Agnes Shanley is senior editor of Pharmaceutical Technology.

Agnes Shanley

	The Falsified Medicines Directive and FDA Safety and Innovation Act have required that pharmaceutical manufacturers verify that their suppliers are manufacturing excipients to cGMP standards.  Regulators in the U.S. and Europe have supported the idea of third-party auditing, and a number of different programs are now available, from ExciPact, Rx360, NSF International, and USP, to help ensure supplier compliance.

	However, regulator’s expectations may still be unclear, and some companies appear to be waiting for more clarification before taking action.  IPEC consultant Irwin Silverstein recalls efforts that led to the development of NSF International’s standard for excipient cGMPs, the only national standard so far in this area.  He also outlines some of the issues and challenges facing the industry in this brief interview.

PharmTech: Please tell us about the standard?  How did it all come together, why was it needed and what was the basis for it?

	Silverstein: The FDA had asked IPEA (now part of NSF International) to become ANSI-accredited for excipient GMP certification.  At the time, the only thing we had available to certify against was the IPEC Excipient GMP guide.  Ordinarily you certify against a standard. So that was our first inkling that a standard should be developed.

	FDA was also interested in developing an ISO standard for excipient cGMPs, so that there would be a common set of requirements, globally. The best path to a global standard would be a national standard. That was the second impetus for developing the standard.

PharmTech: Who was involved in this work and how did it all come about?

	Silverstein: IPEC Americas was first approached.  The first thing we did as a trade association, was to explore what would be involved in becoming a standards-writing body for ANSI.  After looking at the requirements and the costs, we decided that we’d prefer to partner with another organization to write the standard. We decided to work with NSF International, because they have written standards around other quality management system requirements for other materials that are sold to consumers.

	NSF solicited requests for participation on a standards-writing committee. A number of us at IPEC applied, along with representatives from some excipient manufacturers and pharma company users. In addition, a group of independent experts applied, including regulators, academics and consultants. This committee started to write the standard based on the IPEC PQG guide.

PharmTech: Is there any other national standard for excipients? 

	Silverstein: So far, this is the only national standard.  But, in other parts of the world there are cGMP regulations for excipients, which might be considered equivalent to Part 211 in the U.S.  For example, a GMP regulation for excipients is now in effect in China and another in Brazil

PharmTech: How are companies reacting to the idea of the standard, and to recent supply chain regulations in the U.S. and Europe?

	Silverstein: We’re not seeing a rush to certification.  People are still waiting for regulatory authorities to make it clear, through observations from audits, what they expect, whether certification or a site visit. 

	The EU’s Falsified Medicines Directive seemed to make clear the fact that European regulators expect a site visit.  Now, that directive is expected to be implemented in March 2016, which leaves less than one year for every supplier of excipients for the drugs that are made or used in Europe, to have a risk assessment done by their customers, all of their customers. Based on my reading of the directive, either each site must be certified to excipient GMP standards, or its customers must get reliable information, which would presuppose a site visit.  I don’t see any great rush to get on the audit list.

PharmTech:  This is sounding a lot like the situation in the U.S. with pharma serialization.  Why are certification and accreditation so important?

	Silverstein:  We at IPEA decided that we would be accredited by ANSI. 

	Anyone can issue a certificate. There’s nothing out there that says my own company, or I, can’t audit a facility, find good results and then put together a certificate, print it out in Microsoft Publisher and send it to the owner of that facility.  But what does it mean?  What’s behind it?

	Europe’s False Medicines Directive discusses certification without setting any minimum expectations or requirements.

	As to accreditation, two ISO standards get to the issue of accreditation for the purposes of certification: 17021 and 17065. When you look to using an ISO standard, you usually go to a national body, who will then accredit you to compliance with the requirements of that ISO standard. 

	We were audited by ANSI every year. They did both a surveillance audit, where they accompanied us on a physical audit, and a document review, where they came to our offices and looked at our records, procedures, training and audit reports, to see that they met the requirements for what was then called Guide 65, and is now ISO 17065.

	This way, an independent, recognized authority ensures that the program under which the certificate is issued meets the requirements of an international standard. To me, that’s what FDA and other regulatory agencies should expect.

	Excipact is playing the role of an international standard-setting body. They are accrediting the certifying bodies that go out to do audits against the Excipact scheme. They train auditors, and only trained auditors can do the audits.  They are playing the role of ANSI, even though they are not a national organization.  However, they do have deep understanding and knowledge of what is needed with excipients.

PharmTech:  How important is ISO 9001 certification?

	Silverstein: Our colleagues in Europe are very ISO 9001-centric, and put a lot of validity into being certified to ISO 9001.

	Excipact certifies companies that are already compliant with 9001 or gets them to certify to both Excipact and 9001.  The latter requires a registered lead auditor for ISO 9001. In the US, so far, the pharma industry hasn’t put as much credence on compliance with ISO 9001. 

	9001 is a good foundation, because documentation and records requirements are very much the same as they are for excipient GMPs. 

PharmTech: Based on what you’re seeing, does the industry need regulatory mandates for certification? 

	Silverstein: There are companies that do audits, but they are in the minority. Because there just isn’t enough to host everyone as a customer. The only way to properly assess the supplier of excipients, if you can’t do an audit, is to rely on the certification and the audit report that is the basis for certification.

