Pharmaceutical outsourcing: when only the best will do

The changing complexion of the global pharmaceutical market is creating a climate of great potential for the contract services sector. But, says John Bath, Chief Executive of Brecon Pharmaceuticals, to capitalise on these opportunities, companies must invest time, money and effort into every aspect of their business.

The character of the global pharmaceutical industry has undergone radical change in the past decade and the resulting impact on the outsourcing community has been significant. Contract services organisations in particular are having to rethink the way they do business. Traditionally services such as packaging might have been outsourced for products perceived as being of lesser importance or lower value to the brand owner, or to supplement in-house packaging capabilities on an ad hoc basis. Faced with an unforeseen surge in demand or with production problems in-house, a pharmaceutical manufacturer might employ a contract house simply as a means to solve a short-term problem.

Although this model certainly serves a purpose, it is not necessarily the most satisfactory means of doing business for either party. While getting the job done on time, short-term, short-notice requirements do not allow the contractor to develop an optimum process and for the customer, additional costs might be incurred or certain compromises may have to be made. In this scenario, neither party is able to optimise cost savings, efficiencies or performance.

There will always be some demand for contingency operations such as this but the general trend now is for companies to outsource as part of a strategic plan. As the contract sector matures, it is increasingly apparent that in many instances, the decision to outsource provides access to facilities, expertise and cost savings not readily available in-house. Outsourcing is now an added-value rather than a stopgap service.

With efficiency and profit maximisation the drivers for much of the recent M&A; activity in the pharmaceutical sector, the role of the outsourcing community has become more prominent. While sales growth and pooled R&D; resource are often primary objectives for any merger, investors also appreciate that rationalisation is a key to maximising profit. Therefore if each partner involved in a merger has a production or packaging facility operating significantly below capacity – a fairly common state of affairs in the pharmaceutical sector hitherto – there will undoubtedly be rationalisation. A single unit operating close to capacity is ostensibly more efficient and carries fewer overheads. However, the flipside here is that the manufacturer’s ability to react to sudden peaks in demand utilising in-house resources is considerably diminished.

There is a laudable trend in all areas of business towards focussing on core competencies. For ‘big pharma’ these are research & development and – once a product has gained regulatory approval – capitalising on market presence and brand identity to maximise sales. Critical mass is therefore concentrated in these areas, with intermediate activities often regarded as peripheral. Nowhere is this more starkly illustrated than in the case of virtual pharmaceutical companies, which have never had and never intend to have anything other than R&D; and marketing functions.

To a greater degree than ever before, pharmaceutical companies now stand or fall by the perceived strength of their drug pipeline. It used to be the common perception that once marketing approval for a new drug had been obtained, its developer could relax and reap the fruits of his labour in the form of fat profits during several years of exclusivity. Whether this was ever the case is open to debate but it is certainly not an accurate depiction of the current situation.

There are several pertinent factors here. The already huge costs of drug development continue on an ever-upward spiral, against a background of sustained pressure on healthcare costs from governments around the world. Nor is it any longer the case that the quest is necessarily over when one company patents a treatment for a particular condition. Recent court actions have shown that patents for competing products are valid, provided that the therapeutic action is demonstrably different. So the race for an effective treatment for ‘lucrative’ conditions continues, even after one or more companies has crossed the finishing line.

With the value of companies so closely allied to the health of their respective pipelines, it is not surprising that no stone is left unturned in the search for a new blockbuster. This has extended to the revival of projects previously shelved. Whether deemed too costly, or not providing sufficiently strong indicators for success, many studies are now under review. Scientific advances such as the genome project may rejuvenate the prospects for some, while others may be shown to be applicable to different medical conditions from those for which they were originally intended. The aim here is to avoid the daunting costs associated with developing a new drug ab initio and, crucially, to maximise sales under patent by cutting development time.

Reduced time to market has become something of a mantra for the pharmaceutical sector. Typically seven out of seventeen years of patent protection are spent in researching and developing a new drug; any reduction in this time equates to increased profits through greater sales during the period of exclusivity. Some of the initiatives being undertaken to achieve this goal are described above; a further trend is for concurrent multi-market launches, as opposed to the sequential territory launches seen previously. The involvement of a range of contract organisations can make a significant contribution towards achieving this objective.

In summary, therefore, the contract sector now has the opportunity to offer a wider range of services to its pharmaceutical industry customers and to become involved at an earlier stage in the drug life cycle. Business commitments of several years’ duration are commonplace, with the attendant advantages of better planning and greater efficiencies for both parties.

So what do we need to do to earn our place in this exciting scenario? Whatever service we offer, from formulation development right through study management to commercial packaging, there is one commodity in which we must trade above all other – confidence. We must inspire confidence in our expertise, to the extent that customers would feel able to walk away from a contract, once awarded, knowing that it is being handled by the best in the business and that the results or goods will be delivered on time and in a professional manner.

