The CMO Landscape: Diversifying to Meet an Evolving Industry

The CMO Landscape: Diversifying to Meet an Evolving Industry

Part one of a three-part series on the Contract Development and Manufacturing industry and potential products liability and manufacturers E&O risks.

Life sciences and medical device companies face ongoing pressure to maintain quality and innovation while reducing time to market and development costs. Outsourcing to contract development and manufacturing organizations (CMOs or aka CDMOs) allows these companies to meet their objectives while focusing on what matters: developing new products.

What is a CMO?

CMOs assist in the development or production of a drug product or medical device for a company that usually owns intellectual property rights for that product or device. Services include:

• Product Development
• Design
• Assembly
• Manufacturing
• Engineering
• Supply Chain Management
  (including sterilization, packaging, and warehousing)

As recent as two decades ago, drug and device companies hesitated to outsource to CMOs due to quality concerns, IP issues, or simply lack of control. That’s changed, however, as companies have realized the benefits of outsourcing manufacturing and other tasks to meet market demand. In response, CMOs have continued to expand their offerings.

The Role of CMOs for Medical Device Manufacturers

Since the passage of the Affordable Care Act and the coinciding push toward value-based care, CMOs have become an integral component of original equipment manufacturer (OEM) product development strategy. Two primary reasons OEMs rely on CMOs include:

• To fill a gap. Many OEMs require outside technology and expertise to assure finished products are manufactured correctly. An OEM also may not have the in-house capacity or technological capability to manufacture products at scale.
• To cut costs. OEMs must continue to innovate while proving value to payers and customers. Outsourcing certain functions to CMOs allows OEMs to keep staff and space to a minimum. Medical device companies can utilize a CMO and produce the most cost-effective product they can while not sacrificing product quality.

CMOs and OEMs: An Evolving Relationship

The relationship between OEMs and CMOs continues to evolve with the industry. CMOs that offer lower manufacturing costs and a more efficient global supply chain can help OEMs increase profits even while producing at a relatively low volume.

OEMs consider their CMOs valued partners that provide assistance from product development to delivery. As these parties enter into long-term contracts, factors such as trust and close management contact become increasingly important.

Future Outlook

Biologics present a new opportunity for CMOs with cell culture and other specific manufacturing experience. According to Bloomberg, the global cancer biologics market is expected to grow by $40.48 billion between 2019 and 2023.

Meanwhile, medical devices have become more software-driven. Therapeutic devices often now have a digital health component. The rise in digital health products prompted the FDA to launch a Digital Health Program as well as specific procedures for software-as-a-medical-device (SaMD) and software-in-a-medical device (SiMD). CMOs with an understanding of digital technologies can help their OEM partners meet the rapid pace of innovation.

Medmarc has a long history of insuring CMOs, managing their claims, and providing risk management services. To learn more about how Medmarc takes care of its CMO insureds, call us at 1-800-356-6886.

References:

https://www.bloomberg.com/press-releases/2020-01-13/global-cancer-biologics-market-2019-2023-evolving-opportunities-with-amgen-inc-and-bristol-myers-squibb-company-technavio 

https://www.fda.gov/medical-devices/digital-health