Guest Column | March 10, 2016

How To Streamline Serialization Implementations With Your CMOs

By Dave Colombo and Dawn Wang, KPMG Life Sciences Advisory

Pharmaceutical manufacturers or marketing authorization holders (MAHs), as defined by legislation, are required to ensure that all products they supply to the market are compliant with serialization requirements, including products packaged through their contract manufacturing organizations (CMOs). Many manufacturers view serialization as mostly an IT data exchange project when it comes to integrating with external partners; however, properly managing the impacts on business processes is just as critical to the success of a CMO serialization implementation project.

Upcoming due dates of the U.S. Drug Supply Chain Security Act (DSCSA) in 2017, and the E.U. Falsified Medicines Directive (FMD) in 2019, will expose a much larger scope of products to serialization requirements. To prepare for these deadlines, companies should leverage learnings from past CMO implementations for markets such as Turkey, China, and South Korea, but also think about how to develop standardized processes and approaches for scalability.

Managing CMO serialization implementation is a multifaceted process that requires thorough review and planning across functional teams to best understand all the components necessary for success. Thus, it is important for companies to recognize the barriers they will likely encounter during serialization implementation with CMOs — and plan accordingly.

Understanding Network Complexity

The CMO networks of many drug companies have grown steadily throughout the years, driven by many factors, including enhanced CMO turnkey services and continued cost pressures to outsource. While some organizations may have strong existing management processes around their CMO network, others may not have sufficient visibility into how that outsourced business is managed and the correlating product portfolios supplied. To understand the complexity of the CMO network, organizations should assess these three factors:

  1. CMO network size and product portfolio scope: To understand the size and scope of a CMO serialization implementation project, organizations should first conduct a review of all CMO packaging service providers, the affected product families and SKUs, and the markets into which those products are supplied. By conducting this review, organizations will gain a better understanding of which CMOs are most impacted by serialization (e.g., have the most number of SKUs or highest volume of product sold into markets with serialization requirements) or have the most complexity (e.g., supplies product sold to several different markets with distinct serialization requirements and timelines).
  1. CMO business criticality: Another factor to consider when assessing CMO network complexity is how the business criticality of each CMO is determined. Some companies may have existing processes to segment their CMO network into tiers indicating strategic or preferred suppliers. This segmentation method should be leveraged as an input into additional implementation strategy and planning activities. For example, organizations may want to reduce risk by prioritizing the most critical CMOs and pulling them forward in the implementation timeline.
  1. CMO sourcing strategy: The last factor to consider is where the organization is headed in terms of its overall sourcing strategy. Some organizations may want to outsource packaging in order to focus on other core competencies. Other organizations may want to consolidate their supplier network and move manufacturing and packaging services in-house, or consolidate them to a smaller CMO network. These sourcing strategy decisions should be evaluated and considered as input prior to beginning CMO implementations, in order to best align the approach.

These three key factors require data extraction and analysis as well as conversations with key stakeholders across a few functional areas. Conducting the review and considering all factors will ensure that critical decisions on how to manage the network complexity are aligned with ongoing serialization CMO strategy — and are agreed upon prior to starting implementation.

Planning And Developing Execution Timelines

Manufacturers must take an active approach to developing a compliance plan to ensure CMO serialization readiness by market timelines. Since the manufacturer / MAH is ultimately responsible for the compliance requirement, they should work together with CMOs to align on timelines across project teams in both organizations. In order to do so, manufacturers should:

  1. Assess the CMO’s serialization program maturity. Since CMOs will be managing their own serialization programs, manufacturers should take a proactive approach to surveying CMOs on their program maturity. CMOs may be at various stages on the maturity spectrum, from very mature with serialization capabilities already in place, to just getting started with limited awareness of what serialization requirements are. Manufacturers should assess their CMO network maturity against the business criticality factor to understand where the greatest risks are (e.g., a preferred CMO who has low serialization program maturity should be raised as a red flag) and where the quick wins are (e.g., CMOs who are very mature and require little to no oversight to enable serialization for products in-scope).
  2. Evaluate the impact of the CMO design. A leading practice for CMOs would be to design their serialization solutions to be as flexible in meeting requirements from all clients; however; manufacturers should evaluate if the CMO solution is compatible with its own approach. For example, manufacturers should understand the CMO’s serialization IT solution architecture and what functionalities will be used to manage serialized data exchange to support serial number allocation, commissioning file exchange, and external reporting processes. Conversations regarding data exchange should include both what the process is (e.g., manufacturer allocates serial numbers to the CMO vs. CMO provisions its own serial numbers) and what the technical options are to enable the process (e.g., automated file transfer methods vs. manual exchange through a portal or email). Manufacturers should also understand the CMO’s packaging solution and any impacts to artwork that must be reviewed and approved by both organizations.
  1. Review the SKU cut-over plan. As manufacturers dive further into implementations with their CMOs, they will need to develop a detailed SKU cut-over plan from non-serialized product to serialized product. Depending on where the CMO falls in the implementation timeline, as well as the SKU volume and movement in the market, it may be necessary to plan inventory depletion or building of non-serialized inventory to help ensure that business and compliance needs are met.

These planning considerations are key to ensuring alignment between the manufacturer and its CMOs. CMO serialization implementation must be considered as a joint project between the two organizations, so that both are implementing according to common requirements and timelines.

Managing Resource Constraints And Process Impacts

Resource constraints can be a hurdle with any large-scale program, and serialization is no exception. Serialization implementations with CMOs will expand beyond IT connectivity activities, and it is critical that companies consider which supporting functional areas and business processes will be affected by CMO serialization implementation.

  1. Supplier relationship management teams: In most organizations, a single functional area serves as the key relationship owner with CMOs. During a serialization project, this team will be integral to internally reviewing the network complexity and providing key input for the internal CMO serialization implementation strategy. They will also serve as the main channel of communication to CMOs on requirements, timelines, and other implementation activities.
  1. Supplier quality teams: Serialization introduces a significant change to the packaging of the product and also introduces a new element of data exchange between pharmaceutical companies and their CMOs. The supplier quality functional area should be included in serialization discussions in order to understand how existing supplier change control processes should be leveraged to manage serialization as it is implemented at CMOs, and how existing quality agreements should be modified for the addition of serialization as a service provided.
  1. Artwork and labeling teams: As serialization is implemented, organizations should anticipate changes to artwork to make space available for the data identifier and human readable text. As we approach the U.S. 2017 and EU 2019 due dates, the volume of these artwork change requests will start to increase significantly. Organizations will need to plan resources accordingly to manage the work, and identify ways to proactively make standard artwork changes where possible.

There are many business processes that will be affected by the CMO serialization project, and functional areas across the organization will need to be made aware of the impacts to their roles and responsibilities. In many cases, existing business processes may be leveraged for the serialization project, as these functional areas already interact with the CMO network in their current roles.

Conclusion: Preparation Helps Win The Battle

Pharmaceutical companies must not overlook the amount of work CMO serialization implementations will bring. Although the technical implementation work is largely managed by the CMO, there are many business considerations and processes that the manufacturer must ensure are discussed and aligned both internally and with the CMOs. Organizations that take a proactive approach to review their CMO network complexity to identify risks and opportunities, develop an appropriate strategy and implementation plan, and mobilize resources from internal functional areas will be well-positioned to meet compliance requirements and due dates.

About The Authors

Dave Colombo is a director within KPMG’s Life Sciences Advisory Practice with over 25 years of experience supporting supply chain execution processes at a large global pharmaceutical company. Prior to joining KPMG, he spent six years dedicated to product coding, serialization, and traceability implementing solutions in Turkey, China, Spain, and the U.S.

Dawn Wang is a manager within KPMG’s Life Sciences Advisory Practice currently working with clients to comply with various global compliance requirements, with a focus on pharmaceutical serialization regulations. Prior to joining KPMG, Dawn held various roles in operations, supply chain, quality, and compliance at a global pharmaceutical and medical device company.

This article represents the views of the author(s) only, and does not necessarily represent the views or professional or legal advice of KPMG LLP.