Dimitri Otis/Getty ImagesQuality agreements are a crucial element in the relationship between a sponsor company and contract service provider. Recent draft guidance from FDA on contract manufacturing and quality agreements highlights the importance of such agreements and define the roles and responsibilities of each party to be in keeping with quality risk-management principles.  

The expectations between a sponsor company and contract service provider define not only the nature of the outsourced relationship but also dictate the quality of the material being supplied or service provided. Quality agreements between contract manufacturers and their pharmaceutical customers are a well-established practice. Recent draft guidance by FDA brings quality agreements into greater focus by applying the science- and risk-based approach inherent in quality risk-management principles and practices. 

 FDA issued its draft guidance, Contract Manufacturing Arrangements for Drugs: Quality Agreements, in May 2013 to describe the agency’s current thinking on defining, establishing, and documenting the responsibilities of parties involved in contract cGMP manufacturing of drugs (1). Public comment on the draft guidance was scheduled to close at the end of July 2013 (1). The draft guidance describes how parties involved in contract manufacturing of drugs can use quality agreements to delineate their responsibilities and ensure drug quality,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 (1). 

Defining the roles and responsibilities of each party (i.e., sponsor company and contract manufacturer) is crucial to a quality agreement. For purposes of the draft guidance, the “owner” is defined as the party that introduces the drug into interstate commerce, whether the drug is covered by a marketing application/license or not. The “contracted facilities” are the outside entities performing manufacturing operations for the product owner. Some of the manufacturing operations performed by contracted facilities include: formulation, fill–finish, chemical synthesis, cell-culture  manufacturing and fermentation for biological products, analytical testing, other laboratory services, and packaging and labeling. The draft guidance specifies that the owner is responsible for ensuring that drugs introduced for interstate commerce are neither adulterated nor misbranded as a result of the actions of their selected contracted facilities. In turn, all contracted facilities must ensure compliance with applicable cGMP for all manufacturing, testing, or other support operations performed to make a drug(s) for the owner (1). 

The quality agreements described under the draft guidance fit within the larger scheme of pharmaceutical quality systems and provisions of ICH guidelines, including ICH Q7 Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients, ICH Q9 Quality Risk Management, and ICH Q10 Pharmaceutical Quality Systems (1–4). In the draft guidance, FDA specifies that the principles of quality management extend to contract manufacturing, and that the agency FDA expects parties engaged in contract manufacturing to implement quality-management practices. The draft guidance is intended to build upon the quality-management principles in ICH guidelines in developing and executing contracted-manufacturing arrangements (1-4). 

ICH Q7, for example, recommends that manufacturers evaluate contractors for cGMP compliance by establishing a formal agreement that delineates cGMP responsibilities, including quality measures and also by auditing the contractor’s facilities. Product owners may hire another party to perform the operational processes that are part of a manufacturer’s inherent responsibilities, and quality systems call for quality agreements (i.e., contracts) that clearly describe the materials or service, quality specification responsibilities, and communication mechanisms. 

ICH Q9 recommends a comprehensive evaluation of suppliers and contract manufacturers through auditing and implementing supplier quality agreements (1–3). 

ICH Q10 specifies that quality risk management include certain key activities. For example, the guideline specifies that before outsourcing manufacturing activities, the owner should conduct a risk review that evaluates the extent of controls required for the particular supplier and the particular product or service covered by the agreement. Based on this risk, the owner should assess the appropriate oversight  and assess the suitability and competence of the potential contracted facility to carry out the activity (e.g., audits, material evaluations, and qualification). Additionally, owners and contracted facilities should define the responsibilities and communication processes for quality-related activities of the involved parties, and document these in a written agreement between the owner and contracted facility. Owners also should monitor and review the performance of the contracted facility and identify and implement any needed improvements.Additionally, all parties performing manufacturing operations should monitor incoming ingredients and materials to ensure they are from approved sources using the agreed supply chain (1-4). 

The draft guidance notes that although written quality agreements are not explicitly required under existing cGMP, owners and contracted facilities can draw on these 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 (1).  

 1. FDA, Draft Guidance for Industry–Contract Manufacturing–Arrangements for Drugs: Quality Agreements (Rockville, MD, May 2013). 

 2. ICH, Q7, Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients (Geneva, 2000). 

 3. ICH, Q9 Qualified Risk Management (Geneva, 2005). 

 4. ICH, Q10 Pharmaceutical Quality Systems (Geneva, 2008). 

Articles

Featured Content

Recent draft guidance from FDA on contract manufacturing and quality agreements highlights the importance of such agreements and define the roles and responsibilities of each party to be in keeping with quality risk-management principles.

Defining Quality Agreements

Rx-360, a pharmaceutical industry supply-chain consortium, is advancing approaches between pharmaceutical companies, suppliers, and contract manufacturers as a means to better secure the pharmaceutical supply chain. Pharmaceutical Technology discussed the group’s recent activities and upcoming goals with Brian Johnson, chair of Rx-360 and senior director of supply-chain security at Pfizer.

: Can you outline the key accomplishments of Rx-360 during the past year and what is planned in the near term? 

: We continue to see headlines around the world where criminals are putting patient safety at risk to make money through counterfeiting, product diversion, theft, and intentional adulteration. Substandard drugs with little or no active ingredient are being found at very high levels in the legitimate supply chains of many poor countries. Most experts and published data show that the problem is getting worse, not better. Globalization and increasing supply-chain complexity are contributing to the problem. It is time to take action and Rx-360 is leading the way. Rx-360 is a global nonprofit consortium of more than 80 companies and organizations with a mission to protect patient safety by sharing information and developing processes related to the integrity of the healthcare supply chain and the quality of materials within the supply chain. Rx-360 accomplishes its mission through education, sharing information, promoting best practices, and sharing audits. A few highlights from the past year demonstrate our commitment to action. 

. Rx-360 believes that educating stakeholders on supply chain risks and, more importantly, solutions is key for the industry to be successful. A great example is Rx-360’s recent “Protect Your Patients - Know Your Suppliers” campaign targeted at educating healthcare practitioners on the risks of product diversion. Rx-360 also conducted six free educational webinars for the industry this past year providing solutions and best practices for other supply-chain threats. 

. Supply-chain security is not a competitive advantage. Rx-360 believes that freely sharing information, such as alerts on potential supply-chain threats, is vital to the industry’s success. Over the past year, Rx-360 issued 14 alerts, including a potential heparin shortage, use of ‘gutter oil’ in China, toxins in glycerin, reports on Hurricane Sandy,  and Avastin (bevacizumab). [Gutter oil is a term used in China to describe  illicit cooking oil, which has been recycled from waste oil collected from various sources, such as restaurant fryers, drains, grease traps, and slaughterhouse waste; improper use of gutter oil involves its use in excipient manufacture.] Rx-360 also published 80 summaries of new guidances, legislation, and regulations. 

. It is not enough to talk about the risks; the industry needs to develop and share best practices. Over the past 18 months, Rx-360 developed and published seven white papers that contain the industries best thinking on various supply-chain security topics such as: preventing cargo theft; risks of drug shortages; tools for product diversion; auditing logistics service providers (LSPs); comprehensive supply-chain security programs; incident management processes; and monitoring the marketplace for threats--these examples are real solutions to real problems.

