PHARMACEUTICAL CONTRACT MANUFACTURING

Pharmaceutical Contract Manufacturing



Pharmaceutical Contract Manufacturing

The process of manufacturing goods, components and pharmaceutical etc for a hiring company is known as contract manufacturing. This system is usually followed by outsourcing or off shoring companies in developed countries. This business model is most popular among giant pharmaceutical concerns which outsource to avail cost benefits.

Contract manufacturing off shoring is a strategic policy where in apart from cost benefit the need to invest in infrastructure is avoided. For a contract manufacturing company there are few prerequisites like having necessary infrastructure, expertise and capability to manufacture on required scale. The economy of scale plays a greater role here since the outsourcing firm seeks lower cost of manufacture (Myers, 2007, 06-20)

For outsourcing firms in some countries there can be tax benefits as well. The process of engaging a manufacturer is often through bidding between many companies. The final solution is based on best benefits offered besides technical capabilities and production capacity. Besides pharmaceuticals many industrial sectors prefer this like defense, food and beverages, IT, personal care and automotive companies. (Myers, 2007, 06-20)

Another business model is ODM or original design manufacturer which designs and manufactures products and goods. These are then sold to firms which label the products under their brand name and sell in the market. The ODM holds the design right here unlike in contract manufacturing where the hiring company owns the brand.

Contract Manufacturing is usually preferred by foreign companies as a business strategy. The benefits usually are cost, less labor input, transportation costs in case of markets in proximity to the CM. Another advantage is avoidance of tough regulatory laws and restriction on foreign manufacturers. (Myers, 2007, 06-20)

A pharma company may require to specify various capability fields. The company has to specify the type of products as human drugs, serums, vaccines etc. In what form can the company manufacture dosage form, liquid form, powder form etc. The manufacturer has to provide with packaging in most cases after production of drugs.

Large pharmaceutical companies have been doing it for years and now smaller pharmaceutical companies are joining the trend. It has been a long standing practice for large pharmaceutical companies to turn to contract manufacturing organizations (CMOs) to achieve efficiencies in cost and capacity, or to obtain a specific expertise not available in-house. While these factors are still valid, the most dynamic driver behind the use of CMOs in the pharmaceutical industry is rapidly becoming the unique, innovative, and state-of-the-art process and production technology on offer. More and more pharmaceutical companies are leaning towards outsourcing to concentrate on marketing their products, while saving time and headaches involved in manufacturing.

In the last decade or so there has been a complete globalisation in contract manufacturing with the involvement of companies from India. Worldwide revenue for contract manufacturing and research for the pharmaceutical industry was estimated at $100 billion in 2004 and is expected to grow in double digits to more than $160 billion in 2009.

A Contract Manufacturing Organization, often abbreviated as CMO, and ...