New drug approvals by FDA continued their upward advance in 2012, but CMOs didn't benefit much from the improvement. The data suggest that the market share of dose CMOs may have peaked. 

In 2012, FDA's Center for Drug Evaluation and Research (CDER), which approves new small-molecule and biologic therapeutic drugs, approved 101 new drug applications (NDAs). This level was on par with the 102 new drugs approved in 2011 and continues the recovery in NDA approvals that started in 2008 (see 

Figure 1: New drug application (NDA) approvals, 2006-2012. NME is new molecular entity. (ALL FIGURES COURTESY OF AUTHOR)			

The composition of the new approvals was particularly noteworthy. Of the 101 NDA approvals, 39 were for new molecular entities (NMEs) (i.e., drugs containing an API that was approved for the first time). The NMEs included 10 biologics and 28 small molecule drugs. This level was the most NME approvals in more than seven years. 

There were 62 non-NME drugs approved (i.e., drugs containing a previously approved API). Of those, 47 were approved via the 505(b)(2) route, which provides for a simplified approval process for new formulations of previously approved drugs. The 505(b)(2) process is particularly popular with specialty pharmaceutical and generics-drug companies because it is a lower-cost and lower-risk process for developing new drugs than developing NMEs.  

While the approvals trend grew stronger, the propensity for outsourcing the manufacturing of these new drugs remained flat. Overall, dose manufacturing was outsourced for 42% of the NDAs approved in 2012, which was consistent with the 41% average for the previous six-year period (see 

).  Both NMEs and non-NMEs were outsourced at the 42% rate. 

Figure 2: Share of new drug application (NDA) approvals outsourced, 2006-2012. NME is new molecular entity.			

The propensity to outsource was largely a function of the nature of the approval and the size of the company getting the approval. Global and mid-size biopharma companies were more likely to outsource their non-NMEs than their NMEs; the global biopharma companies did not outsource dose manufacturing for any of their biologics approvals, but did outsource some of their small-molecule approvals. Small companies outsourced dose manufacture for most of their new approvals, both NME and non-NME, including 100% of their biologic approvals. As one would expect, generic-drug companies outsourced few of their new approvals. 

A total of 28 different dose CMOs benefited from new product approvals in 2012. Only six had more than one approval, with Catalent (six new approvals) and Patheon (four new approvals) leading the way.  

PharmSource analysis of eight years of FDA approvals data suggests that the acceptance of the CMO business model and its penetration of the biopharmaceutical industry have remained relatively unchanged throughout most of the past decade. NME dose-form outsourcing has remained relatively constant for the past seven years as the industry is governed by two basic truths: smaller companies have a strong tendency to outsource while global biopharma companies have a strong preference to keep products in-house.  

Among global bio/pharma companies, attitudes and strategies regarding contract manufacturing appear to be well entrenched. Out of the 22 global biopharma companies, nine companies—including Abbott/Abbvie, Astellas, Bayer, and Novo Nordisk—outsourced none of their new NDA approvals during the 2005

2012 period. On the positive side, four companies have outsourced 50% or more of their NDA approvals received during the past eight years, and another four have outsourced 30% or more of their approvals. Unfortunately, six of the eight companies have averaged less than one approval per year over the period.  

The data on outsourcing of recent NDA approvals must be analyzed carefully because the majority of the contracts for these products were signed three-to-five years ago (i.e., in 2007

2009). Given the long cycles between contract signings and product approvals, strategy changes triggered by the 2008-2009 financial crisis and the patent cliff probably are not yet reflected in the manufacturing arrangements of recently approved products. 

Nevertheless, it does appear that outsourcing's share of dose manufacturing is stuck in the 40

45% range, and further penetration may be difficult to achieve. Global biopharmaceutical companies have been shrinking their manufacturing networks and shrinking their product pipelines, but they are investing in captive biologics manufacturing capacity and building new manufacturing facilities to serve the growing emerging markets. Among smaller companies, those companies that develop new biologics may be unable to afford their own sterile manufacturing facilities, but small companies developing solid-dose products face a much lower capital expenditure for owning captive capacity.   

CMO executives like to proclaim that outsourcing is growing, and so long as the number of new product approvals continues to rise, they will be right. But just as a rising tide lifts all boats, a receding tide can leave many of them beached. The large number of CMOs receiving approvals again highlights the highly fragmented nature of the sector; so many CMOs have received just a few or no approvals that one wonders how they can stay in business. 

