Pharmaceutical Contract Manufacturing

Shyam Sunder Singh
Septalyst Lifesciences

Contract manufacturing or loan-license manufacturing has become increasingly popular since the early nineties. Pharma companies are trying to outsource manufacturing activities to contract manufactures so that they can focus on core activities of drug discovery and marketing. This article gives a brief overview of contract manufacturing in pharmaceutical industry .

Contract manufacturing is production of goods by one firm, under the label or brand of another firm. Contract manufacturers provide such service to several (even competing) firms based on their own or the customers' designs, formulas, and/or specifications. Also called private label manufacturing.

The main reason a pharmaceutical company would be interested in pharmaceutical contract manufacturing through another company is efficiency. If a company that sells pharmaceuticals is unable to produce either medicines or their packaging in their own facilities, or if making their facilities capable of mass production would be expensive, then that company is likely to look into contract manufacturing.

Surplus labour costs, labour union problems have led to the re-structuring and downsizing of many organisations and prompting many companies to adapt contract manufacturing as a basic mechanism for labour adjustment strategies in India and even developed economies.

What to look for while finalising a Contract Manufacturer:

The only point a company should keep in mind while deciding a contract manufacturer is the basic infrastructure of the manufacturer to scale up & the capability to provide quality products on long term basis. Therefore at Septalyst we select the manufacturers after taking feedback from the market on the quality & punctuality of the manufacturer. After that we conduct thorough audit of the manufacturing plant on the quality & infrastructure setup.

Once we are satisfied on the above mentioned criteria, then & then only we finalise the manufacturer. Therefore we have the best contract manufacturers as our manufacturing partners like Akums, Serum Institute, Theon Pharmaceuticals, Unique Biotech to name a few. Independent quality testing of every batch & regular audits at the manufacturers is a must for companies to ensure that they get quality products from the contract manufacturers.

According to the president of the Indian Drug Manufacturers' Association (IDMA ), S V Veerramani, the overall pharma contract manufacturing industry is growing at 20%, providing a burgeoning opportunity for small and medium enterprises. The current market value is estimated at 50% of the domestic production, which roughly translates to $5.3 billion. Multinationals hold a generous 20%-25% stake in the domestic pharmaceutical market.

Reason for fast growth of contract manufacturing industry:
  • Increasing consumption of medicines around the world, both in emerging markets as incomes rise and mature markets due to aging of the population
  • The growing number of biologic drugs in development, many by traditional pharma companies that lack biotech expertise
  • A more robust pipeline of drug candidates and an increasing rate of FDA NDA/BLA approvals
  • The entrance of numerous small, virtual startups into the market that have no manufacturing capacity
  • The rise in patent expiries and increasing generics competition, which is driving a greater need for cost efficiencies and access to novel, proprietary technologies for achieving product differentiation.
  • And the increasing complexity of both small- and large-molecule drugs , such as antibody-drug con-jugates (ADCs) and highly potent compounds that require specialized skills and capabilities.

There are questions, however, as to how long such strong growth can continue. Merger and acquisition activity has been rampant among both sponsor companies and contract service providers, leading to real consolidation within both sectors. Several pharma firms have also acquired contract service providers to achieve vertical integration. Others have elected to invest in their own in -house capabilities - often smaller, flexible, multiproduct facilities designed to meet the dynamic needs of today’s marketplace.

For the basic manufacture of medical products and drugs, India has a far superior edge over nations such as China, Vietnam and Ireland, due to resources including manpower, technically knowledgeable work force, and World Health Organization-Good Manufacturing Practice- approved production premises. A substantial 40% lower cost of operation and production is clearly the highlight for multinationals to consider India for their outsourcing needs.

The rising cost of manufacturing and some of the ageing plants of Europe reaching their life cycle conclusion may open up enormous opportunities to India's companies in contract manufacturing as European companies are also considering to either relocate those units in cost efficient centres like India or to outsource to India manufacturers. Emerging markets, value-added generics (so-called supergenerics), and biosimilars provide other potential opportunities for growth if contract manufacturers have the global reach and technical capabilities necessary to capitalize on them.

Also it is estimated that patented drugs worth US$ 85 bn in potential annual sales in the USA would be off patent during the period 2014-2020. Price competitiveness and manufacture of these generic drugs in the most cost efficient manner would be the key drivers boosting the prospects of the Indian players as India is known to have the world's best known low-cost manufacturing centers, with the highest number of U.S. Food and Drug Administration (USFDA) approved manufacturing plants outside the US.

The contract manufacturing industry is expected to grow by 17-18 per cent on a compound annual growth rate as efficiency in manufacturing and maturity of business models would lead to containment of cost of manufacturing to a great extent.

The government is also looking at incentivising the upgradation of Schedule M facilities to WHO GMP compliant units with the help of soft loans, which would lead to additional 1000 units being certified WHO-GMP compliant, further corroborating the manufacturing processes.