How CMO Consolidation is Shaping the Manufacturing Industry

In the past, contract manufacturing organizations (CMOs) and contract development manufacturing organizations (CDMOs) have been focused most on achieving scale, reaching new clients in new geographic regions, and adding services that were previously unavailable, according to Gil Y. Roth, president of the Pharma and Biopharma Outsourcing Association. In a new report from CPhI, Roth explicates how consolidation has changed how CMOs position their services to clients and how CMOs add value to their businesses. Now, Roth says CMOs are more interested in engaging a client early in the drug development process and offering said client more specialized services and technology platforms that are tailored to that client’s specific biomanufacturing needs. 

CMOs face hurdles
CMOs face many challenges, says Roth, and some of these challenges are directly related to changing client needs. Some pharma clients have moved their processing operations in house, causing CMOs to face large reductions in revenue. Additionally, while manufacturing contracts were historically for five to eight years in length, CMOs are reporting that they are seeing reductions in the length of their contracts, and clients are now requesting contracts of only two to four years. Plus, these contracts are increasingly for products that require small batches, which may not make best use of the capacity capabilities of many CMO plants. 

Regulatory policies have also presented some issues regarding the operation of some CMO facilities. The enactment of the Generic Drug User Fee Amendment (GDUFA) in 2012 meant that manufacturing fees would be charged to facilities, rather than drug companies, and the fees would not account for the volume of generic drugs manufactured at any particular plant. Under GDUFA, small companies producing one or more generic products would be subject to the same fees as large plants that made numerous generic products. If a CMO were listed on an Abbreviated New Drug Application (ANDA) form, it would also have to pay fees, even if it were not actually manufacturing the drug. These issues, coupled with a race to comply with various track-and-trace and serialization deadlines, may put some undue pressure on the outsourcing industry, says Roth.

Source: CPhI 2015 Annual Report