Lower levels of spending growth in the United States, the continuing impact of patent expirations in developed markets, strong growth in emerging markets, and policy-driven changes in certain countries relating to drug reimbursement are key factors that will influence pharmaceutical industry growth during the next five years.  

The global pharmaceutical market is expected to reach $1 trillion by 2014 and nearly $1.1 trillion by 2015, according to the IMS Institute for Healthcare Informatics. The market will increase at a compound annual growth rate (CAGR) of 3–6% during the next five years, slowing from the 6.2% annual growth rate that occurred during the past five years. Absolute global-spending growth is expected to be $210–240 billion between 2011 and 2015 compared with $251 billion between 2006 and 2010. Removing the effect of exchange-rate fluctuations, absolute global-spending growth will be $230–250 billion on a constant dollar basis compared with $228 billion in the previous five years. For purposes of this analysis, the pharmaceutical market includes all types of biopharmaceuticals, including biologics, over-the-counter drugs, and traditional medicines distributed and administered through regulated delivery systems, such as pharmacies, hospitals, clinics, physician offices, and mail order. Spending figures are reported at ex-manufacturer estimates that do not reflect off-invoice discounts and rebates. 

“The future level of spending on medicines has striking implications for healthcare systems and policy makers across the developed and emerging economies,” said Murrary Aitken, executive director of the IMS Institute for Healthcare Informatics, in a May 18, 2011, IMS press release. “Past patterns of spending offer few clues about the level of expected growth through 2015. There are unprecedented dynamics at play, which are driving rapid shifts in the mix of spending by patients and payers and between branded products and generics and across both developed and pharmerging markets.” 

The US share of global pharmaceutical spending will decline from 41% in 2005 to 31% in 2015 while the share of spending from the top five European national markets  (i.e., Germany, France, Italy, Spain, and the United Kingdom) will decline from 20% to 13% during the same period. Meanwhile, 17 high-growth emerging markets, led by China, will contribute 28% of total spending by 2015, up from only 12% in 2005, according to IMS. The next five years also will see an accelerating shift in spending toward generic drugs, whose share of of pharmaceutical spending will rise to 39% in 2015, up from 20% in 2005. 

On a geographic basis, the pharmaceutical market for developed nations was valued at $587.1 billion in 2010. The US was the single largest national market at $310.6 billion. The pharmaceutical market in the top five European countries (i.e., Germany, France, Italy, Spain, and the United Kingdom) was $147.4 billion in 2010 and $96.5 billion in Japan in 2010, according to IMS. Slowing pharmaceutical market growth is forecasted for the US, Europe, and Japan. In the US pharmaceutical market, CAGR (in $US at constant exchange rates) was 4.5% between 2006–2010, and growth is projected to slow to a CAGR of only 0–3% between 2011 and 2015, according to IMS. In the top five European countries (i.e., Germany, France, Italy, Spain, and the United Kingdom), CAGR  (in $US at constant exchange rates) was 4.1% between 2006–2010, and growth is expected to slow to a CAGR of 1–4% between 2011 and 2015. In Japan, CAGR (in $US at constant exchange rates)) was 2.6% between 2006–2010, and CAGR of 2–5% is projected between 2011 and 2015, according to IMS. 

Factors influencing global pharmaceutical demand

The level of patient expiries will continue to have a strong effect on the global pharmaceutical market. Spending for branded products in developed markets will remain at the same level in 2015 as it was in 2010, according to IMS. Globally, market share for branded medicines, which fell from 70% in 2005 to 64% in 2010, is expected to decline further through 2015, to 53%. While growth for branded products in the emerging markets will be robust, 80 cents of every dollar spent on medicines in emerging markets in 2015 will be for generic drugs, according to IMS. Global generic-drug spending was estimated at $234 billion in 2010, up from $124 billion in 2005. Generic-drug spending in 2015 is expected to be between $400–430 billion, 70% of which will be outside developed markets. 

Overall, expiring patents for branded products will yield $98 billion in net savings to payers in developed countries through 2015, compared with $54 billion in savings realized in the five years to 2010, according to IMS. Patent expiries will save payers $120 billion by 2015, offset by $22 billion of expected generic-drug spending for these medicines. Among developed markets, the US will have the largest expansion of generic-drug spending. Japan will continue to have the lowest share despite significant policy incentives to increase generic-drug prescribing and dispensing. 

During the next five years, growth in emerging markets, defined by IMS as  the “pharmerging markets” are expected to nearly double their spending on medicines to between $285 billion and $315 billion, compared with spending of $151 billion in 2010, according to IMS. Pharmerging countries are defined as those countries with absolute pharmaceutical pending growth of greater than $1 billion during 2011–2015 and that have gross domestic product per capita of less than $25,000 on a purchase-price parity basis. Using that criteria, these countries include: China (classified as Tier 1); Brazil, Russia, and  India (classified as Tier II); and Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam (classified as Tier III). 

