Gil Y. Roth10.11.11
In May 2011, Paul Duffy was named vice president of the External Supply Operating Unit at Pfizer Global Supply (PGS). The new unit is responsible for managing both Pfizer’s CMOs and its growing generics business, in which the company sells products manufactured by other companies. Given the extent of Pfizer’s operations, this makes Mr. Duffy a very busy man. In fact, our meeting at Pfizer’s offices in New York City was contingent on the on-time arrival of a flight from his native Ireland.
Mr. Duffy and I spoke about Pfizer’s changing approach to outsourcing manufacturing, the structure of the new External Supply unit, the influence of legacy Wyeth’s external supply, the transformation from PGM to PGS, the health of the CMO industry, and the importance of respecting the 80/20 rule.
—GYR
Contract Pharma: How long have you been with Pfizer?
Paul Duffy: I’ve been with the company for 20 years, first with the legacy Warner-Lambert organization in Ireland, where I was hired to manage contract manufacturing with third-party businesses in Cork. When Pfizer acquired Warner-Lambert, I moved into a supply chain role, also in Ireland, where I held two Site Leader positions. From there, I moved into an Area Leader role for Pfizer’s Primary Care business unit, with responsibility for sites in Singapore, Belgium, Ireland and Canada. In May 2011, I was named vice president, External Supply Operating Unit for Pfizer Global Supply, with responsibility for the organization’s External Supply Operating Unit (or OpU). The OpU was created earlier this year and encompasses Pfizer’s global external supply network. I also serve on the Pfizer Global Supply Executive Team.
CP: Also this year, Pfizer Global Manufacturing (PGM) changed its name to Pfizer Global Supply (PGS), and named a new president –– what’s the shape of the new organization, and what’s its mission?
PD: When Tony Maddaluna, whom you’ve spoken with previously, became president of PGS, he changed our name from Pfizer Global Manufacturing to Pfizer Global Supply, in recognition of who we are and what we do. We’re more than a preeminent global manufacturing organization — as our mission states, PGS is a globally integrated internal and external supply network. By cost of goods, for example, 30% of the products we supply today come from our 500 external suppliers. Creating the External Supply OpU was another meaningful step for PGS. There was a need to give external supply an equal voice at the table, in concert with our internal manufacturing sites. Both our new name and new OpU recognize that external supply is a growing and vital part of our business.
CP: What’s the structure of the new unit?
PD: The External Supply OpU is designed to manage the end-to-end supply of externally sourced products. To do that, we’ve brought together three functions: Business Develop-ment (BD), Global External Supply (GES), and Alliance. The BD function is vital to the success of this OpU. It’s very important that product supply be involved in every stage of Pfizer-wide business development discussions, and the BD function manages this vital interaction. Traditionally, the BD group has also had responsibility for site sales and has been involved in acquisitions where manufacturing assets are involved. We announced 10 sites for divestment last year, and the BD group is managing that process.
CP: Are these generally sold to other pharmas and biopharma or to CMOs?
PD: It varies — we’ve sold to both CMOs and other pharmaceutical companies. The model we’ve tended to use in these sales involves trailing supply agreements, with the facility continuing to supply products to Pfizer for a period of time. Management of that supply falls within the responsibility of GES. Having the people who arranged the deals aligned with the people who’ll be responsible for managing the ongoing supply is very important. When both parties are working in alignment, a seamless handover is more likely to result.
CP: How smooth a process is it to sell a site off to a CMO with a supply agreement?
PD: There are advantages to sourcing from sites that we’ve sold — they incorporate our standards and know our procedures. As long as a site that we’ve divested maintains its capability to deliver value (measured as a combination of quality, cost and reliability), doing ongoing business makes sense for Pfizer. We’re still doing business with many of the sites we’ve divested, and several have extended beyond the initial supply agreement. There’s a business case for sticking with a vendor that can maintain cost, quality and reliability. That said, companies that acquire our sites shouldn’t rely solely on Pfizer’s business; they need to have a strategic business plan in place moving forward.
