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Change is inevitable, as is contract manufacturing. But which companies will survive the drifts?
Recently, while preparing a presentation on contract manufacturing, it became apparent that there has been a shift in attitude within pharmaceutical manufacturing. The more rigorous adoption of the "core-competency" paradigm, coupled with the loss of experience and know-how, and the impatience of a more academically qualified work force—accompanied by their higher aspirations and expectations, has led to a move away from the "we do everything in-house" culture to a more specialized manufacturing culture.
Three or four decades ago, about the only manufacturing that was contracted out was soft gelatin capsule manufacture. Almost all other formulations were done in-house, and there was a cadre of experience retained within a company. If another technology were required, there would be time to acquire it and to build up the requisite body of experience. In those days, a high percentage of staff expected to stay with the same company for their working life.
R. Christian Moreton, PhD
Several factors have led to a higher acceptance of outsourcing. In the 1970s and '80s, many older staff were given early-retirement packages to make way for younger staff. Soon after, managers realized that although positions could be filled, experience and know-how were often irreplaceably lost. Not only were the younger staff coming through less experienced, but because of their higher education, they were not interested in learning by doing in the style of the old apprenticeships. The loss of the breadth of experience was particularly acute for those manufacturing unit operations that were carried out infrequently, perhaps one campaign per year as a product went into decline. Around the same time, industry began to see the establishment of centers of excellence, in particular aspects of pharmaceutical development and manufacture such as parenteral products.
Change is a constant in life, but paradoxically, it's something the human race handles poorly. This is why it has taken so long for contract manufacturing to become widely accepted as a viable alternative for any organization. There are still holdouts and probably will be for years to come. But the key impetus really has come with the emergence of so-called "virtual" companies. These companies are small; they have few employees and little infrastructure. They contract out as much as they need to—a concept that is totally foreign to the ideas of 35 years ago.
This change in attitude raises some very interesting questions. How viable is the big pharmaceutical company model in the longterm? Is it necessary or inevitable that any successful small company should morph into a medium or large company?
We seem to have two very divergent trends at stake. On the one hand, some large pharmaceutical companies are growing even larger, mostly by acquisition, but they are increasingly seen as inefficient in terms of discovery, development, and manufacture. On the other hand, there are a significant number of start-ups with ideas and a vitality that belies the risks of the business.
One area in which large companies do score higher than small companies is in marketing, detailing, and sales. Does this imply that the large pharmaceutical companies will become (or even have already become) centers of excellence in these fields? Will the future model be one of a great many virtual development organizations servicing or being serviced by a smaller number of global or regional companies that specialize in marketing, detailing, and sales? It is not inevitable; the larger companies may well survive, as will some smaller companies. But core competency is a key concept, and the successful organizations will be those that recognize this, are brutally objective about their shortcomings, and are prepared to buy in the services they need.
Whichever way things drift, one thing seems clear: contract manufacturing is here to stay and will become an increasingly significant part of our industry. So, we had better be prepared.
R. Christian Moreton, PhD, is vice-president of pharmaceutical sciences at Finnbrit Consulting and a member of Pharmaceutical Technology's editorial advisory board, consulting@Finnbrit.com