Angie Drakulich was editorial director of Pharmaceutical Technology.

Angie Drakulich

President Barack Obama signed the fiscal year 2009 Omnibus Appropriations Act on Mar. 11, 2009, giving the US Food and Drug Administration $2.6 billion. The funding can be used through the fiscal year, which ends on Sept. 30, 2009.
 
 Of the funds, $2 billion go directly to FDA. The Center for Drug Evaluation and Research will receive approximately $777 million for its activities and those of the Office of Regulatory Affairs (ORA), $41 million of which will go to the Office of Generic Drugs. The Center for Biologics Evaluation and Research will receive about $271 million for its activities and those of ORA. Approximately $511 million of the funding will come from prescription drug user fees.

In December 2007, Congress enacted the FY 2008 Omnibus Appropriations Act, which gave FDA $1.714 billion, and in June 2008, Congress gave the agency another $150 million as part of the FY 2008 emergency supplemental appropriations bill. 

Articles

President Barack Obama signed the fiscal year 2009 Ombnibus Appropriations Act on Mar. 11, 2009, giving the US Food and Drug Administration $2.6 billion. The funding can be used through the end of the fiscal year, Sept. 30, 2009.

FDA Gets $2.6 Billion to Finish Fiscal Year

Senators Byron Dorgan (D-ND), Olympia Snow (R-ME), John McCain (R-AZ), and Debbie Stabenow (D-MI) introduced a bill on Mar.  4, 2009, that would allow pharmacists and wholesalers to import prescription drugs from Australia, New Zealand, Japan, Switzerland, and the European Union. The bill’s cosponsors claim that Americans pay as much as 5 times more to fill their prescriptions than consumers in other countries and that “promoting competitive market pricing would both contribute to healthcare savings and allow greater access to therapy.”
 
If the bill, 

-Pharmaceutical Market Access and Drug Safety Act of 2009, is passed, the Federal Food, Drug, and Cosmetic Act would be amended to waive limitations on registered exporters and importers to allow qualifying drugs into the United States. A 

 drug is a drug for which there is a corresponding US label drug (i.e., the same active ingredient or ingredients, route of administration, dosage form, and strength, is approved under section 505c and is manufactured by or for the person that manufactures the qualifying drug), according to the proposed legislation.

The bill does not apply to controlled substances, biologics, infused or injected drugs, drugs inhaled during surgery, and sterile ophthlamic drugs intended for topical or eye use. In addition, a drug that is referred to in two or more abbreviated new drug applications cannot be imported under the new proposed legislation.
 
Although patients may be happy with the proposed legislation, industry has voiced concern over the bill. “It is critical that we maintain our focus on comprehensive health reform to help all Americans access high-quality and affordable healthcare coverage,” said the Pharmaceutical Research and Manufacturers of America in a Mar. 4, 2009, 

. “We should not pursue policies that could expose Americans to substandard drug products and potentially weaken the US Food and Drug Administration  by crippling the agency’s ability to fulfill its mission in protecting public health and safety.”

Senators Byron Dorgan (D-ND), Olympia Snow (R-ME), John McCain (R-AZ), and Debbit Stabenow (D-MI) introduced a bill March 4 that would allow pharmacists and wholesalers to import prescription drugs from Australia, New Zealand, Japan, Switzerland and the European Union.

Senate Bill May Allow Overseas Prescription Imports

The new administration is not wasting any time in tackling tough pharmaceutical industry issues. Funding for comparative effectiveness research and health information technology ($1.1 billion and $19 billion, respectively) were included in the economic stimulus package signed late last month (see back stories 

). And now, President Obama’s Fiscal Year 2010 (FY 2010) budget includes support for a regulatory pathway for follow-on biologics.

Although the final full budget will not be presented to Congress for a few more weeks, Obama’s preliminary budget summary tables predict that FDA approval of generic biologic drugs could lead to a decrease in the national deficit of $10 million by 2014. As for data exclusivity, it’s unclear the exact time the administration will push for. The 1984 Hatch-Waxman Act provides for up to five years of data exclusivity for innovator firms of small molecules, but industry groups such as the Biotechnology Industry Organization prefer 14 years for large molecules, or biologics, and the Generic Pharmaceutical Association prefers something closer to the Hatch-Waxman rules for follow-on biologics.