	The EU has said that only approved countries will be allowed to import APIs into Europe.  That would require an audit and certification of each supplier. Nobody really took that seriously until the EU shut the door, and said, ‘If you’re not on the list…you can’t bring excipients into Europe.’ 

	Everyone scrambled to get on the list. But now, what will happen in March, when European regulators see that many drugs are being sold in Europe, when the supplier companies have not been assessed by the manufacturing company.  There will be a rush to certification. It’s not going to happen overnight.

PharmTech:  Is FDA doing anything specifically in excipients?

	Silverstein: We watch closely what FDA is doing.  They’re currently putting together requirements for food audit and certification.  We’re expecting that the drug side of the Agency will be looking at what the food side is developing, and may implement a similar type of audit for excipients in the future.  At this point, though, it is not that high on the priority list.

PharmTech: Pharma is still a relatively small portion of most excipient suppliers’ businesses.  What incentive do they have to seek certification. Is more education needed in the types of quality testing that pharma requires?

	Silverstein: IPEC has been trying to provide that education, and we’ve ramped up webinars and training on various aspects of the issue, but the companies supplying excipients range widely.  Some have very incidental pharma businesses, while others have significant interests in the pharma market. 

	In the end, it is a balancing act. If you push too hard on the regulations, you’ll reduce competition and eliminate the availability of certain excipients for pharma.

	That’s why I think it would be inappropriate to establish a deadline by which everyone should meet standards.  We don’t want to drive anyone out of business if they’re actually making good materials that are safe for patients’ use.

PharmTech: Where do you see the greatest vulnerability in terms of excipient quality? How would a standard and certification program help address this weakness?

	Silverstein : Risk to patients comes, mainly, from cross-contamination and contamination of product. We have to be vigilant about extraneous materials getting into the excipient, and also, any cross-contamination from nearby operations. Some excipients are made at chemical plants, where industrial chemicals such as pesticides may also be made. Nobody wants to see contamination from anything with potential pharmacological effects.

	The rest is a documentation issue, and proving that products have been manufactured the way they are supposed to be, with all procedural and process controls in place to avoid the risk of contamination and cross contamination.

PharmTech: Europe has passed regulations on traceability of excipients. Do you see anything analogous to that being proposed here in the US?

	Silverstein: The problem with excipients is that they are sold in less than truckload volumes.  Common carriers are provided with a bill of lading and told where to deliver each shipment.  Unless they’re delivering a full truckload, which can be sealed, there is limited control.

	A manufacturer may put several pallets on a truck, but then that material is often sent to a warehouse where it is cross stocked, and then put on a different truck.  It is hard to ensure a standard level of cleanliness.

	It is difficult to see how the industry can move past this.  APIs can be put on smaller trucks, where products can be sealed and temperature controlled.  If we require that for excipients, costs will be driven up significantly.

	Given the realities, we have to rely on the integrity of packaging.  Tamper- evident seals should be used for excipient transport.  Today, more companies are moving toward unique tamper-evident seals with their company name and logo.  

	Regulating the supply chain for excipients will be much more difficult than for it is for finished pharmaceuticals, because you can afford to do so much more to protect drugs. On the flip side, however, it’s much more attractive to counterfeit pharmaceuticals than it is excipients.

Articles

The EU has set March, 2016 as a deadline for ensuring excipient supplier GMP compliance, but some manufacturers may still need clarification on how best to do that.

Excipient Certification: More Clarity Needed?

Once upon a time, excipients were considered mere “fillers,” necessary for drug formulation. Even though they make up most of any pharmaceutical formulation, they were not included in original pharmaceutical current good manufacturing practices (cGMP) regulations. The past few years, however, have brought increased awareness of how important their quality is to patient safety.

	Both the European Union’s (EU’s) Falsified Medicines Directive (FMD) and the United States FDA Safety and Innovation Act (FDASIA) require that drug manufacturers verify that their excipients are made according to cGMPs. In March 2015, the EU updated its guidance on excipient cGMPs, requiring systems for tracing starting materials, intermediates and excipients, and identifying risks all along the supply chain. The FMD set a deadline of March 2016 for performing supplier risk assessments. 

	For years, excipient cGMP requirements were set forth in guidance published by the International Pharmaceutical Excipients Council (IPEC). At this point, three countries have established cGMP regulations for excipients, and a number of standards have been set, most recently, the American National Standards Institute’s (ANSI’s) 363, launched in March 2015, which involved the efforts of IPEC, NSF International and a group of industry representatives and independent experts; the EXCiPACT GMP standard, and the EXCiPACT GDP standard (published as an annex to the International Standard Organization’s [ISO] 9001:2008).

	Given the cost of auditing suppliers, regulators in the United States and Europe have encouraged manufacturers to work with third-party auditors to certify that they are using raw materials that meet cGMPs.

		The US Pharmacopeial Convention’s (USP’s) excipient verification program, launched in 2006

		EXCiPACT asbl’s certification scheme, established by IPEC, the European Association of Chemical Distributors (FECC) and the United Kingdom’s Pharmaceutical Quality Group (PQG)

		NSF International’s program, enabled by the acquisition of International Pharmaceutical Excipient Auditing (IPEA), IPEC’s inspection and certification authority, in 2013, and certified against ANSI 363 

		RX-360’s program, which uses various standards and the auditing services of BSI Supply Chain Solutions. 

 interviewed directors of these programs to get some idea of how the programs work and what sets each of them apart. Here is some of what they had to say. 

