Difference Between Contract Manufacturing and Third-Party Manufacturing- In the pharmaceutical and manufacturing industries, both third-party pharma manufacturing and contract manufacturing are popular business models that help small- to medium-sized pharma companies to meet their production needs without investing in in-house manufacturing facilities. In this blog we will understand the Difference Between Contract Manufacturing and Third-Party Manufacturing that helps you to choose the right model based on your needs, capabilities, and growth.
Definition and Scope of Contract Manufacturing and Third-Party Pharma Manufacturing
Contract manufacturing: Contract Manufacturing refers to a pharmaceutical business model where a pharma company (client) enters into an agreement with the pharma manufacturing company to produce the specific range of the pharma medicines according to detailed specifications. The client has the control over the product design, formulation, and quality standards, while the contract manufacturer provides production capacity, expertise, and regulatory compliance
Third-Party Manufacturing: Third-Party Pharma Manufacturing is a subset of contract manufacturing in which the pharma company outsources production of its medicines entirely to an external manufacturer. In this model, the third-party manufacturer carries out the manufacturing task based on the work order given by the pharma company. There is no need for the pharma company to provide the raw materials and other stuff to the manufacturer. In this model the manufacturer company only produces the limited products and no additional services like research and testing are conducted by the company.
Table of Responsibilities and Services
| Contract Manufacturing |
Third-Party Manufacturing
|
| Client-led formulation and R&D |
May include formulation support and collaborative development
|
| Client obtains and maintains regulatory approvals |
Manufacturer may handle submissions, depending on the agreement.
|
| Client may supply raw materials or approve supplier list |
Manufacturer sources and manages raw material procurement
|
| Manufacturer produces, and the client supervises QC |
Manufacturer manages production, QC, and packaging
|
| Client provides the design; the manufacturer executes it. |
Manufacturer often designs and executes under brand guidelines
|
| Client coordinates or uses third-party logistics |
Manufacturer may offer end-to-end supply chain solutions
|
Benefits of Contract Manufacturing
- In contract manufacturing, the cost of production is minimal because there is no requirement for in-house manufacturing units and other facilities.
- With the help of the manufacturing companies and other outsourcing activities, the client pharma company can focus on the other functional areas like sales and marketing.
- The contract pharma manufacturing work for different pharma companies at the same time. Their industry experience will help you to get the technical insight of the manufacturing process.
Benefits of Third-Party Manufacturing
- In this business model, the client pharma company does not need to set up their manufacturing units or need to buy large pieces of land for the production.
- There are fewer investments required for the pharmaceutical companies to operate. So this is the good option for the small- to medium-sized pharma companies.
- This is a hassle-free way to produce the medicines and increase the list of the product portfolio with complete quality assurance.
- This is the fastest production operation, as it can be started with just a simple agreement to outsource medicines from the company.
Key Differences Between the Contract Manufacturing and Third-Party Pharma Manufacturing
- Contract manufacturing is usually opted for by the large pharmaceutical companies. On the other hand, third-party pharma manufacturing services are adopted by the small- to medium-sized pharma companies.
- In contract pharmaceutical manufacturing, companies ask the manufacturer to make products according to their specific needs, which can be changed as necessary. On the other hand, in third-party drug manufacturing, companies agree on how many products will be made and when they will be delivered.
- In contract manufacturing, raw materials and other stuff are provided by the companies to the manufacturer. However, in the case of third-party pharma manufacturing, this is not the same.
Conclusion
We have mentioned the Difference Between Contract Manufacturing and Third-Party Manufacturing in which we provide brief information about these cocepts like key meanings, benefits and key differences.