The battle for market share among CMOs is getting intense, and we sense that customers are able to drive more favorable terms, including lower prices and other concessions. A number of major CMOs have accepted this reality by turning their efforts increasingly to proprietary products. We continue to believe that the CMO industry is headed for a period of consolidation. 

 is president of PharmSource Information Services, Inc., and publisher of 

 tel. 703.383.4903,  Twitter@JimPharmSource, 

Articles

Outsourcing

Approvals of new drugs are on an upward swing, but only a few CMOs are benefiting.

Drug Approval Trends Don't Extend to CMOs

 Ensuring product quality is of utmost importance to the pharmaceutical industry, and appropriate controls and oversight are required for both the drug-manufacturing process and the supply chain for pharmaceutical ingredients. Several key  measures in the United States and European Union that address these issues are progressing with either implementation or further discussion slated for July 2013.  			

On top of the agenda is the implementation of the European Falsified Medicines Directive. The directive seeks to prevent falsified medicines entering the legal supply chain in the EU. The directive was adopted in July 2011, and EU member states began applying provisions in January 2013. The directive harmonizes and strengthens safety and control measures across Europe in four main areas: safety features of medicines, supply chain and good distribution practices (GDPs), active substances and excipients, and Internet sales (1, 2). 			

On the pharmaceutical ingredient side, beginning in July 2013, all active substances manufactured outside the EU and imported into the EU must be accompanied by a written confirmation from the regulatory authority of the exporting country. These statements are to be issued per manufacturing site and per active substance to ensure that standards of GMP equivalent to those in force in the EU are upheld, according to the directive (1, 2). Several countries have already committed to issuing written confirmations. Exporting countries with an "equivalent" regulatory framework will not need to issue these written confirmations. The European Commission (EC), together with the European Medicines Agency and member states, is assessing the regulatory frameworks of countries applying for equivalent status (1, 2).  

To meet the requirement for the import of APIs under the European Falsified Medicines Directive, FDA reported on June 21, 2013, that the US is now a "listed country" within the EC so that US companies need not obtain an export certificate from FDA before shipping certain pharmaceutical products to Europe. Without the waiver, all US companies shipping APIs to Europe after July 1, 2013 would have had to first submit documentation from FDA that the product was manufactured in accordance with Europe's GMPs (3). 

To avoid that burden for companies, FDA filed a formal "listing request" with the EC in January 2013 requesting that FDA's GMPs be considered at least equivalent to those in Europe. The EC approved that request following an audit of FDA's regulatory and inspectional oversight of APIs. The audit took place from May 13–20, 2013 (3). 

The news of the waiver was welcomed by industry groups representing contract API manufacturers and fine-chemical producers. "We are pleased that US drug manufacturers will not be required to provide written confirmation of quality for the exportation of active pharmaceutical ingredients into the EU," said John DiLoreto, executive director of the Bulk Pharmaceutical Task Force (BPTF), an affiliate of the Society of Chemical Manufacturers and Affiliates (SOCMA), in a June 21, 2013 SOMCA statement. SOCMA represents batch and custom manufacturers. "We hope FDA and EU officials will continue to attain the maximum achievable level of information sharing and greater harmonization on implementation of GMPs throughout the drug-supply chain," DiLoreto added. BPTF said it supports negotiations between the US and the EU to eliminate trade barriers, to promote greater global harmonization of GMPs, and to improve the safety of drugs throughout the supply chain. 

The European Falsified Medicines Directive also puts into place measures on the distribution side of the pharmaceutical supply chain. It includes new responsibilities for wholesalers and a definition of brokering activities as well as new responsibilities for brokers. EMA's revised GDP guideline, which was finalized in March 2013, includes specific provisions for brokering activities (4).  

Reflecting the inclusion of GDP into European provisions, the EudraGMDP database also now includes information on GDP. EudraGMDP is a modification of the EudraGMP database, which was launched in April 2007, to facilitate the exchange of information on compliance and noncompliance with GMP among the regulatory authorities within the European medicines network. The new database, now called EudraGMDP, was a deliverable of the European Falsified Medicines Directive. It is gradually being updated by medicines regulatory authorities in EU member states with distribution-related information and will maintained on an ongoing basis (5). The additional information will include: wholesale distribution authorizations; GDP certificates; statements of non-compliance with GDP; and registrations of manufacturers, importers (including information on their suppliers), and distributors of active substances (5). 

The other two main areas in the European Falsified Medicines Directive relate to end-market activity. The directive requires that barcodes be printed on or attached to every single pack of medicines subject to prescription and other medicines at risk of being falsified. The barcodes must be checked into a database by the manufacturer and checked out when dispensed by a pharmacy. These safety features are intended to make sure that there has been no tampering of the outer packaging of pharmaceuticals (1, 2).  

