Cynthia A. Challener is a contributing editor to Pharmaceutical Technology.

Cynthia A. Challener

The total market for biopharmaceuticals in 2013 was $36.8 billion according to Kalorama Information. Meanwhile, Frost & Sullivan estimates that the biosimilars market, which it pegged at just $1.2 billion in 2013, will grow to $23 billion in 2019, or more than 20-fold increase. What is driving this tremendous expansion? The approval of monoclonal antibody biosimilars, greater clarity with respect to biosimilar regulations in major markets such as the US and Japan, and growth of sales in many emerging markets, which are also developing regulatory approval pathways, are key factors.

The market for biosimilars is more advanced in Europe, which has had an established biosimilar approval pathway in place since 2006. The US is comparatively in its infancy. While a pathway has been in place in principle since March 2010, there has been significant uncertainty regarding specific requirements. FDA has since 2012 issued several guidance documents outlining its expectations for demonstrating biosimilarity. Sandoz and Celltrion made news in July and August, respectively, with the first filings for biosimilar approvals in the US: Sandoz for Amgen’s Neupogen (filgrastim) and Celltrion for Johnson & Johnson’s Remicade (infliximab).

In addition, in September, FDA announced the creation of the 

, which lists approved innovator biologics that can serve as reference products for biosimilar applications and, along with the date the product was first approved and the date that the 12-year exclusivity period will (or has) expired. For biosimilars, there is also a column to indicate whether the product is interchangeable (I) with the branded drug or a biosimilar that has not been awarded interchangeability (B). There are of course no biosimilars in the book yet. Even so, biopharmaceutical manufacturers now have a book analogous to the “Orange Book” for small-molecule originator drugs and generics.

Many emerging market countries, such as Brazil, Mexico, Venezuela, Columbia, India, Russia, China, and some African countries are developing pathways for biosimilar approvals. In fact, many companies are launching biosimilars in developing countries where the approval pathways are often less stringent or under development, because the process is more rapid and less costly, and it is possible to gain market experience, collect market data, and recoup some of their investment. It should be noted, however, that many branded drug manufacturers do not see many of these products as true biosimilars because they are not developed in line with established regulatory guidelines for biosimilars.

With respect to monoclonal antibodies (mAbs), McKinsey & Company estimates that approximately 40% of biosimilars in development are mAbs, and that percentage will only increase. By 2020, patents are set to expire on several mAb-based drugs with annual sales greater than $5 billion each in the year of US expiry, according to Jorge Santos da Silva, a principal in the Swiss office of McKinsey & Company. Celltrion and its partner Hospira were the first to receive European approval for a mAb biosimilar in 2013 (infliximab). Others are expected as products such as trastuzumab (Herceptin from Roche) and Adalimumab (Humira from Abbott) lose patent protection. Most major international pharmaceutical companies are developing biosimilar Mabs, including Pfizer, Amgen, Merck Serono, and Boehringer Ingelheim. Leading generics firms, including Sandoz, Mylan, and Teva, are active in this area as well. Other product categories that are expected to help drive the growth of the biosimilars market include follitropins, interferons and low molecular weight heparins, according to Frost & Sullivan.

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The total market for biopharmaceuticals in 2013 was $36.8 billion according to Kalorama Information. Meanwhile, Frost & Sullivan estimates that the biosimilars market, which it pegged at just $1.2 billion in 2013, will grow to $23 billion in 2019, or more than 20-fold increase.

Focus on Biosimilars

The synthesis of small-molecule APIs is often a complex, multi-step process that involves numerous chemical transformations and the manipulation of a range of raw materials with varying physical and chemical properties. Specific types of candidate compounds can provide further challenges. For example, most APIs today are chiral and must be synthesized as a single enantiomer. In addition, over 25% of drugs on the market worldwide today are classified as highly potent, according to a recent report published by Roots Analysis. Antibody-drug conjugates (ADCs), which are a growing class of targeted therapies, have a highly potent small-molecule API linked to an antibody. Special expertise and technologies are required to achieve the synthesis of all of these types of molecules.

