Top Pharma Newsmaker Interview:
Tony J. Maddaluna, Pfizer Global Manufacturing (PGM)

by Gil Roth

After the acquisitions of Warner-Lambert and Pharmacia earlier this decade, Pfizer possessed a global network of 93 plants. The company added another seven plants as part of smaller acquisitions. Through an ongoing series of announced closures and divestitures, Pfizer will rationalize its plant network from 100 to 43.

During this period of consolidation, Pfizer has also made public comments about its plans to double its manufacturing outsourcing expenditure by 2010. To find how the world’s biggest pharma company will shrink its internal network, what it plans to outsource, and where it plans to do it, I spoke with one of the people in charge of that process. Anthony J. Maddaluna serves as vice president, PGM Strategy and Supply Network Transformation. PGM stands for Pfizer Global Manufacturing, and we’ll see how even that choice of name raised some issues as Pfizer embarked on its transformation.—GYR

Photo courtesy of Pfizer Inc

CP: What’s the history of Pfizer Global Manufacturing?

TM: PGM supplies products for all of the Pfizer Business Units. The complexity of our mix — 500 products, 22,000 SKUs, 150 countries, 50 languages — really came to the forefront after the Pharmacia acquisition in 2003. The concept of PGM predates that, and of course it has a story.

We put global operations together in 1997. Prior to that, Pfizer had U.S. operations and International operations and, even though it was the same company, combining those two was probably our hardest merger. The U.S. model and the International model were totally different at that point. The EU was just coming into shape, supply chain systems were different . . . everything was different.

When we named the new organization Pfizer Global Manufacturing (PGM), it was back in the day of, “Make what you sell, sell what you make.” Everyone knew us as Manufacturing, but we actually discussed the idea of naming it Pfizer Global Supply. We always recognized ourselves as a supply organization and at that time we didn’t have logistics built into our operation; this came later.

Our core purpose goes beyond manufacturing. We are a supply organization. We manufacture, source, package, distribute and supply. We also co-develop our manufacturing processes, working closely with Worldwide Pharmaceutical Sciences (WWPS), the development arm of Pfizer Global Research and Development (PGRD). We are intimately involved with the manufacturing process at the very early stages of development. I don’t know if we are unique in the industry in the way we do this, but it has proven to be very effective in facilitating product launches.

CP: What’s your history with PGM?

TM: I’ve been with Pfizer for the past 33 years with various positions in manufacturing and engineering leadership. An interesting part of my career has been my involvement with our “vision and values,” which started in 1990 when I was Site Leader at our plant in Terre Haute, IN. I had concentrated in Organizational Development as part of my MBA program and had a keen interest in the concept of “vision and values,” which was in the early stages of popularity at that time. We decided to give it a try and established a set of shared values for the plant along with a clear vision statement. Lo and behold, it worked! We brought the whole plant together, started seeing cost improvements with colleagues all getting on the same page. From there, it rolled out into an overall U.S. operations program.

When PGM was formed, we developed what we call the PGM Vision, which defines a clear Purpose, Mission and set of Mission Elements that guide the organization. Our mission statement — “We will be the world’s leading supply organization and an innovative and powerful competitive advantage for Pfizer” — guides the organization in everything we do today.

On CMOs

CP: Can you share some of your philosophies on Pfizer’s work with CMOs?

TM: In all my involvement with suppliers and contractors, I feel there needs to be a win-win situation. [Editor gnashes teeth.] My view is it does not make a lot of sense to focus only on cost in the negotiation process; there has to be a true value proposition for both parties.

CP: How do you feel about reverse online bidding? I’ve seen some examples of the procedure where it looks like contractor bids drop to an asymptote near zero.

TM: To my knowledge, we haven’t done that for outsource contracting. That may be done more for commodity supplies, but we haven’t done that for critical supplies or contract manufacturing. We take a different approach.

As we transform to a true “make or buy” supply network, it’s based on value to our customers — competitive cost, quality and supply performance. It’s not just cost. Given the complexity of our product portfolio and the need to launch new products, I believe we will continually optimize the mix of outsourcing and internal manufacturing. Through lean manufacturing techniques, technology and innovation, we believe we can drive internal costs down and stay competitive. We balance this equation as we decide which products to source externally and which to source from our internal network. We are driven to reduce costs, but not at the expense of quality and supply reliability.

CP: One of your competitors has made some (conflicting) statements about its plans to outsource all its manufacturing. Where do you stand on that concept?

TM: I’m interested to see how that turns out. We’ve also heard of companies that don’t want to outsource anything. At this point Pfizer has no plans to go to a “virtual” manufacturing model. I believe our innovative business will always need internal manufacturing to optimize the launch of new products and improve processes to enhance process reliability and efficiency.

I believe that competitor has said publicly that they want to outsource all manufacturing. My personal view is I believe it will be very difficult for them to do this. I also feel it’s not the best overall value proposition with respect to speed to market, supply assurance and IP protection.

CP: In some public statements of its own, Pfizer has mentioned plans to “double its outsourcing” within the next few years. What’s the deal with that?

