Manufacturing site rationalization – a regulatory and logistical challenge

The global pharmaceutical industry faces the dual challenges of mounting pricing pressures and increasing manufacturing costs.

Given the significant challenges of COVID-19, global inflation, and geopolitical unrest, a significant number of “blockbuster” products coming off patent in the coming years, and the global economic challenges faced by a post-pandemic world, realizing cost savings is more important than ever, as many companies are trying to achieve more from less.

Whilst merger and acquisition activities have been a mainstay and driving force of the industry over previous decades, recent years have seen several “demergers,” “spin-offs” or “splits,” especially about Consumer Healthcare divisions. Nonetheless, mergers and demergers present challenges and opportunities for the companies concerned, not least the opportunity to identify efficiencies, synergies, and cost savings.

Cost of goods sold

Central to this issue is the cost of goods sold (COGS), the direct costs attributable to the manufacture of goods sold by a company. For pharmaceutical companies, this is commonly in the range of 25%-50% of total sales revenue, with generics companies representing the higher end of this range. By contrast, this may be several times higher than the cost of a pharmaceutical company’s R&D activities. Therefore, M&A and spin-off activities represent an opportunity to take stock of potential cost savings and operational efficiencies/synergies between manufacturing sites to minimize this cost. Central to this can be the rationalization of supply chains and manufacturing sites and the potential consolidation of Qualified Person (QP) release.

Manufacturing site rationalization strategy

Manufacturing site rationalization (or ‘source transfer’) strategy can be a complex and multifactorial logistical process. Each manufacturing site will possess several different qualities (not always quantifiable) that will inevitably be considered during the decision-making process. These may include:

• Manufacturing site capacity
• Manufacturing site technology
• Location, transportation, and ease of access
• Cost of workers (an aspect of COGS)
• Cost of materials (an aspect of COGS)
• Specialization (e.g., biotechnology, vaccines, and biologics)
• Local economy (e.g., strength of currency, available workforce)
• Local intellectual property laws (e.g., risk to confidential industrial information)
• Geopolitical considerations (e.g., regional stability, risk, and international relations)
• Regulatory environment (e.g., is an ex-EU site GMP-compliant or open to inspection? Is the local regulatory authority sufficiently sophisticated?)
• Potential disruption to stock and supply network
• Potential manufacturing compliance issues
• Local employment law and costs of closure or redundancies
• Site potential for future expansion or reduction in capability.

Regulatory strategy and requirements for source transfer

As part of the manufacturing site rationalization activity, source transfer is the essential process of transferring the manufacture of drug product and drug substance to different sites while ensuring continuous product supply to all markets. From a regulatory perspective, numerous challenges must be considered, especially if the product is marketed globally. Central to the success of such a project are (Fig.1):

• Regulatory information filed in each marketing company
• Details of any commitments made to authorities
• Will company registration be required in any of the impacted markets?
• Political and geopolitical considerations
• Regulatory approval timelines
• Effective gathering and maintenance of regulatory intelligence
• Effective (yet flexible) upfront planning, coupled with strong, clear communication and direction.

Fig.1. Components of Success.

Conversely, several issues could stop or seriously delay a source transfer. Typical issues encountered that may cause serious delays if not addressed early within the transfer process are (Fig.2):

• Lack of clear financial benefits
• Lack of company registration
• Lack of product registrations in the country of the receiving (new) site
• Potential compliance issues following review of site practices against registered details
• Artwork and registration samples (required at the time of submission)
• Certificate of pharmaceutical products (CPPs) are needed
• Political constraints (supply from the receiving site is unacceptable to market)
• Time required to put capital facilities in place
• Realistic confirmation of timeline
• Longer than expected regulatory timeline
• Above-normal level of dossier submissions through external regulators
• Absence of appropriate third-party contracts
• Inadequate planning of auditing and approval of contractors.

Fig.2. Contributors to Delays.

The central regulatory (RA) team is a key stakeholder in the transfer process and provides high-level advice when the project team is initially assembled. As the project progresses through the various milestones, central regulatory invariably becomes increasingly involved in the project.

