Manufacturing (supply) and sourcing (demand) are very much intertwined. In an industry where scaling up manufacturing or getting approvals to use a new supplier can take several months, if not years, it is critical to anticipate future needs.
It is clear that one area to watch in biopharma sourcing and manufacturing is the changing product mix. What generics can bring to market is a function of what innovators launched 10 or so years prior.
Innovators are putting more focus on specialty products, including orphan drugs with high prices and fewer patients. We saw that nearly a third of 2015 product launches were from the anti-cancer area. And significant R&D dollars are continuing to go into the anti-cancer space.
In addition, blockbuster biologics are losing patent protection and many traditionally small molecule focused companies are interested in jumping in the game.
However, in order for generics to play in those new types of products, suppliers to generics must also be ready to manufacture those products at prices that generic companies can tolerate.
Manufacturing hubs
What does the overall manufacturing landscape look like around the globe? Is there any particular region that has the potential to become a manufacturing hub in the future?
As a country, China is moving toward finished dose manufacturing and incremental innovation. If more focus is being placed on finished dose products and R&D rather than manufacturing of active substances, then that could create an opening to other countries to step in and fill the gap. However, we believe China will continue to make active ingredients as it won’t want to increase dependence on other countries for something as critical as pharma products.
One country that has become over the years very dependent on Chinese active ingredients is India. However, these days, we are seeing that India is looking to strengthen its API manufacturing to protect its finished dose industry.
If we look at the number of regulatory filings by region, Indian companies appear to have hit a plateau in the U.S. (See Figure 1.) The number of U.S. Drug Master Files (DMFs) from China, dropped quite a bit in 2016, but ticked back up last year.
Figure 1. U.S. Drug Master Files, 2000 to 2017
Source: Newport Premium, Clarivate Analytics
In the case of European Certificates of Suitability (COS), we see that the number of filings was on the upswing from both India and China, but tailed downward in 2017. (See Figure 2.)
Figure 2: European Certificates of Suitability, 2000 to 2017
We hear lots of talk in India about biosimilars manufacturing, as well. Quite a few companies seem to think that if you build the capacity the demand will come. Unfortunately, many irreversible decisions can be made without fully thinking through what volumes one should expect and what technologies to use. Significant cost is associated with making errors.
With regards to alternatives to India and China, we believe that European manufacturing will continue to rebound and many companies there have a competitive advantage as a result of investment in automation, people and technology over the last few years.
For other countries, there continue to be significant barriers to becoming new manufacturing hubs since many areas need to be aligned, ranging from technological strength, human capital, access to raw materials and a favorable business environment. It takes an entire ecosystem to allow a country or a region to become a manufacturing hub. And it is likely that the current powerhouses, India, China and Europe, will continue to take steps to solidify their positions.
Quality never goes out of style
What other key forces are influencing the supply and demand of active pharmaceutical ingredients?
- It’s not enough to pay attention to “generic” competitors only. Big pharma is also investing in captive biologics capacity, bringing in-house capabilities that were outsourced in the past.
- Certainly increasing focus on regulatory and compliance is continuing to have a big impact on the industry, both in terms of the disruption caused by warning letters issued by the FDA in the U.S. but also in terms of increasing regulations in the countries where manufacturing takes place.
- Buyers across the globe are expecting quality. An increasing expectation these days is that you get low cost and high quality. Quality requirements will not go away. Ultimately, companies that can deliver quality at a reasonable cost/price will succeed.
This article was adapted from a presentation made by the author, “API Sourcing and Manufacturing,” at the CPhI Worldwide Pre-Connect Congress in October in Frankfurt, Germany. To see Kate Kuhrt’s full presentation, click here.
To discuss generic drug development with Kate and other Clarivate industry experts, join us onsite at DCAT Week ’18, from March 19 – 22, 2018 in New York City. DCAT Week is organized and hosted by the Drug, Chemical & Associated Technologies Association (DCAT), a not-for-profit, member-supported, global business development association whose unique membership model integrates both innovator and generic drug manufacturers and suppliers of ingredients, development and manufacturing services, and related technologies. Learn more.