Potential Business Opportunities of Contract Manufacturing in Pharmaceutical Industry - Term Paper Example

POTENTIAL BUSINESS OPPORTUNITIES OF CONTRACT MANUFACTURING IN PHARMACEUTICAL INDUSTRY TABLE OF CONTENTS HEADING PAGE I. Introduction and Objective ……………………………………………………...2 II. Literature Review ……………………………………………………………….4 II.I Contract Development and Manufacturing Organization …………..5 III. Research Methodology…………………………………………………..……...7 III.I Procedure and Data Reliability………………………………………..8 IV. Analysis…………………………………………………………………………..9 V. Conclusion and Managerial Recommendation………………………………...12 VI. Bibliography…………………………………………………………………….14 I. Introduction and Objective: This essay aims at integrating the business processes of the client, contract development and manufacturing organization and consumers to bind them in a long, lasting, expeditious, efficient, accelerated and accomplished relationship and evaluate the effectiveness, efficacy and potential of this Contract Manufacturing (Outsourcing) Trade in the Pharmaceutical Industry. The true success story behind an proficient established business is inspired in the ingenious and innovative mobilization of the basic 4 Cs, namely, Customer, Co-worker, Chain, and Compatriot, on which the deliverables are weighed such as to formulate their dynamic strategies to ACT (A=Awareness Creation, C=Cultivating Innovation, T=Time). Due to the globalization worldwide and the consequent growing complexities of the international market, there is a gradual trend in the increase of the consumer requirements in terms of quantity, quality, diversity and delivery on-time. In addition to the unanticipated differences in the commodity prices, the solid foundation of a strong supply chain management rests in the foresighted plan to configure the cause and effect, design a robust vendor-management inventory programme and hence build a sound buyer-supplier relationship. The supply chain management defines, administers, sustains and develops the uniform flow of reserves, resources and revenues across the continuous network from suppliers to manufacturer to distribution centres and ultimately to end-users – thus completing the circle from pre-sales to after-sales support with eco-friendly recycling programmes. The supply chain management is acclaimed to be the efficient integral systemized chain between Clients and Manufacturers (Miyashita and Russell 1994; Choi, Dooley and Rungtusanatham 2001; Choi and Hong 2002). The relationships in any supply chain management exists in diversified platform, namely, as dyadic between buyers and suppliers or manufacturers (e.g., Gaski 1984; Ganesan 1994; Carr and Pearson 1999), as triadic between buyer-supplier-supplier relations (e.g., Choi et al. 2002; Wu and Choi 2005), as extended enterprises through information system technologies beyond traditional metrics (Ross, Venkataramanan and Ernstberger 1998; Beekun and Glick 2001; Stallkamp 2005). This essay critically evaluates and analyses the relationship between the contract manufacturer and the hiring firm and the kinetics of supply chain network in the domain of the pharmaceutical industry. The major motivating factor for development in a supply chain management is actualizing and amplifying the revenue generated and the uniform distribution of the entire profit within the chain rather than as an isolated gain of the organization itself, hence supply chain management operates as a consolidated connected extensive and expansive team. The enterprise resource planning engineering this robust vendor managed inventory in full functional form has experienced a tremendous growth worldwide since 2005 estimated to average revenue increasing at the rate of 13% per annum calculated to amounting to $31.5 billion in 2005. The fundamental foundations of a strong successful business model in terms of supply chain management dwells primarily and entirely on the strengthening and sustenance of an astounding and ardent manufacturer-supplier-consumer relationships aimed at a lifetime steadfastly growing network. This elaborative essay portrays the able kinetics of the subject in the backdrop of the pharmaceutical supply chain contract manufacturing or outsourcing growth networking platform. II. Literature Review: Contract Manufacturing is an operational collaborative agreement between two business entities whereby one termed as the ‘Client’ finances, procures order and generate sales which the other one known as the ‘Contract Manufacturer’ manages the full supply chain and labour relationships in order to manufacture commodities in this case pharmaceutical items customized in accordance to the needs of the ‘Client’. In the domain of pharmaceutical business the terminology in this context that comes into play is the operational procedures of the enterprise known as the Contract Development and Manufacturing Organization which organizes, executes and governs all the administrational processes that link drug production, manufacture