Recasting the Role of a Contract Packager

The current business climate is pushing pharmaceutical companies to rely more on the services of contract packagers.

Erik Swain, Senior Editor

Contract pharmaceutical packaging used to almost totally be an ad-hoc business. When a drug company had an overflow of demand for a particular product, or needed packaging help for a product launch, it called on a contract packager.

Those scenarios are still commonplace in industry, but thanks to financial, marketing, technology, and regulatory considerations, the contract packager's role has grown, and relationships between drug companies and contract packagers have become more permanent. Some companies even call them partnerships.

"I've seen it evolve to the point where the contract packager is now a full part of the product development cycle," says Ed Hancock, president of the pharmaceutical division of Anderson Packaging Inc. (Rockford, IL). "More and more, we are sitting at the table early in the process when they identify the final form of the drug. The pharmaceutical companies are tending to use two or three contract packagers, and holding onto them as strategic partners going forward."

In today's climate, drug companies have plenty of reasons to use contract packagers. While certain products and market conditions obviously call for the help of contract packagers to handle production, drug companies are enlisting them to help with package design at the earliest stages of new-product development. However, with these added duties comes a high level of expectations, both for the integrity of the contractor's packaging operations and for the constant communication that must be maintained.

WHY OUTSOURCE

The changes in pharmaceutical packaging trends have come as drug companies have decided to focus on their core competencies, such as product development and sales and marketing, and to streamline noncore operations, such as manufacturing and packaging.

"A lot of drug companies tell us that they are really good at developing products, but not as good at blistering and kit assembly," says Rick Sury, director of sales for Sharp Corp. (Conshohocken, PA). "So they go to someone with the equipment and the flexibility to do those things well."

Cost is also a factor in determining whether to use contract packagers. "With the volatility of the business, contract packagers are set up to deal with spikes in production, which are often difficult for the drug companies to handle internally," says Kirsten Voss, executive vice president of the packaging services division for Diamond Packaging (Rochester, NY).

"There's a lot of plant rationalization going on in many of the pharmaceutical organizations," notes Renard Jackson, executive vice president of PCI Services (Philadelphia). "I believe there has been something of a downsizing in their package development groups, and a lot more products are coming to the marketplace than there used to be. So with smaller resources on their side and more products, they are definitely outsourcing more."

In fact, says Phillip Waegelin, director of operations for the contract packaging division of Comar Inc. (Buena, NJ), the drug companies "are using volume and long-term commitments to negotiate pricing. They are giving the opportunity to develop long-term partnerships as opposed to incremental business. And that is beneficial for everyone."

As a result of the increased reliance on contractors, packaging projects are managed differently, says Laura Gustin, vice president of sales for the Caraustar Specialty Packaging Div. (Ashland, OH). "Pharmaceutical companies now assemble contractor management groups to evaluate the feasibility of using a contract packager, select the best company for the job, and then manage the project," she says. "These roles are differentiated from the traditional purchasing relationship in that developmental efforts, components, and large capital initiatives are managed from launch through the completion of a project."

Kumar Nanavati, director of packaging development for Whitehall-Robins (Madison, NJ), which manufactures over-the-counter (OTC) drugs, says his firm treats contract packagers "like partners—an extension of our own plant. They can do so many things so fast, whereas setting up a new machine to package something ourselves would take a much longer time."

WHAT TO OUTSOURCE

Simple packaging jobs, such as routine bottle filling, are more likely to be kept in-house because the firms are likely to have the required equipment on hand. But new drugs often require more complex and unique packaging, and the firm may not want to invest in expensive packaging machinery specialized for just one product. That is where the contract packager comes in. Compliance blister cards, pouches, and promotional secondary packaging are some areas where they are often relied upon.

"When we have a new product, we always give the first chance to our own people," Nanavati says. "But if it's a complicated package or something that can't be handled on a standard packaging line, we'll go over to a contract packager."

For example, Hancock says, drug companies tend to use contract packagers for heat-sealed blister cards. "There is interest in the form because it can help with patient compliance, and it can meet child-resistance requirements," he says. "A contract packager may have the ability to customize those types of packages, create different shapes, and match them up with a firm's product line and product image at a lower cost than a more exotic package."

Pouching technology, especially for OTC samples, is another area where drug firms have been frequently employing contract packagers, Hancock says.

Marketing promotions that require special packaging or labeling are also common candidates for outsourcing, Voss says. "Whether it be the bundling of different drugs together or the attachment of a business reply card, anything unique or with a more complicated process tends to be outsourced more," she says.

A filling operation at PCI is completed using automated machinery that picks and places components into kits.

New products will almost always need some sort of help from contract packagers, as there is intense pressure to produce large volumes as soon as final FDA approvals are granted. But in recent years, the contractor's pre-approval role has expanded far beyond that. "We are involved much earlier, for much longer, and in some cases we have charge of package development projects," Jackson says. "We feed them back all the information for their approvals. We are doing more of the stability sampling as well."

