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	Aseptic manufacturing is one of the key stages of drug development and commercialization. It is also a task that must be approached with the utmost care and attention to detail. Once the discovery cycle has been completed, how does a firm get a drug packaged and passed successfully through clinical manufacturing and into the marketplace? The answer to that question will depend on many factors, some of which are fundamental and straightforward. Others require careful thought and consideration of different criteria that can affect each individual situation. 
	
	Leading global bio/pharmaceutical firms often have their own manufacturing capabilities comprised of a global network of sites that serve different regions. In the past, this business model was practically an industry standard. However, due to the combined effects of expiring patents, tighter regulatory requirements, and the emergence of generic drugs and biosimilars, the industry has seen an increase in competition driving the need for the highest-possible flexibility in the manufacturing model. 

	Biologics, such as antibodies, peptide conjugates, and vaccines, are promising development fields and, if successfully marketed, can address a variety of previously unmet medical needs. Nonetheless, ever-increasing R&D spending and price pressures have created a re-thinking of the entire business model for pharma and biotech companies that, in turn, have led to the fundamental and strategic question of whether it is better to insource, or outsource, the clinical and commercial manufacturing of injectables.

	A different business model for small bio/pharmaceutical companies

	Not every pharmaceutical or biotech company fits the standard model described above. Small biotech companies, for example, will not have the in-house resources to perform development and manufacturing themselves as they lack a significant amount of specialized expertise and expensive equipment. For successful in-house aseptic manufacturing, companies need extensive experience in current good manufacturing practice (cGMP). They also require site approval from regulators and must be able to fulfill special tasks such as lyophilization. It, therefore, makes more sense for smaller companies to contract out most, if not all, of the development and manufacturing work once the discovery phase and preclinical development of their active compounds has been completed.

	Additional options for medium-sized companies

	For medium-sized companies, the strategic options available are not as straightforward. Many have the financial depth to build up the needed expertise and could arrange the technical equipment to do their own development and manufacturing work. Still, they tend to outsource. For example, over the past 10 to 15 years, a number of bio/pharmaceutical protagonists have appeared in the field that had major financial success with a small number of expensive compounds and therapies. They concentrate all their resources on R&D and marketing and have a business model that involves outsourcing of all capabilities including contract manufacturing of both clinical and commercial drug products.

	The advantage of outsourcing non-core competency work is that it allows the company to focus its energy on meeting the development project expectations of investors and shareholders. Resources can then be used to set up a multi-candidate pipeline to mitigate risk of failure in the clinical phase. This model, however, does create an important challenge, because the use of multiple suppliers means that each contract service firm has to be formally audited to allow for the cGMP process and regulatory submission. At the same time, maintaining in-house resources can be impractical given that these capabilities cannot be used completely and as a result, are not cost-efficient. 

	Relying on an outsourcing approach that incorporates reducing and keeping the number of strategic partners to a minimum can offer a promising approach to support the daily operations of a medium-sized company.

	A balanced approach for large companies

	Overall, it seems to be more promising if large bio/pharmaceutical companies do not have a fixed, single-sided strategy. In the past, a number of companies achieved major global manufacturing capabilities through mergers and acquisitions as well as through organic growth within their home country. 

	When asked about their additional reasons for insourcing, they most often cite the term “control.” They want to mitigate risk, which means that the crucial steps in a product’s supply chain should not be entirely dependent on the skills and stability of a third party. Furthermore, a number of companies prefer not using contract development and manufacturing organizations (CDMOs) to handle their most valuable and confidential compounds if those CDMOs are serving other firms at the same time.

	Still, other major players in the industry prefer a strategic balance of insourcing and outsourcing as it helps to secure supply, optimize performance, and minimize risks. The disadvantage of in-house manufacturing is cost efficiency because the same technology level cannot be used all of the time. Also, quality control and compliance at multiple sites within different countries can be equally difficult and risky as compared with having a single, well-vetted CDMO as a manufacturing partner.

	As noted, insourcing is the logical option if a company has the capacities available because it allows for full control over their drug product development and manufacturing. Also, it maintains their independence from suppliers, enabling complete control over their manufacturing processes and supply chain. Using in-house capabilities is also a strategy to avoid the unlikely event of company secrets being accidentally revealed to the competition if a supplier works for different customers.
	
	Outsourcing, however, has a number of important advantages, for example, when the efforts necessary for reaching a global consistency in quality across sites are the same, or even more challenging than contracting with an external CDMO partner. 

