Contract manufacturing organization (CMO) A bids $600,000. CMO B bids $450,000. Which bid is cheaper?
Assume for the moment that both CMOs provide equal service parameters: skill, capacity, timelines, regulatory history, experience, etc. and we are judging both based only on price.
No, this is a not trick question. But the result is not obvious.
Even with a detailed request for proposal (RFP), the quotes from CMOs will likely be very different. Why? Because the RFP is not clear or not complete or the CMO will not be careful. But often, the form of the quote is so different that the total cost is not apparent.
Let’s look at the example totals for CMO A & B. The desired stability testing is as follows:
3 packaging configurations stored at room temperature for 1-, 3-, 6-, 12- and 24 months, 30°C and 40°C for 1-, 3-, 6 months. Test assay, dissolution, n=6.
CMO A: gives test validation costand individual test costs and does the multiplication to yield a total cost which is reflected in the $600,000 total.
CMO B: says test will be developed and validated at $200/hour and that tests will be run at $400/hr for assay and $1000 per dissolution, but does not do the multiplication and puts nothing in the sub total category.
The rest of CMOs A & B quotes go the same way, A gives detailed costs and B gives charges. CMO B total appears less than CMO A. In fact, CMO B will cost more than CMA A when the line item costs are considered.
This example is relatively easy to see since you can actually see the difference in the quoted line items.
In practice, the computation is much more difficult because the assumptions I made – that skill, capacity, timelines, regulatory history, experience, etc. are the same, rarely happens. Particularly timelines. How do you factor in a monthly delay in getting your product approved?