More Than a Packager

As demand for contract services widens to include more than just packaging, contract packagers are expanding and teaming with others to offer one-stop shopping.

 

Erik Swain, Senior Editor

Caraustar Custom Packaging added additional contract packaging capacity through acquisitions.

These days, chances are that the contract packager you are working with is no longer just a contract packager. As pharmaceutical companies take less and less direct responsibility for anything that isn't related to research, development, sales, or marketing, they are looking for outsiders to assume other functions, including packaging. Many of them have also expressed a desire to find as many of these services as possible in one place.

Because contract packagers want to meet this demand, many are now part of larger operations as a result of mergers, acquisitions, and alliances. And this means that in many cases, contract packaging is integrated with other functions to reduce costs and promote efficiency. These efforts can involve anything from the production of packaging components to coordination with major functions elsewhere on the supply chain—from manufacturing to mixing to distribution.

Mergers and acquisitions on the supply side mirror those on the purchasing side. "There is a lot of consolidation within wholesalers, buying groups, and even physicians," says Ed Hancock, president of American Health Packaging (Columbus, OH). "Everyone across the board is looking to leverage their core competencies to their advantage. Going forward, outsourcing services will be similarly positioned."

PACKAGING WITHIN A FRAMEWORK

It is important, however, that packaging considerations do not get overlooked when integrated into such a large scheme. Therefore, the larger contract organizations and alliances tend to give their packaging divisions enough leeway to handle operations as they see fit. The structural and financial aspects may be centralized or integrated, but the operational aspect tends to be left to the packaging experts within the organization or alliance.

"In a team-selling organization, when you are dealing with the particular services that the various units of the organization can provide, you have the category experts take the lead on the particular aspect within their area," says Hancock. "The packaging people work with the customer's corresponding packaging people. No one else tries to be the packaging entity."

American Health is an example of the integrated-services trend. It is the packaging business unit of AmerisourceBergen Corp. (Valley Forge, PA), which has operations all across the pharmaceutical supply chain.

"We are able to offer bundled services to help target product to end-user communities, as well as traditional contract packaging," Hancock says. "Our charge is to get synergies in the area of packaging and packaging-related services. If we can take on bigger chunks of what is being outsourced, that means manufacturers need to manage less, which is an advantage for them."

Another contract packager integrated into a large multifaceted organization is PCI Services (Philadelphia), which is part of Cardinal Health's (Dublin, OH) Pharmaceutical Technologies and Services group (Basking Ridge, NJ). The group also includes drug development, drug delivery, contract manufacturing, prelaunch distribution enhancement, and postlaunch marketing and life-cycle extension services. Cardinal Health says the combination of technologies and services can reduce supply-chain time, total acquisition costs for finished goods, and potential supply-chain delays or failures.

"In particular, the drug delivery and packaging services have combined to maximize value for our customers," says Al Waterhouse, president of PCI Services. "In addition to PCI's specialized packaging and printing components facilities in the United States and Europe, we have also co-located packaging operations at some of Cardinal Health's manufacturing sites or have applied our expertise to in-house packaging sites that already existed."

Cardinal Health has been able to demonstrate quantitatively to its customers that integrating contract packaging with dose-form manufacturing and other services has contributed to cost savings and improved efficiency, he says. As a result, Cardinal Health expects more demand for turnkey solutions in the future.

"There are signs of a trend toward integrated outsourcing," Waterhouse says. "We have seen the outsourcing of entire functions as pharmaceutical companies streamline their operations, and this will likely continue. Cardinal Health continues to add offerings to support this trend, such as offering significantly expanded analytical and stability services, allowing customers to realize real value from integrated outsourcing."

Acquisitions benefit customers by making available a diverse base of goods and services, says Caraustar's Laura Gustin.

When Caraustar Industries (Ashland, OH), a large manufacturer of paperboard and paperboard packaging products, purchased Garber Co. in 1995, the firm immediately entered into the world of contract packaging and contract manufacturing for the pharmaceutical and healthcare industry, explains Tony Petrelli, vice president, marketing and business development for Caraustar. "With the resources of a large, integrated packaging company behind them, the newly named Specialty Packaging Division had a solid foundation to rapidly grow its business during the past seven years," he explains.