While advances in chemocatalysis for chiral synthesis continue apace, many companies have focused attention on the development of a wider array of enzymes that can be used under commercial manufacturing conditions for the selective conversion of various substrates into more complex intermediates. Biocatalysts are attractive for asymmetric synthesis because they often are effective in water under mild conditions, they produce less waste, and they are highly selective. Most importantly, there are a growing number of enzymes that are available in sufficient quantities for commercial-scale manufacturing, and in many cases, enzymes can be customized for a specific application in just a few months at a cost that can be less than that for the chiral ligands needs for a chemical catalyst. There are also efforts being made to develop a guidance document on the use of enzymes according to good manufacturing practices.

Highly potent APIs (HPAPIs) pose a safety challenge; they must be manufactured under conditions that not only protect the operators from exposure, but also prevent cross-contamination via inadvertent carryover. Companies are continually investigating new techniques and technologies to achieve this goal. Most recently, there has been a move away from reliance on personal protective equipment to the use of isolators. Currently, there is interest in the application of single-use systems and the development of improved purification, removal, and cleaning processes. The development of more sensitive analytical methods has also become important for ensuring that the required residue levels are met.

The production of ADCs requires expertise in both small-molecule HPAPI synthesis and biologics manufacturing. The linker connecting the antibody and payload, often a peptide derivative but sometimes a synthetic polymer, is the key to delivering the toxin at the right time and provides a way to match the chemistry of the payload with the biology of the antibody. The types of chemistries used to join the linker to the antibody have evolved over the last several years to improve drug performance. Today, linkers are designed to be selectively cleaved from the antibody by enzymes that are only present inside the targeted cells. In addition, to achieve the highest efficacy and safety, the linker must be selected for a particular payload-antibody combination, and the locations of the amino acid residues and the type of conjugation chemistry must also be carefully considered.

Finally, it is worth noting that advances also continue to be made in fluorination chemistry, which has important consequences with respect to the pharmacokinetics of many drug substances. The incorporation of fluorine atoms into APIs can affect their acidity, basicity, protein binding affinity, and lipophilicity, and thus result in enhanced bioavailability. Solid fluorinating reagents with increased safety and ease of handling are finding widespread use. Custom fluorinated synthons are also now available for the production of new advanced intermediates. Recently, alkylating agents such as trifluoroethyl iodide, which can be used under fairly mild conditions, have been utilized for the introduction of fluorine substituents at later stages of API syntheses. 

These examples of advances in API synthesis and manufacturing technologies serve to highlight the constant innovation that takes place in the pharmaceutical industry.

While advances in chemocatalysis for chiral synthesis continue apace, many companies have focused attention on the development of a wider array of enzymes that can be used under commercial manufacturing conditions for the selective conversion of various substrates into more complex intermediates.

Specialty API Synthesis Technologies Attract Attention

The last 12 months have seen a number of major acquisitions in the contract manufacturing space. Most notably, Merck KGaA announced just a few weeks ago (in September 2014) that it has agreed to acquire firm Sigma-Aldrich Corp. for $17 billion. Earlier in March, Patheon completed its $2.65 billion merger with DSM Pharmaceutical Products (DPP) to form DPx. In October 2013, Cambridge Major Laboratories merged with AAI Pharma Services Corp. in a deal with undisclosed financial terms. What is driving such major players to combine their businesses? 

It is no secret that the pharmaceutical industry is undergoing a major transformation as demand growth shifts from Western regions that consume high-margin branded drugs to emerging markets that can only afford low-margin generics. As pharmaceutical firms look for ways to drive out costs, they are increasing outsourcing across all facets of their organizations. To do so and still maintain control, pharma companies are more likely today than ever before to identify a limited list of approved providers. Consequently, they prefer contract manufacturing organizations that can provide a suite of integrated services. Simultaneously, pharma companies seek to establish stronger relationships with service providers that are willing to become more involved and invested in the success of their pharma industry clients. 