John Atwater, Senior director, USP’s Excipient Verification Programs, Auditing and Certification Program

: When did USP establish its program for excipients verification and how does it work?

: We established the excipient verification program in 2006. It includes a triennial onsite GMP audit for compliance to 

. It also includes a thorough review of chemistry, manufacturing and control (CMC) product documentation, and lab testing of product samples for conformance to standards in the 

	As we perform this work, we come up with observations that companies must correct. Once they do, they are awarded a certificate of standards compliance, and the use of the USP excipient verified mark to use on their bulk labels and certificates of analysis. We have similar programs for APIs and dietary supplements. We also offer an excipient supplier qualification program, a truncated version of the verification program that we launched in 2008.

: How long does it take for certification, and how long does that certification last?

: Certification generally lasts for up to three years. After initial verification, we perform continuous change- control monitoring and annual surveillance testing of samples that have been verified. It’s a continuous process of monitoring excipient quality.

: How long does initial verification take?

: Generally it takes at least three months. Some companies can take up to a year to get through the program.

: What is the cost of excipient certification?

: You’re typically looking at around $25,000-$30,000 for three years. Costs depend on the complexity of the excipient that is involved.

: Today, there are many different routes to certification and auditing. What makes USP’s unique?

: Our program involves both the GMP audit and product documentation review and testing. For instance, we expect participants to provide complete CMC documentation, in the form of the International Council for Harmonization’s (ICH’s) Common Technical Document.

Patty Benson Co-chair, Audit Operations Group, Rx360, and director of quality operations, SAFC, US

: What are the major developments in Rx360’s auditing program?

: Last year, we engaged BSI, one of the largest registrars in the world. The company is now the primary supplier of audits to us. When we get a request for a joint audit, it goes out to BSI, which is a third-party contractor to us.

: It refers to multiple manufacturers sponsoring an audit of one supplier. This approach benefits manufacturers by providing high quality audits while minimizing costs. It also benefits suppliers, since they only have to host one audit instead of several different ones. 

: How many pharmaceutical manufacturers have used your audit approach so far? How much does certification cost?

: This year, we expect to complete around 100 audits. The figure for previous years has been in the 30-to-40 range.

	The audit time varies based on the audit standard and the materials, or the supplier involved. The cost depends on the length of time it takes to do it plus the number of travel days involved, plus where BSI has auditors. Once the audit is completed, licensing costs $2500 for suppliers that are members of Rx360 and $5000 for non-members.

: How many companies can share an audit? 

: In theory, a limitless number, but, in reality, most audits have an initial sponsorship of less than four. We use a database, in which a company enters a supplier and standard wanted for an audit. Other companies can look up this information and join the audit if they wish. This way, we match up sponsors who are looking at the same supplier. Once the audit is completed, anyone can license it.

	For raw materials that are not excipients, we developed our own standard in 2011. We also have audit standards for APIs and packaging materials, and do supply chains security audits to review facilities, controls, and transportation. In addition, we’re working on some new standards including current good distribution practices (cGDPs), medical device standards, and an audit standard for contract labs.

Maxine Fritz, Executive vice-president, Pharma Biotech, NSF Health Services, NSF International

: The standard has been a work in progress for several years. It was developed by NSF with IPEC, with a panel that included representatives from industry, regulatory bodies, and academia, so it went through a rigorous standard-setting process.

: Given the different audit and certification models available, how does your approach differ?

: We are actually accredited by ANSI, which is recognized by global regulatory agencies worldwide.

: Should standards for excipient cGMP compliance be mandatory in the future?

: The whole purpose of standards is to apply a consistent approach to regulating a certain part of the industry, depending on what it is. From an excipient perspective, the standard is the best way to get a consistent approach to regulation.

	It can be very difficult for regulators to implement new regulations, so a voluntary standard is often a very good way to get industry in compliance without having to go through the years and years that are required to set a new regulation.

: What do you see as the key areas where education and guidance are needed in excipient cGMP assessment?

: Suppliers need to get a better understanding of how their excipient products fit in for pharma applications. They also need to understand how much rigor to apply, based on how each particular product will be used.

	For instance, you might have food-based sugars that are also used as pharma excipients. The quality requirements and type of manufacturing process might change based on how that excipient is used. In addition, end users need to have a better understanding of where their excipients are coming from.

: Where do you see the greatest vulnerability today in the pharma excipients supply chain?

: The greatest potential vulnerability is the varying level of commitment and the resource availability from within national authorities and industry to inspect and audit suppliers for compliance with appropriate cGMPs. This is particularly true for Asian manufacturers and suppliers of APIs, excipients, and final dosage forms.

	Pharma companies will strive to secure the information they are legally obliged to obtain from their suppliers and others, proportionate to their evaluation of the technical and commercial risks involved in their supply of a particular product. The pharma company has the ultimate legal responsibility in this regard. In higher risk cases, I would expect companies to complete an audit themselves or via an assured third party.

	The supplier will be more willing to accept a customer audit if a strategic business relationship exists. Overall, the audit burden is increasing as a result of new regulations, and this can be reduced for both suppliers and their customers if the supplier becomes certified in ways acceptable to the regulators.

: Can you please bring our readers up-to-date on new developments in the EXCiPACT program?