CP: What do the other two parts of the OpU handle?
PD: Global External Supply (GES) and the Alliance function are arranged based on the type of molecule that we’re sourcing. If we’re sourcing a Pfizer molecule, it goes through GES. The GES group has managed the outsourcing of Pfizer molecules for nearly a decade, and also manages supply from sites we’ve sold. The Alliance group manages the supply of non-Pfizer molecules — this is a new part of the business, with significant growth potential. The Alliance organization will promote and support collaboration and partnership between PGS and our commercial partners, primarily in the Emerging Markets and Established Products Business Units. This team will help ensure the success of Pfizer’s strategic alliances by providing broad support at all stages of the supply process — from due diligence through launch, product delivery and sustained supply.
CP: This covers the generic sterile injectables that Pfizer is selling, as it’s doing in the partnership with Claris?
PD: Yes, as well as the partnerships with companies like Strides and Aurobindo, including oral solid dosage products.
CP: Does this Alliance function mirror Lilly’s? Among large pharmas, Lilly is out in front with Alliance Management. Are you developing best practices based on industry peers?
PD: Because this structure is new for us, we are able to bring front-end flexibility to the task of defining the Alliance function and its operative processes — two Alliance leads are running with that challenge. Working very closely with the Pfizer commercial business and early stage involvement are key to ensuring that we have product we need, when and where we need it, with the correct quality and in the correct quantity.
CP: So the Alliance side isn’t dealing with CMOs directly?
PD: It’s not uncommon to bring in the existing manufacturer when buying a molecule. Take Aurobindo, for example: Aurobindo owns the molecules and we’re partnering with them to sell in certain markets, utilizing their manufacturing structure and their systems. If a supplier does not pass due diligence, we don’t do business with them. We operate based on a balanced value model of quality, supply reliability, and cost and we demand the same of our external partners. We make difficult and tough choices, but compromising quality/compliance is not an option.
CP: There have been some hiccups early on, though.
PD: It’s a learning experience, certainly. In this business you either learn fast or you get left behind. I’m confident that we have the agility, flexibility, technological expertise and capability to grow and support the business moving forward.
CP: How would you characterize the differences between working with those generics companies vs. working with CMOs?
PD: Overall, the industry is moving toward establishing deeper relationships with a smaller number of CMOs to provide a broadened range of capabilities. Pfizer is no exception — we currently have some 500 suppliers in our supplier base. We’re working to minimize that complexity by, for example, developing strategic partnerships with a smaller number of suppliers to differentiate or tier the supply base.
CP: How do you manage that task?
PD: It’s an example of the “80/20 rule,” where 20% of the vendors provide 80% of the value. In other words, you pick your key partners based on what they’re supplying, the technical complexity of what they’re doing, and other essential criteria to your business needs. For us, the next step is putting a Virtual Site Operating Team (VSOT) in place. The VSOT operates as a cohesive, centralized group and single voice to streamline communication and minimize confusion. Team members encompassing finance, quality, technical, engineering and other areas of interest align our needs with those of our vendors, enabling both parties to move forward in a mutually beneficial fashion.
CP: How long have you had the VSOTs in place?
PD: We’ve had the VSOT structure for about a year. The VSOT function is currently responsible for about half of the total dollar value of External Supply. We generally have about 40 teams in place at any give time.
CP: Are they used primarily with CMOs, or also with the generic partners?
PD: VSOTs can work in either space; Aurobindo, for example, is on the generic partner side and has its own VSOT.
CP: Is the company looking at reducing the number of CMOs it works with? Cutting down that “other 80%”? Given regulatory issues with tech transfer, I can’t imagine that would be a swift process.
PD: The complexity of our business and supplier base present challenges. When we look at the “tail,” (i.e. the proverbial 80% that provide 20% of the value), we find that each product is very important to somebody, and each partner is very important to somebody. So we have to work very hard all the way across the organization to determine the value in making changes.
CP: How is the external supply network organized geographically?
PD: We have GES hubs in North and South America, Europe and Singapore, to cover the entire supply network. While the hubs tend to manage suppliers based in their region, it’s never a totally pure geographical split.