These trends are reflected in the drivers behind the three transactions mentioned above. For example, the company formed by the merger of Cambridge Major Laboratories (CML) and AAI Pharma Services Corp. would be able to offer a full suite of integrated CMC services and deliver meaningful value to customers, with the ability to execute with equal strength across API development, analytical services, and finished dosage form manufacturing, according to then CML CEO Brian Scanlan. He also indicated that the combined companies would be able to provide a superior customer experience by maximizing scientific and project interaction at each phase.

Similarly, at the time of the formation of DPx, CEO Jim Mullen saw the new company as being well positioned as the pharmaceutical industry’s “partner of choice” because it offers end-to-end services and is a global, comprehensive solution provider. Stefan Doboczky, DPx board member and member of the DSM Managing Board also noted the importance of collaborative relationships to pharmaceutical firms.

The merger for Merck is a “quantum leap” for the company’s life sciences business, according to Karl-Ludwig Kley, chairman of Merck’s Executive Board and will make it possible to present a much broader product offering to its global customers. Sigma-Aldrich president and CEO Rakesh Sachdev believes the combined organizations will be “well-positioned to deliver significant customer benefits, including a broader, complementary range of products and capabilities, greater investment in breakthrough innovations, enhanced customer service, and a leading e-commerce and distribution platform in the industry.”

The last 12 months have seen a number of major acquisitions in the contract manufacturing space.

CMO Consolidation Continues

Due to its high ionization potential, electron affinity, and electronegativity, fluorine is a highly electron withdrawing substituent. In addition, fluorine-carbon bonds are much stronger than carbon-hydrogen bonds. Consequently, incorporation of fluorine atoms into APIs results in changes in polarity that often affect not only the reactivity of neighbouring groups, but also the acidity, basicity, protein binding affinity, and lipophilicity of these molecules. As a result, fluorination can significantly impact the bioavailability of drug substances. Introducing fluorine into complex intermediates can be a challenge, however, and generally requires special expertise. Finding contract manufacturers with GMP fluorination capabilities can, therefore, also be a challenge.


The initial reagents used for the fluorination of organic compounds, such as potassium fluoride (KF), hydrogen fluoride (HF), antimony trifluoride (SbF

) itself, generally require harsh reaction conditions. These reagents are also typically gases that are aggressive. Some are also explosive and/or toxic.

Although still widely used in many industries, their application to API synthesis has been somewhat limited. Reagents that are more commonly used in the pharmaceutical industry still present handling issues. They also tend to be costly and often are not appropriate for the introduction of fluorine in the presence of functional groups. Such reagents include poly[4-vinylpyridinium poly(hydrogen fluoride)], 1-fluoro-2,4,6-trimethylpyridinium triflate, cyanuric fluoride, and tetrabutylammonium hydrogen difluoride.


The search for less aggressive, easy-to-handle, nontoxic fluorinating reagents has been underway for many years. Initially improved reagents such as (2-methoxyethyl)aminosulfur trifluoride (Deoxo-Fluor) and 1-chloromethyl-4-fluoro-1,4-diazoniabicyclo[2.2.2]octane bis(tetrafluoroborate) (Selectfluor), which are both from Air Products, have been more widely used in API synthesis. Diethylaminosulfur trifluoride (DAST) is another common reagent.

Deoxo-Fluor and DAST are nucleophilic fluorinating reagents that have improved properties compared to the harsher chemicals mentioned previously. They rapidly deoxofluorinate alcohols, aldehydes, and ketones under mild conditions to yield the corresponding fluorinated compounds with high efficiency and selectivity. The reaction involves the nucleophilic replacement of oxygen with fluorine, with hydroxyl groups converted to C-F substituents and carbonyl groups to CF2 moieties.

