As pharmaceutical companies shift their R&D focus from small and large molecules to biologics and novel drugs, they are increasingly leveraging external supply teams to augment their capacity to produce the existing portfolio of drugs. In particular, external supply teams are exploring how they can maximize the benefits of leveraging contract manufacturing organizations (CMOs), as CMOs can help pharma companies meet growth demands and accelerate their time to market, while also managing costs.
Pfizer, Moderna and Johnson & Johnson leaned on their external supply teams to meet growing demands during the pandemic, with CMOs like Catalent and Lonza helping provide the needed capacity for these three companies to manufacture COVID-19 vaccines. CMOs are also investing heavily to not only help manufacture large and small molecules but also biologics and novel therapies like chimeric antigen receptor T-cell (CAR-T), mRNA and gene therapies. According to Market.us, the global biopharmaceutical CMO market is projected to grow from $16.2 billion in 2022 to $51.5 billion in 2032, and some established pharma companies already leverage CMOs to produce a substantial portion of their overall portfolio of products.
As the market for therapies continues to grow, many pharma companies are looking to their external supply teams to help keep pace and meet global demand, with large companies managing upwards of 100 CMOs and hundreds of additional external manufacturers, often referred to as tier 2 and tier 3 vendors. Pharma companies could engage with a CMO to source a particular drug, but in reality, a CMO may only provide one of the services needed for manufacturing the drug. Meanwhile, tier 2 and tier 3 vendors may provide other services like drug substance manufacturing, bulk manufacturing, primary packaging, secondary packaging and more.
Of course, overseeing CMOs and tier 2 and tier 3 vendors creates additional oversight needs for the external supply operations team. Diligence is important, as sponsoring pharma companies are responsible for any quality issues arising from the external supply channel. Strategically leveraging external supply enables pharmaceutical companies to reduce costs and improve their margins, which in turn frees up resources for innovation and R&D.
External supply is an important value driver for many established global pharma companies, but it requires robust and streamlined business processes, digital infrastructure, collaboration software and platforms, and advanced analytics capabilities. Pharma companies should look for sophisticated collaboration tools and platforms to streamline communication and information sharing throughout the external supply network.
We’ve found external supply teams that successfully optimize their operations often have well-defined strategies, and know which CMOs, tier 2 and tier 3 vendors to engage for a specific product in a particular geography. Choosing and deploying a CMO is not a quick decision, however. External supply teams should identify risks and mitigate them where possible, and ensure they’re adhering to regulations, quality and safety standards. They should also pay close attention to geopolitical and environmental developments that could disrupt the supply chain. Based on the criticality of particular drugs, sponsoring pharma companies may at times need to pursue alternate supply channels.
We have identified five important considerations for managing external supply operations.
Implement a data-driven approach: Pharma companies typically have an operations team made up of business, operational, supply chain and quality leads that can oversee CMOs and associated tier 2 and tier 3 vendors. Oversight for external supply is a major cost driver and should be optimized based on types of therapies, volume, vendor fees, therapy segmentation and risk.
Build strong business processes and governance: External supply business processes are sometimes an afterthought and traditional enterprise resource planning software often doesn’t account for them. A well-defined business process is required to maintain operations, segmentation, technology, modality, supply channels, oversight levels, risk scores, CMO contacts and other important parameters. Clear business processes and data governance will result in consistent and higher-quality data, which are needed for better insights.
Manage and maintain the end-to-end external supply chain: CMOs can’t perform manufacturing steps end to end. While a CMO may engage in bulk manufacturing, tier 2 and tier 3 vendors could be involved in drug substance manufacturing, primary packaging and secondary packaging steps for a specific drug. Pharma companies often have multiple supply channels for the same product across geographies, making it vital for them to have clear visibility over the complete end-to-end external supply chain. Sponsoring pharma companies should invest in creating supply chain resilience solutions—a network digital twin is one example—that can simulate adverse events and help with mitigation plans.
Collaboration tools with external supply networks: Clear communication and information exchange between external supply teams, CMOs and tier 2 and tier 3 vendors are important, but many of these interactions are too complex and crucial to manage through an email or a spreadsheet. Software platforms and collaboration software can help manage this communication and information exchange throughout the external supply network. Collaboration is required in many areas, including when determining the capabilities of external supply partners, supply chain KPIs, nonconformance and more.
Continually “manage the tail”: Not all CMOs are created equal, and it’s common for a small handful of CMOs to contribute to the majority of the external supply portfolio. This often also means a large number of CMOs contribute very little to the external supply portfolio—this is called “the tail” of the portfolio. Sponsoring pharma companies sometimes inherit CMOs through acquisitions and, as certain drugs go through patent expirations, product volume can decrease substantially, leading companies to spend resources overseeing a large number of low contributing CMOs. Pharma companies need tools to identify “the tail,” and by continually managing it, they can save substantial resources for the overall business.
By implementing these initiatives, pharmaceutical companies can optimize their external supply teams and improve their bottom line, enabling them to invest more time and resources in R&D innovations.