CP: How well does that work for a region like Asia?
PD: Asia’s a huge region. We’re questioning whether we need to add a hub in India, as it’s becoming a very significant part of our activity. We already have quality and manufacturing people on the ground there, but the question is whether we need a full hub there.
CP: China?
PD: We have people on the ground there, too, of course.
CP: You began working with contract service providers 20 years ago; how has the relationship between large pharma and contractors changed in that span?
PD: In the distant past, there may have been a certain presumption on the part of large pharma companies that “only we know how to do it,” but we’ve seen a lot of vendors build strong capabilities. The industry perception of CMOs has improved as the CMOs have improved their quality and reliability. Clearly, pharma companies need to focus on core activities, and some types of manufacturing aren’t core any longer. That said, if you pick the right suppliers and work in a true partnership mode — where each party has the right to be successful — the large pharma/CMO relationship is well positioned moving forward. Pfizer’s External Supply OpU is focused on building the specific processes and associated structure to ensure that our external suppliers have the capability and culture to achieve the high standards of quality, safety and reliability required of PGS, no matter where our products are manufactured. We must have the same level of confidence in our external partners that we have in our internal resources — that’s the very definition of a globally integrated internal and external supply network.
CP: Is that a difficult task, respecting the CMO as a standalone business?
PD: That’s a balance that companies have to achieve, in order to make a partnership work. It has to be mutually beneficial. If you keep pushing costs down with your partner, it’s not going to end well. But take process improvement: We’ve good experience with things like energy assessments. We’ve reviewed our internal sites’ water usage, oil usage, etc., to see how we can get best value and minimize waste. We took the knowledge that we have internally and worked with our CMO base. We’ve done 15 assessments of external sites, to see if they can improve their operations. Now, do we expect some sharing of the savings from that? Sure, but it has a value for everyone. That’s what you call a partnership. Taking everything from someone is not a partnership.
CP: Do you see a point where a company like Pfizer will explore “strategic partnerships” with some degree of exclusivity with a CMO?
PD: We could get there but I don’t see that in the near-term. Our supplier base is very complex, and moving a lot of products at one time would be difficult. If a smaller manufacturer is doing a good, cost-effective, reliable job, then you don’t abandon it. There are barriers to exit, just like there are barriers to entry; it can be costly to move a product to another site. With biologics, a more capital-intensive and complex field, you might see some companies move toward a few key partners.
CP: Speaking of biologics, what impact has Wyeth’s integration had on how Pfizer works with external suppliers?
PD: For one thing, Wyeth was outsourcing the majority of its APIs. They brought in an extensive knowledge base of the manufacturers in the industry and when added to the existing knowledge within Pfizer gave us global coverage. The GES organization that supports our Biologics group is a straight bolt-on from Wyeth and is a very valuable resource for the company. We also have quite a few legacy Wyeth colleagues in the other parts of GES, which has helped maintain continuity in external supply for legacy Wyeth products, and they’ve also helped manage external supply for Pfizer products. They brought a lot of knowledge, experience and ability. It’s been a very good thing for us.
CP: What’s your take on the CMO industry’s growth prospects?
PD: Studies indicate an 8% growth in the business, which is very healthy in the current economic climate. There’s a lot of activity in late lifecycle products that could be moving to CMOs. I think we’ll see some companies move up the value chain, be it toward biologics, toward product development, or other services. I see CMOs trying to provide a greater array of services. As in any economic downturn, well-run businesses will tend to survive by adapting to new business realities by, for example, integrating more services and employing Lean principles. Being capital-constrained, the sponsor side is willing to look outside when in need of a particular manufacturing capability. There’s room for growth among well-run contract manufacturers.
CP: What’s been your biggest challenge with this new role?
PD: On one side, you need to understand what makes you successful in the generics industry. Then you have to get to know the suppliers, all across the world. You have to understand the internal players; you have to be very aligned with the marketing function, for example. Most importantly, you have to know the products: their supply challenges, their complexity, their origins. I enjoy the challenge of putting the organization together, of getting the right people in the right place at a time of significant growth in the business.
