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Leveling the playing field:
A primer for CMOs
Bikash Chatterjee, Pharmatech Associates, Inc.
The landscape for the pharmaceutical and biotechnology market is changing rapidly. The emergence of low cost API suppliers in India, China and Croatia, with the portent of low cost manufacturing capability, is pushing US and European firms to take a close look at outsourcing their preclinical development, manufacturing and clinical trial management to these emerging markets. Driving this change is the escalating pressure to perform. Whether the metric is time to market, product pricing or Wall Street performance, pharma and biotech companies are weighing their options closely when considering outsourcing critical development functions. Complicating this picture is the international regulatory shift toward a more scientifically based quality paradigm. FDA, ISO and ICH have all issued guidance defining a quality approach which integrates risk management techniques along with a shift from product-centric to a more process-centric approach to product development.
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We can argue that the pharma and biotech industry has always been scientifically intensive, but the truth is our science has revolved around the development and clinical aspects of product development, rather than process development and manufacturing. The implications of such a shift are significant, both from a product development perspective and from an outsourcing decision-making perspective. Understanding the role of a Contract Manufacturing Organisation (CMO ) in this new product development paradigm is central to successfully outsourcing manufacturing responsibility. This article will discuss the elements necessary for existing US and European CMOs to compete in today’s marketplace, as well as the attributes required of emerging CMOs if they are to be successful in the new global marketplace.
Changing Regulatory and Business Environment
The FDA’s shift to a risk based approach for product development has changed the rules and expectations of manufacturers and regulatory authorities, as they strive to demonstrate that their processes and products are under control.
Prior to 2002 regulatory oversight focused primarily upon adherence to pre-defined procedures, record keeping and an audit trail. David Graham’s testimony to Congress advocating that five drugs currently approved should be withdrawn from the market due to safety concerns underscored the agency’s need to change its quality paradigm. In September 2004 the FDA issued its Pharmaceutical cGMPs for the 21st Century – A Risk Based Approach guidance advocating a more scientifically rigorous quality system integrating quality, safety and risk management considerations.
The FDA was not the only health agency to recognise this need and it enlisted input from regulatory bodies in Canada, Europe and Japan, as well as industry and academia worldwide. Driving this global mindset shift were several key guidance documents from The International Conference on Harmonization (ICH), ICH Q8 (Pharmaceutical Development), ICH Q9 (Quality Risk Management) and the forthcoming ICH Q10 (Quality Management). ICH Q8 articulated a more scientific framework for process and product development, termed Quality by Design (QbD), which focused upon understanding which key drivers affect process stability and ultimately product performance, rather than quality oversight.
ICH Q9 defined a methodology for assessing; mitigating and controlling risk gives the industry the opportunity to concentrate their quality efforts on only those elements that matter. ICH Q10, still under review, attempts to describe a method for integrating ICH Q8 and Q9 requirements into our quality management systems. Together these form the foundation for a new approach to drug development and quality. The ICH Q8 framework for quality by design is shown in Figure 1 and the risk management model supported by ICH Q9 is shown in Figure 2.
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Simultaneously US companies are obligated to provide a much higher level of transparency to shareholders. The Operating and Financial Review (OFR) was established as a tool to engage shareholders at a deeper level in corporate governance. The OFR goes beyond corporate performance but includes Key Performance Indicators (KPIs) spanning the spectrum of corporate operations from R&D to Supply Chain and Distribution. This granularity of information requires a shift in quality and performance philosophy.
Cost vs. Quality
With costs escalating to $1.3 billion to bring a new drug to market, there is a renewed focus on efficiency and economy of practice. Interest in organisation excellence approaches such as Six Sigma* and Lean Manufacturing has provided the industry with tools to measure operational performance. It is only natural that pharmaceutical and biotech markets look to emerging markets such as Asia as the lure of low cost labour signals an opportunity for rapid cost reductions. While our industry has always focused on profitability, this has not always translated into manufacturing efficiency. Given the shift in quality thinking thrust upon industry the question is how does a renewed interest in operating efficiency reconcile with risk based quality management? The answer to this question represents the opportunity for CMOs in all market sectors.