	Another significant benefit of outsourcing is economic efficiency. A committed and professional supplier will have skilled employees and keep its sites and hardware up to date in terms of regulations and technology, which are crucial and expensive elements of manufacturing. Thus, an appropriate solution for a bio/pharmaceutical company would be to have a supplier that has long-term expertise and state-of-the-art equipment to manage manufacturing in a cost-efficient manner that could likely not have been done in-house.

	There is little doubt that outsourcing various types of manufacturing is trending in the bio/pharmaceutical industry. According to recent outsourcing surveys conducted by industry professionals and research institutes, including a 2016 

, approximately 60% of all drug product projects from both large and small pharma and biotech companies are performed in an outsourced manner with third-party manufacturing partners (1). Even large firms that have their own capacity may well choose to invest in intensive R&D activities of their pipeline candidates, leaving the manufacturing process to a high-level expert.

	In the final analysis, however, each individual company must work towards maximum security and minimum risk. If possible, a combined strategy of both insourcing and outsourcing will most often provide the necessary flexibility and avoid any unsound dependence on third-parties. This strategy also has an impact on the relationship with a supplier, which needs to be based on long-term planning and cooperation to contribute to accessible external manufacturing capacity when needed. In addition, long-term strategic partnerships will continuously add experience and know-how to both parties, which is a crucial benefit when navigating in an increasingly challenging market setting.


	Outsourcing Resources 2017
	Supplement
	Pages: s4-s5

	When referring to this article, please cite it as O. Gold, "Insourcing vs Outsourcing: Choosing the Right Strategy," 

Pharmaceutical Technology Europe, Oustourcing Resources

Features

The article reviews strategies for firms with or without existing in-house capacities and the pros and cons for outsourcing bio/pharmaceutical development and manufacturing.

Insourcing vs Outsourcing: Choosing the Right Strategy

Audits of suppliers and service providers are becoming more important in a globalized world. Well-trained auditors will be able to detect potential weak points of the firms that they audit, before such weak points lead to quality problems in routine business with severe consequences (e.g., significant additional costs). 
	
	Thus, supplier audits and qualification have become one of the most important elements in quality assurance and are in the focus of authority inspections. The British Medicines and Healthcare Product Regulatory Agency (MHRA) has published an 

 of the most important GMP deviations within a time span of 12 months, and “poor supplier qualification” was ranked sixth in this overview (1). 

	In principle, a pharmaceutical manufacturer may have an audit as part of supplier qualification, executed by its own employees; or can authorize a suitable third-party audit provider to perform the audit on its behalf; or can buy an audit report from a commercial provider, for example, the Asociación Forum Auditorías (AFA). 

	The main focus of interest lies on the final audit report, regardless of whether the audit has been performed by the pharmaceutical manufacturer itself, by a third party, or whether the report has been purchased from a provider. In any case, the report should be written informatively and distinctly, and should enable the reader to gain a comprehensive impression of the audited firm. This article reports some experiences with the outcome of in-house audits, audits by third parties, and purchased audit reports.

	Within a period of three years, 2012-2015, a total of 126 reports from audits executed by company employees, by third-party audit providers, by “others,” and reports from shared audits bought from commercial providers have been assessed. For the assessment, first a “scale” was issued (see 

), based on Kettelhoit’s description of the desired format and content of an audit report (2). 

	The number of achieved points per audit report was divided by the maximum number of achievable points, and the resulting quotient was then multiplied by 100 to achieve the percentage rate, which stands for the report quality. When the final percentage rate was below 50%, the report was regarded to have “room for optimization.” A report was considered “acceptable” if it scored up to 65% and “satisfactory” for scores of up to 80%. In cases of more than 80%, the report was deemed to be very good.  

 indicates the number of audit reports in each category.

	The quantity and quality of the issues (observations) that have been made is another criterion to be considered when deciding whether to share or to buy an audit report rather than executing an audit. For classification, four grades were used: “critical” (very serious observation), “major” (not critical, but serious), “minor” (observation could become a problem if not corrected [in a timely manner]), and “recommendations” (potential improvement). 
	
	

 shows that there were only a few “critical” observations in this assessment. (In the case of “others,” the relatively high rate of “critical” issues was regarded to be an outlier due to the fact that only very few audit reports from “others” were available, thus one or two “critical” issues within a small total number of issues resulted in a high percentage of critical issues). Approximately 20% were serious or “major” observations, and most observations were classified “minor” or “recommendations.”

, the observed differences of the overall results are not striking. The quantity and quality of observations made are comparable and do not differ too much from each other, with some exceptions in the case of “other” audits, which had a relatively high percentage of “critical” observations, a percentage of “major” observations above the mean value (+ one standard deviation), and only a few recommendations in comparison to the other audit reports; these were considered outliers as described perviously. 

