Top 10 Contract Manufacturing Mistakes Medical Device Startups Should Avoid
What is Medical Device contract manufacturing?
Medical device contract manufacturing is a form of outsourcing (outside resourcing) for medical device manufacturing. As the name of the term “contract manufacturing” implies, a contract manufacturing company creates an agreement (contract) with another business (company A) to complete a planned or existing task. Thus, company A hires the third-party medical device contract manufacturing company to complete activities that they can’t do in-house or do not wish to achieve internally. Utilizing the services of medical device regulatory and compliance solution companies for FDA medical device testing can supply a host of benefits, especially to startups or small companies.
What are the benefits of contract manufacturing?
The use of contract manufacturing companies offers a variety of benefits, including cost savings, time savings, and access to advanced technical skills, GMP qualified facilities, and internal product knowledge. However, contract manufacturing has its risks. Below you can learn how to receive the greatest payoffs with your contract manufacturers.
Top 10 Contract Manufacturing Mistakes Startups Should Avoid
#1: Giving away too much product control during contract negotiation
When a business signs a contract allowing another company to produce their product, they lose significant control over the little decisions that go into manufacturing it. Unless the master services agreement (MSA) between the business and contract manufacturing organization specifically outlines agreed-upon manufacturing requirements, a company cannot force a contract manufacturer to implement certain strategies or practices. Thus, it is essential to pay your prices upfront and be specific about your production needs. These needs may include process strategies, how often you would like to have project updates (or meetings) from the team assigned your manufacturing project, project milestones, dates for project milestones, and any other factors you would like controlled throughout the product’s manufacture.
#2: Forgetting the benefits of building a good contract manufacturing-client relationship
As with any contract or agreement, relationships are important. Contract manufacturing organizations and their project teams have other clients. Set yourself apart as a client that is clear, responsive, and personable. Doing so will incentivize the contract manufacturing production team handling your project to provide you with excellence and efficiency. Many businesses also build relationships with their contract manufacturers by rewarding project excellence with additional business.
#3: Being lenient on setting the raw material quality standards
Businesses should ensure that the manufacturer’s material standards are congruent with their own. Evaluations of the suppliers used by your contract manufacturer are imperative for raw material quality assessment and production timelines. For example, if your contract manufacturer is in India, materials sourced from China will have longer shipment times than materials sourced locally. How raw materials are assessed for quality by the contract manufacturer before use is also essential, especially if you know your product requires a certain raw material grade or form. Without specifying raw material quality needs in your contract, the contract manufacturer and their traditional suppliers will determine the quality standards.
#4: Risking intellectual property loss
It is critical to cover all your legal bases on confidential disclosure agreements (CDAs) and intellectual property (IP) protection before signing a deal with a contract manufacturer. Ensure that you have filed at least a provisional application in the United States and other countries where you would like IP protection before contracting out product manufacturing. When entering a manufacturing contract, a business is often sharing its formulas or technologies. Thus, protecting your intellectual property as much as legally possible is critical to a mutually beneficial agreement between your business and your contract manufacturer.
#5: Not anticipating overseas cultural differences and challenges
Utilizing contract manufacturers abroad has become popular due to the labor cost benefits. However, sourcing raw materials overseas can result in long lead times. Further, cultural differences such as language barriers and work ethic can make contract manufacturing overseas time-consuming and stressful. Thus, ensure that you meet with your contract manufacturing team before signing the MSA so that you can evaluate whether the staff will meet your businesses’ expectations.
#6: Poor handling of unanticipated project delays and manufacturing capacity constraints
A startup will not make up the majority of a contract manufacturer’s business. Thus, it is imperative that startups rigorously manage the progress of projects they contract to manufacturers so that they aren’t de-prioritized over other projects during busy months.
#7: Using only one contract manufacturer for long-term product production
During the beginning phases of product manufacture, it makes sense to work with only one contract manufacturer. However, as your product development expands, it isn’t easy to scale operations when only a single manufacturer can produce the product effectively. Product production is stuck if that single manufacturer has issues sourcing necessary raw materials or can’t meet production timelines. Further, manufacturers who know and have implemented your production process can create your product faster and cheaper than a new supplier because they have experience manufacturing your product. Thus, sticking with a single manufacturer may result in high production costs over time since that single manufacturer has all the leverage during manufacturing rate negotiations. Thus, the ability to produce your product with a secondary manufacturer leads to long-term cost and time savings.
#8: Losing flexibility and responsiveness
As mentioned above, contract manufacturing organizations have more than one client. Thus, a business is at the mercy of the contract manufacturer when responding to manufacturing demand fluctuations, supply chain disruptions, or troubleshooting unexpected activities that can delay product production timelines.
#9: Not negotiating payment terms
Contract manufacturing organizations often ask for a certain amount of money upfront, followed by payments at various project milestones. Timelines for invoice payments range from thirty days up to ninety days. For startups, avoiding unnecessary costs upfront and negotiating for sixty- or ninety-day terms aids in financial flexibility for limited funds.
#10: Losing money to generic products
For pharmaceutical companies, selecting a contract manufacturer that also produces generic drugs sets your business up for financial losses to generic products as soon as your patent protection expires. Give your business more time in the market without competition by avoiding sharing your manufacturing scale-up secrets with companies that manufacture generics. It’s also important to remember that while patents give you the exclusive right to market your product, it is the responsibility of the patent holder to monitor the market and send any “cease and desist” letters.
Summary
Overall, contract manufacturing is a form of outsourcing where a third-party manufacturing company is hired to complete activities that cannot be accomplished internally. The use of contract manufacturing companies offers a variety of benefits to startups, including cost savings, time savings, and access to advanced technical skills, GMP qualified facilities, and internal product knowledge. However, many startups make several mistakes when engaging contract manufacturers for product production. A few of the most common and costly mistakes include not negotiating payment terms, poor handling of unanticipated project delays and manufacturing constraints, leniency on raw material quality and source standards, and using only one contract manufacturer for long-term product production. When looking to engage with a contract manufacturing organization for product production, ensure that the signed master services agreement covers all of your intellectual property, quality, timeframe, formulation development, and packaging needs.
MycoScience is a contract manufacturing organization specializing in sterile syringe and vial filling. MycoScience also offers Preservative Efficacy Testing, Sterilization Validations, Bioburden Testing, Cleaning Validations, Microbial Aerosol Challenge Testing, Accelerated Aging, Microbiology Testing, Cytotoxicity Testing, Bacterial Endotoxin Testing, EO Residual Testing, Package Integrity Testing & Environmental Monitoring services medical devices and allied industries. MycoScience is an ISO 13485 certified facility.
References
Contract Manufacturer. Wikipedia. 2021.
Michael J. Akers. Sterile Drug Products Formulation, Packaging, Manufacture, and Quality. Drugs and the Pharmaceutical Sciences. Informa Healthcare. 2010.
