In the ever-changing pharmaceutical industry, an organization?s ability to act with speed is often the difference between success and failure. Never before have large multinational healthcare companies been under so much pressure to increase earnings year to year and often quarter to quarter. One way in which these companies can increase earnings and revenue is to bring new products to market faster. For a projected $150 million product, a one-month delay in commercializing or launching can result in a sales loss of more than $12 million.
A key strategy for accelerating new products in the healthcare industry is outsourcing. Outsourcing, or the use of contract services, allows sponsor organizations to access technology, capacity, Resources and expertise that may not be readily available in-house. Outsourcing also allows a sponsor to pursue multiple projects concurrently due to the additional resources available from the contract provider. Access to a contract provider and implementation of a sound outsourcing strategy can result in a successful project that meets (or even exceeds) a sponsor's original expectations.
Unfortunately, this is not always the end-result; every contract provider and sponsor can offer examples of projects with very aggressive timelines that ultimately failed to meet either party's expectations. This article details the key components of a successful outsourcing relationship. As our environment grows ever faster, the importance of these factors becomes magnified. In order to paint a balanced picture, the factors associated with a successful project or relationship will be discussed from two different perspectives, that of the sponsor organization and that of the contract provider.
The Sponsor Perspective
Novartis Consumer Health (NCH) is a contract sponsor with a well-developed internal third party support organization that generates approximately 30% of its OTC pharmaceutical sales from products manufactured (and often developed) at a contract facility. The range of contract projects can vary from a simple product transfer to be completed within a few months to a new drug application (NDA) that can take years to reach the market. Through these multifaceted contract relationships, NCH has learned invaluable lessons that help to minimize the time to market for a new product.
Define the Project
Before approaching the contract pro-vider, the sponsor must be sure that the project to be outsourced has been clearly defined within its own organization. The purpose for this is twofold. First, it allows the sponsor to choose the best-qualified contractor for the project, taking into consideration the most critical parameters of the project. The product may require specific technical expertise, additional capacity or other resources from an external provider. Second, it allows the internal project team to become familiar with the various parameters of the project. An informed internal team can clearly communicate the company's needs to the contract provider.
At the least, the sponsor should be able to communicate its expectations regarding product concept, regulatory strategies, estimated volumes, target launch date, anticipated deliverables and applicable budget constraints. This helps to create a level playing field from which both parties can begin to collaborate toward the shared goal of a successful new product launch. If confusion exists internally at the start of the project, that confusion will only grow as the project moves forward in a shared environment.
One aspect of the outsourcing project that is most critical to success is the development of a detailed timeline that will help the companies execute the project from start to finish. The capabilities of each contract manufacturing facility to generate such a plan differ greatly. Some organizations possess well-established project management systems, while others depend completely on the sponsor to provide structure and drive the project.
Regardless of which situation exists, it is important to develop the project plan together. In doing so, both parties will be able to identify systems differences, potential bottlenecks and opportunities for synergy. Most importantly, developing the timeline together creates an environment of open communication and a feeling of ownership for the provider. If both companies plan to track the project independently, make sure to update and cross-check timelines on a regular basis to minimize the chance that the teams are working under different sets of assumptions.
In forming the project timeline together, key issues will surface, allowing both parties the opportunity to address problems before they affect the product launch. For example, a sponsor may have thought its provider was capable of supporting an extensive stability program, but in discussion learned that the scope of its own stability studies is more extensive than the facilities of the provider allow. In this case, the sponsor may perform the stability portion internally, or subcontract that particular part of the project.
During the joint development of the timeline, responsible parties should be identified on both sides. This enables people to meet their counterparts and start work on their portion of the project. A face-to-face meeting is the ideal situation and is usually optimal during an initial visit when working with a new contract partner. If a sponsor is beginning a new project with an existing partner, an initial team visit to develop the first detailed timeline can be very effective at building functional and organizational relationships.
Early Focus on Capacity
When speed to market counts, access to a reasonable amount of excess capacity at a contract provider is a significant criterion for selection. A sponsor should make sure that a contract provider does not have an exorbitant amount of capacity available, because this may indicate potential financial issues and other problems for the provider. However, dependent on the volume and scope of a project, a sponsor expects that its product should smoothly transition into the contract provider?s facility.
In outsourcing, a contract provider?s capacity is dynamic, simply because of the nature of the business. The sponsor must feel comfortable that the provider is going to be able to handle the additional volumes, specifically on anticipated manufacturing and packaging equipment, within the anticipated launch timing.
Typically, a sponsor should not select a contract provider for a project where a significant capital investment is involved. After all, the avoidance of capital investments is a driving force behind the outsourcing trend. In spite of this, depending on the uniqueness of the project, a sponsor must be willing to consider some capital investment for the contract provider should no other reasonable alternative be available.