Gains in pharmaceutical spending in the pharmerging markets will be driven by overall strong economic growth and governments’ commitment to expand healthcare access. IMS projects that by 2015, the pharmerging countries will become the second largest geographic segment globally in spending on medicines, surpassing Germany, France, Italy, Spain, and the United Kingdom combined and approaching US levels. Pharmerging countries are expected to nearly double their pharmaceutical spending by $150 billion by 2015. Of the total increase in spending, approximately 20%will come from branded products. 

Breaking down growth in emerging markets, China’s pharmaceutical market was valued at $41.1 billion in 2010. The pharmaceutical market in Tier-II emerging markets (Russia, India, and Brazil) was $48.4 billion (i.e., Brazil at $22.9 billion, India at $12.3 billion, and Russia at $13.6 billion), and the pharmaceutical market in Tier-III emerging markets (Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam) was $60.6 billion in 2010, according to IMS. In China’s pharmaceutical market, CAGR  (in $US at constant exchange rates) was 23.9% between 2006–2010, and a CAGR of 19–22% is projected between 2011 and 2015, according to IMS. In the Tier-II emerging markets, CAGR  (in $US at constant exchange rates) was 15.9% between 2006–201 (Brazil at 14.1%, India at 15.7%, and Russia at 20.0%). Growth is expected to continue to be roubust with a collective CAGR for Tier-II countries of 11–14% between 2011 and 2015. In Tier-III emerging markets, CAGR (in $US at constant exchange rates) was 11.8% between 2006–2010, and growth is expected to increase at a CAGR of 10–13% between 2011 and 2015, according to IMS. 

 Several policy moves will affect healthcare spending during the next five years. In the US, healthcare reform as made through the passage of the Affordable Care Act is expected to expand health insurance coverage to 25–30 million people in America. Price controls in China are designed to achieve universal health coverage. Japan will implement its first price cut under its new protected innovative products policy. In Europe, price reductions for generic drugs are expected in Spain and Italy, and mandatory cost-benefit evaluations for new products are slated for Germany. Additionally, rebates and discounts, which are not reflected in IMS’s market data, are being applied more extensively by both public and private payers, particularly in the US, France, and Germany. IMS estimates the amount of these off-invoice discounts in 2010 at between $60 billion and $65 billion and expects the value of these discounts to increase to between $65 billion and $75 billion by 2015. 

 Biosimilars are a small, but growing, part of the pharmaceutical market. By 2015, IMS expects spending on biosimilars to reach $2 billion annually, or approximately 1% of total global spending on biologics. New biosimilars are expected to enter the US and European markets by 2014, according to IMS, which will increase spending on biosimilars by $311 million compared with 2010 levels. 

On a therapeutic-class basis, oncology is expected to remain the leading therapeutic class, but with slowing growth of 5–8% between 2011 and 2015 as existing targeted therapies already have been widely adapted. Spending on diabetes treatments between 2011 and 2015 is projected to increase 4 to 7%, driven by the increase in the incidence of diabetes and the introduction of newer oral antidiabetic drugs. Growth for respiratory drugs, specifically for asthma and chronic obstructive pulmonary disease treatments, is expected to slow to 2 to 5% between 2011 and 2015, and spending on lipid regulators will decline from $37 billion in 2010 to $31 billion in 2015, according to IMS.  

Articles

APIs

The global pharmaceutical market is expected to reach sales of nearly $1.1 trillion by 2015, marked by slowing growth in developed markets and strong sales in emerging markets.

Global Pharma Market Expected to Reach $1 Trillion

CSR and Sustainability Forum

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

CSR and Sustainability in the News

The World Health Assembly, the decision-making body of the World Health Organization, concluded an eight-day series of meetings on May 24, 2011, passing 28 resolutions and adopting three decisions to guide the work of the organization in addressing global health issues. The meetings were held in Geneva as part of the annual meeting of the World Health Assembly and included more than 2700 delegates, which included government health ministers, senior health officials, nongovernmental organizations, civil-society groups, and other observers. 

"I believe this has been an especially productive and profoundly effective Assembly," said WHO Director-General Margaret Chan, in a May 24, 2011, WHO press statement. "These World Health Assemblies are having a tremendous impact on the health of this world." 

The policy work of the World Health Assembly included a presentation of outcomes from the independent Review Committee, which examined WHO's response to the influenza pandemic and the International Health Regulations. In its statement, WHO said: “After a year of investigation, the committee agreed that the International Health Regulations helped better prepare the world to cope with public health emergencies, but that the world is currently ill prepared to respond to a severe pandemic or to any other public health emergency on a similarly global and threatening scale.” In addition, the Review Committee declared that the pandemic (H1N1) 2009 was a real pandemic and found no evidence WHO was influenced by industry in its decision-making, according to the WHO statement. 

To improve global preparedness for future pandemics, delegates approved a framework for pandemic influenza preparedness, the culmination of four years of negotiation between WHO's member states. According to WHO, the framework will improve influenza virus sharing and access to vaccines and other benefits. “Member States agreed the framework lays the groundwork for better preparedness and better access to tools and knowledge. The next phase is to ensure the implementation of the agreement,” said WHO in its statement.

