Experts Statements: Christophe Le Ret, Umicore
The Pharma CDMO Challenge
The pharmaceutical industry continues to grow and is estimated to be worth $1.5 trillion by 2021. One important driver is the trend towards outsourcing of development and manufacturing to contract development and manufacturing organizations (CDMOs). What sounds like good news for CDMOs also holds its own challenges — many of these companies are operating in a highly fragmented market that is currently undergoing a significant consolidation. At the same time, many of them are not fully prepared to exploit the maximum potential and willingness-to-pay in project pricing, which calls for new and innovative monetization strategies.
Since price is the single most powerful lever to increase a company’s profits, it is high time for CDMOs to reconsider their project pricing approach. Instead of clinging to traditional cost-plus pricing logic that usually lack consistency, transparency and control, experts propose measures such as harmonizing costing methodologies, incorporating value-based pricing metrics, and systematically using internal project price benchmarks for developing a value-based price model.
CHEManager International asked executives and opinion leaders operating in this market to share their experience and advice. We asked the experts to discuss the following questions:
How would you describe the current market situation for pharma CDMOs and which trends affecting your project pipeline do you see?
Christophe Le Ret: The global pharmaceutical CDMO market has seen continuous growth over the past few years, driven by pharma companies striving to lower costs and gain access to innovative technologies. Within the market, oncology continues to grow at an accelerated pace. As a result, we have seen significant growth in highly potent active pharmaceutical ingredients (hAPIs) being developed for use in cancer therapies.
However, there are health risks associated with the manufacture of hAPIs that must be addressed to ensure both patient and operator safety. At Umicore, we have extensive expertise and experience in handling these highly toxic and pyrophoric materials. This demonstrates to our customers that we are the ideal partner for safe and efficient manufacturing of the next generation of hAPIs.
Which role can CDMOs play in helping pharma companies to manage development, production and supply chain cost?
Christophe Le Ret: As the regulatory environment continues to move with constantly evolving customer demands, it is important that CDMOs remain dynamic in their business approach. Ideally, CDMOs should be proactive and propose their new technologies to pharmaceutical customers. They should focus on how these new solutions can help to manage development, accelerate production and lower supply chain costs. To achieve this, it is important that CDMOs invest heavily in their specialist field of technology. At Umicore, we understand that technology is at the core of our success, and as such, we endeavor to meet the needs of a rapidly changing industry.
How do you rate the potential of value-based pricing models as a contracting strategy and how do your customers respond to that?
Christophe Le Ret: Within the industry, many are seeking new ways to introduce cost efficiencies into all aspects of drug development. As such, value-based pricing models are often viewed as a solution to create a more effective pricing method. The requirements for establishing value-based pricing models can be complex, although this can be made simpler if both the supplier and the CDMO define the important project criteria. If it is agreed that product quality is the key goal of outsourcing, then delivery time can be adjusted to ensure a high-quality product. At Umicore, we leverage our decades of experience in collaborating to provide our customers with innovative solutions and technologies.