	To have another parameter that might show differences in audit report qualities, the mean values of the individual report qualities (percentage rates) were compared with each other. In 

, the summary of the individual qualities was presented. The respective qualities of the individual reports were summarized and the mean values were calculated and differentiated between “third party,” “shared,” “own audits,” and “others.” The resulting mean values were 73.9%, 71.8%, 79.6%, and 68.1% respectively. The differences in mean audit qualities were not striking, but to see whether the differences measured were statistically relevant, the “t-test” for comparison of mean values (4) was applied (normal distribution of the individual values pre-conditioned). 

, reports from audits performed by the company’s own auditors turned out to have significantly higher report qualities in all cases, whereas the report qualities from third-party audit providers, shared audits, and others were comparable with each other (no significance difference in any case).

	The supply chain is increasingly becomimg an area of interest in authority inspections (1, 5). Supply-chain integrity also includes supplier qualification. An on-site audit is only one but nonetheless an important test of a supplier’s qualification to manage supply-chain control effectively (6). Lack of transparency and the corresponding uncertainty along the supply chain might cause severe quality risks. Often, measures that should assure quality are not sufficiently known, such as the meaning and validity of foreign certificates, quality assurance agreements, analytical controls, and on-site auditing. More suppliers refuse an individual on-site audit by the customer because of several reasons, such as “…the quantities announced do not interest us...”, “...considering that the business for which we will be audited for by you does not proceed…”, “…we have invested a lot of money in our certificates…”, among others. When in cases where an on-site audit by the customer is denied by the supplier, the customer can try to instruct a third-party audit provider to perform the audit on its behalf, or can buy an audit report from a commercial service provider who has perfomed an audit on behalf of more than one contract giver (i.e., a shared audit). 

	In the end, a company has to integrate a purchased audit report into its own quality system, and this integration preconditions some precautions (7), as the risk to collect a surrogate (i.e., an audit report of little quality) of an audit report should be avoided by all means.

	There are various preconditions that have to be laid down proactively before integrating an external audit report, either purchased or issued by a third party, into a company’s quality management system (7). The auditor who issues the report has to avoid conflicts of interest, be independent, and be qualified to execute the audit. The report issued by the auditor must contain, beside formal aspects, sufficient information of the product-specific processes and workflows. On the basis of such information, the contract giver can decide whether the supplier is sufficiently qualified or not. Moreover, it should be kept in mind that a report of an on-site audit is only one part of the entire supplier qualification. 

	To guarantee that the audit report (either issued by the company’s own auditiors, or provided by other sources) meets the qualitative requirements necessary to assess whether the supplier is sufficiently qualified, a scale (

 that the quality of reports from audits being performed by own employees was significantly better than the quality of reports being issued by third parties or being purchased from shared audits through an external audit provider (“other audits” that did not fit in either group mentioned will be left out of the discussion because the number of audits/audit reports from “others” was too small). The differences in quality might be because the scale issued was adapted to the report template for audits being performed by own auditors. To raise the calculable quality of the reports being issued by a third party, a company might consider providing the third party with its own report template; by doing so, the third-party auditor will be more inclined to fill in the template according to the format is expected. As can be derived from 

, “time aspects” are not being met by auditors others than own auditors. 

	In case of reports from audits performed by others instead of one’s own auditors, the company has to accept the format and content of the report as it is, because there might be little possibility to gain influence. 

	It can be concluded that on-site audits are an integral part of supplier qualification and management (1). Given that there might be several restrictions preventing a company’s auditors from perform their own on-site audits (e.g., expert required, cultural restrictions, personnel shortages), one has to consider obtaining audit reports from other sources-whether it’s buying audit reports from a commercial service provider, sharing audits with other companies, or using a third-party audit provider to execute an on-site audit on behalf of the company. 

 lists some examples of criteria to consider when deciding what type of audit to use.

	One has to ascertain that audits performed by other auditors are qualitatively comparable with the company’s own audits. This practice is also a requirement of official normative guidelines (8) and might be assured by, among other things, administratively integrating a commercial provider for the execution of on-site audits into one’s own quality assurance (QA) system. For example, one might request that the third-party audit provider is certified according to DIN/EN/ISO 17020 (9) or ISO 19010:2010 (10). When being certified according to an international standard, one can have the assurance that the audits performed by such a certified body follow a standardized procedure. 

	If a company fails to integrate an audit provider into its own quality system, the company might be in danger of receiving surrogates rather than valuable audit reports that will not be accepted in case of an authority inspection. It is important that requirements that are to be followed by a commercial provider of on-site audits are agreed upon prior to an audit. By doing so, it is more likely to satisfy authorities during inspections that external audits are well under control.

