Contract Manufacturing in a Cost-Conscious Environment
New models, new partnerships
By Marcelo Morales
Our current economic uncertainty is putting tremendous pressure on various industries to identify ways to streamline costs and improve efficiencies. This is equally as relevant in Life Sciences, an industry characterized by significant fixed costs, extended timelines for discovery-to-development, and regulatory requirements that necessitate extensive diligence and effort to manage. Although the recent cost pressures are not new to other manufacturing industries, they are becoming more pronounced in the contract manufacturing of pharmaceutical products. This is further compounded by the need to find cost efficiencies throughout the healthcare value chain. However there are numerous strategies that pharmaceutical and biotechnology companies can leverage when identifying and working with contract manufacturing partners to contain cost without compromising the rigorous quality and regulatory requirements characterized by our industry.
Across this lifecycle, contract manufacturers have a role to play in identifying those areas where cost savings can be realized, including identifying efficiencies in API manufacturing, formulation development, and clinical and commercial manufacturing. Typically these areas will benefit from scale, repeatability and efficiency through consistency. This is not to suggest that other functions within discovery-to-development are not targets for efficiency, simply that Life Science organizations can expect greater flexibility and agility with those partners that have evaluated cost management initiatives in core manufacturing functions. For example, greater efficiencies can be identified by those CMOs that can apply fundamental supply chain practices to their business model, such as:
- Understanding the role strategic sourcing plays in the procurement of both direct and indirect materials
- Leveraging integrated supply and demand chain planning efforts across their operations (and combine with a client’s own Sales & Operations planning process)
- Bringing value to the logistics and distribution function by working with preferred third-party logistics and transportation vendors, and
- Investing in modernized machinery to bring additional efficiency to the manufacture of products in their facilities.
Despite working in a cost-sensitive environment, there are numerous areas of focus that pharmaceutical and biotechnology companies must consider with a CMO that go far beyond the typical ‘cost per vial.’ These include ensuring depth in the quality function such that a ‘right-first-time’ mentality is clearly applied across an organization. CMOs that have invested in robust quality management systems and Resources are better positioned to provide a level of confidence in the manufacturing process. A regulatory function with a strong history will further ensure that approvals are received when expected. Single, large-scale clinical projects are being divided into multiple stage opportunities; therefore those CMOs with the ability to be flexible and agile with project start / stop will ensure that the smaller scale segments do not impact timeliness.
In light of the current global economic downturn and the constraints mentioned previously, there are strategies Life Science companies can apply today when looking for a contract manufacturing partner which will lead to both short- and longer-term cost savings:
Utilize an efficient and simple CMO selection process
Cost management can start by having a clear vision and anticipating how long and detailed the selection process for a CMO partner will be. This means being focused on those characteristics that are required at time of evaluation, and those characteristics that can be worked through during due diligence. The typical Request-for-Proposal process tends to be quite rigid and time-intensive. Some innovative clients are applying simple, repeatable criteria to initial screening and evaluation. These companies focus on quality history, regulatory record, key manufacturing capability and total cost-to-development indicators to help identify their prospective partners. Time-to-market or cost-per-unit are only a few of the many characteristics that can be quickly assessed and considered.
Seek out partners with a strong regulatory record and robust quality system early in the process
These are typically capabilities that can quickly be evaluated through publicly-available means. Ensuring documented pro-cesses, enabling technologies, and resource expertise are differentiators of a CMO that will provide confidence in securing a longer-term relationship, and will help control longer-term costs.
Apply continuous improvement methodologies
Seek out those partners that are actively applying Lean Manufacturing, Six Sigma and other related methodologies to both their own processes as well as the manufacturing of their clients’ products. Ensure that CMOs are not just knowledgeable, but are actively infusing continuous improvement methodologies like Six Sigma across their companies. Many Life Science organizations are becoming versed in Six Sigma; therefore, understanding and using this system provides a common language for cost management between CMOs and their clients.
Seek partners that can simplify the Discovery-to-Development lifecycle
Many CMOs can become focused on addressing costs within their organization, forgetting that the client will view costs across the developmental lifecycle from discovery through to commercial fill finish. Therefore those CMOs that have started to look at how they can bring expertise across this lifecycle, either through an integrated service offering or through partner networks, will be better positioned to identify where greater efficiencies can be realized. It is important for a CMO to work closely with a combination of discovery chemistry, API development, method development, clinical compounding and commercial filling to support clients. Although many of these services may be offered in different locations, having an integrated view of the discovery-to-development lifecycle provides the opportunity to determine where reductions can be made in the total cost-to-development.
Work with well-defined and dedicated project management
A significant driver of technology transfer costs is the complexity realized through multiple products and various transfer variables.Working with a robust project management capability is critical to simplifying the transfer process, thereby reducing costs. Focus should be on resource expertise in project management as well as technology solutions such as enterprise project management (EPM) that can be integrated into the transfer lifecycle allowing remote progress monitoring.
Enable production flexibility
CMOs with the ability to make changes to production schedules effectively and tailored to demand are often those that have effective supply chain planning. Integrating the planning function between a client and CMO partner will provide the CMO with critical lead time to be able to assess possible risks in their production schedule.Often flexibility can be a function of how well an organization communicates internally – having manufacturing, quality and supply chain review customer demand requirements can enable a CMO to handle sudden schedule changes.
The Life Sciences manufacturing industry is well positioned to respond to cost pressures. We can learn from other industries that have been faced with these challenges to adopt appropriate measures. A key requirement will be the need to balance speed to market with assurance of quality, all at a competitive price. The current economic environment presents us with a unique and exciting opportunity to apply many of the above-mentioned practices to bring value to our clients.