Stuart R. Gallant, MD, PhD

As pharmaceutical supply chains have become global, the risk management of drug supply has become increasingly complex.  Recently, I was discussing selection of a drug product manufacturing site with a colleague.  He paused in our conversation of the technical and financial issues to ask, “Exactly, how close is the facility to Ukraine?”  I told him that it was more than 1000 kilometers, and we moved on in our discussion.  But, clearly, the recent strife in Eastern Europe was on his mind, even if the risk to this particular CMO was essentially zero.

How do we manage risk to pharmaceutical development projects from forces outside our control?  This post addresses some of the supply chain issues that I have seen in manufacture of drug substance and drug product in Europe and Asia.

GMP Storage, Packaging, and Labeling

One area of risk that can be addressed relatively easily is the location of storage your GMP storage.  This was brought home to me by the Covid-19 Pandemic when it became significantly harder to move drug substance and drug product around the globe.  Thinking carefully about the facilities you use for GMP storage has several advantages in reducing supply chain risk:

1. Having a storage site local to the drug product manufacturing facility ensures that customs issues are ironed out in advance of any drug product manufacturing activities (because the API is already “in country”).
2. This approach is aligned with the principle “let each vendor do what they do best;” drug substance and drug product manufacturers may offer GMP storage, labeling, and packaging, but it’s often not their core competency, so it may be a more expensive and less flexible option, compared to a dedicated storage and labeling and packaging facility.
3. Occasionally, contract manufacturers have been known to use clinical supplies stored at their facility as points of leverage during ongoing negotiations with the sponsor.  Best to move released drug substance and drug product to a dedicated storage facility to eliminate this possible friction with your manufacturing CMO.

Risk During Manufacturing

Storage is a pretty easy risk to manage.  Unfortunately, the risk landscape at your manufacturing sites is a lot harder to manage, particularly early in the development of a pharmaceutical drug.  (Early in development, it’s usually impractical to manage risk by operating multiple facilities to cover the same element of the manufacturing process.)  So, what are some of the manufacturing risks to consider?

1. Site Risk:  This is the category of “can the CMO complete the project?”  Things to consider include:  how many similar projects has the CMO completed, is this a new dosage form or molecule type for the site, are the manufacturing leads on your project experienced?  I’m not trying to be comprehensive, just give a flavor of the issues.  Also, is this your first project with this CMO.  Do you clearly understand the advantages and disadvantages of this site?  The best way to be able to answer that question is if you have already completed a project at this CMO.
2. Compliance Risk:  For early manufacturing (pre-clinical to Phase 2), the major compliance risk you will face is from your QP audit (if you plan clinical trials in Europe).  So, when you do your site visit, you need to think about how a QP will view the site.  Try to structure your site visit like QP would structure an audit—you won’t dig as deep as a QP will, but you want to be sure all the systems are in place for a successful audit.  For late phase manufacturing, you need to think about how the site will stand up to an FDA site visit (PAI).  If you are manufacturing overseas, one resource that can be very helpful is to have a local compliance person, someone who can go the manufacturing site by car, rather than by plane.  You may have several candidate facilities in the country, and your local compliance person can help you rank them.  If the local person’s QP audit is accepted by the QP releasing the drug product in Europe, that can be enabling in time and cost saved.
3. Financial Risk:  When I think about CMO financial risk, I think about a sweet spot in the CMO’s pipeline.  You don’t want the CMO to have too few customers.  They may have to lay off staff, and the budget for plant upgrades and upkeep may be reduced.  You don’t want the CMO to have too many customers.  They will tell you, “Our next opening in the plant is 18 months from now.”  You want them to have a good pipeline, but still be a little hungry for business.  Also, don’t forget to ask, “Is management thinking about a facility sale?”  Transactions can be disruptive.  (Site management can change; there can be freezes on capital projects…)  You may not get a true answer, but at least you asked.
4. Act of God:  Consider the risk of flooding, tornadoes, power loss.  It’s important to remember as you think about this category that many things may be listed but few things qualify as true “Acts of God.”  What I mean is that if your CMO has flooding a week before your manufacturing campaign, it could be truly unexpected, but more likely the facility did poor planning.  (Dikes were insufficiently tall at the facility, storm water drainage was insufficient…)  Thinking about this category will help you have a dialog with your CMO about how good they are at planning.
5. Political Risk:  When I think about political risk which includes the risk of conflict, I think about the Taiwan Strait and the Korean peninsula.  I also think about places like Mexico where the security situation can be problematic.  And, I worry about recent energy insecurity in Eastern Europe.  Nevertheless, I enjoy doing business in China, South Korea, Mexico, and Eastern Europe, and I understand that for the right project the manufacturing economics can be very favorable in those countries.  I would urge you to present political risk just like you present the other risks to the project.  “Here’s what could go wrong, and here is how we can reduce that risk.  But, at the end of the day, some risk can’t be reduced, so here is the portion we must live with if we are doing business in this location.”

