Third party manufacturing and transfers-

challenges, risk mitigation and latest trends

with solution insight

Anshu Verma
Third Party Operations : Current Trend in Pharma Industry

• CRO’s- Contract Research Organizations

• CMO’s-Contract Manufacturing Operations
• Third Party Analytical services
• Third Party Technology Transfer services
• Third Party Logistics services
• Third Party Contractors for entire portfolio planning (right from
identification of Project finding suitable CRO’s Tech transfer at
site Filing support Post launch support and coordination)
• Miscellaneous services
CRO’s-
-Contract Researchers
-May support in IP activities as well
-Develop the Project for respective market as per RA requirements
-Responsible for Tech transfer at proposed receiving site.
-May file/May not file (but support for filing)
-Support for deficiency responses/CRL phase
-Launch support
CMO’s-
-Contract Manufacturers, supply the product to MA holder at fix CCPC
-Cost competitive
-Responsible for consistent product quality, timely supplies, OTIF
-Responsible for Tech transfer at another receiving site, if required.
-BD type of deals (supply the product to MA holder at fix supply prices)

Third Party tech transfer services-

-Provide full support for successful Technology transfer between TS & RS
Emerging complicated trends in Pharma contract
manufacturing business-
 Two Parties involvement-
-Direct transfer TS and RS (here TS could be R&D and RS is CMO)

 Three Parties involvement-

- TS or Licensor / Third Party Tech Transfer / RS (CMO)

 Four Parties involvement-

- CRO / Licensor (Company 1, hires CRO ) / Third party Tech transfer / RS

 Five Parties involvement-

- An external Organization plans everything for Main Company say X (1) 
Finds CRO (2)  May hire a Third party tech transfer Company (3) / TS (which could
be a CMO) (4) / MA holder is company X (5)
Why CMO’s ?

 Cost advantage / benefits

 Capacity constraints at In house sites
 Novel technologies which are not available at IH facilities
 Outdated technologies no more available at IH facilities but required for the product

Type of deals

 CMO business
 BD deals
Challenges in managing Third party manufacturing-
 Selecting a CMO
Deal negotiation

- Pure CMO?
-Co development along with CMO ?
- BD deals
 The Contract or Supply agreement
-OTIF terms and conditions
-Our understanding Vs their understanding in terms of deliveries/OTIF
(normally +/- 10% in duration and quantity variance)
-Logistics and shipments (air Vs sea, correct planning plays an important role
here as the cost is involved)
-Payment terms and conditions

 QTA or quality agreement

 Maintain relationships -Supply relationship concept
 Regulatory status
Challenges in managing Third party manufacturing-
Selecting a CMO- Why very important
-Who has the required capabilities?

-Of those who have the capability, do we have experience— positive or

otherwise—which would favor or disqualify specific contractors? In particular,
can we leverage existing commercial, technical, and quality relationships with
any of our established satisfactory contractors who may have the
capacity/capability/inclination to take on additional work?

-Of those who have the capabilities and whom we might choose to use, who is
interested in doing business?

-Can we identify a preferred contractor with whom to open serious

negotiations?

-What are the offered costs?

-Other factors like geographies/proximity / also plays an important role.

Challenges in managing Third party manufacturing-
Deal negotiations-
 Pure CMO’s
- “I’ll give you the work and will pay you”
-Technology is of contract giver / licenser, who in turn use resources of supplier
or licensee
-Milestone payments
-Materials / vendors all are of contract givers and supplier has to use as it is

 Co development along with CMO ?

-Two R&D’s develop the product together
-MA with licensor
-CMO could be one of the partner
-Profit sharing could be a spilt here

 BD deals
-Suppliers formulation “you buy and sell”
-MA could be with supplier or in some cases with marketing company
- Artworks etc. usually provided by marketing
-Timely launches are important here
Challenges in managing Third party manufacturing-
Contract-
-Precise definition of what is provided covering manufacture, quality,
regulatory/compliance, supply, and cost issues

-Ownership of, and rights to use or assign, IP during the life of the deal and after
the relationship ends—both the initial IP brought by either party to the deal and
IP developed during deal life

-Good Manufacturing Practice (GMP) standards and the overall governing law
against which achievement or otherwise of the contract terms will be decided
Rights of termination for both parties for failure to supply, failure to take
contracted volumes, failure to achieve the required standards of
quality/compliance, and takeover or insolvency of either party.