. Industry collaboration on sharing audit information and jointly conducting audits is crucial to improving the transparency of our increasingly complex and global supply chains. Rx-360 has completed and published almost 100 audits to date, and in 2013, we are on pace to double the number of audits completed in 2012, so we are quickly gaining momentum. Helping drive this initiative was the recent completion of a lean six sigma analysis of our audit programs and making modifications in the process to make it easier, quicker, and more cost effective for companies to use. Our new database is also coming online, which takes a manual process and automates it, leading again to a simpler, more efficient process for all involved. We are also launching a pilot to conduct good distribution practice (GDP) audits, which we believe will help Rx-360 meet an important industry need. Finally, over the past year, we have been promoting the licensing of Rx360 audits by making it easy to purchase an audit already conducted by Rx-360 and helping to defer costs that sponsors of the original audit incurred. This approach allows companies sponsoring an audit to put proceeds towards future audits, thereby, increasing capacity and lowering costs. 

For more information on Rx-360, including free tools and resources, see 

Rx-360, a pharmaceutical industry supply-chain consortium, is advancing approaches between pharmaceutical companies, suppliers, and contract manufacturers to better secure the pharmaceutical supply chain.

Rx-360 Advances Supply-Chain Security

Successful product development and technology transfer between a CMO and the sponsor company requires a multifaceted collaborative approach. The author analyzes a project for an injectable drug for which a new drug application was submitted to FDA. The project required collaboration in development, manufacturing, and technology transfer; resource allocation of scientific and manufacturing staff; project management; and the resolution of related technical issues.

GrifolsA generic injectable drug was to be developed and manufactured in two strengths and supplied in flexible bags for sale in Canada, Australia, Europe, and the United States. The client planned to submit a new drug application (NDA) for FDA approval. This submission required demonstrating to FDA that the contract manufacturing organization (CMO), Laboratorios Grifols, was capable of manufacturing highly safe medicines of the quality demanded by the US market. The challenge of manufacturing a product that would be submitted for FDA approval involved adapting the existing quality system to FDA requirements.

All the CMO production facilities had implemented the same quality management system (QMS), and parametric release was authorized in 2007. The QMS includes European Medicines Agency (EMA) GMPs for medicines, ISO certifications, and FDA GMPs for medical devices. The challenge was to incorporate FDA GMPs for medicines into the QMS with as little upheaval as possible. The dilemma was adapting the QMS to FDA requirements concurrent to developing the medicine, which required teamwork between R&D, manufacturing, and quality assurance departments to, for example, improve master batch records, implement changes in manufacturing procedures, and improve deviation management. 

Fortunately, the FDA inspection of the CMO’s facilities did not require the company to modify any of the production processes, other than those modifications already contemplated for the project. Some secondary non-crucial working procedures did require some adjustments, which were completed over a two-month period.

  One of the major hurdles required Grifols to be flexible and to incorporate the client’s requirements with a minimum impact to the company’s own structure and working procedures. This meant adapting to the customer without compromising the company’s own work philosophy. Third-party project management requires the same amount of dedication and commitment as for one of the company’s own products, because this is the only way to transmit integrity, inspire confidence, and establish clear and honest communication with the client.

Grifols needed to bring together a multi-disciplinary team of professionals. Each member of the team would have to be highly flexible and fully committed to the assignment; they would need to adopt a proactive attitude, have the ability to recognize the pitfalls that would inevitably arise, and provide adequate solutions. The first step was to decide upon a team that would guarantee agile communication with the client and that would respond effectively throughout the different stages of the project from the early development stages to placing the product in the market. The team included the following profiles: 

A galenic development technician (R&D) to develop the formula and the scale-up

An analytical development technician (R&D) for development and for analytical-chemical validations

A support technician for microbiological studies

A technician with a management profile for quality control, contract management, inspections, and audits

A technician with a management profile to provide support during the scale-up process, sterilization studies, and validations

A negotiator able to handle contracts, client communication, and support at launch.

In addition, top management needed to provide their full support and commitment to the project; top management played an important role in resolving strategic issues.

 With the team in place, a schedule was determined for internal project follow-up and client communication. A crucial element was a project plan report to monitor progress on the milestones defined in a Gantt chart (a production control tool used in project management that provides a graphical illustration of a schedule to help plan, coordinate, and track specific tasks in a project). Another element was a global communications plan to review progress in the form of a twice-monthly meeting involving R&D, manufacturing, regulatory, quality, marketing, and project management teams. 

In addition to this meeting, team meetings (between 2 and 4 each month) provided an update on the tasks being performed and helped identify any problems in the course of the project plan. Team meetings with the client (twice-weekly conference calls) were held to review the plan, make any adjustments, or introduce changes. In addition, management committees met as needed to make strategic decisions and evaluate changes that affected the initial planning. 

These communication channels between the production areas (R&D, quality control, and manufacturing) and the client were vital to meet the tight schedule proposed by the client for launching the product in both the US and Europe, which involved a minimal time-to-market after FDA dossier approval.

  Unexpected events can threaten to disrupt a schedule. At the initial stages of any project, particularly during the development phase, there is greater uncertainty in relation to how the latter stages will progress. The probability that problems will arise is also greater. 

The first setback occurred during the analytical transfer due to the difficulty of the analytical methods. Grifols solved this by arranging for the customer to visit the facilities to make certain adjustments to the analytical methods in the high-performance liquid chromatography (HPLC) equipment.

 Figure 1: A robotic palletizer deposits the product in autoclave trolleys.  (All figures are courtesy of the author.)Later, when Grifols had already defined the manufacturing process, chosen the material to produce the bags, manufactured the lots to include in the registration process, and started the stability studies, higher levels of impurities than expected were detected during the first accelerated stability studies. The incident was reported immediately to the client, and both teams set to work to provide a solution to the dilemma.

Materials for producing the bag that had originally been ruled out for other reasons were reconsidered and ultimately proved more compatible. At the same time, investigations led to the source of the impurities. As a result, the entire project was overhauled: new tasks were incorporated, new protocols were designed, and additional studies were performed. Grifols was given a month to reschedule the project and adjust the budget. Both teams worked in synergy, maintained a positive outlook, and collaborated by generously offering human and technical resources to keep the project afloat. No one lost any time looking for culprits or making accusations; everyone got on with the job of finding solutions in a race against the clock.

Figure 2: An overwrapping system is used for double bagging the product.On the production side, two factories located 600 km (more than 370 miles) apart needed to be coordinated. The production lines at both factories, in Parets del Vallès (Barcelona) and Murcia, were modified to meet customer demands and ensure compliance to FDA regulations.

At the facilities in Parets del Vallès, where the end product is manufactured, a series of modifications were made. Artificial vision equipment was installed in the dosing line to control the primary bag and in the packaging area to control the correct insertion of the prospectus into the individual box, in compliance with FDA regulations. The robotic palletizer that deposits the product in autoclave trolleys was adapted prior to entering the terminal sterilization phase (see 

). Due to the properties of the material used for double bagging the product, it was necessary to adapt the artificial vision equipment that transmits the coordinates to the automatic palletizer. 

 shows the automatic overwrapping system used for double bagging. Other production processes, such as secondary packaging, are in the process of being automated. A single boxing machine that will be able to handle the required production for this customer will be installed.

 Changes were introduced at the production plant in Murcia, where the primary bag and the twist-off valve are produced. In-line printers for the thermal images of the primary bag were modified to meet the labeling requirements for the different countries where the product will be sold. In addition, the twist-off valve mold was redesigned, and the corresponding validation was conducted. All these modifications required efficient coordination between the different production areas involved, so that they could be properly implemented on time.

 A few weeks prior to launch, the regulatory authorities of one of the countries where the product was to be launched requested a full analysis of all the raw materials included in the first commercial lots. This request involved making an analytical transfer from the client to Grifols. Although the responsibility of the CMO was initially limited to the identification of the analytical profile index, the CMO adapted and undertook this additional step of raw material analysis to speed up the project.