Selectfluor, also known as F-TEDA-BF4, is a general-purpose, site-selective electrophilic fluorinating agent that rapidly fluorinates a wide range of organic molecules under mild conditions with high efficiency and selectivity and, in many cases, has been used as an alternative to FClO

OF. Recent examples of reactions achieved with Selectfluor include the iron-catalyzed free radical Markovnikov hydrofluorination of unactivated alkenes (1) and the synthesis of monofluorinated benzylic substrates (2), the silver-catalyzed decarboxylative fluorination of aliphatic carboxylic acids (3), and the chemoselective, metal-free introduction of a fluorine atom into various aromatic and aliphatic compounds (4).


More recently, solid fluorinating reagents have been introduced to the market: Xtal-Fluor-E from Manchester Organics (in partnership with OmegaChem) and Fluolead from UBE Industries.

Xtalfluor reagents include (diethylamino)difluorosulfonium tetrafluoroborate (Xtal-Fluor-E) and difluoro(morpholino)sulfonium tetrafluoroborate (Xtal-Fluor-M). These fluorinating agents are easily handled crystalline solids with enhanced thermal stability (i.e., higher decomposition temperatures with lower exothermic heat and higher onset temperatures for self-accelerated decomposition) (5). They do not generate free HF and are compatible with glass equipment. In addition, they generally produce fewer elimination side products, and thus provide greater selectivity than more traditional nucleophilic fluorinating reagents, such as DAST and Deoxo-Fluor (6, 7).

Fluolead (4-tert-Butyl-2,6-dimethylphenylsulfur trifluoride) is also a crystalline nucleophilic fluorinating agent useful for deoxo-fluorination reactions. Its reactivity is comparable to that of SF

, but it has high thermal stability, can be handled in air, does not fume, and reacts slowly with water.  In addition to converting alcohols and carbonyls to CF and CF

 groups, Fluolead converts carboxylic acid (COOH) substituents to trifluoromethyl (CF

) groups and can fluorinate sulfide compounds (8-11). While these reagents are easier and safer to work with, their higher cost can still pose a challenge for commercial-scale use.

I) has also risen recently, according to Anthony Nigro, manager of product development for Halocarbon Products. Conventionally, the trifluoroethyl group has been introduced using trifluoroethylamine, which is a weak base that requires strongly acidic reaction conditions and thus can only be used for substrates that can withstand exposure to strong acids. Trifluoroethyliodide is much more reactive, and this reagent can even be used in later stages of pharmaceutical syntheses. “Convergent synthetic strategies, which require the introduction of fluorine substituents much later in the synthetic sequence, are gaining in popularity, as are direct fluorination techniques. This trend is one of the drivers for the interest in trifluoroethyliodide,” notes Nigro. He adds that the iodide does not require any special equipment or handling and is a cost-effective reagent.

I include the Pd-catalyzed 2,2,2-trifluoromethylation of organoboronic acids and esters (12) and the synthesis of β-trifluoromethylstyrenes via a domino Heck coupling reaction (13).


While the search for fluorinating reagents that are inexpensive, safe, and mild for use with complex intermediates in large-scale manufacturing processes continues, pharmaceutical companies must continue to achieve fluorination using currently available reagents that meet the cost and reactivity constraints of their systems. In the past, it was common for drug manufacturers to perform these types of reactions in-house, but that is not the case today, according to Nigro. “Most pharmaceutical companies have streamlined their operations and generally outsource the production of intermediates that require specialized chemistries and synthetic techniques. Fluorination often falls under this category given the physical and chemical characteristics of most cost-effective fluorinating reagents,” he explains.

There are few contract manufacturers with expertise in fluorination chemistry and not all of them can produce pharmaceutical intermediates under GMP conditions. “There is a need in the marketplace for contract manufacturers that have the necessary skills and expertise to both perform fluorination chemistry and meet GMP requirements,” says Nigro.

