Brand Owner-CMO Collaboration Is Growing--But Is Far From Mature

The business of contract manufacturing in biopharma—heading toward $40 billion/year globally by mid-decade, by some estimates—continues to evolve even as the business volume grows. Manufacturers/brand owners currently look to two models—the close network between major consumer-goods retailers ad their extended chain of suppliers, and suppliers to those suppliers; and the high-volume, high-growth pattern of consumer electronics, where billion-dollar products are changed annually if not faster with barely a hiccup. There are signs that biopharma is tracking these progressions closely—but still from a follower position. In the past, biopharma could comfortably operate with production quotas determined semiannually, and products sitting in warehouses for weeks if not months; now, the push is on to have lean, fast-changing supply chains, low inventories, and, above all, tightly knitted coordination between the brand owner and the network of CMOs.

But progess has been slow and painful. “Pharma companies are making strategic investments in realizing their strategic vision, and that involves identifying and building relationships with strategic CMOs that are aligned to their direction,” observes Michael Prucha, director, life sciences, at Clarkston Consulting (Durham, NC), a management and technology consulting firm. “As a whole, I believe many pharma companies are in the advanced stage of identifying their strategic partners and finding ways to make those relationships work and achieving effective collaboration.”

KRISTIE ZINSELMEIER, BIOPHARMA SOLUTIONS

The increased use of CMOs in pharma manufacturing can be attributed to the flexibility, improved time to market, and reduced scale-up costs they offer to clients, observers report. This outsourcing option also helps relieve capacity and capital constraints, lowers production costs and capital spending, avoids shortages, improves supply chain predictability, and provides specialized manufacturing capabilities. “We have seen a steady increase in contract manufacturing over the past number of years,” says Kristie Zinselmeier, senior director of marketing at BioPharma Solutions, a Baxter business unit which provides sterile manufacturing services for pharma and biotech companies. “We have seen an increased recognition that scarce resources need to be concentrated in the areas which drive the most value for pharma.”

Eli Lilly (Indianapolis) finds CMO relationships effective because they enable flexibility, and support Lilly’s business development strategy and market access efforts. “CMO use is driven by several factors, including business-development agreements, efforts to gain market access, or technology considerations,” says Andrew McLaughlin, a Lilly spokesman. “Strong CMO relationships also allow flexibility in planning and operations. For example, rather than build a single plant to support a new technology, it may make more sense to use a CMO.”

As pharma companies continue integrating outsourcing as a mainstream tool, industry members say their relationships with contractors are taking on greater significance. But despite this, the ability of CMOs and their clients to establish effective relationships has not changed all that much over the years, according to the 2011 8th Annual Report and Survey of Biopharmaceutical Manufacturing Capacity and Production from BioPlan Associates (Rockville, MD). A major reason for this is the inability, or unwillingness, of both clients and contractors to see the problem from their counterpart’s side.

ERIC LANGER, BIOPLAN

Clients would prefer to believe their CMOs can prescribe the overall process and define clear deadlines and milestones for deliverables, says Eric Langer, managing partner. This is unrealistic, given the unpredictability and complexities associated with manufacturing a biologic. “CMOs, on the other hand, are hesitant to provide worst-case scenarios for fear of losing the business,” Langer adds. “As a result, there are often big gaps in the expectations on both sides. This leads to frustration, miscommunication, and damaged relationships.” The annual study from BioPlan Associates is based on responses from 352 global biopharmaceutical manufacturers.

Improving CMO-pharma relationships

To that end, pharma companies are making a concerted effort to forge closer ties with their CMO networks to create an environment for effective communication and collaboration. For example, CDC Software (Atlanta), a provider of end-to-end enterprise solutions, reports its most effective clients advocate an open partnership approach to managing collaboration within their supply chain. “The increased visibility up and down the supply chain allows for better planning by the supply base and better planning at the distribution centers,” notes Jason Childers, director, product engineering for CDC TradeBeam, CDC’s product line business.

