By Wendy Turner & Ninette van Lingen
As the pharmaceutical industry grapples with tempered global sales and growth projections, industry analysts project that outsourcing of pharmaceutical manufacturing will exceed $26 billion by 2011, an increase of 8% each year.
This upsurge in pharmaceutical outsourcing is driven by the emergence of biotech operations lacking internal capacity, as well as midsize and large pharmaceutical companies seeking access to innovative processes and production technologies, such as for parenteral drug manufacturing. Greater reliance on outsourcing also is allowing companies to adopt leaner business models and to manage supply chains more efficiently.
Whether a pharmaceutical company considers outsourcing either as a short-term solution or a long-term liaison, the choice of CMO can influence the company’s bottom line and ongoing relationship with its customers. Evaluation of potential outsourcing partners should include the infrastructure requirements, market demand, and potential ROI, as well as the CMO’s corporate culture, experience, safety record, regulatory history, and customer focus, among other factors. Choosing the right CMO and putting in place practices that facilitate a collaborative working relationship will help ensure the project is a success for both parties.
Getting to the heart of a CMO’s culture requires that companies consider the “why,” “what,” and “how” of outsourcing when choosing an outsourcing provider. The answer to the question “Why outsource?” is not as obvious as it may seem. Clearly, a biotech operation lacking manufacturing infrastructure has a need for outsourcing, driven by technical requirements, project scale, timelines, and the price of doing business. Midsize organizations may have internal capacity but may face specific limitations in scale-up and launch. Large pharmaceutical companies, which typically have extensive capital investment in manufacturing sites, may consider outsourcing because of increased market demand, risk mitigation strategies, or the need to free up internal capacity for a newer product.
While each of these examples demonstrates a particular need that can be resolved through outsourcing, they more accurately address the question of “how” a CMO can help a particular company resolve its business issues. However, it’s equally important for pharmaceutical companies to answer “why,” as in, “Why outsource at this particular time with this particular CMO?”
To this end, the pharmaceutical company should consider what it wants in a CMO agreement, particularly whether this would be a vendor-client relationship or strategic partnership. The distinction between vendor and strategic partner will drive the choice of a CMO and define the nature and depth of interaction throughout the short- or long-term relationship. It also will influence how each party measures the project’s success.
One of the first opportunities for companies to share their philosophy toward outsourcing is through the request for information (RFI). The goal of the RFI is to gain insight into the CMO’s technical capabilities, historical quality and regulatory records, and financial stability. Responses to these requests also may provide a first glimpse into a CMO’s corporate culture and operational procedures, factors that can influence selection of an initial pool of CMOs for a specific project’s needs. In some instances, RFI responses provide the background information a company uses to compile an internal database for tracking technical capabilities of multiple CMOs.
At the same time, a CMO receiving an RFI will evaluate whether a relationship with the pharmaceutical company would bring value to the CMO, whether the value would be short- or long-term, and whether the opportunity is the start of an on-again-off-again relationship or a long-term partnership. The CMO must determine how resources and capacity would be utilized, the likelihood of project success, and how well the organizations have worked together in the past. Completion of the RFI allows a CMO to illustrate its unique business value by highlighting its processes and differentiating technical capabilities.
Other factors that may be pertinent in a company’s choice of CMO include the CMO’s experience with global regulatory authorities; its ability to provide regulatory, marketing, or sales support to the pharmaceutical company; the potential for enhanced packaging solutions or novel formulation techniques; and the CMO’s environmental impact and initiatives to conserve water and reduce waste.
WHAT ARE THE EXPECTATIONS FOR THIS RELATIONSHIP?
A pharmaceutical company’s expectations for the relationship also may influence how the CMO responds to an RFP or request for quote (RFQ). If a company needs short-term, immediate production for clinical trial material, and the CMO has the infrastructure, ability, and capacity to support those needs, then the CMO will respond to the RFP or RFQ as a potential vendor for a short-term project. In this instance, expectations for outcomes are generally clear-cut.
Conversely, if a pharmaceutical company is seeking a long-term contractual relationship — such as a CMO that can provide full-product support from development through scale-up and commercialization of the product — then the CMO must address how the companies will collaborate over the long term. In this instance, it is essential that the two organizations agree on common business and quality practices and policies.
After a CMO responds to a company’s RFP or RFQ, the company needs to assess the potential relationship with the CMO during expectation-setting sessions and to include a thorough review of project operating mechanisms. A due-diligence visit and quality audit, performed separately, are important elements of this assessment. The due-diligence meeting — where expectations and critical success factors are addressed — is pivotal in determining whether the company and CMO are compatible and whether this is the “right fit.” At this time, both parties should discuss the project, communicate concerns, discuss “what if” scenarios, and agree on timing. The quality audit provides a company assurance that the CMO would be able to safely and reliably meet customer demand to limit risk for medical practitioners and patients who may be relying on the product.
