Managing risk is crucial in effective supply-chain practices, particularly for the pharmaceutical industry for which product quality is of paramount importance. The Pharmaceutical Supply Chain Initiative (PSCI), which was formed in 2006, is a program created by a group of pharmaceutical companies to support responsible supply-chain practices of pharmaceutical industry suppliers, a critical issue as drug companies elongate their supply chains geographically and increase their levels of external development and manufacturing.

Two years ago, a Pfizer public relations executive was giving a speech before a business group about communications outreach, and he confessed to having a certain amount of confusion over the bad image that has plagued the pharmaceutical industry.

It was probably the French drugmaker Sanofi’s buyout of Shantha Biotechnics in June that suddenly turned the global spotlight on India’s biotech scene. Sanofi’s vaccine unit Sanofi-Pasteur paid a huge premium to Merieux Alliance — which owned majority ofshares in Shantha Bio through its subsidiary ShanH — to acquire controlling stake in the Hyderabad based bio firm.

With respect to factory inspections, section 704 of the Federal Food, Drug, and Cosmetic Act (“FDCA”) generally allows that for the purposes of enforcing the FDCA, appropriate officials of the U.S. Food and Drug Administration (“FDA”), after presenting appropriate credentials and with written notice, may enter (at reasonable times) any place in which regulated products are manufactured, processed, packed, or held and to reasonably inspect such place.

he past 20 years of biopharma outsourcing has seen pendulum swings in strategy as kinks were worked out of the system and this new industry grew and matured. Ten years ago, the drug industry (including biopharma) was in the process of backing away from the ‘fully vertically integrated’ business model that had been in vogue in the early 1990s, and was moving toward an outsourcing model. Virtual companies were getting funding and investors were recognizing the value that contract manufacturers and other outsourcing firms added to good discovery and intellectual property.

There’s an idea that’s been floating around the drug industry for some years now. It goes in and out of focus, but it refuses to completely die: Why not ditch the research labs and just in-license all your compounds? It’s been at least 10 or 12 years since I first heard of this plan (although I’m sure it’s an older idea than that), and it still keeps popping up as a new thought experiment.

I was happy to participate in the premier issue of Contract Pharma by writing a column assessing the growth prospects for the pharmaceutical outsourcing industry. Following a robust period of expansion, 1999 had been “punctuated by numerous pricks in the sacred balloon of growth.”

In the last decade, research in drug discovery and the life sciences has been dominated by two trends: increased automation and greater parallelization. Once, a researcher would focus on cloning a single gene at a time. Now, with the advent of robotic technology, they can clone thousands of them in parallel. Similarly, researchers no longer attempt to crystallize a single protein, instead screening dozens of variants against hundreds of conditions simultaneously.

Where does the pharmaceutical industry stand in the shift toward outsourcing of manufacturing? Why is there such debate about using contract manufacturers and bulk supply?

Actions needed by the pharmaceutical industry to meet the requirements of the European Union’s new Registration, Evaluation and Authorization of Chemicals (REACH) regulation are gradually becoming clearer now that the December 1, 2008 pre-registration deadline has passed. There has been considerable and ongoing confusion about the requirements of REACH amongst pharmaceutical firms: in some cases, substances used in drug manufacture are exempt from REACH, but this applies only in certain specific situations (See Know Your Exemptions below).

This time, it was different. While the extent of consolidation in outsourcing in 2008 was not bad, we suspect it would have been stronger had it not been for deteriorating economic and capital market conditions. Moreover, the uneven financial results of some drug development firms and outsourcing service providers probably inhibited many contemplated transactions from coming to fruition. In the pages that follow, we comment on patterns of consolidation activity within various outsourcing segments, and on the details of specific transactions.