In practice, of course, customer involvement is usually extensive. Close lines of communication and a partnership approach are the key ingredients for a successful and enduring relationship, whatever the volume of business involved. Much like a marriage, the relationship works best when each party needs the other in equal measure.

The issue of core competencies is significant here. The contract organisation must invest time and money in developing expertise complementary to that of its customers. At Brecon, for example, we have built up a business based on excellence in packaging for solid dose products. Having worked for over 100 major pharmaceutical companies worldwide, we can offer unrivalled experience in packing thousands of products into blisters, sachets and bottles. We have invested in people and infrastructure to ensure that we can fulfil our commitments in the best possible manner. Our range of equipment gives us the flexibility to respond to any requirement quickly and efficiently. Few of our customers have had the opportunity to develop such expertise in-house, for the simple reason that their product range is limited. In this way we graduate from simply the contract packer supplying extra capacity on an ad hoc basis to the status of valuable business partner.

Yet the contract services sector is fiercely competitive, with many companies offering outwardly similar competencies and capacity. How, then, do we differentiate ourselves?

Company ethos is a rather nebulous concept but judging by the frequent customer audits carried out here at Brecon, nonetheless significant. We are passionate in our belief that each member of every team must take responsibility for his or her part of the process to ensure that the end result is never less than excellent and this certainly comes across in the majority of audit reports. Training is therefore at the heart of our business strategy, to the extent that we would be confident of any of our employees being challenged on GMP or protocol issues and coming through with flying colours.

This commitment to training carries considerable costs but the rewards can be surprisingly tangible. In our case, it has been a significant factor in helping us to win contracts packing product for the Japanese market, acknowledged as the most demanding in the world. Training has enabled us to identify and retain the staff best-suited to carrying out the rigorous product inspection routines essential to these contracts.

Developing and maintaining best practice is vital to the continuing success of a contract organisation and the external audit fulfils a valuable function in this context. Growth in demand for outsourcing has turned these into a regular fixture, which we at Brecon welcome. With 20 years’ experience working with scores of pharmaceutical companies, we have established protocols and procedures which are an amalgamation of the industry’s best. Nevertheless, there is always opportunity for improvement and so we view audits and the fresh view they bring to our business not as a test but rather as one of the best ways to improve further.

This is a highly-regulated industry and as such, the outsourcing community must always remain abreast of changes in the regulatory environment. One issue currently taxing all those involved in the clinical studies sector is the impending implementation of the EU Clinical Trials Directive 2001/20/EC. Member States must adopt and publish laws, regulations and administrative provisions to comply with the Directive by May 2003 and must have applied these provisions by May 2004. The objective of the legislation is to ensure the application of GxPs to all clinical trials involving human subjects and it will have particular impact on studies whose sponsor is based outside the EU area, since release of study materials by a European QP will be mandatory.

With just eight months to go before the due date for publication of laws, some of the detail is still to be resolved, causing headaches for the regulators, the pharmaceutical industry and the outsourcing community alike. A major issue is the appropriate training of QPs: article 23 of Council Directive 75/319/EEC (2001/83/EC) sets out the threefold requirement of formal training, practical experience and professional assessment. However, with the legal issues not yet finalised, there are clearly difficulties in determining what constitutes appropriate training, experience and assessment. In these circumstances, the GxP protocols will certainly need to be formulated in close consultation with the authorities and the study sponsors; ongoing in-house training to the highest standards will be of paramount importance.

One effect of the Directive is the recognition of the globalisation of the pharmaceutical outsourcing community, reflecting that of the industry it serves. Contract organisations based outside the EU must have access to the services of a European QP if they are to continue to offer a comprehensive international clinical trials service as required by their customers. The Directive notwithstanding, this requirement is one which all service providers should be seeking to address.

With this in mind, Brecon established a joint venture in 1998 with ProClinical Pharmaceutical Services Inc (Philadelphia, PA). ProClinical’s services include formulation development of Phase I-IV clinical supplies in various dosage forms, analytical testing, packaging, labelling, storage and distribution. Again this is a relationship based on equal need, with ProClinical having access to a European QP release facility via Brecon and Brecon gaining a point of entry to the North American market. Most importantly, however, the relationship benefits the customers of both parties, putting at their disposal a broader portfolio of services in a wider geographical area.

The question of the extent of services on offer is a moot point for the outsourcing community. With less infrastructure in-house, our pharmaceutical customers are understandably looking to one-stop shopping to reduce administration. So how do we expand our offering without diluting our expertise, or losing focus on our core competencies? How do we retain the personal touch of a small organisation, while expanding to satisfy the requirements of our business partners?

Yet again, company ethos is the key. Continuing personnel development is essential and we must establish a set of customer-focused values, transmitted throughout the organisation, which ensure that every team member understands the vital role he or she plays. However large we grow and whatever services we add to our portfolio, maintaining our reputation for quality, service and dependability must remain our foremost objective.

First published in Manufacturing Chemist, September 2002

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