TM: We’re outsourcing around 16-17% right now, and our current goal is around 30% in the next two to three years. Of that 30% target, probably 65% of that amount will come from plants we’ve divested as a result of our plant network rationalization. When we divest a site, we frequently sell to another pharmaceutical firm and then contract with them to continue to make products for us for a period of time. Our approach provides a reliable supply of high quality products, maintains employment and minimizes the financial impact in the affected communities.

CP: Through supply agreements?

TM: Yes, exactly. As I mentioned, about 65% of the outsourcing that Pfizer currently does is related to supply agreements with manufacturing sites that were sold by Pfizer. The other part will come from selective opportunities driven by technology, both in API and drug product. Examples of this are pre-filled syringes, dual chamber injectable cartridges and inhalation devices. These are outsourced to specialized companies that have these capabilities, in addition to the manufacture of certain active ingredients produced by biotechnology where internal capacity is not available. To the extent that Pfizer outsources in emerging markets for whatever reason, we will insist that contract suppliers meet Pfizer standards and comply with the requirements of the U.S. FDA and other pertinent regulatory bodies.

CP: When you sell facilities and set up these supply agreements, do they tend to be with established CMOs or with startups that have roots in the facility itself?

TM: Following a strategic assessment and decision to exit a site, we first communicate to colleagues and key stakeholders. Once this is complete we have an established process to evaluate the entire value proposition, which is usually a combination of assets and trailing supply agreements. From there, we enter into an auction process, solicit offers from a full range of potential buyers and usually target CMOs, small and mid-size research-based pharma, and generic companies.

We will also consider others if there is a fit with the project. Our guiding principle is to find the “right” buyer — one that can add value to establish an ongoing business, offer an opportunity for our colleagues to continue employment and allow us to partner with them for future supply needs at a competitive cost.

On Lean

CP: How difficult is it to implement Lean operations and other significant initiatives across such an enormous network of plants?

TM: It’s not as enormous as you’d think. Only a portion of our remaining facilities are global sites and those are the ones that’ll be fully engaged with Lean. The other plants will certainly adopt some of those principles, but it’s going to be driven at the plant level.

What we’re working on now is the question of how we change our supply chain systems to manage in a Lean way. We’ve done trials on major products, and we know it works. We’re still working out the organizational details of that.

CP: In that sense, would this strategy be more suited for those larger products, and less efficient for smaller ones that demand more flexibility?

TM: I think the best place to start is with the larger products. Lean works very well if you have a dedicated facility that’s making different sizes of the same product. But Lean also works well with changeovers, because you pull through your system what you need. You really have to focus on fast changeovers and other operational efficiencies. You’re going to apply Lean differently in a flexible plant than you will a single-product plant or operation. Above all, you need to have effective and reliable manufacturing processes.

We’re just starting that with the internal plants. The question of Lean with the external suppliers is, “How do you send a signal to the contractor that it’s time to make the lot?” “What kind of visibility do they have within the supply chain?”

Biographical Note As vice president, PGM Strategy and Supply Network Transformation for Pfizer Global Manufacturing (PGM), a division of Pfizer Inc., Tony Maddaluna is responsible for overseeing the global supply network transformation of PGM. Transformed, the organization will focus on product sourcing governance; long-term capacity, capability and capital planning; strategic plant networking; operational management of sites ceasing operation; and other strategic/enterprise-wide initiatives. Tony’s career with Pfizer spans more than 33 years. He joined the company in 1975 in St. Louis, MO, serving in the Minerals, Pigments and Metals (MPM) division in several positions, including Production Supervisor. From 1978 to 1983, he held various engineering positions in the Adams, MA, MPM division and subsequently worked in the Pharmaceutical division as manager, Technical Training. In 1985, Tony relocated to Terre Haute, IN, where he held various positions before becoming plant manager. In 1994, he moved to Pfizer’s Barceloneta, PR plant as general manager. He was named vice president/team leader, Europe in 1998 and also had responsibility for Global Logistics, Global Operations Team and Strategic Planning during a portion of this time before being appointed to his current position in 2008. Prior to joining Pfizer, Tony worked at the U.S. Environmental Protection Agency and at Johnson & Johnson as an engineer. He holds a B.S. in Chemical Engineering from Northeastern University and an M.B.A. in Management and Organization Development from Southern Illinois University.

On QbD and Compliance

CP: Where does PGM stand on Quality by Design, PAT and the FDA’s Risk-based approach?

TM: We have a very strong compliance and quality record with regulatory agencies, especially the FDA. We’re on the forefront of Quality by Design with FDA. We’re working to move away from blind compliance, doing what we “think” the regulatory authorities expect, toward science- and risk-based quality systems. Blind compliance frequently ignores good science and drives cost.

Everything has a tradeoff, and we need to examine these things carefully. First and foremost, we will always protect our patients, our employees and the communities in which we operate. We will not compromise safety and efficacy, quality, the environment or occupational safety. But there are many ways to accomplish these objectives, and we now apply science, engineering and risk management tools to determine the most cost-effective approach.

On India and China

CP: What work is PGM doing in India and China? Is the company outsourcing ingredients, APIs or final dosage forms in those regions?

