Pharmaceutical outsourcing trends are a good indicator of outsourced packaging trends. So, with the pharma outsourcing market growing a tad more than 9% a year and predicted to reach nearly $375 billion by 2018, according to BCC Research, the contract packaging market should continue along its current growth cycle that is estimated to be increasing 5-8% a year.

To get a feel for the pulse of the contract packaging market, Contract Pharma reached out to some of the leading contract packagers including, Packaging Coordinators Inc., Pharma Packaging Solutions, Reed-Lane, Pharma Tech Industries, Bosch Packaging Technology, and Aphena Pharma Solutions. What follows is a roundtable with business leaders from these contract packagers, who offer their views on market trends, opportunities and challenges.

Contract Pharma: Please share your thoughts on the current state of the contract packaging market.
Justin Schroeder, executive director, marketing, business development and design, Packaging Coordinators Inc. (PCI): The contract packaging market is experiencing steady growth, but the dynamics are certainly changing. There is a general trend of M&A activity, which in turn drives reconciliation of supply chain strategies. We see the traditional large pharma trying to work to reposition in the spirit of the virtual supply model and using CMOs more strategically. Likewise on the other end of the spectrum there is an emergence of startups and mid-sized companies who employ this model, but ultimately may be targeted for acquisition by those larger companies. It is a dynamic market. We also see shifts in product delivery forms with the growth in parenterals, consumer oriented delivery such as autoinjectors, pens, infusions and transdermals as well as the growth of biologics and biosimilars. Many of these products are high value and specialized, with special logistical requirements like end-to-end cold chain.

Reid Lederer, president, Pharma Packaging Solutions (PPS): One strategy used by pharmaceutical companies is to build in cost savings on the packaging end. Repatriating the part of the supply chain that is not a core focus may ultimately add value to their supply chain. Most pharmaceutical companies consider their core focuses to be in research and development, drug formulation, as well as sales and marketing. The minutiae world of drug packaging, which now includes the complexities of serialization, may not be the wisest investment of time or resources. Most companies outsource products in order to reduce costs and overhead and to gain outside expertise and focus.

Joe Luke, vice president, sales and marketing, Reed-Lane: The contract packaging market is competitive with all packagers looking to find unique, efficient and timely ways to deliver its customers products. Customers are looking more to their contract packagers for cost savings ideas. They are more open to suggestions and changes like material changes where even just a few years ago they were not as receptive. Customers are more open to alternatives to realize savings. 

Tee Noland, chief executive officer, Pharma Tech Industries (PTI): The market is still very fragmented with concentration among the top 5-10 largest companies. Each year the market grows as more customers choose to outsource more of their products. We are nearing an inflection point where more consolidation will likely occur.

Christian Treitel, head of pharma business development, Bosch Packaging Technology: The coming years will see even stronger differences between the different pharmaceutical branches and markets. While generic producers still require very robust and easy-to-operate machinery with high output, the development of new medicines for targeted treatment demands flexible platforms and smaller batch sizes. Both of these trends will affect the contract packaging business, as more and more different and highly flexible machines will be required to serve all customers’ needs.

Eric Allen, vice president, sales and marketing, Aphena Pharma Solutions: We see the market demanding more turnkey manufacturing and packaging and also requesting more testing services for components and CR compliance. We have also seen increased demand for CII controlled substance packaging.

CP: What are the key trends and/or drivers in the contract packaging business?
Justin Schroeder, PCI: In addition to the general supply chain reconciliation, in the commercial space there has been an evolving trend where batch sizes are smaller and patient populations more targeted. Gone are the days of the “blockbuster” as well as high volume physician sampling. What we see is a rise in orphan drugs and fast tracked medicines, oncology for example, which changes the dynamic in our business. It favors specialized equipment and specialized infrastructure and processes. Companies tend to favor using a contract packaging partner based on our expertise in commercializing new medicines and rapid launch capability. Likewise, while there is steady demand for oral solids in bottles and blisters, we see growth in injectable delivery forms such a prefilled vials and syringes, or autoinjectors and pens due to the rise in biologics and biosimilars.  With oral solids we see increasing interest in calendarized adherence packaging, particularly in high value products such as oncology. Healthcare reform is really providing a focus on effective delivery to the patient and demonstrating improved health outcomes in patients.

