Partnerships Paying Off
Drug manufacturers that involve contract packagers early on in drug development are realizing savings and efficiencies.
Erik Swain, Senior Editor
|Alcan Packaging Margo's contract packaging operations in Bethlehem, PA.|
In past times, contract packaging was an ad hoc business. If a pharmaceutical or medical device manufacturer had a product launch or expected to produce a higher volume than its in-house capacity could handle, it would seek out contract packagers for those jobs. Otherwise, the manufacturer tended to handle packaging itself.
Some manufacturers still operate that way, but in recent years, more have come to rely on contract packagers as extensions of their own packaging operations. They are more aware of the variety of jobs a contract packager can perform. They are more likely to make long-term plans with preferred contractors that could stretch out several years. They look to contract packagers for sampling and clinical trial programs in addition to commercial jobs. And some are even involving contract packagers in the earliest phases of package design and stability testing.
Several factors are driving these trends. One is that many healthcare companies have cut engineering and production staffs and have grown more interested in outsourcing anything that doesn't have to do with research, development, sales, or marketing. Another is that today's new products are often more complex than their predecessors, and it makes sense to seek the input of outside experts on how best to package them. A third is the proliferation of small firms in biotechnology and other emerging fields that do little or no manufacturing themselves and must rely heavily on contractors for production.
As a result, drug and medical device firms are more likely to take full ad-vantage of all of a contract packager's capabilities and to consider preferred contractors as partners.
"In many cases, pharmaceutical manufacturers do pretty standard stuff and outsource when it comes to special technologies they are not capable of doing," says Ed Hancock, president of American Health Packaging, an AmerisourceBergen company (Columbus, OH). "Packages with specialized dispensing functions tend to be outsourced, as do child-resistant and compliance packaging. The contract packagers generally have more experience with these things than do the manufacturers."
But each pharmaceutical company is different, he says. "Some want to do the whole thing and only use contract packagers as surge capacity. They'll send the product and the materials along, and the contract packager will do it and send it all back. More likely, though, the pharmaceutical manufacturer needs the contract packager to provide input on materials. In some cases, they depend heavily on contractors for package design and development. It's a way to reduce costs and lower capital, and there is a greater movement to bring the full-service contract packager in early on. Some will bring them in when commercialization is years away so they can develop packages based on contractor capabilities and capacities."
Some firms see the contract packager's ability to handle stability packaging, clinical trial packaging, or sample packaging in addition to commercial packaging as an asset.
"Once you start manufacturing and packaging clinical material, then you have the ability to transfer your skill to a production run," says Pierre Fortin, vice president of sales and marketing for Confab Laboratories (St. Hubert, QC, Canada). "That prevents technology transfer from site to site and alleviates the problems of scaling up and relearning the curve again."
"Our preferred method is to consult with our customers from the earliest point in the project, preferably prior to the clinical trial packaging or the stability packaging," says Larry Blake, marketing manager for Sharp Corp. (Conshohocken, PA). "That way, the relationship is there, the understanding of the drug is there, and we can work as a partner through the entire process."
Nathalie Brisson, sales director for Ropack Inc. (Montreal), notes that her firm has gotten involved at the very earliest stages of package design in some cases. "We have seen a couple of international customers come to us at the very beginning of a project and end up designing their package according to our equipment," she says. "That means they can offer a better price [to their customers] because production is more efficient and the products can go faster on the line."
The most integrated of partnerships can even lead to a manufacturer paying for a new line at a contract packager's facility, as if it were its own.
"Lately, some pharmaceutical companies are using companies like Sharp as a springboard for new products. Through long-term supply agreements or potentially sharing in capital investment, we can essentially become an extension of our customers' production facilities for certain products," Blake says. "As a result, for new product launches and other big projects, more investment is happening up front, and due to that, there is more of a partnership emerging between big pharma and the contract industry. It's a different game, but we're all learning to play by the new rules."
Long-term planning is coming more into play, especially for specialized products. "We only manufacture prefilled syringes with and without in situ lyophilization. There is a short list of people who need that service," says Jeff Turns, senior vice president of Vetter Pharma Turm (Yardley, PA). "You absolutely need long-term planning in this end of the business, because it is the only way we can manage the capital. The good news is that customers stay for a long time. The bad news is that it takes a long time to get a customer."
