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The more experienced contract manufacturers go far beyond superficial process improvements, drawing on their own expertise and resources to improve the service, value and flexibility they offer their clients.
Contract manufacturing of prescription drugs was reported as being worth $26.2 billion in 2004 and is estimated to grow to $43.9 billion by the end of 2009. There are several reasons for this substantial growth. Price pressures in the pharmaceutical market have never been more intense, yet drug development costs are rising dramatically. In 2001, for example, the Tufts Center for the Study of Drug Development in the US reported that the average cost of developing a new prescription drug was $802 million. The same study suggested that if development costs had increased in line with inflation, the figure would have been nearer to $320 million. The gap of almost $500 million clearly indicates the magnitude of the cost problems faced by large pharmaceutical companies.
These factors aggravate the immense pressure posed by the numerous stringent regulatory requirements. As a result, contract manufacturing has emerged as an alternative solution. By taking on the responsibilities for a whole range of services, including drug delivery systems, packaging, timely manufacture, regulatory compliance and validation, contract manufacturing organizations (CMOs) allow pharmaceutical companies to focus on marketing activities and other issues central to their continued prosperity.
While the potential benefits of outsourcing manufacturing are significant, choosing the right contract manufacturer can be a lengthy and arduous process.
The vendor must be able to meet compliance requirements, manage the validation process and ensure stability compliance. Other key concerns when selecting a supplier include product cost, transfer costs, the time taken to effect the transfer and the CMO's long-term financial stability, which is essential to ensure continuity of supply throughout the product life cycle. Product quality, including packaging quality and shipment reliability, is another important considerations.
Many pharmaceutical contractors are relatively small and while this is no absolute barrier to meeting the aforementioned requirements, it is undoubtedly far easier for larger CMOs — with sound financial backing, and access to proven experience and expertise — to do so.
CMOs that are allied with a strong financial backing company offer drug manufacturers significant advantages over other contractors. Most important is the relationship between the parent company and the contractor, which gives the latter exceptional financial stability and security. This not only guarantees the availability of investment for new equipment and services, but also helps to keep the contractor abreast of the latest developments.
Once these basic criteria have been satisfied, there are four key 'missions' that pharmaceutical manufacturers should consider when outsourcing drug manufacturing.
Develop updated and improved documentation. This is the pharmaceutical dossier, which includes the validation process. The new document includes formulation details, raw material specifications and packaging, as well as data on the finished products. The availability of such a comprehensive dossier ensures that regulatory compliance is achieved more easily and effectively, thus speeding the validation of new products.
Validating new processes. To handle this crucial step, a team of dedicated pharmacists and engineers are charged with facilitating and improving the validation of new products, and with maintaining good manufacturing practice (GMP) standards.
Process improvement. The objective is to continually review production processes, eliminating problems and increasing efficiency so that the best product can be delivered at the lowest price.
Stability studies. These, allied with the improvements and expansion of analytical development, form the second of the primary missions. Process changes are inevitable during the life cycle of any pharmaceutical product and, in many cases, they are even desirable, particularly when they lead to stability improvements or production efficiency gains. However, whenever a process changes, documented stability trials are needed as part of the validation procedure.
Some process improvements are simple and straightforward, such as increasing production batch sizes. Because mixing and processing times vary dramatically, independently of batch size, substantial economies of scale are possible in many processes. Additional process improvements may include installing new equipment to improve overall productivity. However, such changes often require substantial investment, which means that the business benefits must, in each case, be evaluated.
The more experienced CMOs go far beyond superficial process improvements, drawing on their own expertise and resources to improve the service, value and flexibility they offer clients. By applying their production expertise, contractors can achieve significant production cost reductions, which are passed directly to the customers.
Maximizing the availability of costly production plant time by reducing downtime is a further aspect of process improvement frequently overlooked. Additionally, the instigation of effective planned maintenance procedures can often boost overall productivity, as well as reducing the risk of costly major failures. These benefits can result in reduced production costs.
While competitive pricing is a major consideration for pharmaceutical companies that use or are considering the use of CMOs, it is far from being the only consideration. Reliability of deliveries, for example, is another factor that can cause client–contractor relationships to succeed or fail. Therefore, contractors must pay close attention to the quality of the service they provide.
In response to the above consideration, CMOs must establish a set of key performance indicators ensuring the measurement of delivery times against clear and demanding targets. This system provides an indirect, yet accurate and reliable method of evaluating customer satisfaction. As the contract manufacturing market becomes increasingly competitive, such measures are likely to become an indispensable aid for clients seeking to identify those contractors that offer the best levels of service.
Generally, the factors discussed above relate to the situation that will exist once the contractor has commenced manufacture on behalf of the client. But, for many pharmaceutical companies considering using contract manufacturing services, the transfer of production from their own facility to that of the contractor is a major concern.
Given the high number of people who are dependent on continuous drug treatments, supply interruptions are completely unacceptable. One solution is to build up large stocks of the drugs in question to cover the transfer period, but this approach is costly, inconvenient and in the case of short-lived products, it may be impossible.
Theoretically, once the specialist contractor has received the technical documentation, formulation and validation protocols of a specific product, the time it takes for the first batches of product to be ready to leave the plant should be quicker than if the sponsor does the work itself.
Production transfer is quite a complex procedure, involving process considerations, sourcing raw materials, stability trialling, and validation and traceability issues. Transfer periods of around 18–24 months are by no means uncommon. Consequently, CMOs need to analyse and optimize the production transfer process. The availability of plant-wide and product-wide documentation is an excellent foundation for speedy transfers, but another crucial requirement is for the contractor to have a high level of production processing expertise.
Outsourcing production is generally an attractive option for pharmaceutical manufacturers, especially when products are reaching the end of their life cycle, and production volumes and profitability are falling. When the existing production plant ages and, therefore, possibly becomes incapable of meeting current regulatory requirements, it is difficult to justify the large investment needed to upgrade or replace the plant.
A similar situation exists for products that are supplied in glass injectable ampoules. The market for ampoules is declining by around 10% per annum and under these circumstances, pharmaceutical companies would need to invest approximately 10 million to install a new ampoule production line.
In both cases, contract manufacturing provides a cost-effective and convenient solution, provided that the right contractor is chosen.
It is easy to believe that because the pharmaceutical industry is a huge global enterprise, it has a licence to print money. Not only is this perception incorrect, the opposite is closer to the truth. To survive in today's cut-throat pharmaceutical world, where costs are rising and prices falling, every player must concentrate on and develop its core strengths.
For the drug owners, this often means moving away from in-house manufacturing. For CMOs, it means fully understanding the requirements of the drug owners and aligning their operations to enable them to constantly strive for improvement and innovation.
Philippe Mougin is managing director at Cenexi (France).