Gil Roth is president of the Pharma & Biopharma OutsourcingAssociation, gil.roth@pharma-bio.org.

Gil Roth

	Uncertainty about the White House’s agenda has impacted pharma and the contract manufacturing organization (CMO)/contract development and manufacturing organization (CDMO) sector. There’s been some progress in the past few months, including the appointment of FDA Commissioner Scott Gottlieb, MD, but there remains a great deal to be worked out.
	
	In the near term, one of the most critical areas to be resolved is the FDA Reauthorization Act (FDARA), which reauthorizes four major FDA user fee packages: the Prescription Drug User Fee Act (PDUFA), the Generic Drug User Fee Amendments (GDUFA), the Biosimilar User Fee Act (BsUFA), and the Medical Device User Fee Amendments (MDUFA). The new packages will kick in on Oct. 1, 2017 (when the federal government’s FY2018 begins), and without timely approval of FDARA, FDA will be compelled to issue intent-to-furlough notices this summer to staff who are paid with user-fee funds. That would cause drug approval timelines to skyrocket for both innovator and generic drugs, and potentially hazardous facilities to go uninspected.

	On July 12, 2017, the House of Representatives approved FDARA (HR 2430) by voice vote; the bill was finalized in pre-conference with the relevant Senate committee, so this version should be the same one that the Senate will vote on. It retains the negotiated agreements between FDA and industry, while adding amendments intended to prioritize the review of generic drugs where they can help drive down drug prices. FDARA also includes stricter accountability and reporting of FDA’s use of user fee funds.

	The Pharma & Biopharma Outsourcing Association (PBOA) was deeply involved in the negotiations with industry and FDA for GDUFA II, and subsequently worked with Congress to explain some of the changes to the program, how they’re intended to increase patient access to affordable generic medicines, and how the new fee structure is fairer to various industry stakeholders. PBOA also worked through the amendment process to ensure that additions to FDARA wouldn’t harm the CMO/CDMO sector.

	That doesn’t mean everyone’s happy with FDARA. The White House has issued statements and an FY18 budget that runs counter to the negotiated agreements, zeroing out the federal funding that is part of each UFA program and increasing the user fee totals to offset that cut. The day HR 2430 was passed, the White House’s Office of Management and Budget (OMB) issued a 

 that included the following: “The Administration urges the Congress to provide for 100% user fee funding within the reauthorized programs. In an era of renewed fiscal restraint, industries that benefit directly from FDA’s work should pay for it” (1).

	Congress has turned down the White House’s request, retaining the existing UFA budget models. This should provide a degree of predictability for the user fee-paying sector.

	However, if FDARA isn’t passed by Congress and signed into law by the President by August, it’ll be a bad sign for FDA, the pharma sector, and patients. 
	 

	FDARA isn’t the only worrisome deadline the industry faces. Under the Drug Supply Chain Security Act (DSCSA), the federal law mandating FDA secure the drug supply chain, drug manufacturers and packagers had a deadline of Nov. 27, 2017 to make sure that all packages are marked with a product identifier, serial number, lot number, and expiration date.

	This has proved to be an immensely complex project (actually, a series of immensely complex projects). PBOA’s Serialization Working Group held numerous meetings to discuss the CMO sector’s readiness for that deadline, exchanging best practices and sharing other aspects of implementation. The lack of standardization, especially for data exchange, can put CMOs in an especially tough position, where they must accommodate the platforms of their various customers.

	In recent months, PBOA has met with FDA to discuss the CMO/CDMO sector’s readiness for that deadline, both in concert with other industry groups and in a one-on-one setting. In previous years, the agency had heard from a few individual CMOs, but most of their perspective came from other trade groups that represent the customer-client side of the equation. This necessarily led to an incomplete picture of the pharma manufacturing supply chain, and FDA seemed glad to talk directly with CMOs about the pending DSCSA deadline.

	At the end of June 2017, FDA announced that it will use enforcement discretion for 12 months following that November 27 date. Effectively, the agency will not cite manufacturers that are not ready to introduce serialized products into the marketplace. This gives CMOs and their customers some breathing room, but CMOs should be reminded that 12 months is not a lot of time when it comes to implementing a serialization solution.

	Nothing has brought PBOA and its member companies to the table with its industry peers as FDA’s Quality Metrics initiative has. Since the agency’s first draft guidance for quality metrics was introduced, PBOA’s Quality Technical Group has worked with a cross-industry consortium-including Pharmaceutical Research and Manufacturers of America (PhRMA), Biotechnology Innovation Organization (BIO), Association for Accessible Medicines (AAM), Bulk Pharma Task Force (BPTF), International Society for Pharmaceutical Engineering (ISPE), and the Parenteral Drug Association (PDA)-to push FDA to clarify the many ambiguities (and occasional contradictions) contained in that document and its successor.

	Both iterations of FDA’s draft guidance would have placed CMO/CDMOs in a position where they would be responsible for reporting data that are either confidential or outside of their purview (such as data from their customers’ other contract service providers). Reporting timelines that differ from those of Annual Product Reviews (APRs) would create new workflow and staffing requirements for CMOs. Other aspects of the program could also penalize CMOs, or incentivize them to avoid certain types of products for fear of getting a “bad score”.

	PBOA worked to convey to FDA that the quality metrics compliance burden would be immense for both in-house and outsourced manufacturing processes, and that the agency had yet to make a strong case for the benefits that would accrue from the program. Docket submissions and industry presentations have carried that message.

calling for federal agencies to repeal two regulations for every one that they introduce (2). That order also called for the incremental cost of new regulations to be zero (when offset by repeal of other regulations). While those are somewhat basic goals, it’s clear that quality metrics would carry a massive cost to industry to implement, and needs to be put on the back-burner.

