E Pluribus Unum. Out Of Many, One

By Nils U. Olsson, Ph.D., Vice President of Chemistry, Manufacturing and Controls Retrophin, Inc.

A Contemporary Perspective on Global Outsourcing in a Virtual Pharmaceutical Business Model

The global economy, the Internet, and flatbed business-class seats have contributed to bringing goods, services, and people rapidly together in ways that were hard to imagine not long ago. For example, leading a virtual manufacturing operation for a life-science company today often requires collaboration with manufacturing and research organizations around the world. This can be both a challenge and a strength to the organization.

Opportunities and Challenges

For someone who is used to close access to an analytical laboratory, pilot plant, or manufacturing facility, the virtual, outsource-everything model, can feel inefficient at first. But the virtual model has many benefits, especially for startups, single-product companies, and businesses with low-volume products, such as those involved in the treatment of rare or ultra-rare diseases. When there is no need to invest resources in maintaining facilities (with a low degree of utilization), the focus can be on more productive areas to advance the overall business objective of the organization. Whether it’s domestic or offshore outsourcing, the benefits are numerous, allow organizations to be more effective and flexible while minimizing overhead costs.

Early-stage virtual companies may not have the luxury of more than one person managing the supply chain. While the person responsible for management of Chemistry, Manufacturing and Control (CMC) activities should have a good overall knowledge of the pharmaceutical industry from a manufacturing point of view, and is probably an expert in at least one specific area, such as aseptic processing, solid oral dosage forms, or analytical chemistry, it is difficult to be a jack of all trades.

Therefore, I believe it is essential to assemble a small and diverse group of experts in, e.g., analytical chemistry, quality control, solid oral dosage forms or aseptic processing, to match the specific needs of the organization. This multi-talented team can help to critically evaluate and select the best Contract Manufacturing Organization (CMO) for each project, and manage the work along the way.

Leaders therefore need to leverage any outsourcing experience, their models and teams, and consider expanding work on existing and proven service-provider relationships. They need to possess global fluency and flexibility, the ability to innovate and inspire, and have a deep understanding of the sector’s rapidly changing landscape. They also need to quickly formulate and implement enterprise-wide responses to marketplace trends, and align business objectives with the organization’s internal structure, culture, and talent pool.

Learning how to control supply chain operations that are at “arm’s length” is an inherent challenge for all life sciences companies doing business in the global marketplace, especially those that have major Research and Development (R&D) or manufacturing operations in less mature markets, such as Latin America, Asia Pacific, the Middle East or Africa. Sourcing and procurement irregularities and supply chain fraud can be difficult to detect and eradicate when corporate oversight is thousands of miles away, or entrusted to the CMO’s project managers or to local agents. Organizations increasingly virtualizing their manufacturing, and looking at external partners to cover a wider range of activities across manufacturing and distribution, are indeed trading flexible capacity and (in some cases) cost, for greater complexity.

So while the outsourcing model is growing, so potentially are challenges to the sponsor-contractor service relationship. Part of this are the different corporate cultures, between companies in the same country or even in the same town, but more pronounced when the sponsor and service provider are more geographically and/or culturally separated.

Normal relationship challenges, such as regular and productive communication, realistic expectations, team spirit, and showing of mutual respect, are challenges under any set of circumstances, but can be exacerbated when working with companies on the opposite side of the globe. Global outsourcing requires ongoing communication and well-defined governance structures and processes. CMC management must recall and leverage experience, good and bad, gained from other outsourcing efforts, to optimize future projects. While no size fits all, certain common denominators apply:

• Get all stakeholders on board early to create and maintain a transparent and fact-based process
• Develop an understanding of the contractor’s culture
• Nurture personal relationships with your counterparts
• Don’t be a stranger; make periodic visits to meet with the project teams
• Lighten up the mood and have some fun

Establishing personal connections with the contractors early in the process by matching up the sponsor’s responsible persons, such as the analytical, formulation, or manufacturing experts, with their corresponding counterparts at the CMO, sets the stage for a fruitful collaboration. Those personal connections, expert-to-expert, can be priceless if the project runs into a problem or if small out-of-scope favors are needed. A cultural liaison can also be valuable to keep the lines of communication running smoothly and if communication in the English language is challenging.

Speaking The Same Language

We’ve all heard that CMOs in many countries can provide lower-cost labor. However, it’s interesting to note that only a few geographies, such as China and India, have to date become economically powerful in the overall pharmaceutical area. Looking at China, so-called “returnees” nowadays often run management of CMO’s there. These are professionals who had successful technical careers in the United States or in Europe.  It’s estimated that about 1.6 million individuals born in the China have pursued foreign educational opportunities, and about half a million professionals have returned. These returnees are sought after by Chinese companies, and many have returned to take high-level positions to help build Good Manufacturing Practices (GMP) in the expanding Active Pharmaceutical Ingredient (API) manufacturing business,. These international resources are good English speakers. (If there is any communication problem, it actually could arise between them and their own plant workers.)

Over in Europe, the pharmaceutical industry is more mature and focused on both API and final dosage form manufacturing. Americans might think of Europeans as a homogeneous group, with some obvious distinctions between the British, French, Germans, and Italians – the biggest markets (and major tourist magnets). But the European Union comprises 28 member states and six more waiting in the wings. Each of these have their own language – or languages – and cultural traits. While English has become the common language in business throughout the continent, fluency varies. It can be an advantage to have someone on the team that can understand discussions in the native tongue, which technical teams often revert to when they need to sort something out with their colleagues whose proficiency in English is not quite sufficient. 

Other benefits of a diversified team include mining information from batch records, perhaps written and executed in a foreign language and translated into English, and obtaining business intelligence from websites written in, for example, Russian, Mandarin, or any other language. A caution here is that webpages translated into English do not always tell the whole, or correct, story.

These days the global economy is experiencing widespread outsourcing activities. For a life science company operating a virtual manufacturing business model, it is particularly beneficial to assemble a multi-cultural team. This not only helps to understand and manage the technical and scientific issues of a project, but also to grasp cross-cultural sensitivities, and optimize project outcomes. And sometimes that means applying the appropriate amount of pressure on a CMO in a native tongue.