: The EXCiPACT third-party certification scheme is picking up speed globally, especially in the US, China, and India, with over 20 registered suppliers.

: What makes the program unique, and what does certification cost?

: EXCiPACT asbl was created as a non-profit association in January 2014 with IPEC Europe, IPEC Americas, FECC and PQG as founding members, following a five-year development and a two-year pilot phase involving a team of over 40 industrialists and regulators.

	Costs of certification vary, but participation typically costs 30,000 Euros over a three-year period; the savings for a supplier at 90,000 Euros over three years, and the savings for a pharma company at 180,000 Euros over three years, offering a total industry benefit of 240,000 Euros over three years.

	The EXCiPACT standards (EXCiPACT GMP/GDP or NSF/IPEC/ANSI 363) underpin the EXCiPACT Certification Scheme, which can use all of the above standards within a comprehensive, quality-assured process leading to supplier certification. Suppliers have the choice of being audited against the ANSI standard or the ISO 9001 and the EXCiPACT standards in the EXCiPACT Certification Scheme.

: What will be needed to get more pharmaceutical manufacturers to be proactive in managing and overseeing ingredients suppliers?

: More pharma companies are becoming more proactive in managing their excipient suppliers when they see the business benefit from doing so. This has already happened with API suppliers, where strategic relationships are now the norm especially for patented products.

	Given the present huge difference in the value of APIs compared to excipients, I don’t expect a major shift anytime soon, but I feel sure that the trend will develop when pharma companies realize the profit potential from strategically managing their excipient suppliers.

Pharmaceutical Technology's APIs, Excipients, and Manufacturing Supplement

:
	When referring to this article, please cite it as A. Shanley, “Certifying Excipient cGMPs," 

Pharmaceutical Technology APIs, Excipients, and Manufacturing Supplement

As EU supplier risk assessment deadlines approach, a number of voluntary third-party auditing and certification options are available. Will more excipient suppliers, and drug manufacturers, use them?

Certifying Excipient cGMPs

In the past two decades, drug manufacturing companies launched the industry’s first corporate lean manufacturing (Lean) and operational excellence (OpEx) programs. Using modern industrial engineering concepts advanced by thinkers such as Deming, Juran, Shewhart, and principles from the Toyota Production System (TPS), companies began to apply models from other industries to change the way they approached operations and inventory management at key facilities. At Johnson & Johnson, Bristol Myers Squibb, Novartis, and Wyeth, the rise of teams led by empowered operators and a focus on inventory management and metrics such as overall equipment effectiveness (OEE) were seen.
	
	As Japanese terms and phrases such as 

 entered pharma’s lexicon, observers challenged the industry to get better at inventory management, offering Dell Computer and Amazon as role models (1). If Apple can get its inventory turns to 74 (1), and Dell to 36, they reasoned, why should pharma’s continue to hover around 2.3 (2)?

	Now, there is little media coverage of Lean pharma programs. Drug companies have reduced headcount between 2009 and 2014, 156,000 jobs were lost in the United States alone, according to the executive recruiter, Challenger Grey Christmas (3). Pharmaceutical manufacturers have also shut down major research and manufacturing facilities.

	Mergers have complicated the picture not only recent inversions, but prior consolidations, which have challenged companies to connect different legacy systems and cultures. The Lean and OpEx showcase plants of the past have been closed or sold. Wyeth is now part of Pfizer, and its showcase Lean Pearl River plant is no longer manufacturing. Novartis’ Diovan has come off patent, and its Lean plant in Suffern has been shut down. J&J, the first drug company to launch a formal corporate OpEx program, has faced some serious compliance and quality problems at its facilities.

					The Toyota Production System (TPS) introduced many to new terms routinely used in Japan, that are crucial to success in eliminating waste and improving agility.

-Used in Just in Time or “pull” operations, in which manufacturing is dictated by market demand, are communications tools that show delivery of a given quality.

-Small, incremental improvements in some process, typically solicited from people on the plant floor or lab.

-The place where truth will be found, or where work is done. TPS requires top managers to visit the gemba to understand employee and customer needs.

	Does this mean that pharma has suspended its efforts in Lean and OpEx? Observers see pharma as entering a new, more difficult phase in its Lean evolution, since manufacturing has become so much more complex at pharma facilities. A dedicated pharmaceutical manufacturing plant that might have made one or two products in the past may now be manufacturing 20 or 30 for different global markets.

	“The biggest challenge for today’s pharma OpEx programs is that plants have much higher mix now than they did in the past,” says Tom Knight, CEO of Invistics, a Georgia-based company that offers cloud-based software to monitor and improve control of Lean metrics. “Employees are being asked to do more production at the same facility,” he says.  

	“The easily achievable cost saving projects of the past were completed with much fanfare. Now, the more complex projects will take more effort, resources, buy-in, management commitment, and time,” notes Prabir Basu, consultant and former head of the National Institute for Pharmaceutical Technology and Education (NIPTE).

	Adding complexity is the fact that OpEx requires open communications, and pharma still tends to be siloed. “Over the past decade, I’ve come to the conclusion that pharma’s compliance and quality issues are largely due to communications. You need to communicate before you can coordinate, and to coordinate before you can collaborate,” says William Botha, a lean consultant based in California who has held senior positions at large biopharma companies.