. 134 (33), 13588-13591 (2012).
  2. 	S. Bloom et al., 

15 (7), 1722-1724 (2013).
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 76 (9) 3113-3121 (2011).
  10.	T. Umemoto and Y. Xu, “Substituted Phenylsulfur triflouride and other like fluorinating agents”, US patent 7,265,247 B1, Sep. 2007.
  11.	T. Umemoto and R. P. Singh, “Substituted Phenylsulfur triflouride and other like fluorinating agents”, US patent 7,381,846 B2, June 2008.
  12.	Y. Zhao and J.Hu, 

 51 (4) 1033-1036 (2012).
13.	G.A. Olah et al., 


Cynthia A. Challener is a contributing editor at 

Safer fluorinating reagents and access to GMP fluorination capabilities remain challenges in API synthesis.

Fluorination Remains Key Challenge in API Synthesis

Advances in solid and liquid formulation techniques are providing more options.
The number and potency of highly potent drug substances are increasing. Formulators working with highly potent APIs (HPAPIs) are increasingly challenged to ensure the safety of both personnel during development and manufacturing and healthcare workers and patients when using the final drug products. That means addressing potential issues with the homogeneity of the formulation, drug content analysis, and proper handling. Advances in microparticle, capsule and syringe technologies, analytical methods, and containment systems are widening the safe formulating options for HPAPIs.


Safety should always be at the forefront of any research and manufacturing operation, according to Thomas R. Tice, senior director of global technical marketing at Evonik Pharma Polymers & Services. For HPAPIs and their pharmaceutical dosage forms, Tice notes that research and manufacturing operations must take place in facilities built on design requirements specific to operations involving potent compounds. It is also necessary to use appropriate personal protective equipment (PPE), train staff, and follow established policies as well as appropriate standard operating procedures to protect workers, contractors, and the community. Bryan Knox, senior director of pharmaceutics with Pharmatek, adds that as the number of potent compounds increases, manufacturing practices are increasingly moving away from reliance on PPE alone, with current practices focusing more on containment at the source to prevent operator exposure. To aid this process, many equipment providers now offer options for containment within the design of the equipment.

“When Pharmatek built its facility specifically for the handling of highly potent compounds in 2007, we chose to invest in a dedicated facility for the development and manufacture of highly potent compounds. The facility utilizes a combination of facility design features, isolator technology, and PPE to prevent cross contamination and to ensure the safety of personnel,” says Knox. Evonik, as a company that offers HPAPI development and manufacturing services for oral and parenteral dosage forms, has developed a comprehensive safety assessment strategy, invested in containment including isolators and dedicated rooms, and adopted process-specific engineering and procedural controls, thus allowing the safe handling of potent compounds according to specific operations, Tice told 


Although highly potent, HPAPIs do not require specific dosage forms. Any formulation strategy for HPAPIs should, in addition to addressing potential issues with proper handling to ensure personnel safety, consider the homogeneity of the formulation and the drug content analysis. “Because unit doses for highly potent drugs typically contain very small quantities of API, ensuring blend and content uniformity and developing accurate analytical methods are particular challenges for low-dose drugs,” says Knox.

There is a precedence in the industry to put highly potent drugs in solution to minimize exposure risk, but with proper environmental, health, and safety systems in place, formulating powders into capsules or tablets is often preferred, according to Knox. Consideration must also be given to the ability to produce a homogeneous product. “Understanding the segregation potential of low-dose drug formulations is an important aspect, because segregation can lead to poor blend and content uniformity, which can affect the manufacturability of the product,” he explains. Assessment of potential segregation should occur during prototype development and initial process development, particularly when using automated equipment where vibration plays a role. Knox also recommends the use of design of experiment (DOE) studies with factorial design to define the design space and avoid potential segregation due to low-dose requirements.


HPAPI formulation processes must be robust and scalable. It is advantageous to have processes that can be scaled down for formulation development such that smaller-scale process equipment can fit into smaller-scale containment and still make formulations representative of what can be made in larger commercial-scale batches, according to Tice. He adds that it is also important to use equipment that can be taken apart and cleaned.

As importantly, appropriate analytical methods with a high level of sensitivity must be identified for the evaluation of low-dose/highly potent drug formulations, regardless of the form of the product. Both excipients and drug product matrices can interfere with detection of HPAPIs due to the high concentration of excipients relative to active ingredient in analytical samples, according to Knox. He notes that ultra-high pressure liquid chromatography (UHPLC) is often preferred over conventional high-performance liquid chromatography (HPLC) for the analysis of highly potent compounds due to its increased sensitivity, which is increased approximately 10 times.