Long-term planning is equally im-portant for medical device contract packagers. "The requirement for FDA and ISO design controls requires considerable planning to ensure we manufacture our products to meet customers' specifications," says Kevin E. Minnich, senior OEM product engineer, Mountain Territory for the Burron OEM division of B. Braun Medical Inc. (Allentown, PA). "Projects seem to progress best when we secure customer commitment early in the development process through supply agreements—more of a partnership approach than a vendor-customer relationship."
Many relationships begin with a specific project and expand into a more far-reaching collaboration, says Rick Sury, vice president for strategic partnerships of Alcan Packaging Margo (Bethlehem, PA). "In many cases, people will contact us about a specific job. Then when they see the variety of packaging options we offer, it usually opens the door to further opportunities."
Eventually, manufacturers often come to realize that the fully integrated contract packager offers speed, expertise, and supply chain cost savings.
"Imagine ordering a finished pharmaceutical product SKU and your outsource partner can manufacture, package, and provide all components in a turnkey approach that provides your product in its retail format, saving time and the cost of the asset until it's ready to be sold," says Renard Jackson, executive vice president–contract services North America, Cardinal Health (Philadelphia).
SYNERGY AND STRUCTURE
The relationships between manu-facturers and their contract packagers can be structured in a variety of ways.
"More manufacturers are focusing on a few contract packagers that provide a breadth of services. More are looking at one-stop shopping," Fortin says. "That doesn't mean that the contractor will perform all steps, but that they'll control more. They may ask us to put aspirin in a sachet, but they'll ask us to find out which materials are best. They may not have time to do that themselves."
Looking for synergies between contract packaging services and packaging materials has also become a priority for some manufacturers.
"Since we are also a packaging manufacturer, we can design them packaging components that create efficiencies in the contract packaging operation," says Joe Lally, marketing manager, packaging for pharmaceuticals, for Howell Packaging (Elmira, NY). "Additionally, with the interest in child-resistant sample packaging, the ability to take custom design approaches is a real opportunity for contract packagers that also manufacture packaging components."
Deciding which packaging jobs to keep in-house and which to outsource is still a challenge for some manufacturers, and the trends will often change from year to year.
"It depends on the time and the customer," Sury says. "Some years, companies are outsourcing more and taking advantage of all our capabilities, and other years, they do as much as possible in-house. If, for example, there is a new operations person, they may want to control more product launches and selectively outsource their remaining projects. In many cases, small to medium-sized biotech companies are more likely to take full advantage of our services, because many do not have the capability to manufacture and/or package."
The relationship may also evolve over the life of the product. "At the beginning, they usually think they will handle it internally," Brisson says. "But if they see it as a small-volume product, it may not be worth it for them to invest in the equipment."
The size of a manufacturer may also play a role in how it can best relate to its contract packagers.
"When we work with larger pharmaceutical companies, it's more of a directive relationship. They typically have a broad idea of what they want and how the package should work. They then rely on our design and materials experts to produce a package that appeals to their vision yet is practical in its application," Blake says. "The smaller 'virtual companies' have no in-house capabilities at all and are more apt to rely on our expertise to engineer the whole packaging process. The result is it becomes a custom-built program for packaging samples and trade packaging."
Hancock says the size of the contract packager may also be a factor in how well it can serve certain kinds of manufacturers.
"The top-tier participants [in contract packaging] have specialized technical expertise in package design and development, a formal approach to project management, and the ability to handle specialty materials," he says. "Mid-sized and small manufacturers tend to need smaller runs, and sometimes find it a difficult time getting attention from the major packagers, so they may seek out smaller specialists to meet their needs."
Those in the industry expect pharmaceutical and medical device manufacturers to develop even more integrated partnerships with their preferred contractors as time goes on. However, it may not always be a smooth path on the way to that goal.
"Pharmaceutical companies have in the last decade gotten more confident in the good, quality contract packagers out there, and they have realized great outsourcing opportunities," Lally says. "But with consolidation, they have excess capacity, so sometimes it can work in the opposite direction."