	On-site audits play an important role in supplier qualification. Suppliers, however, are sometimes not willing to host on-site audits by their customers for various reasons. In such cases, a customer can either:

		Buy reports from audits being executed at the suppliers’ site, 

		Authorize a commercial audit provider to conduct the required audit on its own behalf.

		Perform audits with other customers of the same supplier who will then share the issued report. 

	If the second option is preferred, one has to carefully select the audit provider and integrate the provider administratively into one’s own quality management system. Finally, it has to be assessed by the contract giver whether the quality of the audit being executed by a commercial audit provider is comparable to audits being performed by its own auditors. Quality assessment will be based on the overall quality of the issued report in percent (

), the quantity and quality of observations made (

), and the statistical comparison of the achieved data (

). The outcome of these assessment and the consequences resulting from it can be seen in 

. When such conclusions from these assessments are laid down proactively, authority inspectors might be convinced that the supplier qualification process is in order, even if parts of the qualification process have been outsourced.

, April 2011-March 2012.
	2. S. Kettelhoit, 

 72 (2) 242-247 (2010).
	3. European Commission, 

GMP Guide: EudraLex-Volume 4 (Human and Veterinary)-Good Manufacturing Practice (GMP) guidelines

, https://ec.europa.eu/health/documents/eudralex/vol-4_en, accessed 12 Dec. 2016.
	4. L. Cavalli-Sforza, Biometrie - Grundzüge biologisch-medizinischer Statistik, Gustav Fischer Verlag, Stuttgart (1974).
	5. A. Shanley, 

., 28 (7) 25-27 (2016).
	6. S. Barr, Staying Ahead in OutsourcingMeeting the Changing Needs of the Pharma Industry, 

, p. 28-29, July/August 2016. 
	7. GMP News, 1 Feb. 2016, www.gmp-navigator.com/dnews_05166_Welche-externen-GMP-Auditberichte-darf-man-verwenden.html, accessed 20 Dec. 2016. 
	8. Arzneimittel und Wirkstoffherstellungs-verordnung of 3 Nov. 2006, BGBl, Part I, p. 2523, version of 28 Oct. 2014.
	9. DIN/EN/ISO 17020: Conformity AssessmentRequirements for the Operation of Various Types of Bodies Performing Inspections (ISO/IEC 17020:2012), Beuth Verlag, Berlin.
	10. ISO 19010:2010, 

Guidelines for Auditing Management Systems

, 
	ISO copyright office, Case Postale 56, CH-210 Geneve 20. 

Pharmaceutical Technology Europe
	Outsourcing Resources 2017 Supplement

	When referring to this article, please cite it as M. Pfeiffer, "Key Considerations in Outsourced “On-Site” Audits as Part of Supplier Qualification,"

 Pharmaceutical Technology Europe, Outsourcing Resources 2017

This article reviews experiences with the outcome of in-house audits, audits by third parties, and purchased audit reports.

Key Considerations in Outsourced “On-Site” Audits as Part of Supplier Qualification

	The pharmaceutical industry is approaching a time of significant change in policy on data handling. The Identification of Medicinal Products (IDMP) stipulates that organizations must standardize how they generate, archive, and transfer information on everything from drug ingredients to brand guidelines and patenting (1). The central goal of the regulation is to ensure patients are safe by unifying communications and encouraging cross-industry collaboration.

	What’s particularly concerning for many companies is that their data management may not be prepared for this industry-wide standardization drive. Achieving regulatory compliance will require that they can achieve a 360-degree view over their data, whether the data reside in the cloud or on premise.

	Under current norms, separate companies will use different nomenclatures for medicines, and use varying ways of recording dose, administration routes and measurement units. Individual medicines are also often classified differently across multiple manufacturers, while branding regularly changes across different countries. One common example is that while paracetamol’s generic name is acetaminophen, it is also sold as Tylenol or Panadol in the US. While this difference is often understood by pharmaceutical staff, it leads to unnecessary silos in databases, which makes it harder to discover and record multiple medicines of the same family. This in turn increases the complexity of data management programs, making it harder to quickly find trends across brands and muddies supply chain data, making it difficult to notice shortages and falsified drugs.

	Multiple companies also currently use manual data-entry, wasting a lot of admin time. Each organization must enter and archive the relevant data for its portfolio, first in its proprietary system and then in the format of all other organizations or agencies with which it does business. This is expensive, and increases the chance that human actions will cause manual error.

