Paying For Lots Of Formulation Work At Your CDMO

By Louis Garguilo, Chief Editor, Outsourced Pharma

We’ve been investigating the outsourcing of drug formulation strategies at differing stages. Fine, but how do you pay for all that work?

To get right to it, the typical method of payment for pre-IND and early-stage formulation of materials for animal and first-in-human use is fee-for-service (FFS).

However, this model is not ubiquitous nor fully applicable through the drug life cycle. So I again turn to Dileep Boinipally, Director, Drug Product Formulation, Metsera, to walk us through other models for contracting for formulation needs at all phases.

First, he explains that usual method of FFS.

“I design an experiment, I discuss it in detail with my CDMO, and they let me know how much that effort will cost.”

“We multiply that by number of experiments,” he explains. “That’s the total cost for that formulation development effort in this simple example, and in fact how most early formulation work is performed at CDMOs.”

That's a nice, straightforward financial transaction for services. It makes it easier to get comparative pricing.

With more complex drug-product development work, for example modified or extended releases with a variety of target absorption sites across the gastro-intestinal tract and in-vivo pharmacokinetic variability, you'll require a much larger body of work.  

A pay-for-service in this case is not recommended nor sustainable. Rather, before thinking of costs, sponsors need to clarify all they are looking for:

• What is the scientific challenge we are facing here? (e.g., solubility, bioavailability, manufacturability challenges etc.)
• What level of control do we want to have in our CMC activities handled by the CDMO?
• What are our goals for inventory management of the excipients and drug substance?
• What is the targeted timing to file the IND, and where will we file?

This list is certainly not exhaustive. And vitally important is you can utilize valuable input from CDMOs to help work through your answers. This is the optimal road to getting an entire formulation effort rolled up into the most workable and varying payment structures and timings.

Regarding those payment methods, at times the sponsor and CDMO will agree to a full-time-equivalent (FTE) model; time-and-materials (TM) considerations; and/or develop milestones or other calculations.

Some CDMOs charge a fee for “project management,” while others will not break that out separately. (Either way, a solid project manager – or at least point person at the CDMO – is a necessity.)

Once the formulation is ready for first in human studies, and you enter middle-to-late stage process development and clinical trials (basically each time a clinical trial material (CTM) is manufactured for human use and for engineering/scale up efforts):

payments per finished-product batch model is more likely adopted, and is structured around batch manufacturing, packaging, labeling, release testing and stability testing as critical-unit operations.

This of course hinges on clinical readout from earlier clinical trials and/or preclinical results and safety profiles.

Formulation professionals advise before rushing to clinical (and expensive) trials, work aggressively upfront to understand whether the biology actually "holds up," the drug substance is stable, and the drug product meets its critical quality attributes.

In other words, whatever your payment structure, spend the funds upfront. Strive to do a complete initial due diligence.

In fact, says Boinipally, that's why he most often prefers a smaller-sized CDMO specializing specifically in early formulation development.

And by the way, those service providers may be more flexible when negotiating costs and payment models.

Fill The Idle Gaps

Consider that you may be paying CDMOs over a long time-frame.

“Generally,” Boinipally says, “from my earliest formulation work nominating a drug candidate to commercial can take half a dozen years to perhaps a decade.”

The challenge are the gaps, when your external formulators have no work coming in from you as clinical investigations play out. 

In the interim, you do not want the CDMO to forget your relationship or needs.

For example, if you go to phase 2a/2b, it could be a six-month or longer clinical trial. Phase 3 can require years in some cases.

“You don't want to just go make a batch that satisfies your present clinical need, enough to supply the trials, and then not be in touch frequently with the CDMO," says Boinipally.

If there is limited contact while the clinical study is in progress, by the time you go back to a CDMO for a resupply or to advance the project, while there will be documentation, the professionals who were assigned to your project may not be working at that CDMO anymore.

Boinipally's mitigation strategy is to fill in those gaps.

“I want to engage my CDMO constantly. I consistently talk to them and explain our thinking and progress.

"I help them understand why we are doing things in a certain way – for example, rationale for a certain formulation and manufacturing process selection. And if permissible, I might also present preclinical and clinical data."

Nonetheless, "idle" sponsors cannot simply drone on to busy CDMOs about what may (or may not) come down the pike. 

How, then, can you keep them genuinely interested and ready to go back to work for you?

“There is background work that needs to happen in the interim," replies Boinipally.

"For example, I participate in analytical discussions during method development impacted by formulation technology. I'll have a CDMO’s formulation team supply R&D samples as needed to support these activities."

He also keeps everyone busy setting up drug-product manufacturing, "so when the time comes for a phase 3 supply, reproducibility is not compromised by producing larger batches – for example, from a 10,000 tablet batch size to a 100,000 tablet batch size."

“An important aspect is managing money spent to ensure the availability of our sponsor-supplied ingredients to manufacture drug substance and product," Boinipally explains. We need to always be considering functional excipients, specialty packaging components, etc.

He lists tweaking analytical methods, phase appropriate qualifications, optimizing formulation, scaling up the manufacturing process to the next phase. 

"I use that time critically to transfer knowledge, lead technical discussions, and build relationships."

In a perfect world, by the time a sponsor is ready to manufacture larger scale, the inventory for all materials, their sourcing, their GMP documentation, audits of production sites, should have been accomplished as a shared responsibility of CDMO and sponsor.

Contracting for and the payment terms for all those items and contingencies start with a clear plan of action, clear documentation and a full mutual understanding of time requirements, and human-resource needs (on both sides). 

Mutually agreed Master Agreements and individual work orders, perhaps side-contracting ... whatever benefits both sides as you think financially in terms of extended project needs and business relationships.

The best CDMOs stay engaged and invested in your success if the investments you are making in them make financial sense – throughout the formulation life cycle.