The directive also introduced an obligatory logo to be placed on the websites of legally operating online pharmacies to allow patients and consumers to identify authorized online pharmacies providing authentic, authorized medicines. These online pharmacy websites must also register with a member state. Medicines regulatory authorities in EU members states will publish lists of authorized internet pharmacies on their websites (1, 2). 

In the US, later this month (July 12, 2013), FDA will hold a day-long public meeting to discuss how to implement the drug supply-chain provisions found in Title VII of the Food and Drug Administration Safety and Innovation Act of 2012. Title VII gave FDA new authorities to address the challenges posed by an increasingly global drug supply chain. According to FDA, 40% of finished drugs are imported, and nearly 80% of active ingredients come from overseas sources (6).  

The purpose of the July 12th meeting is to provide an overview of Title VII, discuss how FDA plans to implement it, and hear public comment about those provisions that specifically address imported drugs and importers. Under Title VII, FDA is authorized to require that importers submit information demonstrating that their drug complies with applicable requirements of the Federal Food, Drug and Cosmetic Act before their products can enter the US. In addition, commercial importers must register with FDA and meet good importer practices (6). 

Another key milestone this month is the end of the public comment period for FDA's draft guidance, 

Contract Manufacturing Arrangements for Drugs: Quality Agreements. 

The draft guidance, which was issued in May 2013, describes the agency's current thinking on defining, establishing, and documenting the responsibilities of parties involved in contract cGMP manufacturing of drugs. Public comment on the draft guidance is open until July 29, 2013 (7).  

The draft guidance describes how parties involved in contract manufacturing of drugs can use quality agreements to delineate their responsibilities and ensure drug quality, safety, and efficacy. The guidance applies to the commercial manufacturing of APIs (drug substances or their intermediates), finished drug products, combination products, and biological drug products. The draft guidance describes how contract manufacturing operations fit within the larger scheme of pharmaceutical quality systems. FDA says the draft guidance incorporates provisions from ICH guidelines, including ICH Q7 

Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients, 

 (7–10). The draft guidance notes that although written quality agreements are not explicitly required under existing cGMP, owners and contracted facilities can draw on quality-management principles to carry out the complicated process of contract drug manufacturing by defining, establishing, and documenting the responsibilities of all parties involved in drug manufacturing, testing, or other support operations. Accordingly, FDA recommends that owners and contracted facilities implement written quality agreements as a tool to delineate responsibilities to ensure the quality, safety, and effectiveness of drug products. 

www.emaeuropa.eu/ema/index.jsp?curl=pages/special_topics/general/general_content_000186.jsp&mid=WC0b01ac058002d4e8

 3. FDA, "FDA Obtains Waiver from European Commission to Facilitate Export for US Pharmaceutical Manufacturers," Press Release (June 21, 2013).  

Good Distribution Practice of Medicinal Products for Human Use

 5. EMA, "Key Deliverable of Falsified Medicines Directive Achieved," Press Release  (Apr. 8, 2013).  

 6. FDA, "Food and Drug Administration Safety and Innovation Act Title VIIDrug Supply Chain; Standards for Admission of Imported Drugs, Registration of Commercial Importers and Good Importer Practices; Notification of Public Meeting; Request for Comments," 

Contract Manufacturing–Arrangements for Drugs: Quality Agreements 

ood Manufacturing Practice Guide for Active Pharmaceutical Ingredients (

Contract Manufacturing

The US and EU move forward with measures to fortify the pharmaceutical supply chain.

Strengthening the Supply Chain for Pharmaceutical Ingredients

The first round of the trade and investment talks for the Transatlantic Trade and Investment Partnership (TTIP), a new trade pact between the United States and the European Union, began this week in Washington DC. The agreement, which would be the largest bilateral trade deal ever negotiated, would also have important implications for the pharmaceutical industry.  

The first round of TTIP negotiations beginning this week in early July 2013 is the result of a multiyear effort between the US and EU. The Transatlantic Economic Council (TEC) was set up in 2007 to guide and stimulate the work on transatlantic economic convergence. The TEC is a high-level forum between the EU and US for discussing economic issues of mutual interest and for serving as a platform to give political guidance and direction to this work. The TEC also provides a political forum for discussing strategic global economic questions. The TEC brings together members of the European Commission and US Cabinet Members who carry the political responsibility for closer economic ties. Three "advisory" groups have been set up to help guide the work of the TEC: the Transatlantic Legislators’ Dialogue, the Transatlantic Consumer Dialogue, and the Transatlantic Business Dialogue. 

