Managing Contract Manufacturing Organization Relationships

Published on: 
BioPharm International, BioPharm International-03-02-2013, Volume 2013 Supplement, Issue 1

Successful management of the CMO/client relationship should include open communication and trust.

It is believed among regulatory officials and industry representatives that many CMO/client relationships are immature. If this is indeed true, what can be done to "mature" these relationships?

The CMO/client relationship is complicated for a variety of reasons. There are many types of contract providers including CMOs who may supply cell banks, APIs, drug product, or finished drug product, CROs, contract test laboratories, and distributors. Marketing partners complicate matters, as their company-specific requirments need to be incorporated and may be different than the client's needs.

Photo Credit: Jean-Christophe Riou/Radius Images/Getty images

Each contract provider has a different business focus. A CMO-Only provider does not manufacture its own drugs, but is built around serving a portfolio of clients. The CMO Hybrid 1 serves a portfolio of clients, but also has its own branded products. The CMO Hybrid 2 serves a portfolio of clients, but also has its own generic products.

In a CMO-Only model, the focus is only on the client and keeping their customers happy. When capacity constraints arise, this model does not have to choose between its own products and its clients. The downside is that its business is dependent on customers only; losing a large customer may put its business in jeopardy. The hybrid companies have diversified their business; hence, the impact of losing clients is buffered by its own business.

The variety of product types also plays a role in the CMO/client relationship. Product types have many different technologies and equipment and varying degrees of personnel who know how to take care of the systems. Products include parenterals (e.g., aseptic fill, lyophilization, and terminal sterilization), sterile powders, sterile creams, nonsterile products (e.g., tablets, capsules, caplets, and sachets), and packaging and labeling/shipping to distributor.

Personnel also play a role in the CMO/client relationship. The choice of a liaison that will be the primary contact for the client with the CMO is crucial. Many people, even seasoned leaders, believe that choosing the smartest and/or most-educated person is best. It is more important to hire the right person with the right set of skills and attributes to interact in the most appropriate way with a CMO. Choose wisely and remember that the most intelligent person is not necessarily the best person. Ensure that the person is matched with the skills and needs of the job.

Lastly, clients and their individual needs are varied. Generics-only biopharmaceutical companies only make generic drugs. These companies tend to have limited resources; cost cutting is a huge focus. Large biopharmaceutical companies make many new molecular entities and some generics and tend to place their focus on large money-making products. Mid-sized biopharmaceutical companies typically have between one and eight commercial products. They tend to focus on their limited drug portfolio because each drug is still important. They tend to generate revenue, and many are profitable. They have the resources to focus on building and maintaining systems and have dynamic, motivated employees. Small biopharmaceutical companies typically have a few clinical products only. They tend to have limited resources (e.g., time, money, expertise, personnel). They tend to lack mature systems and knowledgeable people in some key areas such as quality.


A key regulation regarding CMOs is 21 CFR 200.10 Contract Facilities, which states that FDA considers the CMO as an extension of the client (1). As such, the client may be considered in violation of the regulation if the CMO is in violation. The FDA Safety and Innovation Act (FDASIA) update, approved by Congress and signed by the President in 2012, includes Enhancing the Safety and Quality of the Drug Supply Chain (FDASIA § 711), which states "'current good manufacturing practices' for the purposes of subsection (a)(2)(B), include the implementation of oversight and controls over the manufacture of drugs to ensure quality, including managing the risk of and establishing the safety of raw materials, materials used." (2).


This may be interpreted as requiring firms to have "Modern Pharmaceutical Quality Systems," not just strength, identity, safety, purity, and quality (SISPQ) compliance. BioPharma quality systems are evolving to truer "Quality" systems, not just regulatory requirements. With the newer systems, risk-based approaches are used. More efficient and simple systems are built that remove wasted efforts, allowing us to focus on the more important issues. It is comforting to know that FDA and industry have similar expectations and goals: to assure safe and effective drugs reach the patients who need them.

ICH Q10, Modern Pharma-ceutical Quality Systems, a tripartite guidance document approved by FDA, the European Medicines Agency (EMA) and the Pharmaceuticals and Medical Devices Agency (PMDA) of Japan, states in Section II.F (d) OR 1.7, "The pharmaceutical quality system should include appropriate processes, resources, and responsibilities to provide assurance of the quality of outsourced activities and purchased materials as described in section II.G (2.7)" (3).

Section II.G or 2.7, Management of Outsourced Activities and Purchased Materials, states: "The pharmaceutical quality system, including the management responsibilities described in this section, extends to the control and review of any outsourced activities and quality of purchased materials. The pharmaceutical company is ultimately responsible to ensure processes are in place to assure the control of outsourced activities and quality of purchased materials. These processes should include quality risk management and include:

  • Assessing prior to outsourcing operations or selecting material suppliers, the suitability and competence of the other party to carry out the activity or provide the material using a defined supply chain (e.g. audits, material evaluations, qualification).

  • Defining the responsibilities and communication processes for quality-related activities of the involved parties. For outsourced activities, this should be included in a written agreement between the contract giver and contract acceptor.

  • Monitoring and review of the performance of the contract acceptor or the quality of the material from the provider, and the identification and implementation of any essential improvements.

