The process of identifying and selecting an outsource provider is one of the most important steps in the research, development and manufacturing of many pharmaceutical products. Yet this seems to be one of the most overly simplified and typically one of the most rushed activities in the industry today.

A few of the larger pharmaceutical and biopharmaceutical companies have outsourcing departments that specialize in the process of identifying and selecting outsource providers. These specialists have developed very efficient systems to assist them in identifying, selecting and qualifying external resources. However, virtual and mid-sized pharmaceutical companies typically do not have outsourcing specialists and must instead rely on pharmaceutical consultants, purchasing agents, manufacturing personnel and even the actual researchers to find and contract with outsource providers. While I can’t provide any earth-shattering magic solutions or grand unified theorems for outsourcing that will work for every company, I can offer a reasonable approach to the process of identifying and selecting an outsource provider.

First, there are several widely held misconceptions regarding pharmaceutical service providers. The following statements represent some of the most common misconceptions that exist today.

• It will cost less per unit to outsource the project than to do it internally.
• Service providers have short cycle times and can begin almost immediately.
• The service provider will have a dedicated team assigned to my project.
• The service provider has fully automated and integrated equipment to perform my operations.
• The service provider can dedicate production lines to my product.
• The systems and policies in use at my facility will easily be implemented into the contract site.
• The service provider will understand my current cost constraints and be willing to see the future financial benefit to them.

While some of the items in the list above may seem nonsensical, outsource providers are confronted with them on a daily basis. The pressure to reach market quickly has never been greater than it is today and outsource providers have become a critical element in the process of moving from concept to commercialization of pharmaceutical products. It is important that, when a company makes the decision to outsource, it does so in a very methodical manner with very clear goals and reasonable expectations, established very early in the process.

Setting the Plan
At the outset, a sponsor company must first decide what benefits are necessary in order for it to make sense to outsource a particular project. The sponsor must ask: Is this outsourcing activity being conducted for tactical reasons (deliverables) or for strategic ones (value added)? The answer to this question can determine which suppliers are best suited to satisfy the sponsor’s requirements.

The sponsor must develop a list of essential activities and a scope of work that will be outsourced. Key objectives such as budget, schedule, critical project milestones and deliverables must be clearly understood in order to develop a Request for Quotation (RFQ) that meets the overall objectives and provides a consistent baseline for proposals. Don’t assume that contract service providers know the total scope and needs of a project because “they are the experts.” Every project and every client’s need is unique. Most contract organizations have some sort of questionnaire or survey that needs to be completed under obligations of confidentiality. These forms should be filled out as completely and accurately as possible.

Most contract organizations also do not have a dedicated pool of resources that will only work on one client’s project; instead, each resource will likely be simultaneously juggling six to eight projects, depending on the organization. Sponsors must plan for success by establishing timelines that have built-in slack. This is essential because, just as things never seem to go as planned inside the client organization, one can expect at least this same level of variation at a contract site. The philosophy a sponsor should adopt is: Always plan for the worst with the expectation of achieving the most favorable outcome. The better the plan, the more likely the project will yield a successful result.

Locating Outsource Providers
Information has never been easier to collect than it is today. If done properly, any company can collect a significant amount of information on outsource providers in 15 minutes or less. However, all too often, this investment of 15 minutes is spent three to six months after the outsource providers should have been initially contacted. In order to be successful, sponsors should identify key outsource candidates early in order to have sufficient time to collect quotations, ask questions, learn about the operations and conduct site visits.

There are two basic means of collecting information on outsource providers. The first and most detailed option is the commercially available directories. Three such directories that this author has identified are from High Tech Business Decisions, Pharmsource Information Services and Technomark. These directories rely on outsource providers to complete a survey which outlines their capabilities, size, location and contact information in a non-biased and non-advertorial manner. This is important because the comparison of several outsource providers can be a daunting task if the information is not presented in a consistent manner. These directories charge a fee in order to access their data, but the number of resources listed and the consistency of the information makes this a very wise investment, especially for any companies that routinely outsource activities.

In addition, most of the pharmaceutical trade magazines have an annual directory of contract service providers. Industry organizations such as AAPS, PDA and ISPE also have web pages devoted to identifying and selecting vendors. Internet resources and industry organization web sites are quite valuable because of their ability to query a massive amount of information and provide only those contractors that meet very specific search criterion.

Another excellent source of information on outsource providers also comes from the internet. There are a number free access sites that list service providers. These sites are valuable instruments in the process of identifying and researching outsource providers. However, the data is not usually presented in a consistent format and readers must always remember that the information they are viewing may actually consist of paid advertisements.