 In other news, delegates endorsed the World Health Assembly resolution on the preparations for the United Nations (UN) General Assembly High-Level meeting on the prevention and control of noncommunicable diseases, which will be held this September in New York. To support prevention and control of noncommunicable diseases as well as the health-related goals of the UN Millennium Development (MDGs) goals, the delegates also approved five resolutions to strengthen health systems, including strategies to strengthen nursing and midwifery, actions to improve the health workforce through effective implementation of the WHO Global Code of Practice on the International Recruitment of Health Personnel, and efforts to improve national policy dialogue to build more robust health policies, strategies, and plans. Two other resolutions addressed building sustainable health financing structures and universal coverage of healthcare and services and on strengthening national health emergency and disaster-management capacities. Additionally, the health-related MDGs received support with resolutions and reports on immunization strategy, infant and young child nutrition, child-injury prevention, youth-health risks, malaria, and the presentation of the final report of the Commission on Information and Accountability for Women's and Children's Health. 

The World Health Assembly also adopted a new strategy to combat HIV, the 

Global Health Sector Strategy on HIV/AIDS, 2011-2015

, which will guide actions by WHO and countries. Under the new strategy, WHO aims to promote greater innovation in HIV prevention, diagnosis, treatment, and care services so that countries can achieve the goal of universal access to HIV services.

The assembly also reaffirmed the decision of previous assemblies that the remaining stock of smallpox (variola) virus should be destroyed when ”crucial” research based on the virus has been completed, according to WHO. The state of variola virus research will be reviewed at the 67th World Health Assembly in 2014 and determining a date for destruction of the remaining virus stocks will be discussed. 

Other resolutions focused on the eradication of guinea-worm disease and polio. With respect to polio,  “delegates called for strong national and subnational leadership by political authorities for the implementation of polio eradication strategies and highlighted the need for countries to significantly strengthen routine immunization,” said WHO in its statement. “Delegates expressed particular concern over the funding gap of $665 million to fully carry out polio eradication activities in 2011 and 2012.” The assembly also discussed the need to revitalize the Global Task Force on Cholera Control and the need to scale up advocacy measures.

In the area of counterfeit medicines, the World Health Assembly also discussed the report from the working group of Member States on Substandard/Spurious/Falsely-Labeled/Falsified/Counterfeit Medical Products on improving access to quality and affordable medical products and approved the decision to extend the working group to resume its work and report to the next World Health Assembly.

The World Health Assembly, the decision-making body of the World Health Organization, met in Geneva last month to discuss and take action on initiatives relating to influenza pandemic preparedness, noncommunicable diseases, and the health-related UN Millennium Development Goals.

WHO Meeting Produces Several Action and Policy Items

As the pharmaceutical industry faces increasing cost pressures, the need to accelerate time to market, and a more competitive environment, companies face the task of how to reduce costs and extract greater value from their operations. The pharmaceutical supply chain, from the sourcing of raw materials to the manufacture of an active pharmaceutical ingredient (API), is a potential source of that value creation.

“Supply-chain innovation involves not only a bottom-line focus and looking at ways to reduce costs, but more importantly it has a top-line focus aimed at value creation,” says Christopher McKenna, partner at Accenture. McKenna will be a speaker at an upcoming educational program, the 

DCAT/ISM Sourcing Summit’ 11: Innovative Sourcing, 

 which will be held July 13 and 14 at the Sheraton Newark Airport Hotel in Newark, New Jersey. The program is organized by the Drug, Chemical and Associated Technologies Association (DCAT), and its partner, the Pharma Forum and Chemical Group of the Institute of Supply Management (ISM). McKenna points out that in overall supply-chain relations, there are three potential areas for innovation: products/services, process, and operating/business models. These components of innovation also may be applied to the relationship between a pharmaceutical customer and its suppliers, including contract manufacturers. 

In examining ways to achieve innovation in the pharmaceutical supply chain, it is helpful to look at approaches from other industries and companies. McKenna points to Procter & Gamble’s (P&G)  “open-innovation” approach and its success in using that model to develop a strong innovation culture. “The open-innovation model involves gaining feedback from external sources, such as suppliers and customers, as a way to drive innovation,” he says. In the case of P&G, approximately 50–60% of its product initiatives involve collaboration with outside innovators. The company uses its Connect + Develop platform, an online innovation engine that allows outside parties to connect with the company and offer an idea. According to P&G, this approach has resulted in more than 1000 agreements with innovation partners. 

Although consumer-product industries operate differently than the highly regulated pharmaceutical industry, there is opportunity to apply these models in the pharmaceutical industry, notes McKenna. “An innovation model can be applied on the process side as well,” he says. “It involves two major steps: ideation and implementation. Once a company has an idea, it can design the process, which can include its activities with outside suppliers and contract manufacturers, to implement that idea.” Facilitating ideation is an important task until itself. “Part of the barrier in innovation in supply chain or procurement is that the focus for innovation can be narrowed to existing orthodoxies or ways of thinking,” says McKenna. “Suppliers and customers have to look beyond traditional ways of doing things and see the opportunity for value creation.” 

