Disruptive Outsourcing Means Life Sciences Are Relying on CMOs More Than Ever

It’s no surprise to anyone in the life sciences that the outsourcing of manufacturing and other contracted services is currently undergoing major disruption. Advanced technologies, including automation and the cloud, combined with evolving manufacturing capabilities have expanded the functions of outsourcing. In turn, manufacturers are pivoting their business models and cost optimization estimates to this new paradigm in which there’s increased reliance on contracting services.

What may not be immediately clear is just how heavily life sciences companies are expanding their use of contract manufacturing organizations (CMOs). A recent survey by Accenture of life sciences senior executives showed that 91% of biopharma and medical device companies plan to increase their use of CMOs, contract packing organizations (CPOs) and contract development manufacturing organizations (CDMOs) over the next three years.(1) Moreover, the CMO market is expected to grow at a 7.6% rate (compared to 6% for life sciences as a whole) between 2016-2025.

This article will look at the role of CMOs in life sciences manufacturing, how that role is changing, and areas that may cause friction as manufacturers’ engagement with outsourcing increases.

Production Capacity

Cost optimization remains a major reason why companies outsource. It’s simply less expensive to partner with a CMO to produce a product than it is to do it in-house. Second, as the industry continues to transition toward more complex biopharmaceuticals and highly personalized medical therapies and devices, there’s a larger demand for manufacturing capacity. A 2019 study by Deloitte indicates that accelerated use of outsourcing is happening on nearly all life sciences fronts, including biologics and data-driven clinical innovations that involve patient-centricity, risk-based monitoring and digitization of clinical trials.(2)

That helps explain some of the findings in the aforementioned Accenture study. In the survey, respondents said 44% of their manufacturing volume is now externalized, one-third said they outsource more than half of their manufacturing activity, and 20% said they currently work with over 100 external partners. Nearly 80% said they plan to increase capacity over the next three years as they expand their technology platforms and specialized services.

Only one-third of manufacturing – whether in the developmental stages or after commercial launch – will be conducted in-house, according to the Deloitte report. Clearly, life sciences manufacturers will have no shortage of demand for more manufacturing capacity for the foreseeable future.

Supply Chains and Snags

Greater manufacturing capacity demands are driving increased complexity in supply chain operations and making them more difficult to manage. Many of the so-called “new sciences,” such as CAR-T cell therapy and small molecular pharmaceuticals, require smaller batches and intricate technological components, sometimes for individual patients. As a result, every effort is made to shorten the time-sensitive delivery windows.

This places even more pressure on companies and CMOs to carefully coordinate their planning, scheduling, manufacture and delivery operations. An entirely new level of collaboration is needed for this type of supply chain management to be profitable. To ensure that products contain their intended consistency, quality and purity, manufacturers collect copious amounts of data over the product life cycle and impart it to contract partners through tech transfers in order to gain regulatory approval.

Yet 67% of those surveyed said they had limited visibility and control over CMO product manufacturing and quality, and 78% wanted to improve collaboration within their quality management processes. Thus, while manufacturers are increasingly turning to CMOs for production, there’s plenty of room for improved communication, collaboration and control between partners. It’s imperative that manufacturers raise the bar on quality and production expectations while also creating greater transparency with their contractors. The missing ingredient is technology.

Collaborative Solutions

For life sciences manufacturers to raise return on investment (ROI), a high-degree of precision in production processes and quality system sophistication is required to mitigate risk and increase speed to market. Yet many companies continue to depend on disconnected, paper-based data systems for production and quality data. These slow, manual systems cause errors and delays that result in operational efficiencies and increased risk, a situation that becomes compounded with external partners in the supply chain.

That risk is potentially greatest when the data transfer of complex datasets and knowledge takes place between manufacturer and CMO. “A failure to ensure strong collaboration and knowledge sharing between a pharma company and its CMOs can therefore have real long-term impacts, limiting the efficiency gains that can be realized across a product’s life cycle,” the Accenture study states.

It’s along this vein that technology and solutions, including an automated, interconnected quality management system (QMS) and the accessibility and security of cloud data storage options, set manufacturers apart from the competition. Moreover, a digital production records solution generates operational efficiencies in terms of time savings and shop floor data error reduction so that product batches and lots are completed right first time (RFT). Combined with a robust QMS, a digital production records solution can bring together a company’s quality and manufacturing operations.

Streamlining the Supply Chain

The Accenture study outlines a few other specific actions that life sciences manufacturers can take to instill more active collaboration and encourage stronger relationships with the contractors they depend on:

• Identify a C-level sponsor outside of the quality department to champion innovative solutions and change, and build strong leadership engagement across company functions and departments.
• Define a collaborative roadmap to pilot and then scale up. Define the technology platforms that can best support and connect a company’s people, processes, data and assets.
• Co-invest in a strategic innovation and share its value.
• Continuously measure collaboration performance with outsource partners and seek improvement.

Companies should also evaluate a partner not just on their technical capability and capacity, but also on experience, quality and reputation.(2) “Communication should be paramount, and technology can inform better decision-making, especially in real time,” the Deloitte report states.

Conclusion

With life sciences industries projecting healthy future growth in the coming years, the outsourcing of manufacturing, development, packaging and other functions is likely only to increase. Companies that invest in technological tools and implement an outsourcing strategic plan to achieve more effective collaboration with their contract partners look to be the most successful in lowering risk, raising quality and streamlining their supply chains.

References:

1. “Dare to Be Different: It’s time to revamp collaboration in life sciences contract manufacturing” Accenture Life Sciences. 2019. https://www.accenture.com/_acnmedia/PDF-98/Accenture-Life-Sciences-Dare-to-Be-Different-Contract-Manufacturing.pdf#zoom=50
2. “2019 Global life sciences outlook: Focus and transform. Accelerating changes in life sciences.” Deloitte. 2019. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-ls-outlook-2019.pdf