According to Frost & Sullivan’s global pharmaceutical contract manufacturing market research, large pharmaceutical companies increasingly consider outsourcing manufacturing to CMOs because of the uncomplicated, timely, and cost-effective services these companies provide. And while the debate rages as to how big the market will grow over the next three to five years, one thing is certain — life sciences companies don’t select a CMO in the hopes of increasing the number of products they can have recalled.
This past August, the Medicines and Healthcare Products Regulatory Agency (MHRA) recalled 16 drugs by one manufacturer after finding deficiencies at one of the company’s factories in India. This was the second setback for Wockhardt, which had previously received an FDA-imposed import ban on products from one of its factories, which could result in lost revenues of approximately $100 million this fiscal year. This is not an isolated incident. For the first half of 2013, FDA recalls were higher for both pharmaceuticals (348, up 158 percent) and medical devices (726, up 40 percent) when compared to the same period in 2012. An increasing number of recalls occurring in the world’s largest pharmaceutical market indicates the need for companies to take a closer look at their manufacturing operations, perhaps through the implementation of an operational excellence (OPEX) initiative. As a consequence, Life Science Leader magazine assembled a group of pharmaceutical industry veterans and posed a series of questions to gain their insights on OPEX in pharma/bio manufacturing. The group includes James Bruno, director, Chemical and Pharmaceutical (CAP) Solutions and past president of Drug, Chemical and Associated Technologies (DCAT); David Casebier, Ph.D. VP of chemistry, manufacturing and controls (CMC), Navidea Biopharmaceuticals; Llew Keltner, M.D., Ph.D., CEO and founder of EPISTAT and former CEO of Light Sciences Oncology; Heidi Kempinski, VP of pharmaceutical development and manufacturing operations, Tesaro; and Michael O’Brien, Ph.D., head of the pharmaceutical sciences & technology & innovation group and member of the pharmaceutical sciences executive leadership team, Pfizer.
What Are The Key Components To Achieving OPEX In Bio And Pharma Manufacturing?
James Bruno, CAP Solutions: We need to be looking at innovative ways to increase efficiencies and to reduce time and cost, as we are beyond the days of just handing projects over. This is a group effort which includes the sponsor as well as the CMO. It starts with understanding the problem, having clear goals and tactics as guidance, followed by an understanding of our capabilities and what is really critical in this area tied to well-defined outcomes and metrics. Start looking at incremental step improvements. Instead of a 20 percent or 30 percent increase in yield, perhaps look at 5 percent, followed by 5 percent more and so on. This will eventually net better growth and improvement.
Heidi Kempinski, Tesaro: OPEX involves achieving a level of quality beyond that required through compliance standards alone. A corporate-wide shift in thinking is necessary so quality becomes an imbedded part of the organization’s culture. Fundamental components include gaining a deeper understanding of manufacturing processes, assuming risk-based approaches, and pursuing of continuous process improvement. As a result, one expects to see improvements in quality and safety, increased productivity in yields and cycle times, improved plant utilization and capacity, efficiency in compliance approaches, and lower utility and waste costs.
Michael O’Brien, Pfizer: The first step toward achieving supplier OPEX should occur at the vendor selection stage. There are a number of elements that collectively enable a robust assessment of the ability of an organization to provide sustained OPEX, including but not limited to, onsite due diligence visits, review of regulatory inspection, performance and financial records, and a “quality culture assessment.” Through these mechanisms, we look for consistent reliability, demonstrated efficiency gains, reducing or holding down prices over time, structured efficiency programs (e.g. Lean, 6-Sigma, demonstrated quality by design [QbD] programs), and very importantly, senior leadership accountability.
How Would You Assess OPEX In An Outsourced-Manufacturing Model?
James Bruno, CAP Solutions: Having the same yields and few failed batches may seem like a good metric, but does it tell the real story? I consulted for a company that made over 1,200 batches of a product and had less than five failed batches in a year. While this sounded good, we could have increased the batch size with a minimal investment, reducing operating time and analytical costs. Since the process worked, no one wanted to make the investment. Two years later, they need to reduce their costs due to competition.