  The overall proposed budget includes $76.8 billion in funding for the Department of Health and Human Services with provisions to support efforts by the US Food and Drug Administration to ensure drug safety and effectiveness. It also includes $6 billion (in addition to the $10 billion included in the economic stimulus package) for the National Institutes of Health to support cancer research. The budget summary proposes to increase resources for HIV/AIDS prevention and treatment as well.  

In related news, the US House of Representatives passed a FY 2009 Omnibus Appropriations bill last week that includes 2.622 billion for FDA (see back story 

). The bill is awaiting Senate approval this week.

See the President’s proposed FY 2010 budget 

President Obama's Fiscal Year 2010 (FY 2010) budget includes support for a regulatory pathway for follow-on biologics.

Follow-on Pathway, Funding, and More in Obama's Budget

With low-cost production and a pool of scientific talent, Asia — specifically China and India — has risen in pharmaceutical outsourcing and ingredient supply during the past several years. However, highprofile events concerning product quality and manufacturing practices for select suppliers, as well as recent political turmoil in India, have placed increased attention on the region. Key events were the importation of contaminated heparin supplied from a Chinese facility and incidents of melamine in food and pet food products, and diethylene glycol in toothpaste from China.

  In September 2008, FDA issued warning letters and an import alert for products made at two facilities of Ranbaxy Laboratories (India) for deviations in cGMP.

  Recent terrorist attacks in Mumbai, India's capital, have also raised security concerns. 

Before considering these events, it is important to evaluate the fundamentals of pharmaceutical outsourcing to Asia. "Cost has always been a driver of outsourcing decisions," says Mike Keech, Director of PricewaterhouseCoopers' (PwC) advisory services group in the pharmaceutical and lifesciences sector. "But in today's market, cost is no longer the primary driver — it's just an additional evaluation point. You have to balance cost with risk and market opportunity. Companies today, for example, are balancing their outsourcing approach by trying to look at technology and intellectual property protection along with development and manufacturing capacity capabilities." 

To more fully understand these issues, PwC assessed 13 Asian countries based on cost, risk and market opportunity, and released the results in October 2008. China and India ranked as the two most desirable outsourcing candidates among Big Pharma.

  Keech points out, however, that the buyer has become more sophisticated. How much longer China and India hold their top positions remains to be seen. 

Other Asian countries are gaining a foothold as viable pharmaceutical outsourcing contenders. Korea and Taiwan are just a few steps behind China and India, says Keech, and will soon be followed by Indonesia and Malaysia. Much farther down the list of ideal outsourcing candidates is Thailand, which "looks interesting from a labour perspective and because of their world class set of intellectual property laws," says Keech, but whose "interpretation and enforcement are far from ideal." 

Rather than looking at cost per unit as a measure for a particular product, companies are now evaluating inbound transportation, customclearance issues and additional testing requirements, explains Keech. As they start to look at this "total land-net cost," he says, "companies may choose an outsourcing partner based on the product's stage in the life cycle and the company's overall goals. Is the company simply striving to reduce costs at the end of a product's patent life, for example, or is it looking for more flexible and modern manufacturing, and perhaps unique competencies " 

Even though Western companies can still achieve 50–60% savings in manufacturing by outsourcing to Asia, the region "is not as attractive as it used to be," says Keech. "One PwC client, for instance, used to go to Asia alone because it was cost-driven, but given safety issues of late, they're looking at all different outsourcing candidates — particularly in Eastern Europe — regardless of geography," says Keech. 

A consensus among several major pharmaceutical companies is that Asia will continue to play a part in their research, drug-development and sourcing activities, but as part of larger corporate goals for cost reduction, broadening use of external partners and globalization. For example, as with other major pharmaceutical firms, Pfizer (NY, USA) plans to increase its level of outsourcing as it rationalizes its manufacturing network. In its recent quarterly earnings report (ended 30 September 2008), the company says it expects to increase its level of outsourced manufacturing from a current level of approximately 17% of its products on a cost basis to 30% during the next 2–3 years. 