For injectable products, Knox adds that it is crucial to understand the interaction of the packaging contact surfaces with the drug product in solution. In addition, recovery studies should be performed to ensure that the delivered dosage is within acceptable ranges.


While HPAPIs do not have special drug delivery requirements, the dosage form chosen must ultimately address patient safety, compliance, clinical performance, and manufacturability, according to Knox. There are, however, certain dosage forms that provide some advantages because they are more suitable for the lower drug loads associated with HPAPIs.

“Liquid-filled formulations in either soft-gel or hard-shell capsules offer an important oral dosage strategy for highly potent drugs that can cause homogeneity issues when formulated as powders into capsules or tablets,” observes Knox. The technology also has the benefit of being a safer process than the production of capsules and tablets using powders, because dust generation is not an issue.

To obtain capsules and tablets of HPAPIs, fluidized-bed coating technology (Wurster coating), which involves spraying of an HPAPI solution onto nonpareil beads that can then be filled into capsules or pressed into tablets, is an attractive alternative, according to Knox. Mini-tabs can also be used for multiparticulate HPAPI systems where single- or multi-layered coatings contain a functional coat with the active ingredient and a seal coat.

Extended-release parenteral formulations are also well suited for HPAPIs, according to Tice. He specifically notes that extended-release, bioabsorbable poly(lactide-co-clycolide) (PLG)  microparticles reduce side effects, improve therapeutic efficacy, and increase patient compliance. “Like other parenteral formulations, the administration of suspensions of injectable microparticles is limited by the injection volume. HPAPIs are ideal for PLG microparticles because they are dosed at microgram and milligram quantities, which means less API (less mass) is needed to meet the injection volume requirements. In turn, HPAPIs can be delivered from PLG microparticles for weeks and months following a single administration,” he explains. These formulation advantages also apply to extended-release, rod-shaped injectable PLG implants.

Given the safety issues and growing number of options for low-dosage drugs, choosing the right dosage form for an HPAPI can be challenging. Pharmatek takes a data-driven approach to this decision, according to Knox. “Our goal is to look at the least complex dosage-form options first, because conventional approaches save on development time and costs.”  Success can be obtained with dry blending a formulation for filling capsules or making tablets at drug loads in the 0.01% w/w range, depending on the API properties. Dosage strengths at 10 µg or lower often require special considerations, such as oral solutions, liquid-filled capsules, or granulation and coating techniques with the active ingredient dissolved in a spray solution.


Evonik has developed the FormEZE technology, an improved microencapsulation process for the manufacture of PLG microparticles. The continuous, closed-equipment process involves an emulsion-based extraction and affords 20% higher yields with less post-process handling, according to Tice. “This process shortens unit operations time, reduces waste, and can be scaled down from commercial-size manufacturing, all advantages when working with HPAPIs,” he says. The emulsion is generated by a packed-bed column that produces a defined, narrow size distribution of microparticles that allows the use of smaller-diameter needles and affords the administration of more microparticles for drug delivery over longer durations.

Another benefit is that the PLG microparticles made using the FormEZE technology are much easier to administer by injection and safer to use, according to Tice. Because of the size distribution of the microparticles and the assurance of no large particles or agglomerates, they do not clog needles during injection. “When injection procedures are less prone to complications, particularly when HPAPIs are involved, improved safety to the patient and the healthcare worker is achieved,” he comments.

Improvements in capsule availability and manufacturing equipment for liquid-filled hard shells are also of note, according to Knox. “The availability of both gelatin and hydroxypropyl methyl cellulose capsules designed specifically for liquid formulations of HPAPIs and micro-spray sealing and banding technologies have enabled greater application of this delivery technology for highly potent compounds. Opportunities for liquid delivery outside of softgels, which can be an expensive technology to invest in during the early stages of development, represent a real advantage,” he states. In addition, liquid-filled hard shell encapsulation machines now have faster filling and sealing speeds and provide more in-line process checking (temperature, speed, fill weight), as well as automatic in-line feedback with process analytical technology.


