maintaining focus on quality and compliance, supply reliability, and delivering value to our customers,” he adds.
“There is a critical need for the industry to focus on efficiency gains and value creation,” sums up Kelly. “Through the clarity of our vision and delivering on our strategies, Pfizer will achieve a competitive advantage by offering fast, flexible, and innovative supply solutions,” he concludes.
Listen here for a podcast with John Kelly, vice-president of strategy and transitioning sites for Pfizer Global Supply, who discusses the company's manufacturing and supply strategy and network.