	“There is often a miscommunication of standards and vision, and lack of feedback to teams on where they are in terms of performance and what is required,” he says. “Lean and OpEx tools, from standard work to kaizen, are all about communication,” he says.

	Some see this silence about Lean as a sign that OpEx adopters have made it part of their cultures. After all, after movies like Gung Ho in the 1980s, one never hears about automotive’s Lean projects anymore, notes Greg Anthos, senior managing consultant for life sciences with Tunnell Consulting (King of Prussia, PA). “Early pharma adopters have moved from major upskilling to more of a maintenance of skills and more targeted activities in focused target areas,” Anthos says. “At some companies, Lean and OpEx have become the way they do business, as they have at GE and Ford.”

	There are still a lot of OpEx projects going on, notes Lean expert Thomas Friedli, professor at the University of St. Gallen, Switzerland. “Today, generics companies are working to systematize their global approaches to continuous improvement, and contract manufacturers are also following this path,” he says. He also sees much more engagement to OpEx coming from quality departments.

	Perhaps today’s Lean goals have become more limited but also, more realistic. Drug shortages, aging facilities, a drier pipeline of new products, and manufacturing problems have made it less important to manage inventories as well as Apple, than to guarantee a stable supply of quality product.

	As a result, observers may not be seeing that much improvement in pharma’s inventory turns, but they note a real improvement in metrics such as reduction in cycle time and cost of goods sold (COGS). These efforts are occurring as Big Pharma outsources more functions. In turn, contract companies are developing their own flavors of OpEx and Lean.


	Where, in the past, Big Pharma companies would transfer their own OpEx programs to contract partners and suppliers, today, contract research, development and manufacturing organizations (CMOs, CDMOs, and CROs) have their own programs in place. Patheon is an example, but smaller companies such as Rottendorf are also doing this.

	Some pharma companies and their contract partners share data to gain one view of their combined supply chain. Shire Pharmaceuticals and its contract partner Patheon, for instance, linked data to build a dashboard that provides visibility at all points along the supply chain, from API plant to finished drug product to packaging and finally, logistics, and distribution. The companies used Invistics’ technology to build this feature, and other pharma-contract duos are building common dashboards to increase transparency. “Often, separate companies have very little visibility into their supply chain. This can lead to firefighting, a lot of excess inventory and wasted effort,” says Knight. The project reduced Shire’s cycle times by 40%.
	In another project, Mylan Pharmaceuticals is using a platform developed by Invistics and BuzzeoPDMA, based on Lean and Six Sigma principles, to offer real-time dashboards and insight into controlled substance supply chains and sample activity.


	A growing number of Big Pharma’s current OpEx projects are moving well beyond the plant floor, into areas such as development, from late-stage research to commercialization. “That’s where you can have the greatest impact on the patient on the outcome and the cost structure of the product,” says Anthos. “Adopters are applying Lean and OpEx concepts earlier in process development, not only to get a more robust product, but also a more effective and efficient process from the start,” he notes. This isn’t always easy, he adds, because they’re also trying to speed time to market, and the goals are sometimes in conflict.

	A growing number of quality professionals are advocating for OpEx and Lean, notes Botha. This will be important, because the recent past has seen so many compliance failures in the industry. However, there is a need to build quality into the OpEx program, notes Basu, or the company will eventually compromise on quality.

	“When I was involved in Six Sigma type operational excellence programs at Pharmacia, quality and regulatory groups were part of the team, and they were integral to the cost savings programs,” he says. Short-sighted managers do not realize that integrated programs not only improve quality but save money. In addition, they often fail to understand that most of the cost of poor quality and noncompliance results from inefficient operations, Basu says. “Cost and effort go into failed batches, incident investigations and deviation explanations,” he says, noting that long-term management commitment is needed for synergistic programs to succeed.


	The very term “Lean” may have a negative connotation to many who don’t know what it is, Basu notes. Some companies have used the term as a euphemism for downsizing and cutting corners.
	Applying Lean and efficiency programs to a dysfunctional system only leads to failure. Anthos suggests that managers ask some deep questions, and fix any problems that they find, before embarking on any efficiency programs. “How robust are your processes? Can you make a product on time and get it to the patient, at the right quality and efficacy?  It’s a waste of time to talk about efficiencies when you’re not good at what you’re doing.”  

	Critics have also complained that Lean and OpEx are being misapplied to drug discovery and R&D, and stifling innovation. Outreach and training are needed to counter these problems, experts agree. The serendipity of inspiration and innovation, those “aha” moments, cannot be subjected to Lean and OpEx analysis, but the processes and labs supporting that innovation and connecting it to other vital operations can, and should, says Anthos.

	The key to success in Lean and OpEx remains top-down management support, consultants agree. In today’s business environment, some pharma CEOs are too distracted by major top-line business challenges, such as which companies to acquire, which therapeutic areas to focus on, and how to improve their business models, Anthos says. Thus, the image of the Toyota-style CEO rolling up his or her sleeves and going to visit company labs and manufacturing facilities has not yet taken root in pharma.

	Some managers had an awakening as part of consent decrees, which required that they spend more time in the gemba. But Botha sees a change taking place in younger pharma managers.“Younger leaders like to get on the floor more, maybe because they haven’t spent 20-30 years being rewarded for being in meetings,” he says. “They are more social, more savvy about building relationships, and they seem to understand that it’s all about people, and that what got them to their current position won’t guarantee the next promotion.”