-Communication—who, what, when—particularly for change, deviation, or

product incidents
Challenges in managing Third party manufacturing-
Supply Agreement and relevant monitoring-
-OTIF (=/- 10% rule)
-No Backorder situation (meticulous planning, RFT documentation, close eye on
materials, inventories and all functions)
- Even a small technical error / document delay/ equipment
breakdown/ material unavailability / delayed LIR / could result in a potential
backorder.
-Back- order situations can largely be avoided
-Supply prices should be agreed ASAP before launch.
-Timely availability of PO’s
-Close monitoring / track on Project
-Timely dispatch (sea / air)
Challenges in managing Third party manufacturing-
Quality and Technical Agreement- should be very clear and
unambiguous on below to avoid future conflicts and relationships
-Time to time Compliance audit of CMO
-Vendor audits- Who will do?
-Vendor qualifications as per routine procedures (annual vendor audits /
questionnaires etc.)- whose responsibility?
-Batch failures, market complaints and recalls
-Change controls and deviations in systems
-Implementing and ensuring Good Quality practices at CMO
-Right First time documentation
-Clearly defined roles and responsibilities of site QA and Company QA
-Approved vendor list- who will provide or who should prepare / maintain?
-Obtaining required mandatory documentation from vendors (like USP 661 /EI
declaration etc.)- Whose responsibility?
-Accreditation status of material vendors – Expectations are “you do it”
Challenges in managing Third party manufacturing-
Quality and Technical Agreement- QRM’s

An assigned QRM can not only help the CMO to reach up to the desired level of standards
in terms of quality expectations but can also improve all future supply disruption
possibilities by ensuring good quality and manufacturing practices at site, minimizing
errors , encouraging RFT documentations and guiding their counterparts at site to stick
with best practices.
Challenges in managing Third party manufacturing-
Overall Supplier relationship concept-
Maintaining smooth relationship with suppliers/CMO’s is key for future
success, to leverage maximum benefits from CMO’s in terms of supplies,
costs and quality.
-Timely visits/ review meetings / calls
-Discussing potential issues at Senior level
-Motivation to the supplier in terms of incentives etc. if OTIF is within target
range
-Time to time rate/price negotiations along with procurement support
-Financial reconciliations
-Ensuring supply continuity and BCP
SRM’s (Supply Relationship Manager)
SRM plays an important role in managing relationships with suppliers throughout the
lifecycle of project starting from inception till its decline or withdrawal. SRM’s role is crucial
in conflict management, escalating the important issues at right time to Supplier’s top
management to maintain uninterrupted supplies and to ensure an overall warmth in the
relationship between two companies.
Challenges in managing Third party manufacturing-
Overall Supplier relationship concept-
Maintaining smooth relationship with suppliers/CMO’s is key for future
success, to leverage maximum benefits from CMO’s in terms of supplies,
costs and quality.
-Timely visits/ review meetings / calls
-Discussing potential issues at Senior level
-Motivation to the supplier in terms of incentives etc. if OTIF is within target
range
-Time to time rate/price negotiations along with procurement support
-Financial reconciliations
-Ensuring supply continuity and BCP
SRM’s (Supply Relationship Manager)
SRM plays an important role in managing relationships with suppliers throughout the
lifecycle of project starting from inception till its decline or withdrawal. SRM’s role is crucial
in conflict management, escalating the important issues at right time to Supplier’s top
management to maintain uninterrupted supplies and to ensure an overall warmth in the
relationship between two companies.
Challenges in managing Third party manufacturing-
Overall Supplier relationship concept-
The key to successful
management of supplier relationships is to understand the value each supplier brings to
the short- and long-term success of the company. Suppliers are segmented based
on that value and each segment is managed differently
Leading companies don’t just expect the contract manufacturers in their most strategic
segments to meet their needs. They work collaboratively and transparently to ensure that
they are equipped to handle demand variations, have supply continuity plans in place, and
are actively engaged in continuous improvement efforts and even in joint innovation
initiatives.
Challenges in managing Third party manufacturing-
Regulatory challenges-
-RA accreditations with site
-Last US FDA /EU audit?
- Any major or Critical observations?
-Any long term CAPA’s?
-Address plan?
- Is the site advised by agencies to hire any external consultant for improvement
plan (as CAPA)
-Warning letters any?