David Casebier: Navidea Biopharmaceuticals: I would look at the metrics of lag. The lag between manufacturing and release, release and availability of material for use in either a clinical or commercial sense, the delays that may be incurred on a plan due to material not being available, and material that is expired due to lack of use or inability to re-qualify. While just-in-time strategies are not what most CMC folks would advocate, it is important to manage supply for sufficient utility, as well as minimize an overstock of material for two reasons: potential expiry and needless expense brought forward (capital conservation).
Kempinski: This is challenging in an outsourcing model, given the corporatewide nature and multi-year commitment of attaining OPEX versus your limited view as a client. One can monitor the implementation of techniques such as Six Sigma which help provide overall methodologies and training for process improvement, process analytical technology (PAT) for identification of material, process, plant and release efficiencies, and overall equipment excellence to evaluate good production time versus total available plant time. Productivity is tied to capacity and quality systems and regulatory requirements, so metrics around inspection findings, deviation history, lead-times, cycle-times, unplanned equipment maintenance, plant utilization, safety issues, etc., can help provide insight to a CMO’s progress toward OPEX.
O’Brien: We utilize a tiered approach to both the assessment and the management of our suppliers based on relationship categories, with basic and specialty suppliers low on the pyramid and collaborative and strategic suppliers at the top. The degree of oversight increases as we move toward the top of the pyramid. In general, our supplier management system integrates operations, quality and procurement and for top-tier relationships, mandates senior management participation in governance and communication forums. Collectively, we develop a performance management process that integrates input from operations, quality, management, procurement, supporting groups such as EHS (environmental, health, and safety), and supplier counterparts. Key to the overall success of the collaboration is the Relationship Manager who focuses on a big picture view, is aware of day-to-day operations but not actively involved, and is the center of the formal communication matrix. Critical to quality metrics that clearly define whether or not a product or process is under quality control at all times, together with a periodic review and assessment of improvements based on audits and inspections, is important to the success of the model.
When These Aren’t Being Achieved, What Steps Should Be Taken To Resolve?
Bruno: If you plan to implement some type of system (e.g. OPEX, Six Sigma, total quality) and the metrics that must go along with it, start with the people doing the work and make sure you get their input and gain their buy-in. Often the simplest solutions come from necessity and the workers know what that is. Understand the operation and the system and make sure that what you are trying to do makes sense for the factory and that the concept is carried forward from top to bottom.
Casebier: You need to improve projections and coordination with clinical/commercial. Get a better understanding and control of manufacturing projections and timing by modeling manufacture and distribution, as well as assess the duration assigned to activities in a timeline.
Llew Keltner, EPISTAT: Depends, of course, on the situation — but in a successful manufacturing campaign plan, virtually all of the responses to process failure should be built in at the initiation. There should be no doubt, in virtually every failure, of the response.
Kempinski: Ideally, the client and CMO are working in a collaborative partnership and a forum for discussing OPEX exists. Regular engagement with top management is critical. It is important to communicate your experiences to your CMO — both strengths and weaknesses — and share in the plan for continuous improvement, including expected actions, timing and ongoing monitoring. It is useful to share your own objectives and drivers for cost reduction, increased productivity and real-time involvement in production planning and process data, and to similarly understand strategic drivers for your CMO. This common understanding enables both parties to assume responsibility for continuous improvement.
O’Brien: There are various indicators that can prompt a closer look at specific aspects of an operation, most notably, when issues arise that are not immediately communicated to the customer. Although oftentimes well-intentioned, when the vendor tries to fix a particular problem itself in order to avoid bothering the customer, negative consequences can follow. In our view, best practice is to communicate the issue immediately, while proposing corrective actions and/or a performance improvement plan in order to ensure that the right next steps are taken. When this process does not occur, the problem is often compounded, creating larger issues that could necessitate closing down the operation and shifting work elsewhere.
What Initiatives Should A CMO Be Implementing To Achieve OPEX And Why?
Bruno: CMOs must understand their manufacturing processes and their capabilities. Looking at each step of the process and seeing what improvements can be made and how they can affect the outcome is critical. A 50 percent improvement in the yield may sound great, but if it makes a marginal improvement in the operation, I wasted my time and effort. The FDA is telling us today that if we have a better understanding of what we are doing, which means more work upfront, there will be a greater reward (ability to implement improvements quicker) in the end. What CMOs should have is reasonable targets with rewards for getting there and an understanding of what happened along the way. Sometimes we need to consider failure as success. Increasing yields or reducing production time may not be possible. Understanding this could yield benefits in the long run.
Casebier: Better estimation of resources needed for preproduction leads into scheduling of suite and plant time, as well as more surety of processes and simplification of procedures. CMOs tend to be confident and aggressive at the beginning of a project/ relationship but become far more conservative and unwilling to push projects through as time goes on. Several I have worked with have what appear to be unnecessary bureaucracies and paperwork load.
Kempinski: Initiatives that bring client visibility in the following areas are desired: inventory controls, quality management of materials sourcing, production plans and schedules, real-time production data, compliance findings, and risk assessment. Movement to automated data collection processes is important to provide the real-time access needed to engage in continuous improvement in quality, compliance, plant performance, etc. and to better afford the identification of true key performance indicators (KPIs) for ongoing monitoring. A set of shared continuous improvement initiatives needs to be defined and tracked over time; where practical, it may be helpful to benchmark against similar processes within the CMO or to processes placed with other CMOs.
Share An Example Of An Initiative Being Implemented Either Extremely Well Or The Converse
Casebier: In general, the best implementation of programs or initiatives is accomplished by small, competent, and impassioned teams. I emphasize small, because once consensus of a large group becomes a priority smooth implementation and speed are lost. Focusing on the goal and how to get there is the most important aspect, as opposed to minimizing liabilities first. Being mindful of potential pitfalls is good, but the larger the group, the more focused on liabilities it becomes, either by the need for everyone to contribute something, or by statistical paranoia that emerges with a large enough population. What is needed is an important compelling vision combined with marching orders to technically competent people with a drive to exceed that vision.
Keltner: An API manufacturing process had failed at an outsourced manufacturer, primarily due to a tricky material testing and validation sequence for moisture control. The manufacturer was unable to suggest solutions, and setting up adequate communication was difficult, partially due to culture and language barriers. Another manufacturer was selected by the CMO. Both were located outside North America. To ensure that there was maximal likelihood of detection of process errors and maximal potential for interaction, webcams and webenabled humidity sensors were mounted in the three critical manufacturing suite areas and available to staff 24/7 on any web-enabled device. On four occasions during the first API run, impending errors were detected and corrected before they occurred, likely saving almost nine months on the critical path to NDA submission.
Kempinski: At least one CMO I work with is engaged with Rx-360 whose stated mission is, “To protect patient safety by sharing information and developing processes related to the integrity of the healthcare supply chain and the quality of materials within the supply chain.” Selection of vendors and the ongoing quality oversight required are highly time-consuming processes. Rx-360 has some interesting objectives to establish best practices for auditing standards and the use of expert third parties to conduct audits and authenticate supplies and suppliers. It is too early to categorize this as something being done extremely well or bound to fail, but it is a creative initiative that illustrates some progressive thinking toward improving the efficiency of quality management and compliance oversight of a global supply chain.
O’Brien: We recently implemented a new solution to increase our end-to-end oversight for distribution of clinical study supplies. Our prior model was highly decentralized and relied on local in-country Pfizer support to manage key importation activities such as brokerage services, import licensing, and duty and VAT payments/reclamation. Various factors prompted a reassessment of this model, which resulted in the implementation of a centralized solution. Key factors for success in driving this change included aligning the ownership within our existing clinical distribution team and conducting a rigorous supplier selection process to ensure appropriate alignment of skills and expectations.
What Is Your CMO Doing To Ensure Supply Chain Security And Integrity, And How Does This Help In Achieving OPEX?
Bruno: As a consultant, I work with a number of CMOs. When you start the project and people are already thinking about what could go wrong and where problems exist, this is helpful and makes me more relaxed. Hearing people talking about equipment improvements and how they can reduce the operational time and increase throughput early on is helpful. I recognize that often you have good ideas which do not work.
Casebier: Never enough. We know that at the end of the day it is the responsibility of the sponsor to the Agency (e.g. FDA) for the drug. We expect qualification of the primary supplier and identification of alternate suppliers for raw materials and equipment. We expect this of ourselves for our own supply chain.