Paul Sidhu, vice-president of marketing and strategy at DSM Pharmaceutical Products, who also will be speaking at the DCAT/ISM Sourcing Summit, offers a perspective from a contract manufacturing organization (CMO) on ways in which value can be created in the customer–supplier relationship. In the case of DSM, he points to two different models. “In one example, a pharmaceutical company is rationalizing its manufacturing network and is outsourcing its manufacturing activities. In essence, we have become its manufacturing operations.” He points out that the foundation for this strategic external manufacturing arrangement was based on past relations of mutual trust, collaboration, and performance. 

In a second example, Sidhu points to taking a “portfolio view” in terms of pricing and service models. “A portfolio view is based on a comprehensive partnership,” he says. In this approach, the CMO considers various pricing and service schemes based on the position of the product in the pharmaceutical company’s product life cycle. “For example, a mature pharmaceutical product that is nearing the end of its life cycle is in a more competitive market environment and has different margins than a new or innovative product early its life cycle,” says Sidhu. “For our pricing proposals, e take into consideration where the product is positioned in the customer’s product portfolio.” In this approach, the partnership between the CMO and pharmaceutical companies is based on a holistic portfolio view that accommodates the various products and project types. 

That customer-focused and collaborative approach in outsourcing for value creation also can be realized through technology enhancements. CMOs, for example, invest in technologies that can be used to improve process efficiency and cost structures. In the case of DSM, Sidhu points to the company’s longstanding investment in biocatalysis and microreactor technology as ways to improve manufacturing process efficiency and reduce costs. “These technologies also contribute to a pharmaceutical company’s goals in sustainability,” he says. For example, biocatalysis can be used in asymmetric synthesis to achieve a desired stereoselectivity and potentially can yield more efficient chemical transformations in a given synthesis for a pharmaceutical intermediate or API. Microreactor technology enables more efficient heat transfer  and can improve reaction conditions such as by lowering temperature and pressure. The green-manufacturing approaches of biocatalysis and microreactor technology, through reduced waste or byproducts (as a result of more efficient chemical transformations) or lower energy requirements (through improved process efficiency and operating conditions), provide additional value to a given project. 

Sidhu offers another example of applying innovative process technology to create value by a CMO for its customer. DSM is a contract manufacturer of biologic drug substances. It applies its proprietary technologies to all cell lines, including standard Chinese hamster ovary (CHO) systems, to lower costs and reduce processing time. DSM’s proprietary XD process achieves 5 to 10 times the upstream output, regardless of product or cell line, he notes. 

On the downstream side, DSM acquired the Rhobust technology, an expanded bed-adsorption system. It enables dense, high-yield crude harvest to pass freely through the column system while the adsorbent captures target molecules without clogging the system due to high-density resin balls. The cell suspension passes through the column, and the product is adsorbed on the beads through different tailored ligands, such as Protein A, mixed mode, DEAE, and IMAC. This direct capture leads to less handling and shorter process time. The combination of high-density beads with equal flow distribution in the column also leads to stable expanded beds and consistent performance. Sidhu explains, “the Rhobust technology is an important consideration to prevent the downstream bottlenecks that may occur as upstream processing yields improve.” 

Sidhu comments that the higher upstream yields and downstream efficiencies provide a step-change in biopharmaceutical production by using disposable equipment with lower costs and smaller footprints to enable a small, yet highly productive, facility with only a small fraction of the capital requirement. As a case in point, DSM is building a new mammalian-cell biologics manufacturing facility in Brisbane, Australia.  This facility is scheduled to come on line in 2013 and will offer the XD and Rhobust technologies. In 2010, DSM formed a partnership with the Australian governments (Queensland state government and the Commonwealth of Australia) to design, build, and operate the facility with 100% government funding. 

The mechanisms for implementing various approaches in sourcing and procurement as a tool of value creation will be discussed further at the 

DCAT/ISM Sourcing Summit’ 11: Innovative Sourcing.

Sourcing

Industry experts share perspectives on value creation in sourcing, procurement, and external development and manufacturing.

Innovation in Sourcing

The complexity of global health concerns requires the engagement of national and regional governments, the private sector, nongovernmental organizations, and other civil-society organizations. For the pharmaceutical industry, this involvement can be through individual companies and collective industry actions. The International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) is an important instrument of collective participation on global health concerns. IFPMA represents 26 multinational research-based pharmaceutical companies and 45 national industry associations in North America, Western Europe, Japan, Australia, Central and South America, Asia, and Africa. Eduardo Pisani, IFPMA’s director general, recently spoke with 

 to discuss the association’s policy objectives and action plans in global health, including influenza pandemic preparedness, noncommunicable diseases, counterfeit medicines, and neglected tropical diseases. 

IFPMA occupies an important position at the table of stakeholders involved in global health policy and action. “The mission of the IFPMA is to engage with international organizations to build mutual understanding and to find effective and sustainable solutions to major global health issues with a focus on medicine quality, innovation, and access,” says Pisani. To that end, IFPMA, based in Geneva, has formal consultative status with the United Nations (UN), UN’s specialized bodies, including the World Health Organization (WHO), and with other international organizations, such as the World Intellectual Property Organization, the World Bank, and the World Trade Organization. Consultative status with the UN Economic and Social Council is granted to qualified nongovernmental, nonprofit, or voluntary organizations to enable these organizations to contribute to the work programs and goals of the UN by serving as technical experts, advisers, and consultants to governments and the UN Secretariat. Organizations with consultative status are invited to participate in UN conferences, General Assembly special sessions, and other meetings called by other intergovernmental bodies. In its consultative status with the UN, IFPMA is engaged in the ongoing dialogue on the major global health concerns and is a participant in the solutions that emerge from that dialogue. 