The difficulties that appeared during the course of the project did cause some delay, but because a margin of a few months had been planned, Grifols was able to manufacture and monitor the lots before the deadline. The client thus won the race against the clock and launched the generic product on the US market. 

Marga Viñes is senior product manager of Grifols Partnership, a business area of Grifols International, Barcelona, Spain, marga.vines@grifols.com.

Successful product development and technology transfer between a CMO and the sponsor company requires a multifaceted collaborative approach. The author, Marga Vines from Grifols International, analyzes a project for an injectable drug for which a new drug application was submitted to FDA.

Optimizing Development, Manufacturing, and Technology Transfer in the Outsourced Relationship

Ensuring the quality of the pharmaceutical supply chain is of utmost importance to the pharmaceutical industry. The European Falsified Medicines Directive (FMD), which was adopted in July 2011, contains measures, which became effective in July 2013, requiring that all active substances manufactured outside the European Union (EU) 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 good manufacturing practice (GMP) equivalent to those in force in the EU are upheld. To gain insight on these provisions, two key industry groups, the Active Pharmaceuticals Ingredient Committee (APIC) and the European Fine Chemicals Group (EFCG), both sector groups of the European Chemical Industry Council (CEFIC), offered their perspectives on the strengths and weaknesses of the FMD. 

The European Falsified Medicines Directive (FMD) seeks to prevent falsified medicines entering the legal supply  chain in the European Union (EU). The directive was adopted in July 2011, and EU member states began applying provisions in January 2013. The purpose of the directive is to harmonize and strengthen safety and control measures across Europe in four main areas: safety features of medicines, the supply chain and good distribution practices (GDPs), active substances and excipients, and Internet sales (1-3). 

From July 2, 2013, all active substances manufactured outside of the EU and imported into the EU must be accompanied by a written confirmation from the competent authority of the exporting country that confirms that the standards of good manufacturing practice (GMP) and control of the manufacturing plant are equivalent to those in the EU (4). These requirements constitute one of the main areas of change of the new FMD to provide a clear legal basis for the concept of international cooperation on active substances, which is based on sharing responsibilities with local regulators (4). The written confirmation is required per manufacturing site and per active substance and should provide the following assurances:  

Standards of GMP applicable at the plant are at least equivalent to those in force in the EU. 

The plant is subject to regular and strict controls and effective enforcement of GMP, including inspections. 

Information on findings relating to noncompliance is supplied by the exporting third country without delay to the authorities in the importing country in the EU. 

The duration of validity of the written confirmation is established by the exporting non-EU country (4). As noted by the European Medicines Agency (EMA), these new requirements reinforce the need for pharmaceutical companies to ensure that the active substance manufacturers they are working with are registered with their respective local authorities and subject to adequate regulatory oversight (4). 

Additionally, the directive specifies that exporting countries with a regulatory framework equivalent to that of the EU will not need to issue written confirmations subject to approval. 

Following a request from a non-EU country, the European Commission (EC), together with GMP experts from member states and with the support of the EMA, will assess the regulatory framework of the requesters, and if the assessment is positive, the county will be listed as an “equivalent country” (4). As of July 2, 2013, four countries have been listed by the EC: Australia, Japan, Switzerland, and the United States. An equivalence assessment is ongoing for Brazil. Israel and Singapore have requested to be listed as an “equivalent country” (4). 

To avoid the risk of shortages of medicines if the required written confirmation cannot be obtained, the FMD provides for a waiver from the written confirmation in exceptional circumstances. The waiver can be used where an inspection by an authority of the European Economic Area has been carried out with a positive outcome and the issue of a GMP certificate (4). 

The FMD 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. The EMA’s revised guideline on GDP, which was published in February 2013, includes specific provisions for brokering activities (1-3, 5). 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 FMD. It is gradually being updated by medicines regulatory authorities in EU member states with distribution-related information and will be maintained on an ongoing basis (1, 5). The additional information will include: wholesale distribution authorizations; GDP certificates; statements of noncompliance with GDP; and registrations of manufacturers, importers (including information on their suppliers), and distributors of active substances (1, 5). 

Although the FMD took steps to fortify the supply chain as it relates to APIs coming into the EU, there is concern that the FMD falls short in adequately strengthening the inspection process for APIs imported in the EU. To gain a perspective on these issues, 

 discussed the FMD as it relates to API supply with representatives from the Active Pharmaceutical Ingredient Committee (APIC) and the European Fine Chemicals Group (EFCG), both sector groups of the European Chemical Industry Council (CEFIC), the trade association representing 29,000 large, medium and small chemical companies in Europe. APIC represents approximately 65 fine chemical companies, contract manufacturers, and pharmaceutical companies. EFCG represents approximately 40 small, medium, and large fine-chemical companies including four national and European industry associations: APIC; ASCHIMFARMA--the Italian Association of Manufacturers of Active Ingredients and Intermediates; CPA--Italy’s Chemical Pharmaceutical Generic Association; and SICOS, which represents French fine and biochemical producers (6-8). 

: Do you think the measures contained in the FMD are sufficient to ensure the quality of pharmaceutical ingredients coming into the EU or are there other measures that need to be taken? 

: No, the FMD does not sufficiently ensure the quality of APIs entering the EU. We have been very close to this topic since the FMD concept was born, and we remain concerned that, despite its objectives, it fails to fully meet the needs of EU patients with respect to product quality. Its effectiveness is still too dependent on industry’s supply chain self-evaluation and open to corrupt practices. Other measures that are needed include:

Stricter enforcement of existing laws by all member state regulatory authorities, plus tough sanctions to punish the violators

A consistent approach of member states when transposing the FMD into national law throughout the EU

A change in the existing laws to include mandatory inspections by competent authorities of all API manufacturers with the industry paying for extra regulatory resources if needed similar to the Generic Drug User Fee Act (GDUFA) in the United States

APIs contained in imported finished and semifinished drug products, mixtures of API with excipient(s) and semifinished (crude, moist) APIs should be included in the scope of the FMD. 

The EC should have rigorously tested its assumption that there are 15,000-20,000 API manufacturers selling APIs into Europe before they decided not to propose the mandatory inspection of all API producers. In fact, the Heads of Medicines Agencies survey of medicine manufacturers in Europe, published on Mar. 27, 2013, showed that the top 18 third-country manufacturers/exporters of APIs to Europe had only 1479 manufacturing sites (9). It is, however, never too late for the EC to re-consider mandatory inspections to better protect EU citizens and patients. 

: One concern raised by the FMD is the adequacy of enforcement measures, particularly the inspection process with the new directive lacking a provision requiring mandatory inspections of API producers in third countries (i.e., countries outside the EU). From an industry perspective, what are the advantages/disadvantages of the current inspection process of API producers in third countries? In what areas can the process be improved and at what level/jurisdiction should it be made? 

: The advantage of the current inspection process eases the continuity of supply of APIs from third countries for EU patients and, hence, avoids major product shortages. The disadvantage is the continued risk of substandard APIs/products entering the EU due to a lack of adequate enforcement and tough sanctions to punish individuals and companies. We suggest the following process improvements: 

Ideally, change the FMD to provide for mandatory inspections by EU authorities of API producers in third countries with industry helping to pay, or

Achieve the same end result by providing for mandatory inspections of third-country API producers by European authorities together with other country authorities applying the same EU GMP standards to share the inspection responsibility via mutual recognition agreements (e.g., US, Australia, and Japan) 

Inspectors should be trained to detect falsification or fraud, for example, facade constructions, ghost plants, and falsified official papers. 