  Cynthia A. Challener is a contributing editor at 

Advances in solid and liquid formulation techniques are providing more options.

New Technologies Enhance the Formulation of Highly Potent Drugs

As demand shifts from high-margin branded drugs in Western regions to low-margin generics in emerging markets, successful bio/pharmaceutical companies are adopting new business models that include significantly more outsourcing and require a deeper understanding of costs all along the value chain. Enterprise resource planning (ERP) systems that have been effective for the internal management of sourcing and production are insufficient for managing the extended relationships and multidirectional communications needed in this new environment. Bio/pharmaceutical companies are therefore turning to cloud-based services to achieve greater transparency and facilitate collaboration.


  The biggest trend driving changes in the market today is the shift from a focus on Western markets to growth areas in emerging regions, according to Diane Palmquist, vice president of product management for GT Nexus, a cloud supply-chain platform provider. “High-margin blockbuster drugs are coming off-patent and mature Western markets are experiencing limited growth. Consequently, the focus has shifted to emerging markets, where the growth rate is higher. However, the demand in these regions is greatest for low-cost, low-margin products, and buying habits are very different (buy the dose, not the bottle),” she observes. The result: bio/pharmaceutical companies need to completely transform their old business models.

The biggest impact can be seen in the higher level of outsourcing now taking place. “Pharmaceutical companies are outsourcing nearly every aspect of the business, including some research-related activities, API manufacturing, drug product formulation, packaging, and logistics,” says K.R. Karu, industry solution director for Sparta Systems, a provider of enterprise quality management solutions. Palmquist adds that currently approximately 40% of industry business is outsourced, and that number is expected to increase to 80% over the next several years.


  As outsourcing has increased, companies have lost control over many aspects of the supply chain. “Companies are still trying to manage interactions with suppliers and service providers through personal communications, which is not only inefficient, but ineffective given the number and complexity of relationships and issues that must be managed,” Karu says. The low margins of today also do not support this approach. ERP systems, which in the past have been used to connect purchasing with production operations, are also not capable of managing the complex interactions between service providers and pharmaceutical companies, according to Palmquist. Furthermore, to meet the demand of emerging markets, pharmaceutical companies must be very responsive and need solutions quickly. ERP systems generally take about 18 months to get up and running, and often by that time the opportunity has been lost.

One of the key issues for bio/pharmaceutical companies is the lack of visibility into contract manufacturers. Often pharma companies do not find out about issues that can impact the delivery of API or finished drug product until much later because the suppliers are trying to solve the problem. The common response, according to Palmquist, is to try and stay on top of potential problems by constantly contacting the suppliers via phone or e-mail, which is not a practical, sustainable, or effective approach.

“The challenge lies in the need to manage a whole host of different suppliers at the same time that the customer base is changing dramatically and bringing an entirely new set of customer expectations. The key to this puzzle is to obtain visibility on both the supply side and the value side, from inventory to quality excursions to government fees,” Palmquist asserts. 


Cloud-based services give bio/pharmaceutical companies the ability to extend their visibility into all parts of the value chain, while at the same time enabling vendors to access the information they need in order to provide optimum services. Raw materials suppliers, contract research organizations, contract manufacturers, brokers, and distributors can all interact simultaneously under very controlled conditions that ensure that important information gets to the only the right people when it needs to, according to Palmquist.


  There are several other practical advantages of using cloud-based systems, according to Karu. Because cloud-based software systems are developed by software experts, they are consistent for all users. Maintenance and upgrades are provided on a continual basis, as well as any necessary validation procedures to meet special compliance requirements for the pharmaceutical industry. There is also no need for investments in extensive information technology infrastructure; the servers are maintained by large companies (think Google and IBM). In addition, redundant systems located around the world ensure non-stop operation. 

