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Contract manufacturing and contract packaging strategic considerations

It’s become a fact of life that the North American pharmaceutical industry, while still firmly rooted in manufacturing of its own products, also makes heavy use of outsourcing to contract manufacturing/contract packaging organizations.

When it comes to serialization, however, pharma companies cannot simply drop the ball in CMO/CPO’s laps and simply say, “Do it.”  There are a few reasons for this.

First, under most regulations, the brand owner (CMO’s client) is ultimately responsible for serialized packages coming off the CMO/CPO’s packaging lines. As such, the client company will want a firm hand in how that serialization happens, even if it’s on someone else’s packaging lines.

The second factor has to do with how CMO/CPOs are staffed. Over the years, CMO/CPOs are able to remain cost competitive by keeping extremely lean staffs. That becomes an obstacle when it comes to implementing serialization. While some CMO/CPOs may have the engineering resources to adapt their lines, many lack the resources to handle the IT side of things. Indeed, it’s not unusual for some CMO/CPOs to outsource their entire IT function. The pharma client company may need to be involved at some level in order to support this transition.

Third, the business process connections between CMO/CPOs and client companies today are largely manual—e-mail, spreadsheets, and fax. Going from largely zero real-time visibility today to the complicated data interconnections required to exchange serialization information is a quantum leap that will require a lot of back-and-forth discussions, meetings, and time. The process of onboarding new CMO/CPOs, again a largely manual process today, will need to be completely rethought from the ground up for pharma client companies.

CMO/CPOs slow to act
If the pharmaceutical industry has been reluctant to move into serialization, then the CMO/CPO industry has been even slower to act. There are two factors that are responsible for what might be described as paralysis in the CMO/CPO sector when it comes to serialization.

One is the fact that pharma client companies tend to focus on serializing their internal packaging lines first, a pre-occupation that seems to come at the expense of pushing their CMO/CPOs into serialization. This can be reflected in the finding by Healthcare Packaging’s survey, conducted in October 2012, that reveals that about a third of respondents have even surveyed their trading partners for serialization readiness, with another third not even knowing whether their companies had even surveyed trading partners! Anecdotal conversations with industry experts reveal while many pharma companies are engaging in pilot tests, only a small fraction of them involve CMO/CPOs.

The second, and likely larger, reason for the delay is the sheer complexity of the connectivity involved. In addition to the work required to serialize their packaging lines, CMO/CPOs must work out IT connections to each of their clients, for products destined for various markets around the globe, all with different regulatory environments. 

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