	As a result, industry information is often hard to read and difficult to trust. Duplications, poor labelling and failures in production standards are increasingly hard to discover. Decision-making is then based on inaccurate information. On top of this, the lengthy processes needed to manage these vast amounts of data mean slower decision making and a sluggish industry, with more obstacles to jump before new drugs become available. The ultimate result is that patients have longer to wait before treatments can be accessed.

	Clearly change is needed. Pharmaceutical organizations must take control of their data if they are to get a clear view of all the data linked to their medicines, as well as organizing and storing it in line with the IDMP guidelines. Before standardization can be possible, companies must implement a resilient data management process to ensure data is complete and reliable. IDMP data are highly fragmented by internal processes, which could cause duplications, contradictions and ambiguity. Focusing on improving data quality will be a key element of any IDMP data management drive.

	First up, organizations must be able to find their master data (in other words, information involved in the basic functions of the business). Organizations will need to pay particular attention to data on the ingredients in each drug, its packaging, the company producing and selling it, and reference information around its measurement, dose, and governing body. Once the company has identified all relevant data points in these four areas, it must process them in a systemized manner, to ensure all information is easily discoverable at any time. It’s also key that data is gathered from right across the business, so any inconsistencies can be automatically discovered and dealt with.

	There is an essential part for technology to play in this process. With data volumes increasing every year and the industry moving towards a digital-first model, regulatory compliance will depend on automatic data management. Pharmaceutical organizations must enable themselves to feed masses of information into an automated, intelligent software to produce actionable, regimented datasets for inspection and assignment. The level of systematic organization required by IDMP will be hard to achieve manually, given the size of the industry and the sheer volume of important information generated every year by new medicines and significant changes to existing ones. It will be essential for IDMP project leaders to consider the role of data management in achieving their goals.

	Contracting partners and suppliers also have key parts to play. The wide remit of IDMP implies information must also come from outsourcing partners such as contract research organizations (CROs) and contract manufacturing organizations (CMOs), as well as materials suppliers. Although CROs already understand the competitive importance of data, other partners may not yet be competing on data. Instead of viewing delivering IDMP data as run-of-the-mill business expense, forward-looking CMOs and suppliers can boost their core offerings with valuable data sets as a competitive advantage. Operating company sponsors can also feel the benefit, not only in terms of compliance, but also by using the same data for collaboration in supply chain planning, looking for improved forecasting benefits and ensuring timely delivery and inventory reduction from partner to partner.

	Large system integrators (SIs) are also increasingly willing to partner on IDMP compliance. The application of the ISO standards will probably differ around the world, and the IDMP data model is dynamic. As a result, many SIs are developing service offerings built on data management to ensure that their technology is always up to speed and can operate as a global solution rather than a regional one. These services usually include tech hosting, data model maintenance, and the application of controlled vocabularies. Operating companies who are not yet ready to embrace data management as a core part of governance will benefit from the broad experience made available by specialized services which combine data management and regulatory know-how.

	Building a strong data management system seems like a difficult challenge to some, but there are a lot of benefits to be gained. IDMP is not just another regulation, it is the primary standard that will underpin multiple future regulations and industry initiatives. In terms of public health, improved visibility into the spread of medicines will help authorities to monitor the effects of new drugs entering the market much more efficiently. IDMP will also help to improve tracking of nascent medicine shortages and fake drugs, helping local services to deal with the causes before they take hold, as well as making it more difficult for fraudulent companies to evade the law. The same applies to batch recalls and inspections. When a supplier has to recall multiple shipments from the supply chain, a more in-depth data management system will help to greatly accelerate the process of locating the specific items.

	The end consumer also benefits, gaining the ability to use cross-border electronic prescriptions in the European Union, for example, which enables patients to get the right drugs outside their home nation as a result of standardized information. International prescriptions can also reduce the workload for health workers aiding overseas patients.

	There is a great deal at stake with this regulation. The pharmaceutical industry has a responsibility to provide the best possible service to its customers and end-user patients. With an effective and granular data management process in place, companies will be well-placed not only to meet the requirements of IDMP, but also to help usher in a new age of digital-based identification, in which organizations can easily share data across borders. Now is the time for management to invest in a thorough overhaul of information processes, or risk being left behind by an increasingly connected industry.

	Monica McDonnell is director strategic business development Europe at Informatica.

Having an effective and granular data management process in place will enable companies to meet the requirements of IDMP as well as help usher in a new age of digital-based identification, in which organizations can easily share data across borders.

Pharmaceutical Technology Europe-03-02-2017

Pharmaceutical Technology Europe 2017 Outsourcing Supplement (PDF)

Insourcing vs Outsourcing: Choosing the Right Strategy

Key Considerations in Outsourced “On-Site” Audits as Part of Supplier Qualification

The Challenge of IDMP Compliance