from pre-conception and pre-formulation till clinical record maintenance update and recommended development for commercial production and success of the entire medical case. This practice can be familiarized with the outsourcing model where the Contract Development and Manufacturing Organization (CDMO) takes all the responsibilities of clinical formulation, staff organization and all supply chain management issues to efficiently and effectively deliver a comprehensive package of services as per the specified needs and requirements of the clients. This research essay scrutinizes and assays the benefits and advantages of the contract manufacturing organizations and their development since 2005 with managerial recommendations for absolute advancement based on the deductive research analysis accrued. II.I. Contract Development and Manufacturing Organization: Contract Development and Manufacturing Organization comprises primarily and essentially of Biopharmaceutical Manufacturing covering ‘monoclinal antibodies (MAbs,) complex proteins, peptides, DNA vaccines, gene therapy’ , Primary Pharmaceutical Production incorporating ‘non-sterile and sterile active pharmaceutical ingredients (APIs), custom chemicals, certain specialized manufacturing services such as chiral-chemistry, olignonucleotides and peptides, and high-potency APIs’, Secondary Sterile Manufacturing involving methodologies to manufacture prescribed clinical dosage from bulk production state. [Pharmaceutical Outsourcing Opportunities Post-Launch: Contract Manufacturing and Contract Sales and Marketing (2006), 2nd Edition, Kalorama Information] The Contract Development and Manufacturing Organization (CDMOs) in the fast growing globally advanced pharmaceutical domain has emerged collaboratively and comprehensively from the Contract Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs) and service the outsourcing Clients with competitive costs, sophisticated technology, exceptionally superior clinical production, mutually progressive functional continuity and most effective is the specialized research and development edge. The generalized supply chain in the pharmaceutical domain is illustrated as: [The above Flow Chart directly extracted from: CII Institute of Logistics (2006) Logistics Issues In Indian Pharmaceutical Industry [online] (Cited 17 November 2009) Available from: ] This contract manufacturing industry is characterized by exclusive and hi-tech research orientation, low-price dynamics and optimum service flexibility and continuity. Thus the extensive advantages of the contract manufacturing outsourcing methodology primarily dwell in providing the client with exclusive clinical research technologies without additional overhead and operational resources. This mutually collaborating process aims at strategic partnerships and hence allows the pharma client in this instance to concentrate and empower core competencies and hi-end business generating projects. Thus minimizing capital investments and restricting overhead project costs the client gains multi-profitability in generating higher revenues. However the sole concern in this trade is the protection of intellectual property and project-specific confidential information – which can be practically safeguarded and secured on sustaining a single Client-CDMO association with active commitments through long term contracts inspiring the contract manufacturer as well as the client to plan with maximum utilizations of mutual capacities and to foster long lasting relationship. III. Research Methodology: In this essay the architecture of research is framed and analyzed based on the effective use of secondary data sources. In correlation with the complexity and intricacies of this diversified subject as it deals with the domain of the contract manufacturing management and the client-contract manufacturer-consumer relations in the pharmaceutical industry and the time constraint, the secondary sources of research is identified and preferred in this respect. The Secondary Research sources, since economic both in terms of time and money, is recognized as an information bank to scrutinize and incorporate any relevant subject matter, also as an essential origin of fresh ideas to be integrated in sequential primary research, a precedence of the primary data to structure and systematize organized approach, an original source to comprehend the people and the culture in addition to criticize and certify the authenticity that constitutes the fundamentals of the primary source. The research is supervised and deducted from the extensive base of Client Supplier-Contract Manufacturer-buyer information and data accumulated from expansive community rooted on the basis of the demography, education level, income groups, gender, marital status, age and religious inclinations. To sustain an objective stance all throughout, complete unbiased concentration and responsibility is advocated such as not to influence the outcomes (Saunders et