 Pisani outlines IFPMA’s focus in drug quality, innovation, and access. “In the area of quality, IFPMA’s role is to advocate for policies and regulations aimed at ensuring that quality standards of medicines and vaccines are consistently implemented in all countries,” he explains, “and to provide expertise and capacity-building support so that patients’ health is not comprised by substandard or counterfeit medicines, particularly in developing countries.” In the area of innovation, Pisani says IFPMA’s aim is “to help create a global policy environment that is conducive to biopharmaceutical innovation for the benefit of all patients.” With regard to access to medicines, he emphasizes that the association “advocates policies and seeks partnerships that facilitate substantial access to medicines around the world. This involves working to ensure that medicines are available to patients worldwide but also underscores the need to upgrade healthcare infrastructure so that they are capable of absorbing new therapeutic options.” 

These three core areas of quality, innovation, and access serve as the framework for the specific work of IFPMA in global health, which increasingly requires partnerships between the private and public sector. “Nowadays, most of the work accomplished in the global public health arena is collaborative in nature, so multistakeholder partnerships are encouraged,” says Pisani, pointing to partnerships in research and development (R&D), capacity-building, training, or technology transfer. 

He points to the collaborative focus inherent in the UN Millennium Development Goals (MDGs), a set of eight time-bound targets for addressing extreme poverty, hunger and disease (i.e., maternal and children's health and specific diseases, such as HIV/AIDs, malaria, and tuberculosis), gender equality, education, and environmental sustainability, particularly MDG Goal 8, which emphasizes global partnerships. “MDG Goal 8 specifically mentions the need for cooperation with pharmaceutical companies in the development of a global partnership to provide access to affordable, essential drugs in developing countries,” says Pisani. To illustrate IFPMA’s role in the MDGs, Pisani noted that IFPMA member companies have approximately 210 projects in place, worth an estimated $9.2 billion that address the health-related MDGs. By 2015, the date set for the MDGs to be realized, if the present trend is maintained, the value of these projects is expected to increase to $20 billion (excluding companies’ expenditures on R&D for diseases of the developing world), he adds. 

Influenza pandemic preparedness, including access to vaccines for developing nations, is a crucial issue in global public health and was one of the topics addressed by the World Health Assembly, the decision-making body of WHO, which met in mid-May in Geneva. At the meeting, the World Health Assembly, which consists of the delegates from all WHO member states, agreed to the Pandemic Influenza Preparedness (PIP) framework. IFPMA contributed to the deliberations of the WHO Open-Ended Working Group (OEWG) of Member States on PIP, which was tasked with improving the global system for responding to future influenza pandemics. The OEWG adopted an agreement in April 2011 for a PIP Framework, which was endorsed by the World Health Assembly in May. 

IFPMA supported the OEWG's plan, in particular for addressing key challenges, such as increasing the capacity of vaccine production and enabling access in developing countries. IFPMA also supports the WHO's financial parameters for the industry for the WHO Global Influenza Surveillance Network (GISN). GISN serves as a global alert mechanism for the emergence of influenza viruses with pandemic potential and is also the mechanism through which WHO recommends the content of the influenza vaccine for the subsequent influenza season. 

The OEWG recommendation includes specific requirements for users of the GISN to ensure that vaccines and antivirals are made available to developing countries in the event of a future pandemic. During the most recent H1N1 pandemic, IFPMA vaccine manufacturers committed 166 million doses to meet the WHO target of 200 million vaccine doses for developing countries, according to IFPMA. 

In commenting on the PIP framework, IFPMA recognized the importance of local production of vaccines and antivirals in pandemic preparedness and said it would continue to explore local production, pointing to investment made by member companies in several countries, including Mexico, Brazil, China, Indonesia, and Thailand. During the OEWG/PIP consultations, individual IFPMA members confirmed that they also were willing to voluntarily undertake a selection of actions in the event of a future pandemic, including production-capacity expansion and access to reverse-genetics technology, dependent upon skills, knowledge, financial management, public-health policy, and national regulation. 

 IFPMA supported the adoption of the OEWG/PIP recommendations by the World Health Assembly in May, but also pointed to the need to increase vaccine-production capacity. “It has reminded us that timely access to candidate vaccine viruses and reagents is vital; secondly, that rapid evaluation and approval mechanisms for vaccines must be in place along with effective distribution networks; and thirdly, that seasonal vaccination recommendations provide a means to reduce the burden of influenza whilst sustaining and increasing global vaccine production capacity,” said Pisani, in a May 24, 2011, IFPMA press release. 

 preceding the World Health Assembly meeting in May, Pisani noted the importance of participation of other stakeholders in global influenza pandemic preparedness. “We believe that national governments should play a crucial role in ensuring vaccines reach their population, including immunization policy of seasonal influenza as advised by WHO,” he said. “This would need to be accompanied by regulatory procedures, country surveillance, health-system surveillance, and rules for transfer of viruses to build on significant contributions to the global pandemic made by IFPMA members.” 

