SubscribeOutsourcing has been found to be an effective and cost-efficient way of developing new products. Many so-called "virtual" companies have no in-house development or manufacturing capability, and outsource everything.
Ease of communication now means that the customer and contractor can be in different continents. A UK company could carry out its development activities in mainland Europe, North America, India or the Far East.
There are considerable efficiencies to be achieved by outsourcing. There is no need to tie up valuable capital in building, equipping and maintaining laboratories and factories, and headcounts can be kept low. Passing the practical work to contractors allows the contract giver to concentrate on building and growing their own company, but poses different management challenges to conventional “internal” development.
It is important to have clear project plans and success criteria when identifying the contractor. Subsequent changes are more difficult to implement and will always add time and cost to the project. The contract giver must ensure that the development contract fully protects their interests.
Rather than directly managing staff and having day-to-day knowledge of project progress, the contract giver must rely on the chosen contractor to ensure that the work is carried out efficiently, and that problems are recognised and dealt with appropriately. While there are savings in staff costs and overheads, the contract giver will also need to spend time on finding and assessing a suitable contractor, and regular contacts with the contractor by phone, email or face-to-face meetings. These will involve travel to the contractors, keeping valuable staff away from their office.
Many companies have set themselves up to service this area, ranging from the big multinational contract research organisations, offering pharmaceutical development as an adjunct to their other activities, to small laboratories concentrating on specific areas or expertise. It can be difficult to choose the best contractor for an individual project. All companies have strengths and weaknesses, and one that may have a deservedly good reputation in one area may not be the most suitable in another. Time spent on fully researching potential contractors will result in a much easier, cheaper and quicker development programme later on.
A contract giver should consider these criteria when evaluating potential contractors:
- What experience do they have with this kind of work or project? A contractor that is good at developing a tablet formulation of a new chemical entity may not be appropriate for a generic.
- Do they have appropriate quality standards? If they are to manufacture clinical trial supplies or marketed product they will need to be audited for compliance with GMP.
- Do they have a successful track record? Have you used them before, or do you know of other companies’ experiences with them?
- Are they easy to work with and contact, and are problems easily resolved? Some contractors are more customer-focussed, and willing to work with their clients, than others. This will make project management much easier for the contract giver.
- Are they in this for the long-term, or just seeking to fill some current spare capacity? This can sometimes happen with contract manufacturing, where a company will offer contract services for perhaps a few months or a year while they are waiting for a new product launch. This will not help a client wanting a long-term contract.
- Have they fully considered all of the issues when quoting for the work, or will there be numerous “add-ons”? This can be a problem when comparing quotes from different contractors. One may allow for every possible contingency and provide a very high quotation, another may only quote for the basic work and then charge extra for materials, documentation, validation etc. When you compare like with like, the apparently more expensive quote may turn out to have a lower total cost.
- Do they have sufficient capacity, equipment, staff etc to cover your forecast requirements?
Many of these assessments require good knowledge of the outsourcing industry, the strengths and weaknesses of individual contractors, and past experience with working with them. Contract givers may need help in setting and agreeing the specific criteria against which they can measure contractors’ effectiveness and suitability.
There are many examples of relatively large companies who outsource most, or all, of their pharmaceutical development and manufacturing work. These companies have succeeded by employing their own internal experts to write project plans, and then identify, assess and manage contractors to carry out the work. Smaller companies may not have the resources to employ full-time staff to manage their outsourcing needs.
Some of the larger CRO’s now advertise themselves as “one stop shops” to cater for the needs of growing companies, and will manage the whole development programme on behalf of the contract giver. In some cases this can work successfully, but there can be two drawbacks:
- The CRO can only offer their own contract services. There may be other contractors who would be more suitable for certain parts of the work.
- Control is removed from the developer, and project management is largely placed in the hands of the CRO’s employees. Their primary responsibility is to their employer, the CRO, so they may not always propose the best action from an individual customer’s point of view, if technical or resource issues arise.
Over the past year we have also seen, in Europe, the extension of Good Manufacturing Practice requirements and Qualified Person (QP) certification to cover the supply of Investigational Medicinal Products (IMP’s). The responsibility of ensuring that IMP manufacturers are working to GMP lies with the clinical trial sponsor. In many cases, this is a small company, or even an individual clinician, having clinical knowledge but no pharmaceutical manufacturing experience.
Contract manufacturers will have their own QP’s who can certify the finished product on behalf of customers. However, if several manufacturers are involved in the whole production and testing process, the QP must ensure, by personally auditing or other means, that all of these are complying with GMP. In some cases this will involve the QP auditing a competitor company, raising significant confidentiality issues.
The contract giver could employ their own pharmaceutical development expert to manage outsourcing, but it may not be necessary to have a full-time resource. An alternative is to sub-contract this to an external expert who can assess the technical requirements of the specific project, critically appraise and audit the contractors offering services in that area, and propose the most appropriate one to the client, ensuring that both parties are clear about the scope of the work required and the success criteria.
The services may include:
- Writing development plans to ensure they meet the client’s goals.
- Agreeing scope of work and success criteria with the client.
- Identifying and auditing contractors with appropriate abilities and experience.
- Assessing quotations against the agreed success criteria.
- Drafting/negotiating Development and Technical Agreements.
- Day to day management of contractors on behalf of the client, including attendance at contractor’s progress meetings and resolution of technical problems.
- Regular progress reports to the client.
Quality Assurance/Qualified Person certification.
This leaves the client company free to concentrate on their core activities and building their business..
The expert receives no payment from the contractors, either as an employee or agent, but is paid by the client. Their responsibility is therefore to ensure that the most appropriate contractor is chosen for each aspect of the project, that the work progresses on-time, on-budget and according to the original scope, and that the client’s interests are fully protected.
Since the expert is only paid while actively working for the client, this can give considerable cost savings over employing a full-time member of staff. In this way, companies can achieve the many benefits of outsourcing their development activities.