: Earlier this year, the EU finalized a guideline on GDP for medicinal products in the EU. Although it addresses the distribution of medicinal products from an end-market perspective, the intent of the guideline is to further ensure the quality of medicines coming into the EU. From an industry perspective, what are the implications for suppliers of APIs and other pharmaceutical ingredients? 

: The industry must ensure transparency of sources and intermediaries (brokers and traders) and a register of evidence of compliance at each step along the entire supply chain from raw-material suppliers to the final medicine. Additionally, the EC published in February 2013 a draft guideline on the principles of Good Distribution Practices for Active Substances as part of the implementation of the FMD. Although this guideline only lays down the “principles” of GDP, it will be a step in the right direction. 

: From an industry perspective, as regulatory and industry groups seek ways to fortify the pharmaceutical supply chain in an increasingly global environment, what are the implications in the outsourcing relationship, either from the perspective of a sponsor company (i.e., pharmaceutical company) or contract manufacturer/supplier? 

: The sponsor company needs a contractor that it can trust to meet appropriate GMP standards in terms of product quality, quality culture, regulatory compliance with the laws of the country of product destination, and delivery at a price they are prepared to pay. Roles and responsibilities with respect to manufacture and distribution, including sub-contracting or use of third party distributors, should be clearly defined and understood by both parties. The contractor should be aware of the relevant regulations and should be able to comply with them. They must not fail their sponsor by delivering sub-standard products. 

: Can you outline key recent activities of APIC and EFCG in 2012 and 2013 in response to the EU FMD implementation and other measures that affect API supply into the EU? 

: APIC and EFCG have been very active  opposite the EC during the implementation of the FMD. We have written letters and made face-to-face representations to the EC’s Directorate-General for Health and Consumers (DG SANCO) to point out the continuing risks to EU patients (we are all patients) and to the EU API manufacturing base (our members). The latter suffer unfair competition mainly from Asian API manufacturers, many of whose facilities fall well short of the EU-required GMP standard (ICH Q7) (10). 

We have challenged the “loopholes” that remain within the FMD, which unless rigorously enforced by the various national regulatory authorities, will not prevent substandard APIs from continuing to enter the EU market, either as bulk API (requiring written confirmations) or through formulated products (where there is no separate check on APIs). We are pleased to note via DG SANCO that the national authorities in China and India have severely limited the number of sites for whom written confirmations are permitted. APIC and EFCG will continue to press for mutual recognition agreements with other countries (e.g., US, Japan, and Australia) that operate to the same GMP standards to help level the global playing field. 

2. EMA, “Falsified Medicines,” www.emaeuropa.eu/ema/index.jsp, accessed July 16, 2013. 

4. EMA, “Falsified Medicines Directive: Imported Active Substances Need Written Confirmation to Guarantee GMP Standards,” Press Release (July 2, 2013). 

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

6. CEFIC, “About CEFIC,” www.cefic.org, accessed July 16, 2013

7. APIC, “Objectives,” www.apic.cefic.org, accessed July 16, 2013. 

8. EFCG, “Membership,” www.efcg.cefic.org, accessed July 16, 2013. 

9. European Commission website, Mar 27, 2013, http://ec.europa.eu/health/files/committee/70meeting/pharm622.pdf, accessed July 27, 2013. 

Q7 Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients

, Step 4 version (2000), http://www.ich.org/fileadmin/Public_Web_Site/ICH_Products/Guidelines/Quality/Q7/Step4/Q7_Guideline.pdf, accessed July 22, 2013. 

Industry groups offered perspectives on the strengths and weaknesses of the European Falsified Medicines Directive.

Implications for APIs in the European Falsified Medicines Directive

Bjorn Holland/Getty ImagesThe investment activity of CDMOs and CMOs reveals the broader business and technical trends of the pharmaceutical industry.

The author examines recent expansion activity. Some key areas of investment are technologies for bioavailability/solubilization enhancement, formulation and manufacture of high-potency drugs, and modified-release applications. 

 Contract service providers offering formulation-development, drug-delivery, and manufacturing services are an important part of the value chain for pharmaceutical companies. Recent expansion activity of CDMOs and CMOs reflect the business and technical trends in the pharmaceutical industry as a whole. Key areas of investment include capabilities to support bioavailability enhancement, modified-release applications, parenteral-drug manufacturing, and high-potency drugs. 

 Thus far in 2013, Catalent Pharma Solutions has made several moves to strengthen its position globally as well as to strengthen its toolbox. Earlier this year, the company formed two joint ventures in China, one for its softgel technologies business and one for its clinical-supply-solutions business. In softgels, Catalent agreed to acquire, pending regulatory approvals, a majority share in the Haining-based and privately held Zhejiang Jiang Yuan Tang Biotechnology, which produces nutritional softgel products for the Chinese and Asia Pacific markets. In a separate move, Catalent, and ShangPharma Corp., formed a new joint venture, which includes a new 31,000-ft

 facility in Shanghai. The facility, currently under construction, will offer capabilities in clinical-trial supplies, including comparator sourcing, primary and secondary packaging and labeling, storage, and distribution. The facility is scheduled to open later this year. 

On an organizational basis, in July 2013, Catalent created a new business unit, Advanced Delivery Technologies, which aligns the company’s existing modified-release and 

 medication-delivery businesses. The company’s business units now include Catalent Softgel Technologies, Advanced Delivery Technologies, and Development and Clinical Services. Additionally, Catalent is investing $35 million to expand its controlled-release manufacturing facility in Winchester, Kentucky. The 100,000-ft

 facility is expanding by almost 80,000-ft

. Catalent expects the expansion to be completed by October 2014.

Earlier this year, Almac’s Clinical Services business unit expanded its services for dispensing and bottling solid dosage products with new enhanced containment equipment and processes at its EU and US headquarters, respectively in Craigavon, the United Kingdom and Souderton, Pennsylvania. Additionally, Almac is expanding its commercial-manufacturing capacity and recently added a new non-GMP drug formulation-development facility in Craigavon for a total investment of £13.7million ($21 million). The commercial expansion adds blending equipment and an automated packing and integrated cartoning line for high-volume bulk commercial manufacturing scheduled to begin in November 2013. Almac also launched US commercial packaging services following a successful FDA inspection and new client partnership for its facility in Audubon, Pennsylvania. The facility offers flexible packaging from primary packaging of solid oral dosage forms to customized secondary labeling and packaging of sterile biopharmaceutical products. 

Metrics launched a new proprietary technology (SUBA) that enhances the bioavailability of poorly water-soluble drugs. The technology was successfully used by the parent company of Metrics, Mayne Pharma, which acquired Metrics in 2012. Mayne Pharma has applied SUBA technology to improve the bioavailability of the antifungal drug itraconazole. Metrics also introduced proprietary taste-masking technology, Cleantaste. The company also launched capabilities to produce nonsterile liquids, creams, and gels. The company’s cream suite can manufacture two- and three-phase suspensions and emulsions, including pastes, creams, lotions, and gels. Its two filling lines, which are modular and can be assembled according to product format, and its liquid-processing equipment can produce batch sizes ranging from 250 kg to 2000 kg. Metrics also introduced proprietary pellet technologies for controlled-release applications. Mayne Pharma has successfully applied the pellet technology to a number of proprietary pharmaceuticals with modified-release profiles, including Eryc (delayed-release erythromycin), Doryx (delayed-release doxycycline), Kadian (extended-release morphine), Astrix (delayed-release low-dose aspirin), and pulsed-release diltiazem.

