SOCMA Focuses on Concerns of Batch and Custom Manufacturers

SOCMA President and CEO Lawrence D. Sloan discusses the key policy initiatives and activities of the association.
Jul 12, 2011
Volume 7, Issue 7
Lawrence D. Sloan, SOCMA President and CEO

The Society for Chemical Manufacturers and Affiliates (SOCMA), the trade association representing custom and batch manufacturers, including producers of fine chemicals, intermediates, and active pharmaceutical ingredients (APIs), is actively engaged in policy advocacy and other membership activities. Patricia Van Arnum, senior editor of Pharmaceutical Technology and editor of Pharmaceutical Technology’s Sourcing and Management, recently discussed the association’s key objectives and activities for 2011 with SOCMA President and CEO Lawrence D. Sloan, on a broad range of issues involving policy advocacy in environmental, health, safety, and security measures, drug-manufacturing inspections, and custom and border control.

Membership activities
PharmTech: Looking back at 2010 and 2011 to date, what would you identify as the key accomplishments of the association and its key objectives in 2011?

Sloan: As part of our ongoing efforts to provide exceptional value to the batch, custom, and specialty chemical industry, SOCMA last year began stepping up its offering of program and services to members and non-members alike. In 2010, SOCMA improved existing programs, such as our popular grassroots program, SOCMA CONNECT, which includes our Annual Washington Fly-in. We also launched new services, such as our Sales and Marketing Peer Group and new technical and sales training programs being offered through collaborative partnerships with the American Chemical Society and others.

SOCMA also developed its innovative Member Value Report, customized for every SOCMA member company, which documents a company's specific involvement with the organization in areas, such as Government Relations, ChemStewards, and Public Relations. It features a cost-savings analysis across each program and service. As an example, it calculates the cost of retaining a law firm in lieu of using SOCMA to illustrate the value of our advocacy program. No other US chemical trade association offers this type of member return-on-investment tool. The report, which has been well-received by members, not only serves to indicate the members’ level of engagement, but also reminds them of the programs and services they are not taking advantage of.

Last year, we also began work on a new services directory for SOCMA members and others in the chemical industry. The SOCMA Marketplace and Chemical Services Directory was conceived in response to the growing number of inquiries our staff was receiving for members who produce certain products. This new online tool will be a comprehensive directory and search engine of SOCMA member company capabilities. It will be launched by the end of the year.

PharmTech: In 2010, SOCMA launched member peer groups in human resources and sales and marketing, some of which you have alluded to already. Can you explain the reason behind establishing these groups and their function?

Sloan: As a benefit of membership, SOCMA members can participate in training programs and events throughout the year to broaden their knowledge on issues, network with industry peers, and exchange best practices. The Sales and Marketing Peer Group, for example, includes representation from nearly 30 SOCMA member companies, small and large. The group, which was launched earlier this year, provides virtual forums for SOCMA’s sales and marketing members to interact and learn from subject-matter experts in their field. Through learning, polling, conversations, and collaboration, SOCMA has been using members’ feedback to offer a series of programs through conference calls. Conference-call learning allows these busy individuals to participate from anywhere without the need of a computer. To date, the group held two conference calls in the first quarter, one on May 24, and two others are planned for the the summer and fall. The group has an advisory panel of more than 20 C-level members from a diverse mix of companies. The panel acts as a sounding board for ideas to bring to the larger Peer Group.

Environmental, health, safety, and security measures
PharmTech: In the area of environmental, health, and safety (EHS), how does the association’s ChemStewards program operate in relation to other industry efforts, such as the Responsible Care program, and how is it a useful tool for companies’ EHS efforts? Does the program serve a collateral role in the association’s policy advocacy with respect to EHS regulation and legislation? Are there other benefits from participation in the program from a business perspective, such as recognition of the program and reduction in insurance costs?

Sloan: ChemStewards is SOCMA’s environmental, health, safety, and security (EHS&S) performance-improvement program. The program was created by and for the batch, custom, and specialty chemical industry in 2005, and has quickly gained a reputation as both an efficient and highly effective management system. Among other things, ChemStewards promotes improving the performance of employee safety, lowering a facility’s environmental footprint, and continuously increasing the security of the facility. To date, 92% of SOCMA members are in compliance with ChemStewards.

The performance-improvement programs through industry today have many similarities, but some important differences as well. ChemStewards is the only management system that is totally facility based, thereby providing SOCMA members with adaptability and cost control. Also, ChemStewards verification is completed by third-party auditors approved and certified through ChemStewards as well as the Board of Environmental, Health & Safety Auditor Certification. The program also stands out in the area of support service. ChemStewards provides EHS&S webinars on policy and regulations, governmental audits, and other hot topics. Members also have free access to the Chemical Operator Training Manual, a handbook designed to ensure the successful performance of chemical plant operators, as well as the ChemStewards Integrated Management System, a new database that integrates SOCMA’s program with other government-sponsored performance improvement programs, such as ISO 9001, ISO 14001, and OSHAS 18001.

