Your CDMO Can Make It, But Can Your Market Afford It?
By Jeffrey S. Buguliskis, PhD, Deputy Chief Editor, Outsourced Pharma
Preparing to run a marathon is no small undertaking. Training takes time, and food and equipment costs add up fast (have you seen what good running shoes cost these days?). So, well before race day, it’s worth asking: Can I actually afford to run a marathon?
Drug sponsors face their own endurance test. A manufacturing run takes months of preparation and a team that can work through setbacks. But when the batch meets specifications and the schedule holds, reaching the finish line is worth celebrating.
Yet even if a sponsor can afford to run the race, another question belongs on the table from the start: Can the intended market afford the product it plans to carry across the finish line?
That question can get lost when the next milestone commands everyone’s attention. Clinical supply is needed. Investors want progress. The CDMO has a slot available, and the window may not stay open. With this much urgency today, commercial economics can feel like a problem for the company a sponsor hopes to become.
Meanwhile, that future company’s costs are already taking shape in decisions about formulation, packaging and process design. Sponsors need to weigh technical fit against the economics of the market they intend to serve, while there’s still time to change the development brief.
Affordability Starts In The Development Brief
Start with the intended patient and purchaser. What can the health system support? Where will treatment happen, and what storage conditions, equipment and staff time will it require? The answers help define the product’s acceptable cost and delivery requirements.
The World Health Organization’s target product profile framework emphasizes access, equity and affordability at every stage of innovation. For a sponsor, that means describing the health system the product will enter with some of the care devoted to describing the product itself. Those details belong in the development brief, where an external partner can evaluate them.
This came up in my conversation with Krish Ramanathan, Ph.D., interim CEO of the Gates Medical Research Institute, for Outsourcing Against the Outbreak (see video above). Discussing development decisions, he said, “It is not just safety and efficacy criteria; it is also access criteria.”
His example was a vaccine that needs to cost below $2 per dose in certain disease areas to attract downstream purchasing support. That figure belongs in the same meeting as decisions about formulation and manufacturing. The threshold will differ by product and market, but sponsors need to set it early enough to influence those choices.
A CDMO can help a sponsor understand what meeting that target would require and where a formulation or presentation makes it difficult. It can’t work toward a target the sponsor hasn’t shared.
Follow The Cost Beyond The Factory
An economic target raises a follow-up question: Which number does it apply to? Manufacturing cost, purchase price, and the cost of delivering treatment are different numbers. A lower manufacturing bill creates room to improve affordability, but the eventual price also reflects commercial decisions, development costs, and the purchasing environment. Sponsors need visibility into all three numbers.
Consider packaging. FDA’s pharmaceutical development guidance connects container selection to intended use and suitability for storage and transportation. Those technical choices also deserve an economic discussion with the people who’ll procure and administer the product.
The choice of vial size shows why. If only a few children arrive for vaccination, a health worker opening a multidose measles vaccine vial may have to discard unused doses. UNICEF’s discussion of switching from 10-dose to five-dose measles vaccine vials explains how reduced wastage can help offset a higher price per dose. Smaller vials may also make health workers more willing to open one, reducing missed vaccination opportunities.
The right choice still depends on typical attendance and cold-chain capacity. Before settling on a package, the sponsor needs a clear picture of the settings where its product will be used. A purchased dose that never reaches a patient still consumes part of the budget.
That calculation extends beyond vaccines. A biologic that requires specialized administration can add to treatment costs. A short shelf life could leave a purchaser paying for stock that expires while demand is still building. And if the chosen presentation needs equipment unavailable at the treatment site, someone has to pay to close that gap.
Those conditions should shape the request for proposals. Ask prospective partners how their recommended process and presentation support the intended use, then examine the assumptions behind their quotes. A price that looks attractive at the projected commercial volume may look quite different during a slow launch.
Give Someone Ownership Of The Trade-Offs
The next step is to make economics a recurring part of development decisions. That takes an owner: someone on the sponsor’s team responsible for checking cost assumptions with colleagues in manufacturing, clinical development, commercial planning and access.
Before committing to a process or presentation, ask the CDMO to work through a slower launch. If demand reaches only half the forecast, would the sponsor order smaller batches or hold more inventory? How much would testing and release add to the cost per dose? Compare plausible volumes and examine the effect of expected losses.
Then look at the yield assumptions. If the cost model assumes a better yield than the CDMO has achieved so far, ask what work remains and how much of the projected savings depends on it.
A small biotech won’t have reliable answers to all of that during early development. It should still know which assumptions matter most, what evidence would cause it to reconsider and when it will revisit them with its CDMO. Where a clinical process differs from the intended commercial approach, spell out the work and investment needed to bridge that gap.
Some process or presentation changes may justify a higher development bill because they improve the eventual cost of treatment. Others may add complexity without enough benefit. Sponsors should agree with their partners on what they’ll investigate, who’ll pay, and when the evidence will support a decision.
Quality isn’t one of the trade-offs. As Dr. Ramanathan said of programs serving lower-income settings, “It’s still impacting humans, and everybody should be eligible for the same quality of programs.” Cost pressure belongs in discussions about process efficiency and product design, with the same expectations for safety and quality.
A sponsor also has to offer its manufacturing partner a viable business proposition. Pricing that leaves the partner no room to maintain its capabilities or keep supply reliable won’t support durable access. Sponsors have to consider whether the economics will hold up for the organizations producing the medicine as well as for those buying it.
Crossing the manufacturing finish line deserves a celebration. But a sponsor can complete that marathon and still end up with a product its market can’t afford. Affordability has to help set the course before the race begins.