As competitive pressures increase, nothing can stop the pharmaceutical outsourcing juggernaut. What started off as a “back office” practice for business, IT, HR and real estate management has become well established in manufacturing, and the use of outsourcing continues to grow in other strategic functions, including R&D and clinical.
Developing an accurate assessment of the pharmaceutical outsourcing market’s size is nearly impossible, says Nigel Walker, managing director of That’s Nice (New York, N.Y.) whose Nice Insight market research program studies the evolving contract pharmaceutical services market closely.
A wide range of companies offer services from tiny, privately held and extremely niched players to generic drug manufacturers and even big pharma companies.
The market research company Frost & Sullivan estimates that the pharmaceutical contract services market is roughly $10.7 billion in the United States alone, and growing by roughly 8% per year .
While pharmaceutical manufacturing and development outsourcing has increased, so have pharmaceutical recalls and other regulatory issues, including 483s and consent decrees (Figure 1).
Observers say this parallel growth is no coincidence. Over the past five years, McKinsey & Co. consultants have found there has been a 16%/yr increase in pharmaceutical recalls that can be directly traced to quality failures on the part of suppliers or contract partners.
Paradoxically, in surveys, operating pharmaceutical companies say that quality is the top reason they select a contract partner. CMO’s ability to comply with regulatory requirements is another one of their top selection criteria. [2,3]
Regulators continue to emphasize the need for better risk management. “There has been an evidentiary shift that places the burden on the industry to prove appropriate levels of risk management,” said Michael Long, director of consulting services for Concordia ValSource, LLC (Downington, Pa).
In the future, he says, pharma supply chains may more closely resemble those of the automotive industry, with Tier 1 and 2 suppliers. However, in the short term, Long says, expect more questions from regulators surrounding risk management, product and process knowledge, he says .
Not only regulators, but observers and experts within the industry are calling for much stronger outsourcing governance . The subject is complex, touching on risk management, staffing, training, tech transfer and communications. Are drug manufacturers ready for the challenge?
In this article, two industry experts comment on the issues playing out right now, and suggest best practices. The article also examines results of a recent reader survey, which sheds some light on how drug manufacturers are responding to the challenges of contract supplier oversight.
Risk Management 101
Clearly, many are at an early stage in developing risk management strategies. “Even though ICH Q9 was published six years ago, drug manufacturers are just starting to find their footing in the areas of risk management, quality by design, and quality systems,” said Long. Their progress, he says, depends on how advanced they are in applying risk management tools and concepts.
“If you do not have an adequate quality system in place, with adequate controls, all the product and process development and the process understanding in the world, may go to waste,” he told attendees at PDA’s annual meeting earlier this year in Phoenix. In addition, he says, some professionals have fundamentally misunderstood the concept of a “risk-based approach,” Long said. “It is not a gift card for reducing testing and other precautions,” he said. “Instead, it requires a balance between identifying and mitigating threats, while taking advantage of opportunities. It should never become a hammer in search of a nail, and all systems must be evaluated if it is to be robust.”
Managing contract manufacturers requires asking two key questions, according to Hedley Rees, consultant and founder of the U.K.-based consultancy, Biotech PharmaFlow, who established and chairs the Drug Industry Modernization group on LinkedIn and whose extensive book on optimizing pharmaceutical supply chain management was published two years ago :
1) Do I understand the extent of my obligations to manage my CMOs?
2) Have I the right processes in place to deliver on those obligations?
All manufacture and testing carried out at third parties must be treated as if it were carried out by the drug manufacturer itself, Rees said, and the working supply chain must comply to regulations at every stage. This means:
- Investigating out-of-specification results and appropriate (root cause) corrective and preventive actions
- Examining complaints handling processes
- Reviewing technical documentation and ensuring that it is approved by suitably knowledgeable and qualified personnel
- Ensuring that supply and quality agreements are worded to provide maximum alignment between standard operating procedures (SOPs) across organizational boundaries.
“Contracts must closely spell out such widely ranging activities as corrective and preventive action (CAPA), technology transfer, operation of interfacing quality systems, specific mitigations emerging for risk assessments as well as newer approaches, such as the adoption of a pharmaceutical Quality by Design (QbD )approach,” Rees said. “If your contract did not spell out alignment, it may not happen.”
The best approach, he said, is to view outsourcing as a specific case of procurement, and to remember that it is a strategic, organizational function. Rees urges the following: