Guest Column | May 12, 2016

The Cost Of Success: Keeping Cost Of Goods In Check For Patient-Specific Cell Therapies


By Brian Hampson

Regardless of your stage of cell therapy development, one crucial factor must stay top of mind—cost of goods (COGS). This is particularly true of patient-specific cell therapies (PSCTs, those in which cells are extracted from a patient or matched donor to produce a therapy that is delivered back to the patient). Early consideration of COGS can help ensure that your manufacturing process is commercially viable at launch (when scale will be substantially increased).

COGS for cell therapies can be divided into several categories:

  • Direct costs (directly mapped to the patient-specific lot being manufactured)
    • Labor—production, testing, quality assurance, materials handling
    • Materials—production, testing
    • Third-party services—outplant testing, shipping, cell collection, irradiation, etc.
  • Indirect/overhead costs
    • Supervision, management
    • Quality events (e.g. process deviations, out-of-specification events)
    • Facility operations—cleanroom operations, maintenance/repair, utilities, rent
    • Materials and outside services management
    • Sustaining technical support
  • Amortization of non-recurring investment
    • Non-recurring design, development, engineering
    • Capital expenditure—equipment, facilities
  • Absorption of cost of failed product lots

Managing COGS for PSCTs has unique challenges when compared with traditional biologics. First, PSCTs must be manufactured one at a time — one “batch” equals one patient. This limits the use of traditional economies of scale for cost-savings. Instead, COGS must be reduced through methods such as technology optimization including automation and integration of certain manufacturing steps and reduced costs of human labor wherever possible. Second, it is often very difficult to efficiently use all available manufacturing resources (e.g., trained staff, equipment, facilities), creating an additional cost of idle capacity. For example, constraints on when starting material can be collected from — and/or treatment delivered back to — the patient may restrict processing to only certain days per week. This can be further compounded by uneven demand that naturally occurs for this type of therapy. Third, distribution of PSCTs can be challenging and expensive, with common hurdles including transport time restrictions because of the short shelf life of fresh (nonfrozen) products or the added shipment requirements for cryopreserved products.  

One approach to keeping COGS in check for PSCTs is to consider the commercial COGS early in product development and to keep it top of mind in all major decisions. Consider whether to manufacture in-house or to use a contract manufacturer (or some combination of these options), as well as the cost of idle capacity of your own manufacturing facility. Consider what unit operations can be automated, what raw material suppliers are used, the comparability risk of changing certain manufacturing processes in late-phase development, and so on. The idea of considering COGS early is part of a larger manufacturing philosophy, called Development by Design, whereby four critical aspects leading to viable commercial manufacturing are addressed, including not only COGS, but also quality, scalability, and sustainability.

Depending on the volume of production that is expected once commercialized, investment in automation prior to commercialization may have a significant long-term effect on the reduction of direct costs. In one example of an early FDA-approved cell therapy product, the manufacturing process was manual, with a plan to address automation and achieve its cost-saving benefits at a later time. However, lower than anticipated market demand for the therapy led to an oppressive COGS after commercialization. With both a relatively high direct cost (due to the manual nature of the process) and an extremely high indirect cost (due to the amortization of multiple facilities and personnel allocated over only a relatively small number of products), the cell therapy developer had multiple factors working against it, leading to failure of the business model even after successful approval and significant revenues post-commercial launch. We can imagine, hypothetically, that having applied the combination of a different manufacturing business model through the leveraging of a shared infrastructure (either through a contract manufacturer or use of multi-product facilities leading up to and immediately post-launch, and an investment in automation prior to commercialization) would have significantly reduced both direct and overhead costs and better positioned the therapy for long-term commercial success.

Without undergoing COGS analysis early in development, a PSCT developer cannot say with any certainty that their manufacturing process is optimized for commercial viability. But with such an analysis, the developer has a roadmap for the kind of manufacturing strategy, process improvements, and capital needed for long-term commercial viability.

About The Author

Brian Hampson is VP of global manufacturing sciences and technology at contract manufacturing partner PCT, a Caladrius company. Brian has focused his career primarily on the development of first-generation products and related manufacturing processes for the medical and biotechnology markets.