The CDMO UPM Pharmaceuticals acquired a former Pfizer 500,000-ft

  commercial-manufacturing facility in Bristol, Tennessee. The acquisition provides UPM with large-scale commercial capabilities for manufacturing and packaging of solid oral dosage tablets and capsules as well as for semisolid manufacturing of creams and ointments. The facility further provides for technology-transfer support, pilot-plant scale-up capabilities, analytical and microbial testing, and dedicated suites for potent compounds. As part of the purchase, UPM will continue to manufacture Pfizer’s current portfolio of products within the facility for two years. Pfizer gained the facility with its acquisition of King Pharmaceuticals in 2012. King Pharmaceuticals was founded by UPM’s current Chairman and CEO John Gregory. In addition, in May 2013, UPM increased its capabilities for API-in-capsule dosage forms with the addition of a powder-microdosing system (Xcelodose, Capsugel). The company also added to its analytical capabilities with the addition of a differential scanning calorimeter and a thermogravimetric analyzer. 

Parenteral drug manufacturing and analytical support

 Several companies recently expanded their parenteral-drug manufacturing capabilities. In late 2012, AAIPharma Services announced the expansion of its parenteral-drug manufacturing facility in Charleston, South Carolina. The expansion includes the installation of compounding and aseptic processing suites to contain a newly acquired Monoblock vial-filling machine, expansion of a microbiology laboratory, onsite formulation-development capabilities, and enhanced analytical instrumentation. Following the company’s opening of its technology center in May 2012, AAIPharma acquired additional instrumentation to support its analytical and biopharmaceutical development laboratories. It added systems for new inductively coupled plasma-mass spectrometry, gas chromatography-mass spectrometry, liquid chromatography-mass spectrometry, ultra-high-performance liquid chromatography, and high-performance liquid chromatography. The company also expanded its biopharmaceutical development services by adding a micro-flow imaging system, a multi-angle laser light-scattering detector, and a dynamic light-scattering detector to support aggregate and particulate-testing services. A capillary isoelectric focusing system was added to support protein analysis. AAIPharma also expanded its extractable and leachable) testing services.

In 2013, Vetter’s new filling line at the company’s Ravensburg Vetter South facility in Ravensburg, Germany was fully validated for cGMP filling. The line’s capacity ranges from mid- to large-volume batch sizes, with a maximum filling speed of 800 presterilized syringes per minute. The line currently fills 1-mL-standard-format syringes, with additional formats to be added in the near and long terms. Also, its 18,000-ft2 facility, known as Ravensburg Vetter West, which began operations in April 2012, successfully completed an FDA inspection. The site provides high-bay warehousing for cold storage and room-temperature products as well as visual inspection. Additionally, Vetter broadened its portfolio for lyophilized substances by offering its filling service for high-quality sterile water for injection syringes with five years of stability data.

In January 2013, Dalton Pharma Services began the first stage of its aseptic-filling expansion plan. The investment adds high-speed sterile vial-processing and washing capability, an upgraded high-purity water system, vial-depyrogenation capabilities, lyophilization capacity, and automated vial-inspection capabilities. The upgraded GMP sterile-manufacturing capabilities will allow the company to handle larger-volume commercial aseptic filling of sterile liquids and sterile powders. Later stages of the sterile-processing expansion will include additional GMP manufacturing facilities, equipment, and automation to provide integrated sterile manufacturing services from preclinical to commercial production for sterile API and finished doses. 

 Companies also have made investments to increase capacity for high-potency forms. In February 2013, Baxter International’s BioPharma Solutions business began an approximately 1750-m2 capacity expansion at the company’s fill-finish cytotoxic contract-manufacturing facility in Halle (Westfalen), Germany. This expansion follows previous expansions in Halle in 2007 and 2011. In April 2013, Goodwin Technology and Coldstream Laboratories agreed to develop and manufacture high-potency, highly cytotoxic materials, such as small molecules, protein toxins, cytotoxic ADCs, and other bioconjugates. Goodwin will use Coldstream’s cGMP platform of services, including analytical testing, formulation, liquid or lyophilized fill-finish, storage, and shipment of manufactured highly potent bioconjugates. In May 2013, Penn Pharma successfully completed the first batch of coated tablets at its new contained manufacturing facility in South Wales, UK. The facility is designed for the clinical and commercial manufacture of tablets and capsules. Penn invested £14 million ($21 million) for the new 15,000-ft2 facility, which includes the capability to handle potent compounds. In July 2013, the company announced an additional £3-million investment ($4.6 million).

 Other companies are making moves as well. Bend Research expanded its GMP analytical capabilities with the addition of onsite stability storage and additional GMP testing capabilities for clinical-trial material supply. The company recently added instrumentation to its existing suite of GMP-qualified analytical equipment, including a differential scanning calorimeter and particle-size analyzer. In May 2013, Halo Pharma took a minority ownership position in and established a formal collaboration with the  drug-formulation and development company Altus Formulation. Capsugel launched its new LIPIDEX technology platform that integrates its lipid, liquid, and semisolid fill technologies, product-development capabilites, and  commercial-manufacturing infrastructure. The platform is part of Capsugel’s Dosage Form Solutions business unit. 

Earlier this year, Azaya Therapeutics, an oncology company developing cancer treatments through its nanotechnology platform, launched Parexo Labs, a CDMO providing contract chemical testing and liposomal manufacturing services. In April 2013, the fine-chemicals company Ajinomoto acquired the CDMO Althea Technologies, which offers protein formulation and fill-finish services as well as contract biologics manufacturing. Aptuit launched a translational strategy (i.e., Complementary Vision) for chemistry, manufacturing and control (CMC) services. It is an approach that encompasses all the services that precede and follow CMC in the target product profile: API development and manufacture; qualitative/quantitative chemical, physical and biopharmaceutical characterization of actives and dosage forms; dosage-form design; development and manufacturing for preclinical and clinical dosing; and the development, manufacturing and testing of inhaled products such as dry powder inhalers. 

The investment activity of CDMOs and CMOs reveals the broader business and technical trends of the pharmaceutical industry.

Tracking the Expansion Activities of Contract Service Providers

 David Crockett/Getty ImagesExternal manufacturing plays a crucial role in pharmaceutical companies’ supply strategy. The author examines market trends for the captive (i.e., in-house ) and merchant (i.e., third-party) global market for active pharmaceutical ingredients and intermediates. 

The overall trends of increased globalization, generic-drug incursion, and the rising importance of emerging markets can be further seen in the demand and supply patterns of the API market. In keeping with overall pharmaceutical industry trends, recent growth in the global API market has slowed although the overall market is still increasing at a moderate pace. Led by India and China, Asia Pacific has had the highest recent growth in the API market although North America and the US remain the largest markets, respectively, on a regional and country basis. Generic APIs are outpacing growth for branded, innovator APIs. On a global supply basis, China remains the largest producer of generic APIs, largely for its domestic market as well as the largest exporter of APIs on global basis, primarily to emerging markets. Italy retains its historical position as the largest supplier of generic APIs to both Western Europe and the US although India’s position as a supplier to developed markets is on the rise.

. The global API market (including both the merchant market and the captive market) was valued at $113 billion in 2012, up from $91 billion in 2008, according to a recent report, The World API Market, by the Chemical Pharmaceutical Generic Association (CPA), an organization representing Italian API manufacturers (1). The captive API market is defined as APIs used by pharmaceutical companies for in-house production of finished dosage forms; the merchant API market is defined as APIs sold by third parties. From 2008-2012, the global API market grew at an average annual rate of 5.6% compared to an annual growth rate of 7.2% from 2004-2008. The slowing market is attributable to factors affecting the pharmaceutical industry as a whole: slowing global economic growth, increased pricing pressure due to cost-containment policies adopted by most countries, increased competition from generic drugs, higher risk of pipeline failures with elevated costs for drug discovery, and increasing competition from low-cost producing countries.