In clinical packaging we see substantial focus on speed-to-market and more effective execution of investigational studies. This may include late stage customization or on-demand labeling with pooled supplies. We work very closely with clients to identify the most effective strategies for both supplying the immediate study needs, but other subsequent locations, studies and phases to best manage resources.  We also support longer range planning to ensure a seamless transition to successful commercialization. Sponsor companies should really be giving consideration for the commercial strategy as they progress to Phase II studies and we work with customers to establish this dialogue very early in the process.

Reid Lederer, PPS: Global economies are having an important impact particularly in the ways they support business growth. Also, patent expiration, generics and biosimilars are key trends. In addition, GDUFA fees and the opportunity to change the structure of how they are charged continue to impact the market.

Joe Luke, Reed-Lane: The most important trend for contract packagers is their ability and their line/machine availability for serialization. The 2017 serialization mandate is pushing pharmaceutical companies to look more towards outsourcing their packaging as all their lines may not be ready by 2017. This could be a temporary situation until they are fully serialized in their internal operations but may very well lead to operational rationalization where companies may keep a lot of this work at contract packagers. Customers are depending more on their contract packagers to provide more services and to be truly turnkey.

Tee Noland, PTI: Quality and regulatory compliance are critical. Some CMOs are more focused on proprietary technologies while other CMOs like Pharma Tech are more focused on customer service and broadening services to be more of a strategic supply chain partner.

Christian Treitel, Bosch: As far as primary packaging is concerned, there have been quite some developments in the market recently. While pre-sterilized syringes have been used for many years, some manufacturers have now started the production and development of pre-sterilized, ready-to-fill vials and cartridges. New machine developments, such as the FXS Combi from Bosch, now make it possible to fill and close all three packaging types on one single platform, thus catering for the requested flexibility in handling these new packaging types.

For secondary packaging, safety, speed and reliability are the most decisive characteristics. The main challenge lies in quick changes between different products and product combinations. This is why the horizontal cartoning machines from Bosch are based on a universal platform. Customers such as contract packers are able to safely and gently package the required amount and combination of products into different carton sizes using the same machine.

Eric Allen, Aphena: The trend is to do more for your customer not only in manufacturing and packaging but also sourcing and logistics to help improve total cost of goods to market.  Flexibility is also key for customers when dealing with multiple sku’s and packaging formats as they often split batches over several sku’s.

CP: Where are the opportunities for growth? Conversely, what are the major challenges or obstacles in the market?
Justin Schroeder, PCI: For PCI, we have taken the approach to expand the scope of our services past simply packaging, but to do so in high value specializations where we have true expertise. We have invested substantially in our clinical trials business, including packaging and labeling, global logistics for getting supplies to investigator sites, as well as drug development, analytical laboratory services and scalable manufacturing.  Likewise in support of commercial supply we provide both manufacturing and packaging services, supplemented now with the advent of serialization needs. We have invested substantially in our manufacturing capability as well, with an award winning state-of-the-art contained manufacturing site and recent investment in expanding our capacity for large scale general product manufacturing. Most recently this included installation of a new Gerteis roller compaction unit. In addition we have increased capacity with additional Xcelodose units supporting early phase clinical development.

Within the market we see substantial M&A activity on the customer side, but also within the supply side. Pressure from clients to narrow their supply base has forced the CMO space to invest heavily or consolidate. There is market capital available for companies to acquire competitors and this has resulted in the continued consolidation in the market. This is evidenced in both the contract packaging and broader CMO markets.

Reid Lederer, PPS: Global economies, particularly how many citizens have access to healthcare, offers opportunity for growth. Also the rise of senior citizens affects drug demands. Also, patent expiration, generics and biosimilars—depending on which segment of the business you serve—can affect business positively or negatively by rapid expansion or contraction. In addition, GDUFA fees are proving to be a major obstacle if a contract packager serves generic market segments.

Joe Luke, Reed-Lane: Serialization may be the largest opportunity for growth. The major challenge to this growth is the limited number of vendors who provide the serialization solutions to the packagers and their growing order/work backlog to support the required infrastructure in the marketplace. This is a challenge not just to contract packagers but to the entire pharmaceutical marketplace. It makes you wonder how everyone will be ready for 2017. Hence, it is important to have a plan and to be in the implementation phase of that plan. 

Tee Noland, PTI: There is no shortage of opportunities for growth but the key for Pharma Tech is to grow in a way that promotes sustainability. The major challenges we see are increasing regulatory requirements by FDA and increasing service expectations by our customers while at the same time having aggressive cost objectives.