In November 2011, the TEC established a High-Level Working Group on Jobs and Growth (HLWG) led by EU Trade Commissioner Karel De Gucht and US Trade Representative Ron Kirk.  The HLWG was tasked to identify policies and measures to increase EU-US trade and investment to support mutually beneficial job creation, economic growth, and international competitiveness. Leaders asked the HLWG to work closely with all public and private sector stakeholder groups and to draw on existing dialogues and mechanisms as appropriate. 

The HLWG provided an interim report in June 2012 and a final report in February 2013. The HLWG reached the conclusion that a comprehensive agreement that addresses a broad range of bilateral trade and investment issues, including regulatory issues, and which contributes to the development of global rules, would provide the most significant mutual benefit of the various options considered. The US and EU endorsed the recommendation and announced that each side will initiate the internal procedures necessary to launch the TIPP agreement. On June 14, 2013, the member states of the EU gave the European Commission the green light to start the talks with the US, and the negotiations have begun this week. 

The impetus behind TIPP is to remove trade barriers between the US and EU as a means to stimulate investment, production, and trade between the two regions. A pact hopes to build on an already strong relationship between the US and EU. According to information from the EC, the EU and the US economies account together for about half the world’s gross domestic product (GDP). Total US investment in the EU is three times higher than in all of Asia. EU investment in the US is approximately eight times the amount of EU investment in India and China together. Also, current EU-US trade is an important part of individual company growth. It is estimated that one-third of the trade across the Atlantic consists of intra-company transfers, according to the EC. 

“Our aim is to release the untapped potential of a comprehensive transatlantic trade and investment partnership (TTIP) by bringing our economies closer together than ever before,” said EU Trade Commissioner Karel De Gucht in a June 14, 2013 EC press statement. “We will achieve this through increased access to the US market, by working with the US towards setting global standards and by greater compatibility between our respective regulations. In short, this deal will be about streamlining our economies where it makes sense to do so by making it easier and faster for our companies to do business together.” 

United States Trade Representative Michael Froman, said in a July 8, 2013 statement: “In TTIP, we have the opportunity to accomplish something very significant for our economies, for our relationship, and for the global trading system as a whole. We have an opportunity to spur growth and to generate significant increases in the already substantial number of jobs supported by transatlantic trade and investment. We have the opportunity to complement one of the greatest alliances of all time with an equally compelling economic relationship. And we have the opportunity to work together to establish and enforce international norms and standards that will help inform and strengthen the multilateral, rules-based trading system.” 

Given the low average tariffs (under 3%) between the US and EU, the key focus to TIPP lies in the tackling of non-tariff barriers. These consist mainly of customs procedures and behind-the-border regulatory restrictions. The non-tariff barriers come from diverging regulatory systems (standards definitions notably), but also other non-tariff measures, such as those related to certain aspects of security or consumer protection, according to the EC. 

An economic study by the EC projects that if such a trade pact were to be implemented that EU exports to the US would go up by 28%, equivalent to an additional EUR 187 billion ($240 billion) worth of exports of EU goods and services. EU and US trade with the rest of the world would also increase by over EUR 33 billion ($42 billion). Overall, the extra bilateral trade between the two blocs, together with their increased trade with other partners, would represent a rise of 6% in total EU exports and of 8% in US exports. This would mean an additional EUR 220 billion ($282 billion) and EUR 240 billion ($308 billion) worth of sales of goods and services for EU- and US-based producers, respectively, according to the EC report. 

 An in-depth study by the Centre for Economic Policy Research, a London-based research group that was commissioned by the EC to examine the impact of TIPP, also provided favorable outcomes on the potential effects on TIPP. If the agreement is fully implemented, an ambitious and comprehensive trans-Atlantic trade and investment partnership could bring significant economic gains as a whole for the EU at EUR 119 billion ($153 billion) a year and the US at EUR 95 billion ($122 billion) a year. The report also finds that liberalizing trade between the EU and the US would have a positive impact on worldwide trade and income, increasing GDP in the rest of the world by almost EUR 100 billion ($128 billion). “To the extent that the EU and the US can work together towards better trade rules and less regulatory divergence in the future, some of the reductions achieved in the cost of doing trade will also benefit other partners,” said the report. “The economic importance of the EU and the US will mean that their partners will also have an incentive to move towards the new transatlantic standards. This has the potential to spread gains across the global economy, which is increasingly interdependent especially given the ever greater complexity of global value chains.”

