CMO-Client Relationships: Extremes and Standardisation



Ian Anderson
06/25/2010


Ian Anderson Director, External Networks, M&S Business Unit Norgine, spoke to Pharma IQ about the evolution of the CMO-pharmaceutical relationship. 

How would you say Contract Manufacturing Organisation (CMO) service offerings are evolving?

One trend I have seen over the last ten years is contract manufacturers rarely don’t meet the basic Good Manufacturing Practice (GMP) requirements. I wouldn’t have said that ten years ago. I think there has been a new evolution, where the basic GMP requirements are now very well understood. It is very unusual now to find contract manufacturers who cannot be selected for purely GMP reasons.

Beyond that, the contract manufacturing industry is becoming more niched. I see some big CMOs have clearly developed a strategy of offering development services. This involves working with pharmaceutical companies early in the development of the project, and hoping to take that relationship through all development phases, onto a longer successful commercial supply. That is one niche that has evolved.



There always been, and remains, a niche or a category focused on specific technologies and I think that this will carry on.

The one I find most interesting, is that there seems to be a division in industry related to customer service. I see some contract manufacturers, really pushing development with very strong customer service. By customer service, I mean in its broader sense. One very well-known, big contract manufacturer is offering guarantees on service levels and saying if you partner with us, we will guarantee you certain tangible aspects of customer service. 

On the other hand, I still see and work with companies that offer fairly primitive customer service. They don’t particularly look after their customers in a classical customer service sense, and they are not strong on measurement. They offer a simpler customer service, but coming along with that, is often a price advantage. An interesting trend to see is this division between highly focused customer service CMOs, and less customer focused organisations. Of course, my ideal scenario would be the partner in the future, who can offer both of those, the low cost and the great customer service.

Of course, and how do you effectively ensure that the relationship reflects your true business needs?


Yes, very important, I think it really starts right at the beginning of a relationship, defining the true requirements that the business needs. It is so easy for us all to say that we want a compliant CMO, we want a highly flexible CMO, we want perfect customer service, we want the lowest cost, and that is very nice, but in the practical world it doesn’t help a lot. You have to be very clear at the beginning is your critical factor cost, capacity, flexibility, or is it customer service? Is your product so important, you really want to minimise the risk of it running out of stock. We have to force ourselves to go beyond the nice words of wanting everything, and from the very beginning define what is really important.

Once you have got that understanding, measurement is really important. If you understand what you want, it then becomes easy to measure. When I talk about including in metrics, I am talking about including metrics from the perspective of both companies. If this is going to be a truly win-win relationship, requirements and metrics need to be balanced in a scorecard way. The needs of both companies need to be represented.

Once you have your requirements clear, I would put a lot of emphasis on measurement, leading from that is analysis, understanding and improvement. If you follow that through in a spirit of both companies being represented, I think there is a high probability, that both companies will get what they need from a business perspective.   

Looking to the future, what kind of business relationships will pharma companies and CMOs establish?

I believe we are going to see a large range of types of relationship. I think there is a part of the pharmaceutical business that is becoming quality like, and I think we are going to see very simple transactional relationships at the other extreme. Here, the relationship will largely exist through a buy sell relationship, with little human contact, and relatively little sophisication. I think this model has a place.

At the other extreme, I think we are going to see highly complex shared risk relationships between contract manufacturers and pharmaceutical companies, perhaps, developing and launching highly innovative technologies or products, both sides sharing the risk or reward that comes from the relationship.

I think right in the middle, with the increase in use of contract manufacturers and the expansion of experience in industry, we are going to see standardisation. I think contracts and quality agreements are going to become more standard between different companies, metrics are going to become more standard, and the way pharmaceutical companies and contract manufacturers manage their joint relationship, is going to become more standardised. In summary, I think we are going to see some extremes and a standardisation in the middle.