Contract Testing vs. Contract Manufacturing Organizations For Medical Device Outsourcing
What are contract testing and contract manufacturing?
Contract testing and contract manufacturing are both forms of outsourcing (outside resourcing). As the name of these terms implies, a contract testing (or contract manufacturing) company creates an agreement (contract) with another business (company A). In the case of contract testing, the contract is to complete a series of tests. Whereas with contract manufacturing, the agreement is to complete a planned or existing manufacturing task. Thus, company A hires the contract testing (or manufacturing) organization to complete manufacturing or testing activities that they can’t do in-house or don’t wish to achieve internally. Utilizing the services of a contract testing (or manufacturing) company can supply a host of benefits, especially to startups or small companies.
What are the benefits of using contract testing and contract manufacturing organizations?
Many contract manufacturing benefits overlap with contract testing benefits. The reasons to use an outside company to support with manufacturing or regulatory testing are:
#1: Cost savings
Medical device companies that utilize contractors save money instantly because they do not have to pay startup costs for equipment or facility space. Additionally, companies save money on skilled technician hiring, wages/benefits, and training. As contractors serve multiple customers, they purchase testing and manufacturing materials in bulk. Thus, contractors can often offer reduced testing material costs. While all of these benefits are obvious for startups and small companies with limited startup capital and resources, large corporations also benefit from using contractors through outsourcing any manufacturing or regulatory testing needs outside of their core competencies.
#2: Advanced technical skills at your fingertips
Medical device companies can use the contractor’s engineers, scientists, regulatory experts, and technicians with years of experience to their advantage. These experts will know which tests to run for your unique products.
#3: Instant access to GMP quality facilities
Facilities that are certified for Good Manufacturing Practices (GMP) require ongoing environmental monitoring to maintain certain levels of sterility and excellence. Through utilizing a contract testing (or manufacturing) organization, you gain instant access to GMP quality testing facilities and circumvent the headache of startup facility costs and lengthy certification processes.
#4: Allows outsourcing business to focus on branding depth
With outsourcing regulatory testing (or manufacturing) needs outside of a company’s expertise, businesses can focus on their core competencies and building their corporate brand. Thus, new companies can focus on establishing depth over breadth.
#5: Time savings
Businesses do not need to hire staff, train technicians, reallocate personnel or acquire testing equipment with a contracting organization. Instead, companies access on-demand testing or manufacturing services that parallel medical device branding and other product development activities.
Top 5 mistakes to avoid when utilizing a contract manufacturing or contract testing company
The following items are mistakes to avoid that apply to both contract manufacturing and contract testing organizations. For additional mistakes to avoid when using contract manufacturers, specifically, visit our article here.
#1: Forgetting the benefits of building an excellent contractor-client relationship
As with any contract or agreement, relationships are essential. Contractors 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 (or contract testing) team handling your project to provide you with excellence and efficiency. Many businesses also build relationships with their contractors by rewarding project excellence with additional business.
#2: Not setting raw material quality standards
Businesses should ensure that the contractor’s material standards are congruent with their own. Evaluations of the suppliers used by your contractor are imperative for manufacturing raw material and production timelines. For example, if your contract manufacturer is in India, materials sourced from China will have significantly 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 contractor and their traditional suppliers will determine the quality standards.
#3: Poor intellectual property protection
Before signing a deal with a contractor, it is critical to cover all your legal bases on confidential disclosure agreements (CDAs) and intellectual property (IP) protection. 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 testing or 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 company and your contract manufacturer.
#4: Poor handling of unanticipated project delays and manufacturing capacity constraints
A startup will not make up most of a contract manufacturer’s (or contract tester’s) business. Thus, it is imperative that startups carefully track the progress of projects they contract so that they aren’t de-prioritized over other projects during busy months. Holidays are tricky for all contractors, so avoid large contract manufacturing or contract testing projects over these weeks when possible to avoid holiday-driven project delays.
#5: Not negotiating payment terms
Contract manufacturing organizations often ask for a certain amount of money upfront, followed by payments at various project milestones. Contract testing contracts may be similar or require fewer upfront costs, depending on the resources needed to set up and perform the requested regulatory tests. 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.
Summary
Overall, contract testing and contract manufacturing are forms of outsourcing where a third-party company is hired to complete activities that cannot be accomplished internally. Utilizing the services of contractors can supply a host of benefits, especially to startups or small companies. These benefits include cost savings, time savings, access to advanced technical skills outside a company’s expertise, and other benefits like access to GMP quality facilities. However, many companies make several mistakes when engaging contractors for the first time.
A few of the most common and costly mistakes businesses make when engaging contractors for outsourcing include not negotiating payment terms, poor handling of unanticipated project delays and manufacturing constraints, leniency on raw material quality, and poor intellectual property protection. Contract testing companies, like Ethide Labs, can provide testing services and packages that will supply you with the data you need to get your unique medical device FDA approved.
Ethide Labs is a contract testing organization specializing in Microbiology Testing. Ethide Labs also offers Bioburden Testing, Bacterial Endotoxin Testing, EO Residual Testing, Sterility Testing, Cytotoxicity Testing, Environmental Monitoring & Package Integrity Testing services for medical device companies and allied industries. Ethide 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.
