How Pharma 4.0 Can Unlock The Full Potential Of External Manufacturing

By Kerim Ozbilge, EY

Pharma and biotech organizations are increasingly relying on CMOs/CDMOs, and contract labs for development, manufacturing, and quality operations to fulfill patients’ needs. Externalization helps them reduce operational costs, access new manufacturing technologies, add capacity, and increase local market presence with reduced capital investments. As a result, the pharmaceutical contract manufacturing market is projected to grow to nearly $260 billion at a CAGR¹ of 7.9% by 2028.¹ In parallel, supply chains are evolving into extended global networks; innovative treatments and global regulations are becoming much more complex. Many pharma and biotech companies are finding it increasingly challenging to manage virtual supply chains and manufacturing operations efficiently and effectively. These pain points are largely due to a lack of visibility and process standardization as well as heavy reliance on manual information exchange.

To address these challenges and other headwinds, pharma organizations and partners need to re-evaluate and improve externalized operating models. They should also further invest in digitalizing collaboration processes as part of operational excellence and digital transformation road map efforts. These changes will go a long way toward reducing cost and quality deviations, enhancing cycle times and manufacturing throughput, addressing patients’ needs, and improving health outcomes.

Current State Challenges

In today’s patient-centric environment, the rise of niche specialty drugs has led to complex product formulations, many of which require highly variable manufacturing processes and small-batch production. Personalized therapies such as autologous cell therapies are tailored for each patient, requiring often-tedious traceability for every step of the manufacturing process until the cells are infused back into the patient. Additionally, manufacturing of therapies based on new modalities such as antibody-drug conjugates (ADCs) often involves multiple contract manufacturers, requiring brand owners to orchestrate operations with flawless precision across networks to enable timely manufacturing of the final drug product.

Other manufacturing pressures include the need for faster approvals to keep pace with unmet patient needs, which requires faster tech transfers. Managing the growing global regulatory expectations around product quality and safety is also becoming much more complex in an externalized manufacturing context. Environmental, social, and governance (ESG) considerations are evolving into an important agenda item for the life sciences industry to address issues such as Scope 3 emissions reduction, health equity, and patient access.

Given all the complexities mentioned above, organizations need to refine their operating models as many find it difficult to integrate and collaborate with external partner operations effectively. These challenges are largely due to the absence of a comprehensive digital strategy to enable visibility, suboptimal standardization of processes and technologies, and a lack of control across key processes such as product development, tech transfers, collaborative planning, sustainability, and manufacturing and quality operations. This legacy approach ultimately impacts time to delivery, quality, compliance, product launch and production performance. Together, these factors are causing significant profit margin challenges for both large and emerging life sciences companies, affecting both top- and bottom-line revenue as well as product quality and control.

Further, the COVID-19 pandemic revealed several areas for process improvement in the contract manufacturing space, including the need to move away from centralized production in a single geography, develop real-time performance management capabilities, and deploy co-pilot models that enable life sciences companies and contracted entities to collaborate seamlessly.

The Continuing Rise Of Digital As An Enabler Of External Pharmaceutical Manufacturing

To unlock the full potential and value of an externalization strategy, industry leaders need to collaborate with ecosystem partners in a joint transformation effort that improves conditions for them as well as patients. Brand owners and external partners must therefore put innovation and digital at the top of their operational excellence and transformation agendas.

Through the use of new manufacturing 4.0 technologies and capabilities such as Internet of Things (IoT) sensors, artificial intelligence (AI)-powered digital twins, connected worker capabilities, and cloud-based digital process orchestration platforms, these contracted entities can utilize real-time data and critical business insights to help achieve business objectives around externalization.

Manufacturing 4.0 capabilities powered by advanced data acquisition, analytics, and decision intelligence technologies can ingest data from strategic contract manufacturers to monitor critical process parameters (CPPs), process data verification, and in-line process analytics focused on critical quality attributes (CQAs). These digital capabilities also can enable creation of batch records in an electronic format, as well as automated workflows that provide exception-based batch record review, dispositioning, and efficiency in the quality release process. This approach will help organizations create higher-quality products and improve process consistency, while increasing operational trust, reliability, timing for high-quality releases, and speed to market.

Smart manufacturing capabilities also can be leveraged to digitalize manual technology transfer activities that reduce time to market and costs while also enhancing product quality the first time at commercial scale by employing processes powered by digital solutions. In addition, paper-based standard operating procedures and work instructions can be replaced by connected worker technologies such as smart glasses to deliver efficiency and help reduce operational errors.

Tighter integration and collaboration in supply chain and capacity planning can help organizations better manage variability in the value chain and speed collective decision-making. Many life sciences organizations are investing to modernize existing planning solutions and improving sales and operations planning processes to better orchestrate and plan extended supply chains along with strategic partners. Cloud-based advanced planning solutions and AI-powered digital twin solutions bring agility in decision-making against changing demand, raw material availability, and capacity management. Using internal and external partner and supply chain data, these tools sense risks and even predict schedule deviations to mitigate or reduce business impacts using automated scenario analysis.

Deploying The Right External Manufacturing Strategy

Life sciences companies that seek to move past today’s headwinds to enable more consistent, effective externalized manufacturing operations should consider the following:

1. Don’t take a one-size-fits-all approach in developing collaboration protocols and frameworks with external manufacturing partners. Define a tailored approach for each supplier and external partner segment based on strategic criticality, risk, and the partnership model (e.g., fee for service, joint venture, “site-within-a-site” condominium model).
2. Develop a comprehensive operating model, operational playbooks, and a prioritized implementation and deployment road map for each external partner segment, including data and digital capability requirements.
3. Enable top-to-top conversations with external partners and establish a collaborative vision, shared objectives, and organizational alignment. Validate alignment with the road map of initiatives and incentives.
4. Align on KPIs to measure success and develop change management initiatives that will help shift mindsets about the role of the new operating model and the value it can deliver for the organization, patients, and external partners.
5. Before implementing new technologies and deploying the road map, establish a strategy for planned process improvements to enable quick wins.
6. Initiate piloting solutions and proofs of value across each external partner segment and then scale these processes and capabilities to other partners within each segment. Track improvements and realized value to enable continuous improvements.

Summary

To unlock the full potential of externalization objectives, pharma organizations should invest in overhauling their operating model toward external manufacturing and operations. This approach is a joint effort and requires strong collaboration across partners. A well-defined strategy and road map should be established across partners, including digital capabilities that should be enabled over time to successfully support this strategy. Companies that take this approach will be well positioned to build value for themselves as well as the patients for the long term.

By relying less on manual processes and enabling real-time visibility and information exchange with the help of leading digital technologies, pharma and biotech leaders have an opportunity to reduce supply chain and compliance risks and costs; improve operational productivity, product quality control and revenue; and improve service and outcomes for patients.

Reference

1. “Pharmaceutical Contract Manufacturing Market Size and Companies,” Markets and Markets website, https://www.marketsandmarkets.com/Market-Reports/pharmaceutical-contract-manufacturing-market-201524381.html.

The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.

About the Author:

Kerim Ozbilge is a partner in the Supply Chain & Operations Consulting practice at Ernst & Young LLP (EY US) with more than 24 years’ experience managing full-life cycle supply chain transformation programs. He’s passionate about helping his clients solve their toughest business challenges through operational excellence and digital technology enablement.