Perhaps most importantly, though, is the controlled nature of the interactions through cloud-based systems. “Generally the information that is being shared using cloud-based systems is already being shared via phone calls and e-mails. There are, however, much stronger controls in place in cloud-based systems that ensure that information only goes to the people who should see it. There are no such controls around the use of e-mails with file attachments,” Karu explains


  Overall, according to Palmquist, cloud-based systems offer bio/pharmaceutical companies assistance with achieving assurance of supply. All business activities can be integrated in the cloud and important issues, exceptions, and problems flagged automatically, so that efforts are appropriately focused on resolving potential issues. Not only purchasing systems, but logistics and quality management systems can be linked through the cloud so that the bio/pharmaceutical company is always up to date on what is happening and can readily share information that impacts multiple vendors.

“Moving an established quality system to the cloud and sharing it with raw material suppliers and contract manufacturers makes it possible for these vendors to exchange information immediately. In addition, these vendors can be directly included in specific activities, such as investigations of excursions and remedial actions, leading to much more rapid resolution of problems,” Karu comments. Similarly, cloud computing can benefit other aspects of supply chain management and aid in the rapid response to any type of possible interruption in the supply, from natural disasters to manufacturing malfunctions to distribution issues.


  “The key to success for bio/pharmaceutical companies with such complex supply networks is collaboration across the value chain. Cloud computing is an effective way to enable such relationships,” Karu says. “There is definitely a growing realization in the pharmaceutical industry that suppliers must be thought of as extensions of the company. To be truly successful, we believe that the relationships between bio/pharmaceutical companies and their suppliers should be viewed more like joint ventures, with real transparency of information,” adds Palmquist.

The idea of allowing vendors to see into their business operations is the most challenging aspect of cloud computing for biopharmaceutical companies. “Most companies are at least initially very resistant to letting suppliers see their company information. It is not possible, however, for vendors to effectively participate in quality investigations, audits, and remediation efforts without two-way communication. He adds that the pharmaceutical industry tends to be very conservative about adopting new technology, in part due to concerns about acceptance by regulatory agencies, and cloud computing is no exception. “Both pharmaceutical companies and their suppliers are interested in cloud-based solutions, but neither is convinced that the other is willing to implement them. The greatest challenge at this point, therefore, is to convince the various members of the pharmaceutical industry supply chain to take the first step.


  Companies that have already moved forward with the use of cloud-based services are those that have been pushed fastest towards emerging markets and have realized that ERP systems are insufficient and leave them “flying blind,” according to Palmquist. Pfizer is one example. “Pfizer needed to figure out a way to not only maintain but grow its revenue stream despite having 9 of its blockbuster drugs lose patent protection¾a Herculean task,” she says. Not only did the company need to better manage the supply side, it also needed help tracking costs (taxes, fees, etc.) on the value side in detail, something that was not a concern in the past with high-margin products.

“We expect that more companies will be in this same position and looking for solutions that enable simultaneous, multidirectional communications with numerous members of the value chain. As that occurs, there will also be greater realization that any dollars spent in the supply chain ultimately comes from the pharmaceutical company,” says Palmquist. In the past, it was easy for manufacturers to separate supplier costs from their costs because margins were high. That will no longer be the case as the industry becomes a low-margin business. “As we see in the consumer electronics industry, where every penny is tracked throughout the supply chain, it will be necessary for bio/pharmaceutical companies to look at supplier costs as their costs in order to maximize profits. Connect with suppliers through cloud-based systems will help not only control costs, but also quality and all other aspects of their operations,” she concludes.

For those reasons, Karu anticipates an explosion in demand for cloud-based services in the pharmaceutical industry. “The many-to-many relationships that are possible with cloud-based systems provide a much more efficient mechanism for processing information and managing interactions, which will be critical to the success of pharmaceutical companies in the increasingly challenging business environment they are facing,” he says.

Multidirectional collaboration is critical for the new pharma business model; cloud-based information services can offer a communications alternative.