Noncommunicable diseases, particularly cancer, cardiovascular disease, respiratory disease, and diabetes, are a growing health problem in the developing world. “Noncommunicable diseases present a gigantic challenge for the public health community over the coming years,” says Pisani. “Today, the poorest countries account for a very high burden of the global noncommunicable disease burden. As in the developed world, part of the problem arises from lifestyle choices that can contribute to certain diseases. Noncommunicable diseases have become a problem in certain countries as lifestyle choices, such as an unhealthy diet and tobacco use, accompany a rise in the overall standard of living for middle-income countries as the economies of these countries improve. 

To address the problem, the UN will hold a first-ever UN General Assembly High-Level meeting on noncommunicable diseases in New York in September 2011. IFPMA will be responsible for conveying the research-based pharmaceutical position on chronic diseases. “We believe that the experience in the developed world demonstrates the crucial role of changing risky behaviors and prevention,” says Pisani. “We also will be advocating for the effective, multistakeholder strategies at the global, regional, and national levels that are fully integrated into healthcare systems.” In this multistakeholder framework, he says that governments, the research-based pharmaceutical industry, civil society organizations, and health professionals can play a role in increasing education and awareness, improving early detection and disease surveillance, and facilitating implementation of prevention programs. 

In April 2011, the first global Ministerial Conference on Healthy Lifestyles and Noncommunicable Disease Control was held in Moscow. Presented at that meeting was a survey conducted by IFPMA and the Association of International Pharmaceutical Manufacturers (AIPM), which is the Russian national pharmaceutical trade association. The survey,

 Population Attitude to Personal Health: Perception of Health, Understanding of Risk Factors, Morbidity and Mortality

, which was conducted in Russia from January 2011 to April 2011, showed a significant gap between what people think their state of health is and the negative impact of their behavior, such as smoking, abuse of alcohol, obesity, and lack of physical exercise, has on their health. “The Russian study illustrates the scale of the challenge to be tackled not only in Russia, but in other countries, such as China and India,” says Pisani. He cites estimates that projects that between 2005 and 2015, China, India, and Russia could lose $200 billion to $550 billion in national income due to the effects of noncommunicable diseases. 

Counterfeit drugs in the developing world are a large public health concern and represent a key strategic focus for IFPMA. In 2010, 1735 incidents of fake medicines were reported by the Pharmaceutical Security Institute, a Washington, DC-based nonprofit organization,  a nearly 10% increase compared with the prior two years.  One third of these cases reached licensed wholesale distributors and/or pharmacies in 37 different countries. The Pharmaceutical Security Institute was established in 2002 in Washington DC with participation of the security officers of 14 pharmaceutical companies. It has since expanded to include representational offices in Hong Kong and London and membership of 25 pharmaceutical companies, which share information on counterfeit medicines and initiate enforcement actions through the appropriate authorities. In 2010, IFPMA partnered with its member association, PReMA, the national pharmaceutical industry association in Thailand, the International Association of Patients Organization, and the US Pharmacopeia to raise patient awareness about the health risks imposed by counterfeit medicines in Southeast Asia. IFPMA also chairs the working group on anticounterfeiting technologies of the International Medical Products Anti-Counterfeiting Task Force (IMPACT). IMPACT was established by WHO in 2006 as the organization’s drug anticounterfeiting group.  It consists of multiple stakeholders, which include national pharmaceutical regulatory authorities, health professionals, patients, the generic-drug industry, the research-based pharmaceutical industry, and pharmaceutical distributors and wholesalers. 

At its meeting in May, the World Health Assembly discussed the report from the working group of Member States on Substandard/Spurious/Falsely-Labeled/Falsified/Counterfeit Medical Products on improving access to quality and affordable medical products. The assembly approved the decision to extend the working group to resume its work and report to the next World Health Assembly. In commenting on the action, IFPMA stressed the importance of continuing and strengthening the efforts against anticounterfeit drugs. “The decisions taken on fake medicines provide a viable basis to build on existing work,” said IFPMA in a May 24, 2011, release. “It remains, however, in the longer term vital to establish a platform for international collaboration to protect patients from the dangers of fake medicines.” 

Approximately 1 billion people, or one person out of six people, are afflicted with a tropical disease, and WHO, along with IFPMA, recognize neglected tropical disease as a public health concern. In October 2010, WHO issued its first-ever report on neglected tropical disease, which typically have low visibility in the developed world as they tend to affect specific populations or areas in impoverished and developing nations. Of the world’s poorest 2.7 billion people (defined as those who live on less than $2.00 per day), more than 1 billion are affected by one or more neglected tropical diseases, according to WHO. The WHO report focuses of 17 tropical diseases: dengue fever, rabies, trachoma, Buruli ulcer, endemic treponematoses, leprosy, Chagas disease, sleeping sickness, leishmaniasis, cysticercosis, guinea-worm disease, echinococcosis, foodborne trematode infections, elephantiasis, river blindness, bilharziasis, and intestinal parasitic worms. Most of the diseases are parasitic diseases caused by various protozoan and helminth parasites. 

