Evaluating the Pieces of the Pharma Supply Chain - Pharmaceutical Technology

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Evaluating the Pieces of the Pharma Supply Chain
After a year of increased attention on the pharmaceutical supply chain in Asia, what will be the region's short- and long-term role? This article contains bonus online-exclusive material.


Pharmaceutical Technology
Volume 33, Issue 1

Eli Lilly (Indianapolis) is pursuing what it calls its "FIPNet" strategy, which emphasizes the company's role in assembling and managing a network of external partners. This focus is a change from its practice of being what it calls a "FIPCo," or a fully integrated pharmaceutical company that owns everything from idea-generation to sales.

"We're testing new collaborations with life-sciences firms in China and India," said John C. Lechleiter, president and CEO of Eli Lilly in a speech in September 2008 (9). "Lilly scientists still design our compounds, for example, but a large number of our chemistry-based molecules are now synthesized by a firm in Shanghai, called ShangPharma. In India, meanwhile, we've handed off some molecules using new risk-sharing deals. We have the right to buy back these molecules ... once our collaborators succeed in establishing proof of concept in the clinic."


Figure 3: PricewaterhouseCoopers’ wider risk ranking of Asian countries.
As another example, in October 2008, Lilly agreed to form a drug-development joint venture with the Indian firm Jubilant Organosys (New Delhi), a contract provider of custom research, manufacturing, and drug-discovery services. The joint venture, based in Bangalore, is modeled after Lilly's early-stage development division, Chorus, which provides drug development for Lilly exclusively through external contract companies. The joint venture will focus on preclinical molecules and their development through Phase II clinical testing before returning successful assets to the sponsors for further development.

Industry observers say recent events have not altered pharmaceutical companies' interest in doing business in India. "After the heparin incident, I would say that the comfort level of pharmaceutical companies working with India contract manufacturers increased, not decreased, because of greater transparency in India than in China," says Nailesh Bhatt, managing director of the consulting firm Proximare. He points to the smaller size of India, the benefit of having English as a common language with Western companies, a smaller supplier base, and the increased attention on the supply chain as FDA establishes a presence in the country (see sidebar, "Regulators Grow Global Presence"). "The increased supply-chain robustness is a positive development for Indian CMOs," he says.


Figure 4: PricewaterhouseCoopers’ market opportunity ranking of Asian territories.
He also says that the terrorist attacks in Mumbai in late November 2008 are not likely to dissuade pharmaceutical outsourcing. "The new reality of global terrorism shows that any geographic location is not immune to terrorism." In the case of Mumbai, he points out that the attacks were localized in the city and did not occur in surrounding areas outside of Mumbai, where pharmaceutical manufacturing facilities are located, and that manufacturing activities are diffused in various hubs throughout the country such as in New Delhi and Hyderabad. "The immediate effect has been a beefing up of security and consideration of options for business travel."

Although Asia will play a role in pharmaceutical outsourcing, others point to favorable fundamentals for US and Western European suppliers. "As long as the world's innovative pharmaceutical industry is centered in the West, there will be a need for API development and manufacturing capacity in the West," says Brian Scanlan, vice-president of corporate development at Cambridge Major Laboratories (Germantown, WI), a contract manufacturer of APIs and intermediates. "Our view is that most of the new drugs in development are owned by the small, medium, and virtual pharma companies. The future of these companies resides in one or two molecules in development. The vast majority of them are not going to entrust the future of their company to a company on the other side of the world—it just won't happen. Big Pharma is in a very different scenario. They have the ability to offshore some of their pipeline, but the highest profile, most important new APIs are, by and large, still be entrusted to Western-based companies for development."

Securing the supply chain: Leaders at work

Over the course of 2008, regulators, including FDA, US legislators, and other standard-setting bodies made changes and proposals to improve pharmaceutical import and product safety.

Monographs. The US Pharmacopeia (USP) took immediate action to respond to the heparin contamination by revising its heparin sodium and heparin calcium monographs (Stage 2 of the revisions are scheduled to be published in March 2009). "There's a lot of work going on in USP now, even beyond heparin, to tighten up monographs that might be susceptible to contamination," says USP CEO and

Executive Vice-President Roger L. Williams. "We're working more on our USP Glycerin monograph, for example, with regard to diethylene glycol, and on FCC monographs for Wheat Gluten and other food ingredients that are susceptible to melamine adulteration. We want to help outsourcers know they are purchasing good materials if it conforms to a USP monograph on their certificate of analysis."


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