The Complete Guide to Third Party Manufacturing Pharma Companies: Revolutionizing Healthcare Production

What Is Third Party Manufacturing in Pharma?

Third party manufacturing or contract manufacturing is a situation whereby a pharmaceutical company (the brand owner) hires an external manufacturer, often a CDMO (Contract Development & Manufacturing Organization) to produce all or part of the product. The brand owner is in charge of formula, marketing, distribution, and ownership of patents/IP whereas the CDMO is in charge of technical side: formulation, production (APIs or finished dosage), packaging, quality control and warehousing.

The contracts may be straightforward (produce a batch of tablets) or end-to-end (synthesis of an API to formulation and packaging) in the ability and regulatory control.

third Party manufacting pharma companies

Why It Matters: Drivers of the Industry

1. Cost Effectiveness and Capital Saving:-

Putting up and sustaining pharma manufacturing plants is an intensive investment- constructing clean rooms, GMP approved manufacturing plants, procurement of equipments, training of qualified personnel. Third party manufacturing eliminates this initial investment, and allows brand owners, particularly start-ups or generics competitors, to divert funds to research and development, promotion, and distribution .

2. Core Competencies: - Focusing on core competencies

Outsourcing the production process enables firms to focus more precisely on discovery, clinical research, sales and network-scaling partners, which tend to be marginalized when a firm is managing its own manufacturing processes.

3. Core Competencies: - Focusing on core competencies

Outsourcing the production process enables firms to focus more precisely on discovery, clinical research, sales and network-scaling partners, which tend to be marginalized when a firm is managing its own manufacturing processes.

4. Ability to get Advanced Technology and Expertise:-

The major CDMOs implement the latest technologies in production (e.g., sterilising fillings, complex biologics), and hire highly experienced scientists. Even the small pharma companies can therefore enjoy the premium capabilities without owning or operating them.

5.  Shorter Time-to-Market:-

Contract manufactures that have pre-established, certified plants can condense schedules, which is instrumental to niche drugs, generics or pandemic-related products, assisting the manufacturer to achieve demand in the market in a short time.

6. Regulatory Compliance Quality:-

CDMOs are usually in possession of international regulatory approvals- FDA (US), EMA (EU), WHO, etc. Their audit experience and strong quality systems are things that the smaller players would find difficult to put up on their own.

7. Geopolitical & supply‑Chain Resilience:-

Increased geopolitical anxiety e.g. The US Biosecure Act on Chinese CDMOs such as WuXi has led Western pharma to diversify their manufacturing bases to Korea, India, the EU and the US .

Major Third ‑Party Pharma Leaders

(a) Asia and China:-

WuXi AppTec / WuXi Biologics: Large Chinese CDMOs of APIs and biologics. But they are facing scrutiny in US legislature because of national security.

Samsung Biologics (South Korea): World leading biologics CDMO with supply to Pfizer, Moderna, AstraZeneca, GSK, Roche and Eli Lilly. They have their huge plants such as Plant 4 that is supported by billion contracts

(b) India:- India is the leader in pharma outsourcing with WHO-GMP certified CDMOs producing generics, APIs, injectables, herbal and nutraceuticals.

Akums Drugs & Pharmaceuticals: 12 formulations plants and 2 API sites; EU-GMP certified; it is listed in 2024

Laurus Labs: A large API/CDMO of antiretrovirals, oncology, cardiovascular drugs; FDA-approved plants Several more Indian CDMOs including Zydus Cadila, Sun Pharma, Scinex Biotech, Ciron, Biophar, etc. also provide extensive services 3.3 Europe & North America

Fujifilm Diosynth Biotechnologies: Leading global biologics CDMO with manufacturing sites in the US, UK and Denmark

Rentschler Biopharma (Germany): CDMO biologics

Hovione: Portuguese-US Company specializing in fine chemicals, inhalables, APIs and is B-Corp certified.

Advantages & Disadvantages of Third‑Party Manufacturing:-

1. Advantages:-

·      Capital Efficiency: There is no facility investment; scale cost according to the demand.

·      Operational Focus: Allows to focus on R&D, marketing and distribution

·      Expertise access: State of the art production, QC and regulation maneuvering

·      Time Savings: Faster entry in the market through available capacity

·      Scalability: Be able to adjust the production levels without any problems

·      Global Quality Standards: CDMOs are highly developed regulatory compliant

2. Disadvantages:-

·      Control Limitations: Outsourcing reduces control over processes and time tables.

·      Vulnerabilities to Dependency: There is single-source dependency which can lead to delays or failure of supply.

·      Quality Risk: Brand integrity is at risk of any lapse of compliance.

·      Complexity of Logistics: coordination of supply chain required; trade, shipping, warehousing.

·      IP Confidentiality: Trade secrets disclosed; must have good NDAs.

·      Secret prices: Additional prices on change orders, packaging and small runs.

·      Regulatory issues: Clients have to audit, observe and guarantee CDMO compliance.

Regulatory Oversight

CDMOs and brand owners have to be highly compliant with regulation: GMP (US/WHO/EU), ISO, and regional standards. The contract agreements include the right to audit, release procedures of batches, testing, and recall procedures.

