Pharmaceutical Third-Party Manufacturing: Benefits & Challenges

Dr. Anil Kharia, MD, Modern Laboratories & Nandani Medical Laboratories in a recent interaction with Industry Outlook shares his views on how the reliance on third-party manufacturers impact a pharmaceutical company's ability to innovate and adapt to market shifts, the various hidden costs and long-term implications of outsourcing pharmaceutical production on a company's profit margins and brand equity and more.

How does the reliance on third-party manufacturers impact a pharmaceutical company's ability to innovate and adapt to market shifts? 

Relying on third-party manufacturers enhances our ability to innovate and adapt to market shift. By outsourcing the production the resources can be freed up to focus on research and development and market expansion. Furthermore, it helps in introducing new formulations quickly without the constraints of manufacturing setup cost.

Furthermore, working with specialized manufacturers renders access to advanced technology and expertise and also helps in ensuring we stay ahead of other industry trends. Thus, this third-party manufacturing is better. 

Can third-party manufacturing compromise a brand's control over quality assurance, and what strategies can mitigate this risk?

Quality assurance, specifically in the pharma, is a top priority. While the third-party manufacturing involves outsourcing production, it does not mean compromising on quality.

This risk can be mitigated through strict vendor selection, comprehensive quality agreements and continuous monitoring. We conduct regular audits, implement stringent quality control checks and ensure compliance with regulatory standards such as WHO and GMP.

What are the hidden costs and long-term implications of outsourcing pharmaceutical production on a company's profit margins and brand equity?

With reference to the cost, this outsourcing of the pharmaceutical production can offer significant cost savings. However, there are hidden costs and long-term implications to consider.

These include the regulatory compliance, transportation and dependency on third-party timeline, which can impact the supply chain stability. If not managed well, outsourcing may dilute the brand equity if the quality inconsistencies arise. Therefore, it is vital to give importance to quality.

In a highly regulated industry, how do third-party manufacturers navigate complaints with evolving global standards without delaying production timelines?

Yes, third-party manufacturers navigate evolving global regulations by maintaining proactive compliance strategies. They invest in advanced quality management system, regularly update their processes to align with new guidelines and undergo frequent audits by regulatory authorities. This helps in the production timeline and also meeting the global standards. 

What role does geographic location of third-party manufacturing units play in managing supply chain disruptions and ensuring timely delivery?

The geographical location of third-party manufacturing unit plays a crucial role in supply chain efficiency and risk management. Proximity to key market such as the raw material suppliers and transportation hubs helps to reduce the lead time and logistic costs. We strictly collaborate with the manufacturers in well-connected locations to ensure timely production, a smooth distribution and uninterrupted supplies to our customers.

How can pharmaceutical companies meet strategic partnerships with third-party manufacturers to drive sustainable growth and innovation rather than merely focusing on cost-cutting?

The first objective, first it is the cost-cutting is the main objective and but we can drive the sustainable growth and innovations also because pharmaceutical companies can build the strategic partnership with third-party manufacturers by beyond the cost-cutting mindset and focussing on long-term collaboration. This involves selecting partners who share a commitment to the quality, innovation and regulatory excellence.

By engaging in joint R&D activities, investing in technology upgrades and maintaining transparent communication, we can drive continuous improvement. Establishing mutual beneficial agreements such as capacity commitments and technological sharing ensures the stability, fosters innovations and ultimately leading to the sustainable growth and competitive advantage in the market.

How are companies balancing the need for speed to the market with the rigorous validation processes required in outsourced production environments?

Validation is an important part of the pharmaceutical industry. Validation is necessary and should always be performed regardless of whether a manufacturer is using their own manufacturing site or using a contractor. Validation is an ongoing and recurring activity that is a critical aspect of the overall manufacturing process.

Annual validations, including process validations, and other validations as appropriate are performed on a consistent timeframe, to ensure compliance and product integrity. Third party manufacturers or contractors will also be expected to perform validations, as this will also form part of their own manufacturing responsibilities.

As personalised medicine and small batch production rise, how suitable is the traditional third party manufacturing model for future pharmaceutical needs?

Currently, there are very few companies engaged in personalised medicine. These are very potent types of medicines, designed for individual patients. The essence of personalised medicine is being able to develop drugs in a personalised manner from patient to patient.

One interesting development is using 3D printing technologies to develop tablets. Think of it as using a 3D printer but for drugs. I have heard of at least 1 company in the US which has such a level of advanced facility. Also, there are no such companies in India at the moment.