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Exclusive Life Science Feature make the wrong decision, they're out of business." That means picking the right supplier initially is one of the most critical strategic deci- sions a small company makes. Of course, the stakes are even higher for a start-up with a highly novel molecule to characterize, produce, and develop. James recommends being a "pest" — interacting constantly with your CMO — if that's what it takes, along with good luck, to avoid a catastrophic loss of supply when your company is so vulnerable. Does The CMO Apple Fall Far From The Branded-Parent Tree? By Rob Wright Science has discovered a whole new world. It's called AMRI SMARTSOURCIN Welcome to AMRI SMARTSOURCING CINGG TM and a whole new world of contract research, development and manufacture for the biotechnology and pharmaceutical industries. A world where 21 years of expertise meets customized business models to ensure a better balance of risk and return at every stage of your pipeline. To us, it's a more comprehensive way of delivering even better customer service. To you, it's a whole new world of sourcing opportunity. TM See us at CPhI WW, Booth #6C09 & AAPS, Chicago, Booth #3116 Global HQ: 26 Corporate Circle Albany New York USA 12203 T: 518.512.2345 E: James.Grabowski@amriglobal.com www.amriglobal.com Gl b l HQ 26 C t Ci l 24 The CMO Leadership Awards 2012 What do you do when you see the list of 483s from the FDA and the branded parent of your CMO partner is on the list? Expertise and best practices can pass from parent to child as can faults and weaknesses. It's like the old adage, the apple does not fall far from the tree. But does it apply when working with a CMO division of a branded parent company? The answer is a resounding maybe. Many household names in the pharmaceutical industry have CMO divisions: Pfizer, Baxter, GSK, Boehringer Ingelheim, Hospira, Abbott, and others. According to industry consultancy PharmSource, there are approximately 70 excess-capacity CMOs in the fill-finish category alone. As outsourcing of pharmaceuti- cal and biopharma manufacturing is on the rise, it may become quite common for your CMO's parent to get bad news from the FDA. The big question is, "How does that impact your project?" For example, in 2010, Hospira (NYSE: HSP), a $4.1 billion dollar company known for manufacturing injectable drugs and infusion technologies, received a warning letter from the FDA in connection with an inspection of the company's pharmaceutical manufacturing facilities located in Clayton and Rocky Mount, NC. Follow-up inspections by the FDA in 2011 resulted in the Rocky Mount facility receiving additional 483 observations. While 483s are quite common, they all demand a high level of attention from the industry. Being a Fortune 1000 company, Hospira, as of December 31, 2011, operates 12 manufacturing facilities around the globe, and offers a variety of products and services. In addition to manufacturing approximately 200 generic injectable drugs, IV sets, and infusion pumps, Hospira offers contract manufacturing services through its subsidiary, One2One, which provides formulation development, filling, and finishing of inject- able drugs. If you are a pharmaceutical or biotech company who secured Hospira's One2One as your CMO, seeing news about Hospira receiving 483s and launching product recalls may tempt you to shop for a different CMO or pull out all together. Doing so, without due diligence, could be a costly mistake. According to its website, One2One works with several manufacturing facilities, such as McPherson, KS, or Liscate, Italy, which, according to FDA data, were not under warning letters during this time period. Given Hospira's size, you might imagine the company has excess manufacturing capacity at those plants and that One2One probably utilizes some of this excess capacity. You would be correct. This still does not mean that your product is not at risk. Trust, but verify. Companies which have experienced similar scenarios advise the following. First, be sure to differentiate between parent company problems, in this case Hospira, and your own CMO's performance (e.g. One2One). Second, communicate openly and honestly your concerns with your CMO partner. If you vetted your CMO properly during the process of creating a quality agreement, there should be a level of trust between established organizations. Now, verify. Conduct your own quality and risk assessments based on factual performance. Conduct inspections at relevant plants/lines to ensure your CMO is in compliance. Finally, thoroughly consider vendor-switching costs, such as knowledge and tech transfer, lost productiv- ity, and contract termination fees. Deloitte conducted a 2012 global outsourcing and insourcing survey covering all industry sectors. The single biggest factor in the decision to terminate a contract was perceived overall quality of service. Major business disruptions were reported by 5% of respondents, while 59% reported minor business disruptions. More than half of the respondents (54%) reported transitioning vendors to last between 90 to 180 days. Consider all of these factors, and do not base your decision on emotion. Trust, but verify.