Other RA aspects
-Obtaining required mandatory documentation from vendors (like USP 661 /EI
declaration etc.)- Whose responsibility?
-Accreditation status of material vendors – Expectations are “you do it”
Challenges in managing Third party manufacturing-
Supplier relationship team-
Supplier relationship team comprises individuals from various cross
functional teams who can interact with their respective counterparts at
the CMO’s. This team is led by SRM and can have following functions
(based on the requirement)
-Project management
-Procurement
-Supply chain function
-Quality specialist / QRM
-Formulation specialist / Tech transfer team
-Regulatory support
SRT
-SRT can work either in a functional manner or in a matrix approach where
each individual function can have a solid line of reporting to their respective
function head and a dotted line reporting to Project head for an individual
project.
Challenges in managing Third party manufacturing-

Requirements for a successful and result oriented SRT-

-Complete (i.e. all the concerned stakeholders should be available in team)
-Focused
-Mutually aligned goals
-Capabilities
-Right person at right place and at right time
-Communication skills should be strong
-Should speak in one voice with supplier
-Ownership
Challenges in managing Third party manufacturing-

Major challenges at Supplier/CMO end-

-Technical Capabilities
-Adequate Human Resources
-Capex required for completion of project
-Timely receipt of prerequisites for transfer activities
- Successful Analytical method transfers
-Successful formulation technology transfer
-Qualification of vendors
- Establishing contacts and relationships with vendors
-Getting mandatory required documentation from vendors (USP 661, EI)
-Procurement of materials on time
-Getting the laboratory and manufacturing slots on time
-Right First time documentation
- Right attitude
Challenges in managing Third party manufacturing-

Technical capabilities
-Whether the site has required technical capabilities in terms of understanding
the criticalities of product
-Whether the CMO has ever dealt with such type of
product/category/technology
-Can the site supply consistently a quality product on time in full

Adequate Human Resources

- Does the CMO/ site has customer dedicated team
-Is the site ready to adopt an SRT concept
-SPOC’s
-Are the resources adequate as per the requirement
-Are the resources capable enough to handle the project(s)?
-Does the site have parallel line of reporting for quality?
Challenges in managing Third party manufacturing-

Capex requirements
-If Capex need is identified how fast it can be materialized at site without
disturbing much their existing setup.
-Payment terms
-Is area qualification required?

Successful technology transfer

-Timely completion of AMT activities at site is must for timely completion of
projects
-Right gap assessments (analytical as well as manufacturing)
-Right First time documentation- LIR’s / deviations / Change controls
-Timely availability of pre requisites and materials at site
-Timely availability of tooling and change parts etc.
Challenges in managing Third party manufacturing-

Qualification of vendors (QTA should be clear on)

-Timely qualification of vendors- API / excipients PPMs
-Who should do the audits
-Who is responsible for bringing materials at site ?
-Commercial launches- a win –win for both
-How the parent site can help CMO to develop relationship/rapport with the
vendors for continuous support.
-Getting key documents from vendors could sometimes be challenging for
CMOs like oDMF / EI declaration / validation documents etc. and license
holders
should support CMO’s to facilitate the processes.
Challenges in managing Third party manufacturing

What really attracts a CMO?

-Volumes
-Smart Kitty/basket of products
-Competitive rates
- Timely PO’s
-Required support from License holder

What really a license holder wants from CMO?

-Competitive rates (CCPCs)
-OTIF
-Quality
- Optimized processes
-Required support from CMO’s
Challenges in managing Third party manufacturing

What really attracts a CMO?

-Volumes
-Smart Kitty/basket of products
-Competitive rates
- Timely PO’s
-Required support from License holder

What really a license holder wants from CMO?

-Competitive rates (CCPCs)
-OTIF
-Quality
- Optimized processes
-Required support from CMO’s
Challenges in managing Third party manufacturing

“Together we can”

It’s always beneficial for a licensor to have a strong relationships with strategic
suppliers, (for example, by having peer-to peer relationships at multiple levels,
sharing their overall strategic plans with suppliers (to the extent it pertains to
them), and expecting them to develop their own plans that align with those
strategic plans.
A transparent, open and honest relationship between the two ensures timely
supplies within agreed cost and quality.
Challenges in managing Third party manufacturing

Thank you.