If there is a separate independent RA team working on the rationalization project, they must collaborate and align with the regular RA teams who may also be planning or in the middle of regular CMC maintenance variations. If a MA is already "occupied" by another ongoing CMC variation, it could "block" a critical manufacturing rationalization variation.

Strong cross-functional collaboration (Manufacturing, QA, Supply, RA, etc.) is imperative. Manufacturing and QA need to determine the scope of changes to be included during the source transfers and act to freeze the scope to avoid reworking of strategy and extending timelines. Throughout the entire process, RA status reports of (planned and actual) submission & approval dates are critical to ensure regular alignment with Production/Supply staff at the Sites. This is to align production ramp-down (in closing/donating site) with the corresponding “ramp up” of production in the receiving/new site.

The receiving (new) site personnel, together with central regulatory, should draft the product transfer information and identify any differences to the current marketing authorizations (registered details, packaging and artwork, and labeling). Where manufacturing and packaging are to take place at different sites, the manufacturing receiving site(s) coordinates with the packaging sites and provides the product transfer information. The receiving site should ensure the product transfer information provides comparative details of the current site and receiving site manufacturing and packaging processes, analytical methodology, and specifications for the appropriate regulatory strategy to be devised.

Any proposed changes to the appearance of the dose form (e.g., color, pack type, etc.) should have been discussed and agreed upon with commercial groups in the relevant markets. The product transfer information should provide a list of all markets that are supplied by the current site, and marketing groupings such as “General Export,” should be clarified and specific markets listed, as the regulatory strategy is market-specific. The central regulatory team will then document the proposed regulatory strategy for the transfer based on current market intelligence, dossier data requirements, and other items, such as CPPs and price certificates. Typically, the regulatory strategy should (Fig.3):

• Include a review of product/marketing company implications
• Include a review of current registered details (product history)
• Include regulatory timelines
• Include stability requirements according to the International Council on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH) for zones/regions
• Review availability of certificate of pharmaceutical production and supply (CPPS)
• Review impact on referencing pricing (e.g., Gulf markets)
• Include artworks/samples requirements
• Establish a list of Ministries of Health (MoH) likely to inspect the receiving site
• Include details of markets that will require import permits for samples, etc.
• Highlight issues and risks, determine actions to minimize areas of negative impact
• Suggest mitigation actions.

Fig.3. Good Strategy Essentials.

Local in-market regulatory teams are often small and receive many different regulatory filings from global functions (new submissions, renewals, labeling variations, PSUR updates, etc.), often under considerable pressure. As Manufacturing Rationalisation projects are usually high volume and involve aggressive timelines, robust forward planning in collaboration with local RA teams is important. This should ensure a clear delineation between business-critical and “non-urgent” regulatory changes, and subsequent prioritization.

Once central regulatory has received all market-specific data, the appropriate dossiers/data packages should be compiled. Drafts are sent to the manufacturing sites and market affiliates for comments before these are finalized and published.

Dossiers/data packages should be despatched along with additional market-specific supporting documents and samples/artworks, to the local country affiliates (or agents). The affiliates/agents should complete appropriate MoH forms in the local language, arrange for the appropriate fees to be paid, and then submit the dossier/data package to the regulatory agency and, where possible, highlight the priority with them.

Central regulatory should manage the handling of any questions raised by regulatory agencies and should agree on the approach to resolve these questions with the manufacturing site and affiliate/agent and prepare responses accordingly. It is essential that the manufacturing site provides adequate support and appropriate data and gives prompt responses to central regulatory enabling responses to agency questions to be filed.

Central regulatory should inform the new manufacturing site on approval of source transfer registration. The manufacturing site can then manage supply via the logistics team in conjunction with market affiliates.

Regulatory requirements for international markets

From a practical perspective, there are various elements to consider for source transfers within international markets. These are summarised in Table 1.

Dr. Ivan Fisher is Vice President of Commercialization and Commercial Development at G&L Healthcare Advisors