Pharmaceutical Outsourcing

A value sector

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Roberto Teruzzi
Roberto Teruzzi,  Chairman of the Contract Manufacturing Companies Group of Farmindustria

Outsourcing. It’s a new keyword in the modern industry that defines the contracting out of a business process to a third-party external to the Company. This approach is becoming more and more common among all the industries, pharmaceutical included

Tiziana Azzani

Outsourcing enables companies to optimize the timing and the production processes with positive effects on the cost and the quality of the finished product. «In Italy – declared Roberto Teruzzi, Chairman of the Contract Manufacturing Companies Group of Farmindustria, the Italian pharmaceutical industry association – outsourcing pharmaceutical companies have been constantly evolving and growing and, as result, they need to invest more and more to be updated and to ensure a quality production».

Dr Teruzzi, could you tell us more on Contract Manufacturing Companies Group?

Currently the Contract Manufacturing Companies Group gathers 13 companies based and active in our Country, but our aim is to expand the group by involving all the companies active in Italy, regardless the nationality (italian or foreign) of their social capital. We want to involve all the companies that are producing in Italy because these industries are giving work and value to our Country. The group’s objective is to enhance the italian pharmaceutical productive sector, aligning the group societies with the “Value Production” project, promoted by Farmindustria; the project’s aimed to support the entire italian pharmaceutical manufacturing sector and involve all manufactorers, regardless of their activity as “traditional” or contract manufacturer.

Which is the situation of the Italian pharmaceutical contract manufacturing sector?

In the last years the contribution given by the contract manufacturing companies to the pharmaceutical production industry has become more and more important and this will continue even in the future. There are growing evidences that outsourcing the manufacturing activities is becoming always more and more strategic as it allows to the customer companies to optimize the manufacturing processes as regard timing and quality. The customer does not have to deal with a lot of time and resource consuming issues (such as raw material purchasing, equipments rental or facilities maintenance, because all of these activities are carried out by the contract manufacturing companies) and, most important, this comes together with the guarantee of the quality of the finished product, giving an advantage in terms of cost. Since 2005, the Italian contract manufacturing sector has grown by over 100% in terms of number of employees (about 2700 units) and turnover (532 million Euros). These results have been reached thanks to “old” contractors, historically present in Italy, and new contractors that have took over the manufacturing plants from international pharmaceutical groups, that unfortunately have moved their production from Italy. In the last eigh years exports have tripled and today they account for about half of the whole turnover (238 million Euro), highlightening how the Italian production is appreciated beyond national borders. Even though the European market is still one of our main targets, we are also interested in the emerging Countries, such as the Far East Countries (Indonesia, Malaysia, Vietnam and Corea), that are characterized by a strong demographic and consumption growth. Against all expectations the Italian contract manufacturers are also exporting to China, a nation where many companies are displacing their manufacturing processes because of the low labour costs. This happens as the Italian pharmaceutical products are highly appreciated and valued mainly by the chinese wealthy classes.

What are the values that distinguish Italian Contract Manufacturers?

They are several. The first is our companies stability. It is a long time that most of the italian producers have been active and locally embedded. Besides the pharmaceutical italian personnel is very competent as about one-third of the employees has a degree, a percentage much higher than that of the other italian manufacturing industries (8.4%). Then we do not have to forget the quality of our products, the expertise, the creativity and innovative capacity of our professionals and entrepreneurs are well recognized and appreciated at international level. The quality of products is guaranteed not only by the compliance with GMP but also by the high level investment in technology. According to the latest estimates, in 2012 the companies invested about 64 million Euros in R&D and spent 5.2 million Euros in Health, Safety and Environment areas, that is about 4 times more than the other manufacturing industries did. Another uniquiness tipical of Italy is that all constituents of the whole production chain are widespread in our country. We have manufacturers of raw materials, ingredients, primary and secondary packaging materials, companies leader in the production of pharmaceutical equipments suitable for all pharmaceutical needs, and companies with a very high skills and expertise in logistics and supply chain distribution as well. In other words Italy can ensures the constant presence of all the necessary ingredients needed to work properly without the fear that a production slowdowns or stops due to an accident stop last too much. The quality and characteristics of our  employees together with the presence of technical and production suppports give us a real excellence in the pharmaceutical manufacturing area.

Nowadays many pharmaceutical companies are moving abroad some production steps. How Italian contract companies can be competitive?

The situation has been evolving quickly as “traditional” low-cost Countries are undergoing a gradual increase in their internal costs, because the salaries are raising and they need to investment money to ensure the levels of safety and quality required by FDA and European regulatory Agencies. On the other hand, our companies, which are already operating at high safety and quality levels, have already started to optimize the production processes (for example by adopting machinery more and more efficient) in order to reduce costs and to remain competitive. We have to consider that markets are interested not only in cost saving, but also appreciate the combination of cost, quality, flexibility, supply guarantee, compliance with deadlines, and transport logistics. Our contract manufacturing companies are able to comply with all these requests, even though we could have some delays in our planning due to the Italian regulatory requests and burocracy that give us a burden non comparable to our European competitors.

How the Contract Manufacturing Companies Group intends to promote the value of its members?

Our first commitment is raising awareness of the quality of Made in Italy products. A quality recognised in other fields, but not so well recognised in the pharmaceutical sector too. To do this we made our clients test on the field the italian pharmaceutical manufacturing companies, contract manufacturing companies included, active in Italy. We will strive for promoting the dialogue among all the components of the drug chain, starting from the producers of excipients, raw materials, components and equipment and finishing to producers of primary and secondary packaging. We are working to strengthen the dialogue with the Universities in order to increase research and development of always more innovative methods and processes. We are also promoting a dialogue with all the Institutions, AIFA (Italian Regulatory Agency) included, to let them know and understand our needs and to find an agreement between the links of regulation and the pushes of competitiveness. Finally, we want to strengthen the dialogue with the trade unions not considering only the contractual but also employment issues.

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