al., 2003). III.I Procedure and Data Reliability: A considerable and comprehensive collaborative survey with the abundant support and complete assistance from the Contract Development and Manufacturing Organizations (CDMOs), the original manufacturer or supplier, and the client or consumer sectors have helped to reinforce a common platform for manifesto. In comparison to the traditional reliable sources available, the information collected from the internet in the current scenario has outweighed all previous notions to prove itself as an extensive, expansive, exhaustive and excellent resource of dynamic, authenticated, and qualified information bank. Needless to mention like all conventional information resources, internet may also display its respective share of advantages and disadvantages. In the limited and short expanse of time, to explore in depth into the mind of the matter to equalize it to the reactions and responses of global scenario, the impartial data was aggregated and assayed, planned and programmed to bring out the best results as far as the reliability and authenticity are concerned in close connections with the true attributions and assumptions from the Pharma Client and Contract Manufacturing base and the market data compiled and converged from diversified global backgrounds and culture to get an uninhibited or unrestrained vision. To emphasize upon the reliability and validity of the research not only the internet as well as the books and journals are exhaustively conferred to excavate and determine the true source of knowledge in examining the deductions assumed from the set of queries answered. Regular habitual visits to libraries and research places to intensively refer and consult a myriad resource of books, journals, research works with dedicated time period is a supplementary source of conceiving, evaluating, explaining and inferring from the secondary sources comprising of the Manufacturer-CDMO-Client comments, assessments and surveys, and corporate interviews and reviews executed at different locations. Due congruence is respected in regards to the confidentiality and privacy rights of the origins of the secondary data sources with full protection in order not to divulge in public the shared responses which may pose a conflict of understanding otherwise. IV. Analysis: It has been observed that established pharmaceutical brands collaborate with Contract Manufacturing Organizations for the advantages of technological efficiencies, competitive cost benefits, efficient people management, on-time and perfect delivery of services, exclusive customized research expertise with minimal risk factor but optimum superior project technology and talent involvement on the part of the Client Company. With the advent and fast emergence of Contract Manufacturing the supply chain graphical model and business representation in the pharmaceutical domain has changed as per the following: [Directly Extracted from Tessier, Y. R. (September 28, 2006) Pharmaceutical Contract Manufacturing Challenges, ISPE Central Canada Chapter Annual Meeting: Confab Laboratories Inc. [online] (Cited 17 November 2009) Available from: < URL: www.ispe.org/.../Pharmaceuticalcontractmanufacturingchallenges.ppt ] The estimated revenue to be globally generated is evaluated to be at $100 billion in 2004 with the much anticipated annual growth gamut between 10.8% and 13% to amount to an impressive foreseeable augmentation to $168 billion worldwide in 2009 [Source: Business Communications Company Inc (2005) RB-203 Pharmaceutical Contract Manufacturing and Research Published: April 2005]: [Directly Extracted from Tessier, Y. R. (September 28, 2006) Pharmaceutical Contract Manufacturing Challenges, ISPE Central Canada Chapter Annual Meeting: Confab Laboratories Inc. [online] (Cited 17 November 2009) Available from: < URL: www.ispe.org/.../Pharmaceuticalcontractmanufacturingchallenges.ppt ] The Growth Rate capturing 11% from 2001-2006 can be further cited in the following extracted graphical representation: Source: US Census Bureau, Economist Intelligence Unit, Cygnus Research [The above Chart directly extracted from: CII Institute of Logistics (2006) Logistics Issues In Indian Pharmaceutical Industry [online] (Cited 17 November 2009) Available from: ] In effect the Contract Manufacturing of the Active Pharmaceutical Ingredient (API) as well as the Clinical Test Material (CTM) is also gaining prominence in the market share of this fast advancing global business. To instantiate some notable players in Contract Manufacturing the impact of Quintiles with a market dominance of 16.9% in 2007 with sales generation of $ 2.7 billion and Covance established as the second largest CRO with gross revenue of 4 1.5 billion in 2007 – can be evidenced amongst the top few names out of the 1,100 contributors in the market as per the speculation in 2007. Cost curtailment and niche research risk investments are practically prioritizing contract manufacturing as established