Another good source of information for researching outsource providers are industry exhibits and conferences, which have a high concentration of service providers. Many of these conferences will also provide information about outsource providers on their web sites so that attendees may view the list of exhibitors, learn about their capabilities and get contact information. Many of these sites also allow visitors to query the database of exhibitors for certain search criteria.

Most service providers also have their own web sites. The sites vary dramatically in presentation and overall quality but still provide a valuable look at the essential capabilities and areas of expertise for the outsource providers.

Getting Down to the Short List
The sponsor should begin by developing a Request for Quotation (RFQ), which addresses the important attributes of the project and identifies those activities that are considered critical. The sponsor must ensure that, within every level of the organization, the goals for outsourcing are the same and the deliverables and budget recommendations are approved by upper management. Once a select few candidates have been identified as potentially viable service providers, telephone interviews should be conducted. This will provide the first exposure to the regulatory status, customer service level, resourcefulness and overall knowledge of the organization. Prepare for the interviews by developing a script of questions, based on the requirements stated in the draft RFQ that will be asked of every service provider. This may seem mundane, but having a consistent list of questions makes life a lot easier when it comes time to comparing each service provider.

Request for Quotation
Once the telephone interviews are complete, the sponsor must decide which suppliers are the most desirable and provide each viable supplier with a RFQ. The RFQ must contain the essential attributes that are necessary for the supplier to develop a scope of work and to provide meaningful quotations. The RFQ should address specific requirements and reporting format. The final proposal should be in a format which will allow the sponsor to understand the timeline and budget for each functional area of the project (i.e. formulation development, method development, validation). Proposals should also be itemized by functional tasks. The sponsor should avoid proposals that only provide a single charge for the project.

The project sponsor wants as much information as possible in order to make meaningful decisions regarding which activities will be outsourced. Projects are also susceptible to the dreaded “scope creep,” which is actually the norm for lengthy projects. If a quotation does not detail charges by functional area, then the project sponsor cannot assess the budget impact that will occur when items are added, removed or modified.

When preparing the RFQ, the sponsor must be certain to include items such as deal breakers and maximum acceptable budget. If the sponsor organization has a certain way of performing tasks and this is the only acceptable method to the organization (especially if it exceeds industry norms), then the outsource provider must be made aware of the requirement early on, so that any additional charges may be assessed in a proactive manner. Also, the sponsor should avoid asking for information such as profit margin, client names and other proprietary information, which cannot be provided.

Due Diligence
One of the most common mistakes made by project sponsors is a lack of overall due diligence of potential contract sites. In an ideal world, all products would be multi-sourced, always providing for built-in backup supply in case of problems. However, in the real world only a few select products are produced or even qualified at dual sites. Therefore, it is essential that a thorough due diligence be performed before any contracts are executed. The sponsor must remember that the company is essentially about to place all of its eggs into one basket.

The importance and benefits of QA audits are well understood but QA audits are only one part of what is commonly referred to as due diligence. When considering an outsource provider, the following must be evaluated, in addition to a QA audit.

• Financial stability and liquidity: Will they be there when I need them?
• Equipment ownership: Will my product be produced on any equipment not wholly owned by the contractor?
• Capacity at several levels: What is the status of personnel, equipment and facility today vs. the future?
• How do the personnel respond to your inquiries: Are they slow or fast, professional or curt?
• Core business: Is the contract business unit intended to absorb overhead or is it the core business?
• Legal/regulatory: Is there pending litigation? What is the provider’s regulatory history?
• Experience in pharmaceutical contract manufacturing: Is this one of the many organizations that are attempting contract manufacturing simply in order to fill capacity?

Final Selection
Before final selection, ensure that all critical elements and responsibilities are clearly defined and understood by both parties. Once any questions are resolved and revisions are completed in a final quotation, a legal review should be conducted. Regardless of whether the accepted proposal serves as the rules document, or a formal contract is drafted, it is essential to have legal counsel review the documentation. Remem-ber, contracts are not written for when things go right! Contracts should be balanced but, depending on who wrote the agreement, there may be an imbalance of rights and responsibilities. This must be carefully considered before executing the agreement.

Moving Forward
The sponsor must be courteous to those contractors that were not awarded the contract. One should inform them of the decision to go with another service provider and be honest when explaining why that provider was selected.

As soon as the agreement is fully approved, the sponsor should establish a site meeting, preferably at the contract site. This will serve as the kick-off meeting between the principals that will be working on the project. Often this meeting is the first detailed encounter where all of the essential scientists and technicians come together. Both sides can use this opportunity to form relationships, integrate project teams, thoroughly review the project plan and determine how each party is to communicate and document progress, changes and decisions.

My final word of advice: Communicate often and effectively. The sponsor must always treat the relationship as a partnership and remember that both sponsor and contractor have the same final objective.