Perspectives in Contract Packaging

How have packagers adapted to the new environment?

By Tom Spurgeon

A rise in blister and specialty packaging solutions, an overriding push for safety by way of labeling, and packaging-aided correction of dispensing errors mandated through exhaustive FDA regulatory guidance: the 2000s were a transformational decade in pharmaceutical packaging. Contract packaging organizations move into our current decade to find a vastly altered landscape from 10 years ago. A worldwide economic downturn has curtailed the immediacy of new regulations, made investment in smaller companies that much more capricious and complicated the ability for companies to find common ground in terms of guidance. Today’s outlook calls for more modest gains, more complex and idiosyncratic demands from client companies and a greater allowance for control by the contract packager. With a continuing anti-counterfeiting emphasis and the enforcement of key regulatory standards from years past making a relatively stable period the calm before an industry-wide storm, Contract Pharma spoke to contract packaging leaders about the present state of this vital area. What we found is an industry focus that may have become more fractured and specialized in terms of practical solutions required, but also an industry that’s much more stable and experienced than in years past, more willing and capable to make whatever changes are necessary to meet their clients’ evolving needs.

The growth in “virtual” pharmaceutical continues to boost business for contract service providers overall, and these companies have been a key market for packaging services. With their classic pipeline constraints exaggerated by more tighter investment funds in our beleaguered world economy, virtual companies require highly responsive contract packaging organizations in order to help specific drugs along the testing process to milestones where investment in a drug becomes more likely. They may also require greater coordination of efforts between plans for more than one molecule with which they’re working, in order to raise the company’s overall profile in terms of attracting further capital investment or partnerships with big pharma.

In turn, these companies have had an effect on the way the contract providers have become oriented towards the services they provide. Because of the limited number of drugs typically under development in a virtual company, and the pressure to bring those drugs to market on a very rigorous schedule frequently determined by an outside market factor such as the window provided by a similar drug’s progress, requests to contract packaging companies from these clients tend to focus on expediency and on very focused specialty packaging solutions. As virtual companies remain essentially management and science teams, they tend to offer up more suggestions to the contract packaging companies they employ than traditional pharma and biopharma companies.

More than one representative spoke of making their companies more responsive to the multitude of requests from their clients by altering infrastructure in such a way that solutions can be more quickly implemented. “We see more reactive than proactive clients these days, because many have been burnt,” said one expert contacted by Contract Pharma, “but they are quick to share their opinions.” The traditional strength of CMOs — providing the technology able to handle specialty packaging — has become for many a company-wide ethos as the specificity of demands from clients intensify on all levels.

There are, however, limits as to what can be done in terms of timelines and packaging formats, limits that have to be set by the CPOs. Clients of all types seem more willing to afford their service providers greater leeway in finding solutions to the problems they’ll present. In some ways this is a standard infrastructure issue with virtual pharma — the reason they employ contract packaging organizations is to rely on their expertise; they’re simply not as equipped to supply the answers. “The larger pharma companies tend to have greater interest and input into milestone events,” Daniel Stehn of Sharp Corporation told Contract Pharma. “When you work with the smaller drug companies that are committed to outsourcing, they’re the ones that say, ‘We need you guys to show us through this process.’ You may have an individual or two with an area of expertise that’s different than packaging — they rely on you to keep them away from the landmines.” The result is CPOs that feel more greatly defined by the presentation of a management and problem-solving team more than by a list of specialty services.

Packaging service opportunities arising from the needs of big pharma companies remain. These too are tied into a traditional strength: those companies’ desire for specialty services that may supplement their own packaging resources, an almost entirely different toolset that can be brought to bear on specific problems that arise. “As big pharma companies merge and review their own internal capacity, more and more opportunities are arising for outsourcing providers,” said Gareth Lewis, sales director, Packaging Services, Catalent Pharma Solutions. “In particular, big pharma may decide to not package their end of lifecycle or launch-phase products, as the variable production volume can be much better accommodated by a company that has the flexibility and speed to market required.”

“Big pharma still seems to wrestling with the glut of underutilized assets and divesting functions that are not ‘core’ to the organization, and the advantages of the virtual model are apparent,” said Justin Schroeder, director of Marketing & Busi-ness Development at Anderson Packaging. “Contract partners help round out the services and resources required to bring a product to market successfully.”

Mr. Schroeder noted that his company has seen an influx of mid-tier, foreign-owned, and startup firms operating with the virtual business model. He remarked, “There has been substantial consolidation within our traditional ‘big pharma’ customer base and many talented professionals are gravitating to these other types of organizations. Virtual organizations run very lean in terms of resources and benefit substantially from the value added services companies like Anderson provide across the spectrum of drug development.”

He added, “We have certainly seen the challenges that startups face in terms of maintaining financial support through the stages of drug development, but it seems that the promising candidates are still getting to the filing stage and ultimately developing some commercial agreements with more established drug companies.We have seen growth in particular segments, including oncology treatments, and are opening a new Specialty Pharma Center to support packaging of potent and cytotoxic compounds.” He noted that the 26,000-sq.-ft. facility, Anderson’s eighth, will support clinical and commercial primary and secondary packaging of those compounds, and should be open by press time (March 2010).

