Contract Manufacturing in Pharmaceutical Industry: Critical Factors

Pharmaceuticals industry is regulated by the food and drug administration (FDA) ensuring high-quality supply of drugs. The growth of science and technology has elevated the new ways to manufacture pharmaceuticals which has evolved from in house manufacturing to outsourcing the manufacturing process. Contract manufacturing or outsourcing the manufacturing of pharmaceuticals has experienced tremendous changes in the industry in late 2000s. The changes led to contract the multiple stages of drug manufacturing, from resource mobilization to manufactured drugs supply chain. The industry also witnessed maturity in the services provided by the contract manufacturing organizations (CMOs) and profit centers were driven towards the commoditization. Moreover the emergence of biosimilars and biologics had deeply impacted the pharmaceuticals and the industry has been seizing the opportunities. Thus the pharmaceutical manufacturers started to look towards contract manufacturers to avoid the crises and capture the opportunities.

As the pharmaceutical industry is growing so the contract manufacturing in pharmaceuticals market. But the pricing pressure and added value expectations from new drugs is continuously faced by the industry. The manufacturers are challenged to market cost-effective, highly efficacious and demonstrable safe products and consequently operations are getting efficient in all aspects. This factor has also enhanced the motives for outsourcing to contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs) and gain technical and operational expertise, quality and efficiency, competitive advantage and eliminate risk of supply shortage.

Expenditure over Equipment

With the increasing outsourcing of pharmaceutical manufacturing, the cost of contract manufacturing has declined from 70% to 57% in 2016 and so the number of drugs approved by the FDA has also declined. In order to increase the in house manufacturing of pharmaceuticals, small and medium companies expenditure is witnessed to increase over the devices and equipment. In order to reduce the cost of developing drug, increasing the efficiency and match up to the established standards and regulations, reduce the development time and have access to advanced technologies, the companies are driven to increase their investment on the equipment. Nearly 35.0% companies in the US have raised their budget for investment in equipment and the rest are expected to perform the same way in near future.

Merger and Acquisition

Further, mergers and acquisition activities in the industry has led to healthy growth in past few years. The small and emerging companies with a growing pipeline requires support during the pharmaceutical developmental cycle from research and development to commercialization. During 2016 in the United States, nearly 14 M&A activities were registered. The rising difficulties in the clinical trials of the developed drug is driving the partnering of pharma companies with the CDMOs. Moreover the inspection, testing and certification companies are also acquiring the analytical testing laboratories to curb the cost of testing of large pipeline in order to face the rising regulatory requirements.

Biopharmaceuticals

Biopharmaceutical industry has keen focus on the productivity and efficiency, thus driving the growth of contract manufacturers to focus on the expertise and competencies. Since 2006, biomanufacturers are witnessed to increase the outsourcing of manufacturing processes. Nearly 58.0% in house manufacturing of mammalian bioprocessing has decreased to 45.0% in 2017. Further, as compared to earlier times when only repetitive work was outsourced, now almost every stage in a process is outsourced from starting from R&D to manufacturing, clinical trials, validation, process development and bioprocessing designing.

Over the past years, the microbial fermentation, insect, plant and yeast platforms in general were seen to decline among the 100% in house manufacturing companies. But with the rising trend of contract manufacturing, microbial fermentation were witnessed to increase. Considering the 25 major outsourcing categories, nearly all are outsourced by the biomanufacturers and outsourcing analytical testing was the highest in the category. Other most outsourced activities are, toxicity testing and fill/finish operations. And least preferred activity to outsource are downstream process development, design of experiments, and upstream process development.

Problems of Contract Manufacturing in Pharmaceuticals

Outsourcing is considered to be carried out in times of strong growth of the industry. Thus outsourcing indicates that either a company has huge demand that they turn to CMOs or they are not competent enough to carry out in house operations. Also too much of outsourcing also leaves very little assets with the company thus reducing the chances for opting contract manufacturing for larger number of activities. Moreover, apart from the best benefits derived out of the contract manufacturing such as decrease overhead costs, lack of in house capabilities and others, the most critical and important reason for not outsourcing is to protect intellectual property and other reasons were cross-contamination issue and quality standards issue. Threat of intellectual property is most among the companies that they are not adopted or sold elsewhere by the CMOs. Also the cross-contamination is an industry wide problem and there are low chances for a company to compromise over such issues as compared to problems with in house manufacturing.

 

Future Trends in Contract Manufacturing

Pharmaceutical industry is witnessing changing regulatory environments and emerging markets that is expected to completely change the industry landscape in near future. The emergence of biosimilars is one of the important factor impacting the growth of contract manufacturing market. Further, the offshore outsourcing is an important trend in reshaping the outlook of the industry.

The largest pharmaceutical companies are located in the US, who are turning towards outsourcing the activities to top 5 location, i.e. China, Ireland, Singapore, Japan and UK. Also the Western Europe also comprises of large pharmaceutical companies who are also interested in outsourcing their activities towards China, Germany, Singapore and Ireland. The contract manufacturing organizations in these countries are improving their capabilities and competencies to fulfill the original company requirements the domestic demand of the drugs. Further, Asia being highly populated region with large developmental scope anticipate the installation of new pharmaceutical R&D and manufacturing base in the region. Also the biosimilars are expected to grow substantially in the region.


Steve blade

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