Kempinski: As the supply chain has gained increased dependence on sourcing from emerging regions such as China and India, some CMOs are working together on best practices as a means to obtain and share data regarding the quality and authenticity of supplies/suppliers. Many CMOs hire a local representative to help with vendor selection and real-time oversight, and others open a local office for building trusted relationships. OPEX improvements to control lead-time, process performance, and product quality cannot be achieved without trusted supplies. Additionally, a strong relationship between CMOs and supply vendors is critical to secure a compliant, cost-effective, and reproducible means to deliver quality products.
O’Brien: Of course, there is no higher priority than ensuring that consumers are provided safe and effective medicines. As such, we are relentlessly vigilant in our efforts to address threats to supply chain integrity, including counterfeiting, cargo/theft diversion, and economically motivated adulteration of products. We expect our CMOs to partner with us in these actions, and we constantly evaluate our CMOs to ensure that their processes, ranging from site security to core quality systems, are in place and aligned with these priorities.
How Should A CMO Be Auditing Supply Chain Security?
Bruno: The loss of material in the market can be a real disaster for companies and patients. Companies need to audit their supply lines on a regular basis. The audit needs to be looking at the complete supply line as well as the regulatory history of the company. I looked at this as a typical “risk/reward” situation. How great is the risk for each of the raw materials and how can I minimize that risk? Could anyone really predict a volcano erupting and the effect it had on shipping from Europe? Both sides need to understand the risks and how to mitigate them.
Kempinski: FDA and EMEA have issued guidelines for risk-based approaches in auditing, qualifying, and monitoring suppliers to assure the integrity of supplies. CMOs should follow these guidelines and tailor an approach based on material criticality, experience with the material and vendor, and compliance history. Based on these categories, audit formats can range from paper surveys to on-site inspections. Material acceptances can transition from a repeat of full release testing to acceptance based on certificate of analysis (CoA), and a one-to-three year audit frequency. It is important for CMOs to stay abreast of emerging trends that may compromise supply chain safety or security.
O’Brien: Methods and frequency regarding auditing practices are specific to a given scope of work being conducted by a CMO. On a macro level, we support serialization, electronic pedigree, and track and trace as important safeguards to the pharmaceutical supply chain. Success in these areas requires extensive and open partnerships across the industry (e.g., between pharma companies and CMOs) and more broadly with wholesalers, the pharmacy community, regulations, and law enforcement agencies.
What’s The Biggest Challenge Facing Pharma And Bio Manufacturers, And What Should A CMO Be Doing To Address/Manage It?
Casebier: Cost containment and time management. Accurate estimation of supply costs as well as the ability to schedule and project product availability are critical aspects for a virtual company like ours. While the adage that time is money may apply, I would rather have an accurate timeline for deliverables to plan with than an optimistic timeline that could potentially cause program issues when it is late.
Keltner: I believe the biggest challenge is changing regulations. There are many sources of change in regulations which can affect manufacturing process and flow — all geographic political jurisdictions as well as federal agencies like FDA, EPA, OSHA, and HHS. The CMO needs to have an internal or external resource to warn of upcoming changes which could affect processes in any way. This is hard to do on the local scale, but absolutely necessary. I once witnessed a change in a city’s smoking ordinance shut down a critical commercial finished product facility for almost two months, putting the drug in very short supply and causing years of reputation problems for the seller.
Kempinski: Flexible access to capacity and technology is one of the biggest challenges facing pharma now. Important trends in the industry are: 1) continued needs to build Lean organizations, leading to increased dependence on outsourcing, 2) a desire to work with fewer, quality partners, putting pressure on CMOs to offer more capabilities across the entire development life-cycle versus a focus on early-stage or late-stage, and 3) a transition to lower volume, specialty products. CMOs must be thinking and acting strategically with their clients to understand how needs are evolving and where focus is needed over the long-term.
Do You Think Manufacturing Initiatives Are Critical To Achieving OPEX, And If So, Which Ones?
Bruno: I think that QbD (quality by design), if properly implemented and designed, will be a major help for achieving OPEX. Truly understanding the space that we work in and the risk that we face in these areas is critical. It should give a true picture of what we need to do and if not with a bias, give us areas of improvements which will lead to OPEX and, more importantly, lower cost.