TM: First of all, we’ve had our own manufacturing plants in India and China for decades; so, we know the operating environment well. We now also are working on several outsourcing projects in both India and China. We are currently not sourcing any active pharmaceutical ingredients for human use in the U.S. from China, nor are we sourcing any human drug product from China. We will not do that until we are satisfied that our standards will be met.

That said, Pfizer has had many successful, long-standing relationships with outsourcing partners. Outsourcing to carefully selected, validated and controlled suppliers is key. We have a rigorous partner selection process and quality oversight system that includes a comprehensive evaluation and approval of any outsourcing partner. Part of that lengthy evaluation is assuring that the partner has the appropriate systems in place necessary to meet our standards. In the end, any partnership is based on excellent relationships, full agreement on what is needed, sustained performance and a high level of integrity from all involved. You have to have the right training, the right systems and the right processes in place, with the right mindset. To the degree that you’re comfortable with that, you can look at these other regions.

CP: How’s India distinct from China?

TM: I have visited a few very reputable companies in India and have been very impressed with what I’ve seen. The sites I’ve seen are doing what we would expect them to do. I was particularly impressed that they’re not resting only on the lower cost of labor in India as their source of competitive advantage.

CP: Especially since those labor rates are on the rise.

TM: Companies there are looking at Lean. I’d bet they have very similar transformation strategies to what we’re doing internally. They have had the advantage of being in the non-IP world for a long time. This allowed them to study our processes, because that was their business: “How fast can we get these products to market?” Not only are their costs lower, but their project timelines seem to be shorter.

CP: That said, do you feel more secure about IP in India?

TM: It depends on the partner. I don’t have too much experience there, but some of my colleagues at Pfizer have dealt with them more. We certainly go in with eyes open. If there’s a hint that they’re infringing on IP elsewhere in their facilities, then it’s a no-go. The most reputable companies there tell us that that’s not their business now. They want to take advantage of stronger IP laws and would like to develop their own NMEs. I think they recognize that if they want to do business and partner with big pharma companies, they can’t be beating us down at the same time.

CP: How much has PGM learned from its Pfizer CentreSource (PCS) unit, which handles contract manufacturing for outside clients? [Near the end of 2006, PCS established steroid API supply agreements with a pair of companies in Taiwan and Shanghai.]

TM: That’s part of how we learned about good partner selection in China. There were issues that we wanted resolved that took too long to resolve to our satisfaction. Progress was slow, and that caused us to step back and reconsider. It’s important that we hold external members of our supply network to the same Pfizer standards.

On Closings

CP: Among the plants that you’re keeping, are there trends or common criteria? Do they tend to be younger plants, for example?

TM: The age of the plant is not always a factor. It’s really about capability and capacity. We’re very invested in all our plants and carefully evaluate all the facts. Plant age is a factor that has to be considered but not the key driver.

CP: How difficult is it — practically and, well, emotionally — to close a facility?

TM: It is very difficult work. When we shut down a town’s Pfizer plant that’s been in place for 50 years, it hurts. I recently traveled to our Terre Haute plant [announced to close after the discontinuation of Exubera] where I spent 11 years and left as Plant Manager. My purpose this time was to discuss plans to sell the site. It is very difficult on a personal level.

On Driving the Business

CP: In a sense, PGM must be reactive to the other branches of the company, namely R&D and marketing. How do you think that affects morale within the group?

TM: We know that we’re not a major revenue-generating part of the business, but we are integral to its success. There is no revenue without reliability of product supply to patients. The other thing is, as we implement this plant rationalization strategy, the corporation wants to see the savings quickly and we are fully committed to this. But we have more than 6,000 product transfers going on in the organization right now. Product transfers in an industry regulated by dozens of regulatory authorities don’t happen overnight — it can be a two- or three-year process, sometimes longer. We have a very good process for transfers, and it’s getting better every day, and we’re trying to shorten it. We’re applying Lean to our transfer process, as a matter of fact, to improve it. But reconfiguring a pharmaceutical manufacturing network just takes time, and we are making complex, safe and efficacious products with complex process technology and regulatory requirements; we are not making widgets.

So when something doesn’t work or changes, we can’t just turn on a dime. Commercial or Research can say, “We dropped that project; it’s done,” but we can’t just stop manufacturing or close the plant down overnight.

We also know this is a noble business. We’re supplying products that make a difference in people’s lives. That’s a great thing to be doing and we are very proud to be given this responsibility. And we know this is a commercial enterprise; we recognize the bigger picture. Now more than ever, there’s a strong need to have a “One Pfizer” view, with fewer silos.

Exubera was a big disappointment for everyone. Our site in Frankfurt, Germany was producing insulin with world-class efficiency. The Terre Haute plant was managing a very difficult technical process to make the finished dosage form. It was painful to have to shut it down, but we could still celebrate the technical accomplishment of what we did in those sites.

My point is, we’re part of Pfizer Inc, and our mission is to do what we need to do to make Pfizer successful by being an innovative and powerful competitive advantage for them. That mission statement is reinforced throughout our organization.

Gil Y. Roth has been the editor of Contract Pharma since its inception in 1999.