For big pharma, the advantages of outsourcing services to third-party contract manufacturers have long been obvious. By availing themselves of cost-efficient, seamless and quicker manufacturing, players are subsequently free to dedicate greater amounts of time to their respective core competencies.

As in a number of other industries, the idea of outsourcing is also hardly novel. But, in a sector that is increasingly defined by fiscal awareness and a strong regulatory environment, pharmaceutical companies have become much more prudent in how they go about selecting their manufacturing partners. While many of the bigger, established pharma groups may already be engaged in long-term partnerships, where trust remains the clear watchword, others are reconsidering the way in which they gauge the levels of service provided by their suppliers.

As a result, hard-line performance metrics have become a commonplace method in establishing and monitoring quality of performance. However, as Peter Murray, former quality director at GlaxoSmithKline (GSK), explains, while the need for objective metrics has become something of a prerequisite, straight data extrapolation is not a cut-and-dried process.

"It’s a case of management asking itself what metrics it wants, why it needs them and what it will do with them."

"Let’s take compliance and quality as an example," he says. "Like all metrics, they need to be interpreted with some care. Yes, you can pin numbers on things like rejects and reworks, as these are something you either have or you don’t, and they can therefore be used to measure a supplier’s competence. But, on the other hand, it might also be a case of the contract manufacturer doing its best with what is an inherently unstable process."

Common understanding

Likewise, complaints and product recalls, while being a numerical metric, can also be influenced by external mitigating factors beyond a contract manufacturer’s control.

"Pharma companies are always going to get complaints," says Murray. "But, again, they need to be carefully analysed to determine which ones are as a result of a product fault attributable to the manufacturer, as opposed to there being a poor product design in the first place. Both parties need to come to an agreement on this. So, while these metrics are quite objective, not many are absolutes."

So as to preclude any such confusion, pharmaceutical players and their partners need to establish tight lines of communication from the onset of a contractual agreement – which also includes agreeing on key performance indicators. Otherwise, says Murray, there is a real risk of foregoing the bilateralism and understanding essential to successful partnerships.

"Long-term communication is dependent on the set-up in the first place," he says. "You, the pharma company, need to have the right people, and they need to have a clear understanding of what the deal involves – that goes for metrics and how they will be actioned too.

"It’s a case of management asking itself what metrics it wants, why it needs them and what it is going to do with them. Everybody needs to be clear about that, with a common understanding, because if you try to bring these things about later on, your relationship with your contract manufacturer will be far from ideal."

Amicable cohabitation

Murray, who has more than 45 years’ experience of primary and secondary pharmaceutical manufacturing, is clearly appreciative of and sagacious about the advantages of partnering with third-party players.

Yet he takes issue on a semantic level, particularly with the term ‘partnership’, dismissing it as "warm and fuzzy" business speak, which doesn’t stand up to reality: "It’s something of a fallacy," he says.

"Partnership is an overused euphemism for what is generally a more limited commitment. To use a metaphor, it’s not a marriage; more an amicable cohabitation. In my personal experience, I’ve worked with a number of very good suppliers, and there has been a high level of working cooperation, but we are essentially talking about two separate legal entities who rarely wish to subordinate their own best interests."

In an age of corporate rhetoric, Murray’s somewhat clinical deconstruction is refreshing. He should know, too – during his tenure as quality director at GSK, Murray was part of a team that looked after the group’s European supply division, and which necessitated close contact with third-party manufacturers.

He is a clear exponent of the greater need for well-defined metrics, but he also accepts that metrics are rarely intransigent, and are likely to change over time in line with the demands of the industry. For this reason, an increasing number of pharma companies are starting to use periodic reviews of their metrics so as to ensure they are still relevant.

"Periodic reviews are vital," says Murray. "Especially when you have metrics that are less objective and more subject to interpretation. These are often assessed internally, and are often not an absolute measure in themselves. Therefore, you have to look at them periodically to check that there is still a good proxy for whatever it is you are trying to assess.

"Take the metric of quality. You are trying to assess whether, first of all, there is any patient risk, and, secondly, whether there are any regulatory and compliance risks. When there are changes in legislation, your metrics have to move to accommodate the reality that there are now new risks."

Soft skills

The contract manufacturing organisation sector has grown exponentially over the past decade. While the lion’s share of players still come from Europe and the US, the effects of austerity, which are still being felt in those markets, have paved the way for emerging countries.

"In a cost-conscious environment, it’s looking likely that contract manufacturers will play an even greater role for the foreseeable future."

Contract manufacturing in the BRIC economies, in particular, is in rude health; pharma companies are attracted by comparatively low labour and capital costs. And, while Murray may pick holes in the intangible and indefinable concept of partnership, he believes that strong communication – soft skills – are imperative in breaking down the potential cultural and language barriers associated with infiltrating new markets.

"Going outside your own language or culture group has its challenges," he says. "Pharma companies that do venture into new markets therefore need to adapt their approach and strategy.

"And it doesn’t just go for emerging markets. Japan, for instance, isn’t an emerging nation, but there are some very significant cultural differences for western pharma companies in terms of how they reach agreements. You need to be aware of those when you are setting things up and also in the routine day-to-day administration of whatever agreement is reached."

Today’s big pharma, including Murray’s former employer, have dedicated teams and departments that are able to deal with such hurdles. However, for smaller players, sourcing and building longstanding ties with contract manufacturers that are based on the other side of the world can still be a daunting undertaking.

"The biggest differences between small and big pharma in dealing with their suppliers is communication," says Murray. "For some smaller companies, it may be done by personnel for whom it is only a part-time activity. Big pharma, instead, have specialised units to deal with third-party manufacturing, who are able to understand the criticality of precise communication, so that a relationship is contractually defined rather than being based solely on the idea of partnership. It is something that companies can get better at with practice."

With its onus on efficient supply chain optimisation so as to better provide for end users – patients – the pharmaceutical sector is often described as fast-moving. In line with this, third-party contract manufacturers are becoming increasingly influential when it comes to the sector’s quality drive; notably, the FDA strongly recommends that today’s drug-makers draft quality agreements together with their outsourcing partners.

And, in a cost-conscious environment, it is looking likely that contract manufacturers will play an even greater role for the foreseeable future.

That pharma – whether big or small – should be looking to exact more quantifiable and objective sets of metrics, as advocated by Murray, to ensure that outsourcing relationships are as fruitful as possible, seems more than judicious.