Casebier: QbD is something that makes sense in light of the philosophy that quality cannot be tested into a product. This means understanding the process and having sufficient knowledge of manufacturing plant abilities and limitations such that both the sponsor and the CMO know the critical parameters of the process as they apply in that particular manufacturing environment.
Keltner: No. A good CMO can logically plan and determine best methods to get a campaign done. Outsourcers are well aware — if they are any good — of the best methods for optimization and efficiency. Lean and other “initiatives” are just rigid codifications of logical campaign planning and should never be needed if the right people and methods have been put in place and common sense is being exercised on a constant basis.
Kempinski: OPEX cannot be achieved without a systematic, corporatewide approach. Initiatives such as Lean or Six Sigma can be instrumental in building a foundation of methods and training to support continuous improvement, but more scientific initiatives such as QbD are critical to afford further progress. QbD facilitates a closer collaboration between development and manufacturing earlier in the product life-cycle, and affords better long-term results through continuous monitoring and improvement goals. The FDA has embraced QbD as a means of assuring product quality.
O’Brien: We are committed to the application of QbD principles and Lean in both development and manufacturing. We have demonstrated the value of these programs in quality, cost and efficiency metrics and consequently have reduced our business risks. When problems arise, this science-based approach better positions us to more quickly understand causative factors and develop corrective action or risk mitigation strategies.
What Role Do Sustainability Initiatives Play In Achieving OPEX, And What Should Your CMO Be Doing And Why?
Bruno: Today, technology is changing more rapidly than in the past. If you do not take advantage of these constant improvements, you cannot sustain and grow your business. You cannot sustain growth simply by cutting costs. You need to make improvements and operational improvements can go a very long way to improve overall profitability and reduce cost. If you look at the CMO market today and our competition with lower cost countries like China and India, we can only maintain our businesses by constant improvements and by innovation. Increased yields, lower energy and waste costs, as well has higher throughputs, can negate the low labor rates of these regions.
Casebier: I believe that these are orthogonal issues, not necessarily inclusive or exclusive. The most important aspects of any drug are the safety, quality, and efficacy of the agent. Imposing sustainability initiatives in principal onto a process without understanding the precise impact is not a good idea — especially if done at the outset of the program, because one is implicitly endorsing the potential compromise of quality for an orthogonal property. If the process is well understood and the sustainability initiative does not impact the final quality, then I am entirely for it.
Keltner: I don’t believe sustainability initiatives have anything at all to do with OPEX. They are simply politically necessary and so have to be logically included in corporate and campaign planning. CMOs need to be aware of both the regulations and hot buttons in sustainability and be able to balance the inevitable additional cost with the costs of legal actions or bad PR. This is not to say that sustainability initiatives are bad — they are just quite separate from efficient drug manufacturing.
Kempinski: With cost-reduction pressures, it may seem attractive to take short-term decisions to reduce/delay spending in areas such as training or waste management, or select a supplier based on cost; unfortunately, all can lead to long-term challenges that work against OPEX objectives. Sustainability initiatives can broadly impact social, economic, and environmental outcomes for players across the supply chain. CMOs could follow the route of the Pharmaceutical Supply Chain Initiative (PSCI) to establish an alliance for responsible supplier business and environmental practices. Examples of smaller initiatives I am aware of include the use of solvent recycling, movement to reusable packing and temperature monitoring devices, and the use of green power sources.
O’Brien: In today’s competitive business environment, the benefits of sustainability initiatives are key to improving business processes and operational efficiency. There are obvious cost savings that come from reducing energy and/or water consumption, all of which can contribute to company profitability. OPEX principles (continuous improvement, optimizing processes, etc) go hand in hand with sustainability initiatives. Be it developing new chemical entities or optimizing current processes, optimizing/minimizing such things as solvent volumes, reagent stoichiometries, reaction temperatures, processing times, and the like are critical. Similar sustainability initiatives, when employed by CMOs, can offer the same business benefits and a competitive advantage. In addition to the cost savings associated with continuously optimizing processes and reducing waste, CMOs are more likely to be regarded as highly ethical and a partner of choice. CMOs should embrace corporate sustainability and work closely with partner companies on these types of initiatives.
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