	To paraphrase Mark Twain, rumors of Lean’s death in pharma have been highly exaggerated. If you don’t hear anything about OpEx at the pharma plant near you, or even your own lab or facility, that doesn’t mean it isn’t happening. Pharma Lean and OpEx programs are alive and well, but moving into new spaces.

Apple Turns Over Entire Inventory Every Five Days

, appleinsider.com, accessed July 23, 2015.
	2. R. Spector, 

 Pharmamanufacturing.com, 2010, accessed July 23, 2015.
	3. 

 When referring to this article, please cite it as A. Shanley, " Getting Comfortable With Lean," 

Contract research, development, and manufacturing organizations (CROs, CDMOs and CMOs) are embracing lean manufacturing, while Big Pharma is applying it, not so much for inventory management, but to improve supply chain visibility and control.

Getting Comfortable With Lean

Driven by competitive pressures and using models pioneered in other industries, pharmaceutical
	companies are extending collaboration efforts well beyond their walls. Competitive pressures and the move to value-based medicine are changing the nature of partnership and collaboration in the pharmaceutical industry.  Like other industries, pharma is moving to more of an “open innovation” model.  

	The idea of open innovation involves using both internal and external ideas to help solve specific problems or meet unmet needs.  The term was coined in 2003 by Henry Chesebrough, a professor at the University of California who had worked in Silicon Valley and saw a need to close the gap between academia and business, at least in the realm of new ideas.  

	Pharma outsourcing has opened up the traditionally closed world of pharma innovation. When the trend began, pharmaceutical companies would typically outsource specific projects on a transactional basis; today, more are creating strategic partnerships with their contract research, development and manufacturing organization (CRO, and CDMO/CMO) partners, sharing sensitive data, and even financial risks and rewards.

	Pharma companies are now more attuned to potential sources of innovation. “Over the past 10-12 years, a lot of the most interesting new ‘disruptive’ technology has been coming from startups,” says Christopher Kulp, executive vice-president of Richman Chemical, Inc., which focuses on small-molecule chemistry and on getting new technologies from innovator companies or academia ready for licensing and/or transfer to larger, partner companies.“Small startups are now preeminent on big pharma’s radar, and some receive preliminary feedback on their IP from big pharma licensing teams,” he says.  “This didn’t happen 15-20 years ago when new product development predominantly occurred in-house.”

	Companies like Richman serve to bridge the gap between Big Pharma and innovators whose ideas aren’t quite ready for prime time. “There are lots of opportunities to waste time on technology that isn’t going to go anywhere if it is not evaluated properly,” Kulp says.  In addition, pharmaceutical manufacturers are sharing more innovation and collaborating more in niche areas (see Sidebar).

	Big Pharma is moving to a “hub” model for R&D, with companies that include Johnson & Johnson, Eli Lilly, Pfizer, AstraZeneca, and Sanofi basing research centers in specific areas, such as Cambridge, MA, close to university, industry collaborators, and contract partners. Recently, a study by Deloitte Consulting suggested that open innovation in biopharma could strengthen new drug pipelines (1).  Studying 281 biopharma companies between 1998 and 2012, the research found that drugs sourced via open innovation could have a three-fold higher likelihood of success than those generated traditionally.

	Deloitte’s study shows an evolution in the open innovation model, from the traditional approach of outsourcing with a university, research institute, or CRO, to licensing.  Newer models include the innovation hubs, as well as leading edge partnerships as the transSMART Foundation, the Structural Genomic Consortium, and Asia Cancer Research Group.

	In 2014, Deloitte researchers found, of the 12 largest biopharma companies, 54% sourced new drugs via open innovation, 83% of that figure via outsourcing or licensing. Forty-six percent sourced drugs the traditional way (1).  

	Matthew Hudes, managing principal at Deloitte’s biotech consulting division, shared perspectives on the pharmaceutical industry’s new open innovation model with 

: Why is pharma changing its models and mindset for innovation?
	

: We’ve seen this coming for some time, with the patent cliff and some recent high-profile failures in pharma’s development pipeline. About six years ago, we saw an increased outreach to external sources of innovation. What is remarkable about this is not that it is going on, or even the extent to which it is going on, but the diversity of ways in which this outreach is taking place.  

	It’s a big experiment, and we don’t know which model will prevail in the future, but it is rare to see such a diversity of business models. Science is diverse, but not, typically, the business models behind it.

: I think about it as having two main dimensions: control and source (external vs. internal). If you put those two factors together, you get a broad spectrum of what is going on.

	In one type of model, large companies are lifting out assets and people from an academic setting and moving them to a place where they can focus on a specific project, and giving them everything they need and access to all their resources, on an exclusive basis. The project is treated like a major product extension, and companies that are taking this approach are having terrific results.  They have been picking up intellectual property (IP) that has been, if not languishing in, then bumping up against the limits of what can be achieved in an academic setting.

	Another model takes a ‘hands-off’ approach, in which large pharma invests in an innovation center, in a place where there are many resources and where they are interested in launching companies. They don’t own or contribute to the IP, and don’t even have first right of refusal. Through proximity, they get an early, inside look at what these innovations are, but use a community approach. This way, they can invite competitors into that space for collaboration as well.