On a geographic basis, the highest growth rate for APIs between 2008 and 2012 was in Asia-Pacific (excluding Japan), which experienced average annual growth rate of 13.9%, followed by the Middle East with 8.7% average annual growth, and Eastern Europe and the Commonwealth of States (CIS) with 8.2% average annual growth, according to the CPA report (1). The developed markets in Western Europe, North America, and Japan had slower annual growth rate. Western Europe’s API market had the lowest annual average growth rate, 2.5%, followed by Japan at 3.4% and North America at 3.8%. (1).

On an absolute basis, however, North America is still the largest API market (including both captive and merchant markets) followed by Asia Pacific, although Asia Pacific is gaining ground. The North American share of the global API market declined three percentage points between 2008 and 2012 as the share of Asia Pacific increased. North America’s share was 43% in 2012, down from 46% in 2008. Asia Pacific’s share was 28.3% in 2012, up from 24.2% in 2008, according to the CPA report (1). The US remains the largest global market on a country basis, accounting for 39.7% of the global API market in 2012.

These market positions change, however, if looking at the generic API merchant market alone. Led by China, Asia Pacific accounted for 39.6% of the global generic API merchant market in 2012. China is the largest consumer on a country basis of generic APIs in the merchant market, accounting for 23.7% of the global total, surpassing the North American market as a whole (21.9%) and the US (20.4%). Between 2008-2012, China registered the fastest annual average growth rate in the generic API merchant market at 13.2%, followed by India at 11.9%. Collectively, the two countries accounted for 29.7% of the global generic API merchant market, according to the CPA report (1).

. During 2008-2012, the global captive API market grew at a slightly higher rate comparated to the global merchant market and is larger on an absolute basis. In 2008, the global captive API market was valued at $55 billion and rose to $69 billion in 2012, representing average annual growth of 5.8%, according to the CPA analysis. The global merchant API market was valued at $36 billion in 2008 and increased to $44 billion in 2012 (1).

. Within the global merchant API market, the generic API market is outpacing the branded, innovator API market. The global generic API merchant market was valued at $17 billion in 2008 and rose to $22.5 billion in 2012, representing average annual growth of 7.3%. In 2012, the global branded, innovator API merchant market was valued at $21.5 billion, slightly less than the generic market. Annual average growth in the global branded, innovator API merchant market between 2008 and 2012 was 3.1%, less than half of growth in the generic API merchant market.

The strength of the generic API merchant market is expected to continue. Overall, the generic API merchant is expected to increase at an average annual rate of 7.7% from $22.5 billion in 2012 to $30.6 billion in 2016. The market in Asia Pacific is projected to increase at 10.8% during the next four years, making it the fastest growing region in the generic API merchant market. By 2016, China is expected to account for 27.7% of the global generic API merchant market, making it the largest market and surpassing the US, which will be the second largest global market with a 18.2% share. India will remain as the third largest merchant market for generic APIs with a projected 7.2% by 2016, according to the CPA report (1). Ten emerging markets are projected to experience double-digit growth of 10% to 14% in the generic API market. These countries are Brazil, China, Egypt, India, Jordan, Pakistan, South Africa, Thailand, Turkey, and Vietnam (1).

. Western Europe ranks second behind Asia Pacific in the supply of generic APIs on a global basis, but its market share declined from 16.7% in 2008 to 14.2% in 2012. Italy remains the largest producer of generic APIs in Western Europe, accounting for 58.3% of the region’s total, followed by Spain at 21%. Italy is also the largest supplier of generic APIs to the US market. Italian API producers accounted for 31.2% of the supply to the US generic API market in 2012, and their growth in supplying the US increased at an annual average growth of 5.2% between 2008 and 2012. India is the second largest supplier of generic APIs to the US market with a 24.4% share, according to the CPA report. India is also increasing its supply to Western Europe, accounting for 19.2% of the supply to the region (1).

. In Asia Pacific, China is the largest generic API producer, with its domestic market representing its strength. Between 2008 and 2012, overall API production in China increased at an average annual rate of 7% from $6.43 billion in 2008 to $8.44 billion in 2012. During this period, sales to China’s domestic increased at an average annual rate of 11% while export growth increased only 5.8%. Sales to emerging markets represented the largest target for China’s API export sales, accounting for 63.1% of production. China’s export sales to developed markets (North America, Western Europe, and Japan) accounted for 36.9% of overall export sales and 24.7% of total API production, according to the CPA report (1). Overall, China ranks as the largest producer of generic APIs in the world and the largest exporter of APIs, followed by India.

But unlike China, whose domestic market is the largest target for its API production, India relies heavily on export sales. India’s API production was valued at $4.70 billion in 2012, up from $2.27 billion in 2008. India’s supply to the US market increased at an average annual rate of 44% between 2008 and 2012, increasing from $255 million in 2008 to $1.12 billion in 2012 (1).

   1.	Chemical Pharmaceutical Generic Association (CPA), The World API Market (Milan, March 2013), www.cpa-italy.org/en/indexen.php, accessed July 15, 2013.

External manufacturing plays a crucial role in pharmaceutical companies’ supply strategy. The author examines market trends for the captive and merchant global market for active pharmaceutical ingredients and intermediates.

A Shifting Landscape for the Global API Market

Visage/Getty Images; Dan WardA sense of relative calm seems to have overtaken the bio/pharmaceutical contract services industry in 2013. Bio/pharmaceutical companies say that their spending on contract services is still growing, but at a pace in line with the growth in their overall budgets. Service providers state that 2013 has been a good year, but it is not exceeding their expectations the way 2012 did.

Those are the impressions gained from analyzing the results of this year’s PharmSource 

Outsourcing Survey, administered during June and July 2013. PharmSource and 

have been conducting the survey for more than 10 years.

Figure 1: How will your contract services spending change this year? (All figures are courtesy of the author.)Responses from professionals at bio/pharmaceutical companies indicate that spending on contract services is up in 2013, but at a more modest rate than last year (see 

). Just 30% of buy-side respondents indicated that spending this year will increase by 10% or more; in 2011 and 2012, 43% expected spending growth of 10% or more. Further, the number of respondents indicating that spending year-over-year will remain flat jumped from 27% in 2011 and 2012 to 37% in 2013.

The modest spending growth appears to reflect the overall growth in R&D spending. Approximately 40% of bio/pharma company respondents indicated that contract services spending is growing at the same pace as total R&D spending while those answering that services spend is growing faster or slower than total R&D spend are evenly split. These results are consistent with past years’ responses.

Figure 2: What will business be like for your company this year?Contract service providers appear to have come into 2013 with high expectations and while most haven’t been disappointed, those high expectations have left little room for upside surprises. Among sell-side respondents, 22% said they expect their volume of business in 2013 to be “very good” or “extremely good,” which is down sharply from the 39% in 2012 (see 

). Further, 15% said business in 2013 was “not very good;” only 5% were so pessimistic in 2012.

Those subdued assessments of business conditions may reflect expectations more than actual performance. Only 28% of sell-siders view business in 2013 as “better than expected” while in the 2012 survey 49% were pleasantly surprised. Clearly, many service providers went into 2013 expecting strong performance while their expectations going into 2012 were more tentative.