Gil Y. Roth has been the editor of Contract Pharma since its debut in 1999. He can be reached at gil@rodpub.com.
Mr. Duffy and I spoke about Pfizer’s changing approach to outsourcing manufacturing, the structure of the new External Supply unit, the influence of legacy Wyeth’s external supply, the transformation from PGM to PGS, the health of the CMO industry, and the importance of respecting the 80/20 rule.
—GYR
Contract Pharma: How long have you been with Pfizer?
Paul Duffy: I’ve been with the company for 20 years, first with the legacy Warner-Lambert organization in Ireland, where I was hired to manage contract manufacturing with third-party businesses in Cork. When Pfizer acquired Warner-Lambert, I moved into a supply chain role, also in Ireland, where I held two Site Leader positions. From there, I moved into an Area Leader role for Pfizer’s Primary Care business unit, with responsibility for sites in Singapore, Belgium, Ireland and Canada. In May 2011, I was named vice president, External Supply Operating Unit for Pfizer Global Supply, with responsibility for the organization’s External Supply Operating Unit (or OpU). The OpU was created earlier this year and encompasses Pfizer’s global external supply network. I also serve on the Pfizer Global Supply Executive Team.
CP: Also this year, Pfizer Global Manufacturing (PGM) changed its name to Pfizer Global Supply (PGS), and named a new president –– what’s the shape of the new organization, and what’s its mission?
PD: When Tony Maddaluna, whom you’ve spoken with previously, became president of PGS, he changed our name from Pfizer Global Manufacturing to Pfizer Global Supply, in recognition of who we are and what we do. We’re more than a preeminent global manufacturing organization — as our mission states, PGS is a globally integrated internal and external supply network. By cost of goods, for example, 30% of the products we supply today come from our 500 external suppliers. Creating the External Supply OpU was another meaningful step for PGS. There was a need to give external supply an equal voice at the table, in concert with our internal manufacturing sites. Both our new name and new OpU recognize that external supply is a growing and vital part of our business.
CP: What’s the structure of the new unit?
PD: The External Supply OpU is designed to manage the end-to-end supply of externally sourced products. To do that, we’ve brought together three functions: Business Develop-ment (BD), Global External Supply (GES), and Alliance. The BD function is vital to the success of this OpU. It’s very important that product supply be involved in every stage of Pfizer-wide business development discussions, and the BD function manages this vital interaction. Traditionally, the BD group has also had responsibility for site sales and has been involved in acquisitions where manufacturing assets are involved. We announced 10 sites for divestment last year, and the BD group is managing that process.
CP: Are these generally sold to other pharmas and biopharma or to CMOs?
PD: It varies — we’ve sold to both CMOs and other pharmaceutical companies. The model we’ve tended to use in these sales involves trailing supply agreements, with the facility continuing to supply products to Pfizer for a period of time. Management of that supply falls within the responsibility of GES. Having the people who arranged the deals aligned with the people who’ll be responsible for managing the ongoing supply is very important. When both parties are working in alignment, a seamless handover is more likely to result.
CP: How smooth a process is it to sell a site off to a CMO with a supply agreement?
PD: There are advantages to sourcing from sites that we’ve sold — they incorporate our standards and know our procedures. As long as a site that we’ve divested maintains its capability to deliver value (measured as a combination of quality, cost and reliability), doing ongoing business makes sense for Pfizer. We’re still doing business with many of the sites we’ve divested, and several have extended beyond the initial supply agreement. There’s a business case for sticking with a vendor that can maintain cost, quality and reliability. That said, companies that acquire our sites shouldn’t rely solely on Pfizer’s business; they need to have a strategic business plan in place moving forward.
CP: What do the other two parts of the OpU handle?
