There is no denying that that pace and amount of contract manufacturing in the pharmaceutical industry has grown dramatically in the last few years. There are many reasons why pharmaceutical companies choose to outsource or contract out their manufacturing activities. A recent Frost and Sullivan report on outsourcing in the pharmaceutical industry cited the following factors as some of the main reasons why pharmaceutical companies choose to outsource:
• Outsourcing can reduce overall costs by 30% to 35%
• Faster and cheaper to have discovery work outsourced, reduces drug development cost
• Reduces problems faced during the regulatory processes around the world
• Improves manufacturing efficiencies
• Reduces excess production capacity by divesting facilities
• Minimizes investments in capital-intensive facilities
• Improves net earnings and cash flow
• Diverts resources to focus on other competencies like marketing
The report also states that outsourcing can allow pharmaceutical companies to establish consistency and efficiency across sprawling international networks of commercial, supply chain and manufacturing organizations and, if managed and executed strategically, has every potential to add to shareholder value and keep the investment community happy. No small feat in this time of economic turmoil.1
Contract Manufacturing Market Size
The ever-increasing costs of R&D combined with low productivity and poor bottom lines, has forced many pharmaceutical companies to outsource both research and development and manufacturing activities to low-cost countries, thereby saving costs and time in the process. With increased activity in outsourcing, the global market for such services has grown from approximately $57.2 billion in 2007 to an estimated $76 billion this year. India, with a large share of US FDA-approved manufacturing facilities, is one of the most preferred locations for outsourcing manufacturing services.
But with outsourcing comes concerns. According to the Frost and Sullivan report, “Pharmaceutical companies often fear loss of control in processes and proprietary knowledge, managing complicated and long distance collaborative third-party relationships and delays due to regulatory hold-ups and flawed processes.”
Choosing a CMO
To find out more about the issues that face the industry when considering contract manufacturing, Pharmaceutical Processing recently completed a survey on “Choosing the Right Contract Manufacturer” We asked you, our readers, what specific qualities and capabilities you look for in a contract manufacturer. The survey results are printed here, but some interesting take-aways include:
• 60% of respondents plan to use the services of a CMO in the next 18 months.
• Specific product experience and cost were cited as the two most important CMO characteristics.
• Almost 75% of all respondents would not hesitate to choose a CMO not based in their country.
• Expertise with a given application or service is the number one reason used to select a CMO.
• Reputation is everything, and a poor reputation is the kiss of death for a CMO; FDA warning letters don’t help either.
• Confidentiality is important. A history of being discrete with multiple clients is a prime CMO selection factor.
• With international regulatory agencies increasing their scrutiny on CMOs, respondents cited complete cooperation during a recall as an important CMO attribute.
• In the interest of saving costs, respondents selected lean manufacturing as the most important operational characteristic a CMO can have.