ChemStewards creates an enormous return on investment that extends well beyond the company’s fence line. The third-party audit, for example, is an excellent cost/value proposition for members. Also, through the SOCMA Member Select Insurance Program, participants that incur verification costs after successfully completing ChemStewards audits are granted underwriting risk-management credits on policy premiums.

Also, more and more SOCMA members are finding there is a commercial advantage to practicing ChemStewards. We’re hearing that our members are becoming preferred vendors in many areas as their customers stipulate that ChemStewards is included in their purchase agreements. That is a pretty big deal because now companies are seeing a tangible effect on their bottom line.

Sustainability measures
PharmTech: Can you explain in more detail the ChemStewards Green Metrics standard, how it was developed, by whom, and how will it be used? How may it work with other industry standards, such as voluntary green-chemistry standards or other metrics of sustainability/green manufacturing, including corporate sustainability reporting?

Sloan: The ChemStewards program was founded upon sustainability principles six years ago. From the beginning, our members have been focused on energy and waste-generation reduction. Last year, our Board of Governors requested that greater emphasis be placed on sustainability. A working group made up of representative SOCMA members led by staff canvassed ChemStewards participants on documenting how batch chemical plants are operating in a more sustainable manner. Out of this research, the group recommended the addition of a voluntary new metric focusing on greenhouse-gas reporting. The SOCMA board recently approved this change as well as the launch of a new Sustainability Award, which will be presented at SOCMA’s 90th Annual Dinner in New York on December 5.

In May, more than 100 participants from industry and academia attended SOCMA’s first-ever EHS&S and Sustainability National Conference in Houston. The event focused on the concept of sustainability and how it’s defined for small and medium-sized chemical companies. SOCMA will continue discussions with members on the impact of sustainability on their businesses and what changes ChemStewards can make to meet their needs.


Policy work in EHS
PharmTech: In terms of policy advocacy, can you provide an update of the association’s position (including on related regulations or legislation) as it relates to the Toxic Substances Control Act (TSCA)? Also, can you explain the association’s position on the US Environmental Protection Agency’s (EPA) Chemical Manufacturing Areas Sources Proposals?

Sloan: SOCMA will continue to actively educate members of Congress and staff on SOCMA’s principles for TSCA reform, acknowledging that, if House Republicans choose to proceed with legislation, the 112th Congress may be an opportune time to achieve our priorities for focused reforms. If an opportunity lends itself to broad stakeholder dialogue, we certainly expect to have a seat at the table. Additionally, SOCMA will remain engaged with the American Alliance for Innovation, a coalition of various trade associations, with the hope of ensuring industry consensus on issues wherever possible.

In April, Senator Lautenberg introduced the Safe Chemicals Act of 2011, which includes some improvements to last year’s bill, such as more relaxed requirements for mixtures and articles and the new prioritization scheme. However, we believe this bill is unamendable and that more work needs to be done. It is also unlikely the bill will receive bipartisan support or pass the full Senate.

On the issue of the Inventory Update Reporting (IUR) rule, our biggest concern is the timing of new reporting requirements and, in particular, their retroactive effect. We are pleased, however, by EPA’s recent decision to suspend the submission period to a later date and in recognizing the importance in providing companies adequate time to comply with the modifications. We now await more specifics to come out in the next final rule. We’re also closely watching the proposed changes to EPA’s chemicals of concern list. Creating a list of chemicals will undoubtedly limit the use of such chemicals and likely create unnecessary disruption in the chain of commerce. Certain chemicals that might be considered for such action could have valuable, low or no-exposure uses, some of which, for example, may be vital to our national interest.

The final Chemical Manufacturing Areas Sources rule, issued in 2009, was improved over the original proposal, in part because of feedback the agency received from SOCMA. Specifically, a study conducted by Dixon Environmental for SOCMA showed that the agency had dramatically underestimated the cost impacts of the proposed rule on chemical manufacturers. Still, while the final rule acknowledged these impacts in some respects, it still contained some very burdensome provisions. (It did not provide for a de minimis exemption, for example.) Additionally, the final rule contained numerous provisions that hadn’t been in the original proposal at all, thus depriving the public of its right to comment on those provisions. Consequently, SOCMA filed a Petition for Reconsideration with the agency in February 2010. Essentially acknowledging the validity of our complaints, EPA granted the petition last summer and will soon be issuing a new proposed rule to take comments on several of the issues that SOCMA has raised.