PD: Global External Supply (GES) and the Alliance function are arranged based on the type of molecule that we’re sourcing. If we’re sourcing a Pfizer molecule, it goes through GES. The GES group has managed the outsourcing of Pfizer molecules for nearly a decade, and also manages supply from sites we’ve sold. The Alliance group manages the supply of non-Pfizer molecules — this is a new part of the business, with significant growth potential. The Alliance organization will promote and support collaboration and partnership between PGS and our commercial partners, primarily in the Emerging Markets and Established Products Business Units. This team will help ensure the success of Pfizer’s strategic alliances by providing broad support at all stages of the supply process — from due diligence through launch, product delivery and sustained supply.
CP: This covers the generic sterile injectables that Pfizer is selling, as it’s doing in the partnership with Claris?
PD: Yes, as well as the partnerships with companies like Strides and Aurobindo, including oral solid dosage products.
CP: Does this Alliance function mirror Lilly’s? Among large pharmas, Lilly is out in front with Alliance Management. Are you developing best practices based on industry peers?
PD: Because this structure is new for us, we are able to bring front-end flexibility to the task of defining the Alliance function and its operative processes — two Alliance leads are running with that challenge. Working very closely with the Pfizer commercial business and early stage involvement are key to ensuring that we have product we need, when and where we need it, with the correct quality and in the correct quantity.
CP: So the Alliance side isn’t dealing with CMOs directly?
PD: It’s not uncommon to bring in the existing manufacturer when buying a molecule. Take Aurobindo, for example: Aurobindo owns the molecules and we’re partnering with them to sell in certain markets, utilizing their manufacturing structure and their systems. If a supplier does not pass due diligence, we don’t do business with them. We operate based on a balanced value model of quality, supply reliability, and cost and we demand the same of our external partners. We make difficult and tough choices, but compromising quality/compliance is not an option.
CP: There have been some hiccups early on, though.
PD: It’s a learning experience, certainly. In this business you either learn fast or you get left behind. I’m confident that we have the agility, flexibility, technological expertise and capability to grow and support the business moving forward.
CP: How would you characterize the differences between working with those generics companies vs. working with CMOs?
PD: Overall, the industry is moving toward establishing deeper relationships with a smaller number of CMOs to provide a broadened range of capabilities. Pfizer is no exception — we currently have some 500 suppliers in our supplier base. We’re working to minimize that complexity by, for example, developing strategic partnerships with a smaller number of suppliers to differentiate or tier the supply base.
CP: How do you manage that task?
PD: It’s an example of the “80/20 rule,” where 20% of the vendors provide 80% of the value. In other words, you pick your key partners based on what they’re supplying, the technical complexity of what they’re doing, and other essential criteria to your business needs. For us, the next step is putting a Virtual Site Operating Team (VSOT) in place. The VSOT operates as a cohesive, centralized group and single voice to streamline communication and minimize confusion. Team members encompassing finance, quality, technical, engineering and other areas of interest align our needs with those of our vendors, enabling both parties to move forward in a mutually beneficial fashion.
CP: How long have you had the VSOTs in place?
PD: We’ve had the VSOT structure for about a year. The VSOT function is currently responsible for about half of the total dollar value of External Supply. We generally have about 40 teams in place at any give time.
CP: Are they used primarily with CMOs, or also with the generic partners?
PD: VSOTs can work in either space; Aurobindo, for example, is on the generic partner side and has its own VSOT.
CP: Is the company looking at reducing the number of CMOs it works with? Cutting down that “other 80%”? Given regulatory issues with tech transfer, I can’t imagine that would be a swift process.
PD: The complexity of our business and supplier base present challenges. When we look at the “tail,” (i.e. the proverbial 80% that provide 20% of the value), we find that each product is very important to somebody, and each partner is very important to somebody. So we have to work very hard all the way across the organization to determine the value in making changes.
CP: How is the external supply network organized geographically?
PD: We have GES hubs in North and South America, Europe and Singapore, to cover the entire supply network. While the hubs tend to manage suppliers based in their region, it’s never a totally pure geographical split.
CP: How well does that work for a region like Asia?
PD: Asia’s a huge region. We’re questioning whether we need to add a hub in India, as it’s becoming a very significant part of our activity. We already have quality and manufacturing people on the ground there, but the question is whether we need a full hub there.