At NCH, each external project is typically driven by one particular functional area at the beginning. Product development is typically the driver, but this is dependent on the type of project. On fast-paced projects, it is next to impossible to work through one individual. As a result, all functional areas are encouraged to have contacts at the partner organization from the beginning of the project. Most often, these contacts are established during initial conference calls or meetings, perhaps during the creation of the timeline.
Even though the functional areas have responsibilities to the team and their counterparts, sponsors should provide their contract partners with a primary vehicle for communication from their side of the business. An employee of the sponsor needs to drive the project and be available to relay issues back to his organization from the provider. Designate one internal key service contact and allow that person to manage the details. If a provider makes requests that go unanswered, it may be forced to make decisions without the sponsor?s input and proceed past a point at which the situation can be rectified. A lack of response creates a feeling of frustration on the side of the provider and reflects poorly on the sponsor.
To avoid delays that could result in missing a target launch date, a representative must be on site at the provider during critical stages. The agent must be present for a development batch, an initial packaging run or preparation of clinical supplies. This way, the sponsor can address immediate documentation or compliance issues up front. This helps eliminate the need to investigate ?what happened? during production.
Sponsors must bring strategy changes to the attention of their providers as soon as possible. Potential delays in critical steps of the project, such as clinical start dates or upper management ?go/no-go? decision points, can affect both organizations. If a major change in scope might impact the project, do not wait until it is too late for the contractor to absorb the impact of that change. An operation that may seem simple to a large pharmaceutical sponsor can constitute a major resource burden to a provider that may be handling assignments for multiple sponsors. The sponsor must practice project management on both a micro and macro level in order to provide the best support to its partner.
Respect Your Provider
Regardless of the reason for choosing a particular provider, it is to the sponsor?s benefit to build a strong relationship. The sponsor?s approach should be tailored to each and every contract house. Learn about the individual provider and its systems, what drives the business and the general philosophy of the organization. In doing so, the sponsor can leverage the provider?s strengths and compensate for its limitations.
The sponsor must use the provider?s resources as much as possible. Even if the primary objective of the project was not to access resources but perhaps to obtain a technology, the sponsor should limit its use of resources whenever possible. Level of involvement should be determined in light of the provider?s strengths and weaknesses; the sponsor should not automatically assume that its way is better. Instead sponsors should use their system only when it strengthens the program and accept the provider?s system when it makes sense to do so.
Identify unknowns or potentials for change and work together with the provider to form a solution. The provider will be more willing to adjust to changes and accept input if sponsors demonstrate a level of respect for them Similarly, sponsors must be receptive to the provider?s input. As difficult as it may be for each sponsor to believe, they are not the provider?s only customer, but they can become a preferred customer and, ultimately, get their product to market as planned.
The Contract Provider Perspective
DPT is an established contract services provider, well known for providing contract solutions to both large multinational pharmaceutical and emerging biotech organizations. Within these established relationships, DPT has provided solutions in both the pharmaceutical and consumer products sectors.
In working with different sectors of the pharmaceutical industry and in dealing with clients of various sizes, DPT has established some ?best in class? practices that are common among successful projects. Naturally, these ?best in class? practices become more significant depending on the time and resources allocated to the specific project.
A contract provider?s ability to react and support its sponsor client is directly affected by the information that is made available. The information that must be imparted to the provider is both qualitative and quantitative in nature. Best in class sponsor organizations have a responsibility to communicate and help the provider?s organization visualize the overall plan for a project. Without the ability to visualize and fully understand the sponsor?s perspective, a project often becomes just a task within the contract provider?s organization.
In addition to the qualitative nature of visualization, quantitative information ? the hard facts ? are required to propel a project forward. It is the free and open exchange of complete information early in the process that leads to the success of projects with tight timelines. Too often projects are derailed by incomplete information that leads a contract provider down a path that is contrary to the sponsor?s expectations.
A lack of full disclosure can also result in unexpected or unbudgeted cost overruns to the sponsor organization. Negotiating these cost overruns often deflects the focus of a project from the end goal and leads to unwarranted delays. Although the potential for cost overruns can never be fully eliminated, it can be dramatically reduced by allowing the provider full access to information.
A View with the End in Mind
In any kind of race, whether it?s biking, running or boating, not all competitors use the same strategy. Some start slowly and save their energy for the end of the race and others sprint from the start, hoping to hold on until the finish. Still other competitors use some variation or combination of these two strategies. History has proven that all strategies can be successful, depending on the individual.