  • Monitoring incoming ingredients and materials to ensure they are from approved sources using the agreed supply chain" (3).

These references are not meant to be all inclusive, but they show the increasing concern that regulators throughout the world have about the relationship between a client and a CMO.


Tools can be used to manage the CMO/client relationship including contracts (e.g., supply agreement, technical quality agreement); audits, due diligence (prior to using them) and routine (e.g., annual) visits; regularly scheduled operational meetings (frequency dependent on volume of lots made); start/sustain strategic business review meetings (e.g., quarterly), leveraging a scorecard with key performance indicators (KPIs); joint investigations; and joint material review boards. Trust-based relationships are crucial for success. Intangible relationship skills and attributes allow for an honest, trust-filled relationship. These are attributes that should be encouraged.

Important points should be documented on a timely basis to assure they are captured accurately. Major decisions and agreements between companies should be captured in meeting minutes. People tend to say a lot when unchallenged, but, when they write it down, there is an additional level of scrutiny to assure accuracy. Verbal discussions are like fish stories; after being passed on, they morph into something that was never said.

CMO oversight

A client cannot be afraid of being honest in their thinking. Concerns should be brought up early with the CMO. Prioritize issues so the CMO understands the client's priorities. An agenda should be written in advance, with planned attendees listed and timing, also documenting priorities or discussing highest priority items first. At the end of the meeting, recap salient points, actions, responsible people, and target dates. After the meeting, generate minutes, with all major decisions and salient points verified. Endorse minutes for posterity and keep on file.

During a routine inspection, an FDA investigator from the Center for Biologics Evaluation and Research (CBER) said, "The quality unit in a company is like an internal FDA department; if doing its job, FDA can feel confident with the firm's cGMP compliance." Dig deep to uncover problems and put a plan in place to fix them after prioritizing them appropriately.

Foreign suppliers

A major concern these days in the choice of a CMO is location. More than 70% of APIs are made outside the US. Many are made in countries with less stringent regulatory requirements than the US.

Additional scrutiny, diligence, assessment, and mitigation of risks are needed when choosing suppliers in foreign countries. The risk of poor compliance in certain foreign countries is much higher, however. FDA now has an office in Shanghai, China and is planning to increase its foreign inspection cadre to improve the safety of foreign drugs imported to the US. It is, however, the client's responsibility to also assure compliance.

Process knowledge and management commitment

Manufacturing personnel should work closely with quality personnel within the client and CMO companies to share knowledge of the process, to understand what works well and what needs improvement, and to proactively identify potential problems before they occur. The CMO and client should jointly manage product and process knowledge throughout the product lifecycle. Knowledge should be documented and shared and should include public queries, where applicable, and internal information. Knowledge should be communicated to stakeholders and should include product and process development, tech transfer, process validation, manufacturing experience, improvements, and change management.

Senior leadership at both the client and the CMO needs to be engaged and supportive of a quality culture; and quality leadership needs to be responsible to educate them. Senior leadership needs to see the passion of their quality leadership in assuring this culture and they need to be educated on the cost of nonquality. They need to see examples of the effect of consent decrees and warning letters on the finances and reputations of companies who do not adopt a quality culture.

Lifecycle approach

To best manage a product portfolio, consider taking a lifecycle approach for each product. A product is discovered, developed, made, sold, improved, then, sometimes, is discontinued or removed from the market. Each stage is different and requires an understanding of the needs of each stage. GMPs of a Phase I clinical product are different than GMPs of a commercial product; this should be clear and should be in writing to provide direction. Many people struggle, debate, and argue the same points over and over again without coming to any conclusions, other than "Quality is unreasonable" or "Manufacturing doesn't understand GMPs." The discussion and debate should happen once, with the right level of management, with the right guidance, resources, logic, and common sense over a significant period of time. A document outlining the company's position should state the firm's minimum requirements.

Measuring performance

In every significant, commercial CMO/client relationship, a one-page scorecard should be developed to measure performance (see Figure 1). This scorecard should include 10 key performance indicators to determine the health of the relationship. It should focus on areas of opportunity or pain points; define formulae and process/people to measure them; and define timing to collate prior to business review meetings. Effective KPIs are SMART: specific, measurable, achievable, relevant and time-bound.


Do not try to measure everything. Focus on those areas where pain is felt. Improvements in these areas will feel satisfying. If there is no pain, then measure important, not just urgent areas.


Remember that the CMO is an extension of the client. The client is responsible for the CMO. The quality unit in a company should act as the "internal FDA"; if the unit is doing its job, FDA inspections will be painless (or, at least, less painful). Develop relationships with CMO personnel; go beyond just a business relationship. Define a scorecard with KPIs. Hold each other accountable. Quarterly business review meetings should be held and all decisions should be clearly documented. The client should visit CMO facilities and know the processes. Most importantly, the client and the CMO should have open and honest communication and build trust.

Key Points

Chris Masterson is vice-president of quality at Cubist Pharmaceuticals,


1. 21 CFR 200.10 Contract Facilities

2. FDA Safety and Innovation Act (FDASIA)

3. ICH Q10, Modern Pharmaceutical Quality Systems.