CP: China?
PD: We have people on the ground there, too, of course.
CP: You began working with contract service providers 20 years ago; how has the relationship between large pharma and contractors changed in that span?
PD: In the distant past, there may have been a certain presumption on the part of large pharma companies that “only we know how to do it,” but we’ve seen a lot of vendors build strong capabilities. The industry perception of CMOs has improved as the CMOs have improved their quality and reliability. Clearly, pharma companies need to focus on core activities, and some types of manufacturing aren’t core any longer. That said, if you pick the right suppliers and work in a true partnership mode — where each party has the right to be successful — the large pharma/CMO relationship is well positioned moving forward. Pfizer’s External Supply OpU is focused on building the specific processes and associated structure to ensure that our external suppliers have the capability and culture to achieve the high standards of quality, safety and reliability required of PGS, no matter where our products are manufactured. We must have the same level of confidence in our external partners that we have in our internal resources — that’s the very definition of a globally integrated internal and external supply network.
CP: Is that a difficult task, respecting the CMO as a standalone business?
PD: That’s a balance that companies have to achieve, in order to make a partnership work. It has to be mutually beneficial. If you keep pushing costs down with your partner, it’s not going to end well. But take process improvement: We’ve good experience with things like energy assessments. We’ve reviewed our internal sites’ water usage, oil usage, etc., to see how we can get best value and minimize waste. We took the knowledge that we have internally and worked with our CMO base. We’ve done 15 assessments of external sites, to see if they can improve their operations. Now, do we expect some sharing of the savings from that? Sure, but it has a value for everyone. That’s what you call a partnership. Taking everything from someone is not a partnership.
CP: Do you see a point where a company like Pfizer will explore “strategic partnerships” with some degree of exclusivity with a CMO?
PD: We could get there but I don’t see that in the near-term. Our supplier base is very complex, and moving a lot of products at one time would be difficult. If a smaller manufacturer is doing a good, cost-effective, reliable job, then you don’t abandon it. There are barriers to exit, just like there are barriers to entry; it can be costly to move a product to another site. With biologics, a more capital-intensive and complex field, you might see some companies move toward a few key partners.
CP: Speaking of biologics, what impact has Wyeth’s integration had on how Pfizer works with external suppliers?
PD: For one thing, Wyeth was outsourcing the majority of its APIs. They brought in an extensive knowledge base of the manufacturers in the industry and when added to the existing knowledge within Pfizer gave us global coverage. The GES organization that supports our Biologics group is a straight bolt-on from Wyeth and is a very valuable resource for the company. We also have quite a few legacy Wyeth colleagues in the other parts of GES, which has helped maintain continuity in external supply for legacy Wyeth products, and they’ve also helped manage external supply for Pfizer products. They brought a lot of knowledge, experience and ability. It’s been a very good thing for us.
CP: What’s your take on the CMO industry’s growth prospects?
PD: Studies indicate an 8% growth in the business, which is very healthy in the current economic climate. There’s a lot of activity in late lifecycle products that could be moving to CMOs. I think we’ll see some companies move up the value chain, be it toward biologics, toward product development, or other services. I see CMOs trying to provide a greater array of services. As in any economic downturn, well-run businesses will tend to survive by adapting to new business realities by, for example, integrating more services and employing Lean principles. Being capital-constrained, the sponsor side is willing to look outside when in need of a particular manufacturing capability. There’s room for growth among well-run contract manufacturers.
CP: What’s been your biggest challenge with this new role?
PD: On one side, you need to understand what makes you successful in the generics industry. Then you have to get to know the suppliers, all across the world. You have to understand the internal players; you have to be very aligned with the marketing function, for example. Most importantly, you have to know the products: their supply challenges, their complexity, their origins. I enjoy the challenge of putting the organization together, of getting the right people in the right place at a time of significant growth in the business.
Gil Y. Roth has been the editor of Contract Pharma since its debut in 1999. He can be reached at gil@rodpub.com.