Christian Treitel, Bosch: In many countries serialization has been steadily moving up the agenda. Contract packaging companies will be required to adapt their processes to the different legislation, and have lines ready to incorporate serial numbers and other information at the relevant levels. They will require cartoning machines that offer numerous possibilities for expansion or upgrades, including end-of-line serialization, aggregation and tamper-evident modules. Appropriate track and trace solutions make it possible to integrate printing, verification, labeling and IT systems into both new and existing product and packaging lines. With our serialization concept, we offer customers more than just a machine. Bosch offers the complete package, which also includes the corresponding software solution.

Eric Allen, Aphena: Opportunities exist to provide customers with innovative packaging formats and fast, agile speed to market for new launches and repeat production. We often see customers importing bulk product and needing to have it packaged and turned in days, not weeks, due to market opportunities or delays in shipment or customs. This can challenge our flexibility and internal systems, but that is actually where Aphena is strong and customers value that.

CP: How is the market performing this year compared to last year? What is your prediction for the years ahead? What kind of business climate do you anticipate?
Justin Schroeder, PCI: Contract packaging tends to be a pretty steady growth area with fairly low volatility. More broadly in the CMO market, we see that continued investment will be required for competitors to evolve as the market evolves. It is a healthy market with plenty of opportunity for continued growth and expansion, but continued investment will be key.

Reid Lederer, PPS: This year’s market is stronger than last year. As long as the U.S. economy stays strong, we predict an even better 2016.

Joe Luke, Reed-Lane: For Reed-Lane, our business has continued to grow. We had a stronger year in 2015 than 2014, which was stronger than 2013. While nobody can predict the future we are very optimistic about continued growth for the marketplace and our position in it. With that we plan to make our capital investments accordingly.

Tee Noland, PTI: This year we are having more conversations about global opportunities than prior years. Overall I would say the market is improving for us and we see this trend continuing as we add additional scale to our business.

Eric Allen, Aphena: Our business is up across all 4 sites so we are continuing to invest and improve wherever possible to reduce lead times and offer more options to our customers. We see continued growth for CMOs and customers looking to find reliable partners especially with serialization looming.

CP: What are your customer expectations? How are these evolving?
Justin Schroeder, PCI: We see that customers are operating leaner and leaner. The expectation is that a select CMO will operate as a true partner and extension of their business, so many of the responsibilities that were regarded as internal are now the responsibility of the CMO to maintain. Specifications are a great example. For a pharmaceutical or biotech company there is little value in maintaining two sets of specifications. This model only works, however, when the CMO operates at a high level and there are strong lines of communication and trust between the parties. In our business that is facilitated by metrics reporting and constant engagement at all levels of the organization, forming strong bonds and shared success.

Reid Lederer, PPS: Customers want to focus on their core capabilities due to the rapid nature of change in pharmaceutical markets. Also, they recognize that specialization is needed to support compliance throughout the supply chain. It seems they want to outsource what has become increasing complex for them.

Joe Luke, Reed-Lane: Our customers are expecting the contract packager to be an extension of their operations, often requiring that our operational, procedural and HR processes align closely with theirs. Long-term this makes both the customer and the contractor more interdependent on each other and does build stronger relationships. Very often to meet these expectations requires additional investments in plant and people infrastructure. 

Tee Noland, PTI: Customers tend to want more service. The days of the customer wanting to control the supply chain seem to be coming to an end. They are putting more trust into Pharma Tech to be a true end-to-end supply chain partner, which allows them the freedom to focus on other priorities.

Christian Treitel, Bosch: Customers are looking for a machine manufacturer, who can offer everything from a single source where they can receive complete line concepts. This not only includes a large number of different technologies to choose from. It also means having one single point of contact, as well as receiving optimally compatible machines and software solutions to form a complete line, either by using standardized machine platforms or lines that are customized exactly to a specific requirement.
For customers, it is most important that we understand what they are looking for; which technology will best match their new products or their established processes. This is why our focus is on understanding the pharmaceutical needs. This way, we base all our new developments on therapeutic areas and their specific requirements.

Customers of course also expect to receive solutions that support a fast time to market. By offering detailed consulting, intensive trainings and comprehensive services before, during and after project implementation, Bosch makes sure that this requirement is fulfilled.

Eric Allen, Aphena: Most customers continue to try and reduce lead times and they expect quality in our services starting from planning and procurement through production and logistics. They are also realizing, however, that in order to be most successful it’s better to utilize a 100% turnkey approach and trust Aphena to handle the planning and procurement of the materials and components per their forecast.