The landscape for drug development is constantly changing. A technique or practice that was commonly accepted a few years ago may today be outdated and obsolete. This is true regarding all aspects of your business, including emerging markets, regulatory developments, and certainly partner relationships.
At the 2014 ISPE CMO Executive Workshop, Courtney Billington, VP, Global Janssen Supply Chain at Johnson & Johnson, provided the Big Pharma perspective on these topics, and what needs to change in the relationship between pharma and CMOs.
Billington began his discussion by noting that as pharma companies continue to meet the needs of customers and patients around the globe, and as the industry continues to innovate to address unmet medical needs, the overriding goal is to tackle every disease we have no cure for.
Regulators are working alongside pharma to speed patient access to medicines through accelerated regulatory pathways, but these changes have also created increased complexity and an environment that is fundamentally different from what it was just 10 years ago. “When you think about the supply chain, for example, we were never on the critical path,” says Billington. “We would spend 18 months, perhaps years, waiting on regulatory approval. Preapproval inspections would take place well in advance of when we expected to launch products. Today those things are happening in parallel. Many steps, such as finalizing files and working with CMOs to ensure inspections are ready, are happening at the same time. That environment is dramatically different from what we have seen and experienced in the past.”
In addition to the regulatory changes, pharma is also exploring more opportunities in emerging markets, especially locations outside the BRIC (Brazil, Russia, India, and China) countries. One large focus is on central and western Africa, where Billington notes pharma is looking to create new opportunities. Although many of these areas are fertile for growth, getting into these countries will be a challenge. These new areas will also place pharma under the scrutiny of additional (and different) regulatory requirements.
MORE DISCOVERIES OUTSIDE THE WALLS OF PHARMA
As pharma companies look for ways to accelerate the growth of drug pipelines, many are doing more work with external partners. “Pharma companies are always looking to add new medicines to their pipelines, and we know our internal laboratories are not going to be the only new sources of innovation,” says Billington. “Some of our new relationships will be with very small biopharmaceutical companies. They may have started their initial discovery and development efforts with CMOs, but will then partner with, or be acquired by, a pharma company looking to forge new pipeline relationships.”
These new relationships, along with other consolidation activities taking place in the industry, add to the complexity of the current environment. Today it is not unusual to see two companies that once had been competitors now working together.
Data shows approximately 30 percent of global manufacturing is currently done internally, with the other 70 percent coming through CMOs. Clearly, discovery and development could not be done without these partnering relationships, and much of it is done to gain access to new markets.
Billington realizes this changing environment will force pharma to change as well. “This constantly evolving landscape means pharma will need to partner in a very different way. There is still a place in this industry for transactional relationships, but more and more we really find ourselves having to look for true strategic partners. When you have CMOs producing 70 percent of your portfolio, you cannot handle those companies in a transactional manner. Companies need to have strong programs and processes in place to make sure those relationships continue to work and grow. There needs to be strong linkages in place between the organizations, and the needs of both organizations must be met. When working with regulators, it is important for both the sponsor and the CMO to come across as one unit on a unified front, not as factions of different companies.”
This approach will entail finding different ways to work together. Billington believes one of the first steps is ensuring there is a balanced relationship in place, not one that is skewed in one direction or another. In the past, both sides have verbally stressed the need for a win/win relationship, while at the same time doing everything they could to get a larger slice of the pie. This only can be achieved by each side providing greater transparency to the other.
EXPECTATIONS FOR CMOs ARE RIDING HIGH
Sponsors looking to establish more strategic partnering agreements will go in with high expectations for their CMOs. Increased transparency, sustainability, and systems integration are issues that will need to be further resolved.
Traditionally, the negotiation process revolved around three factors: quality, scheduling, and cost. While all of these factors are still important, Billington believes the industry needs to transition away from that mentality and begin to better manage and deal with the complexities of partnering arrangements. This is the best way for firms to provide true transparency in offerings, which will ultimately transition into the marketplace. Regulators want to see pharma managing supply chains in a way that shows it is looking at the complete offering, and not just at various pieces of the supply chain. Strategic partnerships are a definite move in that direction, but that will happen only when there is increased transparency between partners.
Sustainability is another area that will be around for the long term. Billington believes everyone in the life sciences agrees we have a responsibility to protect the environment in which we live and work, and this topic is one that will continue to grow in importance. He notes good green chemistry should be a goal of both pharma and CMOs, and that more and more customers, especially downstream, are demanding it. Not only that, they are asking for statistics or some other proof that efforts are being made.
“Lastly, as part of our need to come together seamlessly as one complete entity, we need to do a better job of linking our systems together,” he adds. “With the technology available today, there are a lot of things that can help us to do that. We need better signals to help us in forecasting demand, and we need to share capabilities better than we have in the past.”
Ten years ago, Billington notes 10 percent of innovation was coming from outside the company. Today that figure is closer to 50 percent. The dynamics are changing quickly, and will require companies to change quickly as well. “We have to respond faster and better to these dynamics,” says Billington. “The future of this industry will no longer be about who has the biggest pocketbook or who has the most people. It will be about who can best manage that myriad of strategic and transactional partners.”
CHANGE THE MINDSET AND CLEARLY DEFINE ROLES
In order to succeed in the future and continue to meet customer expectations with affordable and high-quality medicines, pharma and CMOs will need to move beyond the competing mindset that has existed in the past. Billington used to be in charge of manufacturing for many years. During that time he would often see peers in the contract manufacturing group openly competing with his plants, and vice-versa.
“My plants were constantly trying to figure out how to do things we did not have the competency to do in-house,” he states. “In many cases it would have been much easier to simply give that project away to a CMO who had better knowledge and capabilities in that area. We need to move away from that competing mindset and identify the strengths and weaknesses of both sides, and design a strategy around how to best maximize the benefits of both.”
Expectations of roles and responsibilities also have to be made very clear, especially when it comes to quality agreements and supply agreements. Billington believes pharma needs to be more mindful of the fact that a CMO might be working with 50 other companies, and they all want things done their own way. “We need to be very clear about our expectations,” he says. “But we also need to be more open to accepting their processes and expertise. The best way to do that is to have processes in place to enable discussions between both parties and properly communicate the ultimate outcomes that we want to have occur. Whether it’s in-person meetings, teleconferences, or phone discussions, communication is the best way to keep everyone engaged and on the same page.”
One important aspect of this process is making sure both sides are clear as to the status of the relationship. Making certain CMO relationships more long-term is a goal of many sponsors, but transactional relationships still have their place as well. The key is to make sure each side is clear and transparent on how it views the relationship.
Billington was recently sitting in a room with representatives of a CMO helping to bring a new product through the pipeline. J&J had not worked extensively with the company. “Suddenly, they are talking strategic partnership and strategic this and strategic that,” states Billington. “I finally said, look, we are not really there yet. You haven’t done much for us other than a little development work. I don’t want you to misconstrue this relationship. We have three levels for our suppliers, ranging from a purely transactional relationship up to what we refer to as a strategic partner. Many suppliers still need to get through those first two levels before we get to what we refer to as a true strategic relationship.”
Since it is easy for misunderstandings such as this to occur, being clear and straightforward from the start can avoid confusion and resentment later on in the process. In the end, it is proper management of these relationships that will enable pharma to take care of the most important stakeholder in the process: the patient.