Pharma and Manufacturing: Are Pharma Companies and Suppliers Aligned?

By Patricia Van Arnum - DCAT Editorial Director

December 12, 2018

A new DCAT benchmarking study surveyed executives from pharmaceutical companies, CDMOs, CMOs, and suppliers to answer this crucial question: is the pharma customer–supplier relationship in alignment? The study examines areas of critical interface: manufacturing demand and supply; supplier business models; performance goals and metrics; the level of customer–supplier integration; and communication.

Inside the study

Pharmaceutical companies are undergoing rapid scale changes in an effort to improve operational efficiency and productivity. At the same time, pharma service providers and suppliers are refining their business models in order to best meet the perceived current and future needs of their customers. Given this dynamic business environment, is the pharma customer–supplier relationship in alignment? And if not, what are the opportunities for improvement?

To answer these questions, Examining the Current and Future Alignment of the Pharma Customer–Supplier Relationship, a new benchmarking study by the Drug, Chemical & Associated Technologies Association (DCAT) surveyed executives from pharmaceutical companies, contract development and manufacturing organizations (CDMOs), contract manufacturing organizations (CMOs), and suppliers to gain their perspectives on areas of critical interface. These included: manufacturing demand and supply; supplier business models; performance goals and metrics; the level of customer–supplier integration; and communication. The study was developed by the DCAT Research & Benchmarking Task Force and administered by Cell Associates, a St. Louis-based market research firm. The full results of the study are available to DCAT members and may be found here.

Manufacturing capabilities: demand and supply

The study showed that the areas of greatest demand for pharma companies for contract services or products are small-molecule manufacturing and packaging services and products (see Table I ).

Contract services for small-molecule manufacturing intermediates and active pharmaceutical ingredients (APIs). Seventy percent (70%) of pharma companies said they are now seeking or likely to seek these services in the next 12 months, and 65% of pharma companies said they would seek them in the next three years.

Packaging services and products. Fifty-two percent (52%) of pharma companies said they are now seeking or likely to seek packaging services and products in the next 12 months as well as in the next three years.

Drug products. Pharma companies’ demand for development and manufacturing services for solid dosage products is greater than that for parenteral drugs, but demand for manufacturing services for parenteral drugs is increasing. Almost half of pharma companies said that they are now seeking or plan to seek in the next 12 months contract services for solid-dosage formulation development (44%) and solid-dosage manufacturing (48%). Contract services for parenteral drugs are less sought with approximately one-third of pharma customers now seeking or planning to seek in the next 12 months contract services for formulation-development (35%) and manufacturing (30%) for parenteral drugs (see Table I ).

Over the next three years, pharma companies’ demand for services for solid dosage products stays fairly constant. Slightly more than one-half (52%) of pharma companies said that they will be seeking contract services for solid-dosage manufacturing over the next three years (compared to 48% currently), and 48% said they will be seeking formulation-development services over the next three years (compared to 44% now).

Where a demand shift is seen is for manufacturing services for parenteral drugs. Thirty-nine percent (39%) of pharma companies said that they will be seeking contract services for parenteral drug-manufacturing in the next three years compared to 30% now. As previously noted, demand for formulation-development services for parenteral drugs remains constant at 35%.

Consistent with that change, more suppliers plan to provide services for parenteral-drug manufacturing in the next three years compared to now (34% vs. 24%) and for formulation development for parenteral drugs (30% vs. 22%).

Table I: Capabilities Being Sought by Pharmaceutical Companies.
Service/Product Area Seeking now or in the next 12 months Seeking in the next three years
Small-molecule manufacturing (intermediates and APIs) 70% 65%
Packaging services and products 52% 52%
Drug-product manufacturing (solid dosage drugs) 48% 52%
Formulation development (solid dosage drugs) 44% 48%
Drug-device design and manufacturing 35% 44%
Formulation development (parenteral drugs) 35% 35%
Biomanufacturing for drug substances 30% 35%
Drug-product manufacturing (parenteral drugs) 30% 39%
Vaccine production 13% 13%

 Source: Examining the Current and Future Alignment of the Pharma Customer–Supplier Relationship (November 2018), Drug, Chemical & Associated Technologies Association (DCAT).

Performance goals and metrics

The study also examined whether pharma companies and suppliers were on the same page in terms of performance goals and metrics. Pharma companies and suppliers ranked the importance of supplier performance goals, said whether they used customer-of-choice metrics or not, and identified metrics used for continuous improvement.

The study showed that pharma companies and suppliers both rated on-time in-full and business continuity/security of supply as their most important measures of supplier performance. Pharma companies, however, also rated responsiveness to forecast changes and transparency of suppliers’ supply chains as very important metrics.

The performance metrics used by pharmaceutical companies in evaluating strategic suppliers that were most important to pharma companies were on-time in-full (96% of pharma companies cited as “very important” or “important”), responsiveness to forecast changes (96%), business continuity/security of supply (96%), and transparency of suppliers’ supply chains (82%). The performance goals and metrics that suppliers felt were most important to their key accounts were business continuity/security of supply (100%) and on-time in-full (100%). A full breakdown of the evaluation of performance goals and metrics may be found here.

Strategic relationships between pharma companies and suppliers

The study also examined the nature of the relationship between pharmaceutical companies and their strategic suppliers and similarly between suppliers and their key accounts to see if the parties viewed their relationships differently or similarly. The study gained feedback from companies overall and in various areas, such as the level of integration (including demand/capacity planning and co-investments) and communication.

Among the key findings, pharma companies almost always defined “strategic suppliers” as partners in a long-term relationship while suppliers were split into two fairly even groups on how they defined “key accounts.” One group saw “key accounts” in the same way as did pharma companies—that is as partners in a long-term relationship; the other group thought of “key accounts” in more financial or transactional terms.

Both pharma companies and suppliers said the level of integration among each other was important in their strategic relationship, but they differed on the importance of other elements in defining such partnerships. Both pharma companies (70%) and suppliers (66%) thought that the level of integration of the customer–supplier relationship was important.

Criticality of materials from a supplier was much more important to pharma companies (78%) than to suppliers (13%). Continued business with a supplier was much less important to pharma companies (39%) than to suppliers (70%). Growth of spend with a supplier was also much less important to pharma companies (17%) than to suppliers (51%).

The full results for evaluating strategic partnerships may be found here.

DCAT will hold a webinar on January 16, 2019 featuring Robert Discordia, Ph.D., Vice President, Pharmaceutical Development & Manufacturing at Corbus Pharmaceuticals and Chairman of DCAT’s Research & Benchmarking Task Force, for an executive briefing of the study’s findings. Registration and further information on the webinar, which is complimentary and available only to DCAT members, may be found here.