The benefit of this for the drug companies, Nanavati says, is that they can draw on the contract packager's expertise and have an early chance to sort out logistical issues such as what the contractor's packaging machines will and will not be able to do.

Sometimes a pharmaceutical firm will use a contract packager for the product launch without knowing right away whether it will eventually bring the packaging in-house. "In the beginning, a lot of companies like to launch through a contractor, and if they think it will be a home-run product, they may wait a few years, and then bring it in-house if it grows and looks like it will be around for a long time," Sury says. "Three years seems to be about the place where they make the transition. At that point, they know they can justify buying equipment if they have to."

Small biotechnology firms, who may only have one or two products and may not have invested in any packaging equipment at all, will outsource all packaging functions. Even if they wanted to package in-house, their biosensitive products usually require special packaging, and they may not have anyone on staff with enough packaging expertise to handle it. So they find a contract packager that does. "With the smaller biotechs and manufacturers of generic drugs, we are also heavily involved in the package development process, because they don't have the resources for that at all," Jackson says.

Another aspect of package development, Gustin says, is that pharmaceutical companies are also turning to contractors to help them solve regulatory and stability challenges. "Child resistance, senior-friendly packaging, and new labeling requirements are challenging, but they are truly opportunities for the innovative contract packager," she says.

WHAT IS EXPECTED

An automated blister filling operation at PCI is equipped with a quality inspection vision system.

With the increased responsibilities of contract packagers come increased expectations. Some drug companies want overall or turnkey sourcing from their contract packagers. Even those that do not still expect versatility, flexibility, and a broad range of expertise. A contract packager must be well-versed in quality control, validation assistance, regulatory support, engineering, and packaging-line development, among many other things.

"A contract packager that has several types of packaging and manufacturing abilities can bring several ideas and solutions to their customer, rather than just focusing on what they do best," Gustin says.

Carl Oberg, general manager of the Clifton, NJ, facility of Caraustar, adds, "Full service, from project management to validation coordination to product and component sourcing, stands as the distinguishing characteristic of the successful contract packager."

In fact, says Michael Rubenstein, COO for the specialty carton and contract packaging division of Alcan Packaging (Baie d'Urfe, QC, Canada), a contract packager is expected to "do everything [drug companies] would do if they manufactured or packaged in their own facility, including documentation and validation."

As drug companies are facing more pressure from regulators to ensure that their packaging processes are under control, they have been stepping up the quality control audits of their contract packagers and expect the same high standards. "One of the most important aspects of your relationship with a drug company is maintaining a controlled environment, from the efficiency of your HVAC system to your maintenance procedures," says Luc Vaugeois, director of sales and marketing for Ropack Inc. (Montreal). "If you can keep everything under control and keep your technology well aligned, the pharmaceutical companies will be pleased with your philosophy."

When trying to determine who the right contract packager will be for the job, Nanavati says they look for GMP-compliant facilities, with high quality standards and no problems with FDA, that have passed their strict quality inspection. "Locations close to our distribution centers and the ability to handle large volumes are important, as is cost. And it is essential that there is no potential for product mix-up, particularly between product lines. We check for material flow, recordkeeping, product lot tracing, training manuals, equipment maintenance logs, quarantine area, and cleanlines. We have to see that everything is moving smoothly, without any quality problems, right up to the shipping department."

HOW TO COMMUNICATE

Another shift in the relationship between drug companies and contract packagers has come in the form of communication. Not only is there more of it, but software programs and other electronic means have made the contract packager almost like an extension of the drug company's packaging division from a paperwork standpoint. Electronic order tracking has become particularly indispensable.

Jackson explains, "We are getting much earlier notification on their long-term production forecasts, in many cases as long as 12 months in advance, and then we firm things up with them on a quarterly basis."

This automated form-fill-seal machine at PCI produces pouches used for unit-dose packages and physician samples.

Drug companies with multiple facilities view electronic communication with contractors as essential, says Nanavati. "We would like contract packagers to be able to receive artwork, specifications, and purchase orders all at once without using lots of paper that can get lost in manual handling," he says. "We want to provide necessary information and changes in a timely manner through electronic communication to reduce errors and lead time."

Information sharing through software can become quite extensive, Vaugeois says. "Everything, from where you are in the process down to where all the pallets are, is available on-line," he says. Ropack is in the process of installing an enterprise resource planning system to allow for the ability to access a secure window of information on-line. Because tracking orders throughout processing and delivery can be critical during the launch of a new product, Vaugeois explains that the system will be an important communication tool.

In fact, contractors and their customers agree, there must be a high level of synergy and communication between a contract packager and its pharmaceutical clients for the contractor to succeed. And given how the relationship has evolved in recent years, it is safe to assume that expectations will only get higher.