The 3Cs of Successful Outsourcing:Communicate, Collaborate, Capitalize

October 1, 2002
Ed Tomlinson

Ed Tomlinson is managing director of KPMG Consulting.

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-10-01-2002,

In a volatile and highly competitive market, one way for pharma companies to keep an edge is through better communication. Companies routinely outsource the services and processes involved in the formulation, manufacture, packaging, labeling, and delivery of products. Leveraging the resources of third parties can be both cost-effective and efficient. But not all companies successfully communicate and collaborate with their partners to capitalize on those benefits.

In a volatile and highly competitive market, one way for pharma companies to keep an edge is through better communication. Companies routinely outsource the services and processes involved in the formulation, manufacture, packaging, labeling, and delivery of products. Leveraging the resources of third parties can be both cost-effective and efficient. But not all companies successfully communicate and collaborate with their partners to capitalize on those benefits.

Many factors contribute to that missed opportunity, including

  • executives' reluctance to discuss "proprietary" topics

  • patent and liability concerns that may be unwarranted

  • pharma companies' historic difficulty in successfully integrating business processes systems after a merger

  • the erroneous assumption that effective communication, collaboration, and knowledge transfer will magically occur by diffusion without a defined strategy.

Effective communication between pharma companies and their trading partners is a critical key to improving clinical trial supply chain performance.

This article outlines the steps that pharma companies can take to improve such communication and thus ensure a more timely supply of data and material, speed the product's time to market, improve return on investment, and maximize the full benefits of outsourcing.

Ensure Compliance

As new suppliers enter the marketplace, pharma organizations must ensure that their trading partners are in compliance with FDA regulations and must require documentary evidence, such as consultant r貵m豬 that verify the third party's ability to do the job. Some companies have taken the lead and initiated stringent supplier qualification protocols. Others are informally taking the concepts of 21 CFR Part 820 (Quality Systems), which are primarily applicable to the device, diagnostics, and biologics industries, and applying them to drug development audits.

Because FDA cannot directly regulate industry suppliers, pharma companies bear full responsibility for verifying that their trading partners meet best practices and standards for good manufacturing, have validated systems and processes, and employ trained and experienced staff. Many companies currently perform thorough vendor audits for raw materials suppliers and software providers, but few adequately check the compliance levels of other third parties, including contract manufacturers, transportation agents, and consultants. But with new suppliers moving into the marketplace from less-regulated industries, pharma companies need to be especially vigilant in establishing that their trading partners possess the necessary credentials to meet FDA standards.

The failure to ensure third-party compliance could have severe consequences. For example, if a pre-approval audit of a clinical trial determines that a contractor lacks the experience needed to perform the work, FDA could void the study. To mitigate such large expenditures-and possible fines-companies should develop formal policies specifying third-party compliance levels, communicate those policies, and follow up with audit and oversight, including the identification of deficiencies and actions needed to correct them.

Enhance Change Control

Collaborative product commerce software-such as offerings from PTC and MatrixOne-use internet technology to open up lines of communication between pharma companies and their suppliers. Those software tools can enable various groups to work together more productively to achieve reliable, FDA-compliant changes in product specifications.

Making informed, change-control decisions requires convenient access to all data collected during the development process. Yet, the data often reside in lab notebooks and other forms of internal documentation that omit critical information, such as input from workers involved only at the beginning or end of a given process. Collaborative product commerce solutions help organizations efficiently capture all of the needed information, including the complete audit trail showing who was involved in making critical decisions and what issues were discussed during development.

With the ability to perform reverse engineering, even for decisions made years before, pharma companies can respond to FDA reviews more quickly than they could with only paper documentation. In addition, companies can use those applications to view the overall drug development process and identify opportunities for efficiency improvements and cost reductions.

The value of electronic access to critical documentation is illustrated in the following example. Employees involved in critical processes are issued lab notebooks in which they record important data. The notebooks are numbered, reviewed, and approved by supervisors, then archived when full. Once the notebooks are archived, key data are virtually buried.

One biotech company experienced a problem during scale-up of an active ingredient for a clinical trial. It eventually discovered a solution after three months of unearthing and analyzing more than 50 lab notebooks. Meanwhile, product development and the start of the trial were on hold. If the data buried in the notebooks had been available online, the company could have found its solution in about a week.