Failures include:

Violations in the factory that result in recalls or closure.

Disruptions in the supply chain caused by the sources of raw materials.

Geopolitical tensions that may influence out-of-country manufacturing, e.g., the US threatening the Chinese CDMOs with the Biosecure Act

Trends & Market Evolution in the Recent Past:

Geopolitical transformations:

a)   Chinese CDMO dependency is being decreased by US and Europe, and companies such as Eli Lilly, Vertex, BeiGene are now looking elsewhere to partner with 6.2 Consolidation & Partnerships

b)   Consolidation in the industry, with a view to increasing biologics capacity, is also reflected in the merger of Suven Pharma with Cohance (Cohances ADC platform).

c)   Interest is being seen in CDMOs in Korea (Samsung) and India/Europe (Fujifilm, Rentschler) .

2. Merger & Alliances:

a)   The merger of Suven Pharma and Cohance (Cohance ADC platform) is an example of industry consolidation to increase biologics capacity .

b)   Large pharmaceutical companies such as Roche are spending billions to expand domestic production in the US to cover the tariff risk

3. Biologics Specialty Drugs:

The surge in demand of complex biologics, ADCs, mRNA vaccines is driving growth in biologics-centric CDMOs such as Samsung Biologics, Fujifilm, and WuXi Biologics.

4. The Emerging India:

With the help of the government incentives and the Make in India slogan, Indian CDMOs are venturing into APIs, generics, and biologics, exploring international markets.

hoosing the Proper CDMO:- 

The Main Factors:

In selecting a manufacturing partner, the clients consider:

a)   Infrastructure & capacity (Dosage forms, biologics).

b)   Regulatory approval (e.g. US FDA, EMA, WHO, EU GMP).

c)   Technical strength (e.g. high-potent APIs, sterile injectables, ADC).

d)   Quality system audit record.

e)   Business conditions: prices, batch quantities, lead time.

f)    The fit of geography and the resilience of a supply chain.

g)   IP security: secrecy, security arrangements

8. Future Outlook:-

a)   Strategic Reshoring: Businesses and governments putting money in domestic pharma manufacturing to limit geopolitical risk .

b)   Advanced Biologics: The further growth in the areas of vaccines, cell therapies, ADCs contributes to the biologics CDMOs development.

c)   Sustainability & Digitalization: CDMOs are increasingly automating, using green chemistry, digital QC to enhance compliance and efficiency.

Conclusion:-

Outsourcing production is a pillar of the global pharma industry- identifying a contemporary value chain in which outsourcing of production is relevant due to the balance between cost, speed and technical complexity. It particularly allows biologics and global generics firms to focus on innovation whilst utilising the infrastructure and expertise of partners.

Nevertheless, it is necessary to mitigate risks, including quality, regulatory, IP, and geopolitical. It takes careful due diligence, contractual protection, audit monitoring, and supply-chain diversification to achieve successful outsourcing. With the changing markets, CDMOs with sophisticated biologics, high levels of compliance, and international capacity (e.g., Samsung Biologics, Akums, Fujifilm Diosynth) will be in the frontline. In India, several pharma companies in Sonipat and reputed ayurvedic companies in India are also contributing significantly to this evolving ecosystem by aligning with global standards of manufacturing and innovation.

Frequently Asked Questions

1. What is the difference between third party manufacturing and contract manufacturing in pharmaceuticals?

Third party manufacturing and contract manufacturing are essentially the same concept in the pharmaceutical industry. Both terms refer to specialized companies that manufacture pharmaceutical products on behalf of other companies. The terms are used interchangeably, with "contract manufacturing" being more commonly used in North America and "third party manufacturing" being more prevalent in other regions.

2. How do pharmaceutical companies ensure quality when using third party manufacturers?

Pharmaceutical companies maintain quality control through comprehensive supplier qualification programs, regular audits, ongoing monitoring of manufacturing processes, and clear quality agreements. They also implement robust change control procedures and maintain responsibility for final product quality regardless of where manufacturing occurs. Leading companies establish dedicated supplier management teams to oversee these relationships.

3. What are the typical cost savings from using third party pharmaceutical manufacturing?

Cost savings vary depending on product complexity, volume, and specific circumstances, but companies typically achieve 15-40% cost reductions compared to in-house manufacturing. These savings come from eliminating capital investments, accessing economies of scale, and converting fixed costs to variable costs. However, companies should consider total cost of ownership, including coordination costs and potential supply chain risks.

4. How long does it take to establish a partnership with a third party pharmaceutical manufacturer?

The timeline for establishing manufacturing partnerships typically ranges from 6-18 months, depending on product complexity and regulatory requirements. This timeline includes supplier evaluation and selection, facility audits, technology transfer, process validation, and regulatory approvals. Simple generic products may require less time, while complex biologics or novel formulations may take longer.

5. What should companies look for when selecting a third party pharmaceutical manufacturer?

Key selection criteria include regulatory compliance record, relevant manufacturing experience, quality management systems, financial stability, capacity availability, and cultural fit. Companies should also evaluate technical capabilities, geographic location, supply chain management systems, and disaster recovery plans. Conducting thorough due diligence, including on-site audits and reference checks, is essential for successful partnerships.