CASE STUDY

A Leading Pharma Company partners with SpendEdge to identify packaging suppliers in APAC | Pharma Intelligence

Oct 28, 2022

Our client is a leading pharma company based in the United States engaged in developing and commercializing lifesaving medications for eye diseases, fatty liver, type 2 diabetes, inflammatory bowel disease, rheumatoid arthritis, and obesity. Enabled by two production facilities in the US and Ireland, our client has brought several FDA-approved therapeutics to the market over three decades of its existence.

Marketing, administrative, and research spending has been trending upward at most pharma companies in the US, especially since 2011. Between 2011 and 2018, marketing, research, and taxes accounted for nearly half of pharma company revenues, with marketing claiming the lion’s share (25-27%). Mounting cost pressures, including raw material costs, is a key concern for US pharma players. Contracting out packaging services to third parties in more cost-friendly destinations has emerged as a preferred business practice in the sector. And also, this practice was efficient even before the advent of the COVID-19 pandemic in late 2019.

The log-jam in Chinese ports and shipment slowdowns amid a COVID surge has resulted in a sharp increase in raw material prices. The conflict in Ukraine has further exasperated the already dire raw material scenario since late February 2022. With no letup in sight to the conflict, oil prices will likely stay above USD 100/barrel, bearing down on transportation costs and drug prices. Which, in turn, further threatens to squeeze pharma company profits.


Introducing newer therapeutics to the market faster than the competition is a key challenge for the sector. Certainly, this calls for a renewed focus by pharma companies on augmenting pharma talent and embracing automation (e.g., robotics, advanced analytics). Moreover, it will help strengthen core processes that pharma businesses have historically excelled in, namely, drug discovery and development. Now, the natural corollary is that ancillary functions, such as drug packaging, would move on to trusted contract packaging organizations (CPOs).

Without a doubt, CPOs present pharma companies with too-good-to-miss cost-saving opportunities. But the CPO landscape is somewhat hazy, with more than 80 providers and counting. The client needed strategic procurement of high-quality contract packaging services, going beyond mere numbers. Quality over quantity. The client turned to experts in sourcing and procurement intelligence at SpendEdge for assistance in shortlisting CPOs with demonstrated capabilities in primary packaging, secondary packaging, artwork, packaging of drug delivery devices (e.g., inhaler), services packaging services, serialization services (i.e., assigning unique identification code to products), and logistic support.


Experts at SpendEdge set out to work almost immediately after getting the green light from the client. As a first step, they evaluated 85 CPOs across the following parameters:

Packaging
capability
No. of years in the
packaging business
Key primary packaging capabilitiesKey secondary packaging capabilitiesNo. of packaging sitesCertifications (FDA, GMP, EMA, MHRA)Packaging facility audits
Sensor-embedded packaging
(“smart packaging”)
 
Environmental Impact
Human ResourcesEmployee strength
Financial StabilityDebt-equityProfitabilityLiquidityReturn on assetsReturn on equity

After the first round of shortlisting, 73 contenders remained in the fray. As mandated by the client, more rigorous selection criteria were applied to these candidates to arrive at a final list of 9 CPOs. Our client is in various stages of negotiations with the shortlisted CPOs, and decision-makers at the client end have some very encouraging words about our supplier selection process and procurement market intelligence capabilities.   

At SpendEdge, our experts provide clients with actionable insights and industry best practices to help them get the most value from the procurement function. Connect with our experts for customized category market intelligence, procurement market reports, and actionable recommendations, all oriented to the needs of procurement managers to make timely decisions.

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