Pharmaceuticals constitute one sector seeking to benefit from more robust bilateral trade. Total bilateral trade in goods between the EU and US in 2011 amounted to EUR 455 billion ($583 billion). The US was the EU's third largest supplier, selling it representing around 11% of total EU imports and the EU's main export market, representing around 17% of total EU exports. These trade flows are complemented and supported by a dynamic investment climate and activity. In 2011, US companies invested around €150 billion ($192 billion) in the EU and EU firms approximately EUR 123 billion ($158 billion) in the US.  On the pharmaceutical side, US exports of pharmaceuticals on a global basis totaled $48.6 billion in 2012, according to the American Chemistry Council (ACC), and US imports of pharmaceuticals were $89.0 billion. 

Global Feature

Negotiations begin this week on the Transatlantic Trade and Investment Partnership, a new trade pact between the United States and European Union. What will be the implications for the pharmaceutical industry?

Boom or Bust for Pharma on a New US-EU Trade Pact?

 released its 2012 sustainability report. Some key highlights include the company exceeding its goal of using 20% renewable power in its facilities by 2015. In 2012, 22% of Baxter's total energy use for operations was from renewable energy sources due in part to several on-site renewable energy projects. These included installation of a photovoltaic (PV) system at Baxter's Toongabbie, Australia, facility that produces sufficient electricity for the office complex with the exception of the heating, ventilation and air conditioning (HVAC) system, and installation of a comprehensive geothermal cooling system at Baxter's Orth, Austria, facility that uses the relatively constant temperature of the groundwater for cooling and heating the building, as opposed to traditional HVAC chiller systems. In late 2012, Baxter's Malta facility began installation of the company's largest on-site PV system that will provide approximately 23% of the site's electricity and reduce the site's greenhouse gas emissions (GHG) by 1100 metric tons carbon dioxide equivalent annually. 

Since 2005, Baxter has reduced GHS emissions by 12% on an absolute basis and  39% indexed to revenue, placing the company on track to exceed its 2015 goal to reduce GHG from operations 45% indexed to revenue. This is due in part to adoption of technologies such as Baxter's Malta facility converting 95% of its lighting to high efficiency light emitting diode (LED) technology, and three facilities using boilers powered by sustainably sourced biomass fuels. 

In other developments, the company created a human rights policy and updated its ethics and compliance standards for supplier to follow human rights practices. Baxter evaluates the sustainability performance of its suppliers, including related to human rights,  through a survey to learn about each supplier's sustainability programs and identify opportunities for best-practice sharing and collaboration to improve the performance of both Baxter and its suppliers. Baxter routinely conducts quality audits of its suppliers and joined the Pharmaceutical Supply Chain Initiative  in 2012, a group of pharmaceutical companies that seek to achieve better social, economic, and environmental outcomes for all those involved in the pharmaceutical supply chain. 

 and Save the Children have launched a $1- million Healthcare Innovation Award to identify and reward innovations in healthcare which have proven successful in reducing child deaths in developing countries. From June 27 to August 26, 2013, organizations from across the developing world can nominate examples of innovative healthcare approaches they have discovered or implemented. These approaches must have resulted in tangible improvements to under-age-five child survival rates, be sustainable, and have the potential to be scaled-up and replicated. Co-chaired by Sir Andrew Witty, CEO of GSK, and Justin Forsyth, CEO of Save the Children, the judging anel, made up of experts from the fields of public health, science and academia, will award $250,000 to the best healthcare innovation to further progress their work. An additional $750,000 is available for runners-up awards. The award will also provide a platform for winning organizations to showcase their innovations and share information to enable others with an interest in improving healthcare to adapt and replicate successful interventions and create more positive change for children in their own country and beyond. 

 and GDF SUEZ, an energy firm, have signed an agreement to strengthen their collaboration for implementing projects in the field of energy at Sanofi industrial sites. The five-year contract includes mainly renewable energy production and distribution systems. Building on an initial agreement signed in March 2012 for Europe and Turkey, the two groups have expanded their collaboration to include sites in the United States, Canada, Mexico, Brazil, China, and Singapore. All Sanofi’s production lines will be included: chemicals, pharmaceuticals, vaccines, biotechnology, and animal health. The initial three-year term contract is extended to five years.

CSR and Sustainability Forum

A roundup of developments in global health and sustainability from the bio/pharmaceutical industry, its suppliers, and other public and private organizations.

PTSM: Pharmaceutical Technology Sourcing and Management-07-10-2013

Drug Approval Trends Don't Extend to CMOs

Strengthening the Supply Chain for Pharmaceutical Ingredients

Boom or Bust for Pharma on a New US-EU Trade Pact?

Pharma News in Global Health and Sustainability