HOW TO DEFINE SUCCESS
Critical to any successful partnership is a clearly defined exchange of information to determine the goals and objectives for the relationship and the critical success factors. From day one of an outsourcing partnership, both sides need to have a thorough understanding and agreement on the nature of the partnership and the strategy. The chief order of business at the outset, therefore, is to determine how the two organizations will work together and to agree on the following:
Alignment: This occurs when both parties agree on quality systems and interpretations of the pertinent regulations or guidelines.
Acceleration: Project management and operational excellence is embraced and supported by both organizations as a way to accelerate project performance.
Project Team: Cross-functional and knowledgeable teams are empowered and know how to function in matrix and alliance-type partnerships.
Communication: Frequent communication in a new relationship builds trust and respect between both parties — elements that play a significant role in assuring a project’s success.
Measurement: Documented operating mechanisms are utilized throughout the project to track progress of key performance indicators (KPIs).
Critical Success Factors: Project management teams in both organizations agree on expectations and project goals.
BEST PRACTICES IN A STRATEGIC PARTNERSHIP
Once a CMO is chosen, all operations and communications between the two organizations should be guided by the project management strategy. The inter-company relationship should be clearly defined and guided by best practices for strategic partnerships. Best practices include the following:
Project Manager: Both organizations should assign a primary project manager who moves the project forward, assesses gaps, and escalates issues when necessary. The two project managers should communicate regularly, understand each other’s expectations, and educate others within their individual organizations.
Project Team: The team should be comprised of cross-functional personnel who are subject-matter experts and who can collaborate on outlined tasks, set task durations, and meet project needs. Regularly scheduled meetings help ensure that timelines are met, issues discussed and resolved, and tasks completed. A core team stays with the project through its lifecycle. Typically, members of the core project team represent Manufacturing, Quality, Technical Services, and Supply Chain functions/divisions
Leadership Steering Committee: This team should comprise leadership from the company and the CMO’s Operations, Project Management, and Quality divisions. These decision makers would be responsible for issue escalation and resolution, receiving project updates, and assessing project strategy change proposals. Having a formal steering committee builds stronger relationships between the two organizations and enables efficient decision making throughout the duration of the project.
Joint Service Document (JSD): Both organizations should collaborate on development of the JSD, which contains information on communication schedule, meeting frequency, contact information for key team members, escalation methods, key performance indicators, project operating process, and critical success factors. The content of this document, which should evolve over the duration of the partnership, would be maintained and actively utilized by project teams and the steering committee.
Other helpful tools for managing the partnership and the project include the following:
- Project Kick-Off Meeting: During this meeting, parties from both organizations explain and define the project requirements; identify scope, risks, issues, and constraints; and create a high-level timeline. This session provides an opportunity to commence team-building and build intercompany relationships.
- Scope Document: Allows the scope of the project to be defined at the onset of the project. It contains project deliverables, risks, assumptions, goals, and high-level timing. Having a scope document and a scope change process allows for tracking and assessing changes during project execution.
- Meeting Agenda and Minutes: An action-item tracker with documented decisions made ensures tasks are completed and the project moves forward on schedule.
- Documentation Tracking: Allows a visible record of documentation that is shared, to be reviewed, and has been approved.
- Timelines and Milestones: Gantt charts and status sheets provide easy tracking of deliverables and milestones.
- Continuous Improvements: Formal Lessons Learned and regular Business Review meetings enable continuous improvements to be discussed and implemented.
- Risk Assessment and Register: Documentation of risks should involve both partners and be continually reviewed and updated.
Finding the right-fit CMO for a short-term project or long-term business relationship is key to a successful partnership. The CMO’s corporate culture, experience, and customer focus need to be assessed during expectation-setting sessions and by reviewing project operating mechanisms. While a wide variety of critical success factors may define an outsourced project’s success, pharmaceutical companies and partner CMOs can collaborate on mechanisms that ensure everyone’s expectations are met. Clear, ongoing communications and use of best practices for working relationships can ensure a productive and continuously improving relationship with CMO partners.
About the Authors
Wendy Turner is the director of technical programs - program management at Baxter BioPharma Solutions. She has 15 years of experience with the company, with her last 10 years in various roles within the program management department, specifically interacting with pharma/biotech customers on outsourcing their products to Baxter.
Ninette van Lingen is the business development manager, pharma partner executive at Baxter BioPharma Solutions. She has 20 years of experience in executive selling and strategic marketing for the pharmaceutical industry. Her specialties include global branding and positioning, key relationship cultivation, strategic alliances, and negotiations.