Broadly speaking, the above 1 to 5 list is in order of decreasing likelihood.  In my experience, the most likely risk of a project disruption is that the CMO will have difficulty delivering a project in a timely manner.  Some of that “site risk” is due to science and engineering:  if you hire a CMO to implement a manufacturing process and manufacture a GMP lot at scale, they may find that there are unexpected scale up issues that require time and money to solve.  But, the fundamental reason that “Site Risk” is so large is because it’s a bit of a grab bag.  It involves many systems (process development, manufacturing, analytics, raw materials, plant design and engineering, maintenance…) and therefore many things that can go wrong.

However, risk has two components likelihood and severity.  A particular event may be unlikely (for example, flooding or tornadoes), but if you happen to be affected by an unlikely event, it can set your project back just as much as if the event were common.  So, the next section of this post looks at setbacks and what can be lost in terms of time and money.

Managing and Communicating Risk

Let’s imagine that your company wants to manufacture 6 kg of a small molecule API according to GMPs.  You already have a process of average complexity that you believe is scalable, and you have assays ready to transfer.

You send out an RFP to CMOs in US, EU, and rest of world.  (Don’t go crazy and send it to a raft of CMOs—realistically, you need about 3 serious proposals to understand cost and timing.)  You receive quotes in the range of 6 months to 12 months for delivery and from $400k to $3M for cost.

If you are new to any of the responding sites, you should visit them.  Your site visit should focus on technical capability, compliance, the state of the business, and any special sources of risk that may apply to the site.

Now that you have all this information about your manufacturing sites, storage sites, logistics vendors, raw materials suppliers, and other supply chain elements, you need to organize it for your team.  An FMEA table with all the risks listed in terms of likelihood and severity is an excellent way to present the information [1]. It’s up to you how deep you want to drill.

Your CMO selection process allows you to control some of these risks because ones that are perceived as unacceptable can be eliminated by selecting a different CMO. Once you select your manufacturing sites, you can initiate formal risk management in dialog with these CMOs [1]:

The reason I mentioned the cost and time at the start of this section is that I wanted to make the risk somewhat concrete.  If your API CMO fails to deliver on an early phase manufacturing run, then you are out 6 to 12 months and $400k to $3M.  Of course, if the problem was the CMOs fault, they will owe you a new manufacturing lot free of charge.  But, if they are really non-performing, you may want to walk away rather than sinking more money into a site that isn’t working out.

In the scenario of non-performance, your #2 CMO in the RFP process may be your preferred back up.  In that case, you dust off their proposal and ask them if the pricing is still valid.  Hopefully, your CEO doesn’t take the setback out on you personally, but there’s no guarantee.  That is a risk that you try to minimize, but you cannot eliminate.

[1] European Medicines Agency, “ICH Guideline Q9 on Quality Risk Management.”

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