Pfizer, however, emphasizes that adherence to quality standards is a prerequisite for working with any supplier. "The importance of a full and complete evaluation of a potential supplier or contract manufacturer by the pharmaceutical firm cannot be overemphasized," said Natale S. Riccardi, President of Pfizer Global Manufacturing and Senior Vice President of Pfizer in a recent interview with 

  "A thorough review of the potential partners' quality systems, including verification that they have control over their own supply chain, must be completed to determine whether they are willing and able to meet the required standards. If not, access to the supply chain should be denied until they have demonstrated that the required standards are being applied. Once a supplier is approved for use, ongoing quality supervision is critical to ensure that standards continue to be met. We have done that and, in fact, have not approved suppliers that have not demonstrated sufficient progress." 

As a larger percentage of APIs is outsourced, there is a resulting need to broaden the supply base, and gain the knowledge and understanding of the capabilities of external suppliers. To that end, in 2006 Pfizer established a centre of excellence team based in Singapore to work in markets in India and China. This team works in concert with the company's strategy to optimize its internal plant network and in planning transitional inventory coverage as external suppliers are qualified.

  For contract R&D, Pfizer also has relationships with CROs in Asia, including WuXi PharmaTech (China), Chembiotek (India) and HD Biosciences (China).

To strengthen its global API sourcing, AstraZeneca (UK) opened a new sourcing centre in China in early 2007, in addition to another sourcing centre in Bangalore (India). These moves are part of other recent investment in Asia. In 2007, the company opened a $15million (€11.7 million) process R&D centre in Bangalore to complement its drug discovery programmes there and the company is also investing $100 million (€77.9 million) for a new translational science research facility in china. In November 2008, as part of its supplychain strategy, the company said it is further investing in its facility in Wuxi (China) to support its growth in Asia Pacific, provide additional packing and formulation capabilities, and make Wuxi its packing centre for Asia Pacific. AstraZeneca established a manufacturing site in Wuxi in 2001 with an initial investment of $134 million (€104 million) and made an additional investment of $35 million (€27 million) in 2006. 

Eli Lilly (IN, USA) is pursuing what it calls its 'FIPNet' strategy, which emphasizes the company's role in assembling and managing a network of external partners. This focus is a change from its practice of being what it calls a 'FIPCo', or fully integrated pharmaceutical company, which owns everything from idea generation to sales. 

"We're testing new collaborations with lifesciences firms in China and India," said John C. Lechleiter, President and CEO of Eli Lilly in a speech in September 2008.

  "Lilly scientists still design our compounds, for example, but a large number of our chemistrybased molecules are now synthesized by a firm in Shanghai (China), called ShangPharma. In India, meanwhile, we've handed off some molecules using new risksharing deals. We have the right to buy back these molecules ... once our collaborators succeed in establishing proof of concept in the clinic." 

As another example, in October 2008, Lilly agreed to form a drug-development joint venture with the Indian firm Jubilant Organosys, a contract provider of custom research, manufacturing and drugdiscovery services. The joint venture, based in Bangalore, is modelled after Lilly's earlystage development division,  

Chorus, which provides drug development for Lilly exclusively through external contract companies. The joint venture will focus on preclinical molecules and their development through Phase II clinical testing before returning successful assets to the sponsors for further development. 

Industry observers say recent events have not altered pharmaceutical companies' interest in doing business in India. "After the heparin incident, I would say that the comfort level of pharmaceutical companies working with Indian contract manufacturers increased, not decreased, because of greater transparency in India than in China," says Nailesh Bhatt, Managing Director of the consulting firm Proximare. He points to the smaller size of India, the benefit of having English as a common language with Western companies, a smaller supplier base and the increased attention on the supply chain as FDA establishes a presence in the country. "The increased supply-chain robustness is a positive development for Indian CMOs," he says. 

He also says that the terrorist attacks in Mumbai in late November 2008 are unlikely to dissuade pharmaceutical outsourcing. "The new reality of global terrorism shows that any geographic location is not immune to terrorism." In the case of Mumbai, he points out that the attacks were localized in the city and did not occur in surrounding areas outside of the city where pharmaceutical manufacturing facilities are located, and that manufacturing activities are diffused in various hubs throughout the country such as in New Delhi and Hyderabad. "The immediate effect has been a beefing up of security and consideration of options for business travel." 

