Pharmaceutical contract manufacturing is an arrangement between two companies where one company that sells and distributes pharmaceutical products enters into a contract with a company that produces such products. Contract manufacturing saves the distributor of the product money as there is no need to have a factory geared to the production of pharmaceuticals nor is there any reason for the distributor to go through the regulatory issues associated with products of this nature.
The key to Pharmaceutical Contract Manufacturing is efficiency. When the company that sells pharmaceutical products does not have the capability to produce and package in their own facility, or if setting up to produce is too costly, then the only genuine alternative is to seek out a company that can manufacture the product under contract. Contract manufacturers are well positioned to provide this service as they are set up to manufacture in huge quantities at a reasonable cost. The seller can lower the costs associated with the product by increasing the quantity or entering into a multi-year contract.
The pharmaceutical industry is highly specialized; those that are involved in distribution have totally different demands on them than do those who are involved in manufacturing. With the production in the hands of a company that is geared for the production of these types of products, the selling company is left with time to focus on R&D, marketing and other areas in the field.
Although contract manufacturing of pharmaceuticals does have considerable benefits, there is some downside to these arrangements. The manufacturing companies are obliged to submit the products to quality assurance by the USFDA (Food and Drug Administration) and they must maintain extremely high standards in production. As a result of the FDA involvement, the client company can exercise limited oversight on the products that are produced. The fact is; the client has little control so it is extremely important that the manufacturing company is well respected.
Another issue that can be a security concern is the fact that the contract manufacturer has access to the formulations of the product, most of which are patented. It is of paramount importance that the manufacturer protects the patents of their clients from those who may attempt to gain access to this information.