	Drug pricing, immigration, tax reform, and other topics could impact CMO/CDMOs. In some respects, the industry is still in a wait-and-see mode regarding the administration, Congress, and FDA, but as an industry, we’re more involved now than we’ve ever been.

H.R. 2430-FDA Reauthorization Act of 2017

. Executive Office of the President, Office Of Management And Budget, Washington, DC, July 12, 2017.
	2. The White House, Reducing Regulation and Controlling Regulatory Costs, 


	Vol. 41, No. 8
	August 2017
	Pages:48-49

	When referring to this article, please cite it as G. Roth, "CDMOs: New Administration, New Frontier," 

Articles

Despite some progress, the industry is still in a wait-and-see mode regarding the administration, Congress, and FDA.

CDMOs: New Administration, New Frontier

	In mid-2016, consolidation, IPOs, pharma-spinouts, and facility selloffs were the major themes in pharmaceutical outsourcing. In the aftermath of the US presidential election, pharma stocks (and other industrials) went up. This giddiness among pharma investors lasted less than a month, ending when President-Elect Trump told 

, “I’m going to bring down drug prices. I don’t like what’s happened with drug prices” (1). 
	
	There was no elaboration for several weeks, and industry, investors, and the general public alike were in the dark about what he meant and how he might achieve that goal. No one was prepared for his Jan. 11, 2017 

 (2), in which he complained that pharma companies are “getting away with murder” and said that Medicare should be negotiating with drug companies for better prices. A few days later, he expanded that notion, calling for Medicaid to also have authority to negotiate prices, despite the fact that it has “best price” entitlement under current law.

	In recent months, the contract manufacturing and contract development organization (CMO/CDMO)  industry has seen a major acquisition in Lonza-Capsugel; a significant one in Asahi Glass-CMC Biologics; a pair in which Pharma & Biopharma Outsourcing Association (PBOA) member Catalent acquired two potential PBOA members in Accucaps and Pharmatek; and a large IPO by Samsung Biologics, which seems to value that company as bigger than Catalent and Patheon’s combined market cap. 

	Where is the CMO/CDMO sector headed in 2017 and beyond? Making predictions is pretty inane at the moment, but the industry should see more efforts at integrating “one-stop” CDMO concepts, along the lines of Patheon’s OneSource model, and that may entail more mid- to large-scale acquisitions, along with strategic purchases for specific technologies.

	Regarding the new administration in the United States, the industry is in wait-and-see mode. With the Republican party controlling both houses of Congress and President Trump in the White House, the Republicans will be in a position to implement business, industrial, and healthcare policy that can trickle down to affect the CDMO sector.

	Tax reform seems to be the top priority for the GOP (after repealing the Affordable Care Act, the process for which has turned out to be a minefield). Along with a drop in the corporate tax rate, they have pushed for a tax holiday that would allow US-headquartered companies to bring overseas profits into the country at a reduced tax rate, along the lines of the American Jobs Creation Act of 2004, which lowered the tax rate from 35% to 5.25% for a one-time repatriation. 

	What effect could a large-scale influx of funds by major pharma companies have on CDMOs? Those pharma companies may simply pay out higher dividends to shareholders, but this repatriation could also trigger a wave of mergers and acquisition activity among domestic players, which could lead to shifts in outsourcing allocation. In concert with the GOP’s idea of a border adjustment tax, there may be greater investment in US R&D and manufacturing facilities by in-house pharma, as well as a potential shift from ex-US facilities to domestic CDMOs for products intended for the US market.

	Anti-immigration sentiment could become problematic if it keeps high-value scientific personnel from coming to the US. More than one CDMO has expressed concern about potential visa restrictions and their impact on the labor pool.

	Congress has talked about accelerating generic drug reviews to provide another outlet for bringing drug prices down. While more generic approvals could benefit the CDMO sector, based on this author’s experience inside the Generic Drug User Fee Act (GDUFA) II negotiations, FDA does not have a lot of margin to shave from review times.

	The appointment of a new FDA commissioner could certainly shape policy in ways that benefit or hinder pharma and CDMOs, but FDA is awfully big, and it’s not the sort of organization that can change direction on a dime. Top-down policy decisions may impact discrete areas (will quality metrics survive the administration’s push for deregulation?), but the day-to-day functions of the agency overall may not reflect the priorities of a new administration very quickly.

	It’s all too uncertain at this point, and no Magic 8-Ball is going to point out the correct path. But one can hope that the new administration recognizes the value that the pharma industry brings to the US healthcare ecosystem, the financial and innovative engines that they represent, and the importance of the CMO/CDMO sector. PBOA’s members provide pharma and biotech companies with the advanced dose forms, regulatory-compliant manufacturing, and supporting development services that help them develop and manufacture drugs, biologics, vaccines, and other treatments safely and cost-effectively, and I hope we can work with the new administration to continue to bring value to American patients.

	1. M. Scherer, “2016 Person of the Year Donald Trump,” 

, Dec. 19, 2016. 
	2. President-elect Donald Trump, press conference, “

Donald Trump’s News Conference: Full Transcript and Video

Politics, drug prices, tax reform, regulatory uncertainty leave CDMOs/CMOs guessing about pharma’s future.

Viewpoint: No Clear Path for Pharma or Outsourcing


	Vol. 41, No. 2
	February 2017
	Pages: 74-75

	When referring to this article, please cite it as G. Roth, "Viewpoint: Challenges and Opportunities for CDMOs," 

The outlook for the CMO and CDMO industry may be affected by ever-changing politics.