Relationships between pharma companies and their contract manufacturing organisations (CMOs) have undergone many changes in the years since the industry eagerly embraced outsourcing, and that process continues, driven now by regulators as much as by pharma companies themselves.

Recent changes in standards laid down by the European Commission in its revision of the current good manufacturing practice (GMP) guidelines have raised the bar for CMOs and put in place stricter management principles for sponsor companies.

EudraLex Volume 4 of the rules governing medicinal products in the European Union, which contains guidance for the interpretation of the principles and guidelines of GMP, has been revised in a way that many perceive as sensible, reflecting improvements to management principles that companies with sophisticated outsourcing practices had already adopted. The changes have been driven, however, by the fact that there are often differences in the way that sponsors and CMOs apply outsourcing practices.

Since January this year, there has been a requirement for sponsors to control and review any outsourced activities and to audit their CMOs to assess GMP competency. Ultimately, pharma companies are held responsible for CMO compliance and the quality of the services, which means they must monitor and document performance on an ongoing basis, identifying and implementing any improvements that are needed.

As a result of the changes, CMOs must also obtain pre-approval for any subcontracting done and must allow the sponsor to audit their subcontractors. This implies that sponsors will need to find a way to improve visibility of secondary suppliers in what is an increasingly global and complex supply chain.

The biggest impact of this change will no doubt be felt by companies that are relatively new to the world of outsourcing, which are often felt to fall short in their attempts to clearly define procedures for managing outsourced activities and may, therefore, have an inconsistent approach to maintaining oversight of their CMO.

For companies with a more mature approach to outsourcing, however, the new guidelines simply reflect the development of their own management processes, though there are still many issues to address before pharma companies are clear about what is required.

"Changes in standards laid down by the European Commission in its revision of current GMP guidelines have raised the bar for CMOs."

In the long run, it will not have a big effect but, in the short term, it will. There is a lot of uncertainty in regard to certain aspects, such as the demands on the delivery of APIs from China and India. "The world cannot live without that supply so, no matter what the demands are in terms of standards and audits, and so on, the authorities and pharmaceutical companies need to agree on how to make it work," says Kim Steffensen, director of contract and licence manufacturing at Novo Nordisk.

"We need to know what the requirements are for companies in Europe to deal with the uncertainty that there will be in the market over the next one-to-three years, but somehow companies will find a way to deal with it," he adds.

Generally, big pharma companies are not questioning the direction that the regulations are taking, but rather accepting them as inevitable if standards are to reflect best practice. If pharma companies and CMOs already have in place more sophisticated outsourcing strategies, then the revised guidance may have little or no impact on the future direction of their outsourcing relationships.

Nevertheless, for companies that have made do with minimally defined quality systems, ambiguous procedures and contracts, and that have managed CMO relationships at arm’s length, then there will be many fundamental changes to make.

"The requirement to ensure partners are compliant is reasonable," says Steffensen. "We were always ahead of that trend, though it is more demanding to manage CMO relationships in that way. It contributes to a more diverse outsourcing strategy, because it is a significant part of the process. We have to ask ourselves whether we want to outsource, how much control we can give to a CMO and how much we want to have control over a process."

The new risk management parts of the GMP come at a time when the pharma industry has already spent many years focusing on how to evaluate risk in terms of the decision about whether to outsource or not. The whole trend in regulation makes the industry look more closely at its outsourcing strategy. It also puts pressure on the CMO to live up to the new code.

Outsourcing: a process of evolution

The latest changes are just one more factor in an ongoing process of evolution that has seen outsourcing become a much more complex and thorough practice than when it first began. Once, pharmaceutical companies were driven to choose their outsourcing partners largely on the basis of price, but that is no longer the deciding factor in building a relationship with a CMO.

Outsourcing is getting much more complex than it was ten to 15 years ago, when it was very simple. Now there is a mixture of strategies, and big pharma has a tendency to look at specific markets and products.

"The requirement to ensure partners are compliant is reasonable."

"With the mergers and acquisitions that have taken place in the industry, many companies have looked at capacity issues too, and have in some cases set up production internally as well as outsourcing," Steffensen says.

"The outsourcing market is more diverse now and that trend will continue. Companies will look at more in-depth, customised needs. For instance, specific markets have their own requirements. Argentina, for example, as a result of the global economic crisis has a requirement to balance imports with exports, so we may need to set up or buy a business in that country rather than just relying on a strategy of importing.

"Also, a lot of companies have looked at a lean model in the last ten years with lots of outsourcing, but they may now be so efficient that they need to outsource less. There are so many topics in play."

The changes in standards are unlikely to result in a decline in the industry’s use of CMOs. In fact, data suggests that the market will continue to grow steadily (see box, below). Nevertheless, they may result in major pharma companies relying on a more select group of CMOs, with which they have built long-term relationships.

"There will not be a significant impact in terms of how much pharmaceutical companies rely on CMOs," observes Steffensen. "But it has made us change the way we choose a CMO. We work with fewer CMOs because dealing with a large number of them is very complex. We want to use fewer, but we increasingly work with the same CMO for a number of different projects.

"Outsourcing is a mixture of strategies, and big pharma has a tendency to look at specific markets and products."

"It is about building long-term relationships, which allow us to cut out some of the smaller CMOs. The portfolio has not changed, but it is shared among fewer partners. The ones that meet our performance targets get more work. They must be willing and able to meet the new standards in order to get more work."

It is not only pharmaceutical companies that will have to respond, but also the CMOs they work with. Some may find it hard to comply with the new standards because they may seem intrusive, but others will no doubt appreciate that the aim is to critical processes are put in the hands of qualified and capable people and that enhancing supply chain oversight is a laudable thing.

"To a large extent the CMOs we work with have shown a willingness to line up with the new standards, whether it is the GMP or the new validation requirements from the US, but it takes time," explains Steffensen. "We ourselves are not fully on top of it yet. We have the regulations, but we need to operationalise it. We need to see specific requirements for processes like audits. We have the theory but we need to see how the regulations work in practice."

GMP: from theory to practice

So far, the amendments that have been made to the GMP do not provide the detail that the industry needs in order to understand how to implement the new standards. That will come in the years ahead through an ongoing process of learning and experience. It remains to be seen what the changes to the guidelines mean in the real world.

"The regulations are based on specific cases," Steffensen says. "It is primarily a reactive way of setting standards. The industry, too, has been reactive rather than proactive and will no doubt respond to the next incident that has a global impact. We are further down the road with problems like counterfeiting, for example, but we have not seen the end of it. The future will depend on what the next incident is."

" There must a dialogue between pharma companies, CMOs and regulators to understand how to adhere to the current regulations."

For now, an ongoing discussion among all parties is required to bring the spirit of the new standards to life. There must a dialogue between pharma companies, CMOs and regulators to understand how to adhere to the current regulations. That will take some years to achieve.

"We need examples to act upon," Steffensen says. "Over the next three years or so, a large part of the activity will be scouting out responses from the authorities in terms of the GMP and other regulations to see what they want. API manufacturers already have filing requirements in Europe, so what is the next level?

"Internally, over many years, we have strengthened the change control process but, in dealing with CMOs – particularly in Asia – there has been a big difference in the documentation supplied by companies in Europe and their partners in India or China, for example, but they have still gone through the regulatory filing process.

"We need to find out what the regulators in Europe mean when they say that CMOs need to raise the bar in terms of the documentation and data they provide. We need more clarity about what needs to be done and we will get it from examples of filings, but it will take some years to find.