pharma outsourcing business globally. Guidelines adopting Health Economics Outcomes Research and Safety Health and Environment (“SHE”) have necessitated the expansion of the prospect and scope of the Contract Research and Manufacturing to an immense momentum and significance – popularizing and making the practice almost indispensable in the competitive fast growing world of the pharmaceutical industry. In the race for global geographical expansion and extensive service offerings the giant pharmaceutical companies are patronizing Contract Manufacturing with the zeal to excel and enhance strategic mergers, acquisitions, joint alliances, partnership ventures. In this context the SWOT Analysis of this collaborative Contract Manufacturing procedure can be briefly elaborated as: Strengths: 1) Extensive and Intensive Speculation in the phase-I to IV clinical practices from pre-formulation, formulation development, stability studies, method development, pre-clinical and Phase I clinical trial materials, late-stage clinical trial materials, formal stability, scale-up, registration batches and commercial production; 2) Favouring Revenue Enhancement Arrangements; 3) Expansive Therapeutic and Niche Research and Development Scope; Weaknesses: 1) Financial Investment and Debt Management to be speculated regularly and properly; Opportunities: 1) Exposure and Advancement in the Early-stage research segments; 2) Geographical Expansion and Acquisition of the Pharmaceutical Client; 3) Optimum utilization of the opportunities and advantages prevalent in the Asia-Pacific belt; Threats: 1) Intensive increase of global competition in expertise; 2) At par with this rat race hazardous clinical practices must be avoided, restricted and regulated following the global Safety Health and Environment (SHE) guidelines. Hence it can be assessed and assayed that the Contract Manufacturing Organizations are of immense importance and benefit for the fastest progressive growth of the pharmaceutical industry, research and development in this highly competitive global perceptive. V. Conclusion and Managerial Recommendation: Contract Manufacturing of pharmaceutical domain is an impressive leap towards its fast growth. Contract Manufacturing Organizations need to acquire a dynamic momentum with the flexible adaptability to new competitive business kinetics and with the possession of excellence expertise efficient in multidisciplinary project and technological diversities. However keeping abreast with the ambitious fast track the ethical Safety Health and Environment issues at no cost be discarded and be religiously followed and sustained. With billions of dollars of extensive revenue generation strategies expanding worldwide an equally balanced parity has to be maintained in the current good manufacturing practice (cGMP) with distribution and regulation of equal opportunities globally. Adapting to the fastest growing new business model, care has to be impressed upon for manufacturing of profitable commercial production at the same time pioneering innovative technological expertise with adequate infrastructural provisions and administrations. VI. Bibliography: Business Communications Company Inc (2005) RB-203 Pharmaceutical Contract Manufacturing and Research Published: April 2005 CII Institute of Logistics (2006) Logistics Issues In Indian Pharmaceutical Industry [online] (Cited 17 November 2009) Available from: Journal Choi, T. W., Wu, Zhaohui (2009) on Triads in supply networks: theorizing buyer-supplier-supplier relationships [online] (Cited 17 November 2009) Available from: Pharmaceutical Outsourcing Opportunities Post-Launch: Contract Manufacturing and Contract Sales and Marketing (2006), 2nd Edition, Kalorama Information Saunders, M., Philip L., & Thornhill, (2003) A. Research Methods for Business Students Spurgeon, Tom (March 2008) Continuity and Connectivity: We Can Do That, Too” “(subtitle) Are CDMOs the Next Big Thing? Contract Pharma: 70–74 Taylor, Phil (May 27, 2008) Outsourcing Of Production Gaining Pace In Big Pharma [online] (Cited 17 November 2009) Available from: < URL:http://www.in-pharmatechnologist.com/Industry-Drivers/Outsourcing-of-production-gaining-pace-in-big-pharma> Tessier, Y. R. (September 28, 2006) Pharmaceutical Contract Manufacturing Challenges, ISPE Central Canada Chapter Annual Meeting: Confab Laboratories Inc. [online] (Cited 17 November 2009) Available from: < URL: www.ispe.org/.../Pharmaceuticalcontractmanufacturingchallenges.ppt> The Top 10 Contract Research Organizations: Positioning, Performance and SWOT Analyses (March 2009) Business Insights Tsay, A. A., Hahmias, S., & Agrawal, N. (1999). Modeling Supply Chain Contracts: A Review. In S. Tayur, M. Magazine, & R. Ganeshan (Eds.), Quantitative Models for Supply Chain Management (pp. 299-336). Boston, MA: Kluwer Academic Publishers Welcome To The Gateway To Indian Contract Manufacturing [online] (Cited 17 November 2009) Available from: < URL:http://www.ittillc.com/> Read More