Outsourcing extends the lifecycle of your Rx and OTC products:
Alternative sourcing becomes a valid option as volumes in the original sourcing plants decline or plants are reconfigured for new products.
Higher competitive threats require local solutions and tactics, such as quick response time and a high degree of demand volatility.
Established products and brands are leveraged with line extensions to defend market share.
When does it make sense to outsource commercial manufacturing?
Outsourcing is part of the global trend. At present, 50% of the
production for active substances is outsourced. Commercial manufacturing is outsourced
for approximately 20% of finished products - and this figure is swiftly increasing - as
pharmaceutical companies continue to focus more on research and development plus marketing.
Some predict that commercial manufacturing will reach an outsourcing ratio of 50% within
a few years. Pharmaceutical companies increasingly commence their outsourcing process
during the final approval phases for NCE.
Cost savings may be achieved through outsourcing manufacturing.
Typically, processing costs, excipients and packaging materials comprise approximately
8-10% of the selling price of a pharmaceutical product. If these costs amount to more
than 10%, then outsourcing will deliver a cost savings that can increase profitability,
or, be re-invested into revenue building activities.
Lengthy lead times (longer than 2-3 months) or high minimum order
quantities (more than 2-3 months of sales) can severely limit the flexibility of a local
organization in responding to its marketing activities. Contract manufacturing is able
to solve this issue by offering standard short lead-times. In Asia, many relatively old
products are sold very successfully; however, headquarters may decide to discontinue an
old product. We can continue to manufacture the product either under a license, or acquire
the rights to the product. This secures a continuous supply of the product for the local
business unit while eliminating the manufacturing complexity for our client.
Adapting products to the needs of a local market can support revenue
growth. This is critical when building revenue and market share in segments shifting to
OTC as products' success becomes more dependent on ever-changing consumer needs. Extending
the lifecycle is imperative as many older products contribute a significant amount to the
profits of a pharmaceutical company. A greater life cycle can be realized by developing
new release forms, more modern packaging or introducing line extensions that shore up