 Figure 3: Which client segment has been the best performing in your company this year?The most striking result in this year’s survey is the shift in where CDMOs say their business is coming from (see 

). In this year’s survey, only 5% of sell-side respondents indicated that small bio/pharma companies have been their best-performing clients. That is a big drop from previous years.In the four years before 2013, the share of respondents indicating that small bio/pharma companies have been their best-performing segment averaged 22%. The drop undoubtedly reflects the difficult funding conditions that early-stage companies have faced in recent years.

Mid-sized and specialty pharma companies are again viewed as the best performing customer segments, with 30% of respondents citing them as their best performers. The perception of mid-sized companies as top performers has increased steadily over the past five years, and probably reflects the fact that those companies have steadily grown their R&D spending while activity in other customer segments has been more volatile.

The share of respondents citing generic-drug companies as their best-performing customers has also grown steadily; 28% of CMO respondents cited them this year. The reasons for this development need to be explored more. They may relate to the cost and quality advantages of contract service providers, but the trend may also reflect the growing number of new drug applications being filed by generic-drug companies.

Only 15% of CDMO respondents cited global bio/pharma companies as their best performers this year. That’s down from 20% in 2012 and continues a downward trend since 2009. This reflects the tepid growth in R&D spending at global bio/pharma companies and the reduced opportunities resulting from efforts to reduce the number of vendors that companies work with.

Figure 4: What is the single biggest risk to your business in the next two to three years? As the market for contract services has stabilized, service providers have moved from worrying about demand-related factors to concerns about the competitive environment (see 

). Our 2013 survey saw a big decline in the share of sell-side respondents concerned about R&D spending cuts and supplier consolidation initiatives at global bio/pharma companies as well as a decline in those worried about funding for early-stage companies. Service provider concerns now appear to be focused on competitive issues, especially competition from suppliers in emerging markets and the implications of too much industry capacity.

Figure 5: Plans for sourcing in India and ChinaResults from buy-side respondents suggest those concerns may be misplaced. The 2013 survey found a slight decline in the share of bio/pharma company respondents actively sourcing from India and China, and a significant increase in respondents indicating they have no plans to source from suppliers in those countries (see 

). Those responses are consistent with a general sense in the market that interest in sourcing from emerging-market supplies is waning due to eroding cost advantages, concerns about quality, and the complexity of overseeing suppliers halfway around the world.

While competition from emerging markets may be waning, the market overall continues to be competitive and service providers remain willing to deal. In this year’s survey, 52% of bio/pharma company respondents indicated that vendors are willing to cut price to get their business; this is the same percentage in the four previous surveys.

Figure 6: How will your contract services spend change next year?Responses from bio/pharma company professionals suggest that 2014 should be another year of modest growth for contract service providers (see Figure 6). A full third (33%) of respondents expect their contract services spend to grow by 10% or more in 2014, which is promising but well below the 47% in last year’s survey that foresaw 10+% growth for 2013. Further, 37% don’t expect their spending to grow at all in 2014, which is up sharply from the 15% projecting no growth in 2012. 

   In our minds, 2013 represents a return to normalcy for contract services. The bio/pharmaceutical industry seems to have worked through the adjustments and uncertainties caused by the patent cliff, big mergers among the global bio/pharma companies, and the global financial crisis. If 2012 looked to deliver more upside surprises for contract services, that was mainly because the industry was finally benefiting from a general recovery in drug-development activity that many CDMOs didn’t dare budget for.

Still, there are some warning signs in the data that shouldn’t be overlooked. The dependence of the contract services industry on the overall level of development activity is hardly surprising, but experience has shown that development activity is cyclical. Big mergers, global financial market conditions, or waves of clinical candidate failures can abruptly disrupt development activity. 

Today, preclinical and Phase 1 clinical research service providers are suffering from the dearth of early-development candidates brought on by funding constraints on early-stage companies and the restructuring of the R&D model at global bio/pharma companies. The paucity of preclinical and Phase 1 candidates will soon be felt by CMC (chemistry, manufacturing, and controls) service providers as the inventory of development candidates shelved during the financial crisis is worked off. Recent financial market developments, notably the reopening of the window for initial public offerings, may attract new capital to the industry, but it will be some time before the impact of that new money is felt.

Figure 7: How have you managed the number of contractors you work with?Another danger for contract service providers is that in good times like these, they can become complacent in service delivery and the acquisition of new business. The 2013 survey confirmed what we have seen in past years, namely that there is a wide gulf between clients and CDMOs in how they perceive the quality of their services. While the gap in expectations and perception will never be fully closed, the fact that it hasn’t narrowed over the five plus years since we started asking the question suggests that service providers have not done enough to improve service or set reasonable expectations.

The survey data also suggest that complacency is an issue in new business development. The level of new client prospecting seems to have gone down dramatically: in 2013, only 22% of CDMO respondents indicated that more than half of their proposals were going to new clients; in 2012, 39% indicated that most of their proposals were going to new clients. This is especially unfortunate because bio/pharma company respondents indicated some increased willingness to consider new service providers (see 

Outsourcing Survey confirm the industry is experiencing a robust market for contract services. Whether it stays that way will partly depend on external developments, but also on the efforts of contract services providers themselves. 

Jim Miller is president of PharmSource Information Services, Inc., and publisher of Bio/Pharmaceutical Outsourcing Report, tel. 703.383.4903, fax 703.383.4905, info@pharmsource.com, www.pharmsource.com.

The PharmTech/PharmSource annual outsourcing survey results suggest that CDMOs may be getting complacent.

Stability Reigns in Contract Services

 Adam Gault/Getty ImagesEmerging markets are playing an increasingly important role in the strategy of pharmaceutical companies from both a revenue and supply perspective. Attendant to that increased globalization comes additional regulatory oversight and cooperation. The author highlights recent efforts by FDA to develop greater collaborative and innovative approaches in overseeing the pharmaceutical supply chain.

The increased globalization of the pharmaceutical industry is not only reflected in the rising importance of emerging markets to pharmaceutical companies’ bottom lines, but also in the supply chain for pharmaceutical ingredients. As overall trade, including pharmaceuticals, increases between the United States and other countries, regulatory agencies are tasked with overseeing an increasingly more expansive and complex supply chain. 

“Sweeping economic and technological changes have revolutionized international trade over the last several decades, creating a truly global marketplace for goods and services,” said Steven Solomon, associate director for global operations and policy in FDA’s Office of Global Regulatory Operations and Policy, in testimony before the Congressional–Executive Commission on China in May 2013. Solomon offered input on FDA’s work in ensuring global product safety and quality and the agency’s work in China (1). To illustrate the extent of globalization, Solomon offered certain key statistics. The number of FDA-regulated shipments (includes food, drugs, and other FDA-regulated products) has more than tripled from 8 million import entry lines per year a decade ago to 28 million entry lines in fiscal year (FY) 2012. In FY 2013, entry lines are anticipated to reach 34 million. The agency tracks import shipments using entry lines, which refer to each portion of a shipment that is listed as a separate item on an entry document. “As trade increases and US consumers continue to demand global products, FDA’s ability to ensure the safety and quality of these imported products will depend on its execution of a myriad of global engagement strategies,” he said. For pharmaceuticals, approximately 40% of finished drugs in the US comes from overseas, and approximately 80% of manufacturers of APIs are located outside the US (1). 