Outsourcing is no different from running a race. A contract provider may present a strategy that is not consistent with the sponsor?s original expectations. A sponsor?s ?best in class? practice is to accept a contract provider?s strategy assuming it meets or exceeds expectations. This strategy should never be accepted on blind faith, but should be challenged for reliability. A contract provider should be able to defend clearly and logically the merits of its strategy. A sponsor may expect a project start date of January 1, 2000 with an anticipated end date of July 2001. Conversely, a contract provider may present a strategy that forecasts a later start date and earlier completion date. Looking at the ?big picture,? not just the start date, helps the sponsor determine if the provider?s strategy will meet its needs.
Acceptance of Contract Provider?s Systems
Sponsors select contract providers for a number of reasons, including regulatory compliance, technical expertise, breadth of services and value. When speed counts, a sponsor?s ability to accept its contract provider?s systems can be critical. A successful contract provider may manage more than 50 different relationships. If the provider is required to maintain independent systems for each client, the likelihood for errors, subsequent project delays or even non-approvals by the FDA could increase.
When the sponsor accepts the contract provider?s systems, it allows both the sponsor and provider to focus on performance and not be concerned with subsystems that are created. Of course, the provider?s systems should not be accepted without due diligence. Instead, these systems should be reviewed by the sponsor?s quality, operations and business teams. For example, a review of the change control system and the comprehensiveness of the provider?s Standard Operating Procedures (SOPs) are good indicators of the provider?s system quality.
Communication in any relationship is critical. Basic project management involves defining when and how you will communicate. The provider should define these parameters at the beginning of the project, while the sponsor organization should identify a project leader. Often, the difference between meeting or exceeding a commitment date and having a project delayed depends on the sponsor?s ability to provide a single ?go to? contact who can eliminate potential internal issues.
However, this ?go to? contact does not replace the need for a solid cross-functional team on the sponsor?s side. In any development or fast-paced project, the need to exchange data and information between scientists and formulators is paramount. The project leader?s responsibility is to keep the overall project on track and provide the wherewithal and authority to break through any potential bottlenecks.
As a general rule, the more intense the project, the greater the likelihood that issues will arise. It is important from the provider?s perspective to establish a mechanism for resolving issues before the project is initiated. A sponsor?s ability to work with a provider on defining this mechanism is vital. This way, as issues arise, the working partners can focus on the solution, rather than on the method for solution. This is especially important when speed is an issue and there is insufficient time to explore all options and remedies.
Partners Focused on What They Do Best
In the medical and legal field, the practice of specialization is widely accepted. When patients fear heart problems, they typically ask their general practitioners to refer them to a cardiologist. The same concept is prevalent in pharmaceutical outsourcing. Sponsors now look for more specialized providers who are proven experts in specific technologies. This practice is even more important when speed to market counts. The sponsor cannot afford delays in dealing with a contract provider that may not have the expertise associated with a specific technology. If this is a driving reason why a sponsor selects a provider, it is important that the sponsor allow the contract provider to focus on and use its core competencies.
In today?s outsourcing environment, the need for hands-on management is reduced and the contract provider is compensated for managing a specific portion of the sponsor?s supply chain. In order to maximize the efficiencies of both parties, the contract provider should be given the necessary latitude to manage this supply chain, allowing the sponsor to focus on value-added activities.
Outsourcing is a growing trend in most major industries, including pharmaceuticals and biopharmaceuticals. However, undertaking a successful strategic outsourcing program requires the sponsor to make a paradigm shift. From the contract provider?s perspective, it is no longer acceptable to implement the antiquated practice of leveraging your supplier (a practice that is still prevalent in many commodity-type relationships). Sponsors should strive to develop relationships that result in a win?win scenario for the both sponsor and contract provider.
At its highest level, a sponsor and contract provider should strive to maximize each other?s gain by moving beyond the transactional nature of buying and selling and focussing on additional opportunities that create significantly more value than individual opportunities alone. Maximizing gain is something that goes beyond the parameters of an individual project, but the concept is clear. For a truly successful outsourcing project, the sponsor and the provider cannot focus only on individual wants and needs. The needs of both parties must be satisfied in order to ensure that a project receives the appropriate attention it deserves.
In the pharmaceutical industry, changes in market conditions have required that large multinational healthcare companies take aggressive measures to increase revenues and earnings. Delays in product launches are not acceptable, causing a direct and damaging impact on quarterly revenues and earnings. One evolving strategy in the healthcare industry is outsourcing. The access to a contract provider?s expertise and the implementation of a sound outsourcing strategy can provide the speed to market that a sponsor organization demands. However, as those who have been involved with outsourcing will concur, rarely is a project executed without issues. As with any relationship, a clear understanding of the other party?s needs and expectations is the key to success, especially when speed to market counts.