 Private-sector support through R&D and direct financial contributions are part of the solution to addressing the problem of neglected tropical diseases. “IFPMA has supported WHO’s efforts to ensure that neglected tropical diseases receive greater attention,” says Pisani. In its 2010 report, WHO identified the contributions made by the pharmaceutical industry. Some specific company initiatives include: 

• Novartis renewed its commitment to donate an unlimited supply of multidrug therapy and loose clofazimine for leprosy and its complications. 

• GlaxoSmithKline announced a new five-year commitment to expand its donation of albendazole through WHO, in addition to its current donation for lymphatic filariasis to treat school-age children for soil-transmitted helminthiases in Africa. The commitment includes 400 million doses per year for this purpose. 

• Sanofi agreed to renew its support for the WHO program to eliminate sleeping sickness and its support for treatments for Buruli ulcer, Chagas disease, and leishmaniasis for the next five years. 

•  Eisai committed to work toward the global elimination of lymphatic filariasis by providing free of charge to WHO up to 2.2 billion 100-mg tablets of the drug diethylcarbamazine.

• Johnson & Johnson announced it is expanding its donation of mebendazole to supply up to 200 million treatments per year for treatment of intestinal worms in children. 

Aside from financial and product donations, Pisani points to collaborative R&D models that the industry is using to address neglected tropical diseases. He points to GlaxoSmithKline’s “open-innovation” strategy of sharing intellectual property in the area of neglected tropical disease. This approach was further advanced by the creation of a nonprofit organization, BIO Venture for Global Health, which provides scientists and their institutions with access to compounds, technologies, and expertise. Pfizer, along with the Drugs For Neglected Diseases 

 have allowed affiliated institutes to screen approximately 150,000 compounds in Pfizer’s library for African sleeping sickness and Chagas disease. AstraZeneca partnered with the Medicines for Malaria Venture to permit 500,000 compounds in its library to be screened. 

Capacity-building serves an important role in advancing global public health, and Pisani explains the role that IFPMA is playing. The association facilitated setting up a Clinical Research Career Development program, which is coordinated by the UN Children’s Fund (UNICEF)–UN Development Program (UNDP)–World Bank–WHO Special Program for Research and Training in Tropical Diseases. “The aim is provide practical clinical experience for promising researchers from low- and middle-income countries and encourage high-quality clinical R&D on medicines, vaccines, and diagnostics,” explains Pisani. After a 12-month fellowship with a research-based pharmaceutical company, the researchers will return to their home countries and institutes to become a resource for R&D for infectious diseases. In 2009, 12 fellows were placed in training programs with seven IFPMA member companies: Eisai, GlaxoSmithKline, Johnson & Johnson, Novartis, Pfizer, Roche, and Sanofi. This year, some of those companies are taking second fellows, and additional fellows are being placed with the IFPMA member companies of Astellas, Boehringer Ingelheim, Merck & Co., and Sigma-tau. 

Using technology to improve healthcare delivery and access to medicines is another important component in global public health. Pisani points to the SMS for Life pilot, a public–private partnership initiated by Novartis with IBM, the mobile-telecommunications company Vodafone, and the Ministry of Health in Tanzania that uses mobile phones, short-message service (SMS) messages, and electronic-mapping technology to monitor stock levels of artemisinin-based combination therapies and quinine injectables at health facilities on a weekly basis as a way to eliminate medicine stockouts for these malaria treatments. The pilot was conducted during a five-month period in September 2009 and covered 226 villages and more than 1 million people in Tanzania with strong results. For example, during the first eight weeks, in one district, the number of health facilities with stock-outs was reduced by more than 75%. 

IFPMA also is joining with other stakeholders to support plans to combat antimicrobial resistance, which was the theme of WHO’s World Health Day this year. “While recognizing the R&D-based pharmaceutical industry’s role in innovation, we called for viable approaches, including incentives, and support from other stakeholders in creating an environment that ensures new antibiotics continue to be developed. 

Pisani emphasizes that the pharmaceutical industry’s participation in solving global health concerns is part of a larger collaborative, multistakeholder approach. In that effort, he says transparency, cooperation, and trust are key. “We have to walk the talk,” he concludes, underscoring not only the industry’s participation in the dialogue on global health concerns, but its specific involvement in solutions. 

Eduardo Pisani, director general of the International Federation of Pharmaceutical Manufacturers & Associations, discusses the global health initiatives and related activities of the association.

IFPMA Outlines Global Health Initiatives

The tragic earthquake and tsunami in Japan in March rocketed supply-chain issues to a prominent position. Even the most sophisticated supply-chain managers were caught off guard by the event, which caused the shutdown of many manufacturing sites due to earthquake damage or power-supply interruptions.  

What is striking about the impact of the Japan earthquake on the supply-chain is the widespread production disruptions caused by supply interruptions of simple components. Automobile manufacturers were forced to shut down manufacturing operations at plants around the world due to component shortages. For example, Ford halted shipments of some cars just because of a shortage of certain paint pigments. Perhaps most famously, production of Apple's iPad2 was threatened by the shutdown of a supplier in northeastern Japan making a connector costing just a few cents.  