	There’s another set of approaches that I would call pure open innovation, which involves the sponsorship and identification of a problem posed to a community.  (For an example in the area of repurposed drugs, see p. 47). Anyone can respond to it.  There are variations on that theme.  For instance, who gets to own the discovery that eventually comes out of the effort:  Is it the company who sponsors the effort, or is the prize shared among those who solve the problem?

	We’re seeing the industry collaborate on some major infrastructure challenges, such as how to get drugs to market more quickly, and dealing with questions such as enrolling investigators, or developing technical standards to get clinical trials to happen more efficiently.

: What roles are risk sharing and value-based healthcare playing in shaping innovation?

: That is part of what is driving this whole movement. It opens up possibilities that have not yet been realized but are being explored, such as enhancing the role of the patient. For example, in clinical trials, patients could not only participate but have a voice in deciding what treatments should do for them as patients. This goes back to focus, not on insurers or providers, but on taking a patient-centered approach and looking for creative solutions to the inefficiencies of our healthcare system.

: Are there still some concerns in pharma about opening up too much and losing control?  

: We hosted a roundtable of biopharma executives recently and asked: How do you trade off control to get better results?  One executive said that the best approach was to take the right approach to innovation, on the inside, first, and then do it outside the four walls.  Within some of the larger biopharma companies today, there is a push to reward innovative and risk-taking behavior, and to single out those types of efforts. We are seeing the rise of scientific executives and others in biopharma focusing not only on risk management, but on how best to take advantage of risk and build opportunities around it.

	In our industry, one of the biggest risks is upside risk.  It’s not only about a drug failing, but about preparing for success. Look at the onset of therapies that didn’t exist a few years ago--in immunotherapy, for example, or precision medicine--and what is needed to be prepared for the future.

: Is the industry still paranoid about the idea of sharing IP in collaborations?  

: Actually, biopharma has done a pretty good job around IP.  If you look at biopharma, biotech, and pharma coming together, they have done groundbreaking work with creative licensing deals, considering such questions as ‘What happens if something is successful but not part of strategy?’ and giving companies the ability to take back programs. In fact, the amount of creativity in the biopharma IP world is unparalleled.

	Areas where additional opportunity exists include the interface between academic institutes, where much of the innovation is happening, and at commercial organizations, whether small biotech, small, or large biopharma, to effectively access academic IP.
	Many academic programs are being funded by government programs, such as the National Institutes of Health, or other regional activities. Today, more people in academia are waking up to the fact that the IP that their professors develop won’t have any impact on human health unless they make it easy for that IP to move from academic to commercial settings. Some enlightened academic leaders have realized that they shouldn’t attempt to extract every ounce of gain from every deal for the university. They see how it would benefit the entire region around the university to have biopharma-related jobs, and realize what a great institutional value it is to participate in that type of ecosystem.

	What are the elements of a thriving ecosystem?  Strong science, but that science needs to get beyond the four walls of academia into the setting where it can get developed and eventually get to patients. Free flow capability needs to exist--not cash, but IP that can make a difference to a patient who needs it.

: Your report mentions leading-edge models of collaboration outside the US.  What tools do these types of groups use, and how do functional groups interact?

: Successful models share the following themes:  

	Openness to learning how to do things from outside biopharm and even life sciences--Some innovation centers are being operated by people from the financial services, consumer products, or software industry.


	Open innovation can be spurred by industry groups. The electronics industry already had a good model: Sematech, the consortium for semiconductor manufacturers. Launched in 1986, originally for US manufacturers as a way to help them compete in a market dominated by Asian companies, the group became private in 1996 and is now a global organization focused on improving materials and processes.

	For years, observers in the pharmaceutical industry, notably Prabir Basu, former head of The National Institute for Pharmaceutical Technology and Education (NIPTE), have called for the establishment of a group like Sematech in pharma. It may not yet exist, but there has been much more sharing of ideas and best practices in niche areas, by groups such as the International Foundation for Process Analytical Chemistry (IFPAC) and the American Institute of Chemical Engineers (AIChE) for process analytical technology (PAT) and pharmaceutical quality by design (QbD).  

	One example of an open innovation consortium is Portable Continuous Miniature and Modular (PCMM), devoted to increasing the use of continuous manufacturing in pharma. Initially involving GEA Process Engineering, G-Con Manufacturing, and Pfizer, the group has extended membership to other pharmaceutical companies and launched pilot programs. 


	Consulting services are also being geared more to the small startup and the academic. “We like to get involved at the earliest stages in order to add the most value,” says Christopher Kulp. executive vice-president of Richman Chemical, Inc. In the engineering and consulting (E&C) space, Klyo Collaborative was established to offer companies the kind of attention that big E&C companies, focused on billable hours, cannot typically afford. “We can start with a very young bio facility,” says cofounder Barry Holtz, a biotech veteran who established G-Con and Caliber Biotherapeutics, and handled tech transfer for the new pandemic flu vaccine manufacturing plant in Texas.  The result is an ability to help companies grow as their ideas take off.  “Very few companies offer a full palette of services, from early to mid-cap biotech,” Holtz says.

Executing an Open Model for Biotech Innovation, Executive Summary

Pharmaceutical Technology Outsourcing Resources Supplement

 When referring to this article, please cite it as A. Shanley, "Opening Up Pharma Innovation," 

Pharmaceutical Technology Outsourcing Resources Supplement 

Driven by competitive pressures and using models pioneered in other industries, pharmaceutical companies are extending collaboration efforts well beyond their walls.

