The Existing Footprint Pharma companies have plowed billions into constructing their own network of plants. The key is to identify a handful of
core competencies—specific physical assets, such as sterile lyophilized filling, or a business process, such as technical
transfer from R&D to manufacturing—that benefit from having an internal capability. Genentech, for example, sees one of its
core competencies as protein manufacturing, and consistently invests hundreds of millions in its facilities. Meanwhile, the
firm is comfortable going outside its four walls for services such as vial filling and packaging, and has developed a core
competency in the effective management of its contract management supply base.
One pitfall to avoid is using an internal capability because no "incremental" staff or equipment is needed. This fallacy leads
to a creeping investment where an a priori decision informed by full costing would have led to a better long term decision.
As with so many other pharma problems, there's no one-size-fits-all solution to the problem of manufacturing. Each company
needs to find the right balance of internal and external functions through a detailed and comprehensive analysis. It also
requires manufacturing executives to engage in a more transparent discussion about how keeping manufacturing in-house generates
value for shareholders and why that value cannot be better captured externally. In the end, most companies are likely to find
that jumping off the manufacturing ship entirely in concert with the trend of day is not the best, or even the cheapest, innovation.