The automobile and electronics industries are known for their supply-chain sophistication, including their ability to source components globally and have them delivered just-in-time to the manufacturing floor. The fact that their production would be disrupted by such minor components speaks to just how complex effective supply-chain management really is. 

Reports so far suggest that the bio/pharmaceutical supply-chain has only been marginally affected by the events in Japan. We have heard of only two interruptions. One was from a supplier of glycine, an ingredient in some common solid-dosage products, which indicated that production may be shut down for up to 24 months. We also heard of disruptions in some supplies of gelatin used in softgel capsules, for which alternative suppliers are readily available. 

Nevertheless, the bio/pharmaceutical industry has not been without its own supply-chain difficulties in recent months. A major fire destroyed a warehouse attached to Catalent's commercial packaging facility in Corby, United Kingdom, and problems stemming from delamination in glass vials resulted in a number of injectable products being recalled from the market.  

The pharmaceutical industry has done surprisingly little to protect itself from supply-chain interruptions. PharmSource recently conducted a survey about a widely used component for solid-dosage drugs, which typically requires preformulation compatibility testing, and found that few companies have exhibited the foresight to qualify second or third suppliers. 

For component-assembly industries, such as automobiles or electronics that are relatively unregulated, the interruption in the supply of a minor component will be disruptive and relatively short-lived. In most cases, it could be a matter of weeks to redesign the component or have substitute suppliers step in for secondary supply. In the bio/pharmaceutical industry, however, the long-term interruption of a minor component could be catastrophic. Even a relatively minor excipient can cause changes in a product's characteristics, thereby requiring full preformulation analysis, stability testing, and testing of  production batches. Add to that the supplier qualification and regulatory-filing requirements, and the production time lost can be considerable.  

This lack of advanced planning by bio/pharmaceutical companies is surprising because the potential costs are so high. An extended period of lost production means lost sales and loss of market share to competitors that might never be regained. 

The bio/pharmaceutical industry's lack of supply-chain sophistication spans the entire length of the chain, from input sourcing, through production and inventory management, to distribution. At the front end of the chain, we need only be reminded of the heparin disaster of a few years ago to appreciate the weaknesses in quality assurance and supplier management for key inputs. At the distribution end of the supply, the bio/pharmaceutical industry has been under attack regarding counterfeiting and security of supply. A recent article in 

 magazine recounted last year's theft of $75 million of finished drug product from an Eli Lilly warehouse in Enfield, Connecticut (1). The article highlighted the lax security at the warehouse, including failure to monitor security cameras that could have caught the theft while it was taking place (1). 

Supply-chain management weakness also can be seen in the way the industry manages its inventories. On average, the global bio/pharmaceutical companies turn their inventories a little more than twice a year. They typically have inventory on hand equivalent to about 180 days' worth of sale. By contrast, a best-practice consumer products firm, such as Procter and Gamble, turns its inventory about six times a year and has about 60 days' worth of inventory on hand. As global bio/pharmaceutical companies are trying to maximize their cash-on-hand to help them weather the patent cliff and take advantage of licensing and acquisition opportunities, keeping so much cash tied up in inventory is a real competitive disadvantage. 

The supply-chain management challenges facing the bio/pharmaceutical industry represent a major opportunity for providers of contract services, especially those in manufacturing (i.e., contract manufacturing organizations [CMOs]) and packaging. Because of their critical position relative to both the upstream and downstream segments of the supply-chain, CMOs and packagers are well positioned to help bio/pharmaceutical companies manage their risk and squeeze cost and inventory out of the system. 

We have seen isolated instances of contract services providers responding to supply-chain management opportunity (e.g., Patheon's recent efforts to promote its services as a backup source of supply and Almac's short-run packaging services). We've also seen some major providers of third-party logistics services (3PL), such as UPS, DHL and FedEx, make greater efforts to address the bio/pharmaceutical industry.  

However, the big opportunity will come when service providers, especially CMOs, figure out how to increase the flexibility and responsiveness of their own operations. For instance, every day that a CMO can knock off the manufacturing schedule lock-in requirement from its traditional three months can save its bio/pharmaceutical company clients millions of dollars in cash tied up in inventory. Further, the internal process changes necessary to achieve those scheduling improvements are likely to deliver substantial cost savings and increased throughput. Given that most CMOs operate well below full capacity, such flexibility should be attainable. 

CMOs have traditionally focused on additions to processing technologies, equipment and gain-to-gain incremental volume. Given the supply-chain challenges facing the bio/pharmaceutical industry, a focus on operations excellence in the context of supply-chain management is likely to yield greater performance for both the client and CMO and yield market share gains going forward. 

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

http://features.blogs.fortune.cnn.com/2011/03/31/drug-theft-goes-big/

Outsourcing

Lessons from the earthquake in Japan show the vulnerability of the bio/pharma supply chain.

PTSM: Pharmaceutical Technology Sourcing and Management-06-02-2011

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IFPMA Outlines Global Health Initiatives

Supply Chain Pain