Taking it a step further, drug makers are reportedly re-inventing processes and technologies used to support the CMO model in order to enhance integrated collaboration and mitigate deficiencies. “From a CMO’s perspective, the ability to be truly integrated into the planning aspects of collaboration allows for the ability to contribute the most value,” BioPharma Solutions’ Zinselmeier says. “Information sharing allows each party to understand and play their role in support of their mutual objectives.”

Pharmaceutical companies willing to engage in integrated collaboration can reap financial benefits, according to Clarkston Consulting. For example, integrated collaboration will allow pharma companies to access timely and accurate information for improving manufacturing and provide a foundation for enhancing supply chain security. Data sharing across sites and at all stages of development and manufacturing allows for greater process understanding.

“We encourage as much collaboration as possible, whether it is related to supply chain, process development or new product launches,” says Kristin Brown, CSCP, customer service and planning manager at Pharma Tech Industries (Royston, GA), a provider of contract manufacturing and packaging services for pharma, OTC, medical device and personal care products. “We strive to provide more than just the actual product for our clients.”

JASON CHILDERS, CDC TRADEBEAM

Achieving better collaboration requires extended visibility and partnership across the trading partners in the supply chain. This visibility can be extended back to the primary pharmaceutical manufacturer and as far out into tiers three and four in the supply side, reducing lead times, lowering premium transportation costs, and reducing stock-outs, CDC’s Childers says. “The net effect is an overall reduction in waste and less working capital tied up for shorter periods of time.”

TraceLink (Woburn, MA), developer of the TraceLink Network, an industry-wide supply collaboration network, reports seeing CMOs working to share greater inventory visibility at their sites with customers. Providing accurate inventory balances for API/raw material levels and different classes of finished goods inventory is helping pharma companies improve financial reconciliation. “Quality teams from both sides are looking past phone and email towards collaborative workspaces that provide a complete communication trail, from quality review initiation to final product release,” says Brian Daleiden, VP marketing. “Not only does this help ensure quality expectations are met on both sides, but it also provides new visibility into the quality workflow and highlights opportunities to decrease delays in the review cycle.”

Communication and collaboration are expedited when companies can share process and manufacturing data in real or relevant time. Quality can vary from site to site and batch to batch, so the ability to identify and compare critical process parameters (CPPs) and key performance indicators (KPIs) faster is extremely valuable and changes the paradigm from reactive to proactive. “Performance measurement strategies are keys to success,” says Hussain Mooraj, partner, global lead, life sciences supply chain products at Accenture. “The ones that succeed are very clear on the metrics.”

GERI STUDEBAKER, AEGIS ANALYTICAL

CMO-pharma relationships work when both parties engage in discussions and planning upfront and put in place mutually agreed upon data requirements which will aid in process understanding and process improvement for all parties, says Geri Studebaker, VP customer operations, Aegis Analytical (Lafayette, CO), a provider of manufacturing and process intelligence software. “While many contracts currently lack performance incentives, innovative clients and CMOs could benefit from collaborative clauses that support joint cost reduction initiatives with incentives built in for the CMOs.” For instance, a sponsor company could implement a quality by design (QbD) program which manufacturing partners must adhere to. Studebaker recalls how one biopharmaceutical company working with multiple CMOs wanted to increase the predictability of quality and yield by identifying causes of process variability and atypical batches. “This company also wanted to reduce report preparation and distribution time, and reduce communication and information-sharing hurdles due to disparate geographical locations and data systems,” he says. “As part of a QbD initiative, the company implemented Aegis’ process intelligence software platform to provide a single view of process data to help mitigate risks and facilitate collaboration across its CMO network.”

Collaboration and agreement on critical metrics throughout the lifecycle of a product provides a mechanism to adapt to changing requirements. “As an example, during the clinical phases of a product life cycle, yield is often a critical factor as the API is scarce and lost production batches could impact the overall time to market,” BioPharma Solutions’ Zinselmeier points out. “During sustained commercial manufacturing, yield continues to be an important metric, however, it does not have the same potential impact.”