Inspections of drug-manufacturing facilities
PharmTech: SOCMA has taken an active role in certain issues, such as advocating for reform in the inspection of foreign drug-manufacturing facilities. Can you provide an update of current or proposed legislation, of other regulatory efforts in both the Unites States and European Union, and the association’s position? Does the association feel that such reform is receiving adequate Congressional or regulatory attention, including funding levels for increases in inspection? What specific reform is the association seeking?

Sloan:SOCMA’s Bulk Pharmaceuticals Task Force (BPTF), a separately funded group for US manufacturers of APIs, is committed to addressing the risk associated with importation of APIs from emerging markets such as China and India. Currently, there are three bills pending in the House and Senate, which BPTF is closely watching. BPTF has been asked to provide input as part of a series of stakeholder meetings on drug safety by the Senate Committee on Health, Education, Labor, and Pensions.

The group is also participating in FDA negotiations on generic-drug user fees. Congressional funding for inspection of drug-manufacturing facilities has been inadequate, forcing the FDA to seek user fees to cover costs. BPTF is seeking to level the playing field for all drug manufacturers by supporting increased inspection of foreign facilities and has expressed a willingness to support fees for foreign inspections. The group would also support changes that mandate for domestic inspections every two years to an inspection frequency that is based on risk. BPTF supports closer harmonization with a global approach to drug safety (i.e., three-year inspection frequency and greater sharing of information among regulatory agencies).

Custom and border control
PharmTech: What are the other key issues that the association is focused on in terms of supply-chain security and related custom and border control issues?

Sloan: SOCMA is part of the Customs and Border Coalition headed by the National Association of Manufacturers. Recently, action has been limited because the committees that have jurisdiction over customs issues are focused on the three pending trade agreements (South Korea, Colombia, and Panama), but we have been told that this area is still a priority and will hopefully come up before the end of the year once the agreements are passed. The House Ways and Means and Senate Finance Committees worked together last Congress in a bipartisan manner to put together customs reauthorization bills. Their work will be the starting point for the bills this Congress, from our understanding. SOCMA provided input when they were gathering stakeholder feedback and looks forward to discussions on these issues later this year.

On the issue of supply-chain safety, the most recent regulation was the Importer Security Filings (ISFs), commonly called “10+2” because of the pieces of data companies are required to submit. The ISF requires shipment information be sent to Customs and Border Protection (CBP) 24 hours prior to landing. There were a significant amount of technical issues and hurdles for some of our members, but we worked with CBP, and this system seems to be running smoothly now. Internationally, we are watching discussions within the Asia-Pacific Economic Cooperation on supply chains as well as in the Trans Pacific Partnership negotiations.

PharmTech: Are there other policy concerns and efforts that the association is engaged with that you would like to mention?

Sloan: SOCMA has consistently called for a longer-term authorization of the current chemical security standards. We strongly support extending the current rules without any significant programmatic changes to allow chemical facilities to fully comply. There are several bills pending in Congress: two in the House and one in the Senate, which would extend the current rules for several years. The Senate bill (S. 473), sponsored by Sen. Susan Collins (R-ME), would extend authorization of the Chemical Facilities Anti-Terrorism Standards (CFATS) for three years, through October 2015, and is nearly identical to a bill that she introduced last Congress. On the House side, the Homeland Security Committee voted in June to approve H.R. 901, sponsored by committee member Dan Lungren (R-CA). Shortly before that, the Energy and Commerce Committee passed H.R. 908, spearheaded by Representatives Tim Murphy (R-PA) and Gene Green (D-TX).

All three bills extend the current rules without mandating product substitution and are endorsed by SOCMA. One of our chief arguments against mandating inherently safer technology (IST) is that there is no proof that implementing process-safety measures in hazardous chemical manufacturing, such as product substitution or reduction, will actually reduce the risk associated with its manufacturing and subsequent movement through the supply chain. Without the assurance of a long-term authorization, companies run a risk of investing in costly activities today that might not satisfy regulatory standards tomorrow. We hope that lawmakers act swiftly to ensure the progression of these bills through the legislative process.

PharmTech:From an overall industry perspective, what would you identify as the key trends most influencing the overall financial health and direction of the custom and batch industry, specifically as it relates to fine-chemical supply (raw materials, intermediates, and APIs).

Sloan: We’ve recently seen the headlines that blockbuster drugs, such as Lipitor and Plavix, will soon become available in generic form, which will translate into major savings for customers. The FDA’s slow review and response to new and generic approvals, however, has significantly slowed down the industry, along with the high cost of getting drugs approved. The high regulatory standards, which are imposed on US manufacturers, are not enforced on producers in other countries, such as India and China, which is why over 80% of the APIs are coming from aboard. Also, there’s not a lot of innovation in the pipeline as compared to the 1990s. However, the arrival of personalized medicine is being touted as the newest breakthrough in drug formulation as pharmaceutical companies tailor their medicine to meet specific individual needs.

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