As those relationships between providers and clients continue on into other drugs or carry over years, a natural tendency is to allow the provider greater control over more parts of the packaging process as a way to provide a greater variety of packaging solutions, even integrated ones once thought to be the hallmark of the all-in-one companies. One result is that companies may see fewer participants in the contract packaging marketplace, but the competition between those companies increases. “The companies that are out there right now are more desperate for business,” suggested one packager. Another suggested that there may be fewer companies involved in competition as existing firms carve more specific identities and present more focused alternatives in the market.

In terms of technology, packaging providers continue to move towards the greater cost-effective use of mechanical approaches, as well as greater opportunity for information gathered from such processes for use directly on the floor, rather than simply collected for a best practices formulation at a later date. “The use of cost-effective, robotic-based ‘flexible automation’ in place of traditional ‘hard automation’ or manual solutions is one of the fastest growing trends we see throughout packaging,” said Rusty Sparling, sales director at Oystar Jones. Citing the company’s PIVoT device, Mr. Sparling cited a set of proprietary tools that “allow operators and maintenance personnel to have changeover, operation, maintenance and troubleshooting information accessible in a very flexible, user-friendly manner.”

One area where greater control to the contract packaging organization has resulted in a business opportunity is in centralizing packaging intended for a variety of international markets with one service provider. “Very rarely is a job U.S.-only anymore,” said Tim Brewer, vice president Logistics at Thermo Fisher Scientific. Requirements for packaging market to market are less fractured than they were a decade ago, but enough key differences exist between entering markets in the EU, Eastern Europe, South America and Japan that leaving those issues to the service provider makes greater sense than adding those burdens to the drug company’s management team and overseeing multiple providers. A larger CPO might not only be able to pool that expertise but has the resources to find potential, longer-term solutions, such as opening an office within a market of interest. Mr. Brewer went on to say that that his company had recently opened an office in Japan that greatly improved its ability to work in that market on behalf of clients; he also cited a litany of unique concerns per market in terms of packaging, the mixture of knowledge, experience and expertise that is increasingly the purview of the once service-dominant CPO menu.

A specter hanging over the domestic packaging business is widespread delays in implementing serialization regulation and a mixed record at the federal level in passing national law concerning serialization. Perhaps most noteworthy is the recent history of California e-pedigree legislation. In a flurry of legislative moves between 2004 and 2006, California lawmakers sought to standardize and enforce the amount of information provided during the entire drug-making process from conception through clinical, on to manufacturing and into pharmacies. The underlying costs and improvements in technology required, however, caused the deadline for compliance to the legislation to be pushed back several years and to be implemented in phases rather than all at once. The state’s general financial woes have further hamstrung this process, and it may be until mid-decade before fuller versions of the new law come into play. A 2006 Florida law more quickly enforced has brought with it complications to industry in areas of expediency and uniform data. While a spur to business in finding practical solutions, the Florida market, unlike California, isn’t big enough to drive standardization.

A regulatory landscape with delayed implementation and a patchwork of existing standards has had an effect on the contract packaging business in two ways. The cost to companies involved in this process stands to be somewhat mitigated by the extra time before the regulations come into effect, including contract service providers asked to help their clients comply. It may also be hindering certain agents with the market from becoming a market leader or forging solutions by virtues of working with the tighter deadline and greater levels of compliance. A greater percentage of current CPOs should be able to make the transition into compliance with forthcoming regulation for it being delayed; many could have felt extreme economic pressure scrambling to immediately match the more strident regulations.

The same concerns driving regulation may also push contract packaging organizations into market solutions to counterfeiting pressures between now and the perceived heavier regulatory landscape of a half-decade now. As counterfeiting continues, clients will demand solutions whether or not regulatory measures continue to slowly coalesce around certain phases of production. Just as counterfeiting concerns have resulted in smaller unit packaging and labeling over the last decade, the next decade could eventually result in unit-dose packaging and anti-counterfeit labeling as industry standard, or an approach with multiple levels of packaging requirements to thwart counterfeiting efforts. It could also lead to on-dose labeling. In July of last year, the FDA issued guidance that called for physical chemical identifiers (PCIDs) to be used as a low-cost supplement to package-driven anti-counterfeiting efforts, the thought being that a chemical formulation included in the dose will drive up the price of producing hard-to-discover counterfeits.

Sharp Corp.’s Mr. Stehn suggested that as companies begin to circle around PCIDs and various approaches to implementing that solution and others like it on various dosage forms, it’s CPOs that will likely manage the future technology, both as a necessity because of how packaging will develop in order to maintain the safety and effectiveness of the resulting surface formulations but also as a natural extension of the services they provide their clients. “There’s been a good deal of talk about the on-dose approach, as opposed to on every package,” he told Contract Pharma. “We’re looking at bringing on technology that provides services desired by our clients, so the on-dose counterfeiting approach is something I expect we’ll see more of in the year or two to come. It’s just a matter for those organizations to get a foothold in the marketplace. Some of the companies say they’re six months to 12 months away, and you can only believe it until you see it.” As the costs come down on labeling the dose itself after years of trends towards smaller and smaller groups of packaging, the next horizon for contract packaging organization may not involve packaging at all, but the kind of problem-solving and expertise that their clients have come to expect distinct from the technology brought to bear.

Tom Spurgeon is a long-time contributor to Contract Pharma.