IT tools enable collaboration, gauge CMO performance

As CMO-pharma relationships continue evolving, so have technology offerings that support both parties. There are a wide variety of technologies being leveraged to support multi-enterprise collaboration and facilitate appraisal of CMO performance. “Successful CMOs are putting in place processes, practices and IT systems that allow them to more efficiently and effectively collaborate with sponsor organizations,” Studebaker says. “Key elements include successful technology transfer and the sharing of process and manufacturing data between organizations.”

Aegis reports its value proposition for Discoverant software maps to CMOs’ need to differentiate through timely, efficient data exchange and reliable and consistent quality control, plus ensuring product delivery meets regulatory and client requirements. “For sponsors, our software platform helps manage the complexities of working with CMOs by gathering and sharing data across the virtual manufacturing network,” Studebaker says. “Shared and timely access to data promotes product quality and effective collaboration for both sponsors and CMOs.”

Lilly maintains a range of IT tools for use by its teams overseeing external manufacturing. “Shared collaboration sites, for example, help improve the flow of information between parties,” McLaughlin says. “We also utilize IT tools that facilitate tracking the scope of partnerships, (which are) useful for when questions from regulators or others require quick assessments of the location and type of manufacturing done outside the company.”

In order to best manage their network of preferred CMOs, Clarkson Consulting advises pharmaceutical companies to implement a business intelligence (BI) software system and take advantage of the opportunity to incorporate their preferred CMO partners in jointly establishing a portal that allows them to share defined information in real time. BI software is utilized for combining information from various data repositories and displaying it in a number of powerful dashboard views for end users to review. “A BI solution will reduce the complex management issues of using CMOs and provide integrated collaboration between the pharmaceutical company and multiple CMOs,” Prucha says.

BRIAN DALEIDEN, TRACELINK

Utilizing IT tools to gaining visibility into CMOs’ operations can help pharma companies evaluate their performance and reduce potential for human error. For example, TraceLink reports having witnessed a top pharma company and their CMO adopt collaboration tools in the quality process which provided a decrease in batch record and deviation event review cycle time of 20 to 25%, due to better information flow and coordination. “Virtual quality team members can now see current review status in a concise dashboard, look at an integrated audit trail of all documents and communications for a specific review, and get notified immediately when information has been viewed or modified,” Daleiden explains. “Using this capability, they can diagnose where in the review cycle is value-add time spent and where there are unnecessary wait states.”

Enterprise resource planning (ERP) systems are utilized in pharma to store batch and quality information as well as data relating to good manufacturing practices. These systems have traditionally been transactional in nature and not tailored to enable brand owners to manage their CMO network, Accenture’s Mooraj observes. While ERP systems typically focus on a few indicators such as on-time deliveries, they tend to not enable collaboration in a cost effective and efficient manner.

“ERP vendors have not lived up to the promise of collaboration within an outsourced environment,” he says. “As a result, you have a number of vendors trying to build solutions to extend ERP collaboration capabilities in contract manufacturing.”

An integrated ERP system with a supply chain visibility product such as CDC Software’s Ross ERP and CDC TradeBeam’s suite of supply chain visibility and collaboration tools is said to provide near-real-time collaboration between contract manufacturers and trading partners. “The traditional ERP system is great at extending visibility internally,” Childers says. “And extending that visibility into the cloud with a proven supply chain visibility solution such as TradeBeam adds instant ROI benefits to further reduce and remove the more traditional supply-chain hurdles.”

By utilizing operational excellence tools to improve supply performance and efficiencies, pharma companies and CMOs are working together to meet marketplace demands for quality products when and where patients need them. These relationships are expected to evolve even further through integrated collaboration. Says Childers: “As with all business cycles, when margins become tighter, an increase in collaboration across the supply chain will remain the defining factor for competitive advantage.” PC