Opening Up Pharma Innovation

Ignoring a contract partner’s ability to handle highly potent APIs (HPAPIs) safely may have serious consequences. Drug owners and contract service providers alike must understand the complexities and liabilities involved in working with HPAPIs.

	Highly active or potent pharmaceutical ingredients (HPAPIs) comprise different compounds, but share one deadly characteristic: the potential to inhibit production of specific enzymes and cause cancer, mutations, development effects, or sickness, at very low doses, in those exposed to them.

	Currently, there are no specific occupational health, safety, and environmental protection regulations covering HPAPIs. In the United States, the Occupational Health and Safety Administration (OSHA), the National Institute for Occupational Safety and Health (NIOSH), and the US Environmental Protection Agency (EPA) have limited specific requirements for potent compound handling in healthcare and manufacturing settings.

	Industry groups in the United States and Europe have developed health risk-based approaches for setting occupational exposure limits (OELs) in such areas as cleaning validation, by setting permitted or acceptable daily exposure limits (PDEs or ADEs), to address carryover of any residual HPAPI. The result has been the International Society for Pharmaceutical Engineers’ (ISPE) Risk Mapp baseline guidance, and the European Medicines Agency’s (EMA) guidance for preventing cross-contamination.

	Drug manufacturers are developing more potent drugs, and despite the lack of specific environmental and safety regulations, HPAPIs have become fertile ground for contract manufacturing and contract development and manufacturing organizations (CMOs and CDMOs), which have been actively building up capacity over the past few years. Experts warn, however, that a systematic and scientific approach is needed. Simply having containment equipment and basic procedures will not be enough to ensure safety.

	Typically, large pharmaceutical companies have the industrial hygienists and occupational toxicologists on staff to evaluate the potential risks of any new HPAPI, and to conduct the necessary safety assessments. Smaller companies and CDMOs/CMOs may not have those experts on staff. Teams that visit potential contract partners may be so focused on cGMPs and product specs that they overlook questions of worker safety and environmental risk from exposure to HPAPIs.

	In addition, CDMOs/CMOs may not have done a sufficiently thorough assessment to determine whether they can handle a potent new drug safely. Failure to vet potential partners thoroughly can lead to regulatory problems with OSHA and potential legal liability.

	SafeBridge Consultants, based in Mountain View, CA, established a third-party certification program 15 years ago, which assesses a manufacturer’s HPAPI handling and manufacturing program readiness. The program focuses on four areas: management systems, evaluating hazards and risks, assessing engineering controls, and analyzing training and standard operating procedures (SOPs). The process also reviews such tools as OELs, industrial hygiene sampling, and analytical work. In addition, it scrutinizes containment and controls, and assesses potential environmental impact. The company has already certified a number of pharma CDMOs (see Sidebar).

	SafeBridge Consultants’ roots go back to Syntex Corp., which helped establish the “control banding” approach that is used in industrial hygiene to determine the potential risk of exposure to new APIs for which no exposure data exist. Pharmaceutical Technology spoke with SafeBridge Consultants’ founder and CEO John Farris and cofounder, vice-president and principal toxicologist Allan Ader, to discuss best practices for sponsors and CMOs alike.

: Why did you decide to go into business?

					AMRI
					Baxter Oncology
					Corden Pharma
					DSM
					Excella Pharma, Germany
					Novasep France
					SAFC
					ScinoPharm, Taiwan

: With the rise of contract manufacturing in pharma, we saw the need to come up with a metric that could evaluate companies’ capabilities to conduct potent compound operations safely to minimize exposure. We had developed a tool while at Syntex to look at the industrial hygiene of our internal facilities around the world. We modified that to come up with a measurement tool for potent-drug safety that would work for any contractor and that anyone could use. It’s a weighted 60-plus criteria exercise that has been proven to be effective and objective in evaluating capabilities.

	A CMO can use certification to show clients that they are competent in HPAPI manufacturing and handling. We also offer a ‘gap assessment’ or qualitative approach that can allow companies to measure their own performance using the same criteria.

: How do companies apply for certification?

: We start with a precertification review, where we send a person to take a walk through the plant, look at procedures and give the company a candid idea of whether or not they have a chance of passing. If they pass the first hurdle, we send two professionals out to do a two-day review (up to three days for companies outside of the United States).

	We don’t certify new facilities because they haven’t had enough significant run time. They won’t have the data that we ask for to support the certification, and they haven’t proven that they can work consistently within industry best practices.

: There are two key points: toxicology evaluations of hazards and materials you will handle, then the industrial hygiene studies measuring impact on workers, and the air and surface monitoring studies to show that you are containing materials and maintaining safe levels. In addition you need to show that you repeat studies to prove that you are doing this accurately and consistently with industry best practices.

: For the US and Europe, certification lasts for two years. During the off year, the company must do a self-assessment and share results with us. For companies in Asia, recertification is required every year.

: Do you think that pharmaceutical companies are lax in their handling of potent compounds?

: They want to do things right but they don’t know how involved it can be. Historically, Big Pharma has struggled with potent drug safety, and, despite its efforts, over the years it has had incidents of exposure to workers. Now, these are the companies with significant resources in toxicology and industrial hygiene that are applying their skills to prevent this. If Big Pharma has trouble, imagine what a small CMO or innovator company faces.