Contract Vendors, They Are A Changin'

No one can dispute that these are turbulent times all around. Not only are we in the midst of choosing a new president for the next four (at least) years, but our economy, most particularly, our banking system, is undergoing some seismic upheavals, and our stock market has officially transmogrified from bull to bear. The pharmaceutical industry has of course been in flux for several years now, but only recently do I think I see a real impact on contract service providers and manufacturers. Certainly that seems to be the theme we discern from this year's PharmSource–Pharmaceutical Technology Outsourcing Survey and from anecdotal evidence and discussions I've had with contract research and contract manufacturing organizations (CROs and CMOs).

Michelle Hoffman

In fact, if I had to sum it up, I'd say that the line between CRO and CMO is becoming more and more blurred. Let's start at the beginning. As I understand it, CMOs originally served to provide extra capacity to pharmaceutical companies that had exhausted their internal capacity. Later, as the biotech industry grew and entered clinical and then manufacturing phases, biotech companies turned to outside contractors for manufacturing and some development services. But large pharmaceutical companies pretty much restricted their outsourcing activities to manufacturing.

Now, however, capacity is not an issue. In fact, as Jim Miller points out in his article in this supplement, there may be too much capacity. So contractors have to find something else to offer their clients, something that differentiates them. For many, this means moving up the value chain and into services.

More and more CMOs seem to be offering various development services, process development, and formulation for clinical-trial-scale production, for example, as well as analytical services and scale-up to commercial-level production. Other vendors are specializing in certain specialty-type production, usually focusing on some kind of bioprocessing in which many traditional pharmaceutical companies are still not expert. Still others have developed proprietary processes for their clients. But they all seem to feel pressure to grow and specialize, or otherwise become ossified relics—fossils.

In no small part, this transformation is due to changes on the client side. Namely, pharmaceutical companies seem to be outsourcing larger parts of projects, including much more of their development work than before. Contract vendors, are operating increasingly as partners with their customers, sharing the risks and responsibilities as well as the rewards of their businesses.

Among the risks, of course, are the source and quality of the raw materials they work with. Even though the burden of compliance falls squarely on the shoulders of the client company, the diligence of contract provider partners will go a long way toward securing the integrity of supply chains. I do hope that while they enjoy the bounty of business, contract vendors take that responsibility very seriously.

Michelle Hoffman is editor-in-chief of Pharmaceutical Technology, mhoffman@advanstar.com.