Numerous acquisitions occurred during this period to add additional capacity of primary contract packaging, such as the acquisition of General Packaging and Milpak, which instantly added a collective 70-plus years of pharmaceutical packaging pouching and blister packaging experience. Laura Gustin, vice president of sales and marketing for Caraustar's Specialty Packaging Division, says that such expansions benefit customers. "The existing Caraustar customer relationships obtain the benefit of expanded services, and the new customers who come on board as a result of the acquisition find that a larger pool of talent, capital, technical, and developmental resources enhance the facility that is acquired. The result is more than 100 facilities that offer customers a broad base of goods and services."

ADDING SERVICES

Unicep Packaging Inc. (Sandpoint, ID) is another firm that has expanded from offering just packaging services into other functions.

"We were originally devoted to forming, filling, and sealing our MicroDose vials with the customer's product, but we found that more and more of our customers were interested in turnkey packaging," says Steve Dilts, director of sales and marketing. "So we expanded our capabilities in terms of secondary packaging and decorating options, and we have gone further up the line into mixing. We're doing what we can from a manufacturing standpoint to stretch [customer] dollars to allow them to remain competitive in price."

In addition, he says, the company has forged a partnership with a firm that distributes to the dental industry, for better coordination between manufacturing, packaging, and distribution.

Ropack Inc. (Montreal), while not part of a large alliance or conglomerate, has branched out to provide distribution and warehousing in addition to contract packaging for its customers.

"We offer an extended service that enables our U.S. and European customers to distribute in Canada so they don't need their own warehouses in Canada. It saves them a lot of money," says Luc Vaugeois, Ropack's director of sales and marketing. "We are able to handle inventory and recalls for them as well."

The important thing to keep in mind when providing a variety of services, Vaugeois says, is to consider the contract operations to be "an extension of the production of the clients. Distance has no importance now, because the Internet helps accelerate the information that must be exchanged. It also helps to have a systematic way to get feedback annually from the client, where you can revisit what went well and what went wrong and apply it to the future."

Margo (Baie d'Urfe, QC, Canada), an Alcan Packaging company, has been able to draw on the Alcan organization to procure packaging materials and components, which reduces costs for customers, says Rick Sury, director of strategic partnerships. Margo manufactures its own folding cartons and can easily procure bottles, caps, and other materials from other Alcan divisions.

"It used to be that the drug companies would often supply their own components such as inserts and booklets, but now we are seeing a lot of customers looking for a supplier that can follow through and buy all the items," Sury says. "They are looking for a true one-stop shop."

STANDING ALONE

Wellspring Pharmaceutical (Oakville, ON, Canada) offers a range of packaging capabilities, like bottle, blister, and tube filling.

There is room for those who want to buck the trend, however. Not all pharmaceutical firms are looking for turnkey operations. So some contract packagers, such as Sharp Corp. (Conshohocken, PA, and West Caldwell, NJ), are carving out a niche to serve those who want only contract packaging and customized printing.

"We see plenty of opportunity for just contract packaging," says Bill Walker, Sharp's vice president of sales and marketing. "It is becoming more and more difficult to meet the high level of quality and service necessary in the pharmaceutical industry, so we are focusing all our resources on that objective. Some people have even told us that they hope we don't get too big and lose our focus." Sharp is interested in packaging for companies that just manufacture or mix product, however, and have participated in the growing trend to provide turnkey services through them.

Anderson Packaging Inc. (Rockford, IL) has provided full-service manufacturing and packaging services to pharmaceutical and consumer health customers for more than 15 years. Currently, the firm maintains six manufacturing facilities in operation, three of which are dedicated facilities providing full-service operations for particular customer partners. It provides everything including package design, process design and implementation, and on-going supply-chain management. "Anderson's full-service operations manage the supply-chain, including packaging components," explains Shawn Reilley, vice president. "We do not manufacture any components, so we create a competitive situation in which we ensure that at all times we are obtaining world-class technology, competitive pricing, and strong inventory management. We are not beholden to a sister company that could affect costs and quality. The benefits to our customers are clear and convincing: quality, innovation, and cost control."

The key, Sury says, is to take on what fits into a firm's core competencies. "If a customer says they have an opportunity for us, we are open to looking at things," he says. "But you have to try to focus on the core business to remain competitive and to optimize services for customers."


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