US and European CMOs
The shift to a more risk based approach to quality has changed the role of CMOs in the product development lifecycle. The decision to use a CMO may be driven by several considerations. Insufficient capacity to support product development or commercial production, organisational expertise or bandwidth are all valid reasons for considering a CMO . Given these issues, is it possible for an established CMO in the US and European markets to be competitive with emerging companies offering a significantly reduced standard cost? The answer lies in the value proposition. The key attributes of an effective CMO in today’s regulated environment are very different from the time prior to the 2004 guidance.
Largely relied upon for execution, a CMO today must participate to a much greater extent in the product development lifecycle if a product is to meet the new quality paradigm. The key lies in the definition surrounding the tech transfer process. A value-added CMO must be able to assist in the identification and or/verification of key process parameters which drive process stability. This extends to the method development, validation and transfer process. In Biotech, for example, it is not unusual for phase II and phase III clinical supplies to be manufactured at a CMO . Supporting the scale-up and in-process controls establishment is a significant value-add for many drug developers. ICH Q8 advocates a Quality by Design approach to product development. A CMO ’s ability to lead or participate in the CMC portion of a drug filing is a significant advantage to any firm.
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The contradiction in this approach is the cost of establishing internal expertise and development systems to support these services. When coupled with a strong quality system, a CMO can differentiate itself from a low cost supplier through the avoidance of Cost of Poor Quality (COPQ). In Biotech a single lot may cost several million dollars. The administration cost and consumer impact of dealing with discrepant material far outweigh the cost of establishing strong development and quality systems.
Emerging CMOs
Emerging CMOs have the advantage of low cost of goods. Equipped with an educated workforce, emerging CMOs in India, Croatia and China have the potential to provide a high quality service at a very competitive price. However, if they are to be successful they must develop strong internal quality systems which can guarantee that a process is capable of being executed repeatedly, consistently. In the absence of these systems the exposure from COPQ far exceeds any short-term benefit from low cost of goods. Investing in developing infrastructure and quality systems, based upon US and European regulatory standards is essential if they are to be successful in developing a viable presence as a CMO.
Conclusion
Once thought of as the tools to execute the final stages of product development, today’s CMO must participate much earlier in the product development cycle for a new therapy to successfully come to market. Established CMOs in the US and Europe find themselves competing with potential low cost suppliers in emerging markets such as India, Croatia and China. To compete in this marketplace these CMOs will need to demonstrate an understanding of the new quality requirements and the ability to assist in the characterisation and technology transfer process. Emerging CMOs have the advantage of a low cost, educated workforce available but must invest to establish infrastructure and quality systems consistent with US and European CMOs if they are to succeed.
* Six Sigma is a trademark of Motorola.
Bikash Chatterjee
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Mr. Chatterjee has served in various senior management positions within the pharmaceutical, medical device/diagnostic fields over the last 25 years and is a frequent lecturer and instructor regarding Lean and Six Sigma practices in the regulated life sciences industry
Mr. Chatterjee is a certified ISO 9000 Lead Assessor and Six Sigma Master Black Belt. He has extensive experience in the design and implementation of quality systems and has successfully implemented six sigma and lean manufacturing solutions in the biotech, pharmaceutical, cosmetic and food industries for over 15 years.
TechSolve has managed and successfully deployed Lean and Six Sigma initiatives for both large and small pharmaceutical and biotech customers. Mr. Chatterjee holds a BA in Biochemistry and a BSc in Chemical Engineering from the University of California at San Diego.
Pharmatech Associates, Inc.
1098 Foster City Blvd., #303
Foster City, CA 94404
USA
Tel: 001 650 227 0177
Fax:001 650 227 0176
Further reading
ICH Harmonized Tripartite Guideline, Pharmaceutical Development,
Q8, International Conference on Harmonization of Technical
Requirements for Registration of Pharmaceuticals for Human Use
November 2005
ICH Harmonized Tripartite Guideline, Quality Risk Management
Q9, International Conference on Harmonization of Technical
Requirements for Registration of Pharmaceuticals for Human Use
November 2005
James P. Womack and Daniel T. Jones, Lean Thinking, ISBN:0-7432- 4927-5, Free Press, 1996