Transfer Knowledge Efficiently

Pharma companies often pay third-party vendors millions of dollars for their expertise, and they should be able to take away at least some of that knowledge after the project is completed. By overseeing the manufacturing and testing methods that the vendor uses, pharma companies can share, receive, and use that knowledge efficiently. A best-in-class strategy allows for timely electronic capture of data to improve compliance while providing a method for technology transfer when launch is imminent and scale-up to commercial quantities is required. Pharma companies should contract with vendors to have part of their payment contingent upon the successful transfer of a predetermined level of information.

During drug development, companies must efficiently transfer knowledge and processes internally between R&D and manufacturing functions. A failure to promote dialogue between R&D and manufacturing can result in a high level of scrap material and low yields, or even a lack of product availability-all without the ability to determine the exact cause of the problem. As a case in point, one pharma company specified that a raw material should have a moisture content of less than .05 percent. Assuming that lower levels would improve the product, the production team succeeded in virtually eliminating the contaminant, then discovered that the manufacturing process no longer worked.

After looking into the problem, the company determined that its R&D people had previously identified the need to maintain a specific contaminant level but had failed to share that information with the manufacturing operation. To promote effective knowledge transfer, pharma companies can use electronic collaboration tools and document vaults for efficiently storing and exchanging important information.

Although the industry often hesitates to share information with trading partners out of concern about disclosing valuable data, knowledge transfer with suppliers can help companies receive better service and manage risk more effectively. In the previous case, the company eventually asked its raw materials supplier to examine product batches and identify those with a moisture content of 0.25-0.5 percent, thus opening up a productive dialogue that prevented the problem from occurring again. If the knowledge had been shared sooner, the company might not have risked the loss of its product stock.

Maximize Value

Companies that focus only on the risks of sharing information with third parties lose sight of the benefits. To realize exceptional returns on investment, pharma companies must communicate closely with suppliers, giving them clear incentives to improve yield and working with them to continuously improve outsourced processes.

They can begin by moving beyond a stringent contract that is only a statement of work to be done and, instead, collaborate with suppliers to identify opportunities for efficiency improvements and cost reductions as they arise throughout the project. Both parties stand to benefit from the approach. Without effective communication, at the conclusion of the arrangement pharma companies can end up with exactly the same process and data they started with-necessitating further investments of time and energy before launch. Collaborative communication allows companies to track process issues, solve problems, and follow the entire improvement process with a full audit trail.

Some pharma companies have moved beyond a "work statement." One oncology company struck a creative agreement with a contractor to manufacture its new therapeutic product. The oncology group offered to pay the manufacturer a specified price per unit of product, regardless of the manufacturer's yield. Thus, the manufacturer had an incentive to find efficient ways to increase the yield-produce more units of the therapy per batch-which, in turn, lowered its cost per unit and increased its profit margin. The agreement also stipulated that the vendor tell the oncology company how it accomplished its increased yield, so the oncology company could use the information to improve its own internal operations. By offering the manufacturer a financial incentive based on process improvement, both companies benefited.

Another pharma company outsourced the packaging of its clinical trial materials. The packager went beyond the initial work statement by suggesting it could use its superior planning system to help the company better manage its inventory. The contract called for the pharma company to provide accurate supply/demand information and for the packager to enter that data into its planning system and, thus, help the pharma company minimize its inventory while fulfilling demand. Both companies benefited from enhanced collaboration and communication.

Ensure Security

In today's environment, any commu-nication carries inherent risks. Confidential information exchanged with third parties must be absolutely secure. Worker identities must be fully protected because, for instance, researchers who work with laboratory animals are often harassed by animal rights activists. But with appropriate safeguards in place, communicating effectively with trading partners enables pharma companies to compound the benefits of outsourcing with the value of supply chain excellence.

The European Economic Community has strict rules about storing and accessing private information. Some countries, such as Germany, go even further with their regulations. But, with appropriate safeguards in place, communicating effectively with trading partners enables pharma companies to compound the benefits of outsourcing with the value of supply chain excellence. Those benefits include

  • more timely and efficient communication

  • asynchronous task completion

  • faster project completion

  • visibility across the value chain

  • ease of adding new resources

  • full audit trail of what worked-and what didn't.

The investment in consultants, contract research, sub-contract manufacturing, and clinical research totals hundreds of millions of dollars. Ensuring that the company captures intellectual capital and key project information in a non-intrusive fashion has the potential to provide benefits on multiple levels, over an extended period of time, saving the company a substantial amount money in the process.

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