Although Asia will play a role in pharmaceutical outsourcing, others point to favourable fundamentals for US and Western European suppliers. "As long as the world's innovative pharmaceutical industry is centred in the West, there will be a need for API development and manufacturing capacity in the West," says Brian Scanlan, Vice President of Corporate Development at Cambridge Major Laboratories (WI, USA), a CMO of APIs and intermediates. "Our view is that most of the new drugs in development are owned by the small, medium and virtual pharma companies. The future of these companies resides in one or two molecules in development, and the vast majority of these companies are not going to entrust their futures to a company on the other side of the world — it just won't happen. Big Pharma is in a very different scenario. They have the ability to offshore some of their pipeline, but the highest profile, most important new APIs are, by and large, still being entrusted to Westernbased companies for development."  

1. FDA, "Melamine Contamination in China" (2008). 

2. FDA, "FDA Detects Melamine Contamination in Flavored Drink" (2008). 

3. FDA, "Pet Food Recall (Melamine)/Tainted Animal Feed" (2008). 

5. HHS, FDA Warning Letter to Ranbaxy Laboratories Limited (September 2008). 

6. The Changing Dynamics of Pharma Outsourcing in Asia: Are You Readjusting Your Sights  

(PricewaterhouseCoopers, New York, NY, USA, October 2008).  

(8) Outsourcing Resources Suppl., s56–s62 (2008). 

9. J. Lechleiter, "Innovation: The Cure for What Ails Us," speech at the Economic Club of Indiana (September, 2008). 

This article was originally published in the January issue of 

After a year of increased attention on the pharmaceutical supply chain in Asia, what will be the region?s short? and long?term role?

Evaluating the pieces of the pharma supply chain

Earlier this week, House Appropriations Committee Chairman Rep. David Obey (D-WI) introduced the FY 2009 Omnibus Appropriations Act (H.R. 1105). Included in the proposed bill is $2.622 billion for the US Food and Drug Administration, approximately $511 million of which is to be derived from prescription drug user fees. 

The Center for Drug Evaluation and Research may receive approximately $777 million for its activities and those of the Office of Regulatory Affairs (ORA), $41 million of which would go to the Office of Generic Drugs. The Center for Biologics Evaluation and Research may receive about $271 million for its activities and those of ORA.

In December 2007, Congress enacted the FY 2008 omnibus appropriations, which gave FDA $1.714 billion, and in June 2008, Congress gave the agency another $150 million as part of the FY 2008 emergency supplemental appropriations bill. FDA can use the $150 million through Sept. 30 of this year, according to the Alliance for a Stronger FDA. 

Overall, the proposed nearly $2 billion in direct appropriations for FY 2009, ending Sept. 30, 2009, would be a few million more than FDA’s FY 2008 funding of approximately $1.7 billion. The full proposed appropriations bill is available online 

Earlier this week, House Appropriations Committee Chairman Rep. David Obey (D-WI) introduced the FY 2009 Omnibus Appropriations Act (H.R. 1105).

FDA's FY 2009 Budget May Increase

The US Food and Drug  Administration and the International Serious Adverse-Event Consortium (SAEC) released last week the first data on certain types of genetic-based adverse drug events. The report, issued Feb. 10, 2009, focuses on the genetics associated with drug-induced serious skin rashes such as toxic epidermal necrolysis. The findings, which help  predict an individual’s risk of developing allergic skin reactions, are meant to help healthcare professionals  understand the genetic basis of certain adverse drug events. 

  is a nonprofit partnership of pharmaceutical companies, the Wellcome Trust, and academic institutions focused on research relating to the genetics of drug-induced serious adverse events. The organization has “fulfilled a key goal of the 

  by providing the research community with public access to new genomic data on adverse drug events,” said Janet Woodcock,  director of FDA’s Center for Drug Evaluation and Research, in a press release. FDA launched the Critical Path Initiative in 2004 to stimulate  a national effort to modernize the sciences.

“This type of cooperation has the potential to lead to more personalized approaches to medicine that can reduce a patient’s risk for experiencing an adverse drug event,” said Woodcock in the release.

The US Food and Drug and Administration and the International Serious Adverse Event Consortium (SAEC) released last week the first data on certain types of genetic-based adverse drug events.