The increased trade in FDA-regulated products, including pharmaceuticals, has obliged the agency to develop more collaborative and resourceful approaches with foreign counterparts. “FDA’s success in protecting the American public depends increasingly on its ability to reach beyond US borders and engage with its government regulatory counterparts in other nations, as well as with industry and regional and international organizations, to encourage the implementation of science-based standards to ensure the quality and safety of products before they reach our country,” said Solomon in his testimony. “FDA is working with its many partners to enhance responsibility and oversight for safety and quality throughout the supply chain” (1). 

To address these challenges, FDA is using a variety of engagement strategies. Solomon noted that these efforts are in line with the 2012 US National Strategy for Global Supply Chain Security, which emphasizes a layered, risk-based approach for achieving global supply-chain systems that are secure, efficient, and resilient (1, 2). In 2011, FDA also released its report, 

Pathway to Global Product Safety and Quality

, which outlines the agency’s strategy to transform itself from a predominantly domestically focused agency to one that is engaged in the complex, globalized regulatory environment (1, 3). Solomon further outlined some of those activities as they apply to international offices, risk-based monitoring of imported products, technical cooperation and capacity building, and new laws to increase FDA’s authority. 

. FDA’s international offices and posts are designed to build partnerships with foreign counterparts by providing enhanced opportunities for cooperation and capacity building. They also are designed to expand the agency’s knowledge base and provide a platform for inspection of foreign facilities. The agency has a permanent FDA presence in 12 foreign posts in nine countries with employees located in China, India, Latin America, Europe, the Middle East, and South Africa, noted Solomon (1). 

Risk-based monitoring of imported products

. Solomon also pointed to FDA’s strategy of using risk-based monitoring for imported products. “While FDA does not have sufficient resources to physically inspect all imported shipments, even if we had such resources, physically inspecting all imports would be neither practical nor strategic,” said Solomon. “However, the agency electronically screens all imports using an automated risk-based system to determine if shipments meet identified criteria for physical examination or other review,” he said (1). To enhance the agency’s ability to target high-risk products, FDA developed the Predictive Risk-based Evaluation for Dynamic Import Compliance Targeting (PREDICT). PREDICT is a screening system that uses intelligence from many sources, such as intrinsic product risks, past inspection results, intelligence data, and other information that would affect shipments, to provide the entry reviewer with risk scores on every import line. PREDICT uses information sources that include FDA and US Customs and Border Protection (CBP) data as well as data collected from foreign offices, foreign regulatory counterparts, other federal agencies, and US state counterparts. It also uses risk analyses received from agreements with academic institutions and international organizations (1). 

Technical cooperation and capacity building

. Part of FDA’s strategy also involves engaging in regulatory cooperation with other global partners. “The capacities of governments to manage, assess, and regulate products within increasingly complex supply chains are a fundamental factor affecting product safety and efficacy,” said Solomon in his testimony (1). “FDA is working strategically with a range of countries to provide information, tools, training, and exchange programs that contribute to building or strengthening regulatory capacity of our trading partners,” he added. 

. Solomon also pointed to recent legislation to facilitate FDA in its efforts, most notably,  the Food and Drug Administration Safety and Innovation Act (FDASIA). With the passage of FDASIA in 2012, Congress granted FDA important new authorities, reauthorized human drug and device user fees, and authorized new user fees for generic human drugs and biosimilar biologics (1). From a FDA perspective, these authorities and fees are intended to maintain a predictable and efficient review process for medical products, provide incentives for developing new antibacterial and antifungal drugs, combat drug shortages, and enhance the agency’s efforts to ensure that US consumers have more timely access to safe, high-quality, and affordable medicines. 

Title VII of FDASIA focuses on improving the safety and integrity of drugs imported into and sold in the US (1). The new authority increases FDA’s ability to collect and analyze data to enable risk-informed decision-making, advance risk-based approaches to facility evaluation, partner with foreign regulatory authorities to leverage resources through information-sharing and recognition of foreign inspection, and allow the use of other tools intended to improve quality throughout the supply chain (1). In his testimony, Solomon pointed to the law’s requirement that foreign and domestic companies provide information on threats to the security of the drug-supply chain and improvements to current registration and listing information. 

With increasing overall trade with China, FDA is also faced with the challenge to provide strengthened oversight for products coming from China. During FY 2007–2012, the total number of shipments of FDA-regulated products from China increased from approximately 1.3 million entry lines to 4.5 million lines. Of the 4.5 million lines arriving from China in FY 2012, 67% were drugs and medical devices, and 6% were human food products. Approximately 5% of imports into the US of drug and biologics come from China (1).  

Solomon noted that FDA has 13 officers posted in three locations in China: Beijing, Shanghai, and Guangzhou. This staffing includes eight US employees and five Chinese staff.  The purpose of FDA’s China office is to strengthen the safety, quality, and effectiveness of FDA-regulated products produced in China for export to the US. Solomon noted several ways in which the agency is seeking to meet that goal. These efforts include: collaborating, capacity-building, and confidence-building with Chinese regulatory counterparts at the central, provincial, and municipal level; reaching out to regulated Chinese firms that wish to export their products to the US to enhance understanding of and compliance with FDA standards; monitoring and reporting on conditions, trends, and events that could affect the safety and effectiveness of FDA-regulated products exported to the US; conducting inspections at facilities that manufacture FDA-regulated goods; and increasing the knowledge base and understanding of key stakeholders about FDA regulations and science-based approaches to strengthen product safety, quality, and effectiveness (1). 

In mid-April 2013, FDA met with the China Food and Drug Administration (CFDA) in Washington, DC to discuss the collaboration between FDA and CFDA across more than a dozen topic areas. “While much of the strengthening of our relationship with CFDA has come through day-to-day collaboration between FDA’s China office and CFDA officials in Beijing, there are other significant ties in multiple areas across our agencies,” said Solomon (1). These efforts include regular meetings with a CFDA and US working group on economically motivated adulteration. It also involves collaboration by FDA and CFDA in working under the auspices of the World Health Organization’s Working Group for Member States on Substandard, Spurious, Falsely Labeled, Falsified and Counterfeit Medicines (1). Solomon also said that FDA and CFDA inspectors regularly observe one another’s inspections. Additionally, in May 2013, FDA and CFDA cohosted a workshop to enhance collaboration in addressing Internet-based, illegal distribution of adulterated drugs (1). 

Solomon noted other examples as well. Between 2010 and 2012, FDA held a series of workshops on good clinical practices for Chinese inspectors who inspect sites that conduct clinical trials to support the development of pharmaceuticals. “Prior to the workshops, CFDA had few well-trained inspectors able to conduct inspections of clinical research sites,” said Solomon, in his testimony. “FDA’s training in this area helped CFDA to establish its national clinical research inspectorate. FDA regularly invites these CFDA inspectors to observe agency [FDA] clinical research inspections in China to continue to enhance CFDA’s understanding of FDA requirements” (1). 

Solomon also noted that at the request of CFDA, FDA’s China Office and Office of Criminal Investigations worked with US Internet-hosting companies to shut down 16 Chinese-language websites that illegally sold unapproved medical products through servers located in the US (1). Also, in 2012, CFDA provided to FDA’s China Office a list of Chinese pharmaceutical firms against which CFDA had taken regulatory action because of their failure to comply with relevant standards for good manufacturing practices. From the list, FDA identified 61 firms that had shipped products to the US and targeted these firms as priorities for inspection (1). 

 1. S. Solomon, “FDA’s Activities Related to China,” testimony before the Congressional–Executive Commission on China (Washington, DC, May 22, 2013). 

 2. Office of the President of the United States, “National Strategy for Global Supply Chain Security (Washington DC, January 2012). 

Increased pharmaceutical trade creates new challenges for regulatory oversight.

Pharmaceutical Technology-08-01-2013