CONTRACT PACKAGING: One Step Ahead of Demand
Contract packagers add capacity for current and future business.
Anderson Packagingï¿½s new facility offers 90% of its capacity to anticipated customer demand.
Contract packagers are investing in lines and facilities to accommodate growth in pharmaceutical industry outsourcing. These expenditures have to be handled prudently, in order to ensure on-demand capacity without adding excessive costs that are eventually passed onto their customers.
Through customer collaboration and close analysis of market trends, packagers can mitigate their investment risks, for proven processes and for new packaging designs.
Howell Packaging (Elmira, NY) has added capacity to meet clients’ existing requirements and anticipated future demand. “Traditionally, we have expanded in response to client’s specific needs, [but] the opportunities today require a certain amount of faith that “if you build it, they will come,” says Joe Lally, sales manager, pharmaceutical packaging.
“That faith is certainly not a blind faith; it is a calculated business decision based on market conditions and foreseeable trends,” Lally adds.
Catalent Pharma Solutions (Somerset, NJ) makes demand projections when investing in lines for campaign customers that share lines to run fixed volumes for specific times.
“We are always looking ahead based on our customers’ forecasts and the needs we see in the market to ensure we are ready to meet the demand,” says Akan Oton, global director of marketing for packaging services. “Staying attuned to where the market is going and having the financial wherewithal to make the necessary investments to meet the demand is what separates a good contract packaging organization from an also-ran,” Oton adds.
Catalent’s dedicated customers may have exclusive use of packaging suites, where “there are usually volume guarantees and long-term contractual obligations associated with the capacity investment. In these cases, the customer might own the equipment, or we might be buying it for them,” says Oton.
Anderson Packaging Inc. (Rockford, IL) is adding capacity with its 260,000-sq-ft expansion in Rockford. New bottling, blister packing, and walleting lines will be delivered to the 410,000-sq-ft facility within the next two months.
Less than 10% of the new capacity is slated for existing demand, says Justin Schroeder, director, marketing and business development. “It is clear that industry is outsourcing more, and with pricing pressures, that will only increase. We have to be in a position to accommodate our customers’ immediate needs with on demand capacity, so as to provide the best customer service we can,” says Schroeder.
“We have a good understanding with customers with whom we partner whether they are serious about moving business to us. For overflow capacity, we have the lines ready. If we are quoting new products, we understand the product development cycle, so we have enough time to put new lines in place,” he says.
Proving Out New Formats
Daryl Madeira, director of marketing, Alcan Global Pharmaceutical Packaging—Contract Packaging and Specialty Cartons (Bethlehem, PA), says capacity investment requires routine evaluation of customers’ requirements and market trends.
“Sound marketing strategy and industry-savvy field sales drive rational investment decisions. We have our thumb on the pulse of the market, so we know where we need to make base investments in capacity, and investments in new technology,” says Madeira.
Strategic market analysis, with input from the Alcan sales force, preceded the packager’s recent investments in vial and syringe packaging and kitting technology as well as cold-chain storage and management.
“Customers don’t want to pay for expansion they don’t need. Any investment that is not paid for by customer applications eventually makes its way back to the customer’s price in some form or fashion. So they are looking for sensible investments that meet their demands but are not so excessive they will have to bear the burden of the investment eventually through their price,” Madeira says.
In new package and technology development, the contract packaging division can leverage the expertise of Alcan Global Packaging’s six package component divisions.
Collaboration may begin at the product development level, “so the customer knows that as they are designing the application, they are using the right components, for the most effective and efficient fill process.”
“This is where we can add the most value, for customers that may be risk averse to investing in unproven packaging formats and processes,” he adds.
Though not tied to any given customer application, new package solutions “are predicated on sound marketing and sales analysis that proves there is a market need for the investment,” Madeira says.
Alcan is taking a balanced approach in its investment in card-sealing solutions, in answer to growing demand for patient compliance packaging. “We are increasing our card sealing competencies, but have not excessively spent on the technology, because we are developing new compliance formats that promise to address compliance as a complement to the wallet genre,” he says.
Catalent has developed new blister compliance packages with its HingePak and Rx Barrier formats. Its proprietary DelPouch system provides unit-dose delivery for lotions and creams. “For these technologies, we made the investment decision upfront to develop the format and operationalize it for the customer, so they can benefit from proven technology. It is our belief that customers should not be learning when it comes to our intellectual property,” says Oton.
A top-five pharma firm has adopted the HingePak, which is designed to run on standard cartoning equipment. The customer is running the format in-house on existing equipment for F=1 sample packing, he says.
Industry regulations, such as e-pedigree requirements, may drive contract packagers’ new technology investments.
Madeira notes that e-pedigree is “the poster child” of difficult decisions surrounding risky investment. Alcan is supporting firms that have tested out technology in pilots. Others are saying, “We are not sure what to do.”
RFID and 2-D Bar cOdes
“We have to support both scenarios, and all technologies, which we are doing. The contract packaging division is leveraging all of the Alcan Packaging component businesses, so we can help customers make their decisions and invest wisely in our infrastructure where appropriate,” he says.
Says Oton: “We are seeing more people come to us for this capability. Since these requirements will affect all of our customers, we intend to make appropriate investments that minimize the cost to any one customer. Customers departing from a standard platform would, of course, bear the obligations associated with that,” says Oton.
“Campaign customers sharing packaging lines would incur pricing associated more with the actual utilization of the lines; dedicated customers would be picking up the primary costs burden of those regulations, because it’s effectively their line,” says Oton.
Catalent is equipping production suites with a solution from Secure Symbology (Wayne, NJ) that Biogen Idec will use for serialized 2-D bar coding of its products. “Biogen made the decision to move forward, so they don’t have potential supply disruptions if California’s 2009 [e-pedigree] deadline remains in place.”
Howell Packaging has added equipment for labeling of vials and ampules and designed a complete packaging line to load vials into thermoformed trays and cartons produced by Howell. Major capital investments in its Howell Marketing Services distribution business include a new facility with state of the art IT infrastructure slated for opening in the second quarter in Elmira, NY. The FDA- and DEA-registered and PDMA-compliant facility will inventory and distribute to physicians and sales reps pharmaceutical physician samples, patient starter kits, and associated materials, says Lally.
“In addition to accommodating existing business, this expansion serves pharma companies that need to support physicians and patients in light of continued contraction of pharmaceutical sales forces,” he says.
For the new walleting line in its expanded facility, Anderson purchased OEM equipment and custom-integrated individual machines.
“This is our highest speed line yet for producing the DosePak, but it will accommodate other designs as well,” says Schroeder.
Schroeder adds that Anderson works closely with customers to maintain product specific forecasts relating to their strategic plans to accommodate for growth or spikes in demand.
“Customer service is something we take seriously at Anderson, not only for ongoing business, but also for future business not yet awarded or realized. Rather than constructing space and purchasing equipment when the situation is in critical mode, we invest capital ahead of demand to avoid potential out of stock scenarios and maintain steady supply.
“Market conditions are such that demand spikes can develop very quickly,” he continues. “A competing product might receive negative press, or be taken off the market, and the effect is immediate.
Generic competition might emerge. Providing capacity ahead of realized demand requires significant capital investment on our part, but our customers recognize the value it provides them in competing in a dynamic market,” he adds.
Room To Grow
It’s a good bet that idle capacity today at contract packagers will be put to good use tomorrow, as pharma firms increasingly outsource based on capacity, package format, and process innovation.